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Marketing in the New Economy
Service Marketing
Intl Marketing
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SERVICES
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Service Perspectives
Not a Product Intangible human act- that is
produced at the time of consumption cant be
standardized or inventoried
No One- Automation, Virtualization Outsourcing
No Difference- Products are just appliances
that provide services- Shift perspective from
Mfgr to consumer and focus on benefits
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Defining -a Service

• An act or performance offered by one party for
  another
• An economic activity that does not result in
  ownership
• A process that creates benefits by facilitating a
  desired change in
• customers themselves get a haircut
• physical possessions- get a wig
• intangible assets- get therapy

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Service as process.
Who / What is Direct Recipient
of the Service?
DIRECTED AT POSSESSIONS
DIRECTED AT PEOPLE
What is the Nature of the Service Act?
People Processing
Possession Processing
e.g., airlines, hospitals, haircutting,
restaurants hotels, fitness centers
TANGIBLE ACTS
e.g., transport, repair, cleaning, landscaping,
retailing, recycling
Mental Stimulus Processing
Information Processing (directed at intangible
assets)
INTANGIBLE ACTS
e.g., accounting, banking, insurance, legal,
research
e.g. media, consulting, education, psychotherapy
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Importance of Service Sector

• In most countries, services add more economic
  value than agriculture, raw materials and
  manufacturing combined
• In developed economies, employment is dominated
  by service jobs and most new job growth comes
  from services

http//earthtrends.wri.org/searchable_db/index.php
?actionselect_countriestheme5variable_ID216
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Changing Structure of Employment as Economic
Development Evolves
Share of Employment
Agriculture
Services
Industry
Time, per Capita Income
Source IMF, 1997
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Waves of Change..
US WORK-FORCE
The Economist, 1996
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http//seekingalpha.com/article/27883-gdp-by-categ
ory-services-spending-and-foreign-investments-in-u
-s
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At present in U.S.

• 80 workers are in service sector
• Services account for 80 of U.S. GDP
• Service occupations is responsible for 90 job
  growth

Composition of US GDP In 2007, 1.2 percent of
total US GDP was contributed by agricultural
sector. Industrial sector made up 19.8 percent of
US GDP in 2007. Services sector made up 79
percent of US GDP in that same period
http//www.economywatch.com/gdp/world-gdp/usa.html

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Fast growing services -next decade- predicted by
macro-environmental trends..

• More People working more, living longer, living
  alone
• Social services
• Health services
• Residential care
• Child day-care
• Finance, Insurance, Real estate

• Changes in workplace- automation, globalization
• Computer data processing
• Business services
• Transportation

• Increased need/desire to recreate communicate
• Hospitality Travel
• Interactive Entertainment
• Mobile Communication

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Services dominate the United States EconomyGDP
by Industry, 2001
Agriculture, Forestry, Mining, Construction 8
Finance, Insurance, Real Estate
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Manufacturing 14
Government (mostly services) 13
Wholesale and Retail Trade 16
Other Services 11
Transport, Utilities, Communications
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SERVICES
Business Services 5
Health 6
Source Bureau of Economic Analysis, November 2002
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US likely to devote "30 GDP on health by mid
century."
http//seekingalpha.com/article/27883-gdp-by-categ
ory-services-spending-and-foreign-investments-in-u
-s
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• Critical Questions
• What is the debate all about regarding how
  services should be defined / envisioned?
• How does the definition of a service affect your
  marketing strategy?
• 2. What are the key Ps to meeting service
  management challenges?
• 3. What are some of the factors considerations
  affecting the near future of services marketing?

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In the olden days- (a few years ago) A Service
was defined categorically according to its
tangibility..
Pure service no tangible good
Major service with minor good
Hybrid equal part goods and service
Tangible goods with some services
Pure tangible good no service
Milk
Computer Warranty
Meal atRestaurant
LegalAdvice
Hair Styling
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Product - Service Spectrum
Salt
?
Soft Drinks
?
Detergents
?
Automobiles
?
Cosmetics
?
Fast-food Outlets
Intangible Dominant
?
Tangible Dominant
?
?
Fast-food Outlets
?
Advertising Agencies
?
Airlines
?
Investment Management
?
Consulting
Teaching
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Customer Evaluation as a Function of Tangibility
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unlike products
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• Intangibility

