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Services Marketing Chapter 01

By Syed Asim Shah.

Services Marketing: Integrating Customer Focus Across the Firm Valarie A. Zeithaml, Mary Jo Bitner

What Are Services?

Any activity or benefit that one party can offer to another that is essentially intangible and des not result in the ownership of any thing

What Are Services?

Services are deeds, processes, and performances.


Nature of product. Greater involvement of customers in the production process. People as part of the product. Greater difficulties in maintaining quality control standards.

A Different Context for Services Marketing


Narrow definition of marketing by other managers. Limited appreciation for marketing skills. Different organizational structure. A relative lack of competitive data. Problems determining costs. Constraints and opportunities facing marketers of public and nonprofits.

Examples of Service Industries


Health Care
hospital, medical practice, dentistry, eye care

Professional Services
accounting, legal, architectural

Financial Services
banking, investment advising, insurance

Hospitality
restaurant, hotel , bed & breakfast,

Travel
airlines, travel agencies, theme park

Others:
hair styling , plumbing, lawn maintenance, counseling services, health club

Figure 1-2

Percent of U.S. Labor Force by Industry


80
Percent of GDP

70
60 50 40 30 20 10 0

1929 1948 1969 1977 1984 1996


Year
Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, The Service Sector of the U.S. Economy, Scientific American, 244,3 (1981): 31-39.

Services Manufacturing Mining & Agriculture

Figure 1-3

Percent of U.S. Gross Domestic Product by Industry


80

Percent of GDP

70 60 50 40 30 20 10 0 1948 1959 1967 1977 1987 1996 Year


Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J. Vojta, The Service Sector of the U.S. Economy, Scientific American, 244,3 (1981): 31-39.

Services Manufacturing Mining & Agriculture

Importance of Service Sector


Services

$3.52 trillion of U.S. GDP


53.2% of U.S. GDP 71% of total employment 91% of new jobs from 1992 to 2005
Computer & data processing Child day-care Social services Transportation services

Fast growing services for the next decade


Health services Business services Finance, insurance, real estate Residential care

Factors Contributing to Growth

Movement to information age Shift to industrialized economy Aging population Longer life expectancies Increase leisure time High per capita income Changing social and cultural values Advances in technology

Challenges for Services


Defining and improving quality Communicating and testing new services Communicating and maintaining a consistent image

Motivating and sustaining employee commitment


Coordinating marketing, operations and human resource efforts Setting prices Standardization versus personalization

Differences Between Goods and Services


Intangibility Heterogeneity

Simultaneous Production and Consumption

Perishability

Figure 1-1

Tangibility Spectrum
Salt

Soft Drinks Detergents Automobiles Cosmetics Fast-food Outlets


Fast-food Outlets

Intangible Dominant

Tangible Dominant

Advertising Agencies Airlines Investment Management Consulting

Teaching

Implications of Intangibility

Services cannot be inventoried Services cannot be patented Services cannot be readily


displayed or communicated Pricing is difficult

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

Implications of Simultaneous Production and Consumption

Customers participate in and


affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult

Implications of Perishability

It is difficult to synchronize supply


and demand with services Services cannot be returned or resold

Table 1-2

Services are Different


Goods
Tangible

Services
Intangible

Resulting Implications
Services cannot be inventoried. Services cannot be patented. Services cannot be readily displayed or communicated. Pricing is difficult.

Standardized

Heterogeneous 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. Simultaneous production and consumption Customers participate in and affect the transaction. Customers affect each other. Employees affect the service outcome. Decentralization may be essential. Mass production is difficult. It is difficult to synchronize supply and demand with services. Services cannot be returned or resold.

Production separate from consumption

Nonperishable Perishable

Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, Problems and Strategies in Services Marketing, Journal of Marketing 49 (Spring 1985): 33-46.

Figure 1-5

The Services Marketing Triangle


Company (Management)
Internal Marketing
enabling the promise

External Marketing
setting the promise

Employees

Interactive Marketing
delivering the promise

Customers

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

Continue..

Internal marketing: orienting and motivating customer-contact employees and the supporting service people to work as a team to provide customer satisfaction . E.g. Ritz- Carlton orients its employees carefully, instills in them a sense of pride, and motivates them by recognizing and rewarding outstanding service deeds. Interactive marketing: training service employees in the fine art of interacting with customer to satisfy their needs . E.g. Ritz Carlton selects only people who care about people or high touch but also high tech

Services Marketing Triangle Applications Assignment???

Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle? How is each type of marketing being carried out currently? Are the three sides of the triangle well aligned? Are there specific challenges or barriers in any of the three areas?

Overall Strategic Specific Service Implementation Assessment


How is the service organization doing on all three sides of the triangle? Where are the weaknesses? What are the strengths?

Ways to Use the Services Marketing Triangle


What is being promoted and by whom?

How will it be delivered and by whom?

Are the supporting systems in place to deliver the promised service?

Figure 1-6

The Services Triangle and Technology


Company

Technology

Providers
Source: Adapted from A. Parasuraman

Customers

The service - profit chain

Successful service companies focus their attention on both their customers and their employees They understand the service profit chain which links from profits with employees & customer satisfaction

This chain consists of five links Internal service quality: superior employee selection and training, a quality work environment, and strong support for those dealing with customers which results in.

The service - profit chain

satisfied and productive service employees: more satisfied, loyal, and hard working employees, which results in.. greater service value employees; more effective and efficient customer value creation and service delivery which results in..

satisfied and loyal

customers: satisfied customers who remain loyal, repeat purchase, and refer other customers, which results in.. healthy service profits and growth: superior service firm performance

Services Marketing Mix: 7 Ps for Services


Traditional Marketing Mix Expanded Mix for Services: 7 Ps Building Customer Relationships Through People, Processes, and Physical Evidence Ways to Use the 7 Ps

Traditional Marketing Mix

All elements within the control of the firm that communicate the firms capabilities and image to customers or that influence customer satisfaction with the firms product and services: Product Price

Place
Promotion

Expanded Mix for Services -the 7 Ps


Product Price Place Promotion

People

Process
Physical

Evidence

Table 1-3

Expanded Marketing Mix for Services


PRODUCT PLACE PROMOTION PRICE
Promotion blend Salespeople Advertising Flexibility Physical good Channel type features Quality level Accessories Packaging Warranties Product lines Branding Exposure Intermediaries

Price level Terms Differentiation Allowances

Outlet location Sales promotion Transportation Publicity Storage

Table 1-3 (Continued)

Expanded Marketing Mix for Services


PEOPLE
Employees Customers Communicating culture and values Employee research

PHYSICAL EVIDENCE
Facility design Equipment Signage Employee dress Other tangibles

PROCESS
Flow of activities Number of steps Level of customer involvement

Ways to Use the 7 Ps


Overall Strategic Assessment

Specific Service Implementation


How effective is a firms services marketing mix? Is the mix well-aligned with overall vision and strategy? What are the strengths and weaknesses in terms of the 7 Ps?

Who is the customer? What is the service? How effectively does the services marketing mix for a service communicate its benefits and quality? What changes/improvements are needed?

Characteristics of Services

Intangibility - Lack of tangible assets which can be seen, touched, or smelled prior to purchase. Perishability - Inability of a service to be inventoried or stored. Inseparability - Simultaneous production and consumption of a service. Variability - Unwanted or random levels of service quality customers receive when they patronize a service firm.

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