Ch-1
Introduction to Services
Chapter Overview (1 of 2)
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Chapter Overview (2 of 2)
Why Study What are
Services? Services?
Marketing Extended
Challenges Marketing
Posed by Mix Required
Services for Services
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Why Study Services (1 of 6)
• Services Dominate the Global Economy
• Increasing size of the service sector across the globe
• The relative share of employment between agriculture, industry and services
is changing dramatically
• Service output is growing rapidly and represents more than 50% of Gross
Domestic Product (GDP).
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Why Study Services (2 of 6)
Evolution of Service
Dominated Economy
Figure 1.4 Changing structure of employment as
an economy develops
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Why Study Services (3 of 6)
Contribution Of
Services Industries To
GDP Globally
Figure 1.5 Contribution of services industries
to GDP globally
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Why Study Services (4 of 6)
Figure 1.6 Estimated size of service sector in selected countries as a percentage of GDP 7
Why Study Services (5 of 6)
• Most new jobs are generated by services
• In most countries around the world, new job creation
comes mainly from services.
• Knowledge-based industries — such as professional and
business services, education, and health care generate
high paid jobs.
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Why Study Services (6 of 6)
• Understanding Services Offers Personal Competitive
Advantage
• The distinctive characteristics of services and how they
affect both customer behavior and marketing strategy will
give important insights and perhaps create a competitive
advantage
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The Principal Industries of the Service Sector
Figure 1.8 Value added by service industry categories to US GDP. 10
Factors stimulating transformation of service economy
Government Social Changes Business Trends Advances in Globalization
Policies Information
Technology
• Changes in • Rising consumer expectations • Push to increase shareholder • Growth of the Internet • More companies operating
regulations • Ubiquitous social networks value • Wireless networking and on a transnational basis
• More affluence • Emphasis on productivity and technology • Increased international
• Privatization • More people short of time cost savings • Digitization of text, travel
• New rules to • Increased desire for buying • Manufacturers add value graphics, audio, and video • International mergers and
protect consumers, experiences vs. things
through service and sell • Cloud technology alliances
employees and the • Rising consumer ownership of
services • Location-based services • “Offshoring” of customer
computers, cell phones, and
environment high-tech equipment • More strategic alliances and • Big data service
• New agreement on • Easier access to more outsourcing • Artificial intelligence • Foreign competitors
trade in services information • Focus on quality and • Improved predictive invade domestic markets
• Immigration customer satisfaction analysis
• Growing but aging population • Growth of franchising
• Marketing emphasis by non-
profits
New markets and product categories create increased demand for services in many existing markets,
making it more competition intensive.
Innovation in service products and delivery systems is stimulated by application of new and
improved technologies.
Success hinges on (1) understanding customers and competitors, (2) viable business models, and (3)
creation of value for both customers and the firm, (4) increased focus on services marketing and
management. 11
B2B Services as Core Engine of Economic Development
Source: Jochen Wirtz and Michael Ehret, "Service-Based Business Models: Transforming Businesses, Industries and Economies," in
Raymond P. Fisk, Rebekah Russell-Bennett, and Lloyd C. Harris, eds. Serving Customers: Global Services Marketing Perspectives (Tilde
University Press, Melbourne, Australia), 28–46. 12
What Are Services?
• Production and consumption inseparable in services
• Benefits without Ownership
• Labor, skills and expertise rentals
• Rented goods services
• Defined space and facility rentals
• Access to shared facilities
• Access and use of networks and systems
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Definition Of Services
Services are economic activities performed by one party to another. Often
time-based, these performances bring about desired results to recipients,
objects, or other assets.
In exchange for money, time, and effort, service customers expect value from
access to labor, skills, expertise, goods, facilities, networks, and systems.
However, they do not normally take ownership of the physical elements
involved.
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Four Categories of Services –
A Process Perspective (1 of 2)
Mental
People Possession Information
stimulus
processing processing processing
processing
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Four Categories of Services –
A Process Perspective (2 of 2)
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Marketing Challenges Posed By Services
• Four characteristics of Services
• intangibility
• heterogeneity (variability of quality)
• inseparability of production and
consumption and
• perishability
… IHIP
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Tangible-dominant to Intangible-dominant
Relative value added by physical versus intangible
elements in goods and services
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Extended Marketing Mix Required For Services
• Process
• Operational Inputs and Outputs Can Vary Widely
• Customers Are Often Involved in Co-production
• Demand and Capacity Need to be Balanced
• Physical Environment
• The appearance of buildings, landscaping, vehicles, interior furnishings,
equipment, staff members’ uniforms, signs, printed materials, and other
visible cues provide tangible evidence of a firm’s service quality
• People
• Service firms need to work closely with their human resources (HR)
departments and devote special care in selecting, training, and motivating
their service employees
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