01 -intro to services


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01 -intro to services

  1. 1. What are services? Comparative analysis: Product and service Characteristics of services Why market services? Contribution of services marketing Services in developing countries Classification of services Concept in services marketing Myths about services Service Sector Management
  2. 2. Role of services in modern economy It affects the way in which we live & work Contributes towards the growth of the economy & creates maximum employment opportunities. Opening of service economy means greater competition, which will in turn stimulate innovation through application of new & improved technologies. Optimum utilization of resources * Accelerates capital formation * Increases standard of living * Investment in R & D – better technology, increased speed, better efficiency, meeting increased supply, up to date MIS Service Sector Management
  3. 3. Reasons for growth of services (verma) Higher disposable income , affluence Increasing specialization , competitive pressure Growing fashion consciousness ,urbanization Professionalism in fields (E.g. education) Information explosion Increased sophistication/civilized lifestyles Government activities – cultural exchange policies, trade policies, global partnerships etc Women in work force Concern for environment Demographic shifts / Life expectancy Innovations , new products, product complexity Service Sector Management
  4. 4. Factors stimulating the growth of service sector Government policies-changes in regulation, LPG, customerisation , new agreements on trade in services. Social changes-rising consumer expectations, more affluence, use of technology Business trends-Providing value, competition, stress on quality, Imp of marketing , Innovation Development in IT-computerisation , web connectivity, benefit of internet, wireless networking Internationalization / globalization-growth of MNC transnationals, Mergers alliances, acquisitions', international trade etc1 Service Sector Management
  5. 5. Services in developing countries Huge untapped potential Basic services- healthcare, education not developed Quality of services- low No service delivery standards set Lack of market research Need for government intervention Proper channels to human, financial and intellectual resources needed Potential to contribute to country’s GDP and economic development Service Sector Management
  6. 6. Service marketing environment (bhattacharjee) External environment for service firms consists of SLEPT factors: Socio-cultural factors--- Socio-cultural changes--* consumption * Beliefs & values --- Demographic changes--*age composition, * gender composition, * changing role of women. Services that received a big boost due to this factor are Retailing, health & personal care, education, BPO travel & transportation etc Legal factors- are the percolation of the political & govt factors, there are more laws & regulations for the service industry. Eg of legal implications—closure of BPOs, FERA guidelines, reservation of certain sectors, CRR,SLR, environmental guidelines etc Service Sector Management
  7. 7. Economic factors—the govt economic policies have tremendous impact on mgt of service sector. An economy has a business cycle consisting of – Recession * Recovery Growth Decline Some economic pointers of the impact on services --with globalization there has been a spurt in the demand for communication & information services. --with increased specialization there has been an demand for specialized services such as M.R, ERP, mgt consultancy, financial consultants etc --knowledge based economy Service Sector Management
  8. 8. Political factors—service firms have been greatly affected by the policies & decisions made by the government, the regressive tax regime on services contributed in damping growthEg of impact of government policies is the leisure, travel & tourism industry, retail sector, education. Technological factors-some technological development which affected services:— Universal product code Credit cards Electronic data capture Internet, ATMs with V-SAT, cellular phones Data mining & data warehousing technology Quick response inventory management system Service Sector Management
  9. 9. Internal or Micro environment factors External customers/ consumers Internal customer/ channel pattern/ providers Competitors- to gain competitive advantage ,a service firm must do either of the following:--Provide product value but operate more efficiently than its rivals(lower cost ) --Operate in a unique way that creates greater product value & command premium price. Four different types of competition are:Direct, Indirect, substitute & new entrant competition. Suppliers Regulators Service Sector Management
  10. 10. Major categories of services Business and professional services – banking, insurance, accountancy, medicine, lawyers, advocates Infrastructural services – roads, railways, motor transport, power, oil Public services – police, defense Trade services – wholesale & retail , distribution Personal services – education, medical, gymnasiums, hotels, spas ,health Individual & group services – beauty parlors, medical, coaching classes (education) Environment Finance- banking, insurance, investment Service Sector Management Travel , tourism, hospitality, recreation
