1 Chapter Introduction to Services Services (p. 4): ________________________ include all economic activities whose output is not a physical product or construction, is generally consumed at the time it is produced, provides added value in forms (such as convenience, amusement, timeliness, comfort, or health) that are essentially intangible

© 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 Figure 1.2 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 Exercise - What are the tangible and intangible components provided by a hotel?  TANGIBLE  Furniture  Lighting  Cleanliness  Carpeting  Parking spaces INTANGIBLE

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Why Services Marketing? (pp. 8-15) Better services mean higher profits:  Rapid changes in technology  Increasing competition  More demanding customers

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Perception: Service Stinks! (pp ) 1. Increasing use of self-service and technology-based service – _____________________________ 2. Technology-based services hard to implement – failures and poorly designed systems 3. Customer expectations are higher because of excellent service received from some companies – ___________ ______________________________________ 4. Delivering consistent, high quality service is not easy, but companies promise it 5. etc.

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Paradoxes and Dark Side of Technology and Service (p )  Some customers are not interested or ready to use technology  Employees are often reluctant to accept and integrate technology into their work life  Technology infusion means loss of human contact  Payback in technology investments is often uncertain

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Table 1.2 Goods versus Services Source: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, “A Conceptual Model of Service Quality and Its Implications for Future Research,” Journal of Marketing 49 (Fall 1985), pp. 41–50.

© 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 Characteristics of Services Compared to Goods Intangibility – services cannot be seen, felt, tasted, or touched in the same manner that you can sense tangible goods Implications:  Services cannot be readily displayed or communicated - therefore, difficult for consumers to assess  Need to add ___________________________________

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Characteristics of Services Compared to Goods Heterogeneity – no two services will be precisely alike Implications:  Service delivery and customer satisfaction depend on __________ and _____________ actions  Service quality depends on many _____________ factors  Need to ___________________ service

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Characteristics of Services Compared to Goods Simultaneous Production and Consumption – most services are sold first, then produced and consumed simultaneously Implications:  ________________ participate in and affect the transaction  Customers affect each other  _________________ affect the service outcome  Mass production is difficult

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Characteristics of Services Compared to Goods Perishability – services cannot be saved, stored, resold, or returned Implications:  It is difficult to _____________ supply and demand with services  Services cannot be ________________________

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Traditional Marketing Mix  All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services:  Product  Price  Place  Promotion

© 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 Table 1.3 Expanded Marketing Mix for Services

© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Challenges for Services  Defining and improving quality  Designing and testing new services  Communicating and maintaining a consistent image  Accommodating fluctuating demand  Motivating and sustaining employee commitment  Coordinating marketing, operations, and human resource efforts  Setting prices  Finding a balance between standardization versus personalization  Ensuring the delivery of consistent quality