Services Marketing

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Services Marketing

• MTG 410
• Fall 2000
• Prof Donna J. Hill, Ph.D.

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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.

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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.

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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
• airlines, travel agencies, theme park
• Others
• hair styling, pest control, plumbing, lawn
  maintenance, counseling services, health club

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Figure 1-2 Percent of U.S. Labor Force by
Industry
80
70
60
Percent of GDP
50
40
30
20
10
0

• Services
• Manufacturing
• Mining Agriculture

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.
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Figure 1-3 Percent of U.S. Gross Domestic
Product by Industry
80
70
60
Percent of GDP
50
40
30
20
10
0

• Services
• Manufacturing
• Mining Agriculture

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.
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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

Fast growing services for the next decade
Health services Business services Finance,
insurance, real estate Residential care
Computer data processing Child day-care Social
services Transportation services
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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

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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

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Differences Between Goods and Services
Intangibility
Heterogeneity
Simultaneous Production and Consumption
Perishability
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Figure 1-1Tangibility Spectrum
Salt
?
Soft Drinks
?
Detergents
?
Automobiles
?
Cosmetics
?
Fast-food Outlets
Intangible Dominant
?
Tangible Dominant
?
?
Fast-food Outlets
?
Advertising Agencies
?
Airlines
?
Investment Management
?
Consulting
Teaching
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Implications of Intangibility

• Services cannot be inventoried
• Services cannot be 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 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

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Implications of Perishability

• It is difficult to synchronize supply and demand
  with services
• Services cannot be returned or resold

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Table 1-2 Services are Different
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.
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Figure 1-5The Services Marketing Triangle
Company (Management)
Internal Marketing
External Marketing
enabling the promise
setting the promise
Customers
Employees
Interactive Marketing
delivering the promise
Source Adapted from Mary Jo Bitner,
Christian Gronroos, and Philip Kotler
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Services Marketing Triangle Applications Exercise

• 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?

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Ways to Use the Services Marketing Triangle

• Specific Service Implementation
• 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?

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

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Figure 1-6 The Services Triangle and Technology
Company
Technology
Customers
Providers
Source Adapted from A. Parasuraman
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Services Marketing Mix7 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

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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

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Expanded Mix for Services --the 7 Ps

• Product
• Price
• Place
• Promotion
• People
• Process
• Physical Evidence

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Table 1-3Expanded Marketing Mix for Services
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Table 1-3 (Continued)Expanded Marketing Mix for
Services
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Ways to Use the 7 Ps

• Overall Strategic Assessment
• 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?

• Specific Service Implementation
• 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?

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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.