A Framework For Developing Effective Service Marketing Strategies: Overview :A Framework For Developing Effective Service Marketing Strategies: Overview Understanding Customer Needs, Decision Making, and Behavior in Service Encounters Chapter 2


Framework for Developing EffectiveService Marketing Strategies: Part I :Framework for Developing EffectiveService Marketing Strategies: Part I I: Understanding Customer Needs, Decision Making, and Behavior in Service Encounters Differences among Services Affect Customer Behavior Three-Stage Model of Service Consumption (Chapter 2)


Slide 3:Chapter 1: New Perspectives on Marketing in the Service Economy


Overview of Chapter 1 :Overview of Chapter 1 Why Study Services? What are Services? The Marketing Challenges Posed by Services* The Expanded Marketing Mix Required for Services* Integration with Other Management Functions*


Slide 5:Why Study Services?


Why Study Services? (1) :Why Study Services? (1) Services dominate economy in most nations Understanding services offers you personal competitive advantages Importance of service sector in economy is growing rapidly: Services account for more than 60 percent of GDP worldwide Almost all economies have a substantial service sector Most new employment is provided by services Strongest growth area for marketing


Why Study Services? (2) :Why Study Services? (2) 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 lost to lower-cost countries? Yes, some service jobs can be exported


Changing Structure of Employment as Economic Development Evolves :Changing Structure of Employment as Economic Development Evolves Industry Services Agriculture Time, per Capita Income Share of Employment Source: IMF, 1997


Slide 9:What Are Services?


Defining Services :Defining Services Services Are economic activities offered by one party to another Most commonly employ time-based performances to bring about desired results in: recipients themselves objects or other assets for which purchasers have responsibility 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 But they do not normally take ownership of any of the physical elements involved


Service Products versus Customer Service and After-Sales Service :Service Products versus Customer Service and After-Sales Service A firm’s market offerings are divided into core product elements and supplementary service elements Is everyone in service? Need to distinguish between: Marketing of services Marketing goods through added-value service 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


Slide 12:Challenges Posed by Services*


Services Pose Distinctive Marketing Challenges :Services Pose Distinctive Marketing Challenges Marketing management tasks in the service sector differ from those in the manufacturing sector The eight common differences are: Most service products cannot be inventoried Intangible elements usually dominate value creation Services are often difficult to visualize and understand Customers may be involved in co-production People may be part of the service experience Operational inputs and outputs tend to vary more widely The time factor often assumes great importance Distribution may take place through nonphysical channels What are marketing implications?


Differences, Implications, and Marketing-Related Tasks (1)* (Table 1.1) :Differences, Implications, and Marketing-Related Tasks (1)* (Table 1.1)


Differences, Implications, and Marketing-Related Tasks (2)* (Table 1.1) :Differences, Implications, and Marketing-Related Tasks (2)* (Table 1.1)


Value Added by Physical, Intangible Elements Helps Distinguish Goods and Services (Fig 1.6) :Value Added by Physical, Intangible Elements Helps Distinguish Goods and Services (Fig 1.6) Physical Elements High Low Intangible Elements High Internet Banking Source; Adapted from Lynn Shostack


Progressive and REI: Two Types of Website Reflecting Core Product (Fig 1.8) :Progressive and REI: Two Types of Website Reflecting Core Product (Fig 1.8) …REI’s camping gear must be delivered through physical channels to customers after they have used the website to make choices, order, and pay Websites can deliver info-based services like Progressive’s car insurance but …


Slide 18:Expanded Marketing Mix for Services*


Services Require An Expanded Marketing Mix :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 The “8Ps” of services marketing are needed to create viable strategies for meeting customer needs profitably in a competitive marketplace


The 8Ps of Services Marketing :The 8Ps of Services Marketing Product Elements (Chapter 3) Place and Time (Chapter 4) Price and Other User Outlays (Chapter 5) Promotion and Education (Chapter 6) Process (Chapter 8)* Physical Environment (Chapter 10)* People (Chapter 11)* Productivity and Quality (Chapter 14)* Fig 1.9 Working in Unison: The 8Ps of Services Marketing


