MKT in Serv Eco

New Perspectives on
Marketing in the
Service Economy
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 1
What Are Services?
Defining Services
Services are economic activities offered by one party to another, most

commonly employing time-based performances to bring about desired
results in recipients themselves or in objects for which purchasers
have responsibility.
Importance of Services
 Services dominate economy in most nations
 Service sector is growing rapidly
 Most new jobs are generated by services
 Powerful forces are transforming service markets
 Reshaping of demand, supply, competition, customers
Why Study Services?
Estimated Size of Service Sector in
Selected Countries
Challenges Posed by Services
Differences, Implications, and
Marketing-Related Tasks
Difference Implications
Use pricing, promotion,
Most service
products
Customers may be and
reservations to smooth
turned away Airlines demand; work with ops to
cannot be inventoried subsidised ticks, telco
manage capacity
Intangible elements Harder to evaluate Emphasize physical clues,

employ metaphors and vivid
usually dominate service and distinguish images in advertising,
value creation from competitors Certi, Books lawyers
Building and infra
Services are often Greater risk and
difficult to visualize uncertainty perceived, Educate customers on
choice of institute making good choices; offer
and understand
Guarantees, 5 yr warranty
Customers may be Interaction between
involved in co-
customer and provider; Develop user-friendly
but poor task execution equipment, facilities, and
production
could affect satisfaction systems; train customers,
Hostel food, Wi Fi provide good support.
Laptops, OHP’s and PC’s
Differences, Implications, and
Difference Implications Marketing-Related Tasks
People may be part Behaviour of service Recruit, train employees to

of personnel and customers
service experience reinforce service concept
can affect satisfaction
Shape customer behaviour
Airlines rowdy passengers
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 Banks,
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
Differentiate between services and goods
 Marketing tasks in services differ from the manufacturing

sector
 Eight common differences :
1. Service products cannot be inventoried
2. Intangible elements dominate value creation
3. Services 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 widely
7. Time factor assumes great importance
8. Distribution through nonphysical channels
 What are marketing implications?
The 8 Ps of Services Marketing
 Marketing is the only function to bring operating

revenues into a business; all other functions are
cost centres
 The “8Ps” of services marketing are needed to

create strategies for meeting customer needs
profitably in a competitive marketplace
 Traditional – product elements, place and time, price and other
user outlays, promotion and educations
 Extended by service delivery – physical environment,
processes, people, productivity and quality
Importance of Productivity and Quality for
Service Marketers
Productivity
Helps to keep costs down
 lower prices to develop market, compete better
 increase margins to permit larger marketing budgets
 raise profits to invest in service innovation
May impact service experience (must avoid negatives)
May require customer involvement, cooperation
Quality
Gain competitive advantage, maintain loyalty
Increase value (may permit higher margins)
Improve profits
Perspectives on Service Quality
Transcendental: Quality = excellence. Recognized only through

experience
Product-Based: Quality is precise and measurable
User-Based: Quality lies in the eyes of the beholder
Manufacturing- Quality is conformance to the firm’s developed

Based: specifications
Value-Based: Quality is a trade-off between price and value
Hard and Soft Measures of Service Quality
 Hard measures refer to standards and measures that can

be counted, timed or measured through audits
 typically operational processes or outcomes
 e.g. how many trains arrived late?
 Soft measures refer to standards and measures that

cannot easily be observed and must be collected by
talking to customers, employees or others
 e.g. SERVQUAL, surveys, and customer advisory panels.
 Control charts are useful for displaying performance over

time against specific quality standards.
Hard Measures of Service Quality
 Control charts to monitor

a single variable
 Service quality indexes
 Root cause analysis

(fishbone charts)
 Pareto analysis
Composition e of FedEx’s
Service Quality Index (SQI)
Weighting No of Daily
Failure Type Factor
X =
Incidents Points
Late Delivery – Right Day 1
Late Delivery – Wrong Day 5
Tracing request unanswered 1
Complaints reopened 5
Missing proofs of delivery 1
Invoice adjustments 1
Missed pickups 10
Lost packages 10
Damaged packages 10
Aircraft Delays (minutes) 5
Overcharged (packages missing label) 5
Abandoned calls 1
Total Failure Points (SQI) = XXX,XXX

Control Chart: Percent of Flights
Leaving within 15 Minutes of Schedule
100%
90%
80%
70%
60%
J F M A M J J A S O N D
Month
Tools to Address Service Quality Problems
 Fishbone diagrams: A cause-and-effect diagram to

identify potential causes of problems.
 Pareto charts: Separating the trivial from the important.

Often, a majority of problems is caused by a minority of
causes i.e. the 80/20 rule.
 Blueprinting: A visualization of service delivery. It allows

one to identify fail points in both the frontstage and
backstage.
Cause and Effect Chart for
Airline Departure Delays
Facilities, Frontstage Procedure

Front-Stage Procedures
Equipment Personnel
Personnel
Gate agents Delayed check-in

Arrive late cannot process procedure
Oversized Mechanical fast enough
bags Acceptance of late
Customers Failures
Customers Late/unavailable passengers
airline crew
Delayed
Departures
Late food Late cabin
service cleaners
Other Causes Poor announcement of
Weather Late baggage departures
Air traffic
Late fuel
Materials,
Materials, Backstage Information
Supplies
Supplies Personnel

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New Perspectives on

Services are economic activities offered by one party to another, most

 Services dominate economy in most nations

 Service sector is growing rapidly

 Most new jobs are generated by services

 Powerful forces are transforming service markets

 Reshaping of demand, supply, competition, customers

Intangible elements Harder to evaluate Emphasize physical clues,

Difference Implications Marketing-Related Tasks

People may be part Behaviour of service Recruit, train employees to

Operational inputs Hard to maintain quality,

 Marketing tasks in services differ from the manufacturing

 What are marketing implications?

 Marketing is the only function to bring operating

 The “8Ps” of services marketing are needed to

Transcendental: Quality = excellence. Recognized only through

Product-Based: Quality is precise and measurable

User-Based: Quality lies in the eyes of the beholder

Manufacturing- Quality is conformance to the firm’s developed

Value-Based: Quality is a trade-off between price and value

 Hard measures refer to standards and measures that can

 Soft measures refer to standards and measures that

 Control charts are useful for displaying performance over

 Control charts to monitor

 Service quality indexes

 Root cause analysis

Total Failure Points (SQI) = XXX,XXX

 Fishbone diagrams: A cause-and-effect diagram to

 Pareto charts: Separating the trivial from the important.

 Blueprinting: A visualization of service delivery. It allows

Facilities, Frontstage Procedure

Gate agents Delayed check-in

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