Services Marketing MTG 410 Fall 2000 Prof Donna

Services Marketing MTG 410 Fall 2000 Prof: Donna J. Hill, Ph. D.

What Are Services? n Services are deeds, processes, and performances. – Nature of product. – Greater involvement of customers in the production process. – People as part of the product. – Greater difficulties in maintaining quality control standards.

A Different Context for Services Marketing Narrow definition of marketing by other managers. n Limited appreciation for marketing skills. n Different organizational structure. n A relative lack of competitive data. n Problems determining costs. n Constraints and opportunities facing marketers of public and nonprofits. n

Examples of Service Industries n Health Care – hospital, medical practice, dentistry, eye care n Professional Services – accounting, legal, architectural n Financial Services – banking, investment advising, insurance n Hospitality – restaurant, hotel/motel, bed & breakfast, – ski resort, rafting n Travel – airlines, travel agencies, theme park n Others: – hair styling, pest control, plumbing, lawn maintenance, counseling services, health club

Figure 1 -2 Percent of U. S. Labor Force by Industry Percent of GDP 80 70 60 50 40 30 20 10 0 1929 1948 1969 1977 1984 1996 Year Source: Survey of Current Business, April 1998, Table B. 8, July 1988, Table 6. 6 B, and July 1992, Table 6. 4 C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U. S. Economy, ” Scientific American, 244, 3 (1981): 31 -39. n Services n Manufacturing n Mining & Agriculture

Figure 1 -3 Percent of U. S. Gross Domestic Product by Industry Percent of GDP 80 70 60 50 40 30 20 10 0 1948 1959 1967 1977 1987 1996 Year Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B. 3; Eli Ginzberg and George J. Vojta, “The Service Sector of the U. S. Economy, ” Scientific American, 244, 3 (1981): 31 -39. n Services n Manufacturing n Mining & Agriculture

Importance of Service Sector Services n $3. 52 trillion of U. S. GDP n 53. 2% of U. S. GDP 71% of total employment 91% of new jobs from 1992 to 2005 n n Fast growing services for the next decade Health services Business services Finance, insurance, real estate Residential care Computer & data processing Child day-care Social services Transportation services

Factors Contributing to Growth n n n n Movement to information age Shift to industrialized economy Aging population Longer life expectancies Increase leisure time High per capita income Changing social and cultural values Advances in technology

Challenges for Services n n n n Defining and improving quality Communicating and testing new services Communicating and maintaining a consistent image Motivating and sustaining employee commitment Coordinating marketing, operations and human resource efforts Setting prices Standardization versus personalization

Differences Between Goods and Services Intangibility Heterogeneity Simultaneous Production and Consumption Perishability

Figure 1 -1 Tangibility Spectrum Salt Soft Drinks Detergents Automobiles Cosmetics Fast-food Outlets Tangible Dominant Fast-food Outlets Intangible Dominant Advertising Agencies Airlines Investment Management Consulting Teaching

Implications of Intangibility üServices cannot be inventoried üServices cannot be patented üServices cannot be readily displayed or communicated üPricing is difficult

Implications of Heterogeneity üService delivery and customer satisfaction depend on employee actions üService quality depends on many uncontrollable factors üThere is no sure knowledge that the service delivered matches what was planned and promoted

Implications of Simultaneous Production and Consumption üCustomers participate in and affect the transaction üCustomers affect each other üEmployees affect the service outcome üDecentralization may be essential üMass production is difficult

Implications of Perishability ü It is difficult to synchronize supply and demand with services ü Services cannot be returned or resold

Table 1 -2 Services are Different Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing, ” Journal of Marketing 49 (Spring 1985): 33 -46.

Figure 1 -5 The Services Marketing Triangle Company (Management) Internal Marketing External Marketing “enabling the promise” Employees “setting the promise” Interactive Marketing Customers “delivering the promise” Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

Services Marketing Triangle Applications Exercise n n Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle? How is each type of marketing being carried out currently? Are three sides of the triangle well aligned? Are there specific challenges or barriers in any of the three areas?

Ways to Use the Services Marketing Triangle Overall Strategic Specific Service Implementation Assessment • How is the service • organization doing on all three sides of • the triangle? • Where are the weaknesses? • What are the strengths? What is being promoted and by whom? How will it be delivered and by whom? • Are the supporting systems in place to deliver the promised service?

Figure 1 -6 The Services Triangle and Technology Company Technology Providers Source: Adapted from A. Parasuraman Customers

Services Marketing Mix: 7 Ps for Services n Traditional Marketing Mix n Expanded Mix for Services: 7 Ps n Building Customer Relationships Through People, Processes, and Physical Evidence n Ways to Use the 7 Ps

Traditional Marketing Mix n All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services: ü Product ü Price ü Place ü Promotion

Expanded Mix for Services -the 7 Ps Product n Price n Place n Promotion n n People n Process n Physical Evidence

Table 1 -3 Expanded Marketing Mix for Services

Table 1 -3 (Continued) Expanded Marketing Mix for Services

Ways to Use the 7 Ps Overall Strategic Assessment n n n 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 7 Ps? Specific Service Implementation n n 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?

Characteristics of Services n n Intangibility - Lack of tangible assets which can be seen, touched, or smelled prior to purchase. Perishability - Inability of a service to be inventoried or stored. Inseparability - Simultaneous production and consumption of a service. Variability - Unwanted or random levels of service quality customers receive when they patronize a service firm.