MARKETING of SERVICES Dr. Jo Ann Asquith

Discussion Question (Posted on D2L) Introductions Describe your best service experience Describe your worst service experience What made the experiences different?

The Service Management Decision Framework

Distinctive Aspects of Service Management

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

What is a Service? Defining the Essence An act or performance offered by one party to another (performances are intangible, but may involve use of physical products) An economic activity that does not result in ownership A process that creates benefits by facilitating a desired change in customers themselves, physical possessions, or intangible assets

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

The Service Sector Includes businesses, government agencies, nonprofits Jobs range from high-paid professionals and technicians to minimum-wage positions Service organizations can be any size--from huge global corporations to local small businesses In most countries, adds more economic value than agriculture, raw materials and manufacturing combined In the USA -- world’s largest economy -- services account for 73% of GDP and 76% of jobs

Marketing of Services A service is an activity or series of activities of more or less tangible nature that normally, but not necessarily, take place in interactions between the customer and the service employees and /or systems of the service provider, which are provided as solutions to customer problems.

Overview: Why Services Matter Services dominate U.S. and worldwide economies Services are growing dramatically Service leads to customer retention and loyalty Service leads to profits Services help manufacturing companies differentiate themselves

Reasons for the Growth in Service Industries 1. Increasing affluence 2. More leisure time 3. High % of women in the labor force 4. Greater life expectancy 5. Greater complexity of products 6. Increasing complexity of life 7. Greater concern about ecology and resource scarcity 8. Increasing number of new products

Factors Stimulating Competition and Innovation in the Service Economy Government Policies (e.g., regulations, trade agreements) Social Changes (e.g., affluent, time poor, seek experiences) Business Trends –Manufacturers offer service –Growth of chains and franchising –Pressures to improve productivity and quality –More strategic alliances –Marketing emphasis by nonprofits –Innovative hiring practices Advances in IT (e.g., speed, digitization, wireless, Internet) Internationalization (travel, transnational companies)

GDP by Industry in the USA

Categories of Services Type of Market - Consumer - Business Degree of Labor – Intensiveness - People based- Equipment based Degree of Customer Contact - High- Low Skill of the Service Provider - Professional- Nonprofessional Goal of the Service Provider - Profit- Nonprofit

What is Service? The Old View Service is a technical after-sale function that is provided by the service department. Old: Service = wrench time Old view of service = Customer Service Center

What is Service? The New View Service includes every interaction between any customer and anyone representing the company, including: Customer Dealers Salespeople Receptionists and Schedulers Management and executives Billing and Accounting Personnel Service Employees Web site and any e-channel Interaction

Service Can Mean all of These Service as a product Customer service Services as value add for goods Service embedded in a tangible product UNCUNC | UNC Di re ct or yUNC Di re ct or y | Site Map Site Map | Equal Opportunit y PolicyEqual Opportunit y Policy | Terms of Use & Privacy PolicyTerms of Use & Privacy Policy | We b m a s t e rWe b m a s t e r Kenan-Flagler Gear Directory Academic Area s Centers & Instit utes The Kenan Instit ute Contact Us

Unique Service Characteristics Heterogeneity Customer Contact Client – based relationships An activity or process Intangibility Perishability Inseparability of production and consumption

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

Basic Differences between Goods and Services Customers do not obtain ownership of services Service products are intangible performances--not objects Customers often actively involved in production process Other people may form part of product experience More variability in operational inputs and outputs--harder to improve productivity, control quality Often difficult for customers to evaluate Absence of inventories after production Time factor is more important--speed may be key Delivery systems include electronic and physical channels

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

Implications of Heterogeneity Service delivery and customer satisfaction depend on employee actions Service quality depends on many uncontrollable factors 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 affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult

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

Internal Services Service elements within an organization that facilitate creation of--or add value to--its final output Includes: –accounting and payroll administration –recruitment and training –legal services –transportation –catering and food services –cleaning and landscaping Increasingly, these services are being outsourced

The “7Ps” of Integrated Service Management vs. the Traditional “4Ps” Product elements Price and other user outlays Promotion and education Place, cyberspace, and time Process People Physical evidence

Product Physical good features Quality level Accessories Packaging Warranties Product lines Branding Benefits

Service Components Core The reason for being on the market. Facilitating Additional services that facilitate the use of the core. If facilitating services are lacking, the core service cannot be consumed Support Are used to the value and/or differentiate the use of the core service.

