fsm session 1

7/31/2019 FSM Session 1

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WELCOME TO COURSE ON

FUNDAMENTALS OF SERVICEMANAGEMENT

Session 1

Ganesh Prabhu


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Learning Objectives

To develop in students set ofcompetencies and prepare them forcareers in the areas of service industry.

To enable the students acquire anunderstanding of the concept andmeaning of services management, therelationship process etc

To enhance students skills andknowledge in dealing effectively with aportfolio of services customers in abusiness setting.


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Text & Reference

Prescribed Text Lovelock Christopher ,Wirtz Jochen and Chatterjee

Jayanta, Service Marketing, Pearson EducationPublications,

Reference Books Hoffman K Douglas and Bateson John E.G.,

Essentials of Services Marketing: Concepts,Strategies and Cases, Thomson Publications.

Clow Kenneth E. and Kurtz David L., ServicesMarketing: Operation, Management and Strategy,New Delhi: Biztantra Publications


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FSM course plan

Session 1/2 Understanding Services (Ch 1/2)

Session 3 Strategic Issues in Services Marketing-

Positioning & targeting customers(Ch 3)

Session 4 Strategic Issues in Services Marketing-

Building Customer relations (Ch 12)Session 5 Strategic Issues in Services Marketing-

Managing Demand (Ch 9)

Session 6/7/8 Tools for Service Marketers (Ch 4,5,6,7)

Session 9/10 Challenges for Senior Management (Ch13,14,15)


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The service sector

The share of services in Indian GDP hasrisen from 30.5% in 1950-51 to 55.2% in2009-10

The services sector has been growing ata rate of > 8% per annum in recent years

This sector dominates with the bestjobs, best talent and best incomes


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What is a service?

It is the part of the product or the fullproduct for which the customer is willingto see value and pay for it.

It is intangible.

It does not result in ownership.

It may or may not be attached with aphysical product


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Any airline can take you from

place to place, but its whathappens to you between take-offand landing that makes the

differenceNaresh Goyal,Chairman Jet Airways


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Services are Different

Goods Services Resulting ImplicationsTangible Intangible Services cannot be inventoried.

Services cannot be patented.Services cannot be readily displayed or communicated.Pricing is difficult.

Standardized Hetero eneous Service delivery and customer satisfaction depend on

employee actions.Service quality depends on many uncontrollable factors.There is no sure knowledge that the service deliveredmatches what was planned and promoted.

Productionseparate fromconsumption

Simultaneousproduction andconsumption

Customers participate in and affect the transaction.Customers affect each other.Employees affect the service outcome.

Decentralization may be essential.Mass production is difficult.

Nonperishable Perishable It is difficult to synchronize supply and demand withservices.Services cannot be returned or resold.

Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, Problems and Strategies in Services Marketing,Journal of Marketing49 (Spring 1985): 33-46.


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Tangibility Spectrum

Tangible

Dominant

IntangibleDominant

SaltSoft Drinks

Detergents

Automobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-food

Outlets

Fast-foodOutlets


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Defining the Essence of a Service

An act or performance offered by one party toanother

An economic activity that does not result inownership

A process that creates benefits by facilitating adesired change in:

customers themselves

physical possessions

intangible assets


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Examples 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, lawnmaintenance, counseling services, health club


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Distinguishing Characteristics of Services

Customers do not obtain ownership of services

Service products are ephemeral and cannot be inventoried

Intangible elements dominate value creation

Greater involvement of customers in production process

Other people may form part of product experience

Greater variability in operational inputs and outputs

Many services are difficult for customers to evaluate

Time factor is more important--speed may be key

Delivery systems include electronic and physical channels


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Internal Services

Service elements within an organization that facilitatecreation 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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Major Trends in Service Sector

Government Policies (e.g., regulations, trade agreements)

Social Changes (e.g., affluence, lack of time, desire forexperiences)

Business Trends

Manufacturers offer service

Growth of chains and franchising Pressures to improve productivity and quality

More strategic alliances

Marketing emphasis by nonprofits

Innovative hiring practices

Advances in IT (e.g., speed, digitization, wireless, Internet) Internationalization (travel, transnational companies)


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Some Impacts of TechnologicalChange

Radically alter ways in which service firms dobusiness: with customers (new services, more convenience)

behind the scenes (reengineering, new value chains)

Create relational databases about customer needs andbehavior, mine databanks for insights

Leverage employee capabilities and enhance mobility

Centralize customer servicefaster and moreresponsive

Develop national/global delivery systems

Create new, Internet-based business models


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The Services Marketing Triangle

InternalMarketing

Interactive Marketing

ExternalMarketing

Company(Management)

CustomersEmployees

enabling thepromise

delivering the promise

setting thepromise

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler


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Ways to Use theServices Marketing Triangle

Overall StrategicAssessment

How is the service

organization doingon all three sides ofthe triangle?

