Learning Outcomes

• Definition of Services

  • Understanding the transforming forces in service markets

  • Extended Marketing Mix in service contexts

  • Processing of Services

What are Services?

Definition

• Services are economic activities conducted by one party for another.

• Typically time-based, resulting in desired outcomes for recipients, objects, or assets.

• Customers expect value in return for money, time, and effort without gaining ownership of physical elements.

Service-Dominant Logic (S-D Logic)

• Emphasizes the idea that all products are valued for the services they provide.

• The value of physical products arises from the service they deliver during consumption.

• Example: Lufthansa Technik promotes its maintenance services as a service-oriented offering rather than merely a product.

Types of Services

Nature of the Service Act

• People Processing Services: Services directed at people’s bodies.

  • Examples: Hairstyling, Health Care, Passenger Transportation.

• Possession Processing Services: Services directed at physical possessions.

  • Examples: Freight Transportation, Laundry, Repair and Maintenance.

• Mental Stimulus Processing: Services affecting people’s minds.

  • Examples: Education, Psychotherapy, Legal Services.

• Information Processing: Services related to intangible assets.

  • Examples: Accounting, Advertising, Banking.

Implications of People Processing Services

• Production and consumption occur simultaneously.

• Active customer cooperation is vital during service delivery.

• Important considerations include:

  • Service location

  • Service process design

  • Demand and capacity management

  • Customer-perceived output

Intangible Services and Mental Stimulation

• Services can be consumed at later times without physical presence.

• Information represents highly intangible service output transformable into tangible forms.

  • Example: Financial advice transforming into reports and documents.

Characteristics of Services (IHIP)

1. Intangibility: Services cannot be physically touched, raising challenges in evaluation.

2. Heterogeneity: Variability of service quality.

3. Inseparability: Production and consumption often occur together.

4. Perishability: Services cannot be stored; they are time-sensitive.

Differences Between Services and Goods

1. Inventory: Service products are perishable and cannot be stored.

2. Intangibility: Customers cannot physically experience most services pre-purchase.

3. Visualization: Services are difficult to understand and visualize, raising consumer risk.

4. Co-production Involvement: Customers may impact production and service delivery experience.

5. Personnel Interaction: The appearance and behavior of employees and customers can alter service experience.

6. Operational Variability: Higher variability in input and output for services.

7. Time Scarcity: Consumers perceive time as a valuable resource, influencing service demand.

8. Distribution Challenges: Service delivery often occurs through non-physical channels; integration is crucial.

Growth of the Service Sector

• The service industry increasingly dominates global economies, contributing over 50% of GDP.

• Job creation in services, particularly in knowledge-based industries, is substantial.

Transformation Forces in Services Market

Key Drivers

• Regulatory changes: New consumer protection laws.

• Rising expectations: Increased consumer access to technology.

• Organizational focus: More emphasis on quality, customer satisfaction, and service differentiators.

• Technological Advances: Automation, AI, and the Internet driving service delivery evolution.

• Globalization: International service collaborations and competition.

Outsourcing and Offshoring

• Outsourcing: Contracting services previously done in-house to external providers.

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

  • Growth of remote service jobs estimated at 11% globally.

Extended Marketing Mix for Services

The 3 'P's

• Process, Physical Environment, People

Role of Supplementary Services

• Supplementary elements enhance core services and customer experiences.

Importance of Process Design

• Successful service delivery relies on effective operational process designs.

  • Key challenges: Balancing demand and capacity, and managing service quality.

Conclusion

• Services represent a significant and growing aspect of the global economy, necessitating specialized marketing strategies focused on intangibility, process, and consumer interaction.