intro to service marketing

SERVICE MARKETING

Aug – Dec. (2008)

SERVICES

“Service is an act or performance offered by one party to another that is essentially intangible and does not result in the ownership of anything.”

TRENDS IN SERVICES SECTOR

Service industry known as tertiary industry (primary – agri, mining; secondary – manufacturing)

Share of services, industry, and agriculture in India's GDP is 55.1 per cent, 26.4 per cent, and 18.5 per cent respectively

A KPMG survey of BRIC countries (Brazil, Russia, India and China), has revealed highest confidence among the service sector in India with 60% of the Indian firms expect rise in activity, a few notches above than that of China


Factors contributing to growth:

1. Government Policies – Govt. regulations, – Privatisation

2. Social Changes – Rising customer expectations– More affluence– Increased desire for buying experiences vs products


Factors contributing to growth:

3. Business trends– Mfrs. Adding value through services– Quality Movement– Growth of franchising

4. Advances in Information Technology– Growth of internet– Convergence of computers & telecommunications

5. Internationalisation– More cos. operating on transnational basis– International mergers & aquisitions


The various sectors that combine together to constitute service industry in India are:

Trade Hotels and Restaurants Railways Other Transport & Storage Communication (Post, Telecom) Banking Insurance Dwellings, Real Estate Business Services Public Administration; Defence Personal Services Community Services Other Services


While almost all service sectors participated in this boom, growth was fastest in communications, banking, hotels and restaurants, trade and business services.

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

GOODS AND SERVICES

Differences between goods & services

Customers do not obtain ownership of services Service products are ephemeral & cannot be

inventoried Intangible element Customers maybe involved in production process Other people part of product

GOODS AND SERVICES

Differences between goods & services

Greater variability in operational inputs & outputs

Services are difficult for customers to evaluate

Time factor assumes more importance Distribution channel take different forms

Value Added by Tangible vs Intangible Elements in Goods

and Services

Fast food restaurant Plumbing repairOffice cleaning

Health clubAirline flight

Retail banking Insurance

Weather forecast

Salt

Soft drinksCD PlayerGolf clubsNew car

Tailored clothingFurniture rental

Lo Hi

Hi

Tan g

ible

Ele

men

t s

Intangible Elements

CLASSIFICATION OF SERVICES

A significant classification is based on process (taking an input & transforming into an output)

Marketers of services need to understand nature of services to which customers are exposed

Services range from simple procedures to highly complex activities


People Possession

People Processing Possession processing Tangible - Passenger transportation - Freight transportation actions

- Health care - Repair & maintenance - Lodging & Restaurant - Retail distribution

Mental stimulus Information processing Intangible - Advtg. & PR - Accounting & Bkg actions

- Education - Insurance & Legal - Entertainment & Arts - Software Consulting


1. People processing

Customers must physically enter the service system as they are integral part of process

They must spend time interacting & co-operating with service providers

Process & output is important


2. Possession processing

Providing treatment to possession. Customers less physically involved

Customer’s involvement – to drop item that needs treatment, requesting the service, explaining problem & later picking it up & paying the bill.

If object to be processed is difficult to move then “service factory” comes to customer


3. Mental stimulus processing

These services interact with the customer’s minds which has the power to shape their attitude & behaviour. Core content is information

Customers not physically present, but mentally connected with information presented.

Recipients have to make investment of time


4. Information processing

Information is most intangible but can be made tangible by letters, reports, books

Financial & professional services are strong examples of collection & processing of information

No requirement of personal contact with supplier of service. Contact could be over e-mail, telephone.

IMPLICATIONS OF SERVICE PROCESS

1. Designing Service Factory (people proc.) When customers have to be physically present

throughout delivery, process must be designed with them in mind – right from the moment they arrive the service factory.

Choose convenient location These factors assume importance

– exterior & interior facilities,– encounters with service personnel, – interactions with self-service equipment – characteristics of other customers


2. For possession-processing, mental-stimulus processing, or information processing services, alternatives include:

1. Customers come to the service factory2. Customers come to a retail office

3. Service employees visit customer’s home or workplace

4. Business is conducted at arm’s length through - physical channels (e.g., mail, courier service)

- electronic channels (e.g., phone, fax, email, Web site)


3. Making most of Information Technology All services can benefit from IT, but mental

stimulus processing and information- processing services have the most to gain.

Remote delivery of information-based services “anywhere, anytime”

New service features through websites, email, and internet (e.g., information, reservations)

More opportunities for self-service


4. Balancing Supply & Demand Problems arise because service output can’t be

stored If demand is high and exceeds supply, business

may be lost. If demand is low, productive capacity is wasted

Services that process people & possession face more capacity limitations. Increasing capacity entails huge costs. Managing demand becomes more important.


5. People becoming part of Product

When people become part of service, their attitude, behaviour & appearance can enhance it or detract it

Managers should be concerned about employees’ appearance, social skills, technical skills

SERVICES MARKETING MIX

Product Place & Time Promotion & Education Price Physical Environment Process People

INTERDEPENDENCE OF MARKETING, OPERATIONS & HR

Customers

Operations Management

Marketing Management

Human Resources Management

SERVICE BUSINESS – AS A SYSTEM

Three Overlapping Sub-systemsService Operations (front stage and backstage) Where inputs are processed and service elements created. Includes facilities, equipment, and personnel

Service Delivery (front stage) Where “final assembly” of service elements takes place and service is delivered to customers Includes customer interactions with operations and other customers Service Marketing (front stage) Includes service delivery (as above) and all other contacts between

service firm and customers

SERVICE MARKETING SYSTEMHigh Contact Service

Service Delivery SystemOther Contact Points

Service Operations System

Backstage Front Stage(Invisible) (Visible)

TheCustomer

TechnicalCore

Interior & ExteriorFacilities

Equipment

Service People

OtherCustomers

OtherCustomers

AdvertisingSales CallsMarket Research

Surveys Billing / StatementsMiscellaneous Mail, Phone Calls, Faxes, etc.Random Exposure toFacilities / VehiclesChance Encounters

with Service PersonnelWord of Mouth

SERVICE MARKETING SYSTEMLow Contact Service

Service Delivery SystemService Operations System Other Contact Point

Mail Self Serv. Equipment Phone, Website

Backstage Front stage

TechnicalCore

Customer

Advertising

Market Research Surveys

Word of Mouth

Customer

Theatre – A Metaphor for Service Delivery

• Service facilities is the stage on which drama unfolds. Some cases customer’s own facilities provide stage.

• Stage can have minimal props or very elaborate• Service dramas could be tightly scripted or

improvisational• Settings change from one act to another• Front stage personnel play roles of actors

( sometimes wearing costumes) supported by backstage production team

SERVICE PLANNING

Operating Assets(Facilities/Equipment, IT Systems, People, Op. Skills, Cost Structure)

SERVICE PLANNING

Corporate Objectivesand Resources

Service Delivery Process

Marketing Assets(Customer Base, Mkt. Knowledge,

Implementation Skills, Brand Reput.)

Service Marketing Concept•Benefits to customer from core/ supplementary elements, style, service level, accessibility

•User costs/outlays incurred•Price/other monetary costs•Time•Mental and physical effort•Neg. sensory experiences

Service Operations Concept•Nature of processes•Geographic scope of ops•Scheduling•Facilities design/layout•HR (numbers, skills)•Leverage (partners, self-service)•Task allocation: front/backstage staff; customers as co-producers

SERVICE PLANNING

1. Starts with statement of objectives or mission at corporate leve

2. This mission leads to two types of analysis – SWOT Analysis identifying strengths, weaknesses, opportunities & threats on marketing & operations fronts

– Market & Competitive Analysis– Resource Allocation analysis – appraisal of

firm’s resources, how to allocate them & identifying additional resources

SERVICE PLANNING3. Each analysis draws two statement of assetsa. Marketing assets statement which includes –

customer portfolio, market knowledge, marketing implementation skill, product line, reputation of brands & positioning strategies.

b. Operating assets statement which includes – Physical facilities, equipment, Information technology, H.R. (numbers & skill), alliances & partnerships, cost structure

SERVICE PLANNING4. Statement of assets leads to creation of the

following concepts. This must be an interactive process.

a. Service marketing concept to clarify benefits to customers & costs they shall incur

b. Service operating concept clarifies nature of processes & how & when operating assets should be deployed

5. Set of choices before the management in configuring delivery process.

intro to service marketing

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