This document discusses marketing of services. It notes that the service sector contributes over half of GDP in developed economies like the US and India. It defines a service as an intangible act or performance offered by one party to another. Key characteristics of services include intangibility, lack of ownership, variability, and involvement of customers. The marketing mix for services, called the 7Ps, expands on the traditional 4Ps to include physical environment, process, and people. Loyalty programs aim to acquire and retain profitable customers over the long run. Franchising is discussed as a way to expand service delivery across multiple sites using local knowledge.

1. MARKETING
APPLICATIONS
Session 1

2. Some FACTS…
 Wal-mart is in the list of Fortune 500
 GE derives almost 40% of its revenue
from services
 In India service sector contributes 56% of
GDP

3. Services dominate the United States
Economy:
GDP by Industry, 2001
Source: Bureau of Economic Analysis, November 2002
Finance, Insurance,
Real Estate
20%
Wholesale and
Retail Trade
16%
Transport, Utilities,
Communications
8%Health
6%
Business
Services
5%
Other Services 11%
Government
(mostly services)
13%
Manufacturing 14%
Agriculture, Forestry,
Mining, Construction 8%
SERVICES

4. Fastest growing services…
 Health care
 Higher education
 Entertainment
 Financial

5. New Generation services…
 Management consultancy
 Computer maintenance
 Recruitment services
 Management training
 Value-added telecom services
 Call centre/BPO

6. What is a SERVICE ?
 “ A service is any act or performance
one party can offer to another that is
essentially intangible & does not result
in the ownership of anything.”
Its production may or may not be tied to a physical
product

7. Defining the Essence of a
Service
 An act or performance offered by one party to another
 An economic activity that does not result in ownership
 A process that creates benefits by facilitating a desired
change in:
 customers themselves
 physical possessions
 intangible assets

8. Distinguishing Characteristics of
Services
 Customers do not obtain ownership of services
 Service products are ephemeral and cannot be inventoried
 Intangible elements dominate value creation
 Greater involvement of customers in production process
 Other people may form part of product experience
 Greater variability in operational inputs and outputs
 Many services are difficult for customers to evaluate
 Time factor is more important--speed may be key
 Delivery systems include electronic and physical channels

9. Growth Factors
 Economic,socio cultural & life style
change
 Women taking up jobs
 Explosion of IT sector
 Advent of many new technical products
 Reforms & liberalization

10. Tasks involved…
 Understanding the nature of services
 Understanding the customer & his expectations
 Giving a shape to service
 Organizing delivery system
 Pricing strategy
 Promoting the services
 Extended marketing mix-7P`s
 Differentiation
 Quality & satisfaction

11. Differentiation parameters…
 Time
 Special offerings
 People
 Physical evidence
 Convenience

12. Marketing Scenario
Company
Employees Customers
Internal
Marketing
External
marketing
Interactive
Marketing

13. Elements of The Services Marketing
Mix:
“7Ps” vs. the Traditional “4Ps”
Rethinking the original 4Ps
 Product elements
 Place and time
 Promotion and education
 Price and other user outlays
Adding Three New Elements
 Physical environment
 Process
 People

14. The 7Ps:
(1) Product Elements
All Aspects of Service Performance that Create
Value
 Core product features—both tangible and
intangible elements
 Bundle of supplementary service elements
 Performance levels relative to competition
 Benefits delivered to customers (customers don’t
buy a hotel room, they buy a good night’s sleep)
 Guarantees

15. The 7Ps:
(2) Place and Time
Delivery Decisions: Where, When, and How
 Geographic locations served
 Service schedules
 Physical channels
 Electronic channels
 Customer control and convenience
 Channel partners/intermediaries

16. The 7Ps:
(3) Promotion and Education
Informing, Educating, Persuading, and Reminding Customers
 Marketing communication tools
 media elements (print, broadcast, outdoor, retail, Internet, etc.)
 personal selling, customer service
 sales promotion
 publicity/PR
 Imagery and recognition
 branding
 corporate design
 Content
 information, advice
 persuasive messages
 customer education/training

17. The 7Ps:
(4) Price and Other User Outlays
Marketers Must Recognize that Customer Outlays
Involve More than the Price Paid to Seller
Traditional Pricing Tasks
 Selling price, discounts, premiums
 Margins for intermediaries (if any)
 Credit terms
Identify and Minimize Other Costs Incurred by Users
 Additional monetary costs associated with service usage (e.g., travel to
service location, parking, phone, babysitting,etc.)
 Time expenditures, especially waiting
 Unwanted mental and physical effort


18. The 7Ps:
(5) Physical Environment
Designing the Servicescape and providing
tangible evidence of service performances
 Create and maintaining physical appearances
 buildings/landscaping
 interior design/furnishings
 vehicles/equipment
 staff grooming/clothing
 sounds and smells
 other tangibles
 Select tangible metaphors for use in marketing communications

19. 7Ps:
(6) Process
Method and Sequence in Service Creation
and Delivery
 Design of activity flows
 Number and sequence of actions for customers
 Providers of value chain components
 Nature of customer involvement
 Role of contact personnel
 Role of technology, degree of automation

20. The 7Ps:
(7) People
Managing the Human Side of the Enterprise
 The right customer-contact employees performing tasks well
 job design
 recruiting/selection
 training
 motivation
 evaluation/rewards
 empowerment/teamwork
 The right customers for the firm’s mission
 fit well with product/processes/corporate goals
 appreciate benefits and value offered
 possess (or can be educated to have) needed skills (co-production)
 firm is able to manage customer behavior

21. Managing the 7Ps Requires Collaboration
between Marketing, Operations, and HR
Functions
Customers
Operations
Management
Marketing
Management
Human Resources
Management

22. The search for customer loyalty
• Targeting, acquiring & retaining the right customers is at
the core of many successful service firms.
 All businesses aspire to have a database of loyal
customers.
 Loyalty is described as a
 customer’s willingness to continue patronizing a firm
 purchasing & using its goods & services on a repeated
& preferably exclusive basis &
 recommending the firm’s products to friends &
associates.

23. What Makes Loyal Customers
More Profitable?
 Tend to spend more as relationship develops
 customer’s balances may grow
 may consolidate purchases to one supplier
 Cost less to serve
 less need for information and assistance
 make fewer mistakes
 Recommend new customers to firm (act as unpaid sales
people or Customer Advocates)
 Trust leads to willingness to pay regular prices vs. shopping
for discounts

24. Franchising
 Resources are limited
 Long-term commitment of store managers is
crucial
 Local knowledge is important
 Fast growth is necessary to pre-empt
competition
Franchising has become a popular way to expand
delivery of all 7Ps to multiple sites

25. The 7 S Framework…
Strategy
Shared Value
Skills
Structure
Staff
System
Style