SERVICES MARKETING: INTEGRATING PEOPLE,
TECHNOLOGY, STRATEGY
MODULE - 1
DR. ZILLUR RAHMAN
PROFESSOR
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE
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Understanding Service Products, Consumers, and Markets
Module 1, 2, & 3: New Perspectives on Marketing in the Service Economy
Module 4, 5, & 6: Consumer Behavior in the Service Context
Module 7 & 8: Positioning Services in Competitive Markets
Applying the 4 Ps of Marketing to
Services
Managing the Customer Interface
Module 9, 10, & 11: Developing
Module 20 & 21: Designing and
Service Products Developing Customer
Managing Service Processes
Module 12 & 13: Distributing Relationships
Module 22, 23, & 24: Balancing
Services through Physical and Module 30, 31, & 32: Managing
Demand and Productive Capacity
Electronic Channels Relationships and Building Loyalty
Module 25 & 26: Crafting Service
Module 14, 15, & 16: Setting Module 33, 34, & 35: Complaint
Environment
Prices and Implementing Revenue Handling and Service Recovery
Module 27, 28, & 29: Managing
Management
People for Service Advantage
Module 17, 18, & 19: Promoting
Services and Educating Customers
Striving for Service Excellence
Module 36, 37, & 38: Improving Service Quality and Productivity
Module 39 & 40: Striving for Service Leadership & Creating the Seamless Service Firms
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NEW PERSPECTIVES ON MARKETING IN THE SERVICE
ECONOMY
MODULE - 1
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MODULE OVERVIEW
1. Understand how services contribute to a country’s economy and
the principal industries of the service sector.
2. Identify the powerful forces that are transforming service markets.
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OVERVIEW
Introduction to
Services Marketing
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WHY STUDY SERVICES
• 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.
– Even in emerging economies, the service output is growing
rapidly and often represents at least half of the Gross Domestic
Product (GDP).
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EVOLUTION OF SERVICE DOMINATED ECONOMY
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CONTRIBUTION OF SERVICES INDUSTRIES TO GDP
GLOBALLY
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SIZE OF SERVICE SECTOR IN VARIOUS ECONOMIES
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WHY STUDY SERVICES
• 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.
– In fact, this shift in employment to the service
sector has been seen as one of the longest and
most stable of economic trends.
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WHY STUDY SERVICES
– Many manufacturing firm too have moved from just bundling
supplementary services with their physical products to marketing
certain elements as standalone services.
Example: IBM previously known mainly as a manufacturer, has
transformed into a service provider and has become the world’s
largest business and technology services provider offering
management consulting, systems integration, and application
management services as part of IBM Global Service.
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WHY STUDY SERVICES
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WHY STUDY SERVICES
• 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
Value added by service industry categories to US GDP.
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POWERFUL FORCES ARE TRANSFORMING SERVICE
MARKETS
• Government policies, business trends, advances in IT etc. are among
the powerful forces transforming today’s service markets.
• Collectively, these forces reshape demand, supply, competitive
landscape, and even the waycustomers buy and use services.
• Of these forces, the dramatic development of IT and communications
is perhaps the most important at the moment.
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POWERFUL FORCES ARE TRANSFORMING SERVICE
MARKETS
• Innovations in big data, user-generated content, mobile communications,
networking technologies, AI, and app-based self-service technologies
bring their own service revolution.
• These technologies enable firms to
– deepen the relationships with their customers,
– offer multi-way information flow and more personalized services,
– improved analytics, and
– increase productivity and profitability.
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POWERFUL FORCES ARE TRANSFORMING SERVICE
MARKETS
• These technologies also lead to an array of innovative business
models, ranging from
– peer-to-peer services (e.g., Airbnb for short-term accommodation and Lending
Club for personal loans),
– integrators (e.g., Uber connects passengers with independent drivers through
apps),
– crowd-based services (e.g., crowdSPRING, a leading provider of logo and graphic
design services).
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FACTORS STIMULATING TRANSFORMATION OF
SERVICE ECONOMY
Social Business Advances
Changes Trends In IT
Government Globalization
Policies
New markets and product categories
Increase in demand for services
More intense competition
Innovation in service products & delivery systems, stimulated by better
technology
Customers have more choices and exercise more power
Understanding customers and competitors
Success hinges Viable business models
on: Creation of value for customers and firm
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FACTORS STIMULATING TRANSFORMATION OF
SERVICE ECONOMY
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FACTORS STIMULATING TRANSFORMATION OF SERVICE
ECONOMY
Social Business Advances
Changes Trends In IT
Government Globalization
Policies
New markets and product categories
Increase in demand for services
More intense competition
Innovation in service products & delivery systems, stimulated by better technology
Customers have more choices and exercise more power
Success hinges on: Understanding customers and competitors
Viable business models
Creation of value for customers and firm
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FACTORS STIMULATING TRANSFORMATION OF SERVICE
ECONOMY
Government Example Impact on Service Economy
Policies
• Changes in • Ban on smoking in • Improved customer comfort
Regulations restaurants, and limitation of • Health measures in restaurants will
transfats in food preparation encourage people to dine out more
• Privatizatio • Privatization of infrastructure • Potential retrenchment of existing
n services like utilities and suppliers in a more competitive
transportation environment, but job creation and
investments by new players entering the
market
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FACTORS STIMULATING TRANSFORMATION OF SERVICE
ECONOMY
Social Business Advances
Changes Trends In IT
Government Globalization
Policies
Rising consumer expectations
More affluence
More people short of time
Increased desire for buying experiences
vs. things
Rising consumer ownership of high tech
