Marketing in the Service Economy

Question 1

LO1: Explain how services are defined

Answer 1

• A service is an act, performance or experience that one party offers to another, and is, in essence, intangible and does not result in ownership of anything, but nonetheless creates value for the recipient.
• Business Services: accountancy, architecture, legal services, printing and insurance.
• Consumer Services: airline, medical, hotel, restaurant.

Question 2

LO2: How do services differ from one another

Answer 2

• Degree of tangibility/intangibility e.g. medical/dental vs education/management consultancy
• Who or what is the direct recipient of the service? –> customers (hairdresser) or possessions (car service)
• The place of service –> do you visit them, or do they visit you? –> lawnmower vs hotel
• Customisation vs Standardisation –> barbershop vs fast-food restaurant
• Customer relationships –> membership, transactional
• High contact vs low contact –> visit a doctors vs doing online banking transaction

Question 3

LO3: Describe how services contribute to the economy

Answer 3

• In most countries, the service sector is an engine of economic development.
• Services in comparison to manufactured goods are becoming mainstream focus of advertising and marketing managers.
• Size of service sector around the world: Hong Kong (93.2%), USA (79.6%) and Singapore (73.4%)

Question 4

LO4: identify forces that are transforming service markets

Answer 4

• The ‘hollowing out’ effect –> outsource low-tech, labour-intensive tasks to low-wage economies.
• Social changes –> as societies become more affluent, demand for more/better services
• Reduced bans on advertising for professional services

Question 5

LO5: describe key characteristics distinguishing services from goods

Answer 5

• Services CANNOT be inventoried, if there is no demand – unused capacity is wasted.
• Intangible elements usually dominate value creation
• Services are difficult to visualise and evaluate.
• Customers may be involved in co-production
• Time efficiency
• Distribution may take place through non-physical channels  e.g. online learning

Question 6

LO6: explain how services create value for customers

Answer 6

Services is all about value creation for the consumer
- Firms must create and deliver services that are perceived by customers to provide them with value that they desire  time, place, problem solving value.

Question 7

LO7: describe ways of categorising services

Answer 7

1. (people processing) Tangible actions to people’s bodies  transportation, hair care, massage.
2. (possession processing) tangible actions to goods and other physical possessions  furniture removal, lawn mowing
3. (mental-stimulus processing) intangible actions directed at people’s minds  education, music, counselling
4. (information processing) intangible actions directed at intangible assets  investments, life insurance

Question 8

LO9: describe the expanded ‘marketing mix’ for services

Answer 8

Price, price, place and promotion + people, physical evidence and process
People –> direct, personal interaction between customers and staff
Physical evidence –> tangible cues (servicescape) physical layout of service facility, ambience and background music
Process –> to manufacture and deliver service