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SERVICES MARKETING
Deepti Shetty1
MODULE 1
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Introduction to Services
• What are services?
• Why services marketing?
• Service and Technology
• Differences in Goods vs. Services Marketing
Continued
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Introduction to Services
• Services Marketing Mix
• Staying Focused on the Customer
• The Gaps Model of Service Quality
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PreamblePreamble
Q. What do we mean by Services?
A. SERVICE IS MADE UP OF DEEDS, PROCESSES AND PERFORMANCES.
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DEFINITIONDEFINITIONA formal definition of Service Marketing:Services include all economic activities whose output is not a physical product or construction, is generally consumed at the time it is produced, and provides added value in forms (such as convenience, amusement, timeliness, comfort or health) that are essential intangible concerns of the first purchaser.
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COMMENTSCOMMENTS
A firm’s offering (s) may be – Pure Goods– Goods and Services– Goods with Services– Services as an integral part of Goods– Pure Services
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WHY SERVICES MARKETING?WHY SERVICES MARKETING?
• A Service Based Economy
• Service biz imperative in Mfg and IT
• Govt. Regulations and Deregulations
• Birth of Services by New Technologies
AND FINALLY
• Service Marketing is different in practice
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Value Addition and ServiceValue Addition and Service
"Economic Value, like the coffee bean, progresses from commodities to goods
to services to experiences."-Joseph B. Pine n & James H. Gilmore
The Experience Economy
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A Cup of Coffee?A Cup of Coffee?• As a raw commodity coffee is
worth $2/Kg.• Processed, packaged and sold
as a good, the price of coffee is about 25 cents a cup.
• When it is sold in a local restaurant, the coffee takes on more service aspects and sells for $1 per cup.
Continued
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A Cup of Coffee?A Cup of Coffee?• When a cup of coffee is sold within the
compelling experience of a 5 star restaurant, the customer gladly pays $5 per cup (the whole process of ordering, creation, and consump tion becomes “a pleasurable” experience.)
• EV, like the coffee bean, progresses from commodities to goods to services to experiences. – The mark-up, from commodity sell to experience
sell is as much as 5000%.
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Service ImperativeService Imperative
Reflects the view that an intangible aspects of a product has become the key feature that differentiates the product in the marketplace.
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Differences BetweenDifferences Between Goods and Services Goods and Services
Intangibility
PerishabilitySimultaneous
Productionand
Consumption
Heterogeneity
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INTANGIBILITYINTANGIBILITY
• THE MOTHER OF ALL UNIQUE DIFFERENCES
• However, it is wrong to imply that services are just like goods 'except' for intangibility. By such logic, apples are just like oranges, except for their 'appleness.'
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Distinguishing DifferencesDistinguishing Differences• Intangibility:
– A characteristic of services that makes them unable to be touched or sensed in the same manner as goods.
• Inseparability: – A characteristic of services that reflects the interconnection among
the service provider, the customer involved in receiving the service and other customers sharing the service experience.
• Heterogeneity: – A characteristic of services that reflects the variation in
consistency from one service transaction to the next.
• Perishability:– A characteristic of services that cannot be saved, their unused
capacity cannot be reserved, and they cannot be inventoried.
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Implications of IntangibilityImplications of Intangibility
• Services cannot be inventoried
• Services cannot be patented
• Services cannot be readily displayed or communicated
• Pricing is difficult
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Possible Solutions to Possible Solutions to Intangibility ProblemsIntangibility Problems
• The use of tangible clues: – The physical characteristics that surround a service to
assist consumers in making service evaluations, such as the quality of furnishings, the appearance of personnel, or the quality of firm's brochure.
• The use of personal sources of information:– Sources such as friends, family , and other opinion
leaders that consumers use to gather information about a service.
• Creation of a strong organizational image: – The perception an organization presents to the public. If
well known and respected, lowers the perceived risk of potential customers making service provider choices.
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Implications of Implications of HeterogeneityHeterogeneity
• Service delivery and customer satisfaction depend on employee actions
• Service quality depends on many uncontrollable factors
• There is no sure knowledge that the service delivered matches what was planned and promoted
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Possible Solutions to Possible Solutions to Heterogeneity ProblemsHeterogeneity Problems
• Customization: – Taking advantage of the variation inherent in
each service encounter by developing services that meet each customer's exact specifications.
• Standardization: – Reducing variability in service production
through intensive training of providers and/or replacing human labor with machines.
