Introduction to Services
(Chapter 1)
What are services?
Why study services marketing?
Goods vs. Services
Characteristics of Services
Services Marketing Mix
- Dwayne D. Gremler
Marketing Definition
Marketing is the process of planning and
executing the conception, pricing, promotion, and
distribution of ideas, goods, and services to
create exchanges that satisfy individual and
organizational objectives.
--American Marketing Association
- Dwayne D. Gremler
Examples of Service Industries
Health Care Travel
hospital, medical practice, airlines, travel agencies,
dentistry, eye care theme park
Professional Services Others:
accounting, legal,
architectural hair styling, pest control,
plumbing, lawn
Financial Services
maintenance, counseling
banking, investment services, health club
advising, insurance
Hospitality
restaurant, hotel/motel, bed
& breakfast,
ski resort, rafting
- Dwayne D. Gremler
“Goods” and “Services”
In General:
Goods are…
Services are…
- Dwayne D. Gremler
What are services?
Long Definition:
Services “include all economic activities whose output is
not a physical product or production, is generally
consumed at the time it is produced, and provides added
value in forms (such as convenience, amusement,
timeliness, comfort, or health) that are essentially
intangible concerns of its first purchaser.”
Short Definitions:
- Dwayne D. Gremler
Why study services marketing?
service-based
source of for
manufacturing firms
in some service industries
have created new service
opportunities
- Dwayne D. Gremler
Percent of U.S. Labor Force by Industry
Figure 1.3
- Dwayne D. Gremler
Percent of U.S. Gross Domestic Product by
Industry
Figure 1.4
- Dwayne D. Gremler
Contributions of Service Industries to
U.S. Gross Domestic Product (in 2003)
Figure 1.1
Source: Inside Sam’s $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86. - Dwayne D. Gremler
Goods vs. Services
Goods Services
Production separate S
from consumption
Standardized V
Tangible I
Nonperishable P
- Dwayne D. Gremler
Goods vs. Services
Table 1.2
Goods Services Resulting Implications
Tangible Intangible Services cannot be inventoried.
Services cannot be patented.
Services cannot be readily displayed or communicated.
Pricing is difficult.
Standardized Variable Service delivery and customer satisfaction depend on
employee actions.
Service quality depends on many uncontrollable factors.
There is no sure knowledge that the service delivered
matches what was planned and promoted.
Production Simultaneous Customers participate in and affect the transaction.
separate from production and Customers affect each other.
consumption consumption Employees affect the service outcome.
Decentralization may be essential.
Mass production is difficult.
Nonperishable Perishable It is difficult to synchronize supply and demand with
services.
Services cannot be returned or resold.
Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,”
Journal of Marketing 49 (Spring 1985): 33-46.
- Dwayne D. Gremler
What Customers Buy…
“Customers do not buy goods or services: they buy
offerings which render services which create value.”
“The traditional division between goods and services
is long outdated. It is not a matter of redefining
services and seeing them from a customer
perspective; activities render services, things render
services.”
“The shift in focus to services is a shift from the
means and the producer perspective to the utilization
and the customer perspective.”
– Gummesson (1993, p. 250)
- Dwayne D. Gremler
Product Definition
Product
it is everything that the customer receives in making an
exchange
- Dwayne D. Gremler
Tangibility Spectrum
Salt
Soft Drinks
Detergents
Automobiles
CosmeticsFast-food
Outlets
Intangible
Dominant
Tangible
Dominant
Fast-food
Outlets
Advertising
Agencies
Airlines
Investment
Management
Figure 1.2
Consulting
Teaching
Challenges for Services
Defining and improving quality
Communicating and testing new services
Communicating and maintaining a consistent image
Motivating and sustaining employee commitment
Coordinating marketing, operations and human
resource efforts
Setting prices
Standardization versus personalization
- Dwayne D. Gremler
Services Marketing Mix
traditional marketing mix:
Product
Place
Promotion
Price
expanded mix for services:
P
P
P
- Dwayne D. Gremler
People
are the firm in the customer’s eye
are a critical part of the product
may be involved in production
can facilitate or inhibit service performance
can impact service encounters via their attitude,
behavior, or degree of involvement
- Dwayne D. Gremler
Process
the actual procedures, mechanisms, and flow of
activities by which the service is delivered
includes:
Examples:
- Dwayne D. Gremler
Physical Evidence
includes:
(1)
background characteristics (furnishings, noise, color)
signs
(2) tangible cues/facilitating goods that facilitate performance
or communication of the service
examples:
bank statements, travel brochures, business cards
- Dwayne D. Gremler
Expanded Marketing Mix for Services
Table 1.3
PRODUCT PLACE PROMOTION PRICE
Physical good Channel type Promotion Flexibility
features blend
Quality level Exposure Salespeople Price level
Accessories Intermediaries Advertising Terms
Packaging Outlet location Sales Differentiation
promotion
Warranties Transportation Publicity Allowances
Product lines Storage
Branding
- Dwayne D. Gremler
Expanded Marketing Mix for Services
Table 1.3 (Continued)
PEOPLE PHYSICAL PROCESS
EVIDENCE
Employees Facility design Flow of activities
Customers Equipment Number of steps
Communicating Signage Level of customer
culture and values involvement
Employee research Employee dress
Other tangibles
- Dwayne D. Gremler
