Lecture service marketing and design 6.8.2014

SERVICE MARKETING AND DESIGN

Introduction to Service Marketing and Design6.8.2014

Johanna Gummerus

Aims and Learning Goals

» To clarify what is the essence of service marketing

» After this lecture, you should be able to»Identify the different approaches to service

»Know ”classical” service definition (based on IHIP)

»Be acquainted with the elements of the Service Marketing

Mix

»Be able to define what a service encounter means and

what are the different types of service encounters

»Identify the main challenges of Service Marketing

Hanken Svenska handelshögskolan / Hanken School of Economics www.hanken.fi

The three main sectors of economy -agriculture - industry- production of services

• Agriculture dominated until approximately 1850s • Industrial revolution led to the growth of the industrial sector• Today the service sector dominates, 70 % of OECD country GDP (USA 80%,

Finland 65%)

The growth of the Service Industry

Different Views on Service

» Service industries and companies

» Services as products»Intangible product offerings that customers value and pay

for in the marketplace »

Customer Service»Provided in support of a company’s core products

» Derived Service»Both physical goods and intangible service products render

service to the buyer and are value for that service


Service industries

» Distribution services (retail etc)

» Health care services

» Financial services

» Knowledge services

» Travel and hospitality services

» Entertainment services

» Information services

» Transport

» Government and other servicesHanken Svenska handelshögskolan / Hanken School of Economics www.hanken.fi

Goods and services distinguished

» “Services” are compared with products and defined in terms of their differences from them

» Goods as a thing (object, device, article, material) , Service as an act (deed, performance, effort)

» Service: what is received and how this received (Grönroos, 1992)

» A service is an interactive process that supports the consumers’ everyday practices in a value-creating way, i.e., so that value emerges in those everyday practices (value-in-use) (Grönroos, 2006)


What is Service?


Source http://www.lamsade.dauphine.fr/~giard/IEEE_SSSM06_Giard_Balin.pdf

Strategic Service Classification (Nature of the Service Act)

Strategic Service Classification (Nature of the Service Act)

Direct Recipient of the Service

Nature of

the Service Act People Things

People’s bodies: Physical

possessions:

Health care Freight

transportation

Passenger transportation Equipment repair and

maintenance

Tangible actions Beauty salons Veterinary care

Exercise clinics Janitorial services

Restaurants Laundry and dry

cleaning

Haircutting Landscaping/lawn care

People’s minds: Intangible

assets:

Education Banking

Intangible actions Broadcasting Legal services

Information services Accounting

Theaters Securities

Museums Insurance

Background to Services MarketingIHIP


» Based on the ideology that services are fundamentally different from goods

» Services are dynamic, “unfolding over a period of time through a sequence or constellation of events and steps” (Bitner et al.)

» Sometimes you can see quotes “services do not produce anything”, or “services are costs” (see e.g. Rathmell, 1966, Smith,

1776)

IHIP - Differences Between Goods and Services

Intangibility

Perishability

Heterogeneity

Inseparability

(SimultaneousProduction

andConsumption)

Intangibility

» Being performances or actions, they cannot be seen, felt, tasted or touched in the same way as tangible goods can

» Differentiating between physical intangibility, mental intangibility and generality of an experience

» (Laroche et al.2001 )


Implications of Intangibility for Marketing

Services cannot be inventoried

Services cannot be patented

Services cannot be readily displayed or communicated

Pricing is difficult

Differences Between Goods and Services

Intangibility

PerishabilityInseparability


andConsumption)

Heterogeneity

Heterogeneity


Implications of Heterogeneity

Service delivery and customer satisfaction depend on employee actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered matches what was planned and promoted


Intangibility

Perishability

Heterogeneity

Inseparability


andConsumption)

Implications of Inseparability (Simultaneous Production and

Consumption)

Customers participate in and affect the transaction

Customers affect each otherEmployees affect the service

outcomeDecentralization may be essentialMass production is difficult


Intangibility

Perishability

Heterogeneity

Inseparability


andConsumption)

Implications of Perishability

It is difficult to synchronize supply and demand with services

Services cannot be returned or resold

Critique of the IHIP

» Technology has made many services »standardized (reducing heterogeineity)

»recordable, storable and reproducable (diminishing

perishability)

(Lovelock, 2004)

» Many services produced before they are consumed, e.g. repair, maintenance, cleaning (being separable)

» Intangible aspects to goods and tangible aspects to service exist

» Both goods and services render service Vargo and Lusch, Grönroos

» Alternatives to IHIP»Treat goods and services similarly, see ”derived service”

»Differentiate between rental goods versus those whose

ownership is transferred (Lovelock 2004) Hanken Svenska handelshögskolan / Hanken School of Economics

www.hanken.fi

Service Logic /Nordic School

» Rejecting division between goods and service production

» IHIP do not define goods and services as economic categories – they are dimensions that can help define ANY offering or marketing situation

