New Perspectives On Marketing in The Service Economy

Chapter 1:
New Perspectives
on
Marketing in the
Service Economy
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 1
Overview of Chapter 1
Why Study Services?
What are Services?
The Marketing Challenges Posed by Services
The Expanded Marketing Mix Required for Services
Why Study Services?
Why Study Services? (1)
Services dominate economy in most nations
Understanding services offers you personal competitive

advantages
Importance of service sector in economy is growing

rapidly:
Services account for more than 60 percent of GDP worldwide
Almost all economies have a substantial service sector
Most new employment is provided by services
Strongest growth area for marketing
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
Will service jobs lost to lower-cost countries? Yes, some service jobs
can be exported
Changing Structure of Employment as
Economic Development Evolves
Share of
Employment Agriculture
Services
Industry
Time, per Capita Income Source: IMF, 1997
Powerful forces are transforming service markets

Government policies, social changes, business trends,
advances in IT, internationalization
These forces are reshaping

Demand
Supply
The competitive landscape
Customers choices, power, and decision making
Transformation of the Service Economy
Social Business Advances in

Changes Trends IT
Government
Globalization
Policies
New markets and product categories
Increase in demand for services
More intense competition
Innovation in service products & delivery systems, stimulated by better technology
Customers have more choices and exercise more power
Success hinges on:

Understanding customers and competitors
Viable business models
Creation of value for customers and firm
Factors Stimulating Transformation
of the Service Economy (1)

Changes Trends IT
Government
Globalization
Policies
Changes in regulations
Privatization
New rules to protect customers,
employees, and the environment
New agreement on trade in services

Changes Trends IT
Government
Globalization
Policies
Rising consumer expectations
More affluence
More people short of time
Increased desire for buying experiences
versus things
Rising consumer ownership of high tech
equipment
Easier access to information
Immigration
Growing but aging population

Changes Trends IT
Government
Globalization
Policies
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
Marketing emphasis by nonprofits

Changes Trends IT
Government
Globalization
Policies
Growth of the Internet

Greater bandwidth
Compact mobile equipment
Wireless networking
Faster, more powerful software
Digitization of text, graphics, audio, video

Changes Trends IT
Government
Globalization
Policies
More companies operating on transnational

basis
Increased international travel

International mergers and alliances
Offshoring of customer service
Foreign competitors invade domestic markets
What Are Services?
What Are Services? (1)
The historical view

Goes back over 200 years to Adam Smith and Jean-Baptiste Say
Different from goods because they are perishable (Smith 1776)
Consumption cannot be separated from production, services are
intangible (Say 1803)
A fresh perspective: Services involve a form of rental,

offering benefits without transfer of ownership
Include rental of goods
Marketing tasks for services differ from those involved in selling
goods and transferring ownership
What Are Services? (2)
Five broad categories within non-ownership framework:

1. Rented goods services
2. Defined space and place rentals
3. Labor and expertise rentals
4. Access to shared physical environments
5. Systems and networks: access and usage
Implications of renting versus owning (Service Perspectives 1.1)

Markets exist for renting durable goods rather than selling them
Renting portions of larger physical entity (e.g., office space, apartment) can
form basis for service
Customers more closely engaged with service suppliers
Time plays central role in most services
Customer choice criteria may differ between rentals and outright purchases
Services offer opportunities for resource sharing
Defining Services
Services
Are economic activities offered by one party to another
Most commonly employ time-based performances to bring about
desired results in:
recipients themselves
objects or other assets for which purchasers have responsibility
In exchange for their money, time, and effort, service

customers expect to obtain value from
Access to goods, labor, facilities, environments, professional skills,
networks, and systems
But they do not normally take ownership of any of the physical
elements involved
Service Products versus Customer Service
and After-Sales Service
A firms market offerings are divided into core product

elements and supplementary service elements
Is everyone in service? Need to distinguish between:
Marketing of services
Marketing goods through added-value service
Good service increases the value of a core physical good

