Introduction To Service Marketing

Introduction to Services Marketing

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

1

Module – I Overview • Importance of Service sector. • Why study service marketing. • “Service”. • Nature of Services. • Characteristics of services • Goods vs Services • Service Mix • Classification of services • Service marketing framework • Challenges in Service Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

2

The Service Management Decision Framework W h a t B u sin e ss A r e W e In ?

W h a t S e r v ice P r o ce sse s C a n B e U s e d in O u r O p e r a ti o n ?

W h o A r e O u r C u s to m e r s a n d H o w S h o u ld W e R e l a t e to T h e m ?

W h a t S h o u l d b e th e C o r e a n d S u p p l e m e n ta r y E l e m e n t s o f O u r S e r v i c e P r o d u c t? W h a t P r ice S h o u ld W e C h a r g e fo r O u r S e r v ic e s ?

H o w S h o u ld W e C o m m u n ic a te W h a t O u r S e r v i c e H a s to O ff e r ?

W h a t A r e th e O p tio n s fo r D e liv e r in g O u r S e r v ice ?

H o w C a n W e B a l a n c e P r o d u c ti v i t y a n d Q u a lity ?

H o w S h o u l d W e M a t c h D e m a n d a n d P r o d u c ti v e C a p a c i t y ? W h a t A r e A p p r o p r ia te R o le s fo r P e o p le a n d Te c h n o lo g y ? H o w C a n O u r F ir m A ch ie v e S e r v ice L e a d e r s h ip ? Faculty: J.Rai, IIPM-School of Management, Kansbahal

Module I 3

How Important is the Service Sector in Our Economy? • In most countries, services add more economic value than agriculture, raw materials and manufacturing combined • In developed economies, employment is dominated by service jobs and most new job growth comes from services • Jobs range from high-paid professionals and technicians to minimum-wage positions • Service organizations can be any size—from huge global corporations to local small businesses • Most activities by government agencies and nonprofit organizations involve services Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

4

Why Study Services Marketing? • Significantly different from goods marketing • Relatively new discipline with a strong interdisciplinary base • Importance of services sector – 70% - 80% GDP in highly dev. economies – Service sector in India approx 50% Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

5

Evolving of Services • Changing pattern of government regulations. • Privatization of some public/ nonprofit service • Technological innovations. • Internationalization & Globalization. • Expansion of leasing & rental business. • Manufacturers as service providers. • Hiring of employees. Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

6

What is a Product? Anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. – Includes: Goods, services, events, persons, places, organizations, ideas, or some combination thereof.

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

7

What is a Service? • An act or performance offered by one party to another (performances are intangible, but may involve use of physical products) • An economic activity that does not result in ownership • A process that creates benefits by facilitating a desired change in customers themselves, physical possessions, or intangible assets

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

8

Government Sector Courts Employment. Exchanges Hospitals Municipal Services Post Office Schools, Colleges etc

Services

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

9

Business Sector Airlines Banks Insurance Management Consultants Lawyer's Doctors Motion Pictures

Services

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

10

Manufacturers Computers Operators Legal Staff Accountants Administrative Staff Supportive Staff Security Staff

Services

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

11

“ Something that can be bought and sold but which cannot be dropped on your foot !”

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

12

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, lawn maintenance, counseling services, health club Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

13

Internal Services • Service elements within an organization that facilitate creation 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 Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

14

Need For Services & Products Old Age Care Senior Citizen Home Wheel Chair Dental Care Dental Chair Dental Equipments Photography Camera Films Printing

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

15

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

16

The Nature of A Service

Fed Ex Example

“ The service product is essentially a bundle of activities, consisting of the core product - which in Federal Express’ case consists of transporting packages overnight and delivering them next morning to the addressee, plus a cluster of supplementary services.” Module I

Faculty: J.Rai, IIPM-School of Management, Kansbahal

17

The Nature of A Service The Example of Federal Express

Advice and Communication Bill Statements Order Taking Supplies

Overnight Transportation and Delivery of Packages

Problem Solving

Tracking

Pick-up Documentation

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

18

Characteristics of Services

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

19

INVEN

TORY

INSEPARABILITY

INCONSISTENCY

INTANGIBILITY Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

20

Intangibility No physical attributes Impossible to taste feel hear smell before buying Cant be easily displayed Inference from place,people price,symbols….. Transform intangibility to tangibility

Faculty: J.Rai, IIPM-School of Management, Kansbahal

Nobody cares As much ..Taj

I’ve got a piece Of rock… Prudential

Macdonald ..the Family restaurant

University Degree tangible evidence of knowledge acquired Module I 21

Tangibilising the Intangibles: Strategies Visualization Association Physical Representation Documentation People Involvement Place Advantage Promotion Branding

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

22

Tangibilising the Intangibles

Visualization Hotels depicting benefits of dinning at restaurant through Advertisement

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

23

Tangibilising the Intangibles

Association Air India Used Friendly Maharaja Shah Rukh with Air-tel

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

24

Tangibilising the Intangibles

Physical Representation Citibank credit Card in Gold or Platinum Symbolizes wealth & Status Airlines Dress Symbolizes visibility, reliability and cleanliness

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

25

Tangibilising the Intangibles Documentation Citing fact & figures in support of performance • Major Awards Won By Jet Air • % Of People Preferring Jet Air • Number. One Company in Market Share Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

26

Tangibilising the Intangibles

People Involvement People are often Critical Element in service Delivery Training People To be courteous in Hotel for Service Delivery

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

27

Tangibilising the Intangibles

Place Advantage The clean, well laid down interiors of a Hotel Room depicts the quality of service

