Slide 15.1 Marketing services Chapter 15

Slide 15.2 Introduction Phenomenal growth of services, with the resultant shift towards a service economy attributed to rising affluence, more leisure time and growing complexity of products that require servicing. In major European countries, USA and Japan, private and public sector services account for 60-75% of gross domestic output.

Slide 15.3 Introduction Service industries vary greatly from governmental organisations such as the National Health Service of the United Kingdom to private non profit organisations such as museums and charities.

Slide 15.4 The nature of services A service is defined as any activity or benefit that one party can offer to another which is essentially intangible and does not result in the ownership of anything. The same general principles of marketing apply to both products and services, but services have characteristics that mean that instead of four P's, there are seven in a services marketing mix.

Slide 15.5 Services defined A service is any activity or benefit that one party can offer to another which is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product.

Slide 15.6 Services defined Most company offerings to customers contain an element of service and this is illustrated by the service continuum. Figure 15.1 The tangible–intangible continuum for goods and services

Slide 15.7 Categorising offerings along the service continuum Pure tangible goods –toothpaste Tangible goods accompanied by one or more service –computer and warranty Hybrid offer consists of equal parts of goods and services –restaurants Service with accompanying minor goods –air travel Pure service –haircut

Slide 15.8 Service characteristics  Intangibility  Inseparability  Variability  Perishability  Lack of ownership

Slide 15.9 Intangibility –Cannot be seen, tasted, felt, heard or smelt before they are bought. –Service providers need to manage the evidence by providing evidence of the benefits.

Slide Inseparability –Services produced and consumed simultaneously. –Cannot be separated from providers, whether people or machines. –Customers are always involved

Slide Variability –Quality may vary greatly depending on who provides the service, when and how. –Staff need to know how to do something well. –Staff must be well motivated to maintain high standards of service.

Slide Perishability –Services cannot be stored for later sale or use.

Slide Lack of ownership –No physical product is exchanged and therefore nothing owned.

Slide Marketing strategies for service firms The service component and support processes of product offerings are rapidly becoming the competitive advantage in winning customer loyalty.

Slide The service–profit chain Internal service quality –Superior selection and training of staff Satisfied and productive service employees Greater service value Satisfied and loyal customers Healthy service – profits and growth

Slide Three types of interdependent marketing in service industries Internal marketing External marketing Interactive marketing

Slide Internal marketing –Marketing conducted by a service firm to train and effectively motivate its customer contact employees and all the supporting service people to work as a team to provide customer satisfaction.

Slide External marketing –Traditional marketing incorporating the 7Ps Price Product/service Place Promotion People Processes Physical environment –of the services marketing mix.

Slide Interactive marketing –Marketing that recognises that the perceived service quality depends heavily on the buyer- seller interaction. –Emphasis on relationship marketing.

Slide Major tasks of service industries Service companies are faced with three major marketing tasks; they need to: –increase competitive differentiation –increase service quality –increase productivity

Slide Managing differentiation Intensive price competition has resulted in service differentiation to increase competitiveness. The 3 Ps, people, processes and physical environment of service marketing and service delivery –form the core differential and competitive advantage. Service intangibility and variability means that a consistent brand is not easily built.

Slide Managing service quality The key to success is to exceed customer service quality expectations. Customer satisfaction is achieved if the delivered service quality exceeds the customer’s expectation. However, expectation is a variable component and depends upon the perception and expectations of the individual customer.

Slide Ten key determinants of perceived service quality (1) Concerned with the quality outcome of the service –Access –Credibility –Knowledge –Reliability –Security

Slide Ten key determinants of perceived service quality (2) Related to the delivery process –Competence –Communication –Courtesy –Responsiveness –Tangibles

Slide Characteristics of service organisations Customer obsession Management commitment to quality High service quality standards Scrutinise service performance Good service recovery and management of disgruntled customers Empowerment of employees, especially front-line staff Satisfy and reward employees as well as customers

Slide Managing productivity Training and development of staff. Service providers can increase the quantity of service by reducing some quality. Industrialise the service. Design more effective service delivery mechanisms. Customers are given incentives to substitute company labour. Introduce new technology to save time and costs and increase efficiencies.

Slide International services marketing The global economy is dominated by services! The World Trade Organisation estimates that commercial–service trade is now worth over one trillion Euros, approximately 25% of global trade. Worldwide growth of services is 16% per annum over the past decade and double the growth rate of manufacturing. The trend is towards the outsourcing of skilled professional services to overseas locations. The General Agreement on Tariffs and Trade (GATT) has extended international trade rules to address services as well as manufactured goods, but these are in their infancy.