MARKETING APPLICATIONS

Session 1

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

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

Fastest growing services…

Health care Higher education Entertainment Financial

New Generation services…

Management consultancy Computer maintenance Recruitment services Management training Value-added telecom services Call centre/BPO

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

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

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

Growth Factors

Economic,socio cultural & life style change

Women taking up jobs Explosion of IT sector Advent of many new technical

products Reforms & liberalization

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

Differentiation parameters…

Time Special offerings People Physical evidence Convenience

Marketing Scenario

Company

Employees Customers

Internal Marketing

External marketing

Interactive Marketing

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

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

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

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

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 Negative sensory experiences

The 7Ps:(5) Physical Environment

Designing the Servicescape and providingtangible 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

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

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

Managing the 7Ps Requires Collaboration between Marketing, Operations, and HR Functions

Customers

Operations Management

Marketing Management

Human Resources Management

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.

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

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

The 7 S Framework…

Strategy

Shared Value

Skills

Structure

Staff

System

Style