Introduction to services mktg

Introduction

Objectives

• What are services?• Why services marketing?• Service and Technology• Characteristics of Services Compared to Goods• Services Marketing Mix• Staying Focused on the Customer

Overview

• Service oriented economy• Growing and huge % age of service economy• Size of service sector is increasing around the

world in both developed and emerging countries

• In US it contributes to 68% of its GDP

Service sector in India

• 15 th across the world in service output• Employment to around 23% of total workforce in the

country• Contributes to almost 54% of GDP(2005)• Services include: construction, trade,

hospitality,transport,F&B,communication, social and personal services, insurance and finance services.ITES from India is the biggest example

• Egs Taj Group of hotels (lodging),Indian Airlines (transportation),Fortis (healthcare), Max new york life (insurance)

Sector wise contribution to India s GDP

Services53%

Agriculture22%

Industry25%

% cont to GDP

Adapted from PIB,GOI jan 29,2010

Powerful forces are transforming services Economy

Govt Policies

•Regulation change•Privatization•Newer agreements•New rules to protect consumers, employees and environment

Social changes

•Rising consumer expectations• More affluence• Speed• Consumerism• Rising ownership of computers,cellphones• Easier info access• Immigration

Business trends

•Emphasis on shareholder value• Productivity and cost savings• Mfgs add value• Focus on quality and consumer satisfaction• Growth of franchising


Globalization• Ioncreased transnationalization• Increased international travel• increased mergers• offshoring

Advances in IT• Growth of internet• greater bandwidth• compact mobile equipment• wireless networking• more powerful software• digitization of text


Newer mkts and products create an increased demand for services , increased competition

Innovation in service products and delivery systems stimulated by application of new and improved technologies

Customers have more choices and more power

Success based on – understanding customers and competitors,viable business models, creation of value for both customers n and firm

Increased focus on services mktg

WHAT ARE SERVICES?

• Services offer benefits without ownership• Services involve a form of “rental”• Services customers obtain benefits by renting

the right to use a physical object, to hire the labor, and expertise of personnel, or to pay for access to facilities and network

• Value is created when customers benefit from obtaining desired experiences and solutions

Non ownership framework• Rented goods and services: Obtain temp right to an exclusive use of

product which they prefer not to own Eg boats, formal clothing• Defined space and rentals: Obtain use of a defined portion of larger

space in a building, vehicle or other area sharing with others under varying levels of privacy eg hotel room, suite in a office building

• Labor and expertise rentals: hire other people to perform work that they either choose not to do for themselves or unable to do because they lack the necessary expertise, tools and skills Eg car repair, surgery, consulting

• Access to shared physical environment: Eg museums, resorts, amusement parks

• Systems and networks: Eg telecom, utilities, banking, insurance etc.

In many instances, two or more categories may be combined

Services- definition

• Services are deeds, processes, and performances provided or co produced by one entity or person for another entity or persons

• All economic activities whose output is not a physical product or construction ,is generally consumed at the time it is produced, and provides added value in forms (such as convenience, amusement, timeliness,comfort or health) that are essentially intangible concerns of its first purchasing

Services- four distinct categories

Service industry and companies

Services as products

Customer service

Derived service

Service industry- whose core product is a service

• 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: airline, travel agency, theme park• Others: hair styling, pest control, plumbing, lawn

maintenance, counseling services, health club, interior design

Services as a product

• Represent a wide range of intangible product offerings that customers value and pay for in a market place.

• Eg : IBM & HP : offer IT consulting services competing with firms such as Accenture

Customer service

• It is the service provided in support of a companys core product.

• Companies typically do not charge for customer service

• Occurs on site or over phone/internet• Quality customer service is essential to build

services

Derived service

• In JOM Steve Vargo and Bob Lusch- all products and physical goods are valued for services they provide

• Value derived from physical goods is really the service provided by the good not the good itself. For eg: pharmaceuticals: medical services, razor: barbering service.

• This view- more broader and inclusive

Tangibility spectrum

• Intangibility is a key determinant of whether an offering is a service

• Few products are purely intangible or totally tangible

• Services tend to be more intangible than mfged products and mfgd products tend to be more tangible than services

Tangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

GOODS VS SERVICES

Characteristics of services

Intangibility

Heterogenity

Simultaneous production and consumption

Perishability

Intangibility

• Services are performances or actions- they cannot be seen, felt, tasted or touched in a same manner as you can sense tangible goods. Eg healthcare services are actions such as surgery, treatment performed by providers and directed towards patients and their families

• Marketing implications: Services cannot be inventoried, difficult to manage demand, difficult to patent, can be easily copied by competitors, difficult to assess quality ,advt and promotion decisions are challenging, dynamic pricing

Heterogenity

• Services are performances- frequently produced by humans- no to services will be exactly alike. Employees delivering services may differ in their performances.

