Services marketing part one

ServicesServicesServicesServices
MarketingMarketingMarketingMarketing
(part one)(part one)(part one)(part one)
Erminia Corsi www.marketenergy.info
(part one)(part one)(part one)(part one)

TopicsTopicsTopicsTopics
•The intangible assets at work
•The Services Marketing Mix
•Positioning Services in Competitive Markets
•The SWOT analysis
•The SWOT analysis
•Prices
•Sales Distribution Channels

TTTThehehehe intangible assets at workintangible assets at workintangible assets at workintangible assets at work
Customer base
Reputation for delivery capacity
Tested and well known business processes
Reliability
Knowledge of the local environment (local utilities)
Deep experience of the management and the personnel
Very well known brand

Basic differences between goods and servicesBasic differences between goods and servicesBasic differences between goods and servicesBasic differences between goods and services
Service products cannot be inventoried
Intangible elements dominate value creation
Services are difficult for customers to evaluate
Distribution channels takes different form
“Service marketing is much broader than the activities and
output of the traditional marketing department, requiring closeclosecloseclose
cooperation between marketers and those managerscooperation between marketers and those managerscooperation between marketers and those managerscooperation between marketers and those managers
responsible for operations and human resourcesresponsible for operations and human resourcesresponsible for operations and human resourcesresponsible for operations and human resources “ (Christian
Groenroos)

The Services Marketing MixThe Services Marketing MixThe Services Marketing MixThe Services Marketing Mix
Variables controlled by marketing managers in traditional markets (the 4 P’s):
Product : physical product or service offered, functionality, appearance,
packaging
Price : list price, discounts, other payment opportunities and conditions
Place (distribution): channel of distribution, territories
Promotion (communication): advertising, public relations,…
To capture the distinctive nature of service performances three variables should be
To capture the distinctive nature of service performances three variables should be
added to the traditional 4P’s:
Physical Environment
Process
People
(7P marketing mix – Booms&Bitner)

The Services Marketing MixThe Services Marketing MixThe Services Marketing MixThe Services Marketing Mix
ProcessProcessProcessProcess : method and sequence of actions in the service performance.
Supplier Performance is not evaluated on the basis of the “core
product” (gas, EE,…) but on the basis of help desk, billing, customerhelp desk, billing, customerhelp desk, billing, customerhelp desk, billing, customer
care, service deliverycare, service deliverycare, service deliverycare, service delivery
PeoplePeoplePeoplePeople : many services depend on direct interaction between
customers and the company’s employees.
customers and the company’s employees.
The nature of these interactions, such as talking to a call center staff,
strongly influences the customers’ perception of service quality
Physical environmentPhysical environmentPhysical environmentPhysical environment : staff members, printed material, contact points
with the customers, counter desks,…

Positioning Services in Competitive MarketsPositioning Services in Competitive MarketsPositioning Services in Competitive MarketsPositioning Services in Competitive Markets
Who is the customer?
What to sell?
At what price?
Answering the following questions
Defining the target market
Defining the value proposition
Which distribution
channel?
How to deliver the
service?
Defining the sales strategy
Defining the process

Positioning Service in Competitive MarketsPositioning Service in Competitive MarketsPositioning Service in Competitive MarketsPositioning Service in Competitive Markets
Basic steps involved in identifying a suitable market position
Market
analysis
•Size
•Composition
•Location
•Trends
•ResourcesInternal
Define, Analyze
Market Segments
Select Target
Segments
to Serve
Articulate Marketing
•Resources
•Reputation
•Constraints
•Values
Internal
analysis
Articulate
Desired Position
in Market
Select Benefits
to Emphasize
to Customers
Analyze
Possibilities for
Differentiation
•Strengths
•Weaknesses
•Current
Positioning
Competitor
analysis
Marketing
Action Plan
Developed from an earlier schematic by
Michael R. Pearce

Positioning Service in Competitive MarketsPositioning Service in Competitive MarketsPositioning Service in Competitive MarketsPositioning Service in Competitive Markets
Market analysis :Market analysis :Market analysis :Market analysis :
define and analyze actual market position, identifying market
segments served, geographical area covered, customer perception of
service performances, define and analyze potential new business :
geographical expansion or offering expansion
Internal assets analysis:Internal assets analysis:Internal assets analysis:Internal assets analysis:
Internal assets analysis:Internal assets analysis:Internal assets analysis:Internal assets analysis:
analyze organization's resources (financial, know how, physical asset)
to identify companies’ capability to strengths the position in the captive
market and/or to develop new business
Competition analysis:Competition analysis:Competition analysis:Competition analysis:
analyze competitors’ strengths and weaknesses

