Essentials of services marketing 2nd

1.2 Powerful Forces Are Transforming Service Markets Forces Transforming the Service Economy 2 Government Policies Business Trends Social Changes ● Growing but aging population © Pe

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Essentials of Services Marketing, 2nd Edition

Chapter One – Introduction

to Services Marketing

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Chapter 1 Outline

1.1 Why study services?

1.2 Powerful forces are transforming service markets

1.3 What are services?

1.4 Four broad categories of services

1.5 Challenges posed by services

1.6 The 7 Ps of services marketing

1.7 Framework for effective services marketing strategies

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1.1

Why study services?

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1.1 Why study services?

• Services dominate most economies and are growing rapidly:

– Services account for more than 60% of GDP worldwide (why?)

– 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 (How?)

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1.1 Why study services?

Contribution of Services Industries to Global GDP

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1.1 Why study services? (Find your home country)

Estimated Size of Service Sector in Selected Countries

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1.2

Powerful Forces Are Transforming Service Markets

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Social Changes

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1.2 Powerful Forces Are Transforming Service Markets Forces Transforming the Service Economy (2)

Government

Policies

Business Trends

Social Changes

● Growing but aging population

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Government

Policies

Business Trends

Social Changes

Advances in

IT

Globalization

● Push to increase shareholder value

● Emphasis on productivity and cost savings

● Manufacturers add value through service and sell services

● More strategic alliances

● Focus on quality and customer satisfaction

● Growth of franchising

● Marketing emphasis by nonprofits

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Government

Policies

Business Trends

Social Changes

● Faster, more powerful software

● Digitization of text, graphics, audio, video

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Government

Policies

Business Trends

Social Changes

● Increased international travel

● International mergers and alliances

● “Offshoring” of customer service

● Foreign competitors invade domestic markets

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1.3

What are services?

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1.3 What are services?

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

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1.4

Four broad categories of services

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1.4 Four broad categories of services – which of these do you use regularly?

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1.5

Challenges posed by services

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1.5 Challenges posed by services

Differences, Implications, and Marketing-Related

 Services are often

difficult to visualize &

 Customers turned away

or capacity not used

 Harder to evaluate service & distinguish from competitors

 Greater risk &

uncertainty perceived

 Interaction between customer & provider;

but poor task execution could affect satisfaction

Marketing-Related Tasks

 Use pricing, promotion, reservations to smooth demand; work with ops to manage capacity

 Emphasize physical clues, employ metaphors and vivid images in advertising

 Educate customers on making good choices; offer guarantees

 Develop user-friendly equipment, facilities &

systems; train customers, provide good support

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Differences, Implications, and Marketing-Related

Tasks (2) (Table 1.2)

Implications

 Behavior of service personnel & customers can affect satisfaction

 Hard to maintain quality, consistency, reliability

 Difficult to shield customers from failures

 Time is money;

customers want service

at convenient times

 Electronic channels or voice telecommunications

Difference

 People may be part of

service experience

 Operational inputs and

outputs tend to vary

 Shape customer behavior

 Redesign for simplicity and failure proofing

 Institute good service recovery procedures

 Find ways to compete on speed of delivery; offer extended hours

 Create user-friendly, secure websites and free access by telephone

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Added by Physical, Intangible Elements Helps

Distinguish Goods (Products) and Services (Fig 1.14)

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1.6

The 7 Ps of services marketing

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1.6 The 7 Ps of services marketing

• Product elements (Chapter 4)

• Place and time (Chapter 5)

• Price and other user outlays (Chapter 6)

• Promotion and education (Chapter 7)

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1.7

Framework for effective services marketing strategies

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1.7 Framework for effective services marketing strategies

Overview

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Chapter Two – Consumer

Behavior in a Services

Context

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2.1

Pre-purchase Stage

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2.1 Pre-purchase Stage Overview

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2.1 Pre-purchase Stage

Need Awareness

• A service purchase is triggered by an underlying need (need arousal)

• Needs may be due to:

– People’s unconscious minds (e.g., aspirations)

– Physical conditions (e.g., chronic back pain)

– External sources (e.g., marketing activities)

• When a need is recognized, people are likely take action to resolve it

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Information Search

• When a need is recognized, people will search for solutions

• Several alternatives may come to mind and these form the evoked set

– Evoked set – set of possible services or brands that a customer may consider in the decision process

– Positioning for these brands may be very particular to the individual

Think about your evoked set for a typical product (fast food, soft

drinks, athletic shoes)

• When there is an evoked set, the different alternatives need to be

evaluated before a final choice is made (not every brand in the evoked set is one we think positively about)