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Implications of Simultaneous Implications of Simultaneous Production and ConsumptionProduction and Consumption
• Customers participate in and affect the transaction
• Customers affect each other
• Employees affect the service outcome
• Decentralization may be essential
• Mass production is difficult
• Physical connection of the service provider to the service
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Possible Solutions to Possible Solutions to Inseparability ProblemsInseparability Problems
• Emphasis on selecting & training contact staff:– A strategy to minimize the impact of inseparability by hiring and
educating employees in such a way that the customer's service experience is positive and the employees are properly equipped to handle customers and their needs.
• Consumer management: – A strategy service personnel can implement that minimizes the impact
of inseparability, such as separating smokers from nonsmokers in a restaurant.
• Use of multi-site locations: – A way service firms that mass produce combat inseparability,
involving multiple locations to limit the distance the consumers have to travel and staffing each location differently to serve a local market.
*Factories in the field Another name for multi-site locations.
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Implications of PerishabilityImplications of Perishability
• It is difficult to synchronize supply and demand with services
• Services cannot be returned or resold
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Possible Solutions to Possible Solutions to Perishability ProblemsPerishability Problems
• Creative pricing: – Used by service firms to help smooth demand fluctuations, such
as offering "matinee" prices or "early-bird specials" to shift demand from peak to non-peak periods.
• Reservation systems:– A strategy to help smooth demand fluctuations in which
consumers ultimately request a portion of the firm's services for a particular time slot.
• Development of complementary services: – Services provided for consumers to minimize their perceived
waiting time, such as driving ranges at golf courses, arcades at movie theaters, or reading materials in doctors' offices.
• Development of non-peak demand: – A strategy in which service providers use their downtime by
marketing to a different segment that has a different demand pattern than the firm's traditional market segment.
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THE DIFFERENCETHE DIFFERENCE
Goods Services Marketing ImplicationsTangible Intangible Can’t keep an Inventory, Can’t Patent, Can’t Display & communication is
not easy, Pricing is difficult
Standardized Heterogeneous Service delivery and Customer satisfaction depends on employee actions, Never are you sure that the promise made has been met!
Production separate from Consumption
Simultaneous Production and Consumption
Customer participation affects transaction, Customer affect each other, Employees affect the service outcome, Decentralization may be mandatory, Mass production is not possible if not difficult
Nonperishable Perishable Difficult to synchronize demand and supply, Services can not be returned or re-sold.
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SERVICE MARKETING SERVICE MARKETING TRIANGLE(SMT)TRIANGLE(SMT)
CUSTOMERPROVIDER
SBU
External Marketing
Making Prom
ises
Interactive Marketing/ Encounters
Delivering on Promises
Inte
rnal
Mar
ketin
g
Enab
ling
Prom
ises
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SMT- ExplanationSMT- Explanation
• Contact Personnel: Employees other than the primary service provider who briefly interacts with the customer, who are extremely important in service interactions, even if they interact briefly with the customer, just as thie supermarket employee is assisting a customer.
• Service Providers: The primary providers of a core service, such as a waiter or waitress, dentist, physician, or college instructor.
• Benefit Concept: The encapsulation of the benefits of a product in the consumer's mind.
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SMT SMT MODIFIEDMODIFIED
CUSTOMERPROVIDER
SBU
Technology
Here Technology enables SBU, Customer and Provider to get the best of Service.
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A market focused management model. Depicts relationships among the systems, the service strategy & the people, with the customer @ the center interacting with each group.
SMT SMT MODIFIED, AGAINMODIFIED, AGAIN
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MOLECULAR MODELMOLECULAR MODEL
A conceptual model of the relationship between tangible and intangible components of a firm's operations.
Continued
Example- 1
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MOLECULAR MODELMOLECULAR MODELExample -2
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Servuction ModelServuction Model
The model Illustrates the factors that influence the service experience, including those that are visible to the consumer and those that are not.
Continued
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Servuction Model- Servuction Model- ExplanationExplanation
• Inanimate Environment: All the nonliving features that are present during the service encounter.
• Invisible Organization and Systems: That part of a firm that reflects the rules, regulations, and processes on which the organization is based.
• Customer A: The recipient of the bundle of benefits that is created through the service experience.
• Customer B: Other customers who are part of Customer A's experience.
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OTHER SERVICE MARKETING OTHER SERVICE MARKETING MODELSMODELS
• Market-focused Management Model– A new organizational model that focuses on the
components of the firm that facilitate the firm's service delivery system.