  11. 11. What are services? Services are activities, benefits or satisfaction which are offered for sale, and are provided in connection with the sale of goods Service is action of an organization that maintains and improves the well being and functioning of people. Payne has defined service as an activity which has some element of intangibility associated with it, which involves some interaction with customers or property in their possession and does not result in transfer of ownership. In simple terms services are intangible deeds, activities, processes, and performances that cannot be touched, seen or felt but can be experienced& which benefits and satisfies the consumer. Service Sector Management
  13. 13. Some of the distinctive aspects that emerge from the above definitions are as follows;Services are intangible, however some of these may include a final tangible component eg reports, notes They do not result in ownership of anything Services are activities performed by the provider Customer interaction & co-operation is integral to service creation,delivery and consumption. Services are actions bought for their ability to provide satisfaction or benefit Service production may be some times tied to goods and are an integral offerings of many manufactured Service Sector Management goods for eg warranties, deliveries, installations
  14. 14. Four Categories of product as distinguished by Philips Kotler A pure tangible good- eg tooth paste, salt rice where no service accompanies product. A tangible good accompanied by service- consumer durables ,to enhance consumer appeal/satisfaction. A major service accompanied by minor goods &services- 1st class air travel, premium hotel stay. A pure service- consultancy, teaching ,babysitting etc Service Sector Management
  15. 15. The continuum of goods & services Pure goods Combination of goods & services Pure services In the world of marketing there are very few pure products or services, instead the market offerings can be visualized to be falling on a continuum with two ends being tangible & intangible dominance . Shostack presented the idea of tangible & intangible scale to classify market offering as below Pure goods Goods major service minor Tangible & intangible equal Major services minor goods Pure services Service Sector Management
  16. 16. Tangibility Spectrum The term goods can be interchangeably used with product, a product can be defined as a comprehensive package of goods or services or both, which adds value to the consumer. Intangibility is the key characteristic of a service, however there are few goods & services that are purely tangible or purely intangible. Instead services tend to be more intangible than goods and goods tend to be more tangible than services Service Sector Management
  17. 17. Continuum of tangibility Service Sector Management
  18. 18. Classification of services Classification of services on the basis of customer involvement -People Processing- customer has to actively co-operate eg health care, beauty salons, being transported etc -Possession processing- service offered to physical objects-both living & inanimate, that belong to the customer. Eg courier, car repair/maintenance , dry cleaning -Mental stimulus processing- services that interacts with peoples minds, eg Psychotherapy, education, counseling. -Information processing- services that are highly dependent on effective collection and processing of information eg financial services ,medical diagnosis, M.R Service Sector Management
  19. 19. Classification on the basis of tangibility Highly tangible- car rental , wending mac, ATM etc. Service linked to tangible goods- installation, maintenance Tangible goods linked to services-restaurant, health care, education. Highly intangible- housekeeping, hairdressing etc Classified on the basis of expertise Professional- medicine, legal, accountancy, teaching Non professional- baby sitting, housekeeping. Profit-Oriented—i)Non profit ii) commercial Based on end user—i) consumer ii)Business to bussi iii)Industrial Service Sector Management
  20. 20. Characteristics of services Intangibility—visualization, association, physical representation and service marks, facts & figures.  Perish ability– over marketing, managing demand & supply. Heterogeneity (Quality aspect)– Training of internal & external customers, automation, quality recruitment & selection, developing service minded culture. Inseparability/simultaneity (of creation and delivery)training internal customers, use of technology Ownership/Resell Quality measurement—feedback, monitoring. Service Sector Management Nature of Demand (by season, by time – e.g. peak
  21. 21. Some eg of service marks Alliance group insurance --- “the power on your side” AT & T --- “It is within your reach” British Airways--- “ The worlds favorite airline” Taj Business Hotels– “Nobody cares as much” Discovery channel– “explore your world” Godrej – “promise of good living” Jet Airways– “the joy of flying” Holiday Inn Hotels– “ Be yourself” Service Sector Management
  22. 22. Comparative analysis: Product and service Tangibility Transferability (Physical transfer) Existence Heterogeneity Reselling Service Sector Management
  23. 23. Generic difference between goods &services Nature of the product Customer involvement in the prod process People as part of the product Quality control problems Harder for customer to evaluate Absence of inventories Importance of time factor Structure & nature of distribution channels offered to physical Service Sector Management
