Introduction to Services Marketing

Introduction to Services Marketing

Prepared by: Ms. Megha Mody

Assistant Professor

Marwadi Education Foundation

OverviewWhat are services?Why services marketing?Role of services in the economyPowerful forces that are transforming

service MarketsService and TechnologyDistinctions between Services and

Goods; ServicesServices Marketing MixFramework for effective services

marketing strategies

What are services?• Services :

– Are economic activities offered by one party to another

– Most commonly employ time-based performances to bring about desired results in: • Recipients themselves• Objects or other assets for which purchasers have

responsibility• In exchange for their money, time, and effort, service

customers expect to obtain value from– Access to goods, labor, facilities, environments,

professional skills, networks, and systems; – But they do not normally take ownership of any of

the physical elements involved.

What are services?• Any activity or benefit that one party can offer to another

which is essentially intangible and does not result in the ownership of anything.

• Services are deeds, processes and performances.

•Services involve a form of rental, offering benefits without transfer of ownership

– Include rental of goods– Marketing tasks for services differ from those

involved in selling goods and transferring ownership

Examples of Service Industries Health Carehospital, medical practice, dentistry, eye careProfessional Servicesaccounting, legal, architecturalFinancial Servicesbanking, investment advising, insuranceHospitalityrestaurant, hotel/motel, bed & breakfast ski resort, raftingTravelairline, travel agency, theme parkOthers hair styling, pest control, plumbing, lawn maintenance, counseling,

services, health club, interior design

Cont…– Five broad categories within non-ownership

framework:

• Rented goods services• Defined space and place rentals• Labor and expertise rentals• Access to shared physical environments• Systems and networks: access and usage

Temporary rights.

Cont…

DOCTORS/BEUTICIANS/MECHANISTS/STAFF SCIENTISTS

AMUSEMENT PARKS / CLUBS / GYM

WIFI/SOCIAL MEDIA/ BANKING/TELECOMMUNICATION

Cont…Distinction between..

1. Service Industries and Companies…

2. Services as a Product

3. Customer Services

4. Derived Services…

Characteristics of Services Compared to Goods

Intangibility

PerishabilitySimultaneou

sProduction

andConsumptio

n

Heterogeneity

Goods versus Services

Cont…1. Higher Intangibility

2. Lack of ability to store them for future use

3. Greater interaction between the customer and the service factory

4. Greater variability in service delivery

5. Greater variability among service customer’s Expectations..

Implications of Intangibility

1. Services cannot be inventoried

2. Services cannot be easily patented

3. Services cannot be readily displayed or communicated

4. Pricing is difficult

Implications of Heterogeneity

1. Service delivery and customer satisfaction depend on employee and customer actions

2. Service quality depends on many uncontrollable factors

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

Implications of Simultaneous Production and 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

Implications of Perishability

• It is difficult to synchronize supply and demand with services

• Services cannot be returned or resold

Tangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgenciesAirlines

InvestmentManagement

ConsultingTeaching

Fast-foodOutlets

Fast-foodOutlets

Role of services in the economy• Contribution of Services Industries to

Global GDP

Estimated Size of Service Sector in Selected Countries

Contribution Of The Service Sector To GDP In INDIA• India's services sector Contributes around

60% to the GDP of the country, 35% to employment, 25% to total trade, around 40% to exports, 20% to imports and accounts for more than 50% of FDI into the country.

Powerful Forces Are Transforming Service

Markets

GovernmentPolicies

BusinessTrends

Social Changes

Advances inIT

Globalization

Innovation in service products & delivery systems, stimulated by better technology

Customers have more choices and exercise more power

Success hinges on:● Understanding customers and competitors● Viable business models● Creation of value for customers and firm

● New markets and product categories● Increase in demand for services● More intense competition

Forces Transforming the Service Economy

GovernmentPolicies

BusinessTrends

Social Changes

Advances inIT

Globalization

●Changes in regulations

●Privatization

●New rules to protect customers, employees, and the environment ●New agreement on trade in

services

Forces Transforming the Service Economy (1)

• Mobile phone SMS/1 hr cutting off the call• Ban on smoking in restaurant• Privatization of Transportation sector• Increased taxes to Aviation Industry• Premium calculators• Grievance redressal cell

GovernmentPolicies

BusinessTrends

Social Changes

Advances inIT

Globalization

●Rising consumer expectations●More affluence●Personal Outsourcing● Increased desire for buying

experiences vs. things●Rising consumer ownership of high

tech equipment● Easier access to more information● Immigration●Growing but aging population

Forces Transforming the Service Economy (2)

• Home delivery/TGB – ANNIVERSARIES/• Higher spending on Tourism• Home Cleaning/baby seating• Higher spending on luxury Services- SPA n all..• Increased users of Computers, mobile phones etc..