After-sales service is as important as pre-sales service
for many physical goods
Manufacturing firms are reformulating and enhancing
existing added-value services to market them as stand-
alone core products
Challenges Posed by Services
Services Pose Distinctive
Marketing Challenges
Marketing management tasks in the service sector
differ from those in the manufacturing sector
The eight common differences are:

1. Most service products cannot be inventoried
2. Intangible elements usually dominate value creation
3. Services are often difficult to visualize and understand
4. Customers may be involved in co-production
5. People may be part of the service experience
6. Operational inputs and outputs tend to vary more widely
7. The time factor often assumes great importance
8. Distribution may take place through nonphysical channels
What are marketing implications?

Differences, Implications, and
Marketing-Related Tasks (1) (Table 1.1)
Difference Implications Marketing-Related Tasks
Most service
products
Customers may be Use pricing, promotion,
and
turned away reservations to smooth
cannot be inventoried
demand; work with ops to
manage capacity
Intangible elements Harder to evaluate
service and distinguish Emphasize physical clues,
usually dominate employ metaphors and vivid
from competitors images in advertising
value creation
Services are often Greater risk and Educate customers on

uncertainty perceived making good choices; offer
difficult to visualize
and understand guarantees
Customers may be Interaction between Develop user-friendly

customer and provider; equipment, facilities, and
involved in co-
but poor task execution systems; train customers,
production
could affect satisfaction provide good support
Differences, Implications, and
Marketing-Related Tasks (2) (Table 1.1)
Difference Implications Marketing-Related Tasks
People may be part Behavior of service Recruit, train employees to

of personnel and customers
service experience reinforce service concept
can affect satisfaction
Shape customer behavior
Operational inputs Hard to maintain quality,
and consistency, reliability
outputs tend to vary Difficult to shield
more widely customers from failures
Institute good service
Time is money; recovery procedures
Time factor often customers want service
assumes great at convenient times Find ways to compete on
importance speed of delivery; offer
Electronic channels or extended hours
Distribution may take voice telecommunications
place through Create user-friendly,
nonphysical channels secure websites and free
access by telephone
Value Added by Physical, Intangible Elements
Helps Distinguish Goods and Services (Fig 1.6)
Physical
Elements
High
Salt
Detergents
CD Player
Wine
Golf Clubs
New Car
Tailored clothing Plumbing Repair
Fast-Food Restaurant Health Club
Airline Flight
Landscape Maintenance
Consulting
Life Insurance
Internet Banking
Low Intangible Elements High

Source; Adapted from Lynn Shostack
Expanded Marketing Mix
for Services
Services Require
An Expanded Marketing Mix
Marketing can be viewed as:

A strategic and competitive thrust pursued by top management
A set of functional activities performed by line managers
A customer-driven orientation for the entire organization
Marketing is the only function to bring operating

revenues into a business; all other functions are cost
centers
The 8Ps of services marketing are needed to create

viable strategies for meeting customer needs profitably
in a competitive marketplace
The 8Ps of Services Marketing
Product Elements
Place and Time
Price and Other User Outlays
Promotion and Education
Process
Physical Environment
People
Productivity and Quality

Fig 1.9 Working in
Unison: The 8Ps of
Services Marketing
The 8Ps of Services Marketing:
(1) Product Elements
Embrace all aspects of service performance that

create value
Core product responds to customers primary need
Array of supplementary service elements

Help customer use core product effectively
Add value through useful enhancements
Planning marketing mix begins with creating a service
concept that:
Will offer value to target customers
Satisfy their needs better than competing alternatives
(2) Place and Time
Delivery decisions: Where, When, How
Geographic locations served
Service schedules
Physical channels
Electronic channels
Customer control and convenience
Channel partners/intermediaries
(3) Price and Other User Outlays
Marketers must recognize that customer outlays

involve more than 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
(4) Promotion and Education
Informing, educating, persuading, reminding customers
Marketing communication tools

Media elements (print, broadcast, outdoor, retail, the Internet, etc.)
Personal selling, customer service
Sales promotion
Publicity/PR
Imagery and recognition

