Chapter 1 - Services marketing

8/18/2019 Chapter 1 - Services marketing

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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " !

Chapter 1:

New PerspectivesonMarketing in the

Service Economy


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " 2

Overview of Chapter 1

Why Study Services?

What are Services?

The Marketing Challenges Posed by Services

The !panded Marketing Mi! "e#uired for Services


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " #

Why Study Services?


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " $

Why Study Services? $1%

Services do&inate econo&y in &ost nations

'nderstanding services offers you personal co&petitiveadvantages

(&portance of service sector in econo&y is growingrapidly)

Services account for more than 60 percent of GDP worldwide

Almost all economies have a substantial service sector

Most new employment is provided by services

Strongest growth area for mareting


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " %

Why Study Services? $*%

Most new +obs are generated by services

!astest growth e"pected in nowledge#based industries

Significant training and educational $ualifications re$uired%but employees will be more highly compensated

&ill service 'obs lost to lower#cost countries( )es% some service 'obs

can be e"ported


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Changing Structure of &ploy&ent ascono&ic ,evelop&ent volves

Industry

Services

Agriculture

Time, per Capita Income

S hare of

E mployment

Source: IMF, 1997


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Why Study Services? $-%

Powerful forces are transfor&ing service &arkets

Government policies% social changes% business trends%advances in *+% internationali,ation

These forces are reshaping Demand

Supply

+he competitive landscape

-ustomers& choices% power% and decision maing


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Transfor&ation of the Service cono&y

Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

Innovation in service products & delivery systems, stimulated by better technology

Customers have more choices and eercise more po!er

Success hinges on"

#nderstanding customers and competitors

$iable business models

Creation o% value %or customers and %irm

e! mar'ets and product categories

Increase in demand %or services

(ore intense competition


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.actors Sti&ulating Transfor&ationof the Service cono&y $1%

Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

Changes in regulations

Privatization

e! rules to protect customers,employees, and the environment

e! agreement on trade in services


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.actors Sti&ulating Transfor&ationof the Service cono&y $*%

Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

)ising consumer epectations

(ore a%%luence

(ore people short o% time

Increased desire %or buying eperiencesversus things

)ising consumer o!nership o% high teche*uipment

+asier access to in%ormation

Immigration

Gro!ing but aging population


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.actors Sti&ulating Transfor&ationof the Service cono&y $-%

Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

Push to increase shareholder value

+mphasis on productivity and cost savings

(anu%acturers add value through service andsell services

(ore strategic alliances and outsourcing

ocus on *uality and customer satis%action

Gro!th o% %ranchising

(ar'eting emphasis by nonpro%its



.actors Sti&ulating Transfor&ationof the Service cono&y $/%

Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

Gro!th o% the Internet

Greater band!idth

Compact mobile e*uipment

-ireless net!or'ing

aster, more po!er%ul so%t!are

.igitization o% tet, graphics, audio, video


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.actors Sti&ulating Transfor&ationof the Service cono&y $0%

Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

(ore companies operating on transnationalbasis

Increased international travel

International mergers and alliances

/%%shoring2 o% customer service

oreign competitors invade domestic mar'ets


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What 3re Services?


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What 3re Services? $1%

The historical view

Goes bac over .00 years to Adam Smith and /ean#aptiste Say

Different from goods because they are perishable 1Smith 23364

-onsumption cannot be separated from production% services areintangible 1Say 2504

3 fresh perspective) Services involve a for& of rental4offering benefits without transfer of ownership

*nclude rental of goods Mareting tass for services differ from those involved in selling

goods and transferring ownership



What 3re Services? $*%

.ive broad categories within non5ownership fra&ework)27 8ented goods services

.7 Defined space and place rentals

7 9abor and e"pertise rentals

:7 Access to shared physical environments

;7 Systems and networs< access and usage

(&plications of renting versus owning $Service Perspectives 161%

Marets e"ist for renting durable goods rather than selling them

8enting portions of larger physical entity 1e7g7% office space% apartment4 can

form basis for service -ustomers more closely engaged with service suppliers

+ime plays central role in most services

-ustomer choice criteria may differ between rentals and outright purchases

Services offer opportunities for resource sharing



,efining Services

Services Are economic activities offered by one party to another

Most commonly employ time#based performances to bring aboutdesired results in<

) recipients the&selves) ob+ects or other assets for which purchasers have responsibility

(n e!change for their &oney4 ti&e4 and effort4 servicecusto&ers e!pect to obtain value fro&

Access to goods% labor% facilities% environments% professional sills%networs% and systems

ut they do not normally tae ownership of any of the physicalelements involved


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Service Products versus Custo&er Serviceand 3fter5Sales Service

3 fir&0s &arket offerings are divided into core productele&ents and supple&entary service ele&ents

(s everyone in service? 7eed to distinguish between)

Mareting of services Mareting goods through added#value service

8ood service increases the value of a core physical good

3fter5sales service is as i&portant as pre5sales servicefor &any physical goods

Manufacturing fir&s are refor&ulating and enhancinge!isting added5value services to &arket the& as stand5alone core products


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Challenges Posed by Services


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Services Pose ,istinctiveMarketing Challenges

Marketing &anage&ent tasks in the service sectordiffer fro& those in the &anufacturing sector

The eight co&&on differences are)

27 Most service products cannot be inventoried

.7 *ntangible elements usually dominate value creation

7 Services are often difficult to visuali,e and understand

:7 -ustomers may be involved in co#production

;7 People may be part of the service e"perience

67 =perational inputs and outputs tend to vary more widely

37 +he time factor often assumes great importance

57 Distribution may tae place through nonphysical channels

What are &arketing i&plications?


