Download Marketing343

Marketing in the
“New” Economy
CRM
CRM
Service
Marketing
Internet
Marketing
Int’l
Marketing
SERVICES
Service Perspectives:
Not a “Product”
No Difference-
Intangible human
act- that is
produced at the
time of
consumption &
can’t be
standardized or
inventoried…
Products are just
appliances that
provide servicesShift perspective
from Mfgr to
consumer… and
focus on benefits
No OneAutomation,
Virtualization
&
Outsourcing
Defining -a Service
• An act or performance offered by one
party for another
• An economic activity that does not
result in ownership
• A process that creates benefits by
facilitating a desired change in:
– customers themselves –get a haircut
– physical possessions- get a wig
– intangible assets- get therapy
Service as process….
Who / What is Direct Recipient of the Service?
What is the
Nature of the
Service Act?
DIRECTED AT
PEOPLE
People Processing
DIRECTED AT
POSSESSIONS
Possession
Processing
TANGIBLE
ACTS
e.g., airlines, hospitals,
haircutting, restaurants
hotels, fitness centers
INTANGIBLE
ACTS
Mental Stimulus
Processing
(directed at intangible assets)
e.g. media, consulting,
education, psychotherapy
e.g., accounting, banking,
insurance, legal, research
e.g., transport, repair,
cleaning, landscaping,
retailing, recycling
Information
Processing
Importance of Service Sector

In most countries,
services add more
economic value than
agriculture, raw materials
and manufacturing
combined

In developed economies,
employment is
dominated by service
jobs and most new job
growth comes from http://earthtrends.wri.org/searchable_db/index.php?action=se
lect_countries&theme=5&variable_ID=216
services
Changing Structure of Employment
as Economic Development Evolves
Agriculture
Services
Industry
Time, per Capita Income
Source: IMF, 1997
Waves of Change..
80
% US WORK-FORCE
70
Percent
60
50
Services
40
Industry
Agriculture
30
20
10
0
1820
1840
1860
1880
1900
1920
Year
1940
1960
1980
The Economist, 1996
2000
http://seekingalpha.com/article/27883-gdp-by-category-services-spending-and-foreign-investments-in-u-s
At present …in U.S.
• ~80% workers are in
90
service sector
• Services account for ~80%
of U.S. GDP
• Service occupations is
responsible for ~90% job
growth
80
70
60
50
40
workers
GDP
Growth
30
20
10
0
Composition of US GDP
In 2007, 1.2 percent of total US GDP was contributed by agricultural sector.
Industrial sector made up 19.8 percent of US GDP in 2007. Services sector
made up 79 percent of US GDP in that same period
http://www.economywatch.com/gdp/world-gdp/usa.html
Fast growing services -next decade-
predicted by macro-environmental trends..
More People: working more,
living longer, living alone:
•Social services
•Health services
•Residential care
•Child day-care
•Finance, Insurance, Real estate
Changes in workplaceautomation, globalization:
•Computer & data processing
•Business services
•Transportation
Increased need/desire to
recreate & communicate:
•Hospitality & Travel
•Interactive Entertainment
•Mobile Communication
Services dominate the United States Economy:
GDP by Industry, 2001
Agriculture, Forestry,
Mining, Construction 8%
Finance, Insurance,
Real Estate
20%
Manufacturing 14%
Government
(mostly services)
13%
Wholesale and
Retail Trade
16%
Other Services 11%
SERVICES
Business Health
Services
6%
5%
Transport, Utilities,
Communications
8%
Source: Bureau of Economic Analysis, November 2002
US likely to devote "30 %+
GDP on health by mid century."
http://seekingalpha.com/article/27883-gdp-by-category-services-spending-and-foreign-investments-in-u-s
Critical Questions
1. What is the “debate” all about
regarding how services should be
defined / envisioned?
o How does the definition of a service affect your
marketing strategy?
2. What are the key P’s to meeting
service management challenges?
3. What are some of the factors &
considerations affecting the near
future of “services” marketing?
In the olden days- (a few years ago)…
A Service was defined
“categorically” according to its
“tangibility”…..
Pure
tangible
good; no
service
Milk
Hybrid:
Tangible equal part
goods with goods and
service
some
services
Computer
Meal at
& Warranty Restaurant
Major
service
with
minor
good
Hair
Styling
Pure
service;
no tangible
good
Legal
Advice
Product - Service Spectrum
Salt
 Soft Drinks
 Detergents
 Automobiles
 Cosmetics Fast-food
Outlets

