Kripa Kalro - Ssm - Chp 1-5

TYBMS SEMESTER 5: SERVICE SECTOR MANAGEMENT PART 1: SSM THEOREY AND CONCEPT BUILDING

CHAPTER 1: INTRODUCTION TO SERVICE SECTOR MANAGEMENT

SERVICES- DEFINED  An act or a performance  Can be offered from one party to another  Intangible  Does not result in the ownership of anything  Its production may or may not be tied down to the physical product

SERVICE V/S CUSTOMER SERVICE:  Service= Major service  Eg: Teaching

 Customer service = Service provided in support of a company's core products.  Eg: Motorola 1 year warranty

CLASSIFICATION OF ECONOMIC SECTORS A. Based on stage in production chain: - Primary - Quaternary - Secondary - Quinary - Tertiary F. Based on ownership: - Public - Private - Voluntary

MARKETING SERVICES VERSUS PHYSICAL GOODS 1. 2. 3. 4. 5. 6. 7. 8. 9.

No Customer ownership of services Service products as intangible performances Customer involvement in the production process People as part of the product Greater variability in operational inputs and outputs Difficulty of customer evaluation No inventories for Services after production Importance of the Time factor Different Distribution Channels

GOODS VS. SERVICES CHARACTERISTICS

GOODS

SERVICES

Product

Tangible

Intangible

Ability to measure

Objective

Subjective

Customer perception

Standardized

Must be consumed to evaluate

Form

Manufactured

Created

Time interval

Before and after

Almost instantaneous

Shelf life

Days to years

Zero (perishable)

Procession

Utilitarian/ finite

Memories/ forever

Place

Product to consumer

Consumer to product

Delivery

Consistent

Heterogeneity/variable

Unit definition

Precise

General

Product flexibility

Limited

Broad

Pricing

Cost basis

Limited cost basis

Marketing

Traditional / external

Non traditional / largely internal

RELATION BETWEEN PRODUCTS AND SERVICES/ CATEGORIZATION OF SERVICES T A N G I B I L I T Y

Product Major Product Hybrid Major Service Service

INTANGIBILITY

RELATION BETWEEN PRODUCTS AND SERVICES/ CATEGORIZATION OF SERVICES Hi

Salt

Tangible Elements

Soft drinks CD Player Golf clubs New car Tailored clothing Furniture rental

Lo

Fast food restaurant Plumbing repair Office cleaning Health club Airline flight Retail banking Insurance Weather forecast Intangible Elements

Hi

RELATION /CATEGORIZATION WITH EXAMPLES PRODUCT / SERVICE EXAMPLE Pure tangible product Major product with accompanying minor service Equal product and service Major service with minor product Pure service

Soap, toothpaste Car with warranty Consumer durable Restaurant Airline, Hospitals Massage, hair cut

ACTUAL EXAMPLE HLL Hyundai, Maruti, LG, Samsung

Mc Donald’s Jet airways Lilavati Hospital Juice

GOODS/ PRODUCT SERVICE CONTINUUM

PURE GOODS

GOODS RELATED

HYBRID

SERVICE RELATED

PURE SERVICE

GOODS/ PRODUCT SERVICE CONTINUUM

Salt

Invest Cons Fast Ad Soft Deterg Autom Cosm Airline ment Teachi food agenc ultan drinks ents obile etics s Manag ng outlet y ement cy

Tangible Dominant

Intangible Dominant

TANGIBILITY SPECTRUM Salt Car + Warranty

Restaurant

Tangible dominant Intangible Dominant

Hospital

Teaching

FEATURES OF SERVICE SECTOR  Highly employee oriented and highly overstaffed  Under government control  Theoretically more socially beneficial  Difference in operating environment as compared to other countries  Dominated by procedures and statistics  “Customer is king” philosophy never works

 Increasing Use of Technology and Automation (80%+ of technology investment is for service industries)  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 service  Jobs range from high-paid professionals and technicians to minimum-wage positions

SIGNIFICANCE/ IMPORTANCE OF SERVICES MARKETING  Job opportunities  Utilization of resources  Standard of living  Environmentally friendly technology

MODELS OF SERVICE MANAGEMENT •

The Industrial Management Model:

 Focus on revenue and operating costs  Ignores the role of personnel in customer satisfaction and sustainable profits  Hangover of manufacturing methods  Belief that factors that bring revenue are  advertising, sales promotion, accessibility,  distribution and location advantages  Cost drivers are personnel and operations

