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Introduction to Services Marketing

• Instructor: Dr. Jeynakshi Ladsawut

• Department of Tourism and Leisure Studies

• Reference: Lovelock & Wirtz, Prentice Hall

Learning Outcomes

• Understanding key concepts related to services marketing.

  • Defining services.

  • Identifying forces transforming service markets.

  • Exploring the extended marketing mix.

  • Analyzing service processing.

What are Services?

• Definition: Economic activities performed by one party for another, time-based, resulting in desired outcomes for consumers.

• Exchange: Involves money, time, and effort; customers expect value without owning physical elements.

Service-Dominant Logic (S-D Logic)

• All products provide valued services during consumption, not just the goods themselves.

• Example: Lufthansa Technik emphasizes maintenance services, demonstrating S-D Logic.

Nature of the Service Act

• Types of Service Acts:

  • Tangible Actions: Physical interactions.

  • Intangible Actions: Services that influence thoughts and feelings.

• Categories:

  • People Processing: Services targeting individuals (e.g., hairstylist, healthcare).

  • Possession Processing: Focus on physical possessions (e.g., laundry, transportation).

  • Mental Stimulus Processing: Targeting mental states (e.g., education, therapy).

  • Information Processing: Focused on intangible assets (e.g., banking, legal services).

Implications of People Processing Services

• Production and consumption occur simultaneously.

• Requires active customer cooperation.

• Important factors: Service location, process design, customer perspective in service delivery.

Possession Processing

• Services can occur independently of the customer's presence.

• Example: Elevator repair is a possession-processing service.

Mental Processing

• Services targeting mental states can be consumed later and may provide repeat usage benefits.

• Example: Orchestral concerts provide mental stimulation.

Information Processing

• Most intangible service outputs can be converted to tangible forms (e.g., documents, reports).

Nature of Services

• Key Features:

  1. Inseparability of Production and Consumption: Services are produced and consumed together.

  2. Benefits Without Ownership: Rental of skills, goods, and facilities.

     • Examples: Car repair, medical check-ups.

  3. Defined Space and Facility Rentals: Shared access (e.g., office suites, storage containers).

  4. Access to Shared Facilities: Rights to use facilities (e.g., theme parks, toll roads).

  5. Use of Networks and Systems: Rights to participate in network services (e.g., telecommunications).

Characteristics of Services (IHIP)

• Intangibility: Unable to touch or own the service.

• Heterogeneity: Variability in service quality.

• Inseparability: Production and consumption occur together.

• Perishability: Services cannot be stored or inventoried.

Differences between Services and Goods

• Inventory Challenges: Services cannot be inventoried and are perishable.

• Intangibility: Difficult for customers to assess and differentiate services.

• Visualization: Services are harder to visualize and require customer involvement.

• People as Part of Experience: Personnel can significantly impact customer satisfaction.

• Time Sensitivity: Time spent directly affects customer satisfaction.

• Distribution: Canal delivery can vary across platforms.

Changes in Economic Structure

• Service Sector Growth: Services dominate the global economy, comprising over 50% of GDP.

• Job Creation: Majority of new jobs are in services, particularly in knowledge-based industries.

Forces Transforming Service Markets

• Influences include government policies, social changes, business trends, and technological advances.

Specific Changes Affecting Services

• Government Policies: New regulations, privatization, trade agreements.

• Social Changes: Rising consumer expectations, affluent societies, tech ownership.

• Business Trends: Focus on productivity, shareholder value, and strategic alliances.

• Technological Advances: Internet, AI, robotics, big data impacting service delivery.

Outsourcing and Offshoring

• Outsourcing: Contracting external providers for services.

• Offshoring: Services conducted in one country for consumption in another.

Understanding the Extended Marketing Mix (7 P's)

• The 4 P's:

  • Product

  • Price

  • Place

  • Promotion

• Extended:

  • Process

  • People

  • Physical Environment

Product

• Core service products and supplementary service elements that enhance customer experiences.

Place and Time

• Distribution management, with a focus on timing and efficiency to meet customer needs.

Price and User Outlays

• Dynamic pricing strategies based on demand, service quality, and customer segments.

Promotion and Education

• Importance of educating customers about service benefits and usage.

Process

• Effective process design and management are crucial for service delivery.

  • Challenges: Variability of inputs/outputs, need for customer co-production, balancing demand and capacity.

Physical Environment

• Service quality perceived through physical cues (service scape).

People

• Proper training and management of service personnel impact customer satisfaction.

Conclusion

• All concepts point towards a comprehensive understanding of services marketing, emphasizing the blend of customer interaction, quality, and efficient service delivery for success.

• Thank You! Next week session focus.

Introduction to Services Marketing

Instructor: Dr. Jeynakshi LadsawutDepartment: Tourism and Leisure StudiesReference: Lovelock & Wirtz, Prentice Hall

Learning Outcomes

• Understanding key concepts related to services marketing, including the unique characteristics and challenges associated with services compared to goods.

• Defining services within the context of economic activities, highlighting how services create value for customers.

• Identifying forces transforming service markets, including technology, globalization, and changes in consumer behavior.

