Services Marketing:

People, Technology, Strategy

CHAPTER 1
Creating Value In The Service
Economy

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 Course Assessment – 15 days
1. Participants (30%):
1.1 Attendance (10%) following the school’s system
1.2 Mini Test (30 mins) (15%) - Week 12
1.5. Class activities (5%)
Note: Minus points (-0.1): 20 minutes late
Plus points (+0.1): 5 times of expressing ideas
2. Mid-term group presentation (20%):
2.1 Khảo sát chất lượng dịch vụ của đối thủ / Survey the
service quality of competitors.

3. Final Service MKT Service Project Report &

Presentation (50%):
- Group Report Assignment in word – (80%)
- Group presentation + debating by other group – (by
individual) (20%) – 20 mins
 Class rules:

- 20 mins late: (-0.1)

- Using phone for private issues during lecturing (-0.1)
- Talking to each other during lecturing (-0.1)
- Express own ideas by raising hands: 5 times =
(+0,1)
- Self-learning
Day 1 Chap 1 Chap 13 (Handling
Day 9
complaint)
Day 2 Chap 2,3
Mid-term - Service
Day 3 Chap 4 Day 10
survey report

Day 4 Chap 4,5 Mid-term - Service

Day 11
survey report
Day 5 Chap 6,7,8
Day 12 Mini - Test
Day 6 Chap 9,10 Final report &
Day 13
presentation
Day 7 Chap 11,14 Final report &
Day 14
presentation
Chap 13 (Handling Final report &
Day 8 Day 15
complaint) presentation
 What is
your
business?
 Learning Objectives (1 of 2)
By the end of this chapter, the reader should be able to:
• Understand how services contribute to a country’s economy.
• Know the principal industries of the service sector.
• Identify the powerful forces that are transforming service
markets.
• Understand how B2B services improve the productivity of
individual firms and drive economic development.
• Be familiar with the difference between outsourcing and
offshoring of services.
• Define services using the non-ownership service framework.
• Identify the four broad “processing” categories of services.
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 Learning Objectives (2 of 2)
• Be familiar with the characteristics of services and the distinctive
marketing challenges they pose.
• Understand the components of the traditional marketing mix applied
to services.
• Describe the components of the extended marketing mix for
managing the customer interface.
• Appreciate that the marketing, operations, and human resource
management functions need to be closely integrated in service
businesses.
• Understand the implications of the Service-Profit Chain for service
management.
• Know the framework for developing effective service marketing
strategies.

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Chapter Overview (1 of 2)

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 Chapter Overview (2 of 2)
• Why Study Services?

• What are Services?

• Marketing Challenges Posed by Services

• Extended Marketing Mix Required for Services

• Integration of Marketing with Other Management Functions

• Developing Effective Service Marketing Strategies

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11
May cái Bán cái
quần quần
Selling Sewing
13
Customer Service
ThS. Nguyen Thi Trung Trinh
Phone: 090.88.736.88
 “Customer service is not a
department,… it’s everyone’s job”
18
 Why Study Services (1 of 6)
• Services Dominate the Global Economy
– Increasing size of the service sector across the
globe
– The relative share of employment between
agriculture, industry and services is changing
dramatically
– Service output is growing rapidly and represents
more than 50% of Gross Domestic Product
(GDP).

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 Why Study Services (2 of 6)

Evolution of
Service Dominated
Economy

Figure 1.4 Changing structure of employment as

an economy develops

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 Why Study Services (3 of 6)

Contribution Of
Services Industries
To GDP Globally

Figure 1.5 Contribution of services industries to GDP globally

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 Why Study Services (4 of 6)

Size Of Service
Sector In Various
Economies

Figure 1.6 Estimated size of service sector in selected countries as a

percentage of GDP

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 Why Study Services (5 of 6)
• Most new jobs are generated by
services
– In most countries around the world, new
job creation comes mainly from services.
– Knowledge-based industries — such as
professional and business services,
education, and health care generate high
paid jobs.

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 Why Study Services (6 of 6)
• Understanding Services Offers Personal
Competitive Advantage
– The distinctive characteristics of services
and how they affect both customer
behavior and marketing strategy will give
important insights and perhaps create a
competitive advantage

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The Principal Industries of the Service
Sector

Figure 1.8 Value added by service industry categories to US GDP.

