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Services dominate the United States Economy: GDP by Industry, 2001 (Fig. 1.1)
Agriculture, Forestry, Mining, Construction 8% Manufacturing 14% Finance, Insurance, Real Estate 20% Wholesale and Retail Trade 16% Transport, Utilities, Communications 8%
Health 6%
Indust ry
Time, per Capita Income
Source: IMF, 1997
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Some Service Industries Profiled by NAICS but Not Identified by SIC Codes
v Casino Hotels v Continuing Care Retirement Communities v Diagnostic Imaging Centers v Diet and Weight Reducing Centers v Environmental Consulting v Gold Courses and Country Clubs v3/18/12 Hazardous Waste Collection v HMO Medical Centers v Industrial Design Services v Investment Banking and Securities Dealing v Management Consulting Services v Satellite Telecommunications v Telemarketing Bureaus v Temporary Help Services
Internal Services
Service elements within an organization that facilitate creation of--or add value to--its final output Includes:
accounting and payroll administration recruitment and training legal services transportation catering and food services 3/18/12 cleaning and landscaping
Government Policies (e.g., regulations, trade agreements) Social Changes (e.g., affluence, lack of time, desire for experiences) Business Trends
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Manufacturers offer service Growth of chains and franchising Pressures to improve productivity and quality More strategic alliances Marketing emphasis by nonprofits Innovative hiring practices
with customers (new services, more convenience) behind the scenes (reengineering, new value chains)
Create relational databases about customer needs and behavior, mine databanks for insights 3/18/12 Leverage employee capabilities and
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An act or performance offered by one party to another An economic activity that does not result in ownership A process that creates benefits by facilitating a desired change in:
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Customers do not obtain ownership of services Service products are ephemeral and cannot be inventoried Intangible elements dominate value creation Greater involvement of customers in production process Other people may form part of product 3/18/12
Marketing Implications - 1
No ownership
Customers obtain temporary rentals, hiring of personnel, or access to facilities and systems Pricing often based on time Customer choice criteria may differ for renting vs. purchase--may include convenience, quality of personnel Cant own people (no slavery!) but can hire expertise and labor
Marketing Implications - 2
Customer involvement includes selfservice and cooperation with service personnel Think of customers in these settings as partial employees Customer behavior and competence can help or hinder productivity, so marketers need to educate/train customers the delivery process may affect
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TANGIBILITY SPECTRUM
Tangible Elements
Lo
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Fast food restaurant Plumbing repair Office cleaning Health club irline A flight Retail banking Insuranc e Weather Intangible Elements forecast
Hi
Marketing Implications - 3
Achieve competitive edge through perceived quality of employees Ensure job specs and standards for frontline service personnel reflect both marketing and operational criteria Recognize that appearance and behavior of other customers can influence service experience positively or negatively inappropriate mix of customer
Avoid 3/18/12
Marketing Implications - 4
Offer convenience of extended service hours up to 24/7 Understand customers time constraints 3/18/12
Educate customers to help them make good choices, avoid risk Tell customers what to expect, what to look for Create trusted brand with reputation for considerate, ethical behavior Encourage positive word-of-mouth from satisfied customers
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People Processing
e.g., airlines, hospitals, haircutting, restaurants hotels, fitness centers
Possession Processing
e.g., freight, repair, cleaning, landscaping, retailing, recycling
INTANGIBLE ACTS
Information Processing
(directed at intangible assets)
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Processes determine how services are created/delivered process change may affect customer satisfaction Imposing new processes on customers, especially replacing people by machines, may cause dissatisfaction New processes that improve 3/18/12
Think of facility as a stage for service performance Design process around customer Choose convenient location Create pleasing appearance, avoid unwanted noises, smells Consider customer needs--info, parking, food, toilets, etc.
Implications of Service Processes: (3) Evaluating Alternative Delivery Channels For possession-processing, mentalstimulus processing, or information processing services, alternatives include: 1. Customers come to the service factory 2. Customers come to a retail office 3. Service employees visit customers home or workplace 3/18/12 4. Business is conducted at arms length
serve is limited and demand varies widely, problems arise because service output cant be stored: 1. If demand is high and exceeds supply, business may be lost 2. If demand is low,
All services can benefit from IT, but mental-stimulus processing and informationprocessing services have the most to gain: Remote delivery of information-based services anywhere, anytime
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Core product featuresboth tangible and intangible elements Bundle of supplementary service elements Performance levels relative to competition Benefits delivered to customers 3/18/12 (customers dont buy a hotel room,
Geographic locations served Service schedules Physical channels Electronic channels Customer control and convenience
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Channel partners/intermediaries
media elements (print, broadcast, outdoor, retail, Internet, etc.) personal selling, customer service sales promotion publicity/PR
The 7Ps: (4) Price and Other User Outlays Marketers Must Recognize that Customer
Outlays Involve More than the Price Paid to Seller
Traditional Pricing Tasks Selling price, discounts, premiums Margins for intermediaries (if any) Credit terms Identify and Minimize Other Costs Incurred by Users Additional monetary costs associated with service usage (e.g., travel to service location, parking, phone, babysitting,etc.) Time expenditures, especially waiting Unwanted mental and physical effort Negative sensory experiences
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Design of activity flows Number and sequence of actions for customers Providers of value chain components Nature of customer involvement Role of contact personnel