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Management of the Three Additional Ps of Services Marketing Mix. Innovations in Service Marketing. Review Questions. Application Exercise . Concept Of Service | Service Characterristics | Service Expectations | The Service Product Evidence | People And Services | Internal Versus External Marketing |. wfhm.info: Services Marketing: People, Technology, Strategy Additionally, I see almost everything as a service exchange--and this book does a wonderful.
Fears have been expressed that ifsuccessful firms become too large, through a combination of internal growth and acqui-sitions, there may eventually be a decline in the level of competition.
Conversely, liftingrestrictions on pricing benefits customers in the short run as competition lowers pricesbut leaves insufficient profits for needed future investments.
For instance, fierce pricecompetition among American domestic airlines led to huge financial losses within theindustry during the early s, bankrupting several airlines. This made it difficult forunprofitable carriers to invest in new aircraft and raised troublesome questions aboutservice quality and safety. Another important action taken by many national governments has been privatiza-tion of what were once g o v e r n m e n t - o w n e d services.
T h e t e r m "privatization," firstwidely used in the United Kingdom, describes the policy of transforming governmentorganizations into investor-owned companies. Privatization has been moving aheadrapidly in many European countries, as well as in Canada, Australia, N e w Zealand, andmore recently in some Asian and Latin American nations.
T h e transformation of opera-tions like national airlines, telecommunication services, and utilities into private enter-prise services has led to restructuring, cost cutting, and a more market-focused posture.
When privatization is combined with a relaxing of regulatory barriers to allowentry of new competitors, the marketing implications can be dramatic, with foreigncompetitors moving into markets that were previously closed to outside investment. Thus, French companies specializing in water treatment have downloadd and m o d e r n -ized many of the privatized water utilities in Britain, while American companies haveinvested in a n u m b e r of British regional electrical utilities.
Privatization can also apply to regional or local government departments. At thelocal level, for instance, services such as trash removal and recycling have been shiftedfrom the public sector to private firms. N o t everyone is convinced that such changes arebeneficial to all segments of the population.
W h e n services are provided by public agen-cies, there are often cross subsidies, designed to achieve broader social goals. W i t h priva-tization, there are fears that the search for efficiency and profits will lead to cuts in ser-vice and price increases.
T h e result may be to deny less affluent segments the servicesthey need at prices they can afford. Such fears fuel the arguments for continued regula-tion of prices and terms of service in key industries such as health care, telecommunica-tions, water, electricity, and passenger rail transportation.
Not all regulatory changes represent a relaxation of government rules. In manycountries, steps continue to be taken to strengthen consumer protection laws, safeguardemployees, improve health and safety, and protect the environment.
These new rulesoften require service firms to change their marketing strategies, their operational proce-dures, and their human resource policies.
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Finally, national governments control trade in b o t h goods and services. Negotiations at the World Trade Organization have led to a loosening of restrictions ontrade in some services, but not all. Some countries are choosing to enter into free-tradeagreements with their neighbors. Social Changes T h e demand for consumer services—and the ways in which people use them—have been strongly influenced by a host of social changes.
More people are living alone than before and there are more households containing two w o r k i n g adults including telecommuters w h o work from in-home offices ; as a result, more people find t h e m - selves short on time. They may be obliged to hire firms or individuals to perform tasks like childcare, housecleaning, laundry, and food preparation that were traditionally per- formed by a household member.
Per capita income has risen significantly in real terms for many segments of the population although not all have benefited from this trend.
Increasing affluence gives people more disposable i n c o m e and there has been an observed trend from downloading new physical possessions to downloading services and expe- riences. In fact, some pundits have begun speaking of the "experience economy. In the meantime, the rapid growth in the use of mobile phones and other wireless equipment means that customers are more " c o n - nected" than ever before and no longer out of touch once they leave their homes or offices.
Another important social trend has been increased immigration into countries such as the United States, Canada, and Australia. These countries are becoming m u c h more multicultural, posing opportunities—and even requirements—for service features designed to meet the needs of non-traditional segments now living within the domes- tic market. For instance, many immigrants, even if they have learned to speak the lan- guage of their new country, prefer to do business in their native tongues and appreciate those service organizations that accommodate this preference by offering communica- tions in multiple languages.
Business Trends Over the past 25 years, significant changes have taken place in h o w business firms oper- ate. For instance, service profit centers within manufacturing firms are transforming many well-known companies in fields such as computers, motor vehicles, and electrical and mechanical equipment.