Where are theweaknesses?

What are thestrengths?

Specific ServiceImplementation

What is being promoted

and by whom? How will it be delivered

and by whom?

Are the supporting

systems in place todeliver the promisedservice?


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Marketing RelevantDifferences BetweenGoods and Services


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Marketing Implications - 1 No ownership

Customers obtain temporary rentals, hiring of personnel, or access tofacilities and systems

Pricing often based on time

Customer choice criteria may differ for renting vs. purchase--mayinclude convenience, quality of personnel

Cant own people (no slavery!) but can hire expertise and labor

Services cannot be inventoried after production

Service performances are ephemeraltransitory, perishable

Exception: some information-based output can be recorded

in electronic/printed form and re-used many times

Balancing demand and supply may be vital marketing strategy

Key to profits: target right segments at right times at right price

Need to determine whether benefitsare perishable or durable


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Marketing Implications - 2

Customers may be involved in production process Customer involvement includes self-service and cooperation with

service personnel

Think of customers in these settings as partial employees

Customer behavior and competence can help or hinder productivity,so marketers need to educate/train customers

Changing the delivery process may affect role played by customers Design service facilities, equipment, and systems with customers in

mind: user-friendly, convenient locations/schedules

Intangible elements dominate value creation Understand value added by labor and expertise of personnel

Effective HR management is critical to achieve service quality Make highly intangible services more concrete by creating and

communicating physical images or metaphors and tangible clues


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Other people are often part of the service product Achieve competitive edge through perceived quality of

employees

Ensure job specs and standards for frontline service personnelreflect both marketing and operational criteria

Recognize that appearance and behavior of other customers caninfluence service experience positively or negatively

Avoid inappropriate mix of customer segments at same time

Manage customer behavior (the customer is notalways right!)

Greater variability in operational inputs and outputs

Must work hard to control quality and achieve consistency Seek to improve productivity through standardization, and by

training both employees and customers

Need to have effective service recovery policies in placebecause it is more difficult to shield customers from servicefailures


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Often difficult for customers to evaluate services Educate customers to help them make good choices, avoid risk

Tell customers what to expect, what to look for

Create trusted brand with reputation for considerate, ethicalbehavior

Encourage positive word-of-mouth from satisfied customers Time factor assumes great importance

Offer convenience of extended service hours up to 24/7

Understand customers time constraints and priorities

Minimize waiting time

Look for ways to compete on speed Distribution channels take different forms

Tangible activities must be delivered through physicalchannels

Use electronic channels to deliver intangible, information-

based elements instantly and expand geographic reach


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Important DifferencesExist among Services


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Four Categories of ServicesEmploying 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, psychotherapye.g., accounting, banking,

insurance, legal, research

TANGIBLE

ACTS

INTANGIBLE

ACTS

DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS

What is theNature of theService Act?

Who or What is the Direct Recipient of the Service?


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Implications of Service Processes(1) Seeking Efficiency May Lower Satisfaction

Processes determine how services are created/deliveredprocess change may affect customer satisfaction

Imposing new processes on customers, especially replacingpeople by machines, may cause dissatisfaction

New processes that improve efficiency by cutting costs may hurt

service quality

Best new processes deliver benefits desired by customers

Faster

Simpler

More conveniently

Customers may need to be educated about new procedures andhow to use them


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Implications of Service Processes:(2) Designing the Service Factory

People-processing servicesrequire customers to visit theservice factory, so:

Think of facility as a stage forservice performance

Design process around customer

Choose convenient location

Create pleasing appearance, avoidunwanted noises, smells

Consider customer needs--info,parking, food, toilets, etc.


