Services marketing Module 2


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Services marketing Module 2

  1. 1. Marketing Infrastructure Services Infrastructure Services Marketing Module 1
  2. 2. Statistics of INDIA $1.847 trillion (nominal: 10th; 2011)[1] GDP GDP growth $4.530 trillion (PPP: 3rd; 2011)[1] 5.5% (Q1, 2012)[2] $1,514 (nominal: 139th; 2011)[1] GDP per capita GDP by sector Inflation (CPI) Population below poverty line Gini coefficient Labour force Labour force by occupation Unemployment Average gross salary Main industries Ease of Doing Business Rank Exports $3,652 (PPP: 125th; 2011)[1] agriculture: 17.2%, industry: 26.4%, services: 56.4% (2011 est.) WPI: 7.81% (Sep 2012)[3] CPI: 9.73% (Sep 2012)[4] 29.8% (2010) (Note: 32.7% live on less than $1.25 a day 68.7% live on less than $2 a day)[5] 36.8 (List of countries) 487.6 million (2011 est.) agriculture: 52%, industry: 14%, services: 34% (2009 est.) 9.4% (2011 est.)[6] $1,410 yearly (2011)[5] textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software, pharmaceuticals 132nd[7] (2012) External $299.4 billion (2011 est.) Export goods petroleum products, precious stones, machinery, iron and steel, chemicals, vehicles, apparel Main export partners UAE 13%, US 11.4%, China 6.3%, Singapore 5.3% (2011) Imports $461.4 billion (2011 est.) crude oil, precious stones, machinery, fertilizer, iron and steel, chemicals Import goods
  3. 3. Marketing Infrastructure Services SERVICE MARKETING
  4. 4. Marketing Infrastructure Services SERVICES “Service is an act or performance offered by one party to another that is essentially intangible and does not result in the ownership of anything.”
  5. 5. Marketing Infrastructure Services What are Services • The Services Industry Journal defines “Service as any primary or complimentary activity that does not directly produce a physical product, that is, the non goods part of transactions between Buyer & seller” • “Services are those which are separately identifiable essentially intangible activities, which provide want satisfaction when marketed to consumers and/or industrial uses and which are not necessarily tied to the sale of a product or another service” - Stanton
  6. 6. Marketing Infrastructure Services What are Services (Cont) • A Service is an activity or benefit that one party can offer to another that is essentially tangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product – Kotler & Armstrong • Services are deeds, processes & performances produced or coproduced by one entity or person for another entity or person
  7. 7. Marketing Infrastructure Services Changing structure of Employment as an Economy Develops Agriculture Share of Employment Service Industry Manufacturing Time, Per Capita Income *Source: Adapted from IMF , 1997 report
  8. 8. Marketing Infrastructure Services * Source: World fact book 2008
  9. 9. Marketing Infrastructure Services Value added by service Industry categories to the USA GDP
  10. 10. Estimated Size of Service sector in selected countries as a percentage of GDP
  11. 11. Marketing Infrastructure Services Other Service concepts  Service Industries & Companies  Their core product is Service.  Service as Products  Intangible product offerings that customers value and pay for. Sold by service and non-service companies.  Customer Service  Service provided in support of company‟s core products (typically not charged for). It can occur over phone or internet • Derived Service – It suggests that all products and physical goods are valued for the services they provide.
  12. 12. Marketing Infrastructure Services Examples of Service Industries • Health Care - hospital, medical practice, dentistry, eye care • Professional Services accounting, legal, architectural • Financial Services banking, investment advising, insurance • Hospitality - restaurant, hotel/motel, bed & breakfast, ski resort, rafting  Travel - airlines, travel agencies, theme park  Others - hair styling, pest control, plumbing, lawn maintenance, counseling services, health club
  13. 13. Marketing Infrastructure Services Tangible versus intangible elements in goods and services
  14. 14. Marketing Infrastructure Services Increasing importance of Services • • • • • Advances in technology Growth in per capita income A trend towards outsourcing Deregulation Increasing growth in retailing due to increase in propensity to consumer
  15. 15. Marketing Infrastructure Services Need for Services Marketing • In this consumer oriented scenario the service sector is growing rapidly. But there was a lack of innovative marketing on the part of service industry because of: – – – – Limited view of Marketing Limited Competition Non creative Management Lack of Innovation in the Distribution of Services
  16. 16. Marketing Infrastructure Services Need for Services Marketing (Cont) • There is a growing market of services & increasing dominance of services in economies Worldwide & this tremendous growth & economic contributions of the service sector have drawn increasing attention to the issues & challenges of service sector industries Worldwide • Services require a special understanding & unique marketing efforts by marketers.