• Exploring the extended marketing mix, which expands on the traditional 4 P’s to include process, people, and physical environment.

• Analyzing various service processing methods and their implications for service delivery and customer satisfaction.

What are Services?

Definition: Services are economic activities performed by one party for another, which are time-based and result in desired outcomes for consumers. Unlike goods, services are intangible and cannot be stored. They involve the exchange of money, time, and effort, with consumers expecting value without actual ownership of physical elements.

Service-Dominant Logic (S-D Logic)

The concept of Service-Dominant Logic posits that all products provide valuable services during consumption, suggesting that value is derived from the service provided rather than the product itself.Example: Lufthansa Technik emphasizes maintenance services, showing how S-D Logic views service as integral to the perceived value of a product.

Nature of the Service Act

Types of Service Acts:

• Tangible Actions: Physical interactions that facilitate the service delivery process.

• Intangible Actions: Actions that primarily influence thoughts and feelings, demonstrating the emotional or psychological impact of services.

Categories of Services:

1. People Processing: Services targeting individuals directly, such as hairstyling or healthcare.

2. Possession Processing: Focuses on the physical possessions of customers, like laundry services or vehicle transportation.

3. Mental Stimulus Processing: Services aimed at affecting mental states, such as education or therapeutic services.

4. Information Processing: Concentrated on intangible assets, including banking or legal consultancy.

Implications of People Processing Services

In the context of people processing, production and consumption occur simultaneously, making customer involvement crucial. The effectiveness of service delivery can be influenced by various factors:

• Service Location: The physical setting in which services are delivered affects customer experience.

• Process Design: Careful structuring of service delivery processes can enhance efficiency and satisfaction.

• Customer Perspective: Understanding the customer’s viewpoint is vital for improving service quality and perceived value.

Possession Processing

Unlike people processing, possession processing can occur independently of the customer's presence. Example: Elevator repair services illustrate possession processing, as the customer does not have to be present during the service delivery.

Mental Processing

Services targeted towards mental stimulation, like concerts or educational seminars, may offer benefits that can be experienced at a later time, leading to repeat engagement. Example: Orchestral concerts provide intellectual stimulation and emotional enrichment, offering audiences lasting value beyond the immediate experience.

Information Processing

Intangible outputs from services can often be converted into tangible forms, such as reports and documentation, which provide measurable outputs for clients, enhancing their perception of value.

Nature of Services

Key Features:

• Inseparability of Production and Consumption: Services are produced and consumed simultaneously, meaning the customer often plays a critical role in the creation of their own experience.

• Benefits Without Ownership: Services allow consumers to gain access to skills, goods, and facilities without needing to own them, as seen in rental services. Examples: Car repairs or health check-ups exemplify this characteristic.

• Defined Space and Facility Rentals: Services can involve the rental of facilities such as office suites or event spaces where shared access is key.

• Access to Shared Facilities: Using facilities such as toll roads or amusement parks illustrates the rights to use without ownership.

• Use of Networks and Systems: Engagement in network services, like telecommunications, requires rights to participate rather than ownership of physical infrastructure.

Characteristics of Services (IHIP)

• Intangibility: Services cannot be physically touched or owned, making them harder for consumers to evaluate before purchase.

• Heterogeneity: There is a significant variability in service quality and performance, often depending on who provides the service and when.

• Inseparability: Services are produced and consumed simultaneously, which complicates the service delivery process and customer experience.

• Perishability: Services cannot be stored for future use; this perishability necessitates effective demand management.

Differences between Services and Goods

• Inventory Challenges: Unlike goods, services cannot be inventoried and are subject to perishability.

• Intangibility: This characteristic makes it more difficult for customers to assess and differentiate between service options.

• Visualization Needs: Services require customer involvement in visualization, often leading to a greater emphasis on communication and customer education.

• People as Part of Experience: The personnel delivering the service have a profound impact on customer satisfaction and experience.

• Time Sensitivity: The duration of service delivery can affect customer satisfaction, meaning timely service is crucial.

• Distribution Variability: Different channels may deliver services, each with its own set of challenges and customer expectations.
  
  ## Differences between Services and Goods ### Inventory Challenges - Unlike tangible goods, services cannot be stored or inventoried for future sale or consumption, making them inherently perishable. This characteristic leads to unique challenges in managing supply and demand; unsold services can't be reclaimed or held over, resulting in lost revenue opportunities for service providers. ### Intangibility - Services lack a physical form, which leads to significant challenges in evaluation by consumers. For example, customers cannot physically inspect or test services before purchase, making it difficult to assess their quality or value. This intangibility often necessitates strong branding, reviews, and guarantees to reassure customers. ### Visualization Needs - Since services are abstract and cannot be seen or touched, customers often require assistance in visualizing the outcomes and benefits before committing. This can involve persuasive marketing strategies, customer testimonials, or demonstrations that highlight service quality and efficacy. As a result, effective communication and detailed customer education become critical components of service marketing. ### People as Part of Experience - The personnel involved in delivering a service are crucial to customer satisfaction. Their interactions can significantly influence the overall customer experience, shaping perceptions of quality and value. Training, empowerment, and ongoing development of service staff are vital to maintaining high standards and responsiveness to customer needs, directly impacting repeat business and loyalty. ### Time Sensitivity - The length of time taken to deliver a service often carries a direct correlation with customer satisfaction. Timeliness is crucial; delays can lead to frustration and negative perceptions, whereas prompt service can enhance the overall experience. Businesses must effectively manage their operations to ensure services meet or exceed customer expectations for delivery time. ### Distribution Variability - The delivery of services can occur through various channels, such as in-person, online, or through mobile platforms. Each channel presents its own set of challenges, including varying levels of customer interaction and expectations. For instance, in-person services may allow for immediate feedback, while online services might require efficient systems for customer support and issue resolution. Understanding the nuances of each channel is essential for optimizing the customer experience across all touchpoints.

