Introduction

Ahmad A. Maiyaki, PhD

Dept. of Business Admin. BUK
[email protected]
 Introduction
• Services make up the bulk of today's economy,
not only in the United States and Canada
where they account for more than 73% and 67
% of the GDP, respectively, but also in other
nations throughout the world
• This trend is also similar in the developing
countries such as Thailand
 Introduction
• The rise in the global significance of services are
associated with dynamic changes in the world
economy, customer expectations and demands, and
the opportunities offered by new technologies.
• The collapse of former centrally planned economies
and/or their replacement with market-based
economies:highly educated middle-class consumers
• Transfer of many manufacturing operations to less
developed countries with reduced labour costs
 What is service?
• Is an intangible offering involving deeds,
process and performances provided by one
party for another
• Basically are intangible that can’t be toughed,
seen or felt such as consulting and other
professional services
• Services offered by financial institutions, hotels,
hospital, educational institution are
performance co-produced with consumers
• Services have been defined to include all
economic activities whose output is not a
physical product or construction, is generally
consumed at the time it is produced and
provides value that are essentially intangible.
• Although the process may be tied to a physical
product, the performance is essentially
intangible and does not normally result in
ownership of any tangible product.
• Services are economic activities that create
value and provide benefits for customers at
specific times and places, as a result of
bringing about a desired change in the
recipient’s situation.
 Categories of service
• Service industries and companies
– Are industries and coys whose core offering is
service
– This sector dominates the modern economy in
terms of GDP, employment etc
– Example of such industries: financial,
wholesale/retail trades, transportation, education
and professional services, health, government etc
• Service offerings
– This include the variety of service being offered by
the coys in the service sector
– Although intangible in nature but service provide
value to customers and thus willing to pay
– Sometimes even coys in other sectors provide
array of service
• Customer service
– Complementary service provided to support the coy’s
core products
– This takes place on the site during service encounter, after
the transaction using phones or internet
– Call centres’ staff work round the clock to provide
customer service
– is the support you offer your customers both before and
after they buy and use your prodcuts or servives that will
help them have an easy and enjoyable esxperiance with
you
• Derived service
– It has been argued that value derived from
products is actually the service they produced
– E.g. pharmaceutical coys provide medical services,
computer provides information service etc
– This definition provides a broader meaning of
service
 Tangibility continuum
• Considering various definition of services,
intangibility stands out as the main feature
• Similarly, it’s the main distinguishing factor
between products and service
• However, it should be noted that very few
pure services and pure products exist
• Instead products tend to be more tangible
than services and vice-versa
 Tangibility Spectrum
Salt
l Soft Drinks
l Detergents
l Automobiles
l CosmeticsFast-food
l Outlets
l Intangible
Dominant

Tangible
Dominant l
Fast-food
Outlets l
Advertising
Agencies
l
Airlines l
Investment
Managementl
Consultingl
Teaching
 Most Goods Most Services

Easy Difficult
to evaluate to evaluate*
Clothing Restaurant meals Computer repair
Chair Lawn fertilizer Education
Motor vehicle Haircut Legal services
Foods Entertainment Complex surgery

High in search High in experience High in credence

attributes attributes attributes
*NOTE: Difficulty of evaluation tends to decrease with broad exposure Source:
to a service category and frequency of use of a specific supplier Adapted from Zeithaml
 Why service marketing
• Service-dominated economies
– As noted earlier many modern economies tend to be
service-based
– Example, the contribution of service to the economy in
terms of GDP and employment more than 80% most
developed economies
– Growth in the global trade of service, while trade of
manufactured product remains in deficit, service trade
posts surplus
– Exportation of services such as knowledge, information and
creativity by both the big and small coys continue to grow
• An edge for competition in manufacturing
• Initially service was thought to be restricted to
coys in the service sector
• But with increased competition and consumer
demand, service is used by manufacturing and IT
coys as competitive tool
• Based on the above, service marketing continue to
flourish
• Service marketing is unique
– Marketing and management of services presented
challenges not faced in mktg of goods
– Service marketers that were formerly engaged in
mktg goods realised that they needed new skills
– So, academics, practitioners and marketers put
head together to develop the field of service mktg
 Characteristics of services
• Intangibility
– The most basic differentiating factor between
products and service
– Generally, service can’t be seen, touched, tasted,
felt etc even though certain equipments used to
deliver service can be touched
– So, service is difficult to comprehend and assess
 Marketing Challenges
• Can easily be imitated because services
cannot be patented
• Services cannot be readily displayed or
communicated, so quality becomes hard to
assess
• Pricing is difficult
 Heterogeneity
• This arises due the fact that services are co-
produced as a result of human interactions
(between and among employees and cust.)
• Just like two different service employees can’t
produce the same service, so also the output
of the same employee fluctuates
• Similarly, different customers perceive the
same service differently
 Marketing Challenges
• Service delivery and customer Satisfaction
depend on employee actions
• Service quality depends on many
uncontrollable factors (articulating needs,
other customers)
• There is no sure knowledge that the service
delivered matches what was planned and
promoted
Simultaneous production and consumption

• Services are usually produced and consumed at

the same time
• While for most products they’re produced first,
then sold and consumed; services are sold first
then produced and consumed
• This implies that the consumers frequently interact
with service employee to co-produce the service
• Similarly, consumers not only influence service
delivery but service experience by other cust.
 Marketing implication
• Customers participate in and affect the
transaction
• Customers affect each other
• Being part of the service, employees affect the
service outcome
• Mass production is difficult, hence economics
of scale can’t be achieved
 Perishability
• Most services can’t be saved, stored for future
use and can’t be returned
• A failed appointment of a medical doctor has
gone forever
• A customer who failed to pay for a room
booked in hotel or airline
 Marketing implications
• It is difficult to synchronize supply and
demand with services
• Difficulty in matching demand with supply as
services cannot be inventoried
• What size of plane to use for particular route
• Services cannot be returned or resold and
therefore, making recovery difficult
 7Ps of service (4Ps plus 3Ps)

• These include the traditional 4ps of product

marketing in addition to 3ps peculiar to service
• Due to the intangibility of service, customers
often fall back to tangible cues for assessment
• Similarly, the active role played by service
employee makes it part and parcel of the
offering
• Hence the need for more elements in the mix
 7ps…
• Product
• Price
• Place
• Promotion
• People
• Process
• Physical Evidence
 People
• For being part and parcel of service delivery
humans greatly influence it
• Employees attitudes and behaviours to a large
extent affect the perception of service
• Customers also affect the service delivery
process due to “co-production”
• Customers affect the service experience of
other customers e.g. class rooms etc
 Physical Evidence
• This include the environment where the service
interactions take place
• Visible cues that provide tangible evidence of a
firm's service style and quality.
• The appearance of buildings, landscaping,
vehicles, interior furnishing, equipment, staff
members, signs, printed materials etc
• For instance, an umbrella may symbolize
protection, and a fortress, security.
 Process
• A particular method of operations or series of
actions, typically involving steps that need to
occur in a defined sequence.
• Consists of procedures, mechanisms and flow
of activities by which the service is delivered
• The less the complicated the service the
better and easier for the customer to assess
the quality
Expanded mix
Expanded mix