  24. 24. Marketing challenges of services Narrow definition of marketing— some service executives continue to define mkt as simply advt, sales promotion & P.R, where as crucial areas for a service firm are, new product development, pricing STP, customer service, service quality. Lack of appreciation for marketing skills— the prevailing environment not only restricts the resources allocated to marketing but also inhabits the creativity of the service marketer. Different org structure-- service org should try and achieve an org structure which will integrate marketing & operational considerations, in order to ensure high level of service quality & satisfaction. Limited data on competitive performance— Service Sector Management Unlike consumer goods segment, the service
  25. 25. on a product to product basis, which would have enabled service provider managers & their advt agencies to tightly monitor the results of their efforts. Two key uses of market research data are :i) Determination of customer needs and preferences ii)Measures of service specific customer satisfaction. Problems in determining costs for pricing— In comparison to manf firms it is more difficult to determine which fixed & operating costs are associated with which products especially when several services are being produced concurrently by the same organization. The basic difference between goods & services may lead to myriad other challenges & questions that marketer may face which can be as follows:Service Sector Management
  26. 26. * How can product quality be defined& improved when the product is intangible and not standardized. Eg beauty salon * How does the firm accommodate fluctuating demand when the capacity is fixed and the service itself is perishable eg theatre * How can the firm best motivate and select service employees who, because the service is delivered in real time become a part of the product itself. * How can a balance between standardization & personalization be determined to maximize both the efficiency of the org and the satisfaction of its customers as well as its employees. * How can the org protect new service concepts from competitors when service process cannot be Service Sector Management
  27. 27. * How can organizations ensure delivery of consistent quality service when, both the organizations employees and customers themselves affect the service outcome. The service Marketing Triangle The challenges faced by the service managers can be conceptualized in the service marketing triangle. According to Gronross there are three types of marketing activities that must be successfully carried out for service org to succeed, namely external marketing, internal marketing and interactive marketing. Service Sector Management
  28. 28. Types of marketing in service firms Service triangle Service Firm Internal marketing enabling the promise promise External marketing setting the promise Employees Customers Inter active mkt Interactive mkt Internal marketing – directed towards employees External marketing - directed towards consumers Service Sector Moment of truth Management
  29. 29. External marketing Anything that is communicated to the customer before the service delivery-that an org engages in the set up of its customers expectations & make promises to the customers regarding what is to be delivered.  It includes advt, sales promotion, P.R,, sales management , direct marketing , the firms physical facilities & the process of service delivery. Internal Marketing • It suggests a critical role which enables employees to keep the promise that have been made to the customers. • The employees are considered the first internal market for the org & every individual play an imp role in mkt of the service. • It includes any efforts such as training,, customer knowledge, sales –mkt knowledge ,motivation by the org to satisfy its customers Service Sector Management
  30. 30. Internal marketing Definition:- attracting, developing, motivating, and retaining qualified employees through job products that satisfy their needs. Components of internal marketing: Motivation  Co-ordination  Information  Education Proposed Process of Internal Marketing Programs  Attract best talent  Motivate  Impart knowledge  Emphasize on Team work  Empower  Reward Service Sector Management
  31. 31. Interactive marketing or moment of truth Emphasized by Scandinavian airlines system(SAS) & has become popular as MOT or moment of truth Though companies strive to design effective service products, communicate its promise to the customers. Train, convince & enable its front line providers ,it is only the front line staff who keeps the promise. The provider becomes the face of the company & all their perception of quality & satisfaction entirely depends on the provider. Finally it is the responsibility of the provider to convey the sincerity of purpose & validity of promise that is to be kept, to put their best foot forward, smiling , being extra polite, going out of way to help the customer, to make their experience memorable. These encounters are termed as MOM or Moment of truth. Service Sector Management
  32. 32. The molecular model Helps us to understand the difference between goods & services, highlighting the relationship between tangible & intangible component It has benefited managers to see the big picture of the firms service offering, he gets to appreciate the tangible & intangible offering & the customers needs better, thus preparing him to offer competitive features. Eg Indian railways & Prithvi theater Service Sector Management
  33. 33. Molecular model for prithvi theatre Service Sector Management
