1. Services Marketing, 7e, Global Edition
Chapter 1:
New Perspectives On
Marketing in the
Service Economy

2. Overview of Chapter 1 1. Why Study Services? 2. What are Services?
3. Marketing Challenges Posed by Services
4. Extended Marketing Mix Required for Services
5. Integration of Marketing with Other Management Functions
6. Developing Effective Service Marketing Strategies

3. 1. Why Study Services?

4. Why Study Services?
Services dominate most economies and are growing rapidly:
Increased productivity and automation in agriculture and industry, combined with growing demand for both new and traditional services
Services account for more than 60% of GDP worldwide
Most new employment is provided by services
(B2C: financial advice, medical examination,
B2B: outsourcing)
Strongest growth area for marketing

5. Changing Structure of Employment as Economies Develop
Agriculture
Services
Employment
Share of
Industry
Time (per capita income)
Source: IMF, 1997

6. Contribution of Services to GDP Globally (G, T, U, C), SIC, NAICS (711211)
Manufacturing
(32, 29) %
Services
(64, T69~71, U79, C40) %
Agriculture
(4, 2) %

7. Estimated Size of Service Sector in Selected Countries (%)
Services as Percent of GDP
South Africa (65%), Brazil (66%), Poland (66%)
Japan (72%), Taiwan (71%), Australia (71%), Italy (71%)
Saudi Arabia (35%)
Indonesia (41%), China (40%)
Malaysia (46%), Chile (45%)
Argentina (57%), Russia (55%)
USA (79%), Fiji (78%), Barbados (78%), France (77%), U.K. (76%)
Jersey (97%), Cayman Islands (95%), Hong Kong (92%)
Bahamas (90%), Bermuda ( 89%), Luxembourg (86%)
Canada (70%), Germany (69%), Israel (67%)
Turkey (63%), Mexico (62%) 30 40 50 60 70 80 90 20 10
Source: The World Factbook 2008, Central Intelligence Agency

8. Why Study Services? Most new jobs are generated by services
Fastest growth expected in knowledge-based industries
Significant training and educational qualifications required, but employees will be more highly compensated (IBM SSME: Service Science, Management and Engineering)
Will service jobs be lost to lower-cost countries? Yes, some service jobs can be exported

9. 5 Powerul forces are transforming service markets
(1) Government policies
(2) Social changes
(3) Business trends
(4) Advances in IT
(5) Internationalization

10. (1) Government policies
Changes in regulations, e.g., deregulation (放鬆管制，開放競 爭)
Privatization (BOT)
New rules to protect customers, employees, and the environment
New agreement on trade in services

11. (2) Social changes Rising consumer expectations More affluence
More people short of time
Increased desire for buying experiences vs. things
Rising consumer ownership of high tech equipment
Easier access to information
Growing but aging population

12. (3) Business trends Push to increase shareholder value
Emphasis on productivity and cost savings
Manufacturers add value through service and sell services
More strategic alliances and outsourcing
Focus on quality and customer satisfaction
Growth of franchising

13. (4) Advances in IT Growth of Internet Greater bandwidth, e.g., 4G
Compact mobile equipment
Wireless networking
Faster, more powerful software
Self-service technology

14. (5) Internationalization
More companies operating on transnational basis
Increased international travel
International mergers and alliances
“Offshoring” of customer service
Foreign competitors invade domestic markets

15. 2. What are Services?

16. What Are Services?
Historical view of services—production and consumption are separable
Fresh new perspective—services is distinguished as benefits without ownership. Rental of goods:
(a) Payment made for using or accessing something – usually for a defined period of time – instead of buying it outright and
(b) Allows participation in network systems that individuals and organizations could not afford

17. What Are Services? Access to and usage of systems and networks
Five broad categories within non-ownership framework of which two or more may be combined
Rented goods services
Defined space and place rentals
Labor and expertise rentals
Access to shared physical environments
Access to and usage of systems and networks

18. Definition of Services
are economic activities offered by one party to another
most commonly employ time-based performances to bring about desired results
In exchange for their money, time, and effort, service customers expect to obtain value from
normally do not take ownership of any of the physical elements involved.

19. Categories of Services
2 * 2
Tangible, Intangible
People: Passenger Transportation, Education
Possessions: fright transportation, Accounting

20. Service Products, Customer Service, After-Sales Service
A firm’s market offerings are divided into core product elements and supplementary service elements
Need to distinguish between:
Marketing of services – when service is the core product
Marketing through service – when good service increases the value of a core physical good
Manufacturing firms are reformulating and enhancing existing added-value services to market them as stand- alone core products (Rolls-Royce sells power by the hour)

21. 3. Marketing Challenges Posed by Services

22. Services Pose Distinctive Marketing Challenges
Marketing is usually separated from the operations and human resources functions in a manufacturing business, where goods are usually produced in a factory and then distributed and sold at a separate location.
Marketing management tasks in the service sector differ from those in the manufacturing sector.
Eight common differences between services and goods but they do not apply equally to all services

23. 8 characteristics of services
1. Most service products cannot be inventoried
2. Intangible elements usually dominate value creation
3. Services are often difficult to visualize & understand
4. Customers may be involved in co-production
5. People may be part of service experience
6. Operational inputs and outputs tend to vary more widely
7. Time factor often assumes great importance
8. Distribution may take place through nonphysical channels

24. 4. Extended Marketing Mix for Services

25. Services Require An Extended Marketing Mix
Marketing can be viewed as:
A customer-driven orientation for the entire organization
Marketing is only function to bring operating revenues into a business; all other functions are cost centers
The “7 Ps” of services marketing are needed to create viable strategies for meeting customer needs profitably

26. The 7Ps of Services Marketing
Traditional Marketing Mix Applied to Services
Product (Chapter 4)
Place and Time (Chapter 5)
Price (Chapter 6)
Promotion and Education (Chapter 7)
Extended Marketing Mix for Services
Process (Chapter 8 & 9)
Physical Environment (Chapter 10)
People (Chapter 11)

27. 5. Integration of Marketing with Other Management Functions

28. Integration of Marketing with Other Management Functions
Marketing links the firm to its external environment and acts as a customer champion;
Operations is concerned with service design and delivery, often involving customers in operational processes;
Human resources helps to recruit, train, and motivate employees whose jobs bring them into direct contact with customers.

29. 6. Developing Effective Service Marketing Strategies

30. Overview of Framework
Understanding Service Products, Consumers and Markets
Applying the 4 P’s of Marketing to Services
The Extended Services Marketing Mix for Managing the Customer Interface
Implementing Profitable Service Strategies

31. Summary (Integration, Extensions, Questions)
Understand the contribution of services to a country’s economy
Define services using the non-ownership of services framework and understand how non-ownership affects services marketing strategies
Understand the components of the services marketing mix (the 7Ps)
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