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Why study services marketing?


Significantly different from goods marketing Relatively new discipline with a strong interdisciplinary base importance of services sector
70% - 80% GDP in highly dev. economies

Services Marketing

Transformation of the service economy


International Government -isation regulation Hollowing Deregulation/ out effect privatisation Increased New trade services agreements in trade services Global customers Social changes Increased consumer expectations Increased affluence and leisure time Working women

Business trends
Relaxation of professional assn. standards Marketing emphasis by nonprofit organisations Outsourcing Quality movement Franchising

Advances in technology Convergence of computers and telecommunications Miniaturisation Digitalisation Enhanced software

What is a Service?
A form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.

Services are deeds, processes, and


performances. - Valarie Zeithaml & Mary Jo Bitner

Increased demand and competition Facilitated by information technology Growth and focus on service marketing and management

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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

The Nature of A Service


The

service product is essentially a bundle of activities, consisting of the core product - which in Federal Express case consists of transporting packages overnight and delivering them next morning to the addressee, plus a cluster of supplementary services.

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Tangibility of goods and services

Implications of Intangibility Services cannot be inventoried Services cannot be patented Services cannot be readily displayed or communicated Pricing is difficult

Product qualities affect ease of evaluation

Strategies for intangibility


provide tangible evidence symbolic cues (i.e. uniforms, logos) tangible cues (i.e. membership cards, ticket, certificates) reduce risk emphasise reputation and qualifications service guarantees inform and educate customers

Furniture

Computer repair Legal services

Clothing

Restaurant meals

Medical surgery

Motor vehicle

Vacation

High in search qualities

High in experience qualities

High in credence qualities

Consultancy project

Easy to evaluate

Difficult to evaluate

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Heterogeneity (Variable)
service quality varies across service encounters service encounter is the interaction between service employee and customer moments of truth service people are central to service delivery service is delivered in real time

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

Strategies for Variability


customer surveys and feedback training in interpersonal and technical skills provide product knowledge ensure back-stage systems support front line staff use standardisation strategies
franchising, scripts

Inseparable
simultaneous production and consumption the service provider is the product the customer is involved (partial employee) other customers may be present

build quality into all processes

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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

Strategies for inseparability


manage the service encounter scripts and roles front-line staff need both technical and interpersonal skills (recruit & train) educate the customer (provider marketer) manage customer interactions manage the physical evidence develop customer service policies and service recovery procedures

Perishable
services cannot be stored need to manage supply and demand

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

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How can demand be managed?


accurate demand forecasting develop off-peak and on-peak strategies use reservation systems and differential pricing employ part-time staff extend hours of operation Provide self-service options (i.e. ATMs, internet banking)

Goods versus Services

Four Categories of Services Based on the Process Used


People Processing Tangible Acts Directed Toward People e.g. airlines, hospitals, hair stylists, fitness centers Possession Processing Tangible Acts Directed Toward Possessions e.g. repair services, landscaping, house cleaning services
Mental Stimulus Processing Intangible Acts Directed Toward People e.g. consulting, education, psychotherapy, broadcasting Information Processing Intangible Acts Directed Toward Intangible Assets e.g. accounting, banking, financial services

Levels of Customer Contact with Service Organizations


High
Emphasizes encounters with service personnel

Emphasizes encounters with equipment

Low

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Traditional Marketing Mix


All elements within the control of the firm that communicate the firms capabilities and image to customers or that influence customer satisfaction with the firms product and services: Product Price Place Promotion

Services Marketing Mix

An expanded marketing mix for services


People All human actors who play a part in service delivery and thus influence the buyers perceptions: namely, the firms personnel, the customer, and other customers in the service environment. customer service employees other customers

People Place, Place & cyberTime space & time

Product (service)

Process
Price Price

Customers Customers Customers

Promotion

Physical evidence

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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. atmosphere dcor, music etc. equipment facilities uniforms

Process The actual procedures, mechanisms, and flow of activities by which the service is deliveredthe service delivery and operating systems.

service delivery systems back stage front stage procedures policies

Expanded Marketing Mix for Services

Expanded Marketing Mix for Services

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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

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