24306 - SERVICES MARKETING
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LECTURE 1:
Introduction to Services (CH 1,2,3)
What is a service?
• Services are the non-physical, intangible parts of our economy, as opposed to goods which we can touch or handle.
• Service Economy: Includes the “soft parts” of the economy consisting of nine industry supersectors.
• scale of market entities: The scale that displays a range of products along a continuum based on their tangibility, ranging from tangible dominant to intangible dominant
Why should we care?
• The service sector accounts for 75% of Australia’s economic activity Service imperative
• Reflects the view that the intangible aspects of products are becoming the key features that differentiate products in the marketplace.
Servicescape
• The use of physical evidence to design service environments.
e-service
• An electronic service available via the Net that completes tasks, solves problems, or conducts transactions Search attributes
• comprise the parts of a product that can be evaluated before purchase and include such attributes as touch, smell, visual cues, and taste.
New trends in (Services) Marketing
• “Hollowing out” Effect
– outsourcing of service tasks to low-wage economies
• Deregulation & Privatisation
– some industries now have minimal constraint on competitive activity
• Emergence & Growth of a Global Middle Class
– effect on the demand for services such entertainment, hospitality, travel, fitness etc.
• Automation & Self-service
– methods of service delivery that are used to decrease labour costs
• Internet of Things
– the interconnection via the Internet of computing devices embedded in everyday objects, enabling them to send and receive data.”
• Social Media & Digital Revolution
– they affect promotional strategies as well as the way consumers search for services/goods and… give feedback!
Emergency and growth of a global middle class
• In only 3 years, the fast expanding global middle class will reach a historic milestone
• Around 2020, the middle class will become majority of the global population for the first time ever
• We are on pace to add another billion in seven years and another billion by 2028.
• The global middle class market is growing slowly in advanced countries and rapidly among emerging market economies
Key concepts in Services Marketing
• Marketing is all about delivering value to customers in the form of products. But products can be classified either goods or services.
– Goods are objects, devices, or things – in other words, you can touch, feel, smell, and taste goods.
– Services are deeds, efforts, or performances – in other words, you can not tangibly touch, feel, smell, and taste services.
Ø The Service-Dominant Logic
• Are goods merely service-delivery mechanisms, or merely means to an end to provide value to customers that is predominantly based on services?
Ø Service as a Means of Differentiation
• The underlying good is often the same among competitors. What distinguishes one firm from another is the service it provides.
There are Four Characteristics that distinguish Services from Goods:
1. Intangibility 2. Heterogeneity 3. Inseparability 4. Perishability
Ø Intangibility
• A product that lacks physical substance.
• Services are intangible and do not have a physical existence. Hence services cannot be touched, held, tasted or smelt. This is most defining feature of a service and that which primarily differentiates it from a product. Also, it poses a unique challenge to those engaged in marketing a service as they need to attach tangible attributes to an otherwise intangible offering.
• Problems:
– Lack of service inventories – Lack of patent protection
– Difficulties involved in displaying and communicating the attributes of the service to its intended target market
– Pricing of services Ø Heterogeneity
• Given the very nature of services, each service offering is unique and cannot be exactly repeated even by the same service provider. While products can be mass produced and be homogenous the same is not true of services. g: All burgers of a particular flavor at McDonalds are almost identical. However, the same is not true of the service rendered by the same counter staff consecutively to two customers.
• Each service experience is different each time, for each customer.
– It reflects the variation in consistency from one service transaction or encounter to the next
• Problems:
– Consistency in performance/quality Ø Inseparability
• this refers to the fact that services are generated and consumed within the same time frame. Eg: a haircut is delivered to and consumed by a customer simultaneously
• Is the service provider providing a service? Or is he/she the service?
– It reflects the interconnection among the service provider, the customer involved in receiving the service and other consumers sharing the same experience.
• Problems:
– Execution of the service that requires the physical presence of the service provider – Customer involvement in the delivery process
– Service experience shared among a number of customers – Issues resulting from the mass production of services Ø Perishability
• Services cannot be stored, saved, returned or resold once they have been used. Once rendered to a customer the service is completely consumed and cannot be delivered to another customer.
• You can’t store services, so it’s hard to manage supply and demand.
– It refers to the idea that services can’t be saved, their unused capacity can’t be reserved and they can’t be inventoried.
• Problems:
– Matching supply and demand
– Pricing strategies to match supply and demand
How can we we solve the problems of inseparability, heterogeneity, perishability and intangibility?
• physical evidence/ tangible clues: The physical characteristics that surround a service to assist consumers in making service evaluations, such as the quality of furnishings, the appearance of personnel, or the quality of paper stock used to produce the firm’s brochure.
Classification of Services (based on the Type of Process)
• A process is a particular method of operation or a series of actions, typically involving multiple steps that often need to take place in a defined sequence.
7p’s model
• Product
– This refers to your pricing strategy for your products and services and how it will affect your customers.
• Price
– This refers to your pricing strategy for your products and services and how it will affect your customers.
• Place
- Place is where your products and services are seen, made, sold or distributed. Access for customers to your products is key and it is important to ensure that customers can find you
• Promotion
– These are the promotional activities you use to make your customers aware of your products and services, including advertising, sales tactics, promotions and direct marketing.
• Process
– refers to the entire organization and systems, including overall management, policies, and procedures involved in providing services.
• People
– refer to both the employees and customers that come together to provide services.
• Physical evidence
– refers to the tangible elements of services.
The Experience Economy
• The experience economy is the idea that products and services can outcompete by creating an experience that customers value.
• In an economy where many products and services have become a commodity, experience is a valuable competitive advantage.
• consumer purchasing is nowadays more influenced by the experiences provided by the brand, not just the product itself
• move from commodity to experience
• using experience as value adding
Ø The 4 realms of an experience Pine and Gilmore (1999) 1. Entertainment
– Passive absorption of experiences – Using the senses see and listen – Traditional perception of experiences
– Entertainment will often be an element of the experience – Examples: Concerts; Movies, Sports events
2. Education
– Active absorption of knowledge by engaging the intellect or the body (training) – Is often seen as serious experiences (you learn something or is developed physically) – a fusion with entertainment is becoming popular (edutainment)
3. Escapism
– Active immersion; customer becomes part of the experience; the experience can be affected – Customer participates in activities, where you forget about time and place
– The most development is seen within this area
– Examples: Amusement parks; Extreme sport; Gambling; Cyberspace 4. Esthetic
– Passive immersion; no influence on the experience – Special moments of enjoyment to remember
– The environment is unchanged; only the customer is affected Is often related to art and nature
