Cavite State University – CCAT Campus

Department of Management Studies

Bachelor of Science in Business Management

SERVICE MARKETING
ELEC 4

Prepared by:

HAZEL ANN G. AGACER, REB

PROF. ARMAN M. AMBAS, MBA
Chapter 1:
New Perspectives On
Marketing in the
Service Economy
Overview of Chapter 1
 Why Study Services?

 What are Services?

 Marketing Challenges Posed by Services

 Extended Marketing Mix Required for Services

 Integration of Marketing with Other Management Functions

Why Study Services?
Why Study Services?

 Services dominate most economies and are growing

rapidly:
➔ Services account for more than 60% of GDP worldwide
➔ Almost all economies have a substantial service sector
➔ Most new employment is provided by services
➔ Strongest growth area for marketing

 Understanding services offers you a personal competitive

advantage
Contribution of Service Industries to GDP Globally

Manufacturing 32%

Services 64%

Agriculture 4%
Why Study Services?

 Most new jobs are generated by services

➔ Fastest growth expected in knowledge-based industries

➔ Significant training and educational qualifications required,

but employees will be more highly compensated

➔ Will service jobs be lost to lower-cost countries? Yes, some service

jobs can be exported
Why Study Services?

 Powerful forces are transforming service markets

➔ Government policies, social changes, business trends,
advances in IT, internationalization

 Forces that reshape:

➔ Demand
➔ Supply
➔ The competitive landscape
➔ Customers’ choices, power, and decision making
Transformation of the
Service Economy
Social
Changes
Business
Trends
Advances
In IT

Government Globalization
Policies
▪ New markets and product categories
▪ Increase in demand for services
▪ More intense competition

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

Customers have more choices and exercise more power

▪ Understanding customers and competitors

▪ Viable business models
▪ Creation of value for customers and firm
Success hinges on:
Increased focus on services marketing and management
Factors Stimulating Transformation
of the Service Economy
Social Business Advances
Changes Trends In IT

Government Globalization
Policies

▪ Changes in regulations
▪ Privatization
▪ New rules to protect customers, employees,
and the environment
▪ New agreement on trade in services
Factors Stimulating Transformation
of the Service Economy
Social Business Advances
Changes Trends In IT

Government Globalization
Policies

▪ Rising consumer expectations

▪ More affluence
▪ More people short of time
▪ Increased desire for buying experiences vs.
things
▪ Rising consumer ownership of high tech
equipment
▪ Easier access to information
▪ Immigration
▪ Growing but aging population
Factors Stimulating Transformation
of the Service Economy
Social Business Advances
Changes Trends In IT

Government Globalization
Policies

▪ Push to increase shareholder value

▪ Emphasis on productivity and cost savings
▪ Manufacturers add value through service and
sell services
▪ More strategic alliances and outsourcing
▪ Focus on quality and customer satisfaction
▪ Growth of franchising
▪ Marketing emphasis by nonprofits
Factors Stimulating Transformation
of the Service Economy
Social Business Advances
Changes Trends In IT

Government Globalization
Policies

▪ Growth of Internet
▪ Greater bandwidth
▪ Compact mobile equipment
▪ Wireless networking
▪ Faster, more powerful software
▪ Digitization of text, graphics, audio, video
Factors Stimulating Transformation
of the Service Economy
Social Business Advances
Changes Trends In IT

Government Globalization
Policies

▪ More companies operating on transnational

basis
▪ Increased international travel
▪ International mergers and alliances
▪ “Offshoring” of customer service
▪ Foreign competitors invade domestic markets
What are Services?
What Are Services?

 The historical view

➔ Smith (1776): Services are different from goods because they are
perishable
➔ Say (1803): As services are immaterial, consumption cannot be
separated from production

 A fresh perspective: Benefits without Ownership

➔ Rental of goods:
(a) Payment made for using or accessing something – usually for a defined
period of time – instead of buying it outright and
(b) Allows participation in network systems that individuals and
organizations could not afford
Definition of Services

Services are a form of product that

consists of activities, benefits, or
satisfactions offered for sale that are
essentially intangible and do not result in
the ownership of anything.
What Are Services?