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Evaluation of Alternatives (2)

Service Attributes

• Search attributes help customers evaluate a product before purchase

– Style, color, texture, taste, sound

• Experience attributes cannot be evaluated before purchase—must

“experience” product to know it

– Vacations, sporting events, medical procedures

• Credence attributes are product characteristics that customers find impossible to evaluate confidently even after purchase and

consumption

– Quality of repair and maintenance work

Think about a service you have abandoned for some of these reasons

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Perceived Risks

• Functional ― unsatisfactory performance outcomes

• Financial ― monetary loss, unexpected extra costs

• Temporal ― wasted time, delays leading to problems

• Physical ― personal injury, damage to possessions

• Psychological ― fears and negative emotions

• Social ― how others may think and react

• Sensory ― unwanted impact on any of five senses

Which do you relate to? Some that seem unimportant to you?

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Perceived Risks ― How Do Consumers Handle Them?

• Seeking information from respected personal sources

• Using Internet to compare service offerings and search for independent reviews and ratings

• Relying on a firm that has a good reputation

• Looking for guarantees and warranties

• Visiting service facilities or trying aspects of service before purchasing

• Asking knowledgeable employees about competing services

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Evaluation of Alternatives (5a)

Perceived Risks ― Strategies for Firms to Manage Consumer Perceptions of Risk

•Preview service through brochures, websites, videos

•Encourage visit to service facilities before purchase

•Free trial (for services with high experience attributes)

•Advertise (helps to visualize)

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•Use evidence management (e.g., furnishing, equipment etc.)

•Give customers online access to information about order status

•Offer guarantees

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Evaluation of Alternatives (8a)

Service Expectations ― Components of Custom Expectations

•Desired Service Level:

– Wished-for level of service quality that customer believes can and should be delivered

•Adequate Service Level:

– Minimum acceptable level of service

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Evaluation of Alternatives (8b)

Service Expectations ― Components of Custom Expectations

•Predicted Service Level:

– Service level that customer believes firm will actually deliver

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2.2

Service Encounter Stage

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2.2 Service Encounter Stage

Service Encounters Range from High-contact to contact

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Theater as a Metaphor for Service Delivery

“All the world’s a stage and all the men and women merely players They have their exits and their entrances and each man in his time plays many parts”

William Shakespeare

As You Like It

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Theatrical Metaphor: An Integrative Perspective

• Good metaphor as service delivery is a series of events that customers experience as a performance

• Service facilities

– Stage on which drama unfolds

– This may change from one act to another

• Personnel

– Front stage personnel are like members of a cast

– Backstage personnel are support production team

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Theatrical Metaphor: An Integrative Perspective

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2.3

Post-purchase Stage

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2.3 Post-purchase Stage

Customer Delight: Going Beyond Satisfaction

• Research shows that delight is a function of 3 components

– Unexpectedly high levels of performance

– Arousal (e.g., surprise, excitement)

– Positive affect (e.g., pleasure, joy, or happiness)

• Once customers are delighted, their

expectations are raised

• If service levels return to previous

levels, this may lead to

dissatisfaction and it will be more

difficult to “delight” customers in

future

Have you experienced customer delight?

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Summary of Chapter 2:

Customer Behavior in a Services Context (3)

• Post-purchase stage

– In evaluating service performance, customers can have

expectations positively disconfirmed, confirmed, or negatively disconfirmed

– Unexpectedly high levels of performance, arousal and positive affect are likely to lead to delight

Now let’s watch some videos from all sizes of businesses and

various countries displaying Customer Delight and see what you think:

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Positioning Services in

Competitive Markets

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Chapter 3 Outline

3.1 Customer-Driven Services Marketing Strategy

3.2 Segmenting Service Markets

3.3 Targeting Service Markets

3.4 Positioning Services

3.5 Using Positioning Maps to Analyze Competitive Strategy

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3.1

Customer-Driven Services Marketing Strategy

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3.1 Customer-Driven Services Marketing Strategy

Customer, Competitor and Company Analysis (3Cs)

• Customer analysis

– Overall examination of market characteristics

– Customer needs and related characteristics and behaviors

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3.1 Customer-Driven Services Marketing Strategy Segmentation, Targeting and Positioning

• Segmentation

– Dividing population of possible customers into groups with

common service-related characteristics

– Similar needs within same segment, different needs between segments

• Targeting

– Choose one/more segments to focus on

• Positioning

– Unique place in the minds of customers

– Differentiation forms first step to creating unique positioning

Describe the positioning of various fast food chains

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3.2

Segmenting Service Markets

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