Marketing in the service economy

Question 1

Why Study services Marketing? (4 points)

Answer 1

1. services account for more than 60% of GDP worldwide
2. Almost all economies have a substantial service sector
3. Most new employment is provided by services
4. The strongest growth area for marketing

Question 2

what are 4 facts about the UK service economy? (4)

Answer 2

1. it transitioned from a manufacturing led to a service led labour market over 170 years
2. as of 2011, 80% of workers are in the service industry
3. London is the worlds largest financial centre
4. Britain’s aerospace industry is the second largest national aerospace industry.

Question 3

How come most jobs are generated by services? (3)

Answer 3

1. The fastest growth is expected in knowledge-based industries. (biotech, telecommunications, IT, software)
2. With significant training and educational qualifications required most employees are highly compensated
3. Some services can be exported (call services)

Question 4

Why is the integration of product and service providers such as TotalCare’s package deal, attractive to companies? (5)

Answer 4

TotalCare: Package deal

allows:
1. fixes engine maintenance cost
2. aligns business structures
3. increases aircraft availability
4. allows airlines to focus on core business
5. fully transfers financial risk

Question 5

What are the 5 powerful forces transforming service markets?

Answer 5

1. Government Policies
2. Social Changes
3. Business Trends
4. Advances in IT (most important atm)
5. Globalisation

Question 6

What are the forces reshaping the service landscape? (4)

Answer 6

1. Demand
2. Supply
3. The competitive landscape
4. Customers choice, power and decision making

Question 7

What does the forces create and what are the effects of these forces transforming the economy? (4)

Answer 7

1. New Markets and product categories
2. Increase in demand for services
3. # More intense competitionIt creates greater innovation in service products and delivery systems, stimulated by better technology. ->
   which in turn gives customers more choice and power.

Question 8

What does the successes hinge/depend on when it comes to the transformation of the service economy for companies? (3 factors)

Answer 8

1. Understanding customers and competitors
2. Viable business models
3. Creation of value for customers and firm

Question 9

Factors stimulating the service economy: What impact do government policies have on firms? (3)

Answer 9

1. Changes in regulations
2. New rules to protect customers, employees and the environment
3. New agreement on trade in services ex; Airbnb

Question 10

Factors stimulating the service economy: What impact do social changes have on firms? (8)

Answer 10

1. Rising consumer expectations
2. More affluence
3. More people short of time
4. Desire to experience
5. Rising consumer tech ownership
6. Easier access to information
7. Immigration/migration
8. Growing but ageing population
   e. g. Airbnb tourism pollution

Question 11

Factors stimulating the service economy: What impact do business trends have on firms? (6)

Answer 11

1. Push to increase shareholder value
2. Emphasis on productivity and cost savings
3. Manufacturers add value through service and sell services
4. More strategic alliances and outsourcing
5. Focus on quality and customer satisfaction
6. Growth of franchising

Question 12

Factors stimulating the service economy: What impact do advances in IT have on firms? (6)

Answer 12

1. growth of internet
2. big data
3. cloud computing
4. user-generated content
5. mobile communications
6. AI

Question 13

In relation to the impact IT advances have, what can firms do? (3)

Answer 13

1. Deepen relations with consumers
2. multiway info flow
3. innovative business models
   e. g peer-to-peer (airbnb, uber)

Question 14

Factors stimulating the service economy: What impact does globalisation have on firms? (4)

Answer 14

1. More companies operating on a transnational basis
2. Increased international travel
3. International mergers and alliances
4. Offshoring of customer service (services conducted in one country and consumer in another)

Question 15

What services can be offshored? (7)

Answer 15

1. Finance and accounting
2. HR and legal
3. Call centres
4. Marketing and sales services
5. IT infrastructure
6. application development
7. knowledge services (engineering support, product design, research and development, and analytics).

Question 16

Define a service?

Answer 16

An economic activity performed by one party to another. Often time-based, these performances bring about desired results to recipients, objects, or these assets.

Question 17

What are the four broad categories of services?

Answer 17

1. People-processing e.g. Barbers and Healthcare (tangible, people)
2. Possession-processing e.g. Refuelling, disposal/recycling (tangible, possessions)
3. Mental stimulus processing e.g. education and advertising/PR (intangible, people)
4. Information processing e.g. Accounting and banking (intangible, possessions)

Question 18

People processing: what must customers do and what are the managerial implications? (2 & 3)

Answer 18

Airlines, hospitals, restaurant hotels etc.
customers must:

1. Physically enter the service factory
2. Cooperate actively with the service operation

Managerial implications:

1. Time
2. Mental
3. Physical effort

Question 19

Possession processing: what does it signify? (3)

Answer 19

1. Service is directed at physical possessions
2. Less physical involvement
3. Production and consumption are separable

e.g. UPS, freight, repair, cleaning, retailing etc.

Question 20

Mental stimulus processing: what does it signify? (4)

Answer 20

1. service is directed at the consumer mind
2. the physical presence of recipients is required
3. core content of service is information based
4. can be inventoried (broadcasting, consulting, education- in terms of essays and exams).

