Services Marketing


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Some basic concepts on Services Marketing

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Services Marketing

  1. 1. Services Marketing Session 1
  2. 2. Tale of two IT Majors-Infosys and IBM <ul><li>Infy </li></ul><ul><li>Headquartered in Bangalore, India </li></ul><ul><li>Established in 1981 </li></ul><ul><li>Started out as an IT services provider </li></ul><ul><li>Current Yr Revenues: $ 5 Billions </li></ul><ul><li>IBM </li></ul><ul><li>Headquarted in Armonk,NY </li></ul><ul><li>Established in 1881 </li></ul><ul><li>Started out as a manufacturer of puched card data processing equipemts </li></ul><ul><li>Current Yr Revenues: $ 100 Billion </li></ul>
  3. 3. Offerings from IBM <ul><li>Products </li></ul><ul><li>Systems and Servers </li></ul><ul><li>(Blade Servers, Cluster Servers,….) </li></ul><ul><li>Software </li></ul><ul><li>(Lotus,Rational,Websphere,Tivoli,DB2) </li></ul><ul><li>POS and Self Service Offerings </li></ul><ul><li>(kiosks, POS, printers,dispalys) </li></ul><ul><li>Storage Systems </li></ul><ul><li>( Disks,Tapes, SANs,….) </li></ul><ul><li>Services </li></ul><ul><li>Business Continuity and Resiliecy Services </li></ul><ul><li>End-User Services </li></ul><ul><li>IT strategy and Architecture Services </li></ul><ul><li>Maintenance and Technical Support Services </li></ul>
  4. 4. Offerings from Infosys <ul><li>Products </li></ul><ul><li>Infosys ActiveDesk </li></ul><ul><li>Finacle </li></ul><ul><li>Infosys mConnect </li></ul><ul><li>Infosys Unified Communication and Collaboration </li></ul><ul><li>Services </li></ul><ul><li>IT Services </li></ul><ul><li>Engineering Services </li></ul><ul><li>Consulting Services </li></ul><ul><li>BPO Services </li></ul>
  5. 5. What are Services? <ul><li>Deeds </li></ul><ul><li>Processes </li></ul><ul><li>Performances </li></ul>
  6. 6. What are Services? <ul><li>Economic Activity </li></ul><ul><li>Output not a physical product </li></ul><ul><li>Generally consumed at the time it is procuced </li></ul><ul><li>Provides Added Value </li></ul><ul><li>Value in terms of intangibles(amusement,health,security,accomodation) </li></ul>
  7. 7. Industries within the Services Sector <ul><li>Transportation and Utilities </li></ul><ul><li>Transportation </li></ul><ul><li>Railroad Transportation </li></ul><ul><li>Local and Suburban Transport </li></ul><ul><li>Water Transportation </li></ul><ul><li>Air Transportation </li></ul><ul><li>Pipelines </li></ul><ul><li>Communication </li></ul><ul><li>Telephone and Telegraph </li></ul><ul><li>Radio and Television Broadcating </li></ul><ul><li>Electric, gas and Sanitary Services </li></ul>
  8. 8. Industries within the Services Sector <ul><li>Wholesale Trade </li></ul><ul><li>Retail Trade </li></ul><ul><li>Finance,Insurance and Real Estates </li></ul><ul><li>Hotels and Lodging </li></ul><ul><li>Health Services </li></ul><ul><li>Legal Services </li></ul><ul><li>Government Services </li></ul>
  9. 9. Services versus Customer Services <ul><li>Services can be offered by wide range of companies. Manufacturing and Tech cos also can provide services </li></ul><ul><li>Customer Services offered by wide range of companies also </li></ul><ul><li>Customer Service: Service provided in support of company’s core products </li></ul>
  10. 10. Customer Service <ul><li>Usually, not chargeable </li></ul><ul><li>Essential to building customer relationships </li></ul>
  11. 11. Customer Service….. <ul><li>Airtel Employee attending billing complaint </li></ul><ul><li>Dell employee explaining laptop operations on phone </li></ul><ul><li>Indian Railway Employee attending to passenger Queries </li></ul><ul><li>LG employee explaining remote operations to customer </li></ul>
  12. 12. Tangibilty Spectrum <ul><li>Tangible…..detect with senses </li></ul><ul><li>Very few products are purely tangible or purely intangible </li></ul><ul><li>Services tend to be more intangible than manufactured products </li></ul><ul><li>Manufactured products tend to be more tangible than services </li></ul>
