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1. Chapter 1
Introduction to
Services
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2. CHAPTER
1 Introduction to Services
• What are services?
• Why services marketing?
• Service and Technology
• Characteristics of Services Compared to Goods
• Services Marketing Mix
• Staying Focused on the Customer
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3. Objectives for Chapter 1:
Introduction to Services
 Explain what services are and identify important trends in
services.
 Explain the need for special services marketing concepts and
practices and why the need has developed and is
accelerating.
 Explore the profound impact of technology on services.
 Outline the basic differences between goods and services and
the resulting challenges and opportunities for service
businesses.
 Introduce the expanded marketing mix for services and the
philosophy of customer focus as powerful frameworks and
themes that are fundamental to the rest of the text.
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4. Examples of Service Industries
 Health Care

Hospital, medical practice, dentistry, eye care
 Professional Services

Accounting, legal, architectural
 Financial Services

Banking, investment advising, insurance
 Hospitality

Restaurant, hotel/motel, bed and breakfast

Ski resort, rafting
 Travel

Airline, travel agency, theme park
 Others

Hair styling, pest control, plumbing, lawn maintenance,
counseling services, health club, interior design
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5. FIGURE 1.1 Contributions of Service Industries to Canadian
Gross Domestic Product
Text
Text
Text
Text
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6. Four Distinctions in Services
 Service industries and companies
 Services and products
 Customer service
 Derived service
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7. Figure 1.2
Tangibility Spectrum
Salt
 Soft Drinks
 Detergents
 Automobiles
 Cosmetics
 Fast-food
Outlets
 Intangible
Dominant
Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies

Airlines 
Investment
Management 
Consulting 
Teaching
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8. Service Sector Contribution to Selected
TABLE 1.1
Economies Worldwide
Country Percent of GDP Attributed to
Services
Bahamas 90
United States 79
Japan 74
United Kingdom 73
France 73
Canada 71
Sweden 69
Australia 68
Germany 68
Singapore 67
Brazil 51
India 48
China 33
Source: The World Factbook 2004, published by the Central Intelligence Agency, www.cia.go/cia/publications/factbook/geos
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9. Why Study Services Marketing?
 Service-based economies
 Service as a business imperative in manufacturing and IT
 Deregulated industries and professional service needs
 Services marketing is different
 Service equals profits
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10. Service and Technology
 Potential for new service offerings
 New ways to deliver service
 Enabling both customers and employees
 Extending the global reach of services
 The Internet
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11. Characteristics of Services
Compared to Goods
Intangibility Heterogeneity
Simultaneous
Production
and Perishability
Consumption
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12. Implications of Intangibility
 Services cannot be inventoried
 Services cannot be easily patented
 Services cannot be readily displayed or
communicated
 Pricing is difficult
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13. 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
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14. 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
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15. Implications of Perishability
 It is difficult to synchronize supply and demand
with services
 Services cannot be returned or resold
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16. Challenges for Services
 Defining and improving quality
 Designing and testing new services
 Communicating and maintaining a consistent image
 Accommodating fluctuating demand
 Motivating and sustaining employee commitment
 Coordinating marketing, operations, and human resource
efforts
 Setting prices
 Finding a balance between standardization versus
personalization
 Ensuring the delivery of consistent quality
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17. Traditional Marketing Mix
 All elements within the control of the firm that
communicate the firm’s capabilities and image to
customers or that influence customer satisfaction
with the firm’s product and services:
 Product

Price
 Place
 Promotion
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18. Expanded Mix for Services –The 7 Ps
 Product
 Price
 Place
 Promotion
 People

All human actors who play a part in service delivery and thus
influence the buyer’s perceptions: namely, the firm’s personnel,
the customer, and other customers in the service environment.
 Physical Evidence

The environment in which the service is delivered and where the
firm and customer interact, and any tangible components that
facilitate performance or communication of the service.
 Process
 The actual procedures, mechanisms, and flow of activities by
which the service is delivered—the service delivery and operating
systems.
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19. WestJet: Aligning People, Processes
and Physical Evidence
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20. Ways to Use the 7 Ps
 Overall strategic assessment
 How effective is a firm’s services marketing mix?
 Is the mix well-aligned with overall vision and
strategy?
 What are the strengths and weaknesses in terms
of the 7 Ps?
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21. Ways to Use the 7 Ps
 Specific service implementation
 Who is the customer?
 What is the service?
 How effectively does the services marketing mix
for a service communicate its benefits and
quality?
 What changes/ improvements are needed?
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