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

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Presentation on theme: "Marketing in the “New” Economy Internet Marketing CRM Int’l Marketing Service Marketing."— Presentation transcript:

1 Marketing in the “New” Economy Internet Marketing CRM Int’l Marketing Service 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 Difference- Products are just appliances that provide services- Shift perspective from Mfgr to consumer… and focus on benefits No One- Automation, Virtualization & Outsourcing

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

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

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 lect_countries&theme=5&variable_ID=216

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

8 The Economist, 1996 Waves of Change.. % US WORK-FORCE

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10 At present …in U.S. ~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.. Changes in workplace- automation, globalization: Computer & data processing Business services Transportation Changes in workplace- automation, globalization: Computer & data processing Business services Transportation Increased need/desire to recreate & communicate: Hospitality & Travel Interactive Entertainment Mobile Communication Increased need/desire to recreate & communicate: Hospitality & Travel Interactive Entertainment Mobile Communication More People: working more, living longer, living alone: Social services Health services Residential care Child day-care Finance, Insurance, Real estate More People: working more, living longer, living alone: Social services Health services Residential care Child day-care Finance, Insurance, Real estate

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

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

14 Critical Questions 1.What is the “debate” all about regarding how services should be defined / envisioned? o 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? Critical Questions 1.What is the “debate” all about regarding how services should be defined / envisioned? o 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 tangible good; no service Tangible goods with some services Hybrid: equal part goods and service Major service with minor good Pure service; no tangible good Milk Computer & Warranty Meal at Restaurant Legal Advice Hair Styling

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

17 Customer Evaluation as a Function of Tangibility

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

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

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

25 The Four Service Marketing Myths: Remnants of a Goods-Based, Manufacturing Model The 4 characteristics: 1. Do not distinguish services from goods 2. Only have meaning from a manufacturing perspective, and 3. Suggest inappropriate marketing strategies The 4 characteristics: 1. Do not distinguish services from goods 2. Only have meaning from a manufacturing perspective, and 3. Suggest inappropriate marketing strategies

26 Key Point- Product-service differentiation is result of industrial age-2 nd 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 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 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 1. What is the “debate” all about regarding how services should be defined / envisioned? o 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? Critical Questions 1. What is the “debate” all about regarding how services should be defined / envisioned? o 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 1. Creating & offering the consumer value 2. Communicating a desired & distinct image 3. Create, sustain & enhance customer relationships 4. Defining- maintaining- improving quality Mind the gaps…. 1. Creating & offering the consumer value 2. Communicating a desired & distinct image 3. Create, sustain & enhance customer relationships 4. Defining- maintaining- improving quality Mind the gaps….

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

31 Closing the gaps by fine tuning 4 Service P’s ~Process ~ People ~ 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 Internal Marketing Employees “enabling the promise” Performance/ Experience Management “delivering promises” External Marketing Customers “setting promises” Services Mgt Triangle

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

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 ______% 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 Why services lose customers ~3 ~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. 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 Time is Money (Lost Customers) *Source: Forum Corporation Time Taken to Resolve a Customer’s Problem 20% 25% 45% 55% 80% Percent of Customers That Will Not Buy Again MinutesHours Days WeeksMonths

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.

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

54 Critical Questions 1. What is the “debate” all about regarding how services should be defined / envisioned? o 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? Critical Questions 1. What is the “debate” all about regarding how services should be defined / envisioned? o 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?

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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 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 Increasingly Outsourced Increasingly Virtualized

57 U biquitious C omPunication T echnologies 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'.

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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 shoppingFuture 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 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 Increasingly Outsourced Increasingly Virtualized

65 Predicting a diverse future: Directions and issues in the marketing of services European Journal of Marketing ; Bradford; 2002; Angus LaingAngus Laing Predicting a diverse future: Directions and issues in the marketing of services European Journal of Marketing ; Bradford; 2002; Angus LaingAngus Laing “Driven by technological developments, deregulation, and globalization - the service sector in post-industrial economies is facing unprecedented change” “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 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 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” 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” m/counsel/index.cfm Free Advice on Any Topic Free Advice on Any Topic Online From America's Elders Personal Reply to Each Request org org Free Advice on Any Topic Free Advice on Any Topic Online From America's Elders Personal Reply to Each Request org org

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- 1,2,312 3

70 Restaurants without waiters

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

72 “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 "secondary production "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….. ? "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 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 The most numerous & stable jobs of tomorrow will be those that cannot be offshored Why Dilbert is doomed The jobs of tomorrow are not what you'd expect

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

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80 The Other Side of Outsourcing

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