equipment
Easier access to information
Immigration
Growing but aging population
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FACTORS STIMULATING TRANSFORMATION OF SERVICE
ECONOMY
Social Example Impact on Service Economy
Changes
• Rising • Higher expectation of service • Training of service staff to deliver good
consumer quality and convenience service
expectations • Extended hours offer more part-time job
opportunities
• More • Higher spending on tourism • Creation of a wide variety of offerings
affluence • Development of new services in new
locations boosts local economies
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FACTORS STIMULATING TRANSFORMATION OF SERVICE
ECONOMY
Social Business Advances
Changes Trends In IT
Government
Policies Globalization
Push to increase shareholder value
Emphasis on productivity and cost
savings
Manufacturers add value through service
and sell services
More strategic alliances and outsourcing
Focus on quality and customer
satisfaction
Growth of franchising
Marketing emphasis by nonprofits
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FACTORS STIMULATING TRANSFORMATION OF SERVICE
ECONOMY
Business Example Impact on Service Economy
Trends
• Emphasis • Move to self-service • Rethink service delivery system
on technologies • Invest in new technologies that replace
productivity employees
and cost
savings
• Growth of • Fast food chains expand • Challenge of maintaining consistent
franchising around the world service standards worldwide while
adapting to local food preferences and
cultures
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FACTORS STIMULATING TRANSFORMATION OF SERVICE
ECONOMY
Social Business Advances
Changes Trends In IT
Government Globalization
Policies
Growth of Internet
Greater bandwidth
Compact mobile equipment
Wireless networking
Faster, more powerful software
Digitization of text, graphics, audio,
video
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FACTORS STIMULATING TRANSFORMATION OF SERVICE
ECONOMY
Advances in Example Impact on Service Economy
IT
• Growth of • Information at the fingertips • Creation of new services that gather the
internet of customers, making them various sources of information and
more knowledgeable and repackage them to provide value to
informed customers
• Digitization • Online download service • Need for service providers to invest in
of text, providers maintaining a secure and credible
graphics, website and guarantee virus-free files for
audio, and download
video
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FACTORS STIMULATING TRANSFORMATION OF SERVICE
ECONOMY
Social Business Advances
Changes Trends In IT
Government
Globalization
Policies
More companies operating on
transnational basis
Increased international travel
International mergers and alliances
“Offshoring” of customer service
Foreign competitors invade domestic
markets
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FACTORS STIMULATING TRANSFORMATION OF SERVICE
ECONOMY
Globalization Example Impact on Service Economy
• More • MNCs such as banks and • Increase in the scope of service that can
companies “Big 4” accounting firms be provided
operating on have numerous operations • Training of staff in local markets to
transnationa around the world upgrade skills, capabilities and service
l basis standards
• Foreign • International banks such as • Build branch network by purchasing one
competitors HSBC and American Express or more regional banks
invade do business in India • Invest heavily in new and improved
domestic branches and in electronic delivery
markets channels
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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.
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OUTSOURCING AND OFFSHORING
• Outsourcing refers to the contracting of services that were previously
conducted internally in an organization to an external service provider.
• Offshoring refers to services that are conducted in one country and
consumed in another.
• Outsourcing and offshoring are independent (e.g., firms can outsource
without offshoring to a domestic service provider; or offshore without
outsourcing to a foreign subsidiary),
• But often work in tandem (e.g., a U.S.-based firm
outsources a customer contact center to a service
provider in the Philippines).
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OUTSOURCING AND OFFSHORING
• Earlier offshoring was mostly confined to the manufacturing sector, but
of late offshore services have emerged as a dynamic global sector,
driven by the rise of information and communication technologies, and
the evolution of global business models.
• According to McKinsey & Company about 11% of service jobs around
the world could be carried out remotely.
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OUTSOURCING AND OFFSHORING
Source: Jochen Wirtz, Sven
Tuzovic, and Michael Ehret
(2015), “Global Business
Services: Increasing
Specialization and Integration
of the World Economy as
Drivers of Economic Growth,”
Journal of Service
Management, Vol. 26, No.4,
pp. 565--587.
Outsourcing and offshoring are independent, but often work in tandem.
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OUTSOURCING AND OFFSHORING
― The above figure shows the different business models that can develop
in the outsourcing and offshoring of services.
― The first scenario (Arrow1) describes a firm’s decision to outsource
services domestically.
― Arrow 2 describes a situation where a firm switches from a domestic
supplier to a foreign supplier.
― In some cases, firms make the decision to outsource
and to offshore to a foreign supplier simultaneously
(Arrow 3).
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OUTSOURCING AND OFFSHORING
― The fourth scenario is when firms source from foreign locations by
establishing a subsidiary abroad ( Arrow 4). This is often referred to as
“ captive offshoring”.
― Finally combining outsourcing and offshoring implies shifting the
service provision from a foreign affiliate to a foreign-owned supplier
(Arrow 5).
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CONCLUSION
This module highlights the importance of services in our economies.
We also identified the various forces (e.g. Government policies, business
trends, advances in IT etc.) that are impacting the service economy.
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REFERENCES
• Wirtz, J., Lovelock, C., & Chatterjee, J. (2017) Services Marketing:
People Technology Strategy, Pearson Education, Eighth Edition.
• Zeithaml, V. A., Bitner, M. J., Gremler, D. D., and Pandit, A. (2009)
Services Marketing: Integrating customer focus across the firm, Tata
McGraw-Hill Education Pvt. Ltd., Fourth Edition.
• Hoffman, K. D., & Bateson, J. E. G. (2007) Services
Marketing : Concepts, strategies, & cases, Thomson
Publication, Third Edition.
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Thank You
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