13049590 introduction-to-service-marketing

Module I

Faculty: J.Rai, IIPM-School of Management, Kansbahal 1

Introduction to Services Marketing

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Module – I Overview

• Importance of Service sector.

• Why study service marketing.

• “Service”.

• Nature of Services.

• Characteristics of services

• Goods vs Services

• Service Mix

• Classification of services

• Service marketing framework

• Challenges in Service

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The Service Management Decision Framework

What Business A re We In?

What Service Processes Can Be U sed in O ur O pera tion?

Who Are O ur Custom ers and H ow Should We Rela te to Them ?

What Price Should We Charge for O ur Services?

H ow Should We Com m unica te Wha t O ur Service H a s to O ffer?

What Are the O ptions for Delivering O ur Service?

H ow Can We Ba lance Productivity a nd Q ua lity?

What Should be the Core a nd Supplem enta ry Elem ents of O ur Service Product?

H ow Should We M atch Dem a nd a nd Productive Capacity?

What Are Appropria te Roles for People and Technology?

H ow Can O ur Firm Achieve Service Leadership?

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How Important is the Service Sector in Our Economy?

• In most countries, services add more economic value than agriculture, raw materials and manufacturing combined

• In developed economies, employment is dominated by service jobs and most new job growth comes from services

• Jobs range from high-paid professionals and technicians to minimum-wage positions

• Service organizations can be any size—from huge global corporations to local small businesses

• Most activities by government agencies and nonprofit organizations involve services

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Why Study Services Marketing?Why Study Services Marketing?

• Significantly different from goods marketing

• Relatively new discipline with a strong interdisciplinary base

• Importance of services sector

– 70% - 80% GDP in highly dev. economies

– Service sector in India approx 50%

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Evolving of Services

• Changing pattern of government regulations.

• Privatization of some public/ nonprofit service

• Technological innovations.

• Internationalization & Globalization.

• Expansion of leasing & rental business.

• Manufacturers as service providers.

• Hiring of employees.

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What is a Product?What is a Product?What is a Product?What is a Product?

Anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need.

– Includes: Goods, services, events, persons, places, organizations, ideas, or some combination thereof.

Anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need.

– Includes: Goods, services, events, persons, places, organizations, ideas, or some combination thereof.

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What is a Service?

• An act or performance offered by one party to another (performances are intangible, but may involve use of physical products)

• An economic activity that does not result in ownership

• A process that creates benefits by facilitating a desired change in customers themselves, physical possessions, or intangible assets

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Services

Government Sector

CourtsEmployment. ExchangesHospitalsMunicipal ServicesPost OfficeSchools, Colleges etc

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Services

Business Sector

AirlinesBanksInsuranceManagement

ConsultantsLawyer'sDoctorsMotion Pictures

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Services

Manufacturers

Computers OperatorsLegal StaffAccountantsAdministrative StaffSupportive StaffSecurity Staff

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“ Something that can be bought and sold but which cannot be dropped on your foot !”

“ Something that can be bought and sold but which cannot be dropped on your foot !”

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Examples of Service IndustriesExamples of Service Industries

• Health Care

– hospital, medical practice, dentistry, eye care

• Professional Services

– accounting, legal, architectural

• Financial Services

– banking, investment advising, insurance

• Hospitality

– restaurant, hotel/motel, bed & breakfast,

– ski resort, rafting

• Travel

– airlines, travel agencies, theme park

• Others:

– hair styling, pest control, plumbing, lawn maintenance, counseling services, health club

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Internal Services

• Service elements within an organization that facilitate creation of--or add value to--its final output

• Includes:

– accounting and payroll administration

– recruitment and training

– legal services

– transportation

– catering and food services

– cleaning and landscaping

• Increasingly, these services are being outsourced

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Need For Services & ProductsOld Age Care

Senior CitizenHomeWheel Chair

Dental Care

Dental ChairDental Equipments

Photography

CameraFilmsPrinting

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Fed Ex ExampleFed Ex ExampleFed Ex ExampleFed Ex Example

The Nature of A Service“ The service product is essentially a bundle of activities, consisting of the core product - which in Federal Express’ case consists of transporting packages overnight and delivering them next morning to the addressee, plus a cluster of supplementary services.”

