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04/12/2304/12/23 Deepti ShettyDeepti Shetty 11

SERVICES MARKETING

Deepti Shetty1

MODULE 1


Introduction to Services

• What are services?

• Why services marketing?

• Service and Technology

• Differences in Goods vs. Services Marketing

Continued


Introduction to Services

• Services Marketing Mix

• Staying Focused on the Customer

• The Gaps Model of Service Quality


PreamblePreamble

Q. What do we mean by Services?

A. SERVICE IS MADE UP OF DEEDS, PROCESSES AND PERFORMANCES.


DEFINITIONDEFINITIONA formal definition of Service Marketing:Services include all economic activities whose output is not a physical product or construction, is generally consumed at the time it is produced, and provides added value in forms (such as convenience, amusement, timeliness, comfort or health) that are essential intangible concerns of the first purchaser.


COMMENTSCOMMENTS

A firm’s offering (s) may be – Pure Goods– Goods and Services– Goods with Services– Services as an integral part of Goods– Pure Services


WHY SERVICES MARKETING?WHY SERVICES MARKETING?

• A Service Based Economy

• Service biz imperative in Mfg and IT

• Govt. Regulations and Deregulations

• Birth of Services by New Technologies

AND FINALLY

• Service Marketing is different in practice


Value Addition and ServiceValue Addition and Service

"Economic Value, like the coffee bean, progresses from commodities to goods

to services to experiences."-Joseph B. Pine n & James H. Gilmore

The Experience Economy


A Cup of Coffee?A Cup of Coffee?• As a raw commodity coffee is

worth $2/Kg.• Processed, packaged and sold

as a good, the price of coffee is about 25 cents a cup.

• When it is sold in a local restaurant, the coffee takes on more service aspects and sells for $1 per cup.

Continued


A Cup of Coffee?A Cup of Coffee?• When a cup of coffee is sold within the

compelling experience of a 5 star restaurant, the customer gladly pays $5 per cup (the whole process of ordering, creation, and consump tion becomes “a pleasurable” experience.)

• EV, like the coffee bean, progresses from commodities to goods to services to experiences. – The mark-up, from commodity sell to experience

sell is as much as 5000%.


Service ImperativeService Imperative

Reflects the view that an intangible aspects of a product has become the key feature that differentiates the product in the marketplace.


Differences BetweenDifferences Between Goods and Services Goods and Services

Intangibility

PerishabilitySimultaneous

Productionand

Consumption

Heterogeneity


INTANGIBILITYINTANGIBILITY

• THE MOTHER OF ALL UNIQUE DIFFERENCES

• However, it is wrong to imply that services are just like goods 'except' for intangibility. By such logic, apples are just like oranges, except for their 'appleness.'


Distinguishing DifferencesDistinguishing Differences• Intangibility:

– A characteristic of services that makes them unable to be touched or sensed in the same manner as goods.

• Inseparability: – A characteristic of services that reflects the interconnection among

the service provider, the customer involved in receiving the service and other customers sharing the service experience.

• Heterogeneity: – A characteristic of services that reflects the variation in

consistency from one service transaction to the next.

• Perishability:– A characteristic of services that cannot be saved, their unused

capacity cannot be reserved, and they cannot be inventoried.


Implications of IntangibilityImplications of Intangibility

• Services cannot be inventoried

• Services cannot be patented

• Services cannot be readily displayed or communicated

• Pricing is difficult


Possible Solutions to Possible Solutions to Intangibility ProblemsIntangibility Problems

• The use of tangible clues: – The physical characteristics that surround a service to

assist consumers in making service evaluations, such as the quality of furnishings, the appearance of personnel, or the quality of firm's brochure.

• The use of personal sources of information:– Sources such as friends, family , and other opinion

leaders that consumers use to gather information about a service.

• Creation of a strong organizational image: – The perception an organization presents to the public. If

well known and respected, lowers the perceived risk of potential customers making service provider choices.


Implications of Implications of HeterogeneityHeterogeneity

• 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


Possible Solutions to Possible Solutions to Heterogeneity ProblemsHeterogeneity Problems

• Customization: – Taking advantage of the variation inherent in

each service encounter by developing services that meet each customer's exact specifications.

• Standardization: – Reducing variability in service production

through intensive training of providers and/or replacing human labor with machines.


Implications of Simultaneous Implications of Simultaneous Production and ConsumptionProduction and Consumption

• Customers participate in and affect the transaction

• Customers affect each other

• Employees affect the service outcome

• Decentralization may be essential

• Mass production is difficult

• Physical connection of the service provider to the service


Possible Solutions to Possible Solutions to Inseparability ProblemsInseparability Problems

• Emphasis on selecting & training contact staff:– A strategy to minimize the impact of inseparability by hiring and

educating employees in such a way that the customer's service experience is positive and the employees are properly equipped to handle customers and their needs.

• Consumer management: – A strategy service personnel can implement that minimizes the impact

of inseparability, such as separating smokers from nonsmokers in a restaurant.

• Use of multi-site locations: – A way service firms that mass produce combat inseparability,

involving multiple locations to limit the distance the consumers have to travel and staffing each location differently to serve a local market.

*Factories in the field Another name for multi-site locations.


Implications of PerishabilityImplications of Perishability

• It is difficult to synchronize supply and demand with services

• Services cannot be returned or resold


Possible Solutions to Possible Solutions to Perishability ProblemsPerishability Problems

• Creative pricing: – Used by service firms to help smooth demand fluctuations, such

as offering "matinee" prices or "early-bird specials" to shift demand from peak to non-peak periods.

• Reservation systems:– A strategy to help smooth demand fluctuations in which

consumers ultimately request a portion of the firm's services for a particular time slot.

• Development of complementary services: – Services provided for consumers to minimize their perceived

waiting time, such as driving ranges at golf courses, arcades at movie theaters, or reading materials in doctors' offices.

• Development of non-peak demand: – A strategy in which service providers use their downtime by

marketing to a different segment that has a different demand pattern than the firm's traditional market segment.


THE DIFFERENCETHE DIFFERENCE

Goods Services Marketing ImplicationsTangible Intangible Can’t keep an Inventory, Can’t Patent, Can’t Display & communication is

not easy, Pricing is difficult

Standardized Heterogeneous Service delivery and Customer satisfaction depends on employee actions, Never are you sure that the promise made has been met!

Production separate from Consumption

Simultaneous Production and Consumption

Customer participation affects transaction, Customer affect each other, Employees affect the service outcome, Decentralization may be mandatory, Mass production is not possible if not difficult

Nonperishable Perishable Difficult to synchronize demand and supply, Services can not be returned or re-sold.


SERVICE MARKETING SERVICE MARKETING TRIANGLE(SMT)TRIANGLE(SMT)

CUSTOMERPROVIDER

SBU

External Marketing

Making Prom

ises

Interactive Marketing/ Encounters

Delivering on Promises

Inte

rnal

Mar

ketin

g

Enab

ling

Prom

ises


SMT- ExplanationSMT- Explanation

• Contact Personnel: Employees other than the primary service provider who briefly interacts with the customer, who are extremely important in service interactions, even if they interact briefly with the customer, just as thie supermarket employee is assisting a customer.

• Service Providers: The primary providers of a core service, such as a waiter or waitress, dentist, physician, or college instructor.

• Benefit Concept: The encapsulation of the benefits of a product in the consumer's mind.


SMT SMT MODIFIEDMODIFIED

CUSTOMERPROVIDER

SBU

Technology

Here Technology enables SBU, Customer and Provider to get the best of Service.


A market focused management model. Depicts relationships among the systems, the service strategy & the people, with the customer @ the center interacting with each group.

SMT SMT MODIFIED, AGAINMODIFIED, AGAIN


MOLECULAR MODELMOLECULAR MODEL

A conceptual model of the relationship between tangible and intangible components of a firm's operations.

Continued

Example- 1


MOLECULAR MODELMOLECULAR MODELExample -2


Servuction ModelServuction Model

The model Illustrates the factors that influence the service experience, including those that are visible to the consumer and those that are not.

Continued


Servuction Model- Servuction Model- ExplanationExplanation

• Inanimate Environment: All the nonliving features that are present during the service encounter.

• Invisible Organization and Systems: That part of a firm that reflects the rules, regulations, and processes on which the organization is based.

• Customer A: The recipient of the bundle of benefits that is created through the service experience.

• Customer B: Other customers who are part of Customer A's experience.


OTHER SERVICE MARKETING OTHER SERVICE MARKETING MODELSMODELS

• Market-focused Management Model– A new organizational model that focuses on the

components of the firm that facilitate the firm's service delivery system.

• Industrial Management Model– An approach to organizing a firm that focuses on

revenues and operating costs and ignores the role personnel play in generating customer satisfaction and sustainable profits.


Challenges for ServicesChallenges for Services

• Defining and improving quality• Communicating and testing new

services• Communicating and maintaining a

consistent image• Motivating and sustaining

employee commitmentContinued


Challenges for ServicesChallenges for Services

• Coordinating marketing, operations and human resource efforts

• Setting prices• Standardization versus

personalization

Anecdote on

Weight Loss Plan

A fat huge man reading news paper, having a look on advertisement of “Bulbul health care centre” of assuring 10lb weight loss program in just 5 days.

And he calls up to the company for more details of the program.

The next day. There’s a knock on the door and there stands before him a voluptuous, athletic, 19 year old babe dressed in a pair of Nike running shoes and a sign on her t-shirt that reads

“IF YOU CAN CATCH ME, YOU CAN HAVE ME”

IF U CAN

CATCH ME, U CAN

GET ME

Without a second thought, he takes off after her

A few miles later huffing and puffing, he finally gives up.

The same girl shows up for the next 4 days and the same thing happens.

On the 5th day, he weighs himself and is delighted to find he lost 10lb, as promised.

He calls the company and gets a new special offer which is reducing 20 pound program in next 5 days.

The next day there’s a knock at the door and there stands the most stunning and beautiful women, which he has ever seen in his life.

She is wearing Reebok running shoes and a sign on her t-shirt reads that

“IF YOU CAN TOUCH ME, YOU CAN HAVE ME”

IF U CAN

TOUCH ME, U CAN

HAVE ME

Well, he’s out the door after her like a shot.

This girl is in excellent shape and he does his best, but no such luck.

So for the next 4 days, the same routine happens with him gradually getting in better and better shape.

Much to his delight on the 5th day when he weighs himself, he discovers that he has lost another 20lbs, as promised.

After loosing 30lbs, he gets more excited aboout the offers getting from the company.

Again he decided to go for broke and calls the company to order the 7-day/50 pound program.

“Are you sure?” asks the representative on the phone. “This is our most rigorous program.”

“Absolutely.” he replies, “I haven’t felt this good in years.”

The next day there’s a knock at the door; and when he opens it he finds a huge muscular guy standing there wearing nothing but pink running shoes and a sign around his neck that reads,

“IF I CATCH YOU, YOU ARE MINE!!!”

HE LOST 63 POUNDS THAT WEEK.

MORAL:- THIS STORY IS CONNECTED TO

MANAGEMENT PRINCIPLE OF MARKETING STRATEGY.

GOODBYE


Examples of Service Examples of Service IndustriesIndustries

• Health Care– hospital, medical practice, dentistry,

eye care• Professional Services

– accounting, legal, architectural• Financial Services

– banking, investment advising, insurance

Continued


Examples of Service Examples of Service IndustriesIndustries

• 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


Some Key TermsSome Key Terms• Tangible Dominant: Products that possess physical

properties that can be felt, tasted, and seen prior to the consumer's purchase decision.

• Intangible Dominant: Products that lack the physical properties that can be sensed by consumers prior to the purchase decision.

• Scale of market entities: The scale that displays a range of products along a continuum based on their tangibility.

• Marketing Myopia: The practice of too narrowly defining one's business.


Tangibility SpectrumTangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teach

ing

Fast-foodOutlets

Fast-foodOutlets

Goods: Objects, devices, or things.Services: Deeds, efforts, or performances.


Goods/Service ContinuumGoods/Service Continuum


0

10

20

30

40

50

60

70

80

1929 1948 1969 1977 1984 1999

Perc

ent o

f U

.S. L

abor

For

ce

Year

Services Manufacturing Mining & Agriculture

U.S. Labor Force in % by U.S. Labor Force in % by IndustryIndustry


0

10

20

30

40

50

60

70

80

1948 1959 1967 1977 1987 1999

Perc

ent o

f G

DP

Year

Services Manufacturing Mining & Agriculture

Percent of U.S. GDP by Percent of U.S. GDP by IndustryIndustry


India's GDP, Sector wise Share(%) India's GDP, Sector wise Share(%) @ Constant Prices@ Constant Prices

YearPrimary Sector(Agriculture,

Mining)

Secondary Sector(Industry and

Manufacturing)

Tertiary Sector(Services)

Growth OverPrevious Period(%) in Services

1950-51 55.4 16.1 28.5 -

1960-61 50.9 20.0 29.1 + 2.1

1970-71 44.5 23.6 31.9 + 9.6

1980-81 38.1 25.9 36.0 + 12.9

1990-91 30.9 30.0 39.1 + 8.6

1999-2000 27.5 24.6 47.9 + 22.5

Source: Statistical Outline of India, Tata Services Ltd, 2001-2002


Global distribution of GDP in the Global distribution of GDP in the year 2000 (share in GDP)year 2000 (share in GDP)

CountryPrimary Sector

(%)

Secondary Sector (%)

Tertiary Sector

(%)

India 27 25 48

China 17 49 34

France 3 23 74

Japan 2 36 62

Germany 1 28 71

USA 8 19 73

Source: Statistical Outline of India, Tata Services Ltd, 2001-2002


Industries Classified within Industries Classified within the Service Sectorthe Service Sector


Services Marketing Mix:Services Marketing Mix:7 Ps for Services7 Ps for Services

• Traditional Marketing Mix

• Expanded Mix for Services: 7 Ps

• Building Customer Relationships Through People, Processes, and Physical Evidence

• Ways to Use the 7 Ps


Traditional Marketing MixTraditional 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


SERVICE MARKETING MIX - ISERVICE MARKETING MIX - I

SERVICE

MARKETING MIX

PRODUCT

PLACE

PROMOTION

PRICE

PEOPLE

PROCESS

PHYSICAL EVIDENCE


SERVICE MARKETING MIX - IISERVICE MARKETING MIX - II

PLACE

PROMOTION

PRICE

PEOPLE

PROCESS

PHYSICAL EVIDENCE

Physical features, Quality, Accessories, Packaging, Warranties, Brands

Channel type, Exposure, IM’s, Outlet locations, Transportation, Storage, Managing Channels

Sales people, Advertising, Sales Promotion, Publicity

Flexibility, Discounts, Allowances, Price levels

Flow of activities, Number of steps, Customer Involvement

PRODUCT

Employees, Customers

Facility, Equipment,

Signage, Other Tangibles


Ways to Use the 7 PsWays to Use the 7 Ps

Overall Strategic Assessment– How effective is a firm’s services marketing

mix?– Is the mix well-aligned with overall vision and

strategy?– What are the strengths and weaknesses in

terms of the 7 Ps?


Ways to Use the 7 PsWays to Use the 7 Ps

Specific Service Implementation– Who is the customer?– What is the service?– How effectively does the services marketing

mix for a service communicate its benefits and quality?

– What changes/ improvements are needed?


PerceivedService

Expected Service

CUSTOMER

COMPANY

CustomerGap

GAP 1

GAP 2

GAP 3

External Communications

to CustomersGAP 4Service Delivery

Customer-Driven Service Designs and Standards

Company Perceptions of Consumer Expectations

Part 1 Opener

Gaps Model of Service QualityGaps Model of Service Quality


WHAT’S GAP MODEL ABOUT?WHAT’S GAP MODEL ABOUT?

• That there exists gaps in what is expected and what is delivered and that it alters the perceptions, both for the Customer and the Provider– As the aim of the Service Marketers’ is to close

the customer gap they need to know the Consumer Behavior


ExpectedService

PerceivedService

GAP

The Customer GapThe Customer Gap

Part 1 Opener


CECE AND AND CPCP

CE: The Reference Points Customers Have When They Plan To Utilize or Enter Into a Service

CP: The Perceptions formed as the customers receive the actual Service


THE GLARING GAPTHE GLARING GAP

THE ORIGINAL GAP IS

THE CUSTOMER GAPThe gap between Customer Expectations (CE) and Customer Perception (CP)


THE OTHER GAPS

These are called the Provider Gaps, as they pertain to the SBU, which tries to close the Customer Gap

• Gap1 Not Knowing What Customers Want

• Gap 2 Not Selecting the Right Service Designs and Standards

• Gap 3 Not Delivering to Standards• Gap 4 Not Matching Performance to

Promises


THE END

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