Supplementary services once designed to help sell equip- ment—including consultation, credit, transportation and delivery, installation, training, and maintenance—are n o w offered as profit-seeking services in their own right, even to customers w h o have chosen to download competing equipment. Several large manufac- turers including General Electric, Ford, and DaimlerChrysler have become important players in the global financial services industry as a result of developing credit financing and leasing divisions.
Similarly, many manufacturers now base much of their competi- tive appeal on the capabilities of their worldwide consultation, maintenance, repair, and problem-solving services.
In fact, service profit centers contribute a substantial propor- tion of the revenues earned by such well-known "manufacturers" as IBM, Hewlett- Packard, and Xerox. T h e financial pressures confronting public and nonprofit organizations have forced them to develop more efficient operations and to pay more attention to customer needs and competitive activities. In their search for new sources of income, many "non-busi- ness" organizations are developing a stronger marketing orientation that often involves rethinking their product lines; adding profit-seeking services such as shops, retail cata- A m o n g the types of professionals affected by such rulings are accountants, architects, doctors, lawyers, and optometrists, whose practices now engage in much more vigorous c o m - petitive activity.
T h e freedom to engage in advertising, promotion, and overt selling activities is essential in bringing innovative services, price cuts, and new delivery systems to the attention of prospective customers. However, some critics worry that advertising by lawyers, especially in the United States, simply encourages people to file more and more lawsuits, many of them frivolous.
With increasing competition, often price-based, has come greater pressure for firms to improve productivity. Demands by investors for better returns on their investments have also fueled the search for new ways to increase profits by reducing the costs of ser- vice delivery.
Historically, the service sector has lagged behind the manufacturing sector in productivity improvement, but there are encouraging signs that some services arebeginning to catch up. Using technology to replace labor or to permit customer self-service is one cost-cutting route that has been followed in many service industries.
Reengineering of processes often results in speeding up operations by cutting outunnecessary steps. However, managers need to be aware that cost-cutting measures, dri-ven by finance and operations personnel without regard for customer needs, may lead toa perceived deterioration in quality and convenience. Recognizing that improving quality was good for business and necessary for effec-tive competition has led to a radical change in thinking.
Traditional definitions of qual-ity based on conformance to standards defined by operations managers were replacedby the new imperative of letting quality be customer driven. This had enormous impli-cations for the importance of service marketing and the role of customer research inboth the service and manufacturing sectors.
However, maintaining quality levels over time is difficult and customer dissatisfactionhas risen in recent years. Franchising has become widespread in many service industries, not only for con-sumer services but also for business-to-business services. It involves the licensing ofindependent entrepreneurs to produce and sell a branded service according to tightlyspecified procedures. Because these entrepreneurs must invest their own capital, fran-chising has become a popular way to finance the expansion of multi-site service chainsthat deliver a consistent service concept.
Large franchise chains are replacing or absorb-ing a wide array of small, independent service businesses in fields as diverse as b o o k -keeping, car hire, dry-cleaning, haircutting, photocopying, plumbing, quick servicerestaurants, and real estate brokerage services. A m o n g the requirements for success arecreation of mass media advertising campaigns to promote brand names nationwide andeven worldwide , standardization of service operations, formalized training programs, anongoing search for new products, continued emphasis on improving efficiency, and dualmarketing programs directed at both customers and franchisees.
Finally, changes have occurred in service firms hiring practices. Traditionally, manyservice industries were very inbred. Managers tended to spend their entire careersworking within a single industry, even within a single organization. Each industry wasseen as unique and outsiders were suspect. Relatively few managers possessed graduatedegrees in business although they might have held an industry-specific diploma in afield such as hotel management or health care administration.
In recent years, however, Some of the best service companies are k n o w n for being very selective in hiring employees, seeking individuals w h o will share the firms strong service quality culture and be able to relate to customers well. W i t h i n many firms, intensive-training programs are n o w exposing employees, at all levels, to new tools and concepts. Advances in Information Technology N e w and improved technologies are radically altering the ways in w h i c h many ser- vice organizations do business with their customers, as well as altering what goes on behind the scenes.
Many types of technology have important implications for service, including biotechnology, power and energy technology, methods technology how people work and h o w processes are organized , materials technology, physical design technology, and information technology. In some cases, technology enables service firms to substitute automation for service personnel. But in other instances, as sug- gested in recent advertising for Singapore Airlines Figure 1.
Perhaps the most powerful force for change in service businesses comes from infor- mation technology, reflecting the integration of computers and telecommunications. Digitization allows text, graphics, video, and audio to be manipulated, stored, and trans- mitted in the digital language of computers.