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

28

Tangibilising the Intangibles

Promotion Personal Care through Promotion Campaigns offers life long Assurance scheme

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

29

Tangibilising the Intangibles

Branding

The family Restaurant

Branding helps in differentiation of the service from competitors

The world on time

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

30

Tangibility of goods and services

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

31

Difficult to evaluate Consultancy project

Medical surgery

Computer repair Legal services

Vacation

Lawn Fertiliser

Restaurant meals

Motor vehicle

Furniture

Easy to evaluate

Clothing

Product qualities affect ease of evaluation

High in search High in experience High in credence qualities qualities qualities Faculty: J.Rai, IIPM-School of Management, Kansbahal

Module I 32

Heterogeneity (Variability/Inconsistency ) • service quality varies across service encounters • service encounter is the interaction between service employee and customer – ‘moments of truth’ • service people are central to service delivery • service is delivered in ‘real’ time

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

33

Inconsistency Different services

Performance of an Artist

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

34

Implications of Inconsistency  Service delivery and customer satisfaction depend on employee actions

 Service quality depends on many uncontrollable factors

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

Strategies for

Inconsistency • customer surveys and feedback • training in interpersonal and technical skills • provide product knowledge • ensure back-stage systems support front line staff • use standardisation strategies – franchising, scripts • build quality into all processes

Faculty: J.Rai, IIPM-School of Management, Kansbahal

Module I 35

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

36

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

37

Inseparability

•It can not be separated from the creator-seller of •The product simultaneous production and consumption •The customer is involved (partial employee) •Other customers may be present

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

38

Strategies for inseparability

Implications of Simultaneous Production and Consumption •

 Customers participate

– scripts and roles

in and affect the transaction

– front-line staff need both technical and interpersonal skills (recruit & train)

 Customers affect

– educate the customer (provider –marketer)

each other

 Employees affect the service outcome

 Decentralization may be essential

 Mass production is

manage the service encounter

•

manage customer interactions

•

manage the physical evidence

•

develop customer service policies and service recovery procedures

difficult

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

39

Services are typically produced And consumed simultaneously oCo-production.. dentist/patient oIsolated production.. T.V.serial oSelf-services… ATM, weighing Machine

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

40

•Services cannot be stored •Need to manage supply and demand

Inventory Empty seats at 10 am flight to Bombay does not mean Seats may be available in the next flight

Empty seats in a stadium for a Cricket game can not be carried To the next game Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

41

Strategies for Dealing With Inventory (Perishability) Result Of Demand Variability Match Capacity by Shifting demand— Sunday open Adjusting Prices- lowering or increasing prices Stretch the existing Capacity- 24hrs banking Stretching Facilities- adding manpower/machines

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

42

Goods Vs Services

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

43

Basic Differences between Goods and Services

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

44

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 Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

45

An expanded marketing mix for services

Product (service)

People Place, Place & cyberTime space & time

Customers Customers Customers

Process Price Price

Promotion Physical evidence Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

46

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

customer service employees other customers Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

47

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.

•Atmosphere, décor, music etc. •equipment •facilities •uniforms Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

48

Process – The actual procedures, mechanisms, and flow of activities by which the service is delivered—the service delivery and operating systems.

service delivery systems •back stage •front stage procedures policies Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

49

Expanded Marketing Mix for Services

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

50

Classification of Services Based on Degree Of Cust. Involvement ( Lovelock) 3. People Processing 4. Possession Processing 5. Mental Stimulus Processing 6. Information Processing Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

51

Some other classification includes• The degree of tangibility. • Whether customer directed/possessions. • Time and place of delivery. • Level of Customization/Standardization. • Relationship with customer. • Demand supply fluctuation. • Interaction with people. Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

52

Four Categories of Services Employing Different Underlying Processes What is the Nature of the Service Act? TANGIBLE ACTS

INTANGIBLE ACTS

Who or What is the Direct Recipient of the Service? DIRECTED AT PEOPLE

People Processing e.g., airlines, hospitals, haircutting, restaurants hotels, fitness centers

Mental Stimulus Processing e.g., broadcasting, consulting, education, psychotherapy

DIRECTED AT POSSESSIONS

Possession Processing e.g., freight, repair, cleaning, landscaping, retailing, recycling

Information Processing (directed at intangible assets)

e.g., accounting, banking, insurance, legal, research Module I

Faculty: J.Rai, IIPM-School of Management, Kansbahal

53

Service Marketing Framework: Analysis

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

54

The Services Marketing Triangle Company (Management) Internal Marketing

External Marketing

“enabling the promise”

Employees

“setting the promise”

Interactive Marketing

Customers

“delivering the promise” Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

55

Ways to Use the

Services Marketing Triangle Overall Strategic Assessment • How is the service organization doing on all three sides of the triangle? • Where are the weaknesses? • What are the strengths?

Specific Service Implementation • What is being promoted and by whom? • How will it be delivered and by whom? • Are the supporting systems in place to deliver the promised service?

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

56

Marketing Framework

3 C’s

Market Intelligence

Customers

Competitors

Company

T

S

(Segment)

P

(Target)

Product Price

(Position)

Promotion

4 P’s

Place

Faculty: J.Rai, IIPM-School of Management, Kansbahal

Module I 57

Challenges for Services • Defining and improving quality • Communicating and testing new services • Communicating and maintaining a consistent image • Motivating and sustaining employee commitment • Customer Relation Management. • Bridging Demand- Supply • Coordinating marketing, operations and human resource efforts • Setting prices • Standardization versus personalization Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

58

Module I Faculty: J.Rai, IIPM-School of Management, Kansbahal

59