An Exploratory Study of Services Marketing in Global Markets: Major Areas of Inquiry for the Health Care Services Industry

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An Exploratory Study of Services Marketing in
Global MarketsMajor Areas of Inquiry for the
Health Care Services Industry

• Authors Sandy Young, S. Altan Erdem
• Presented by Jason Nguyen

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Objectives

• Overview of service industry.
• Understand how health care service industry is
  marketed overseas.
• Propose a list of consideration areas important
  for entry into overseas markets by service
  providers.

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Previous WorksSERVICE INDUSTRY

• Cateora and Hess (1979) one should examine the
  opportunities in overseas markets to assure the
  continued profitability and growth in a
  competitive industry.
• Kothari (1988) According to the U.S. Bureau of
  Census, the services sector grew from 30.9 to
  49.6, and manufacturing fell from 56.7 to 41.
• Murdick, Render, and Russel (1990) Seven out of
  ten American workers are employed in service
  sector.
• Rosenbloom (1991) Almost 80 of all new jobs
  over the last ten years in the U.S. have been in
  service sector, and this sector accounted for
  more than half of all consumer expenditures.

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Previous Works Cont.

• Sanderson and Luffman (1988) Technical, social,
  political, and economic environments of foreign
  markets represent some of the major factors for
  strategic planning of international marketing.
• Carman and Langeard (1980) stated that
  out-of-country marketing expansion was reported
  to be the most risky growth strategy for service
  firms.
• Kothari (1988) The United States is estimated to
  command a 20 percent share of the over 650
  billion annual international service trade.
  Service account for 40 percent of all U.S.
  exports, and provide a surplus in contrast to a
  deficit in the merchandise account.
• Nicoulaud (1989) Services make up the fastest
  growing sector in international trade with an
  annual growth rate of 17 percent in real term
  compared to six percent for merchandise in 1980

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Previous Works Cont.

• Cundiff and Hilger (1988) business services such
  as banking, research, consulting, advertising,
  engineering, information and maintenance work
  have been the fastest growing U.S. exports during
  the 1970s and 1980s.
• Bateson (1989) Berry (1980) Bessom and Jackson
  (1975) Gronroos (1990) Lovelock (1983)
  Shostack (1977) Uhl and Upah (1983) Products
  characteristics versus services characteristics
  
• Products are tangible entities separate from the
  producer, services are intangible and inseparable
  from the provider.
• Products also lend themselves to standardization
  more easily than services. Because services are
  delivered by different people at different times,
  it is difficult to guarantee that they will be
  delivered the same way each time.
• Services also appear to be more perishable since
  they are usually measured in time rather than in
  physical quantity, and there is usually more
  consumer involvement with services than is
  customary with products.

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Previous Works Cont.SERVICE MARKETING

• Judd (1964) Levitt (1972, 1976 ) Zeithaml,
  Parasuraman, and Berry (1985) Cateora (1993)
  Hill and Neeley (1988) Lovelock (1983, 1988)
  Shostack (1977) Porter (1986) While the
  marketing concept of satisfying customers'
  needs/wants is still applicable to the delivery
  of services, the primary difference is in the
  approach. Services in the value chain of global
  competition are downstream value activities that
  are inherently tied to the buyer's location in a
  particular country

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Previous Works Cont.

• Gronroos (1984) Parasuraman, Zeithaml and Berry
  (1985) Kotler and Armstrong (1991) Kotler and
  Bloom (1984)
• Suggest that service companies need to practice
  both internal and interactive marketing along
  with the four basic variables of marketing mix.
• Traditional (external) marketing covers the
  performance of a company in terms of producing,
  pricing, promoting, and distributing services.
• Internal marketing is directed to
  customer-contact and/or supporting service
  employees - organize the company personnel as a
  cohesive team to maximize customer satisfaction
• Interactive marketing deals with the marketers ,
  skill in handling customer contacts
• The time and money spent on marketing should be
  carefully assessed not to have the over-marketing
  problem.

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Previous Works Cont.

• Bitner and Zeithaml (1989) Booms and Bitner
  (1983) Murdick, Render, and Russell (1990)
  Gronroos (1984)
• Suggest the idea that the four P's (product,
  price, place, promotion) of product marketing
  could be expanded to the seven P's for services
  marketing
• The new marketing mix for services would
  additionally include three supplementary P's
  basically refer to the comprehensive coverage of
  services marketing
• Participants (skills, attitudes, commitment of
  employees and customers),
• Physical evidence (tangible evidences such as
  materials, equipment, and uniforms),
• Process (activities required in producing the
  services such as customer involvement,
  demand/quality control, and customer follow up)

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Previous Works Cont.

• Langeard, Bateson, Lovelock, and Eiglier (1981)
• In terms of distribution of services, service
  businesses either use electronic channels or
  combine the service factor, retail outlet, and
  point of consumption into one unit and perform
  the retailing task of channel intermediaries.
• Vandermerwe and Chadwick (1989) Boddewyn,
  Halbrich, and Perry (1986) Erramilli (1990)
  Shostack (1984)
• In terms of service exports, intangibility of
  services requires special arrangements in
  reviewing the international entry modes
• Some services are somewhat unique in the sense
  that their creation and consumption can actually
  be separated. Once they are separated, "intrinsic
  value" of those services is transferred into
  tangible forms (such as blueprint) so that they
  can be exported to other countries and reproduced
  in those countries

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Previous Work Cont.

• Berry (1986) The key in services is to think
  high-tech and high-touch
• High-tech services should strive to provide lower
  delivery costs, faster delivery, control quality,
  and free personnel to provide better and more
  varied services.
• High touch capabilities should deliver more
  customized service, superior problem resolution,
  effective cross-selling, and greater customer
  confidence in the technology.
• Identification of the right mix of high-tech and
  high-touch depends on the markets served and this
  is not a simple task since technology in these
  markets changes in somewhat unpredictable
  patterns.

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Previous Work Cont.

• Nicoulaud (1988) other important considerations
  in services marketing
• Service quality is a key to success in building a
  good reputation and name exposure the more
  intangible the service is, the more important it
  will be to differentiate the service based on
  firm's reputation and the quality provided.
• Exports of services are impacted by changing
  economic conditions and exchange rates.
• Western Europe and the United Kingdom are serious
  competitors as they shift from production to
  service economies.
• There are also non-tariff trade barriers such as
  local labor, ownership restrictions, foreign
  exchange controls, discriminatory taxation
  policies, bans on certain business investments,
  employment bans, quotas, local standards, and
  discriminatory codes.

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Previous Works Cont.HEALTH CARE INDUSTRY

• Leite-Ferraz (1991) Walker and Roscoe (1988)
• The Mayo brothers pioneered international
  marketing of health care services, but the Texas
  Medical Center in Houston has perfected this
  marketing approach
• With the introduction of the Medicare prospective
  payment system in 1983, U.S. hospitals lose money
  if their costs exceed their payment rates
• Involvement of the medical staff and well-trained
  marketing professionals made a difference in the
  effectiveness of the marketing plan

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Previous Works Cont.

• Walker and Roscoe (1988) Hout, Porter, and
  Rudden (1982)
• Studies reveal that substantial economies of
  scale are not present in the hospital industry
  and serve as a hinderance to the success of a
  global marketing approach
• Suggest a multi-domestic strategy if there are
  insufficient scale economies to yield the global
  competitors a significant competitive edge
• Another potential problem exists because
  hospitals may not be able to profit from the
  experience curve if there are constant changes in
  medical technology or product differentiation
  services. Rather hospitals may move from one
  experience curve to the next.
• Another problem in globalization of health care
  is government regulation. The U.S. system of
  health care is based primarily on
  employer-provided coverage whereas the health
  care system in most countries of Western Europe,
  Japan, Canada, and Australia is based on
  government-sponsored programs

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Health Care Services Industry.

• This is an industry which is in the mature stage
  of the product life cycle in the domestic market,
  faces saturated markets, and needs to consider
  global marketing of its services for continued
  growth.
• Focuses on the exchange of benefits between the
  consumer and the health care service provider.
• Identifies target market, their characteristics,
  geographic location, and the health care needs of
  consumers (prevention of disease or illness, the
  maintenance of health, or the regaining of
  health).
• Matching specific clients needs with the
  necessary service.
• Satisfaction of current customers and the
  attraction of new customers are essential in the
  competitive environment of this industry.
• Method market the over capacity of beds and
  services to other nations where advanced
  treatment and state-of-the -art technology are
  not available. For those foreigners who can
  afford better health care than socialized
  medicine provides, the United States is an
  attractive alternative.

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Management Implication

• Managers can use the list to assist in deciding
  whether to enter an overseas market or not.
• The list can be used to decide what markets
  possess the most potential for growth and profit
  and where a match exists with the comparative
  advantages of a specific health care or fast food
  firm.

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Conclusion

• Because the environment of health care overseas
  is typically highly regulated, organizations
  involved with its delivery will need to take a
  proactive stance.
• Strategic coordination of economic,
  psychological, political, and public relations
  skills are necessary to gain the cooperation of
  several parties in order to enter or operate in
  an obstructed or protected market.
• The four P's of the marketing mix now become the
  seven P's with personnel, physical facilities,
  and process management as the additions.