Learning Outcomes

• Defining Services

  • Understanding the foundational concepts of services.

• Forces Transforming Service Markets

  • Identifying market trends and global changes.

• Extended Marketing Mix

  • Exploring the additional elements of the marketing mix pertinent to services.

• Service Processing

  • Analyzing how services are produced and delivered.

What are Services?

• Definition: Economic activities performed by one party for another.

  • Often time-based, services yield desired results for recipients.

  • Customers trade money, time, and effort for access to labor, skills, expertise, and systems.

  • Services do not typically result in ownership of physical elements involved.

Service-Dominant (S-D) Logic

• Concept: The value of a product stems from the services it provides during consumption rather than the product itself.

  • Example: Lufthansa Technik focuses on the value of maintenance services over the tangible components.

Object of the Service Act

• Categories of Services:

  • People Processing: Services directed at people's bodies (e.g., hairstylist, healthcare).

  • Possession Processing: Services directed at physical possessions (e.g., laundry, repair).

  • Mental Stimulus Processing: Services directed at people's minds (e.g., education, psychotherapy).

  • Information Processing: Services directed at intangible assets (e.g., accounting, legal services).

Implications of People Processing Services

• Simultaneity: Service production and consumption occur at the same time.

• Customer Involvement: Active participation of customers is crucial.

• Design Considerations: Importance of location, service process design, managing demand and capacity from the customer perspective.

  • Example: Luxurious manicure service involves attentive customer care.

Mental Stimulus Processing

• Characteristics: These services influence customers' attitudes and behaviors.

• Non-physical Presence: Customers do not need to be physically present during service delivery.

• Inventoried Services: Services can be scheduled for future use.

  • Example: Orchestral concerts provide mental stimulation.

Information as Intangible Service Output

• Outcome: Services deliver information that can be transformed into tangible forms (letters, reports).

  • Example: Financial advising for home purchasing.

Benefits Without Ownership

• Types of Services:

  1. Labor, Skills, and Expertise Rentals: Services performed by hired professionals (e.g., car repair, medical check-ups).

  2. Rented Goods Services: Temporary right to use physical objects (e.g., boats, costumes).

  3. Defined Space and Facility Rentals: Use of specific areas (e.g., airplane seats, office suites).

  4. Access to Shared Facilities: Right to share facilities (e.g., theme parks, golf clubs).

  5. Access and Use of Networks: Participation in designated networks (e.g., telecommunications, online platforms).

Four Characteristics of Services

• Intangibility: Services cannot be touched or owned.

• Heterogeneity: Variability in service quality.

• Inseparability: Production and consumption of services occur simultaneously.

• Perishability: Services cannot be stored.

Services vs. Goods**

• Inventory Differences: Services cannot be stocked; require dynamic strategies to align demand and capacity.

• Intangible Elements: Services are difficult to evaluate and compare.

• Risks and Uncertainty: Customers perceive higher risks in service quality than with goods.

• Consumer Interaction: Involvement with service providers affects satisfaction.

Key Forces Transforming Service Markets**

• Government Policies: Regulations and trade agreements are reshaping market dynamics.

• Consumer Expectations: Rising affluence and access to technology influence service delivery.

• Globalization: International competition is increasing service market complexity.

Outsourcing and Offshoring**

• Outsourcing: Contracting services previously done internally.

• Offshoring: Conducting services in one country for consumption in another.

  • Up to 11% of service jobs can be remote.

The Extended Marketing Mix for Services**

• 4 'P's: Product, Price, Place, Promotion.

• 3 Additional 'P's: Process, Physical Environment, People.

Service Process Considerations**

• Operational Variation: Inputs and outputs may fluctuate widely.

• Co-production: Customers often participate in service production.

• Balancing Demand and Capacity: Essential for maintaining service quality and customer satisfaction.

Role of Physical Environment and People**

• Physical Cues: Enhance service quality perception through buildings, signs, and staff appearance.

• Human Resources: Proper training and recruitment of service employees are crucial for customer experience.