A short course on services marketing july 2 k13


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A short course on services marketing july 2 k13

  1. 1. Short Course : July 2013 By Prof S K Palekar 3 Sessions on Services Marketing Audience : PGDM – IM The objective is to prepare you for consulting, business development and operations roles in IT and ITES industries These slides will be put up on http://
  2. 2. 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
  3. 3. Service sector is fastest growing (Rs ‘000 Crores) Indian GDP 159 244 463 888 1736 104 154 280 480 831 209 243 339 445 554 0 200 400 600 800 1000 1200 1400 1600 1800 2000 1970 1980 1990 2000 2007 SER IND AGRI
  4. 4. 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
  5. 5. “Boxed “ Products “Intangible” Services
  6. 6. Generally there is neither a pure product, nor a pure service
  7. 7. HUL sells products but customers buy products + services Customers of Dove soap need BOTH products and services Service costs  Trade margins  Advertising  Transportation  People  Administration You may be making a product But customers want to buy services along with it
  8. 8. Fishermen : “More fish : less cost” solution Cummins : Diesel Engines Promoters go and meet the fishermen and get acquainted Promoters explain type of engines and applications Promoters answer their queries and convince them Distributors stocks engines and spares and ensure availability Distributors take orders, invoice, collect payment Technical installs and trains After sales service for maintenance and repairs Customers Buy Solutions involving Service. You may think you are selling products. skpalekar@hotmail.com
  9. 9. Role of Service as a competitive weapon My product best My price lowest I am close to you skpalekar@hotmail.com
  10. 10. Role of Service in a corporate turnaround Scandinavian Airlines skpalekar@hotmail.com
  11. 11. Upper Part of Maslow’s Pyramid expands faster with affluence Service skpalekar@hotmail.com
  12. 12. 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 skpalekar@hotmail.com
  13. 13. 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 perishable Front ( sales and reception ) capacity can get unutilized if no customer Car Loan is a product. Can be scaled up quickly. skpalekar@hotmail.com
  14. 14. skpalekar@hotmail.com +9821046013 DUSHYANT CORPORATE TRAINERS
  15. 15. 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
  16. 16. 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
  17. 17. 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
  18. 18. 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 Employees skpalekar@hotmail.com
  19. 19. Service Operations Model Management BuyerEmployee A lot of value gets created in this interaction Managing employees To make them Manage customers Managing customer Expectations 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
  20. 20. Nature of Service Intangible Low search attributes ( which can be inspected prior to purchase ) Person dependent High 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 / input Customer 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 people skpalekar@hotmail.com
  21. 21. TYPES OF SERVICES BASED 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)
  22. 22. Different types of persons needed for service RARE EXPERTISE / JUDGEMENT / SKILL Expertise / Experience Lawyer Perform Singer, Dancer, Teacher, Priest Judgment / Decision Doctor MEDIUM EXPERTISE / JUDGEMENT / SKILL Empathy Sales Executives Conversation / Sociability Customer Relation Executives Awareness and Feedback Barber, Tailor LOW EXPERTISE / JUDGEMENT / SKILL Physique Laborer, Guard skpalekar@hotmail.com
  24. 24. People-intensive Services Costs Main 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 end routine / standard operating process at the back end
  25. 25. Equipment –Intensive Services Costs Main 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 Classification automated services vending machines, automated car washes monitored by unskilled labor dry cleaning, door keepers, cleaning operated by skilled labor excavators, airline pilots,
  26. 26. Value embedded in encounters between doctor and patient DIAGNOSIS
  27. 27. Value embedded in encounters between airline staff and passengers CUSTOMER CARE
  28. 28. Value embedded in encounters between a singer and audience ENTERTAINMENT
  29. 29. Value embedded in encounters between a priest and parish FAITH
  30. 30. High and Low Contact Service - 1 Location ( Where to locate ) High contact : Convenient to customer Low 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
  31. 31. 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 Skills High Contact : Capable of interacting with customers, capable of using judgment , capable of using his talent Low Contact : Only Technical skills are needed
  32. 32. High and Low Contact Service - 3 Service Process High 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 customer Service Package High contact : Varies with customer : many choices and outcomes Low contact : Fixed, less extensive
  33. 33. 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, Promotion 3 Ps : High contact like : People, Process, Physical Evidence / Proof serviceProduct INSPECTABLE EXPERIENCED BELIEVED
  34. 34. High Contact Service value creation Customers are homogenized through filtration, access, fencing, selection Service providers are selected Through filtration, access, fencing, selection To match with the expectations of the customers Service providers are prepared to handle the job Customer expectations / scripts are communicated Service delivery process is taught Servicescape is appropriate : Facilities and processes Keep in mind technical logic, customer logic and employee logic Mechanism to handle complaints and counsel The ultimate objective is The “service encounter" should be satisfying for the customers as well as employees
  35. 35. In high contact service Variations are common On both the sides ! Mismatch of expectations is common Complaints should not be treated as exceptions Complaint handling mechanisms Counseling is a regular business process Customer recovery is an important process`
  36. 36. Positioning  Marketing Mix Product Product Place Price Promotion Service People Process Physical Evidence ( Proof )
  37. 37. 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 they select employees induct them on the job train them motivate them provide social glue recognize them incentivize them promote them develop them
  38. 38. Service Profit Chain Model skpalekar@hotmail.com
  39. 39. skpalekar@hotmail.com +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
  40. 40. skpalekar@hotmail.com +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
  41. 41. 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 met Get existing customers to bring new customers Get existing customers to meet new customers
  42. 42. How to have a good service design?  What to plan ? Location, Layout, Fittings, Furnishings, Equipment, Signage, Comfort, Lighting, Temperature, Colors How 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.
  43. 43. How to Plan / Execute Service delivery ? ( Service Marketing Mix ) Standard 4 Ps of products Physical / Material product Price Place (location) Promotion ( communication to attract customers, manage expectations and inform at site) 3 Ps of services People ( 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)
  44. 44. 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.
  45. 45. 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.
  46. 46. 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 skpalekar@hotmail.com
  47. 47. 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 skpalekar@hotmail.com