Chapter 11 Services and Non-profit Marketing

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Services contribute to our economy- GREATLY

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Percent of U.S. Labor Force 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): Year Services Manufacturing Mining & Agriculture Percent of U.S. Labor Force by Industry

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 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

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Tangibility Spectrum Tangible Dominant Intangible Dominant Salt Soft Drinks Detergents Automobiles Cosmetics Advertising Agencies Airlines Investment Management Consulting Teaching Fast-food Outlets Fast-food Outlets

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Characteristics of Services Compared to Goods Intangibility Perishability Simultaneous Production and Consumption Heterogeneity

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Service Quality is more difficult to determine than goods quality: we need: Ability to perform the promised service dependably and accurately. Knowledge and courtesy of employees and their ability to inspire trust and confidence. Physical facilities, equipment, and appearance of personnel. Caring, individualized attention the firm provides its customers. Willingness to help customers and provide prompt service. Tangibles Reliability Responsiveness Assurance Empathy

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Service Failures What are your experiences of horrible customer service?

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Service recovery paradox

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin How to Give Horrible Service (Service Gaps) 1. Don’t listen to what your customers want (i.e., only listen to your CEO or wallet)- customer gap 2. Don’t act on customers’ wants 3. Hire people without skills or a care, and don’t train them 4. Tell the customer whatever they want to hear (i.e., overpromise and underdeliver) 5. Don’t meet (or barely meet) customers’ expectations (i.e., ignore people and insult their intelligence)=Customer Gap

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Perceived Service Expected Service CUSTOMER COMPANY Customer Gap Gap 1 Gap 2 Gap 3 External Communications to Customers Gap 4 Service Delivery Customer-Driven Service Designs and Standards Company Perceptions of Consumer Expectations Gaps Model of Service Quality

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 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 buyer’s perceptions: namely, the firm’s 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 delivered—the service delivery and operating systems.

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin ACSI and Annual Percentage Growth in S&P 500 Earnings

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Customer Satisfaction and Customer Loyalty Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Excellent service and value 1. Financial bonds 2. Social bonds 4. Structural bonds 3. Customization Bonds Volume and frequency rewards Bundling and cross selling Stable pricing Social bonds among customers Personal relationships Continuous relationships Customer intimacy Mass customization Anticipation/ innovation Shared processes and equipment Joint investments Integrated information systems How to create relationships (loyalty) in Services

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Services and Profit Not all services are for profit Non profit services and organizations are a large part of society What nonprofits can you think of? What nonprofits can you think of?

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Non-Profit Marketing

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Non-Profit Marketing Non-profits are over 20% of U.S. economic activity Government taxes> housing, healthcare, or food costs Hard to service someone who doesn’t want it (e.g., AA, gambling help) Must complement (vs. compete with) for profit businesses

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Questions?