Services Marketing

SERVICES MARKETING ASSIGNMENT 1 QUESTION: How does marketing services to organizations differ from marketing services to consumers? Discuss. Introduction Services marketing can be define as a marketing activities based on relationship and value that may used to market service and product. This services marketing is different from the product-base marketing in several terms. In services marketing, the purchases made by buyers are intangible and the service might depend on the reputation of a single person. However it is more difficult to compare the quality of the same services and the services are not refundable or returned back to the organization. Beside of the regular four marketing mix, services marketing add in another 3 more P’s that is People, Physical evidence and Process. People refer to the use of appropriate staff and people. Hiring, recruiting and training staff appropriately are essential in delivering their services, to obtain competitive advantage. The employees should have the appropriate interpersonal skills, attitude and service knowledge to provide the services for consumers. Process refers to the system used by organization to deliver their services to their consumer. Accurate and efficient process will enhance consumer’s satisfaction and foster their loyalty and confidence towards the company. Physical evidence is the element of the service mix that allows the consumer to make judgments on the organizations. Based on this element, consumers make their perceptions based on their opinion and view of the service provision which could leave an impact on the organizations perceptual plan of the services. Services can be identified by the characteristics below. 1

a) Inseparable - Services cannot be separated from the provider from the point it was

consumed. In

the other mean, the service is being produced at the same time that the

client is receiving it. b) Intangible – Services are not able to have a real, physical presence as a regular product

which the services cannot be touched or viewed. c) Perishable - Once the services is given, it cannot be repeated in the same way like before

because unused capacity cannot be stored for future use. d) Variability – The services given should not be completely the same with the other. It is

important to minimize the differences in performance of the services. e) Right of ownership – Consumers who get the services cannot have the ownership of it,

instead of the experience they get. There is a difference between marketing services of the organization and consumer. Organization marketing vs. consumer marketing The differences between organization and consumer marketing may seem confusing since there is inconspicuous difference between it. Consumer marketing is aimed at large demographic groups by using mass media and retailers. Instead, the negotiation process between the buyer and the seller is more personal in business marketing.

The role of marketing is critical in efforts to markets the organizations services. Marketing for organizations means running the first-rate program and letting people know about it. It can take many forms focuses in fostering exchanges. The exchanges are something of value that it needs to continue organizations services. Marketing helps organizations to initiate, cultivate and nurture exchangerelationship with their clients and community. Effective marketing helps the organizations to enhance demand for its services to maximize profits and better ensure 2

its long-term sustainability. This comprehensive approach to marketing helps organizations achieve long term goal for its target population that developed through strategic planning. Managers can use marketing to help them to: •

define a unique niche, or role and image, for their organization in the marketplace

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unite all operational, administrative, and managerial efforts and focus them on the target populations identified in their organizational mission

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provide their target populations with a clearly identified set of services and products that reflect the organization's niche

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provide these services in ways that satisfy their potential clients' needs, preferences, and aspirations

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always concentrate their limited resources on their target Business marketing (B2B) was also known as organization marketing. B2B commonly

used to describe any activity that happen between businesses with the other businesses or organization. It is also known as industrial marketing. Consumer marketing (B2C) is the marketing activities that happen between business and consumers.

Customer / target market B2B target market is small and focused. Differ from marketing services customer, business customers (B2B) can be divided into four broad categories that is, companies that buy products or services, government agencies, institutions and resellers. Companies that consume the products or services include original equipment manufacturers, such as automakers who buy hardware and tools to put in the cars. The biggest and main consumer is the government agencies who buy products and services for nation development purpose. This includes state and local governments. Next category is the institutions include schools, hospitals, churches and charities 3

that buy products and use services for their institutions needs. Finally, the resellers who are the wholesalers, brokers and industrial distributors who buy products to be distributed to individual consumers. The business customers are more sophisticated and understand the product and services more than the producer. They also buy the products and services to help their own company to stay profitable, sustainable, competitive and successful in the preferred industry. The B2C is more to large target market of individual consumer. Purchasing process of the individual might be influenced by many factors such as family members, friends, and last experience of the product or services. It also focuses on merchandising and point of buying activities including coupons and store fronts. The consumers are more concern in looking or best price and are willing to do research and comparison through shopping.Also, most of the consumer will stick on their trusted retailer or sources to get the product or services they want and need. So, for those who operate in B2C marketing industries, they need to double their efforts to convince the customer and build trust and loyalty among them. Building relationship B2B Company should focuses in building relationship and communication by using marketing activities that generate leads. Such companies use marketing to educate their target market because of the purchasing decision making process will be made by more than one person. B2B marketing clearly caters one business to another business to maximize the relationship value that brings the multi-step buying process and longer sales cycle. B2C build their relationship with customer by delivering value to their customer through product and services offered. They also allow communication by various methods such as sending email, letter and promotion or call the customer by phone. Marketing strategies 4