• Services mrktg
• Describe the invisible
• Articulate the imaginary
• Define the indistinct

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• Inseparability

• Performance consumption of service - happens at
  same time (eating _at_ restaurant, staying _at_ hotel
  getting haircut, etc)
• Customers participate in affect the transaction
• Customers affect each other

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• Variability-Heterogeneity

• Difficult to standardize
• Delivery, Quality Customer Satisfaction depend
  on employee actions
• Employees vary -attitudes, skills, mood, etc.
• No assurance service delivered matches what was
  planned/ promoted

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Perishability

• Can not be inventoried
• Difficult to synchronize supply demand with
  services
• Services cannot be returned or resold

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Marketing Strategies that address shortcoming
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Re service marketing for decades this has
been the thinking-
But is it the
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The Four Service Marketing Myths Remnants of a
Goods-Based, Manufacturing Model

• The 4 characteristics
• Do not distinguish services from goods
• Only have meaning from a manufacturing
  perspective, and
• Suggest inappropriate marketing strategies

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Key Point- Product-service differentiation is
result of industrial age-2nd wave thinking

• Re- Variabilty
• Customizaton not standardization is the goal
• Re-Inseparability
• Customer-ization not isolation goal
• Re-Perishability
• Services can be/are inventoried (ie-knowledge in
  databases experts head) AND Inventory
  management not maximization is the objective
  Everything is perishableif not in substance
  certainly in style
• Re Intangibility
• its not the product that people are buying. Its
  the functions served benefits rendered- as it
  is w/ services

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A shift in perspective

• Instead of focusing on product service
  differences

Focus on consumer commonalities in consuming
evaluating that which is purchased
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• Critical Questions
• What is the debate all about regarding how
  services should be defined / envisioned?
• How does the definition of a service affect your
  marketing strategy?
• 2. What are the key Ps to meeting service
  management challenges?
• 3. What are some of the factors considerations
  affecting the near future of services marketing?

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Challenges for Service Mgt Same as Product Mgt

• Creating offering the consumer value
• Communicating a desired distinct image
• Create, sustain enhance customer relationships
• Defining- maintaining- improving quality
• Mind the gaps.

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Service Quality Gaps
Word of Mouth Communications
Personal Needs
Past Experience
Expected Service
Expectations
Consumer
Perceived Service
Overpromising
Marketer
External Communications to Consumers
Service Delivery
Performance
Misunderstanding
Service Quality Specs
Communication
Mgmt. Perceptions of Consumer Expectations
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Closing the gaps by fine tuning 4 Service Ps
People
Process
Physical Evidence
Protocol
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People are your Product

• In many instances-people performing the service
  are the product
• They are the service and/or organization in
  customers eyes.
• They are the brand.

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Recruit, Hire, Train, Monitor, Motivate, Reward

• Why customer satisfaction starts with HR
• Delivering excellent service Lessons from the
  best firms

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Marketing-to personnel is as important as to
consumers
External Marketing
Internal Marketing
Employees
Customers
enabling the promise
setting promises
Services Mgt Triangle
Performance/ Experience Management
delivering promises
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Process Trade-off between Standardization
Personalization
Same as w/ Products
Limiting the variability in your service by
standardizing the process of delivery level of
consumer involvement will lower expenses but
comes w/ a cost

• Although standardization may provide for
  manufacturing efficiency, this efficiency comes
  at expense of marketing effectiveness. ..
• the consumer orientation screams heterogeneity

Vargo Lusch The Four Service Marketing Myths
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The importance of Physical Evidence in the
Service Encounter

• At Moment of Truth when service delivered
  evaluated by consumer everything in evidence
  contributes to the consumer's evaluation of the
  service
• Be it a website, restaurant, office, hotel room
  or theme parkit needs to be designed packaged
  as well as any product
• What the customer sees -- hears, smells, feels-is
  what s/hell believes they will get
• Colors, textures, sounds, smells, décor, dress,
  demeanoreverything in evidence needs attention
  and management

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Its the little things that count

• How you design your service encounter is critical
  in a highly competitive market where consumers
  hard pressed to discern a significant difference
  in service performance
• Herein the design of your service encounter will
  prove the most critical variable in your
  marketing mix
• Again a lesson proven equally valid for
  products---

