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Chapter 12Services Marketing
and Customer Relationships
Copyright © 2001 by McGraw-Hill Ryerson Limited
Sommers Sommers Barnes BarnesNinth Canadian EditionNinth Canadian Edition
Presentation byPresentation by
Karen A. BlotnickyKaren A. Blotnicky
Mount Saint Vincent University, Halifax, NSMount Saint Vincent University, Halifax, NS
Copyright © 2001 McGraw-Hill Ryerson Limited12 - 2
Chapter Goals
To gain an understanding of:• The nature and importance of services• Characteristics of services and their
marketing implications• Issues related to the planning and
marketing of services• The four Rs of services marketing• The relationship marketing approach• The impact of technology in providing
services
Copyright © 2001 McGraw-Hill Ryerson Limited12 - 3
The Nature of Services• regardless of the “product”, there is a
services component to the offerings of all firms
• in some cases, a service is the principal purpose of the transaction, as in the rental of a car, a haircut, or legal services -- we refer to this as the core servicecore service
• in others, service is performed in support of the sale of a tangible product -- these are referred to as supplementary supplementary servicesservices
Copyright © 2001 McGraw-Hill Ryerson Limited12 - 4
Goods and Services Continuum
• There are two classes of services.• Services that are the main purpose of a
transaction —renting a truck to move.• Services that supplement the sale of a
tangible good — for example, an information hotline for computer software.
• The focus here is primarily on identifiable, intangible services that are the main object of a transaction designed to provide want-satisfaction to customers; supplementary services growing in importance, however.
Copyright © 2001 McGraw-Hill Ryerson Limited12 - 5
Cannedfoods
Ready-madeclothes
Auto-mobiles
Draperies,Carpets
Rest-aurantmeals
Repairs: auto, house, landscaping
Airtravel
Insurance,Consulting,Teaching
MOSTLY GOODS MOSTLY SERVICES
The Goods-Services Continuum
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Importance of Services
• Three-fourths of the Canadian labour force is employed in service industries.
• Over 70% of the nation’s gross national product is produced by services.
• From 1986 to 2000, virtually all new jobs will be in the service industries.
• Huge growth in personal servicespersonal services as well as business services.business services.
Copyright © 1998 by The McGraw-Hill Companies, Inc.
Copyright © 2001 McGraw-Hill Ryerson Limited12 - 7
Characteristics of Services• intangibilityintangibility: difficult to sample and to evaluate• inseparabilityinseparability:: difficult to separate services from
the service provider; mainly direct sales; staff are essential to the delivery of quality services
• heterogeneityheterogeneity: virtually every service is different; very difficult to standardize quality
• perishabilityperishability:: those not sold can not be stored• fluctuating demandfluctuating demand:: demand for some services
fluctuates by season, or even by time of day
Copyright © 2001 McGraw-Hill Ryerson Limited12 - 8
Strategic Services Management• intangibility generally makes the
marketing of services a challenge• understanding how people buy services
and the segments that exist is just as important
• knowing more about the value of customer segments is important -- some are more valuable than others
• knowing what they value so that service levels can be tailored is also important
Copyright © 2001 McGraw-Hill Ryerson Limited12 - 9
Strategic Product Implications
• service organizations have to plan the introduction of new services and the management of the life cycle
• the core service can be enhanced through the addition of supplementary services, thereby creating added value
• the life cycle of services has to be managed
• the branding of a service can be difficult as the customer often has nothing tangible to show
Copyright © 2001 McGraw-Hill Ryerson Limited12 - 10
Managing Service Quality• Quality is hard to define, measure, control, and
communicate • Quality is defined by the consumer• It’s important to measure customer satisfaction
with an organization’s service quality.• Customers see five important components:
• Core serviceCore service must measure up.• Quality of serviceQuality of service, meeting expectations.• Technical aspectsTechnical aspects of delivery.• InteractionInteraction with people who deliver service.• Affective dimensionsAffective dimensions:: How customers feel.
Copyright © 2001 McGraw-Hill Ryerson Limited12 - 11
Pricing ServicesThe characteristics of perishability, inability
to store, and fluctuating demand for services create pricing challenges.
• Pricing Strategies include:• Discount strategies: Cheaper by the
week.• A variable pricing strategy: Kids eat
free, movies cheaper on Tuesdays.• Price competition.
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Distribution of Services• because most services are tied directly to a
specific service provider, most have been distributed directly to customers
• with advancing technology, many firms are now delivering services through machines
• channels of distribution are necessarily short; some firms use one agent intermediary, such as insurance, real estate, and travel agents
• some firms use franchisesfranchises to distribute services
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Promotion of Services• customer contact personnel represent the
main channel of customer communication• service providers must ensure that each
service encounterservice encounter is a positive one if customers are to develop a positive image
• many professional service firms are now permitted to advertise
• other elements of the promotional mix are used, including publicity and community affairs
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Four Rs of Service Marketing
• Retention• Referrals• Relationships• Recovery
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The Changing Environment for Services• The boom in the service economy, reduced
regulation has created an increase in competition.
• Major focus on increased productivity, efficiency• Work on people aspects of business:
• Education, training programs• Change technology:
• Computer-based technologies used.• Restructure jobs.
• Bottom line: People are key to success!
Copyright © 2001 McGraw-Hill Ryerson Limited12 - 16
Other Considerations in Marketing Services
• Impact of Technology:Impact of Technology:• Remember, not everyone likes impersonal
technology• Performance Measurement:Performance Measurement:
• Larger firms can use market share, etc.• Customer perceptions are essential.
• Prospects for Growth:Prospects for Growth:• It is very likely that services will continue to
take an increasing share of the consumer dollar.
• The use of marketing programs in all services is expected to increase considerably.
Copyright © 2001 McGraw-Hill Ryerson Limited12 - 17
Future Service Profitability
Impacted by:1. Focusing on the right priorities2. Increasing service quality3. Investing in problem solving4. Being fair to customers5. Investing in leadership
development