1

Introduction to Services (Chapter 1)

What are services? Why study services marketing? Goods vs. Services Characteristics of Services Services Marketing Mix

- Dwayne D. Gremler

Marketing Definition

Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.
--American Marketing Association

- Dwayne D. Gremler

Examples of Service Industries

Health Care
hospital, medical practice, dentistry, eye care

Travel
airlines, travel agencies, theme park

Professional Services
accounting, legal, architectural

Others:
hair styling, pest control, plumbing, lawn maintenance, counseling services, health club

Financial Services
banking, investment advising, insurance

Hospitality
restaurant, hotel/motel, bed & breakfast, ski resort, rafting

- Dwayne D. Gremler

Goods and Services

In General:
Goods are

Services are

- Dwayne D. Gremler

What are services?

Long Definition:
Services include all economic activities whose output is not a physical product or production, is generally consumed at the time it is produced, and provides added value in forms (such as convenience, amusement, timeliness, comfort, or health) that are essentially intangible concerns of its first purchaser.

Short Definitions:

- Dwayne D. Gremler

Why study services marketing?

service-based source of manufacturing firms opportunities for

in some service industries have created new service

- Dwayne D. Gremler

Percent of U.S. Labor Force by Industry

Figure 1.3
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Percent of U.S. Gross Domestic Product by Industry

Figure 1.4
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Contributions of Service Industries to U.S. Gross Domestic Product (in 2003)

Figure 1.1
- Dwayne D. Gremler

Source: Inside Sams $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86.

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Goods vs. Services

Goods
Production separate from
consumption

Services
S
V I

Standardized Tangible

Nonperishable

- Dwayne D. Gremler

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Goods vs. Services

Table 1.2

Goods
Tangible

Services
Intangible

Resulting Implications
Services cannot be inventoried. Services cannot be patented. Services cannot be readily displayed or communicated. Pricing is difficult. Service delivery and customer satisfaction depend on employee actions. Service quality depends on many uncontrollable factors. There is no sure knowledge that the service delivered matches what was planned and promoted. Customers participate in and affect the transaction. Customers affect each other. Employees affect the service outcome. Decentralization may be essential. Mass production is difficult. It is difficult to synchronize supply and demand with services. Services cannot be returned or resold.

Standardized

Variable

Production separate from consumption

Simultaneous production and consumption

Nonperishable Perishable

Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, Problems and Strategies in Services Marketing, Journal of Marketing 49 (Spring 1985): 33-46.

- Dwayne D. Gremler

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What Customers Buy

Customers do not buy goods or services: they buy offerings which render services which create value. The traditional division between goods and services is long outdated. It is not a matter of redefining services and seeing them from a customer perspective; activities render services, things render services. The shift in focus to services is a shift from the means and the producer perspective to the utilization and the customer perspective.
Gummesson (1993, p. 250)

- Dwayne D. Gremler

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Product Definition
Product
it is everything that the customer receives in making an exchange

- Dwayne D. Gremler

Tangibility Spectrum

Salt

l Soft Drinks l Detergents l Automobiles l Cosmetics l Fast-food Outlets l l

Intangible Dominant

Tangible Dominant

Figure 1.2

Fast-food Outlets Advertising Agencies Airlines Investment Management Consulting Teaching

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Challenges for Services

Defining and improving quality Communicating and testing new services Communicating and maintaining a consistent image Motivating and sustaining employee commitment Coordinating marketing, operations and human resource efforts Setting prices Standardization versus personalization

- Dwayne D. Gremler

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Services Marketing Mix

traditional marketing mix:
Product Place Promotion Price

expanded mix for services:

P P P

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People

are the firm in the customers eye are a critical part of the product

may be involved in production can facilitate or inhibit service performance

can impact service encounters via their attitude, behavior, or degree of involvement

- Dwayne D. Gremler

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Process
the actual procedures, mechanisms, and flow of activities by which the service is delivered includes:

Examples:

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Physical Evidence
includes: (1)
background characteristics (furnishings, noise, color) signs

(2) tangible cues/facilitating goods that facilitate performance or communication of the service
examples: bank statements, travel brochures, business cards

- Dwayne D. Gremler

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Expanded Marketing Mix for Services

Table 1.3
PRODUCT
Physical good features Quality level Accessories Packaging Warranties Product lines Branding

PLACE
Channel type

PROMOTION PRICE
Promotion blend Salespeople Advertising Flexibility

Exposure Intermediaries

Price level Terms Differentiation Allowances

Outlet location Sales promotion Transportation Publicity Storage

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Expanded Marketing Mix for Services

Table 1.3 (Continued)

PEOPLE
Employees Customers Communicating culture and values Employee research

PHYSICAL EVIDENCE
Facility design Equipment Signage Employee dress Other tangibles

PROCESS
Flow of activities Number of steps Level of customer involvement

- Dwayne D. Gremler