  13. 13. The Importance of Services <ul><li>Services play an increasingly dominant role in a developing country </li></ul><ul><li>like India </li></ul>
  14. 14. Percentage of GDP from Services <ul><li>Hong Kong…90.6% </li></ul><ul><li>Netherlands: 79.6% </li></ul><ul><li>USA: 78.7% </li></ul><ul><li>Japan: 72.3% </li></ul><ul><li>India: 53.8% </li></ul><ul><li>China: 40% </li></ul>
  15. 15. Percentage of GDP from Agriculture <ul><li>Somalia….65% </li></ul><ul><li>Liberia…..60% </li></ul><ul><li>Myanmar: 56.4% </li></ul><ul><li>India: 18.6% </li></ul><ul><li>Japan: 1.1% </li></ul><ul><li>USA: 1% </li></ul><ul><li>UK: 0.5% </li></ul>
  16. 16. Percentage of GDP from Industry <ul><li>Quatar………80% </li></ul><ul><li>Iraq………….66% </li></ul><ul><li>Angola……..65% </li></ul><ul><li>China………47.3% </li></ul><ul><li>Uk………….23% </li></ul><ul><li>Japan……..21% </li></ul><ul><li>India………..16% </li></ul><ul><li>USA…………14% </li></ul>
  17. 17. Fillip to Services Marketing <ul><li>Deregulation in several key industries(Airlines, Telecommunication, Education,Insurance and Healthcare) </li></ul><ul><li>Professional Service Needs </li></ul>
  18. 18. Services Marketing <ul><li>Different from product marketing,though fundamental princples remain same </li></ul><ul><li>Better Service translates into increased profits </li></ul><ul><li>Quality of service remains very unsatisfactory </li></ul>
  19. 19. Measuring Customer Satisfaction at JUSCO <ul><li>Jamshedpur Utilities and Services Co. Ltd. Created out of Tata Steel Town Services Division in 2004 </li></ul><ul><li>India’s only comprehensive urban infrastructure service provider </li></ul><ul><li>Mission: providing “quality services for life” </li></ul><ul><li>Services include water,power,infrastructure,public health and horticultural services </li></ul>
  20. 20. CSI at JUSCO
  21. 21. Servicewise CSI at JUSCO
  22. 22. Poor Customer Service…many reasons <ul><li>Tiered Service….many unhappy </li></ul><ul><li>Self Service Technologies…no human interaction </li></ul><ul><li>Technology Failures </li></ul><ul><li>High expectations </li></ul><ul><li>Organizations too lean and understaffed </li></ul><ul><li>Availibility of human resources </li></ul><ul><li>Inadequate training, compensation and empowerment </li></ul>
  23. 23. Services and Technology <ul><li>Technology dramatically changing the nature of services </li></ul><ul><li>New service offerings(eMedicine,remote support of Software Applications,mobile VAS applications) </li></ul><ul><li>Innovations in service delivery(eTicketing,Internet Banking) </li></ul>
  24. 24. Technology-the Dark Side <ul><li>Lack of privacy (unwelcome phone calls,emails) </li></ul><ul><li>Lack of human interaction </li></ul><ul><li>Huge Investments-unsure about paybacks </li></ul>
  25. 25. Technology and New Service Offerings <ul><li>Travel aggregators( </li></ul><ul><li>Education portals( ) </li></ul><ul><li>Online booksellers( ) </li></ul><ul><li>Online Auctionsites( ) </li></ul>
  26. 26. Technology…New Ways of Delivering Services <ul><li>Facilitates </li></ul><ul><li>Learning and Information Seeking </li></ul><ul><li>Transactions </li></ul><ul><li>* Retail </li></ul><ul><li>* B2B(eProcurement sites like w,www, , etc.) </li></ul><ul><li>Basic customer service </li></ul><ul><li>* Bill paying </li></ul><ul><li>* Query handling </li></ul><ul><li>* Checking account records </li></ul><ul><li>* Order Tracking </li></ul>
  27. 27. Customer Service….a full circle Face to Face Interactions Telephone Based Services IVR systems Internet Based Customer Service Mobile based Customer Service
  28. 28. Technology Enables Customers <ul><li>Self-Service Technologies(SSTs) </li></ul><ul><li>Customers operate their Internet Enabled Bank Accounts </li></ul><ul><li>Customers check in Flights Online or through Kiosks </li></ul><ul><li>Customers place orders and track orders at eCommerce sites </li></ul>