Tangible
Pure
Good

Tangible
Hybrid
Good
Tangible
Dominant
w/
Services

Fast-food
Outlets

Major
Intangible
Pure
Service
Dominant
w/ Goods Service

Advertising
Agencies
Airlines
Investment
Management
Consulting



Teaching
Customer Evaluation as a Function of Tangibility
Intangibility
Services cannot
be experienced
before
purchase
Variability
Quality of
services depends
on who provides
them & when,
where, & how
Inseparability
Services cannot
be separated
from their
providers
Perish-ability
Services cannot
be stored for
later sale or use
Intangibility
Services mrktg:
•Describe the
invisible
•Articulate the
imaginary
•& Define the
indistinct
Inseparability
• Performance &
consumption of
service - happens at
same time (eating @
•
•
restaurant, staying @ hotel;
getting haircut, etc)
Customers participate
in & affect the
transaction
Customers affect each
other
Variability-Heterogeneity

•
Difficult to standardize
Delivery, Quality &
Customer Satisfaction
depend on employee
actions
• Employees vary -attitudes,
skills, mood, etc.
• No assurance
service delivered
matches what was
planned/ promoted
Perishability
 Can not
•
•
be
inventoried
Difficult to
synchronize
supply & demand
with services
Services cannot
be returned or
resold
Inseparability
Intangibility
use tangibles to create/convey
identity -signs, uniforms, imagery
Good hands of Allstate/ Traveler’s
Intangibility
Umbrella/ Prudential Rock
“Tangibilize”
the intangible
Variability
simultaneous production
& consumption
 importance of service
Inseparability
provider
 selection,
training and
Increase
rewarding
of staff
professionalism
 avoid customer conflict
of
employees
Marketing
Strategies
that address
Perish-ability
“shortcoming”
standardization difficult
Variability
 Constantly monitorSystematize
regularly evaluate staff
service
 Systemize/franchise
production
production & marketing
& delivery
consumption cannot be stored
match supply and demand
Perish-ability
 use of part-time staff
 differential pricing
Match supply
 stimulation of off-peak
& demand
demand
 comfortable waiting area
 reservation system
Re: service marketing –
for decades this has been the thinking-
But is it
the
The Four Service Marketing Myths:
Remnants of a Goods-Based,
Manufacturing Model
The 4 characteristics:
1.
2.
Do not distinguish services from goods
Only have meaning from a
manufacturing perspective, and
3. Suggest inappropriate marketing
strategies
Key Point- Product-service differentiation
is result of industrial age-2nd wave
thinking




Re- Variabilty:
Customizaton not standardization is the goal
Re-Inseparability:
“Customer-ization” not isolation = goal
Re-Perishability:
Services can be/are inventoried (ie-knowledge in databases &
experts head) AND Inventory management not maximization is
the objective; Everything is perishable—if not in substance
certainly in style…
Re: Intangibility:
its not the product that people are buying. It’s the
functions served & benefits rendered- as it is w/ services
A shift in perspective
Instead of focusing on
product – service
differences
…Focus on consumer
commonalities
…in “consuming &
evaluating” that which
is purchased
Critical Questions
What is the “debate” all about
regarding how services should be
defined / envisioned?
1.
o
How does the definition of a service affect your
marketing strategy?
2. What are the key P’s to meeting
service management challenges?
3. What are some of the factors &
considerations affecting the near
future of “services” marketing?
Challenges for Service Mgt
Same as Product Mgt
1. Creating & offering the consumer value
2. Communicating a desired & distinct image
3. Create, sustain & enhance customer
relationships
4. Defining- maintaining- improving quality
 Mind the gaps….
Service Quality Gaps
Word of Mouth
Communications
Personal Needs
Past Experience
Expected Service
Expectations
Consumer
Marketer
Perceived Service
Overpromising
Service Delivery
Performance
Misunderstanding
External
Communications
to Consumers
Service Quality Specs
Communication
Mgmt. Perceptions of Consumer Expectations
Closing the gaps by fine tuning
4 Service P’s
~People
Product Place
Target
Market
Price Promotion
~Process
~Physical
Evidence
~Protocol
People are your Product
 In
many instancespeople performing the
service are the product
 They are the service
and/or organization in
customer’s eyes.
 They are the brand.
Recruit, Hire, Train,
Monitor, Motivate, Reward
 Why
customer
satisfaction starts
with HR
 Delivering excellent
service: Lessons
from the best firms
Marketing-to personnel is as important as to consumers
External
Marketing
Internal
Marketing
Employees
“enabling the
promise”
Customers
Services
Mgt
Triangle
Performance/ Experience
Management
“delivering promises”
“setting
promises”
Process
Trade-off between
Standardization & Personalization
Same as w/ Products
Limiting the variability in your
service by standardizing the process
of delivery & level of consumer
involvement will lower expenses but
comes w/ a cost:
“Although standardization may
provide for manufacturing
efficiency, this efficiency
comes at expense of marketing
effectiveness. ..
the consumer orientation
screams heterogeneity”
Vargo & Lusch: The Four Service Marketing Myths
The importance of Physical
Evidence in the “Service Encounter”

