Services Marketing1

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Services Marketing

By

Prof. Ashok Kumar Patnaik



Books for services marketing

Services marketing by Vasanti Venugopal andRaghu V.N., Himalaya

Services marketing by Ronald, Anthony and

Timmothy , Addison wesley Services marketing by Dr S. Shajahan, Himalaya

Services marketing Indian context byR.Srinivasan, PHI

Services marketing by Lovelock,Wirtz and Ken,PHI



Learning Methodology

Conceptual Learning

Case studies/ Presentations

Projects Research Assignments

Home Assignments

10 February 2011 Prof. Ashok K. Patnaik - AIMS



General perception

about services management



General perception

about services management



Household help





Second industrial

revolution

Or Growth of service

industry



Banking sector



Railway / Rail road



Insurance sector



Service dominated economies

USA

JAPAN

UK

AUSTRALIA

CANADA

INDIA



What is services?

Services are activities or benefits that one

party can offer to another that are essentially

intangible and do not result in the ownership

of anything.

This is how we see how services are different

from goods.



Definition of services

A service is an economic activity that creates

value and provides benefits for customers at a

specific time and place,by bringing about a

desired change in, or on behalf of, the

recipient of the service.



Philip Kotler

A service is any act or performance that one

party offers to another, which is essentially

intangible and does not result in the

ownership of anything. Its production may or

may not be tied to a physical product.



Mahatma Gandhi

Consciously or unconsciously , every one of

us does render some service or other. If we

cultivate the habit of doing this service

deliberately, our desire for service will

steadily grow stronger and we will make not

only our own happiness, but that of the world.

The best way to find yourself is to loseyourself in the service of others





Services and goods

Companies / Industry

± Goods/Product (deal with tangible dominants:

commodities, automobiles, FMCG etc.)

± Services (deal with intangible dominants : airlines,

consulting, teaching, advertisement agency etc.)



GOODS

SEARCH

GOODS

PRIOR

PURCHASE/USE



GOODS

EXPERENCEGOODS

ONLY AFTERBUYING OR AFTER

CONSUMPTION

INTANGIBLE



PHYSICAL GOODS VS SERVICES

Tangible

Homogeneous

Production and distribution are

separated from consumption

A thing

Core value product in factory

Customers do not participate in

the production process

Can be kept in stock

Transfer of ownership

Intangible

Heterogeneous

Production, distribution and

consumption are simultaneous

processes

An activity or process

Core value produced in buyer-

seller interaction

Customer participates in

production

Cannot be kept in stock

No transfer of ownership









Myths about services

Services industry produces services at the

expense of other sectors.

Services production is primarily labour intensive.

People satisfy their product needs before theneed for services or buy products first.

Services sector is cottage industry and pay very

low to employees. Services are only offered by government sector



Types of services

Business services: Consulting, finance, banking

Trade services: Retailing, maintenance and

repair Infrastructure services: Communication and

transportation

Social/ Personal services: Restaurants, healthcare

Public administration: Education, government



Growth of service sector

Affluence (Rs 238.8 in 1950,11934.5 in 1998 and 38084 in 2009, dinning

out habits, clubs, repairs and services, carpet and dry cleaning, banking and

investment, retailing and insurance )

Leaser time (travel agencies, resorts, hotels, entertainment)

Life expectancy (old age homes, nursing homes, health care)

Working females (home delivery, baby caring, domestic help,fast food

restaurants, marriage counseling, personal care )



Growth of service sector

Product complexity (microwaves, computers, water purifiers- after

sale, maintenance/ repair services, training and education, sharing services etc.)

Lifes complexity (tax consultants, legal advisors, professional services,

courier services, travel etc)

Resource scarcity and ecology (pollution control agency, car

pool, water management etc)

Corporate crowd /New Young /Youth (advertising, recruitment

services, management counseling, marketing research, educational institutes, tutorialaids, picnic resorts)



Factors stimulating

the services economy

Government policies

Social changes

Business trends Advances in information technology

Internationalization



Factors stimulating


Government policies

± Changes in regulation

± Privatization

± New rules to protect consumers, employees and

the environment

± New agreement on trade and services



Factors stimulating


Social changes

± Rising consumer expectations

± Immigration

± More people find themselves short of time

± Increasing desire for buying (experience vs things)

± Rising ownership of computer and mobile phones



Factors stimulating


Business trends

± Manufacturers add value through service and sellservices

± More strategic alliances ± Marketing emphasis

± Quality movement

± Emphasis on productivity and cost savings

± Growth of franchaising

± Innovative hiring practices



Factors stimulating


Advances in IT

± Convergence of computer andtelecommunications

± Greater bandwidth ± Miniaturisation of products

± Wireless networking

± Faster, more powerful software

± Digitization of text, graphics, audio and video

± Growth of internet users



Factors stimulating


Internalization

± More companies going global

± Increased international travel

± Internationsation mergers and alliances



Major services categories as per GATS

Business services

Communication

Construction and engineering

Distribution Education

Environment

Finance

Health Tourism

Recreation

transport



Financial services

Banking

Insurance

Leasing



Shipping and distribution

Ocean carriers

Rail

Trucking Air fright

Wholesaling

Warehousing Distribution



Professional and technical services

Technical licensing

Sales

Engineering design services Architectural design

Construction management

Legal services Accounting services



Other producers services

Computer data processing

Communication services

Franchising

Advertising

Commercial real-estate consulting

Business travel

Security services

Postal services



Consumer services

Retailing

Healthcare

Travel, recreation, entertainment Education

Home repair

Laundry etc.