  29. 29. Technology Enables Employees <ul><li>Customer Relationship Management Software </li></ul><ul><li>Availibilty of comprehensive information about customer helps employees serve customers better </li></ul><ul><li>Sales Support Software </li></ul><ul><li>Availibilty of comprehensive information about products and services help serve customers better </li></ul><ul><li>Widely used by banks,hotels,insurance companies,airlines etc. </li></ul>
  30. 30. Technology Enables Globalization of Services <ul><li>Information, Transaction and Customer Services move across continents </li></ul><ul><li>Virtual Teams(Boeing) </li></ul><ul><li>New opportunities </li></ul><ul><li>Improved efficiency and effectiveness of service businesses </li></ul>
  31. 31. Difference in Goods versus Services Marketing- Tangibility <ul><li>Goods….Tangible </li></ul><ul><li>Services…..Intangible </li></ul><ul><li>Implications: </li></ul><ul><li>Cannot be stored </li></ul><ul><li>Cannot be patented </li></ul><ul><li>Cannot be displayed or communicated </li></ul><ul><li>Difficult to price </li></ul>
  32. 32. Intangible Services <ul><li>Actions performed by providers and directed towards customers </li></ul><ul><li>Intangible Services,tangible components </li></ul><ul><li>Many services difficult to comprehend </li></ul><ul><li>Assessing Quality difficult </li></ul>
  33. 33. Marketing Challenges for Service Providers <ul><li>Synchronising Demand and Supply </li></ul><ul><li>New service concepts easily copied…difficult to differentiate </li></ul><ul><li>As customers find it difficult to assess quality,what to communicate? </li></ul><ul><li>Difficult to determine costs </li></ul><ul><li>How to arrive at pricing? </li></ul>
  34. 34. Differences in Goods and Services Marketing- Heterogenity <ul><li>Two Michael Jackson performances are not identical </li></ul><ul><li>No two services are identical </li></ul><ul><li>Employees differ in their performances </li></ul><ul><li>Each customer has unique demand </li></ul><ul><li>Human interaction ( between and among employees and customers) is the key </li></ul>
  35. 35. Marketing Challenges for Service Providers <ul><li>Ensuring consistent service quality is a challenge </li></ul><ul><li>Numerous factors beyond control by service provider </li></ul><ul><li>Service Manager never knows for sure whether service delivered as per plan or what is promoted </li></ul>
  36. 36. Differences in Goods and Services Marketing…… Simultaneous production and consumption <ul><li>Most goods produced first, then sold and consumed </li></ul><ul><li>Most goods sold first, then produced and consumed simultaneously </li></ul><ul><li>Lux soap manufactured in Mumbai, sold after a month in Muzaffarpur and used over a month </li></ul><ul><li>A theatre performance is produced and consumed at the same time </li></ul><ul><li>Customers often present when service being produced </li></ul><ul><li>Other customers present affect experience </li></ul><ul><li>Service provider essential ingredient for experience </li></ul>
  37. 37. Marketing Challenges for Service Providers <ul><li>Mass production is difficult,if not impossible </li></ul><ul><li>No significant economies of scale through centralization </li></ul><ul><li>Need for rekative decentralization for convenience </li></ul><ul><li>Problem customers </li></ul>
  38. 38. Differences in Goods and Services Marketing- Perishability <ul><li>Services cannot be stored, resold or returned </li></ul>
  39. 39. Marketing Challenges for Service Providers <ul><li>Demand Forecasting </li></ul><ul><li>Creative planning for capacity utilization </li></ul>
  40. 40. Services Marketing….the Seven Ps <ul><li>Product </li></ul><ul><li>Price </li></ul><ul><li>Promotion </li></ul><ul><li>Place </li></ul><ul><li>People </li></ul><ul><li>Physical Evidence </li></ul><ul><li>Process </li></ul>
