Chapter 1 Overheads

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Introduction to Services
Chapter
1

• What are services?
• Why services marketing?
• Service and Technology
• Characteristics of Services Compared to Goods
• Services Marketing Mix
• Staying Focused on the Customer

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Figure 1.1Contributions of Service Industries
toU.S. Gross Domestic Product
Source Inside Sams 100 Billion Growth Machine,
by David Kirkpatrick, Fortune, June 14, 2004, p
86.
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Figure 1.4Percent of U.S. Gross Domestic
Product by Industry
80
70
60
50
40
Percent of GDP
30
20
10

• Services
• Manufacturing
• Mining Agriculture

0
1948
1959
1967
1977
1987
1999
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.
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Figure 1.3Percent of U.S. Labor Force by Industry
80
70
60
50
Percent of U.S. Labor Force
40
30
20
10
0

• Services
• Manufacturing
• Mining Agriculture

1929
1948
1969
1977
1984
1999
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.
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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
• airline, travel agency, theme park
• Others
• hair styling, pest control, plumbing, lawn
  maintenance, counseling services, health club,
  interior design

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Why study Services Marketing?

• Service-based economies
• Service as a business imperative in manufacturing
  and IT
• Deregulated industries and professional service
  needs
• Service equals profits
• Services marketing is different

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Figure 1.2Tangibility Spectrum
Salt
?
Soft Drinks
?
Detergents
?
Automobiles
?
Cosmetics
?
Fast-food Outlets
Intangible Dominant
?
Tangible Dominant
?
?
Fast-food Outlets
?
Advertising Agencies
?
Airlines
?
Investment Management
?
Consulting
Teaching
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Characteristics of ServicesCompared to Goods
Intangibility
Heterogeneity
Simultaneous Production and Consumption
Perishability
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Table 1.2Goods versus Services
Source A. Parasuraman, V.A. Zeithaml, and L. L.
Berry, A Conceptual Model of Service Quality and
Its Implications for Future Research, Journal of
Marketing 49 (Fall 1985), pp. 4150.
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Implications of Intangibility

• Services cannot be inventoried
• Services cannot be easily patented
• Services cannot be readily displayed or
  communicated
• Pricing is difficult

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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

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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

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Implications of Perishability

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

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Challenges for Services

• Defining and improving quality
• Designing and testing new services
• Communicating and maintaining a consistent image
• Accommodating fluctuating demand
• Motivating and sustaining employee commitment
• Coordinating marketing, operations, and human
  resource efforts
• Setting prices
• Finding a balance between standardization versus
  personalization
• Ensuring the delivery of consistent quality

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Traditional Marketing Mix

• All elements within the control of the firm that
  communicate the firms capabilities and image to
  customers or that influence customer satisfaction
  with the firms product and services
• Product
• Price
• Place
• Promotion

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Expanded Mix for Services --The 7 Ps

• Product
• Price
• Place
• Promotion
• People
• All human actors who play a part in service
  delivery and thus influence the buyers
  perceptions namely, the firms 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 deliveredthe
  service delivery and operating systems.

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Table 1.3Expanded Marketing Mix for Services
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Ways to Use the 7 Ps

• Overall Strategic Assessment
• How effective is a firms 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?

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Table 1.1Eight Central Paradoxes of
Technological Products
Source D. G. Mick and S. Fournier, Paradoxes of
Technology Consumer Cognizance, Emotions, and
Coping Strategies, Journal of Consumer Research
25 (September 1998), pp. 12347.
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Test your knowledge

• In India weddings are timed to occur when Venus
  is in the ascendant and Jupiter is strong. This
  day is deemed lucky. In 2005, almost 15, 000
  couples in New Delhi had their wedding on
  December 25, the day astrologers announced would
  be the best day for a wedding. The service
  provided by the astrologers is an excellent
  illustration of the _____ of services.
• A) intangibility
• B) comparability
• C) divisibility
• D) perishability
• E) compatibility
• Answer

