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Published on January 9, 2009

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Services Marketing IIIBUSE3004 : Services Marketing IIIBUSE3004 Mr. Solomon Habtay The required text for this course isServices Marketing, 6/E , by Lovelock / Wirtz It's important you buy this book because: It is the best book in services marketing theories and concepts Has relevant readings and case materials Class discussions are based on theoretical chapters and readings from this book Individual/group assignments will come from (refer to) the book I will test on material from the book Course 0utline : Course 0utline The objective of the course Analyse market opportunities Pursue services value innovation Design viable business model Implement profitable services strategies Presentation of the course Lectures Case study Individual assignment (learn analytical skills) Group assignment Course 0utline : Course 0utline Group assignment Course 0utline : Course 0utline Performance evaluation Consulting times Monday: 14:00 – 15:00hrs Tuesday: 14:00 – 15:00hrs A Framework for Developing Effective Service Marketing Strategies : A Framework for Developing Effective Service Marketing Strategies Understanding Services and Customer Needs, Understanding a business model Chapter 1-2, G&G (2001) Integrated approach to Marketing : Integrated approach to Marketing Production-oriented business model Marketing is just another link in the value chain. Market-oriented business model Marketing is an activity engaged in pursuing value innovation by looking systematically across all elements of a business model. Customer needs & wants R&D Production Customer Marketing Customer Marketing Customer needs & wants R&D Procurement Production Distribution Distribution Marketing Procurement Sells Sells Keegan, W. & Green, M. (2003). Global Marketing. Int’l Ed. New Jersey: Pearson Education., p.4 Govindarajan, V. and Gupta A. K. (2001). Strategic innovation: A conceptual road map. Business Horizons, 44(4): 3-12. Customer value What is a Business Model : What is a Business Model A business model is a conceptual tool that depicts a set of key components of a business, and their dynamic relationships interlinked by a business logic. Key components of a business Dynamic relationships Business logic Five Key Components of a Business Model : Five Key Components of a Business Model A Framework for Developing Effective Service Marketing Strategies—Part II : A Framework for Developing Effective Service Marketing Strategies—Part II Value chain: Production and delivery Customer value Capabilities Price mechanisms Strategy Overview : Overview Why Study Services? What are Services? The Marketing Challenges Posed by Services The Expanded Marketing Mix Required for Services What is a business model? Why Study Services? (1) : Why Study Services? (1) Services dominate economy in most nations Understanding services offers you personal competitive advantages Importance of service sector in economy is growing rapidly: Services account for more than 65 percent of GDP in SA Almost all economies worldwide have a substantial service sector Most new employment is provided by services Strongest growth area for marketing Services Dominate the SA Economy :  Services Dominate the SA Economy Services, 67.1% Agriculture 2.6% Manufacturing 30.3% Government Services Source: https://www.cia.gov/cia/publications/factbook/appendix/appendix-b.html INSIGHTS Private sector service industries account for over two-thirds of GDP Adding government services, total is almost four-fifths of GDP Why Study Services? (2) : Why Study Services? (2) Most new jobs are generated by services Significant training and educational qualifications required, but employees will be more highly compensated Will service jobs lost to lower-cost countries? Is it possible for a SA economy to be entirely based on services? Fastest growth expected in knowledge-based industries What are the key driving forces for growing service industries in major economies of the world? Key drivers for value innovation in services industries : Key drivers for value innovation in services industries What Are Services? : What Are Services? The historical view Goes back over 200 years to Adam Smith and Jean-Baptiste Say Different from goods because they are perishable (Smith 1776) Consumption cannot be separated from production, services are intangible (Say 1803) A fresh perspective: Services involve a form of rental, offering benefits without transfer of ownership Include rental of goods Marketing tasks for services differ from those involved in selling goods and transferring ownership What Are Services? : What Are Services? Five broad categories within non-ownership framework: Rented goods services Defined space and place rentals Labor and expertise rentals Access to shared physical environments Systems and networks: access and usage Implications of renting versus owning (Service Perspectives 1.1) Markets exist for renting durable goods rather than selling them Renting portions of larger physical entity (e.g., office space, apartment) can form basis for service Customers more closely engaged with service suppliers Time plays central role in most services Customer choice criteria may differ between rentals and outright purchases Services offer opportunities for resource sharing