At Moment of Truth when service delivered &
evaluated by consumer– everything in evidence
contributes to the consumer's evaluation of the
service…

Be it a website, restaurant, office, hotel room or theme
park…it needs to be designed & packaged as well as any
product

What the customer sees -- hears, smells,
feels-is what s/he’ll believes they will get…

Colors, textures, sounds, smells, décor, dress,
demeanor…everything in evidence needs attention and
management…
It’s the little things that count
How you design your service encounter is
critical in a highly competitive market
where consumers hard pressed to discern
a significant difference in service
performance …
Herein the design of your service
encounter will prove the most critical
variable in your marketing mix
Again – a lesson proven equally valid for
products---
Identifiable apparel:
An image-making marketing tool
By ~ 8-to-1
ratio, US
consumers
prefer
employees
wear
identifiable
apparel
A good uniform
makes all the
difference
Identifiable apparel:
An image-making marketing tool
1. Improves your image: Customers
equate a professional-looking
worker w/ a well-run company
2. Increases employee
commitment: Adding employee's
name can boost morale & loyalty
3. Provides a popular employment
"perk":.
4. Shows off your firm's
experience and expertise:
"certification" -job titles, slogans &
performance emblems on shirts/
sleeves…
Instill Proper Protocol so as to
avoid the air of indifference
Most common
aspect of
service
complaints
is lack of
respect for
the
customer.
Why services lose customers
~3 move away
______%
~30
_______%
lost due to competitive reasons
and/or unhappy w/ the service
~67 suspend patronage because of an
______%
attitude of indifference from owner,
manager or an employee
What Customers Desire:
2500 shoppers said
courtesy,
knowledge &
friendliness are
most important
components of
customer service.
The Multiplier Effect
When a customer has a minor service problem:
•In transactions >$100 - s/he will tell 9 to 10 people.
•In transactions over $100, s/he will tell 16 people.
TARP
statistics.
Time is Money (Lost Customers)
80%
90
90%
80%
Percent of
70%
70
55%
60%
Customers
That Will
Not Buy
45%
50%
50
40%
30
30%
25%
20%
20%
Again
10%
10
0%
M inutes
Minutes
Hours
Hours
Days
Days
Weeks
Weeks
M onths
Months
Time Taken to Resolve a Customer’s Problem
*Source: Forum Corporation
Where and Who Complains

Most complaints made to service provider
(employee) at time & place of service

Less than 5% of complaints about
services ever reach corporate
headquarters.

High-income households, younger people,
and service-knowledgeable customers are
more likely to complain.
Actively Encourage
Complaints

Average company does not hear
from 95% of its unhappy customers.

Many complaints go unregistered
because customers do not think
it will help and/or do not know
best way to register complaint

Encouraging complaints is a good
way to “break the silence.”
Attitude is Crucial
 Customers
value
acknowledged w/ every
transaction…
 Customers lose
confidence when:
– Complaints not readily
or personally addressed
E-pologies?
Email response
should include
options/names &
telephone
numbers for
further
assistance..
Tarp Research -
Service Guarantees


Relatively new w/
respect to services.
Service guarantees
provide both
consumer &
business benefits:
Service Guarantee: Customer
Benefits
– Customers
perceive
better value.
– Lower perceived risk.
– Higher perceived
reliability
– Reinforces customer
loyalty
Service Guarantee:
Organizational Benefits

Forces firm to focus on
customer.

States a clear performance goal.

Provides measures for tracking
poor service.

Forces examination of service
delivery system.

Source of pride.
Critical Questions
What is the “debate” all about
regarding how services should be
defined / envisioned?
1.
o
How does the definition of a service affect your
marketing strategy?
2. What are the key P’s to meeting
service management challenges?
3. What are some of the factors &
considerations affecting the near
future of “services” marketing?
Exact nature of Future Changesdepends on nature of the Service




Network Information Services: banking,
credit card, insurance, telecom
Retail
Hospitality: travel, restaurants, lodging,
leisure, hotels
Labor & Expertise:
– Business Support: administrationprocesses, consulting, customer
service
– Personal & Professional: medical,
legal, financial, technical assistance
UCT
Enhanced
SelfService
Increasingly
Outsourced
Increasingly
Virtualized
Ubiquitious ComPunication
Technologies




3G videophones w/
broadband – 2 meg
per second – always
online for self-service
Mobile Kiosks
AI Enhanced PDA
devices w/ speech
recognition & avatars
RFID – everywhere & in
everything
RFID- everywhere & in
everything
 SmartCode making
0.25mm chips
 target
cost 5-10 cents ..w/
15-20 feet
range
 Manufacturing
capacity
10+ billion a year
UCT in Everything you wear
washable garments w/
miniaturized in-ear
speakers /solar cells to
provide energy.