GovernmentPolicies

BusinessTrends

Social Changes

Advances inIT

Globalization

●Push to increase shareholder value

● Emphasis on productivity and cost savings

●Manufacturers add value through service and sell services

●More strategic alliances

● Focus on quality and customer satisfaction

●Growth of franchising

●Marketing emphasis by nonprofits

Forces Transforming the Service Economy (3)

• Aviation company- low cost/• Online ticket booking• Car- after sale services• ING vaishya/ kingfisher –Jet/• Healthcare ind.- Hinduja Hospital• macD

GovernmentPolicies

BusinessTrends

Social Changes

Advances inIT

Globalization

●Growth of Internet

●Greater bandwidth

●Compact mobile equipment

●Wireless networking

● Faster, more powerful software

●Digitization of text, graphics, audio, video

Forces Transforming the Service Economy (4)

• OLX.IN • Online education• Mobile banking/Internet banking• Online ticket booking/Online ordering• Bandwidth – 2g and 3G• Online complaint redressal

GovernmentPolicies

BusinessTrends

Social Changes

Advances inIT

Globalization

●More companies operating on transnational basis

● Increased international travel

● International mergers and alliances

● “Offshoring” of customer service

● Foreign competitors invade domestic markets

Forces Transforming the Service Economy (5)

• TOURS AND TRAVEL COMPANIES- HOTELS/• TATA DOCOMO• IT• GAMING/ ENROID APPLICATION

Why study Services Marketing?

• Service-based economies

• Service as a business imperative in manufacturing and IT

• Deregulated industries and professional service needs

• Services marketing is different

• Service equals profits

Service and Technology• Potential for new service Offerings

• New ways to deliver services

• Enabling both Customers and Employees

• Extending the Global reach of services

• The internet is a service

• The paradox and dark side of technology and services.

Eight Central Paradoxes of Technological Products

Traditional 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

Expanded Mix for Services - The 7 Ps

• Marketing can be viewed as:• A strategic and competitive thrust pursued by top management• A set of functional activities performed by line managers• A customer-driven orientation for the entire organization

• Marketing is only function to bring operating revenues into a business; all other functions are cost centers.

• The “7 Ps” of services marketing are needed to create viable strategies for meeting customer needs profitably in a competitive marketplace

Traditional 4 Ps Applied to Services (1)

Product elements• Service products are at the heart of services marketing

strategy• Marketing mix begins with creating service concept that

offers value• Service product consists of core and supplementary elements• Core products meet primary needs• Supplementary elements are value-added enhancements.

Event management / Accounting

Traditional 4 Ps Applied to Services (2)• Place and time– Service distribution can take place through physical and

non-physical channels.– Some firms can use electronic channels to deliver all (or at

least some) of their service elements.– Information-based services can be delivered almost

instantaneously electronically.– Delivery Decisions: Where, When, How– Time is of great importance as customers are physically

present.– Convenience of place and time become important

determinants of effective service delivery.

Hotel / Transportation/ Airport

Traditional 4 Ps Applied to Services (3)• Price and other user outlays

– Marketers must recognize that customer costs involve more than price paid to seller

– Identify and minimize non-monetary costs incurred by users:• Additional monetary costs associated with service usage

(e.g., travel to service location, parking, phone, babysitting, etc.)

• Time expenditures, especially waiting .• Unwanted mental and physical effort.• Negative sensory experiences.• Revenue management is an important part of pricing.

Mentally Stressed Person, Travelling & Money

Traditional 4 Ps Applied to Services (4)

• Promotion and Education– Plays three vital roles:

•Provide information and advice.•Persuades the target customers of merit of service product

or brand.•Encourages customer to take action at specific time

– Customers may be involved in co-production so:•Teach customer how to move effectively through the

service process•Shape customers’ roles and manage their behavior

• Tripada

Extended Mix for Managing the Customer Interface

• Process– How firm does things may be as important as what it does.– Customers often actively involved in processes, especially

when acting as co-producers of service– Operational inputs and outputs vary more widely

•Quality and content varies among employees, between employees

•Variations can be with different customers •Variations from time of the day

Queue In The Banks

Cont…– Variability can be reduced by:

•Standardized procedures•Implementing rigorous management of service

quality•Training employees more carefully•Automating tasks•Train employees in service recovery procedures

– Manage process design and “flow of customers

Extended Mix for Managing the Customer Interface (2)

• Physical environment– Design services cape and provide tangible evidence

of service performances– Create and maintain physical appearances

•Buildings/landscaping•Interior design/furnishings•Vehicles/equipment•Staff grooming/clothing•Sounds and smells & Other tangibles

– Manage physical cues carefully— can have profound impact on customer impressions

Mosquitoes In The Hotel

Extended Mix for Managing the Customer Interface (3)People

– Interactions between customers and contact personnel strongly influence customer perceptions of service quality

– Well-managed firms devote special care to selecting, training and motivating service employees

– Other customers can also affect one’s satisfaction with a service

Insurance People

Expanded Marketing Mix for Services

Ways to Use the 7 PsOverall Strategic Assessment

– How effective is a firm’s services marketing mix?