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Identifiable apparel An image-making marketing
tool

• By 8-to-1 ratio, US consumers prefer employees
  wear identifiable apparel

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A good uniform makes all the difference
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Identifiable apparel An image-making marketing
tool

• 1. Improves your image Customers equate a
  professional-looking worker w/ a well-run company
  
• 2. Increases employee commitment Adding
  employee's name can boost morale loyalty
• 3. Provides a popular employment "perk".
• 4. Shows off your firm's experience and
  expertise "certification" -job titles, slogans
  performance emblems on shirts/ sleeves

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Instill Proper Protocol so as to avoid the air of
indifference

• Most common aspect of service complaints is lack
  of respect for the customer.

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Why services lose customers
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______ move away _______ lost due to
competitive reasons and/or unhappy w/ the
service ______ suspend patronage because of an
attitude of indifference from owner, manager or
an employee
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What Customers Desire

• 2500 shoppers said courtesy, knowledge
  friendliness are most important components of
  customer service.

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The Multiplier Effect

• When a customer has a minor service problem
• In transactions gt100 - s/he will tell 9 to 10
  people.
• In transactions over 100, s/he will tell 16
  people.

TARP statistics.
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Time is Money (Lost Customers)
Percent of Customers That Will Not Buy Again
Time Taken to Resolve a Customers Problem
Source Forum Corporation
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Where and Who Complains

• Most complaints made to service provider
  (employee) at time place of service
• Less than 5 of complaints about services ever
  reach corporate headquarters.
• High-income households, younger people, and
  service-knowledgeable customers are more likely
  to complain.

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Actively Encourage Complaints

• Average company does not hear from 95 of its
  unhappy customers.
• Many complaints go unregistered because customers
  do not think it will help and/or do not know best
  way to register complaint
• Encouraging complaints is a good way to break
  the silence.

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Attitude is Crucial

• Customers value acknowledged w/ every
  transaction
• Customers lose confidence when
• Complaints not readily or personally addressed

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E-pologies?

• Email response should include options/names
  telephone numbers for further assistance..

Tarp Research -
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Service Guarantees

• Relatively new w/ respect to services.
• Service guarantees provide both consumer
  business benefits

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Service Guarantee Customer Benefits

• Customers perceive better value.
• Lower perceived risk.
• Higher perceived reliability
• Reinforces customer loyalty

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Service Guarantee Organizational Benefits

• Forces firm to focus on customer.
• States a clear performance goal.
• Provides measures for tracking poor service.
• Forces examination of service delivery system.
• Source of pride.

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• Critical Questions
• What is the debate all about regarding how
  services should be defined / envisioned?
• How does the definition of a service affect your
  marketing strategy?
• 2. What are the key Ps to meeting service
  management challenges?
• 3. What are some of the factors considerations
  affecting the near future of services marketing?

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Services Future
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Exact nature of Future Changes- depends on nature
of the Service

• Network Information Services banking, credit
  card, insurance, telecom
• Retail
• Hospitality travel, restaurants, lodging,
  leisure, hotels
• Labor Expertise
• Business Support administration-processes,
  consulting, customer service
• Personal Professional medical, legal,
  financial, technical assistance

UCT Enhanced Self-Service
IncreasinglyOutsourced
IncreasinglyVirtualized
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Ubiquitious ComPunication Technologies

• 3G videophones w/ broadband 2 megper second
  always online for self-service
• Mobile Kiosks
• AI Enhanced PDA devices w/ speech recognition
  avatars
• RFID everywhere in everything

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RFID- everywhere in everything

• SmartCode making0.25mm chips
• targetcost 5-10 cents ..w/ 15-20 feetrange
• Manufacturing capacity10 billion a year

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UCT in Everything you wear-

• washable garments w/ miniaturized in-ear
  speakers /solar cells to provide energy.
• technology woven into fabric,
• components allowing many functions to be almost
  built in' to our bodies, creating a second
  skin'.

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UCT Enhanced Jewelry

• embed functional technology into jewelry body
  accessories -- rings, necklaces, earrings,
  glasses and watches. - -
• for body adornment and for more intimate and
  discreet communication, information gathering and
  entertainment.

