Marketing Of Services

MARKETING OF SERVICES

LESSON 3: CLASSIFICATION OF SERVICES The Objective of this Lesson is to have an insight into • Classification of services

Profit Orientation The overall business orientation is a recognized means of classification:

• Development of service marketing

• Not-for-profit: The Scouts Association, charities, public

sector leisure facilities.

• Examples of service sectors

• Commercial: banks, airlines, tour operators, hotel and

• Importance of service sectors

catering services.

• Factors contributing to growth

The Development of Services Marketing

• Challenges faced by service sectors • Difference between goods and services.

Classification of Services As has already been suggested, there are a number of ways of classifying service activity, and there is inevitably some degree of overlap between the methods available. This section outlines some of the methods of classification commonly used.

Firms which produce and manufacture physical goods were involved in market-ing long before service providers embraced marketing and developed specific marketing activities. Many of the developments in services marketing are fairly recent. There are a number of factors affecting developments within services marketing: Organisation size and structure

End-user Services can be classified into the following categories:

Regulatory bodies

• Consumer: leisure, hairdressing, personal finance, package

Characteristics of services

Growth in service industries

holidays.

Customer/employee interaction

• Business to business: advertising agencies, printing,

Service quality

accountancy, consultancy. . • Industrial: plant maintenance and repair, work wear and

hygiene, installation, project management. Service Tangibility The degree of tangibility of a service can be used to classify services: • Highly tangible: car rental, vending machines,

telecommunications. • Service linked to tangible goods: domestic appliance repair,

car service. • Highly intangible: psychotherapy, consultancy, legal services.

People-based Services Services can be broken down into labour-intensive (peoplebased) and equipment-based services. This can also be represented by the degree of contact: • People-based services - high contact: education, dental care,

restaurants, medical services. • .Equipment-based -low contact automatic car wash,

launderette, vending machine, cinema. Expertise The expertise and skills of the service provider can be broken down into the following categories: • Professional: medical services, legal services, accountancy,

tutoring. • Non-professional: babysitting, care taking, casual labour.

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Specific service sectors Organisation Size and Structure Many service providers are typically small and specialized plumbers, lawyers and accountants are representative of the traditional service provider. In the past, they catered exclusively for the existing local demand. Marketing specialists were not employed due to the size of the operations, which may have been sole trader or partnership based, and due to limited competition, especially on a local scale. Regulatory Bodies Regulatory bodies have also restricted the activities of many service providers. Restrictions still exist today on the amount and type of advertising which can be undertaken by certain professional services, particularly in the medical and legal fields (although these have been relaxed in the UK and the USA). Public sector services and charities are also frequently constrained in their ‘business’ activities by various forms of legislation and regulations. Growth in Service Industries However, growth in major services industries such as banking, hotel and catering and tourism services has been accompanied by new developments in marketing. Services marketing ideas and techniques have grown alongside the growth of the service economy. Marketing has contributed to the growth and success of service industries in a number of ways. The design of the service product, or offering, has shifted from a product-based focus to a customer focus - the organisation provides what the

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Characteristics of Services

The characteristics of services “‘intangibility, inseparability, heterogeneity and Perishability - mean that there are new considerations facing services marketers. These differences led to the development of the expanded marketing mix to focus on issues perceived by customers to be important in services marketing. Customer/employee Interaction The customer/employee interaction takes on a far more significant role in services marketing than in the marketing of physical goods. Consequently, services marketing attaches more emphasis to training and better communica-tions. Relatively new concepts have emerged to support services marketing such as internal marketing and relationship’ marketing. These are now finding increas-ing acceptance in mainstream marketing and are being applied to areas outside service. Service Quality Services marketing also places a clear focus on service quality and programmes for implementing service quality. The development of a clearer understanding of perceived service quality and the customer’s perception of quality based on the total service experience has addressed specific quality issues in services marketing. Specific Service Sectors Specific areas of services marketing have attractedihterest, especially not-for -profit organisations and professional services. Marketers in these organisations are faced with ethical considerations and other constraints. Certain public sector services are similarly constrained. The adoption of marketing by these organisations, and the growth or marketing expertise in the area, is leading to a greater marketing orientation.