Faster and more powerful software enables firms to create relational databases that combine information about customers with details of all their transactions and then to " m i n e " these databases for insights into new trends, new approaches to segmentation, and n e w marketing opportunities. Greater bandwidth, made possible by innovations such as fiber-optic cables, allows fast transmis- sion of vast amounts of information so that customer-contact personnel can interact almost instantly with a central database, no matter where they are located.
Companies operating information-based services, such asfinancial service firms, have seen the nature and scope of their businesses totally trans-formed by the advent of global electronic delivery systems. In recent years, the development of the Internet and its best-known component,the World Wide Web, have provided not only an important new medium of c o m m u n i -cation between service organizations and their customers, but also the potential for cre-ating radically new business models for delivery of services.
Properly designed and con-figured, such Internet-based services offer unprecedented speed and reach. For instance,by taking advantage of the Internet, site. However, for many " d o t. In some cases, the problem lies1 1 development of inappropriate e-commerce business models that failed to generate 1sufficient revenues to cover expenses.
Underlying such failures is often a lack of understanding of some of thekey principles of service marketing and management. Technological change affects many other types of services, too, from airfreight tohotels to retail stores. Express package firms such as T N T , D H L , FedEx, and U P S recog-nize that the ability to provide real-time information about customers packages hasbecome as important to success as the physical m o v e m e n t of those packages.
Technology does more than enable creation of new or improved services. It may alsofacilitate reengineering of such activities as delivery of information, order-taking andpayment; enhance a firms ability to maintain more consistent service standards; permitcreation of centralized customer service departments; allow replacement of personnelby machines for repetitive tasks; and lead to greater involvement of customers in opera-tions through self-service technology.
All in all, technology is an important theme r u n -ning through this book. Its covered in detail in Chapter Internationalization and GlobalizationThe internationalization of service companies is readily apparent to any tourist orbusiness executive traveling abroad.
M o r e and m o r e services are b e i n g deliveredthrough national or global chains. In some instances, such chains are entirely company owned.
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In otherinstances, the creator of the original concept has entered into partnership with o u t -side investors. Airlines and airfreight companies that were formerly just domestic inscope n o w have extensive foreign route networks. N u m e r o u s financial service firms,advertising agencies, hotel chains, fast-food restaurants, car rental agencies, andaccounting firms n o w operate on several continents. Some of this growth has beeninternally generated, but m u c h has also c o m e about through acquisitions of othercompanies.
A strategy of international expansion may be driven by a search for new markets orby the need to respond to existing customers w h o are traveling abroad in increasingnumbers. A similar situation prevails in business-to-business services.
W h e n companiesset up operations in other countries, they often prefer to deal with a few internationalsuppliers rather than numerous local firms. Developing a strategy for competing effectively across different countries is becoming a major marketing priority for many service firms. Franchising offers a way to enable a service concept developed in one nation to be delivered around the world through dis- tribution systems o w n e d by local investors. For example, FedEx and U P S have expanded into numerous countries by downloading local courier firms.
Many w e l l - k n o w n service companies around the world are A m e r i c a n - o w n e d ; examples include Citicorp, McDonalds, and Accenture Andersen Consulting. T h e upscale Four Seasons hotel chain is Canadian.
An alternative to mergers and takeovers is strategic alliances, where several firms working in the same or complementary indus- tries in different countries join forces to expand their geographic reach and product scope. T h e airline and telecommunication industries are good examples. Managing in a Continually Changing Environment It has been said that the only person in the world w h o really appreciates a change is a wet baby.
However, the willingness and ability of managers in service firms to respond to the dramatic changes affecting the service economy will determine whether their own organizations survive and prosper or are defeated by more agile and adaptive c o m - petitors. On the positive side, these changes are likely to increase the demand for many services, and the opening of the service economy means that there will be greater c o m - petition for that demand.
Service Marketing Books
In turn, more competition will stimulate innovation, notably through the application of new and improved technologies. Both singly and in combi- nation, these developments will require managers of service organizations to focus more sharply on marketing strategy.
T h e 8Ps of integrated service strategy are tools that service managers can use to develop effective strategies for mar- keting and managing many different types of services. T h e service decision framework reproduced in Figure 1. Your challenge is to learn to ask the right questions and to learn to use the resulting answers to develop a viable strat- egy, employing different elements of the 8Ps as appropriate.
T h e framework begins with a question that lies at the heart of marketing and busi- ness strategy in general: What business are we in? Determining the nature of the busi- ness goes beyond just specifying the industry with which a specific service is usually associated. Astute managers recognize that competition may come from outside that industry as well as within it. Hence they ask: With what other goods and services do we compete?
