SERVICES MARKETINGStrategic Marketing Management
DEFINITION
SERVICES: “TO INCLUDE ALL ECONOMIC ACTIVITIES WHOSE OUT PUT IS NOT A PHYSICAL PRODUCT OR CONSTRUCTION; GENERALLY CONSUMED AT THE TIME IT IS PRODUCED AND PROVIDES ADDED VALUE IN FORMS (SUCH AS AMUSEMENT, CONVENIENCE, TIMELINESS, COMFORT, OR HEALTH) THAT ARE ESSENTILLY INTANGIBLE CONCERNS OF ITS FIRST PURCHASER.”
SOME MAJOR SERVICE DOMAINS
RETAILING & WHOLESALING TRANSPORTATION, DISTRIBUTION & STORAGE BANKING AND INSURANCE REAL ESTATE COMMUNICATION AND INFORMATION PUBLIC UTILITIES, GOVT AND DEFENCE HEALTH CARE BUSINESS, PROFESSIONAL AND PERSONAL SERVICES RECREATIONAL AND HOSPITALITY SERVICES EDUCATION OTHER NON-PROFIT ORGANIZATIONS
SERVICES ARE DIFFERENTGOODS SERVICES
Tangible Intangible Services Cannot be inventoriedCannot be patentedReadily Displayed/CommunicatedPricing is difficult
Standardized Heterogeneous Services Delivery & Customer Satisfaction Depend On EmployeesQuality Depends On Many Uncontrollable FactorsNo Surety that Services go as Planned/ Promoted
Prod Separate From Consumption
Simultaneous Production & Consumption
Customers participate in and after the transactionCustomers affect each otherEmployees affect outcomeLow CentralizationMass Production Difficult
Nonperishable Perishable It Is Difficult to Synchronize Supply and Demand Services cannot be Returned or Sold
SERVICES CHARACTERISTICS
Inseparability
Perish ability
Heterogeneity
Intangibility
Services
Service Firms are Different
1. Simultaneous production and consumption means that clients of services consume the output of the organization at the same time it is produced
2. Customized output and customer participation means that clients become a part of the production process
3. Intangible output means that a service is abstract such as information or knowledge
4. Service firms are usually more labor intensive, with many employees needed to meet the needs of the customer
Service Firms’ Typology Typology of service organizations is based on two
dimensions:1. Degree of labor intensity:
The ratio of labor cost incurred to the value of plant and equipment.Lawyer’s office is highly labor intensiveTrucking firm is _______in labor intensityUniversity is _____ on labor intensity
2. Customer Interaction & Customization: It contains two concepts: (1) degree to which consumer interacts with the service process, and (2) the degree to which service is customized to the consumer
A fast food restaurant would be ______ on customer interaction but ______ on customization; whereas a prestigious, waiter-service restaurant would be
______ on both counts.
Typology of Services
Service Factory(Low Labor Intensity/Low Customization)AirlinesHotelsLogistics Firms
Service Shop(Low Labor Intensity/High Customization)HospitalsConstruction FirmsPublishers
Mass Service(High Labor Intensity/Low Customization)RetailersSchoolsCommercial Banking
Professional Services(High Labor Intensity/High Customization)DoctorsArchitectsLawyers
Challenges in Services Marketing
1. Service Factory Monitoring the technological sector of the
environment Scheduling supply and demand – as it is
difficult to increase capacity in the short term – in peak and off- seasons
2. Service Shop Monitoring the technological sector of the
environment Finding flexible and adaptable
technologies and work processes to make customization possible without overspending
Service Business Technology
3. Mass Service Managers face marketing challenges Must try to bring in a warm, friendly touch, though the
customer doesn’t get as much personalization as desired
Treating the customers with a sense of warmth
4. Professional Services Must deal with higher costs and more talented HR Managing costs by keeping them down or passing
them to consumer becomes a significant challenge Maintaining quality and responding to customer
interaction
TRADITIONAL MARKETING MIX
PRODUCT PLACE PROMOTION
PRICE
GOOD FEATURES CHANNEL TYPE PROMOTION BLEND
FLEXIBILITY
QUALITY LEVEL EXPOSURE SALES PEOPLE PRICE LEVEL
ACCESSORIES OUTLET LOCATION
ADVERTISING TERMS & CONDITIONS
PACKAGING TRANSPORTATION SALES PROMOTION
DIFFERENTIATION
WARRANTIES STORAGE PUBLICITY DISCOUNTS
BRANDINGPRODUCT LINES
MANAGING CHANNELS
ALLOWANCES
EXPANDED MARKETING MIX FOR SERVICES
PEOPLE PHYSICAL EVIDENCE
PROCESS
EMPLOYEES: FACILITY DESIGN FLOW OF ACTIVITIES:
Recruiting, training EQUIPMENT Standardized
Motivation SIGNAGE Customized
Teamwork & Rewards
DRESS NUMBER OF STEPS:
CUSTOMERS: OTHER TANGIBLES: Simple or Complex
Education Reports/Business Cards
CUSTOMER INVOLVEMENT:
Training Statements, guarantees
High or Low
SERVICE MARKETING TRIANGLE
COMPANY
PROVIDERS CUSTOMERSINTERACTIVE MKTG
Keeping Promises
INTERNAL MKTG
Enabling PromisesEXTERNAL MKTG
Making PromisesTechnology
Standardized vs. Customized Services
1. Variety: Number of exceptions in the work Frequency of unexpected and novel events
that occur in service process2. Analyzability: When the service process is analyzable, the
work can be reduced to mechanical steps Participants can follow an objective,
computational procedure to solve problems Problem solution may involve the use of
standard procedures such as instruction manuals, or technical knowledge such as textbook
Standardized/Customized Services
When work is not analyzable, it is difficult to identify correct solution when variability (a novel situation) arises
No store of techniques or procedures exist to tell a person exactly what to do
The cause of, or solution to, a problem is not clear , so employees rely on accumulated experience, intuition and judgment
Standardized/Customized Services
Low Analyzability/Low Variability
Teaching of Humanities/Social SciencesSkills Training/CoachingOrchestra MusiciansGeneral Admin./Management
Low Analyzability/High Variability
Counseling/Rehabilitation servicesAdvertising AgenciesInterior DecoratorsFashion DesignersBeauticians
High Analyzability/Low Variability
Auditing/Accounting FirmsTeaching of Empirical SciencesTechnical Training
High Analyzability/High Variability
DoctorsEngineering ServicesArchitectsLawyers
SERVQUAL
SERVQUAL (Service Quality) was originally measured on 10 aspects of: reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding the customer and tangibles.
By the early nineties the authors had refined the model to the useful acronym RATER:
Reliability Assurance Tangibles Empathy Responsiveness
SERVQUAL DIMENSIONS
TANGIBLES - the appearance of physical facilities, equipment, personnel and information material
RELIABILITY - the ability to perform the service accurately and dependably
RESPONSIVENESS - the willingness to help customers and provide a prompt service
SERVQUAL DIMENSIONS
ASSURANCE - a combination of the following
Competence - having the requisite skills and knowledge
Courtesy - politeness, respect, consideration and friendliness of contact staff
Credibility - trustworthiness, believability and honesty of staff
Security - freedom from danger, risk or doubt
SERVQUAL DIMENSIONS
EMPATHY - a combination of the following:
Access (physical and social) - approachability and ease of contact
Communication - keeping customers informed in a language they understand and really listening to them
Understanding the customer - making the effort to get to know customers and their specific needs
SERVQUAL (RATER)
The RATER model is a simple and useful model for exploring and assessing customers' service experiences and has been used widely by service delivery organizations. It is an efficient model in helping an organization shape up their efforts in bridging the GAPS between perceived and expected service.
SERVQUAL (RATER)
The five gaps that organizations should measure, manage and minimize:
Gap 1 is the distance between what customers expect and what managers think they expect – the Perception Gap
Gap 2 is between management perception and the actual specification of the customer experience – the Standards Gap
Gap 3 is from the experience specification to the delivery of the experience – are standards consistently being met: the Control Gap
Gap 4 is the gap between the delivery of the customer experience and what is communicated to customers – the Communication Gap
Gap 5 is the gap between a customer's perception of the experience and the customer's expectation – the Expectation Gap
REASONS FOR GAPS
GAP 1 (Perception Gap) - not knowing what customers expect Lack of a marketing orientation Inadequate upward communication (from
contact staff to management) Too many levels of management
REASONS FOR GAPS
GAP 2 (Standards Gap) - the wrong service quality standards
Inadequate commitment to service quality
Lack of perception of feasibility - ‘it cannot be done’
Inadequate task standardization The absence of goal setting
REASONS FOR GAPS
GAP 3 (Control Gap) - the service performance gap
Role ambiguity and role conflict - unsure of what your remit is and how it fits with others
Poor employee or technology fit - the wrong person or system for the job
Inappropriate supervisory control or lack of perceived control - too much or too little control
Lack of teamwork
REASONS FOR GAPS
GAP 4 (Communication Gap) - when promises made do not match actual delivery
Inadequate horizontal communication – between departments or services
A propensity to overpromise
REASONS FOR GAPS
GAP 5 (Expectation Gap) - when experience does not match actual expectations
Building wrong/too high/too many expectations
Not understanding target customer’s needs and value perceptions