1. Marketing in the “New” Economy
CRM
Service Marketing
Internet Marketing
Int’l Marketing

2. SERVICES

3. Service Perspectives:
Not a “Product”
Intangible human act- that is produced at the time of consumption & can’t be standardized or inventoried…
No One-
Automation,
Virtualization
& Outsourcing
No Difference-
Products are just appliances that provide services- Shift perspective from Mfgr to consumer… and focus on benefits

4. Defining -a Service
An act or performance offered by one party for another
An economic activity that does not result in ownership
A process that creates benefits by facilitating a desired change in:
customers themselves –get a haircut
physical possessions- get a wig
intangible assets- get therapy 4

5. Service as process…. People Processing Mental Stimulus Processing
Who / What is Direct Recipient of the Service?
DIRECTED AT POSSESSIONS
DIRECTED AT PEOPLE
What is the
Nature of the
Service Act?
People Processing
Possession Processing
TANGIBLE
ACTS
e.g., airlines, hospitals,
haircutting, restaurants hotels, fitness centers
e.g., transport, repair, cleaning, landscaping, retailing, recycling
Mental Stimulus Processing
Information Processing
(directed at intangible assets)
INTANGIBLE
ACTS
e.g., accounting, banking,
insurance, legal, research
e.g. media, consulting,
education, psychotherapy

6. Importance of Service Sector
In most countries, services add more economic value than agriculture, raw materials and manufacturing combined
In developed economies, employment is dominated by service jobs and most new job growth comes from services

7. Changing Structure of Employment as Economic Development Evolves
Share of
Employment
Agriculture
Services
Industry
Time, per Capita Income
Source: IMF, 1997

8. Waves of Change.. % US WORK-FORCE
THE PROPORTION OF AMERICANS WORKING IN SERVICES
BANKING, INSURANCE, CONSULTING, SOFTWARE DESIGN, HEALTH CARE, ENTERTAINMENT
CONTINUES TO GROW.
IT IS THESE SERVICE WORKERS WHO WILL BE AFFECTED MOST BY DIGITAL DOCUMENT PROCESSING SYSTEMS OF ALL TYPES.
The Economist, 1996

10. At present …in U.S. Services account for ~80% of U.S. GDP
~80% workers are in service sector
Services account for ~80% of U.S. GDP
Service occupations is responsible for ~90% job growth
Composition of US GDP In 2007, 1.2 percent of total US GDP was contributed by agricultural sector. Industrial sector made up 19.8 percent of US GDP in Services sector made up 79 percent of US GDP in that same period

11. Fast growing services -next decade- predicted by macro-environmental trends..
More People: working more, living longer, living alone:
Social services
Health services
Residential care
Child day-care
Finance, Insurance, Real estate
Changes in workplace- automation, globalization:
Computer & data processing
Business services
Transportation
Increased need/desire to recreate & communicate:
Hospitality & Travel
Interactive Entertainment
Mobile Communication

12. Services dominate the United States Economy: GDP by Industry, 2001
Agriculture, Forestry,
Mining, Construction 8%
Finance, Insurance,
Real Estate
20%
Manufacturing 14%
Government
(mostly services)
13%
Wholesale and
Retail Trade
16%
Other Services 11%
Transport, Utilities,
Communications 8%
SERVICES
Business
Services 5%
Health 6%
Source: Bureau of Economic Analysis, November 2002

13. US likely to devote "30 %+ GDP on health by mid century."

14. Critical Questions
What is the “debate” all about regarding how services should be defined / envisioned?
How does the definition of a service affect your marketing strategy?
2. What are the key P’s to meeting service management challenges?
3. What are some of the factors & considerations affecting the near future of “services” marketing?

15. In the olden days- (a few years ago)… A Service was defined “categorically” according to its “tangibility”…..
Pure service; no tangible good
Major service with minor good
Hybrid: equal part goods and service
Tangible goods with some services
Pure tangible good; no service
Milk
Computer
& Warranty
Meal at Restaurant
Hair Styling
Legal Advice

16. Product - Service Spectrum
Salt 
Soft Drinks 
Pure
Service
Tangible
Good w/
Services
Major
w/ Goods
Hybrid
Detergents 
Automobiles 
Cosmetics 
Fast-food
Outlets 
Intangible
Dominant
Tangible
Dominant  
Fast-food
Outlets 
Advertising
Agencies 
Airlines 
Investment
Management 
Consulting
Teaching