21/42 Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " 2!

,ifferences4 (&plications4 andMarketing5"elated Tasks $1% 1+able 2724

.i%%erence

(ost serviceproducts

cannot be inventoried

Intangible elementsusually dominate

value creation

Services are o%ten

di%%icult to visualizeand understand

Customers may beinvolved in co1

production

Implications

Customers may beturned a!ay

2arder to evaluateservice and distinguish

%rom competitors

Greater ris' anduncertainty perceived

Interaction bet!eencustomer and provider3

but poor tas' eecution

could a%%ect satis%action

(ar'eting1)elated Tas's

#se pricing, promotion,and

reservations to smoothdemand3 !or' !ith ops to

manage capacity

+mphasize physical clues,employ metaphors and vividimages in advertising

+ducate customers on

ma'ing good choices3 o%%erguarantees

.evelop user1%riendlye*uipment, %acilities, and

systems3 train customers,

provide good support


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Implications

Behavior o% servicepersonnel and customers

can a%%ect satis%action

2ard to maintain *uality,consistency, reliability

.i%%icult to shieldcustomers %rom %ailures

Time is money3

customers !ant serviceat convenient times

+lectronic channels orvoice telecommunications

.i%%erence

People may be parto%

service eperience

/perational inputsand

outputs tend to vary

more !idely

Time %actor o%tenassumes great

importance

.istribution may ta'eplace through

nonphysical channels

(ar'eting1)elated Tas's

)ecruit, train employees to

rein%orce service concept

Shape customer behavior

Institute good servicerecovery procedures

ind !ays to compete onspeed o% delivery3 o%%er

etended hours

Create user1%riendly,secure !ebsites and %reeaccess by telephone

,ifferences4 (&plications4 andMarketing5"elated Tasks $*% 1+able 2724


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " 2#

9alue 3dded by Physical4 (ntangible le&ents:elps ,istinguish 8oods and Services 1!ig 2764

PhysicalElements

2igh

4o!Intangile Elements 2igh

Salt

.etergents

C. Player -ine

Gol% Clubse! Car

Tailored clothing

ast1ood )estaurantPlumbing )epair

2ealth Club

Airline light4andscape (aintenance

Consulting

4i%e Insurance

Internet Ban'ing

Source; Adapted from Lynn Shostack


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " 2$

!panded Marketing Mi!for Services


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " 2%

Services "e#uire3n !panded Marketing Mi!

Marketing can be viewed as) A strategic and competitive thrust pursued by top management

A set of functional activities performed by line managers

A customer#driven orientation for the entire organi,ation

Marketing is the only function to bring operatingrevenues into a business; all other functions are costcenters

The 5


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The lements

Place and +ime

Price and =ther ?ser =utlays

Promotion and >ducation

Process

Physical >nvironment

People

Productivity and @ualityFig 1!9 "or#ing in$nison: The %Ps ofSer&ices Mar#eting


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The


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " 2'

The


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " 2(

The


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The


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " #%

Marketing Must e (ntegrated withOther Manage&ent .unctions


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Three management functions play central an' interrelate' rolesin meeting nee's of ser&ice customers

Marketing Must e (ntegrated withOther Manage&ent .unctions 1!ig 27204

Customers

/perations

(anagement

(ar'eting

(anagement

2uman )esources

(anagement


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Services) 3n 3lternative Classification

Sche&e


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " #'

.our Categories Of Services 1!ig .724

Information processing

(services directed at

intangible assets):

Accounting

Banking

ature of the Service Act !eople !ossessions

"angible Actions !eople processing


people’s bodies):

Barbers

#ealth care

$ho or $hat Is the %irect &ecipient of the Service'

!ossession processing


physical possessions):

&efueling

%isposalrecycling

ental stimulus

processing

(services directed at people’s minds):

*ducation

Advertising!&

Intangible Actions


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " #(

People Processing

Custo&ers &ust)

Physically enter the servicefactory

-o#operate actively with theservice operation

Managers should think aboutprocess and output fro&custo&ers perspective

+o identify benefits created andnon#financial costs<

) Ti&e4 &ental4 physical effort

.our Categories Of Services


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " $0

Possession Processing

Possession Processing

Customers are less physicallyinvolved compared to people

processing services

Involvement is limited

Production and consumptionare separable


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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/ Chapter ! " $!

Mental Sti&ulus Processing

Mental Stimulus Processing

Ethical standards required whencustomers who depend on suchservices can potentially be

manipulated by suppliers

Physical presence of recipientsnot required

Core content of services isinformation-based

Can be inventoried!


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(nfor&ation Processing

Information Processing

Information is the mostintangible form of serviceoutput

"ut may be transformed intoenduring forms of serviceoutput

#ine between information processing and mental stimulus processing may be blurred$

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Chapter 1 - Services marketing