The SWOT analysisThe SWOT analysisThe SWOT analysisThe SWOT analysis
StrengthsStrengthsStrengthsStrengths WeaknessesWeaknessesWeaknessesWeaknesses
An important tool for auditing the overall strategic position of a business
and its environment
OpportunitiesOpportunitiesOpportunitiesOpportunities ThreatsThreatsThreatsThreats

The SWOT AnalysisThe SWOT AnalysisThe SWOT AnalysisThe SWOT Analysis
StrengthsStrengthsStrengthsStrengths
service delivery’s expertise – heating services, energy management,…
location – historical local supplier
quality processes and procedures – help desk already running with
good performance (help desk as a service, not necessarily as a
technology)
customer base
…………
WeaknessesWeaknessesWeaknessesWeaknesses
lack of marketing expertise – no information about the customer base
undifferentiated products and service – no innovation capability yet
stress by new rules and mission
not used to work accordingly to economic efficiency principles
….

The SWOT AnalysisThe SWOT AnalysisThe SWOT AnalysisThe SWOT Analysis
OpportunitiesOpportunitiesOpportunitiesOpportunities
mergers, joint ventures or strategic alliances
developing a multiutility offer
developing a geographical expansion
exploit customer penetration with complementary services
……….
ThreatsThreatsThreatsThreats
ThreatsThreatsThreatsThreats
new competitors, likely aggressive
strong price competition – very high probability of losing margin
competitor developing a strong commercial network
conservative attitude (poor customer orientation in the majority of the
organization)
………

Positioning Services in Competitive MarketsPositioning Services in Competitive MarketsPositioning Services in Competitive MarketsPositioning Services in Competitive Markets
Basic advices for right positioning :
establish a position in the minds of targeted,
-- focus on public servicesfocus on public servicesfocus on public servicesfocus on public services
the position should be singular, providing one simple and consistent
,message
-- close to the customerclose to the customerclose to the customerclose to the customer
-- close to the customerclose to the customerclose to the customerclose to the customer
the position must set a company apart from its competitors
-- focus on local communities needsfocus on local communities needsfocus on local communities needsfocus on local communities needs
a company cannot be all things to all people; it must focus its efforts
-- specializationspecializationspecializationspecialization

Product : defining the Value PropositionProduct : defining the Value PropositionProduct : defining the Value PropositionProduct : defining the Value Proposition
The Value Proposition articulates the position the company
wants to have in the market place, and the “service offer”
identified to be winning in that market place
The Value Proposition, to be effective, should be :
The Value Proposition, to be effective, should be :
specific, for an identified market segment
clear and strongly related to expected customer needs

Developing supplementary servicesDeveloping supplementary servicesDeveloping supplementary servicesDeveloping supplementary services
As competition increases the core product tends to become even
more a pure commodity
The search for competitive advantage in a mature industry often
emphasizes performance on the supplementary services
Supplementary services could be:
Information
Information
Order Taking
Billing
Payment
Help Desk
Add on Services

Developing supplementary servicesDeveloping supplementary servicesDeveloping supplementary servicesDeveloping supplementary services
Information :Information :Information :Information : both new and old customers need to be informed about pricing, contacts point,
service hours, add-on services
Order TakingOrder TakingOrder TakingOrder Taking :::: competition will develop customer switching from one supplier to another.
The process of order taking should be easy, fast and accurate so that customers do not
waste time and endure unnecessary mental or physical effort
Billing :Billing :Billing :Billing : inaccurate, illegible or incomplete bills risk disappointing customers who may, up to
that point, have been quite satisfied with their experience. Customers usually expect bills to
be clear, informative, and itemized in ways that make it clear how the total was computed
Payment :Payment :Payment :Payment : easy payment procedures means save time for the customer
Help Desk :Help Desk :Help Desk :Help Desk : the quality of help desk (to receive an answer in time, with courtesy and
satisfying customer expectations) is one point through which give “tangibility” to the service
AddAddAddAdd----on Services :on Services :on Services :on Services : to complete basic offer with add-on services is an opportunity to strength
customer relationship and increase margin

PricingPricingPricingPricing
Pricing is the key factor by which sales are transformed into revenues
Pricing is typically more complex in services than in manufacturing,
because it is more difficult to determine the financial costs of creating a
process than to identify the cost associated with creating and
distributing physical goods
Assets upon which defining a pricing strategy :
Costs
Competition
Value to Customers

