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  1. 1. 4/3/2014 Deepti Shetty 1 SERVICES MARKETING Deepti Shetty 1 MODULE 1
  2. 2. 4/3/2014 Deepti Shetty 2 Introduction to Services • What are services? • Why services marketing? • Service and Technology • Differences in Goods vs. Services Marketing Continued
  3. 3. 4/3/2014 Deepti Shetty 3 Introduction to Services • Services Marketing Mix • Staying Focused on the Customer • The Gaps Model of Service Quality
  4. 4. 4/3/2014 Deepti Shetty 4 Preamble Q. What do we mean by Services? A. SERVICE IS MADE UP OF DEEDS, PROCESSES AND PERFORMANCES.
  5. 5. 4/3/2014 Deepti Shetty 5 DEFINITION A formal definition of Service Marketing: Services include all economic activities whose output is not a physical product or construction, is generally consumed at the time it is produced, and provides added value in forms (such as convenience, amusement, timeliness, comfort or health) that are essential intangible concerns of the first purchaser.
  6. 6. 4/3/2014 Deepti Shetty 6 COMMENTS A firm’s offering (s) may be – Pure Goods – Goods and Services – Goods with Services – Services as an integral part of Goods – Pure Services
  7. 7. 4/3/2014 Deepti Shetty 7 WHY SERVICES MARKETING? • A Service Based Economy • Service biz imperative in Mfg and IT • Govt. Regulations and Deregulations • Birth of Services by New Technologies AND FINALLY • Service Marketing is different in practice
  8. 8. 4/3/2014 Deepti Shetty 8 Value Addition and Service "Economic Value, like the coffee bean, progresses from commodities to goods to services to experiences." -Joseph B. Pine n & James H. Gilmore The Experience Economy
  9. 9. 4/3/2014 Deepti Shetty 9 A Cup of Coffee? • As a raw commodity coffee is worth $2/Kg. • Processed, packaged and sold as a good, the price of coffee is about 25 cents a cup. • When it is sold in a local restaurant, the coffee takes on more service aspects and sells for $1 per cup. Continued
  10. 10. 4/3/2014 Deepti Shetty 10 A Cup of Coffee? • When a cup of coffee is sold within the compelling experience of a 5 star restaurant, the customer gladly pays $5 per cup (the whole process of ordering, creation, and consump­tion becomes “a pleasurable” experience.) • EV, like the coffee bean, progresses from commodities to goods to services to experiences. – The mark-up, from commodity sell to experience sell is as much as 5000%.
  11. 11. 4/3/2014 Deepti Shetty 11 Service Imperative Reflects the view that an intangible aspects of a product has become the key feature that differentiates the product in the marketplace.
  12. 12. 4/3/2014 Deepti Shetty 12 Differences Between Goods and Services Intangibility Perishability Simultaneous Production and Consumption Heterogeneity
  13. 13. 4/3/2014 Deepti Shetty 13 INTANGIBILITY • THE MOTHER OF ALL UNIQUE DIFFERENCES • However, it is wrong to imply that services are just like goods 'except' for intangibility. By such logic, apples are just like oranges, except for their 'appleness.'
  14. 14. 4/3/2014 Deepti Shetty 14 Distinguishing Differences • Intangibility: – A characteristic of services that makes them unable to be touched or sensed in the same manner as goods. • Inseparability: – A characteristic of services that reflects the interconnection among the service provider, the customer involved in receiving the service and other customers sharing the service experience. • Heterogeneity: – A characteristic of services that reflects the variation in consistency from one service transaction to the next. • Perishability: – A characteristic of services that cannot be saved, their unused capacity cannot be reserved, and they cannot be inventoried.
  15. 15. 4/3/2014 Deepti Shetty 15 Implications of Intangibility • Services cannot be inventoried • Services cannot be patented • Services cannot be readily displayed or communicated • Pricing is difficult
  16. 16. 4/3/2014 Deepti Shetty 16 Possible Solutions to Intangibility Problems • The use of tangible clues: – The physical characteristics that surround a service to assist consumers in making service evaluations, such as the quality of furnishings, the appearance of personnel, or the quality of firm's brochure. • The use of personal sources of information: – Sources such as friends, family , and other opinion leaders that consumers use to gather information about a service. • Creation of a strong organizational image: – The perception an organization presents to the public. If well known and respected, lowers the perceived risk of potential customers making service provider choices.