For B2B, branding give the business a chance to be known and considered by consumers but it doesn’t mean that the consumer will choose that brand to be purchased. Business buyers are more rational in considering and selecting product or services for their company. The reason is they are motivated by the sense of using less money but increase productivity and being profitability beside of the desire to success, style and prestige. B2B brings the multi-step buying process and longer sales cycles. Its brand identity is created on personal relationship. For B2C, strong brand will encourage consumer to buy their product, being royal and potentially ready to pay higher price if they are satisfy with the offer. For this type of business, the brand identity created through repetition and imagery. The consumer are relying more on emotional feeling when they make purchase decision that are usually based on status, desire, price and also quality and comfort. Other differences B2B is driven by relationship that encourages it to maximize the value of relationship. It also focuses on educational and awareness building activities and the business value was determined by rational buying decisions. In B2B, the consumer will be helped to make consideration but not making selection. In B2C, the value of the transaction is maximized to reach maximum profits. The customer service encourages customer’s loyalty as they know that they can deal with the businesses if they have or wanted to do so.

Conclusion There are many clear differences that can be found between organization or business marketing and consumer marketing. Even these two businesses implement the same developed marketing strategies and marketing program such as advertising, direct marketing and public 5

relation, but there are still differ in terms of program execution and the outcome of their marketing activities. Marketing a service is much harder than to market a product. The people who are responsible in running the services have to be responsive to their customers, reliable at most of the time, courteous and competent, so, the confidence among customer can be enhanced. Marketing is the most important factor in the profitability of a business. Businesses can use their marketing information and positive relationships with clients to develop strategies that will strengthen the marketing mix. Marketing is not a responsibility of the only specialized department in the business organization that devoted to the advertising, education or promotion. This responsibility will also be taken by the staffs who deal directly with the consumers in order to shape organizational image with clients and potential clients, supported by co-workers. It will takes all employees, pulling together to achieve organization goals. (1497 words)

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ASSIGNMENT 2 QUESTION: How has Michael Porter’s Five Forces become a yardstick for assessing industry profitability? Explain its application using a local service of your choice. Introduction Doing business nowadays is not as easy as last time. There is lots of difficulties and competition around. For entrepreneur or business owner who want to enter the business world of their preferred industry, they must be able to compete with the competitors to make sure their sustainability by analyzing the business environment with appropriate tools. Michael Porter’s Five Forces The model of Porter’s Five Forces was developed by Michael E. Porter in 1980. This model has become important and powerful tool for analyzing organization industry structure and finding the power of the organization that lies in the business situation. It helps in understanding both strength of business current competitive situation and the strength of the position that the business are looking for. This will assist the business to improve their weaknesses and avoid taking wrong action. There are five competitive forces identified by Porter that plays important roles in shaping every industry and market that determine the intensity of competition and hence the profitability and attractiveness of an industry. Porter’s model supports analysis of the driving forces in an industry. The Porter’s Five Forces are, existing competitive rivalry between

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suppliers, threat of new market entrants, bargaining power of customers/ suppliers, bargaining power of suppliers and threat of substitute products, as shown in the model below:

Figure 1 To demonstrate the use of Michael Porter’s Five Forces, I have choose one of the local companies in Malaysia, that is, International Business Machines (IBM) Corporation or also known as IBM Malaysia. Overview of International Business Machines (IBM) Corporation International Business Machines (IBM) corporation was founded in 1914. IBM started their operation in Malaysia since its establishments in this country on 1961. As world’s largest and leading IT company, IBM operates in 164 countries and employs more than 200 000 people worldwide. Their fundamental mission is to strive to lead in the creation, development and manufacture of the industry’s most advanced information technologies including computer 8

systems, software, network systems, storage devices and microelectronics. Their one more mission is to translate the advanced technologies into value for their customer through their professional solution businesses worldwide. For IBM, their responsibility is to help local company to compete effectively both locally and globally by the efficient use of IT, innovation in management and excellence in service. Their key strength is their people, skills and experience in IT and managing complex projects, and their worldwide infrastructure of international offices and laboratories, that they can quickly implement for best practice required to help their customers. Application of Michael porter’s five forces 1) Existing competitive rivalry between suppliers This force describes the degree of competition among existing company in the industry. High degree of competition will results pressure on prices and margins, hence, on profitability for every company in the industry. However, competition is not perfect and firms are not unsophisticated passive price takers. The intensity of rivalry commonly referred to as being extreme, intense, moderate or weak based on the firms aggressiveness in attempting to gain an advantage. The company may pursue an advantage over its rival by changing price that is raising or lowering the price to gain the advantage. Company also can improve the product or service differentiation by improving features, implementing innovations in manufacturing process and the product itself. They also have to use the channel of distribution creatively to enable the consumer to get their product or services. Good relationship with suppliers is fundamentals for high quality of product specification and price. The degree of rivalry will be higher if there are large numbers of similar size company that are competing with each other to get customer. Because the cost of leaving the industry is high, the existing company will fight hard to survive. If there is a high level of capacity being 9

