Lovelock SRVCMKTG Ce PPT 01

Chapter 1
New
Perspectives on
Marketing in
the Service
Economy
Copyright 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 1- 1
Chapter One Learning Objectives
Define services
Recognize the importance of services
Differentiate between services marketing and goods
marketing
Acquire introductory knowledge of the 8Ps of services
marketing
Chapter 1- 2
What Are Services?
Chapter 1- 3
Defining Services
Services involve a form of rental and non-ownership
Meaning access and usage fees, for a defined period of time,
instead of buying it outright
Services non-ownership framework

Rental-good services right to a physical good
Defined space and place rentals private space shared with other
customers
Labour and expertise rentals hire people
Access to shared physical environments share use of an
environment, not private
Systems and networks: access & usage rent right to participate
Chapter 1- 4
Defining Services
Services are economic activities offered by one party to another, most

commonly employing time-based performances to bring about desired
results in recipients themselves or in objects or other assets for which
purchasers have responsibility.
In exchange for their money, time and effort, service customers expect
to obtain values from access to goods, labour, professional skills,
facilities, networks, and systems; but they do not normally take
ownership of any of the physical elements involved.
Chapter 1- 5
Defining Services
Service Product
A service product comprises all the elements of the service
performance, both tangible and intangible, that creates value for
customers
Businesses sell and market the core service product
This is the marketing of services
Customer Service
Customer support of the core product after it is sold
Marketing through service
Chapter 1- 6
Importance of Services
Services dominate economy in most nations
Service sector is growing rapidly
Most new jobs are generated by services
Powerful forces are transforming service markets
Reshaping of demand, supply, competition, customers
Personal competitive advantage
Chapter 1- 7
Why Study Services?
Chapter 1- 8
Contribution of Service Industries to

Canadian Gross Domestic Product, 2005
(Fig 1.1)
Chapter 1- 9
Estimated Size of Service Sector in

Selected Countries (Fig 1.2)
Chapter 1- 10
Challenges Posed by Services
Chapter 1- 11
Differences, Implications, and

Marketing-Related Tasks (1) (Table 1.1)
Difference
Implications
Most service
products
cannot be inventoried
Customers may be
Intangible elements
Harder to evaluate
Services are often
Greater risk and
Customers may be
Interaction between
usually dominate
value creation
difficult to visualize
and understand
involved in coproduction
turned away
service and distinguish

from competitors
uncertainty perceived
customer and provider;

but poor task execution
could affect satisfaction
Marketing-Related Tasks
Use pricing, promotion,

and
reservations to smooth
demand; work with ops to
manage capacity
Emphasize physical clues,
employ metaphors and vivid

images in advertising
Educate customers on
making good choices; offer

guarantees
Develop user-friendly
equipment, facilities, and

systems; train customers,
provide good support
Chapter 1- 12
Differences, Implications, and

Marketing-Related Tasks (2) (Table 1.1)
of
Difference
Implications
Marketing-Related Tasks
People may be part
Behaviour of service
Recruit, train employees to
service experience
Operational inputs
and
personnel and customers

can affect satisfaction
Hard to maintain quality,

consistency, reliability
outputs tend to vary

more widely
Difficult to shield
Time factor often
Time is money;
customers want service
at convenient times
assumes great
importance
Distribution may take
customers from failures
Electronic channels or
voice telecommunications
place through
nonphysical channels
reinforce service concept

Shape customer behaviour
Institute good service

recovery procedures
Find ways to compete on

speed of delivery; offer
extended hours
Create user-friendly,
secure websites and free

access by telephone
Chapter 1- 13
Value Added by Physical, Intangible Elements

Helps Distinguish Goods and Services (Fig 1.7)
Chapter 1- 14
NAICS
North American Industry Classifications System
Replacing the SIC system Standard Industrial Classification
Better understanding of service dominated economies
Some examples of new classifications:
Diet and Weight Reducing Centres
Management Consulting Services
Temporary Help Services
Telemarketing Bureaus
Chapter 1- 15
Differentiate between services and goods
Marketing tasks in services differ from the manufacturing

sector
Eight common differences :

1.
2.
3.
4.
5.
6.
7.
8.
Service products cannot be inventoried

Intangible elements dominate value creation
Services difficult to visualize and understand
Customers may be involved in co-production
People may be part of the service experience
Operational inputs and outputs tend to vary widely
Time factor assumes great importance
Distribution through nonphysical channels
What are marketing implications?
Chapter 1- 16
The 8 Ps of Services Marketing

Marketing is the only function to bring operating
revenues into a business; all other functions are
cost centres
The 8Ps of services marketing are needed to
create strategies for meeting customer needs
profitably in a competitive marketplace
Traditional product elements, place and time, price and other
user outlays, promotion and educations
Extended by service delivery physical environment, processes,
people, productivity and quality
Chapter 1- 17
Expanded Marketing Mix

for Services
Chapter 1- 18
The 8 Ps of Services Marketing

Product Elements (Chapter 3)
Place and Time (Chapter 4)
Price and Other User Outlays (Chapter 5)
Promotion and Education (Chapter 6)
Process (Chapter 8)
Physical Environment (Chapter 10)
People (Chapter 11)
Productivity and Quality (Chapter 14)
Chapter 1- 19
The 8Ps of Services Marketing:

(1) Product Elements
Embrace all aspects of service performance that create

value
Core product responds to customers primary need
Help customers use core product through array of
supplementary service elements
Creates a service concept that offers value to customers
and satisfies better than competitors
Chapter 1- 20

(2) Place and Time
Delivery decisions: Where, When, How
Geographic locations served
Service schedules
Physical channels
Electronic channels
Customer control and convenience
Channel partners/intermediaries
Chapter 1- 21

(3) Price and Other User Outlays
Traditional pricing tasks:
Selling price, discounts, premiums
Margins for intermediaries (if any)
Credit terms
Service marketers must recognize that customer outlays

involve more than price paid to seller
Identify and minimize other costs incurred by users:
Costs associated with service usage (e.g., travel to service location,
parking, phone, babysitting, etc.)
Time expenditures, especially waiting
Unwanted mental and physical effort
Negative sensory experiences
Chapter 1- 22

(4) Promotion and Education
Informing, educating, persuading, reminding customers
Marketing communication tools
Media elements (print, broadcast, outdoor, retail, the Internet,
etc.)
Personal selling, customer service
Sales promotion
Publicity/PR
Imagery and recognition

Branding
Corporate design
Content
Information, advice
Persuasive messages
Customer education/training
Chapter 1- 23

(5) Process
How firm does things may be as important as what it does
Customers often involved in processes, especially when
acting as co-producers of service
Process involves choices of method and sequence in service
creation and delivery
Design of activity flows

Number and sequence of actions for customers
Nature of customer involvement
Role of contact personnel
Role of technology, degree of automation
Badly designed processes waste time, create poor

experiences, and disappoint customers
Chapter 1- 24

(6) Physical Environment
Design servicescape and provide tangible evidence of
service performances
Create and maintain physical appearances
Buildings/landscaping
Interior design/furnishings
Vehicles/equipment
Staff grooming/clothing
Sounds and smells
Other tangibles
Manage physical cues carefully can have profound impact

on customer impressions
Chapter 1- 25

(7) People
Interactions between customers
and employees influence
perceptions of service quality
Need the right customer-contact
employees, performing tasks well
Job design
Recruiting
Training
Motivation
Need the right customers for firms

mission
Contribute positively to experience
of other customers
Possessor can be trained to have
needed skills (co-production)
Can shape customer roles and
manage customer behaviour
Chapter 1- 26

(8) Productivity and Quality
Productivity and quality must work hand in hand
Improving productivity key to reducing costs
Improving and maintaining quality essential for building
customer satisfaction and loyalty
Ideally, strategies should be sought to improve both
productivity and quality simultaneouslytechnology often
the key
Technology-based innovations have potential to create high payoffs
But, must be user friendly and deliver valued customer benefits
Chapter 1- 27
Summary Chapter 1
Services Defined
Rental and non-ownership of goods
Time based exchange of economic activity performed in exchange for money,
time and effort
Services are transforming markets and experiencing rapid growth

The differences between services and goods marketing focus on
intangibility, people and time
8Ps of services marketing
1. Product Elements
2. Place and Time
3. Price and Other User Outlays
4. Promotion and Education
5. Process
6. Physical Environment
7. People
8. Productivity and Quality
Chapter 1- 28

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Chapter 1

Services Marketing, Canadian Edition

Chapter One Learning Objectives

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

What Are Services?

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Services non-ownership framework

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Services are economic activities offered by one party to another, most

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Personal competitive advantage

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Why Study Services?

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Contribution of Service Industries to

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Estimated Size of Service Sector in

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Challenges Posed by Services

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Differences, Implications, and

Services are often

Greater risk and

Copyright 2008 Pearson Education Canada

service and distinguish

customer and provider;

Use pricing, promotion,

employ metaphors and vivid

making good choices; offer

equipment, facilities, and

Services Marketing, Canadian Edition

Differences, Implications, and

People may be part

Recruit, train employees to

personnel and customers

Hard to maintain quality,

outputs tend to vary

Time factor often

Distribution may take

customers from failures

Copyright 2008 Pearson Education Canada

reinforce service concept

Institute good service

Find ways to compete on

secure websites and free

Value Added by Physical, Intangible Elements

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition

Differentiate between services and goods

Marketing tasks in services differ from the manufacturing