Introduction to Services Marketing

By

Dr Githa Heggde

Part 1

FOUNDATIONS FOR SERVICES MARKETING

FOUNDATIONS FOR SERVICES MARKETING

Introduction to Services

What are services? Why services marketing? Service and Technology Characteristics of Services Compared to Goods Services Marketing Mix Staying Focused on the Customer

Objectives Introduction to Services

• Explain what services are and identify important trends in services.

• Explain the need for special services marketing concepts and practices and why the need has developed and is accelerating.

• Explore the profound impact of technology on service.

• Outline the basic differences between goods and services and the resulting challenges and opportunities for service businesses.

• Introduce the expanded marketing mix for services and the philosophy of customer focus, as powerful frameworks and themes that are fundamental to the rest of the text.

Examples of Service Industries

• Health Care– hospital, medical practice, dentistry, eye care

• Professional Services– accounting, legal, architectural

• Financial Services– banking, investment advising, insurance

• Hospitality– restaurant, hotel/motel, bed & breakfast – ski resort, rafting

• Travel– airline, travel agency, theme park

• Others– hair styling, pest control, plumbing, lawn maintenance, counseling services,

health club, interior design

Categories of Service MixPure tangible goods

Good w/ accompanying services

Hybrid

Service w/ accompanying goods

Pure service

Tangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

Goods versus Services

Source: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, “A Conceptual Model of Service Quality and Its Implications for Future Research,” Journal of Marketing 49 (Fall 1985), pp. 41–50.

. The services sector provides employment to 23% of the work force and is growing quickly, with a growth rate of 7.5% in 1991–2000, up from 4.5% in 1951–80. It has the largest share in the GDP, accounting for 55% in 2007, up from 15% in 1950. Information technology and business process outsourcing are among the fastest growing sectors, having a cumulative growth rate of revenue 33.6% between 1997–98 and 2002–03 and contributing to 25% of the country's total exports in 2007–08. The growth in the IT sector is attributed to increased specialisation, and an availability of a large pool of low cost, highly skilled, educated and fluent English-speaking workers, on the supply side, matched on the demand side by increased demand from foreign consumers interested in India's service exports, or those looking to outsource their operations. The share of the Indian IT industry in the country's GDP increased from 4.8 % in 2005–06 to 7% in 2008. In 2009, seven Indian firms were listed among the top 15 technology outsourcing companies in the world

Sector wise GDP growth rate - 2011

Sector GDP Growth Rate

Manufacturing 9.8 percent

Farming 4.4 percent

Construction 8.8 percent

Mining 8 percent

Service 9.8 percent

Why study Services Marketing?

• Service-based economies

• Service as a business imperative in manufacturing and IT

• Deregulated industries and professional service needs

• Services marketing is different

• Service equals profits

Distinctive Characteristics of Services

Intangibility

Inseparability

Variability

Perishability

Characteristics of ServicesCompared to Goods

Intangibility

Perishability

SimultaneousProduction

andConsumption

Heterogeneity

Implications of Intangibility

• Services cannot be inventoried

• Services cannot be easily patented

• Services cannot be readily displayed or communicated

• Pricing is difficult

Implications of Heterogeneity

• Service delivery and customer satisfaction depend on employee and customer actions

• Service quality depends on many uncontrollable factors

• There is no sure knowledge that the service delivered matches what was planned and promoted

Implications of Simultaneous Production 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

Implications of Perishability

• It is difficult to synchronize supply and demand with services

• Services cannot be returned or resold

Challenges for Services• Defining and improving quality• Designing and testing new services• Communicating and maintaining a consistent image• Accommodating fluctuating demand• Motivating and sustaining employee commitment• Coordinating marketing, operations, and human resource

efforts• Setting prices• Finding a balance between standardization versus

personalization• Ensuring the delivery of consistent quality

Traditional 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

Expanded Mix for Services --The 7 Ps

• Product• Price• Place• Promotion• People

– All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment.

• Physical Evidence– The environment in which the service is delivered and where the firm and customer

interact, and any tangible components that facilitate performance or communication of the service.

• Process– The actual procedures, mechanisms, and flow of activities by which the service is

delivered—the service delivery and operating systems.

Expanded Marketing Mix for Services

Ways to Use the 7 PsOverall 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?

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?

IBM has moved from a goods business to a

service business

Service Sectors

GovernmentPrivate

nonprofit

Manufacturing

Business Retail

Service Distinctions

• Equipment-based or people-based

• Service processes

• Client’s presence required or not

• Personal needs or business needs

• Objectives and ownership

Physical Evidence and Presentation

Place

People

Equipment

Communication material

Symbols

Price

• SERVICESCAPES

Environment in which the service is assembled and delivered

Physical evidence can be used by service marketers as a mix variables

- Facility design- Equipment- Signage

- Employee dress

- Business cards

- Statements

- Slogans

- Logos

• DELIVERY PROCESSA tactical tool to achieve strategic goals.Blueprint- Mapping the service process-Steps- Identify the process to be blueprinted- Map process from the customers point of view- Draw line of interaction

- Draw line of visibility

- Map process from customer contact person’s view

- Draw line of internal interaction

- Link customer and contact person activities to needed support functions.

Process of setting customer-defined standards.

- Identify existing and desired service encounter sequence

- Translate customer expectations into behaviour/action

- Select behaviour/action for standards

- Develop feedback mechanism

- Establish measures and target levels

- Track measures against standards

- Provide feedback and Performance to employees

- Update target levels and measures.

Factors Leading to Customer Switching Behavior

• Pricing

• Inconvenience

• Core Service Failure

• Service Encounter Failures

• Response to Service Failure

• Competition

• Ethical Problems

• Involuntary Switching

Service-Quality Model

Gaps that Cause Unsuccessful Service Delivery

• Gap between consumer expectation and management perception

• Gap between management perception and service-quality specifications

• Gap between service-quality specifications and service delivery

• Gap between service delivery and external communications

• Gap between perceived service and expected service

Determinants of Service QualityReliability

Responsiveness

Assurance

Empathy

Tangibles

Best Practices

• Strategic Concept

• Top-Management Commitment

• High Standards

• Self-Service Technologies

• Monitoring Systems

• Satisfying Customer Complaints

• Satisfying Employees