Transcript The Satisfaction-Loyalty Curve

Chapter 1
New Perspectives on
Marketing in the
Service Economy
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 1- 1
Chapter One – Learning Objectives
 Define services
 Recognize the importance of services
 Differentiate between services marketing and goods
marketing
 Acquire introductory knowledge of the 8Ps of services
marketing
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 1- 2
What Are Services?
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 1- 3
Defining Services
 Services involve a form of rental and non-ownership
 Meaning access and usage fees, for a defined period of time,
instead of buying it outright
 Services non-ownership framework
 Rental-good services — right to a physical good
 Defined space and place rentals — private space shared with other
customers
 Labour and expertise rentals — hire people
 Access to shared physical environments — share use of an
environment, not private
 Systems and networks: access & usage — rent right to participate
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 1- 4
Defining Services
Services are economic activities offered by one party to another, most
commonly employing time-based performances to bring about desired
results in recipients themselves or in objects or other assets for which
purchasers have responsibility.
In exchange for their money, time and effort, service customers expect
to obtain values from access to goods, labour, professional skills,
facilities, networks, and systems; but they do not normally take
ownership of any of the physical elements involved.
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 1- 5
Defining Services
 Service Product
 A service product comprises all the elements of the service
performance, both tangible and intangible, that creates value for
customers
 Businesses sell and market the core service product
 This is the marketing of services
 Customer Service
 Customer support of the core product after it is sold
 Marketing through service
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Services Marketing, Canadian Edition
Chapter 1- 6
Importance of Services
 Services dominate economy in most nations
 Service sector is growing rapidly
 Most new jobs are generated by services
 Powerful forces are transforming service markets
 Reshaping of demand, supply, competition, customers
Personal competitive advantage
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Services Marketing, Canadian Edition
Chapter 1- 7
Why Study Services?
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Services Marketing, Canadian Edition
Chapter 1- 8
Contribution of Service Industries to
Canadian Gross Domestic Product, 2005
(Fig 1.1)
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Services Marketing, Canadian Edition
Chapter 1- 9
Estimated Size of Service Sector in
Selected Countries (Fig 1.2)
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Services Marketing, Canadian Edition
Chapter 1- 10
Challenges Posed by Services
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Services Marketing, Canadian Edition
Chapter 1- 11
Differences, Implications, and
Marketing-Related Tasks (1) (Table 1.1)
Difference
 Most service products
cannot be inventoried
 Intangible elements
usually dominate
value creation
 Services are often
difficult to visualize
and understand
 Customers may be
involved in coproduction
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Implications
 Customers may be
turned away
 Harder to evaluate
service and distinguish
from competitors
 Greater risk and
uncertainty perceived
 Interaction between
customer and provider;
but poor task execution
could affect satisfaction
Marketing-Related Tasks
pricing, promotion, and
 Use
reservations to smooth
demand; work with ops to
manage capacity
 Emphasize physical clues,
employ metaphors and vivid
images in advertising
 Educate customers on
making good choices; offer
guarantees
 Develop user-friendly
equipment, facilities, and
systems; train customers,
provide good support
Services Marketing, Canadian Edition
Chapter 1- 12
Differences, Implications, and
Marketing-Related Tasks (2) (Table 1.1)
Difference
 People may be part of
service experience
 Operational inputs and
outputs tend to vary
more widely
Implications
 Behaviour of service
personnel and customers
can affect satisfaction
assumes great
importance
 Distribution may take
place through
nonphysical channels
Copyright © 2008 Pearson Education Canada
 Recruit, train employees to

reinforce service concept
Shape customer behaviour
 Hard to maintain quality,
 Redesign for simplicity and
 Difficult to shield

 Time is money;
 Find ways to compete on
consistency, reliability
customers from failures
 Time factor often
Marketing-Related Tasks
customers want service
at convenient times
 Electronic channels or
voice telecommunications
failure proofing
Institute good service
recovery procedures
speed of delivery; offer
extended hours
 Create user-friendly,
Services Marketing, Canadian Edition
secure websites and free
access by telephone
Chapter 1- 13
Value Added by Physical, Intangible Elements
Helps Distinguish Goods and Services (Fig 1.7)
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Services Marketing, Canadian Edition
Chapter 1- 14
NAICS
 North American Industry Classifications System
 Replacing the SIC system – Standard Industrial Classification
 Better understanding of service dominated economies
 Some examples of new classifications:
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Diet and Weight Reducing Centres
Management Consulting Services
Temporary Help Services
Telemarketing Bureaus
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Services Marketing, Canadian Edition
Chapter 1- 15
Differentiate between services and goods

