Services Marketing: Concepts, Strategies, And Cases, 5th Edition Solution Manual

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Chapter 1 An Introduction to Services 1
CHAPTER 1: AN INTRODUCTION TO SERVICES
"It’s just the little touches after the average man would quit that makes the master’s
fame."
Orison Swett Marden, Founder, Success magazine
Chapter Objectives:
This chapter provides an introduction to the field of services marketing. The chapter
discusses the basic differences between goods and services and the factors necessary
for the creation of the service experience. In addition, the chapter establishes the
importance of the service sector in the world economy and the need for services
marketing education.
Learning Objectives:
After reading this chapter, you should be able to
1. Understand the basic difference between goods and services.
• In general, goods are defined as objects, devices, or things, whereas services
are defined as deeds, efforts, or performances (The term product refers to both
goods and services and is used in such a manner throughout the remainder of
this text).
2. Develop an appreciation for how service can be used as a competitive
advantage for both intangible and tangible products.
• The scale of market entities displays a continuum of products based on their
tangibility where goods are tangible dominant and services are intangible
dominant. The core benefit of a tangible dominant product typically involves a
physical possession that contains service elements to a less degree. In contrast,
intangible dominant products do not involve the physical possession of a product
and can only be experienced.
3. Appreciate the factors that create the customer's service experience and why it
is important to manage the overall experience.
• The Servuction model is constructed of two parts: that which is visible to the
consumer and that which is not. The visible part of the Servuction model consists
of three parts: the inanimate environment, the contact personnel/service
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Chapter 1 An Introduction to Services 2
providers, and other customers. The invisible component of the model consists of
the invisible organization and systems.
4. Comprehend the driving forces behind the importance of the study of services
marketing.
• There are a number of reasons why the study of services marketing is important:
(1) consumers evaluate services differently than goods, and service marketers
must effectively manage the experiential aspects of the service product; (2)
services can be effectively used as a differential advantage for tangible dominant
products; (3) the growth of the global service economy in terms of contributions
to gross domestic product (GDP) has increased dramatically; (4) the growth of
the global service workforce has also increased accordingly; (5) the emergence
of technologically based e-services has transformed many service industries; and
(6) knowledge is needed in the area of developing sustainable services
marketing business practices.
Opening Vignette: “The Burj al Arab Hotel
• The world’s only 7-star hotel offers guests a remarkable service experience:
o Magnificent views
o Large rooms
o Rain showers and Jacuzzis standard
o Fleet of chauffeur-driven Rolls-Royces
o Finest in personal service
• The concepts provided in this text are the keys for delivering a truly remarkable
service experience.
Lecture Outline:
I. Introduction
A. Traditional goods producers are turning to the service aspects of their
operation to establish a differential advantage in the marketplace
B. New “global services era” characterized by:
1. Economies and labor force dominated by the service sector
2. More customer involvement in strategic business decisions
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Chapter 1 An Introduction to Services 3
3. Products that are increasingly market-focused
4. The development of technologies that assist in the provision of
services
5. Employees with more discretionary freedom
6. The emergence of new service industries and the “service
imperative”
-Reflects the view that the intangible aspects of products are
becoming the key features that differentiate the product in
the marketplace.
II. What Is a Service?
A. The distinction between goods and services is not perfectly clear.
Examples include General Electric and IBM, generally thought of as major
goods producers, who now generate more than half of their revenues from
services.
1. Goods - is described as objects, devices, or things.
2. Services - is described as deeds, efforts, or performances.
3. Product – refers to both goods and services.
B. Scale of Market Entities
1. Helps illustrate how products fall along a continuum that ranges
from tangible dominant to intangible dominant. (See Figure 1.1)
-Tangible dominant: products that possess physical
properties that can be felt, tasted, and seen prior to the
consumer’s purchase decision.
-Intangible dominant: products that lack the physical
properties that can be sensed by consumers prior to the
purchase decision
2. Defining service businesses too narrowly, firms can develop classic
cases of marketing myopia.
