The ‘Services’ Sector

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

Gross Domestic Product by Industry Percent of U.S. Gross Domestic Product by Industry 80 70 60 Percent of GDP 50 40 30 20 10 Services Manufacturing Mining & Agriculture 1948 1959 1967 1977 1987 1996 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.

Importance of Service Sector $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 knowledge-based 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

Table 1-2 Services are Different 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) External Marketing Internal Marketing “setting the promise” “enabling the promise” Employees Customers Interactive Marketing “delivering the promise” 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 Specific Service Implementation What is being promoted and by whom? How will it be delivered and by whom? Are the supporting systems in place to deliver the promised service? Overall Strategic Assessment How is the service organization doing on all three sides of the triangle? Where are the weaknesses? What are the strengths?

The Services Triangle and Technology Company Technology Customers Providers Source: Adapted from A. Parasuraman