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MKTG 29 : Service Marketing
 PART 1  – Understanding Services
Chapter 1: Distinctive Aspects of Service
                    Management


                Instructor: Mr. Abelito T. Quiwa. MBA
                            School Year 2011 – 2012
Distinctive Aspect of Service
Management
 “ Ours is a service economy and it has been one
 for some time.” – Karl Albrecht and Ron Zemke

 “ Consciously or unconsciously, every one of us
 does render some service or other. If we cultivate
 the habit of doing this service deliberately, our
 desire for service will steadily grow stronger and
 we will make not only our own happiness, but that
 of the world. The best way to find yourself is to
 love yourself in the service of others.”
 - Mahatma Gandhi
Objectives
 To know how significant is the service sector in the
    economies of different countries.
   To know what characteristics make services different
    from goods and what are their implications for
    service marketers.
   To know why is it important to examine services
    marketing within the broader framework of integrated
    service management.
    To know why do service businesses need to
    integrate the marketing, operations and human-
    resources functions.
    To what are the major changes occurring in the
Service in the Modern Economy
 HSBC Holdings, one of the world’s largest banking
  groups, is turning to it own backyard, Asia, in search
  of profit and growth after two decades of expansion
  in the US and Europe.
 Singapore Airlines (SIA) is one of the most
  consistently profitable airlines in the world. Turning
  economic crisis of 1997 into opportunity. It has spent
  $292 million on upgrading service in all classes
  without raising fares.
 NBC Asia, a subsidiary of the National Broadcasting
  Company, one of the leading national television
  network in the U.S., has launched CNBC Asia, a 24
  hour business and financial news covering from
  three continents.
What Is a Service?
 The two definitions that capture its essence.
 A service is an act or performance offered by one
  party to another. Although the process may be tied to
  a physical product, the performance is essentially
  intangible and does not usually result in ownership of
  any of the factors of production.
 A service is an economic activity that creates value
  and provides benefits for customers at a specific
  time and place, by bringing about a desired change
  in, or on behalf of, the recipient of the service.
Understanding the Service Sector
Table 1.1. Size of the Service Sector in Selected Asian
           Countries
 Value Added by Services as a Percentage of Gross Domestic
  Product in 1999, 1990,1989
                  1999         1990      1989
   China          32.9%        30.1%     21.4%
   Hon Kong       84.7%        74.5      67.5         1
   India          46.1         39.7      36.0
   Indonesia      37.7         41.5      31.8
   South Korea    51.5         48.4      43.7          3
   Malaysia       43.1         42.6      n.a.
   Philippines    52.0         43.6      36.1          3
   Singapore      64.1         65.3      60.6
   Taiwan         64.3         54.6      46.6          2
   Thailand       49.6         50.3      48.1
   Vietnam        40.1         38.6      26.9
   Pakistan       49.4         48.8      45.5
Service Marketing Versus
Physical Goods Marketing
 Marketing can be described in several ways. It
  can be as a strategic thrust pursued by top
  management; as a set of functional activities
  performed by line managers ( such as product
  policy, pricing, delivery and communications); or
  as a customer-driven orientation for the entire
  organization.
 It also recognizes that the service-marketing
  function is much broader than the activities and
  output of the traditional marketing department,
  requiring close cooperation between marketers
  and those managers responsible for operations
Table 1.2. Management Implication of some Basic Differences b
Goods and Services
How Service do not Differ
from Goods                      Some Key Implications
Customers do not obtain      Need to think of temporary rentals
                             rather than permanent sales
ownership of services        How best to price such rentals?
                              Customer criteria are different for
                              renting an object instead of purchasing
                              it.