17. Customer Evaluation as a Function of Tangibility

18. unlike products Intangibility Services cannot be experienced before
purchase
Inseparability
Services cannot
be separated
from their
providers
unlike products
Variability
Quality of
services depends
on who provides
them & when,
where, & how
Perish-ability
Services cannot
be stored for
later sale or use

19. Intangibility Services mrktg: Describe the invisible
Articulate the imaginary
& Define the indistinct

20. Inseparability
Performance & consumption of service - happens at same time restaurant, hotel; getting haircut, etc)
Customers participate in & affect the transaction
Customers affect each other

21. Variability-Heterogeneity
Difficult to standardize
Delivery, Quality & Customer Satisfaction depend on employee actions
Employees vary -attitudes, skills, mood, etc.
No assurance service delivered matches what was planned/ promoted

22. Perishability Can not be inventoried
Difficult to synchronize supply & demand with services
Services cannot be returned or resold

23. Marketing Strategies that address “shortcoming”
Intangibility
use tangibles to create/convey identity -signs, uniforms, imagery
Good hands of Allstate/ Traveler’s Umbrella/ Prudential Rock
Inseparability
simultaneous production & consumption
importance of service provider
selection, training and rewarding of staff
avoid customer conflict
Inseparability
Increase
professionalism of
employees
Intangibility
“Tangibilize”
the intangible
Marketing
Strategies
that address
“shortcoming”
standardization difficult
Constantly monitor- regularly evaluate staff
Systemize/franchise production & marketing
Variability
Perish-ability
consumption cannot be stored
match supply and demand
use of part-time staff
differential pricing
stimulation of off-peak demand
comfortable waiting area
reservation system
Variability
Systematize
service
production
& delivery
Perish-ability
Match supply
& demand

24. Re: service marketing – for decades this has been the thinking-
But is it the

25. Do not distinguish services from goods
The Four Service Marketing Myths: Remnants of a Goods-Based, Manufacturing Model
The 4 characteristics:
Do not distinguish services from goods
Only have meaning from a manufacturing perspective, and
Suggest inappropriate marketing strategies

26. Key Point- Product-service differentiation is result of industrial age-2nd wave thinking
Re- Variabilty:
Customizaton not standardization is the goal
Re-Inseparability:
“Customer-ization” not isolation = goal
Re-Perishability:
Services can be/are inventoried (ie-knowledge in databases & experts head) AND Inventory management not maximization is the objective; Everything is perishable—if not in substance certainly in style…
Re: Intangibility:
its not the product that people are buying. It’s the functions served & benefits rendered- as it is w/ services

27. Instead of focusing on product – service differences
A shift in perspective
Instead of focusing on product – service differences
…Focus on consumer commonalities
…in “consuming & evaluating” that which is purchased

28. Critical Questions
What is the “debate” all about regarding how services should be defined / envisioned?
How does the definition of a service affect your marketing strategy?
2. What are the key P’s to meeting service management challenges?
3. What are some of the factors & considerations affecting the near future of “services” marketing?

29. Challenges for Service Mgt Same as Product Mgt
Creating & offering the consumer value
Communicating a desired & distinct image
Create, sustain & enhance customer relationships
Defining- maintaining- improving quality
Mind the gaps….

30. Service Quality Gaps Expectations Consumer Overpromising Marketer
Word of Mouth
Communications
Personal Needs
Past Experience
Expected Service
Expectations
Consumer
Perceived Service
Overpromising
Marketer
External
Communications
to Consumers
Service Delivery
Performance
Misunderstanding
Service Quality Specs
Communication
Mgmt. Perceptions of Consumer Expectations

31. Closing the gaps by fine tuning 4 Service P’s
~People
~Process
~Physical Evidence
~Protocol

32. People are your Product
In many instances-people performing the service are the product
They are the service and/or organization in customer’s eyes.
They are the brand.

33. Recruit, Hire, Train, Monitor, Motivate, Reward
Why customer satisfaction starts with HR
Delivering excellent service: Lessons from the best firms

34. Marketing-to personnel is as important as to consumers
External Marketing
Internal Marketing
Employees
Customers
“enabling the
promise”
Services Mgt Triangle
“setting
promises”
Performance/ Experience Management
“delivering promises”

35. Process Trade-off between Standardization & Personalization
Same as w/ Products
Limiting the variability in your service by standardizing the process of delivery & level of consumer involvement will lower expenses but comes w/ a cost:
“Although standardization may provide for manufacturing efficiency, this efficiency comes at expense of marketing effectiveness. ..
the consumer orientation screams heterogeneity”
Vargo & Lusch: The Four Service Marketing Myths