  41. 41. People-the Fifth P <ul><li>All human actors provide cues </li></ul><ul><li>Dress,appearance,behaviour all influence pereptions </li></ul><ul><li>Service provider is the service </li></ul><ul><li>Person may play relatively small part……but critical </li></ul>
  42. 42. Physical Evidence-the Sixth P <ul><li>The Environment where service is delivered </li></ul><ul><li>Where the firm and customer interact </li></ul><ul><li>Any tangible components that faccilitate performance </li></ul><ul><li>Includes all tangible representations (brochure,letterhead,signage etc.) </li></ul><ul><li>Servicscape </li></ul><ul><li>Cues </li></ul><ul><li>Strong and consistent messages </li></ul>
  43. 43. Process-the Seventh P <ul><li>Operational Flow give customers evidence to judge services </li></ul><ul><li>Production Line-Standardized approach or Empowered/Customized approach </li></ul>
  44. 44. Marketing Mix Imperative <ul><li>All Elements of Marketing Mix should be consistent with vision and market position </li></ul>
  45. 45. Staying focused on the customer <ul><li>All strategies dveloped with an eye on the customer </li></ul><ul><li>All implementations carried out with understanding of their impact on the customer </li></ul><ul><li>All decisions re new services & communication will integrate customer’s point of view </li></ul><ul><li>Operations and HR decisions will be considered in terms of their impact on customers </li></ul>
  46. 46. The Importance of the Customers <ul><li>Customers as Assets </li></ul><ul><li>To be valued,developed and retained </li></ul><ul><li>All strategies and tools: Focus on customer relationship building and loyalty </li></ul><ul><li>No transactional focus </li></ul><ul><li>CRM: not a software, but a business philosophy </li></ul>
  47. 47. Serving Customers in the Downturn <ul><li>Usual corporate reaction to recession: belt tightening </li></ul><ul><li>One major danger: compromising relationship with the best customers </li></ul><ul><li>Key relationships must be nurtured and grown </li></ul><ul><li>No compromises in customer sevices to the best customers </li></ul><ul><li>Even during recession,some customers want more than lowest prices </li></ul>
  48. 48. Serving Customers in the Downturn <ul><li>High Yield customers most profitable </li></ul><ul><li>Cut Service: Price sensitive customers may not be lost </li></ul><ul><li>Cut Service: High Yield customers will depart </li></ul><ul><li>Common fallacy : “All customers want is a low price” </li></ul><ul><li>Most cos don’t sell pure commodities </li></ul>
  49. 49. Downturn in the Travel Industry <ul><li>Business Class customers often pay ten times </li></ul><ul><li>Profitability of almost every flight depends on them </li></ul><ul><li>Easy to fill planes-just cut prices </li></ul><ul><li>Much harder to make money </li></ul><ul><li>2-3% of airlines customers account for 25% of revenues </li></ul>
  50. 50. Airlines strategy during downturn <ul><li>Cutting costs </li></ul><ul><li>If services re cut for high-yield passengers,needless commoditization </li></ul><ul><li>Deathly spiral,if major carriers follow strategy of budget carriers </li></ul>
  51. 51. High Yield Fliers <ul><li>Easy to identify most profitable customers from database </li></ul><ul><li>Frequent Flier records: Who boards most flights/logs most miles </li></ul><ul><li>Ticket Sales: How much customer pays for each flight? </li></ul><ul><li>Combine the two: Who flies often at high prices </li></ul>
  52. 52. <ul><li>United Airlines Targets High-Yield Fliers </li></ul><ul><li>New Program: Global Services </li></ul><ul><li>Not only based on the number of flights,but also on amounts of money spent on flights </li></ul><ul><li>Separate check-in Counters at major airports </li></ul><ul><li>Separate check-in areas away from crowded ticket counters </li></ul><ul><li>Special area overstaffed to minimize check-in time </li></ul>