2) The Market- Focused Management Model:  Focuses on components that facilitate the firms delivery system  Proposes that the firm should be supportive of those personnel who serve the customer and interact with them  Emphasizes front line employees  Belief that factors that bring revenue are firms delivery system and personnel

THE TRANSFORMATION PROCESS

Inputs

Process

Output

Performance Measurement

EXAMPLES Service system

Primary input

Conversion process

Desired output

College

Student

Knowledge Educated transmission people

Hospital

Patient

Healthcare

Healthy people

Restaurant

Customer

Food preparation

Satisfied customers

Video store

Customer

Fill requests

Satisfied customers

CHAPTER 2: SERVICE MARKETING ENVIRONMENT

POLITICAL LEGAL FORCES

TECHNOLOGY

PEST IMPACT

SOCIO-CULTURAL FORCES

ECONOMIC CONDITIONS

POLITICAL- LEGAL ENVIRONMENT • • • •

Taxes- Airlines, Hotel Rules & regulations Pricing- Gas, best bus, railways, Cellular De-regulation & privatization- Airlines, Banks • Consumer protection- Mc donalds hot coffee • Environmental laws

ECONOMIC ENVIRONMENT • • • • • •

Changing lifestyles Changing economies Changing technological advances Changing commercial needs Globalization Specialization

SOCIO- CULTURAL ENVIRONMENT • • • •

Lifestyle Social values Beliefs Culture affects services globally more than goods • “Adaptability of services”

TECHNOLOGICAL ENVIRONMENT • Computers • Telecommunications • E-commerce • Innovations • SST`s

SST`S: SELF SERVICE TECHNOLOGIES “Services produced entirely by the customer without any interaction with the firms employees.” Ultimate form of customer participation

Services produced

Services produced

entirely by the firm

entirely by the customer

Examples: • • • • • • • • • • •

ATM Automated airline check-in Automated hotel check-in & check-out Electronic blood pressure machine Tax preparation software Internet banking Buying online Automated investment transactions Insurance online Internet shopping Phone banking

CHAPTER 3: GROWTH OF SERVICE SECTOR

STATISTICS Service Sector Contribution to GDP Sector

2003-04

2004-05

2005-06

Agriculture 22.2

20.8

19.9

Industry

19.5

19.5

19.4

Services

58.3

59.7

60.7

REASONS FOR GROWTH OF SERVICE SECTOR A. DEMOGRAPHIC FACTORS  High life expectancy  Structural shifts in communities/ development of new towns • ECONOMIC FACTORS  Globalization  Specialization

•   

POLITICAL FACTORS Huge infrastructure of government department Internalization Privatization/ deregulation

•      

SOCIAL FACTORS Increase in number of working people High quality of life Two income households More international travel and mobility Greater complexity of life Higher aspiration levels

•   

TECHNOLOGICAL FACTORS Innovations in various fields Range of new products Computer explosion

•     

OTHERS Manufacturing became expensive Increase in competition Availability of trained manpower Outsourcing of functions New inventions

SCOPE OF SERVICE SECTOR: Profit seeking organizations Industry classification

Examples

Housing

Rentals, real-estate agents

Household

Repair and maintenance, electricity, plumbing, domestic help

Personal care

Beauty care, hair dressing, image services

Recreation and entertainment

Parks, discos, D J services

Medical and healthcare

Diagnostic, dental, nursing, hospitalization

Business and professional

Detective, legal, accounting, management consultancy

Private education

Schools , colleges

Financial

Insurance, banking, stock brokers

Communication

Telephone, telex, fax, e-mail, internet, website, PR agencies, ad agencies

Transportation

BEST, rail , airways, parcel delivery services

Non- Profit seeking organizations Service sector

Examples

Education

Universities, schools

Religious

Temples, gurudwaras, churches, mosques

Cultural

Cultural events, theatres, zoos, museums

Charitable

Welfare groups and research foundations (red cross)

Social cause

Family planning, cancer eradication, environmental concerns

Social

Clubs

Healthcare

Hospitals, health research institutes( Indian cancer society)

Political

Individual politicians, parties

CHAPTER 4: CHARACTERISTICS OF SERVICES / 4 I`S OF SERVICES

INTANGIBILITY  Cant be seen, touched or felt  Very difficult to evaluate or measure quality in services  Buyers look for signs/ evidence of quality  The customer cannot stake claim of ownership or procession of the service proposition: he can only experience the offer

