SERVICES MARKETING
Dr. K.SUDHA
Asst.Professor
Department of Business Administration
STET Women’s College,
Mannargudi...
SERVICES MARKETING
SERVICES
“Services are activities, benefits or satisfaction which are offered for sale or provided in connection with sale of goods”. - The American Marketing Association
“Services are those separately identifiable essentially
intangible activities, which provide
want satisfaction when marketed to consumers and/or industrial uses and which are not necessarily tied to the sale of a product or another service”. - Stanton
characteristics of a service
1.Intangibility:
Services are intangible and do not have a physical existence. Hence services cannot be touched, held, tasted or smelt.
2.Heterogeneity/Variability:
Given the very nature of services, each service offering is unique and cannot be exactly repeated even by the same service provider. is not true of services.
3.Perishability:
Services cannot be stored, saved, returned or resold once they have been used. Once rendered to a customer the service is completely consumed and cannot be delivered to another customer. eg: A customer dissatisfied with the services of a barber cannot return the service of the haircut that was rendered to him
4.Inseparability/Simultaneity of production and consumption: This refers to the fact that services are generated and consumed within the same time frame. Eg: a haircut is delivered to and consumed by a customer simultaneously unlike, say, a takeaway burger which the customer may consume even after a few hours of purchase. Moreover, it is very difficult to separate a service from the service provider. Eg: the barber is necessarily a part of the service of a haircut that he is delivering to his customer.
NEEDS FOR SERVICE MARKETING
Limited view of marketing
Growing population increase in education level and in living standards have brought about the needs for new and diversified services. Service firms must meet these changing needs by developing a new service and new
Limited competition
One of the major cause of the lack of innovative marketing in many service industries was due to the lack of competition . many service industries , like banking , rail road and public utilities have throughout most of their histories faced very little competition ,
Non –creative management
The managements of service industries have been criticized for not being progressive and creative. Railway management was criticized for many years for being slow to innovate.
NEEDS FOR SERVICE MARKETING
No obsolescence Services
because of their intangibility are less subject to obsolescence than goods. While this is an obvious advantage , it has also led some service firms to be sluggish in their approach to marketing .
Lack of innovation in the distribution of services
Using this concept as a frame of reference, most marketing writers ,generalize that , because of the intangible and inseparable nature of services, direct sale is the only possible channel for distributing most services. This channel is used in the distribution of such services as securities, housing, environment, insurance etc
COMPONENTS OF SERVICE
Physical Product
1. The Physical Product
The various products marketed by a firm involve the physical transfer of ownership of those products. They are tangible and their quality is standardised.
For Example, physical products include T.V., Radio, Refrigerators, Computers, Hair oil, Vacuum Cleaner, Washing Machine, etc.
2. Service Product
A service is an activity or benefit that one party can offer to another which is essentially intangible in nature. Service involve some interaction with customers without effecting transfer of ownership.
For example, people visiting exhibitions, trade fairs are allowed to inspect the consumer durables without being approached by sales representatives. Salesmen are trained in making proper approach to the customer visiting their showrooms.
3. Service Environment
The potential customers form an impression about the service on the basis of service environment. The service environment represents the physical back drop that surrounds the service.
For example, providing hygienic food is the core service in a hotel or restaurant. Customers expect the restaurants to be maintained clean, offer flexible dining hours prompt service, soft music, décor, exotic menu etc.
4. Service Delivery
The Service delivery is one of the important components of service. Service delivery is of great importance to the customer’s overall perception about the quality of service. The service provider should give due consideration to the way service is rendered to customers. Services are created as they are consumed.
SERVICES
CLASSIFICATION OF SERVICES
(i) Other non-profit organisations
CLASSIFICATION OF SERVICES
Recipient of Services
Nature or Service
Act
People Things
Tangible Actions
Intangible Actions
CLASSIFICATION OF SERVICES
CLASSIFICATION OF SERVICES – Philip Kotler
SERVICES DESIGN
A service involves creation and delivery of core benefits in order to satisfy an identified need of the customer. As a process, it refers as to how a service is provided or delivered to a customer. In a competitive market, the importance of the actual process in service delivery has been recognised.
Product
Design
Facilitie
s Design
Service Operati ons Process Design
Custom er Service Process Design
Service Encounter Environment
Provider
behaviour
Customer Provider interaction
Service Requirements
Service Performance Standards
Customer Expectations
Customer Experience With service
Service Design
Service
Quality
Factors Influence Designing Service Process
Mgt model for Service Design / Stages / Process
Developing design attributes
Specifying design performance standards
Generating & evaluating design concepts
Developing
design details
Improving
performance
Assessing
satisfaction
Measuring
performance
Implementing
the design
BLUEPRINTING
A service blueprint is a flow chart of the service process. It conveys the service concept by showing all the elements or activities and their sequencing and interaction. It is pictorial description of the service system showing the service at an overview level. It explains how each job or department functions in relationship to the service as a whole. Blueprinting was developed by Shostak in 1987.
STAGES IN PREPARATION OF BLUEPRINTING
Technology & Service Productivity
Service organisations can improve their productivity by introducing systems and technology in their operations. Under the systems approach to services marketing technology, engineering and management sciences are implemented into service industries. The systems approach looks at the task as a whole. The systems approach identifies the key operations to be performed, devises new ways of performing each operation, eliminates superfluous practices through new methods and improves the coordination of processes within the system.
Application of technology to service activities
Hard
Technology
Soft Technology
Hybrid
Technology
1. Hard Technology
Hard technologies substitute machinery, tools and other engineering devices for labour intensive performance of service work. The following examples can be offered for the application of hard technologies in the service sector.
Example: Automatic car washes, airport x-ray
,
2. Soft Technology
Soft technology means substituting pre-planned systems for individual service operations. Though the systems involve some technology, the basic characteristic is the system itself.
Example: Fast food restaurants such as MC Donald, Wendy, Pizza hut, Kentucky Fried Chicken follow rationale division of labour. Use of soft technologies in these organistions ensures the benefits in the forms of high quality, cost control, speed and efficiency, cleanliness and low prices.
3. Hybrid Technology
hardware
with
Hybrid technologies combine carefully engineered systems to
bring greater
efficiency, order and speed to the service process.
Role of Technology in Service process
AspirationsBuilding Service
The service generating organisations building service aspirations in the process of generating demand for the services. The aspirations may be generated in two ways, namely, generating aspirations to serve the users and generating aspirations to use the services.
Service aspirations of organisation engaged in generating services focus on offering quality services. Quality is generally conceptualised as an attitude towards service.
Building Service Aspirations
Service Marketing Mix
The traditional marketing mix is considered in the context of services. Since a different marketing mix is needed for services some have expanded the traditional four Ps.
Service Marketing Mix
CUSTOMER
Product
Price
Promotion
Physical Evidence
Service Marketing Mix - Definition
“The marketing mix concept is a well established tool used as a structure by marketers. It consists of the various elements of a marketing programme which need to be considered in order to successfully implement the marketing strategy and positioning in the company’s market. It is important internal elements or ingredients that make up an organisation’s marketing programme”.
– Adrian Payne
Product (Service Product)
According to Adrian Payne, a product is an overall concept of objects or processes which provide some values to customers. Goods and services are sub-categories of product. The term produce is used in a broad sense to denote either a manufactured good or product and a service. Strictly speaking, customers are not buying goods or services but specific benefits and value from the total offering. This total offering to the customer is termed as “offer”.
Product (Service Product)
Core
Potential
Augmented
Expected
Total Product
1. The core or generic product
The core product represents the basic services of a product. This product is at its basic level. For example, food served in a restaurant a bed in a hotel room for the night safety of deposits and loanable funds in a bank.
2. The expected product
The expected product consists of the core product together with the minimal purchase conditions which need to be met. For example in a restaurant in addition to basic food served, aspects such as cleanliness, timely service polite and courteous service of bearer, availability of menu and background music are expected.
3. The augmented product
Augmented product refers to offerings (product benefit or services in addition to hat customers expect). This concept enables a product to be differentiated from another. For example, though IBM has not got technologically advanced core product they are praised for excellent customer service. This adds value to their core product in terms of reliability and responsiveness.
4. The Potential product
product feasible
refers to to hold
doing everything and attract the
Potential potentially customers.
concept of potential product of
a restaurant is viewed in terms of a pleasing flower arrangement, manager’s word of thanks, readiness to go out of the way to serve, etc.
PRICE
Price plays a significant role in the marketing mix by attracting revenue to the marketer. Pricing decisions are important for determining the value of the service as perceived by the customer and building of an image for the service. Price serves as a basis for perception of quality. The pricing strategy should be in tune with the marketing strategy. Pricing strategy should gain competitive advantage for the firm.
PRICE Decisions - Reasons
PRICE Decisions - Reasons
PRICING Objective
The price policies for service marketers should be on the lines of those used throughout the general field of marketing. The pricing policy to be followed should be based on pricing objectives. The important pricing objectives are survival, profit maximisation, sales maximisation, prestige and ROI.
In quoting prices, some firms try to meet competition. Where adverse market conditions prevail, marketers quote lower prices in order to ensure survival in the market, even foregoing profitability.
PROMOTION
Promotion is an important part of the marketing mix for many marketers. The promotion element of the service marketing mix communicates the positioning of the service to customers. Promotion adds tangibility and helps the customer evaluate the service offer. The promotion mix includes six elements, namely (a) Advertising (b) Personal Selling (c) Sales Promotion (d) Public Relations (e) Word of mouth and (f) Direct mail.
PROMOTION
Personal
Selling
PROMOTION
(a) Advertising for services
Advertising is the impersonal communication used by service firms. Advertising in service marketing adds to the customer’s knowledge of the service, persuades the customer to buy and differentiates the service from other service offerings. Persistent advertising is, therefore, a must for the success of the marketing of the service.
(b) Personal Selling
Personal Selling has assumed much importance in service firms owing to the following reasons.
(c) Sales Promotion
Those marketing activities other than personal selling, advertising and publicity that stimulate customers and dealers effectively such as display shows, exhibitions, demonstrations and various non-recurrent selling efforts not in the ordinary routine are the sales promotional measures.
(c) Sales Promotion
TOOLS OF SALES PROMOTION
Warranties
Free Offers
Contest
Discount & Commission Fairs
Show
Coupons, Prizes
Cash Refunds
(d) Publicity or Public Relations
Publicity consists of non-personal stimulation of demand for a product or service by way of arranging commercially significant news to have appeared in mass media free of cost (not paid for the sponsor). Publicity is a free news appearing in mass media about a company and its products.
(e) Word of Mouth Promotion
Customers who are already exposed to the delivery of a service, share their experiences with other potential customers. They offer advice on service providers and businesses who are established already.
4. PLACE
Place mix of services marketing involves the location and channels which are the two key decision areas. The service provider should decide as to how to deliver the service to the customer and where this should take place. The service provider should ensure that the promised services reach the ultimate users without any distortion. With regard to location, a service firm decides where its operations and staff are situated.
5. PEOPLE
In all the organisations, people play a decisive role. Employees working in the service organisations are the contact people with the customers. Employees working in a bank, hotel, hair-cutting saloon etc., are all frontline people. They are in direct contact with the customers who visit their services. The role of these frontline people decides the success of the service organisation. A service organisation can be only as good as its people. The strength and success of the service organisation lies in the quality of the service personnel working in the organisation.
6. PHYSICAL EVIDENCE
Physical evidence is another important variable to be considered in the context of services marketing. Since a service is intangible, it is important for the client to search for evidences which enables him to evaluate the service. Physical evidences are those tangible clues which customers may receive during the process of receiving the service. The customers evaluate the worthiness of the service with the physical evidences they receive.
7. PROCESSES
The processes by which services are created and delivered to the customers are an important element of marketing mix. Customers perceive the delivery system as a part of the service itself. The decisions on process management are of great importance to the success of the marketing of the service. The processes involve the procedures, tasks, schedules, mechanisms, activities and routines by which a service is delivered to the customer.
Managing Demand & Supply
Services cannot be transported from one place to another or transferred from one person to another. So, service firms are not able to build inventories during periods of slow demand to use later when the demand increases.
Managing Demand & Supply
Outcome of lack of Inventory-Capability
Excess Demand
Demand exceeds optimum capacity
Balanced demand & supply at the level of optimum capacity
Excess Capacity
1. Excess demand
Every service firm has a maximum capacity to serve customers. Maximum capacity represents the absolute limit of service availability. When demand for the service of a particular firm exceeds its maximum capacity, it results in undesirable consequences. First, the existing customers of the firm may cross over to the competitor, selling similar service. As a result, the service firm may lose considerable business. Second, in case of excess demand for services, the working hours of staff may be stretched.
2. Demand exceeds optimum capacity
Both optimum and maximum capacity may not be the same. At optimum capacity level, resources are fully employed but not over-used. As a result, customers will receive quality service on time. But when demand exceeds optimum capacity, the staff and facilities are stretched, resulting in poor service.
3. Demand and supply are balanced at the level of optimum capacity
Optimum capacity refers to the efficient use of the capacity from the point of view of both the customers and the company. When demand and supply are balanced at the level of optimum capacity, staff and facilities are regarded to be occupied at an ideal level. No employee is over- stretched and facilities are maintained well. As a result, customers stand to benefit. Moreover, utilisation of optimum capacity gives a psychological satisfaction to customers too.
4. Excess capacity
Excess capacity means the demand is below the optimum capacity. Staff and facilities will be under-utilised. Under-utilisation of facilities like labour and equipment results in loss of profit to the firm. However, customers may prefer such a situation as they can avail full facilities at will. On the other hand, customers may be disappointed by low demand too in the long run. They may even worry that they have chosen an inferior service provider.
Strategies for Managing Demand & Supply
1. Understanding capacity constraints
2. Understanding demand patterns
3. Capacity Planning
Types of Capacity Planning:
Social factors
Economy
Long-term
capacity
decisions
Markets
Competitors
4. Managing capacity to match demand
The strategic approach to matching supply and demand focuses on adjusting capacity. So, the service firm should build into its capacity some degree of flexibility. The extent of flexibility depends upon the type of service offered, cost, labour availability and other factors.
5. Managing demand to match capacity
This strategy involves shifting demand to match capacity when demand exceeds capacity. Then, the organisation tries to shift customers to periods of slow demand. This is just convincing the customers to use the service during periods of slow demand. So, people who cannot shift their demand represent lost business for the firm.
5. Managing demand to match capacity
customers first.
service – no discounts.
Shift Demand
Demand too high
Demand too
low
reductions.
customer
6. Strategies to follow when demand & capacity cannot be matched
Sometimes, it may not be possible for the service organisations to manage capacity to match demand or vice versa. For example, in a health clinic patients wait longer to be examined by the doctor during monsoon/inclement weather when more people catch ‘flu’. The demand is flexible but the service capacity is inflexible and it is not economical for health clinics to add additional facilities or physician to handle peaks in demands.
Internal Marketing - Definition
“The means of applying the philosophy and marketing to people who serve the external customers so that:
- Berry
Internal Marketing - Definition
“Treating with equal importance the needs of the internal market (the employees) and the external market (customers) through proactive programmes and planning to bring about organisational objective by delivering employee and customer satisfaction”.
-Helen Woodruffe
Objectives of Internal Marketing
Objectives of Internal Marketing
Strategic level objectives
Tactical level objectives
Overall objectives
Procedure
Role of Internal Marketing
work better and satisfy customers.
reduces conflict between the functional areas of business.
Role of Internal Marketing
awareness and appreciation of the company’s aims and strength.
Components of Internal Marketing
Steps in developing Internal Marketing
External Marketing
External marketing is directed at those individuals and groups that buy goods and services from an organisation an external marketing involves
traditional marketing efforts such as research, personal selling, advertising, direct mail, sales promotion, pricing and public relations. The organization makes promises which correspond with the personal needs and wishes
Internal & External Marketing
External Marketing | Internal Marketing | ||||
1. There is interaction between the organization and customers | There is interaction between the organization and its employees. | ||||
2. Customers influence the operations of the organization. | Management plays a crucial role in finalising tasks and directing employees. | ||||
3. Organisation makes promises to its customers. | Internal marketing enables the employees to fulfil the promises made during external marketing | ||||
4. Customers derive benefits from the service offering. | Employees compensation company. | derive plan | benefits adopted | by | from the |
5. External Marketing aims at achieving customer satisfaction | Internal marketing increases job satisfaction among employees. | ||||
6. Market research is conducted on customer trends, competitors’ strategy etc., in the market. | Feedback is obtained from employees. Training and appraisal of employees are suitably adopted. | ||||
Quality of Service
The quality of service (QOS) is crucial both to the customer and to the service firm. Service firms maintain competitive edge by rendering quality service. The concept of quality seems to refer to several diverse areas, namely, quality of the output, quality of the process, quality of the delivery system and quality as a general philosophy of the organization.
Quality of Service
The following are some important ways of judging quality of service:
Dimensions of Quality of Service
Dimensions of Service Quality
Reliability | | Responsiv eness | | Assurance | | Empathy | | Tangibles |
Gap Analysis
There is always bound to be a gap between the QOS which is expected and the QOS that is rendered. Customer service is based on perceptions. While one customer appreciates, the other may narrate it as harrowing experience.
Parasuram and Berry have developed a service quality model to indicate consumer quality perceptions. Viewing services in a structured, integrated way is called the gap model of QOS.
Gap model of Service Quality
Expected Service
Perceived Service
Service Delivery
Company perceptions
of consumer expectations
External communication to customers
Customer
Customer
Company
Gap 1
Gap 3
Customer driven service design & standards
Gap 2
Gap 4
Gap 1: Not knowing what customers expect
Gap 2: Not selecting the right service designs and standards
Key factors leading to the customer gap
Gap 3: Not delivering to service standards
Gap 4: Not matching performance to promises
Customer Expectations
Customer Perceptions
1. Provider Gap 1: Not knowing what customers expect
Inadequate marketing research orientation
Insufficient marketing research Research not focused on service quality Inadequate use of marketing research
Lack of upward communication
Lack of interaction between management and customers Insufficient communication between contact employees and managers
Too many layers between contact personnel and top management
Insufficient relationship focus
Lack of market segmentation
Focus on transactions rather than relationships
Focus on new customers rather than relationship customers Inadequate service recovery
Customer Expectations
Company perceptions of customer expectations
2. Provider gap 2: Not selecting the right service quality designs and standards
Poor Service design
Unsystematic new service development process Vague, undefined service designs
Failure to connect service design to service positioning
Absence of customer defined standards
Lack of customer-defined standards
Absence of process management to focus on customer requirements Absence of formal process for setting goals
Inappropriate physical evidence and scope for services
Customer driven service designs and standards
Company perceptions of customer expectations
3. Provider gap 3: Not delivering to service standards
Deficiencies in human resource policies
Ineffective recruitment Role ambiguity and role conflict
Poor employee-technology job fit Inappropriate evaluation and compensation systems
Lack of empowerment, perceived control and team work
Failure to match supply and demand Failure to align peaks and valleys of demand Inappropriate customer mix
Over reliance on price to smoothen demand
Customer’s unfulfilling roles
Customer ignorance of roles and responsibilities Customer negatively affecting each other
Problems with service intermediaries
Channel conflict over objectives and performance Channel conflict over costs and rewards Difficulty in controlling quality and consistency Tension between empowerment and control
Service delivery
Customer-driven service designs and standards
4. Provider gap 4: When promises do not match
performance
Lack of integrated services marketing communication
Tendency to view each external communication as being independent
Not including interactive marketing in communication plans
Absence of strong internal marketing programme
Ineffective management of customer expectations
Not managing customer expectations through all forms of communication
Not adequate educating customers
Overpromising
Over-promising in adversting Over-promising in personal selling
Over-promising through physical evidence cues
Inadequate horizontal communication Insufficient communication between advertising and operations Differences in policies and procedures across branches or units
Service delivery
External communication to customers
Marketing of Services
Financial Services
Healthcare
Tourism
Professional or Consultancy Services
Telecommunication
Banking
Insurance
Financial Services - Banking
The financial services such as banking and insurance are an inevitable part of an economy. This is the area which really needs to be strengthened. Financial services like banking and insurance require a focus on improving efficiency and performance through operations and costs. The financial system has improved in terms of number of financial instruments and the number of active participants in the market.
Characteristics of Financial Service
Financial Services
Intangibility
Inseparability
Variability
Perishability
High involvement and long-time purchase
Brand loyalty
Case1: Finished
Shelly Co. is a multinational corporation. It entered the Indian market by opening petrol bunks in chennai city. The price of petro and diesel. The price of petrol and diesel at Shelly outlets are higher than outlets. The Petrol Bunks than outlets. The Petrol Bunks are large in size and are well maintained. The employees follow a decent dress code. But the overall sales of Shelly is not very high.
Questions:
Cases 2:
Premier Courier Ltd. (PCL) is an innovative overnight delivery company that helped change the way companies do business. It was the first company to offer an overnight delivery system, but the company markets more than just a delivery service. What PCL really sells is on-time reliability. The company markets risk reduction and provides the confidence that people shipping packages will be “Absolutely, positively, certain their packages will be there by 10.30 in the morning”. In fact, PCL sells even more than reliable delivery. It designs tracking and inventory management systems for
Cases 2: Finished
many large companies. In other words, its customers buy more than just delivery service they buy a solution to their distribution problems. For example, a warehouse designed and operated by PCL is part of the distribution centre for a very large computer firm. In other organisations, customers can place an order for inventory as late as midnight, and the marketer, because of PCL’s help, can guarantee delivery by the next morning. PCL has positioned itself as a company with a service that solves its customers’ problems.
Case 2:
Questions: