Marketing in the New Economy

CRM CRM

Service Marketing

Internet Marketing

Intl Marketing

SERVICES

Service Perspectives:
Not a Product
Intangible human act- that is produced at the time of consumption & cant be standardized or inventoried

No DifferenceProducts are just appliances that provide servicesShift perspective from Mfgr to consumer and focus on benefits

No OneAutomation, Virtualization & Outsourcing

Defining -a Service
An act or performance offered by one
party for another

An economic activity that does not

result in ownership

A process that creates benefits by

facilitating a desired change in:

customers themselves get a haircut

physical possessions- get a wig intangible assets- get therapy

Service as process.
Who / What is Direct Recipient of the Service? What is the Nature of the Service Act?

DIRECTED AT PEOPLE

DIRECTED AT POSSESSIONS

People Processing
TANGIBLE ACTS
e.g., airlines, hospitals, haircutting, restaurants hotels, fitness centers

Possession Processing
e.g., transport, repair, cleaning, landscaping, retailing, recycling

INTANGIBLE ACTS

Mental Stimulus Processing

e.g. media, consulting, education, psychotherapy

Information Processing
(directed at intangible assets)

e.g., accounting, banking, insurance, legal, research

Importance of Service Sector

In most countries, services add more economic value than agriculture, raw materials and manufacturing combined
In developed economies, employment is dominated by service jobs and most new job growth comes from http://earthtrends.wri.org/searchable_db/index.php?action=se lect_countries&theme=5&variable_ID=216 services

Changing Structure of Employment as Economic Development Evolves

Agriculture Services

Industry

Time, per Capita Income

Source: IMF, 1997

Waves of Change..
80

% US WORK-FORCE
70 60
Percent

50 40 30 20 10 0 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000
Year
The Economist, 1996

Services Industry Agriculture

http://seekingalpha.com/article/27883-gdp-by-category-services-spending-and-foreign-investments-in-u-s

At present in U.S.
~80% workers are in
90 80 70 60 50 40 30 20 10 0 workers GDP Growth

service sector Services account for ~80% of U.S. GDP Service occupations is responsible for ~90% job growth

Composition of US GDP In 2007, 1.2 percent of total US GDP was contributed by agricultural sector. Industrial sector made up 19.8 percent of US GDP in 2007. Services sector made up 79 percent of US GDP in that same period
http://www.economywatch.com/gdp/world-gdp/usa.html

Fast growing services -next decadepredicted by macro-environmental trends.. More People: working more, living longer, living alone:
Social services Health services Residential care Child day-care Finance, Insurance, Real estate

Changes in workplaceautomation, globalization:

Computer & data processing Business services Transportation

Increased need/desire to recreate & communicate:

Hospitality & Travel Interactive Entertainment Mobile Communication

Services dominate the United States Economy: GDP by Industry, 2001

Agriculture, Forestry, Mining, Construction 8% Manufacturing 14% Finance, Insurance, Real Estate 20%

Government (mostly services) 13% Other Services 11%

SERVICES

Wholesale and Retail Trade 16% Transport, Utilities, Communications 8%

Business Health Services 6% 5%

Source: Bureau of Economic Analysis, November 2002

US likely to devote "30 %+ GDP on health by mid century."

http://seekingalpha.com/article/27883-gdp-by-category-services-spending-and-foreign-investments-in-u-s

Critical Questions
1. What is the debate all about regarding how services should be defined / envisioned?
o How does the definition of a service affect your marketing strategy? 2. What are the key Ps to meeting

service management challenges?

3. What are some of the factors & considerations affecting the near future of services marketing?

In the olden days- (a few years ago) A Service was defined categorically according to its tangibility..
Major service with minor good Pure service; no tangible good

Pure tangible good; no service Milk

Hybrid: Tangible equal part goods with goods and service some services Computer Meal at & Warranty Restaurant

Hair Styling

Legal Advice

Product - Service Spectrum

Salt

Soft Drinks Detergents Automobiles Cosmetics Fast-food Tangible Outlets Pure Good Tangible Hybrid
Good w/ Services

Major Intangible Pure Service Dominant w/ Goods Service

Tangible Dominant

Fast-food Outlets

Advertising Agencies Airlines Investment Management Consulting

Teaching

Customer Evaluation as a Function of Tangibility

Intangibility Services cannot be experienced before purchase

Inseparability Services cannot be separated from their providers

Variability Quality of services depends on who provides them & when, where, & how

Perish-ability Services cannot be stored for later sale or use

Intangibility
Services mrktg: Describe the invisible

Articulate the imaginary & Define the indistinct

Inseparability

Performance &

consumption of service - happens at same time (eating @

restaurant, staying @ hotel; getting haircut, etc)

Customers participate in & affect the transaction Customers affect each other

Variability-Heterogeneity

Difficult to standardize Delivery, Quality & Customer Satisfaction depend on employee actions Employees vary -attitudes,
skills, mood, etc.

