1 understanding services

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UNDERSTANDING SERVICES

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Contents1 . Understanding Services.

2. Understanding Service Customers.3. Creating Services and Managing Service Delivery Process.

4. Managing Demand and Capacity.5. Pricing of Services and Revenue Management.

6. Communicating and Promoting Services.7. Managing Physical Evidence of Service.

8. Managing People in Service Industry.9. Managing Service Quality.

10. Managing Relationships and Building Loyalty.11. Marketing of Banking Services.12. Marketing of Insurance Service.13. Marketing of Telecom Services.

14. Marketing Tourism Services.15. Marketing of Hospitality Services.

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The Marketing Machine

Marketing ConceptEnvironmental AnalysisBehavior and Segmentation AnalysisMarketing ResearchMarketing Mix

Uncontrollables Needs

Technology

Competitors

Government

MarketingStrategy

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If you know how the marketing machine works, and can turn the crank, you will always produce the correct marketing strategy.

The machine does not change.

The only thing that changes are the inputs.

Different inputs produce different outputs.

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If the machine never changes, then there is no such thing as:

International Marketing

Industrial Marketing

Services Marketing

eMarketing

Non-Profit Marketing

………..???

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Perspective(A mental view of a scene) SET OF PERSPECTIVES IN CONSUMER BEHAVIOR

MARKETER CONSUMER PUBLIC POLICY

MAKETERS AND CONSUMERS ARE ACTIVE ON DAILY BASIS

MARKETING DECISIONS

CONTROLLABLE (4P’s) UNCONTROLABLE(5C’s)

Marketing mixelements

Customers Channels Conditions Competitors

Company,

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Realistic view

This realistic view is important to the marketer because ,

1. It gives an external view of the customer.

2. An aggregate view of the customer

3. A product specific view of the customer

4. A brand preference /purchase point of view

5. A behavioral influence orientation

• who does or does not use the product

• Who uses the competitors Brand

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Comparison of two perspectives

Perspective characteristics

Marketer’s perspective

Customer’s perspective

Point of view External (buyers)

Internal(me)

Level of interest Aggregate(markets)

Individual(myself)

Scope of interest Product specific(what I make)

Across products(what I buy)

correct choice Brand specific(my brand)

Best alternative(best brand for me)

Role of influence Influence behavior

Handle behavioralinfluences

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What are services

• Services are deeds,processes and performance

• Intangible, but may have a tangible component

• Generally produced and consumed at the same time

• Need to distinguish between SERVICE and CUSTOMER SERVICE

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Basic Differences between Goods and Services

• Customers do not obtain ownership of services

• Service products are intangible performances--not objects

• Customers often actively involved in production process

• Other people may form part of product experience

• More variability in operational inputs and outputs--harder to improve productivity, control quality

• Often difficult for customers to evaluate

• Absence of inventories after production

• Time factor is more important--speed may be key

• Delivery systems include electronic and physical channels

Challenges for ServicesChallenges for Services

• Defining and improving quality

• Communicating and testing new services

• Communicating and maintaining a consistent image

• Motivating and sustaining employee commitment

• Coordinating marketing, operations and human resource efforts

• Setting prices

• Standardization versus personalization

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The Service Sector• Includes businesses, government agencies, nonprofits

• Jobs range from high-paid professionals and technicians to minimum-wage positions

• Service organizations can be any size--from huge global corporations to local small businesses

• In most countries, adds more economic value than agriculture, raw materials and manufacturing combined

• In India -- world’s largest democracy-- services account for 46% of GDP

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GDP by Industry in india , 1999

Source: Bureau of Economic Analysis, December 2000

S E R V I C E S

Agriculture, Forestry,Fish ing a nd M in ing

7%

M a nufa cturing16%

G overnm ent(M ostly Services)

12%

O ther Services10%

BusinessServices

5%

H ea lth5%

Tra nsport, U tilitiesa nd Com m unica tions

8%

Wholesa le a ndReta il Tra de

17%

Fina nce, Insura ncea nd Rea l Esta te

20%

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Changing Structure of Employment as Economic Development Evolves

Time, per Capita Income

Share of Employment

Industry

Services

Agriculture

Source: IMF

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Some Industries in the Service Sector

• Banking, stockbroking

• Lodging

• Restaurants, bars, catering

• Insurance

• News and entertainment

• Transportation (freight and passenger)

