Introduction
Phenomenal growth of services, with the resultant shift towards a service economy attributed to rising affluence, more leisure time and growing complexity of products that require servicing.
In major European countries, USA and Japan, private and public sector services account for 60-75% of gross domestic output.
Service industries vary greatly from governmental organisations such as the National Health Service of the United Kingdom to private non profit organisations such as museums and charities.
The nature of services
A service is defined as any activity or benefit that one party can offer to another which is essentially intangible and does not result in the ownership of anything.
The same general principles of marketing apply to both products and services, but services have characteristics that mean that instead of four P's, there are seven in a services marketing mix.
Services Defined
A service is any activity or benefit that one party can offer to another which is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product.
Most company offerings to customers contain an element of service and this is illustrated by the service continuum.
Categorising offerings along the service continuum
Pure tangible goods
- toothpaste
Tangible goods accompanied by one or more service
- computer and warranty
Hybrid offer consists of equal parts of goods and services
- restaurants
Service with accompanying minor goods
- air travel
Pure service
- haircut
Service characteristics
- Intangibility
- Cannot be seen, tasted, felt, heard or smelt before they are bought.
- Service providers need to manage the evidence by providing evidence of the benefits.
- Inseparability
- Services produced and consumed simultaneously.
- Cannot be separated from providers, whether people or machines.
- Customers are always involved
- Variability
- Quality may vary greatly depending on who provides the service, when and how.
- Staff need to know how to do something well.
- Staff must be well motivated to maintain high standards of service.
- Perishability
- Services cannot be stored for later sale or use
- Lack of ownership
- No physical product is exchanged and therefore nothing owned.
Marketing strategies for service firms
The service component and support processes of product offerings are rapidly becoming the competitive advantage in winning customer loyalty.
The service–profit chain
- Internal service quality
- Superior selection and training of staff
- Satisfied and productive service employees
- Greater service value
- Satisfied and loyal customers
- Healthy service – profits and growth
Internal marketing
Marketing conducted by a service firm to train and effectively motivate its customer contact employees and all the supporting service people to work as a team to provide customer satisfaction.
External marketing
Traditional marketing incorporating the 7Ps
- Price
- Product/service
- Place
- Promotion
- People
- Processes
- Physical environment
- of the services marketing mix.
Interactive marketing
Marketing that recognises that the perceived service quality depends heavily on the buyer-seller interaction.
Emphasis on relationship marketing.
Major tasks of service industries
Service companies are faced with three major marketing tasks; they need to:
- increase competitive differentiation
- increase service quality
- increase productivity
Managing differentiation
Intensive price competition has resulted in service differentiation to increase competitiveness.
The 3 Ps, people, processes and physical environment of service marketing and service delivery
form the core differential and competitive advantage.
Service intangibility and variability means that a consistent brand is not easily built.
Managing service quality
The key to success is to exceed customer service quality expectations.
Customer satisfaction is achieved if the delivered service quality exceeds the customer’s expectation.
However, expectation is a variable component and depends upon the perception and expectations of the individual customer.
Ten key determinants of perceived service quality
Concerned with the quality outcome of the service
- Access
- Credibility
- Knowledge
- Reliability
- Security
- Competence
- Communication
- Courtesy
- Responsiveness
- Tangibles
Characteristics of service organisations
- Customer obsession
- Management commitment to quality
- High service quality standards
- Scrutinise service performance
- Good service recovery and management of disgruntled customers
- Empowerment of employees, especially front-line staff
- Satisfy and reward employees as well as customers
Managing productivity
- Training and development of staff.
- Service providers can increase the quantity of service by reducing some quality.
- Industrialise the service.
- Design more effective service delivery mechanisms.
- Customers are given incentives to substitute company labour.
- Introduce new technology to save time and costs and increase efficiencies.
International services marketing
- The global economy is dominated by services!
- The World Trade Organisation estimates that commercial–service trade is now worth over one trillion Euros, approximately 25% of global trade.
- Worldwide growth of services is 16% per annum over the past decade and double the growth rate of manufacturing.
- The trend is towards the outsourcing of skilled professional services to overseas locations.
- The General Agreement on Tariffs and Trade (GATT) has extended international trade rules to address services as well as manufactured goods, but these are in their infancy.