Price and Other User Costs Managing Customer Outlays Relative to Corporate Revenues Quoted price level and trade margins Discount terms Price-setting mechanism –determined by seller –negotiation/barter –auction/reverse auction Credit terms Strategies to minimize other user costs –out-of-pocket financial expenses (e.g., travel, phone) –time investments and mental/physical effort –negative sensory experiences

Pricing Issues How much should be charged for this service? What should be the basis of pricing? Who should collect payment? Where should payment be made? When should payment be made? How should payment be made? How should prices be communicated to the target market?

Promotion and Education Inform, Educate, Persuade, and Remind Marketing communication tools –media elements (print, broadcast, outdoor, etc.) –Social media and websites –personal selling, customer service –sales promotion –publicity/PR Imagery and recognition –branding –corporate design Content –information, advice –persuasive messages –customer education/training

Promotion Mix Elements Salespeople –Number - Selection –Training- Incentives Advertising –Types of ads- Copy thrust –Targets- Media types Sales Promotion Publicity/ Public relations

Place, Cyberspace, and Time Delivery Decisions: Where, When, and How Channel type and exposure Geographic locations served Service schedules Physical channels Electronic channels Customer control and convenience Channel partners/intermediaries

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

People The Human Side of the Enterprise The right employees performing tasks well –job design –recruiting/selection –training –motivation –evaluation/rewards –empowerment/teamwork The right customers for the firm’s mission –fit well with product/processes/corporate goals –appreciate benefits and value offered –possess (or can be educated to have) necessary skills –firm is able to manage customer behavior

Process Method and Sequence in Service Creation and Delivery Design of activity flows Number and sequence of actions for customers Providers of value chain components Nature of customer involvement Role of contact personnel Role of technology, degree of automation

Physical Evidence Providing tangible evidence of service performances Create and maintaining physical appearances –buildings/landscaping –interior design/furnishings –vehicles/equipment –staff grooming/clothing –other tangibles Select tangible metaphors for use in marketing communications

Physical Evidence Facility design –Aesthetics –Functionality –Ambient Conditions Equipment Signage Employee dress Other tangibles –Reports – Business Cards –Statements – Guarantees

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 8 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?

Relating the 7Ps to the Service Decision Framework

Service Decision Framework What Business Are We In? With what industry is our service associated? With what other goods and services do we compete? What forces for change do we face? What solutions do we offer to meet customer needs? (How do we create value?)

The Services Marketing Triangle Internal Marketing Interactive Marketing External Marketing Company (Management) CustomersEmployees “enabling the promise” “delivering the promise” “setting the promise”

Ways to Use the Services Marketing Triangle Overall Strategic Assessment How is the service organization doing on all three sides of the triangle? Where are the weaknesses? 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?

Challenges and Questions for Service Marketers How can service quality be defined and improved? How can services be designed and tested effectively? How does the firm accommodate fluctuating demand? How can the organization ensure the delivery of consistent quality service? How can the firm best select and motivate service employees? How should prices be set? How can the firm be certain it is communicating a consistent and relevant message? How does the firm communicate quality and value to the customers? Finding a balance between standardization versus customization

The Service Profit Link Employee Satisfaction and Loyalty Service Value Customer Satisfaction and loyalty Profits and Growth

The Service Profit Link “Putting the Service-Profit Chain to Work” by James L. Heskett; Thomas O. Jones; Gary W. Loveman; W. Earl Sasser Jr.; Leonard A. Schlesinger