Service product are           Consider how to create and
                              communicate tangible evidence
intangible performances       Understand how to stage the
                              performance and manage each step
Greater involvement of        Customer behavior and competence
                              can help or hinder productivity
customers in the production   Customers may need to be managed
process                       as partial employees
                              Consider opportunities for self-service
                              Location and opening hours of service
                              “factories” must be convenient for
                              customers
Table 1.2. Management Implication of some Basic Differences b
 Goods and Services
How Service do not Differ Some Key Implications
from Goods

Other people may form part   Behavior and demeanor of employees
                             and other customers must be
of the product               managed, because they affect
                             customer satisfaction
                             Recruit service personnel who possess
                             or can be trained to have both
                             technical skills and human skills; keep
                             them motivated
                             May be unwise to mix different market
                             segments at the same time and
                             location
More variability in          Quality control-particularly
                             consistency-is more difficult to achieve
operational inputs and       Productivity may be improved by
outputs                      standardization
                             Replacing employees by automation
Table 1.2. Management Implication of some Basic Differences b
Goods and Services
How Service do not Differ        Some Key Implications
from Goods

Many services are difficult for Need to develop trust between
customers to evaluate           customer and firm
                                 Educate customers to help them
                                 make smarter choices
Absence of inventories after     One produced, services cannot
production                       usually be stored, so firms must
                                 develop strategies to manage
                                 demand levels
                                 Many capacity level to match
                                 predicted fluctuations in demand
                                 Profitability of capacity-constrained
                                 service businesses is often a
                                 function of getting the right
                                 business at the right time at the
                                 right price.
Table 1.2. Management Implication of some Basic Differences b
 Goods and Services
How Service do not Differ Some Key Implications
from Goods

Time factor is relatively     Must understand customer’s time
more important                constraints and priorities
                              Recognize that spending time is often
                              seen by customers as a burden
                              Look for ways to compete on fast
                              service delivery; minimize waiting
                              Expand service hours ; consider 24/7
                              service.
Delivery systems may          Consider opportunities for electronics
involve both electronic and   delivery of any information-based
                              service elements.
physical channels             Recognize opportunities for
                              instantaneous delivery of services
                              worldwide
                              Where services are delivered through
Customer Do Not Obtain
Ownership of Services
 In many instances, service marketing
  offer customers the opportunity to rent
  the use of physical object like a rental
  car or hotel room, to hire the labor and
  expertise of people.
 A key implication for marketers concerns
  pricing. When the firm rents out usage of
  its physical, human or intangible assets,
  time becomes as important denominator
  and determining the relevant costs
Service Products as Intangible
    Performance
 An interesting way to distinguish between goods
    and services is to place them on a scale from
    tangible-dominant to intangible-dominant.
   Kotler has proposed five categories of markets
    based on the goods offered.
    Pure tangible food (like soap or salt)
   Tangible good with accompanying services ( for
    example, cars or computers)
   Hybrid( like a restaurant) combining roughly equal
    parts of good and services.
   Major service with accompanying minor goods
    and services(e.g. air travel).
    Pure service(such as babysitting or
and Most Service Contain a
       Good
              GOODS                             SERVICES
              Automobile
                Computer
                 Installed carpeting
                            Fast-food meal
                           Restaurant meal/auto repair
                                       Hospital care
                           Advertising agency/investment management
                                      Consulting Services/teaching
                                                Counseling


100%    75%      50%     25%      0       25%       50%      75%     100%
Customer Involvement in the
Production Process
 Under such circumstances, customers can be
  thought of as partial employees and services
  firms have much to gain form trying their
  customers to make them more competent and
  productive.
 Changing the nature of the production
  process often affects the role that customers
  are asked to play in that process.
 When customers are required to visit the site
  of services delivery, it should have a
  convenient location and be open at times that
  suit customer’s needs.
People as part of the Product
 The difference between one high-contact
  service and another often lies in the quality of
  employees who serve customers. This is
  especially so in many “high-contact” service,
  where customers come into contact not only
  with service personnel but also with other
  customers.
 Service firms need to devote special care to
  selecting, training and motivating those
  employees who will be serving customer
  directly. At the same time firms need to
  manage and shape customer behavior so that
  the misbehavior of a few will not spoil the
Greater Variability in Operational
Inputs and Outputs
 The presence of employees and other
  customers in the operational systems makes it
  difficult to standardize and control quality in
  both inputs and outputs.
 The services performed while the customer is
  absent, such as process bank cheque,
  repairing cars or cleaning offices at night. As a
  result, mistakes are both more likely to occur
  and more difficult to shield from customers.
 These factors make it difficult for service
  organizations to improve productivity, control
Harder for Customer to Evaluate
 Service marketers can reduce
  customers perceived risk before a
  service purchase by helping them match
  their needs to specific service features
  and educating them on what to expect
  both during and after service delivery.
 A firm that develops as reputation for
  considerate and ethical treatment of its
  customers will gain the trust of its
  existing customers and benefit from
  positive word-of-mouth referrals
No Inventories for Service after
Production
 The necessary facilities, equipment and labor
  can be held in readiness to create the service,
  but these simply represent productive capacity,
  not the product itself.