• Health care

• Education

• Wholesaling and retailing

• Laundries, drycleaning

• Repair and maintenance

• Professional (e.g., law, architecture, consulting)

• Internet and Web services

• BPO

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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

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Figure 1-1Figure 1-1

Tangibility SpectrumTangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

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Differences BetweenDifferences Between Goods and Services Goods and Services

Intangibility

PerishabilitySimultaneous

Productionand

Consumption

Heterogeneity

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Implications of IntangibilityImplications of Intangibility

Services cannot be inventoried

Services cannot be patented

Services cannot be readily displayed or communicated

Pricing is difficult

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Implications of HeterogeneityImplications 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

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Implications of Simultaneous Implications of Simultaneous Production and ConsumptionProduction 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

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Implications of PerishabilityImplications of Perishability

It is difficult to synchronize supply and demand with services

Services cannot be returned or resold

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Services are DifferentServices are DifferentGoods Services Resulting ImplicationsTangible Intangible Services cannot be inventoried.

Services cannot be patented.Services cannot be readily displayed or communicated.Pricing is difficult.

Standardized Heterogeneous Service delivery and customer satisfaction depend onemployee actions.Service quality depends on many uncontrollable factors.There is no sure knowledge that the service deliveredmatches what was planned and promoted.

Productionseparate fromconsumption

Simultaneousproduction andconsumption

Customers participate in and affect the transaction.Customers affect each other.Employees affect the service outcome.Decentralization may be essential.Mass production is difficult.

Nonperishable Perishable It is difficult to synchronize supply and demand withservices.Services cannot be returned or resold.

Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,” Journal of Marketing 49 (Spring 1985): 33-46.

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The Services Marketing TriangleThe Services Marketing Triangle

Internal Marketing

Interactive Marketing

External Marketing

Company(Management)

CustomersEmployees

“enabling thepromise”

“delivering the promise”

“setting thepromise”

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

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Ways to Use the Ways to Use the Services Marketing TriangleServices Marketing Triangle

Overall Strategic Assessment

• How is the service organization doing on all three sides of the triangle?

• Where are the weaknesses?

• What are the strengths?

Specific Service Implementation

• What is being promoted and by whom?

• How will it be delivered and by whom?

• Are the supporting systems in place to deliver the promised service?

26Source: Adapted from A. Parasuraman

Company

CustomersProviders

Technology

The Services Triangle The Services Triangle and Technologyand Technology

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Distinctive Aspects of Service Management

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The Service Management Decision Framework

What Business A re We In?

What Service Processes Can Be U sed in O ur O pera tion?

Who Are O ur Custom ers and H ow Should We Rela te to Them ?

What Price Should We Charge for O ur Services?

H ow Should We Com m unica te Wha t O ur Service H a s to O ffer?

What Are the O ptions for Delivering O ur Service?

H ow Can We Ba lance Productivity a nd Q ua lity?

What Should be the Core a nd Supplem enta ry Elem ents of O ur Service Product?

H ow Should We M atch Dem a nd a nd Productive Capacity?

What Are Appropria te Roles for People and Technology?

H ow Can O ur Firm Achieve Service Leadership?

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Service Decision Framework What Business Are We In?

• With what industry is our service associated?

• With what other goods and services do we compete?

• What forces for change do we face?

• What solutions do we offer to meet customer needs? (How do we create value?)

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The “8Ps” of Integrated Service Management vs. the Traditional “4Ps”

• Product elements

• Place, cyberspace, and time

• Process

• Productivity and quality

• People

• Promotion and education

• Physical evidence

• Price and other user outlays

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8Ps: (1) Product Elements

All Aspects of Service Performance that Create Value

• Core product features

• Bundle of supplementary service elements

• Performance levels relative to competition

• Benefits delivered to customers

• Guarantees

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8Ps: (2) Place, Cyberspace, and Time

Delivery Decisions: Where, When, and How

• Geographic locations served

• Service schedules

• Physical channels

• Electronic channels

• Customer control and convenience

• Channel partners/intermediaries

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8Ps: (3) 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

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8Ps: (4) Productivity and Quality

Synergy in Value Creation for Customers and the Firm

• Achieve productive transformation of inputs to outputs– efficiency (cost control, avoidance of waste)

– effectiveness (value added, including quality and timeliness)

• Attain customer-defined quality standards– reliability

– responsiveness

– competence/trust

– human dimensions

– tangibles

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8Ps: (5) People

The Human Side of the Enterprise

• The right 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) necessary skills

