Importance of Service Sector

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Transcript Importance of Service Sector

Services Marketing

MTG 410 Fall 2000 Prof: Donna J. Hill, Ph.D.

What Are Services?

 Services are deeds, processes, and performances.

– Nature of product.

– Greater involvement of customers in the production process.

– People as part of the product.

– Greater difficulties in maintaining quality control standards.

A Different Context for Services Marketing

 Narrow definition of marketing by other managers.

 Limited appreciation for marketing skills.

 Different organizational structure.

 A relative lack of competitive data.

 Problems determining costs.

 Constraints and opportunities facing marketers of public and nonprofits.

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

Figure 1-2 Percent of U.S. Labor Force by Industry 30 20 10 0 80 70 60 50 40 1929 1948 1969 1977 1984 1996

Year    Services Manufacturing Mining & Agriculture Source:

Survey of Current Business,

Economy,”

Scientific American

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. , 244,3 (1981): 31-39.

Figure 1-3 Percent of U.S. Gross Domestic Product by Industry 80 70 60 50 40 30 20 10 0 1948 1959 1967 1977 1987 1996

Year Source:

Survey of Current Business,

Economy,”

Scientific American

August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. , 244,3 (1981): 31-39.    Services Manufacturing Mining & Agriculture

Importance of Service Sector Services

 $3.52 trillion of U.S. GDP    53.2% of U.S. GDP 71% of total employment 91% of new jobs from 1992 to 2005 Fast growing services for the next decade Health services Business services Finance, insurance, real estate Residential care Computer & data processing Child day-care Social services Transportation services

Factors Contributing to Growth

        Movement to information age Shift to industrialized economy Aging population Longer life expectancies Increase leisure time High per capita income Changing social and cultural values Advances in technology

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

Differences Between Goods and Services

Intangibility Heterogeneity Simultaneous Production and Consumption Perishability

Figure 1-1

Tangibility Spectrum

Salt

Soft Drinks

Detergents

Automobiles

Cosmetics

Fast-food Outlets

Intangible Dominant Tangible Dominant

Fast-food Outlets

Advertising Agencies

Airlines

Investment Management

Consulting

Teaching

Implications of Intangibility

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

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

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

Implications of Perishability

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

Table 1-2

Services are Different

Goods

Tangible Standardized Production separate from consumption

Services

Intangible

Resulting Implications

Services cannot be inventoried.

Services cannot be patented.

Services cannot be readily displayed or communicated.

Pricing is difficult.

Heterogeneous 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.

Simultaneous production and consumption Nonperishable Perishable Customers participate in and affect the transaction.

Customers affect each other.

Employees affect the service outcome.

Decentralization may be essential.

Mass production is difficult.

It is difficult to synchronize supply and demand with services.

Services cannot be returned or resold.

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.

Figure 1-5

The Services Marketing Triangle

Company (Management) Internal Marketing

“enabling the promise”

External Marketing

“setting the promise”

Employees Interactive Marketing

“delivering the promise”

Customers

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

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?

Ways to Use the Services Marketing Triangle

Overall Strategic Assessment Specific Service Implementation

• How is the service • organization doing on all three sides of • the triangle?

What is being promoted and by whom?

How will it be delivered and by whom?

• Where are the weaknesses?

• Are the supporting systems in place to deliver the promised service?

• What are the strengths?

Figure 1-6 The Services Triangle and Technology Company Technology Providers

Source: Adapted from A. Parasuraman

Customers

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

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

Expanded Mix for Services - the 7 Ps

 Product  Price  Place  Promotion 

People

Process

Physical Evidence

Table 1-3

Expanded Marketing Mix for Services

PRODUCT Physical good features PLACE Channel type PROMOTION PRICE Promotion blend Flexibility Quality level Accessories Packaging Warranties Product lines Branding Exposure Salespeople Intermediaries Storage Advertising Outlet location Sales promotion Transportation Publicity Price level Terms Differentiation Allowances

PEOPLE Employees

Table 1-3 (Continued)

Expanded Marketing Mix for Services

PHYSICAL EVIDENCE Facility design PROCESS Flow of activities Customers Equipment Communicating culture and values Signage Employee research Employee dress Other tangibles Number of steps Level of customer involvement

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?

Characteristics of Services

 Intangibility - Lack of tangible assets which can be seen, touched, or smelled prior to purchase.

 Perishability - Inability of a service to be inventoried or stored.

 Inseparability - Simultaneous production and consumption of a service.

 Variability - Unwanted or random levels of service quality customers receive when they patronize a service firm.