3Why study services?Services dominate most economies and are growing rapidly:Services account for more than 60% of GDP worldwideAlmost all economies have a substantial service sectorMost new employment is provided by servicesStrongest growth area for marketingUnderstanding services offers you a personal competitive advantage
4Definition of Services are economic activities offered by one party to anothermost commonly employ time-based performances to bring about desired resultsIn exchange for their money, time, and effort, service customers expect to obtain value fromaccess to goods, labor, facilities, environments, professional skills, networks, and systems;normally do not take ownership of any of the physical elements involved.
5What are services?Five broad categories within the non-ownership framework of servicesRented goods servicesDefined space and place rentalsLabor and expertise rentalsAccess to shared physical environmentsAccess to and usage of systems and networks
7Examples of Service Industries Health CareHospital, medical practice, dentistry, eye careProfessional ServicesAccounting, legal, architecturalFinancial ServicesBanking, investment advising, insuranceHospitalityRestaurant, hotel/motel, bed and breakfastSki resort, raftingTravelAirline, travel agency, theme parkOthersHair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design
9People Processing Customers must: physically enter the service factory co-operate actively with the service operationManagers should think about process and output from customer’s perspectiveto identify benefits created and non-financial costs: Time, mental, physical effort
10Possession Processing Customers are less involved compared to people processing servicesInvolvement may be limited to just dropping off the possessionProduction and consumption are separable
11Mental Stimulus Processing Ethical standards required when customers who depend on such services can potentially be manipulated by suppliersPhysical presence of recipients not requiredCore content of services is information-basedCan be ‘inventoried’
12Information Processing Information is the most intangible form of service outputMay be transformed into enduring forms of service outputLine between information processing and mental stimulus processing may be blurred.
13How Services Differ from Pure Products IntangibilityCannot be seen, tasted,felt or smelled beforepurchasingInseparabilityProduction and,consumption, andfrom the providerVariabilityService quality dependson who provides andunder what conditionsPerishabilityCannot be stored,for resale orlater use
14Challenges Posed by Services - Table 1.2 DifferenceMost service productscannot be inventoriedIntangible elementsusually dominatevalue creationServices are oftendifficult to visualize &understandCustomers may beinvolved in co-ProductionImplicationsturned awayHarder to evaluateservice & distinguishfrom competitorsGreater risk &uncertainty perceivedInteraction betweencustomer & provider;but poor task executioncould affect satisfactionMarketing-Related TasksUse pricing, promotion,reservations to smoothdemand; work with ops tomanage capacityEmphasize physical clues,employ metaphors and vividimages in advertisingEducate customers onmaking good choices; offerguaranteesDevelop user-friendlyequipment, facilities &systems; train customers,provide good support
15Challenges Posed by Services - Table 1.2 ImplicationsBehavior of servicepersonnel & customerscan affect satisfactionHard to maintain quality,consistency, reliabilityDifficult to shieldcustomers from failuresTime is money;customers want serviceat convenient timesElectronic channels orvoice telecommunicationsDifferencePeople may be part ofservice experienceOperational inputs andoutputs tend to varymore widelyTime factor oftenassumes greatimportanceDistribution may takeplace throughnonphysical channelsMarketing-Related TasksRecruit, train employees toreinforce service conceptShape customer behaviorRedesign for simplicity andfailure proofingInstitute good servicerecovery proceduresFind ways to compete onspeed of delivery; offerextended hoursCreate user-friendly,secure websites and freeaccess by telephone
17The 7 Ps of services marketing Product/service elementsPlace and timePrice and other user outlaysPromotion and educationProcessPhysical environmentPeople
18Extended Mix for Managing the Customer Interface ProcessHow firm does things may be as important as what it doesCustomers often actively involved in processes, especially when acting as co-producers of serviceOperational inputs and outputs vary more widelyCustomers are often involved in co-productionDemand and capacity need to be balanced
19Extended Mix for Managing the Customer Interface Physical EnvironmentDesign servicescape and provide tangible evidence of service performancesManage physical cues carefully— can have profound impact on customer impressionsCreate and maintain physical appearancesBuildings/landscapingInterior design/furnishingsVehicles/equipmentStaff grooming/clothingSounds and smellsOther tangibles
20Extended Mix for Managing the Customer Interface PeopleInteractions between customers and contact personnel strongly influence customer perceptions of service qualityWell-managed firms devote special care to selecting, training and motivating service employeesOther customers can also affect one’s satisfaction with a service
21Video – Apple and the Retail Store Discussion Question:Apply the additional 3 Ps of the extended services marketing mix to the process of buying an Apple MacBook computer