• Industrial Management Model– An approach to organizing a firm that focuses on
revenues and operating costs and ignores the role personnel play in generating customer satisfaction and sustainable profits.
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Challenges for ServicesChallenges for Services
• Defining and improving quality• Communicating and testing new
services• Communicating and maintaining a
consistent image• Motivating and sustaining
employee commitmentContinued
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Challenges for ServicesChallenges for Services
• Coordinating marketing, operations and human resource efforts
• Setting prices• Standardization versus
personalization
Anecdote on
Weight Loss Plan
A fat huge man reading news paper, having a look on advertisement of “Bulbul health care centre” of assuring 10lb weight loss program in just 5 days.
And he calls up to the company for more details of the program.
The next day. There’s a knock on the door and there stands before him a voluptuous, athletic, 19 year old babe dressed in a pair of Nike running shoes and a sign on her t-shirt that reads
“IF YOU CAN CATCH ME, YOU CAN HAVE ME”
IF U CAN
CATCH ME, U CAN
GET ME
Without a second thought, he takes off after her
A few miles later huffing and puffing, he finally gives up.
The same girl shows up for the next 4 days and the same thing happens.
On the 5th day, he weighs himself and is delighted to find he lost 10lb, as promised.
He calls the company and gets a new special offer which is reducing 20 pound program in next 5 days.
The next day there’s a knock at the door and there stands the most stunning and beautiful women, which he has ever seen in his life.
She is wearing Reebok running shoes and a sign on her t-shirt reads that
“IF YOU CAN TOUCH ME, YOU CAN HAVE ME”
IF U CAN
TOUCH ME, U CAN
HAVE ME
Well, he’s out the door after her like a shot.
This girl is in excellent shape and he does his best, but no such luck.
So for the next 4 days, the same routine happens with him gradually getting in better and better shape.
Much to his delight on the 5th day when he weighs himself, he discovers that he has lost another 20lbs, as promised.
After loosing 30lbs, he gets more excited aboout the offers getting from the company.
Again he decided to go for broke and calls the company to order the 7-day/50 pound program.
“Are you sure?” asks the representative on the phone. “This is our most rigorous program.”
“Absolutely.” he replies, “I haven’t felt this good in years.”
The next day there’s a knock at the door; and when he opens it he finds a huge muscular guy standing there wearing nothing but pink running shoes and a sign around his neck that reads,
“IF I CATCH YOU, YOU ARE MINE!!!”
HE LOST 63 POUNDS THAT WEEK.
MORAL:- THIS STORY IS CONNECTED TO
MANAGEMENT PRINCIPLE OF MARKETING STRATEGY.
GOODBYE
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Examples of Service Examples of Service IndustriesIndustries
• Health Care– hospital, medical practice, dentistry,
eye care• Professional Services
– accounting, legal, architectural• Financial Services
– banking, investment advising, insurance
Continued
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Examples of Service Examples of Service IndustriesIndustries
• Hospitality– restaurant, hotel/motel, bed & breakfast, – ski resort, rafting
• Travel– airlines, travel agencies, theme park
• Others:– hair styling, pest control, plumbing, lawn
maintenance, counseling services, health club
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Some Key TermsSome Key Terms• Tangible Dominant: Products that possess physical
properties that can be felt, tasted, and seen prior to the consumer's purchase decision.
• Intangible Dominant: Products that lack the physical properties that can be sensed by consumers prior to the purchase decision.
• Scale of market entities: The scale that displays a range of products along a continuum based on their tangibility.
• Marketing Myopia: The practice of too narrowly defining one's business.
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Tangibility SpectrumTangibility Spectrum
TangibleDominant
IntangibleDominant
SaltSoft Drinks
DetergentsAutomobiles
Cosmetics
AdvertisingAgencies
AirlinesInvestment
ManagementConsulting
Teach
ing
Fast-foodOutlets
Fast-foodOutlets
Goods: Objects, devices, or things.Services: Deeds, efforts, or performances.
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Goods/Service ContinuumGoods/Service Continuum
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0
10
20
30
40
50
60
70
80
1929 1948 1969 1977 1984 1999
Perc
ent o
f U
.S. L
abor
For
ce
Year
Services Manufacturing Mining & Agriculture
U.S. Labor Force in % by U.S. Labor Force in % by IndustryIndustry
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0
10
20
30
40
50
60
70
80
1948 1959 1967 1977 1987 1999
Perc
ent o
f G
DP
Year
Services Manufacturing Mining & Agriculture
Percent of U.S. GDP by Percent of U.S. GDP by IndustryIndustry
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India's GDP, Sector wise Share(%) India's GDP, Sector wise Share(%) @ Constant Prices@ Constant Prices
YearPrimary Sector(Agriculture,
Mining)
Secondary Sector(Industry and
Manufacturing)
Tertiary Sector(Services)
Growth OverPrevious Period(%) in Services
1950-51 55.4 16.1 28.5 -
1960-61 50.9 20.0 29.1 + 2.1
1970-71 44.5 23.6 31.9 + 9.6
1980-81 38.1 25.9 36.0 + 12.9
1990-91 30.9 30.0 39.1 + 8.6
1999-2000 27.5 24.6 47.9 + 22.5
Source: Statistical Outline of India, Tata Services Ltd, 2001-2002
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Global distribution of GDP in the Global distribution of GDP in the year 2000 (share in GDP)year 2000 (share in GDP)
CountryPrimary Sector
(%)
Secondary Sector (%)
Tertiary Sector
(%)
India 27 25 48
China 17 49 34
France 3 23 74
Japan 2 36 62
Germany 1 28 71
USA 8 19 73
Source: Statistical Outline of India, Tata Services Ltd, 2001-2002
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Industries Classified within Industries Classified within the Service Sectorthe Service Sector
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Services Marketing Mix:Services Marketing Mix:7 Ps for Services7 Ps for Services
• Traditional Marketing Mix
• Expanded Mix for Services: 7 Ps
• Building Customer Relationships Through People, Processes, and Physical Evidence
• Ways to Use the 7 Ps
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Traditional Marketing MixTraditional Marketing Mix
• All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services:– Product– Price– Place– Promotion
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SERVICE MARKETING MIX - ISERVICE MARKETING MIX - I
SERVICE
MARKETING MIX
PRODUCT
PLACE
PROMOTION
PRICE
PEOPLE
PROCESS
PHYSICAL EVIDENCE
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SERVICE MARKETING MIX - IISERVICE MARKETING MIX - II
PLACE
PROMOTION
PRICE
PEOPLE
PROCESS
PHYSICAL EVIDENCE
Physical features, Quality, Accessories, Packaging, Warranties, Brands
Channel type, Exposure, IM’s, Outlet locations, Transportation, Storage, Managing Channels
Sales people, Advertising, Sales Promotion, Publicity
Flexibility, Discounts, Allowances, Price levels
Flow of activities, Number of steps, Customer Involvement
PRODUCT
Employees, Customers
Facility, Equipment,
Signage, Other Tangibles
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Ways to Use the 7 PsWays to Use the 7 Ps
Overall Strategic Assessment– How effective is a firm’s services marketing
mix?– Is the mix well-aligned with overall vision and
strategy?– What are the strengths and weaknesses in
terms of the 7 Ps?
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Ways to Use the 7 PsWays to Use the 7 Ps
Specific Service Implementation– Who is the customer?– What is the service?– How effectively does the services marketing
mix for a service communicate its benefits and quality?
– What changes/ improvements are needed?
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PerceivedService
Expected Service
CUSTOMER
COMPANY
CustomerGap
GAP 1
GAP 2
GAP 3
External Communications
to CustomersGAP 4Service Delivery
Customer-Driven Service Designs and Standards
Company Perceptions of Consumer Expectations
Part 1 Opener
Gaps Model of Service QualityGaps Model of Service Quality
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WHAT’S GAP MODEL ABOUT?WHAT’S GAP MODEL ABOUT?
• That there exists gaps in what is expected and what is delivered and that it alters the perceptions, both for the Customer and the Provider– As the aim of the Service Marketers’ is to close
the customer gap they need to know the Consumer Behavior
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ExpectedService
PerceivedService
GAP
The Customer GapThe Customer Gap
Part 1 Opener
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CECE AND AND CPCP
CE: The Reference Points Customers Have When They Plan To Utilize or Enter Into a Service
CP: The Perceptions formed as the customers receive the actual Service
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THE GLARING GAPTHE GLARING GAP
THE ORIGINAL GAP IS
THE CUSTOMER GAPThe gap between Customer Expectations (CE) and Customer Perception (CP)
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THE OTHER GAPS
These are called the Provider Gaps, as they pertain to the SBU, which tries to close the Customer Gap
• Gap1 Not Knowing What Customers Want
• Gap 2 Not Selecting the Right Service Designs and Standards
• Gap 3 Not Delivering to Standards• Gap 4 Not Matching Performance to
Promises
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THE END