– Is the mix well-aligned with overall vision and strategy?

– What are the strengths and weaknesses in terms of the 7 Ps?

Specific Service Implementation– Who is the customer?– What is the service?– How effectively does the

services marketing mix for a service communicate its benefits and quality?

– What changes/ improvements are needed?

Challenges Posed by Services

Services Pose Distinctive Marketing Challenges

Marketing management tasks in the service sector differ from those in the manufacturing sector.

The eight common differences are:– Most service products cannot be inventoried– Intangible elements usually dominate value creation– Services are often difficult to visualize and understand– Customers may be involved in co-production– People may be part of the service experience– Operational inputs and outputs tend to vary more widely– The time factor often assumes great importance– Distribution may take place through nonphysical channels

Differences, Implications Marketing-Related Tasks

DifferenceMost service productscannot be inventoried

Intangible elementsusually dominatevalue creationServices are oftendifficult to visualize &understandCustomers may beinvolved in co-Production

ImplicationsCustomers may beturned away

Harder to evaluateservice & distinguishfrom competitorsGreater risk &uncertainty perceived

Interaction betweencustomer & provider; but poor task execution could affect satisfaction

Marketing-Related Tasks

Use pricing, promotion, reservations to smooth demand; work with ops

to manage capacity Emphasize physical clues, employ metaphors and vivid images in advertisingEducate customers onmaking good choices; offer guaranteesDevelop user-friendlyequipment, facilities & systems; train customers, provide good support

ImplicationsBehavior of servicepersonnel & customerscan affect satisfaction

Hard to maintain quality,

consistency, reliability

Difficult to shield customers from

failuresTime is money; customers want serviceat convenient timesElectronic channels or voice telecommunications

DifferencePeople may be part of service experience

Operational inputs andoutputs tend to vary more widely

Time factor often assumes great importanceDistribution may take place through nonphysical channels

Marketing-Related TasksRecruit, train employees to reinforce service conceptShape customer behavior

Redesign for simplicity and

failure proofingInstitute good service recovery proceduresFind ways to compete on speed of delivery; offer extended hoursCreate user-friendly,secure websites and freeaccess by telephone

Differences, Implications & Marketing-Related Tasks

Most Service Products Cannot Be Inventoried• AIRCRAFT/ AIR TRAVEL

Intangible elements usually dominate value creation

• EXTERIOR OF HOTEL

Services are often difficult to visualize & understand• DOCTORS

Customers may be involved in co-Production• HAIR TREATMENT

People May Be Part Of Service Experience• SAM WALTON- WALMART

Operational inputs & outputs tend to vary more widely• Banking Services

Time factor often assumes great importanceRestaurant

Distribution may take place through nonphysical channels

• Premium Calculator

Four Broad Categories of Services

Four Broad Categories of Services

• Based on differences in nature of service act (tangible/intangible) and who or what is direct recipient of service (people/possessions), there are four categories of services: – People processing– Possession processing– Mental stimulus processing– Information processing

Four Categories Of Services

People Processing

Customers must: physically enter the

service factory co-operate actively with

the service operation

Managers should think about process and output from customer’s perspective

to identify benefits created and non-financial costs:

- Time, mental, physical effort

• Ex. - Passenger Transportation - Health Care - Beauty salons - Fitness centers - Barbers - Lodging - Restaurants - Physical therapy

Possession ProcessingPossession ProcessingCustomers are less physically involved compared to people processing servicesInvolvement is limitedProduction and consumption are separable

• Ex. - Freight Transportation - Warehousing/Storage on rent - Retail sealing of goods/services - Laundry - Refueling - Giving home on rent

Mental Stimulus Processing

●Mental Stimulus Processing●Ethical standards

required when customers who depend on such services can potentially be manipulated by suppliers●Physical presence of

recipients not required●Core content of services

is information-basedCan be ‘inventoried’

• Ex. - Advertising/PR - Management Consulting• - Education - IT services - Musical nights

Information Processing

Information is the most intangible form of

service output,But may be transformed

into enduring forms of service output

Line between information processing and mental stimulus processing may be blurred.

• Ex. – Letters - Research report - CDs, DVDs - Books - Analyses of trends - Past records etc…

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