No assurance

service delivered matches what was planned/ promoted

Perishability
Can not

be inventoried Difficult to synchronize supply & demand with services Services cannot be returned or resold

Intangibility
use tangibles to create/convey identity -signs, uniforms, imagery Good hands of Allstate/ Travelers Intangibility Umbrella/ Prudential Rock

Inseparability
simultaneous production & consumption importance of service Inseparability provider selection, training and Increase rewarding of staff professionalism avoid customer conflict of

Tangibilize the intangible

Variability

Marketing Strategies that address Perish-ability shortcoming

employees

standardization difficult

Variability Constantly monitorSystematize regularly evaluate staff service Systemize/franchise production marketing production & & delivery

consumption cannot be stored match supply and demand Perish-ability use of part-time staff differential pricing Match supply stimulation of off-peak & demand demand comfortable waiting area reservation system

Re: service marketing for decades this has been the thinking-

But is it the

The Four Service Marketing Myths: Remnants of a Goods-Based, Manufacturing Model The 4 characteristics:

1. Do not distinguish services from goods 2. Only have meaning from a

manufacturing perspective, and strategies

3. Suggest inappropriate marketing

Key Point- Product-service differentiation is result of industrial age-2nd wave thinking

Re- Variabilty: Customizaton not standardization is the goal Re-Inseparability: Customer-ization not isolation = goal Re-Perishability: Services can be/are inventoried (ie-knowledge in databases & experts head) AND Inventory management not maximization is the objective; Everything is perishableif not in substance certainly in style Re: Intangibility: its not the product that people are buying. Its the functions served & benefits rendered- as it is w/ services

A shift in perspective Instead of focusing on product service differences

Focus on consumer

commonalities

in consuming & evaluating that which is purchased

Critical Questions
1.

What is the debate all about regarding how services should be defined / envisioned?
o

How does the definition of a service affect your marketing strategy?

2. What are the key Ps to meeting

service management challenges?

3. What are some of the factors & considerations affecting the near future of services marketing?

Challenges for Service Mgt Same as Product Mgt

1. Creating & offering the consumer value 2. Communicating a desired & distinct image 3. Create, sustain & enhance customer
relationships 4. Defining- maintaining- improving quality
Mind the gaps.

Service Quality Gaps

Word of Mouth Communications Personal Needs Expected Service Past Experience

Expectations Consumer Marketer

Perceived Service

Overpromising
Service Delivery

Performance

External Communications to Consumers

Misunderstanding

Service Quality Specs

Communication
Mgmt. Perceptions of Consumer Expectations

Closing the gaps by fine tuning 4 Service Ps

~People
Product Place
Target Market

~Process

Price Promotion

Evidence ~Protocol

~Physical

People are your Product

In

many instancespeople performing the service are the product They are the service and/or organization in customers eyes. They are the brand.

Recruit, Hire, Train, Monitor, Motivate, Reward

Why

customer satisfaction starts with HR Delivering excellent service: Lessons from the best firms

Marketing-to personnel is as important as to consumers

External Marketing

Internal Marketing

Employees

Customers

enabling the promise

Services Mgt Triangle

setting promises

Performance/ Experience Management

delivering promises

Process

Trade-off between Standardization & Personalization

Same as w/ Products Limiting the variability in your service by standardizing the process of delivery & level of consumer involvement will lower expenses but

comes w/ a cost: Although standardization may provide for manufacturing efficiency, this efficiency comes at expense of marketing effectiveness. .. the consumer orientation screams heterogeneity
Vargo & Lusch: The Four Service Marketing Myths

The importance of Physical Evidence in the Service Encounter

At Moment of Truth when service delivered & evaluated by consumer everything in evidence contributes to the consumer's evaluation of the service
Be it a website, restaurant, office, hotel room or theme parkit needs to be designed & packaged as well as any product

