SERVICES MARKETING

INTRODUCTION

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

SELL THE FOLLOWING PRODUCTS

Characteristics of Services Compared to Goods

Intangibility

Perishability

Simultaneous

Productionand

Consumption

(Inseparability)

Heterogeneity

Tangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

Characteristics of Services Compared to Goods

An act or performance performed by one party to another

An economic activity that does not result in ownership

Essence of Service

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

Travel◦ airline, travel agency, theme park

Others◦ hair styling, pest control, plumbing, lawn maintenance, counseling services,

health club, interior design

Chirstopher Lovelock :

Services are economic activities offered by one party to another, most commonly employing time-based performances to bring about desired results in recipients themselves or in objects or other assets for which purchasers have responsibility.

DEFINITION : SERVICES

PRODUCTION

STORAGE

SALE

CONSUMPTION

PHYSICAL GOODS

SALE

PRODUCED & CONSUMED AT SAME TIME

SERVICES

Services : Characteristics

1. Intangibility

Problems

• Lack of service inventories

• Lack of patent protection

• Difficulty in displaying or communicating services

• Difficulty in pricing services

Solutions

• Use of tangible clues• Use of personal source

of information• Creation of a strong

organizational image

2. Inseparability

Problems

• Physical connection• Involvement of

customers in the production process

• Involvement of other customers in the production process

• Special challenges in mass production

Solutions

• Selecting & training public contact personnel

• Consumer management

• Use of multi-site locations

3.Heterogeneity

Problems

• Difficult to standardize service quality control

Solutions

• Customization• Standardization

4.Perishability

Problems

• Higher demand than maximum availably supply / optimal supply level

• Lower demand than optimal supply level

• Demand & supply at optimal levels

Solutions

• Creative pricing• Reservation system• Development of

complementary services

• Development of non peak demand

Customer has access to but not ownership of activity or facility

Stress advantages of non-ownership (eg. Easier payment systems)

5. Lack of ownership

Basis Goods Services

Tangibility Goods are tangible. Can be patented

Services are intangible. Cannot be patented

Transfer of ownership Possible Not possible

Perishability Less Perishable. It can be stored as inventory

Highly perishable. Cannot store for future use

Heterogeneity Goods can be standardized. Less heterogeneity

High heterogeneity. Difficult to standardize

Reselling Possible Not possible

Production & consumption

Takes place at different places

Both process take place simultaneously

DISTINGUISH : GOODS & SERVICES

Basis Goods Services

Customer relationship Low High

Marketing mix 4 P’s – Traditional marketing mix

7 P’s – Extended marketing mix

Customer Involvement

Low High

Mass Production Easy Difficult

DISTINGUISH : GOODS & SERVICES

Economy

Agriculture Industrial Services

SERVICES ECONOMY

1. Crawling out stage prior to 1980- Marketing channels- Marketing theories- Identified characteristics of services2. Scurrying about stage : 1980-1986- Services classification- Managing quality in service operations- GAP model- Expanded marketing mix- Service encounter, Relationship marketing,

Internal marketing etc.,- Emergence of Service marketing

Evolution of Services Marketing

3. Walking erect stage : 1986-2000Focus on marketing problems of servicesService encounters, Service design,

perceived service quality, customer satisfaction, Internal marketing & Relationship marketing.

4. Galloping stage : 2000 till dateIncrease in growth of service sectorMain contributors to GDP of the country.

Service Sector Related activities

Wholesale and Retail trade Sales to business / individuals

Transportation & Warehousing

Transportation or storage. Modes : Air, Water, Rail, Road & Pipeline

Utilities Establishments that provide electricity, natural gas, steam, water, sewage removal

Information Establishments that produce and distribute information and provide the means to distribute or transmit these products and / or process data

Financial Activities

Finance & Insurance Engaging in financial transactions

Real estate, rental & leasing Selling or allowing the use of assets

Government Public Administration

Services Economy : Components

Service Sector Related Activities

Professional & Business Services

Professional, scientific & technical

Legal advice, accounting, architectural, engineering, computer services, consulting, health care, research & others

Management of companies and enterprises

Undertake a decision making role in the company or enterprises

Administrative support & Waste management

Performing routine support activities for other organisation

Education & health services

Education Provide instruction & training

Health care and social assistance Provide medical care & social assistance

Leisure & Hospitality

Arts, entertainment & recreation Services to meet cultural, entertainment and recreational interests

Accommodation & food services

GovernmentPolicies

BusinessTrends

Social Changes

Advances in IT

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)

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

●Migration

●Growing but aging population

Forces Transforming the Service Economy (2)

Government Policies

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)

GovernmentPolicies

BusinessTrends

Social Changes

Advances in IT

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)

GovernmentPolicies

BusinessTrends

Social Changes

Advances in IT

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)

Increase in Affluence More leisure time

Working women Growth in population of DINKS

Greater life expectancy Greater complexity of products

Greater complexity in life Greater concern for resource scarcity & Ecology

Increasing number of new product

Young generation

Cultural changes Technology – Key driver

Consciousness of healthcare Migration

Economic liberalization

Reasons : Growth – Service sector

Service Triangle Management Framework Molecular Model Servuction Model Services triangle Marketing model Six market model

SERVICES MODEL

Focus : Revenues & operating cost

Ignores : Role personnel play – customer satisfaction & sustainable profits.

