Introduction to Services Chapter 1

1
Introduction to Services(Chapter 1)

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

2
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

3
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

4
What are services?

• 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.

5
What are services?

6
Why study services marketing?

• service-based economy
• source of competitive advantage for manufacturing
  firms
• deregulation in some service industries
• new technologies have created new service
  opportunities

7
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
Figure 1-2
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
Percent of U.S. Gross Domestic Product by Industry
80
70
60
Percent of GDP
50
40
30
20
10
0
1948
1959
1967
1977
1987
1996

• Services
• Manufacturing
• Mining Agriculture

Year
Figure 1-3
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
Goods vs. Services

• Goods
• Production separate from consumption
• Standardized
• Tangible
• Nonperishable

• Services
• S
• H
• I
• P

10
Services are Different
Table 1-2
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.
11
Product Definition

• Product
• it is everything that the customer receives in
  making an exchange

12
Tangibility Spectrum
Salt
l
Soft Drinks
l
Detergents
l
Automobiles
l
Cosmetics
l
Fast-food Outlets
l
Intangible Dominant
Tangible Dominant
l
l
Fast-food Outlets
l
Advertising Agencies
l
Airlines
l
Investment Management
l
Figure 1-1
Consulting
Teaching
13
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

14
Services Marketing Mix

• traditional marketing mix
• Product
• Place
• Promotion
• Price
• expanded mix for services
• P
• P
• P

15
People

• are the firm in the customers eye
• are a critical part of the product
• may be involved in production
• can facilitate or inhibit service performance
• can impact service encounters via their attitude,
  behavior, or degree of involvement

16
Process

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

17
Physical Evidence

• includes
• (1)
• background characteristics (furnishings, noise,
  color)
• spatial layout
• signs
• (2) tangible cues/facilitating goods that
  facilitate performance or communication of the
  service
• examples

18
Expanded Marketing Mix for Services
Table 1-3
19
Expanded Marketing Mix for Services
Table 1-3 (Continued)