SSM Report Services Marketing Environment

7/28/2019 SSM Report Services Marketing Environment

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MMK COLLEGE OF

COMMERCE & ECONOMICS

Subject: Service Sector Management

Topic: Services Marketing Environment

Submitted to: Prof. Laila

Report Compiled By: Ashish Anil Matai

Class: TYBMS B

Roll No: 119


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SERVICES MARKETING ENVIRONMENT

Contents

Introduction

Service Definition & Meaning

What should be classified as a service ?

Services Marketing

SWOT Analysis

PEST Analysis

Developing a Services Marketing Program

Characteristics of Services

Classification of Services

Service Marketing Triangle


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Introduction

One of the major megatrends of recent years has been the phenomenal growth of

services. Today every business is a service business : you are not a chemical

company, you are a chemical services business. In world economy today the

contribution of various sectors is :

Service Sector : 65-%

Industrial Sector : 30-%

Agriculture Sector : 5-%

In U.S. the contribution of service sector is 74-%. In India the contribution of

various sectors is :

Service Sector : 56-%Industrial Sector : 26-%

Agriculture Sector : 18-%

The growth of service industries can be traced to the economic development of

society and the socio-cultural changes that have accompanied it. Sometimes the

growth of a specific service industry is the result of a combination of several

reasons. The major reasons for the growth of service industries are given below:

1. Increasing affluence

2. More leisure time

3. Higher percentage of women in labor force

4. Greater life expectancy

5. Greater complexity of products6. Increasing complexity of life


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7. Greater concern about ecology and resource scarcity

8. Increasing number of new products

Sectoral Growth in 2009-10 : ( % )

Insurance : 40-%

Internet Adv. : 35-%

Organized Retailing : 35-%

Live Entertainment : 20-%

Therefore, with increasing importance of service sector, the marketing activities

have assumed importance. In fact today many workers in the manufacturing sector

computer operators etc. are really service providers. In a way, they makeup a

Service Factory, providing services to the Goods Factory.

Service Definition & Meaning

According to Philip Kotler Service is any act or performance that one party can

offer to another that is essentially intangible and does not result in any ownership of

anything. Its production may or may not be tied to physical products.

It is intangible.

It does not result in ownership.

It may or may not be attached with a physical product

A service is any act or performance that one party can offer to another that is

essentially intangible and does not result in the ownership of anything. Its

production may or may not be tied to a physical product. Increasingly, however,

manufacturers, distributors, and retailers are providing value-added services, or

simply excellent customer service, to differentiate themselves.


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A service is an activity or series of activities of more or less intangible nature

that normally not necessarily take place in interaction between the customer and

service employee and or physical resources or goods and/or system of the service

provider which are provided as solution to the customer problem

In short services are the activities benefits or satisfaction which are offered for

sale are provided in connection with sale of goods.

What should be classified as a service ?

The answer isnt always apparent because invariably services are marketed in

conjunction with goods. A company may sell a combination of goods and services.

Therefore, it may be helpful to think of every product as a mix of goods and

services located on a continuum ranging from mostly goods to mostly services.

A Goods - Services Continuum (Categories of Service Mix) :

(Mostly Goods) canned foods ready made clothes automobiles

draperies carpets restaurant meals repairs air travels insurance &

teaching (Mostly Services).

The service component can be a minor or a major part of the total offering.

We distinguish five categories of offerings :

o Pure tangible good

o Tangible good with accompanying services

o Hybrid

o Major service with accompanying minor goods & services

o Pure service

For marketing purposes, it is useful to separate services into two categories.


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In the first are services that are the main purpose or object of a transaction rent

a car from a company Hertz the company makes a car available (a tangible

good), but what you are purchasing is accessibility to transportation a service.

Because you are buying the use of the car, not the car itself, this is a service

transaction.

In the second category are services that support or facilitate the sale of good or

another service. Thus, when you rent the car from Hertz, you can also obtain

collision insurance, the use of a cellular phone, and an electronic navigational

service. These are called supplementary or support services because you obtain

them only in conjunction with renting the car.

Scope of Services : Using a broad definition of transactions and customers, it is

appropriate to recognize both for-profit and non-business services organizations.

For profit services firms sell to consumers or other businesses with profitable

operations as a primary goal in the following examples :

Housing & other structures, household operations, recreation & entertainment,

personal care, medical & health care, private education, professional business

services, financial services, transportation, communication etc.