Beliefs : Difficult to find good employees Better to rely on technical machines / systems Employees are indifferent, unskilled,

incapable of fulfilling any duties.

1. Service Triangle Management FrameworkA. Industrial management model

Focus : To serve customers / Service delivery

Beliefs : Firms should be organized

Framework : Depicts 6 key relationships

B. Market focused management model

6 KEY RELATIONSHIPS

1. Firms service strategy communicated to the customer

2. Service strategy communicated to firm’s employees

3. Focus on consistency of service strategy & systems developed to run day to day operations

4. Impact of organisational system upon customers.

5. Importance of organisational systems & employee efforts

6. Customer/service provider interaction.

MOMENTS OF TRUTH

( MOT )

Interaction between customer and service provider give rise to service encounters or critical incidents.

The quality of these interactions is the source of customer satisfaction.

Jan Carlzon, CEO, Scandinavian Airline System

Pictorial representation of the relationship

between the tangible and intangible

elements of a firm’s operation

2. Molecular Model - G.Lynn Shostack

Depicts the factors that influence the

service experience

I a. Contact personnel

Eg. Parking attendants, Receptionist,

hostesses

I b. Service providers

Eg. Waiter, Dentist, Physician, Instructors

3. Servuction Model- Langeard et al

THE SERVUCTION MODEL

Invisible organizations and systems

Contact personnel/

Service providers

Other customers Servicescap

e

Customer

II Other customers

III Invisible organisation systems

- Rules, regulations & processes upon which organisation is based.

IV Servicescape- Use of physical evidence to design service

environmentAmbient conditions : Eg. Room temperature&

MusicInanimate Objects : Eg. Assist firm in

completing tasks such as furnishings & business equipment

Physical evidence : Eg. Sign / symbols and personal artifact

THE SERVUCTION MODEL

4. Services Triangle Marketing Model

I The company

II The customer

III The provider (Internal customers)Eg. Employees, franchisees, channel

partners, distributors, wholesalers, retailers etc.,

3 entities : Service transaction

Game of promises

I External marketing : “Makes promises”

II Internal marketing : “Keeps promises”

III Interactive marketing : “Enables promises”

Types of marketing : 3 entities

1. Customer Markets

2. Referral Markets3. Influence Markets4. Recruitment

Markets5. Supplier Markets6. Internal Markets

5. Six market model :(Proposed by Adrian Payne)

◦ 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

Challenges : Service Marketing

I Marketing issuesA. Managing Differentiation1. Services premises2. Packaging3. Service personnel4. Tools and equipment use5. Customers6. ConvenienceB. Managing productivityC. Managing service quality

Issues : Service Marketing

II Ethical issues1. Aggressive promotion 2. Invasion of privacy3. Misleading claims backed by poor service

performanceIII Communication issues4. Management of technology5. Management for budgetary provisions for

communication6. Management of communication content

Differences, Implications & Marketing related tasks

Difference

Most service products

cannot be inventoried

Intangible elements

usually dominatevalue creation

Services are oftendifficult to visualize

&understand

Customers may beinvolved in co-Production

Implications

Customers may beturned away

Harder to evaluateservice & distinguishfrom competitors

Greater 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 advertising

Educate customers onmaking good choices;

offer guarantees

Develop user-friendlyequipment, facilities & systems; train

customers, provide good support

Differences, Implications & Marketing related tasks

Implications

Behavior of servicepersonnel & customerscan affect satisfaction

Hard to maintain quality,

consistency, reliability Difficult to shield customers from

failures

Time is money; customers want

serviceat convenient times

Electronic channels or voice

telecommunications

Difference

People may be part of

service experience

Operational inputs and

outputs tend to vary more widely

Time factor often assumes great importance

Distribution may take

place through nonphysical

channels

Marketing-RelatedTasks

Recruit, train employees to

reinforce service conceptShape customer

behavior

Redesign for simplicity and

failure proofingInstitute good service recovery procedures

Find ways to compete on

speed of delivery; offer extended hours

Create user-friendly,secure websites and

freeaccess by telephone