-is the practice of too narrowly defining one’s business by
overlooking the service aspects of one’s products.
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Chapter 1 An Introduction to Services 4
C. The Economic Value of Transforming Goods into Services
1. The economic value of products, like the coffee bean, progresses
from commodities to goods to services to experiences. (See Figure
1.2)
D. Molecular Model
1. A conceptual model of the relationship between tangible and
intangible components of a firm’s operations. (See Figure 1.3)
2. Understanding the importance and components of the service
experience is critical.
III. Creating the Service Experience
A. Benefit concept
-the encapsulation of the benefits of a product in the consumer’s
mind
1. Services deliver a bundle of benefits through the experience that is
created for the consumer.
2. For example, most consumers of an orange will never see the
orange grove, will most likely never interact with the grove workers
who harvest the fruit nor with the management staff that directs the
workers; and they will also generally not consume the orange in the
company of other consumers at the grocery store.
B. Servuction Model
-a model used to illustrate the factors that influence the service
experience, including those that are visible to the consumer and
those that are not. (See Figure 1.4)
Consists of four factors that directly influence consumers’ service
experience: (visible) servicescape, contact personnel/service
providers, other customers, and (invisible) organizations and
systems
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Chapter 1 An Introduction to Services 5
1. Servicescape
-the physical evidence used to design service environments.
a. Plainly visible to consumers.
b. Consists of ambient conditions, inanimate objects, and other
physical evidence.
2. Contact Personnel/Service Providers
-Contact Personnel - employees other than the primary
service provider who briefly interact with the customer.
-Service Providers - the primary providers of a core service,
such as a waiter or waitress, dentist, physician, or college
instructor.
a. Plainly visible to consumers.
b. Interaction between consumers and contact
personnel/service providers are commonplace.
3. Other Customers
a. Plainly visible to consumers.
b. Many customers may be served simultaneously. The
influence of other customers can be active or passive.
4. Invisible Organization and Systems
-reflects the rules, regulations, and processes upon which
the organization is based.
a. Invisible to consumers.
b. Have a very profound effect on the consumer’s service
experience.
IV. Why Study Services?
A. Growth of the global service economy
1. Caused by a highly competitive international marketplace
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Chapter 1 An Introduction to Services 6
2. Higher disposable incomes have led to a proliferation of personal
services
a. Particularly in the entertainment sector
b. Breakdown of U.S. Service Supersectors and their
respective contributions to GDP (see Figure 1.5)
c. End result has been phenomenal growth in service
industries, shown clearly in Worldwide GDP (see Figure 1.6)
B. Growth of the global service labor force
1. (See Figure 1.7) The growth and shifting of employment from
agriculture to manufacturing to services
2. U.S. Bureau of Labor Statistics expected service occupations to
account for more than 96% of all new job growth for the period
2002–2012.
3. The bulk of new jobs created in America over the last 30 years
have been white-collar jobs, in higher-level professional, technical,
administrative, and sales positions.
4. Read Global Services in Action – Ski Dubai
C. Emergence of e-services?
- an electronic service available via the Net that completes tasks,
solve problems, or conducts transactions
1. Phenomenal developments in technology – particularly the Internet
a. In 2014, over 3 billion people representing 42.3% of the
world’s population had access to the Internet. (See Figure
1.8)
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Chapter 1 An Introduction to Services 7
2. Growth of e-services
a. Including self-service technologies
1. Technologically based services that help customers
help themselves.
2. Including local bank’s online account services, ATMs,
UPS package tracking service, Schwab’s stock
trading services, Travelocity’s online purchasing
options, a grocery store’s self-check-out
b. Read E-Service In Action – Restaurants Ride the Social
Media Wave
D. Developing sustainable service marketing business practices
-the ability to meet current needs without hindering the ability to
meet the needs of future generations in terms of economic,
environmental, and social challenges
1. Why would a service provider want to embrace sustainable
practices?
a. When the social good can overlap with business opportunity
b. The overlap is known as the “sweet spot”
2. There are four areas in which a company can achieve a source of
competitive advantage: eco-efficiency, environmental cost
leadership, beyond compliance leadership, and eco-branding.