• Also no two customers are alike – will have unique demand and experience.

• Eg a customer service associate may behave differently at diff times

Heterogenity

• Marketing implications: Services because they are heterogenous across time,organizations and people ensuring consistent service quality is challenging.

• Many complicating factors which affects the service quality: customers ability to admit the need, presence of other customers


• Most goods are produced first then sold and consumed, whereas most services are sold first and then produced and consumed simultaneously. Eg car mfged in place A shipped to city B and consumed over a period of years. But restaurant services cannot be provided until they have been sold and dining experience is produced and consumed at the same time. Frequently the situation means that customers are present where they can be cocreators of service. Also other customers may also affect the services production process. Eg business travellers do not wish to be seated near families. Also service producers play a part of product as well as service. Eg university class


• Mass production is difficult• Quality of service and customer satisfaction

will depend real time: employee actions customers needs and wants.

• But gives opportunity for customization• Customers also involved in and observes the

production process and may affect the outcome.

• Operations may also need to be decentralized

Perishability

• Services cannot be saved, stored, resold or returned

• Contrast to goods services cannot be resold, returned etc. eg bad haircut

• Implication: inability to inventorise. Challenging decision areas: demand forecasting and creative planning for capacity utilization.

• Need for strategizing strong recovery strategy . Eg bad haircut- could not returned but other strategies to recover customers goodwill

Goods versus Services

Source: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, “A Conceptual Model of Service Quality and Its Implications for Future Research,” Journal of Marketing 49 (Fall 1985), pp. 41–50.

Goods vs ServicesList 1 List 2 List 3

Blue Jeans Business Suit Appendix OperationCar Casual Clothing Car servicingDental Examination Meal Restaurant EyeglassesGolf Lessons Day Care FurnitureHaircut Dishwasher machine Greeting CardHotel Room Dry Cleaning Health Club MembershipTailored clothing Fast Food Legal RepresentationIce Cream Flu vaccine Poster framingJewelry Maid PsychotherapyDetergent Life Insurance Rental CarPlumbing Repairs Soft Drink Sports shoesTV Repair Socks Typing ServiceVacation Package Tax Consultant Xeroxing/Copying

Challenges for services

• Defining and improving quality• Designing and testing new services• Communicating and maintaining a consistent image• Accommodating fluctuating demand• Motivating and sustaining employee commitment• Coordinating marketing, operations, and human resource

efforts• Setting prices• Finding a balance between standardization versus

personalization• Ensuring the delivery of consistent quality

SERVICES MARKETING MIX

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 srvices

• Services are usually produced and consumed simultaneously, customers are often present in the firms factory ,interact directly with the firms personnel, and are a part of service production process.

• Services are intangible, customers look for tangible cues which will help them to understand the nature of the service experience. Eg hotel: design, décor,appearance and attitude of employees will determine the customers experience and perceptions

Expanded Mix for Services --The 7 Ps

• Product• Price• Place• Promotion• People

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

• 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.

• Process– The actual procedures, mechanisms, and flow of activities by which the service

is delivered—the service delivery and operating systems.

People• All humans involved in delivery of a service provide cues to the

customer reagrding the nature of the service itself.• Attitudes,behavior,how people are dressed,personal appearance

all influence customers perceptions regarding the service. Eg teaching, consulting, providing is the service.

• In other cases, the contact person – plays a small role in service delivery. Eg dispatch or handler.

• In many situations, customers themselves influence the service delivery eg consulting- client needs to provide all the information and implement recommendations

• Customers can influence other customers experience as well. Eg theater, game classroom

Physical evidence

• Includes all tangible representations of the service such as brochures, letterhead, business cards, reports, signage and equipment, physical facility where the service is offered- servicescape – retail bank branch facility.

• Provides excellent cues to send consistent and strong messages regarding the organizations purpose, intended market segments and the nature of the service

Process

• The actual delivery steps that the customer experiences, or the operatinal flow of the service also give customer the evidence on the which to judge the service.Complex services need the customer to follow a series of complicated actions.

• Need to determine if the service is a standardized or customized approach

Table 1.3

Expanded Marketing Mix for Services

Ways to Use the 7 Ps

Overall 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?