Marketing tasks in services differ from the manufacturing
sector

Eight common differences :
1.
2.
3.
4.
5.
6.
7.
8.
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Service products cannot be inventoried
Intangible elements dominate value creation
Services difficult to visualize and understand
Customers may be involved in co-production
People may be part of the service experience
Operational inputs and outputs tend to vary widely
Time factor assumes great importance
Distribution through nonphysical channels
What are marketing implications?
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 1- 16
The 8 Ps of Services Marketing
 Marketing is the only function to bring operating
revenues into a business; all other functions are
cost centres
 The “8Ps” of services marketing are needed to
create strategies for meeting customer needs
profitably in a competitive marketplace
 Traditional – product elements, place and time, price and other
user outlays, promotion and educations
 Extended by service delivery – physical environment, processes,
people, productivity and quality
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Services Marketing, Canadian Edition
Chapter 1- 17
Expanded Marketing Mix
for Services
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Services Marketing, Canadian Edition
Chapter 1- 18
The 8 Ps of Services Marketing
 Product Elements (Chapter 3)
 Place and Time (Chapter 4)
 Price and Other User Outlays (Chapter 5)
 Promotion and Education (Chapter 6)
 Process (Chapter 8)
 Physical Environment (Chapter 10)
 People (Chapter 11)
 Productivity and Quality (Chapter 14)
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Services Marketing, Canadian Edition
Chapter 1- 19
The 8Ps of Services Marketing:
(1) Product Elements
 Embrace all aspects of service performance that create
value
 Core product responds to customer’s primary need
 Help customers use core product through array of
supplementary service elements
 Creates a service concept that offers value to customers
and satisfies better than competitors
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Services Marketing, Canadian Edition
Chapter 1- 20
The 8Ps of Services Marketing:
(2) Place and Time
 Delivery decisions: Where, When, How
 Geographic locations served
 Service schedules
 Physical channels
 Electronic channels
 Customer control and convenience
 Channel partners/intermediaries
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Services Marketing, Canadian Edition
Chapter 1- 21
The 8Ps of Services Marketing:
(3) Price and Other User Outlays
 Traditional pricing tasks:
 Selling price, discounts, premiums
 Margins for intermediaries (if any)
 Credit terms
 Service marketers must recognize that customer outlays
involve more than price paid to seller
 Identify and minimize other costs incurred by users:
 Costs associated with service usage (e.g., travel to service location,
parking, phone, babysitting, etc.)
 Time expenditures, especially waiting
 Unwanted mental and physical effort
 Negative sensory experiences
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Services Marketing, Canadian Edition
Chapter 1- 22
The 8Ps of Services Marketing:
(4) Promotion and Education
 Informing, educating, persuading, reminding customers
 Marketing communication tools
 Media elements (print, broadcast, outdoor, retail, the Internet,
etc.)
 Personal selling, customer service
 Sales promotion
 Publicity/PR
 Imagery and recognition
 Branding
 Corporate design
 Content
 Information, advice
 Persuasive messages
 Customer education/training
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Services Marketing, Canadian Edition
Chapter 1- 23
The 8Ps of Services Marketing:
(5) Process
 How firm does things may be as important as what it does
 Customers often involved in processes, especially when
acting as co-producers of service
 Process involves choices of method and sequence in service
creation and delivery
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Design of activity flows
Number and sequence of actions for customers
Nature of customer involvement
Role of contact personnel
Role of technology, degree of automation
 Badly designed processes waste time, create poor
experiences, and disappoint customers
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Services Marketing, Canadian Edition
Chapter 1- 24
The 8Ps of Services Marketing:
(6) Physical Environment
 Design servicescape and provide tangible evidence of
service performances
 Create and maintain physical appearances
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Buildings/landscaping
Interior design/furnishings
Vehicles/equipment
Staff grooming/clothing
Sounds and smells
Other tangibles
 Manage physical cues carefully— can have profound impact
on customer impressions
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Services Marketing, Canadian Edition
Chapter 1- 25
The 8Ps of Services Marketing:
(7) People
 Interactions between customers
and employees influence
perceptions of service quality
 Need the right customer-contact
employees, performing tasks well
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Job design
Recruiting
Training
Motivation
 Need the right customers for firm’s
mission
 Contribute positively to experience
of other customers
 Possess—or can be trained to
have— needed skills (coproduction)
 Can shape customer roles and
manage customer behaviour
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 1- 26
The 8Ps of Services Marketing:
(8) Productivity and Quality
 Productivity and quality must work hand in hand
 Improving productivity key to reducing costs
 Improving and maintaining quality essential for building
customer satisfaction and loyalty
 Ideally, strategies should be sought to improve both
productivity and quality simultaneously—technology often
the key
 Technology-based innovations have potential to create high payoffs
 But, must be user friendly and deliver valued customer benefits
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 1- 27
Summary – Chapter 1
 Services Defined
 Rental and non-ownership of goods
 Time based exchange of economic activity performed in exchange for money,
time and effort
 Services are transforming markets and experiencing rapid growth
 The differences between services and goods marketing focus on
intangibility, people and time
 8Ps of services marketing
1. Product Elements
2. Place and Time
3. Price and Other User Outlays
4. Promotion and Education
Copyright © 2008 Pearson Education Canada
5. Process
6. Physical Environment
7. People
8. Productivity and Quality
Services Marketing, Canadian Edition
Chapter 1- 28