» Thinking about service as perspective – service and goods are interdependent

» Long-term interactive relationships and networks, not exchange, are the core of research (critique to 7Ps)

» Source: Gummesson and Grönroos (2012)Hanken Svenska handelshögskolan / Hanken School of Economics

www.hanken.fi

Taking service thinking to products

» “Derived service”» Product as tangible “packaged service” (Vargo

and Lusch, 2004)


Product picture: http://www.ferndalefoods.co.uk/MealRange.aspx

Marketing vs. Service Marketing

» Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. (American Marketing Association, Approved July 2013)

» Marketing of services as marketing of one type of offering (services)

» Vs. Relationship marketing ”The purpose of marketing is to identify and establish, maintain and enhance, and when necessary terminate relationships with customers (and other parties) at profit... through promises(Grönroos, 2007)


»Services often priced through rates, fees, admissions, charges, tuition, contributions, interest

»The buyer is often a client rather than a customer»Differentiated marketing for different services »Being acts, cannot be inventoried»Of varying economic nature (e.g. charitable and religious

bodies)»Formal or professional approach to many services

(financial, legal, medical, educational)»Imprecise standards (variability)»Varying price setting practices (regulated, competition-

led)»Economic concepts e.g. demand and supply difficult to apply»Fringe benefits take the form of services (pensions,

insurance, care)»Limited concentration (fewer chains)»Symbolism derives from performance, not possession

(Rathmell, 1966) Hanken Svenska handelshögskolan / Hanken School of Economics www.hanken.fi

Marketing characteristics of services

What about design?


Design can be...

» An addition to service artefacts


Design can also refer to PROCESS

» The PROCESS of planning services, in a similar manner as innovation

» Service design used to depict the whole process from idea to specification (Goldstein et al. 2002; Zeithaml et al.,

1990; Martin and Horne, 1993).

» In many cases, processes are ongoing in terms of investments in physical assets, employee training, service encounter process changes and back room service support processes (Goldstein et al.)

» Take place at several levels – strategic, operational, service encounter levels (Goldstein et al. 2002)


» What are we designing? »Designing a new service

»Re-designing the current service

»Designing the service recovery (Goldstein

2002)

» From the service organization’s perspective, designing a service means defining an appropriate mix of physical and non-physical components (Goldstein et al. 2002 p. 121-122)

Service Design can be....

» Visualizations of service, ”tools” » Gummesson (1991): “the concretization of the

service concept in drawings, flowcharts . . . ”.»

http://learningspacetoolkit.org/services-and-support/service-design-process/

Service design can be...

» An all encompassing ”company-wide phenomenon” (Venkatesh et al. 2012)


Additional perspectives to service design

» Operations perspective – ”Specification of the detailed structure, infrastructure, and integration content of a service operations strategy (Patricio et al.

2008: 234 referring to Johnson et al. 2000)

» HCI perspective (human-computer interaction)

Service as a complex outcome of parts

» A service organization can only deliver a service after integrating (or outsourcing) investments in numerous assets, processes, people, and materials. Much like manufacturing a product composed of hundreds or thousands of components, services similarly consist of hundreds or thousands of components.

» However, unlike a product, service components are often not physical entities, but rather are a combination of processes, people skills, and materials that must be appropriately integrated to result in the ‘planned’ or ‘designed’ service.

» Source: Goldstein et al. 2002


Success in customer focused service development /design requires a deep understanding of:

(1) Customer needs, requirement, expectations and preferences

(2) Customer values(3) Customer service systems (technical infrastructure, the customers' knowledge and ability to use services)(4) The customers' behaviour when using services; customers' usability processes - what the customer does & what s/he wants to do(5) Customers' quality perceptions

Source Ekdahl, Gustafsson and Edvardsson, 1999

Customer focused service development/design


In Summary

» Service refers to process/act/effort/performance

» Often services understood in terms of Intangibility, Heterogeneity, Inseparability and Perishability

» Services benefit from design

» Design can be treated at different levels, as design artefacts, as processes, as objects designed (new/re-design/recovery), as tools, as core

References...


» Gummesson, Evert & Grönroos Christian (2012): The emergence of the new service

marketing: Nordic School perspectives, Journal of Service Management Volume: 23

Issue: 4 2012

» Patrício, L., Fisk, Raymond P. And Falcão e Cunha, J. (2008), Designing Multi-

interface Service Experiences: The Service Experience Blueprint, Journal of Service

Research, Vol. 10 Iss. 4, pp. 318-334.

» Wemmerlöv, Urban (1990) "A Taxonomy for Service Processes and its Implications for

System Design", International Journal of Service Industry Management, Vol. 1 Iss: 3,

pp.20 - 40

http://www.emeraldinsight.com/journals.htm?issn=1757-5818

http://www.emeraldinsight.com/journals.htm?issn=1757-5818

http://www.emeraldinsight.com/journals.htm?issn=1757-5818&volume=23&issue=4


Lecture service marketing and design 6.8.2014

Documents

service industries

economics

service marketing

service design

customer

service

marketing

core