services marketing part one

ServicesServicesServicesServices

MarketingMarketingMarketingMarketing

(part one)(part one)(part one)(part one)

Erminia Corsi www.marketenergy.info

(part one)(part one)(part one)(part one)

TopicsTopicsTopicsTopics

•The intangible assets at work

•The Services Marketing Mix

•Positioning Services in Competitive Markets

•The SWOT analysis


•The SWOT analysis

•Prices

•Sales Distribution Channels

TTTThe he he he intangible assets at work intangible assets at work intangible assets at work intangible assets at work

� Customer base

� Reputation for delivery capacity

� Tested and well known business processes

� Reliability


� Knowledge of the local environment (local utilities)

� Deep experience of the management and the personnel

� Very well known brand

Basic differences between goods and servicesBasic differences between goods and servicesBasic differences between goods and servicesBasic differences between goods and services

�Service products cannot be inventoried

�Intangible elements dominate value creation

�Services are difficult for customers to evaluate

�Distribution channels takes different form


“Service marketing is much broader than the activities and

output of the traditional marketing department, requiring closeclosecloseclose

cooperation between marketers and those managers cooperation between marketers and those managers cooperation between marketers and those managers cooperation between marketers and those managers

responsible for operations and human resourcesresponsible for operations and human resourcesresponsible for operations and human resourcesresponsible for operations and human resources “ (Christian

Groenroos)

The Services Marketing MixThe Services Marketing MixThe Services Marketing MixThe Services Marketing Mix

Variables controlled by marketing managers in traditional markets (the 4 P’s):

�Product : physical product or service offered, functionality, appearance, packaging

�Price : list price, discounts, other payment opportunities and conditions

�Place (distribution): channel of distribution, territories

�Promotion (communication): advertising, public relations,…

To capture the distinctive nature of service performances three variables should be


To capture the distinctive nature of service performances three variables should be added to the traditional 4P’s:

�Physical Environment

�Process

�People

(7P marketing mix – Booms&Bitner)

The Services Marketing MixThe Services Marketing MixThe Services Marketing MixThe Services Marketing Mix

� ProcessProcessProcessProcess : method and sequence of actions in the service performance.

Supplier Performance is not evaluated on the basis of the “core product” (gas, EE,…) but on the basis of help desk, billing, customer help desk, billing, customer help desk, billing, customer help desk, billing, customer care, service deliverycare, service deliverycare, service deliverycare, service delivery

� PeoplePeoplePeoplePeople : many services depend on direct interaction between customers and the company’s employees.


customers and the company’s employees.

The nature of these interactions, such as talking to a call center staff, strongly influences the customers’ perception of service quality

� Physical environmentPhysical environmentPhysical environmentPhysical environment : staff members, printed material, contact points with the customers, counter desks,…

Positioning Services in Competitive MarketsPositioning Services in Competitive MarketsPositioning Services in Competitive MarketsPositioning Services in Competitive Markets

Who is the customer?

What to sell?

At what price?

Answering the following questions

Defining the target market

Defining the value proposition


Which distribution channel?

How to deliver the service?

Defining the sales strategy

Defining the process

Positioning Service in Competitive MarketsPositioning Service in Competitive MarketsPositioning Service in Competitive MarketsPositioning Service in Competitive Markets

Basic steps involved in identifying a suitable market position

Marketanalysis

•Size•Composition•Location•Trends

•ResourcesInternal

Define, AnalyzeMarket Segments

Select TargetSegments to Serve

Articulate Marketing


•Resources•Reputation•Constraints•Values

Internalanalysis

ArticulateDesired Positionin Market

Select Benefitsto Emphasizeto Customers

AnalyzePossibilities forDifferentiation

•Strengths•Weaknesses•CurrentPositioning

Competitoranalysis

MarketingAction Plan

Developed from an earlier schematic by Michael R. Pearce

Positioning Service in Competitive MarketsPositioning Service in Competitive MarketsPositioning Service in Competitive MarketsPositioning Service in Competitive Markets

� Market analysis : Market analysis : Market analysis : Market analysis :

define and analyze actual market position, identifying market segments served, geographical area covered, customer perception of service performances, define and analyze potential new business : geographical expansion or offering expansion

� Internal assets analysis:Internal assets analysis:Internal assets analysis:Internal assets analysis:


� Internal assets analysis:Internal assets analysis:Internal assets analysis:Internal assets analysis:

analyze organization's resources (financial, know how, physical asset) to identify companies’ capability to strengths the position in the captive market and/or to develop new business