technology woven into
fabric,

components allowing
many functions to be
almost `built in' to our
bodies, creating a
`second skin'.
UCT Enhanced Jewelry
embed functional
technology into jewelry
& body accessories -rings, necklaces,
earrings, glasses and
watches. - for body adornment and
for more intimate and
discreet
communication,
information gathering
and entertainment.
Invisible, intelligent wireless
tickets
 Can be
read in your
pocket at 25 metres
 Ultra-wide band
frequency
 “One-ticket fits all”
RFID Shopping App’s
Future grocery
shoppingintegrated –info
system
Exact nature of Future Changesdepends on nature of the Service




Network Information Services: banking,
credit card, insurance, telecom
Retail
Hospitality: travel, restaurants, lodging,
leisure, hotels
Labor & Expertise:
– Business Support: administrationprocesses, consulting, customer
service
– Personal & Professional: medical,
legal, financial, technical assistance
UCT
Enhanced
SelfService
Increasingly
Outsourced
Increasingly
Virtualized
Predicting a diverse future: Directions
and issues in the marketing of services
European Journal of Marketing ; Bradford; 2002; Angus Laing
“Driven by
technological
developments,
deregulation, and
globalization
- the service sector in
post-industrial
economies is facing
unprecedented
change”
Increasing importance of
technological mediation…
Virtual Experiences
Redefining concept of“Service Encounter”
The Moment of Truth when a
service is delivered &
evaluated by consumer
Commodification… standardized
"off-the-shelf" service packages
Pre-Packaged, fill in
the blank, instantservice forms &
queries
 Some Computer
generated…Expertsystem managed…
Responses

Professional Services

To date-- characterized by high levels of
limited/regulated interpersonal interaction
NOW- 24/7 “access to
specialist technical
information, formerly the
preserve of professionals,
http://www.psychadvisor.co
m/counsel/index.cfm
Free Advice on Any
…fundamentally changed the Topic
informational asymmetries Online From America's
which have conventionally Elders
characterized the delivery of Personal Reply to
Each Request
professional services”
www.ElderWisdomCircle.
org
“Technologically driven productivity
growth is-most important factor in
shaping employment in U.S. & every
country in the world.
Productivity growth substitutes
technology &/or more efficient
techniques for physical & mental labor
Inventors & investors always figure out
ways to replace people with machines”
Automation- 1 ,2 ,3
Restaurants without waiters
Ultimately most all your service
needs will be handled by & thru
your AI enhanced PDA…
“With the ruthlessness of
Skynet in "The Terminator,"
computerization in the tertiary
sector is now committing mass
Dilberticide, replacing
receptionists with automated
phone systems and travel
agents with services like
Priceline.
Why Dilbert is
doomed
The jobs of tomorrow are
not what you'd expect
Recession creating a lost generation
•mechanization of agriculture
"primary
production”
"secondary
production
As it has always done in
the past, labor will shift
from more mechanized
to less mechanized
sectors…. But what will
those jobs be?
& mining -- freed up labor for
factories…
•automation in manufacturing
freed up workers for-office
work
•Computers & AI in the office-free up workers for…..?
"tertiary
production"
The most numerous & stable jobs of tomorrow
will be those that cannot be offshored
• cannot be automated
• require a high degree of creativity
• & rely on the human touch in face-to-face
interactions
•these are called "proximity services"
& include fastest-growing occupations,
healthcare & education.
Since the recession began, healthcare has added
559,000 jobs. Even more remarkable, the average
monthly gain of 22,000 jobs during 2009 has been
only slightly lower than the average increase of 30,000
jobs a month in 2008.
Why
Dilbert is
doomed
The jobs of
tomorrow
are not
what you'd
expect
Outsourcing of IT Services

$10.8 billion The value of IT
outsourcing contracts
signed in the first quarter of
2005. Source: TPI Index

3% Percentage of last year's
total layoffs due to
offshoring. Source: U.S.
Department of Labor

400,000 Number of service
jobs sent overseas since
2000. Source: The Goldman
Sachs Group Inc.

104,000 Number of IT jobs
lost due to offshore
outsourcing between 2000
and 2003, equaling 2.8% of
U.S. IT jobs. Source:
Information Technology
Association of America
3.5 million Number of U.S.
white-collar jobs moving
offshore by 2015, averaging
200,000 a year. Source:
Forrester Research Inc.

Where the Jobs Go!
India
India graduates 300,000 IT
engineers and 90,000 MBAs
per year
China
Mexico
Ireland
Canada
Malaysia
Phillipines
Russia
Singapore
0%
5%
10%
15%
20%
25%
30%
Source: Computer world and Interunity Group, Inc., April & May 2003
Base: Survey of 252 corporate IT managers in the U.S.; multiple responses allowed
35%
40%
The Other Side of Outsourcing