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& OutsourcingNo Difference-Products are just appliances that provide services- Shift perspective from Mfgr to consumer… and focus on benefits
4 Defining -a ServiceAn act or performance offered by one party for anotherAn economic activity that does not result in ownershipA process that creates benefits by facilitating a desired change in:customers themselves –get a haircutphysical possessions- get a wigintangible assets- get therapy4
5 Service as process…. People Processing Mental Stimulus Processing Who / What is Direct Recipient of the Service?DIRECTED AT POSSESSIONSDIRECTED AT PEOPLEWhat is theNature of theService Act?People ProcessingPossession ProcessingTANGIBLEACTSe.g., airlines, hospitals,haircutting, restaurants hotels, fitness centerse.g., transport, repair, cleaning, landscaping, retailing, recyclingMental Stimulus ProcessingInformation Processing(directed at intangible assets)INTANGIBLEACTSe.g., accounting, banking,insurance, legal, researche.g. media, consulting,education, psychotherapy
6 Importance of Service Sector In most countries, services add more economic value than agriculture, raw materials and manufacturing combinedIn 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 ofEmploymentAgricultureServicesIndustryTime, per Capita IncomeSource: IMF, 1997
8 Waves of Change.. % US WORK-FORCE THE PROPORTION OF AMERICANS WORKING IN SERVICESBANKING, INSURANCE, CONSULTING, SOFTWARE DESIGN, HEALTH CARE, ENTERTAINMENTCONTINUES 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 sectorServices account for ~80% of U.S. GDPService occupations is responsible for ~90% job growthComposition 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 servicesHealth servicesResidential careChild day-careFinance, Insurance, Real estateChanges in workplace- automation, globalization:Computer & data processingBusiness servicesTransportationIncreased need/desire to recreate & communicate:Hospitality & TravelInteractive EntertainmentMobile Communication
12 Services dominate the United States Economy: GDP by Industry, 2001 Agriculture, Forestry,Mining, Construction 8%Finance, Insurance,Real Estate20%Manufacturing 14%Government(mostly services)13%Wholesale andRetail Trade16%Other Services 11%Transport, Utilities,Communications8%SERVICESBusinessServices5%Health6%Source: Bureau of Economic Analysis, November 2002
13 US likely to devote "30 %+ GDP on health by mid century."
14 Critical QuestionsWhat 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 goodMajor service with minor goodHybrid: equal part goods and serviceTangible goods with some servicesPure tangible good; no serviceMilkComputer& WarrantyMeal at RestaurantHair StylingLegal Advice
16 Product - Service Spectrum SaltSoft DrinksPureServiceTangibleGoodw/ServicesMajorw/ GoodsHybridDetergentsAutomobilesCosmeticsFast-foodOutletsIntangibleDominantTangibleDominantFast-foodOutletsAdvertisingAgenciesAirlinesInvestmentManagementConsultingTeaching
17 Customer Evaluation as a Function of Tangibility
18 unlike products Intangibility Services cannot be experienced before purchaseInseparabilityServices cannotbe separatedfrom theirprovidersunlike productsVariabilityQuality ofservices dependson who providesthem & when,where, & howPerish-abilityServices cannotbe stored forlater sale or use
19 Intangibility Services mrktg: Describe the invisible Articulate the imaginary& Define the indistinct
20 InseparabilityPerformance & consumption of service - happens at same time restaurant, hotel; getting haircut, etc)Customers participate in & affect the transactionCustomers affect each other
21 Variability-Heterogeneity Difficult to standardizeDelivery, Quality & Customer Satisfaction depend on employee actionsEmployees 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 servicesServices cannot be returned or resold
23 Marketing Strategies that address “shortcoming” Intangibilityuse tangibles to create/convey identity -signs, uniforms, imageryGood hands of Allstate/ Traveler’s Umbrella/ Prudential RockInseparabilitysimultaneous production & consumptionimportance of service providerselection, training and rewarding of staffavoid customer conflictInseparabilityIncreaseprofessionalismofemployeesIntangibility“Tangibilize”the intangibleMarketingStrategiesthat address“shortcoming”standardization difficultConstantly monitor- regularly evaluate staffSystemize/franchise production & marketingVariabilityPerish-abilityconsumption cannot be storedmatch supply and demanduse of part-time staffdifferential pricingstimulation of off-peak demandcomfortable waiting areareservation systemVariabilitySystematizeserviceproduction& deliveryPerish-abilityMatch 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 ModelThe 4 characteristics:Do not distinguish services from goodsOnly have meaning from a manufacturing perspective, andSuggest inappropriate marketing strategies
26 Key Point- Product-service differentiation is result of industrial age-2nd wave thinking Re- Variabilty:Customizaton not standardization is the goalRe-Inseparability:“Customer-ization” not isolation = goalRe-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 perspectiveInstead of focusing on product – service differences…Focus on consumer commonalities…in “consuming & evaluating” that which is purchased
28 Critical QuestionsWhat 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 valueCommunicating a desired & distinct imageCreate, sustain & enhance customer relationshipsDefining- maintaining- improving qualityMind the gaps….