Branding
Corporate design
Content
Information, advice
Persuasive messages
Customer education/training
(5) Process
How firm does things may be as important as what it does
Customers often actively involved in processes, especially

when acting as co-producers of service
Process involves choices of method and sequence in service
creation and delivery
Design of activity flows
Number and sequence of actions for customers
Nature of customer involvement
Role of contact personnel
Role of technology, degree of automation
Badly designed processes waste time, create poor

experiences, and disappoint customers
(6) Physical Environment
Design servicescape and provide
tangible evidence of service
performances
Create and maintain physical

appearances
Buildings/landscaping
Interior design/furnishings
Vehicles/equipment
Staff grooming/clothing
Sounds and smells
Other tangibles
Manage physical cues carefully
can have profound impact on
customer impressions
(7) People
Interactions between customers and contact
personnel strongly influence customer
perceptions of service quality
The right customer-contact employees
performing tasks well
Job design
Recruiting
Training
Motivation
The right customers for firms mission
Contribute positively to experience of
other customers
Possessor can be trained to have
needed skills (co-production)
Can shape customer roles and manage
customer behavior
(8) Productivity and Quality
Productivity and quality must work hand in hand
Improving productivity key to reducing costs
Improving and maintaining quality essential for building

customer satisfaction and loyalty
Ideally, strategies should be sought to improve both

productivity and quality simultaneouslytechnology
often the key
Technology-based innovations have potential to create high payoffs
But, must be user friendly and deliver valued customer benefits
Marketing Must Be Integrated with
Other Management Functions
Marketing Must Be Integrated with
Other Management Functions (Fig 1.10)
Three management functions play central and interrelated roles
in meeting needs of service customers
Operations Marketing
Management Management
Customers
Human Resources
Management
Services: An Alternative Classification
Scheme
Four Categories Of Services (Fig 2.1)
Who or What Is the Direct Recipient of the Service?

Nature of the Service Act People Possessions
Tangible Actions People processing Possession processing
(services directed at (services directed at

peoples bodies): physical possessions):
Barbers Refueling
Health care Disposal/recycling

Intangible Actions Mental stimulus Information processing
processing
(services directed at
(services directed at intangible assets):
peoples minds):
Education
Accounting
Advertising/PR
Banking
Four Categories Of Services
People Processing
Customers must:
Physically enter the service
factory
Co-operate actively with the
service operation
Managers should think about

process and output from
customers perspective
To identify benefits created and
non-financial costs:
Time, mental, physical effort
Possession Processing
Possession Processing
Customers are less physically

involved compared to people
processing services
Involvement is limited
Production and consumption

are separable
Mental Stimulus Processing
Mental Stimulus Processing
Ethical standards required when

customers who depend on such
services can potentially be
manipulated by suppliers
Physical presence of recipients

not required
Core content of services is

information-based
Can be inventoried
Information Processing
Information Processing
Information is the most

intangible form of service
output
But may be transformed into

enduring forms of service
output
Line between information

processing and mental stimulus
processing may be blurred.
Chapter 2
Customer involvement in
service processes - Managing
the service encounter
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Chapter 2 Objectives
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: Customer A
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Physical
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core Contact
Service
Service BB
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Direct interactions
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Secondary interactions
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The Services Marketing System varies with
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s System (1)
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designated intermediaries.
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Service Facilities and Equipment e.g. building exteriors,
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vehicles, self-service equipment, other equipment
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The Components of the Services Marketing
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service delivery, word of mouth from friends, family,
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acquaintances and strangers.
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Service Marketing System
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Customers Sales Calls
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Contact
& Exterior Service System (e.g. Market Research
Facilities
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Hotel) Billing / Statements
Surveys
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Technical Equipment The
Core Customer Miscellaneous Mail,
0 Phone Calls, Faxes, etc.