Non business services organizations are of two types

One type is not for profit (N-F-P) services organizations & has shown tremendous

growth & the other for profit business

Educational, cultural, religious, charitable &philanthropic, social concerns,

professional & trade, social, health care, political.

What is Services Marketing or Marketing of Services?

Services marketing are a sub field of marketing, which can be split into the two

main areas of goods marketing (which includes the marketing of fast moving


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consumer goods (FMCG) and durables) and services marketing. Services

marketing typically refers to both business to consumer (B2C) and business to

business (B2B) services, and includes marketing of services like

telecommunications services, financial services, all types of hospitality services,

car rental services, air travel, health care services and professional services. The

range of approaches and expressions of a marketing idea developed with the

hope that it be effective in conveying the ideas to the diverse population of

people who receive it.

Services are economic activities offered by one party to another. Often time-

based, performances bring about desired results to recipients, objects, or other

assets for which purchasers have responsibility. In exchange for money, time,

and effort, service customers expect value from access to goods, labor,

professional skills, facilities, networks, and systems; but they do not normally

take ownership of any of the physical elements involved.

The marketing environment surrounds and impacts upon the organization. There

are three key perspectives on the marketing environment, namely the 'macro-

environment,' the 'micro-environment' and the 'internal environment'.

MICRO ENVIRONMENT


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This environment influences the organization directly. It includes suppliers that

deal directly or indirectly, consumers and customers, and other local

stakeholders. Micro tends to suggest small, but this can be misleading. In this

context, micro describes the relationship between firms and the driving forces

that control this relationship. It is a more local relationship and the firm may

exercise a degree of influence.

MACRO ENVIRONMENT

This includes all factors that can influence an organization but that are out of

their direct control. A company does not generally influence any laws (although

it is accepted that they could lobby or be part of a trade organization). It is

continuously changing, and the company needs to be flexible to adapt. There

may be aggressive competition and rivalry in a market. Globalization means that

there is always the threat of substitute products and new entrants. The wider

environment is also ever changing, and the marketer needs to compensate for

changes in culture, politics, economics and technology.

SWOT ANALYSIS

SWOT analysis is a tool for auditing an organization and its environment.

It is the first stage of planning and helps marketers to focus on key issues. SWOT

stands for strengths, weaknesses, opportunities, and threats. Strengths and

weaknesses are internal factors. Opportunities and threats are external factors.

In SWOT, strengths and weaknesses are internal factors.

A strength could be:

- Your specialist marketing expertise.


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- A new, innovative product or service.

- Location of your business.

- Quality processes and procedures.

- Any other aspect of your business that adds value to your product or service.

A weakness could be:

- Lack of marketing expertise.

- Undifferentiated products or services (i.e. in relation to your competitors).

- Location of your business.

- Poor quality goods or services.

- Damaged reputation.

An opportunity could be:

- A developing market such as the Internet.

- Mergers, joint ventures or strategic alliances.

- Moving into new market segments that offer improved profits.

- A new international market.

- A market vacated by an ineffective competitor.

A threat could be:

- A new competitor in your home market.

- Price wars with competitors.

- A competitor has a new, innovative product or service.

- Competitors have superior access to channels of distribution.

- Taxation is introduced on your product or service.

SWOT Analysis Examples

Example 1

- Strengths - Wal-Mart is a powerful retail brand. It has a reputation for value

for money, convenience and a wide range of products all in one store.


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- Weaknesses - Wal-Mart is the World's largest grocery retailer and control of

its empire, despite its IT advantages, could leave it weak in some areas due to

the huge span of control.

- Opportunities - To take over, merge with, or form strategic alliances with

other global retailers, focusing on specific markets such as Europe or the

Greater China Region.

- Threats - Being number one means that you are the target of competition,

locally and globally.

Example 2 - Starbucks SWOT Analysis.

- Strengths - Starbucks Corporation is a very profitable organization, earning in

excess of $600 million in 2004.

- Weaknesses - Starbucks has a reputation for new product development and

creativity.

- Opportunities - New products and services that can be retailed in their cafes,

such as Fair Trade products.

- Threats - Starbucks are exposed to rises in the cost of coffee and dairy

products.

Example 3 - Nike SWOT Analysis.- Strengths - Nike is a very competitive organization. Phil Knight (Founder and

CEO) is often quoted as saying that 'Business is war without bullets.

- Weaknesses - The organization does have a diversified range of sports

products.

- Opportunities - Product development offers Nike many opportunities.

- Threats - Nike is exposed to the international nature of trade.

Example 4 - Indian Premier League (IPL) SWOT Analysis.


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- Where will you find the Mumbai Indians, the Royal Challengers, the Deccan

Chargers, the Chennai Super Kings, the Delhi Daredevils, the Kings XI

Punjab, the Kolkata Knight Riders and the Rajasthan Royals?

- In the Indian Premier League (IPL) - the most exciting sports franchise that

the World has seen in recent years, with seemingly endless marketing

opportunities (and strengths, weaknesses and threats of course!).

Example 5 - BhartiAirtel SWOT Analysis.

- Weaknesses - An often cited original weakness is that when the business was

started by Sunil Bharti Mittal over 15 years ago, the business has little

knowledge and experience of how a cellular telephone system actually

worked. So the start-up business had to outsource to industry experts in the

field.

PEST Analysis

It is very important that an organization considers its environment before beginning

the marketing process. In fact, environmental analysis should be continuous and

feed all aspects of planning.

The organization's marketing environment is made up of:

1. The internal environment e.g. staff (or internal customers), office technology,

wages and finance, etc.

2. The micro-environment e.g. our external customers, agents and distributors,

suppliers, our competitors, etc.

3. The macro-environment e.g. Political (and legal) forces, Economic forces, Socio-

cultural forces, and Technological forces. These are known as PEST factors.

Political Factors

The political arena has a huge influence upon the regulation of businesses, and the

spending power of consumers and other businesses. You must consider issues such

as:


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1. How stable is the political environment?

2. Will government policy influence laws that regulate or tax your business?

3. What is the government's position on marketing ethics?

4. What is the government's policy on the economy?

5. Does the government have a view on culture and religion?

6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or

others?

Economic Factors

Marketers need to consider the state of a trading economy in the short and long-

terms. This is especially true when planning for international marketing. You needto look at:

1. Interest rates.

2. The level of inflation Employment level per capita.

3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita,

and so on.

Socio-cultural FactorsThe social and cultural influences on business vary from country to country. It is

very important that such factors are considered. Factors include:

1. What is the dominant religion?

2. What are attitudes to foreign products and services?

3. Does language impact upon the diffusion of products onto markets?

4. How much time do consumers have for leisure?

5. What are the roles of men and women within society?


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6. How long are the population living? Are the older generations wealthy?

7. Do the population have a strong/weak opinion on green issues?

Technological Factors

Technology is vital for competitive advantage, and is a major driver of

globalization. Consider the following points:

1. Does technology allow for products and services to be made more cheaply and to a

better standard of quality?

2. Do the technologies offer consumers and businesses more innovative products and

services such as Internet banking, new generation mobile telephones, etc?

3. How is distribution changed by new technologies e.g. books via the Internet, flight

tickets, auctions, etc?

4. Does technology offer companies a new way to communicate with consumers e.g.

banners, Customer Relationship Management (CRM), etc?

Developing a Services Marketing Program

Marketing business & non-business services includes the same business

elements as marketing goods. Whether its focus is goods or services, every

organization should first define and analyze its markets, identify segments, & select

targets - & then finally design a coordinated marketing mix around a differential

advantage that will create the position the organization desires.

However, some important differences between goods and services influence these

marketing decisions the most important differences are :

Intangibility

Inseparability

Variability

Perishability

Ownership


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Characteristics of Services

Intangibility : Because of this, it is impossible for prospective customers to

sample, feel, see, hear, taste or smell a service before they buy it. Consequently, a

companys promotional program must be explicit about the benefits to be derived

from the service, rather than emphasizing the service itself. The following

promotional strategies may be used to suggest service benefits & reduce the effect

of intangibility. Therefore, the service providers task is to manage the evidence

to tangibilise the intangible.

Visualization : e.g. carnival cruise lines depicts the benefits of its cruises with

ads. that show people happy dancing, dining, playing games & visiting exotic

places.

Association : by connecting the service with a tangible good, person, object or

place, a particular image can be created. Professional sports teams are linked with

cities/regions to give them an identity. Merrill Lynch uses the symbol of a bull to

imply strength & leadership.

Physical Representation : LIC of India, uses the symbol of two hands

protecting a diya to suggest security or protection.

Documentation : there are two forms of documentation past performance &

future capability. A hospital can document its past performance by pointing out

in its ads., how many babies have been born & cared for in its obstetrics

department. Another hospital may choose to stress its capability by highlighting the

specialized equipment it has for any emergency during the delivery of a baby.


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Websites are available tool in reducing the intangibility of a service. They make

it possible for marketers to present extensive information, use animation and sound,

& answer a site visitors specific questions via e-mail. The web has increased the

quantity & quality of available information and thereby improves the customers

understanding of the service. Suppose a bank wants to position itself as the fast

bank, it could tangibilize this positioning strategy through a number of marketing

tools.

Place - physical setting must connote quick service with clean exterior/interior

& other things to show quick movement of business.

People - sufficient no. of people to manage the work load efficiently and

quickly.

Equipment - like computers, fax & copying machines.

Communication material - like text & photos should suggest efficiency & speed.

Symbols - name & symbol should suggest fast service.

Price - the bank could advertise that it will deposit Rs100/- in the account of

any customer who waits in line for more than five minutes.

Inseparability : Services typically cannot be separated from the creator seller

of the service. Moreover many services are created, dispensed & consumed

simultaneously fast food drive-up window employee, a physical therapist,

automatic teller machine. From marketing standpoint, inseparability limits

distribution. When clients have strong provider preferences, price is raised to ration

the preferred providers limited time. Several means can be attempted to overcome

this limitation:

- To work with larger groups

- Can learn to work faster spend 30 minutes instead of 50 minutes with

each patient

- Train people to do less important work themselves


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Variability : Because they depend on who provides them and when & where

they are provided, services are highly variable. Therefore to overcome this

problem, service firms can take three steps toward quality control.

Investing in good hiring & training procedures. Better trained personnel exhibits

six characteristics - competence, courtesy, credibility, reliability, responsiveness

& communication.

Standardizing the service performance process throughout the organization. It is

helped by preparing a service blueprint that depicts events & processes in a

flowchart, with the objective of recognizing potential fail points.

Monitoring customer satisfaction through suggestion & complaint systems,

surveys & comparison.

Perishability :- It creates potential imbalances in supply and demand more so

when the demand for many services fluctuates considerably by season, by day of

the week, and by hour of the day Perishability and the resulting difficulty of

balancing supply with fluctuating demand poses promotion, product planning,

scheduling and pricing challenges to services executives. Some organizations have

developed new uses for idle capacity during off seasons e.g. during the summer,

ski resorts operate their ski lifts for hikers & sight seers.

Marketers have developed several strategies for producing a better match

between demand & supply in a service business.

On the demand side

- Differential pricing - will shift some demand from peak to off peak periods.

- Non-peak demand - can be cultivated.

- Complimentary services - can be developed during peak time to

provide alternatives to waiting customers.

- Reservation systems - are a way to manage the demand level.

On the supply side


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- Peak-time efficiency routines - can be introduced wherein employees

perform only essential tasks during peak periods.

- Increased consumer participation - can be encouraged.

- Shared Services - can be developed , hospitals can share medical

equipment purchases.

- Facilities for future expansion can be developed.

- Pat-time employees - can be hired to serve peak demand.

Ownership : Usually there is no transfer of ownership of anything in a service.

There is no transfer of any tangible object as in product marketing. What is

purchased by customers is just the use of, or access to the facility or service. The

buyer does not become the owner of anything like in the case of buying a car, TV,

fridge, etc.. In product marketing.

Marketing Strategies for service firms : Traditional four Ps marketing

approaches work well for goods, but additional elements require attention in service

business three additional Ps for service marketing -People, Physical evidence,

Process.

Most services are provided by people the selection, training, & motivation of

employees can make a huge difference in customer satisfaction exhibit

competence, a caring attitude, responsiveness, initiative, problem solving ability

and goodwill. Demonstrate service quality through physical evidence &

presentation.

Service companies can choose among different processes to deliver their

evidence restaurants developed different formats as cafeteria style, fast-food

buffet & candle light service.

In view of complex nature of service industry, service marketing requires not

only external marketing but also internal and interactive marketing external


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marketing refers to the normal work to prepare, price, distribute and promote the

service to customers. Internal marketing describes the work to train & motivate

employees to serve customers well.

Interactive marketing describes the employees skill in serving the client.

Because the client judges service not only by its technical quality (e.g. was the

surgery successful ?) but also by its functional quality (e.g. did the surgeon show

concern and inspire confidence, service providers must deliver high touch as well as

high tech.

Service companies face three tasks :-

Increasing competitive differentiation

Service quality &

Productivity

Classification of Services

There are a number of ways in which services can be classified. Some of them are

mentioned here.

1. On the basis of the END USER the services can be classified into following

categories:

- Consumer : leisure, hairdressing, personal finance and package holidays

- Business to Business: advertising agencies, printing, accountancy,

Consultancy

- Industrial: Plant Maintenance and repair, workwear and hygiene, installation

and project management.


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2. The DEGREE OF TANGIBILITY can be used to classify a service.

- Highly tangible: car rental, vending machines, telecommunications

- Service linked to tangible goods: domestic appliance repair, car service.

- Highly tangible: psychotherapy, Consultancy , legal services.

3. Services can be broken down into LABOR INTENSIVE (PEOPLE based)

and EQUIPMENT based services. This can also be represented by degree of

contact.

People based services: high contact : education, dental care, restaurants and medical

services

Equipment based: low contact: automatic car wash, launderette, vending machine,

cinema.

4. 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: baby sitting, care taking, and casual labor.

5. The overall BUSINESS ORIENTATION ( PROFIT) is a recognized means

of classifications:

- Not for profit: The Scouts Association, charities, and public sector leisure

facilities.

- Commercial: banks, airlines, tour operators, hotel and catering services


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Christopher Lovelock gives another classification of services based on the

customer involvement in production process:

People processing: tangible actions to peoples bodies, such as airline

transportation, haircutting and surgery. Customers need to be physically present

throughout service delivery in order to receive the desired benefits of such services.

It is important to figure the process and output to identify the benefits created. Also

some non- financial costs are to be identified such as time, mental and physical

effort and even tear and pain that customers incur in obtaining these benefits.

Possession Processing: Tangible actions to goods and other physical

possessions, such as air freight, lawn mowing, and janitorial services. In these

instances, the object requiring processing must be present, but the customer need

not be.

Mental Stimulus Processing: intangible actions directed at peoples mind,

such as broadcasting and education. In this instance the customers must be present

mentally but can be located either in specific service facility or in a remote location

connected by broadcast signals or telecommunication linkages. Services that

interact with peoples mind have the power to shape attitudes and influence

behavior. So when the customer is in a position of dependency or there is a potential

for manipulation, strong ethical standards and careful oversight is required. This

type of service can easily be converted to digital bits or analog signals, recorded for

prosperity, and transformed into a manufactured product, such as a compact disc,

videotape, or audio cassette, which may then be packaged and marketed much like

any other physical good.

Information Processing: Intangible actions directed at intangible assets,

such as insurance, investment banking, and Consulting. For these services, no direct

involvement with the customer may be needed, once the request for the service is

initiated. Services highly dependent on effective collection and processing of


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information include financial services, accounting, law, marketing research,

management consulting, medical diagnosis and a variety of other professional

services. Tradition and a personal desire to meet the supplier than often determine

the extent of customer involvement in such services more by the needs of operation

process.

Service Marketing Triangle


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In a triangle, all three sides are essential to complete the whole. For

services all three marketing activities, represented by the sides of the triangle, are

critical to success; without one of the sides in place, the triangle, or the total

marketing effort, cannot be optimally supported. Each side represents significant

challenges, as also approaches and strategies for dealing with each other.

FedEx Corporation is an example of a company that has all sides of the

triangle well aligned. 13 With respect to external marketing, FedEx is a master.

They understand their customers, do extensive market research (2,400 customer

surveys per quarter), measure customer satisfaction daily (through their service

quality indicator, or SQI), and listen to customers. Promises are communicated

effectively to the marketplace through winning advertising messages and consistent

statements by their people.

Interactive marketing-keeping promises-is at the heart of FedEx's strategy.

The book-length "Manager's Guide," given to every FedEx manager, states that

"Each customer contact is a moment of truth that conveys an image of Federal

Express." A shared goal within the company is that every one of these service

encounters be flawless from the customer's point of view. The folks that deliver


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FedEx's premises directly (drivers, front-line telephone people, business logistics

consultants) all know - that 100 percent success in interactive marketing is the goal.

FedEx also knows that 100 percent success is not possible unless all of

these providers are enabled to provide quality service through technology, rewards,

support systems, and empowerment. Open communication with employees is

another key to successfully rallying them around new initiatives and opportunities

aimed at building business. As a result of its support and fair treatment of

employees, employee loyalty at FedEx is very high, and promises to customers can

be kept.

Documents

SSM Report Services Marketing Environment