PowerPoint Presentation

Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinPart 1FOUNDATIONS FOR SERVICES MARKETING1-2Introduction to ServicesWhat are Services?Why Service Marketing?Service and TechnologyCharacteristics of Services Service Marketing MixStaying Focused on the CustomerChapter11-3Objectives for Chapter 1:Introduction to ServicesExplain what services are and identify important trends in services.

Explain the need for special service marketing concepts and practices and why the need has developed and is accelerating.

Explore the profound impact of technology on service.

Outline the basic differences between goods and services and the resulting challenges and opportunities for service businesses.

Introduce the expanded marketing mix for services and the philosophy of customer focus as powerful frameworks and themes that are fundamental to the rest of the text.1-4Examples of Service IndustriesHealth Carehospital, medical practice, dentistry, eye careProfessional Servicesaccounting, legal, architecturalFinancial Servicesbanking, investment advising, insuranceHospitalityrestaurant, hotel/motel, bed & breakfast ski resort, raftingTravelairline, travel agency, theme parkOthershair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design

1-5Contributions of Service Industries toU.S. Gross Domestic Product

1-6Tangibility Spectrum

1-7In-class Learning Activity: (Refer to the yellow-colour pile of in-class learning acts)

Ranking services by tangibility

Each group is to rank its list in terms of goods/services, starting with the product that is the best example of a good at the top and ending with the product that is the best example of a service at the bottom. This task should take approximately 15 minutes. A member of each group then writes its rankings on the board or on an overhead. The following questions can be asked during a whole class discussion to bring closure to the exercise: What do the products at the top of the list (or the left of the continuum) have in common? What do the products at the bottom (or the right of the continuum) have in common? What do the products in the middle have in common?

Why Service Marketing?Services dominate U.S. and worldwide economiesService as a business imperative in goods-focused businessesDeregulated industries and professional service needsService marketing is differentService leads to profits1-9Percent of U.S. Labor Force by Industry

1-10Percent of U.S. Gross Domestic Product by Industry

1-11Examples of Goods Companies that are Expanding into Services

Boeing

1-12Characteristics of ServicesCompared to GoodsIntangibilityPerishability(d hng)SimultaneousProductionandConsumptionHeterogeneity(khng ng nht)1-13Comparing Goods and Services

1-14Implications of IntangibilityServices cannot be inventoried

Services cannot be easily patented

Services cannot be readily displayed or communicated

Pricing is difficult1-15Implications of HeterogeneityService delivery and customer satisfaction depend on employee and customer actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered matches what was planned and promoted1-16Implications of Simultaneous Production and ConsumptionCustomers participate in and affect the transaction

Customers affect each other

Employees affect the service outcome

Decentralization may be essential

Mass production is difficult1-17Implications of PerishabilityIt is difficult to synchronize supply and demand with services

Services cannot be returned or resold1-18Search, Experience, and Credence Qualities

1-19Challenges and Questions for Service MarketersDefining and improving qualityDesigning and testing new servicesCommunicating and maintaining a consistent imageAccommodating fluctuating demandMotivating and sustaining employee commitmentSetting pricesOrganizing to facilitate strategic and tactical decision-makingFinding a balance between standardization and personalizationProtecting new service concepts from competitorsCommunicating quality and value to customersEnsuring the delivery of consistent quality service

1-20JeromeThe are 3 main reasons why our program is focusing on services.It provides a higher profit margin than tangible products,Increases satisfaction and retention,Provides a competitive advantage over others.

I am going to use two examples to illustrate these points.

The automotive industry has typically been perceived as a manufacturing industry. However,after-sale services and parts account for nearly 80% of all revenue opportunities, and more than 50% of the average automobile dealers profitsIt is by far the largest creator of shareholder value on a percentage basis. A GM study revealed that $9 billion in after sale revenue produced $2 billion in profits (22% margin). Profits from $150 billion car sales were much lower.JD Power and Associates published a report showing a strong correlation between customer satisfaction with after-sale services and customer intent to repurchase the same brand (Lexus and Saturn cars)Hyundais success is due largely to its differentiation strategy of offering 10 year - 100,000 mile guarantee. The service offering is changing customers perception of the brand

The same can be said about the personal computer industry. With the advancement of technology, personal computers are now becoming more and more of a commodity. While 25% of revenue opportunities are in the initial sale, most revenue opportunities are from after-sale.Company responsiveness to customer calls is the biggest driver customer satisfaction with its product.Dell revolutionized the industry by being the first to offer mass customization of personal computers.

-------------------------Across manufacturing companies, after-sale services and parts contributes about 25% of total revenue, and 40%-50% of all profitsServices related revenue exceeds first-time product sales by 500% - 2000%Retail industry derive largest margins from sale of extended warrantiesIt is a program that is designed in response to a business environment that is increasingly moving away from a product orientation to a service-focus GE, IBM other good examples.Traditional Marketing MixElements an organization controls that can be used to satisfy or communicate with customers: Product Price Place Promotion1-21Expanded Mix for Services The 7 PsProductPricePlacePromotion

PeopleAll human actors who play a part in service delivery and thus influence the buyers perceptions: namely, the firms personnel, the customer, and other customers in the service environment.Physical EvidenceThe environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service.ProcessThe actual procedures, mechanisms, and flow of activities by which the service is deliveredthe service delivery and operating systems.1-22Expanded Marketing Mix for Services

1-23Ways to Use the 7 PsOverall Strategic AssessmentHow effective is a firms service marketing mix?Is the mix well-aligned with overall vision and strategy?What are the strengths and weaknesses in terms of the 7 Ps?

Specific Service ImplementationWho is the customer?What is the service?How effectively does the service marketing mix for a service communicate its benefits and quality?What changes/ improvements are needed?1-24Preparation for Week-1 Tuitorial (refer to the green-color pile of tuitorial matierals)Q4. One of the underlying frameworks for the text is the service marketing mix. Discuss why each of the three new mix elements (process, people, and physical evidence) is included.

With reference to an example of how Southwest Airlines develops its positioning strategy around the three new Ps (as shown in Exhibit 1.2), how might each of these communicate with or help to satisfy an organizations customers?

Preparation for Week-1 TuitorialQ2. Read the major section of chapter 1 titled Service and Technology, and comment on how is technology changing the nature of customer service and service offerings?

With reference to the Technology Spotlight on the Changing Face of Customer Service, how does technology enable new ways to deliver services?Eight Central Paradoxes of Technological Products

1-27