Question 21

information processing: what does it signify? (3)

Answer 21

1. Service reliant on effective collection and processing of information
2. Most intangible form of service
3. May be transformed into enduring forms of service output
   e. g. account, banking, insurance, legal and research

Question 22

What other factors are added to the service marketing mix 4p’s? (3)

Answer 22

1. Process: the process and procedures within a company are as important as what it produces
2. Physical environment: appearance
3. People: service employees
   = together the 7 ps

Question 23

How do consumers handle perceived risk? (6)

Answer 23

1. Seek information from respected personal sources
2. Using the internet to compare service offerings (reviews, ratings)
3. Rely on the firm with a good reputation
4. Look for guarantees and warranties
5. Visit service facilities or try an aspect of service before purchase
6. Ask knowledgeable employees about competing services

Question 24

How do firms respond to the perceived risk? (6)

Answer 24

1. Free trials
   2 Advertise
2. Display credentials
3. Offer guarantees
4. Encourage a visit to service facilities
5. Give customers online access to information about order status

Question 25

What does it mean when a service is intangible? (4)

Answer 25

1. means a service is not physical and therefore cannot be perceived by the senses.
2. A service cannot be seen, touched, tasted, or smelled.
3. A service cannot be physically possessed.
4. There is a continuum of intangibility: ranging from pure goods (tangible) to pure services (intangible); knowing where a product lies on this continuum is important in creating marketing strategies for service-dominant product

Question 26

What does inseparability of consumption and production mean? (3)

Answer 26

1. it means the production of a service cannot be separated from its consumption by customers; production and consumption are simultaneous.
2. Although the manufacturer of a tangible good may never see an actual customer, customers often must be present during the production of a service and cannot take the service home.
3. Because of inseparability, customers not only want a specific type of service but expect it to be provided in a specific way by a specific individual.

Question 27

what does perishability of service mean? and how can providers manage it? (3)

Answer 27

1. It means that the unused service capacity from one time period cannot be stored for future use.
2. Service providers and marketers cannot handle supply-demand problems through production scheduling and inventory techniques.
3. Service providers can plan for demand which fluctuates according to day of the week, time of day, or season.

Question 28

what does heterogeneity of service mean? (4)

Answer 28

1. means variation in quality.
2. Quality of manufactured goods is easier to control with standardized procedures and mistakes are easier to correct than in the service industry.
3. Maintaining a consistent quality of service delivery can be very difficult for service providers. Variations can occur with services provided by different organizations, the same organization, different people, or the same person and are therefore difficult to control.
4. Heterogeneity usually increases as the degree of labour-intensiveness increases. This is because services are people-based and susceptible to fluctuations in quality.

Question 29

What is the goods dominant logic? (4)

Answer 29

1. Purpose of economic activity is to make and distribute units of output, preferably tangible (i.e., goods)
2. Goods are embedded with utility (value) during manufacturing
3. Goal is to maximise profit through the efficient production and distribution of goods
4. Firms exist to make and sell value - Firms exist to make and sell value laden goods

Question 30

What is the problem of goods dominant logic? (2)

Answer 30

1. Goods are not why we buy goods, it Is about the Service (benefits) they render, Intangibles (brand, self image, social connectedness, meaning) and Experiences
2. Goods are not what we fundamentally “own” to exchange with others, it is the Applied knowledge and skills (our services)

Question 31

According to Vargo and Lusch (2006,2008,2014), what is the principle of service-dominant logic? (2)

Answer 31

1. Products are valued for the service they provide and that the value derived from a physical good, for example, is not the good itself, but the service it provides during consumption
2. operant resources are perceived to be primary as they are producers of effects

Question 32

What is meant by the term value-in-use? (1)

Answer 32

Value can only be created with and determined by the user in the consumption process and through use or what is referred to as value-in-use

Question 33

What is meant by co-creation? (2)

Answer 33

1. Customers co-create value in the interactive co-creation process during which customers evaluate the company’s value proposition and assess its actual value
2. Both parties are value creators and value beneficiaries

Question 34

What is the principle of the interactive process of exchange? (5)

Answer 34

1. Service, rather than goods are the basis of economic and social exchange
   i. e., Service is exchanged for service
2. Competences are fundamental units in the exchange process and not goods like in the GD logic
3. Focus is on intangibles (skills, information, knowledge), interactivity, connectivity, and ongoing relationships
4. Marketers should market withcustomers, as well as other value-creation partners in the firm’s value network.
5. Should not market to customers

Question 35

What are the foundation premises of SDL? (9)

Answer 35

1. Service is the fundamental basis of exchange: the application of operant resources is the basis for all exchange. (service is exchanged for service)
2. Indirect exchange masks the fundamental basis of exchange ( goods, money and institutions mask the service for service nature)
3. Operant resources are the fundamental source of competitive advantage (the comparative ability to cause desired change derived competition)
4. All economies are service economies (service is only now becoming more apparent with increased specialisation and outsourcing).
5. The customer is always a co-creator of value (implies value creation is interactional)
6. The enterprise can not deliver value but only offer value propositions (the firm can offer its applied resources and collaboratively create value following acceptance but not create or deliver value alone).
7. A service centred view is inherently customer orientated and relational (service is customer determined and co-created)
8. All economic and social actors are resource integrators: (the context of value creation is networks of networks)
9. Value is always uniquely and phenomenologically determined by the beneficiary (value is idiosyncratic, experimental contextual and meaning laden).

Question 36

Why is co-creation so important? (4)

Answer 36

1. One of the keys to successful marketing is collaboration.
2. Today more than ever, it is possible to marry collaboration between a firm and a customer using social media.
3. A firm company would benefit from engaging with their customer base
4. Customers is key and the interactive, processual, experiential, and relational nature form the basis for characterising service
   e. g. customising nike shoes online through nike id

Question 37

What are some forms of co-creation? (4)

Answer 37

1. Co-design: supplier and customer engage in design, i.e. Nike ID.
2. Self-service: transfer of labour to the customer (IKEA)
3. Supplier provides an experience and the customer is part of this context (disneyland)
4. Emotional engagement: through promotions or advertising (coke)
5. Self selection: using the suppliers prescribed processes to solve particular problem (computer issue)