  17. 17. Marketing Infrastructure Services Further challenges for Service Marketers • How can service quality be defined & improved when the product is intangible • How can new service be designed & tested effectively when the service is essentially an intangible process • How can the firm be certain that it is communicating a consistent & relevant image when so many elements of marketing mix are present • How does the firm accommodate the fluctuating demand when capacity is fixed & service itself is perishable
  18. 18. Marketing Infrastructure Services Further challenges for Service Marketers (Cont) • How should prices be set when it is difficult to determine actual costs of production • How can the balance between standardization & personalization be determined to maximize both the efficiency of the organization & the satisfaction of its customers • How does the firm communicate quality & value to customers when the offering is intangible • How can the organization ensure the delivery of consistent quality service
  19. 19. Marketing Infrastructure Services TRENDS IN SERVICES SECTOR  Service industry known as tertiary industry (primary – agri, mining; secondary – manufacturing)  Share of services, industry, and agriculture in India's GDP is 55.1 per cent, 26.4 per cent, and 18.5 per cent respectively  A KPMG survey of BRIC countries (Brazil, Russia, India and China), has revealed highest confidence among the service sector in India with 60% of the Indian firms expect rise in activity, a few notches above than that of China
  20. 20. Factors stimulating the transformation of the service industry Govt. Policies 1. Changes in regulation s 2. Privatization 3. New rules to protect customers, employees, and the environment 4. New agreements on trade in services Social Changes Business Trends 1. Raising customer 1. Push to increase expectation 2. More affluence 3. More people short of time. 4. Increased desire for buying experience Vs things 5. Rising consumer ownership of computers, cell phones, and high tech equipment 6. Easier access to more information 7.Growing but aging population the share holder value 2. Emphasis on productivity and cost saving 3. Manufacturers add value though service and sell services 4. More strategic alliances and outsourcing 5. Focus on quality and customer satisfaction 6. Growth of franchising 7. Marketing emphasis by nonprofits Advances in Information technology 1. Growth of Internet 2. Greater bandwidth 3. Compact mobile equipments 4. Wireless networking 5. Faster more powerful software's 6. Digitization of text, graphics, audio & video Globalization 1. More companies operating on transnational basis 2.Increased International travel 3. International alliances and merger 4. “Off shoring” of customer service 5. Foreign competitors invade domestic markets New Markets and products categorizes create increased demand for services in many existing markets, making it more competition intensive
  21. 21. Marketing Infrastructure Services
  22. 22. Marketing Infrastructure Services TRENDS IN SERVICES SECTOR Factors contributing to growth: 1. Government Policies – Govt. regulations, – Privatisation 2. Social Changes – Rising customer expectations – More affluence – Increased desire for buying experiences vs products
  23. 23. Marketing Infrastructure Services TRENDS IN SERVICES SECTOR Factors contributing to growth: 3. Business trends – – – 4. Mfrs. Adding value through services Quality Movement Growth of franchising Advances in Information Technology – – 5. Growth of internet Convergence of computers & telecommunications Globalization – – More cos. operating on transnational basis International mergers & aquisitions
  24. 24. Marketing Infrastructure Services TRENDS IN SERVICES SECTOR While almost all service sectors participated in this boom, growth was fastest in communications, banking, hotels and restaurants, trade and business services.
