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2 sessions on services marketing as a part of the core marketing course taught to an executive audience at S P Jain Institute by Prof S K Palekar
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[email protected] +9821046013
2 Sessions on Service MarketingProf S K Palekar
Post Graduate Executive Management Program S P Jain Institute of Management & Research, Mumbai Campus
CORE MARKETING MANAGEMENT COURSE - 2012
Objectives
Customers want services along with products Marketing Mix of services is different Basic ways ot organizing service business Differences between products and services “High contact” services : MOT model Gap Model Challenges of Managing Service business Consumer behavior in services
If services are 55% of GDP, why do we see mainly products around us?
You tend to see the tangible “products” more easily than the intangible services. The fact is that it is the services which make the products known, accessible and useable. Services convert products into “solutions”. People always prefer to consume solutions.
Services make products into solutions.Customers Buy Solutions.
Physical product “Soap” gets sold because of services Availability service ( supply chain, sales, payments )Awareness ( advertising and promotion )Redressal ( call centers, customer care departments )
Physical product “Medicines” get sold because of services Diagnosis ( pathologists )Administration ( nurses and doctors )Monitoring ( specialists )
ERP Software gets sold because of servicesstudy, specs, installation, customizing, Training and handholding
Sale of Cummins Engines to Fishermen
Its diesel engine will not get sold to fishermen for converting their manual boats into motorized boats unless
Promoters go and meet the fishermen and get acquainted Promoters explain the type of engines available and their applicationsPromoters answer their queries and convince themDistributors who stocks engines and spares and ensure availabilityDistributors who take orders, invoice, collect paymentTechnical staff who installs and trains After sales service for maintenance and repairs
Is Hindustan Unilever a service company?P&L for 12M ending December 31, 2007
Sales ( Net of taxes and trade commissions)Rs 14106 Crores This is equivalent to Rs 18760 Crores at MRP level
Commissions : Rs 3250 Crores ( Trading ) Taxes : Rs 1400 Crores
( Paid to the Government for public administration )
Employee costs, Advertising, Freight etc Rs 4400 Crores Customer pays Rs 9050 Crores through HUL
Trade Services Rs 3250 CroresGovernment Services Rs 1400 CroresAd, Promo, freight, peopleRs 4400 Crores
50% of customer revenue to HUL goes for services
A poor man spends a lot of his income on basic needs (lower part of this Maslow’s pyramid) but there is a limit to how much you can consume. As your income increases, you will buy more clothes and will buy more expensive clothes but will hit a limit ultimately. This is not so for services. The more affluent a society, the more services it will consume. The more money you earn, the more you outsource your chores (driving, cleaning, cooking which are all services) and the extra time you this earn is spent on services (travel, play, hobbies, health).
“Products” vis-à-vis “Services”In reality there is no “pure product” (green) or “pure service” (blue)
Product marketers’ perspective : is use “4 Ps” model of marketing mix to decide what Product, Place, Price and Promotion they should offer to the market But the customers’ perspective is different : they consider the “total solution” consisting of the products and associated services they will need to use along with the products. When customers consume service, they expect additional “3Ps of services” : People, Process and Proof.Many product marketers forget that – when it becomes difficult to differentiate your products because the technology is flat – they can differentiate themselves by following the route of improving their services!
Products Services
Recognizing the differencebetween “Products” and “Services”
Services have a different cost structureCustomers judge services differently than they judge products“High contact service” gets “co-created” through “encounters”(also called
MOT – Moment of Truth) between service customers and service providers.
In these encounters there is an ample scope for “delight” as well as “disasters” : it depends on how the customer’s expectations are managed and how the service providers are selected, trained and motivated.
Cost Structures in Service Business( Many of your companies will be a combination of product business and service business.)
Product Business Costs• Materials• Mfg / storage space facilities • Machinery for materials• Cost of People for materials conversion• Planning : Batches / Made to stock• Location : based on mfg convenience
Service Business Costs• Cost of People to service customers• Space for serving customerslike parking, offices, lecture halls
• Machinery for servicing customerslike A/C, projectors, PCs
• Planning : driven by how/when the customers come to service facility
• Location : convenient for customers
Customers Judge Services Differently
A “product” is tangible and its “need-satisfying-qualities” can be expressed explicitly to the satisfaction of the customer even before they buy the product. “XYZ car gives 10 km / liter” “Sony laptop model has 320 Gb memory capacity”
On the other hand “services” are intangible. Their “need-satisfying-quality” cannot be expressed explicitly to the
satisfaction of the customer before buying. The talent of a singer, the brilliance of a professor, the expertise of a lawyer cannot be explicitly expressed before buying. It can be only experienced after buying.
That’s the risk in buying services that customers are aware of because the service quality is not easy to judge before spending the money.
Sometimes the quality cannot even be experienced - but can only be believed. Since the customer cannot even experience if the prescription of the doctor or the advice of the lawyer is proper or not; the customer has no alternative but to believe in the advice of the experts.