Defining Services : Defining Services Services Are economic activities offered by one party to another Most commonly employ time-based performances to bring about desired results in: recipients themselves objects or other assets for which purchasers have responsibility In exchange for their money, time, and effort, service customers expect to obtain value from Access to goods, labor, facilities, environments, professional skills, networks, and systems But they do not normally take ownership of any of the physical elements involved Service Products versus Customer Service and After-Sales Service : Service Products versus Customer Service and After-Sales Service A firm’s market offerings are divided into core product elements and supplementary service elements Is everyone in service? Need to distinguish between: Marketing of services Customer service Good service increases the value of a core physical good After-sales service is as important as pre-sales service for many physical goods Manufacturing firms are reformulating and enhancing existing added-value services to market them as stand-alone core products Services Pose Distinctive Marketing Challenges : Services Pose Distinctive Marketing Challenges Marketing management tasks in the service sector differ from those in the manufacturing sector The eight common differences are: Most service products cannot be inventoried Intangible elements usually dominate value creation Services are often difficult to visualize and understand Customers may be involved in co-production People may be part of the service experience Operational inputs and outputs tend to vary more widely The time factor often assumes great importance Distribution may take place through nonphysical channels What are marketing implications? Differences, Implications, and Marketing-Related Tasks : Differences, Implications, and Marketing-Related Tasks Differences, Implications, and Marketing-Related Tasks : Differences, Implications, and Marketing-Related Tasks Value Added by Physical, Intangible Elements Helps Distinguish Goods and Services : Value Added by Physical, Intangible Elements Helps Distinguish Goods and Services Physical Elements High Low Intangible Elements High Internet Banking Source; Adapted from Lynn Shostack The 8Ps of Services Marketing : The 8Ps of Services Marketing Product Elements (Chapter 3) Place and Time (Chapter 4) Price and Other User Outlays (Chapter 5) Promotion and Education (Chapter 6) Process (Chapter 8) Physical Environment (Chapter 10) People (Chapter 11) Productivity and Quality (Chapter 14) Fig 1.9 Working in Unison: The 8Ps of Services Marketing Tangible goods marketing mix : Product/service Quality Safety Brand name Guarantees/warranties Services/spare parts Place Numbers and types of middlemen Locations/availability Inventory levels Transportation The target market Speed Options Packaging Price Discounts Allowances Credit terms Payment period Rental/lease List price Promotion Advertising Personal selling Sales promotion Word-of-mouth Publicity Walker, O.C., Mullins, J. W., Boyd, H. W., & Larreche, J.C. (2006). Marketing Strategy, 5th Ed. New York. McGraw-Hill, pp. 153-169. Tangible goods marketing mix Summary: New Perspectives on Marketing in the Service Economy : Summary: New Perspectives on Marketing in the Service Economy A business model: a way of doing business Reasons for studying services: Service sector dominates economy in most nations, many new industries Most new jobs created by services Powerful forces—government policies, social changes, business trends, IT advances, and globalization—are transforming service markets Understanding services offers personal competitive advantage The service concept and its definition: Services create benefits without transfer of ownership Most employ time-based performances to bring about desired results in recipients or in assets for which they have responsibility Customers expect value from access to goods, facilities, labor, professional skills, environments, networks & systems in return for money, time, effort Services present distinctive marketing challenges relative to goods, requiring: Expanded marketing mix comprising 8Ps instead of traditional 4Ps Integration of marketing function with operations and human resources Summary: New Perspectives on Marketing in the Service Economy : Summary: New Perspectives on Marketing in the Service Economy Reasons for studying services: Service sector dominates economy in most nations, many new industries Most new jobs created by services Powerful forces—government policies, social changes, business trends, IT advances, and globalization—are transforming service markets Understanding services offers personal competitive advantage The service concept and its definition: Services create benefits without transfer of ownership Most employ time-based performances to bring about desired results in recipients or in assets for which they have responsibility Customers expect value from access to goods, facilities, labor, professional skills, environments, networks & systems in return for money, time, effort Services present distinctive marketing challenges relative to goods, requiring: Expanded marketing mix comprising 8Ps instead of traditional 4Ps Integration of marketing function with operations and human resources

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