  25. 25. Marketing Infrastructure Services TRENDS IN SERVICES SECTOR The various sectors that combine together to constitute service industry in India are: • • • • • • • • • • • • • Trade Hotels and Restaurants Railways Other Transport & Storage Communication (Post, Telecom) Banking Insurance Dwellings, Real Estate Business Services Public Administration; Defence Personal Services Community Services Other Services
  26. 26. Marketing Infrastructure Services Marketing Mix to Extended Marketing Mix • There have been attempts to develop an 'extended marketing mix' to better accommodate specific aspects of marketing. – For example, in the 1970s, Nickels and Jolson suggested the inclusion of packaging. – In the 1980s Kotler proposed public opinion and political power – Booms and Bitner included three additional 'Ps' to accommodate trends towards a service or knowledge based economy:
  27. 27. Marketing Infrastructure Services INTERNAL SERVICES Service elements within an organization that facilitate creation of--or add value to--its final output • • Includes: – accounting and payroll administration – recruitment and training – legal services – transportation – catering and food services – cleaning and landscaping Increasingly, these services are being outsourced
  28. 28. Marketing Infrastructure Services GOODS AND SERVICES Differences between goods & services • • • • • Customers do not obtain ownership of services Service products are ephemeral & cannot be inventoried Intangible element Customers maybe involved in production process Other people part of product
  29. 29. Marketing Infrastructure Services GOODS AND SERVICES Differences between goods & services • • • • Greater variability in operational inputs & outputs Services are difficult for customers to evaluate Time factor assumes more importance Distribution channel take different forms
  30. 30. Marketing Infrastructure Services Value Added by Tangible vs Intangible Elements in Goods and Services Hi Salt Soft drinks CD Player Golf clubs New car Tailored clothing Furniture rental Fast food restaurant Lo Plumbing repair Office cleaning Health club Airline flight Retail banking Insurance Weather forecast Intangible Elements Hi
  31. 31. Marketing Infrastructure Services CLASSIFICATION OF SERVICES • A significant classification is based on process (taking an input & transforming into an output) • Marketers of services need to understand nature of services to which customers are exposed • Services range from simple procedures to highly complex activities
  32. 32. Marketing Infrastructure Services CLASSIFICATION OF SERVICES People Possession People Processing Possession processing - Passenger transportation - Freight transportation - Health care - Repair & maintenance - Lodging & Restaurant - Retail distribution Tangible actions Mental stimulus - Advtg. & PR - Education - Entertainment & Arts Intangible actions Information processing - Accounting & Bkg - Insurance & Legal - Software Consulting
  33. 33. Marketing Infrastructure Services CLASSIFICATION OF SERVICES 1. People processing – Customers must physically enter the service system as they are integral part of process – They must spend time interacting & co-operating with service providers – Process & output is important
  34. 34. Marketing Infrastructure Services CLASSIFICATION OF SERVICES 2. Possession processing – Providing treatment to possession. Customers less physically involved – Customer‟s involvement – to drop item that needs treatment, requesting the service, explaining problem & later picking it up & paying the bill. – If object to be processed is difficult to move then “service factory” comes to customer
  35. 35. Marketing Infrastructure Services CLASSIFICATION OF SERVICES 3. Mental stimulus processing – These services interact with the customer‟s minds which has the power to shape their attitude & behaviour. Core content is information – Customers not physically present, but mentally connected with information presented. – Recipients have to make investment of time
  36. 36. Marketing Infrastructure Services CLASSIFICATION OF SERVICES 4. Information processing – Information is most intangible but can be made tangible by letters, reports, books – Financial & professional services are strong examples of collection & processing of information – No requirement of personal contact with supplier of service. Contact could be over e-mail, telephone.
