1. McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

2. FOUNDATIONS FOR SERVICES MARKETING
Part 1
FOUNDATIONS FOR SERVICES MARKETING
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3. Introduction to Services
Chapter 1
Introduction to Services
What are Services?
Why Service Marketing?
Service and Technology
Characteristics of Services
Service Marketing Mix
Staying Focused on the Customer
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4. The American Marketing Association defines services as - “Activities, benefits and satisfactions which are offered for sale or are provided in connection with the sale of goods.”

5. What are Services?
Intangible products such as accounting, banking, cleaning, consultancy, education, insurance, expertise, medical treatment, or transportation.
Sometimes services are difficult to identify because they are closely associated with a good; such as the combination of a diagnosis with the administration of a medicine.
No transfer of possession or ownership takes place when services are sold, and they (1) cannot be stored or transported, (2) are instantly perishable, and (3) come into existence at the time they are bought and consumed. .
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6. 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
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7. Contributions of Service Industries to U.S. Gross Domestic Product
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8. Tangibility Spectrum
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9. Why Service Marketing?
The world economy nowadays is increasingly characterized as a service economy.
This is primarily due to the increasing importance and share of the service sector in the economies of most developed and developing countries.
In fact, the growth of the service sector has long been considered as indicative of a country’s economic progress.
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10. Why Service Marketing?
Economic history tells us that all developing nations have invariably experienced a shift from agriculture to industry and then to the service sector as the main stay of the economy.
This shift has also brought about a change in the definition of goods and services themselves. No longer are goods considered separate from services.
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11. Why Service Marketing?
Rather, services now increasingly represent an integral part of the product and this interconnectedness of goods and services is represented on a goods-services continuum.
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12. Percent of U.S. Labor Force by Industry
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13. Examples of Goods Companies that are Expanding into Services
Boeing
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14. Proliferation of technology-based services Customers Perspective
Technology is providing vehicles for delivering existing services in more accessible, convenient, productive ways.
Technology facilitates basic customer service functions such as bill paying and order tracking.
Technology also facilitates transactions by offering a direct vehicle for making purchases.
Technology also gives customers access to a wealth of information.

15. Proliferation of technology-based services
Through self-service technologies, customers can serve themselves more effectively.
On the downside, customers worry about privacy and the confidentiality of their personal information.
Customer technology readiness is also an issue with some customers who prefer to be laggards.
With technology infusion, there is a loss of human interaction, which may be seen as a negative by both customers and employees.

16. Proliferation of technology-based services Employess
For employees, technology can provide tremendous support in making them more efficient and effective in delivering services. Customer relationship management and sales support software are broad categories of software that can aid front-line employees in providing better service.

17. Proliferation of technology-based services
Employees can use the information available through technology to customize services and create greater customer satisfaction.
Not all employees are eager to integrate technology into their work life either because they don't want to change or they don't see value in the new technology.

18. Characteristics of Services Compared to Goods
Intangibility
Heterogeneity
Simultaneous
Production
and
Consumption
Perishability
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19. Characteristics of Services Compared to Goods
Intangibility: Services are intangible and do not have a physical existence. Hence services cannot be touched, held, tasted or smelt.
This is most defining feature of a service and that which primarily differentiates it from a product.
Also, it poses a unique challenge to those engaged in marketing a service as they need to attach tangible attributes to an otherwise intangible offering.
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20. Characteristics of Services Compared to Goods
Heterogeneity/Variability: Given the very nature of services, each service offering is unique and cannot be exactly repeated even by the same service provider. While products can be mass produced and be homogenous the same is not true of services. eg: All burgers of a particular flavor at McDonalds are almost identical. However, the same is not true of the service rendered by the same counter staff consecutively to two customers.
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21. Characteristics of Services Compared to Goods
Perishability: Services cannot be stored, saved, returned or resold once they have been used. Once rendered to a customer the service is completely consumed and cannot be delivered to another customer. eg: A customer dissatisfied with the services of a barber cannot return the service of the haircut that was rendered to him.
At the most he may decide not to visit that particular barber in the future.
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22. Characteristics of Services Compared to Goods
Inseparability/Simultaneity of production and consumption: This refers to the fact that services are generated and consumed within the same time frame. Eg: a haircut is delivered to and consumed by a customer simultaneously unlike, say, a takeaway burger which the customer may consume even after a few hours of purchase. Moreover, it is very difficult to separate a service from the service provider. Eg: the barber is necessarily a part of the service of a haircut that he is delivering to his customer.
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23. Comparing Goods and Services
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24. Implications of Intangibility
Services cannot be inventoried
Services cannot be easily patented
Services cannot be readily displayed or communicated
Pricing is difficult
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25. 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
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26. Implications of Simultaneous Production and Consumption
Most goods are produced first, then sold and consumed, many services are sold first and then produced and consumed simultaneously
Restaurant services can not be provided until they have been sold and the dining experience is essentially produced and consumed at the same time.
For car the scenario is different.
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27. Implications of Simultaneous Production and Consumption
Employees affect the service outcome
Decentralization may be essential
Mass production is difficult
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28. Implications of Perishability
Demand forecasting and creative planning for capacity utilization are therefore important and challenging decisions areas
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29. Consumer Evaluation Processes for Services
Search Qualities
attributes a consumer can determine prior to purchase of a product
Experience Qualities
attributes a consumer can determine after purchase (or during consumption) of a product
Credence Qualities
characteristics that may be impossible to evaluate even after purchase and consumption

30. Figure 13.2 Continuum of Evaluation for Different Types of Products
Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall

31. Consumer Evaluation Processes for Services
Products high in search qualities are the easiest to evaluate .
Product high in experience qualities are more difficult to evaluate because they must be purchased and consumed before assessment is possible (center)
Products high in credence qualities are the most difficult to evaluate because customer may be unaware of or may lack sufficient knowledge to appraise whether the offerings satisfy given wants or needs even after usage and /or consumption (right end of the continuum)
Most of the goods fall to the left whereas most services fall to the right.