Five broad categories within non-ownership

framework of which two or more may be combined

Rented goods Defined space Labor and

services and place rentals expertise rentals

Access to shared Access to and

physical usage of systems
environments and networks
Definition of Services
 Services
➔ are economic activities offered by one party to another
➔ most commonly employ time-based performances to bring about
desired results

 In exchange for their money, time, and effort, service

customers expect to obtain value from
➔ access to goods, labor, facilities, environments, professional
skills, networks, and systems;
➔ normally do not take ownership of any of the physical elements
involved.
Service Products vs. Customer
 A firm’s
Service & market offerings
After-Sales are divided into core product
Service
elements and supplementary service elements

 Need to distinguish between:

➔ Marketing of services – when service is the core product
➔ Marketing through service – when good service increases the
value of a core physical good

 Manufacturing firms are reformulating and enhancing

existing added-value services to market them as stand-
alone core products
Service – A Process
 Differences Perspective
exist amongst services depending on what is
being processed

 Classification of services into

➔ People processing
➔ Possession processing
➔ Mental stimulus processing
➔ Information processing
4 Categories of Services
People Processing

 Customers must:
➔ physically enter the service factory

➔ cooperate actively with the service operation

 Managers should think about process and output from

the customer’s perspective
➔ to identify benefits created and non-financial costs: Time, mental
and physical effort
Possession Processing

 Involvement is limited

 Less physical involvement

 Production and consumption are separable

Mental Stimulus Processing
 Ethical standards required:
➔ Customers might be manipulated

 Physical presence of recipients not required

 Core content of services is information-based

➔ Can be ‘inventoried’
Information Processing

 Most intangible form of service

 May be transformed:

➔ Into enduring forms of service output

 Line between information processing and mental

stimulus processing may be unclear
Marketing Challenges Posed
by Services
Services Pose Distinctive
Marketing Challenges

 Marketing management tasks in the service sector differ

from those in the manufacturing sector.

 Eight common differences between services and goods but

they do not apply equally to all services

What are marketing implications of these differences?

Differences, Implications,
Difference and
Implications Marketing-Related Tasks
Marketing-Related▪ Customers
Tasks may be
▪ Most service products ▪ Use pricing, promotion,
cannot be inventoried turned away reservations to smooth
demand; work with ops to
manage capacity
▪ Intangible elements ▪ Harder to evaluate ▪ Emphasize physical clues,
usually dominate service & distinguish employ metaphors and vivid
value creation from competitors images in advertising

▪ Services are often ▪ Greater risk & ▪ Educate customers on

difficult to visualize & uncertainty perceived making good choices; offer
understand guarantees

▪ Interaction between ▪ Develop user-friendly

▪ Customers may be
customer & provider; equipment, facilities &
involved in co-
poor task execution systems; train customers,
production
could affect satisfaction provide good support
Differences, Implications,
Difference and
Implications Marketing-Related Tasks
Marketing-Related▪ Behavior
Tasksof service
▪ People may be part of ▪ Recruit, train employees to
service experience personnel & customers reinforce service concept
can affect satisfaction ▪ Shape customer behavior

▪ Operational inputs and ▪ Hard to maintain quality, ▪ Redesign for simplicity and
outputs tend to vary consistency, reliability failure proofing
more widely ▪ Difficult to shield ▪ Institute good service
customers from failures recovery procedures

▪ Time factor often ▪ Time is money; ▪ Find ways to compete on

assumes great customers want service speed of delivery; offer
importance at convenient times extended hours

▪ Distribution may take ▪ Electronic channels or ▪ Create user-friendly,

place through voice communications secure websites and free
access by telephone
nonphysical channels
Extended Marketing Mix for
Services
Services Require

AnMarketing
Extended Marketing
can be viewed Mix
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 organization

 Marketing is only function to bring operating revenues into

a business; all other functions are cost centers

 The “7 Ps” of services marketing are needed to create

viable strategies for meeting customer needs profitably
 Traditional
The MarketingMarketing
7Ps of Services Mix Applied to Services
➔ Product
➔ Place and Time
➔ Price
➔ Promotion and Education

 Extended Marketing Mix for Services

➔ Process
➔ Physical Environment
➔ People
Integration of Marketing with
Other Management Functions
Marketing to be Integrated
Three management with
functions play central and interrelated
Other Management Functions
roles in meeting needs of service customers

Operations Marketing
Management Management
Customers

Human Resources
Management
 Services dominate Why Study Unique Services are often
the economy in many Services? Characteristics intangible, difficult to
nations. The majority visualize and understand,
of jobs are created in and customers may be
the service sector. involved in co-production.

CHAPTER 1
Services are a form
Product, Place & Time,
of rental (not
Price, Promotion &
ownership). They are
Extended Education, Process,
performances that What are
Marketing Physical Environment,
bring about a desired Services?
Mix People
result.

Summary
 THANK YOU!
HAZEL ANN G. AGACER, REB
[email protected]

ARMAN M. AMBAS, MBA

[email protected]