Problems with services

Quality and value of services

Late deliveries

Rude or incompetent personnel Inconvenient service hours

Complicated procedures

Long queues



Tangible & Intangible elements

Pure tangible goods (salt, bathing soap, cloths)

Tangible goods with accompanying services (cars,computer)

Hybrid (restaurants combining equal part of goods and services)

Major services with accompanying minor goodsand services (air travel, house cleaning)

Pure services (babysitting, psychotherapy,investment management)



Customer as partial employee/ trainee

ATM services

Hairdressing Saloon

Laundromat Hotels

Colleges/ institutions

Hospitals



Elements of Service management -1

Product elements (create value for customer)

Place, cyberspace and time (speed and

convenience in delivery of services)

Process (sequence of actions in performance)

Productivity and quality (transformation and

satisfaction)



Elements of Service management-2

People (Nature of interaction & perception)

Promotion and education (benefit of services)

Physical evidence (appearance of building,interior, equipment, signs, staff members,

printed material, advertising & other visible

clues)

Price and other costs of services ( travel

expense, time, mental and physical efforts)



Customers dont obtain ownership

Need to think of temp rentals rather rather

than permanent sales so, how best to price

such rentals.

Customer criteria are different for renting an

object instead of purchasing it.



Service products are intangible

Consider how to create and communicate

tangible evidence

Understand how to stage the performance

and manage each step

Customer behavior and competency can help

or hinder productivity

Consider opportunities for self service

Design of service factors must be user friendly



Other people may form part of the

product

Behaviour of employees and other customers

need to be managed

Recruit service personal who has technical

skill

Wise to mix different segments at same

location and time



More variability in operational inputs

and outputs

Quality control for consistency

Go for standardisation

Replace employees by automation to reducevariability



Services are difficult for customers to

evaluate

Need to develop trust between customer and

company

Educate customer to make them smart and

appropriate choice of services



Absence of inventory after production

Mange demand levels

Manage capacity levels to meet demand

fluctuations and predicted demand

Right business at right time



Time factor is relatively important

Must understand customer time constraints

and priorities

Understand that customer feels spending time

is a burden

Look for fast services, consider 24X7 services

or expand service hours



Delivery system may involve both

electronic and physical channel

Consider the electronic delivery system for

information based services

Recognise new methods of service delivery

through use of IT

Use the system of point of consumption

model of delivering services



Telephone services



Social networking sites



Health care



Passenger transport



Restaurants



Laundry and dry cleaning



Repair and maintenance service



Babysitter



Movie theater



Security services



Pet care



Classification of services

Extent to which service processes are tangible Who or what is the direct recipient of the service

process?

The place and time of service delivery

Customization vs standardization

Nature of the relationship with customers

Extent to which demand and supply are in

balance Extent to which facilities, equipment and people

are part of service experience



Service as a process

People processing involves tangible actions to

peoples bodies

Possession processing covers tangible actions

to customers physical possession

Mental stimulus processing refers to

intangible actions directed at peoples minds.

Information processing describes intangible

actions directed at a customers assets.



Services directed at peoples bodies

Passenger transportation

Healthcare

Lodging

Beauty salons

Physical therapy

Fitness centers

Restaurants or bars

Funeral services



Services directed at peoples minds

Advertising

Public relations

Arts and entertainment

Broadcasting and cable

Management consulting

Education

Information services

Music concerts

Religion services

Voice telephone



Services directed at physical

possessions

Freight transportation

Repair and maintenance

Warehousing and storage

Office cleaning services

Retail distribution

Refueling

Landscaping or gardening

Disposal and recycling



Services directed at intangible assets

Accounting

Banking

Data processing

Insurance

Data transmission

Insurance

Legal services

Research

Security investment

Software consulting



HOME ASSIGNMENT-1

DEAD LINE FOR SUBMISSION OF PPTs THROUGH EMAIL BY

1800 HRS 15 SEPT 09

Email: [email protected]



Format

History of the selected services Key players in World & in India

Services process flow chart

Customer profile/ type

Relationship with customer Products used during the service

Customer involvement status

Other key issues if any

Future of the service delivery etc.



