1. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 1 Chapter 1 New Perspectives on Marketing in the Service Economy

2. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 2 Chapter One – Learning Objectives  Define services  Recognize the importance of services  Differentiate between services marketing and goods marketing  Acquire introductory knowledge of the 8Ps of services marketing

3. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 3 What Are Services?

4. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 4 Defining Services  Services involve a form of rental and non-ownership  Meaning access and usage fees, for a defined period of time, instead of buying it outright  Services non-ownership framework  Rental-good services — right to a physical good  Defined space and place rentals — private space shared with other customers  Labour and expertise rentals — hire people  Access to shared physical environments — share use of an environment, not private  Systems and networks: access & usage — rent right to participate

5. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 5 Defining Services Services are economic activities offered by one party to another, most commonly employing time-based performances to bring about desired results in recipients themselves or in objects or other assets for which purchasers have responsibility. In exchange for their money, time and effort, service customers expect to obtain values from access to goods, labour, professional skills, facilities, networks, and systems; but they do not normally take ownership of any of the physical elements involved.

6. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 6 Defining Services  Service Product  A service product comprises all the elements of the service performance, both tangible and intangible, that creates value for customers  Businesses sell and market the core service product  This is the marketing of services  Customer Service  Customer support of the core product after it is sold  Marketing through service

7. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 7 Importance of Services  Services dominate economy in most nations  Service sector is growing rapidly  Most new jobs are generated by services  Powerful forces are transforming service markets  Reshaping of demand, supply, competition, customers Personal competitive advantage

8. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 8 Why Study Services?

9. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 9 Contribution of Service Industries to Canadian Gross Domestic Product, 2005 (Fig 1.1)

10. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 10 Estimated Size of Service Sector in Selected Countries (Fig 1.2)

11. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 11 Challenges Posed by Services

12. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 12 Differences, Implications, and Marketing-Related Tasks (1) ( Table 1.1) Difference  Most service products cannot be inventoried  Intangible elements usually dominate value creation  Services are often difficult to visualize and understand  Customers may be involved in co- production Implications  Customers may be turned away  Harder to evaluate service and distinguish from competitors  Greater risk and uncertainty perceived  Interaction between customer and provider; but poor task execution could affect satisfaction Marketing-Related Tasks  Use pricing, promotion, and reservations to smooth demand; work with ops to manage capacity  Emphasize physical clues, employ metaphors and vivid images in advertising  Educate customers on making good choices; offer guarantees  Develop user-friendly equipment, facilities, and systems; train customers, provide good support

13. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 13 Implications  Behaviour of service personnel and customers can affect satisfaction  Hard to maintain quality, consistency, reliability  Difficult to shield customers from failures  Time is money; customers want service at convenient times  Electronic channels or voice telecommunications Difference  People may be part of service experience  Operational inputs and outputs tend to vary more widely  Time factor often assumes great importance  Distribution may take place through nonphysical channels Marketing-Related Tasks  Recruit, train employees to reinforce service concept  Shape customer behaviour  Redesign for simplicity and failure proofing  Institute good service recovery procedures  Find ways to compete on speed of delivery; offer extended hours  Create user-friendly, secure websites and free access by telephone Differences, Implications, and Marketing-Related Tasks (2) ( Table 1.1)

14. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 14 Value Added by Physical, Intangible Elements Helps Distinguish Goods and Services (Fig 1.7)

15. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 15 NAICS  North American Industry Classifications System  Replacing the SIC system – Standard Industrial Classification  Better understanding of service dominated economies  Some examples of new classifications:  Diet and Weight Reducing Centres  Management Consulting Services  Temporary Help Services  Telemarketing Bureaus

16. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 16 Differentiate between services and goods  Marketing tasks in services differ from the manufacturing sector  Eight common differences : 1.Service products cannot be inventoried 2.Intangible elements dominate value creation 3.Services difficult to visualize and understand 4.Customers may be involved in co-production 5.People may be part of the service experience 6.Operational inputs and outputs tend to vary widely 7.Time factor assumes great importance 8.Distribution through nonphysical channels  What are marketing implications?

17. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 17 The 8 Ps of Services Marketing  Marketing is the only function to bring operating revenues into a business; all other functions are cost centres  The “ 8Ps ” of services marketing are needed to create strategies for meeting customer needs profitably in a competitive marketplace  Traditional – product elements, place and time, price and other user outlays, promotion and educations  Extended by service delivery – physical environment, processes, people, productivity and quality

18. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 18 Expanded Marketing Mix for Services

19. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 19 The 8 Ps of Services Marketing  Product Elements (Chapter 3)  Place and Time (Chapter 4)  Price and Other User Outlays (Chapter 5)  Promotion and Education (Chapter 6)  Process (Chapter 8)  Physical Environment (Chapter 10)  People (Chapter 11)  Productivity and Quality (Chapter 14)

20. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 20 The 8Ps of Services Marketing: (1) Product Elements  Embrace all aspects of service performance that create value  Core product responds to customer ’ s primary need  Help customers use core product through array of supplementary service elements  Creates a service concept that offers value to customers and satisfies better than competitors

21. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 21 The 8Ps of Services Marketing: (2) Place and Time  Delivery decisions: Where, When, How  Geographic locations served  Service schedules  Physical channels  Electronic channels  Customer control and convenience  Channel partners/intermediaries

22. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 22 The 8Ps of Services Marketing: (3) Price and Other User Outlays  Traditional pricing tasks:  Selling price, discounts, premiums  Margins for intermediaries (if any)  Credit terms  Service marketers must recognize that customer outlays involve more than price paid to seller  Identify and minimize other costs incurred by users:  Costs associated with service usage (e.g., travel to service location, parking, phone, babysitting, etc.)  Time expenditures, especially waiting  Unwanted mental and physical effort  Negative sensory experiences

23. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 23 The 8Ps of Services Marketing: (4) Promotion and Education  Informing, educating, persuading, reminding customers  Marketing communication tools  Media elements (print, broadcast, outdoor, retail, the Internet, etc.)  Personal selling, customer service  Sales promotion  Publicity/PR  Imagery and recognition  Branding  Corporate design  Content  Information, advice  Persuasive messages  Customer education/training

24. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 24 The 8Ps of Services Marketing: (5) Process  How firm does things may be as important as what it does  Customers often involved in processes, especially when acting as co-producers of service  Process involves choices of method and sequence in service creation and delivery  Design of activity flows  Number and sequence of actions for customers  Nature of customer involvement  Role of contact personnel  Role of technology, degree of automation  Badly designed processes waste time, create poor experiences, and disappoint customers

25. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 25 The 8Ps of Services Marketing: (6) Physical Environment  Design servicescape and provide tangible evidence of service performances  Create and maintain physical appearances  Buildings/landscaping  Interior design/furnishings  Vehicles/equipment  Staff grooming/clothing  Sounds and smells  Other tangibles  Manage physical cues carefully— can have profound impact on customer impressions

26. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 26 The 8Ps of Services Marketing: (7) People  Interactions between customers and employees influence perceptions of service quality  Need the right customer-contact employees, performing tasks well  Job design  Recruiting  Training  Motivation  Need the right customers for firm’s mission  Contribute positively to experience of other customers  Possess — or can be trained to have — needed skills (co- production)  Can shape customer roles and manage customer behaviour

27. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 27 The 8Ps of Services Marketing: (8) Productivity and Quality  Productivity and quality must work hand in hand  Improving productivity key to reducing costs  Improving and maintaining quality essential for building customer satisfaction and loyalty  Ideally, strategies should be sought to improve both productivity and quality simultaneously—technology often the key  Technology-based innovations have potential to create high payoffs  But, must be user friendly and deliver valued customer benefits

28. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 28 Summary – Chapter 1  Services Defined  Rental and non-ownership of goods  Time based exchange of economic activity performed in exchange for money, time and effort  Services are transforming markets and experiencing rapid growth  The differences between services and goods marketing focus on intangibility, people and time  8Ps of services marketing 1. Product Elements5. Process 2. Place and Time6. Physical Environment 3. Price and Other User Outlays 7. People 4. Promotion and Education8. Productivity and Quality