What the customer sees -- hears, smells, feels-is what s/hell believes they will get
Colors, textures, sounds, smells, dcor, dress, demeanoreverything in evidence needs attention and management

Its the little things that count

How you design your service encounter is critical in a highly competitive market where consumers hard pressed to discern a significant difference in service performance Herein the design of your service encounter will prove the most critical variable in your marketing mix
Again a lesson proven equally valid for products---

Identifiable apparel: An image-making marketing tool

By ~ 8-to-1 ratio, US consumers prefer employees wear identifiable apparel

A good uniform makes all the difference

Identifiable apparel: An image-making marketing tool

1. Improves your image: Customers
equate a professional-looking worker w/ a well-run company

2. Increases employee commitment: Adding employee's

name can boost morale & loyalty

3. Provides a popular employment "perk":. 4. Shows off your firm's experience and expertise:
"certification" -job titles, slogans & performance emblems on shirts/ sleeves

Instill Proper Protocol so as to avoid the air of indifference

Most common aspect of service complaints is lack of respect for the customer.

Why services lose customers

~3 ______% move away

~30 _______% lost due to competitive reasons and/or unhappy w/ the service

~67 ______% suspend patronage because of an attitude of indifference from owner, manager or an employee

What Customers Desire:

2500 shoppers said courtesy, knowledge & friendliness are most important components of customer service.

The Multiplier Effect

When a customer has a minor service problem:
In transactions >$100 - s/he will tell 9 to 10 people. In transactions over $100, s/he will tell 16 people.

TARP statistics.

Time is Money (Lost Customers)

90%

90

80%

80%

Percent of

70% 70 60%

55% 45% 25%

Customers
That Will Not Buy

50%

50

40%

30%

30

20%

20%

Again

10% 10

0% M inutes Hours Days

Minutes

Hours

Days

Weeks

M onths

Weeks

Months

Time Taken to Resolve a Customers Problem

*Source: Forum Corporation

Where and Who Complains

Most complaints made to service provider (employee) at time & place of service

Less than 5% of complaints about services ever reach corporate headquarters.

High-income households, younger people, and service-knowledgeable customers are more likely to complain.

Actively Encourage Complaints

Average company does not hear from 95% of its unhappy customers. Many complaints go unregistered because customers do not think it will help and/or do not know best way to register complaint Encouraging complaints is a good way to break the silence.

Attitude is Crucial
Customers value

acknowledged w/ every transaction Customers lose confidence when: Complaints not readily or personally addressed

E-pologies?
Email response should include options/names & telephone numbers for further assistance..
Tarp Research -

Service Guarantees

Relatively new w/ respect to services. Service guarantees provide both consumer & business benefits:

Service Guarantee: Customer Benefits

Customers perceive

better value. Lower perceived risk. Higher perceived reliability Reinforces customer loyalty

Service Guarantee: Organizational Benefits

Forces firm to focus on customer.

States a clear performance goal.

Provides measures for tracking poor service.

Forces examination of service delivery system. Source of pride.

Critical Questions
1.

What is the debate all about regarding how services should be defined / envisioned?
o

How does the definition of a service affect your marketing strategy?

2. What are the key Ps to meeting

service management challenges?

3. What are some of the factors & considerations affecting the near future of services marketing?

Exact nature of Future Changesdepends on nature of the Service

Network Information Services: banking, credit card, insurance, telecom Retail Hospitality: travel, restaurants, lodging, leisure, hotels Labor & Expertise: Business Support: administrationprocesses, consulting, customer service Personal & Professional: medical, legal, financial, technical assistance

Enhanced

UCT

SelfService

Increasingly Outsourced Increasingly Virtualized

Ubiquitious ComPunication Technologies

3G videophones w/ broadband 2 meg per second always online for self-service Mobile Kiosks AI Enhanced PDA devices w/ speech recognition & avatars RFID everywhere & in everything

RFID- everywhere & in everything

SmartCode making

0.25mm chips target cost 5-10 cents ..w/ 15-20 feet range Manufacturing capacity 10+ billion a year

UCT in Everything you wear

washable garments w/ miniaturized in-ear speakers /solar cells to provide energy. technology woven into fabric, components allowing many functions to be almost `built in' to our bodies, creating a `second skin'.