30 Service Quality Gaps Expectations Consumer Overpromising Marketer Word of MouthCommunicationsPersonal NeedsPast ExperienceExpected ServiceExpectationsConsumerPerceived ServiceOverpromisingMarketerExternalCommunicationsto ConsumersService DeliveryPerformanceMisunderstandingService Quality SpecsCommunicationMgmt. 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 productThey 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 HRDelivering excellent service: Lessons from the best firms
34 Marketing-to personnel is as important as to consumers External MarketingInternal MarketingEmployeesCustomers“enabling thepromise”Services Mgt Triangle“settingpromises”Performance/ Experience Management“delivering promises”
35 Process Trade-off between Standardization & Personalization Same as w/ ProductsLimiting 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 productWhat 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 mixAgain – 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
40 Identifiable apparel: An image-making marketing tool 1. Improves your image: Customers equate a professional-looking worker w/ a well-run company2. Increases employee commitment: Adding employee's name can boost morale & loyalty3. 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%9070503010Percent of Customers That Will Not Buy AgainMinutesHoursDaysWeeksMonthsTime 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 serviceLess 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 complaintEncouraging 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:
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 QuestionsWhat 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?
56 Exact nature of Future Changes- depends on nature of the Service Network Information Services: banking, credit card, insurance, telecomRetailHospitality: travel, restaurants, lodging, leisure, hotelsLabor & Expertise:Business Support: administration-processes, consulting, customer servicePersonal & Professional: medical, legal, financial, technical assistanceUCTEnhanced Self-ServiceIncreasinglyOutsourcedIncreasinglyVirtualized
57 Ubiquitious ComPunication Technologies 3G videophones w/ broadband – 2 meg per second – always online for self-serviceMobile KiosksAI Enhanced PDA devices w/ speech recognition & avatarsRFID – everywhere & in everything
58 RFID- everywhere & in everything SmartCode making 0.25mm chipstarget cost 5-10 cents ..w/ feet rangeManufacturing 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 Jewelryembed 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 metresUltra-wide band frequency“One-ticket fits all”
63 RFID Shopping App’sFuture grocery shopping-integrated –info system
64 Exact nature of Future Changes- depends on nature of the Service Network Information Services: banking, credit card, insurance, telecomRetailHospitality: travel, restaurants, lodging, leisure, hotelsLabor & Expertise:Business Support: administration-processes, consulting, customer servicePersonal & Professional: medical, legal, financial, technical assistanceUCTEnhanced Self-ServiceIncreasinglyOutsourcedIncreasinglyVirtualized
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 ExperiencesRedefining 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 & queriesSome Computer generated…Expert-system managed… Responses
68 Professional Services To date-- characterized by high levels of limited/regulated interpersonal interactionNOW- 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 laborInventors & investors always figure out ways to replace people with machines”Automation- 1 ,2 ,3
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 doomedThe jobs of tomorrow are not what you'd expectRecession 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 workComputers & 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 offshoredcannot be automatedrequire a high degree of creativity& rely on the human touch in face-to-face interactionsthese 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 doomedThe 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 Index400,000 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 Labor104,000 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 America3.5 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 yearSource: Computer world and Interunity Group, Inc., April & May 2003Base: Survey of 252 corporate IT managers in the U.S.; multiple responses allowed