Marketing Of Marketing Of ServicesServices

MBAMBATERM-04-2013TERM-04-2013

Unit-1Unit-1

MODULE-01MODULE-01Duration-3 Lectures.Duration-3 Lectures.

► INTRODUCTION TO SERVICES INTRODUCTION TO SERVICES MARKETINGMARKETING

► Definitions.Definitions.► Characteristics & classification of Characteristics & classification of

servicesservices► Services economy Services economy ► Nature and scope of Nature and scope of ► service market potential service market potential

GoodsGoods - things you can touch - “tangible”

ServicesServices - things you can’t touch - but you can see their effect “intangible”“… services are not physical, they are intangible…”

A Service is a type of a product.

“… a deed performed by one party for another…”

Services have special characteristics that make them different than products.

Service

A product without physical characteristics;

a bundle of performance and symbolic attributes designed to produce consumer want satisfaction.

Service Definition

Definition of Service-2Definition of Service-2

►A service is an act for performance of A service is an act for performance of an essentially intangible nature that an essentially intangible nature that does not result in the ownership of does not result in the ownership of tangible product or commodity but tangible product or commodity but serves to create value and benefits for serves to create value and benefits for customer.customer.

►A service, according to Vargo and A service, according to Vargo and Lusch (2004), is ‘the application of Lusch (2004), is ‘the application of specialized competences (knowledge specialized competences (knowledge and skills) through deeds, processes, and skills) through deeds, processes, and performances for the benefit of and performances for the benefit of another entity or the entity itself. another entity or the entity itself. ServicesServices are economic activities,  are economic activities, rather than tangible products, offered rather than tangible products, offered by one party to another.  by one party to another. 

““There are no such thing as There are no such thing as service industries.There are only service industries.There are only

industries whose service industries whose service components are greater or less components are greater or less than those of other industries. than those of other industries.

Everybody is in service.” Everybody is in service.”

-Theodore Levitt--Theodore Levitt-

►Services make up the bulk of the Services make up the bulk of the economy in economy in post-industrial societiespost-industrial societies and account for most of the growth in  and account for most of the growth in new jobs. Unless a person is already new jobs. Unless a person is already predestined for a career in family predestined for a career in family manufacturing or agricultural manufacturing or agricultural business, the probability is high that business, the probability is high that they will spend their working life in they will spend their working life in service organizationss. service organizationss.

► TangibleTangible touchtouch seesee tastetaste smell smell

► IntangibleIntangible can’t seecan’t see can’t touchcan’t touch can’t smellcan’t smell can’t tastecan’t taste

Tangible / Intangible AttributesTangible / Intangible Attributes

Not in the text

What is a service What is a service Services are deeds, processes and performances.Services are deeds, processes and performances. Service industries and companies – industries and Service industries and companies – industries and

companies typically classified within the service companies typically classified within the service sector whose core product is a service.sector whose core product is a service.

Services as products – a wide range of intangible Services as products – a wide range of intangible product offerings that customers value and pay for in product offerings that customers value and pay for in the marketplace.the marketplace.

Customer service – the service provided in support of Customer service – the service provided in support of a company's core product.a company's core product.

Derived service – the value derived from physical Derived service – the value derived from physical goods is really the service provided by the good, not goods is really the service provided by the good, not the good itself. the good itself.

DefinitionsDefinitionsJames SchorrJames Schorr

• At Procter & Gamble:At Procter & Gamble: “ “ A product is A product is something a consumer something a consumer purchases and takes purchases and takes away with him or away with him or consumes or otherwise consumes or otherwise uses. If it is not uses. If it is not physical, not something physical, not something that they can take that they can take away or consume, then away or consume, then we call it a service”we call it a service”

• At Holiday Inns:At Holiday Inns: “… “…people are buying people are buying a hotel experience. I’m a hotel experience. I’m selling the room, the selling the room, the way they treat you at way they treat you at the front desk, the way the front desk, the way the bellman treats you, the bellman treats you, the way the waitress the way the waitress treats you – it’s all treats you – it’s all mixed together in a mixed together in a consumer’s mind when consumer’s mind when he makes a hotel he makes a hotel decision”decision”

Services (examples)Services (examples)

Casino / HotelsCasino / Hotels

Continuing Care Continuing Care Retirement CommunitiesRetirement Communities

Diet and Weight Diet and Weight Reducing CentersReducing Centers

Environmental ConsultingEnvironmental Consulting

Golf Courses and Country Golf Courses and Country ClubsClubs

Hazardous Waste Hazardous Waste CollectionCollection

Medical CentersMedical Centers

Industrial Design Industrial Design ServicesServices

Investment Banking Investment Banking

Management Management Consulting ServicesConsulting Services

Satellite Satellite TelecommunicationsTelecommunications

Internet Search Internet Search Engine providerEngine provider

Goods and Services: Scale of Elemental Dominance

Not in the text

1. Intangibility - “u can’t touch this”

2. Production (or performing the service) and Consumption (using the service) - happens at the same time

3. Heterogeneity - services are not always delivered the same way

4. Perishability - cannot be put in inventory or stored for later useie. You can’t buy 2 haircuts

4 Characteristics of Services

1. Intangibility - “u can’t touch this”

• Services cannot be stored

• Services cannot be protected through patents

- therefore a really great travel package and service can be copied

a really great physical object can be patented, and NOT allowed to be copied

Characteristics of Services

1. Intangibility - “u can’t touch this”

• Hard to explain and display Services if you can’t see them

• Prices are difficult to set - depends on customers expectations

Characteristics of Services

Not in the text

2. Inseparability of Production (or performing the service) and Consumption (using the service) - happens at the same time

Characteristics of Services

•mass production of services is hard to do

Not in the text

3. Heterogeneity - services are not always delivered the same way

It is very difficult to standardize services

eg. A machine can make ice cream cones a standard size 100% of the time

A person filling an ice cream cone with a scoop cannot do it the same amount each time, unless you use a machine to dispense the ice cream

Characteristics of Services

Not in the text

3. Heterogeneity - services are not always delivered the same way

Services are ephemeral-transitory and perishable

Characteristics of Services

Not in the text

►It is very difficult to standardize services

►eg. A Taxi driver cannot drive you to the office in exactly the same time each day because the traffic patterns change

►eg. A travel agent can sell you a vacation package - but cannot guarantee you will like the trip exactly the same way another tourist did.

4. Perishability - cannot be put in inventory or stored for later use

ie. You can’t buy 2 haircuts

Demand fluctuates and changes, sometimes depending on the season, or weather

eg. Taxi in the rain, vacation in summer

Characteristics of Services

Not in the text

So what’s it all about?So what’s it all about?

• No ownershipNo ownership• Not inventoriedNot inventoried• Intangible dominatedIntangible dominated• Customer involvement in productionCustomer involvement in production• Other customers may form part of the productOther customers may form part of the product• More variability in operational inputs and More variability in operational inputs and

outputsoutputs• More difficult to evaluateMore difficult to evaluate• Time = importantTime = important

► Intangible elements dominate value Intangible elements dominate value creationcreation

►Distribution channels take different Distribution channels take different forms .forms .

Key factors behind the growth Key factors behind the growth of servicesof services

• DemographicsDemographics• Social norms and Social norms and

workingworking• 2 income families2 income families• Increase in quality of Increase in quality of

lifelife• Greater life complexityGreater life complexity• International travel International travel

and mobilityand mobility• Increasing aspirationsIncreasing aspirations• GlobalisationGlobalisation

• E- businessE- business• IT linked to competitive IT linked to competitive

advantageadvantage• GlobalisationGlobalisation• Growth in government Growth in government

servicesservices• Mergers and acquisitionsMergers and acquisitions• Too expensive to retain Too expensive to retain

service expertiseservice expertise• Outsourcing of Outsourcing of

servicesservices

Consumer Business

Results in…Results in… In the US 80% of employment and 77% of GDP is In the US 80% of employment and 77% of GDP is

attributable to the service sector.attributable to the service sector. In the UK 63% of employment and 76% of GDP is In the UK 63% of employment and 76% of GDP is

attributable to the service sector. attributable to the service sector. • Across Europe, services account for most growth in Across Europe, services account for most growth in

new jobsnew jobs• Business services are growing even where Business services are growing even where

manufacturing is in declinemanufacturing is in decline• Service sector accounts for >50% of GNP and employs Service sector accounts for >50% of GNP and employs

>50% of work force in many Latin American countries >50% of work force in many Latin American countries • Now growing rapidly in developing nationsNow growing rapidly in developing nations

(World Bank)(World Bank)

Services dominate the Services dominate the Economy:Economy:

GDP by Industry, 2015GDP by Industry, 2015

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

In China (2004)In China (2004)

• Services Services sector sector contributecontributed$265 d$265 billion of billion of its its economic economic growthgrowth

share of the economy

41%

46%

13%

service

Small factory

primaryindustries

AssignmentAssignment►Prepare a PPT of.Prepare a PPT of.►5 organizations providing services in 5 organizations providing services in

different categories .different categories .TOTAL OF 8 SLIDES.TOTAL OF 8 SLIDES.Presentation Time- 5 minutes.Presentation Time- 5 minutes.Give one page write up on Give one page write up on services industry services industry

relevance in today’s economyrelevance in today’s economy with facts with facts and figures- Mention along the sources.and figures- Mention along the sources.

Date of presentation 4Date of presentation 4thth Sept 2014 Sept 2014