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7/28/2019 Marketing of Services Notes
1/27
2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Part 1
FOUNDATIONS
FOR SERVICESMARKETING
7/28/2019 Marketing of Services Notes
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1
Chapter
Introduction to Services
What are services?
Why services marketing?
Characteristics of Services Compared to Goods
Services Marketing Mix
7/28/2019 Marketing of Services Notes
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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
What are services?
All economic activities whose output is not a physical
product, is generally consumed at the time it is produced
and provides added value in forms (such as convenience,
amusement, timeliness, comfort or health) that are
essentially intangible concerns of its first purchaser
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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
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/motel, bed & breakfast
ski resort, rafting
Travel airline, travel agency, theme park
Others hair styling, pest control, plumbing, lawn maintenance, counseling
services, health club, interior design
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Figure 1.2
Tangibility Spectrum
Tangible
Dominant
Intangible
Dominant
Salt
Soft Drinks
DetergentsAutomobiles
Cosmetics
AdvertisingAgencies
AirlinesInvestment
ManagementConsulting
Teaching
Fast-foodOutlets
Fast-food
Outlets
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Why Services Marketing
Services based economies
United States 80%
India 48%
Traditional marketing course has more focus on
manufacturing and packaged goods (like P&G, Unilever,
General Foods)
There is a need for Marketing concepts specifically for
Services
Service initiatives and promoting service quality leads to
competitive advantage and so to profits
Customer satisfaction index for services is declining
7/28/2019 Marketing of Services Notes
7/27 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Figure 1.1
Contributions of Service Industries to
U.A.E. Gross Domestic Product
Source: Inside Sams $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86.
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8/27 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Employment in Dubai - 2005
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Table 1.2
Goods versus Services
Source: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, A Conceptual Model of Service Quality and Its Implications for Future Research, Journal ofMarketing49 (Fall 1985), pp. 4150.
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Characteristics of Services
Compared to Goods
Intangibility
Perishability
Simultaneous
ProductionandConsumption
Heterogeneity
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11/27 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Implications of Intangibility
Services cannot be inventoried
Services cannot be easily patented
Services cannot be readily displayed or communicated
Pricing is difficult
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Implications of Heterogeneity
Service delivery and customer satisfaction depend on
employee and customer actions
Service quality depends on many uncontrollable factors
There is no sure knowledge that the service delivered
matches what was planned and promoted
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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
7/28/2019 Marketing of Services Notes
14/27 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Implications of Perishability
It is difficult to synchronize supply and demand with
services
Services cannot be returned or resold
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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Traditional Marketing Mix
All elements within the control of the firm that
communicate the firms capabilities and image tocustomers or that influence customer satisfaction with the
firms product and services:
Product
Price
Place
Promotion
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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Expanded Mix for Services --
The 7 Ps
Product
Price
Place
Promotion
People
All human actors who play a part in service delivery and thus influence thebuyers perceptions: namely, the firms personnel, the customer, and othercustomers in the service environment.
Physical Evidence
The environment in which the service is delivered and where the firm andcustomer interact, and any tangible components that facilitate performanceor communication of the service.
Process
The actual procedures, mechanisms, and flow of activities by which theservice is deliveredthe service delivery and operating systems.
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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Table 1.3
Expanded Marketing Mix for Services
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2Chapter
The Gaps Model of Service Quality
The Customer Gap
The Provider Gaps:
Gap 1 not knowing what customers expect
Gap 2 not having the right service designs andstandards
Gap 3 not delivering to service standards
Gap 4 not matching performance to promises Putting It All Together: Closing the Gaps
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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Expectedservice
Perceived
service
Customer Gap
Figure 2.1
The Customer Gap
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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Gaps Model of Service Quality
Customer Gap:
difference between customer expectations and perceptions
Provider Gap 1 (The Knowledge Gap):
not knowing what customers expect
Provider Gap 2 (The Service Design & Standards Gap):
not having the right service designs and standards
Provider Gap 3 (The Service Performance Gap):
not delivering to service standards
Provider Gap 4 (The Communication Gap):
not matching performance to promises
K F t L di
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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Provider Gap 1: Not knowing what customers expect
Provider Gap 2: Not selecting the right service designs and standards
Provider Gap 3: Not delivering to service standards
Provider Gap 4: Not matching performance to promises
Customer
Expectations
CustomerPerceptions
Key Factors Leading
to the Customer Gap
Customer
Gap
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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Customer Expectations
Company Perceptions ofCustomer Expectations
Inadequate marketing research orientationInsufficient marketing researchResearch not focused on service qualityInadequate use of market research
Lack of upward communicationLack of interaction between management and customersInsufficient communication between contact employees and managersToo many layers between contact personnel and top management
Insufficient relationship focusLack of market segmentationFocus on transactions rather than relationshipsFocus on new customers rather than relationship customers
Inadequate service recoveryLack of encouragement to listen to customer complaintsFailure to make amends when things go wrongNo appropriate recovery mechanisms in place for service failures
Figure 2.2
Not knowing what customers expect
Gap
1
gure .