Technological Developments in Services Marketing Perhaps the biggest impact of new technology in services marketing is the move away from traditionally people-based service to a higher degree of automation. Automated teller machines - the banks’ hole-in-the-wall cash dispensers - are a familiar sight on high streets everywhere. Automatic car washes, computerized self-serve ticket reservation machines, even remote banking services where all transactions are done by telephone are all gaining wide acceptance amongst consumers. Even one-to-one training programmes can now be delivered via interactive video technology. Technological advances in home equipment has led to a demand for new services. The widespread ownership pf VCRs (video cassette recorders) has led to flourishing video film rental businesses. Cable TV network and satellite TV receivers are growing in popularity, opening up new areas of business for installation contractors. Today’s motor cars, with ‘on board computers’, need greater technical expertise for maintenance, which, in turn, leads to greater demand for training. Technological developments have also had an impact on the services market-ing management task. Information technology,

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electronic funds transfer and the use of databases have revolutionized services marketing management. In fact, most marketing-linked technological developments have a role to play in ser-vices marketing management. Many new technological developments have been developed specifically around services as discussed previously, such as cash dispensers. Many restaurants and fast food outlets use computerized till systems, where the order is keyed in to the till, or even a hand-held key pad, and relayed directly to the kitchen while the bill is being produced. It is not only consumer services which have been revolutionized by new technology. Industrial services are also utilizing new technology. Remote diag-nostics using the telephone modem facility allow computer service technicians to carry out software adjustments and upgrades from base, even if the customer is located overseas. Libraries and universities can utilize computer databases from anywhere in the world via computer modem links. In general, it can be seen that new technology increases the demand for services overall. This creates opportunities for marketers in service organisations.

International Services Marketing The UK economy depends on invisible exports for a substantial proportion of revenue. Invisible exports have traditionally included shipping, insurance and investment but now cover a far wider range services. Service organisations are not only involved in the business of exporting, but are increasingly becoming international. Advertising agencies are an example of a service industry becom-ing internationalized in response to changes in the world market situation. London is still one of the major bases for financial services including commodities brokerage and insurance. City financial services and expertise are invisible exports when the customer is from outside the UK. Exporting is considered to be a higher risk venture for service organisations than for firms producing physical products. The main reason for this is that services tend to be far more people based. Production and consumption are inseparable, and the service provider must, therefore, establish a base in the target export market, with trained service personnel. It is not possible to export a batch of the ‘product’ to be sold through distributors or agents as it is with physical goods. This means that the level of initial investment, even for a very small overseas operation, is relatively high. Market entry methods closely mirror those for international marketing of goods. Direct export is possible, as when a firm of consulting engineers sends a. member of staff to another country to carry out contract design work. Joint ventures may be undertaken, with the service provider forming a partnership with an organisation in the target country to develop business. Franchising is also undertaken, as evidenced by the worldwide growth of McDonalds fast food restaurants. McDonalds use a combination of franchising and setting up wholly owned subsidiaries on various locations. Agents who act as employees of the service provider can be appointed in export markets. ‘Color Me

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MARKETING OF SERVICES

marlset needs! not what the organisation thinks the market wants.

MARKETING OF SERVICES

Beautiful’, a personal image consultancy service, has consultants in many countries. One of the main difficulties associated with international services marketing is the question of cultural differences. Cultural differences take on far greater significance in the highcontact service encounter situation. Service delivery may have to be adapted, and perceived service quality criteria examined from the perspective of the target customers in different markets.

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MARKETING OF SERVICES

Tutorials • Discuss examples of service sectors. • Explain the factors contributing to the growth of service

sectors • Challenges faced by Service sector are many. Discuss.

Notes

Good-Service Continuum ~Pure Goods w/ Goods Services

50/50

Physical Product w/ product service

Equal mix

Gasoline, steel, groceries.

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Auto repair, computers.

Services ~Pure w/ Goods Services Knowledge based

Restaurants, Rental movie movies, theater, software. bookstores.

Immediate consumption

Medical care, consulting, day care.

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