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The Nature of A ServiceThe Nature of A Service

The Example of Federal Express

OvernightTransportation and Delivery of

Packages

Advice andCommunication

Order Taking

Supplies

Pick-up

Documentation

Tracking

Bill Statements

Problem Solving

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Characteristics of ServicesCharacteristics of ServicesCharacteristics of ServicesCharacteristics of Services

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INTANGIBILITY

INCONSISTENCY

INSEPARABILITY

INVENTORY

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IntangibilityNo physical attributes

Impossible to taste feel hear smell before buying

Cant be easily displayed

Inference from place,people price,symbols…..

Transform intangibility to tangibility

Nobody caresAs much ..Taj

I’ve got a pieceOf rock…Prudential

Macdonald ..theFamily restaurant

University Degreetangible evidence ofknowledge acquired

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Tangibilising the Intangibles: Strategies

VisualizationAssociationPhysical RepresentationDocumentationPeople InvolvementPlace AdvantagePromotionBranding

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Tangibilising the Intangibles

Visualization

Hotels depicting benefits of dinning at restaurant through Advertisement

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Association

Air India Used Friendly Maharaja

Shah Rukh with Air-tel

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Physical Representation

Citibank credit Card in Gold or Platinum Symbolizes wealth & Status

Airlines Dress Symbolizes visibility, reliability and cleanliness

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Documentation

Citing fact & figures in support of performance

• Major Awards Won By Jet Air

• % Of People Preferring Jet Air

• Number. One Company in Market Share

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People Involvement

People are often Critical Element in serviceDelivery

Training People To be courteous in Hotel for Service Delivery

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Place Advantage

The clean, well laid down interiors of a Hotel Room depicts the quality of service

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Promotion

Personal Care through Promotion Campaigns offers life long Assurance scheme

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Branding

Branding helps in differentiation of the service from competitors

The world on time

The family Restaurant

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Tangibility of goods and services

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High in search qualities

High in experience qualities

High in credence qualities

Clo

thin

g

Furn

itur

e

Mot

or v

ehic

le

Res

taur

ant m

eals

Vac

atio

n

Com

pute

r re

pair

Leg

al s

ervi

ces

Med

ical

sur

gery

Con

sult

ancy

pro

ject

Law

n Fe

rtil

iser

Easy to evaluate

Difficult to evaluate

Product qualities affect ease of evaluation

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Heterogeneity Heterogeneity (Variability/Inconsistency )(Variability/Inconsistency ) Heterogeneity Heterogeneity (Variability/Inconsistency )(Variability/Inconsistency )

• service quality varies across service encounters

• service encounter is the interaction between service employee and customer

– ‘moments of truth’

• service people are central to service delivery

• service is delivered in ‘real’ time

• service quality varies across service encounters

• service encounter is the interaction between service employee and customer

– ‘moments of truth’

• service people are central to service delivery

• service is delivered in ‘real’ time

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Inconsistency

Different services

Performance of an Artist

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Implications of Implications of InconsistencyInconsistency

Service delivery and customer satisfaction depend on employee actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered matches what was planned and promoted

StrategiesStrategies for for InconsistencyInconsistency

• customer surveys and feedback

• training in interpersonal and technical skills

• provide product knowledge

• ensure back-stage systems support front line staff

• use standardisation strategies

– franchising, scripts

• build quality into all processes

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Inseparability

•It can not be separated from the creator-seller of•The product simultaneous production and consumption•The customer is involved (partial employee)•Other customers may be present

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Implications of Implications of Simultaneous Production Simultaneous Production and Consumptionand Consumption

Customers participate in and affect the transaction

Customers affect each other

Employees affect the service outcome

Decentralization may be essential

Mass production is difficult

Strategies for Strategies for inseparabilityinseparabilityStrategies for Strategies for inseparabilityinseparability

• manage the service encounter

– scripts and roles

– front-line staff need both technical and interpersonal skills (recruit & train)

– educate the customer (provider –marketer)

• manage customer interactions

• manage the physical evidence

• develop customer service policies and service recovery procedures

• manage the service encounter

– scripts and roles

– front-line staff need both technical and interpersonal skills (recruit & train)

– educate the customer (provider –marketer)

• manage customer interactions

• manage the physical evidence

• develop customer service policies and service recovery procedures

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oCo-production.. dentist/patient

oIsolated production.. T.V.serial

oSelf-services… ATM, weighing Machine

Services are typically produced And consumed simultaneously

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Inventory

Empty seats in a stadium for aCricket game can not be carriedTo the next game

Empty seats at 10 am flight to Bombay does not mean Seats may be available in the next flight

•Services cannot be stored

•Need to manage supply and demand

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Strategies for Dealing With Inventory (Perishability)

Result Of Demand Variability

Match Capacity by Shifting demand— Sunday open

Adjusting Prices- lowering or increasing prices

Stretch the existing Capacity- 24hrs banking

Stretching Facilities- adding manpower/machines

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Goods Vs ServicesGoods Vs Services

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Basic Differences between Goods and Services

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Services Marketing MixServices Marketing MixServices Marketing MixServices Marketing Mix

Traditional Marketing MixTraditional Marketing MixTraditional Marketing MixTraditional Marketing Mix

• All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services:

– Product

– Price

– Place

– Promotion

• All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services:

– Product

– Price

– Place

– Promotion

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An expanded marketing mix for services

Customers PricePlace & Time

Promotion

Product (service)People Process

Physical evidence

Customers PriceCustomers

Place, cyber-space & time

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People

– All human actors who play a part in service delivery and thus influence the perceptions: namely the firm’s personnel, the customer, and other customers in the service environment.

People

– All human actors who play a part in service delivery and thus influence the perceptions: namely the firm’s personnel, the customer, and other customers in the service environment.

customerservice employeesother customers

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Physical Evidence

– The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service.

Physical Evidence

– The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service.

•Atmosphere, décor, music etc.•equipment•facilities•uniforms

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Process

– The actual procedures, mechanisms, and flow of activities by which the service is delivered—the service delivery and operating systems.

Process

– The actual procedures, mechanisms, and flow of activities by which the service is delivered—the service delivery and operating systems.

service delivery systems•back stage•front stage

procedurespolicies

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Expanded Marketing Mix for ServicesExpanded Marketing Mix for ServicesExpanded Marketing Mix for ServicesExpanded Marketing Mix for Services

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Classification of ServicesClassification of ServicesClassification of ServicesClassification of Services

Based on Degree Of Cust. Involvement

( Lovelock)

1. People Processing

2. Possession Processing

3. Mental Stimulus Processing

4. Information Processing

Based on Degree Of Cust. Involvement

( Lovelock)

1. People Processing

2. Possession Processing

3. Mental Stimulus Processing

4. Information Processing

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Some other classification includes-

• The degree of tangibility.

• Whether customer directed/possessions.

• Time and place of delivery.

• Level of Customization/Standardization.

• Relationship with customer.

• Demand supply fluctuation.

• Interaction with people.

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Four Categories of Services Employing Different Underlying Processes

People Processing Possession Processing

Mental Stimulus Processing

Information Processing(directed at intangible assets)

e.g., airlines, hospitals,haircutting, restaurants hotels,

fitness centers

e.g., freight, repair, cleaning, landscaping, retailing,

recycling

e.g., broadcasting, consulting,education, psychotherapy

e.g., accounting, banking, insurance, legal, research

TANGIBLE ACTS

INTANGIBLEACTS

DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS

What is the Nature of the Service Act?

Who or What is the Direct Recipient of the Service?

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Service Marketing Framework: Analysis

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The Services Marketing TriangleThe Services Marketing Triangle

Internal Marketing

Interactive Marketing

External Marketing

CompanyCompany(Management)(Management)

CustomersEmployees

“enabling thepromise”

“delivering the promise”

“setting thepromise”

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Ways to Use the Ways to Use the Services Marketing TriangleServices Marketing Triangle

Ways to Use the Ways to Use the Services Marketing TriangleServices Marketing Triangle

Overall Strategic Assessment

• How is the service organization doing on all three sides of the triangle?

• Where are the weaknesses?

• What are the strengths?

Overall Strategic Assessment

• How is the service organization doing on all three sides of the triangle?

• Where are the weaknesses?

• What are the strengths?

Specific Service Implementation

• What is being promoted and by whom?

• How will it be delivered and by whom?

• Are the supporting systems in place to deliver the promised service?

Specific Service Implementation

• What is being promoted and by whom?

• How will it be delivered and by whom?

• Are the supporting systems in place to deliver the promised service?

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Marketing Framework

3 C’s3 C’s3 C’s3 C’sCustomers Competitors Company

SS(Segment)

TT(Target)

PP(Position)

Mar

ket

In

tell

igen

ce

4 P’s4 P’s4 P’s4 P’sProduct

Price Place

Promotion

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Challenges for ServicesChallenges for Services

• Defining and improving quality

• Communicating and testing new services

• Communicating and maintaining a consistent image

• Motivating and sustaining employee commitment

• Customer Relation Management.

• Bridging Demand- Supply

• Coordinating marketing, operations and human resource efforts

• Setting prices

• Standardization versus personalization

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13049590 introduction-to-service-marketing

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