The need for forward thinking in decision making requires that m a n - agers also ask themselves, " W h a t forces for change do we face?
Only w h e n service marketers understand what problems customers are trying to solve through use of their products can we truly say that they know what business they are in. Recognizing that most readers of this bookalready have some familiarity with marketing, we try to build on this prior understand-ing rather than repeating the basics of introductory marketing theory and practice.
Hence we leave detailed discussion of customers to Part II of the book and focus thereon what is distinctive about service consumption. O n e of the keys to strategy formulation in services, not normally addressed in goodsmarketing, is the question: What service processes can be used in our operation?
As we showin this text, the importance of this question goes beyond operational issues. Marketers mustunderstand how the processes used to create and deliver service affect their customers, Human resource managers must understand how the choice of processes influences skill requirements and j o b descriptions for employees, including the nature of their interac- tions with customers.
We examine the issue of service processes in depth in Chapter 2. Conclusion W h y study services? M o d e r n economies are driven by service businesses, both large and small. Services are responsible for the creation of a substantial majority of new jobs, both skilled and unskilled, around the world. T h e service sector includes a tremendous vari- ety of different industries, including many activities provided by public and nonprofit organizations. It accounts for over half the economy in most developing countries and for over 70 percent in many highly developed economies.
As weve shown in this chapter, services differ from manufacturing organizations in many important respects and require a distinctive approach to marketing and other management functions. As a result, managers w h o want their enterprises to succeed cannot continue to rely solely on tools and concepts developed in the manufacturing sector. In the remainder of this book, well discuss in more detail the unique challenges and opportunities faced by service businesses.
Its our hope that youll use the material from this text to enhance your future experiences not only as a service employee or manager, but also as a customer of many different types of service businesses! Study Questions and Exercises 1. Business schools have traditionally placed more emphasis on manufacturing industries than on service industries in their courses.
W h y do you think this is so? Does it matter?
W h y is time so important in services? W h a t are the implications of increased competition in service industries that have been deregulated? Give examples of h o w computer and telecommunications technologies have changed services that you use in your professional or personal life. Choose a service company you are familiar with and show how each of the eight elements 8Ps of integrated service management applies to the company.
Is the risk of unethical business practices greater or lesser in service businesses than in manufacturing firms? Explain your answer. W h y do marketing, operations, and human resources have to be more closely linked in services than in manufacturing? Give examples.
Answer the four questions associated with " W h a t business are we in? Endnotes 1. Reserve your consultation today. Here is a basic outline of the process: You download the service on myidentifiers. You complete and submit the questionnaire. Smith Publicity, a firm specializing in promoting authors and publishers that has forged a reputation as one of the most creative publicity and public relations agencies worldwide, reviews your questionnaire and book and author information You will be introduced to one of Smith's experts, who will coordinate and execute your one-hour one-on-one consultation.
You receive a concluding email from your consultant, which includes additional educational material on the topic you select. What types of questions are on the questionnaire? The questionnaire asks for information about your book, the target audience you're trying to reach, and your personal and professional background. For example, you'll be asked to name specific things you want your readers to know about you. You can also list topics, not related to your book, that you feel qualified to discuss when promoting your book such as trending news topics.
This will help customize and focus the session, and ensure that it is tailored with advice, publishing industry information, and initiatives specifically for you and your work. Don't hesitate. The sooner you get your marketing plan in place, the sooner you'll get your book discovered and sold.
Select one or more of the six initiatives listed and take the first big step toward launching a successful book promotion. Reserve your consultation today.
Here is a basic outline of the process: You download the service on myidentifiers. You complete and submit the questionnaire. Smith Publicity, a firm specializing in promoting authors and publishers that has forged a reputation as one of the most creative publicity and public relations agencies worldwide, reviews your questionnaire and book and author information You will be introduced to one of Smith's experts, who will coordinate and execute your one-hour one-on-one consultation.
You receive a concluding email from your consultant, which includes additional educational material on the topic you select.Here is a basic outline of the process: You download the service on myidentifiers. Service 7 provides you with 7 principles to help you and your staff create and deliver advice and service experiences that your clients will love today and well into the future.
Watson, Sr. Leonard A. Your training will be custom-tailored to your needs, based on your answers to these questions. Service 7 is for professional advice providers and business owners. We're offering a one hour phone consultation with a book marketing professional Authors often say "writing the book was easy What is yours?
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