Services Marketing - Nature of Services Marketing


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One of the Chapters of an MBA Course Series on Services Marketing under Marketing Management that is tought at the B-Schools in India.
This chapter is the Introduction (Part-2) which deals with How to market "Services"

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Services Marketing - Nature of Services Marketing

  1. 1. SERVICES MARKETING Chapter – 2 : Nature of Services Marketing
  2. 2. Category of Services • Services Industries and Companies : Healthcare, Hotels, Hospitality, Transportation, Education • Services as Products : Normally sold with goods as accompanying services, like gift wrapping, training and grooming 23/07/2013 2© Himansu S M
  3. 3. Category of Services • Customer Services : Provided to support the core product, like cars are sold along with the periodical services. • Derived Services : This is comparatively a new concept where any goods are always associated with some kind of service, like a pharmaceutical provides medical services, a razor provides grooming services, a computer provides information services, etc. 23/07/2013 3© Himansu S M
  4. 4. Classification of Services • Degree of Involvement of the Customer : • Service Tangibility : • Skills and Expertise required : • The Business Orientation of Service Provider : • The Type of End User : 23/07/2013 4© Himansu S M
  5. 5. DEGREE OF INVOLVEMENT OF THE CUSTOMER : • People processing : Customer’s presence at the place of delivery required to consume the service, like a training workshop, a dance class, health care, etc. • Possession Processing : The customer’s presence is not required but his possession or property needs to be deposited for service, like car servicing/repair, TV/VCD repair, laundry, courier service, etc. 23/07/2013 5© Himansu S M
  6. 6. DEGREE OF INVOLVEMENT OF THE CUSTOMER : • Mental Stimulus Processing : Here the customer’s mental attention is required if not physical presence in order to experience the service, like career counselling, advertising, consultation and education services, etc. • Information Processing : In this case, data, information, knowledge are gathered and analysed for the use of the clients, like research studies, market surveys, data processing, accounting, legal services, programming, etc. 23/07/2013 6© Himansu S M
  7. 7. SERVICE TANGIBILITY : • Highly Tangible : The service includes a physical product (highly tangible) for use during the contract period, like the cell phone or a house on rent. • Service Linked To Tangible Goods : These are the guaranty or warranty periods, during which the sellers provide free or subsidised service to the customer, like machines, vehicles, gadgets, etc. 23/07/2013 7© Himansu S M
  8. 8. SERVICE TANGIBILITY : • Tangible Goods Linked to Services : Here some physical goods are given to the customer as the part of a service, like food with a train/air ticket, hotel accommodation includes morning breakfast, etc. • Highly Intangible : Here no products are offered as a part of the services, like hair- cuts, body-massage, cinema, etc. 23/07/2013 8© Himansu S M
  9. 9. SKILLS AND EXPERTISE REQUIRED : • Professional (High Skill) Services : These services require a high level of qualification and training to provide the services, like doctors, lawyers, pilots, IT professionals, etc. • Non-Professional (Low Skill) Services : These services don’t require any special prerequisites in skills, and can be performed by anybody with some practice, like office security guards, baby sitting, courier delivery boys, etc. 23/07/2013 9© Himansu S M
  10. 10. THE BUSINESS ORIENTATION OF SERVICE PROVIDER : • Commercial Organisations (Profit Oriented) : The main objective here is to make a profit by providing service. They strive to do all that are required to earn a profit by keeping the customers satisfied. 23/07/2013 10© Himansu S M
  11. 11. THE BUSINESS ORIENTATION OF SERVICE PROVIDER : • Non-Profit Organisations (Service Oriented) : The main objective here is to serve the target clientele, without any profit motive. Of course money is needed for running such an organisation, and that is obtained from public donation, trust fund, or govt aid. This category includes Govt. bodies and also no-profit-no-loss organisations. Schools, NGOs, welfare societies, disaster relief organisations. 23/07/2013 11© Himansu S M
  12. 12. THE TYPE OF END USER : • Consumer Services (B2C) : This is between the service provider (the company) and the individual customer for his personal consumption, like medical treatment, fitness services. • Business to Business (B2B) : This is between two companies, like a company hiring another to do a market research for it. • Industrial Services : This is the case where a manufacturing company buys services from a service provider like supply, erection, commissioning, maintenance of the plant and machinery. 23/07/2013 12© Himansu S M
  13. 13. CHALLENGES AND QUESTIONS FOR SERVICE MARKETERS Because of the inherent nature of Services, the marketers face several distinctive challenges. Service marketers strive to answer the following questions and try to act accordingly : 1. How can service quality be defined and improved - when the product is intangible and non-standardised ? 2. How can new services be designed and tested effectively - when the service is essentially an intangible process ? 23/07/2013 13© Himansu S M
  14. 14. CHALLENGES AND QUESTIONS FOR SERVICE MARKETERS 3. How can the firm be certain that it's communi-cating a consistent and relevant image - when so many elements of marketing mix communicate to customers and some of these elements are the service providers themselves ? 4. How can the firm accommodate fluctuating demand - when capacity is fixed and the service itself is perishable ? 23/07/2013 14© Himansu S M
  15. 15. CHALLENGES AND QUESTIONS FOR SERVICE MARKETERS 5. How can the firm best motivate and select service employees - who, because the service is delivered in real time, become a critical part of the product itself ? 6. How should the prices be set - when it's difficult to determine actual cost of production and price may be inextricably intertwined with perceptions of quality ? 23/07/2013 15© Himansu S M
  16. 16. CHALLENGES AND QUESTIONS FOR SERVICE MARKETERS 7. How should the firm be organised so that good tactical and strategic decisions are made - when a decision in any of the functional areas of marketing, operations, HR, may have significant impact on the other two areas ? 8. How can the organisation protect new service concepts from competitors - when the service processes can't be readily patented ? 23/07/2013 16© Himansu S M
  17. 17. CHALLENGES AND QUESTIONS FOR SERVICE MARKETERS 9. How does the firm communicate quality and value to customers - when the offering is intangible and can't be readily tried or displayed ? 10.How can the organisation ensure the delivery of consistent quality service - when both the firm's employees and the customer themselves can affect the service outcome ? 23/07/2013 17© Himansu S M
  18. 18. CHALLENGES AND QUESTIONS FOR SERVICE MARKETERS 11.How can the balance between standardisation and personalisation (customisation) be deter-mined to maximise both the efficiency of the organisation and the satisfaction of its customers ? 23/07/2013 18© Himansu S M
  19. 19. Marketing Mix Product • Physical Goods Features • Quality Level • Accessories • Packaging • Warranties • Product Lines • Branding Price • Flexibility • Price Level • Terms • Differentiation • Discounts • Allowances • Pay Mode : • Cash • Credit • Loan 23/07/2013 19© Himansu S M
  20. 20. Marketing Mix Place • Channel Type • Exposure • Intermediaries • Outlet Locations • Transportation • Storage • Managing Channels Promotion • Promotion Blend • Sales People : • Selection • Training • Incentives • Advertising : • Media Types • Types of Ads • Sales Promotion • Publicity • Internet/Web Strategies 23/07/2013 20© Himansu S M
  21. 21. Extended Marketing Mix for Services People • Employees : • Recruiting • Training • Motivation • Rewards • Teamwork • Customers : • Education • Training Process • Flow of Activities : • Standardised • Customised • No. of Steps : • Simple • Complex • Customer Involvement 23/07/2013 21© Himansu S M
  22. 22. Extended Marketing Mix for Services Physical Evidence • Facility Design • Equipment • Signage • Employee Dress • Other Tangibles : • Reports • Business Cards • Statements • Guaranties Productivity & Quality • Service Quality • Maintaining : • Service Quality Level • Trade-off between : • Incremental Cost • Incremental Revenue 23/07/2013 22© Himansu S M
  23. 23. KEY MARKETING ISSUES BEFORE A SERVICE ORGANISATION • Managing Productivity : • Managing Service quality : • Managing Differentiation : 23/07/2013 23© Himansu S M
  24. 24. Managing Productivity : • Service firms have several type of functional activities to look after. And these are done by people mostly and in some specific areas by machines. • So productivity and efficiency are the key words here. The same people handling variety of activities have to be trained and effectively deployed. 23/07/2013 24© Himansu S M
  25. 25. Managing Service Quality : • It’s simple to say that the superior quality of services will offer a competitive advantage over the competitors’. But to achieve this is difficult for the quality can’t be tested nor measured. • Fortunately all the modern day management tools and procedures are available like flow chart, CPM, quality systems, process quality control, analyses of failure points, marketing surveys, attitude surveys and measurement, etc. 23/07/2013 25© Himansu S M
  26. 26. Managing Differentiation : • The intangible nature of services make it difficult for the service firms to differentiate their services from that of their competitors except on the basis of price. Then how do they do it. • They try to throw in some tangible element which may attract the customers or help them compare with that of the competitors. They carefully identify such elements and decide what proportion to be used as follows : 23/07/2013 26© Himansu S M
  27. 27. Managing Differentiation : • Service Premises : This is nothing but the environment which is important for the services where the customers visit the service providers. The image, outlook, presentation and ambience of the place of service delivery play a very critical role. The following are some elementary factors : 23/07/2013 27© Himansu S M
  28. 28. Managing Differentiation : –The Lighting Arrangement : Good lights, anti-glare set-ups, –The Visual Aspects : Interior decoration, art objects, –The Sound of Music : Piped music, soothing music, 23/07/2013 28© Himansu S M
  29. 29. Managing Differentiation : –The Fragrance of Incense : Scent of flowers, room fresheners, –The Layout Plan : Convenient movement, flow of process, safety, floors, –The Acclimatiser : AC, humid control, fresh air, healthy environment, insect- free, 23/07/2013 29© Himansu S M
  30. 30. Managing Differentiation : • Packaging : Where customers’ properties are involved, the use of good and attractive packaging is an effective differentiation. 23/07/2013 30© Himansu S M
  31. 31. Managing Differentiation : • Service Personnel : since service personnel are in direct contact with the customers, they should be presentable. Nobody likes a bunch of dirty smelling, ill dressed service personnel. So they are trained to groom themselves, improve appearance, neat and clean, smart, figure conscious, dressed for the occasion, etc. On the other side we have, good mannerism, courteous behaviour, smiling face, enthusiastic actions of the personnel are critical assets. 23/07/2013 31© Himansu S M
  32. 32. Managing Differentiation : • Tools and Equipment used : Several service types need the use of different equipment and tools. So the use of advanced and sophisticated tools and equipment has an edge over the competitors. 23/07/2013 32© Himansu S M
  33. 33. Managing Differentiation : • Customers : Some service firms like to cater to only discerning customers. They differentiate the customers on the basis of level of refined workmanship (finesse), and then design services for them. Thus the firms not only address the physical needs, but also the psychological needs. 23/07/2013 33© Himansu S M
  34. 34. Managing Differentiation : • Convenience : The firms cater to the convenience of the customers, by going to their doorstep or to the proximity. Like car driving trainers pick up the customers from home and drop back at home, taking food order thro’ telephone and delivering at home. The customers are benefited by saving time, and also by the pleasant gesture of the service providers. 23/07/2013 34© Himansu S M
  35. 35. Managing Differentiation : • Name of the Service Establishment : Many think “what’s in a name”, but mostly the name itself can create a first impression, and also the general level of comfort in the customers, of course in both positively and negatively. 23/07/2013 35© Himansu S M
  36. 36. NEW AVENUES IN SERVICES MARKETING • Trade Fairs and Shows : These are used for attracting prospects and to find out their exact area and level of service expectations, new ideas, or response to new ideas, etc. 23/07/2013 36© Himansu S M
  37. 37. NEW AVENUES IN SERVICES MARKETING • Internet and World Wide Web (www) : Perhaps the most revolutionary technological advancements to have happened in the 20th. Century is the Internet and World wide web. By this both the provider and the consumer are close to each other, in fact all are closer today. Providing this facility itself is a huge service, thro’ which almost every service has some benefit. 23/07/2013 37© Himansu S M
  38. 38. NEW AVENUES IN SERVICES MARKETING • Information Technology and computers : This again has become the part and parcel of our lives today. Any service related to this is in enormous proportion. • Advanced Communications : Refinement and advancements in telecommunication shows great opportunities for service providers to exploit. 23/07/2013 38© Himansu S M
  39. 39. THE END © Himansu S M / 25-Aug-2011 23/07/2013 © Himansu S M 39