In product businesses most of these marketing steps happen when the customer is not present on the premises. This permits extensive and expert-driven internal processes efficiently and properly within the company. But in service business much of this happens in presence of – and in response to – the customer in real time. In service business these processes are driven by the front-line and the whole organization can be only as good as its front line.
Management in service business cannot contribute to the value creation process in services because the main value gets co-created during the “problem-solving” or “customizing” “encounters” between the front line employees and the customers in front of them. The role of management therefore is to ensure that 1. The right people are selected as service providers2. These are inducted, trained in technical as well human sides3. They are lead and motivated by leaders 4. Right customers come in front of right service providers 5. Such providers know how to deal with such customers
Management in service business is mainly concerned with employee issues
Management
BuyersEmployees
Much value is co-created as MOT ( Moments of Truth) at the front line. Customers evaluate the service based on many intangibles like responsiveness, competence, courtesy, communication, appearance.
Managing employees so that they manage customers better.
Recruit, induct, train, motivate, supervise, compensate, control
Management needs to have a “line of sight” to what is happening at service locations and also needs to have a customer satisfaction measuring process in place to know if service is getting delivered.
Other characteristics of Services
Not inspectable High variation of “outcomes” (being Person dependent) Embedded in “Encounters”Person dependentUsed but not ownedCo-createdPerishable Frequent under / over utilization of capacity
Think : Managerial implications of these service characteristicsWhich are different from those of products
Designed and produced to the need of the customer – on the fly Frequently designed / produced at the same time.Service quality depends a lot on customer-fronting employees Customer present throughout design, production, delivery. Many times other customers are also watching this.Management cannot inspect all customer transactionsIn service, machines assist service givers Service giver visits customer or customer comes to serviceDistribution and storage not possible. Service has locations and catchment areas.Look of the people and facilities is important in service.
Virtuous [email protected]
Vicious [email protected]
Recruitment Process
Define the type of work that needs to be done in serviceDefine the type of person who is ideally suited to do itIdentify where the “pools” of prospective employees existHow to contact, interact and select the employees you wantOffer appointment and inward assistanceInduction and on-boarding the new employees
How Customers Judge Quality
OUTCOME PARAMETERSReliability : How consistent and dependable ?Access : Easily accessible without unacceptable wait ?Credibility : Can consumers trust the company ?Security : Is the service free from risk and danger ?Knowledge : Does the company try to understand the needs ?
PROCESS PARAMETERSResponsiveness : How willing are the employees to serve ?Competence : Do the staff have skills to do their job ?Courtesy : Are the staff polite and considerate ?Communication : Does the company clearly explain ?Tangibles : Appearance of people and facilities ?
Service Providers Exhibit a Wide RangeEach type / context needs a different type of person
RARE EXPERTISE / JUDGEMENT / SKILLExpertise / Experience LawyerPerform Singer, Dancer, Teacher, Priest Judgment / Decision Doctor
MEDIUM EXPERTISE / JUDGEMENT / SKILLEmpathy Sales ExecutivesConversation / Sociability Customer Relation ExecutivesAwareness and Feedback Barber, Tailor
LOW EXPERTISE / JUDGEMENT / SKILLPhysique Laborer, Guard
In most service businesses the service providers are the main value creators for the customers. Therefore, in many service businesses, managing people is mainly an operations responsibility and not the HR responsibility. Each business needs its own “People Strategies” of locating, sourcing, recruiting, inducting, deploying, training and motivating the people. People strategies are more important than marketing strategies for service firms. [email protected]
Consumer Behavior
STRATEGIES
Higher Perceived Risk
- Cannot judge before buying.- Cannot sample or display.- Once happy, stick to it.
STRATEGY Depend more on referrals.
Create brand names and the look of the facilities to judge by.Satisfy customers to create a loyalty.
Place Of Production & Use Same.
- Service is delivered in real time.- When others are also watching.- Cannot grow fast because cannot scale up facilities fast.- Bottleneck is training and development.
STRATEGY Franchise network as a route to expand.
Training and development is a key process. Facilities can be streamlined to use less labor in service delivery.
Consistency Difficult To Achieve.
- Service is delivered in different and decentralized locations.- Not possible to supervise all the time.- How to ensure uniformity is a problem.- Service process cannot be halted /reworked before consumer sees it.
STRATEGY Educated employees understand standards better.
Create and train in uniform procedures.Industrialize service through automation.
Customization and inconsistency are 2 sides of the same coin.
Not possible to Utilize Capacity Fully
Facility geared up for peak load remains idle the rest of the time
STRATEGY Differential pricing for peak and non-peak times.
Make wait comfortable.Increase off peak demand.
Reservations to smoothen the schedule.Use part-time employees for peak periods.
Staff does routine (non-customer) work during non-peak times.Customers undertake to do part of the work in peak time.
