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Service & Relationship Marketing
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Week 1: Introduction to Service
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The Students Association of Management and Marketing
COMPETITIONTest your knowledge of Marketing Communications in
our Case Competition
JOIN US?Join the committee and become a part of a great team of
like-minded students
[email protected]/UniMelbSAMMunimelbsamm.com
INSIGHTGain insight into the industry through talking with
professional representativesat our Annual Networking Night
WORKSHOPSDevelop greater knowledgeof specific functions of
Management and Marketing through our industry workshops proudly
supported by
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Subject overview
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Readings provided on LMS pageConsultation time by
appointment
[email protected] individual and team based:Mid
semester test (10%)Case study introduction oral (10%)Servicescape
written analysis (30%)Final exam (50%)
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Learning objectivesAfter this week you should be able to:
Demonstrate importance of services to economies
Appreciate challenges services present Outline the seven Ps of
the service mix Contrast the service-dominant logic for
marketing with the market orientation logic
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Australian services
The service industry represents about 70% of Australias gross
domestic product (GDP) and employs four out of five Australians
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Australian trade in services
In 2012-13, Australia's five largest services exports were:
Education-related travel services - $14.5. billion Recreational
travel services - $12.6 billion Business travel services $4.2
billionProfessional services - $4.1 billionTechnical and other
business services (including architectural, engineering, surveying
and scientific services) - $3.5 billion
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Growth of service
Material production now involves little or no material labour.
For example, the actual material production of cars by automobile
workers is now of less importance than the immaterial production of
ideas to improve manufacturing, marketing, or design of the
product.
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Services are diverse
Consumer Services
Airlines Banking and financeHairdressingHotels Restaurants
Business-to-Business
Accountancy Architecture Engineering Legal Management Consulting
GovernmentNot-for-profit
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Services defined
Berry, 1991Goods = Object, Device, ThingServices = Act, Deed
Performance or Effort
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Services marketing defined
Services Marketing is the study and practice of building
relationships with customers over time through valued deeds,
processes and performances
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Service encounters
Are dyadicAre made up of a number of incidents termed moments of
truthCan take different forms differing in duration and
complexity
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Service encounters takemany forms
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Issues associated with services
IntangibleInseparableCustomer plays a role in production and
deliveryHeterogeneousPerishableOwnership
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Intangibility
Services cannot be seen, touchedor tasted. Customers are asked
to buy promises
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The Good-Service Continuum
All products can be placed on a scale somewhere between being a
pure service (no tangible output) and a pure good (no intangible
service added to the good). In practice, most products fall between
the two extremes by being a combination of good and service
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The Good-Service Continuum
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Inseparability Unlike physical goods, it is difficult to
separate the service from the person who performs the actThe
service provider plays an important role
Interaction with the service provider affects the service
provision and the customers satisfaction
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Role of customer
Customers are often part of the service deliveryOther customers
directly affect service perception
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Heterogeneity
Difference or variability in the serviceHeterogeneity is the
result of different people providing the same service in a slightly
different way because no two people are identical.
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Perishability
Services cannot be stored like physical goods in inventory for
later sales or useServices cannot be returned after purchase
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Ownership
Services cannot be ownedBut, they are remembered as we take away
our memories of the service e.g., how we felt during the hotel
stay
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Classifying services Chase 1981
Three levels of contact:Low- an absence of, or limited physical
contact between service personnel and customer. Often takes place
remotely.Medium- some contact between the customer and service
personnel, usually at the initiation or conclusion of the service
encounterHigh- active engagement between the customer and service
personnel for the duration of the service delivery
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Expanded marketing mix for services
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Place, Cyber-space & Time
Price
Promotion
Product (Service)
Customers
People Process
Physical Evidence
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People
Service personnel and service customers have an influence upon
the marketing of servicesService personnel quality and performance
needs to be maintained and/or improvedCustomers can influence other
customers directly in the production process with servicesStaff are
often the face of the service
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Physical evidenceIncludes servicescape the physical layout of
service facility, ambience, etcService organisations need to manage
the evidence to help overcome the problems posed by the intangible
nature of services
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Process of service assembly
This is basically the how of the service delivery
functionProcesses can be considered in two ways - complexity(nature
of steps and sequence) and divergence (variability)Process is
essentially between marketing and operations
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Managerial challenges
Estimating demandTraining staff to reach uniform levels of
service provisionTraining customersIntegration with human resource
and operations departments.
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Service as defined by SD-Logic
Definition:the application of specialized competences (skills
and knowledge), through deeds, processes, and performances for the
benefit of another entity or the entity itself (self-service)
(Vargo & Lusch, 2004)
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Services
Definition:Implies units of output, rather than a process as
implied by the singular word service (Vargo & Lusch, 2004)Both
goods and services render service
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Service
Service is sometimes provided directly, and sometimes it is
provided indirectly through the provision of tangible goods (Vargo
& Lusch, 2004)The importance of tangible goods lies not so much
in owning them as in obtaining the service they render (Kotler,
1997). As the individual uses and consumes the good over time,
value is derived from the consumption experience (Vargo &
Lusch, 2004)
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Products
Products are a means for reaching end-states or valued states of
being, such as happiness, security and accomplishment Example:
A person may purchase a sports car because owning it, displaying
it and experiencing it provides satisfactions beyond those
associated with the basic functions of the car (e.g.,
transportation)
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ValueValue creation is the unit of analysis
Goods-centered view value is embedded in outputService-centered
view value is defined and co-created with the consumerMove from
make-and-sell strategy to sense-and-respond (Haeckel 1999)
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ValueFirms provide their customers with value propositions that
constitute experiences and/or solutionsHowever, it is only through
the interactive co-creation process that the customer is enabled to
evaluate this proposition and assess its actual value (as a
value-in-context).
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Co-creation of valueFP6: The customer is always a co-creator of
value: There is no value until an offering is used experience and
perception are essential to value determination
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Co-creation of value
The focus on marketing should be on value co-creation rather
than value distribution. Marketing needs to facilitate and support
the customers value-creating processes rather than simply
distributing ready-made value to customers
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How?
The best way to co-create value is to focus on the experiences
of the customer
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How?
Enjoyable and engaging experiences provide instrinsic value
(Deci and Ryan, 1985). They offer a state which people try to
maintain and seek to repeat.
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