Introduction to Services Marketing Week 1

The emergence of services marketing u Services dominate most economies and are growing rapidly: u Services account for more than 60% of GDP worldwide u Almost all economies have a substantial service sector u Most new employment is provided by services u Strongest growth area for marketing u Understanding services offers you a personal competitive advantage

Some facts and figures

The macro environmental context of the emerging service sector UNCONTROLLABLE FACTORS Demographic factors Regulatory factors Economic factors Technological factors Social factors

Uncontrollable ‘Demographic factors’ u Population growth u Increase in number of households u Decrease in number of household members in industrialised countries u Greater life expectancy u Dejuvenation and population aging u Better education u Multi racial societies Threats or opportunities??

Uncontrollable ‘Regulatory factors’ u Governments controlling the commercial operations of service providers u EU controlling business legislation which affects service sectors (EU warning to 10 countries for not implementing telecom regulations) u In UK BT regulated in their service strategy by regulations

Uncontrollable ‘Economic factors’ u Impact of recession u ‘Baby boom’ generation being forced to save for pensions - Impact on expenditure in health, travel and financial u Long term impact - - Shortage of young labour - - Prices of healthcare and leisure - - More demand for professionals working in services for the aging population

Uncontrollable ‘Technological’ factors  Growth of Internet  Greater bandwidth  Compact mobile equipment  Wireless networking  Faster, more powerful software  Digitisation of text, graphics, audio, video  E-advertising

Uncontrollable ‘Social factors’  Growing individualism  More people short of time/ Work life balance emphasis  Increased desire for buying experiences vs. things  Services for household chores owing to more female labour force participation  Immigration  Growing but aging population

Impact of ‘Macro context’ on services in a travel company FactorTrendMacro level Impact on Travel service sector DemographicSmaller familiesMore income to spend on leisure/less time Specialised theme package tours EconomicPressure to save for pensions- Aging population Less disposable income for leisure Bundling of products and services/differenti ation TechnologicalUse of internet, mobile technology Emphasis on ‘self service’ E-booking ba.com SocialMore single people Emphasis on individualism Tailored holidays/ Extreme sports

Marketing-Related trends influencing the service sector Internationalisation The rise of commercial principles Increased down sizing, outsourcing, off shoring Up-scaling in core activities

Marketing Related trends - Internationalisation u Global brands (Nike/Gap) u Internationalisation of media and television (American soaps - ‘Friends’) u Impact on ‘Glocal’ service strategies (Mc Donald’s in India)

Marketing Related trends – Increase in commercial principles u Emphasis on stakeholder value u Being self sufficient (focus on core activities) u Commercialising government services u Unbundling of services for increased competition

Marketing Related trends – Focussing on Core Business u Outsourcing - Hotels outsourcing cleaning, security and gardening services - Supermarkets outsourcing packaging of food products u Off-shoring - Software development - Processing claims etc

Marketing Related trends – Up-scaling in Core Business u Cooperation - Strategic partnering and Strategic alliances (Airlines) u Franchising -Franchising ‘business formats’ (Hairdressers)

Marketing Related trends – Diminishing Differences u Diminished borders between services and goods (IBM - computer or service??) u Bundling of products and services u Growth in leasing, rentals and collective property

Marketing Related trends – Changes in Delivery Mode /Asset Structure - The use of mobile phones - Internet (E -tickets) - Call centres (Service queries) - Self service (Direct Insurance)

Impact of ‘marketing related trends’ on the service sector – Travel services Marketing factors Trend Impact on travel services InternationalisationIncrease in global travel Customising onboard service (menus, multilingual in flight crew) Focussing on core business Outsourcing peripheral services Call centre bookings/ reservations/missing baggage queries Changes in delivery mode Cost cutting by companies/ emphasis on self help for convenience Self check-in, E- tickets, E-bookings

Summary u Decline of ‘traditional industries’ in industrialised western society u Combination of ‘macro environmental’ and ‘marketing led’ factors resulting in the emergence/growth of the service sector u Next Week u Fundamentals of the ‘service’ concept - The 5I’s