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Short Course : July 2013By Prof S K Palekar
3 Sessions on Services MarketingAudience : PGDM – IM
The objective is to prepare you for consulting, business development and operations roles in IT and ITES industries
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Learning Objectives about Services
Introduction to services
How is it different than products
How do services create value for the customer
How can you compete in services
You can use services but cannot carry them and own
Service sector is fastest growing (Rs ‘000 Crores)Indian GDP
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1970 1980 1990 2000 2007
SER
INDAGRI
Who is in Service !
Trading Government / Public Admn / Defense Banking & Insurance Transport of people and goods Communications Customer contact : reception, selling, telemarketing Personal service : teacher, waiter, hair stylist Installation and repair Housekeeping : Laundry, sweeping, floor care, polishing Health and patient care : nurses Entertainment and Tourism Housing : construction and fabrication, masons, guards Professionals : Lawyers, architects
“Boxed “ Products
“Intangible” Services
Generally there is neither a pure product, nor a pure service
HUL sells products but customers buy products + services
Customers of Dove soap need BOTH products and servicesService costs
Trade margins Advertising Transportation People Administration
You may be making a productBut customers want to buy services along with it
Fishermen : “More fish : less cost” solutionCummins : Diesel Engines
Promoters go and meet the fishermen and get acquainted Promoters explain type of engines and applicationsPromoters answer their queries and convince themDistributors stocks engines and spares and ensure availabilityDistributors take orders, invoice, collect paymentTechnical installs and trains After sales service for maintenance and repairs
Customers Buy Solutions involving Service.You may think you are selling products.
Role of Service as a competitive weapon
My product best
My price lowest
I am close to you
Tailored Suit
(S) Quality cannot be pre-inspected : largely intangible Tailor’s role is to measure, advise, stitch and make it look good on you.
(S) Quality depends on the quality of the tailor a bad tailor can ruin your suit. A good tailor can make you look good.
(P) Only a brief contact for measurement and trial is needed Except measurement and trial the customer is not needed
(S) Suit is made to order and customized A tailor makes to order and does not keep readymade products
Fabric is product but tailoring is largely a service.Tailoring cannot be scaled up quickly
Car Loan
(P) Interest rate and terms can be pre-inspected Interest rate and commercial terms are tangible
(P) Main value (Commercial Terms) not People dependent Response time, paper work, complaint resolution does depend on people.
(P) Customer presence is necessary only for a little time Filling out forms and giving documents
(P) Capacity to give loans is not perishableFront ( sales and reception ) capacity can get unutilized if no customer
Car Loan is a product. Can be scaled up quickly.
How Profit is Made
Value
Price
Cost
• Studying the market conditions • Selecting the right customers• Developing the right value proposition• Selecting the right delivery channels• To be different than the competition
• Purchasing efficiency• Downgrading specifications• Value engineering• Reduction of waste
Profit
The Process of Marketing
Whom to serve ? Whom to fight?
Create Attractive value? Capture some of it ?
Go to market & “sell” the valueUndertake value creation activities
Measure satisfactionMeasure Profit
Important Difference
In a product business the company creates a structure of high level and experienced specialist departments manned by experts to perform the tasks of discovering, diagnosing, designing and delivering at different locations and times and most of these are invisible to the customer.
In a service business many of these functions are done by the front line service providers : they assess, diagnose, design and deliver in real time at the location when the customer is present and watching
Discover Diagnose Design Deliver
Customer
Service Employees
Management
The job of management in services is to create context, culture & employees
“Service Value” is co-created between Customer & Service [email protected]
Service Operations Model
Management
BuyerEmployee
A lot of value gets created in this interaction
Managing employeesTo make themManage customers
Managing customerExpectations and satisfaction
Employees is the “first market”. Poor marketing to them results into poor marketing ultimately
Selecting & Influencing employees.Based on knowledge or attitude?
Actual interaction, observation and demonstrated leadership
Nature of Service
IntangibleLow search attributes ( which can be inspected prior to purchase )
Person dependentHigh in experience attributes ( can be felt but not inspected )
Reputation / Reference dependent High in credence attributes ( cannot be felt also )
Needs each customer’s presence / inputCustomer and provider needed in the same place at the same time
Perishable Demand -Supply synchronization difficult , Capacity planning key.Peak and Lean times a regular phenomenon.
Standardization and efficiency of machines Customization and warmth of [email protected]
TYPES OF SERVICESBASED ON “CONTACT”
HIGH-END CONTACT SERVICES Professional services needing high level of education and experience
(architects, doctors, professors, lawyers, pilots) MID END CONTACT SERVICES
Technical services based on knowledge of technology. (nursing, tailoring, repairing). Or Customer care services involving personality and social skills (air hostess, handling complaints, salespersons, reception)
LOW END CONTACT SERVICES Routine services that can be performed by almost anyone with little
training. (cleaning, guard duty, door keeping)AUTOMATABLE SERVICES
Simple services which can be automated (shoe shine, vending packaged products, ticketing on the net, giving cash against cards)
Different types of persons needed for service
RARE EXPERTISE / JUDGEMENT / SKILLExpertise / Experience LawyerPerform Singer, Dancer, Teacher, Priest Judgment / Decision Doctor
MEDIUM EXPERTISE / JUDGEMENT / SKILLEmpathy Sales ExecutivesConversation / Sociability Customer Relation ExecutivesAwareness and Feedback Barber, Tailor
LOW EXPERTISE / JUDGEMENT / SKILLPhysique Laborer, Guard
High Contact Service Encounters
S E R V I C E S C A P E
MOODINTERACTION
PERSON
TRAINING / EXPECTATIONSRESOURCES
MOODSCRIPT / INTERACTION
M O M E N T O F T R U T H
PERSON
NEEDEXPECTATION
encounter
People-intensive Services
CostsMain investment and cost is in
selection, training, motivation & retention of people
People Selection Criteria Good social skills of dealing with customers individually
and to have a good EQ . In professional service you need judgment and experience.In performing arts you need flair, temperament
Trained to follow Consultative, diagnostic, solution providing, counseling
Customer orientation at the front endroutine / standard operating process at the back end
Equipment –Intensive Services
CostsMain investment and cost is in the machines
People Selection Criteria Good technical qualification / knowledge Trained to follow routine / standard operating process Dealing with the Customer : Transactional
Classificationautomated services
vending machines, automated car washesmonitored by unskilled labor
dry cleaning, door keepers, cleaningoperated by skilled labor
excavators, airline pilots,
Value embedded in encountersbetween doctor and patient
DIAGNOSIS
Value embedded in encountersbetween airline staff and passengers
CUSTOMER CARE
Value embedded in encountersbetween a singer and audience
ENTERTAINMENT
Value embedded in encountersbetween a priest and parish
FAITH
High and Low Contact Service - 1
Location ( Where to locate )High contact : Convenient to customerLow contact : Near labor or Transportation source
Service Scape ( How to layout and do interiors)High contact : set up like a customer reception / contact / service
area. Presentable, inviting, facilitate interaction with staff, and waiting and serviceb.
Low contact : set up like a job work shop : for efficiency Quality Control
High Contact : customized benchmarks – customer present and actively influences – can see all Ps - defects and all
Low Contact : since there is no customer during production, it is possible to run using standard benchmarks and rework is possible to correct the defects
High and Low Contact Service - 2
How the operations are organized ?High Contact : Pace is set by the location and time of customer
requests for service. Customer is present, sees process, intervenes, directs but also likes to see the process. A key issue is how to handle demand peaks and how to shape the demand
Low Contact : Customer is absent and is concerned with completion date and final result. He does not see the people and the process. Hence grouping (batching) and scheduling is possible. Pace can be set internally and can be the “average demand”.
Front Line Worker SkillsHigh Contact : Capable of interacting with customers, capable of
using judgment , capable of using his talentLow Contact : Only Technical skills are needed
High and Low Contact Service - 3
Service ProcessHigh contact : Mostly front-room activities. The service may
change during delivery in response to customer.Low contact : Mostly backroom activities planned and executed
with minimal interference from customerService Package
High contact : Varies with customer : many choices and outcomesLow contact : Fixed, less extensive
Product –Service continuum
“Pure Product” “Pure Service” Teaching is almost pure service ( Mostly intangible )Meal in a sit down diner is both product ( food) and service ( 3Ps)Match box is almost a pure product
7 Ps of Marketing Mix” ( Way to influence the market ) 4 Ps : Product like : Product, Place ( Location ), Price, Promotion3 Ps : High contact like : People, Process, Physical Evidence / Proof
serviceProduct
INSPECTABLE
EXPERIENCED
BELIEVED
High Contact Service value creation
Customers are homogenized through filtration, access, fencing, selection
Service providers are selectedThrough filtration, access, fencing, selectionTo match with the expectations of the customers
Service providers are prepared to handle the jobCustomer expectations / scripts are communicatedService delivery process is taught
Servicescape is appropriate : Facilities and processes Keep in mind technical logic, customer logic and employee logicMechanism to handle complaints and counsel
The ultimate objective is The “service encounter" should be satisfying
for the customers as well as employees
In high contact service
Variations are commonOn both the sides !
Mismatch of expectations is commonComplaints should not be treated as exceptionsComplaint handling mechanismsCounseling is a regular business process
Customer recovery is an important process`
Positioning Marketing Mix
ProductProductPlacePricePromotion
ServicePeopleProcessPhysical Evidence ( Proof )
WHAT MAKES THE SERVICE BUSINESS WORK
Leadership provided from the top is an extremely valuable input in the working of a service business. Some of the great service organizations have become so because of the way theyselect employeesinduct them on the jobtrain themmotivate themprovide social gluerecognize themincentivize thempromote themdevelop them
[email protected] +9821046013
There is no absolute quality standard In service
Since there is nothing that can be objectively specified,People judge service subjectively by how they felt
Service Quality = Actual Service – Expected Service
[email protected] +9821046013
Keys to customer satisfaction in services are
1. How to manage customer expectations
2. How to have a good service design
3. How to plan service delivery
4. Dealing with dissatisfied customers
5. Reducing the service gap
How to Manage customer expectations ?
Admission / filtration process that accepts customers whose expectations can be met / exceeded
Communicating with the customers so that the expectations are brought in line with what can be delivered
Rejecting customers whose expectations cannot be metGet existing customers to bring new customersGet existing customers to meet new customers
How to have a good service design?
What to plan ? Location, Layout, Fittings, Furnishings, Equipment,
Signage, Comfort, Lighting, Temperature, ColorsHow to plan ? Keep in mind
Positioning : who do you want to serve? Who competes for these customers ? How do you compete?
Logic : Customers, Employees, technical and legal demands.
How to Plan / Execute Service delivery ?( Service Marketing Mix )
Standard 4 Ps of productsPhysical / Material productPricePlace (location)Promotion ( communication to attract customers, manage
expectations and inform at site)
3 Ps of servicesPeople ( front line service providers, front line supervisors,
leaders up the line)Processes (of discovering needs, diagnosing what needs to be
done, designing a solution and deploying the solution)Proofs (because service is intangible, customers need evidence
and proof)
Dealing with dissatisfied customers
Service being intangible, there is an ample scope for interpretation and subjectivity on both sides - provider and receiver - and hence complaints is a normal phenomenon in the marketing of services.
How complaints are handled is a very important part of service marketing. Complaints - if not handled well - can lead to loss of customers but if they are handled well, they can lead to customers who spread good word about the company. This is called service recovery.
Constantly trying to reduce the "service gap”
Knowledge Gap : is between what the customer really wants vis-a-vis what the service provider thinks he wants
Planning Gap : is between what the service provider knows he must deliver vis-a-vis what he has planned to deliver
Delivery Gap is between what the service provider has planned to deliver vis-a-vis what he lands up delivering
Promise Gap is between what the service delivers vis-a-vis what he promises to deliver.
Service Gap Model
Customer Gap Provider Gap
Expected Service
Perceived Expectation Knowing
Satisfaction Design / SOP / Standards Planning
Deliver : Design / SOP / Standard Doing
Communicated to customers Promise
Perceived Delivery
Consumer Behavior in Services
RISKY : Higher perceived risk in buying a service.REAL TIME : Place of production and use is same.INCONSISTENT : Quality consistency difficult to achieve.CAPACITY : Not possible to use the capacity fully
