pcc mktg 29 chapter 1 serv. mktg mgmt

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  • 1.MKTG 29 : Service Marketing PART 1 Understanding ServicesChapter 1: Distinctive Aspects of ServiceManagementInstructor: Mr. Abelito T. Quiwa. MBASchool Year 2011 2012

2. Distinctive Aspect of ServiceManagement Ours is a service economy and it has been one for some time. Karl Albrecht and Ron Zemke Consciously or unconsciously, every one of us does render some service or other. If we cultivate the habit of doing this service deliberately, our desire for service will steadily grow stronger and we will make not only our own happiness, but that of the world. The best way to find yourself is to love yourself in the service of others. - Mahatma Gandhi 3. Objectives To know how significant is the service sector in theeconomies of different countries. To know what characteristics make services differentfrom goods and what are their implications forservice marketers. To know why is it important to examine servicesmarketing within the broader framework of integratedservice management.To know why do service businesses need tointegrate the marketing, operations and human-resources functions.To what are the major changes occurring in the 4. Service in the Modern Economy HSBC Holdings, one of the worlds largest bankinggroups, is turning to it own backyard, Asia, in searchof profit and growth after two decades of expansionin the US and Europe. Singapore Airlines (SIA) is one of the mostconsistently profitable airlines in the world. Turningeconomic crisis of 1997 into opportunity. It has spent$292 million on upgrading service in all classeswithout raising fares. NBC Asia, a subsidiary of the National BroadcastingCompany, one of the leading national televisionnetwork in the U.S., has launched CNBC Asia, a 24hour business and financial news covering fromthree continents. 5. What Is a Service? The two definitions that capture its essence. A service is an act or performance offered by oneparty to another. Although the process may be tied toa physical product, the performance is essentiallyintangible and does not usually result in ownership ofany of the factors of production. A service is an economic activity that creates valueand provides benefits for customers at a specifictime and place, by bringing about a desired changein, or on behalf of, the recipient of the service. 6. Understanding the Service SectorTable 1.1. Size of the Service Sector in Selected Asian Countries Value Added by Services as a Percentage of Gross DomesticProduct in 1999, 1990,19891999 19901989 China32.9%30.1% 21.4% Hon Kong 84.7%74.567.5 1 India46.1 39.736.0 Indonesia37.7 41.531.8 South Korea51.5 48.443.73 Malaysia 43.1 42.6n.a. Philippines52.0 43.636.13 Singapore64.1 65.360.6 Taiwan 64.3 54.646.62 Thailand 49.6 50.348.1 Vietnam40.1 38.626.9 Pakistan 49.4 48.845.5 7. Service Marketing VersusPhysical Goods Marketing Marketing can be described in several ways. Itcan be as a strategic thrust pursued by topmanagement; as a set of functional activitiesperformed by line managers ( such as productpolicy, pricing, delivery and communications); oras a customer-driven orientation for the entireorganization. It also recognizes that the service-marketingfunction is much broader than the activities andoutput of the traditional marketing department,requiring close cooperation between marketersand those managers responsible for operations 8. Table 1.2. Management Implication of some Basic Differences bGoods and ServicesHow Service do not Differfrom GoodsSome Key ImplicationsCustomers do not obtainNeed to think of temporary rentals rather than permanent salesownership of servicesHow best to price such rentals?Customer criteria are different forrenting an object instead of purchasingit.Service product are Consider how to create andcommunicate tangible evidenceintangible performances Understand how to stage theperformance and manage each stepGreater involvement ofCustomer behavior and competencecan help or hinder productivitycustomers in the production Customers may need to be managedprocess as partial employeesConsider opportunities for self-serviceLocation and opening hours of servicefactories must be convenient forcustomers 9. Table 1.2. Management Implication of some Basic Differences b Goods and ServicesHow Service do not Differ Some Key Implicationsfrom GoodsOther people may form part Behavior and demeanor of employees and other customers must beof the product managed, because they affect customer satisfaction Recruit service personnel who possess or can be trained to have both technical skills and human skills; keep them motivated May be unwise to mix different market segments at the same time and locationMore variability inQuality control-particularly consistency-is more difficult to achieveoperational inputs and Productivity may be improved byoutputsstandardization Replacing employees by automation 10. Table 1.2. Management Implication of some Basic Differences bGoods and ServicesHow Service do not DifferSome Key Implicationsfrom GoodsMany services are difficult for Need to develop trust betweencustomers to evaluate customer and firm Educate customers to help them make smarter choicesAbsence of inventories after One produced, services cannotproduction usually be stored, so firms must develop strategies to manage demand levels Many capacity level to match predicted fluctuations in demand Profitability of capacity-constrained service businesses is often a function of getting the right business at the right time at the right price. 11. Table 1.2. Management Implication of some Basic Differences b Goods and ServicesHow Service do not Differ Some Key Implicationsfrom GoodsTime factor is relatively Must understand customers timemore importantconstraints and prioritiesRecognize that spending time is oftenseen by customers as a burdenLook for ways to compete on fastservice delivery; minimize waitingExpand service hours ; consider 24/7service.Delivery systems mayConsider opportunities for electronicsinvolve both electronic and delivery of any information-basedservice elements.physical channels Recognize opportunities forinstantaneous delivery of servicesworldwideWhere services are delivered through 12. Customer Do Not ObtainOwnership of Services In many instances, service marketingoffer customers the opportunity to rentthe use of physical object like a rentalcar or hotel room, to hire the labor andexpertise of people. A key implication for marketers concernspricing. When the firm rents out usage ofits physical, human or intangible assets,time becomes as important denominatorand determining the relevant costs 13. Service Products as IntangiblePerformance An interesting way to distinguish between goodsand services is to place them on a scale fromtangible-dominant to intangible-dominant. Kotler has proposed five categories of marketsbased on the goods offered.Pure tangible food (like soap or salt) Tangible good with accompanying services ( forexample, cars or computers) Hybrid( like a restaurant) combining roughly equalparts of good and services. Major service with accompanying minor goodsand services(e.g. air travel).Pure service(such as babysitting or 14. and Most Service Contain a GoodGOODS SERVICESAutomobileComputer Installed carpetingFast-food meal Restaurant meal/auto repair Hospital care Advertising agency/investment managementConsulting Services/teachingCounseling100%75%50% 25%0 25% 50%75% 100% 15. Customer Involvement in theProduction Process Under such circumstances, customers can bethought of as partial employees and servicesfirms have much to gain form trying theircustomers to make them more competent andproductive. Changing the nature of the productionprocess often affects the role that customersare asked to play in that process. When customers are required to visit the siteof services delivery, it should have aconvenient location and be open at times thatsuit customers needs. 16. People as part of the Product The difference between one high-contactservice and another often lies in the quality ofemployees who serve customers. This isespecially so in many high-contact service,where customers come into contact not onlywith service personnel but also with othercustomers. Service firms need to devote special care toselecting, training and motivating thoseemployees who will be serving customerdirectly. At the same time firms need tomanage and shape customer behavior so thatthe misbehavior of a few will not spoil the 17. Greater Variability in OperationalInputs and Outputs The presence of employees and othercustomers in the operational systems makes itdifficult to standardize and control quality inboth inputs and outputs. The services performed while the customer isabsent, such as process bank cheque,repairing cars or cleaning offices at night. As aresult, mistakes are both more likely to occurand more difficult to shield from customers. These factors make it difficult for serviceorganizations to improve productivity, control 18. Harder for Customer to Evaluate Service marketers can reducecustomers perceived risk before aservice purchase by helping them matchtheir needs to specific service featuresand educating them on what to expectboth during and after service delivery. A firm that develops as reputation forconsiderate and ethical treatment of itscustomers will gain the trust of itsexisting customers and benefit frompositive word-of-mouth referrals 19. No Inventories for Service afterProduction The necessary facilities, equipment and laborcan be held in readiness to create the service,but these simply represent productive capacity,not the product itself. Unused capacity is wasted and when demandexceeds capacity, customers may be sent awaydisappointed, unless they are prepared to wait. An important task for service marketers,therefore, is to find ways of smoothing demandlevels to match capacity through price incentives,promotions or other means. If profit maximization is an important goal, thenmarketers should target the right segments at t