Special Topic: Strategies for Service Markets Chapter Fifteen

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 15-2 Key Learning Points The nature and characteristics of services The service quality model Measuring the quality of services Developing marketing strategies for services Marketing-mix decision making for service businesses How information technology affects the marketing of services

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 15-3 Overview Services account for nearly 85% of U.S. jobs.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 15-4 Figure 15.2 Services as a Percentage of U.S. GDP

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 15-5 Figure 15.3 Continuum of Evaluation for Different Types of Products

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 15-6 Discussion In groups of three, list three services not shown in Figure Classify each service in terms of the difficulty of evaluation and the degree to which it is high in search, experience, or credence qualities. In groups of three, list three services not shown in Figure Classify each service in terms of the difficulty of evaluation and the degree to which it is high in search, experience, or credence qualities.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 15-7 Overview The distinction between physical products and services is not always crystal clear.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 15-8 The Nature of Services IntangibilityNonstandardization Inseparability of production and consumption

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 15-9 Figure 15.4 A Perceived Model of Quality

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Figure 15.5 Dimensions of Service Quality

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Figure 15.6 Loss Aversion Model of Service Quality

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall The Nature of Services Types of Service Gaps Between customers’ expectations and management perceptions Between management’s perceptions and service quality specifications Between service quality specifications and service delivery Between service delivery and external communications

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Table 15.1 Example of SERVQUAL Survey

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Service Quality The return on quality (ROQ) Quality is an investment. Quality improvement efforts must be financially accountable. It is possible to overspend on quality. Not all quality expenditures are equally valid.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Figure 15.7 Linking Customer Satisfaction to Retention

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Strategic Issues Services can also be differentiated from the competition by emphasizing the value chain: Inbound logistics Operations Marketing and sales Service

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Strategic Issues Professional services Professional services are highly dependent upon employees. Quality is influenced by several factors. Differentiation can occur along several dimensions. Making a firm’s accomplishments tangible is the key to success. CRM is critical.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall “ Service blueprinting involves creating a flowchart that describes the flow of activity from the time the customer first contacts the service provider to the time the customer receives the service. ” - Russell S. Winer

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Figure Express Mail Delivery Service Blueprint

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Figure Singapore Airlines Service Blueprint

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Figure Singapore Airlines: Detailed Customer Service Activities

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Activity In groups of two, create a service blueprint for one of the following services: In groups of two, create a service blueprint for one of the following services: A restaurant A hair salon A bank or credit union An e-commerce web site A furniture store

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Marketing Mix Implications Distribution channels The intangible nature of services complicates distribution decisions. Service principles must be distinguished from service deliverers.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Marketing Mix Implications Major approaches to service distribution: Company owned Agents and brokers Electronic channels Franchising

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Marketing Mix Implications Elements of Typical Franchise Agreement Nature of service Geographic territory Revenue percent Agreement length Up-front fee Terms of agreement Promotion support Support provided Termination conditions

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Marketing Mix Implications Advertising Plays a key role in setting expectations Implications for service advertising

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Marketing Mix Implications Pricing Service prices are difficult for consumers to evaluate and compare. Price is often used as an indicator of service quality. The role of reference prices is very important.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Customer Relationship Management CRM is critically important for contractual services. Marketers must continuously remind customers about the benefits of the service. Marketers need to track the customer’s usage.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Global Aspects of Services Marketing Basic global growth strategies for service businesses. MultisiteMultiserviceMultisegment

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Table 15.2 Issues Posed by Internationalization of a “Strategic Service Vision”

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Illustration Disney learned that the quality of service concepts can be difficult to maintain in a global expansion due to cultural and institutional differences. Disney learned that the quality of service concepts can be difficult to maintain in a global expansion due to cultural and institutional differences.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Impact of Technology on Service Marketing Technology has changed services marketing for three main reasons: Internet channels of distribution. Computerization. Opportunities for differentiation.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Illustration Travel services are the largest category of e-commerce. Most bookings are done through Internet travel sites and web sites run by airlines. While fares can be easily compared at travel sites, the majority of bookings are done through airline websites as discount airlines do not sell through travel agents. Travel services are the largest category of e-commerce. Most bookings are done through Internet travel sites and web sites run by airlines. While fares can be easily compared at travel sites, the majority of bookings are done through airline websites as discount airlines do not sell through travel agents.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall Executive Summary Services have experience attributes. Services have three characteristics. Service quality is defined by five dimensions. Service quality can be assessed negatively. SERVQUAL measures service quality. There are several strategic issues in services marketing. Globalization of services requires special attention. New technologies affect channels of distribution for services.