36. The importance of Physical Evidence in the “Service Encounter”
At Moment of Truth when service delivered & evaluated by consumer– everything in evidence contributes to the consumer's evaluation of the service…
Be it a website, restaurant, office, hotel room or theme park…it needs to be designed & packaged as well as any product
What the customer sees -- hears, smells, feels-is what s/he’ll believes they will get…
Colors, textures, sounds, smells, décor, dress, demeanor…everything in evidence needs attention and management…

37. It’s the little things that count
How you design your service encounter is critical in a highly competitive market where consumers hard pressed to discern a significant difference in service performance …
Herein the design of your service encounter will prove the most critical variable in your marketing mix
Again – a lesson proven equally valid for products---

38. Identifiable apparel: An image-making marketing tool
By ~ 8-to-1 ratio, US consumers prefer employees wear identifiable apparel

39. A good uniform makes all the difference

40. Identifiable apparel: An image-making marketing tool
1. Improves your image: Customers equate a professional-looking worker w/ a well-run company
2. Increases employee commitment: Adding employee's name can boost morale & loyalty
3. Provides a popular employment "perk":.
4. Shows off your firm's experience and expertise: "certification" -job titles, slogans & performance emblems on shirts/ sleeves…

41. Instill Proper Protocol so as to avoid the air of indifference
Most common aspect of service complaints is lack of respect for the customer.

42. Why services lose customers~3
______% move away
_______% lost due to competitive reasons and/or unhappy w/ the service
______% suspend patronage because of an attitude of indifference from owner, manager or an employee
~30
~67

43. What Customers Desire:
2500 shoppers said courtesy, knowledge & friendliness are most important components of customer service.

44. The Multiplier Effect When a customer has a minor service problem:
In transactions >$100 - s/he will tell 9 to 10 people.
In transactions over $100, s/he will tell 16 people.
TARP statistics.

45. Percent of Customers That Will Not Buy Again
Time is Money (Lost Customers)
20%
25%
45%
55%
80% 90 70 50 30 10
Percent of Customers That Will Not Buy Again
Minutes
Hours
Days
Weeks
Months
Time Taken to Resolve a Customer’s Problem
*Source: Forum Corporation

46. Where and Who Complains
Most complaints made to service provider (employee) at time & place of service
Less than 5% of complaints about services ever reach corporate headquarters.
High-income households, younger people, and service-knowledgeable customers are more likely to complain.

48. Actively Encourage Complaints
Average company does not hear from 95% of its unhappy customers.
Many complaints go unregistered because customers do not think it will help and/or do not know best way to register complaint
Encouraging complaints is a good way to “break the silence.”

49. Attitude is Crucial Customers value acknowledged w/ every transaction…
Customers lose confidence when:
Complaints not readily or personally addressed

50. E-pologies?
response should include options/names & telephone numbers for further assistance..
Tarp Research -

51. Service Guarantees Relatively new w/ respect to services.
Service guarantees provide both consumer & business benefits:

52. Service Guarantee: Customer Benefits
Customers perceive better value.
Lower perceived risk.
Higher perceived reliability
Reinforces customer loyalty

53. Service Guarantee: Organizational Benefits
Forces firm to focus on customer.
States a clear performance goal.
Provides measures for tracking poor service.
Forces examination of service delivery system.
Source of pride.

54. Critical Questions
What is the “debate” all about regarding how services should be defined / envisioned?
How does the definition of a service affect your marketing strategy?
2. What are the key P’s to meeting service management challenges?
3. What are some of the factors & considerations affecting the near future of “services” marketing?

55. Services Future

56. Exact nature of Future Changes- depends on nature of the Service
Network Information Services: banking, credit card, insurance, telecom
Retail
Hospitality: travel, restaurants, lodging, leisure, hotels
Labor & Expertise:
Business Support: administration-processes, consulting, customer service
Personal & Professional: medical, legal, financial, technical assistance
UCT
Enhanced Self-Service
IncreasinglyOutsourced
IncreasinglyVirtualized

57. Ubiquitious ComPunication Technologies
3G videophones w/ broadband – 2 meg per second – always online for self-service
Mobile Kiosks
AI Enhanced PDA devices w/ speech recognition & avatars
RFID – everywhere & in everything

58. RFID- everywhere & in everything
SmartCode making 0.25mm chips
target cost 5-10 cents ..w/ feet range
Manufacturing capacity 10+ billion a year

59. UCT in Everything you wear-
washable garments w/ miniaturized in-ear speakers /solar cells to provide energy.
technology woven into fabric,
components allowing many functions to be almost `built in' to our bodies, creating a `second skin'.