32. Challenges and Questions for Service Marketers
Defining and improving quality
Designing and testing new services
Communicating and maintaining a consistent image
Accommodating fluctuating demand
Motivating and sustaining employee commitment
Jerome
The are 3 main reasons why our program is focusing on services.
It provides a higher profit margin than tangible products,
Increases satisfaction and retention,
Provides a competitive advantage over others.
I am going to use two examples to illustrate these points.
The automotive industry has typically been perceived as a manufacturing industry. However,
after-sale services and parts account for nearly 80% of all revenue opportunities, and more than 50% of the average automobile dealer’s profits
It is by far the largest creator of shareholder value on a percentage basis. A GM study revealed that $9 billion in after sale revenue produced $2 billion in profits (22% margin). Profits from $150 billion car sales were much lower.
JD Power and Associates published a report showing a strong correlation between customer satisfaction with after-sale services and customer intent to repurchase the same brand (Lexus and Saturn cars)
Hyundai’s success is due largely to its differentiation strategy of offering 10 year - 100,000 mile guarantee. The service offering is changing customer’s perception of the brand
The same can be said about the personal computer industry.
With the advancement of technology, personal computers are now becoming more and more of a commodity. While 25% of revenue opportunities are in the initial sale, most revenue opportunities are from after-sale.
Company responsiveness to customer calls is the biggest driver customer satisfaction with its product.
Dell revolutionized the industry by being the first to offer mass customization of personal computers.
Across manufacturing companies, after-sale services and parts contributes about 25% of total revenue, and 40%-50% of all profits
Services related revenue exceeds first-time product sales by 500% %
Retail industry derive largest margins from sale of extended warranties
It is a program that is designed in response to a business environment that is increasingly moving away from a product orientation to a service-focus
GE, IBM other good examples.
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33. Challenges and Questions for Service Marketers
Setting prices
Organizing to facilitate strategic and tactical decision-making
Finding a balance between standardization and personalization
Protecting new service concepts from competitors
Communicating quality and value to customers
Ensuring the delivery of consistent quality service
Jerome
The are 3 main reasons why our program is focusing on services.
It provides a higher profit margin than tangible products,
Increases satisfaction and retention,
Provides a competitive advantage over others.
I am going to use two examples to illustrate these points.
The automotive industry has typically been perceived as a manufacturing industry. However,
after-sale services and parts account for nearly 80% of all revenue opportunities, and more than 50% of the average automobile dealer’s profits
It is by far the largest creator of shareholder value on a percentage basis. A GM study revealed that $9 billion in after sale revenue produced $2 billion in profits (22% margin). Profits from $150 billion car sales were much lower.
JD Power and Associates published a report showing a strong correlation between customer satisfaction with after-sale services and customer intent to repurchase the same brand (Lexus and Saturn cars)
Hyundai’s success is due largely to its differentiation strategy of offering 10 year - 100,000 mile guarantee. The service offering is changing customer’s perception of the brand
The same can be said about the personal computer industry.
With the advancement of technology, personal computers are now becoming more and more of a commodity. While 25% of revenue opportunities are in the initial sale, most revenue opportunities are from after-sale.
Company responsiveness to customer calls is the biggest driver customer satisfaction with its product.
Dell revolutionized the industry by being the first to offer mass customization of personal computers.
Across manufacturing companies, after-sale services and parts contributes about 25% of total revenue, and 40%-50% of all profits
Services related revenue exceeds first-time product sales by 500% %
Retail industry derive largest margins from sale of extended warranties
It is a program that is designed in response to a business environment that is increasingly moving away from a product orientation to a service-focus
GE, IBM other good examples.
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34. Types of Services
Core Services: A service that is the primary purpose of the transaction. Eg: a haircut or the services of lawyer or teacher.
Supplementary Services: Services that are rendered as a corollary to the sale of a tangible product. Eg: Home delivery options offered by restaurants above a minimum bill value.
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35. Traditional Marketing Mix
Elements an organization controls that can be used to satisfy or communicate with customers:
Product
Price
Place
Promotion
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36. Expanded Mix for Services – The 7 Ps
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.
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37. Expanded Marketing Mix for Services
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38. Ways to Use the 7 Ps Overall Strategic Assessment
How effective is a firm’s service 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 service marketing mix for a service communicate its benefits and quality?
What changes/ improvements are needed?
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39. Group Discussion
“Services are Going to move in this decade to being the front edge of the industry”.
“Quality service be used in a manufacturing context for competitive advantage”.
“The expanded marketing mix for services and customer focus as a unifying theme”.
Bangladesh service strategy insight- Excellence and trust, Affordability, Proximity, Customer’s focus, Specialties and services