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Introduction to Services (Chapter 1)

What are services? Why study services marketing? Goods vs. Services Characteristics of Services Services Marketing Mix

- Dwayne D. Gremler

Marketing Definition

Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.
--American Marketing Association

- Dwayne D. Gremler

Examples of Service Industries

Health Care
hospital, medical practice, dentistry, eye care

Travel
airlines, travel agencies, theme park

Professional Services
accounting, legal, architectural

Others:
hair styling, pest control, plumbing, lawn maintenance, counseling services, health club

Financial Services
banking, investment advising, insurance

Hospitality
restaurant, hotel/motel, bed & breakfast, ski resort, rafting

- Dwayne D. Gremler

Goods and Services

In General:
Goods are

Services are

- Dwayne D. Gremler

What are services?

Long Definition:

Services include all economic activities whose output is not a physical product or production, is generally consumed at the time it is produced, and provides added value in forms (such as convenience, amusement, timeliness, comfort, or health) that are essentially intangible concerns of its first purchaser.

- Dwayne D. Gremler

Tangibility Spectrum

Salt

l Soft Drinks l Detergents l Automobiles l Cosmetics l Fast-food Outlets l l

Intangible Dominant

Tangible Dominant

Figure 1.2

Fast-food Outlets Advertising Agencies Airlines Investment Management Consulting Teaching

Competing Strategically through Service

Four Strategic approaches (competitive Advantage): OUT-OF-THE box customer service: Innovative, Cutting Edge Services: being the First and Best / on the forefront of innovation, technology (not necessarily totally new invention but a new service approach) Value Added, Revenue producing service: Applicable for mostly nonservice industries, when cant compete with manufactured products. (IBM) HARLEY Club) A service culture that Differentiates: Employer of - Dwayne D. Gremler choice & Provider of Choice.

Percent of U.S. Labor Force by Industry

Figure 1.3
- Dwayne D. Gremler

Percent of U.S. Gross Domestic Product by Industry

Figure 1.4
- Dwayne D. Gremler

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Contributions of Service Industries to U.S. Gross Domestic Product (in 2003)

Figure 1.1
- Dwayne D. Gremler

Source: Inside Sams $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86.

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Goods vs. Services

Goods
Production separate from
consumption

Services
S
V I

Standardized Tangible

Nonperishable

- Dwayne D. Gremler

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Goods vs. Services

Table 1.2

Goods
Tangible

Services
Intangible

Standardized

Variable

Production separate from consumption

Simultaneous production and consumption

Nonperishable Perishable

Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, Problems and Strategies in Services Marketing, Journal of Marketing 49 (Spring 1985): 33-46.

- Dwayne D. Gremler

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Intangibility Services cannot be inventoried Services cannot be patented Services cannot be readily displayed Pricing is difficult

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Heterogeneity

Service delivery and customer satisfaction depend on employee actions Service quality depends on many uncontrollable factors

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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

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Implications of Perishability

Services cannot be returned or resold It is difficult to synchronize supply and demand with services Demand forecasting is required

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Services Marketing Mix

traditional marketing mix:
Product Place Promotion Price

expanded mix for services:

P P P

- Dwayne D. Gremler

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People

are the firm in the customers eye

may be involved in production can facilitate or inhibit service performance

can impact service encounters via their attitude, behavior.

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Process
the actual procedures, mechanisms, and flow of activities by which the service is delivered includes:

Examples:

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Physical Evidence

Tangible cues/facilitating goods that facilitate performance or communication of the service

examples: bank statements, brochures, business cards

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Expanded Marketing Mix for Services

Table 1.3 (Continued)

PEOPLE
Employees Customers Communicating culture and values

PHYSICAL EVIDENCE
Facility design Equipment Signage Employee dress Other tangibles

PROCESS
Flow of activities Number of steps Level of customer involvement

- Dwayne D. Gremler