  17. 17. 4/3/2014 Deepti Shetty 17 Implications of Heterogeneity • Service delivery and customer satisfaction depend on employee actions • Service quality depends on many uncontrollable factors • There is no sure knowledge that the service delivered matches what was planned and promoted
  18. 18. 4/3/2014 Deepti Shetty 18 Possible Solutions to Heterogeneity Problems • Customization: – Taking advantage of the variation inherent in each service encounter by developing services that meet each customer's exact specifications. • Standardization: – Reducing variability in service production through intensive training of providers and/or replacing human labor with machines.
  19. 19. 4/3/2014 Deepti Shetty 19 Implications of Simultaneous Production and Consumption • Customers participate in and affect the transaction • Customers affect each other • Employees affect the service outcome • Decentralization may be essential • Mass production is difficult • Physical connection of the service provider to the service
  20. 20. 4/3/2014 Deepti Shetty 20 Possible Solutions to Inseparability Problems • Emphasis on selecting & training contact staff: – A strategy to minimize the impact of inseparability by hiring and educating employees in such a way that the customer's service experience is positive and the employees are properly equipped to handle customers and their needs. • Consumer management: – A strategy service personnel can implement that minimizes the impact of inseparability, such as separating smokers from nonsmokers in a restaurant. • Use of multi-site locations: – A way service firms that mass produce combat inseparability, involving multiple locations to limit the distance the consumers have to travel and staffing each location differently to serve a local market. *Factories in the field Another name for multi-site locations.
  21. 21. 4/3/2014 Deepti Shetty 21 Implications of Perishability • It is difficult to synchronize supply and demand with services • Services cannot be returned or resold
  22. 22. 4/3/2014 Deepti Shetty 22 Possible Solutions to Perishability Problems • Creative pricing: – Used by service firms to help smooth demand fluctuations, such as offering "matinee" prices or "early-bird specials" to shift demand from peak to non-peak periods. • Reservation systems: – A strategy to help smooth demand fluctuations in which consumers ultimately request a portion of the firm's services for a particular time slot. • Development of complementary services: – Services provided for consumers to minimize their perceived waiting time, such as driving ranges at golf courses, arcades at movie theaters, or reading materials in doctors' offices. • Development of non-peak demand: – A strategy in which service providers use their downtime by marketing to a different segment that has a different demand pattern than the firm's traditional market segment.
  23. 23. 4/3/2014 Deepti Shetty 23 THE DIFFERENCE Goods Services Marketing Implications Tangible Intangible Can’t keep an Inventory, Can’t Patent, Can’t Display & communication is not easy, Pricing is difficult Standardized Heterogeneous Service delivery and Customer satisfaction depends on employee actions, Never are you sure that the promise made has been met! Production separate from Consumption Simultaneous Production and Consumption Customer participation affects transaction, Customer affect each other, Employees affect the service outcome, Decentralization may be mandatory, Mass production is not possible if not difficult Nonperishable Perishable Difficult to synchronize demand and supply, Services can not be returned or re-sold.
  24. 24. 4/3/2014 Deepti Shetty 24 SERVICE MARKETING TRIANGLE(SMT) CUSTOMERPROVIDER SBU Interactive Marketing/ Encounters Delivering on Promises
  25. 25. 4/3/2014 Deepti Shetty 25 SMT- Explanation • Contact Personnel: Employees other than the primary service provider who briefly interacts with the customer, who are extremely important in service interactions, even if they interact briefly with the customer, just as thie supermarket employee is assisting a customer. • Service Providers: The primary providers of a core service, such as a waiter or waitress, dentist, physician, or college instructor. • Benefit Concept: The encapsulation of the benefits of a product in the consumer's mind.
  26. 26. 4/3/2014 Deepti Shetty 26 SMT MODIFIED CUSTOMERPROVIDER SBU Technology Here Technology enables SBU, Customer and Provider to get the best of Service.
  27. 27. 4/3/2014 Deepti Shetty 27 A market- focused management model. Depicts relationships among the systems, the service strategy & the people, with the customer @ the center interacting with each group. SMT MODIFIED, AGAIN
  28. 28. 4/3/2014 Deepti Shetty 28 MOLECULAR MODEL A conceptual model of the relationship between tangible and intangible components of a firm's operations. Continued Example- 1
  29. 29. 4/3/2014 Deepti Shetty 29 MOLECULAR MODEL Example -2
  30. 30. 4/3/2014 Deepti Shetty 30 Servuction Model The model Illustrates the factors that influence the service experience, including those that are visible to the consumer and those that are not. Continued
  31. 31. 4/3/2014 Deepti Shetty 31 Servuction Model- Explanation • Inanimate Environment: All the nonliving features that are present during the service encounter. • Invisible Organization and Systems: That part of a firm that reflects the rules, regulations, and processes on which the organization is based. • Customer A: The recipient of the bundle of benefits that is created through the service experience. • Customer B: Other customers who are part of Customer A's experience.