  34. 34. The servuction model Is used to illustrate factors that influence service experience The experiential aspect of consumption becomes important when service firms provide complex bundle of benefits. All those who come in contact with the customer help in the service delivery & affect service encounter & experience This model is relevant in those services where there is a high degree of involvement of the consumer like ATM, buffet lunch, self service in petrol pumps etc Consumer tends to add their own bundle of benefits taking Sector Management the given offer. off from Service
  35. 35. Myths about services A service economy produces services at the cost of other sectors Service jobs are low paying & menial Service production is labor intensive & low in productivity Service is necessary evil for manufacturing firms Managing service is just as managing a manufacturing business. The growth of the government is the reason we are a service economy. Service Sector Management
  36. 36. Consumer Behavior- sub topics Difference between evaluation process between goods & services Customer decision making process Implication for service providers Service gap & Zone of tolerance Customer expectation—Types, factors influencing customer expectations, Managing & Exceeding service expectations. Customer Perception—Factors influencing perception ( service encounter, service evidence, image & Price) Strategies for influencing customer Perception Service Sector Management
  37. 37. Categories of qualities of consumer goods or servicesSearch quality- these attributes can be determined even before purchase of product. For e.g color, style, price, hardness etc. Goods are high in search quality & services being in-tangible are low in search qlty. Experience quality- attributes that can be discerned after or during purchase or consumption. For e.g vacation, restaurant meal etc. or through others who have experienced it. Credence qualities- Difficult or impossible to evaluate even after consumption or usage, due to the tech, lack of expertise or nature of service it is difficult to evaluate. For e.g heart surgery, kidney transplant, dental service, auto repairs, etc. Service Sector Management
  38. 38. Conclusion- goods & services high is search quality are easily evaluated & that which are high in experience qualities are somewhat difficult & those high in credence qualities are very difficult to evaluate. Service Sector Management
  39. 39. Customer decision making process involves four main sub-processes:- i) Search for the information—a)Use of sources- personal & non personal b) greater Perceived risk-as services are intangible, non- std, no warranties. ii)Evaluation of alternatives-depends on emotions & moods of consumer & availability of alternatives. iii)Purchase & consumption-dramatizing the service experience, compatibility of service customer. iv)Post purchase evaluation- Attribution of dissatisfaction ,customer loyalty Service Sector Management
  40. 40. Implication of the difference for service providers --Word of mouth plays an imp role in the marketing of services as consumer rely more on personal sources. --Since perceived risk is more in purchase of services companies should design strategies to reduce risk, e.g std of offering, training to employees. --Since moods & emotions have an impact on the way information is absorbed & retrieved, marketer should be aware & attempt to influence them in a +ve way. --Control should be exerted on unruly customer who cause dissatisfaction not only to themselves but to fellow customers by specifying limits. --Service marketers should provide incentives while introducing new services to speed up adaptation --Service providers should research customer demands & expectation especially for unprofessional Service Sector Management services
  41. 41. Service gap Primary objectives of service provider is to develop & provide offerings that satisfy consumer needs & expectations, thereby ensuring survival To remain competitive & survive in today's business env companies need to understand consumer behavior thoroughly Service marketers need to be able to close the gap between expectations & perceptions of the consumer as shown in the following fig:- Service gap Expected service Perceived service Service Sector Management
  42. 42. Customer expectations & perceptions Understanding the customers wants , perception & expectations is crucial, if customers perception of service recd is less than expected it will lead to dis- satisfaction thus customer should be given more than his expectation (customer delight) Customer expectations—formed from variety of influencing factors such as past exp, current needs, feed back. Types of service expectations- ( two levels of expectations) a) desired level-which he hopes to receive but may not be always possible (eg business school ) b) adequate level-it is the minimum tolerable expectation or the lower level of expectation or the service that the customer will accept. Service Sector Management
  43. 43. Zone of tolerance The variation between desired service & adequate service is called as zone of tolerance, it is the extent to which customers recognize & are willing to accept this variation. A performance below the tolerance zone will frustrate the customer & above it will delight him. One may consider the zone of tolerance as a range or window in which customer does not particularly notice service performance.  e.g banking. airlines Limit of expectation Zone of tolerance Desired service Adequate service Service Sector Management
  44. 44. Managing customer expectations Customers main expectations of service are quite simple & basic, they expect companies to do what they are supposed to do, they expect fundamentals not fancies, performance not promises. Service org can manage expectations by managing the following 3 things Ensuring promise reflect reality Performing the promised service reliably Communicating effectively with customers. Service Sector Management