The 8Ps of Services Marketing: (1) Product Elements :The 8Ps of Services Marketing: (1) Product Elements Embrace all aspects of service performance that create value Core product responds to customer’s primary need Array of supplementary service elements Help customer use core product effectively Add value through useful enhancements Planning marketing mix begins with creating a service concept that: Will offer value to target customers Satisfy their needs better than competing alternatives


The 8Ps of Services Marketing: (2) Place and Time :The 8Ps of Services Marketing: (2) Place and Time Delivery decisions: Where, When, How Geographic locations served Service schedules Physical channels Electronic channels Customer control and convenience Channel partners/intermediaries


The 8Ps of Services Marketing: (3) Price and Other User Outlays :The 8Ps of Services Marketing: (3) Price and Other User Outlays Marketers must recognize that customer outlays involve more than price paid to seller Traditional pricing tasks: Selling price, discounts, premiums Margins for intermediaries (if any) Credit terms Identify and minimize other costs incurred by users: Additional monetary costs associated with service usage (e.g., travel to service location, parking, phone, babysitting, etc.) Time expenditures, especially waiting Unwanted mental and physical effort Negative sensory experiences


The 8Ps of Services Marketing: (4) Promotion and Education :The 8Ps of Services Marketing: (4) Promotion and Education Informing, educating, persuading, reminding customers Marketing communication tools Media elements (print, broadcast, outdoor, retail, the Internet, etc.) Personal selling, customer service Sales promotion Publicity/PR Imagery and recognition Branding Corporate design Content Information, advice Persuasive messages Customer education/training


The 8Ps of Services Marketing: (5) Process :The 8Ps of Services Marketing: (5) 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 Process involves choices of method and sequence in service creation and delivery Design of activity flows Number and sequence of actions for customers Nature of customer involvement Role of contact personnel Role of technology, degree of automation Badly designed processes waste time, create poor experiences, and disappoint customers


The 8Ps of Services Marketing: (6) Physical Environment :The 8Ps of Services Marketing: (6) Physical Environment Design servicescape and provide tangible evidence of service performances Create and maintain physical appearances Buildings/landscaping Interior design/furnishings Vehicles/equipment Staff grooming/clothing Sounds and smells Other tangibles Manage physical cues carefully— can have profound impact on customer impressions


The 8Ps of Services Marketing: (7) People :The 8Ps of Services Marketing: (7) People Interactions between customers and contact personnel strongly influence customer perceptions of service quality The right customer-contact employees performing tasks well Job design Recruiting Training Motivation The right customers for firm’s mission Contribute positively to experience of other customers Possess—or can be trained to have— needed skills (co-production) Can shape customer roles and manage customer behavior


The 8Ps of Services Marketing: (8) Productivity and Quality* :The 8Ps of Services Marketing: (8) Productivity and Quality* Productivity and quality must work hand in hand Improving productivity key to reducing costs Improving and maintaining quality essential for building customer satisfaction and loyalty Ideally, strategies should be sought to improve both productivity and quality simultaneously—technology often the key Technology-based innovations have potential to create high payoffs But, must be user friendly and deliver valued customer benefits


Slide 29:Marketing Must Be Integrated withOther Management Functions*


Marketing Must Be Integrated with Other Management Functions (Fig 1.10) :Three management functions play central and interrelated roles in meeting needs of service customers Marketing Must Be Integrated with Other Management Functions (Fig 1.10)


Slide 31:A Framework for Developing Effective Service Marketing Strategies (Fig 1.11)


Chapter 1 Summary: New Perspectives on Marketing in the Service Economy :Chapter 1 Summary: New Perspectives on Marketing in the Service Economy Reasons for studying services: Service sector dominates economy in most nations, many new industries Most new jobs created by services Powerful forces—government policies, social changes, business trends, IT advances, and globalization—are transforming service markets Understanding services offers personal competitive advantage The service concept and its definition: Services create benefits without transfer of ownership Most employ time-based performances to bring about desired results in recipients or in assets for which they have responsibility Customers expect value from access to goods, facilities, labor, professional skills, environments, networks & systems in return for money, time, effort Services present distinctive marketing challenges relative to goods, requiring: Expanded marketing mix comprising 8Ps instead of traditional 4Ps Integration of marketing function with operations and human resources