3. Read Sustainability & Service in Action – The Origins and Growth
of “Green”
V. Summary
Ultimately, service marketing is about managing the compromising relationships
that must exist among marketing, operations, and human resources.
Services permeate every aspect of our lives; consequently, the need for services
marketing knowledge is greater today than ever before.
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Chapter 1 An Introduction to Services 8
REVIEW QUESTIONS:
1. Define the following terms: goods, services, products.
In general, goods are defined as objects, devices, or things, whereas, services are
defined as deeds, efforts, or performances. The term product refers to both goods
and services.
2. What can be learned from the service imperative?
Today’s business environment is experiencing the emergence of new service
industries and the “service imperative,” where the intangible aspects of the product
are becoming more and more the key features that differentiate product in the
marketplace. There are countless examples of firms using the service imperative to
drive their businesses forward to profit and growth.
3. Why is it difficult to distinguish between many goods and services? Use the
scale of market entities and the molecular model concept to explain your
answer.
The distinction between goods and services is not always perfectly clear. In reality,
most services contain some tangible components, while most goods also contain
intangible components. It is difficult to say whether a pure service or a pure good
even exist. The scale of market entities helps us understand whether the product
under consideration is tangible dominant or intangible dominant.
4. Utilizing the servuction model, describe your classroom experience.
Answers will vary, but at the core should be a description of the visible servicescape,
contact personnel/service providers, other customers, and invisible organization and
systems.
5. How would your servuction model, discussed in question 4, change as you
describe the experience at a local restaurant?
Answers will vary, but at the core should be a description of the visible servicescape,
contact personnel/service providers, other customers, and invisible organization and
systems.
6. How does the organization and systems dimension of the servuction model
differ from the other three dimensions? What is the purpose of the organization
and systems dimension?
The organization and systems dimension is invisible to the customer. Of course, the
visible components that comprise the servuction model cannot exist in isolation, and

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Chapter 1 An Introduction to Services 9
indeed, they have to be supported by invisible components that tie together the
organization and its systems. Invisible organization and systems reflects the rules,
regulations, and processes upon which the organization is based.
7. As you consider the table that provides Worldwide GDP information, a mix of
countries comprise the top 10 service economies. These countries sometimes
differ greatly, yet still generate large service economies. Please explain.
Countries that industrialized their economies first eventually come under attack by
other countries that are newly making the transition from an agricultural to an
industrial economy. These “newcomer” countries offer lower product costs that attract
industry. Consequently, as industrial sectors flow from one country to the next, the
countries they abandon begin to more heavily rely on the growth of their service
sectors as the mainstay of their economies. All developed economies now have large
service sectors; and Japan, France, and Great Britain have service economies at
least as developed as that of the United States. Leading the pack are Hong Kong and
the Bahamas.
8. Discuss the keys to delivering effective self-service technologies.
Self-service technologies are purposely created to automate routine interactions
between customers and providers with the goal of providing convenience and
efficiency to both parties. A self-service must provide the customer a benefit (e.g.,
convenience, an opportunity to customize, cost savings, time savings, etc.). An SST
that is implemented purely to decrease the operating cost of the firm will most likely
not be well-received.
9. Describe online services that help humanize the online experience.
E-services play a critical role in the transformation of the customer’s online
experience that progresses over time from a functional experience to a more
personalized experience. E-service humanizes the Net by providing various customer
service activities while simultaneously reducing the online firm’s operating costs.
10. Discuss the four approaches to using sustainability as an effective
business positioning strategy.
The four areas include: eco-efficiency, environmental cost leadership, beyond
compliance leadership, and eco-branding. Eco-efficiency focuses on the concept of
the “double dividend.” Companies that attempt to reduce wastes and inefficiencies
within the system see positive results both financially and environmentally.
