MARKETING of
SERVICES
Dr. Jo Ann Asquith
Discussion Question
(Posted on D2L)
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Introductions
Describe your best service experience
Describe your worst service experience
What made the experiences different?
The Service Management
Decision Framework
What Business Are We In?
What Service Processes Can Be Used in
Our Operation?
Who Are Our Customers and How Should
We Relate to Them?
What Should be the Core and Supplementary
Elements of Our Service Product?
What Price Should We Charge
for Our Services?
How Should We Communicate What
Our Service Has to Offer?
What Are the Options for Delivering
Our Service?
How Can We Balance Productivity
and Quality?
How Should We Match Demand and Productive Capacity?
What Are Appropriate Roles for People and Technology?
How Can Our Firm Achieve Service Leadership?
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
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Increasing affluence
More leisure time
High % of women in the labor force
Greater life expectancy
Greater complexity of products
Increasing complexity of life
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
2010
2000
Agriculture, Forestry,
Fishing and Mining
7%
Manufacturing
16%
Wholesale and
Retail Trade
17%
Government
(Mostly Services)
12%
Other Services
10%
Finance, Insurance
and Real Estate
20%
S ER V I CES
Transport, Utilities
and
Communications
Business
Health
8%
Services
5%
5%
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 view of service =
Customer Service Center
Old:
Service =
wrench time
What is Service? The New View
• Service includes every interaction between any customer
and anyone representing the company, including:
Dealers
Web site and
any e-channel
Interaction
Salespeople
Customer
Billing and Accounting
Personnel
Service
Employees
Receptionists
and
Schedulers
Management
and
executives
Service Can Mean all of These
• Service as a product
• Customer service
• Services as value
add for goods
• Service embedded in
a tangible product
Unique Service Characteristics
• Heterogeneity
• Customer Contact
• Client – based
relationships
• An activity or process
• Intangibility
• Perishability
• Inseparability of
production and
consumption
Tangibility Spectrum
Salt
 Soft Drinks
 Detergents
 Automobiles
 Cosmetics Fast-food
 Outlets
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Tangible
Dominant
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Fast-food
Outlets
Intangible
Dominant
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Advertising
Agencies
Airlines
Investment
Management
Consulting
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Teaching
Basic Differences between
Goods and Services
• Customers do not obtain ownership of services
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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:
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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
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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
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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
– Training
- Selection
- Incentives
• Advertising
– Types of ads
– Targets
- Copy thrust
- 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
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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
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Reports
Business Cards
Statements
Guarantees
Ways to Use the 7 Ps
Overall Strategic
Assessment
Specific Service
Implementation
• 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?
• 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
WHAT BUSINESS ARE WE I N ?
What Service Processes Can Be Used in
Our Operation? (PROCESS)
Who Are Our Customers and
How Should We Relate to Them?
What Should be the Core and Supplementary Elements
of Our Service Product? (PRODUCT ELEMENTS)
What Price Should We Charge?
(PRICE AND OTHER USER OUTLAYS)
How to Communicate? (PROMOTION &
EDUCATION, PHYSICAL EVIDENCE)
Options for Delivery? (PLACE, CYBERSPACE
& TIME, PHYSICAL EVIDENCE)
How Can We Balance
PRODUCTIVITY AND QUALITY?
How Should We Match Demand and Productive Capacity?
What Are Appropriate Roles for People and Technology? (PEOPLE)
How Can Our Firm Achieve Service Leadership?
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
Company
(Management)
Internal
Marketing
“setting the promise”
“enabling the promise”
Employees
External
Marketing
Interactive Marketing
“delivering the promise”
Customers
Ways to Use the
Services Marketing Triangle
Overall Strategic
Assessment
Specific Service
Implementation
• How is the service
organization doing on
all three sides of the
triangle?
• What is being promoted
and by whom?
• Where are the
weaknesses?
• Are the supporting
systems in place to
deliver the promised
service?
• What are the
strengths?
• How will it be delivered
and by whom?
Challenges and Questions for
Service Marketers
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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