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 Powerful Forces are Transforming Service
Markets
• Government policies, social changes, business
trends, globalization, and advances in information
technology and communications are among the
powerful forces transforming today’s service
markets
• Development of IT and communications
• Innovations in big data, cloud computing, user-
generated content, mobile communications,
networking technologies, artificial intelligence, and
app-based self-service technologies bring service
revolution

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Factors stimulating transformation of service economy
Government Social Changes Business Trends Advances in Globalization
Policies Information
Technology
• Changes in • Rising consumer • Push to increase • Growth of the Internet • More companies
regulations expectations shareholder value • Wireless networking operating on a
• Privatization • Ubiquitous social • Emphasis on productivity and technology transnational basis
• New rules to networks and cost savings • Digitization of text, • Increased international
• More affluence • Manufacturers add value
protect consumers, graphics, audio, and travel
• More people short of time through service and sell
employees and the • Increased desire for services
video • International mergers
environment buying experiences vs. • More strategic alliances and • Cloud technology and alliances
• New agreement on things outsourcing • Location-based • “Offshoring” of
trade in services • Rising consumer • Focus on quality and services customer service
ownership of computers, customer satisfaction • Big data • Foreign competitors
cell phones, and high-tech • Growth of franchising • Artificial intelligence invade domestic
equipment • Marketing emphasis by non- • Improved predictive markets
• Easier access to more profits analysis
information
• Immigration
• Growing but aging
population

New markets and product categories create increased demand for

services in many existing markets, making it more competition
intensive.

Innovation in service products and delivery systems is stimulated by

application of new and improved technologies.

Success hinges on (1) understanding customers and competitors, (2) viable

business models, and (3) creation of value for both customers and the firm, (4)
increased focus on services marketing and management. 27
B2B Services as Core Engine of
Economic Development

Source: Jochen Wirtz and Michael Ehret, "Service-Based Business Models: Transforming Businesses, Industries and Economies," in
Raymond P. Fisk, Rebekah Russell-Bennett, and Lloyd C. Harris, eds. Serving Customers: Global Services Marketing Perspectives (Tilde 28
University Press, Melbourne, Australia), 28–46.
 Outsourcing and Offshoring (1 of 2)
• Offshoring refers to services that are
conducted in one country and consumed in
another
• 11% of service jobs around the world could
be carried out remotely

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Outsourcing and Offshoring (1 of 2)
Video Clip

VTV Cap
Outsourcing and Offshoring (2 of 2)

Figure 1.12 Outsourcing and offshoring are independent, but often work in tandem.

Source: Jochen Wirtz, Sven Tuzovic, and Michael Ehret (2015), “Global Business Services: Increasing
Specialization and Integration of the World Economy as Drivers of Economic Growth,” Journal of Service 32
Management, Vol. 26, No.4, pp. 565--587.
33
 What Are Services?
• Production and consumption inseparable in services
• Benefits without Ownership
• Labor, skills and expertise rentals
• Rented goods services
• Defined space and facility rentals
• Access to shared facilities
• Access and use of networks and systems

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 Definition Of Services
Services are economic activities performed by one party
to another. Often time-based, these performances bring
about desired results to recipients, objects, or other
assets.
In exchange for money, time, and effort, service
customers expect value from access to labor, skills,
expertise, goods, facilities, networks, and systems.
However, they do not normally take ownership of the
physical elements involved.

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 Four Categories of Services –
A Process Perspective (1 of 2)

• People processing
• Possession processing
• Mental stimulus processing
• Information processing

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Four Categories of Services –
A Process Perspective (2 of 2)

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 People Processing
• Implications of people processing
services:
– Service production and consumption are
simultaneous
– Active cooperation of the customer is needed in
the service delivery process
– Careful consideration of location of the service
operation, the design of service processes and the
service environment, demand and capacity
management, and output from the customer’s
point of view
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People Processing
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 Possession Processing
• Production and consumption are not
necessarily simultaneous
• Customers tend to be less involved in
these services, compared to people-
processing services

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Possession Processing
Possession Processing
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 Mental Stimulus Processing
• Customers do not have to be physically
present in the service factory
• Services can be “inventoried” for
consumption at a later date, or
consumed repeatedly.