– firm is able to manage customer behavior

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8Ps: (6) 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

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8Ps: (7) Physical Evidence

Providing tangible evidence of service performances

• Create and maintaining physical appearances

– buildings/landscaping

– interior design/furnishings

– vehicles/equipment

– staff grooming/clothing

– other tangibles

• Select tangible metaphors for use in marketing communications

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8Ps:(8) Price and Other User Costs

Managing Customer Outlays Relative to Corporate Revenues

• Quoted price level and trade margins

• Discount terms• Price-setting mechanism

– determined by seller

– negotiation/barter

– auction/reverse auction

• Credit terms

• Strategies to minimize other user costs– out-of-pocket financial expenses (e.g., travel, phone)

– time investments and mental/physical effort

– negative sensory experiences

The PRICE of Marketing

P

R

I

C

E

Planning

Research

IImplementation

Control

Evaluation

Morrison, A.M.

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Planning & Research

1. Where are we now?

Analysis & Strategy

2. Where would we like to be?

Implementation

3. How do we get there?

Control

4. How do we make sure we get there?

Evaluation 5. How do we know if we got there?

Hospitality and Travel Marketing System

Morrison, A.M.

The Iceberg Nature of Hospitality and Travel Marketing

In some ways, hospitality

and travel marketing is

like an iceberg

Some of it is “above-the-waterline” and marketing ‘people’ tend to notice it more and pay the most attention to it.

The “I” in PRICE.

This is also the part of marketing that is most ‘visible’ to customers; the advertising and other promotions done by our industry.

Morrison, A.M.


In some ways, hospitality

and travel marketing is

like an iceberg

Most of it is “below-the-waterline” and is what we tend not to notice and pay the least attention to.

This is not something that the customer sees.

The “PRCE” in PRICE.

Morrison, A.M.


What we tend to notice andpay most attention to

Implementation

What we tend not to notice and

pay the least attention to

Research Control

Planning Evaluation

But remember, it’s not the tip of the iceberg --

the part that we see most readily -- that sinks the ship!

Morrison, A.M.

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Factors Stimulating Competition and Innovation in the Service Economy

• Government Policies (e.g., regulations, trade agreements)• Social Changes (e.g., affluent, time poor, seek experiences) • Business Trends

– Manufacturers offer service– Growth of chains and franchising– Pressures to improve productivity and quality– More strategic alliances– Marketing emphasis by nonprofits– Innovative hiring practices

• Advances in IT (e.g., speed, digitization, wireless, Internet)• Internationalization (travel, transnational companies)

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Some Impacts of Technological Change• Radically alter ways in which service firms do business:

– with customers (new services, more convenience)

– behind the scenes (reengineering, new value chains)

• Create relational databases about customer needs and behavior, mine databanks for insights

• Leverage employee capabilities and enhance mobility• Centralize customer service, be faster and more

responsive• Develop national/global delivery systems• Create new, Internet-based business models

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Relating the 8Ps to the Service Decision Framework

W H AT BU SIN ESS A RE W E IN ?

W ha t Service Pro cesses C a n Be U sed in O ur O pera tio n? (PRO CESS)

W ho A re O ur C usto m ers a nd H o w Sh o u ld W e Rela te to Th em ?

W ha t Price Sho u ld W e C h arge? (PRICE AN D O TH ER U SER O U TLAYS)

H o w to C o m m u nica te? (PRO M O TIO N & EDU CATIO N , PH YSICAL EV IDEN CE)

O ptio ns fo r D e livery? (PLACE, CYBERSPACE & TIM E, PH YSICAL EVIDEN CE)

H o w C a n W e Ba la nce ?PRO DU CTIV ITY AN D Q U ALITY

W ha t Sh o u ld be the C o re a nd Supp lem en ta ry Elem en ts o f O u r Service Pro duct? (PRO DU CT ELEM EN TS)

H o w Sh o u ld W e M a tch D em a nd a nd Pro ductive C a pa city?

W ha t A re A ppro pria te Ro les fo r Peo p le a nd Techno lo gy? (PEO PLE)

H o w C a n O ur F irm A ch ieve Service Lea dersh ip?

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Services Marketing

Gap Theory:

Satisfaction is a function of the gap between expected service and perceived service.

An extension of buyer behavior

What you thought was going to happen versus your perception of what happened

Key is to minimize the gapGive the customer what they expect…?

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