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Service People Random Exposure to
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Other Chance Encounters
Backstage Front Stage with Service Personnel
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(invisible) (visible) Customers
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Medium Contact Service System
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s (e.g. Banking)
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Other
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Core Equipment
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Low Contact Service System
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c Backstage (visible)
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Critical Incidents
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A Flowchart is a map of the service experience
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which shows the total process step by step.
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Flowcharting is useful as a management tool to
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identify problems in stages of the delivery.
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Flowcharting is also known as Blueprinting and
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o Flowcharting includes the Front-stage and Back-
Ed stage components of the service.
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, Flowcharting the Service Experience: A
Pa
e hotel
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W Front-stage includes porter service, valet parking,

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and other personal assistance.
vi
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Back-stage includes management and administration,
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kitchen preparation, housekeeping, storage, buying
n tangibles such as food, furnishings and other essential
e supplies.
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4
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W The Moment of Truth is when the customer and the

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The point when the skill, motivation and the tools
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employed by the service personnel and, the
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expectations and behaviour of the customer create the
n service experience.
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4
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tr
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Pa Critical Incidents
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s
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W Unsatisfactory encounters are likely to be more

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satisfactory ones.
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Critical Incidents can occur pre-consumption and post-
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consumption as well as during.
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Pa Categories of Critical Incidents
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s
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W Employee response to service delivery systems failures.

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e Employee response to customer needs and requests.
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M Unprompted and unsolicited employee actions.

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4
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Employee response to service

c
,
Pa
e
s
n
delivery systems failures
W
l
e
Unavailable service
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vi
e
M
r Unreasonably slow service
et
n
0
4
Other core service failures
Pe
r
o
Ed
c (Source: Bitner et al,1990,The Service Encounter: Diagnosing Favorable and
ti Unfavorable Incidents, Journal of Marketing, vol.54, pp. 71-84.)
n
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Conclusion
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,
Pa
e
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W Not all services are the same.

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e
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e Managers need to understand how the different
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e components of the service interact and are judged
M by the customer.
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et
n
The customers evaluation of the service may be
e
determined by more than just what has been
0
4
provided.
Pe
r
o Understanding and managing service encounters are
Ed vital to creating satisfied customers.
c
ti
n
Au
tr
li
o
Employee response to customer

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,
Pa
e
s
needs and requests
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W Customers with special needs

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e
:
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Expressed customer preferences
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Admitted customer error
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4
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r Potentially disruptive others
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Ed
c
ti
n Source: Bitner et al,1990,The Service Encounter: Diagnosing Favorable and Unfavorable Incidents, Journal of Marketing,
Au vol.54, pp. 71-84.)
tr
li
o
Unprompted and unsolicited

el
c
,
Pa
e
s
employee actions
n
W
l
e Attention paid to customer.
:
e
vi Extraordinary employee behaviour.
e
M Behaviours in the context of cultural norms (e.g. fairness not

r
et discrimination).
n
e Gestalt evaluation (no single factor)
0
4 Exemplary performance under adverse circumstances
Pe
r
o
Ed Source: Bitner et al,1990,The Service Encounter: Diagnosing Favorable and Unfavorable Incidents, Journal of Marketing, vol.54,
c pp. 71-84.)
ti
n
Au
tr
li
Chapter 3:
Developing
Service Concepts:
Core and
Supplementary
Elements
Overview of Chapter 3
Planning and Creating Services
The Flower of Service
Planning and Branding Service Products
Development of New Services
A service product comprises all elements of service

performance, both tangible and intangible, that create
value for customers
The service concept is represented by:

A core product
Accompanied by supplementary services
Core Products and
Supplementary Services
In mature industries, core products often become

commodities
Supplementary services help to differentiate core
products and create competitive advantage by:
Facilitating use of core product (a service or a good)
Enhancing the value and appeal of the core product
Augmenting the Core Product (Fig 3.1)
Figure 3.1 Distribution

