SERVICES MARKETING

PROF.R.MATHUR

INTRODUCTIONServices Are Deeds (perishable), Processes And Performances that creates value and benefits for the customer. Facilities, equipment, labour can be held in readiness to create the Services, elements represent the Productive Capacity.Services are all Economic Activities:- Intangible output, - Generally consumed at the time it is produced- Adds value to, say, Convenience, Timeliness, Comfort, HealthIntangibles: Repair & Maintenance Services, Consulting services, Training, Software Programs – Problem Analysis and Solution.

SERVICES’ DEFINITIONServices Provided by Hospitals, Hotels, Banks, Insurance, to result in Customer satisfaction.Services by companies and also manufacturers and Technology companies e.g. IBM – IT services Services Sector:Transportation, Communication, Electricity, Gas,Trade, Finance, Insurance, Hospitality, Health, Amusement, Recreation, Educational, Legal, Management, Household, Private, Government Customer Services:Services provided to support Company’s Core Products.

TANGIBILITY

Services more Intangible than Manufactured Products and Manufactured Products more Tangible than Services. Fast-food Industry is “Services” but has tangible components as food and Packaging.Intangibles are produced by Service sector as well as by Manufacturing sector – Boeing provides Consulting and Forecasting services Manufacturers often have “associates” which provide allied Services – HUL + Lintas

VALUE ADDED BY TANGIBLE VS.INTANGIBLE ELEMENTS IN GOODS AND

SERVICES

Tangible ElementsCoffee powderSoft DrinksCD playerNew carTailored Clothing

Furniture RentalFast-Food Restaurant

Plumbing RepairHealth Club

Airline FlightRetail BankingWeather

forecast

Intangible

Elements

GOODS vs. SERVICES MARKETING

The most basic difference is Intangibility – Related Marketing Implications – Services cannot be Inventoried – Fluctuation in Demand. Services cannot be: - Easily Patented- Readily displayed or be easily Communicated to customers – Quality?- Assessed in Quality of ServicesNew Services concepts can be easily copied by Competitors’Decisions about Advertising content are challenging, as is PricingPrice Quality relationship complexCost of unit of service difficult to determine

SERVICES MARKETING IMPORTANCE

Services sector is 80% of Employment and 78% of GDP. Absolute and Fastest rate of growth is in Services sector. Export of Information, Knowledge, Creativity, Technology are growing in economies worldwide. Lead in development of Service Industry was taken by Banking & Health Care services. These Service Industries continue to evolve and become more competitive. The need for effective Services Management and Marketing Strategies as manufacturing and technology industries also need to provide quality Services to compete worldwide.

HETEROGENEITY IN SERVICES

No two human Services Performances are alikeServices delivery at different times and by different employees differDifferent Customers’ demands of Services in Content and quality differServices are heterogeneous across time, organizations and people ensuring consistent service quality is challengingQuality depends upon factors that cannot be fully controlled by Service suppliers – consumer’s articulation of needs, level of demand for the serviceOrganization may Sub-contract certain service elements of its total offering

SERVICES PRODUCED & CONSUMED

Products – Produced Sold ConsumedServices – Sold Produced & Consumed Restaurant Services Sold first, dining experience Produced and Consumed. Customer present while Service Produced, can participate in the production processMass production of services difficult. Customer satisfaction dependent upon happenings in “Real Time”Centralization does not Produce economies of Scale – operations need to be relatively decentralized.Customers may affect the outcome of Services Production due simultaneous production and Consumption

SERVICES PERISHABLEServices Are Perishable: Cannot be Saved, Stored, Resold or returned.Services cannot be inventoriedDemand forecasting, Planning and Capacity utilization are challenging decision areasStrong recovery Strategies when things go wrong to regain customer goodwill.

SERVICES OPERATIONS

Variability: Services can be evaluated for quality before reaching the customers, e.g. car repairs. Services consumed as produced, final services must be performed in real-time conditions.