  32. 32. 4/3/2014 Deepti Shetty 32 OTHER SERVICE MARKETING MODELS • Market-focused Management Model – A new organizational model that focuses on the components of the firm that facilitate the firm's service delivery system. • Industrial Management Model – An approach to organizing a firm that focuses on revenues and operating costs and ignores the role personnel play in generating customer satisfaction and sustainable profits.
  33. 33. 4/3/2014 Deepti Shetty 33 Challenges for Services • Defining and improving quality • Communicating and testing new services • Communicating and maintaining a consistent image • Motivating and sustaining employee commitment Continued
  34. 34. 4/3/2014 Deepti Shetty 34 Challenges for Services • Coordinating marketing, operations and human resource efforts • Setting prices • Standardization versus personalization
  35. 35. Anecdote on Weight Loss Plan
  36. 36. A fat huge man reading news paper, having a look on advertisement of “Bulbul health care centre” of assuring 10lb weight loss program in just 5 days. And he calls up to the company for more details of the program.
  37. 37. The next day. There’s a knock on the door and there stands before him a voluptuous, athletic, 19 year old babe dressed in a pair of Nike running shoes and a sign on her t-shirt that reads “IF YOU CAN CATCH ME, YOU CAN HAVE ME”
  38. 38. Without a second thought, he takes off after her A few miles later huffing and puffing, he finally gives up. The same girl shows up for the next 4 days and the same thing happens. On the 5th day, he weighs himself and is delighted to
  39. 39. He calls the company and gets a new special offer which is reducing 20 pound program in next 5 days. The next day there’s a knock at the door and there stands the most stunning and beautiful women, which he has ever seen in his life.
  40. 40. She is wearing Reebok running shoes and a sign on her t-shirt reads that “IF YOU CAN TOUCH ME, YOU CAN HAVE ME”
  41. 41. Well, he’s out the door after her like a shot. This girl is in excellent shape and he does his best, but no such luck. So for the next 4 days, the same routine happens with him gradually getting in better and better shape. Much to his delight on the 5th day when he weighs himself, he discovers that he has lost another 20lbs, as promised.
  42. 42. After loosing 30lbs, he gets more excited aboout the offers getting from the company. Again he decided to go for broke and calls the company to order the 7-day/50 pound program. “Are you sure?” asks the representative on the phone. “This is our most rigorous program.” “Absolutely.” he replies, “I haven’t felt this good in years.”
  43. 43. The next day there’s a knock at the door; and when he opens it he finds a huge muscular guy standing there wearing nothing but pink running shoes and a sign around his neck that reads, “IF I CATCH YOU, YOU ARE MINE!!!” IF I CATCH U, U R MINE HE LOST 63 POUNDS THAT WEEK.
  45. 45. 4/3/2014 Deepti Shetty 46 Examples of Service Industries • Health Care – hospital, medical practice, dentistry, eye care • Professional Services – accounting, legal, architectural • Financial Services – banking, investment advising, insurance Continued
  46. 46. 4/3/2014 Deepti Shetty 47 Examples of Service Industries • 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
  47. 47. 4/3/2014 Deepti Shetty 48 Some Key Terms • Tangible Dominant: Products that possess physical properties that can be felt, tasted, and seen prior to the consumer's purchase decision. • Intangible Dominant: Products that lack the physical properties that can be sensed by consumers prior to the purchase decision. • Scale of market entities: The scale that displays a range of products along a continuum based on their tangibility. • Marketing Myopia: The practice of too narrowly defining one's business.
  48. 48. 4/3/2014 Deepti Shetty 49 Tangibility Spectrum Tangible Dominant Intangible Dominant Salt Soft Drinks Detergents Automobiles Cosmetics Advertising Agencies Airlines Investment Management Consulting Teaching Fast-food Outlets Fast-food Outlets             Goods: Objects, devices, or things. Services: Deeds, efforts, or performances.
