Services Marketing 1

Lovelock, Patterson & Walker: Services Marketing 4e © 2007 Pearson Education Australia 1

SERVICES MARKETING

Lecturer: Dr. Ian Benton [email protected]

Today, lecture1 (ch1):

Understanding marketing

in the service economy.


Lecture Objectives

Explain how services are defined and conceptualised.

Identify the key characteristics that distinguish services from goods.

Explain how services create value for consumers.

Describe ways of categorising services.

Explain the key components of a service operations system.

Explain the expanded ‘marketing mix’ for services.


The Importance of Services in the Asia-Pacific Region

Today, service sector is the engine of economic growth in developed (and most developing) countries.

Manufacturing industries in developed and developing countries continue to be replaced by service industries.

Service sector now accounts for between 60-80% of GDP, and between 50-90% of all new employment in many economies.


Defining Services

Any act, performance or experience that one party can offer to another.

Essentially intangible and does not result in the ownership of anything.

Economic activities that provide time, place, form, problem solving or experiential value.

Something that may be bought or sold but cannot be dropped on your foot. Ie. Not tangible.


Examples of the Diversity of Services

Business services Accountancy Architecture Engineering Legal services Printing Insurance Telecommunications IT consulting Logistics consulting Management

consulting Marketing research

Business services Accountancy Architecture Engineering Legal services Printing Insurance Telecommunications IT consulting Logistics consulting Management

consulting Marketing research

Consumer services Airline Banking and finance Insurance Medical Telecommunications Hotel Restaurant Opera/theatre Football match Transportation House cleaning

Consumer services Airline Banking and finance Insurance Medical Telecommunications Hotel Restaurant Opera/theatre Football match Transportation House cleaning


It’s all about value

Value is created for both seller and buyer.

Customers buy services because they are looking for desired results.

Customers expect to obtain value from their service purchases in exchange for their money, time and effort.

Value comes from a variety of value-creating elements rather than the transfer of ownership.


It’s all about value (cont.)

Place (distribution/logistics) value: using a mobile, email or Internet banking.Place (distribution/logistics) value: using a mobile, email or Internet banking.

Form value: medical, hairdressing.Form value: medical, hairdressing.

Problem solving value: buying an experience (e.g. going to the movies) or performance (e.g. Education).Problem solving value: buying an experience (e.g. going to the movies) or performance (e.g. Education).

Time value: catching a taxi, employing a gardener.Time value: catching a taxi, employing a gardener.


Framework for Developing & Delivering Customer Value


Services: intangible elements dominate value creation

Most services are multidimensional with both tangible and intangible elements-such as a meal in a restaurant; bed in a hotel; medical supplies used during a hospital stay.

Few services are without tangibles elements and few goods are without a service component.


Relative value added by physical versus intangible elements in goods and services


Service products versus customer service and after-sales service

Service products versus customer service (or customer support)

Core service versus supplementary service

Marketing of services - where a service itself is the core product

Supplementary services may include after-sales service, consultation, finance, shipping, installation, maintenance, upgrades…etc.


Reasons for the rapid growth of services

The ‘hollowing out’ effect- the shift in employment patterns in industrialised nations as as task/service can be differentiated and outsourced to where least cost.

Deregulation and privatisation- eg. Telcos, utilities from govt.

Social changes- affluence changes needs eg entertainment.

Professional services and franchises- eg H&R tax services, cleaning services, pet minding.


Differences b/w goods & services

Customer does not obtain ownership & cannot be inventoried.

Intangible elements dominate value creationeg hotel bed, spare parts in a car repair.

Services are often co-produced by the customereg self-serve restaurants.

Greater difficulty in managing quality (variability).

Services are often difficult for customers to objectively evaluate.(next slide examples)

Time factor (eg 24/7 requirement) may become important.

Non-physical distribution channels (eg www) may be used.


How product qualities affect ease of evaluation


How can services be classified?

The degree of tangibility/intangibility.

Who or what is the direct recipient.

The place of service delivery.

Customisation versus standardisation.

Relationships with customers.

Discrete versus continuous services.

High contact versus low contact- download music versus a tailored suit.


Service as a process

Tangible actions to people’s bodies (people processing)

Tangible actions to goods and other physical possessions (possession processing)

Intangible actions directed at people’s minds (mental-stimulus processing)

Intangible actions directed at intangible assets (information processing)

Categorising service processes (p21…)


Service as a system

Service operations system- front-stage/back-stage proportion of “visibility” to the customer.

Service delivery system- where/when/how delivered to the customer.

Service marketing system- how (comms&advertising) to who (= targeting).


The service business as a system


The service marketing system for a low-contact service


The service marketing system for a high-contact service


The Traditional Marketing Mix(four Ps)

Customers PricePlace & Time

Promotion

Product

Customers PricePlace Customers


The Additional Marketing Mix Elements for Services

People: direct contact between customers and service personnel, some services involve high levels of contact, high levels of trust and dependency.

Physical evidence: this may be an actual physical component or a cue to indicate or represent the existence of quality of the service purchased (often referred to as ‘Servicescape’).

Process: the order and/or system of service delivery.


Therefore, an expanded marketing mix for services (= “the 7 Ps”)

Customers PricePlace & Time

Promotion

Product (Service)People Process

Physical Evidence

Customers Pricecustomers

Place, Cyber-space & Time


The interdependence of marketing; operations and IT; & HR…

Marketing cannot operate in isolation from other functional areas of management.

Operations (i.e. facilities, equipment) is the primary line function in a service business.

HRM is responsible for job definition, recruitment, training, reward systems and quality of work life.


The service management trinity

Customers

Marketingmanagement

HumanResources

management

Operations and informationTechnology management


Keys to Success in Service Businesses…

Understanding that service is a time bound performance comprising core products and supplementary services.

Recognising the importance of understanding and managing the operational processes.

Understanding the customer’s role in the service transaction.

Seeking distinctive market positions for competitive strength.

Understanding and offering what target customers perceive to be superior value.

Managing contact between customers and service personnel.

Understanding the role of technology in service delivery.


The Actions of Efficient Companies

Evaluate and select market segments.

Research customer needs and preferences.

Monitor competitors’ performance, strategies, strengths and weaknesses.

Tailor the product to suit the chosen market segment.

Set prices to reflect costs, competitive strategies and consumer sensitivity to different price levels.

Tailor location, and scheduling of service availability to customers’ needs and preferences.

Develop communication strategies, using appropriate media to transmit messages that inform prospective customers about the service and promote its advantages.

Develop performance standards and measures.

Create programs for rewarding and reinforcing customer loyalty.


.

…and these are precisely many of the things that we will discuss in the coming weeks;

…also, each week we shall chat thru the review questions from the lecture before chapter(s) & a nominated mini-case study;

…therefore, getting the text is important;

…&, keeping up with the reading is VITAL.

Do those things & you’ll acquire some excellent (and highly profitable)

skills.

[Internal assessment requirements & how to best meet those requirements will be discussed at lectures and tutorials along the way…and so, being at those might prove vital to your “academic health”]

Documents

Services Marketing 1