Chapter 12 Services Marketing and Customer Relationships Sommers  Barnes Ninth Canadian Edition Presentation by Karen A. Blotnicky Mount Saint Vincent University, Halifax, NS Copyright © 2001 by McGraw-Hill Ryerson Limited

Chapter Goals To gain an understanding of: The nature and importance of services Characteristics of services and their marketing implications Issues related to the planning and marketing of services The four Rs of services marketing The relationship marketing approach The impact of technology in providing services

The Nature of Services regardless of the “product”, there is a services component to the offerings of all firms in some cases, a service is the principal purpose of the transaction, as in the rental of a car, a haircut, or legal services -- we refer to this as the core service in others, service is performed in support of the sale of a tangible product -- these are referred to as supplementary services

Goods and Services Continuum There are two classes of services. Services that are the main purpose of a transaction —renting a truck to move. Services that supplement the sale of a tangible good — for example, an information hotline for computer software. The focus here is primarily on identifiable, intangible services that are the main object of a transaction designed to provide want-satisfaction to customers; supplementary services growing in importance, however.

The Goods-Services Continuum MOSTLY GOODS MOSTLY SERVICES Canned foods Ready- made clothes Auto- mobiles Draperies, Carpets Rest- aurant meals Repairs: auto, house, landscaping Air travel Insurance, Consulting, Teaching MOSTLY GOODS MOSTLY SERVICES

Importance of Services Three-fourths of the Canadian labour force is employed in service industries. Over 70% of the nation’s gross national product is produced by services. From 1986 to 2000, virtually all new jobs will be in the service industries. Huge growth in personal services as well as business services. Copyright © 1998 by The McGraw-Hill Companies, Inc.

Characteristics of Services intangibility: difficult to sample and to evaluate inseparability: difficult to separate services from the service provider; mainly direct sales; staff are essential to the delivery of quality services heterogeneity: virtually every service is different; very difficult to standardize quality perishability: those not sold can not be stored fluctuating demand: demand for some services fluctuates by season, or even by time of day

Strategic Services Management intangibility generally makes the marketing of services a challenge understanding how people buy services and the segments that exist is just as important knowing more about the value of customer segments is important -- some are more valuable than others knowing what they value so that service levels can be tailored is also important

Strategic Product Implications service organizations have to plan the introduction of new services and the management of the life cycle the core service can be enhanced through the addition of supplementary services, thereby creating added value the life cycle of services has to be managed the branding of a service can be difficult as the customer often has nothing tangible to show

Managing Service Quality Quality is hard to define, measure, control, and communicate Quality is defined by the consumer It’s important to measure customer satisfaction with an organization’s service quality. Customers see five important components: Core service must measure up. Quality of service, meeting expectations. Technical aspects of delivery. Interaction with people who deliver service. Affective dimensions: How customers feel.

Pricing Services The characteristics of perishability, inability to store, and fluctuating demand for services create pricing challenges. Pricing Strategies include: Discount strategies: Cheaper by the week. A variable pricing strategy: Kids eat free, movies cheaper on Tuesdays. Price competition.

Distribution of Services because most services are tied directly to a specific service provider, most have been distributed directly to customers with advancing technology, many firms are now delivering services through machines channels of distribution are necessarily short; some firms use one agent intermediary, such as insurance, real estate, and travel agents some firms use franchises to distribute services

Promotion of Services customer contact personnel represent the main channel of customer communication service providers must ensure that each service encounter is a positive one if customers are to develop a positive image many professional service firms are now permitted to advertise other elements of the promotional mix are used, including publicity and community affairs

Four Rs of Service Marketing Retention Referrals Relationships Recovery

The Changing Environment for Services The boom in the service economy, reduced regulation has created an increase in competition. Major focus on increased productivity, efficiency Work on people aspects of business: Education, training programs Change technology: Computer-based technologies used. Restructure jobs. Bottom line: People are key to success!

Other Considerations in Marketing Services Impact of Technology: Remember, not everyone likes impersonal technology Performance Measurement: Larger firms can use market share, etc. Customer perceptions are essential. Prospects for Growth: It is very likely that services will continue to take an increasing share of the consumer dollar. The use of marketing programs in all services is expected to increase considerably.

Future Service Profitability Impacted by: Focusing on the right priorities Increasing service quality Investing in problem solving Being fair to customers Investing in leadership development