  
  
  
  ### Inventory Challenges **Definition:** Services cannot be stored or inventoried for future sale or consumption, making them inherently perishable and leading to unique supply and demand management challenges. **Examples:** - Unsold services cannot be reclaimed or held over, resulting in lost revenue opportunities for service providers. - **Perishability:** Unlike tangible goods, services cannot be preserved for later use. - **Supply and Demand Management:** This characteristic complicates the ability to balance service availability with customer demand. ### Intangibility **Definition:** Services lack a physical form, leading to significant challenges in evaluation by consumers. **Examples:** - Customers cannot physically inspect or test services before purchase, making it difficult to assess their quality or value. - **Dependency on Branding:** This often necessitates strong branding, reviews, and guarantees to reassure customers on their choices. ### Visualization Needs **Definition:** Customers require assistance in visualizing the outcomes and benefits of services before committing. **Examples:** - Effective use of persuasive marketing strategies, customer testimonials, or demonstrations is essential in showcasing service quality and efficacy. - **Abstraction of Services:** Services cannot be seen or touched, increasing the need for effective communication. - **Customer Education:** Detailed customer education becomes critical to marketing success. ### People as Part of Experience **Definition:** The personnel involved in delivering a service significantly influences customer satisfaction and perceptions of quality. **Examples:** - Interactions with service staff shape overall customer experiences, impacting loyalty and repeat business. - **Staff Training:** Ongoing development of service staff is vital for maintaining high service standards and responsiveness to customer needs. ### Time Sensitivity **Definition:** The duration taken to deliver a service directly correlates with customer satisfaction. **Examples:** - Delays in service delivery can lead to customer frustration and negative perceptions. - **Importance of Timeliness:** Prompt services can enhance overall customer experiences, leading to positive reviews and repeat business. ### Distribution Variability **Definition:** Services are delivered through various channels, each presenting unique challenges in customer interaction and expectations. **Examples:** - In-person services may allow for immediate feedback, while online services require efficient support systems. - **Channel Management:** Understanding the nuances of each channel is essential for optimizing the customer experience across all touchpoints.

Changes in Economic Structure

• Service Sector Growth: Services continue to dominate the global economy, now comprising over 50% of GDP across various nations, highlighting a shift towards the service economy.

• Job Creation: The service sector is the primary source of new job opportunities, particularly in industries that require knowledge-based skills.

Forces Transforming Service Markets

Several dynamic forces influence service markets:

• Government Policies: Changes in regulations, privatization initiatives, and new trade agreements that impact service delivery frameworks.

• Social Changes: Elevated consumer expectations, the emergence of affluent societies, and increased technology ownership influence service demand.

• Business Trends: A notable shift towards enhancing productivity, focusing on shareholder value, and forming strategic alliances in service provision.

• Technological Advances: Innovations such as the Internet, AI, robotics, and big data analytics are reshaping service delivery and expanding service capabilities.

Outsourcing and Offshoring

• Outsourcing: The practice of contracting external providers to handle specific services, often to improve efficiency or reduce costs.

• Offshoring: Involves conducting service activities in one country for consumption in another, enabling access to global labour markets.

Understanding the Extended Marketing Mix (7 P's)

The Traditional 4 P’s:

1. Product: The core service product and supplementary elements enhance the customer experience.

2. Price: Dynamic pricing strategies are informed by demand, service quality, and customer demographics.

3. Place: Effective distribution management to optimize timing and efficiency in service delivery.

4. Promotion: Strategies focused on educating consumers regarding the benefits and appropriate usage of services.

The Extended 3 P’s:5. Process: The management and design of service delivery processes are critical for ensuring customer satisfaction and meeting demand.

• Challenges: Inherent variability in inputs and outputs, the role of customer co-production, and the equilibrium of demand and capacity.

6. Physical Environment: The service quality is often perceived through physical cues known as the service scape, influencing customer perceptions.

7. People: The training and management of service personnel are essential in delivering high-quality service and maximizing customer satisfaction.

Conclusion

All concepts outlined emphasize a comprehensive understanding of services marketing, where the blend of customer interactions, quality assurance, and efficient service delivery plays a pivotal role in achieving success in competitive markets.

Understanding services marketing involves customer interactions, quality assurance, and efficient service delivery, which are vital for success in competitive markets.

Thank You! Next week’s session will focus on advanced topics in services marketing and customer engagement strategies.