N t l ti th i ht i
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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Customer-Driven ServiceDesigns and Standards
Management Perceptions ofCustomer Expectations
Poor service designUnsystematic new service development processVague, undefined service designsFailure to connect service design to service positioning
Absence of customer-driven standardsLack of customer-driven service standardsAbsence of process management to focus on customer
requirementsAbsence of formal process for setting service quality goals
Inappropriate physical evidence and servicescapeFailure to develop tangibles in line with customer expectationsServicescape design that does not meet customer and
employee needsInadequate maintenance and updating of the servicescape
Not selecting the right service
designs and standards
Gap
2
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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Service Delivery
Customer-Driven Service
Designs and Standards
Deficiencies in human resource policiesIneffective recruitmentRole ambiguity and role conflictPoor employee-technology job fitInappropriate evaluation and compensation systemsLack of empowerment, perceived control, and teamwork
Customers who do not fulfill rolesCustomers who lack knowledge of their roles and responsibilitiesCustomers who negatively impact each other
Problems with service intermediariesChannel conflict over objectives and performanceDifficulty controlling quality and consistency
Tension between empowerment and control Failure to match supply and demand
Failure to smooth peaks and valleys of demandInappropriate customer mixOverreliance on price to smooth demand
Figure 2.4
Not delivering to service standards
Gap
3
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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Service Delivery
Lack of integrated services marketing communicationsTendency to view each external communication as independentNot including interactive marketing in communications plan
Absence of strong internal marketing program Ineffective management of customer expectations
Absence of customer expectation management through all forms ofcommunicationLack of adequate education for customers
OverpromisingOverpromising in advertisingOverpromising in personal sellingOverpromising through physical evidence cues
Inadequate horizontal communications
Insufficient communication between sales and operationsInsufficient communication between advertising and operationsDifferences in policies and procedures across branches or units
External Communications to
Customers
Figure 2.5
Not matching the performance to promises
Gap
4
Fi 2 6
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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Perceived
Service
ExpectedService
CUSTOMER
COMPANY
Customer
Gap
Gap 1
Gap 2
Gap 3
ExternalCommunications
to CustomersGap 4Service
Delivery
Customer-Driven
Service Designs andStandards
Company Perceptionsof ConsumerExpectations
Figure 2.6
Gaps Model of Service Quality
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2006 The McGraw-Hill Companies, Inc All rights reservedMcGraw-Hill/Irwin
The Customer Gap Chapter 3 Consumer Behavior in Services Chapter 4 Customer Expectations of Service Chapter 5 Customer Perceptions of Service Gap 1 Not Knowing What Customers Expect (The Knowledge Gap)
Chapter 6 Listening to Customers through Research Chapter 7 Building Customer Relationships Chapter 8 Service Recovery Gap 2 Not Having the Right Service Quality Designs and Standards (The Service Design and
Standards Gap)
Chapter 9 Service Development and Design Chapter 10 Customer-Defined Service Standards Chapter 11 Physical Evidence and the Servicescape Gap 3 Not Delivering to Service Standards (The Service Performance Gap) Chapter 12Employees Roles in Service Delivery
Chapter 13Customers Roles in Service Delivery Chapter 14 Delivering Service through Intermediaries and Electronic Channels Chapter 15 Managing Demand and Capacity Gap 4 Not Matching Performance to Promises (The Communication Gap) Chapter 16 Integrated Services Marketing Communications Chapter 17 Pricing of Services