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Mental Stimulus Processing
Mental Stimulus Processing
Mental Stimulus Processing
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 Information Processing
• Can be transformed into more
permanent and tangible forms
like letters, reports, books, or files in any
type of format
• Not very different from mental stimulus
processing services

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Information Processing
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 Marketing Challenges Posed By
Services
• Four characteristics of Services
– intangibility

– heterogeneity (variability of quality)

– inseparability of production and

consumption and
– perishability

… IHIP
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Eight Features of Services

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 Difference Implications Marketing-related
Topics

1. Most service Customers may be Smooth demand through

products cannot turned away or have promotions, dynamic
be inventoried to wait pricing, and reservations
(i.e., output is Work with operations to
perishable) adjust capacity

2. Intangible Customers cannot Make services tangible

elements usually taste, smell, or touch through emphasis on
dominate value these elements and physical clues
creation may not be able to see Employ concrete
(i.e., service is or hear them metaphors and vivid
physically Harder to evaluate images in advertising
intangible) service and distinguish and branding
from competitors
 Difference Implications Marketing-related Topics

3. Services are Customers perceive Educate customers to

often difficult to greater risk and make good choices, explain
visualize and uncertainty what to look for, document
understand performance, offer
(i.e., service is guarantees
mentally intangible)

4. Customers may Customers interact Educate customers to

be involved in co- with providers’ make good choices, explain
production equipment, facilities, what to look for, document
(i.e., if people and systems performance, offer
processing is Poor task execution guarantees
involved, the service by customers may
is inseparable) hurt productivity, spoil
the service
experience, and
curtail benefits
 Difference Implications Marketing-related Topics

5. People may Appearance, attitude and Recruit, train, and reward

be part of the behavior of service personnel employees to reinforce the
service and other customers can shape planned service concept
experience the experience and affect Target the right customers at
satisfaction the right times; shape their
behavior

6. Operational Harder to maintain consistency, Set quality standards based

inputs and reliability, and service quality or on customer expectations;
outputs tend to lower costs through higher redesign product elements
to vary more productivity for simplicity and failure-
widely Difficult to shield customers from proofing
(i.e., services results of service failures Institute good service
are recovery procedures
heterogeneou Automate customer-provider
s) interactions; perform work
while customers are absent
 Difference Implications Marketing-related Topics

7. The time Customers see time as a scarce Find ways to compete on

factor often resource to be spent wisely, dislike speed of delivery, minimize
assumes wasting time waiting, want service at burden of waiting, offer
great times that are convenient extended service hours
importance

8. Information-based services can be Seek to create user-

Distribution delivered through electronic friendly, secure websites
may take channels such as the Internet or and free access by
place through voice telecommunications, but core telephone
nonphysical products involving physical activities Ensure that all information-
channels or products cannot based service elements are
Channel integration is a challenge; delivered effectively and
that is to ensure consistent delivery reliably through all key
of service through diverse channels, channels
including branches, call centres and
websites.
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Tangible-dominant to
Intangible-dominant

Relative value added by physical versus intangible elements in goods

and services
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Value through the marketing mix
 The 7 ‘P’s Of Services Marketing
Price
Service
Process
Product

People
Promotion
Place
Physical environment
 The 7 ‘P’s Of Services Marketing

The 4 ‘P’s
product, price, place (or distribution), and
promotion (or communication)

Extended Marketing Mix for Services – The 3

‘P’s
process, physical environment, and people

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 The Traditional Marketing Mix
Applied To Services (1 of 2)
• Product Elements
– Service products consist of a core product that
meets the customers’ primary need and a variety
of supplementary service elements
• Place and Time
– Distribution of core versus supplementary
Services
– Importance of the time factor

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 The Traditional Marketing Mix
Applied To Services (2 of 2)
• Price and Other User Outlays
– Pricing strategy is highly dynamic, with price levels
adjusted over time according to factors like customer
segment, time and place of delivery, level of demand,
and available capacity.
– The outlays include additional monetary costs, time
spent, unwanted mental and physical effort, and
exposure to negative sensory experiences.
• Promotion and Education
– Services are often difficult to visualize and understand as
intangible elements tend to dominate value creation
– Customer-customer interactions affect the service
experience

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 Extended Marketing Mix Required
For Services
• Process
– Operational Inputs and Outputs Can Vary Widely
– Customers Are Often Involved in Co-production
– Demand and Capacity Need to be Balanced
• Physical Environment
– The appearance of buildings, landscaping, vehicles, interior
furnishings, equipment, staff members’ uniforms, signs,
printed materials, and other visible cues provide tangible
evidence of a firm’s service quality
• People
– Service firms need to work closely with their human
resources (HR) departments and devote special care in
selecting, training, and motivating their service employees
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Integration Of Marketing With Other
Management Functions

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The Service-Profit Chain

Reprinted by permission of Harvard Business Review: Heskett, JL., Jones, T.O., Loveman, G.W., Sasser Jr., W.E., and Schlesinger, L.A. (March–
April 1994), “Putting the Service–Profit Chain to Work,” Harvard Business Review, p.166. Copyright © 1994 by the Harvard Business School
Publishing Corporation; all rights reserved.
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Developing Effective Service Marketing
Strategies

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 Winning service! – Winning sales!

see
you!