� Competition analysis:Competition analysis:Competition analysis:Competition analysis:

analyze competitors’ strengths and weaknesses

The SWOT analysisThe SWOT analysisThe SWOT analysisThe SWOT analysis

StrengthsStrengthsStrengthsStrengths WeaknessesWeaknessesWeaknessesWeaknesses

An important tool for auditing the overall strategic position of a business and its environment


OpportunitiesOpportunitiesOpportunitiesOpportunities ThreatsThreatsThreatsThreats

The SWOT AnalysisThe SWOT AnalysisThe SWOT AnalysisThe SWOT Analysis

StrengthsStrengthsStrengthsStrengths

� service delivery’s expertise – heating services, energy management,…

� location – historical local supplier

� quality processes and procedures – help desk already running with good performance (help desk as a service, not necessarily as a technology)

� customer base

� …………


WeaknessesWeaknessesWeaknessesWeaknesses

� lack of marketing expertise – no information about the customer base

� undifferentiated products and service – no innovation capability yet

� stress by new rules and mission

� not used to work accordingly to economic efficiency principles

� ….

The SWOT AnalysisThe SWOT AnalysisThe SWOT AnalysisThe SWOT Analysis

OpportunitiesOpportunitiesOpportunitiesOpportunities� mergers, joint ventures or strategic alliances � developing a multiutility offer� developing a geographical expansion� exploit customer penetration with complementary services� ……….

ThreatsThreatsThreatsThreats


ThreatsThreatsThreatsThreats� new competitors, likely aggressive� strong price competition – very high probability of losing margin � competitor developing a strong commercial network� conservative attitude (poor customer orientation in the majority of the

organization)� ………

Positioning Services in Competitive MarketsPositioning Services in Competitive MarketsPositioning Services in Competitive MarketsPositioning Services in Competitive Markets

Basic advices for right positioning :

� establish a position in the minds of targeted,

-- focus on public servicesfocus on public servicesfocus on public servicesfocus on public services

� the position should be singular, providing one simple and consistent ,message

-- close to the customerclose to the customerclose to the customerclose to the customer


-- close to the customerclose to the customerclose to the customerclose to the customer

� the position must set a company apart from its competitors

-- focus on local communities needsfocus on local communities needsfocus on local communities needsfocus on local communities needs

� a company cannot be all things to all people; it must focus its efforts

-- specializationspecializationspecializationspecialization

Product : defining the Value PropositionProduct : defining the Value PropositionProduct : defining the Value PropositionProduct : defining the Value Proposition

The Value Proposition articulates the position the company wants to have in the market place, and the “service offer” identified to be winning in that market place

The Value Proposition, to be effective, should be :


The Value Proposition, to be effective, should be :

� specific, for an identified market segment

� clear and strongly related to expected customer needs

Developing supplementary servicesDeveloping supplementary servicesDeveloping supplementary servicesDeveloping supplementary services

� As competition increases the core product tends to become even more a pure commodity

� The search for competitive advantage in a mature industry often emphasizes performance on the supplementary services

� Supplementary services could be:

� Information


� Information

� Order Taking

� Billing

� Payment

� Help Desk

� Add on Services

Developing supplementary servicesDeveloping supplementary servicesDeveloping supplementary servicesDeveloping supplementary services

� Information :Information :Information :Information : both new and old customers need to be informed about pricing, contacts point, service hours, add-on services

� Order TakingOrder TakingOrder TakingOrder Taking :::: competition will develop customer switching from one supplier to another. The process of order taking should be easy, fast and accurate so that customers do not waste time and endure unnecessary mental or physical effort

� Billing :Billing :Billing :Billing : inaccurate, illegible or incomplete bills risk disappointing customers who may, up to that point, have been quite satisfied with their experience. Customers usually expect bills to be clear, informative, and itemized in ways that make it clear how the total was computed


� Payment :Payment :Payment :Payment : easy payment procedures means save time for the customer

� Help Desk : Help Desk : Help Desk : Help Desk : the quality of help desk (to receive an answer in time, with courtesy and satisfying customer expectations) is one point through which give “tangibility” to the service

� AddAddAddAdd----on Services : on Services : on Services : on Services : to complete basic offer with add-on services is an opportunity to strength customer relationship and increase margin

PricingPricingPricingPricing

� Pricing is the key factor by which sales are transformed into revenues

� Pricing is typically more complex in services than in manufacturing, because it is more difficult to determine the financial costs of creating a process than to identify the cost associated with creating and distributing physical goods


� Assets upon which defining a pricing strategy :

� Costs

� Competition

� Value to Customers

Foundation for setting prices: costsFoundation for setting prices: costsFoundation for setting prices: costsFoundation for setting prices: costs