  37. 37. Marketing Infrastructure Services IMPLICATIONS OF SERVICE PROCESS 1. Designing Service Factory (people proc.) • When customers have to be physically present throughout delivery, process must be designed with them in mind – right from the moment they arrive the service factory. • Choose convenient location • These factors assume importance – exterior & interior facilities, – encounters with service personnel, – interactions with self-service equipment – characteristics of other customers
  38. 38. Marketing Infrastructure Services IMPLICATIONS OF SERVICE PROCESS 2. For possession-processing, mental-stimulus processing, or information processing services, alternatives include: 1. Customers come to the service factory 2. Customers come to a retail office 3. Service employees visit customer‟s home or workplace 4. Business is conducted at arm‟s length through - physical channels (e.g., mail, courier service) - electronic channels (e.g., phone, fax, email, Web site)
  39. 39. Marketing Infrastructure Services IMPLICATIONS OF SERVICE PROCESS 3. Making most of Information Technology – All services can benefit from IT, but mental stimulus processing and information- processing services have the most to gain. – Remote delivery of information-based services “anywhere, anytime” – New service features through websites, email, and internet (e.g., information, reservations) – More opportunities for self-service
  40. 40. Marketing Infrastructure Services IMPLICATIONS OF SERVICE PROCESS 4. Balancing Supply & Demand – Problems arise because service output can‟t be stored – If demand is high and exceeds supply, business may be lost. If demand is low, productive capacity is wasted – Services that process people & possession face more capacity limitations. Increasing capacity entails huge costs. Managing demand becomes more
  41. 41. Marketing Infrastructure Services IMPLICATIONS OF SERVICE PROCESS 5. People becoming part of Product – When people become part of service, their attitude, behavior & appearance can enhance it or detract it – Managers should be concerned about employees‟ appearance, social skills, technical skills
  42. 42. Marketing Infrastructure Services Services Marketing Mix • The preceding questions are some of the many raised by managers & marketers of services • To address these questions, variety of tools & strategies are implemented, sometimes these tools are adaptations of Traditional Marketing tools. • All principles of Marketing apply to services • Traditional Marketing Mix – 4P Model
  43. 43. Marketing Infrastructure Services Traditional Marketing Mix • Traditional marketing mix – – – – Product Price Place Promotion • For services • Modifications in marketing mix required • Why?
  44. 44. Marketing Infrastructure Services Traditional Marketing Mix (Cont) • Simultaneous production and consumption • People involved in service delivery process – Hair dressers – Bank cashier – Doctor – Instructor • Being intangible, customer look for „tangible cues‟ • Services marketers need to look for additional variables to communicate and satisfy their customers.
  45. 45. Marketing Infrastructure Services Traditional Marketing Mix (Cont) • How would you rate a hotel – Design and decor – Courtesy of employees – How prompt they attend your request. • Do we need to expand traditional marketing mix to take care of this?
  46. 46. Marketing Infrastructure Services SERVICES MARKETING MIX i.e. 7 P‟s of Marketing 1. 2. 3. 4. 5. 6. 7. Product Place & Time Promotion & Education Price Physical Environment Process People
  47. 47. Marketing Infrastructure Services Extended Marketing Mix
  48. 48. Marketing Infrastructure Services Price • • • • The price is the amount a customer pays for the product. Determined by a number of factors including market share, competition, material costs, product identity and the customer's perceived value of the product. The business may increase or decrease the price of product if other stores have the same product. It will be in the form of Listed price, Discounts, Allowances, Payment period & credit
  49. 49. Marketing Infrastructure Services Product • Methods used to improve/differentiate the product and increase sales or target sales more effectively to gain a competitive advantage e.g. – – – – Extension strategies Specialized versions New editions Improvements – real or otherwise! – Changed packaging – Technology, etc.
  50. 50. Marketing Infrastructure Services Promotion • • Promotion activities are meant to communicate & persuade the target market to buy the company‟s products This is done by:– – – – – • • Advertising Personal selling Sales promotion- POS Public Relations Word of mouth – Viral advertising Above-the-line promotion - This uses advertising media over which a firm has no direct control e.g. television, radio and newspapers Below-the-line promotion - This uses promotional media which
  51. 51. Marketing Infrastructure Services Place • Place represents the location where a product can be purchased. • Products should be conveniently available for customers to buy • „Places‟ include: – – – – Stores Mail order Telesales Internet • The use of e-commerce (promoting and selling on the internet) has grown massively over the last few years
  52. 52. Marketing Infrastructure Services Place (Cont)… Manufacturers Wholesaler – buys in bulk from suppliers/manufacturers and then breaks this up to sell into smaller quantities to retailers Wholesaler Retailer – a shop which sells products to the consumer. May be a customer of a wholesaler or manufacturer. Retailers Consumer – uses the goods/services Direct selling occurs when the consumer buys directly from the manufacturer. The internet and factory shops allow this to happen. Consumers
  53. 53. Marketing Infrastructure Services People • People – all people who directly or indirectly influence the perceived value of the product or service, including knowledge workers, employees, management and consumers.