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Invisible, intelligent wireless tickets

• Can be read in yourpocket at 25 metres
• Ultra-wide bandfrequency
• One-ticket fits all

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RFID Shopping Apps

• Future grocery shopping-
• integrated info system

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Exact nature of Future Changes- depends on nature
of the Service

• Network Information Services banking, credit
  card, insurance, telecom
• Retail
• Hospitality travel, restaurants, lodging,
  leisure, hotels
• Labor Expertise
• Business Support administration-processes,
  consulting, customer service
• Personal Professional medical, legal,
  financial, technical assistance

UCT Enhanced Self-Service
IncreasinglyOutsourced
IncreasinglyVirtualized
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Predicting a diverse future Directions and
issues in the marketing of services European
Journal of Marketing Bradford 2002 Angus Laing

• Driven by technological developments,
  deregulation, and globalization
• - the service sector in post-industrial economies
  is facing unprecedented change

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Increasing importance of technological mediation

• Virtual Experiences
• Redefining concept of-
• Service Encounter
• The Moment of Truth when a service is delivered
  evaluated by consumer

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Commodification standardized "off-the-shelf"
service packages

• Pre-Packaged, fill in the blank, instant-service
  forms queries
• Some Computer generatedExpert-system managed
  Responses

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Professional Services

• To date-- characterized by high levels of
  limited/regulated interpersonal interaction

NOW- 24/7 access to specialist technical
information, formerly the preserve of
professionals, fundamentally changed the
informational asymmetries which have
conventionally characterized the delivery of
professional services
http//www.psychadvisor.com/counsel/index.cfm
Free Advice on Any TopicOnline From America's
EldersPersonal Reply to Each Request
www.ElderWisdomCircle.org
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Technologically driven productivity growth
is-most important factor in shaping employment in
U.S. every country in the world. Productivity
growth substitutes technology /or more efficient
techniques for physical mental labor
Inventors investors always figure out ways to
replace people with machines
Automation- 1 ,2 ,3
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Restaurants without waiters
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Ultimately most all your service needs will be
handled by thru your AI enhanced PDA
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With the ruthlessness of Skynet in "The
Terminator," computerization in the tertiary
sector is now committing mass Dilberticide,
replacing receptionists with automated phone
systems and travel agents with services like
Priceline.
Why Dilbert is doomed The jobs of tomorrow are
not what you'd expect
Recession creating a lost generation
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• mechanization of agriculture mining -- freed up
  labor for factories
• automation in manufacturing freed up workers
  for-office work
• Computers AI in the office--free up workers
  for..?

As it has always done in the past, labor will
shift from more mechanized to less mechanized
sectors. But what will those jobs be?
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The most numerous stable jobs of tomorrow will
be those that cannot be offshored

• cannot be automated
• require a high degree of creativity
• rely on the human touch in face-to-face
  interactions
• these are called "proximity services" include
  fastest-growing occupations, healthcare
  education.
• Since the recession began, healthcare has added
  559,000 jobs. Even more remarkable, the average
  monthly gain of 22,000 jobs during 2009 has been
  only slightly lower than the average increase of
  30,000 jobs a month in 2008.

Why Dilbert is doomed The jobs of tomorrow are
not what you'd expect
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Outsourcing of IT Services

• 10.8 billion The value of IT outsourcing
  contracts signed in the first quarter of 2005.
  Source TPI Index
• 400,000 Number of service jobs sent overseas
  since 2000. Source The Goldman Sachs Group Inc.

• 3 Percentage of last year's total layoffs due to
  offshoring. Source U.S. Department of Labor
• 104,000 Number of IT jobs lost due to offshore
  outsourcing between 2000 and 2003, equaling 2.8
  of U.S. IT jobs. Source Information Technology
  Association of America
• 3.5 million Number of U.S. white-collar jobs
  moving offshore by 2015, averaging 200,000 a
  year. Source Forrester Research Inc.

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Where the Jobs Go!
India graduates 300,000 IT engineers and 90,000
MBAs per year
Source Computer world and Interunity Group,
Inc., April May 2003 Base Survey of 252
corporate IT managers in the U.S. multiple
responses allowed
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The Other Side of Outsourcing
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Services