Characteristics of Services

Intangibility Inseparability

PerishabilityHetrogeneity



Intangibility

Marketing implications ± Cannot be stored

± No patent

± No ready display

± Communication problem

± Pricing difficulties

Strategies ± Tangible clues

± Personal sources

± Organisational image

± Post purchase communication



Inseparability

Marketing implications

± Consumer involved in production

± No mass production

± Supply demand match

Strategies

± Selection and training of contact person

± Manage customers

± Multi-site locations



Heterogeneitys

Marketing implications

± Standardization difficult

± Quality control difficult

Strategies

± Industrialize

± Customize



Product in the marketing context is anything

which is offered to the market for exchange or

consumption. (style, aftersale services, credit)

Service is a bundle of features and benefits

and these benefits have relevance for a

specific target market.



Marketing mix in services industry

Product in services (Ref: Philip Kotler) Core product

± The fundamental benefit (hotel- rest/sleep)

Basic product

± Basic functional attributes (room, bed & bathroom) Expected product

± Set of attributes/conditions (clean, towel, quietness)

Augmented product

± Beyond expectation (prompt room service, music, aroma) Potential product

± Factors to distinguish the product from others (all suitehotel)

Th l l f i ff d



Three levels of service offered as a

productThe core services

Facilitating services

Supporting services

The services concept

Accessibility of the services

Consumer participation

Interaction

Corporate image

Word of mouth

Marketing

communication



Pricing in services marketing

Services pricing generally follows the concept

of cost based or market pricing method.

The pricing of services is greatly influenced by

the basic service characteristics.

Customers dont need high quality service at

maximum price.



Guidelines for services pricing

Pricing should be able to handle demand

fluctuation.(delaytill the period of low demand)

Service prices should be based on cost

It should provide value addition and quality

indication to the customer.

The pricing strategy should be such as to cope-

up with the degree of competition operating

within a certain geographic and time zone.



Services pricing objectives

Support the planned market position for the

service product

Stage of the life cycle of the service product

Competitive situation (inter brand and other

substitute service products)

Strategic role of pricing in overall marketing

strategy



Few examples:

Differential or flexible pricing

± Build primary demand during nonpeak time.

± Even out fluctuations in demand

e.g.

± Price time differentials (telephone services)

± Customer ability (housing loan)

± Time and Place differentials (discount at hotel

during offseason)



Few examples:

Discount pricing

± To enable service production and consumption to

take place

± To encourage actions like early payments, bulkpurchase or peak usage

E.g.

±Rebates in the bill amount deposit given byelectricity company.



Few examples:

Guarantee pricing

± To enable high quality operator to compete with

others

± To satisfy a customer seeking clear assurancebefore paying for it.

E.g.

±Employment agencies charge either or both theparties after the assignment gets over.



Few examples:

Loss leader pricing

± To charge a reduced price for the first order with

a hope to get further business at better prices.

E.g

± To attract first time trials, a restaurant offer a

discount on the day of inauguration.



Place or distribution

Products use traditional distribution channels

wholesalers, retailing and intermediaries.

Services must be created and sold at the same

time. So most of the services are distributed

through direct sales.

At best one agent or middleman is added to

it. (insurance, courier service and travelagency etc.)



Promotion in services

Services consumers purchase with less

information than the product customers

Consumers of services will prefer personal

sources over impersonal sources of

information

The basic characteristics of service have

implications on communication strategy



Service promotion objectives

Develop personal relationship with the client

Make a strong impression of competency,

honesty and sincerity

Should be able to use indirect selling

techniques

Manage to maintain a positive image by word

of mouth



Sales promotion in services marketing

Sampling cannot be used frequently because of the cost of service

Premiums are frequently used to give an elementof tangibility

Price and quantity promotion can help ingenerating long term commitments fromconsumers

Prize promotions can be used effectively and add

excitement and involvement Refunds and future discounts are not much in

practice



People or internal marketing

A service is a performance and it is usually

difficult to separate from the people

Employees are essentially the contact point

for customers in services



Essentials of internal marketing

Compete aggressively for talent market share Offer a vision that brings purpose a meaning to

the workplace

Equip people with the skills ad knowledge toperform their service roles excellently

Bring people together to benefit from the fruits oteam play

Leverage the freedom factor

Nature achievement through measurement andrewards

Base job-product design decision on research orknow customer



Physical evidence

A physical object is self defining; a service is

not .

A service is defined through environment,

communication and price

Physical environment

± Ambient factors

± Design factors

± Social factors



Role of physical evidence

Shaping its first impression

Managing trust

Facilitating quality of service

Changing the image

Providing sensory stimuli

Socializing employees



Process management

Process management is that it assures availabilityand consistent quality.

Process helps balancing service demand with

service supply. As there is no tangible product the operations

management is vital to deliver satisfactionbecause here the operations management would

decide how the process of service delivery wouldfunction, or in other words, the interactiveexperience that would deliver the servicebenefits to the customer.

Documents

Services Marketing1