UCT Enhanced Jewelry

embed functional technology into jewelry & body accessories -rings, necklaces, earrings, glasses and watches. - for body adornment and for more intimate and discreet communication, information gathering and entertainment.

Invisible, intelligent wireless tickets

Can be

read in your pocket at 25 metres Ultra-wide band frequency One-ticket fits all

RFID Shopping Apps

Future grocery shoppingintegrated info system

Exact nature of Future Changesdepends on nature of the Service

Network Information Services: banking, credit card, insurance, telecom Retail Hospitality: travel, restaurants, lodging, leisure, hotels Labor & Expertise: Business Support: administrationprocesses, consulting, customer service Personal & Professional: medical, legal, financial, technical assistance

Enhanced

UCT

SelfService

Increasingly Outsourced Increasingly Virtualized

Predicting a diverse future: Directions and issues in the marketing of services

European Journal of Marketing ; Bradford; 2002; Angus Laing

Driven by technological developments, deregulation, and globalization - the service sector in post-industrial economies is facing unprecedented change

Increasing importance of technological mediation

Virtual Experiences
Redefining concept ofService Encounter The Moment of Truth when a service is delivered & evaluated by consumer

Commodification standardized
"off-the-shelf" service packages

Pre-Packaged, fill in the blank, instantservice forms & queries Some Computer generatedExpertsystem managed Responses

Professional Services

To date-- characterized by high levels of limited/regulated interpersonal interaction

NOW- 24/7 access to specialist technical information, formerly the

preserve of professionals,

http://www.psychadvisor.co m/counsel/index.cfm

Free Advice on Any fundamentally changed the Topic informational asymmetries Online From America's which have conventionally Elders characterized the delivery of Personal Reply to Each Request professional services
www.ElderWisdomCircle. org

Technologically driven productivity growth is-most important factor in shaping employment in U.S. & every country in the world.
Productivity growth substitutes technology &/or more efficient techniques for physical & mental labor Inventors & investors always figure out ways to replace people with machines

Automation- 1 ,2 ,3

Restaurants without waiters

Ultimately most all your service needs will be handled by & thru your AI enhanced PDA

With the ruthlessness of Skynet in "The Terminator," computerization in the tertiary sector is now committing mass Dilberticide, replacing receptionists with automated phone systems and travel agents with services like Priceline. Why Dilbert is
doomed
The jobs of tomorrow are not what you'd expect

Recession creating a lost generation

mechanization of agriculture
"primary production

"secondary production

& mining -- freed up labor for factories automation in manufacturing freed up workers for-office work Computers & AI in the office-free up workers for..?

As it has always done in the past, labor will shift from more mechanized to less mechanized sectors. But what will those jobs be?

"tertiary production"

The most numerous & stable jobs of tomorrow will be those that cannot be offshored
cannot be automated require a high degree of creativity & rely on the human touch in face-to-face interactions these are called "proximity services" & include fastest-growing occupations, healthcare & education.
Since the recession began, healthcare has added 559,000 jobs. Even more remarkable, the average monthly gain of 22,000 jobs during 2009 has been only slightly lower than the average increase of 30,000 jobs a month in 2008.

Why Dilbert is doomed The jobs of tomorrow are not what you'd expect

Outsourcing of IT Services

$10.8 billion The value of IT outsourcing contracts signed in the first quarter of 2005. Source: TPI Index 400,000 Number of service jobs sent overseas since 2000. Source: The Goldman Sachs Group Inc.

3% Percentage of last year's total layoffs due to offshoring. Source: U.S. Department of Labor 104,000 Number of IT jobs lost due to offshore outsourcing between 2000 and 2003, equaling 2.8% of U.S. IT jobs. Source: Information Technology Association of America 3.5 million Number of U.S. white-collar jobs moving offshore by 2015, averaging 200,000 a year. Source: Forrester Research Inc.

Where the Jobs Go!

India China Mexico Ireland Canada Malaysia Phillipines Russia Singapore 0% 5% 10% 15% 20% 25% 30% 35% 40%

India graduates 300,000 IT engineers and 90,000 MBAs per year

Source: Computer world and Interunity Group, Inc., April & May 2003 Base: Survey of 252 corporate IT managers in the U.S.; multiple responses allowed

The Other Side of Outsourcing