Download What Are Services?

Services Marketing, 7e, Global Edition
Chapter 1:
New Perspectives On
Marketing in the
Service Economy
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 1 – Page 1
Overview of Chapter 1
1. Why Study Services?
2. What are Services?
3. Marketing Challenges Posed by Services
4. Extended Marketing Mix Required for Services
5. Integration of Marketing with Other Management Functions
6. Developing Effective Service Marketing Strategies
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 1 – Page 2
1. Why Study Services?
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 1 – Page 3
Why Study Services?
 Services dominate most economies and are growing
rapidly:
 Increased productivity and automation in agriculture
and industry, combined with growing demand for both
new and traditional services
 Services account for more than 60% of GDP worldwide
 Most new employment is provided by services
(B2C: financial advice, medical examination,
B2B: outsourcing)
 Strongest growth area for marketing
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
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Changing Structure of Employment
as Economies Develop
Agriculture
Share of
Employment
Services
Industry
Time (per capita income)
Source: IMF, 1997
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
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Contribution of Services to GDP Globally (G, T, U, C),
SIC, NAICS (711211)
Manufacturing
(32, 29) %
Services
(64, T69~71, U79,
Agriculture
C40) %
(4, 2) %
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Services Marketing 7/e
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Estimated Size of Service Sector
in Selected Countries (%)
Jersey (97%), Cayman Islands (95%), Hong Kong (92%)
Bahamas (90%), Bermuda ( 89%), Luxembourg (86%)
USA (79%), Fiji (78%), Barbados (78%), France (77%), U.K. (76%)
Japan (72%), Taiwan (71%), Australia (71%), Italy (71%)
Canada (70%), Germany (69%), Israel (67%)
South Africa (65%), Brazil (66%), Poland (66%)
Turkey (63%), Mexico (62%)
Argentina (57%), Russia (55%)
Malaysia (46%), Chile (45%)
Indonesia (41%), China (40%)
Saudi Arabia (35%)
10
20
Services as Percent of GDP
30
40
50
60
70
80
90
Source: The World Factbook 2008, Central Intelligence Agency
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
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Why Study Services?
 Most new jobs are generated by services
 Fastest growth expected in knowledge-based industries
 Significant training and educational qualifications required,
but employees will be more highly compensated
(IBM SSME: Service Science, Management and Engineering)
 Will service jobs be lost to lower-cost countries?
Yes, some service jobs can be exported
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 1 – Page 8
5 Powerul forces are transforming service markets
(1) Government policies
(2) Social changes
(3) Business trends
(4) Advances in IT
(5) Internationalization
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 1 – Page 9
(1) Government policies
 Changes in regulations, e.g., deregulation (放鬆管制，開放競
爭)
 Privatization (BOT)
 New rules to protect customers, employees, and the
environment
 New agreement on trade in services
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Services Marketing 7/e
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(2) Social changes
 Rising consumer expectations
 More affluence
 More people short of time
 Increased desire for buying experiences vs. things
 Rising consumer ownership of high tech equipment
 Easier access to information
 Growing but aging population
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Services Marketing 7/e
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(3) Business trends
 Push to increase shareholder value
 Emphasis on productivity and cost savings
 Manufacturers add value through service and sell services
 More strategic alliances and outsourcing
 Focus on quality and customer satisfaction
 Growth of franchising
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 1 – Page 12
(4) Advances in IT
 Growth of Internet
 Greater bandwidth, e.g., 4G
 Compact mobile equipment
 Wireless networking
 Faster, more powerful software
 Self-service technology
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
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(5) Internationalization
 More companies operating on transnational basis
 Increased international travel
 International mergers and alliances
 “Offshoring” of customer service
 Foreign competitors invade domestic markets
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Services Marketing 7/e
Chapter 1 – Page 14
2. What are Services?
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Services Marketing 7/e
Chapter 1 – Page 15
What Are Services?
