Services Marketing MTG 410 Fall 2000 Prof: Donna J. Hill, Ph.D.

What Are Services? n Services are deeds, processes, and performances. –Nature of product. –Greater involvement of customers in the production process. –People as part of the product. –Greater difficulties in maintaining quality control standards.

A Different Context for Services Marketing n Narrow definition of marketing by other managers. n Limited appreciation for marketing skills. n Different organizational structure. n A relative lack of competitive data. n Problems determining costs. n Constraints and opportunities facing marketers of public and nonprofits.

Examples of Service Industries n Health Care –hospital, medical practice, dentistry, eye care n Professional Services –accounting, legal, architectural n Financial Services –banking, investment advising, insurance n Hospitality –restaurant, hotel/motel, bed & breakfast, –ski resort, rafting n Travel –airlines, travel agencies, theme park n Others: –hair styling, pest control, plumbing, lawn maintenance, counseling services, health club

Figure 1-2 Percent of U.S. Labor Force by Industry Percent of GDP Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): Year Services Manufacturing Mining & Agriculture

Figure 1-3 Percent of U.S. Gross Domestic Product by Industry Percent of GDP Year Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): Services Manufacturing Mining & Agriculture

Importance of Service Sector n $3.52 trillion of U.S. GDP n 53.2% of U.S. GDP n 71% of total employment n 91% of new jobs from 1992 to 2005 Services Fast growing services for the next decade Health services Business services Finance, insurance, real estate Residential care Computer & data processing Child day-care Social services Transportation services

Factors Contributing to Growth n Movement to information age n Shift to industrialized economy n Aging population n Longer life expectancies n Increase leisure time n High per capita income n Changing social and cultural values n Advances in technology

Challenges for Services n Defining and improving quality n Communicating and testing new services n Communicating and maintaining a consistent image n Motivating and sustaining employee commitment n Coordinating marketing, operations and human resource efforts n Setting prices n Standardization versus personalization

Differences Between Goods and Services Intangibility Perishability Simultaneous Production and Consumption Heterogeneity

Figure 1-1 Tangibility Spectrum Tangible Dominant Intangible Dominant Salt Soft Drinks Detergents Automobiles Cosmetics Advertising Agencies Airlines Investment Management Consulting Teaching Fast-food Outlets Fast-food Outlets

Implications of Intangibility Services cannot be inventoried Services cannot be inventoried Services cannot be patented Services cannot be patented Services cannot be readily displayed or communicated Services cannot be readily displayed or communicated Pricing is difficult Pricing is difficult

Implications of Heterogeneity Service delivery and customer satisfaction depend on employee actions Service delivery and customer satisfaction depend on employee actions Service quality depends on many uncontrollable factors Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted There is no sure knowledge that the service delivered matches what was planned and promoted

Implications of Simultaneous Production and Consumption Customers participate in and affect the transaction Customers participate in and affect the transaction Customers affect each other Customers affect each other Employees affect the service outcome Employees affect the service outcome Decentralization may be essential Decentralization may be essential Mass production is difficult Mass production is difficult

Implications of Perishability It is difficult to synchronize supply and demand with services It is difficult to synchronize supply and demand with services Services cannot be returned or resold Services cannot be returned or resold

Table 1-2 Services are Different Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,” Journal of Marketing 49 (Spring 1985):

Figure 1-5 The Services Marketing Triangle Internal Marketing Interactive Marketing External Marketing Company (Management) CustomersEmployees “enabling the promise” “delivering the promise” “setting the promise” Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

Services Marketing Triangle Applications Exercise n Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle? n How is each type of marketing being carried out currently? n Are the three sides of the triangle well aligned? n Are there specific challenges or barriers in any of the three areas?

Ways to Use the Services Marketing Triangle Overall Strategic Assessment How is the service organization doing on all three sides of the triangle?How is the service organization doing on all three sides of the triangle? Where are the weaknesses?Where are the weaknesses? What are the strengths?What are the strengths? Specific Service Implementation What is being promoted and by whom? How will it be delivered and by whom? Are the supporting systems in place to deliver the promised service?

Source: Adapted from A. Parasuraman Company Customers Providers Technology Figure 1-6 The Services Triangle and Technology

Services Marketing Mix: 7 Ps for Services n Traditional Marketing Mix n Expanded Mix for Services: 7 Ps n Building Customer Relationships Through People, Processes, and Physical Evidence n Ways to Use the 7 Ps

Traditional Marketing Mix n All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services: Product Product Price Price Place Place Promotion Promotion

Expanded Mix for Services -- the 7 Ps n Product n Price n Place n Promotion n People n Process n Physical Evidence

Table 1-3 Expanded Marketing Mix for Services

Table 1-3 (Continued) Expanded Marketing Mix for Services

Ways to Use the 7 Ps Overall Strategic Assessment n How effective is a firm’s services marketing mix? n Is the mix well-aligned with overall vision and strategy? n What are the strengths and weaknesses in terms of the 7 Ps? Specific Service Implementation n Who is the customer? n What is the service? n How effectively does the services marketing mix for a service communicate its benefits and quality? n What changes/improvements are needed?

Characteristics of Services n Intangibility - Lack of tangible assets which can be seen, touched, or smelled prior to purchase. n Perishability - Inability of a service to be inventoried or stored. n Inseparability - Simultaneous production and consumption of a service. n Variability - Unwanted or random levels of service quality customers receive when they patronize a service firm.