The Satisfaction-Loyalty Curve

The Satisfaction-Loyalty Curve

Chapter 1 New Perspectives on Marketing in the Service Economy Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 1 Chapter One Learning Objectives Define services Recognize the importance of services Differentiate between services marketing and goods marketing Acquire introductory knowledge of the 8Ps of services marketing

Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 2 What Are Services? Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 3 Defining Services Services involve a form of rental and non-ownership Meaning access and usage fees, for a defined period of time, instead of buying it outright Services non-ownership framework Rental-good services right to a physical good Defined space and place rentals private space shared

with other customers Labour and expertise rentals hire people Access to shared physical environments share use of an environment, not private Systems and networks: access & usage rent right to participate Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 4 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 or other assets for which purchasers have responsibility. In exchange for their money, time and effort, service customers expect to obtain values from access to goods, labour,

professional skills, facilities, networks, and systems; but they do not normally take ownership of any of the physical elements involved. Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 5 Defining Services Service Product A service product comprises all the elements of the service performance, both tangible and intangible, that creates value for customers Businesses sell and market the core service product This is the marketing of services Customer Service Customer support of the core product after it is sold Marketing through service

Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 6 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 Personal competitive advantage Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 7 Why Study Services?

Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 8 Contribution of Service Industries to Canadian Gross Domestic Product, 2005 (Fig 1.1) Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 9 Estimated Size of Service Sector in Selected Countries (Fig 1.2) Copyright 2008 Pearson Education Canada

Services Marketing, Canadian Edition Chapter 1- 10 Challenges Posed by Services Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 11 Differences, Implications, and Marketing-Related Tasks (1) (Table 1.1) Difference Implications Most service products

cannot be inventoried Customers may be Intangible elements Harder to evaluate usually dominate value creation Services are often difficult to visualize and understand Customers may be involved in coproduction Copyright 2008 Pearson Education Canada turned away

service and distinguish from competitors Greater risk and uncertainty perceived Interaction between customer and provider; but poor task execution could affect satisfaction Marketing-Related Tasks Use pricing, promotion, and reservations to smooth demand; work with ops to manage capacity Emphasize physical clues, employ metaphors and vivid images in advertising

Educate customers on making good choices; offer guarantees Develop user-friendly equipment, facilities, and systems; train customers, provide good support Services Marketing, Canadian Edition Chapter 1- 12 Differences, Implications, and Marketing-Related Tasks (2) (Table 1.1) Difference People may be part of service experience

Operational inputs and outputs tend to vary more widely Time factor often assumes great importance Distribution may take Implications Marketing-Related Tasks Behaviour of service Recruit, train employees to personnel and customers can affect satisfaction

Hard to maintain quality, consistency, reliability Difficult to shield customers from failures Time is money; customers want service at convenient times Electronic channels or voice telecommunications place through nonphysical channels Copyright 2008 Pearson Education Canada reinforce service concept Shape customer behaviour

Institute good service recovery procedures Find ways to compete on speed of delivery; offer extended hours Create user-friendly, secure websites and free access by telephone Services Marketing, Canadian Edition Chapter 1- 13 Value Added by Physical, Intangible Elements Helps Distinguish Goods and Services (Fig 1.7) Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition

Chapter 1- 14 NAICS North American Industry Classifications System Replacing the SIC system Standard Industrial Classification Better understanding of service dominated economies Some examples of new classifications: Diet and Weight Reducing Centres Management Consulting Services Temporary Help Services Telemarketing Bureaus Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 15 Differentiate between services and goods

Marketing tasks in services differ from the manufacturing sector Eight common differences : 1. 2. 3. 4. 5. 6. 7. 8. Service products cannot be inventoried Intangible elements dominate value creation Services difficult to visualize and understand

Customers may be involved in co-production People may be part of the service experience Operational inputs and outputs tend to vary widely Time factor assumes great importance Distribution through nonphysical channels What are marketing implications? Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 16 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 Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 17 Expanded Marketing Mix for Services Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 18 The 8 Ps of Services Marketing Product Elements (Chapter 3) Place and Time (Chapter 4)

Price and Other User Outlays (Chapter 5) Promotion and Education (Chapter 6) Process (Chapter 8) Physical Environment (Chapter 10) People (Chapter 11) Productivity and Quality (Chapter 14) Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 19 The 8Ps of Services Marketing: (1) Product Elements Embrace all aspects of service performance that create value Core product responds to customers primary need Help customers use core product through array of supplementary service elements Creates a service concept that offers value to customers and satisfies better than competitors

Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 20 The 8Ps of Services Marketing: (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 Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 21

The 8Ps of Services Marketing: (3) Price and Other User Outlays Traditional pricing tasks: Selling price, discounts, premiums Margins for intermediaries (if any) Credit terms Service marketers must recognize that customer outlays involve more than price paid to seller Identify and minimize other costs incurred by users: 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 Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 22

The 8Ps of Services Marketing: (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 Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition

Chapter 1- 23 The 8Ps of Services Marketing: (5) Process How firm does things may be as important as what it does Customers often 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 Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 24 The 8Ps of Services Marketing: (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 Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 25 The 8Ps of Services Marketing: (7) People Interactions between customers and employees influence perceptions of service quality Need the right customercontact employees, performing

tasks well Job design Recruiting Training Motivation Need the right customers for firms mission Contribute positively to experience of other customers Possessor can be trained to have needed skills (coproduction) Can shape customer roles and manage customer behaviour Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition

Chapter 1- 26 The 8Ps of Services Marketing: (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 Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- 27

Summary Chapter 1 Services Defined Rental and non-ownership of goods Time based exchange of economic activity performed in exchange for money, time and effort Services are transforming markets and experiencing rapid growth The differences between services and goods marketing focus on intangibility, people and time 8Ps of services marketing 1. Product Elements 5. Process 2. Place and Time 6. Physical Environment 3. Price and Other User Outlays 7. People 4. Promotion and Education 8. Productivity and Quality Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition

Chapter 1- 28

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