INCONSISTENCY/ VARIABILITY/ HETEROGENEITY  No 2 services are identical  Standardization possible upto a point  Performance differs from place to place, time to time and person to person  Need to do away with variability

INSEPARABILITY/ SIMULTANEOUS PRODUCTION AND CONSUMPTION  Services are sold, produced and consumed at the same time  The client participates in production and the service provider has direct contact with the client  Service provider and client may be physically present  Customer involvement in production process  Hard or impossible to mass produce

INVENTORY/ PERISHABILITY  After the service is over it cannot be stored  Utility of most services is short lived  Cannot be produced ahead of time and stored for periods of peak demand  Need to produce a better match between demand and supply

STRATEGIES FOR INTANGIBILITY 1. Visualization 2. Association 3. Physical representation (Equipment, Uniforms, Colors, Logos and Mascots, Buildings, Communication Material, Business Cards) 5. Documentation 6. Facts and figures 7. People 8. Place

STRATEGIES FOR INCONSISTENCY 1. Industrialize Services 3. Training of Internal Customers 5. Training of external customers 7. Automation 9. Monitor Customer Satisfactions

STRATEGIES FOR INSEPARABILITY 1. Training of internal customers 3. Video conferencing

STRATEGIES FOR INVENTORY • • • • • • • • • • • •

Over marketing Managing Demand Differential pricing Cultivating non-peak demand Complementary services Reservation systems Managing Supply Part Time employees Peak time efficiency routines Increased consumer participation Shared services Facilities for future expansion

CHAPTER 5: CLASSIFICATION OF SERVICES

I. ACCORDING TO LOVELOCK Direct Recipient of the Service Nature of the Service Act

DIRECTED AT PEOPLE

DIRECTED AT POSSESSIONS

TANGIBLE ACTS

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

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

INTANGIBLE ACTS

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

Information Processing e.g., accounting, banking, insurance, legal, research

I. ACCORDING TO KOTLER 2. Equipment based v/s People based 4. Client presence v/s Client Non-presence 6. Personal need v/s Business Need 8. For profit v/s for Non-Profit 10.Private v/s Public ownership

I. OTHER CLASSIFICATIONS 1. Based on market segment 2. Based on degree of tangibility 3. Based on skills of service providers 4. Based on goals of the service provider 5. Based on degree of regulation 6. Based on degree of labour intensiveness 7. Based on degree of customer contact 8. Based on level of Tangibility

1. 2. 3. 4.

Based on customer- employee presence Based on customization/ empowerment Based on “drama” analogy of services Based on type of focus: product or process focus 5. Based on method of service delivery: single and multiple sites 6. Based on source of value: front office and back office 7. Based on type of end user

CHAPTER 6: CONSUMER AND ORGANIZATIONAL BEHAVIOUR AND EXPECTATIONS

UNDERSTANDING CONSUMER NEEDS Self Actualization Needs Esteem Needs Social Affiliation Security and Safety Basic Physiological needs

UNDERSTANDING CONSUMER EXPECTATIONS Explicit & Implicit Service Promises

Personal Needs

Word-of-Mouth Desired Service Beliefs about What Is Possible

Past Experience

ZONE OF TOLERANCE

Perceived Service Alterations Adequate Service Situational Factors

Predicted Service

HOW CUSTOMERS EVALUATE SERVICE PERFORMANCE

High in search attributes

High in experience attributes

Complex surgery

Legal services

Education

Computer repair

Entertainment

Most Services

Haircut

Lawn fertilizer

Restaurant meals

Foods

Motor vehicle

Chair

Easy to evaluate

Clothing

Most Goods

Difficult to evaluate

High in credence attributes

CONTINUUM OF PRODUCT ATTRIBUTES

FACTORS AFFECTING CONSUMER BUYING BEHAVIOUR TOWARDS SERVICES SOCIAL FACTORS

CULTURAL FACTORS

Family influence

Culture

Reference group influence

Subculture

Roles and status

Social class CONSUMER AS DECISION MAKER

Beliefs and attitudes Learning

Age & family life cycle Economic circumstances Occupation Personality & self concept Psychographics

PSYCHOLOGICAL FACTORS

PERSONAL FACTORS

COSUMER PURCHASE PROCESS 1. 2. 3. 4. 5. 6.

Awareness/ Need Perception Search and Comprehension Attitude Development Evaluation of Alternatives Purchase and Consumption Adoption and Post Purchase Behavior