  53. 53. Global Services program at <ul><li>Customers escorted in front of security </li></ul><ul><li>Adavantage: arrive at airport later, go to boarding area sooner </li></ul><ul><li>Better seating preference </li></ul><ul><li>Better meal choices </li></ul><ul><li>Far more personal attention </li></ul><ul><li>United will call 55 min before departure,escorted from airport gate </li></ul>
  54. 54. GAPS Model of Service Quality Expected Service Perceived Service Service Delivery Customer-driven service designs and standards External communications to customers Company perceptionsof consumer expectations Customer Gap Customer Company Gap 4 Gap 3 Gap 1 Gap 2
  55. 55. The Customer Gap <ul><li>Difference between customer expectations and perceptions </li></ul><ul><li>Expectations: Reference points customer have coming in to a service experience </li></ul><ul><li>Perception: Service,as actually received </li></ul><ul><li>Firms will want to close this gap </li></ul><ul><li>To close this, four other gaps, the Provider Gaps must be closed </li></ul>
  56. 56. The Provider Gaps <ul><li>Gap 1 : Not knowing what customers expect </li></ul><ul><li>Gap 2: Not selecting the right service designs and standards </li></ul><ul><li>Gap 3: Not delivering to service standards </li></ul><ul><li>Gap 4: Not matching performances to promises </li></ul>
  57. 57. The Customer Gap <ul><li>Perceived Service: Subjective assessment of actual service experiences </li></ul><ul><li>Expected Services: Standards or reference points for performance against which service experiences are compared: </li></ul><ul><li>Expected Services: What should happen </li></ul>
  58. 58. Expected Services <ul><li>Market-Controlled Factors </li></ul><ul><li>Pricing </li></ul><ul><li>Advertising </li></ul><ul><li>Sales </li></ul>
  59. 59. Expected Services <ul><li>Limited control by marketer </li></ul><ul><li>Innate personal needs </li></ul><ul><li>Word-of-Mouth Communication </li></ul><ul><li>Competetitive offerings </li></ul>
  60. 60. Services: Important differences Traditionally grouped by Industry Tunnel Vision: Look outside own industries
  61. 61. Service Processes <ul><li>Important basis of classification of services </li></ul><ul><li>Process: Particular method of operation, or series of operation </li></ul><ul><li>Process: Multiple steps, often in predefined sequence </li></ul><ul><li>Process: Takes an input and transforms to output </li></ul><ul><li>What gets processed: People and Objects </li></ul>
  62. 62. Who or what is the Direct Recipient of the Service? People Possessions Tangible Actions Intangible Actions People Processing Possession processing Mental stimulus processing What is the nature of the service act? Information processing
  63. 63. People Processing <ul><li>Services directed at People’s bodies </li></ul><ul><li>Passenger transportation </li></ul><ul><li>Health care </li></ul><ul><li>Lodging </li></ul><ul><li>Beauty Salons </li></ul><ul><li>Physical Therapy </li></ul><ul><li>Fitness Center </li></ul><ul><li>Restaurant/Bars </li></ul><ul><li>Barbers </li></ul><ul><li>Funeral Services </li></ul>
  64. 64. People Processing <ul><li>Customers must physically enter the service system </li></ul><ul><li>Must be prepared to spend time interacting and cooperating with the service provider </li></ul><ul><li>Output: A customer who has achieved a new state </li></ul>
  65. 65. Possession Processing <ul><li>Services directed at physical possessions </li></ul><ul><li>Freight transportation </li></ul><ul><li>Repair and Maintenance </li></ul><ul><li>Warehousing and storage </li></ul><ul><li>Office Cleaning Services </li></ul><ul><li>Retail distribution </li></ul><ul><li>Laundry and dry cleaning </li></ul><ul><li>Refuelling </li></ul><ul><li>Landscaping and gardening </li></ul><ul><li>Disposal and recycling </li></ul>