Shostacks Molecular Price
Model: Passenger
Airline Service
Service Vehicle
Frequency
In-flight
Transport Service
Pre- &
Postflight
Service Food &
Drink
Key
Tangible Elements
Marketing Positioning Intangible Elements
(weighted toward evidence) Source: Shostack
Augmenting the Core Product
Are supplementary services needed to facilitate use of

core product or simply to add extra appeal?
Should customers be charged separately for each service

element?
Or should all elements be bundled at a single price?
Designing a Service Concept
Core Product
Central component that supplies the principal, problem-solving
benefits customers seek
Supplementary Services
Augment the core product, facilitating its use and enhancing its
value and appeal
Delivery Processes
Used to deliver both the core product and each of the
supplementary services
Core and Supplementary Product Design:
An Integrated Perspective (Fig 3.2)
Delivery Concept
Supplementary Nature of for Core Product
services offered Scheduling Process
and delivered
Service Customer
Level Role
Documenting Delivery Sequence
Over Time
Must address sequence in which customers will use

each core and supplementary service
Determine approximate length of time required for
each step
Customers may budget a specific amount of time for an activity
Information should reflect good understanding of
customers, especially their:
Needs
Habits
Expectations
Question: Do customers expectations change during

service delivery in light of perceived quality of each
sequential encounter?
Core and Supplementary Services at Luxury Hotel
(Offering Much More than Cheap Motel!)
Reservation
Cashier Valet
Parking
Business
Reception
Center
A Bed for the
Room Night in an
Service Elegant Private
Baggage
Room with a
Service
Bathroom
Wake-up Cocktail
Call Bar
Internet Entertainme Restaura

nt/ Sports/
Exercise nt
What Happens, When, in What Sequence?
Time Dimension in Augmented Product (Fig 3.3)
Reservation
Parking Get car
Check in Check out
Internet Internet
Use
room USE GUESTROOM OVERNIGHT
internet
Porter
Pay TV
Meal
Room service
Time Frame of An Overnight Hotel Stay

Before Visit
(Real-time service use)
Flowcharting Service Delivery
Helps to Clarify Product Elements
Offers way to understand totality of customers
service experience
Useful for distinguishing between core product
itself and service elements that supplement core
Restaurants: Food and beverage (core)
Reservations (supplementary services)
Shows how nature of customer involvement with
service organizations varies by type of service:
People processing
Possession processing
Mental Stimulus processing
Information processing
Defining Core and Supplementary
Elements of Our Service Product
How is our core product defined and what supplementary
elements augment it?
What product benefits create most value for customers?
Is our service package differentiated from competition in
meaningful ways for target customers?
What are current levels of service on core product and each
supplementary element?
Can we charge more for higher service levels? For example:
Faster response and execution
Better physical amenities
Easier access
Higher staffing levels
Superior caliber personnel
Alternatively, should we cut service levels and charge less?

Simple Flowchart for Delivery of a
People-Processing Service (Fig 3.4)
People Processing Stay at Motel

Spend Night in Room
Check In Check Out

Park Car Breakfast
Maid Makes up Room

Breakfast Prepared
Simple Flowchart for Delivery of a
Possession-Processing Service (Fig 3.4)
Possession Processing Repair a DVD Player

Travel to Store Technician Examines Leave Store Return, Pick up (Later) Play
Player, Diagnoses Player and Pay DVDs at Home
Problem
Technician Repairs Player
Simple Flowchart for Delivery of Mental
Stimulus-Processing Service (Fig 3.4)
Mental Stimulus Processing Weather Forecast
Turn on TV, Select View Presentation of Confirm Plans for

Channel Weather Forecast Picnic
Collect Weather Data Meteorologists Input Data to Models and Creates Forecast from Output TV Weatherperson Prepares Local Forecast
Weather Forecasting Is a Service
Directed at Customers Minds (Fig 3.5)
Simple Flowchart for Delivery of An
Information-Processing Service (Fig 3.4)
Information Processing Health Insurance

Printed Policy
Learn about Options
Select Plan, Insurance Coverage
Pay Documents Arrive
Complete Forms Begins
University and Insurance Company Agree on Terms of

Coverage Customer Information Entered in Database
The Flower of Service (Fig 3.6)
Information
Payment Consultation
Billing Core Order Taking
Exceptions Hospitality
Safekeeping
KEY:
Facilitating elements
Enhancing elements
How to Determine What Supplementary
Services Should Be Offered
Not every core product is surrounded by supplementary elements

from all eight clusters
Nature of product helps to determine:

Which supplementary services must be offered
Which might usefully be added to enhance value and ease of doing
business with the organization
People-processing and high-contact services tend to have more
supplementary services
Market positioning strategy helps to determine which

supplementary services should be included
Firms that offer different levels of service often add extra

supplementary services for each upgrade in service level
The Flower of Service:
Facilitating ServicesInformation
Customers often require

information about how to obtain
and use a product or service.
Examples of elements:
Core
Directions to service site

Schedule/service hours
Prices
Conditions of sale
Usage instructions
Facilitating ServicesOrder Taking
Customers need to know what

is available and may want to
secure commitment to
delivery. The process should
be fast and smooth.
Core
Applications
Order entry
Reservations and check-in
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 -
Facilitating ServicesBilling
How much do I owe you?

Bills should be clear,
Accurate, and intelligible.
Core Examples of elements:
Periodic statements of
account activity
Machine display of amount
due
Facilitating ServicesPayment
Customers may pay faster

and more cheerfully if you
make transactions simple
and convenient for them.
Core
Self service payment

Direct to payee or intermediary
Automatic deduction
Enhancing ServicesConsultation
Value can be added to goods

and services by offering advice
and consultation tailored to
each customers needs and
situation.
Core
Customized advice
Personal counseling
Management consulting
Enhancing ServicesHospitality
Customers who invest time and

effort in visiting a business and
using its services deserve to be
treated as welcome guests
after all, marketing invited them!
Greeting
Waiting facilities and amenities
Food and beverages
Toilets and washrooms
Security
Enhancing ServicesSafekeeping
Customers prefer not to worry

about looking after the personal
possessions that they bring
with them to a service site.
Looking after possessions

customers bring with them
Caring for goods purchased
(or rented) by customers
Enhancing ServicesExceptions
Customers appreciate some

flexibility when they make
special requests and expect
responsiveness when things
dont go according to plan.
Core
Special requests in advance

Complaints or compliments
Problem solving
Restitution
Managerial Implications
To develop product policy and pricing strategy, managers

need to determine:
Which supplementary services should be offered as a standard
package accompanying the core
Which supplementary elements could be offered as options for an
extra charge
In general, firms that compete on a low-cost, no-frills

basis needs fewer supplementary elements than those
marketing expensive, high-value-added services
Each flower petal must receive consistent care and

concern to remain fresh and appealing
Developing New Services
A Hierarchy of
New Service Categories (1)
1. Major service innovations

New core products for previously undefined markets
2. Major process innovations

Using new processes to deliver existing products with added
benefits
3. Product-line extensions
Additions to current product lines
4. Process-line extensions
Alternative delivery procedures
A Hierarchy of
New Service Categories (2)
5. Supplementary service innovations

Addition of new or improved facilitating or enhancing elements
6. Service improvements
Modest changes in the performance of current products
7. Style changes
Visible changes in service design or scripts
Reengineering Service Processes
Service processes affect not only customers, but also

cost, speed, and productivity with which desired
outcome is achieved
Reengineering involves analyzing and redesigning
processes to achieve faster and better performance
Running tasks in parallel instead of sequence can
reduce/eliminate dead time
Examination of processes can lead to creation of

alternative delivery methods that constitute new
service concepts
Add/eliminate supplementary services
Resequence delivery of service elements
Offer self-service options
Physical Goods as a Source Of
New Service Ideas
Services can be built around rentals: Alternatives to

owning a physical good and/or doing work oneself
Customers can rent goodsuse and return for a feeinstead of
purchasing them
Customers can hire personnel to operate own or rented equipment
Any new durable good may create need for after-sales
services now and in futurepossession processing
Shipping
Installation
Problem-solving and consulting advice
Cleaning and maintenance
Upgrades
Removal and disposal
Creating Services as Substitutes for
Owning and/or Using Goods (Fig 3.10)
Rent Use of a
Own a Physical Good Physical Good
Perform Work Drive Own Car Rent a Car and Drive

it
Oneself Use Own Computer
Rent Use of
Computer
Hire Someone
Hire a Chauffeur to Hire a Taxi or
Drive Limousine
to Do Work
Hire a Typist to Type Send Work Out to a
Secretarial Service
Caterpillar Promotes Its
Service Businesses (Fig 3.11)
Reprinted Courtesy of Caterpillar, Inc.