SERVICES OPERATIONSDifficult Evaluation: Goods can be evaluated for Physical properties. Services may emphasize Experience properties, e.g. Taste, wear ability.Credence properties – characteristics difficult to evaluate even after consumption, customers not knowledgeable, e.g. Surgery, Technical repairs, Professional Services.Time factor: Services delivered in Real Time. Customers may be willing to pay faster service. Service Marketers should appreciate customers time constraints and priorities. Distribution Channels: Advances in technology, electronic delivery of services is expanding fast. Banks offer customers choice of Distribution channels – visit the Bank or Home Banking

CATEGORISING SERVICE PROCESSES

Marketing-relevant differences among Services:Traditional way of Grouping Services by Industry–Transportation, Hospitality, Banking. Groupingsdefine Core products, customer needs and satisfaction. However innovative managers must look outside their own industries for effectiveStrategies to adapt for their own organization.

One categorization on nature of Processes by which services are created and delivered. Unlike goods, Services Marketing may involve customers in service production. A Process is a method or series of action involving multiple steps in a defined sequence – taking an input and transforming them into Output. .......

CATEGORIZING ….…. Two categories get processed PeopleCustomers are the Principal Inputs:Objectse.g., Passenger Transportation, Education.In case of Objects as Inputs: automobile

repair, processing of financial data. In some services, processes are tangible. In others it could be Intangible, e.g., Education, Information.

Service Processes on Operational perspective, can be categorized into four broad Groups. These are based on:

- tangible action to people’s physical bodies or customers’ physical possessions (Products)

- Intangible actions to people’s minds or their intangible assets ……

CATEGORIZING ….…..These four categories are referred to as:

People ProcessingProduct ProcessingMental Stimulus processingInformation processing

Industries within each category share important Process related characteristics. Managers can create valued innovations by studying other industries of the same category.

PEOPLE PROCESSING Services directed at themselves –

Transportation, Health, Lodging, Feeding. Customers must physically enter the service system by spending time and actively interact with Service Providers

POSSESSION PROCESSINGCustomers want Services for treatment of Physical possession, e.g., House, Pets, Computer: Customers not personally involved. Customers drop the possession at the Service Provider’s centre, explain the problem, instruct for services and pick up the serviced product. If the possession cannot be moved, the service is provided at the site.

MENTAL STIMULUS PROCESSING.Services that interact with people’s minds – News, education, Information, Consultancy, Entertainment, Discourses. Services aimed at Changing people’s attitude and influence behaviour. Strong ethical standards and careful monitoring, else manipulation possible ….

MENTAL STIMULUS….Customers have to be mentally in

communication with information being processed. Services like education and entertainment are often created in one place and transmitted to distant customers. (Live concert directly to group of customers?). Core content of all services in this category is Information based. Such Services can be recorded and made available subsequently or converted into a disc like a manufactured product.

In People Processing, a customer can sleep through a journey and still arrive at the destination in time. In contrast a student sleeping through a lecture will not be any wiser at the end of the lecture.

INFORMATION PROCESSINGInformation is the most Intangible form of Service output. Information transformed into Reports, Books, Letters, Discs are tangible.Financial and professional services as Accounting, Law, Market Research, Management Services, Medical diagnosis are highly dependent on effective collection and processing of Information.Extent of customer involvement in Mental Stimulus processing and information Services are to learn about each other’s Needs, Capabilities and Personalities. Habits and tradition define the existing service delivery system and service use patterns. Increasing use of telephones, e-mails and internet will shift these Services to arm’s-length.

PEOPLE PROCESSING PRODUCT PROCESSING

TANGIBLE PASSENGER TRANSPORTATION FREIGHT TRANSPORTATION

ACTIONS HEALTH CARE REPAIR & MAINTENANCELODGING RETAIL TRADESALONS WAREHOUSING/STORAGEPHYSIO THRAPY LAUNDRY/DRY CLEANINGFITNESS CENTRES REFUELINGRESTAURANTS OFFICE CLEANING

INTANGIBLE MENTAL STIMULUS INFORMATION PROCESSINGACTIONS PROCESSING

ADVERTISING/PR BANKINGENTERTAINMENT DATA PROCESSINGMANAGEMENT CONSULTING DATA

TRANSMISSIONEDUCATION INSURANCEINFORMATION SERVICES LEGAL SERVICESMUSIC CONCERTS RESEARCHRELIGIOUS SERVICES SOFTWARE CONSULTING

CLASSIFICATION OF SERVICES

SERVICES MARKETING MIXStrategic elements of marketing manufactured goods are: Product, Price, Place & Promotion. For Services Performance, 3 elements added: Physical Environment, Process & People. 7 P’s are interrelated decision variables.PRODUCT: Select features of Core Product – a Product or Service plus other Service elements in reference to customer requirements and other competing products. Service performance with potential to create value for customers.PLACE: Place, Time of Delivery and Methods, Channels (Physical, Electronic) used. Messaging, Internet Services delivers Information in cyberspace. Physical delivery directly to customers. Speed and convenience determine Strategy. …..

7 Ps ….PROMOTION: Effective Communication Strategy: Provide Information, Features and Advantages, Persuading for action. Services promotion more in nature of Education – Benefits of service, Where and When to obtain it, How to avail the Services. Communication delivered through Direct Sales or through Media. Promotions influence Brand choice. Incentives attract customers to buy.PRICE: Price to pay for benefits of Services. Service marketers must Minimize other Expenses a customer might incur in Purchasing and Using Services, e.g., travel to service location, time, physical and mental efforts, exposure to negative sensory experiences. ……

7 Ps ….PHYSICAL ENVIRONMENT: Provide Tangible evidence of a firm’s Service quality. Customers impressions get impacted by Building appearance, landscaping, Interior furnishing, Equipment, Printed material, Signs and other Visuals.PROCESS: Delivery of Product Elements require Design and Implementation of Effective Processes- A method and sequence of actions in Service performance. Bad processes lead to Slow, Bureaucratic, Ineffective Service delivery, dissatisfied customers. Poor Processes make front-line staff jobs difficult, results in low Productivity and more chances of service failures.

7 Ps ….PEOPLE: Services Quality is often assessed based on customer’s interactions with front -line staff. Successful Service firms devote a lot of effort to Recruit, Train and Motivate these employees.In the 7 Ps of Services Strategy, Marketing must operate with other functions in Services business. Three management functions have Central and Interrelated Roles: Marketing, Operations and Human Resources.Marketing expert T.Levitt has remarked, “There are Industries whose Service Components are greater or lesser than other Industries. Every Industry is in Service”. R.Rust suggests “Most goods businesses now view themselves primarily as Services”.

MARKETING SERVICES VS.GOODS

There are Service Industries with Services as Core Product. There are Goods manufacturers with service like strategies to market Physical Goods. There may be firms Marketing Services and firms with physical Goods as Core products Marketing these through Services.Creating Value: Firms create value by offering Services of the type the Customers need at an acceptable Price. When a customer pays for the Services, an Exchange takes place. The benefit may be immediate on Service delivery or later on a long term perspective. The firms treatment of its own Employees impacts its Image on a long term perspective. Fair treatment adds to its market value as perceived by customers.

CONSUMER BEHAVIOR IN SERVICESHigh Contact customers encounters differ from

low contact ones. Customers have difficulty in Evaluating Services in advance of purchase as they can only have expectations. For manufactured goods, customers are rarely involved in the production. In Services, customers participate in creation and delivery.Customer Involvement: (1) Stay at a hotel (People processing): Reach the hotel, Check In, Spend the night in the room, Get ready, Have breakfast, Check out. (2) Repair a TV (Possession processing): Visit a Service centre, have the TV examined by a technician, TV serviced, pick up the TV and use it at home.

(Core services) ….

CONSUMER BEHAVIOR IN SERVICES(3) Choosing a PG programme (Mental stimulus

processing): Collect Information Brochures, Select an appropriate programme, Apply for the programme. (4) Life Insurance (Information processing) Learn about various Plans, Select plan and fill Form, Pay, Insurance Cover begins, Policy Document received.High-contact Services: Customers actively involved with Services personnel during Services delivery. All people-processing services, other than those delivered at home, are high contact, e.g., Lodging, medical servicesLow-contact Services: Customers contact from a distance through Distribution Channels, e.g., mail, courier services, telephone, internet.

CONSUMER BEHAVIOR IN SERVICESPURCHASE PROCESS FOR SERVICESPREPURCHASE STAGE

NEED INFORMATION SEARCH EVALUATION OF SERVICE SUPPLIERSSERVICE ENCOUNTER STAGE

INITIATE SERVICE FROM SUPPLIER SERVICE DELIVERYPOSTPURCHASE STAGE

EVALUATION OF SERVICE PERFORMANCE FUTURE

REFERENCE

PRE-PURCHASE STAGEDecision to buy and use a service. Needs and expectations of customer will influence alternatives considered. Purchase routine and low risk, customers select Service provider quickly. First time Service requirement, of a high risk, customers spend more time to select service provider.

CONSUMER BEHAVIOR IN SERVICESPERCEIVED RISKS1. Functional – Will this service deliver desired result.2. Financial – Will I lose money 3. Temporal – Time Loss, Delays4. Physical –Injury or Damage to Possession5. Psychological – Fears ( flying), Emotions (feel upset)6. Social – Others’ thinking, Reaction7. Sensory – Unwanted sensory feelings. (comfort,

smell)SERVICE ENCOUNTER STAGE Begins with starting the service process: placing an

order, submitting an application. In high contact services, customers involved in service process. In low contact, impersonal interactions with instruments, computers. Customers experience a variety of elements during service delivery providing clues to service quality.

CONSUMER BEHAVIOR IN SERVICESPOST-PURCHASE STAGEEvaluate customer Quality and satisfaction with service experience. Results will affect future intentions. Customers evaluation is basis their expectations and perceived delivery. If delivery exceeds then good quality, if price quality relationship, other personal and situational factors acceptable.SERVICES EVALUATIONService performance containing few tangible attributes are difficult to evaluate. In case of unsatisfactory performance, some services can be repeated, e.g., dry-cleaning. Product attributes can be divided into Search, Experience and Credence properties. As the tangible attributes reduce, evaluation becomes difficult. …….

CONSUMER BEHAVIOR IN SERVICES

HOW CUSTOMERS EXPECTATIONS FORMED Good service expectations varies from

business: expectations from a vet to treat a pet or accountant for tax returns. Vary in differentiated positioned service providers – low cost airlines vs. full service. Purchase dept. evaluate against internal standards. Expectations change over time – Customers seek participative role in health care decisions.

CUSTOMER EXPECTATIONS COMPONENT Desired Service: Customers hope to receive Zone of tolerance: Constant delivery difficult.

Extent of variation customers willing to accept.

Adequate Service: Minimum Service levels Predicted Service: Levels of Service

Customers anticipate receiving

SERVICES EVALUATION ....Search Attributes: Physical goods can be evaluated before purchase. Style, colour, texture, taste, machine output are tangibles that can be tested before purchase. Apparel, automobiles, electronics, food are goods high in search attributes.Experience Attributes: To evaluate some services, customers must experience them: Can be evaluated only after purchase -entertainment, restaurants fall in the Experience Category. Information on Websites, reviews, by friends etc. may not help in evaluation.Credence Attributes: Product characteristics extremely difficult for customers to evaluate even after purchase and consumption. Customer forced to trust that benefits have been delivered.

SERVICE BUSINESS – A SYSTEMService business is a system of three elements: 1. Service Operations – Inputs processed and Service elements created

2. Service Delivery – Assembly of elements and Delivery of the Product to Customer3. Service Marketing – Involves all Customer Contact points e.g., Advertising, Market ResearchFront office- operations visible to customers, Back office – Operations hidden to customers.

1. Service Operations Related to Service Personnel Related to other tangibles, Equipment

High contact services have a high visible front office operation. Low contact services have limited front office operations. ……

SERVICE BUSINESS …..2. Service Delivery – Where, When and How

Service Product is delivered. In high Contact Service operations, the visible elements – Building, equipment, personnel are exposed as also exposure to other customers. This is like a live show. A low contact delivery operation is like a TV Play where only the final delivery is done through media. Role performance by employees and customers. Script – detailed actions for employees and customers – Structured Scripts, Flexible Scripts

3. Service Marketing – The other elements of Service business include Communication, Advertising, Billing, News stories, Editorials in mass media, Market research

SERVICE POSITIONING STRATEGYHow do businesses compete?

“On Service” …. “Value for money”, “Service quality”, “People”,

“Convenience”Speed, Quality, Extras to core service

Convenient Location, Time or Ease of use Which product feature interests a customer? Will help develop Competitive Strategy. Else customers will not perceive any real difference between competitive alternatives and choose basis price.Positioning Strategy is to create and maintain distinctive differences that will be noticed and valued by Potential Target Customers for a long term relationship.

SERVICE POSITIONING STRATEGYService firms to provide a narrow product mix for a particular market segment – a group of buyers with common characteristics, needs, purchasing behavior or consumption pattern. Concentrate resources on strategically important elements of service operations. A firm’s focus can be described in two dimensions - Market focus and Service focus. Market focus is extent to which a firm serves few or many markets. Service focus is extent to which a firm offers few or many services. These two dimensions describe four Basic focus Strategies. A fully focused firm provides limited range of services (maybe one core product) to a narrow and specific market segment. A Market focused firm concentrates on narrow market segment but wide range of Services.

SERVICE POSITIONING STRATEGY  BREADTH OF SERVICE

OFFERING

    NARROW WIDE

NUMBER OF MARKETS SERVED

MANYSERVICE FOCUSED

UNFOCUSED (EVERYTHIN

G FOR EVERYONE)

FEW

FULLY FOCUSED(SERVICE & MARKET

FOCUSED)

MARKET FOCUSED

Service focused firms offer narrow range of services to a fairly broad market. Many Service providers fall into unfocused category because they try to serve broad markets and provide a wide range of Services.

SERVICE POSITIONING STRATEGYService focused firms offer narrow range of services

to a fairly broad market. Many Service providers fall into unfocused category because they try to serve broad markets and provide a wide range of Services.

SELECTION OF FOCUSFully focused strategy has Risks and Opportunities.

Developing recognized expertise in a well defined niche to may protect against potential competition and charge premium price. Risk-Market small for volume business and financial viability is ? The demand may be displaced by generic competition or customers may be affected by economic downturn. Firms with narrow product line may serve multiple segments (service focused) to create portfolio of customers. For new customers firm should develop expertise. …….

SERVICE POSITIONING STRATEGY…… SELECTION OF FOCUS

Developing expertise to serve each segment will require greater investment in marketing communication – in btob Services.

Offering broad product lines to narrow target segment has potential of selling multiple services to customers. Firms must have operational capability. To cross-sell additional services to btob, client companies may have different purchase groups.

MARKET SEGMENTATIONFirms offer services to segmented markets to identify segments it can serve best. Need-based segments have customers valuing specific attributes. Mass customization to serve specific market segment by offering Standardized Core product with tailormade supplementary service elements.

MEASURING SERVICE QUALITYConsumers evaluate 5 dimensions of service quality:Tangibles – physical facilities, Reliability – perform service promised dependably and accurately, Responsiveness – firm’s staff help customers with prompt service, Assurance – Inspire trust and confidence through knowledge and courtesy and Empathy – Caring, Individualized attention.

SERVICE POSITIONING STRATEGY

SERVICE POSITIONING STRATEGY

SERVICE POSITIONING STRATEGY

SERVICE POSITIONING STRATEGY