1. FOUNDATIONS FOR SERVICES MARKETING
Part 1
FOUNDATIONS FOR SERVICES MARKETING
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2. 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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3. Objectives for Chapter 1: Introduction to Services
Explain what services are and identify important trends in services.
Explain the need for special service 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.
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4. What are Services?
Services are deeds, processes, and performances provided or coproduced by one entity or person for another entity or person.
e.g. IBM
-repair and maintenance service for its equipment,
-consulting services for IT and e-commerce applications,
-training services and etc.

5. Differentiate these terms
Service industries and companies
Service as a product
a wide range of intangible product offerings that customers value and pay for
Customer Service
the service provided in support of a company’s core products
Derived service
the value derived from physical goods

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
Tangibility is a key determinant of whether and offering is a service.
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9. Why Service Marketing? Services dominate U.S. and worldwide economies
Service as a business imperative in goods-focused businesses
Deregulated industries and professional service needs
Service marketing is different
Service leads to profits
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10. Percent of U.S. Labor Force by Industry
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11. Percent of U.S. Gross Domestic Product by Industry
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12. Why service? (Continued)
Service as a business imperative in goods-focused businesses
e.g.
Xerox: document management service
Petsmart: pet hotels, groooming, and training
P&G:Tide Dry Cleaners, Mr.Clean Car Wash

13. Examples of Goods Companies that are Expanding into Services
Boeing
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14. Firms focus on services because
Services can provide higher profit margins and growth potential than products
Customer satisfaction and loyalty are driven by service excellence
Services can be used as a differentiation strategy in competitive markets
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.

15. Why service? (Continued)
Deregulated industries and professional service needs
For example, the deregulation in airline industries created turmoil in the industry, since the price used to be determined and monitored by US government.
Professional service providers need to understand their customers, to ensure the delivery of quality services

16. Why service? (Continued)
Service marketing is different
Services differ from goods.
There is a need for new concepts and approaches for marketing and managing service businesses.
Service leads to profits
Successful businesses devote to common service themes, e.g. trust-based relationship with customers and commitment to investment in employee success.

17. Service and Technology
Technology significantly influences the practice of service marketing
New service offerings
Interactive edition of The Wall Street Journal
New way to deliver existing services
Medical information on the web
Enabling both customers and employees
Customers: online banking, online shopping
Employees: software and real-time information to customize services to fit customer’s needs

18. Eight Central Paradoxes of Technological Products
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22. Characteristics of Services Compared to Goods
Intangibility
Heterogeneity
Simultaneous
Production
and
Consumption
Perishability
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23. Comparing Goods and Services
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24. Intangibility
Services cannot be seen, felt, tested or touched
Heterogeneity
No two services will be precisely alike

25. Simultaneous Production and Consumption
Sold first, and then produced and consumed simultaneously
Perishability
Services cannot be saved, stored, resold, or returned.

26. 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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27. 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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28. 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
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29. Implications of Perishability
It is difficult to synchronize supply and demand with services
Services cannot be returned or resold
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30. Search, Experience, and Credence Qualities: A framework to classify goods and services
Search qualities
Attributes that a customer can determine before purchasing a product
Experience qualities
Attributes that can be discerned only after purchase or during consumption
Credence qualities
Attributes that may be impossible to evaluate even after purchase and consumption

31. Search, Experience, and Credence Qualities
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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.
1-32

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.
1-33

34. 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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35. 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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36. Expanded Marketing Mix for Services
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37. Expanded Marketing Mix for Services

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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