  66. 66. Possession Processing <ul><li>Customers less physically involved </li></ul><ul><li>Usually limited to dropping off item, requesting for service, explain problem and returning to pick up item/pay bill </li></ul><ul><li>Sometimes service factory moves to customer </li></ul><ul><li>Output: Satisfactory solution to custome problem or tangible enhancement to item </li></ul>
  67. 67. Mental stimulus processing <ul><li>Services directed at people’s minds: </li></ul><ul><li>Advertising/PR </li></ul><ul><li>Arts and entertainment </li></ul><ul><li>Broadcasting and Cable </li></ul><ul><li>Management Consulting </li></ul><ul><li>Education </li></ul><ul><li>Information Services </li></ul><ul><li>Music concerts </li></ul><ul><li>Psychotherapy </li></ul><ul><li>Religion </li></ul><ul><li>Voice Telephone </li></ul>
  68. 68. Mental stimulus processing <ul><li>Power to shape attitudes and influence behaviour </li></ul><ul><li>Strong ethical standards and careful monitoring required </li></ul><ul><li>Investments of time requirement </li></ul><ul><li>No requirement of physical presence in the service factory </li></ul><ul><li>Need to be mentally in communication </li></ul><ul><li>Often created in one location and transmitted over long distances </li></ul><ul><li>Core content: Information </li></ul>
  69. 69. Information processing <ul><li>Services directed at intangible assets: </li></ul><ul><li>Accounting </li></ul><ul><li>Banking </li></ul><ul><li>Data Processing </li></ul><ul><li>Data Transmission </li></ul><ul><li>Insurance </li></ul><ul><li>Legal Services </li></ul><ul><li>Programming </li></ul><ul><li>Research </li></ul><ul><li>Securities Investment </li></ul><ul><li>Software Consulting </li></ul>
  70. 70. Information Processing <ul><li>Most intangible form of service offering </li></ul><ul><li>Can be converted into more tangible forms </li></ul><ul><li>Some are highly dpendent on efficient collecting of information </li></ul>
  71. 71. For both mental-stimulus and Information Processing Services <ul><li>Is there any need for customer to visit the service factory? </li></ul><ul><li>More habits and traditions </li></ul><ul><li>Continous shift to arms-length transactions </li></ul>
  72. 72. Designing the Service Factory <ul><li>People-processing Services: customers need to visit service factory </li></ul><ul><li>Satisfaction influenced by : </li></ul><ul><li>* Appearance and features of external and internal service facilties </li></ul><ul><li>* Encounters with service personnel </li></ul><ul><li>* Interactions with self service equipments </li></ul><ul><li>* Characteristics and behavious of other customers </li></ul>
  73. 73. Designing the Service Factory <ul><li>Facilties should be designed to be pleasing to customers and efficient to operate </li></ul><ul><li>Need for marketing managers to work with counterparts </li></ul><ul><li>Exterior: First Impressions </li></ul><ul><li>Interiors: Stage </li></ul><ul><li>Longer the customer remains, the more the facilities should be attractive and comfortable </li></ul>
  74. 74. Alternative Channels for Service Delivery <ul><li>Only people processing requires customers visit service factory </li></ul><ul><li>For others,various alternative delivery channels: </li></ul><ul><li>* Let customers come to user-friendly factory </li></ul><ul><li>* Limiting contact to “back office” </li></ul><ul><li>* Coming to customer’s home or office </li></ul><ul><li>* Conducting business via phone/Fax/email/Website </li></ul>
  75. 75. Innovation in Service Delivery <ul><li>Physical and Electronic Channels allow customers and providers conduct transactions at arms length </li></ul><ul><li>Information based items delivered immediately </li></ul><ul><li>Rethinking Service-Delivery Procedures: Innovation </li></ul><ul><li>From High-Contact to low contact </li></ul><ul><li>Design and location of factory purely on operational priorities </li></ul>
  76. 76. Integrating Marketing,Operations and HR Customers Marketing Management Human Resources Management Operations Management