JM 601 Services Marketing

1. JM 601 Services Marketing

2. Teaching personnel • Jessie Harman (lectures) • B014

3. Welcome to JM601 • Unit objectives: • To understand the importance of the services sector in an advanced economy • To appreciate the distinctive nature of services • To provide frameworks with which to understand services & services marketing • To develop more effective marketing strategies for service organisations

4. What will we cover in JM601? • Distinctive aspects of services marketing and management • Managing the service encounter • Customer behaviour in service settings • Service quality and customer satisfaction • Handling customer complaints • Managing customer relationships

5. Services Marketing • Strategic services marketing issues: • Target market definition, understanding and positioning • Developing a service product strategy • Service delivery and servicescape strategies • Costing and pricing services

6. Services Marketing • Managing capacity and demand • Communicating and promoting services • Managing the customer service function • International services marketing

7. Text • Lovelock C., Patterson P, and Walker R, (2004). Services marketing: An Asia-Pacific and Australian perspective (3rd ed). Sydney: Pearson Education • McColl-Kennedy J, (Ed). Services marketing: A managerial approach. Queensland: Wiley

8. JM601- Assessment • Individual assignment – Service Encounter analysis 30% • Group Assignment: • Group report 20% • Group presentation 20% • Exam 30% • Tutorial attendance 10%

9. Individual assignment • Minimum 5 different SERVICE encounters • Use a theoretical framework to: • Analyse • Evaluate, and • Make recommendations (where appropriate) • Service Journal Entry form • Due Tuesday 29 August 2005

10. Group assignment • Case study, and • Class presentation Outputs: 2,500 words • 30 minute presentation Due: 10 October 2006

11. Exam • 2 hour exam • Part A (medium length answers) • Part B (case study) Date: to be advised

12. The service sector: What is it? • Traditional & simplest way, is to define the sector by what it isn’t, eg. isn’t agriculture, mining or manufacturing • An alternative way of defining services is to look for common features which make them different from goods

13. Defining the services sector • Distribution services – wholesale & retail trade, transport & storage, communications • Social services – health & community services, education, government administration & defence • Producer services – property & business services, finance, insurance • Personal services – accommodation, cafes & restaurants, personal & other services, cultural & recreational services • Utility and construction services – electricity, gas & water, construction ABS

14. Three horizons of economic development • First horizon: the nation’s core products: • Agriculture, mining, manufacturing, metals, chemicals etc • Second horizon: recently introduced services that are expected to grow in the medium term: • Communications, retail, tourism, finance, transport, construction, hospitality, personal services, business services etc. • Third horizon: services in the embryonic stages of development which represent future growth potential (exports, job growth and GDP): • Biotechnology & health, new information economy

15. The Diversity of Services • Large commercial corporations • e.g.banking, airlines, insurance, telecommunications, hotel chains, transport, consultants etc. • Smaller corporations • e.g.restaurants, laundries, taxis, travel agents, optometrists and many business to business professional services etc. • Franchises • e.g.Fast food chains, hotels, tax preparation services etc.

16. Value Added Utilities • Time based utility: airlines, car hire, cleaning and maintenance services etc. • Place based utility: distribution, retailing, telecommunications, serviced offices etc. • Form based utility: medical, hairdressing, investment management, sports and leisure etc. • Problem solving utility: consulting, research services, legal services, IT services etc.

17. Defining services? • Any act, performance or experience that one party can offer another; one that is essentially intangible, and does not result in the ownership of anything. Its production may or may not be tied to a physical product Lovelock (2004)

18. Multidimensional Services • Most services are multidimensional with both tangible and intangible elements-such as a meal in a restaurant, bed in a hotel or medical supplies used during a hospital stay. Few services are without tangibles elements and few goods are without a service component.

19. Figure 1.5 The dominance of tangible versus intangible elements in goods and services

20. Factors responsible for the transformation of the service economy • Internationalisation (e.g. ‘Hollowing out’ effect, Increased services trade, Global customers) • Government Regulation (e.g. Deregulation/ privatisation, New trade agreements in services) • Social Changes (e.g. Increased customer expectations, Increased affluence and leisure time, More women in the workforce)

21. Factors responsible for the transformation of the service economy • Business trends (e.g. Relaxation of professional association standards, Marketing emphasis by non –profit organisations, Outsourcing of non-core services, Services quality movement, Franchising and service chains) • Advances in technology (Convergence of computers and telecommunications, Miniaturisation, Digitalisation, Enhanced software)

22. The service sector in Australia • Services dominate economic growth in Australia • Account for more than three quarters of economy’s output • 4 out of every 5 jobs are in the services sector • Services also provide essential inputs, eg communications and transport, into nearly everything Australia produces ITR (2001) Industry Brief Services Sector

23. Australia’s service sector • Accounts for 76% of GDP • Property and business services is largest service industry (14% of economy’s output) • Retail trade is the biggest service employer (15% of economy’s jobs) • Travel services was the sector’s biggest export earner (10%+ of economy’s exports)

24. Australia’s service sector • Service sector output grew at a trend annual rate of 3.6% over period 1975 – 2001 • Communications was the fastest growing service industry (8.4%) • Property and business services exhibited the highest employment growth (5.8%) Access Economics (2001b)

25. Myths of the service sector • Often viewed as poorly-paid, low skilled, mainly part-time & concentrated in urban areas • However….