underutilized, the firms will be very competitive to win the sales to increase their own demand. Rivalry degree also influenced if the market is shrinking, so the company are fighting for the share of falling sales. There is also a little brand loyalty so consumers are likely to switch easily between products. For IBM, they are a world’s largest and leading IT company. They use their expertise to help customer to solve business problem with their skills and experience. Being a leader for IT businesses give them the advantage to sustain and being strong in the industry. They can decrease the great competition by giving best services to customer through efficient use of IT usage, management innovation and excellence in services. They also deliver best value and relationship to the customer. 2) Threats of new entrants New entrants will increase the level of competition and reduce attractiveness. It mostly depends on the barriers to entry. This usually depends on factors such as economies of scale that is the minimum size of requirement for profitable operations and high initial investments and fixed costs. The new entries have to invest more if they want to sustain in competitive industry as they will have to use more resources in sustaining the company. The cost advantages of existing company due to experience effects of operation with fully depreciated assets. The entries will be hard if the consumers are brand loyal, the intellectual property is protected, there is scarcity of resources and access to raw materials is controlled by existing company. Same problem will also occurs if distribution channel was controlled by existing company, good relationship with consumer exist among old company, the switching cost is high and also the legislation and government policies. IBM controlled this factor by establishing and delivering good value and relationship to their consumer through their services in helping the consumer in solving the business problem 10

with their expertise in IT. With their key strength; skills, people and experience, they make themselves difference from the other. Wide range of products makes them as the only IT company that can provide end solution to their customer. These characteristics enable them to sustain even the new entrants join them in the same industry. 3) Bargaining power of suppliers These mean that the stronger the suppliers power, the more difficult for the firm in the same industry to make profits because suppliers can determine and control the terms and conditions on which business is conducted. The suppliers will get more power if there are just few of them to supply the company, switching to another suppliers is difficult or too expensive and there is no substitute for particular input. The same term will also happen if the buying industry has higher profitability than the supplying industry and the buying industry has low barriers to entry. This will increase the pressure on margins from suppliers. IBM takes care of this force by implementing good relationship with their suppliers. By doing this they can get high quality and good price for their IT products supply. This will enable them to continuously contribute to the development of the local IT industry. 4) Bargaining power of customer These forces determine how much customers can impose pressure on margins and volumes. Bargaining will be high if there are few big buyers so each one of them is very important to the company, and the buyers can easily switch to other provider to provide high quality service at good price. Buyers are also powerful if the product or services is undifferentiated and can be replaced by substitutes and if customers can produce it themselves. This also influences the possibility for the customers integrating backwards. Because of the good relationship and value delivered to IBM’s customer, there seems a balance bargaining power between them. They help their customer in solving their business 11

problem by translating advance technologies into value for customers through professional solutions and services businesses worldwide. Good relationship with customers will advantage them in term of customer retention and increase the profitability. 5) Threat of substitute products These threats exist if there are alternative products with lower prices of better performance for the same purposes. Substitute products can lower industry attractiveness and profitability because they can limit the price levels. This depends on buyer’s willingness to buy substitute, relative price and performance of such products and the switching costs of it. It also depends on the level of customers brand loyalty. If they are loyal, they will not switch into substitute product and instead. For IBM, there are many substitutes for their product ranges as there is other companies operate in the same industry. However, they still have their key strength in term of services that is skill, people and experience which are the only in the industry and because there is no substitute for intellectual property. Their products are high in quality with good pricing too.

Conclusion Porter’s model is based on understanding that a business strategy should meet the opportunities and threats in the organizations external environment. The main assumption is that the competitive strategy should base on and understanding of industry structures and the way they change. The information resulted from the Five Forces Analysis can be used by management to decide how to influence or exploit particular characteristics of their industry. Therefore, the company should take an advantage from the benefit of using the Michael Porter’s Five Forces in analyzing the profitability of their business. 12

(1540 words)

References: •

Justin G. Longenecker, Carlos W. Moore, & J.William Petty, Small Business Management, An Entrepreneurial Emphasis, published by Thompson-South Western.

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http://erc.msh.org/ (19/03/08)

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http://www.mma.com/ (19/03/08)

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http://www.bizjournals.com/denver/stories/2006/04/03/focus2.html (19/03/08)

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http://www.marketingprofs.com/ea/qst_question.asp?qstid=1141(19/03/08)

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http://www.ibm.com/ibm/my/ (03/04/08)

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http://en.wikipedia.org/wiki/Porter_5_forces_analysis (03/04/08)

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http://www.quickmba.com/strategy/porter.shtml (03/04/08)

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