Chapter 1

An Introduction to
Services

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Chapter Objectives
Understand the basic differences between goods
and services.
Appreciate the factors that create the
customer's service experience.
Comprehend the driving forces behind the
increasing demand for services marketing
knowledge.
Understand the two organization models used in
service firms: the industrial management model
and the market-focused management model.

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Opening Vignette: Private

Escape

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What is a Service?
Services: deeds, efforts, or
performances
Goods: objects, devices, or things

The distinction between goods and

services is not perfectly clear.
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Figure 1.1: Scale of Market

Entities

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Figure 1.2: Molecular

Model

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What is benefit concept?

Benefit concept: Encapsulation
of benefits in the consumers mind
Tides core benefit concept
Might simply be Cleaning or
Cleanliness
Whiteness
Motherhood
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What is the Servuction

model?
(visible)
Servicescape
Servuction
Servuction Model
Model
A
A framework
framework
for
for understanding
understanding
the
the consumers
consumers
experience
experience

Contact personnel
Service providers
Other customers
(invisible)
Organization and
systems

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Figure 1.3: The Servuction

Model
Inanimate
Environment
Invisible
organization
and systems

Invisible

Customer A

Contact
Personnel
Or
Service
Provider

Customer B

Visible
Bundle of
service
benefits
received
by Customer A

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Why Study Services?

Growth in the service sector
employment in 2004

73% of GDP in Japan (58% in 1990)

70% of GDP in the European
Community (60% in 1990)

Economic Impact

81% of workforce in the United States

(74% in 1984)
The majority of industries in the U.S.
economy do not produce, they perform
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The Service Revolution

Industrial
Market-focused
Management
Management
model:
model:
an approach to
a new organizational
organizing a firm
model that focuses
that focuses on
on the components
revenues and
of the firm that
operating costs and
facilitate the firms
ignores the role
service delivery
personnel play
system.
ingenerating
customer
satisfaction and
sustainable profits.
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Industrial Management
Model

Sales Revenues are a function of:

Location Strategies
Sales Promotions
Advertising

Labor and operating costs should

be kept as low as possible
Places a higher value on upper and
middle managers
Replaces full-time personnel with
part-time personnel to reduce costs
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Industrial Management
Model

Consequences
Produce dead-end front-line jobs,
poor pay, superficial training, no
opportunity for advancement, if
any, access to company benefits.
Can lead to customer
dissatisfaction, flat or declining
sales revenues, high employee
turnover, little service productivity.
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Figure 1.6: The Services

Triangle

The
The company service
exists to serve strategy
the customer

The
customer

The
organization
exists to serve
the needs of
the people who
serve the
customer

The
systems

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The
people

Six Key Relationships

1. Communicate the
service strategy to
the customer (Firms
commitment to excellence)

2. Communicate the
service strategy to
the employees (Good
service starts at the Top)

3. Consistency of the
service strategy to
run the day-to-day
operations

4. Impact of
organizational
systems upon
customers
5. Importance of
organizational
systems and
employee efforts
6. The customer/service
provider interaction
(Critical incidents or moments of
truth)

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Market-Focused
Management Model
Recognizes that employee turnover
and customer satisfaction are
clearly related.
Employs more full-time employees.
Attempts to utilize innovative data
to examine the firms performance
by looking beyond generally
accepted accounting principles.
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