SERVICES MARKETINGStrategic Marketing Management

DEFINITION

SERVICES: “TO INCLUDE ALL ECONOMIC ACTIVITIES WHOSE OUT PUT IS NOT A PHYSICAL PRODUCT OR CONSTRUCTION; GENERALLY CONSUMED AT THE TIME IT IS PRODUCED AND PROVIDES ADDED VALUE IN FORMS (SUCH AS AMUSEMENT, CONVENIENCE, TIMELINESS, COMFORT, OR HEALTH) THAT ARE ESSENTILLY INTANGIBLE CONCERNS OF ITS FIRST PURCHASER.”

SOME MAJOR SERVICE DOMAINS

RETAILING & WHOLESALING TRANSPORTATION, DISTRIBUTION & STORAGE BANKING AND INSURANCE REAL ESTATE COMMUNICATION AND INFORMATION PUBLIC UTILITIES, GOVT AND DEFENCE HEALTH CARE BUSINESS, PROFESSIONAL AND PERSONAL SERVICES RECREATIONAL AND HOSPITALITY SERVICES EDUCATION OTHER NON-PROFIT ORGANIZATIONS

SERVICES ARE DIFFERENTGOODS SERVICES

Tangible Intangible Services Cannot be inventoriedCannot be patentedReadily Displayed/CommunicatedPricing is difficult

Standardized Heterogeneous Services Delivery & Customer Satisfaction Depend On EmployeesQuality Depends On Many Uncontrollable FactorsNo Surety that Services go as Planned/ Promoted

Prod Separate From Consumption

Simultaneous Production & Consumption

Customers participate in and after the transactionCustomers affect each otherEmployees affect outcomeLow CentralizationMass Production Difficult

Nonperishable Perishable It Is Difficult to Synchronize Supply and Demand Services cannot be Returned or Sold

SERVICES CHARACTERISTICS

Inseparability

Perish ability

Heterogeneity

Intangibility

Services

Service Firms are Different

1. Simultaneous production and consumption means that clients of services consume the output of the organization at the same time it is produced

2. Customized output and customer participation means that clients become a part of the production process

3. Intangible output means that a service is abstract such as information or knowledge

4. Service firms are usually more labor intensive, with many employees needed to meet the needs of the customer

Service Firms’ Typology Typology of service organizations is based on two

dimensions:1. Degree of labor intensity:

The ratio of labor cost incurred to the value of plant and equipment.Lawyer’s office is highly labor intensiveTrucking firm is _______in labor intensityUniversity is _____ on labor intensity

2. Customer Interaction & Customization: It contains two concepts: (1) degree to which consumer interacts with the service process, and (2) the degree to which service is customized to the consumer

A fast food restaurant would be ______ on customer interaction but ______ on customization; whereas a prestigious, waiter-service restaurant would be

______ on both counts.

Typology of Services

Service Factory(Low Labor Intensity/Low Customization)AirlinesHotelsLogistics Firms

Service Shop(Low Labor Intensity/High Customization)HospitalsConstruction FirmsPublishers

Mass Service(High Labor Intensity/Low Customization)RetailersSchoolsCommercial Banking

Professional Services(High Labor Intensity/High Customization)DoctorsArchitectsLawyers

Challenges in Services Marketing

1. Service Factory Monitoring the technological sector of the

environment Scheduling supply and demand – as it is

difficult to increase capacity in the short term – in peak and off- seasons

2. Service Shop Monitoring the technological sector of the

environment Finding flexible and adaptable

technologies and work processes to make customization possible without overspending

Service Business Technology

3. Mass Service Managers face marketing challenges Must try to bring in a warm, friendly touch, though the

customer doesn’t get as much personalization as desired

Treating the customers with a sense of warmth

4. Professional Services Must deal with higher costs and more talented HR Managing costs by keeping them down or passing

them to consumer becomes a significant challenge Maintaining quality and responding to customer

interaction

TRADITIONAL MARKETING MIX

PRODUCT PLACE PROMOTION

PRICE

GOOD FEATURES CHANNEL TYPE PROMOTION BLEND

FLEXIBILITY

QUALITY LEVEL EXPOSURE SALES PEOPLE PRICE LEVEL

ACCESSORIES OUTLET LOCATION

ADVERTISING TERMS & CONDITIONS

PACKAGING TRANSPORTATION SALES PROMOTION

DIFFERENTIATION

WARRANTIES STORAGE PUBLICITY DISCOUNTS

BRANDINGPRODUCT LINES

MANAGING CHANNELS

ALLOWANCES

EXPANDED MARKETING MIX FOR SERVICES

PEOPLE PHYSICAL EVIDENCE

PROCESS

EMPLOYEES: FACILITY DESIGN FLOW OF ACTIVITIES:

Recruiting, training EQUIPMENT Standardized

Motivation SIGNAGE Customized

Teamwork & Rewards

DRESS NUMBER OF STEPS:

CUSTOMERS: OTHER TANGIBLES: Simple or Complex

Education Reports/Business Cards

CUSTOMER INVOLVEMENT:

Training Statements, guarantees

High or Low

SERVICE MARKETING TRIANGLE

COMPANY

PROVIDERS CUSTOMERSINTERACTIVE MKTG

Keeping Promises

INTERNAL MKTG

Enabling PromisesEXTERNAL MKTG

Making PromisesTechnology

Standardized vs. Customized Services

1. Variety: Number of exceptions in the work Frequency of unexpected and novel events

that occur in service process2. Analyzability: When the service process is analyzable, the

work can be reduced to mechanical steps Participants can follow an objective,

computational procedure to solve problems Problem solution may involve the use of

standard procedures such as instruction manuals, or technical knowledge such as textbook

Standardized/Customized Services

When work is not analyzable, it is difficult to identify correct solution when variability (a novel situation) arises

No store of techniques or procedures exist to tell a person exactly what to do

The cause of, or solution to, a problem is not clear , so employees rely on accumulated experience, intuition and judgment

Standardized/Customized Services

Low Analyzability/Low Variability

Teaching of Humanities/Social SciencesSkills Training/CoachingOrchestra MusiciansGeneral Admin./Management

Low Analyzability/High Variability

Counseling/Rehabilitation servicesAdvertising AgenciesInterior DecoratorsFashion DesignersBeauticians

High Analyzability/Low Variability

Auditing/Accounting FirmsTeaching of Empirical SciencesTechnical Training

High Analyzability/High Variability

DoctorsEngineering ServicesArchitectsLawyers

SERVQUAL

SERVQUAL (Service Quality) was originally measured on 10 aspects of: reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding the customer and tangibles.

By the early nineties the authors had refined the model to the useful acronym RATER:

Reliability Assurance Tangibles Empathy Responsiveness

SERVQUAL DIMENSIONS

TANGIBLES - the appearance of physical facilities, equipment, personnel and information material

RELIABILITY - the ability to perform the service accurately and dependably

RESPONSIVENESS - the willingness to help customers and provide a prompt service

SERVQUAL DIMENSIONS

ASSURANCE - a combination of the following

Competence - having the requisite skills and knowledge

Courtesy - politeness, respect, consideration and friendliness of contact staff 

Credibility - trustworthiness, believability and honesty of staff 

Security - freedom from danger, risk or doubt

SERVQUAL DIMENSIONS

EMPATHY - a combination of the following:

Access (physical and social) - approachability and ease of contact

Communication - keeping customers informed in a language they understand and really listening to them

Understanding the customer - making the effort to get to know customers and their specific needs

SERVQUAL (RATER)

The RATER model is a simple and useful model for exploring and assessing customers' service experiences and has been used widely by service delivery organizations. It is an efficient model in helping an organization shape up their efforts in bridging the GAPS between perceived and expected service.

SERVQUAL (RATER)

The five gaps that organizations should measure, manage and minimize:

Gap 1 is the distance between what customers expect and what managers think they expect – the Perception Gap

Gap 2 is between management perception and the actual specification of the customer experience – the Standards Gap

Gap 3 is from the experience specification to the delivery of the experience – are standards consistently being met: the Control Gap

Gap 4 is the gap between the delivery of the customer experience and what is communicated to customers – the Communication Gap

Gap 5 is the gap between a customer's perception of the experience and the customer's expectation – the Expectation Gap

REASONS FOR GAPS

GAP 1 (Perception Gap) - not knowing what customers expect Lack of a marketing orientation Inadequate upward communication (from

contact staff to management) Too many levels of management

REASONS FOR GAPS

GAP 2 (Standards Gap) - the wrong service quality standards

Inadequate commitment to service quality

Lack of perception of feasibility - ‘it cannot be done’

Inadequate task standardization The absence of goal setting

REASONS FOR GAPS

GAP 3 (Control Gap) - the service performance gap

Role ambiguity and role conflict - unsure of what your remit is and how it fits with others

Poor employee or technology fit - the wrong person or system for the job

Inappropriate supervisory control or lack of perceived control - too much or too little control

Lack of teamwork

REASONS FOR GAPS

GAP 4 (Communication Gap) - when promises made do not match actual delivery

Inadequate horizontal communication – between departments or services

A propensity to overpromise

REASONS FOR GAPS

GAP 5 (Expectation Gap) - when experience does not match actual expectations

Building wrong/too high/too many expectations

Not understanding target customer’s needs and value perceptions