  45. 45. Exceeding service expectations It involves delighting & surprising the customers by giving them more than they expect, it helps in intensifying customer loyalty & ruling out competitive options Foll are some of the things that companies can do: Strive constantly to provide additional customer value in every transaction Use a flexible service envelop around the core service to generate surprise benefits Constantly surpass the benefits that the customer has built around the service Treat the customer as if he is the most imp customer and offer personalized package. Service Sector Management
  46. 46. Customer Perception It may be defined as the process by which people select, organise & interpret information to form a meaningful picture of the world. Service Sector Management
  47. 47. Factors that influence customer perception There are four primary factors, these are service encounter, evidence of service, image & price 1. Service encounter:- for any customer a clear impression of the service occurs when the customer interacts with the service & starts using the service. Types of service encounters— Remote encounters Phone encounters Face to face encounters Sources of satisfaction & dis- satisfaction Recovery Adaptability Spontaneity Service Sector Management coping
  48. 48. 2. Service evidence:-Due to the intangible nature of the services customer searches for evidence in every interaction that they have with the organization. Customer will experience three types of service evidences:People Process Physical evidence These three are not mutually exclusive, rather they are interrelated 3. Image:- a favorable image is an asset to an org, because it can impact perception of quality, value & satisfaction 4. Price:- it is Service Sector Management a visible indicator of service level &
  49. 49. Strategies for influencing customer perception Aim for customer satisfaction in every service encounter Reinforce perception by managing the evidence of service Communicate realistically & use customer experience to reinforce images Use price to enhance customer perceptions of quality & value Service Sector Management
  50. 50. Buying Roles Decision making role Initiator Influencer Gatekeeper Decider Buyer User Types of buying behavior Complex buying behavior Dissonance-reducing buyer behavior Habitual buying behavior Variety seeking buying behavior Service Sector Management
  51. 51. Market segmentation Process of market segmentation in services– service provider has three alternatives:- Undifferentiated segment– no recognition of distinct segment– known as market aggregation. Eg laundry, courier etc Company Service Marketing Mix Service Sector Management Undifferentiated Market Customers
  52. 52. Differentiated Marketing approach —separate market segment identified and separate marketing mix developed to target the segment. Eg tours & travels, insurance etc Marketing Mix 1 Marketing Mix 2 Company Segment 1 Segment 2 Marketing Mix 3 Segment 3 Marketing Mix 4 Segment 4 Marketing Mix 5 Segment 5 Service Sector Management Customers
  53. 53. Concentrated marketing approach —separate segment is identified, but efforts are concentrated on only one or two specific segment. Eg driving school Segment 1 Company Service Marketing Mix Segment 2 Segment 3 Segment 4 Segment 5 Service Sector Management Customers
  54. 54. Basis for market segmentation Demographic segmentation:- age, gender, income, family, education, occupation ,size of family etc. eg insurance, investment banks, travel & tourism, hotels, health food. Geographic :- scope factors– local , regional , state etc features factor– density of population, climate related. • Psychographic:- social class, lifestyle, personality eg hotels, health clubs, pubs, investment banks etc * Service Sector Management
  55. 55. • Behavioral Segmentation:- Benefit Segmentation- on the basis of benefit sought Purchase occasion – reasons behind purchase User status Segmentation– usage pattern i.e first time, regular users. Usage Rate- Frequency of use Loyalty Segmentation- hard core, soft core, shifting loyalists, switchers Service Sector Management
  56. 56. Positioning of services It involves establishment of a competitive position. It is largely a communication issue dealing with psychology of the service seeker. It deals with identifying the need of the customer and fulfilling it by identifying a unique selling proposition. It offers an opportunity to create a differentiation in the minds of the service seeker Levels of positioning:Industry positioning Organizational positioning Service sector positioning Individual service positioning Service Sector Management
  57. 57. Service Sector Management
  58. 58. Implementing positioning Ensure recall value Service should stand out distinct from its competitors Positioning should be evaluated from time to time, less it does not become outdated—repositioning Marketing mix is the key to implementing an effective positioning strategy eg—by way of The service itself The price The promotion The place Process People Physical evidence Service Sector Management
  59. 59. Key characteristics of effective positioning It should be meaningful It should be believable It must be unique It needs to keep competitors out & not draw them in. Steps in developing positioning strategy Determining level of positioning Identifying the key attributes of importance to selected segment Location of attributes on position map Evaluating position options Service Sector Management