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Marketing Service Organisations

Marketing Service Organisations. BM404 - 2006. Overview. Defining services Understanding the services economy The service sector in Australia Mega-trends and the service sector: Professional services Characteristics of services Marketing implications. BM404 Assessment.

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Marketing Service Organisations

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  1. Marketing Service Organisations BM404 - 2006

  2. Overview • Defining services • Understanding the services economy • The service sector in Australia • Mega-trends and the service sector: • Professional services • Characteristics of services • Marketing implications

  3. BM404 Assessment • ‘Service Watch’ individual assignment: • 4 September • Report (1,000) words & presentation (10 mins) • Group ‘Case Study’ assignment: • 30 October • Written summary (500 words) & presentation (40 mins) • ‘Service Encounter’ assignment: • 17 November • Report (2,500) plus attachments

  4. Defining services? • Any act, performance or experience that one party can offer another; one that is essentially intangible, and does not result in the ownership of anything. Its production may or may not be tied to a physical product Lovelock (2004)

  5. Other service concepts • Service industries and companies: • Classified within the service sector whose core product is service • Service as products: • Represent the wide range of intangible product offerings that customers value and pay for. Sold by service and non-service companies • Customer Service: • Service provided in support of company’s core products (typically not charged for) • Hidden services: • Another way of thinking about products and services

  6. The dominance of tangible versus intangible elements in goods and services

  7. The Services sector in Australia • Distribution services: • Wholesale and retail trade, transport and storage and communications • Social services: • Health and community services, education and government administration and defence • Producer services: • Property and business services, finance and insurance • Personal services: • Accommodation, cafes and restaurants, personal and other services, cultural and recreational services • Utilities and construction services: • Electricity, gas and water, and construction

  8. The service sector in Australia • Services dominate economic growth in Australia • Account for more than three quarters of economy’s output • 4 out of every 5 jobs are in the services sector • Services also provide essential inputs, eg communications and transport, into nearly everything Australia produces ITR (2001) Industry Brief Services Sector

  9. Australia’s service sector • Accounts for 76% of GDP • Property and business services is largest service industry (14% of economy’s output) • Retail trade is the biggest service employer (15% of economy’s jobs) • Travel services was the sector’s biggest export earner (10%+ of economy’s exports)

  10. Australia’s service sector • Service sector output grew at a trend annual rate of 3.6% over period 1975 – 2001 • Communications was the fastest growing service industry (8.4%) • Property and business services exhibited the highest employment growth (5.8%) Access Economics (2001b)

  11. Australia’s service sector: the future • Service output is expected to grow over next 5 – 10 years at similar rates • Highest growth industries: communications, property & business services, finance & insurance, transport and storage

  12. Factors responsible for the transformation of the service economy • Internationalisation (e.g. ‘Hollowing out’ effect, Increased services trade, Global customers) • Government Regulation (e.g. Deregulation/ privatisation, New trade agreements in services) • Social Changes (e.g. Increased customer expectations, Increased affluence and leisure time, More women in the workforce)

  13. Factors responsible for the transformation of the service economy • Business trends (e.g. Relaxation of professional association standards, Marketing emphasis by non –profit organisations, Outsourcing of non-core services, Services quality movement, Franchising and service chains) • Advances in technology (Convergence of computers and telecommunications, Miniaturisation, Digitalisation, Enhanced software)

  14. Mega-trends impacting on Professional Services Firms • Client sophistication • Governance • Connectivity • Transparency • Modularisation • Globalisation • Commoditisation

  15. Characteristics of ServicesCompared to Goods Intangibility Heterogeneity Simultaneous Production and Consumption Perishability

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

  17. Implications of Heterogeneity • Service delivery and customer satisfaction depend on employee and customer actions • Service quality depends on many uncontrollable factors • There is no sure knowledge that the service delivered matches what was planned and promoted

  18. 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

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

  20. Challenges for Services • Defining and improving quality • Designing and testing new services • Communicating and maintaining a consistent image • Accommodating fluctuating demand • Ensuring the delivery of consistent quality

  21. Challenges for Services (cont.) • Motivating and sustaining employee commitment • Coordinating marketing, operations, and human resource efforts • Setting prices • Finding a balance between standardization versus personalization

  22. Further challenges for services managers • Differentiation and competitive advantage may be difficult to achieve • Marketing orientation is still relatively new to many managers • Operations management, rather than marketing, continues to dominate • Customer service management and marketing is often in the hands of lower paid subordinates, possibly in multiple locations • Limited data on competitive performance is available • Problems in determining costs for pricing purposes

  23. 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

  24. Expanded Mix for Services --The 7 Ps • People • All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment. • Physical Evidence • The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service. • Process • The actual procedures, mechanisms, and flow of activities by which the service is delivered—the service delivery and operating systems.

  25. An expanded marketing mix for services Product (Service) People Process customers Place, Cyber-space & Time Place & Time Customers Price Price Customers Promotion PhysicalEvidence

  26. Table 1.3Expanded Marketing Mix for Services

  27. 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? Ways to Use the 7 Ps

  28. Organisation Internal marketing Traditional marketing Satisfaction; Quality; Brand Loyalty Relationship management Employees Customers A framework for analysing servicesmarketing

  29. Operations Management Marketing Management Customers Human Resources Management Managing the 7Ps Requires Collaboration between Marketing, Operations, and HR Functions (Fig. 1.14)

  30. Models of service quality

  31. The evolution ofservice quality • Disconfirmation of expectations • The Nordic model • The Gaps model of service quality & SERVQUAL • The three component model • Integrating perspectives

  32. Disconfirmation of expectations (Oliver 1980)

  33. The Nordic model (Gronroos 1990) • Represents the service experience on the basis of functional and technical elements • Technical quality refers to what the customer receives from the service • Functional quality refers to service delivery • Model emphasises companies must be careful what they promise

  34. The SERVQUAL dimensions – Perceived Service Quality(Parasuraman, Zeithaml & Berry 1988) • Reliability (dependability, accurate performance) • Assurance (competence, courtesy, credibility & security) • Tangibles (appearance of physical elements) • Empathy (easy access, good communications & customer understanding) • Responsiveness (promptness & helpfulness)

  35. SERVQUAL

  36. SERVQUAL (cont.)

  37. The Gaps model of service quality (Zeithaml, Parasuraman & Berry 1990)

  38. The three-component model Rust & Oliver (1994) Source: Rust & Oliver, 1994. p. 11

  39. Hierarchical model

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