1. Chapter 12 Services Marketing and Customer Relationships
Sommers  Barnes
Ninth Canadian Edition
Presentation by
Karen A. Blotnicky
Mount Saint Vincent University, Halifax, NS
Copyright © 2001 by McGraw-Hill Ryerson Limited

2. Chapter Goals To gain an understanding of:
The nature and importance of services
Characteristics of services and their marketing implications
Issues related to the planning and marketing of services
The four Rs of services marketing
The relationship marketing approach
The impact of technology in providing services

3. The Nature of Services
regardless of the “product”, there is a services component to the offerings of all firms
in some cases, a service is the principal purpose of the transaction, as in the rental of a car, a haircut, or legal services -- we refer to this as the core service
in others, service is performed in support of the sale of a tangible product -- these are referred to as supplementary services

4. Goods and Services Continuum
There are two classes of services.
Services that are the main purpose of a transaction —renting a truck to move.
Services that supplement the sale of a tangible good — for example, an information hotline for computer software.
The focus here is primarily on identifiable, intangible services that are the main object of a transaction designed to provide want-satisfaction to customers; supplementary services growing in importance, however.

5. The Goods-Services Continuum MOSTLY GOODS MOSTLY SERVICES Canned foods
Ready-
made
clothes
Auto-
mobiles
Draperies,
Carpets
Rest-
aurant
meals
Repairs:
auto, house,
landscaping
Air
travel
Insurance,
Consulting,
Teaching
MOSTLY GOODS
MOSTLY SERVICES

6. Importance of Services
Three-fourths of the Canadian labour force is employed in service industries.
Over 70% of the nation’s gross national product is produced by services.
From 1986 to 2000, virtually all new jobs will be in the service industries.
Huge growth in personal services as well as business services.
Copyright © 1998 by The McGraw-Hill Companies, Inc.

7. Characteristics of Services
intangibility: difficult to sample and to evaluate
inseparability: difficult to separate services from the service provider; mainly direct sales; staff are essential to the delivery of quality services
heterogeneity: virtually every service is different; very difficult to standardize quality
perishability: those not sold can not be stored
fluctuating demand: demand for some services fluctuates by season, or even by time of day

8. Strategic Services Management
intangibility generally makes the marketing of services a challenge
understanding how people buy services and the segments that exist is just as important
knowing more about the value of customer segments is important -- some are more valuable than others
knowing what they value so that service levels can be tailored is also important

9. Strategic Product Implications
service organizations have to plan the introduction of new services and the management of the life cycle
the core service can be enhanced through the addition of supplementary services, thereby creating added value
the life cycle of services has to be managed
the branding of a service can be difficult as the customer often has nothing tangible to show

10. Managing Service Quality
Quality is hard to define, measure, control, and communicate
Quality is defined by the consumer
It’s important to measure customer satisfaction with an organization’s service quality.
Customers see five important components:
Core service must measure up.
Quality of service, meeting expectations.
Technical aspects of delivery.
Interaction with people who deliver service.
Affective dimensions: How customers feel.

11. Pricing Services
The characteristics of perishability, inability to store, and fluctuating demand for services create pricing challenges.
Pricing Strategies include:
Discount strategies: Cheaper by the week.
A variable pricing strategy: Kids eat free, movies cheaper on Tuesdays.
Price competition.

12. Distribution of Services
because most services are tied directly to a specific service provider, most have been distributed directly to customers
with advancing technology, many firms are now delivering services through machines
channels of distribution are necessarily short; some firms use one agent intermediary, such as insurance, real estate, and travel agents
some firms use franchises to distribute services

13. Promotion of Services
customer contact personnel represent the main channel of customer communication
service providers must ensure that each service encounter is a positive one if customers are to develop a positive image
many professional service firms are now permitted to advertise
other elements of the promotional mix are used, including publicity and community affairs

14. Four Rs of Service Marketing
Retention
Referrals
Relationships
Recovery

15. The Changing Environment for Services
The boom in the service economy, reduced regulation has created an increase in competition.
Major focus on increased productivity, efficiency
Work on people aspects of business:
Education, training programs
Change technology:
Computer-based technologies used.
Restructure jobs.
Bottom line: People are key to success!

16. Other Considerations in Marketing Services
Impact of Technology:
Remember, not everyone likes impersonal technology
Performance Measurement:
Larger firms can use market share, etc.
Customer perceptions are essential.
Prospects for Growth:
It is very likely that services will continue to take an increasing share of the consumer dollar.
The use of marketing programs in all services is expected to increase considerably.

17. Future Service Profitability
Impacted by:
Focusing on the right priorities
Increasing service quality
Investing in problem solving
Being fair to customers
Investing in leadership development