© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin A Note on the PowerPoint Slides...  These PowerPoint slides contain selected exhibits, figures, and tables from the chapters as well as objectives for the chapters. For some chapters, we include extra lecture slides and in-class exercises that we have compiled and used in our classes. The lecture slides are not intended to provide full outlines or complete lectures for the chapters, but rather may be used selectively to enhance class sessions.

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Part 1 FOUNDATIONS FOR SERVICES MARKETING

1 Chapter Introduction to Services  What are services?  Why services marketing?  Service and Technology  Characteristics of Services Compared to Goods  Services Marketing Mix  Staying Focused on the Customer

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Objectives for Chapter 1: Introduction to Services  Explain what services are and identify important trends in services.  Explain the need for special services marketing concepts and practices and why the need has developed and is accelerating.  Explore the profound impact of technology on service.  Outline the basic differences between goods and services and the resulting challenges and opportunities for service businesses.  Introduce the expanded marketing mix for services and the philosophy of customer focus, as powerful frameworks and themes that are fundamental to the rest of the text.

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Examples of Service Industries  Health Care  hospital, medical practice, dentistry, eye care  Professional Services  accounting, legal, architectural  Financial Services  banking, investment advising, insurance  Hospitality  restaurant, hotel/motel, bed & breakfast  ski resort, rafting  Travel  airline, travel agency, theme park  Others  hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Figure 1.1 Contributions of Service Industries to U.S. Gross Domestic Product Source: Inside Sam’s $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86.

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Figure 1.2 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

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Percent of U.S. Labor Force 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. Labor Force by Industry

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 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 Figure 1.4 Percent of U.S. Gross Domestic Product by Industry

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Table 1.1 Eight Central Paradoxes of Technological Products Source: D. G. Mick and S. Fournier, “Paradoxes of Technology: Consumer Cognizance, Emotions, and Coping Strategies,” Journal of Consumer Research 25 (September 1998), pp. 123–47.

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Table 1.2 Goods versus Services Source: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, “A Conceptual Model of Service Quality and Its Implications for Future Research,” Journal of Marketing 49 (Fall 1985), pp. 41–50.

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Why study Services Marketing?  Service-based economies  Service as a business imperative in manufacturing and IT  Deregulated industries and professional service needs  Services marketing is different  Service equals profits

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Characteristics of Services Compared to Goods Intangibility Perishability Simultaneous Production and Consumption Heterogeneity

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Implications of Intangibility  Services cannot be inventoried  Services cannot be easily patented  Services cannot be readily displayed or communicated  Pricing is difficult

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Implications of Heterogeneity  Service delivery and customer satisfaction depend on employee and customer actions  Service quality depends on many uncontrollable factors  There is no sure knowledge that the service delivered matches what was planned and promoted

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Implications of Simultaneous Production and Consumption  Customers participate in and affect the transaction  Customers affect each other  Employees affect the service outcome  Decentralization may be essential  Mass production is difficult

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Implications of Perishability  It is difficult to synchronize supply and demand with services  Services cannot be returned or resold

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Challenges for Services  Defining and improving quality  Designing and testing new services  Communicating and maintaining a consistent image  Accommodating fluctuating demand  Motivating and sustaining employee commitment  Coordinating marketing, operations, and human resource efforts  Setting prices  Finding a balance between standardization versus personalization  Ensuring the delivery of consistent quality

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Traditional Marketing Mix  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  Price  Place  Promotion

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Expanded Mix for Services -- The 7 Ps  Product  Price  Place  Promotion  People  All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment.  Physical Evidence  The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service.  Process  The actual procedures, mechanisms, and flow of activities by which the service is delivered—the service delivery and operating systems.

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Table 1.3 Expanded Marketing Mix for Services

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Ways to Use the 7 Ps Overall Strategic Assessment  How effective is a firm’s services marketing mix?  Is the mix well-aligned with overall vision and strategy?  What are the strengths and weaknesses in terms of the 7 Ps? Specific Service Implementation  Who is the customer?  What is the service?  How effectively does the services marketing mix for a service communicate its benefits and quality?  What changes/ improvements are needed?