Service Marketing - Lecture 2 - Creating Value in The Service Economy

Learning Outcomes

  • Importance of services in modern economies.

  • Main industries and growth drivers in the service sector.

  • Define services with a non-ownership framework.

  • Four categories of services.

  • Distinctive marketing challenges posed by services.

Service Economy Overview

  • A service economy focuses on services for output and jobs, not physical goods.

  • Services deliver value through knowledge and customer experience.

  • Services are intangible and often consumed simultaneously with their production.

UK Service Economy

  • Services account for 80-82% of UK economic output and employment.

  • Key industries: business services, finance, health, education, retail, transport, hospitality.

  • UK has strong service export orientation.

Service Consumer Behavior

  • Daily consumption of multiple services, often unnoticed.

  • Service failures significantly impact customer satisfaction.

  • Past service experiences shape future expectations.

Universities as Service Organizations

  • Education as a major service investment.

  • Service quality directly affects learning outcomes.

  • Student engagement and effort enhance educational value.

B2C vs. B2B Services

  • B2C: Focus on individual experiences and needs.

  • B2B: Supports organizational operations, often complex and contract-based.

  • Reliability crucial for B2B service performance.

Service Dissatisfaction

  • Common frustrations: broken promises, inconsistency, technology failures.

  • Growing customer expectations demand improvements in service delivery.

Mapping Personal Service Economy

  • Identify services used, categorize as B2C or B2B.

  • Evaluate satisfaction and suggest improvements.

Historical Economic Comparison

  • Two nations diverged in economic outcomes due to service industry development.

  • Economic growth varied based on institutional and cultural factors.

Jobs and Value Creation

  • New jobs primarily in service sectors, spanning various skill levels.

  • Services often provide more revenue than product sales.

Drivers of Service Market Transformation

  • Influences: government policies, social changes, globalization, technology.

  • Emergence of new business models: P2P services, platforms.

Non-Ownership Framework in Services

  • Services are rented, not owned; creates lasting value.

  • Five types of rental services include labor, rented goods, facilities, shared access, and networks.

Categories of Services

  1. People Processing: Services directed at physical well-being, requiring customer presence.

  2. Possession Processing: Services for physical possessions without customer presence.

  3. Mental Stimulus Processing: Services aimed at customers' minds, can be consumed later.

  4. Information Processing: Collective services focused on information and analysis.

Unique Marketing Characteristics of Services (IHIP)

  1. Intangibility: Challenges in evaluating quality before purchase.

  2. Heterogeneity: Service experiences vary by time, place, and provider.

  3. Inseparability: Production and consumption occur simultaneously.

  4. Perishability: Services can't be stored; demand needs to be managed actively.

The 7 Ps of Services Marketing

  • Expanded marketing mix includes: Process, Physical Environment, and People.

  • Key for ensuring a competitive service delivery experience.

Managing Customer Interface - The 3 Additional Ps

  1. Process: Critical for delivery design, affects customer experience.

  2. Physical Environment: Influences customer perceptions and satisfaction.

  3. People: Employee interaction is key for service quality; HR management is essential.

Group Exercise

  • Analyze a university service, identify core and complementary services.

  • Assess IHIP characteristics and suggest improvements based on the 7Ps.