61. UCT Enhanced Jewelry
embed functional technology into jewelry & body accessories -- rings, necklaces, earrings, glasses and watches. - -
for body adornment and for more intimate and discreet communication, information gathering and entertainment.

62. Invisible, intelligent wireless tickets
Can be read in your pocket at 25 metres
Ultra-wide band frequency
“One-ticket fits all”

63. RFID Shopping App’s
Future grocery shopping-
integrated –info system

64. Exact nature of Future Changes- depends on nature of the Service
Network Information Services: banking, credit card, insurance, telecom
Retail
Hospitality: travel, restaurants, lodging, leisure, hotels
Labor & Expertise:
Business Support: administration-processes, consulting, customer service
Personal & Professional: medical, legal, financial, technical assistance
UCT
Enhanced Self-Service
IncreasinglyOutsourced
IncreasinglyVirtualized

65. Predicting a diverse future: Directions and issues in the marketing of services European Journal of Marketing ; Bradford; 2002; Angus Laing
“Driven by technological developments, deregulation, and globalization - the service sector in post-industrial economies is facing unprecedented change”

66. Increasing importance of technological mediation…
Virtual Experiences
Redefining concept of-
“Service Encounter”
The Moment of Truth when a service is delivered & evaluated by consumer

67. Commodification… standardized "off-the-shelf" service packages
Pre-Packaged, fill in the blank, instant-service forms & queries
Some Computer generated…Expert-system managed… Responses

68. Professional Services
To date-- characterized by high levels of limited/regulated interpersonal interaction
NOW- 24/7 “access to specialist technical information, formerly the preserve of professionals,
…fundamentally changed the informational asymmetries which have conventionally characterized the delivery of professional services”
Free Advice on Any Topic Online From America's Elders Personal Reply to Each Request

69. “Technologically driven productivity growth is-most important factor in shaping employment in U.S. & every country in the world.
Productivity growth substitutes technology &/or more efficient techniques for physical & mental labor
Inventors & investors always figure out ways to replace people with machines”
Automation- 1 ,2 ,3

70. Restaurants without waiters

71. Ultimately most all your service needs will be handled by & thru your AI enhanced PDA…

72. Recession creating a lost generation
“With the ruthlessness of Skynet in "The Terminator," computerization in the tertiary sector is now committing mass Dilberticide, replacing receptionists with automated phone systems and travel agents with services like Priceline.
Why Dilbert is doomed
The jobs of tomorrow are not what you'd expect
Recession creating a lost generation

73. mechanization of agriculture & mining -- freed up labor for factories…
"primary production”
mechanization of agriculture & mining -- freed up labor for factories…
automation in manufacturing freed up workers for-office work
Computers & AI in the office- -free up workers for…..?
"secondary production
"tertiary production"
As it has always done in the past, labor will shift from more mechanized to less mechanized sectors…. But what will those jobs be?

74. The jobs of tomorrow are not what you'd expect
The most numerous & stable jobs of tomorrow will be those that cannot be offshored
cannot be automated
require a high degree of creativity
& rely on the human touch in face-to-face interactions
these are called "proximity services" & include fastest-growing occupations, healthcare & education.
Since the recession began, healthcare has added 559,000 jobs. Even more remarkable, the average monthly gain of 22,000 jobs during 2009 has been only slightly lower than the average increase of 30,000 jobs a month in 2008.
Why Dilbert is doomed
The jobs of tomorrow are not what you'd expect

76. Outsourcing of IT Services
$10.8 billion The value of IT outsourcing contracts signed in the first quarter of Source: TPI Index
400,000 Number of service jobs sent overseas since Source: The Goldman Sachs Group Inc.
3% Percentage of last year's total layoffs due to offshoring. Source: U.S. Department of Labor
104,000 Number of IT jobs lost due to offshore outsourcing between 2000 and 2003, equaling 2.8% of U.S. IT jobs. Source: Information Technology Association of America
3.5 million Number of U.S. white-collar jobs moving offshore by 2015, averaging 200,000 a year. Source: Forrester Research Inc.

77. India graduates 300,000 IT engineers and 90,000 MBAs per year
Where the Jobs Go!
India graduates 300,000 IT engineers and 90,000 MBAs per year
Source: Computer world and Interunity Group, Inc., April & May 2003
Base: Survey of 252 corporate IT managers in the U.S.; multiple responses allowed

80. The Other Side of Outsourcing

81. Services