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Test your knowledge

• The first time Terry brought his car to Auto Lube
  to have the oil changed he was very satisfied
  with the service. The service manager consulted
  him several times while his car was being
  serviced, asked him if there were any problems
  with the car, recommended when additional
  services should be performed, and answered
  questions directly and politely. However, when
  Terry went back to Auto Lube after three months
  to have his oil changed again, he was not
  satisfied with the service. The manager spoke to
  him only when he arrived and when he paid his
  bill. In addition, the manager was impatient and
  unfriendly during the interaction. Terry's
  experience at Auto Lube illustrates the _____ of
  services.
• A) intangibility
• B) heterogeneity
• C) simultaneous production and consumption
• D) perishability
• E) divisibility
• Answer

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Test your knowldege

• The Offshore Sailing School in Jersey City, New
  Jersey offers a basic sailing course, which takes
  place in three days over two weekends, for 495.
  Students enrolled in the course attend classroom
  sessions that cover the theory and technology of
  sailing and receive hands-on sailing instructions
  in the water that introduces them to all
  fundamental sailing skills. Student
  participation in the Offshore Sailing School's
  classroom sessions and hands-on sailing
  instructions illustrates the_____ characteristic
  of services.
• A) versatility
• B) heterogeneity
• C) simultaneous production and consumption
• D) perishability
• E) intangibility
• Answer

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• In India weddings are timed to occur when the
  stars and planets are in certain positions, which
  are deemed lucky. In 2005, almost 15, 000
  couples in New Delhi had their wedding on
  December 25, the day astrologers announced would
  be the best day for a wedding. Wedding planners
  had to prepare all year for this one date instead
  of planning lots of weddings throughout the year.
  The service provided by the Indian wedding
  planners illustrates the _____ characteristic of
  services.
• A) versatility
• B) heterogeneity
• C) simultaneous production and consumption
• D) perishability
• E) intangibility
• Answer

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Test your knowldege

• When Alicia and Jordan dined at Formia
  Ristorante, a contemporary Italian restaurant in
  New Jersey, they both enjoyed Formia's coy,
  smart, and embracing atmosphere. Formia creates
  this atmosphere with a single large dining room
  that measures 20 by 60 feet and contains 14 roomy
  tables. Ceiling fans slowly swirl as candlelight
  dances across the tables that are attentively
  cared for by servers. Vertical pink and white
  florid patterns emerge from old wainscoting.
  Finally, Formia's two-page menu offers guests a
  range of pasta, chicken, veal, and seafood
  entrees, in addition to nightly specials that are
  handwritten and presented on large index cards.
  Alicia and Jordan experienced the _____ element
  of Formia Ristorante's services marketing mix.
• A) product
• B) production
• C) process
• D) place
• E) physical evidence
• Answer

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Test your knowledge

• Extron Electronics makes coaxial cables for
  connecting computers to all types of peripheral
  devices like printers, modems, and fax machines.
  For the benefit of its customers, Extron provides
  a laminated card with pictures of all the
  possible cable connections that a customer could
  need. With this card, a customer can order from
  one to any number of connectors with as many feet
  of cable as is needed. Orders can be placed
  using a toll-free number, a fax number, or an
  e-mail address. Company reps are also available
  24-hours a day in case the customer is not sure
  which drawing on the card matches his or her
  needs. Orders are shipped within 48-hours of
  receipt. If a customer is not completely
  satisfied with his or her order, Extron has a 100
  percent satisfaction guaranteed return policy.
  Which of the following trends that has influenced
  the development of services marketing concepts
  and strategies as illustrated by Extron's focus
  on customer service?
• A) the increasing importance of service
  industries to the U.S. and world economies
• B) the increase of government regulation of
  service industries
• C) the growth in information-based technology
• D) increased competition in professional
  services
• E) manufacturing firms are placing increased
  emphasis on providing services
• Answer E