 Historical view of services—production and consumption
are separable
 Fresh new perspective—services is distinguished as
benefits without ownership. Rental of goods:
(a) Payment made for using or accessing something –
usually for a defined period of time – instead of buying it
outright and
(b) Allows participation in network systems that
individuals and organizations could not afford
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
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What Are Services?
Five broad categories within non-ownership
framework of which two or more may be combined
Rented goods
services
Defined space
and place rentals
Access to shared
physical
environments
Slide © 2010 by Lovelock & Wirtz
Labor and
expertise rentals
Access to and
usage of systems
and networks
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Definition of Services
 Services
 are economic activities offered by one party to another
 most commonly employ time-based performances to
bring about desired results
 In exchange for their money, time, and effort, service
customers expect to obtain value from
 normally do not take ownership of any of the physical
elements involved.
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
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Categories of Services
 2*2
 Tangible, Intangible
 People: Passenger Transportation, Education
Possessions: fright transportation, Accounting
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
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Service Products, Customer Service, After-Sales Service
 A firm’s market offerings are divided into core product
elements and supplementary service elements
 Need to distinguish between:
 Marketing of services – when service is the core
product
 Marketing through service – when good service
increases the value of a core physical good
 Manufacturing firms are reformulating and enhancing
existing added-value services to market them as standalone core products (Rolls-Royce sells power by the hour)
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 1 – Page 20
3. Marketing Challenges
Posed by Services
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Services Marketing 7/e
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Services Pose Distinctive Marketing Challenges
 Marketing is usually separated from the operations and
human resources functions in a manufacturing business,
where goods are usually produced in a factory and then
distributed and sold at a separate location.
 Marketing management tasks in the service sector differ
from those in the manufacturing sector.
 Eight common differences between services and goods but
they do not apply equally to all services
Slide © 2010 by Lovelock & Wirtz
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8 characteristics of services
1. Most service products cannot be inventoried
2. Intangible elements usually dominate value creation
3. Services are often difficult to visualize & understand
4. Customers may be involved in co-production
5. People may be part of service experience
6. Operational inputs and outputs tend to vary more widely
7. Time factor often assumes great importance
8. Distribution may take place through nonphysical channels
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
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4. Extended Marketing Mix for
Services
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
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Services Require
An Extended Marketing Mix
 Marketing can be viewed as:
 A customer-driven orientation for the entire organization
 Marketing is only function to bring operating revenues into a
business; all other functions are cost centers
 The “7 Ps” of services marketing are needed to create viable
strategies for meeting customer needs profitably
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 1 – Page 25
The 7Ps of Services Marketing
 Traditional Marketing Mix Applied to Services
 Product (Chapter 4)
 Place and Time (Chapter 5)
 Price (Chapter 6)
 Promotion and Education (Chapter 7)
 Extended Marketing Mix for Services
 Process (Chapter 8 & 9)
 Physical Environment (Chapter 10)
 People (Chapter 11)
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 1 – Page 26
5. Integration of Marketing
with Other Management
Functions
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 1 – Page 27
Integration of Marketing with Other
Management Functions
 Marketing links the firm to its external environment and acts
as a customer champion;
 Operations is concerned with service design and delivery,
often involving customers in operational processes;
 Human resources helps to recruit, train, and motivate
employees whose jobs bring them into direct contact with
customers.
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 1 – Page 28
6. Developing Effective
Service Marketing Strategies
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 1 – Page 29
Overview of Framework
Understanding Service Products,
Consumers and Markets
Applying the 4 P’s of
Marketing to Services
The Extended Services Marketing Mix
for Managing the Customer Interface
Implementing Profitable Service
Strategies
Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
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Summary (Integration, Extensions, Questions)
 Understand the contribution of services to a country’s
economy
 Define services using the non-ownership of services
framework and understand how non-ownership affects
services marketing strategies
 Understand the components of the services marketing
mix (the 7Ps)
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Slide © 2010 by Lovelock & Wirtz
Services Marketing 7/e
Chapter 1 – Page 31