Lovelock Srvcmktg Ce Ppt 01

Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 1

Chapter 1

New Perspectives on Marketing in the Service Economy


Chapter One – Learning Objectives

Define services

Recognize the importance of services

Differentiate between services marketing and goods marketing

Acquire introductory knowledge of the 8Ps of services marketing


What Are Services?


Defining Services

Services involve a form of rental and non-ownership

Meaning access and usage fees, for a defined period of time, instead of buying it outright

Services non-ownership framework

Rental-good services — right to a physical good Defined space and place rentals — private space shared

with other customers Labour and expertise rentals — hire people Access to shared physical environments — share use of

an environment, not private Systems and networks: access & usage — rent right to

participate


Defining Services

Services are economic activities offered by one party to another, most commonly employing time-based performances to bring about desired results in recipients themselves or in objects or other assets for which purchasers have responsibility.

In exchange for their money, time and effort, service customers expect to obtain values from access to goods, labour, professional skills, facilities, networks, and systems; but they do not normally take ownership of any of the physical elements involved.


Defining Services

Service Product

A service product comprises all the elements of the service performance, both tangible and intangible, that creates value for customers

Businesses sell and market the core service product This is the marketing of services

Customer Service

Customer support of the core product after it is sold Marketing through service


Importance of Services

Services dominate economy in most nations

Service sector is growing rapidly

Most new jobs are generated by services

Powerful forces are transforming service markets

Reshaping of demand, supply, competition, customers

Personal competitive advantage


Why Study Services?


Contribution of Service Industries to Canadian Gross Domestic Product, 2005 (Fig 1.1)


Estimated Size of Service Sector in Selected Countries (Fig 1.2)


Challenges Posed by Services


Differences, Implications, and Marketing-Related Tasks (1) (Table 1.1)

Difference

Most service productscannot be inventoried

Intangible elementsusually dominatevalue creation

Services are oftendifficult to visualizeand understand

Customers may beinvolved in co-production

Implications

Customers may beturned away

Harder to evaluateservice and distinguishfrom competitors

Greater risk anduncertainty perceived

Interaction betweencustomer and provider; but poor task execution could affect satisfaction

Marketing-Related Tasks

Use pricing, promotion, andreservations to smooth demand; work with ops to manage capacity

Emphasize physical clues, employ metaphors and vivid images in advertising

Educate customers onmaking good choices; offer guarantees

Develop user-friendlyequipment, facilities, and systems; train customers, provide good support


Implications

Behaviour of servicepersonnel and customerscan affect satisfaction

Hard to maintain quality, consistency, reliability

Difficult to shield customers from failures

Time is money; customers want serviceat convenient times

Electronic channels or voice telecommunications

Difference

People may be part of service experience

Operational inputs andoutputs tend to vary more widely

Time factor often assumes great importance

Distribution may take place through nonphysical channels

Marketing-Related Tasks

Recruit, train employees to reinforce service conceptShape customer

behaviour

Redesign for simplicity and

failure proofingInstitute good service

recovery procedures

Find ways to compete on speed of delivery; offer extended hours

Create user-friendly,secure websites and freeaccess by telephone

Differences, Implications, and Marketing-Related Tasks (2) (Table 1.1)


Value Added by Physical, Intangible Elements Helps Distinguish Goods and Services (Fig 1.7)


NAICS

North American Industry Classifications System

Replacing the SIC system – Standard Industrial Classification

Better understanding of service dominated economies

Some examples of new classifications:

Diet and Weight Reducing Centres Management Consulting Services Temporary Help Services Telemarketing Bureaus


Differentiate between services and goods

Marketing tasks in services differ from the manufacturing sector

Eight common differences :1. Service products cannot be inventoried2. Intangible elements dominate value creation3. Services difficult to visualize and understand4. Customers may be involved in co-production5. People may be part of the service experience6. Operational inputs and outputs tend to vary widely7. Time factor assumes great importance8. Distribution through nonphysical channels

What are marketing implications?


