Topic 1

Introduction to
Services Marketing
 Overview of Topic 1

• Why study services?

• What are services?
• Four broad categories of services
• Four characteristics of services
• Challenges posed by services
• Expanded marketing mix for services
 Why Study Services?

• Services dominate economy in most nations

• Most new jobs are generated by services
– Fastest growth expected in knowledge-based
industries
– Many new jobs are well-paid positions
requiring good educational qualifications

• Many manufacturing firms moved to

marketing
stand-alone services
 Contribution of Services Industries to
Global GDP

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Pte Ltd 2013. All rights reserved
 How Important is the Service Sector
in Our Economy?
• The size of the service sector is increasing in
almost all economies around the world.
• Even in emerging economies, service output is
growing rapidly and often accounts for half or
more of GDP. In HK, it accounts for more than
90% of the GDP.
• Jobs range from high-paid professionals and
technicians to minimum-wage positions.
• Service organizations can be any size – from
huge global corporations to local small
businesses.
Estimated Size of Service Sector in
Selected Countries
 What are Services?

• Services involve a form of rental through

which customers can obtain benefits.

• What customers value and are willing to pay

for are desired experiences and solutions.

• Transfer of ownership is not involved.

• We use the term rent as a general term to
describe payment made for use of something
or access to skills & expertise, facilities or
networks (usually for a defined period of time)
instead of buying it outright (which is not even
possible in many instances).

• Marketing tasks for services differ from those

involved in selling goods & transferring
ownership.
Four Categories Of Services

9
 Characteristics of Services

• Intangibility

• Inseparability

• Heterogeneity

• Perishability
 Intangibility
• Because services are performances or
actions rather than objects, they cannot be
seen, felt, tasted or touched in the same
manner that you can sense tangible goods.
• E.g. health care service are actions (such as
diagnosis, surgery & treatment) directed
toward patients.
 Value Added by Tangible vs Intangible
Elements in Goods & Services

Hi
Salt
Soft drinks
CD Player
Golf clubs
New car
Tangible Elements

Tailored clothing
Furniture rental
Fast food restaurant
Plumbing repair
Office cleaning
Health club
Airline flight
Retail banking
Insurance
Weather forecast
Lo Intangible Elements Hi
 Implications
• What are the implications for marketing because of
this characteristics of services? or, what issues do
we need to consider when marketing services?
 Inseparability

• Simultaneous production & consumption.

• Whereas most goods are produced first, then
sold and consumed, most services are sold
first and then produced and consumed
simultaneously.
• E.g. flight services is produced and consumed
at the same time.
 Implications
• What are the implications for marketing because of
this characteristics of services? or, what issues do
we need to consider when marketing services?
 Heterogeneity

• Because services are performances, frequently

produced by humans, no two services will be
precisely alike.
• The employees delivering the service
frequently are the service in the customer’s
eyes.
• The service personnel may differ in their
performance from day to day or even hour to
hour.
 Implications
• What are the implications for marketing because of
this characteristics of services? or, what issues do
we need to consider when marketing services?
 Perishability

• Services cannot be stored, resold or returned.

• E.g. A seat in an airplane or in a cinema not
used cannot be used or resold at a later time.
• Perishability is in contrast to goods that can be
stored in inventory or resold another day, or
even returned if the customer is unhappy.
• E.g. A bad haircut cannot be returned or resold
to another customer.
 Differences, Implications, and
Marketing-Related Tasks (1) [Table 1.1)

Difference Implications Marketing-Related Tasks

Most service Customers may be Use pricing, promotion,

products
turned away reservations to smooth
cannot be inventoried demand; work with ops to
manage capacity
Harder to evaluate
Intangible elements Emphasize physical clues,
service & distinguish employ metaphors and vivid
usually dominate
from competitors images in advertising
value creation
Greater risk & Educate customers on
Services are often
uncertainty perceived making good choices; offer
difficult to visualize &
understand guarantees

Interaction between Develop user-friendly

Customers may be
customer & provider; equipment, facilities &
involved in co-
but poor task execution systems; train customers,
Production
could affect satisfaction provide good support
 Differences, Implications, and
Marketing-Related Tasks (2) [table 1.1)

Difference Implications Marketing-Related Tasks

People may be part of Behavior of service Recruit, train employees to

service experience personnel & customers reinforce service concept
can affect satisfaction Shape customer behavior

Operational inputs Hard to maintain quality,

and 
consistency, reliability
outputs tend to vary
Difficult to shield
more widely Institute good service
customers from failures
recovery procedures
Time is money;
Time factor often
customers want service Find ways to compete on
assumes great speed of delivery; offer
at convenient times
importance extended hours
Electronic channels or
Distribution may take Create user-friendly,
voice telecommunications
place through secure websites and free
nonphysical channels access by telephone
Services Require An Expanded Marketing Mix
● Marketing can be viewed 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 in a competitive marketplace.
 The 7 Ps of Services Marketing

● Product (Chapter 4)
● Place (Chapter 5)
● Price (Chapter 6)
● Promotion (Chapter 7)
● Process (Chapter 8)
● Physical environment (Chapter 10)
● People (Chapter 11)
 Extended Mix for Services

•People
– Interactions between customers & service
personnel strongly influence customer
perceptions of service quality.
– Well-managed firms devote special care to
selecting, training & motivating service
employees.
– Other customers can also affect one’s
satisfaction with a service.
• Process
– How firm does things may be as important as
what it does.
– Customers often actively involved in processes,
especially when acting as co-producers of
service.
– Operational inputs & outputs vary more widely
and it is difficult to control service quality.
– E.g. Variability can be reduced through providing
good training to employees or adopting
standardized procedures.
– Demand & capacity needs to be balanced.
• Physical environment
– Design servicescape & provide tangible
evidence of service performances.
– Create and maintain physical appearances
(e.g., interior design/furnishings, staff
grooming/clothing).
– Manage physical cues carefully— can have
profound impact on customer impressions.
 Linking the Marketing, Operations and
HR Functions

• As shown by the component elements of the

7Ps model, marketing cannot operate
successfully in isolation from other functions in
a service business.
• Managing the 7Ps requires collaboration
between marketing, operations and HR
functions.
• Service marketers must work well with their
colleagues in other functions in planning and
implementing marketing strategies.
 Interdependence of Marketing,
Operations & HR Functions

Operations Marketing
Management Management

Customers

Human Resource
Management
 Summary
• Reasons for studying services:
– Service sector dominates economy in most nations.
– Most new jobs are generated by services.
• The service concept and its definition:
– Services offer benefits without transfer of
ownership.
– Four broad categories of services—people
processing, possession processing, mental stimulus
processing & information processing.
– Four characteristics of services—intangibility,
inseperability, heterogeneity & perishability.
• Services present distinctive marketing challenges
relative to goods, requiring:
– Expanded marketing mix comprising 7Ps instead of
traditional 4Ps.