Environmental cost leadership involves developing a radical innovation that will allow
the company to be more environmentally friendly while maintaining cost
competitiveness. Beyond compliance leadership involves companies wanting to
increase their sustainability efforts, but also wanting these efforts to be acknowledged

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Chapter 1 An Introduction to Services 10
by the public. These companies often spend money on environmental certifications,
such as LEEDS building certifications. The first-movers in an industry in this case
have the greatest advantage. Those who take the first initiative are seen as
innovative, while the rest of the companies within the industry are forced to follow
suit. Eco-branding strategies focus on the use of marketing differentiation based on
the environmental attributes (e.g., organic, vegan, or fair-trade status) of products.
There are three basic prerequisites that often exist for firms to successfully execute
this approach: consumers must be willing to pay for the costs of ecological
differentiation; reliable information about the product’s environmental performance
must be readily available to the consumer; and the differentiation must be difficult to
imitate by competitors.

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Chapter 2 The Service Economy: Supersectors and Ethical Considerations 11
CHAPTER 2: THE SERVICE ECONOMY: SUPERSECTORS AND ETHICAL
CONSIDERATIONS
"If you don’t have integrity, you have nothing. You can’t buy it. You can have all the money
in the world, but if you are not a moral and ethical person, you really have nothing."
Henry Kravis
Chapter Objectives:
This chapter provides an overview of the service economy by introducing the nine
service supersectors. Although on the surface many of these supersectors seem quite
diverse, service classification schemes are discussed that assist in our understanding of
the commonalities among service industries. Trends and concerns pertaining to the
growth of service industries are presented that further our understanding of the service
economy. Finally, this chapter introduces the very important topic of ethical issues in
services marketing. Service marketers as well as service customers often face unique
ethical issues that merit discussion.
Learning Objectives:
After reading this chapter, you should be able to
1. Describe the nine supersectors that comprise the service economy.
• An in-depth look into the service economy provides an overview of the service
economy supersectors including: (1) education and health services, (2) financial
activities, (3) government, (4) information, (5) leisure and hospitality, (6) professional
and business services, (7) transportation and utilities, (8) wholesale and retail trade,
and (9) other services.
2. Identify the trends and concerns pertaining to the growth of the service
economy.
• Several key forces continue to influence the growth of the service sector. These
tends include the emergence of technologically based e-services, socio-cultural
forces derived from an aging population, and the competitive force of
“outservicing,” which involves the offshoring, outsourcing, and industrialization of
many services.
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Chapter 2 The Service Economy: Supersectors and Ethical Considerations 12
3. Understand the reasons consumers are particularly vulnerable to ethical
misconduct within the service sector.
• Reasons contributing to consumer vulnerability include: (1) services possess few
search attributes; (2) services are often technical and specialized, thereby,
difficult to understand; (3) a time lapse sometimes exist between service
performance and consumer evaluation; (4) many services are sold without
warranties or guarantees; (5) many services are provided by unsupervised
boundary-spanning personnel; (6) services are nonstandardized; consequently,
some variability is accepted; (7) reward structures based solely on sales tend to
reward and fail to punish ethical misconduct; and (8) due to the consumers’
involvement in the production process, consumers often accept part of the blame
for less than perfect performance.
4. Appreciate the types of ethical issues that often arise in the business sector.
• The most typical issues that managers and/or employees will face while
conducting business include: conflict of interest, organizational relationship,
honesty, fairness, and communication.
5. Discuss the consequences of ethical misconduct.
• Employees forced to deal with ethical issues on a continuous basis frequently
suffer from job-related tension, frustration, anxiety, ineffective performance (i.e.,
reduced sales and reduced profits), turnover intentions and lower job satisfaction.
In addition to the personal effects of ethical misconduct, the organization as a
whole suffers. Ethical improprieties have also been linked to customer
dissatisfaction (loss of sales), unfavorable word-of-mouth publicity for the
organization, and a negative public image for the entire industry.
6. Explain strategies that attempt to facilitate positive ethical behaviors.
• Strategies suggested to control the ethical behavior of personnel include
employee socialization, standards of conduct, corrective control, leadership
training, service/product knowledge, monitoring of employee performance, and
the building of long-term customer relationships.
Opening Vignette: Getaway2Give
• Getaway2Give (G2G) is the world’s only philanthropic vacation club. Its
destinations include elite resorts and privately owned homes in coveted beach,
ski, city and international destinations, such as Anguilla, Aspen, New York City,
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Chapter 2 The Service Economy: Supersectors and Ethical Considerations 13
and Tuscany. Its designated charities receive half of new membership fees and a
percentage of all rental fees.
• Another way G2G differentiates itself is by facilitating “voluntourism,” or special
activities that allow members to give their talents and time to deserving charities
while on vacation.
• G2G appeals to affluent Americans who feel grateful for their fortunate lifestyle
and want to give something back.
Lecture Outline:
I. Introduction
A. The first half of the chapter focuses on the nine service supersectors that
collectively comprise the service economy. For students seeking a career
in services marketing, the information on projected supersector growth,
salary implications, and educational requirements should be particularly
helpful.
B. Next, the chapter introduces and discusses concepts related to social
responsibility and services marketing ethics. Because of the unique
opportunities that exist for ethical misconduct in service organizations,
students of services marketing courses in particular should be made aware of
the issues surrounding ethical decision making.
II. What Is the Service Economy?
A. It is generally accepted that the service economy includes the “soft parts”
of the economy consisting of nine industry supersectors – education and
health services, financial activities, government, information, leisure and
hospitality, professional and business services, transportation and utilities,
wholesale and retail trade, and other services.
1. Figure 2.1 The U.S. Service Economy (Employment Growth
Projections 2006–2016)
2. Figure 2.2 Past, Present, and Future: U.S. Service Supersector
Employment
B. Education and Health Services
1. The educational services subsector includes schools, colleges,
universities and training centers.
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Chapter 2 The Service Economy: Supersectors and Ethical Considerations 14
. The second largest employment industry.
b. Accounting for 13.3 million jobs.
2. The health care and social assistance subsector is comprised of:
a. Health services such as hospitals, nursing care facilities,
physician’s offices and home health care services.
1. The largest employment industry in the private sector.
2. Accounting for 14 million jobs.
3. Seven of the top 20 fastest growing occupations are in
health care.
b. Social assistance such as individual and family services,
vocational rehabilitations services, and community food and
housing, and emergency and other relief services.
C. Financial Activities
1. Banking and Insurance subsector is comprised of:
a. Commercial banking, savings institutions, credit unions.
b. Banking employment expected to increase by 4% (2006–
2016).
c. Insurance subsector provides clients protection against
financial loss for a variety of incidents.
2. Securities, commodities, and other investments
a. Manage the issuance, purchase, and sale of financial
instruments.
b. Staggering 46% employment increase expected because of
the growing need for investments and securities to fuel the
global marketplace, as well as the increase in need for
financial advice.
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Chapter 2 The Service Economy: Supersectors and Ethical Considerations 15
D. The Government
1. Consist of three subsectors:
a. Not-for-profit sector (advocacy, grantmaking, and civic
organizations)
b. Federal government
c. State and local governments
2. Employed approximately 1.2 million personnel in 2006; projected
increase by 13% (2006–2016) in the not-for-profit sector.
3. Federal government is largest single employer with 1.8 million civilian
employees.
E. Information
1. Consist of establishments that produce and distribute information and
cultural products, provide the means to distribute or transmit these
products, and/or process data.
2. Major players include publishing industries, the motion picture and
sound recording industries, the broadcasting industries, the
telecommunication industries, Internet service providers and web
search portals, data procession industries, and information services
industries.
a. Represents 2.6% of all employment and 1.9% of all
establishments.
b. Software publishers are currently the fastest growing industry
within the Information supersector, with a projected growth
rate of 32% (2006–2016).
3. Read E-Services in Action – Top Ten Social Media Retailers
F. Leisure and Hospitality
1. Arts, entertainment, and recreation
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