 Unused capacity is wasted and when demand
  exceeds capacity, customers may be sent away
  disappointed, unless they are prepared to wait.
 An important task for service marketers,
  therefore, is to find ways of smoothing demand
  levels to match capacity through price incentives,
  promotions or other means.
 If profit maximization is an important goal, then
  marketers should target the right segments at the
Importance of the Time Factor
 Many services are delivered in real time and
  customers have to be physically present. There
  are limits as to how long people are willing to
  spend at the service factory as customers place a
  value on their time and some people are willing to
  pay more for faster service.
 In general, today speed is often seen as a key
  element in good service. Service marketers need
  to understand customers time constraints and
  priorities, which may vary from one market
  segment to another.
Different Distribution Channels
 Service businesses may choose to combine the
  service factory, retail outlet and point of consumption
  at a single location, or use electronic means to
  distribute their services ( broadcasting or electronic
  fund transfer).
 Sometimes, as in banking, firms offer customers a
  choice of distribution channels, ranging from visiting
  the bank in person to conducting home banking on
  the internet.
 A firm that previously could not survive because it
  was serving a narrow market segment in a limited
  geographic area can now greatly increase its market
  potential, with no geographic boundaries.
An Integrated Approach to
Service Management
 Image yourself as the manager of a hotel. In both
  instances, you need to be concerned about
  satisfying your customers on daily basis, about
  operational system running smoothly and
  efficiently, about your employees not only working
  productively but are also delivering good service.
 In short, integration of activities between
  functions is the name of the game. Problems in
  any one of those three area may signal future
  financial problems.
An Integrated Approach to
Service Management
 The Eight Components of Integrated Service
 Management
1. Product Elements
2. Place, Cyberspace and Time
3. Process
4. Productivity and Quality
5. People
6. Promotion and Education
7. Physical Evidence
8. Price and Other Costs of Service
An Integrated Approach to
Service Management
 Linking Services Marketing, Operation and Human
  Resources
 As shown on the 8Ps model, marketing cannot
  operate successfully in isolation from other functions
  in service business.
 Three management functions play central and
  interrelated roles in meeting customer needs, namely
  marketing, operations and human resources.
 Service firms must understand that implications of the
  eight components of integrated service management,
  as described above, in order to develop effective
  strategies.
 Firms whose managers succeed in developing
An Integrated Approach to
Service Management
 Marketing Services Versus Marketing Goods and
  through Service
 Theodore Levitt, one of the world’s best known
  marketing experts, commented almost 30 years
  ago that “there are no such things as service
  industries. There are only industries whose
  service components are greater or less than
  those of other industries. Everybody is in service.
 More recently. Roland Rust, editor of the Journal
  of Service Research, suggested that
  manufacturing firms had got this message when
  he observed that “ most goods businesses now
  view themselves primarily as services.”
An Integrated Approach to Service
 Management
 Creating Value
 Value can defined as the worth of a specific action or
  object, relative to an individual’s ( or organization’s)
  needs at a particular point in time, less the costs involved
  in obtaining those benefits.
 A useful way of thinking about “values” is as underlying
  beliefs about how life should be lived, how people should
  be treated and how business should be conducted.
 Managers would be wise to use their firm’s values as a
  reference point when recruiting and motivating
  employees. They should also clarify the firm’s values and
  expectation in dealing with prospective customers and
  make an effort to attract and retain customers who share
  and appreciate those same values
 Today, there is greater scrutiny of a firm’s business ethics
  and tougher legislation to protect both customers and
  employees form abusive treatment.
The Evolving Environment of
Services
 Even as service industries grew, many practitioners
  had an outdated view of marketing, regarding it as
  little more than advertising and public relations.
 Academics, too were slow to respond to the
  changing business environment. But scholars
  eventually began challenging the notion of applying
  traditional marketing concepts to the burgeoning
  service sector.
 Many factors underline the transformation of
  services management. Depending on the industry
  and the country in which the service firm does
  business.
Government Policies
 Action by government agencies continue to see the
  structure of the service economy and the terms
  under which competition takes place. Traditionally,
  many service industries have been highly regulated.
 Government agencies mandated price levels, placed
  geographic constraints on distribution strategies and,
  in some instances, even defined the product
  attributes.
 When services are provided by public agencies,
  there are often cross subsidies, designed to achieve
  broader social goals.