Foundation for setting prices: costsFoundation for setting prices: costsFoundation for setting prices: costsFoundation for setting prices: costs
The cost base for service is based upon : product costs, distribution
costs, process delivery costs
Because of the labor and infrastructure needed to create
performances, the cost base for service has some fixed costs and
some variable costs:
Fixed costs:Fixed costs:Fixed costs:Fixed costs: costs that a supplier would continue to incur even if no services were
sold. This include minimum infrastructure – like personnel, IT, and other - needed to
sold. This include minimum infrastructure – like personnel, IT, and other - needed to
deliver the service
Variable costsVariable costsVariable costsVariable costs refer to the economic costs associated with serving an additional
customer
Semi variable costsSemi variable costsSemi variable costsSemi variable costs represent expenses that rise or fall in a stepwise as the volume
of business increases/decreases (for example infrastructure)
Contribution costsContribution costsContribution costsContribution costs is the difference between the variable cost of selling an extra unit
of service and the money received from the buyer of that service. Contribution goes
to cover fixed and semi variable costs before creating profits

Foundations for setting prices : value to the customerFoundations for setting prices : value to the customerFoundations for setting prices : value to the customerFoundations for setting prices : value to the customer
In order to set an appropriate price marketers need to understand how
customers perceive the service value
Customers are willing to pay higher prices to reduce no monetary
costs of service: save time, reduce unwanted effort, obtain greater
comfort
Strategies for capturing and communicating the value of a service are:
Strategies for capturing and communicating the value of a service are:
Uncertainty reduction
Relationship pricing
Low-cost leadership
Managing the perception of the value

Foundations for setting prices : value to the customerFoundations for setting prices : value to the customerFoundations for setting prices : value to the customerFoundations for setting prices : value to the customer
Uncertainty reduction :
monthly charge with small yearly adjustment
Relationship pricing :
define a pricing strategy in order to consolidate long-term
relationship with the customer and reward customer loyalty
Low-cost leadership :
good only to gain quickly a customer base. Very critical in utilities
good only to gain quickly a customer base. Very critical in utilities
market because low price is perceived as low quality and low
reliability (mainly if not proposed by the traditional supplier)
Managing the Perception Value :
price on the basis of the perceived value for the customer means a
strong knowledge of the customer base to stress values important
for the customer base. (Not easy)

Market SegmentationMarket SegmentationMarket SegmentationMarket Segmentation
A market segmentmarket segmentmarket segmentmarket segment is composed of a group of buyers who share common
characteristics, needs, purchasing behavior or consumption patterns.
Market segmentation criteria could be:
service usage,
purchasing behavior,
average expense,
average expense,
……..
Market segmentation helps defining customer profiling and then focus :
value proposition,
price,
sales organization,
advertising/promotional campaign

Sales Distribution ChannelsSales Distribution ChannelsSales Distribution ChannelsSales Distribution Channels
“Selling” is the new word for public services
“Selling” means not only change “users” into “customers” but
also:
“ keep in touch“ with the customer to negotiate agreements
and sign up contracts !

Sales Channels: an exampleSales Channels: an exampleSales Channels: an exampleSales Channels: an example
Medium
enterprise
Large enterprise
Few customers
High revenue for single customer
Reducing margin for single customer
Lot of competitors Direct sales:Direct sales:Direct sales:Direct sales:
Company’s Sales representatives
Responsible for customer
management
Value Added ResellersValue Added ResellersValue Added ResellersValue Added Resellers
Suppliers of central
heating systems, etc could be
The customer base
Residential
Lot of customers
Small revenue for single customer
High margin (%)for single customer
Few competitors
heating systems, etc could be
a channel for energy services
Franchisee, shopsFranchisee, shopsFranchisee, shopsFranchisee, shops
Internet, Supermarkets,Internet, Supermarkets,Internet, Supermarkets,Internet, Supermarkets,
Telemarketing, ………Telemarketing, ………Telemarketing, ………Telemarketing, ………
Soho

Sales ChannelsSales ChannelsSales ChannelsSales Channels
Direct Sales
Value Added Resellers
Franchisee
Large Retail Channels
Plus Minus
Expensive
(fixed costs)
Easy to manage
and to check performances
Variable cost
(success fee based)
Customer base
Independent organization
Difficult to manage
Geographical presence
Brand recognition
Difficult balance between
cost and revenues
Customer attitudeLow costs for
Large Retail Channels
Door to door sales
Organization
(multilevel marketing)
Telemarketing
Internet
Customer attitude
Start up costs, low margin
Low costs for
high volumes
Presence to the customer,
High redemption,
Variable cost
High success fee
Potential issues for
credibility and image
Start up costs
Collection physical docs
Low cost
Customer attitudeVery low cost

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