Services Marketing

1. Services Marketing

2. Objectives for Chapter 1:Introduction to Services • Explain what services are and identify service trends • Explain the need for special services marketing concepts and practices • Outline the basic differences between goods and services and the resulting challenges for service businesses • Introduce the service marketing triangle • Introduce the expanded services marketing mix • Introduce the gaps model of service quality

3. Introduction • Services are deeds,processes and performance • Intangible, but may have a tangible component • Generally produced and consumed at the same time • Need to distinguish between SERVICE and CUSTOMER SERVICE

4. 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

5. 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

6. Figure 1-1Tangibility Spectrum Salt  Soft Drinks  Detergents  Automobiles  Cosmetics  Fast-food Outlets Intangible Dominant  Tangible Dominant   Fast-food Outlets  Advertising Agencies  Airlines  Investment Management  Consulting Teaching

7. Figure 1-2 Percent of U.S. Labor Force by Industry 80 70 60 Percent of GDP 50 40 30 20 10 0 • Services • Manufacturing • Mining & Agriculture 1929 1948 1969 1977 1984 1996 Year Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,”Scientific American, 244,3 (1981): 31-39.

8. Figure 1-3 Percent of U.S. Gross Domestic Product by Industry 80 70 60 Percent of GDP 50 40 30 20 10 0 • Services • Manufacturing • Mining & Agriculture 1948 1959 1967 1977 1987 1996 Year Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,”Scientific American, 244,3 (1981): 31-39.

9. Differences Between Goods and Services Intangibility Heterogeneity Simultaneous Production and Consumption Perishability

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

11. 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

12. 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

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

14. Table 1-2 Services are Different 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.

15. Figure 1-5The Services Marketing Triangle Company (Management) Internal Marketing External Marketing “enabling the promise” “setting the promise” Employees Customers Interactive Marketing “delivering the promise” Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

16. Ways to Use the Services Marketing Triangle Overall Strategic Assessment • How is the service organization doing on all three sides of the triangle? • Where are the weaknesses? • What are the strengths? Specific Service Implementation • What is being promoted and by whom? • How will it be delivered and by whom? • Are the supporting systems in place to deliver the promised service?

17. Figure 1-6 The Services Triangle and Technology Company Technology Customers Providers Source: Adapted from A. Parasuraman

18. Services Marketing Mix:7 Ps for Services • Traditional Marketing Mix • Expanded Mix for Services: 7 Ps • Building Customer Relationships Through People, Processes, and Physical Evidence • Ways to Use the 7 Ps

19. Traditional Marketing Mix • All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services: • Product • Price • Place • Promotion

20. Expanded Mix for Services --the 7 Ps • Product • Price • Place • Promotion • People • Process • Physical Evidence

21. Table 1-3Expanded Marketing Mix for Services

22. Table 1-3 (Continued)Expanded Marketing Mix for Services

23. Ways to Use the 7 Ps Overall Strategic Assessment • How effective is a firm’s services marketing mix? • Is the mix well-aligned with overall vision and strategy? • What are the strengths and weaknesses in terms of the 7 Ps? Specific Service Implementation • Who is the customer? • What is the service? • How effectively does the services marketing mix for a service communicate its benefits and quality? • What changes /improvements are needed?

24. Services Marketing Triangle Applications Exercise • Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle? • How is each type of marketing being carried out currently? • Are the three sides of the triangle well aligned? • Are there specific challenges or barriers in any of the three areas?

25. S M Part 1 FOCUS ON THE CUSTOMER

26. Gaps Model of Service Quality Expected Service CUSTOMER Customer Gap Perceived Service External Communications to Customers Service Delivery COMPANY GAP 4 GAP 1 GAP 3 Customer-Driven Service Designs and Standards GAP 2 Company Perceptions of Consumer Expectations Part 1 Opener

27. Gaps Model of Service Quality • Customer Gap: • difference between expectations and perceptions • Provider Gap 1: • not knowing what customers expect • Provider Gap 2: • not having the right service designs and standards • Provider Gap 3: • not delivering to service standards • Provider Gap 4: • not matching performance to promises Part 1 Opener

28. The Customer Gap Expected Service GAP Perceived Service Part 1 Opener

29. S M Chapter 2 CONSUMER BEHAVIOR IN SERVICES

30. Objectives for Chapter 2:Consumer Behavior in Services • Overview the generic differences in consumer behavior between services and goods • Introduce the aspects of consumer behavior that a marketer must understand in five categories of consumer behavior: • Information search • Evaluation of service alternatives • Service purchase and consumption • Post purchase evaluation • Role of culture

31. Consumer Evaluation Processes for Services • Search Qualities • attributes a consumer can determine prior to purchase of a product • Experience Qualities • attributes a consumer can determine after purchase (or during consumption) of a product • Credence Qualities • characteristics that may be impossible to evaluate even after purchase and consumption

32. Figure 2-1Continuum of Evaluation for Different Types of Products Clothing Jewelry Furniture Houses Automobiles Restaurant meals Vacations Haircuts Child care Television repair Legal services Root canals Auto repair Medical diagnosis Most Services Most Goods Easy to evaluate Difficult to evaluate { { { High in experience qualities High in credence qualities High in search qualities

33. Figure 2-2Categories in Consumer Decision-Making and Evaluation of Services Information Search Evaluation of Alternatives  Use of personal sources  Perceived risk  Evoked set  Emotion and mood Purchase and Consumption Post-Purchase Evaluation  Service provision as drama  Service roles and scripts  Compatibility of customers  Attribution of dissatisfaction  Innovation diffusion  Brand loyalty

34. Information Search Evaluation of Alternatives  Evoked set  Emotion and mood  Use of personal sources  Perceived risk Culture • Values and attitudes • Manners and customs • Material culture • Aesthetics • Educational and social institutions Purchase and Consumption Post-Purchase Evaluation  Service provision as drama  Service roles and scripts  Compatibility of customers  Attribution of dissatisfaction  Innovation diffusion  Brand loyalty Figure 2-3 Categories in Consumer Decision-Making and Evaluation of Services

35. Information search • In buying services consumers rely more on personal sources. WHY? Refer p32 • Personal influence becomes pivotal as product complexity increases • Word of mouth important in delivery of services • With service most evaluation follows purchase

36. Perceived Risk • More risk would appear to be involved with purchase of services (no guarantees) • Many services so specialised and difficult to evaluate (How do you know whether the plumber has done a good job?) • Therefore a firm needs to develop strategies to reduce this risk, e.g, training of employees, standardisation of offerings

37. Evoked Set • The evoked set of alternatives likely to be smaller with services than goods • If you would go to a shopping centre you may only find one dry cleaner or “single brand” • It is also difficult to obtain adequate prepurchase information about service • The Internet may widen this potential • Consumer may choose to do it themselves, e.g. garden services

38. Emotion and Mood • Emotion and mood are feeling states that influence people’s perception and evaluation of their experiences • Moods are transient • Emotions more intense, stable and pervasive • May have a negative or positive influence

39. Service Provision as Drama • Need to maintain a desirable impression • Service “actors” need to perform certain routines • Physical setting important, smell, music, use of space, temperature, cleanliness, etc.

40. Global Feature:Differences in the Service Experience in the U.S. and Japan • Authenticity • Caring • Control Courtesy • Formality • Friendliness • Personalization • Promptness

41. S M Chapter 3 CUSTOMER EXPECTATIONS OF SERVICES

42. Objectives for Chapter 3:Customer Expectations of Service • Recognize that customers hold different types of expectations for service performance • Discuss controllable and uncontrollable sources of customer expectations • Distinguish between customers’ global expectations of their relationships and their expectations of the service encounter • Acknowledge that expectations are similar for many different types of customers • Delineate the most important current issues surrounding customer expectations

43. DEFINITIONS • Customers have different expectations re services – or expected service • Desired service – customer hopes to receive • Adequate service – the level of service the customer may accept • DO YOUR EXPECTATIONS DIFFER RE SPUR and CAPTAIN DOREGO?

44. Figure 3-1 Dual Customer Expectation Levels (Two levels of expectations) Desired Service Zone of Tolerance Adequate Service

45. Figure 3-2 The Zone of Tolerance Desired Service Zone of Tolerance Adequate Service

46. Desired Service Zone of Tolerance Adequate Service Figure 3-3 Zones of Tolerance VARY for Different Service Dimensions Desired Service Level of Expectation Zone of Tolerance Desired Service Adequate Service Adequate Service Most Important Factors Least Important Factors Source: Berry, Parasuraman, and Zeithaml (1993)

47. Figure 3-4 Zones of Tolerance VARY for First-Time and Recovery Service First-Time Service Outcome Process Recovery Service Outcome Process LOW HIGH Expectations Source: Parasuraman, Berry and Zeithaml (1991)

48. Figure 3-5 Factors that Influence Desired Service Enduring Service Intensifiers Desired Service Personal Needs Zone of Tolerance Adequate Service

49. Personal needs include physical, social, psychological categories • Enduring service intensifiers are individual, stable factors that lead to heightened sensitivity to service This can further divided into Derived Service Expectations and Personal service Philosophies

50. Figure 3-6 Factors that Influence Adequate Service Transitory Service Intensifiers Desired Service Perceived Service Alternatives Zone of Tolerance Self-Perceived Service Role Adequate Service Situational Factors