  49. 49. 4/3/2014 Deepti Shetty 50 Goods/Service Continuum
  50. 50. 4/3/2014 Deepti Shetty 51 0 10 20 30 40 50 60 70 80 1929 1948 1969 1977 1984 1999 PercentofU.S.LaborForce Year  Services  Manufacturing  Mining & Agriculture U.S. Labor Force in % by Industry
  51. 51. 4/3/2014 Deepti Shetty 52 0 10 20 30 40 50 60 70 80 1948 1959 1967 1977 1987 1999 PercentofGDP Year  Services  Manufacturing  Mining & Agriculture Percent of U.S. GDP by Industry
  52. 52. 4/3/2014 Deepti Shetty 53 India's GDP, Sector wise Share(%) @ Constant Prices Year Primary Sector (Agriculture, Mining) Secondary Sector (Industry and Manufacturing) Tertiary Sector (Services) Growth Over Previous Period (%) in Services 1950-51 55.4 16.1 28.5 - 1960-61 50.9 20.0 29.1 + 2.1 1970-71 44.5 23.6 31.9 + 9.6 1980-81 38.1 25.9 36.0 + 12.9 1990-91 30.9 30.0 39.1 + 8.6 1999-2000 27.5 24.6 47.9 + 22.5 Source: Statistical Outline of India, Tata Services Ltd, 2001-2002
  53. 53. 4/3/2014 Deepti Shetty 54 Global distribution of GDP in the year 2000 (share in GDP) Country Primary Sector (%) Secondary Sector (%) Tertiary Sector (%) India 27 25 48 China 17 49 34 France 3 23 74 Japan 2 36 62 Germany 1 28 71 USA 8 19 73 Source: Statistical Outline of India, Tata Services Ltd, 2001-2002
  54. 54. 4/3/2014 Deepti Shetty 55 Industries Classified within the Service Sector
  55. 55. 4/3/2014 Deepti Shetty 56 Services Marketing Mix: 7 Ps for Services • Traditional Marketing Mix • Expanded Mix for Services: 7 Ps • Building Customer Relationships Through People, Processes, and Physical Evidence • Ways to Use the 7 Ps
  56. 56. 4/3/2014 Deepti Shetty 57 Traditional Marketing Mix • All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services: – Product – Price – Place – Promotion
  58. 58. 4/3/2014 Deepti Shetty 59 SERVICE MARKETING MIX - II PLACE PROMOTION PRICE PEOPLE PROCESS PHYSICAL EVIDENCE Physical features, Quality, Accessories, Packaging, Warranties, Brands Channel type, Exposure, IM’s, Outlet locations, Transportation, Storage, Managing Channels Sales people, Advertising, Sales Promotion, Publicity Flexibility, Discounts, Allowances, Price levels Flow of activities, Number of steps, Customer Involvement PRODUCT Employees, Customers Facility, Equipment, Signage, Other Tangibles
  59. 59. 4/3/2014 Deepti Shetty 60 Ways to Use the 7 Ps Overall Strategic Assessment – How effective is a firm’s services marketing mix? – Is the mix well-aligned with overall vision and strategy? – What are the strengths and weaknesses in terms of the 7 Ps?
  60. 60. 4/3/2014 Deepti Shetty 61 Ways to Use the 7 Ps Specific Service Implementation – Who is the customer? – What is the service? – How effectively does the services marketing mix for a service communicate its benefits and quality? – What changes/ improvements are needed?
  61. 61. 4/3/2014 Deepti Shetty 62 Perceived Service Expected Service CUSTOMER COMPANY Customer Gap GAP 1 GAP 2 GAP 3 External Communications to CustomersGAP 4 Service Delivery Customer-Driven Service Designs and Standards Company Perceptions of Consumer Expectations Part 1 Opener Gaps Model of Service Quality
  62. 62. 4/3/2014 Deepti Shetty 63 WHAT’S GAP MODEL ABOUT? • That there exists gaps in what is expected and what is delivered and that it alters the perceptions, both for the Customer and the Provider – As the aim of the Service Marketers’ is to close the customer gap they need to know the Consumer Behavior
  63. 63. 4/3/2014 Deepti Shetty 64 Expected Service Perceived Service GAP The Customer Gap Part 1 Opener
  64. 64. 4/3/2014 Deepti Shetty 65 CE AND CP CE: The Reference Points Customers Have When They Plan To Utilize or Enter Into a Service CP: The Perceptions formed as the customers receive the actual Service
  65. 65. 4/3/2014 Deepti Shetty 66 THE GLARING GAP THE ORIGINAL GAP IS THE CUSTOMER GAP The gap between Customer Expectations (CE) and Customer Perception (CP)
  66. 66. 4/3/2014 Deepti Shetty 67 THE OTHER GAPS These are called the Provider Gaps, as they pertain to the SBU, which tries to close the Customer Gap • Gap1 Not Knowing What Customers Want • Gap 2 Not Selecting the Right Service Designs and Standards • Gap 3 Not Delivering to Standards • Gap 4 Not Matching Performance to Promises
  67. 67. 4/3/2014 Deepti Shetty 68 THE END