26. The evidence • Full-time jobs in the service sector are more highly paid • Highest paid – jobs in electricity, gas & water, and finance & insurance • Lowest paid – retail trade & accommodation, cafes & restaurants • Skills of service sector employees compare favourably: • 59% work in high-skilled occupations (cf. 56%) • 54% have post-secondary qualifications (cf. 47%) Source: Productivity Commission (2002) Australia’s service sector: A study in diversity

27. The evidence (cont) • More than 70% of jobs are full-time (although service workers are twice as likely to be employed in part-time jobs) • Just over 30% of all service workers are employed in non-metropolitan regions • Services are the fastest growing component of international trade

28. Myth 2 • Services are non-tradeable • But….

29. International trade • Services are the fastest growing component of international trade • Cross-border trade • Consumption abroad • Commercial presence • Presence of natural persons

30. Australia’s service sector: the future • Service output is expected to grow over next 5 – 10 years at similar rates • Highest growth industries: communications, property & business services, finance & insurance, transport and storage

31. Next lecture • What are services? • What are the key differences between goods and services? • What is services marketing? • How is it distinctive? • What does this mean for marketers of service organisations?

32. Introduction to services and the services sector Lecture 2

34. Defining services? • Any act, performance or experience that one party can offer another; one that is essentially intangible, and does not result in the ownership of anything. Its production may or may not be tied to a physical product Lovelock (2004)

35. Defining services? • Deliver help, utility or care, an experience, information or other intellectual content – and the majority of that content is intangible rather than residing in any tangible object Lovelock (2004) • Customers are buying an experience or a performance

36. Alternative service concepts • Service industries and companies: • Classified within the service sector whose core product is service • Service as products: • Represent the wide range of intangible product offerings that customers value and pay for. Sold by service and non-service companies • Customer Service: • Service provided in support of company’s core products (typically not charged for) • Hidden services: • Another way of thinking about products and services

37. Characteristics of ServicesCompared to Goods Intangibility Heterogeneity Simultaneous Production and Consumption Perishability

38. Implications of Intangibility • Services cannot be inventoried • Services cannot be easily patented • Services cannot be readily displayed or communicated • Pricing is difficult

39. Implications of Heterogeneity • Service delivery and customer satisfaction depend on employee and customer actions • Service quality depends on many uncontrollable factors • There is no sure knowledge that the service delivered matches what was planned and promoted

40. Implications of Simultaneous Production and Consumption • Customers participate in and affect the transaction • Customers affect each other • Employees affect the service outcome • Decentralization may be essential • Mass production is difficult

41. Implications of Perishability • It is difficult to synchronize supply and demand with services • Services cannot be returned or resold

42. Differences between Goods and Services) • Customers do not obtain ownership of the intangible element of the service product (i.e. service personnel and their performance cannot be ‘owned’ by the customer). • Intangible elements dominate value creation • There is greater involvement of customers in the production process (i.e. customers are part of the performance, they interact with the service provider).

43. Differences between Goods and Services (Table 1.1) • It is more difficult to maintain quality standards of service products (i.e. individuals’ behaviour is hard to control and standardise). • Many services are difficult for customers to evaluate (i.e. there may be elements of personal taste, experience, ability and mood that affect customers’ evaluation).

44. Differences between Goods and Services (Table 1.1) • Absence of inventories for services (i.e. no use for unsold stock, difficult to deal with sudden increases in demand). • Importance of time factor (i.e. many services are delivered in real time so the consumer and provider must be together for the service to occur). • Delivery systems may involve both electronic and physical channels (i.e. different needs for staff behaviour management).

45. The Traditional Marketing Mix (four Ps) • Product • Price • Promotion • Place

46. An expanded marketing mix for services Product (Service) People Process customers Place, Cyber-space & Time Place & Time Customers Price Price Customers Promotion PhysicalEvidence

47. The Additional Marketing Mix Elements for Services • People: direct contact between customers and service personnel, some services involve high levels of contact, high levels of trust and dependency. • Physical evidence: this may be an actual physical component or a cue to indicate or represent the existence quality of the service purchased (often referred to as ‘Servicescape’). • Process: the order and/or system of service delivery.

48. Organisation Internal marketing Traditional marketing Satisfaction; Quality; Brand Loyalty Relationship management Employees Customers A framework for analysing servicesmarketing

49. Operations Management Marketing Management Customers Human Resources Management Managing the 7Ps Requires Collaboration between Marketing, Operations, and HR Functions (Fig. 1.14)