  54. 54. Marketing Infrastructure Services Process • • • • Procedures, mechanisms and flow of activities which lead to an exchange of value. How do people consume services? What processes do they have to go through to acquire the services? Where do they find the availability of the service? – – – – – – Contact Reminders Registration Subscription Form filling Degree of technology
  55. 55. Marketing Infrastructure Services Physical Environment • • • Physical evidence is the material part of a service. Strictly speaking there are no physical attributes to a service, so a consumer tends to rely on material cues. There are many examples of physical evidence, including some of the following: – – – – – – – – Packaging. Internet/web pages. Paperwork (such as invoices, tickets and despatch notes). Brochures. Furnishings. Signage (such as those on aircraft and vehicles). Uniforms. Business cards.
  56. 56. Marketing Infrastructure Services INTERDEPENDENCE OF MARKETING, OPERATIONS & HR Operations Management Marketing Management Customers Human Resources Management
  57. 57. Marketing Infrastructure Services SERVICE BUSINESS – AS A SYSTEM Three Overlapping Sub-systems Service Operations (front stage and backstage) • Where inputs are processed and service elements created. • Includes facilities, equipment, and personnel Service Delivery (front stage) • Where “final assembly” of service elements takes place and service is delivered to customers • Includes customer interactions with operations and other customers Service Marketing (front stage) • Includes service delivery (as above) and all other contacts between service firm and customers
  58. 58. Marketing Infrastructure Services SERVICE MARKETING SYSTEM High Contact Service Service Delivery System Other Contact Points Other Customers Service Operations System Interior & Exterior Facilities Technical Core Equipment The Customer Service People Backstage (Invisible) Front Stage (Visible) Other Customers Advertising Sales Calls Market Research Surveys Billing / Statements Miscellaneous Mail, Phone Calls, Faxes, etc. Random Exposure to Facilities / Vehicles Chance Encounters with Service Personnel Word of Mouth
  59. 59. Marketing Infrastructure Services SERVICE MARKETING SYSTEM Low Contact Service Service Delivery System Service Operations System Other Contact Point Advertising Mail Technical Core Self Serv. Equipment Customer Customer Market Research Surveys Word of Mouth Phone, Website Backstage Front stage
  60. 60. Marketing Infrastructure Services Theatre – A Metaphor for Service Delivery • Service facilities is the stage on which drama unfolds. Some cases customer‟s own facilities provide stage. • Stage can have minimal props or very elaborate • Service dramas could be tightly scripted or improvisational • Settings change from one act to another • Front stage personnel play roles of actors ( sometimes wearing costumes) supported by backstage production
  61. 61. Marketing Infrastructure Services SERVICE PLANNING
  62. 62. Marketing Infrastructure Services SERVICE PLANNING Corporate Objectives and Resources Marketing Assets Operating Assets (Customer Base, Mkt. Knowledge, Implementation Skills, Brand Reput.) (Facilities/Equipment, IT Systems, People, Op. Skills, Cost Structure) Service Marketing Concept Service Operations Concept •Benefits to customer from core/ supplementary elements, style, service level, accessibility •Nature of processes •Geographic scope of ops •Scheduling •Facilities design/layout •HR (numbers, skills) •Leverage (partners, self-service) •Task allocation: front/backstage staff; customers as co-producers •User costs/outlays incurred •Price/other monetary costs •Time •Mental and physical effort •Neg. sensory experiences Service Delivery Process
  63. 63. Marketing Infrastructure Services SERVICE PLANNING 1. Starts with statement of objectives or mission at corporate level This mission leads to two types of analysis – SWOT 2. Analysis identifying strengths, weaknesses, opportunities & threats on marketing & operations fronts – Market & Competitive Analysis – Resource Allocation analysis – appraisal of firm‟s resources, how to allocate them & identifying additional resources
  64. 64. Marketing Infrastructure Services SERVICE PLANNING 3. Each analysis draws two statement of assets a. Marketing assets statement which includes – customer portfolio, market knowledge, marketing implementation skill, product line, reputation of brands & positioning strategies. b. Operating assets statement which includes – Physical facilities, equipment, Information technology, H.R. (numbers & skill), alliances & partnerships, cost structure
  65. 65. Marketing Infrastructure Services SERVICE PLANNING 4. Statement of assets leads to creation of the following concepts. This must be an interactive process. a. Service marketing concept to clarify benefits to customers & costs they shall incur b. Service operating concept clarifies nature of processes & how & when operating assets should be deployed 5. Set of choices before the management in configuring delivery process.