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Implications of Service Processes:(3) Evaluating Alternative Delivery

ChannelsFor possession-processing, mental-stimulus processing,

orinformation processing services, alternatives include:

1. Customers come to the service factory

2. Customers come to a retail office

3. Service employees visit customers home or workplace

4. Business is conducted at arms length through

- physical channels (e.g., mail, courier service)- electronic channels (e.g., phone, fax, email, Web site)


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Implications of Service Processes:(4) Balancing Demand and Capacity

When capacity to serve islimited and demand varieswidely, problems arise becauseservice output cant be stored:

1. If demand is high and exceeds

supply, business may be lost

2. If demand is low, productivecapacity is wasted

Potential solutions:

- Manage demand- Manage capacity


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Implications of Service Processes:(5) Applying Information Technology

All services can benefit from IT,but mental-stimulus processingand information-processingservices have the most to gain:

Remote delivery of information-based services anywhere,anytime

New service features throughwebsites, email, and internet

(e.g., information, reservations)More opportunities for self-

service

New types of services


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Implications of Service Processes:(6) Including People as Part of the

Product

Involvement in servicedelivery often entailscontact with other peopleManagers should be

concerned about employees

appearance, social skills,technical skills

Other customers mayenhance or detract fromservice experience--need tomanage customer behavior


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The ServicesMarketing Mix


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Overview of Marketing Strategy Planning Process

PlaceProduct

Price Promotion

C

External Market EnvironmentTechnologies Political and Legal Cultural and Social Economic

Narrowing down to focused strategy with quantitative and qualitative screening criteria

CustomersNeeds and other

Segmenting

Dimensions

CompanyObjectives

&

Resources

CompetitorsCurrent

&

Prospective

Segmentation &

Positioning

Segmentation &

TargetingS.

W.

O.

T.


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Elements of The Services Marketing Mix:7Ps vs.the Traditional 4Ps

Rethinking the original 4Ps

Product elements

Place and time

Promotion and education

Price and other user outlays

Adding Three New Elements

Physical environment Process

People


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The 7Ps:(1) Product Elements

All Aspects of Service Performance that CreateValue

Core product featuresboth tangible andintangible elements

Bundle of supplementary service elementsPerformance levels relative to competition

Benefits delivered to customers (customersdont buy a hotel room, they buy a good

nights sleep)Guarantees


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The 7Ps:(2) Place and Time

Delivery Decisions: Where, When, and How

Geographic locations served

Service schedules

Physical channels

Electronic channels

Customer control and convenienceChannel partners/intermediaries


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The 7Ps:(3) Promotion and Education

Informing, Educating, Persuading, and RemindingCustomersMarketing communication tools

media elements (print, broadcast, outdoor, retail, Internet, etc.)

personal selling, customer service

sales promotion

publicity/PR

Imagery and recognition

branding

corporate design

Content information, advice

persuasive messages

customer education/training


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The 7Ps:(4) Price and Other User Outlays

Marketers Must Recognize that Customer OutlaysInvolve

More than the Price Paid to SellerTraditional Pricing Tasks

Selling price, discounts, premiums Margins for intermediaries (if any)

Credit terms

Identify and Minimize Other Costs Incurred by Users

Additional monetary costs associated with service usage (e.g., travel toservice location, parking, phone, babysitting,etc.)

Time expenditures, especially waiting

Unwanted mental and physical effort

Negative sensory experiences


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The 7Ps:(5) Physical Environment

Designing the Servicescape and providingtangible

evidence of service performancesCreate and maintaining physical appearances

buildings/landscaping

interior design/furnishings

vehicles/equipment

staff grooming/clothing

sounds and smells other tangibles

Select tangible metaphors for use inmarketing communications


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7Ps:(6) Process

Method and Sequence in Service Creation andDelivery

Design of activity flows

Number and sequence of actions forcustomers

Providers of value chain components

Nature of customer involvement

Role of contact personnel

Role of technology, degree of automation


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The 7Ps:(7) People

Managing the Human Side of the Enterprise The right customer-contact employees performing tasks well

job design

recruiting/selection

training

motivation evaluation/rewards

empowerment/teamwork

The right customers for the firms mission fit well with product/processes/corporate goals

appreciate benefits and value offered possess (or can be educated to have) needed skills (co-production)

firm is able to manage customer behavior

Managing the 7Ps Requires Collaboration


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Managing the 7Ps Requires Collaborationbetween Marketing, Operations, and HR

Functions

Customers

OperationsManagement

MarketingManagement

Human ResourcesManagement


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CIA 1

GROUP FORMATION & TASKBEFORE THE NEXT SESSION


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Industries that I want the class tostudy

1. Tourism Industry in India2. Hotel industry in India

3. Airline Industry in India

4. Telecom Industry in India5. Courier industry in India

6. Education industry in India

7. Retail industry in India8. Hospital Industry in India

9. Banking Industry in India

10.Insurance Industry in India

I d i h I h l


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Industries that I want the class tostudy

As we go through the sessions, everysession there will be a few presentations/discussions

Next session please come with a 5slide ppt

This should cover Basic industry landscape- size, key players

etc Analysis of Services Marketing Triangle in

each industry


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fsm session 1

Documents