When CNN, The Wall Street Journal and The Business Journal report on the U.S. economy, they often introduce the idea that we are now in a service economy.
So, I got to thinking about that claim and decided to do some research to see if that truly is the case. Well, they are actually very much correct – no fake news here.
According to the Bureau of Labor Statistics, service-type industries employ about 70% of the U.S. workforce. Wholesale and retail trades make up about 13% of the total of the 153 million people employed in January. Information services is rapidly approaching 2%. Financial activities and real estate is just about 7%. Professional and business services is just over 12%. Education and health services is about 22%. Leisure and hospitality is 9% and other services are just under 5%.
What does that mean for sales and marketing? Consider this:
The American Marketing Association, the marketing discipline’s major professional trade organization, has defined the concept of marketing for the industry over the past 30 years.
As of 2018, the AMA defines it this way: “Marketing is the set of functional activities and processes within an enterprise that make value exchange happen for the benefit of both buyers and sellers.”
The definition has evolved over the past three decades. Yet each successive definition still stresses critical success factors essential to executing a successful marketing effort, whether it be for a traditional product-type business or a modern service-type business. These are value and customer relationships.
The product-centric notion of value recognizes that customer satisfaction can be derived from high-quality products at a low price. However, customer relationships – which grow and thrive on exceptional value – are an absolute necessity, particularly in the commodity-driven exchanges of many markets.
The association’s definitions of marketing between 1985 and 2005 had a transactional and product focus. Definitions since 2013 emphasize long-term relationships that provide value for customers and the company.
So, whether you sell tangible products or intangible services, you will clearly be positioned better in the marketplace by focusing on customer satisfaction (e.g., value) and customer relationships.
Another way to think about marketing is in the context of how your product and service offerings relate to meeting human and social needs. This philosophy is often embedded in the mission or vision statements of many companies. Is it in yours? It is a more altruistic view, but it links marketing efforts with customers’ improved standard of living, not only in terms of consumption and prosperity, but also in overall well-being.
Through your coordinated marketing activities, consumers of your product and services can fulfill needs and wants (value).
The employees and firms can earn a viable profit, making both employees and owners happy (relationships). However, this view demands that some marketers rethink the social and ethical implications of their actions and whether they are practicing good citizenship and giving back to the community.
A business organization would have no reason to exist without customers and a product or service to offer them. A very simple definition is that a product is something that can be acquired via exchange to satisfy a need or a want. Goods or products are typically thought of as tangible items.
The marketing and sale of goods or products is arguably the most widely recognizable business activities in the world. The nearly 20 million people employed in retail and wholesale trade can attest to that fact.
Services, however, are largely intangibles consisting of acts or deeds directed toward fulfilling needs and wants of people or other businesses. Services dominate other modern economies too, not only the domestic economy.
Banks, hospitals, lawyers, package-delivery companies, airlines, hotels, technicians, nannies, housekeepers, business consultants, accountants and taxi drivers (now Uber and Lyft drivers) all offer services.
Ideas can be a product. They can include platforms or issues aimed at promoting a benefit for the customer. Examples include the Red Cross, the American Cancer Society, Mothers Against Drunk Drivers or even the United Way of Youngstown and the Mahoning Valley’s upcoming 21st Annual Day of Caring.
Organizations can also be thought of as products, but usually are more recognized as providers of a service. Virtually all organizations strive to create favorable images with the public – not only to increase sales or membership, but also to generate public goodwill in order to attract volunteers and contributions. Sales, after all, are measured in terms of donations.
Information is now a product. Marketers of information include websites, magazines and book publishers, schools and universities, research firms, churches and charitable organizations. CarFax, a unit of IHS Markit, is a good example of a popular information product that significantly impacts the automobile market today.
In this new digital age, the production and distribution of information has become a vital part of our economy. Products you are now most familiar with are digital products. Think of such products as software (think of Quickbooks software solution), music (iTunes or Spotify), and movies (Netflix or Amazon Studios), are among the most profitable firms in our economy.
People – yes, people – can be products too. The individual promotion of people, such as athletes or celebrities, is now a huge business not only in the United States, but around the world.
In the sports marketing course at Youngstown State University, we discuss the magnitude of wealth created by sponsorships and endorsements and how they help support the sale of millions of dollars worth of non-sports products.
This does not even come close to the monetization, exchanges and trading of professional athletes that takes place in the complex systems of drafts, contracts and free agency. Just think about LeBron’s four-year deal with the Lakers that will pay him $153.3 million. (No worries. The Cavs still have Kevin Love, who signed an extension, which means his contract is now $145 million for five years.)
Places are products too. When we think of marketing a place, we usually think about vacation destinations like Rio de Janeiro, Orlando (Disney World) or Nashville (Grand Olde Opre). However, the marketing of places is quite diverse.
Cities, states and nations all market themselves to tourists, businesses and potential residents. Recall the bids for Amazon’s HQ2 location. I am betting on Pittsburgh. My marketing students were pointing toward Atlanta. According to Money Magazines’s Business Insider, evidence is mounting that Amazon could select northern Virginia – and specifically, a site near Dulles International Airport – as the site of its second headquarters.
Events and experiences are products. Examples here include theme parks such as Disney World and Universal Studios, as well as Graceland in Memphis, Tennessee, the home of Elvis Presley. Also include athletic events such as the Olympics, the Daytona 500, Wimbledon and the Super Bowl, as well as stage and musical performances such as “Hamilton” or a concert by The Eagles.
It’s important to remember that the products in the above- mentioned examples are not mutually exclusive. Companies and organizations that sell tangible products almost always sell services to supplement their offerings and vice versa.
Special events like the upcoming U.S. Open Tennis Championships, combine people (players), a place (New York City), an event (the tournament), organizations (sponsors) and goods (souvenirs) to create a memorable and unique experience for tennis fans, and sports fans in general.
So as you can see, to effectively meet the needs and expectations of customers or clients and fulfill your own organizational mission, as a marketer you must work harder at creating products and services that have value and be better at combining them in ways that make them unique from other offerings in the competitive marketplace.
The customer or client’s decisions to purchase one product or group of products over another is primarily a function of how well that choice will fulfill their needs and satisfy their wants and what type of relationship you can build with the customer or client through your organization’s set of functional activities and processes that enable the value exchange to happen.
People who sell services perform many of the same activities as those selling products. For example, they still need to identify and qualify prospects, prepare proposals and make sales presentations, handle customer objections, close the sale and follow-up by providing customer support.
In addition, managing service salespeople involves similar management activities. The representative’s roles must be defined, qualified personnel must be found and recruited and trained, effective compensation plans must be administered, and the salesforce must be supervised and evaluated.
Regardless of whether your company is a product business, a service offering or some combination of both, the value exchange you deliver and the type of customer relationships you develop will ultimately have significant implications for all aspects of your marketing strategy. This includes market entry and exit to pricing and profitability, product development, image and branding, sales force compensation, and nearly everything else in the marketing mix.
Feel free to contact me at The Business Journal in Youngstown – firstname.lastname@example.org.
Copyright 2018 The Business Journal, Youngstown, Ohio.
Published by The Business Journal, Youngstown, Ohio.
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