The 8 Ps of Services Marketing

Marketing is the only function to bring operating revenues into a business; all other functions are cost centres

The “8Ps” of services marketing are needed to create strategies for meeting customer needs profitably in a competitive marketplace Traditional – product elements, place and time, price and

other user outlays, promotion and educations Extended by service delivery – physical environment,

processes, people, productivity and quality


Expanded Marketing Mix for Services


The 8 Ps of Services Marketing

Product Elements (Chapter 3)

Place and Time (Chapter 4)

Price and Other User Outlays (Chapter 5)

Promotion and Education (Chapter 6)

Process (Chapter 8)

Physical Environment (Chapter 10)

People (Chapter 11)

Productivity and Quality (Chapter 14)


The 8Ps of Services Marketing: (1) Product Elements

Embrace all aspects of service performance that create value

Core product responds to customer’s primary need

Help customers use core product through array of supplementary service elements

Creates a service concept that offers value to customers and satisfies better than competitors


The 8Ps of Services Marketing: (2) Place and Time

Delivery decisions: Where, When, How

Geographic locations served

Service schedules

Physical channels

Electronic channels

Customer control and convenience

Channel partners/intermediaries


The 8Ps of Services Marketing: (3) Price and Other User Outlays

Traditional pricing tasks: Selling price, discounts, premiums Margins for intermediaries (if any) Credit terms

Service marketers must recognize that customer outlays involve more than price paid to seller

Identify and minimize other costs incurred by users: Costs associated with service usage (e.g., travel to service

location, parking, phone, babysitting, etc.) Time expenditures, especially waiting Unwanted mental and physical effort Negative sensory experiences


The 8Ps of Services Marketing: (4) Promotion and Education

Informing, educating, persuading, reminding customers

Marketing communication tools Media elements (print, broadcast, outdoor, retail, the

Internet, etc.) Personal selling, customer service Sales promotion Publicity/PR

Imagery and recognition Branding Corporate design

Content Information, advice Persuasive messages Customer education/training


The 8Ps of Services Marketing: (5) Process

How firm does things may be as important as what it does

Customers often involved in processes, especially when acting as co-producers of service

Process involves choices of method and sequence in service creation and delivery Design of activity flows Number and sequence of actions for customers Nature of customer involvement Role of contact personnel Role of technology, degree of automation

Badly designed processes waste time, create poor experiences, and disappoint customers


The 8Ps of Services Marketing: (6) Physical Environment

Design servicescape and provide tangible evidence of service performances

Create and maintain physical appearances Buildings/landscaping Interior design/furnishings Vehicles/equipment Staff grooming/clothing Sounds and smells Other tangibles

Manage physical cues carefully— can have profound impact on customer impressions


The 8Ps of Services Marketing: (7) People

Interactions between customers and employees influence perceptions of service quality

Need the right customer-contact employees, performing tasks well Job design Recruiting Training Motivation

Need the right customers for firm’s mission Contribute positively to

experience of other customers

Possess—or can be trained to have— needed skills (co-production)

Can shape customer roles and manage customer behaviour


The 8Ps of Services Marketing: (8) Productivity and Quality

Productivity and quality must work hand in hand

Improving productivity key to reducing costs

Improving and maintaining quality essential for building customer satisfaction and loyalty

Ideally, strategies should be sought to improve both productivity and quality simultaneously—technology often the key

Technology-based innovations have potential to create high payoffs

But, must be user friendly and deliver valued customer benefits


Summary – Chapter 1

Services Defined Rental and non-ownership of goods Time based exchange of economic activity performed in exchange

for money, time and effort

Services are transforming markets and experiencing rapid growth

The differences between services and goods marketing focus on intangibility, people and time

8Ps of services marketing1. Product Elements 5. Process2. Place and Time 6. Physical Environment

3. Price and Other User Outlays 7. People 4. Promotion and Education 8. Productivity and Quality

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Lovelock Srvcmktg Ce Ppt 01