Chapter 1Introduction to Services

Introduction to ServicesWhat are services?Why services marketing?Service and TechnologyCharacteristics of Services Compared to GoodsServices Marketing MixStaying Focused on the Customer

What are services?Services are deeds, processes, and performances. And intangibility is the key determinant.

From broader perspectiveServices include all economic activities whose output is not a physical product or construction, 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.

Services are going to move in this decade to being the front edge of the industry. - former CEO, IBM (Louis V. Gerstner, 2001)

Services versus Customer ServiceServices (as been defined earlier) encompasses a wide range of industries.

Customer service is the service provided in support of a companys core products. It often includes:Answering questionsTaking ordersDealing with billing issuesHandling complaintsScheduling maintenance or repairsIt can occur on site, or via telephone, or via internet and typically there is no charge for customer service.

Federal Express markets and delivers services, but it also provides a high level of customer service.

Figure 1.1Contributions of Service Industries toU.S. Gross Domestic ProductSource: Inside Sams $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86.

Examples of Service IndustriesHealth Carehospital, medical practice, dentistry, eye careProfessional Servicesaccounting, legal, architecturalFinancial Servicesbanking, investment advising, insuranceHospitalityrestaurant, hotel/motel, bed & breakfast ski resort, raftingTravelairline, travel agency, theme parkOthershair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design

Why study Services Marketing?Service-based economies

Service as a business imperative in manufacturing and IT

Deregulated industries and professional service needs

Service equals profits

Services marketing is different

Tangibility SpectrumThe concept is: most of the services are not strictly confined to intangibility although intangibility is the key determinant of service rather the extent of intangibility varies in different types of services and it is also true with the goods as well regarding tangibility.

Very few products are purely intangible or tangible.

Services tend to be more intangible than manufactured products and manufactured products tend to be more tangible than services.

Figure 1.2Tangibility SpectrumTangibleDominantIntangibleDominantSaltSoft DrinksDetergentsAutomobilesCosmeticsAdvertisingAgenciesAirlinesInvestmentManagementConsultingTeachingFast-foodOutletsFast-foodOutlets

Characteristics of ServicesCompared to GoodsIntangibilityPerishabilitySimultaneousProductionandConsumptionHeterogeneity

Table 1.2Goods versus ServicesSource: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, A Conceptual Model of Service Quality and Its Implications for Future Research, Journal of Marketing 49 (Fall 1985), pp. 4150.

Implications of IntangibilityServices cannot be inventoried

Services cannot be easily patented

Services cannot be readily displayed or communicated

Pricing is difficult

Implications of HeterogeneityService 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

Implications of Simultaneous Production and ConsumptionCustomers 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 PerishabilityIt is difficult to synchronize supply and demand with services

Services cannot be returned or resold

Service Equals ProfitsMany firms jumped on the service bandwagon, investing in service initiatives and promoting service quality as ways to differentiate themselves and create competitive advantage. Service strategies, if implemented properly, can be very profitable. Corporate strategies focused on customer satisfaction, revenue generation, and service quality may actually be more profitable than strategies focused on cost cutting or strategies that attempt to do both simultaneously.

But Service Stinks Despite the importance of service and the bottom-line profit potential for service, consumers perceive that overall the quality of service is declining.Service based on calculated profitability of different market segments results less service than earlier.Self-service and technology based service is perceived as less service.Higher customer expectations might not be equally met by all companies.Less skilled people in frontline service jobs.Delivering consistent, high-quality service is difficult but is promised by many companies and sometimes they fail to keep their words.

Challenges for ServicesDefining and improving qualityDesigning and testing new servicesCommunicating and maintaining a consistent imageAccommodating fluctuating demandMotivating and sustaining employee commitmentCoordinating marketing, operations, and human resource effortsSetting pricesFinding a balance between standardization versus personalizationEnsuring the delivery of consistent quality

Traditional Marketing MixAll 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 PsProductPricePlacePromotionPeopleAll human actors who play a part in service delivery and thus influence the buyers perceptions: namely, the firms personnel, the customer, and other customers in the service environment.Physical EvidenceThe environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service.ProcessThe actual procedures, mechanisms, and flow of activities by which the service is deliveredthe service delivery and operating systems.

Table 1.3Expanded Marketing Mix for Services

Ways to Use the 7 PsOverall Strategic AssessmentHow 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?

Specific Service ImplementationWho 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?

Table 1.1Eight Central Paradoxes of Technological ProductsSource: D. G. Mick and S. Fournier, Paradoxes of Technology: Consumer Cognizance, Emotions, and Coping Strategies, Journal of Consumer Research 25 (September 1998), pp. 12347.