Services - School of Management



SCHOOL OF MANAGEMENT SEMESTER 1 2012/2013 AMW342 SERVICES MARKETING ASSOCIATE PROFESSOR DR. AZIZAH OMAR Lecture: Venue: Room: Tel: Thursday DK - R PhD/MA Office, Level 1 School of Management 04 653 888 ext.2889

Email: [email protected]

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

Part 1



Introduction to Services

 What are Services?

 Why Service Marketing?

 Service and Technology  Characteristics of Services  Service Marketing Mix  Staying Focused on the Customer Chapter 1 1-3

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 fundamental to the rest of the text.

and the philosophy of customer focus as powerful frameworks and themes that are 1-4

Examples of Service Industries

Health Care

 hospital, medical practice, dentistry, eye care 

Professional Services

 accounting, legal, architectural 

Financial Services

 banking, investment advising, insurance 


  restaurant, hotel/motel, bed & breakfast ski resort, rafting 


 airline, travel agency, theme park 


 hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design 1-5

Contributions of Service Industries to U.S. Gross Domestic Product


Where the Money in Manufacturing Is: Services The sale of a product accounts for only a small portion of overall revenues.

100% 80%

Providing services to customers is where the real money is.

60% 40% 20%

Personal Computers annual cost of PC use: $6,259

network administration network technical support network equipment nonproductive operations by end user (downtime, file management, etc.) administration technical support desktop hardware 0%

total expenditure: 5X product costs Locomotives total annual cost of rail operations: $29 billion

yard operations, railroad administration, other train operations Infrastructure freight car services locomotive services locomotives

total expenditure: 21X product costs Automobiles average annual household expenditure: $6,064

other finance repair insurance gas used car purchase new car purchase

total expenditure: 5X product costs

Source : GartnerGroup, Association of American Railroads, Federal Highway Administration Office of Highway Information Management. (Railroad expenditures are for Class 1 railroads.)

Tangibility Spectrum


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 1-9

Percent of U.S. Labor Force by Industry


Percent of U.S. Gross Domestic Product by Industry


Examples of Goods Companies that are Expanding into Services

Boeing 1-12

Services in Malaysia








Advertising Agency Services Assurance Services Auction Brokerage, Intermediary Service Business Travel Services Certification, Inspection & 8.

Credit Management Computer & Information 9.

Technology Services Construction Services 10. Consulting 11. Corporate Register & Transfer 12. Design Services 13. Education & Training 14. Financial Services 15. Insurance 16. International Settlement Services 17. Internet Service 18. Labour & Employment 19. Law Services 20. Leasing Services 21. Logistics Services 22. Other Business Services

Eight Central Paradoxes of Technological Products


Characteristics of Services Compared to Goods Intangibility Heterogeneity Simultaneous Production and Consumption Perishability


Comparing Goods and Services


Implications of Intangibility

 Services cannot be inventoried  Services cannot be easily patented  Services cannot be readily displayed or communicated  Pricing is difficult 1-17

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 1-18

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 1-19

Implications of Perishability

 It is difficult to synchronize supply and demand with services  Services cannot be returned or resold 1-20

Search, Experience, and Credence Qualities


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 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 1-22

Traditional Marketing Mix

 Elements an organization controls that can be used to satisfy or communicate with customers:  Product  Price  Place  Promotion 1-23

Expanded Mix for Services – The 7 Ps

    Product Price Place Promotion   


 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.


 The actual procedures, mechanisms, and flow of activities by which the service is delivered—the service delivery and operating systems.


Expanded Marketing Mix for Services


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?


Case Study 1

Read the articles given and prepare your case analysis.

1. Contributions of Service Industries to Malaysia Gross Domestic Product. 2. Percent of Malaysian Labor Force by Industry.

3. Percent of Malaysia Gross Domestic Product by Industry.

Thank You For Your Time