 With privatization, there are fears that the search for
  efficiency and profits will lead to restricted service
Social Changes
 A combination of changing lifestyle , higher incomes
  and declining prices for many high-tech products has
  meant that more people are buying computers and
  using the internet to access information from around
  the world.
 For example, the pharmaceutical industry in China
  has been growing at an average annual rate of 20
  percent since 1990. This is in striking contrast to an
  average annual growth of 7-9 percent in the U.S.
  and Europe during the same period.
Business Trends
 The environment in which businesses operate has also
  been changing rapidly. Supplementary services one
  designed to help sell equipment, including consultation,
  credit, transportation and delivery, installation, training
  and maintenance, are now offered as profit-seeking
  services in their own right, even to customers who have
  chosen to purchase competing equipment.
 The freedom to engage in aggressive marketing is
  essential to bring innovative services, price cuts and
  new delivery systems to prospective customers.
Advance in information Technology
 New technologies are radically altering the ways in
  which many service organizations do business. One
  of the most powerful is the integration of computers
  and telecommunications.
 Digitization allow text, graphics, video and audio to be
  manipulated, stored, and transmitted digitally.
 Technology does more than enable creation of new or
  improved services. It may also facilitate re-
  engineering of such activities as delivery of
  information, order-taking and payment , maintaining
  more consistent service standards, creation of
  centralized customer-service departments,
  automation and self-service systems.
Internationalization and
   Localization
 The internationalization of service companies is
  readily apparent to any tourist or business executive
  travelling through Asia.
 Brand names such as Giordano, 7-Eleven, Sogo,
  Shangria-la Hotels and Carrefour have moved far
  from their nations of origin.
 These companies recruit local employees and
  modify their products or services to the local
  business environment and culture. Ex. Mcdonald’s “
  Curry Potato Pie “ and “ Red Bean Sundae”
  introduced in Hong Kong is a case in point.
Managing in a Continually
Changing Environment
 The willingness and ability of managers in service
  firms to respond to the dramatic changes
  affecting the service economy will determine
  whether their own organizations survive and
  prosper or go under in the face of more agile and
  adaptive competitors.
 The opening up of the service economy means
  that there will be greater competition. In turn,
  more competition will stimulate innovation, not
  least through the application of new and improved
  technologies.
Conclusion
 Why study services? The answer is simply that modern
  economies are driven by service businesses. Services
  are responsible for the creation of a substantial
  proportion of new jobs, both skilled and unskilled, around
  the world. This sector includes a wide variety of different
  industries, including many activities provided by public
  and non-profit organizations. It accounts for over half the
  economy in most developing countries and for 70% or
  more in many highly developed economies.
 As has been shown in this chapter, services differ from
  manufacturing organizations in may important respect
  and require a distinctive approach to marketing and other
  management functions. As a result, managers who want
  their enterprises to succeed cannot continue to rely solely
  on tools and concepts developed in the manufacturing
  sector. The rest of this book will discuss in more detail
  the unique challenges and opportunities faced by service
  businesses. It is our hope that you will use the material
  from this text to enhance your future experiences, not

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Pcc mktg 29 chapter 1 serv. mktg mgmt

  • 1. MKTG 29 : Service Marketing PART 1 – Understanding Services Chapter 1: Distinctive Aspects of Service Management Instructor: Mr. Abelito T. Quiwa. MBA School Year 2011 – 2012
  • 2. Distinctive Aspect of Service Management  “ Ours is a service economy and it has been one for some time.” – Karl Albrecht and Ron Zemke  “ Consciously or unconsciously, every one of us does render some service or other. If we cultivate the habit of doing this service deliberately, our desire for service will steadily grow stronger and we will make not only our own happiness, but that of the world. The best way to find yourself is to love yourself in the service of others.” - Mahatma Gandhi
  • 3. Objectives  To know how significant is the service sector in the economies of different countries.  To know what characteristics make services different from goods and what are their implications for service marketers.  To know why is it important to examine services marketing within the broader framework of integrated service management.  To know why do service businesses need to integrate the marketing, operations and human- resources functions.  To what are the major changes occurring in the
  • 4. Service in the Modern Economy  HSBC Holdings, one of the world’s largest banking groups, is turning to it own backyard, Asia, in search of profit and growth after two decades of expansion in the US and Europe.  Singapore Airlines (SIA) is one of the most consistently profitable airlines in the world. Turning economic crisis of 1997 into opportunity. It has spent $292 million on upgrading service in all classes without raising fares.  NBC Asia, a subsidiary of the National Broadcasting Company, one of the leading national television network in the U.S., has launched CNBC Asia, a 24 hour business and financial news covering from three continents.
  • 5. What Is a Service?  The two definitions that capture its essence.  A service is an act or performance offered by one party to another. Although the process may be tied to a physical product, the performance is essentially intangible and does not usually result in ownership of any of the factors of production.  A service is an economic activity that creates value and provides benefits for customers at a specific time and place, by bringing about a desired change in, or on behalf of, the recipient of the service.
  • 6. Understanding the Service Sector Table 1.1. Size of the Service Sector in Selected Asian Countries  Value Added by Services as a Percentage of Gross Domestic Product in 1999, 1990,1989 1999 1990 1989 China 32.9% 30.1% 21.4% Hon Kong 84.7% 74.5 67.5 1 India 46.1 39.7 36.0 Indonesia 37.7 41.5 31.8 South Korea 51.5 48.4 43.7 3 Malaysia 43.1 42.6 n.a. Philippines 52.0 43.6 36.1 3 Singapore 64.1 65.3 60.6 Taiwan 64.3 54.6 46.6 2 Thailand 49.6 50.3 48.1 Vietnam 40.1 38.6 26.9 Pakistan 49.4 48.8 45.5
  • 7. Service Marketing Versus Physical Goods Marketing  Marketing can be described in several ways. It can be as a strategic thrust pursued by top management; as a set of functional activities performed by line managers ( such as product policy, pricing, delivery and communications); or as a customer-driven orientation for the entire organization.  It also recognizes that the service-marketing function is much broader than the activities and output of the traditional marketing department, requiring close cooperation between marketers and those managers responsible for operations
  • 8. Table 1.2. Management Implication of some Basic Differences b Goods and Services How Service do not Differ from Goods Some Key Implications Customers do not obtain Need to think of temporary rentals rather than permanent sales ownership of services How best to price such rentals? Customer criteria are different for renting an object instead of purchasing it. Service product are Consider how to create and communicate tangible evidence intangible performances Understand how to stage the performance and manage each step Greater involvement of Customer behavior and competence can help or hinder productivity customers in the production Customers may need to be managed process as partial employees Consider opportunities for self-service Location and opening hours of service “factories” must be convenient for customers
  • 9. Table 1.2. Management Implication of some Basic Differences b Goods and Services How Service do not Differ Some Key Implications from Goods Other people may form part Behavior and demeanor of employees and other customers must be of the product managed, because they affect customer satisfaction Recruit service personnel who possess or can be trained to have both technical skills and human skills; keep them motivated May be unwise to mix different market segments at the same time and location More variability in Quality control-particularly consistency-is more difficult to achieve operational inputs and Productivity may be improved by outputs standardization Replacing employees by automation
  • 10. Table 1.2. Management Implication of some Basic Differences b Goods and Services How Service do not Differ Some Key Implications from Goods Many services are difficult for Need to develop trust between customers to evaluate customer and firm Educate customers to help them make smarter choices Absence of inventories after One produced, services cannot production usually be stored, so firms must develop strategies to manage demand levels Many capacity level to match predicted fluctuations in demand Profitability of capacity-constrained service businesses is often a function of getting the right business at the right time at the right price.
  • 11. Table 1.2. Management Implication of some Basic Differences b Goods and Services How Service do not Differ Some Key Implications from Goods Time factor is relatively Must understand customer’s time more important constraints and priorities Recognize that spending time is often seen by customers as a burden Look for ways to compete on fast service delivery; minimize waiting Expand service hours ; consider 24/7 service. Delivery systems may Consider opportunities for electronics involve both electronic and delivery of any information-based service elements. physical channels Recognize opportunities for instantaneous delivery of services worldwide Where services are delivered through
  • 12. Customer Do Not Obtain Ownership of Services  In many instances, service marketing offer customers the opportunity to rent the use of physical object like a rental car or hotel room, to hire the labor and expertise of people.  A key implication for marketers concerns pricing. When the firm rents out usage of its physical, human or intangible assets, time becomes as important denominator and determining the relevant costs
  • 13. Service Products as Intangible Performance  An interesting way to distinguish between goods and services is to place them on a scale from tangible-dominant to intangible-dominant.  Kotler has proposed five categories of markets based on the goods offered.  Pure tangible food (like soap or salt)  Tangible good with accompanying services ( for example, cars or computers)  Hybrid( like a restaurant) combining roughly equal parts of good and services.  Major service with accompanying minor goods and services(e.g. air travel).  Pure service(such as babysitting or
  • 14. and Most Service Contain a Good GOODS SERVICES Automobile Computer Installed carpeting Fast-food meal Restaurant meal/auto repair Hospital care Advertising agency/investment management Consulting Services/teaching Counseling 100% 75% 50% 25% 0 25% 50% 75% 100%
  • 15. Customer Involvement in the Production Process  Under such circumstances, customers can be thought of as partial employees and services firms have much to gain form trying their customers to make them more competent and productive.  Changing the nature of the production process often affects the role that customers are asked to play in that process.  When customers are required to visit the site of services delivery, it should have a convenient location and be open at times that suit customer’s needs.
  • 16. People as part of the Product  The difference between one high-contact service and another often lies in the quality of employees who serve customers. This is especially so in many “high-contact” service, where customers come into contact not only with service personnel but also with other customers.  Service firms need to devote special care to selecting, training and motivating those employees who will be serving customer directly. At the same time firms need to manage and shape customer behavior so that the misbehavior of a few will not spoil the
  • 17. Greater Variability in Operational Inputs and Outputs  The presence of employees and other customers in the operational systems makes it difficult to standardize and control quality in both inputs and outputs.  The services performed while the customer is absent, such as process bank cheque, repairing cars or cleaning offices at night. As a result, mistakes are both more likely to occur and more difficult to shield from customers.  These factors make it difficult for service organizations to improve productivity, control
  • 18. Harder for Customer to Evaluate  Service marketers can reduce customers perceived risk before a service purchase by helping them match their needs to specific service features and educating them on what to expect both during and after service delivery.  A firm that develops as reputation for considerate and ethical treatment of its customers will gain the trust of its existing customers and benefit from positive word-of-mouth referrals
  • 19. No Inventories for Service after Production  The necessary facilities, equipment and labor can be held in readiness to create the service, but these simply represent productive capacity, not the product itself.  Unused capacity is wasted and when demand exceeds capacity, customers may be sent away disappointed, unless they are prepared to wait.  An important task for service marketers, therefore, is to find ways of smoothing demand levels to match capacity through price incentives, promotions or other means.  If profit maximization is an important goal, then marketers should target the right segments at the
  • 20. Importance of the Time Factor  Many services are delivered in real time and customers have to be physically present. There are limits as to how long people are willing to spend at the service factory as customers place a value on their time and some people are willing to pay more for faster service.  In general, today speed is often seen as a key element in good service. Service marketers need to understand customers time constraints and priorities, which may vary from one market segment to another.
  • 21. Different Distribution Channels  Service businesses may choose to combine the service factory, retail outlet and point of consumption at a single location, or use electronic means to distribute their services ( broadcasting or electronic fund transfer).  Sometimes, as in banking, firms offer customers a choice of distribution channels, ranging from visiting the bank in person to conducting home banking on the internet.  A firm that previously could not survive because it was serving a narrow market segment in a limited geographic area can now greatly increase its market potential, with no geographic boundaries.
  • 22. An Integrated Approach to Service Management  Image yourself as the manager of a hotel. In both instances, you need to be concerned about satisfying your customers on daily basis, about operational system running smoothly and efficiently, about your employees not only working productively but are also delivering good service.  In short, integration of activities between functions is the name of the game. Problems in any one of those three area may signal future financial problems.
  • 23. An Integrated Approach to Service Management  The Eight Components of Integrated Service Management 1. Product Elements 2. Place, Cyberspace and Time 3. Process 4. Productivity and Quality 5. People 6. Promotion and Education 7. Physical Evidence 8. Price and Other Costs of Service
  • 24. An Integrated Approach to Service Management  Linking Services Marketing, Operation and Human Resources  As shown on the 8Ps model, marketing cannot operate successfully in isolation from other functions in service business.  Three management functions play central and interrelated roles in meeting customer needs, namely marketing, operations and human resources.  Service firms must understand that implications of the eight components of integrated service management, as described above, in order to develop effective strategies.  Firms whose managers succeed in developing
  • 25. An Integrated Approach to Service Management  Marketing Services Versus Marketing Goods and through Service  Theodore Levitt, one of the world’s best known marketing experts, commented almost 30 years ago that “there are no such things as service industries. There are only industries whose service components are greater or less than those of other industries. Everybody is in service.  More recently. Roland Rust, editor of the Journal of Service Research, suggested that manufacturing firms had got this message when he observed that “ most goods businesses now view themselves primarily as services.”
  • 26. An Integrated Approach to Service Management  Creating Value  Value can defined as the worth of a specific action or object, relative to an individual’s ( or organization’s) needs at a particular point in time, less the costs involved in obtaining those benefits.  A useful way of thinking about “values” is as underlying beliefs about how life should be lived, how people should be treated and how business should be conducted.  Managers would be wise to use their firm’s values as a reference point when recruiting and motivating employees. They should also clarify the firm’s values and expectation in dealing with prospective customers and make an effort to attract and retain customers who share and appreciate those same values  Today, there is greater scrutiny of a firm’s business ethics and tougher legislation to protect both customers and employees form abusive treatment.
  • 27. The Evolving Environment of Services  Even as service industries grew, many practitioners had an outdated view of marketing, regarding it as little more than advertising and public relations.  Academics, too were slow to respond to the changing business environment. But scholars eventually began challenging the notion of applying traditional marketing concepts to the burgeoning service sector.  Many factors underline the transformation of services management. Depending on the industry and the country in which the service firm does business.
  • 28. Government Policies  Action by government agencies continue to see the structure of the service economy and the terms under which competition takes place. Traditionally, many service industries have been highly regulated.  Government agencies mandated price levels, placed geographic constraints on distribution strategies and, in some instances, even defined the product attributes.  When services are provided by public agencies, there are often cross subsidies, designed to achieve broader social goals.  With privatization, there are fears that the search for efficiency and profits will lead to restricted service
  • 29. Social Changes  A combination of changing lifestyle , higher incomes and declining prices for many high-tech products has meant that more people are buying computers and using the internet to access information from around the world.  For example, the pharmaceutical industry in China has been growing at an average annual rate of 20 percent since 1990. This is in striking contrast to an average annual growth of 7-9 percent in the U.S. and Europe during the same period.
  • 30. Business Trends  The environment in which businesses operate has also been changing rapidly. Supplementary services one designed to help sell equipment, including consultation, credit, transportation and delivery, installation, training and maintenance, are now offered as profit-seeking services in their own right, even to customers who have chosen to purchase competing equipment.  The freedom to engage in aggressive marketing is essential to bring innovative services, price cuts and new delivery systems to prospective customers.
  • 31. Advance in information Technology  New technologies are radically altering the ways in which many service organizations do business. One of the most powerful is the integration of computers and telecommunications.  Digitization allow text, graphics, video and audio to be manipulated, stored, and transmitted digitally.  Technology does more than enable creation of new or improved services. It may also facilitate re- engineering of such activities as delivery of information, order-taking and payment , maintaining more consistent service standards, creation of centralized customer-service departments, automation and self-service systems.
  • 32. Internationalization and Localization  The internationalization of service companies is readily apparent to any tourist or business executive travelling through Asia.  Brand names such as Giordano, 7-Eleven, Sogo, Shangria-la Hotels and Carrefour have moved far from their nations of origin.  These companies recruit local employees and modify their products or services to the local business environment and culture. Ex. Mcdonald’s “ Curry Potato Pie “ and “ Red Bean Sundae” introduced in Hong Kong is a case in point.
  • 33. Managing in a Continually Changing Environment  The willingness and ability of managers in service firms to respond to the dramatic changes affecting the service economy will determine whether their own organizations survive and prosper or go under in the face of more agile and adaptive competitors.  The opening up of the service economy means that there will be greater competition. In turn, more competition will stimulate innovation, not least through the application of new and improved technologies.
  • 34. Conclusion  Why study services? The answer is simply that modern economies are driven by service businesses. Services are responsible for the creation of a substantial proportion of new jobs, both skilled and unskilled, around the world. This sector includes a wide variety of different industries, including many activities provided by public and non-profit organizations. It accounts for over half the economy in most developing countries and for 70% or more in many highly developed economies.  As has been shown in this chapter, services differ from manufacturing organizations in may important respect and require a distinctive approach to marketing and other management functions. As a result, managers who want their enterprises to succeed cannot continue to rely solely on tools and concepts developed in the manufacturing sector. The rest of this book will discuss in more detail the unique challenges and opportunities faced by service businesses. It is our hope that you will use the material from this text to enhance your future experiences, not