Essentials of Service Marketing

09/09/2015
Chapter1.IntroductiontoServicesMarketingEssentialsofServicesMarketing,SecondEdition
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Chapter 1. Introduction to Services Marketing

LearningObjectives
Bytheendofthischapter,thereadershouldbeableto:
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LO1Understandhowservicescontributetoacountryseconomy.
LO2Identifythepowerfulforcesthataretransformingservicemarkets.
LO3Defineservicesusingthenonownershipserviceframework.
LO4Identifythefourbroadprocessingcategoriesofservices.
LO5Befamiliarwiththecharacteristicsofservicesandthedistinctivemarketing
challengestheypose.
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LO6Understandthecomponentsofthetraditionalmarketingmixappliedto
services.
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LO7Describethecomponentsoftheextendedmarketingmixformanagingthe
customerinterface.
LO8Knowtheframeworkfordevelopingeffectiveservicesmarketingstrategies.
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Figure1.1.Tertiaryeducationmaybeoneofthebiggestservicepurchases
inlife.
OpeningVignette:IntroductiontotheWorldofServicesMarketing
Likeeveryreaderofthisbook,youareanexperiencedserviceconsumer.Youuseavariety
ofserviceseveryday.Youtalkonthephone,useacreditcard,rideabus,orwithdraw
moneyfromanATM.Someoftheseservicesaresoroutinethatyouhardlynoticethem
unlesssomethinggoeswrong.Otherservicepurchasesmayinvolvemoreplanningandbe
morememorable.Examplesoftheseincludebookingacruisevacation,gettingfinancial
advice,andhavingamedicalexamination.
Enrollingincollegeorgraduateschoolmaybeoneofthebiggestservicepurchasesyouwill
evermake.Thetypicaluniversityisacomplexserviceorganizationthatoffersnotonly
educationalservicesbutalsolibraries,studentaccommodation,healthcare,athletic
facilities,museums,security,counseling,andcareerservices.Oncampus,youmayfinda
bookstore,apostoffice,photocopyingservices,Internetaccess,abank,food,entertainment,
andmore.
Unfortunately,consumersarenotalwayshappywiththequalityandvalueoftheservices
theyreceive.Bothindividualandcorporatecustomerscomplainaboutbrokenpromises,
poorvalueformoney,lackofunderstandingoftheirneeds,rudeorincompetentpersonnel,
inconvenientservicehours,bureaucraticprocedures,wastedtime,malfunctioningself
servicemachines,complicatedwebsites,andahostofotherproblems.
Youprobablyhaveafewfavoriteservicefirmsyouliketopatronize.Haveyoueverstopped
tothinkaboutthewaytheysucceedindeliveringservicesthatmeetandsometimeseven
exceedyourexpectations?Thisbookwillshowyouhowservicebusinessescanbemanaged
toachievecustomersatisfactionandprofitability.Inadditiontostudyingkeyconcepts,
organizingframeworks,andtoolsofservicesmarketing,youwillalsobeintroducedtomany
examplesfromfirmsacrosstheUnitedStatesandaroundtheworld.Fromtheexperiences
ofotherfirms,youcandrawimportantlessonsonhowtosucceedinincreasingly
https://www.safaribooksonline.com/library/view/essentialsofservices/9780133359008/ch01.html
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competitiveservicemarkets.
Inthisopeningchapter,weprovideanoverviewoftodayseverchangingserviceeconomy,
definethenatureofservices,andhighlightsomechallengesinvolvedinmarketingservices.
Weconcludethechapterbypresentingaframeworkfordevelopingandimplementing
servicesmarketingstrategies.Thisframeworkprovidesthestructureforthisbook.
Figure1.2.Happypeopleonacruisevacation.
Why Study Services?

Heresaparadox:Whileweliveinaservicedriveneconomy,mostbusinessschoolsstill
teachmarketingfromamanufacturingperspective.Ifyouhavetakenamarketingcourse
before,youmostlikelylearnedmoreaboutmarketingmanufacturedproducts,especially
consumergoods,thanaboutservicesmarketing.Fortunately,agrowingandenthusiastic
groupofscholars,consultants,andeducatorsincludingtheauthorsofthistexthaschosen
tofocusonservicesmarketing.Together,theybuildontheextensiveresearchconductedin
thisfieldoverthepastthreedecades.Wetrustthatthisbookwillprovideyouwiththe
knowledgeandskillsthatarehighlyrelevantintomorrowsbusinessenvironment.
LO1
Understandhowservicescontributetoacountryseconomy.
Services Dominate the Economy in Most Nations

Thesizeoftheservicesectorisincreasinginvirtuallyallcountriesaroundtheworlda
trendthatappliestobothdevelopedandemergingeconomies.Figure1.3showsthe
contributionoftheservicesectortotheGrossDomesticProduct(GDP)globally.
Source:TheWorldFactbook2009,CentralIntelligenceAgency,
https://www.cia.gov/library/publications/theworld
factbook/fields/2012.html,accessedMarch12,2012.
Figure1.3.ContributionofservicesindustriestoGDPglobally.
Figure1.4breaksthisdownfurtherintoaselectionofcountries.Itshowstherelativesizeof
theservicesectorinavarietyofbothlargeandsmalleconomies.Formostofthehighly
developednations,servicesaccountfor6775%oftheGDP.OneexceptionisSouthKorea,
whichisamanufacturingorientedcountrywiththeservicesectorcontributingonly58%to
GDP.Whicharetheworldsmostservicedominatedeconomies?OneistheCayman
Islands(95%),agroupofsmall,BritishadministeredislandsinthewesternCaribbean,
knownforbothtourismandoffshorefinancialandinsuranceservices.Jersey,theBahamas,
andBermudaallsmallislandswithasimilareconomicmixareequallyservice
dominated.Luxembourg(86%)hasthemostservicedominatedeconomyintheEuropean
Union.Panamasstrongshowing(76%)reflectsthefactthatthePanamaCanaliswidely
usedbycruiseshipsaswellasfreightvessels.Theseshipsaresupportedbyrelatedservices
suchascontainerports,flagshipregistry,andafreeportzone,aswellasfinancialservices,
insurance,andtourism(Figure1.5).
Source:TheWorldFactbook2009,CentralIntelligenceAgency
https://www.cia.gov/library/publications/theworld
factbook/fields/2012.html,accessedMarch12,2012.
Figure1.4.Estimatedsizeofservicesectorinselectedcountriesasa
percentageofGDP.
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Figure1.5.ThePanamaCanalformsthebackboneofPanamasservice
economy.
NeartheoppositeendofthescaleisChina(41%),whoseemergingeconomyisdominated
byasubstantialagriculturalsectorandboomingmanufacturingandconstructionindustries.
However,Chinaseconomicgrowthisnowleadingtoincreaseddemandforbusinessand
consumerservices.Chinasgovernmentisinvestingheavilyinserviceinfrastructure,
includingshippingfacilitiesandnewairportterminals.Lastamongrelativelyaffluent
countriesisSaudiArabia,withitsoildominatedeconomytowhichservicescontributeonly
36%ofitsGDP.
Most New Jobs Are Generated by Services

Sincetheservicesectorisgrowingsorapidlyinvirtuallyallcountriesaroundtheworld,new
jobcreationcomesmainlyfromservices.Newservicesarebeingintroducedallthetime.
Servicejobsdonotjustrefertorelativelylowlypaidfrontlinejobssuchasinrestaurantsor
callcenters.Rather,someofthefastesteconomicgrowthisinknowledgebasedindustries,
suchasprofessionalandbusinessservices,education,andhealthcare.
Thesejobstendto
bewellpaid,requiregoodeducationalqualifications,andofferattractivecareers.
Manymanufacturingfirms,too,havemovedfromjustbundlingsupplementaryservices
withtheirphysicalproductstomarketingcertainelementsasstandaloneservices.See
ServiceInsights1.1tofindouthowRollsRoyceachievedthattransformation.
ServiceInsights1.1:RollsRoyceSellsPowerbytheHour
Manymanufacturingfirmsenhancetheircompetitiveedgebyproviding
superiorvaluetotheircustomersintheformofservice.RollsRoyceisone
suchexample.RollsRoyceisasuccessfulcompanybecauseitfocuseson
technicalinnovationandmakesworldclassaircraftengines.RollsRoyce
enginespowerabouthalfofthelatestwidebodiedpassengerjetsanda
quarterofallsingleaisleaircraftsintheworldtoday.Averyimportantfactor
foritssuccesshasbeenitsmovefrommanufacturingtosellingpowerbythe
hourabundleofgoodsandservicesthatkeepsthecustomersengines
runningsmoothly.
Imaginethis:highabovethePacific,passengersdozeonalonghaulflight
fromTokyotoLosAngeles.Suddenly,aboltoflightningstrikesthejet.
Passengersmaynotthinkmuchofit,butontheothersideoftheworld,in
Derby,England,engineersatRollsRoycegetbusy.Lightningstrikesonjets
arecommonandusuallyharmless,butthisonehascausedsomeproblems
inoneoftheengines.Theaircraftwillstillbeabletolandsafelyandcould
dosoevenwiththeaffectedengineshutdown.Thequestioniswhetherit
willneedafullengineinspectioninLosAngeles,whichwouldbenormal
practicebutwouldalsoinconveniencehundredsofpassengerswaitinginthe
departurelounge.
AstreamofdataisbeamedfromtheplanetoDerby.Numbersdanceacross
screens,graphsareplottedanddrawn,andengineersscratchtheirheads.
Beforetheaircraftlands,wordcomesthattheengineisrunningsmoothly
andtheplanewillbeabletotakeoffontime.
Industryexpertsestimatethatmanufacturersofjetenginescanmakeabout
seventimestherevenuefromservicingandsellingsparepartsthantheydo
fromjustsellingtheengines.Sinceitissoprofitable,manyindependent
servicingfirmscompetewithcompanieslikeRollsRoyceandofferspareparts
foraslowasonethirdofthepricechargedbytheoriginalmanufacturers.To
fendofftheseindependentfirms,RollsRoycehasusedacombinationof
technologyandservicetomakeitmoredifficultforcompetitorstostealits
clients.Insteadofsellingenginesfirstandthenpartsandservicelater,Rolls
Roycehascreatedanattractivebundle,whichitbrandedTotalCare.Its
websiteadvertisesitasasolutionensuringpeaceofmindforthelifetimeof
anengine.Customersarechargedforeveryhourthatanengineruns.Rolls
Roycepromisestomaintaintheengineandreplaceitifitbreaksdown.The
operationsroominDerbycontinuouslymonitorstheperformanceofsome
3,500engines,enablingittopredictwhenenginesarelikelytofailandlet
airlinesscheduleenginechangesefficientlyandreducerepairsandunhappy
passengers.Today,about80%ofenginesshippedtoitscustomersare
coveredbysuchcontracts!AlthoughRollsRoycehadsometroublesonits
A380engines,theywereabletofixtheproblemquicklyandbouncedback
fromtheincidentwithmanymoreordersfortheirengines.
Sources:TheEconomist,BriefingRollsRoyce.BritainsLonelyHigh
FlyerJanuary10,2009,pp.5860www.rollsroyce.com(http://www.rolls
royce.com) ,March12,2012.TheEconomist,PerArdua,February5,2011,
p.68.Sourceofphoto:www.rollroyce.com(http://www.rollroyce.com) ,
accessedMarch12,2012.
JustlikeRollsRoyce,IBMwasalsopreviouslyknownmainlyasamanufacturer.The
companyalsomadethetransformationtoaserviceproviderandtodayoffersfourmain
groupsofservicesaspartofIBMGlobalServices.Theyarestrategicoutsourcing,business
consulting,integratedtechnologyservices,andmaintenance.
NotonlyhasIBMmoved
intodeliveringservices,butitisalsoattheforefrontofthemovementtoensurethatit
trainsworkersfortheserviceeconomy.Reflectingtheevertighterintegrationofvalue
creationintheserviceeconomy,IBMcameupwiththetermServiceScience,Management
andEngineering(SSME),oftencalledServiceScienceforshort,whichintegrateskey
disciplinesrequiredtodesign,improve,andscaleservicesystems.Arecentarticlein
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HarvardBusinessReviewsuggeststhatServiceSciencebeafieldofstudyinitself.
IBM
believesthat,tobeeffectiveintodaysservicedriveneconomies,futuregraduatesshould
beTshaped.Thatis,theyneedadeepunderstandingoftheirowndisciplinesuchas
business,engineering,orcomputerscience(theverticalpartoftheT),aswellasabasic
understandingofservicerelatedtopicsinotherdisciplines(thehorizontalpartoftheT).
4
LO2
Identifythepowerfulforcesthataretransformingservicemarkets.
Powerful Forces Are Transforming Service Markets

Whatarethefactorscausingthisrapidgrowthoftheservicesector?Governmentpolicies,
socialchanges,businesstrends,advancesininformationtechnology,andglobalizationare
amongthepowerfulforcestransformingtodaysservicemarkets(Figure1.6).TheInternet,
forexample,transferspowerfromsupplierstocustomers,especiallyinconsumermarkets.
Inthetravelindustry,travelerscannoweasilycheckforalternativesandmaketheirown
bookings.Electronicdistributionischangingrelationshipsandrolesbetweensuppliers,
intermediaries,andcustomersastraditionalintermediaries(suchaslocaltravelagencies)
arebeingreplacedbyinnovativenewcomerssuchasExpedia,Travelocity,andPriceline.
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TheInternetalsohelpstocreateadditionaloutsourcingopportunities.Manyprofessors
nowoutsourcetheirgradingtocompanieslikeEduMetryInc.Thegraderstherearetrained
toprovidegoodqualitygradingandfeedbackthatareverybeneficialtohelpingstudentsto
improveontheirweaknesses.
Table1.1showsspecificexamplesofeachoftheseforces
andtheirimpactontheserviceeconomy.Collectively,theyinfluencethecompetitive
landscapeandthewaycustomersbuyanduseservices.
Figure1.6.Factorsstimulatingthetransformationoftheserviceeconomy.
Table1.1.Examplesofforcesthattransformandimpacttheservice
economy
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What Are Services?

Thusfar,ourdiscussionofserviceshasfocusedondifferenttypesofserviceindustries.But
now,itstimetoaskthequestion:Whatexactlyisaservice?
Benefits without Ownership

Servicescoverahugevarietyofdifferentandoftenverycomplexactivities,makingthem
difficulttodefine.
Earlymarketingdefinitionsofservicesdescribedservicesasacts,
deeds,performances,oreffortsandcontrastedthemagainstgoodsbyarguingthatthey
haddifferentcharacteristicsfromgoodsdefinedasarticles,devices,materials,objects,or
things.
Thisthinkinghassinceadvancedfurtherandnowfocusesonthelackoftransfer
ofownershipwhenbuyingaservice.Supposeyoustayedatahotellastweekendorwentto
aphysicaltherapistwhoworkedonyourinjuredkneeorattendedaconcert.Noneofthese
purchasesresultedinactualownershipofsomething.Ifyoudidntreceiveatransferof
ownershipthelasttimeyoupurchasedaservice,thenwhatdidyoubuy?Thedistinction
betweenownershipandnonownershipisaonethathasbeenemphasizedbyseveralleading
servicesmarketingscholars.
ChristopherLovelockandEvertGummessonarguethatservicesinvolveaformofrental
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throughwhichcustomerscanobtainbenefits. Whatcustomersvalueandarewillingtopay
foraredesiredexperiencesandsolutions.Weusethetermrentasageneraltermto
describepaymentmadeforuseofsomethingoraccesstoskillsandexpertise,facilities,or
networks(usuallyforadefinedperiodoftime)insteadofbuyingitoutright(whichisnot
evenpossibleinmanyinstances).
Figure1.7.Servicestodaycanbeoutsourcedtocheaperdestinationsatthe
dropofahatsokeepyourjob(andhaton)byremainingproductive.
LO3
Defineservicesusingthenonownershipserviceframework.
Wecanidentifyfivebroadcategorieswithinthenonownershipframeworkthatfocuson(1)
useoflabor,skills,andexpertise,(2to4)variousdegreesofuseofgoodsandfacilities
(exclusive,defined,orshared),and(5)accessanduseofnetworksandsystems:
1)Labor,skillsandexpertiserentals.Here,otherpeoplearehiredtoperformwork
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thatcustomerseithercannotorchoosenottodothemselves.Someoftheseinclude:
Carrepair
Medicalcheckup
Managementconsulting
2)Rentedgoodsservices.Theseservicesallowcustomerstoobtaintheexclusive
temporaryrighttouseaphysicalobjectthattheyprefernottoown.Examplesofthese
include:
Boats
Fancydresscostumes
Constructionandexcavationequipment
3)Definedspaceandfacilityrentals.Thisiswhencustomersobtaintheuseofa
certainportionofalargerfacilitysuchasabuilding,vehicle,orarea.Theyusuallysharethis
facilitywithothercustomers.Examplesofthiskindofrentalinclude:
Aseatinanaircraft
Asuiteinanofficebuilding
Astoragecontainerinawarehouse
4)Accesstosharedfacilities.Customersrenttherighttosharetheuseofthefacility.
Thefacilitiesmaybeacombinationofindoors,outdoors,andvirtual.Examplesinclude:
Themeparks
WorldofWarcraftcommunitysite
Tollroads(Figure1.8)
Figure1.8.Customersrenttherighttousetollroads.
5)Accessanduseofnetworksandsystems.Customersrenttherighttoparticipate
inaspecifiednetwork.Serviceprovidersofferavarietyoftermsforaccessanduse,
dependingoncustomerneeds.Examplesoftheseinclude:
Telecommunications
Utilities
Banking
Thedifferencebetweenownershipandnonownershipaffectsthenatureofmarketingtasks
andstrategies.Forexample,thecriteriaforacustomerschoiceofservicewilldifferwhen
somethingisbeingrentedinsteadofowned.Ifyouarelookingforarentalcartobeusedon
vacation,youarelikelytofocusontheeaseofmakingreservations,therentallocationand
hours,theattitudesandperformanceofservicepersonnel,thecleanlinessandmaintenance
ofvehicles,etc.Ifyouarelookingtoownthecar,thenyouaremorelikelytoconsider
factorssuchasprice,brandimage,easeofmaintenance,runningcosts,design,color,
upholstery,etc.
Defining Services
Basedonthenonownershipperspectiveofservices,weofferthefollowingcomprehensive
definitionofservices:
DefinitionofServices
Servicesareeconomicactivitiesofferedbyonepartytoanother.Oftentime
based,theseactivitiesbringaboutdesiredresultstorecipients,objects,or
otherassets.
Inexchangeformoney,time,andeffort,servicecustomersexpectvaluefrom
accesstolabor,skills,expertise,goods,facilities,networks,andsystems.
However,theydonotnormallytakeownershipofthephysicalelements
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involved.
LO4
Identifythefourbroadprocessingcategoriesofservices.
Four Broad Categories of ServicesA Process Perspective

Didyounoticethatthedefinitionofservicesemphasizesnotonlyvaluecreationthrough
rentalandaccessbutalsothedesiredresultsthatcanbebroughttorecipientsoftheservice,
objects,andotherassets?Therearemajordifferencesamongservicesdependingonwhatis
beingprocessed.Inservices,people,physicalobjects,data,andinformationcanbe
processed.Thenatureoftheprocessingcanbetangibleorintangible.Tangibleactionsare
performedonpeoplesbodiesortotheirphysicalpossessions.Intangibleactionsare
performedonpeoplesmindsortotheirintangibleassets.Thisgivesrisetotheclassification
ofservicesintofourbroadcategories.Theyarepeopleprocessing,possessionprocessing,
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mentalstimulusprocessing,andinformationprocessing(Figure1.9).
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Figure1.9.Fourbroadcategoriesofservices.
People Processing
Theseareservicesthataredirectedatthepeoplethemselves.Theyincludebeing
transported,fed,ormademorebeautiful(Figure1.10).Sometimes,ofcourse,service
providersarewillingtocometocustomers,bringingthenecessarytoolsoftheirtradeto
createthedesiredbenefitsatthecustomerspreferredlocation.Someimplicationsof
peopleprocessingservicesare:
Serviceproductionandconsumptionaresimultaneous,whichmeansthatthecustomers
typicallymustbepresentinthephysicallocation(servicefactory).Thisrequiresplanning
aboutthelocationoftheserviceoperation,carefuldesignofserviceprocessesandthe
serviceenvironment,anddemandandcapacitymanagement.
Activecooperationofthecustomerisneededintheservicedeliveryprocess.Forexample,
atamanicuresalon,youwouldhavetocooperatewiththemanicuristbyspecifyingwhat
youwant,sittingstill,andpresentingeachfingerfortreatmentwhenrequested.
Thereisaneedformanagerstothinkabouttheprocessandoutputfromthecustomers
pointofview.Apartfromfinancialcosts,nonfinancialcostssuchastime,mentalandphysical
effortneedtobetakenintoaccount.
Figure1.10.Acustomergettingpamperedtolookmorebeautiful.
Possession Processing
Customersmayaskserviceorganizationstoprovidetreatmentfortheirphysical
possessions.Thesephysicalpossessionscouldinclude,forinstance,ahousethatisinfestedby
pests,dirtylaundry,oramalfunctioningelevator(Figure1.11).Theimplicationsofsuch
servicesare:
Unlikeforpeopleprocessingservices,productionandconsumptionforpossession
processingservicesarenotnecessarilysimultaneous.Thisallowstheservicefirmgreater
flexibilityindesigningsuchservicesforcostefficiency.
Customerstendtobelessinvolvedinpossessionprocessingservicesthaninpeople
processingservices.Theinvolvementmaybelimitedtojustdroppingofforcollectingan
item.Sometimes,customersmayprefertobepresentduringtheservicedelivery(e.g.,
whilethefamilydogreceivesaninjectionattheveterinaryclinic).
Figure1.11.Elevatorrepairisapossessionprocessingservice.
Mental Stimulus Processing

Theseservicestouchpeoplesmindsandhavethepowertoshapeattitudesandinfluence
behavior.Mentalstimulusprocessingservicesincludeeducation,newsandinformation,
professionaladvice,andsomereligiousactivities.Thecorecontentofservicesinthis
categoryisinformationbased.Hence,it(whethermusic,voice,orvisualimages)canbe
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convertedtodigitalbitsoranalogsignalsandrecorded(Figure1.12).Increasingly,
customerscandownloadelectroniccontentondemandthroughtheircomputersorcell
phones.Therearesomeimplicationsthatarisefromthesekindsofservices:
Customersdonothavetobephysicallypresentintheservicefactory.Theyonlyaccessthe
informationremotelywhentheyneedit.
Servicesinthiscategorycanbeinventoriedforconsumptionatalaterdate,oreven
consumedrepeatedly.
Figure1.12.Orchestralconcertsprovidementalstimulationandpleasure.
Information Processing
Informationcanbeprocessedbymachinesorbyprofessionalswhousetheirbrainsto
performinformationprocessingandpackaging.Informationisthemostintangibleformof
serviceoutput.However,itcanbetransformedintomorepermanentandtangibleforms
likeletters,reports,books,CDROMs,orDVDs.Someservicesthatarehighlydependent
ontheeffectivecollectionandprocessingofinformationarefinancialandprofessional
servicessuchasaccounting(Figure1.13),law,marketingresearch,managementconsulting,
andmedicaldiagnosis.
Figure1.13.Acouplegettingfinancialadviceontheirpension.
Itissometimesdifficulttotellthedifferencebetweeninformationprocessingandmental
stimulusprocessingservices.Forexample,ifastockbrokerperformsananalysisofaclients
brokeragetransactions,itseemslikeinformationprocessing.However,whentheresultsof
theanalysisareusedtomakearecommendationaboutthemostsuitabletypeof
investmentstrategyforthefuture,itwouldseemlikementalstimulusprocessing.
Therefore,forsimplicity,mentalstimulusprocessingservicesandinformationprocessing
servicesaresometimescombinedandsimplycalledinformationbasedservices.
LO5
Befamiliarwiththecharacteristicsofservicesandthedistinctivemarketingchallengesthey
pose.
Services Pose Distinct Marketing Challenges

Canthemarketingconceptsandpracticesdevelopedinmanufacturingcompaniesbe
directlytransferredtoserviceorganizationswherenotransferofownershiptakesplace?
Theanswerisoftenno.Servicestendtohavedifferentfeaturesfromgoods,includingthe
frequentlycitedfourcharacteristicsofintangibility,heterogeneity(variability),
13
inseparabilityofproductionandconsumption,andperishabilityofoutput, orIHIPfor
14
short. Table1.2explainsthesecharacteristics,andothercommondifferencesbetween
servicesandgoods.Together,thesedifferencescausethemarketingofservicestodiffer
fromthatofmanufacturedgoods.
Table1.2.Managerialimplicationsofeightcommonfeaturesofservice
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Itsimportanttorecognizethatthesedifferences,whileusefulgeneralizations,donotapply
equallytoallservices.Intangibility,forexample,rangesfromtangibledominantto
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intangibledominant(seeFigure1.14forascalethatpresentsavarietyofexamples).
Largedifferencesalsoexistbetweenthefourcategoriesofserviceswediscussedinthe
previoussection.Forexample,peopletendtobepartoftheserviceexperienceonlyifthe
customerhasdirectcontactwithserviceemployees.Thisisusuallythecaseforpeople
processingservices,butnotformanyinformationprocessingservicetransactionssuchas
onlinebanking.Youwillrecognizethesedifferencesaswediscussthemarketingmixfor
serviceslaterinthischapterandthroughoutthistext.
Source:AdaptedfromLynnShostack.
Figure1.14.Relativevalueaddedbyphysicalversusintangibleelementsin
goodsandservices.
The 7 Ps of Services Marketing

Whendevelopingwaystomarketmanufacturedgoods,marketersusuallyfocusonproduct,
price,place(ordistribution),andpromotion(orcommunication).Asagroup,theseare
16
usuallycalledthe4Psofthemarketingmix. However,asshowninTable1.2,thenature
ofservicesposesdistinctmarketingchallenges.Hence,the4Psofgoodsmarketingare
unabletodealwiththeissuesarisingfrommarketingservicesandhavetobeadaptedand
extended.Wewillthereforerevisitthetraditional4Psofthemarketingmixinthisbook
andfocusonapplyingthemtoservicespecificissues.
Furthermore,thetraditionalmarketingmixdoesnotcovermanagingthecustomer
interface.WethereforeneedtoextendthemarketingmixbyaddingthreePsassociated
17
withservicedeliveryprocess,physicalenvironment,andpeople. Together,wereferto
themasthe7Psofservicesmarketing.Letuslookbrieflyateachofthe7Ps.
LO6
Understandthecomponentsofthetraditionalmarketingmixappliedtoservices.
The Traditional Marketing Mix Applied to Services

Product Elements
Serviceproductslieattheheartofafirmsmarketingstrategy.Ifaproductispoorly
designed,itwontcreatemeaningfulvalueforcustomers,eveniftherestofthe7Psare
wellexecuted.Planningthemarketingmixbeginswithcreatingaserviceconceptthatwill
offervaluetotargetcustomersandsatisfytheirneedsbetterthancompetingalternatives.
Serviceproductsconsistofacoreproductthatmeetsthecustomersprimaryneedanda
varietyofsupplementaryserviceelementsthataremutuallyreinforcingandaddvalueto
helpcustomerstousethecoreproductmoreeffectively.Supplementaryserviceelements
includeprovidinginformation,consultation,ordertaking,hospitalityandhandling
exceptions.
Place and Time
Servicedistributionmaytakeplacethroughphysicalorelectronicchannels(orboth),
dependingonthenatureoftheservice(seeTable1.2).Forexample,todaysbanksoffer
customersawiderangeofdistributionchannels,includingvisitingabankbranch,usinga
networkofATMs,doingbusinessbytelephone,andconductingbankingtransactionsover
theInternet.Inparticular,manyinformationbasedservicescanbedeliveredthroughthe
Internet.Firmsmayalsodeliverservicedirectlytocustomersorthroughintermediary
organizationssuchasretailoutletsthatreceiveafeeorcommissioninreturn.Inorderto
deliverserviceelementstocustomers,companiesneedtodecidewhereandwhenthese
18
servicesaredelivered,aswellasthemethodsandchannelsused.
DistributionofCoreversusSupplementaryServices.TheInternetisreshaping
distributionstrategyforanumberofindustries.Weneedtodifferentiatebetween
deliveringinformationbasedcoreproducts(thosethatrespondtocustomersprimary
requirements)andprovidingsupplementaryservicesthatfacilitatethepurchaseanduseof
physicalgoods.Examplesofinformationbasedcoreproductsincludeonlineeducational
programsofferedbytheUniversityofPhoenixandautomobileinsurancecoveragefrom
ProgressiveCasualtyCo.
ImportanceoftheTimeFactor(seeTable1.2).Manyservicesaredeliveredinreal
timewhilecustomersarephysicallypresent.Therefore,speedandconvenienceofplaceand
timehavebecomeimportantdeterminantsofeffectivedistributionanddeliveryofservices.
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Manycustomerstodayavoidwastingtime.(Youprobablydo,too.)Theymaybewillingto
payextratosavetime,suchastakingataxiwhenacitybusservesthesameroute(Figure
1.15).Manybusycustomersexpectservicewhenitsuitsthem,ratherthanwhenitsuitsthe
supplier.Ifonefirmrespondsbyofferingextendedhours,itscompetitorsoftenfeeltheneed
todothesame.Nowadays,agrowingnumberofservicesareavailable24/7.
Figure1.15.Timeistheessenceserviceprovidersmustbeswiftandsmart
intheircustomerinteractions.
Price and Other User Outlays
Likeproductvalue,paymentisveryimportantinallowingavalueexchangetotakeplace
betweenthefirmanditscustomers.Forfirms,thepricingstrategyaffectshowmuch
incomeisgenerated.Thisisusedtocoverthecostsofprovidingserviceandtocreate
profits.Afirmspricingstrategyoftenishighlydynamic,withpricelevelsadjustedovertime
accordingtofactorssuchastypeofcustomer,timeandplaceofdelivery,levelofdemand,
andavailablecapacity.
Forcustomers,priceisakeypartofthecoststheymustincurtoobtaindesiredbenefits.To
calculatewhetheraparticularserviceisworthit,theymaygobeyondjustmoneyand
assesshowmuchtimeandeffortareinvolved(Figure1.16).Servicemarketers,therefore,
mustnotsetonlypricesthattargetcustomersarewillingandabletopay.Theymustalso
understandandtrytominimizeothercustomeroutlays.Theseoutlaysmayinclude
additionalmonetarycosts(suchastravelexpensestoaservicelocation),timespent,inthe
processofpurchasingtheservice(suchasthetimetakentotraveltoaservicelocation).
Figure1.16.Moneyisnottheonlyconsiderationwhenmeasuringthecost
ofaservice.
MostServiceProductsCannotBeInventoried.Sinceservicesinvolveactionsor
performances,theyaretemporaryandperishable.Therefore,theyusuallycannotbe
stockedasinventoryforfutureuse(seeTable1.2).Althoughfacilities,equipment,andlabor
canbepreparedtocreatetheservice,eachrepresentsproductivecapacity,nottheproduct
itself.Ifthereisnodemand,unusedcapacityiswastedandthefirmlosesthechanceto
createvaluefromtheseassets.Duringperiodswhendemandexceedscapacity,customers
maybesentawaydisappointedoraskedtowaituntillater.Akeytaskforservice
marketers,therefore,istofindwaysofsmoothingdemandlevelstomatchthefirms
availablecapacityusingdynamicpricingstrategies.
Promotion and Education
Whatshouldwetellcustomersandprospectsaboutourservices?Fewmarketingprograms
cansucceedwithouteffectivecommunications.Thiscomponentplaysthreevitalroles:(1)
providingneededinformationandadvice(2)persuadingtargetcustomerstobuythebrand
orserviceproductand(3)encouragingthemtotakeactionatspecifictimes.Inservices
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marketing,mostcommunicationiseducationalinnature,especiallyfornewcustomers.
Suppliersneedtoteachtheircustomersaboutthebenefitsoftheservice,whereandwhen
toobtainit,andhowtoparticipateinserviceprocessestogetthebestresults.
ServicesareOftenDifficulttoVisualizeandUnderstandasIntangibleElements
UsuallyDominateValueCreation.Intangibilitycanconsistofbothmentalandphysical
dimensions.Mentalintangibilitymeansitisnoteasilyvisualizedandunderstood,while
19
physicalintangibilityisthatwhichcannotbetouchedorexperiencedbythefivesenses.
Intangibleelementslikeprocesses,Internetbasedtransactions,andtheexpertiseand
attitudesofservicepersonneloftencreatethemostvalueinserviceperformances.When
servicesarephysicallyintangible,itisharderforcustomerstoevaluateimportantservice
featuresbeforepurchase,orevaluatethequalityoftheperformanceitself(seeTable1.2).
Firmscanusephysicalimagesandmetaphorstopromoteservicebenefitsanddemonstrate
thefirmscompetencies(seeFigure1.17).Inaddition,formanyservices,itisdifficultfor
customerstovisualizetheexperiencepriortoapurchaseandtounderstandwhattheywill
begetting.Thissituationcanmakeservicepurchasesseemrisky.Therefore,animportant
roleofaservicefirmscommunicationsistocreateconfidenceinthefirmsexperience,
credentials,andexpertiseofitsemployees.Welltrainedserviceemployeescanhelp
potentialcustomerstomakegoodchoicesbyeducatingthemonwhattoexpectduringand
afterservicedeliveryandbyhelpingthemmovesmoothlythroughtheserviceprocess.
Figure1.17.Insuranceservicesareintangible,butNationwideshowstheir
reliabilitywithadashofcreativeadvertising.
Generally,servicefirmshavemuchtogainfromhelpingcustomersbecomemore
20
competentandproductive. Afterall,ifyouknowhowtouseaservicewell,notonlywill
youhaveabetterserviceexperienceandoutcome,butyourgreaterefficiencymayalso
eventuallyboostthefirmsproductivity,loweritscosts,andperhapsevenenableitto
reducethepriceyoupay.
CustomerCustomerInteractionsAffecttheServiceExperience.Whenyou
encounterothercustomersataservicefacility,they,too,canaffectyoursatisfaction.How
theyredressed,whotheyare,andhowtheybehavecanallenhanceornegatetheimagea
firmistryingtoprojectandtheexperienceitistryingtocreate.Theimplicationsareclear:
Weneedtousemarketingcommunicationstoattracttherightsegmentofcustomersto
theservicefacility,andalsotoeducatethemontheproperbehavior.
LO7
Describethecomponentsoftheextendedmarketingmixformanagingthecustomer
interface.
The Extended Services Marketing Mix for Managing the Customer Interface
Process
Smartmanagersknowthatwhereservicesareconcerned,howafirmdoesthingsisjustas
importantaswhatitdoes.Therefore,creatinganddeliveringproductelementsrequirethe
designandimplementationofeffectiveprocesses.Ifserviceprocessesarebadlydesigned,it
couldleadtoslowandineffectiveservicedeliveryforstaff.Forcustomers,itcouldmean
wastedtimeandadisappointingexperience.
OperationalInputsandOutputsCanVaryWidely.Operationalinputsandoutputs
tendtovarymorewidelyforservicesandmakecustomerserviceprocessmanagementa
challenge(seeTable1.2).Whenaserviceisdeliveredfacetofaceandconsumedasitis
produced,finalassemblymusttakeplaceinrealtime.However,operationsareoften
distributedacrossthousandsofsitesorbranches.Whenoperationsaredistributed(rather
thancentralizedinafactory),itisdifficultforserviceorganizationstoensurereliable
delivery,tocontrolquality,andtomaintain,ifnotimprove,productivity.Asaformer
packagedgoodsmarketeronceobservedaftermovingtoanewpositionatHolidayInn:
WecantcontrolthequalityofourproductaswellasaProcterandGamblecontrolengineer
onaproductionlinecan...WhenyoubuyaboxofTide,youcanreasonablybe99and
44/100thspercentsurethatitwillworktogetyourclothesclean.Whenyoureservea
HolidayInnroom,youresureatsomelesserpercentagethatitwillworktogiveyoua
goodnightssleepwithoutanyhassle,orpeoplebangingonthewallsandallthebadthings
21
thatcanhappeninahotel.
Nevertheless,thebestservicefirmshavemadesignificantprogressinreducingvariability
bycarefullydesigningcustomerserviceprocesses,adoptingstandardizedprocedures,
implementingrigorousmanagementofservicequality,trainingemployeesmorecarefully,
andautomatingtaskspreviouslyperformedbyhumans.
CustomersAreOftenInvolvedinCoproduction.Someservicesrequirecustomers
toparticipateactivelyincoproducingtheserviceproduct(seeTable1.2).Forexample,
youreexpectedtohelptheinvestmentbankerunderstandwhatyourneedsare,howmuch
youwanttoinvestfinancially,thekindofrisksyouarewillingtotake,andtheexpected
returns.Thiswillenablethebankertogiveyouadviceonwhattoinvestin.Infact,service
22
scholarsarguethatcustomersoftenfunctionaspartialemployees. Increasingly,your
involvementtakestheformofselfservice,oftenusingselfservicetechnologies(SSTs)
23
facilitatedbysmartmachines,telecommunications,andtheInternet. Whethercustomers
coproduceoruseSSTs,welldesignedcustomerserviceprocessesareneededtofacilitate
servicedelivery.
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Figure1.18.Professionalserviceisthekeytocustomersatisfactioninthe
hospitalityindustry.
DemandandCapacityNeedtoBeBalanced.Manufacturingcanensureasmooth
processflowbyhavinganinventoryofmaterialsorpartsreadyforuse.However,for
services,thesamethingwouldmeanmakingcustomerswaitintheserviceprocess!
Therefore,effectiveserviceprocessmanagementiscloselyrelatedtothebalancingof
demandandcapacity,thedesignofwaitingsystemsandqueuesconfigurations,andthe
managementofthecustomerspsychologyofwaiting.
Physical Environment
Ifyourjobisinaservicebusinessthatrequirescustomerstoentertheservicefactory,youll
alsohavetospendtimethinkingaboutthedesignofthephysicalenvironmentor
24
servicescape. Theappearanceofbuildings,landscaping,vehicles,interiorfurnishings,
equipment,staffmembersuniforms,signs,printedmaterials,andothervisiblecuesprovide
tangibleevidenceofafirmsservicequality.Theservicescapealsofacilitatesservice
deliveryandguidescustomersthroughtheserviceprocess.Servicefirmsneedtomanage
theirservicescapescarefully,sincetheycanhaveaprofoundimpactoncustomer
25
satisfaction andserviceproductivity.
People
Despiteadvancesintechnology,manyserviceswillalwaysneeddirectinteractionbetween
customersandserviceemployees(seeTable1.2).Youmusthavenoticedmanytimeshow
thedifferencebetweenoneservicesupplierandanotherliesintheattitudesandskillsof
theiremployees.Servicefirmsneedtoworkcloselywiththeirhumanresources(HR)
departmentsanddevotespecialcareinselecting,training,andmotivatingtheirservice
employees(seeFigure1.19).Inadditiontopossessingthetechnicalskillsrequiredbythe
job,theseindividualsalsoneedgoodinterpersonalskillsandpositiveattitudes.Having
loyal,skilled,andmotivatedemployeeswhocanworkwellindependentlyortogetherin
teamsrepresentsakeycompetitiveadvantageforservicefirms.
Figure1.19.Hospitalityisshownthroughemployeeswearingsmartoutfits
andareadysmile.
LO8
Knowtheframeworkfordevelopingeffectiveservicesmarketingstrategies.
A Framework for Developing Effective Services Marketing Strategies

The7Psareintegratedintothewiderorganizingframeworkofthisbook.Itshowshow
eachofthechaptersfitstogetherwiththeothersastheyaddressrelatedtopicsandissues.
Figure1.20presentstheorganizingframeworkforthisbook,whichisdividedintofiveparts:
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(1)understandingserviceproducts,consumers,andmarkets(2)applyingthe4Psof
marketingtoservices(3)designingandmanagingthecustomerinterface(i.e.,the
additional3Psofservicesmarketing)(4)developingcustomerrelationshipsand(5)
strivingforserviceexcellence.Notethatthearrowslinkthedifferentboxesinthemodel
theystresstheinterdependencesbetweenthedifferentparts.Decisionsmadeinonearea
mustbeconsistentwiththosetakeninanother,sothateachstrategicelementwill
mutuallyreinforcetheotherelements.
Figure1.20.IntegratedModelofServicesMarketing.
Thekeycontentsofthefivepartsofthisbookare:
PartI:UnderstandingServiceProducts,Consumers,andMarkets
PartIofthisbooklaysthefoundationforstudyingservicesandlearninghowto
becomeaneffectiveservicesmarketer.
Chapter1Wedefineservicesandshowshowwecancreatevaluewithout
transferofownership.
Chapter2Wediscussconsumerbehaviorinbothhighandlowcontact
services.Thethreestagemodelofserviceconsumptionisusedtoexplorehow
customerssearchforandevaluatealternativeservices,makepurchase
decisions,experienceandrespondtoserviceencounters,andevaluateservice
performance.
Chapter3Wediscusshowaservicevaluepropositionshouldbepositionedin
awaythatcreatescompetitiveadvantageforthefirm.Thechaptershowshow
firmscansegmentaservicemarket,positiontheirvalueproposition,andfocuson
attractingtheirtargetsegment.
PartII:Applyingthe4PsofMarketingtoServices
PartIIrevisitsthe4Psofthetraditionalmarketingmixtaughtinyourbasic
marketingcourse.However,the4Psareexpandedtotakeintoconsiderationthe
characteristicsofservicesthataredifferentfromgoods.
Chapter4Productincludesboththecoreandsupplementaryserviceelements.
Thesupplementaryelementsfacilitateandenhancethecoreserviceoffering.
Chapter5Placeandtimeelementsrefertothedeliveryoftheproductelements
tocustomers.
Chapter6Pricesofservicesneedtobesetwithreferencetocosts,competition
andvalue,andrevenuemanagementconsiderations.
Chapter7Promotionandeducationexplainhowfirmsshouldinformcustomers
abouttheirservices.Inservicesmarketing,muchcommunicationiseducationalin
naturetoteachcustomershowtoeffectivelymovethroughserviceprocesses.
PartIII:DesigningandManagingtheCustomerInterface
PartIIIofthebookfocusesonmanagingtheinterfacebetweencustomersandthe
servicefirm.Itcoverstheadditional3Psthatareuniquetoservicesmarketing
andnotfoundingoodsmarketing.
Chapter8Processescreateanddelivertheproductelements.Thechapter
beginswiththedesignofeffectivedeliveryprocesses,specifyinghowthe
operatinganddeliverysystemslinktogethertocreatethevalueproposition.Very
often,customersareinvolvedintheseprocessesascoproducers,andwell
designedprocessesshouldaccountforthat.
Chapter9Thischapteralsorelatestoprocessmanagementandfocuseson
balancingfluctuatingdemandandproductivecapacityforeachstepofacustomer
serviceprocess.Marketingstrategiesformanagingdemandinvolvesmoothing
demandfluctuations,inventoryingdemandthroughreservationsystems,and
formalizedqueuing.Managingcustomerwaitingisalsoexploredinthischapter.
Chapter10Thephysicalenvironment,alsoknownastheservicescape,needs
tobedesignedandengineeredtocreatetherightimpressionandfacilitate
effectiveserviceprocessdelivery.Theservicescapeprovidestangibleevidence
ofafirmsimageandservicequality.
Chapter11Peopleplayaveryimportantroleinservicesmarketing.Many
servicesrequiredirectinteractionbetweencustomersandservicepersonnel.The
natureoftheseinteractionsstronglyinfluenceshowcustomersperceiveservice
quality.Hence,servicefirmsdevoteasignificantamountofefforttorecruiting,
training,andmotivatingemployees.Howtogetallthisrightisexplainedusingthe
ServiceTalentCycleasanintegrativeframework.
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PartIV:DevelopingCustomerRelationships
PartIVfocusesonhowtodevelopcustomerrelationshipsandbuildloyalty.
Chapter12Achievingprofitabilityrequirescreatingrelationshipswith
customersfromtherightsegmentsandthenfindingwaystobuildandreinforce
theirloyalty.ThischapterintroducestheWheelofLoyalty,whichshowsthree
systematicstepsinbuildingcustomerloyalty.Thechaptercloseswitha
discussionofcustomerrelationshipmanagement(CRM)systems.
Chapter13Aloyalcustomerbaseoftenisbuiltfromeffectivecomplaint
handlingandservicerecovery,whicharediscussedinthischapter.Service
guaranteesareexploredasapowerfulwayofinstitutionalizingeffectiveservice
recoveryandasaneffectivemarketingtooltosignalhighqualityservice.
PartV:StrivingforServiceExcellence
PartVfocusesonhowtodevelopandtransformafirmtoachieveservice
excellence.
Chapter14Productivityandqualityarebothnecessaryandarestrongly
relatedtofinancialsuccessinservices.Thischapterfocusesonservicequality,
diagnosingqualityshortfallsusingtheGapsModel,andstrategiestoclosequality
gaps.Customerfeedbacksystemsarediscussedasaneffectivetoolfor
systematicallylisteningtoandlearningfromcustomers.Productivityisintroduced
asbeingcloselyrelatedtoquality,anditisemphasizedthatintodayscompetitive
markets,firmsneedtosimultaneouslyimprovebothqualityandproductivitynot
oneattheexpenseoftheother.
Chapter15TheServiceProfitChainisusedasanintegrativemodelto
demonstratethestrategiclinkagesinvolvedinrunningasuccessfulservice
organization.Implementingtheserviceprofitchainrequirestheintegrationofthe
threekeyfunctionsofmarketing,operations,andhumanresources.Thischapter
discusseshowtomoveaserviceorganizationtohigherlevelsofperformancein
eachfunctionalarea,andcloseswithadiscussionabouttheroleofleadershipin
creatingandmaintainingaclimateforservice.
Chapter Summary
LO1Servicesrepresentanimportantandgrowingcontributiontomost
economiesintheworld.Aseconomiesdevelop,servicesformthelargestpartoftheGDPof
thoseeconomies.Globally,mostnewjobsaregeneratedintheservicesector.
LO2Manyforcesaretransformingoureconomies,makingthemmoreservices
oriented.Theyincludegovernmentpolicies,socialchanges,businesstrends,advancesin
informationtechnology,andglobalization.
LO3Whatexactlyisaservice?Thekeydistinguishingfeatureofaserviceisthat
itisaformofrentalratherthanownership.Servicecustomersobtaintherightstohirethe
labor,skills,andexpertiseofpersonneltouseaphysicalobjectorspaceortoaccessshared
facilities,networks,andsystems.Servicesareperformancesthatbringaboutthedesired
resultsorexperienceforthecustomer.
LO4Servicesvarywidelyandcanbecategorizedaccordingtothenatureofthe
underlyingprocess:Istheservicedirectedatcustomersortheirpossessions?Areservice
actionstangibleorintangibleinnature?Thesedistinctionshaveimportantmarketing
implicationsandleadtofourbroadcategoriesofservices:
Peopleprocessing
Possessionprocessing
Mentalstimulusprocessing
Informationprocessing
Mentalstimulusandinformationprocessingcanbecombinedintowhatiscalled
informationbasedservices.
LO5Serviceshaveuniquecharacteristicsthatmakethemdifferentfrom
products:
Mostserviceproductscannotbeinventoried(i.e.,areperishable).
Intangibleelementsusuallydominatevaluecreation(i.e.,arephysicallyintangible).
Servicesoftenaredifficulttovisualizeandunderstand(i.e.,arementallyintangible).
Customersmaybeinvolvedincoproduction(i.e.,ifpeopleprocessingisinvolved,the
serviceisinseparable).
Peoplemaybepartoftheserviceexperience.
Operationalinputsandoutputstendtovarywidely(i.e.,areheterogeneous).
Thetimefactoroftenassumesgreatimportance.
Distributionmaytakeplacethroughnonphysicalchannels.
LO6Duetotheuniquecharacteristicsofservices,thetraditionalmarketingmix
ofthe4Psneedstobeamended.Someimportantamendmentsinclude:
Productelementsincludemorethanjustthecoreelements.Theyalsoinclude
supplementaryserviceelementssuchastheprovisionofconsultation,hospitality,or
handlingofexceptions.
Placeandtimeelementsrefertothedeliveryoftheproductelementstothecustomer
manyinformationprocessingelementsaredeliveredelectronically.
Pricingincludesnonmonetarycoststotheconsumerandrevenuemanagement
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considerations.
Promotionisalsoviewedasaformofcommunicationandeducationthatguides
customersthroughserviceprocesses,ratherthanfocusingmainlyonadvertisingand
promotions.
LO7ServicesmarketingrequiresthreeadditionalPsthatcoverthemanagement
ofthecustomerinterface:
Processreferstothedesignandmanagementofcustomerserviceprocesses,including
managingdemandandcapacityandrelatedcustomerwaiting.
Physicalenvironment,alsoknownastheservicescape,facilitatesprocessdeliveryand
providestangibleevidenceofafirmsimageandservicequality.
Peoplecoverstherecruiting,training,andmotivatingofserviceemployeestodeliver
servicequalityandproductivity.
LO8Aframeworkforservicesmarketingstrategyformstheunderlyingstructure
ofthisbook.Theframeworkconsistsofthefollowingfiveinterlinkedparts:
PartIbeginswiththeneedforservicefirmstounderstandtheirmarkets,customers,and
competition.
PartIIshowsushowtoapplythetraditional4Pstoservicesmarketing.
PartIIIcoversthe3Psoftheextendedservicesmarketingmixandshowshowto
managethecustomerinterface.
PartIVillustrateshowtodeveloplastingcustomerrelationshipsthroughavarietyof
tools,rangingfromtheWheelofLoyaltyandCRMtoeffectivecomplaintmanagementand
serviceguarantees.
PartVdiscusseshowtoimproveservicequalityandproductivityandcloseswitha
discussiononhowchangemanagementandleadershipcanpropelafirmtobecomea
serviceleader.
Unlock Your Learning
ThesekeywordsarefoundwithinthesectionsofeachLearningObjective(LO).Theyare
integraltounderstandingtheservicesmarketingconceptstaughtineachsection.Havinga
firmgraspofthesekeywordsandhowtheyareusedisessentialtohelpingyoudowellon
yourcourse,andintherealandverycompetitivemarketingsceneoutthere.
LO11Knowledgebasedindustries
2Servicescience
3Servicesector
4Servicedriveneconomy
5Supplementaryservices
LO26Advancesininformationtechnology
7Businesstrends
8Globalization
9Governmentpolicies
10Socialchange
LO311Acts
12Deeds
13Economicactivities
14Efforts
15Nonownership
16Performances
17Rental
LO418Inventoried
19Informationprocessing
20Informationbasedservices
21Intangibleactions
22Mentalstimulusprocessing
23Peopleprocessing
24Possessionprocessing
25Tangibleactions
LO5264Ps
27Heterogeneity
28Inseparability
29Intangibility
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30Intangibledominant
31Perishability
32Tangibledominant
LO6337Ps
34Coreproducts
35Placeandtime
36Price
37Productelements
38Promotionandeducation
39Serviceproducts
40Useroutlays
LO741Servicescape
42Capacity
43Coproduction
44Demand
45Operationalinputs
46People
47Physicalenvironment
48Process
LO849Complainthandling
50Customerfeedbacksystems
51Customerinterface
52Customerrelationshipmanagement(CRM)systems
53Customerrelationships
54Deliveryprocesses
55Gapsmodel
56Highcontactservices
57Humanresources
58Lowcontactservices
59Marketing
60Motivating
61Operations
62Productivecapacity
63Productivity
64Quality
65Recruiting
66Serviceexcellence
67Serviceprofitchain
68Servicerecovery
69Tangibleevidence
70Targetsegment
71Training
72Valueproposition
73WheelofLoyalty
Howwelldoyouknowthelanguageofservicesmarketing?Quizyourself!
Notfortheacademicallyfaintofheart
Foreachkeywordyouareabletorecallwithoutreferringtoearlierpages,give
yourselfapoint(andapatontheback).Tallyyourscoreattheendandseeifyou
earnedtherighttobecalledaservicesmarketeer.
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Score
0112ServicesMarketingisdoneagreatdisservice.
1324Themidnightoilneedstobelit,pronto.
2536Iknowwhatyoudidntdoallsemester.
3748ByGeorge!Youregettingthere.
4960Now,goforthandmarket.
6173Thereshouldbeamarketingconceptnamedafteryou.
KnowYourESM
ReviewQuestions
1.Whatarethemainreasonsforthegrowingshareoftheservicesectorinall
majoreconomiesoftheworld?
2.Whatarethefivepowerfulforcestransformingtheservicelandscape,and
whatimpactdotheyhaveontheserviceeconomy?
3.Aserviceisrentedratherthanowned.Explainwhatthisstatement
means,anduseexamplestosupportyourexplanation.
4.Describethefourbroadprocessingcategoriesofservices,andprovide
examplesforeachcategory.
5.Whatissospecialaboutservicesmarketingthatitneedsaspecial
approach?
6.The4Psareallamarketingmanagerneedstocreateamarketing
strategyforaservicebusiness.Preparearesponsethatarguesagainstthis,
andsupportitwithexamples.
7.Whattypesofservicesdoyouthinkare(a)themostaffectedand(b)the
leastaffectedbytheproblemofvariableinputsandoutputs?Why?
8.Whyistimesoimportantinservices?
9.Whataretheelementsintheframeworkfordevelopingeffectiveservice
marketingstrategies?
WorkYourESM
ApplicationExercises
1.Visitthewebsitesofthefollowingnationalstatisticalbureaus:USBureau
ofEconomicAnalysis(www.bea.gov(http://www.bea.gov) )StatisticsCanada
(www.statcan.ca (http://www.statcan.ca) )NationalBureauofStatisticsofChina
(www.stats.gov.cn/english/(http://www.stats.gov.cn/english/) )Eurostat
(http://europa.eu.int/en/comm/eurostat/(http://europa.eu.int/en/comm/eurostat/) )
JapaneseStatisticsBureau(www.stat.go.jp (http://www.stat.go.jp) )CentralBureau
ofStatistics(Indonesia)(www.bps.go.id (http://www.bps.go.id) )StatisticsSouth
Africa(www.statssa.gov.za (http://www.statssa.gov.za) )andtherespectivewebsites
foryourcountryifitisnotcoveredhere.Ineachinstance,obtaindataonthe
latesttrendsinservicesas(a)apercentageoftheGDP(b)thepercentageof
employmentaccountedforbyservices(c)breakdownsofthesetwostatistics
bytypeofindustryand(d)serviceexportsandimports.Lookingatthese
trends,whatareyourconclusionsforthemainsectorsoftheseeconomies,
andwithinservices,forspecificservicesectors?
2.Legalandaccountingfirmsnowadvertisetheirservicesinmanycountries.
Searchforafewadvertisementsandreviewthefollowing:Whatdothese
firmsdotocopewiththeintangibilityoftheirservices?Whatcouldtheydo
better?Howdotheydealwithconsumerqualityandriskperceptions,and
howcouldtheyimprovethisaspectoftheirmarketing?
3.GiveexamplesofhowInternetandtelecommunicationstechnologies(e.g.,
InteractiveVoiceResponseSystems(IVRs)andmobilecommerce(m
commerce)havechangedsomeoftheservicesyouuse).
4.Chooseaservicecompanyyouarefamiliarwith,andshowhoweachof
the7Psofservicesmarketingappliestooneofitsspecificserviceproducts.
Endnotes
1 .MarionWeissenbergerEiblandDanielJeffreyKoch,ImportanceofIndustrial
ServicesandServiceInnovations,JournalofManagementandOrganization,no.13(2007):
88101JochenWirtzandMichaelEhret,CreativeRestructionHowBusinessServices
DriveEconomicEvolution,EuropeanBusinessReview,21,no.4(2009),380394.
2 .http://www.ibm.com/us/en/ (http://www.ibm.com/us/en/),accessedMarch12,2012.
3 .HenryChesbrough,TowardsaNewScienceforServices,HarvardBusinessReview,
February2005,4344.
4 .FormoreinformationonSSME,seeIFMandIBM,SucceedingthroughService
Innovation:ADiscussionPaper.Cambridge,UK:UniversityofCambridgeInstitutefor
Manufacturing,2007PaulP.MaglioandJimSpohrer.FundamentalsofServiceScience,
JournaloftheAcademyofMarketingScience,36,no.1(2008):1820R.C.Larson,
ServiceScience:AttheIntersectionofManagement,Social,andEngineeringSciences,
IBMSystemsJournal,47,no.1(2008)R.J.Glushko,DesigningaServiceScience
DisciplinewithDiscipline,IBMSystemsJournal,47,no.1(2008):1527RobertaS.
Russell.CollaborativeResearchinServiceScience:QualityandInnovation,Journalof
ServiceScience,2,no.2(2009):17.
5 .BillCarrollandJudySiguaw,TheEvolutionofElectronicDistribution:Effectson
HotelsandIntermediaries,CornellHotelandRestaurantAdministrationQuarterly44,
(August2003):3851.
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6 .AudreyWilliamsJune,SomePapersareUploadedtoBangaloretoBeGraded,The
ChronicleatHigherEducation,April4,2010http://edumetry.com/ (http://edumetry.com/),
accessedMarch12,2012.
7 .RobinG.Qiu,ServiceScience:ScientificStudyofServiceSystems,ServiceScience.
Retrievedathttp://www.sersci.com/ServiceScience/paper_details.php?id=1
(http://www.sersci.com/ServiceScience/paper_details.php?id=1),publishedonNovember22,2008.
8 .JohnM.Rathmell,WhatIsMeantbyServices?JournalofMarketing30(October
1966):3236.
9 .RobertC.Judd,TheCaseforRedefiningServices,JournalofMarketing28
(January1964):59JohnM.Rathmell,MarketingintheServiceSector.Cambridge,MA:
Winthrop,1974ChristopherH.LovelockandEvertGummesson,WhitherServices
Marketing?InSearchofaNewParadigmandFreshPerspectives,JournalofService
Research7(August2004):2041.
10.ChristopherH.LovelockandEvertGummesson,WhitherServicesMarketing?In
SearchofaNewParadigmandFreshPerspectives,JournalofServiceResearch7(August
2004):2041.
11.AdaptedfromadefinitionbyChristopherLovelock(identifiedanonymouslyasExpert6,
TableII,p.112)inBoEdvardsson,AndersGustafsson,andIngerRoos,ServicePortraitsin
ServiceResearch:ACriticalReview,InternationalJournalofServiceIndustry
Management16,no.1(2005):107121.
12.TheseclassificationsarederivedfromChristopherH.Lovelock,ClassifyingServicesto
GainStrategicMarketingInsights,JournalofMarketing47,(Summer1983):920.
13.ValarieA.ZeithamI,A.Parasuraman,LeonardL.Berry,ProblemsandStrategiesin
ServicesMarketing.JournalofMarketing49,(Spring1985):3346.
14.ChristopherH.LovelockandEvertGummesson,WhitherServicesMarketing?In
SearchofaNewParadigmandFreshPerspectives,JournalofServiceResearch7(August
2004):2041.
15.G.LynnShostack,BreakingFreefromProductMarketing,JournalofMarketing41
(April1977):7380.
16.The4PsclassificationofmarketingdecisionvariableswascreatedbyE.Jerome
McCarthy,BasicMarketing:AManagerialApproach(Homewood,IL:RichardD.Irwin,
Inc.,1960).Itwasarefinementofthelonglistofingredientsincludedinthemarketingmix
conceptcreatedbyProfessorNeilBordenatHarvardinthe1950s.Bordengottheidea
fromacolleaguewhodescribedthemarketingmanagersjobasbeingamixerof
ingredients.
17.Anexpanded7PsmarketingmixwasfirstproposedbyBernardH.BoomsandMaryJ.
Bitner,MarketingStrategiesandOrganizationStructuresforServiceFirms,inJ.H.
DonnellyandW.R.George,eds.MarketingofServices(Chicago:AmericanMarketing
Association,1981,4751).
18.PhilipJ.CoelhoandChrisEasingwood,MultipleChannelSystemsinServices:Pros,
Cons,andIssues,TheServiceIndustriesJournal24(September2004):130.
19.JohnE.G.Bateson,WhyWeNeedServiceMarketinginConceptualandTheoretical
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09/09/2015

Essentials of Services Marketing, Second Edition

Chapter 1. Introduction to Services Marketing

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Why Study Services?

Services Dominate the Economy in Most Nations

Most New Jobs Are Generated by Services

Powerful Forces Are Transforming Service Markets

What Are Services?

Benefits without Ownership

Four Broad Categories of ServicesA Process Perspective

Mental Stimulus Processing

Services Pose Distinct Marketing Challenges

The 7 Ps of Services Marketing

The Traditional Marketing Mix Applied to Services

Price and Other User Outlays

A Framework for Developing Effective Services Marketing Strategies

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