Achieving Success in Developing
New Services
Services are not immune to high

failure rates that plague new
manufactured products
dot.com companies
In developing new services

Core product is of secondary
importance
Ability to maintain quality of the
total service offering is key
Accompanying marketing support
activities are vital
Market knowledge is of utmost
importance
Success Factors in
New Service Development
Market synergy
Good fit between new product and firms image/resources
Advantage versus competition in meeting customers needs
Strong support from firm during/after launch
Firm understands customer purchase decision behavior
Organizational factors
Strong interfunctional cooperation and coordination
Internal marketing to educate staff on new product and its
competition
Employees understand importance of new services to firm
Market research factors
Scientific studies conducted early in development process
Product concept well defined before undertaking field studies
Summary of Chapter 3:
Developing Service Concepts (1)
Planning and creating services involve:

Augmenting core product
Designing core product, supplementary services, and delivery process
Documenting delivery sequence over time with flowcharts
Gaining insights from flowcharting
Flower of service includes core product and two types of

supplementary services: facilitating and enhancing
Facilitating services include information, order taking, billing, and
payment
Enhancing services include consultation, hospitality, safekeeping, and
exceptions
Spectrum of branding alternatives exists for services

Branded house
Sub-brands
Endorsed brands
House of brands
Summary of Chapter 3:
Developing Service Concepts (2)
Seven categories of new services:

Major service innovations
Major process innovations
Product-line extensions
Process-line extensions
Supplementary service innovations
Service improvements
Style changes
To develop new services, we can

Reengineer service processes
Use physical goods as a source of new service ideas
Use research to design new services
Achieve success in developing new services

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Chapter 1:

Why Study Services?

What are Services?

The Marketing Challenges Posed by Services

The Expanded Marketing Mix Required for Services

Services dominate economy in most nations

Understanding services offers you personal competitive

Importance of service sector in economy is growing

Most new jobs are generated by services

Fastest growth expected in knowledge-based industries

Time, per Capita Income Source: IMF, 1997

Powerful forces are transforming service markets

These forces are reshaping

Social Business Advances in

Innovation in service products & delivery systems, stimulated by better technology

Customers have more choices and exercise more power

Success hinges on:

Social Business Advances in

New agreement on trade in services

Social Business Advances in

Social Business Advances in

Push to increase shareholder value

More strategic alliances and outsourcing

Social Business Advances in

Growth of the Internet

Social Business Advances in

More companies operating on transnational

Increased international travel

The historical view

A fresh perspective: Services involve a form of rental,

Five broad categories within non-ownership framework:

Implications of renting versus owning (Service Perspectives 1.1)

In exchange for their money, time, and effort, service

A firms market offerings are divided into core product

Good service increases the value of a core physical good

The eight common differences are:

What are marketing implications?

Difference Implications Marketing-Related Tasks

Services are often Greater risk and Educate customers on

Customers may be Interaction between Develop user-friendly

Difference Implications Marketing-Related Tasks

People may be part Behavior of service Recruit, train employees to

Low Intangible Elements High

Marketing can be viewed as:

Marketing is the only function to bring operating

The 8Ps of services marketing are needed to create

Place and Time

Price and Other User Outlays

Promotion and Education

Productivity and Quality

Embrace all aspects of service performance that

Core product responds to customers primary need

Array of supplementary service elements

Delivery decisions: Where, When, How

Geographic locations served

Customer control and convenience

Marketers must recognize that customer outlays

Identify and minimize other costs incurred by users: