Introduction to service marketing


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This is a compilation of introductory notes on Service Marketing with emphasis on meaning, evolution, universal nature of services, challenges to delivering services and finally basic insights into 7Ps of marketing from the perspectives of marketing of services.

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Introduction to service marketing

  3. 3. UNIT 1: INTRODUCTION 1.Concept of Service Marketing 2.Development of Service Marketing 3.Differentiating Goods and Service Marketing 4.Challenges for Service Marketers 5.Triangle of Service Marketing 6.Service Marketing Mix February 22, 2014 3
  4. 4. 1. Concept of Service Marketing  For building up our basic understanding about service marketing, we should consider at least three things – defining services, defining service marketing, and recognizing the main marketable service entities.  So, let’s focus on understanding the basic concepts on service, service marketing and main marketable service entities. February 22, 2014 4
  5. 5. Defining Service …  Simply speaking, service is the way how a provider or producer acts by means of its deeds, processes or performances so as to satisfy the expectations, deprivations, motivations and unmet needs of the receivers of the outputs of such deeds, processes or performances.  Facebook provides with social networking features, The British Airways offers with worldclass flight experiences, Norvic Hospital offers quality healthcare solutions in Nepal. These all are a few examples of services.  The quality of such services relies on effectiveness of the actions of the provider – the deeds, the way they are produced – processes, and the effects they generate on experiencing or consuming them – performances. February 22, 2014 5
  6. 6. Defining Service …  A service may be referred to as an intangible and more perishable component of any business offering – absolute package as a core product or as an augmented form to promote the tangible products.  Normally, the production and consumption of services takes place simultaneously.  The purpose of creating such may be business as well as purely service to the society.  There is big difference between the services offered by ‘service not for profit’ organizations and ‘service at a cost’ organizations.  Let’s consider ‘service at a cost’ proposition in business. February 22, 2014 6
  7. 7. Defining Service Marketing …  The overall approach of generating awareness, interest, desire and action (AIDA) to consume services that are put on offer of the provider may be referred to as service marketing.  Communication of the core meaning, benefits, and procedures of consumption of a service; making it convenient for the reach of target customers; building a sound in-bound and outbound logistics support system; selection, development and promotion of an effective service distribution network; and developing and promoting systems visibility are a few integrated functions related to marketing of services. February 22, 2014 7
  8. 8. Defining Service Marketing …  Ordinarily, ‘service marketing’ can be linked to the overall approach adopted by a firm to promote the service component of its offering – no matter whether it is a core offering or augmented one.  The key functions related to marketing of services will include branding and packaging of services, performing advertising and publicity about the services on offer, promoting the business partners that leverage marketing and promotion of services across the markets, assessing the service impact and customer satisfaction, and so on – as it applies to marketing of tangible goods.  In other words, service marketing refers to the overall approach of promoting the marketable service entities. February 22, 2014 8
  9. 9. Main Marketable Entities Can you justify with examples how these elements can serve as marketing entities? 1. Goods or commodities 2. Services Better, differentiate 3. Ideas these in respect with -4. Events a. tangibility, b. perishability, 5. Places c. transfer of ownership, 6. Persons d. heterogeneity, and 7. Information e. timing of production and consumption? 8. Properties 9. Experiences 10.Know-how February 22, 2014 9
  10. 10. Main Marketable Service Entities Can you justify with examples how these elements can serve as marketing entities?  Idea or concept  Know-how What is common in all these entities?  Experience Commonality should be sought  Event in respect with –  Campaign a. Tangibility b. Perishability  Information c. Transfer of ownership  Technology d. Heterogeneity  Value addition e. Timing of production and consumption February 22, 2014 10
  11. 11. Implications of Intangibility  Services cannot be inventoried.  Services cannot be patented.  Services cannot be readily displayed or communicated.  Pricing is difficult.  Services cannot be physically handed over the buyer after transaction.  There will remain a long-term debate over the ownership of services as they cannot be fully separated from their maker. February 22, 2014 11
  12. 12. Implications of Heterogeneity Service delivery and customer satisfaction depend on employee actions. Service quality depends on many uncontrollable factors. There is no sure knowledge that the service delivered matches what was planned and promoted. Quality of delivered services will vary from person to person delivering it. Different customers will have varying level of perception on delivered service quality. February 22, 2014 12
  13. 13. Implications of Simultaneous Production and Consumption Customers participate in the process and affect the transaction. Customers affect each other, a less satisfied customer may affect adversely to a greater extent. Employees affect greatly the service outcomes. Mass production of services is quite difficult. If not consumed immediately, many services turn into big cost to the firm. February 22, 2014 13
  14. 14. Implications of Perishability  It is difficult to synchronize supply and demand of services.  Services cannot be returned or resold.  They cannot be stocked for future sale or use.  Opportunity cost is always unpredictable. February 22, 2014 14
  15. 15. Value Added by Physical, Intangible Elements Helps Distinguish Goods and Services February 22, 2014 15
  16. 16. Tangibility Spectrum Salt  Soft Drinks  Detergents  Automobiles  Cosmetics Fast-food  Outlets  Tangible Dominant February 22, 2014  Fast-food Outlets Intangible Dominant   Advertising Agencies Airlines Investment Management Consulting    16 Teaching
  17. 17. Main Marketable Service Entities Can you justify with examples how these elements can serve as marketing entities?  Idea or concept What is common in all  Know-how these entities?  Experience Commonality should be  Event sought in respect with – a. Tangibility  Campaign b. Perishability  Information c. Transfer of ownership  Technology d. Heterogeneity e. Timing of production  Value addition and consumption February 22, 2014 17
  18. 18. More Examples of Services… 1. What does an academic advisor do? 2. What services does a five-star hotel sell? 3. What services does your university and college offer? 4. What does a cinema hall do? 5. What about The British Airways? 6. What does The Bir Hospital do? 7. What does KFC get in return of the process and branding of its products throughout the world? 8. What does an internet café do? 9. What does a research firm do? 10. What does an after sales service firm do? February 22, 2014 18
  19. 19. A Few Examples of Service Industries 1. Health Care: hospital, medical practice, dentistry, eye care, etc. 2. Professional Services: accounting, legal, architectural, research and innovation, consulting, management contracts, etc. 3. Financial Services: banking, investment advising, insurance 4. Hospitality: restaurant, hotel/motel, bed and breakfast, ski, resort, rafting, etc. 5. Travel: airlines, travel agencies, theme park, etc. 6. Public Service: national security, defense, general administration, etc. 7. Social Service: politics, economic development, NGO/INGO services, etc. 8. Education: all type of educational services, counseling, coaching, teaching, etc. 9. Others: hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, etc. February 22, 2014 19
  20. 20. Discussion Questions… 1. Marketing of services is equally applicable tangible goods and commodities as it applies to intangibles. Comment. 2. Rather than being a separate discipline, service marketing is an integral concept of marketing itself. Comment and justify. 3. Define service marketing and give a few examples of service entities that can be marketed. 4. Discuss with examples the various sectors of services. February 22, 2014 20
  21. 21. 2. Development of Service Marketing What resulted in evolution of services? 1. Evolution of human being as a social entity required services of others for living better lives. 2. The financial prosperity and well-being of people made it realize the need of special services in which they could spend their disposable money. 3. Changing behavior and values of people forced them realize the need of services. 4. Felt importance of spending some portion of life in pleasure, entertainment and leisure resulted evolution of services as alternatives to it. 5. A range of survival needs also resulted in evolution of services. February 22, 2014 21
  22. 22. What resulted in evolution of services? 6. To facilitate the challenges of material developments, it required a number of services. 7. Various new inventions required to be attached with a number of services. 8. More service sectors evolved to create jobs, empowerment and employment as part of government and social development missions. 9. Due to more educated and aware people, they got realized a number of services required. 10.To meet the ever-increasing and ever-evolving unmet needs of the human beings. February 22, 2014 22
  23. 23. Additional Reasons of Growth of Services 1. Evolution of service-based economies 2. Economic changes 3. Service as a business imperative in manufacturing and IT 4. Increasing needs of professional services, especially in hospitality, research and innovation 5. Industrial deregulation; political legal changes; policy changes 6. Globalization 7. Socio-demographic changes 8. Technological changes February 22, 2014 23
  24. 24. A Few Evolutionary Landmarks of Services Phase I: Argumentation (Prior to 1980s) Phase II: Foundation Phase (1980 – 1985) Phase III: Independent Phase (1986 onwards) 1. Can you explain what happened during these phases? And why these phases are called argumentation, foundation and independent? 2. Also discuss how the need of marketing of services evolved as one of the core marketing concepts. February 22, 2014 24
  25. 25. More discussion questions… Q1. Discuss briefly how service marketing evolved passing across various stages of evolution of core marketing concepts. Q2. Rather than itself being a separate discipline, service marketing may be referred to as an integral component of evolution of the concept of marketing. Comment. Q3. Elaborate the various factors that resulted in evolution of service marketing. February 22, 2014 25
  26. 26. 3. Differentiating Goods and Service Marketing Use the bases of differentiation as given in the next slide and discuss in class how these bases apply in the cases of marketing of goods and services. Try to figure out 2-3 differences per basis of differentiation given here. February 22, 2014 26
  27. 27. 3. Differentiating Goods and Service Marketing Let’s compare it from at least five perspectives… Marketing of Goods ? Basis of comparison 1. Tangibility Marketing of Services ? ? 2. Perishability ? ? 3. Timing of production and consumption 4. Separating from its creator 5. Heterogeneity of offered quality ? ? ? February 22, 2014 ? ? 27
  28. 28. 4. Challenges for Service Marketers 1. Since the services are intangible, it is quite difficult to define and improve their quality. 2. Communicating and testing new services is always complicated as they do not have any tangible form. 3. Communicating and maintaining a consistent image is always a tough task. 4. Motivating and sustaining employee commitment to serve the best is a highly complicated task. 5. Coordinating marketing, operations and human resource efforts for best service delivery is another challenge. 6. Setting prices of services is very much difficult job. 7. Standardization and customization of services is difficult. February 22, 2014 28
  29. 29. 5. Triangle of Service Marketing  It is a tri-logical concept advocating that effectiveness of service delivery relies on three integral elements – company that offers of owns services, customers for whom the services are targeted to, and the employees responsible for the delivery of services.  It all talks about how the company, its employees and customers can work collectively for setting, enabling and delivering the promises more effectively. February 22, 2014 29
  30. 30. The Services Marketing Triangle Company (Management) enabling the promise Employees setting the promise Interactive Marketing Customers delivering the promise February 22, 2014 30
  31. 31. The Services Triangle and Technology Technology connects all the agencies responsible in it. Company or Management Technology Customers or Users Employees or Providers February 22, 2014 31
  32. 32. Ways to Use the Services Marketing Triangle Specific Service Implementation Overall Strategic Assessment 1. How is the service organization doing on all three sides of the triangle? 1. What is being promoted and by whom? 2. Where are the weaknesses? 3. Are the supporting systems in place to deliver the promised service? 3. What are the strengths? February 22, 2014 2. How will it be delivered and by whom? 32
  33. 33. Discussion Question Take for an example, a service company and try to figure out the areas where the company management, its employees and customers can work collectively to enhance the relevance of quality of services it delivers and also try to figure out a few consequences if they failed to maintain a perfect relationship. February 22, 2014 33
  34. 34. 6. Service Marketing Mix  Product, price, place and promotion decisions are referred to as traditional elements of marketing mix.  Service marketing mix goes three steps further as it incorporates additional three elements including people, physical evidence and processes involved in production and consumption of services. February 22, 2014 34
  35. 35. 7 Ps in Service Marketing 1. 2. 3. 4. Product Price Place Promotion Building Customer Relationships Through People, Processes, and Physical Evidence 5. People 6. Process 7. Physical Evidence February 22, 2014 35
  36. 36. Expanded Marketing Mix for Services PRODUCT PLACE P R O M O T IO N P R IC E P h y s ic a l g o o d fe a tu re s C h a n n e l ty p e P ro m o tio n b le n d F le x ib ility Q u a lity le v e l E x p o s u re S a le s p e o p le P ric e le v e l A c c e s s o rie s In te rm e d ia rie s A d v e rtis in g T e rm s P a c k a g in g O u tle t lo c a tio n D iffe re n tia tio n W a rra n tie s T ra n s p o rta tio n S a le s p ro m o tio n P u b lic ity P ro d u c t lin e s S to ra g e B ra n d in g A llo w a n c e s
  37. 37. Expanded Marketing Mix for Services PEO PLE P H Y S IC A L E V ID E N C E PROCESS E m p lo ye e s F a c ility d e s ig n F lo w o f a c tivitie s C u s to m e rs E q u ip m en t N u m b e r o f s te p s C o m m u n ic a tin g c u ltu re an d va lu es S ig n a g e L e ve l o f c u s to m e r in vo lve m e n t E m p lo ye e re s e a rc h E m p lo ye e d re s s O th e r ta n g ib le s
  38. 38. Ways to Use the 7 Ps Overall Strategic Assessment Specific Service Implementation 1. How effective is a firm’s services marketing mix? 2. Is the mix well-aligned with overall vision and strategy? 3. What are the strengths and weaknesses in terms of the 7 Ps? 1. Who is the customer? 2. What is the service? 3. How effectively does the services marketing mix for a service communicate its benefits and quality? 4. What changes or improvements are needed? February 22, 2014 38
  39. 39. Discussion Question Take for example, a service related offering of a company and closely identify and analyze the various aspects in line with 7Ps related to this offering. Also explore different problems, challenges or issues aligned to managing the mix of these 7 elements of selected service. February 22, 2014 39
  40. 40. Discussion Question Thank You ! February 22, 2014 40