� The cost base for service is based upon : product costs, distribution costs, process delivery costs

� Because of the labor and infrastructure needed to create performances, the cost base for service has some fixed costs and some variable costs:� Fixed costs:Fixed costs:Fixed costs:Fixed costs: costs that a supplier would continue to incur even if no services were

sold. This include minimum infrastructure – like personnel, IT, and other - needed to


sold. This include minimum infrastructure – like personnel, IT, and other - needed to deliver the service

� Variable costsVariable costsVariable costsVariable costs refer to the economic costs associated with serving an additional customer

� Semi variable costsSemi variable costsSemi variable costsSemi variable costs represent expenses that rise or fall in a stepwise as the volume of business increases/decreases (for example infrastructure)

� Contribution costsContribution costsContribution costsContribution costs is the difference between the variable cost of selling an extra unit of service and the money received from the buyer of that service. Contribution goes to cover fixed and semi variable costs before creating profits

Foundations for setting prices : value to the customerFoundations for setting prices : value to the customerFoundations for setting prices : value to the customerFoundations for setting prices : value to the customer

� In order to set an appropriate price marketers need to understand how customers perceive the service value

� Customers are willing to pay higher prices to reduce no monetary costs of service: save time, reduce unwanted effort, obtain greater comfort

� Strategies for capturing and communicating the value of a service are:


� Strategies for capturing and communicating the value of a service are:

� Uncertainty reduction

� Relationship pricing

� Low-cost leadership

� Managing the perception of the value

Foundations for setting prices : value to the customerFoundations for setting prices : value to the customerFoundations for setting prices : value to the customerFoundations for setting prices : value to the customer

� Uncertainty reduction :

monthly charge with small yearly adjustment

� Relationship pricing :

define a pricing strategy in order to consolidate long-term relationship with the customer and reward customer loyalty

� Low-cost leadership :

good only to gain quickly a customer base. Very critical in utilities


good only to gain quickly a customer base. Very critical in utilities market because low price is perceived as low quality and low reliability (mainly if not proposed by the traditional supplier)

� Managing the Perception Value :

price on the basis of the perceived value for the customer means a strong knowledge of the customer base to stress values important for the customer base. (Not easy)

Market SegmentationMarket SegmentationMarket SegmentationMarket Segmentation

A market segmentmarket segmentmarket segmentmarket segment is composed of a group of buyers who share common characteristics, needs, purchasing behavior or consumption patterns.

Market segmentation criteria could be:

�service usage,�purchasing behavior, �average expense,


�average expense, �……..

Market segmentation helps defining customer profiling and then focus :

�value proposition,�price,�sales organization, �advertising/promotional campaign

Sales Distribution ChannelsSales Distribution ChannelsSales Distribution ChannelsSales Distribution Channels

� “Selling” is the new word for public services

� “Selling” means not only change “users” into “customers” but also:


“ keep in touch“ with the customer to negotiate agreementsand sign up contracts !

Sales Channels: an exampleSales Channels: an exampleSales Channels: an exampleSales Channels: an example

Medium enterprise

Large enterprise

Few customersHigh revenue for single customerReducing margin for single customerLot of competitors Direct sales:Direct sales:Direct sales:Direct sales:

Company’s Sales representativesResponsible for customer management

Value Added ResellersValue Added ResellersValue Added ResellersValue Added Resellers

Suppliers of central heating systems, etc could be


The customer base

ResidentialLot of customersSmall revenue for single customerHigh margin (%)for single customerFew competitors

heating systems, etc could be a channel for energy services

Franchisee, shopsFranchisee, shopsFranchisee, shopsFranchisee, shops

Internet, Supermarkets,Internet, Supermarkets,Internet, Supermarkets,Internet, Supermarkets,Telemarketing, ………Telemarketing, ………Telemarketing, ………Telemarketing, ………

Soho

Sales ChannelsSales ChannelsSales ChannelsSales Channels

Direct Sales

Value Added Resellers

Franchisee

Large Retail Channels

Plus MinusExpensive(fixed costs)

Easy to manageand to check performances

Variable cost(success fee based)Customer base

Independent organizationDifficult to manage

Geographical presenceBrand recognition

Difficult balance betweencost and revenues

Customer attitudeLow costs for


Large Retail Channels

Door to door salesOrganization (multilevel marketing)

Telemarketing

Internet

Customer attitudeStart up costs, low margin

Low costs forhigh volumes

Presence to the customer,High redemption,Variable cost

High success feePotential issues for credibility and image

Start up costsCollection physical docs

Low cost

Customer attitudeVery low cost