The Services Sector What Are Services Services are

The ‘Services’ Sector

What Are Services? 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. Limited appreciation for marketing skills. Different organizational structure. A relative lack of competitive data. Problems determining costs. Constraints and opportunities facing marketers of public and nonprofits.

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 • airlines, travel agencies, theme park • Others: • hair styling, pest control, plumbing, lawn maintenance, counseling services, health club

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 $3. 52 trillion of U. S. GDP 53. 2% of U. S. GDP 71% of total employment 91% of new jobs from 1992 to 2005 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 Movement to information age Shift to knowledge-based economy Aging population Longer life expectancies Increase leisure time High per capita income Changing social and cultural values Advances in technology

Challenges for Services • 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

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) External Marketing Internal Marketing “setting the promise” “enabling the promise” Employees Interactive Marketing Customers “delivering the promise” Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

Services Marketing Triangle Applications Exercise 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 Assessment Specific Service Implementation • 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?

The Services Triangle and Technology Company Technology Providers Source: Adapted from A. Parasuraman Customers