Services Marketing

Presented By Neha Gupta

"Marketing is not an event, but a process... It has a beginning, a middle, but never an end, for it is a process. You improve it, perfect it, change it, even pause it. But you never stop it completely." - Jay Conrad Levinson.

WHAT IS SERVICE 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

It is the process of researching and promoting to a market with nonphysical goods known as services.

What are services? Put in the most simple terms services are deeds, processes and performances. Services Industries Services as products Customer service Derived service

How Important is the Service Sector in Our Economy?

In most countries, services add more economic value than agriculture, raw materials and manufacturing combined In developed economies, employment is dominated by service jobs and most new job growth comes from services Jobs range from high-paid professionals and technicians to minimum-wage positions Service organizations can be any sizefrom huge global corporations to local small businesses Most activities by government agencies and nonprofit organizations involve services

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The services sector is remarkably diverse. At one end of the scale are large industries like airlines, banking, insurance, telecommunication, hospitality, road and rail transport etc. At the other end are small businesses like restaurant, healthcare, fitness centers, event management and other B2B services.

Services dominate the United States Economy: GDP by Industry, 2001

Agriculture, Forestry, Mining, Construction 8% Manufacturing 14%

Finance, Insurance, Real Estate 20% Wholesale and Retail Trade 16% Transport, Utilities, Communications 8%

Government (mostly services) 13% Other Services 11%

SERVICES

Business Health Services 6% 5%

Internal Services
During 2009-10 and 2010-11, automobiles, rubber and plastics, fabricated metal products, machinery and equipment and radio, TV and communication equipment segments had witnessed double digit growth. The share of services sector in countrys Gross Domestic Product (GDP) has risen from 50.4 per cent in 2000-01 to 59.0% in 2011-12 (advance estimates).

Service elements within an organization that facilitate creation of--or add value to--its final output Includes:
accounting and payroll administration recruitment and training legal services transportation catering and food services cleaning and landscaping

Increasingly, these services are being outsourced

Major Trends in Service Sector

Government Policies (e.g., regulations, trade agreements) Social Changes (e.g., affluence, lack of time, desire for experiences) Business Trends
Manufacturers offer service Growth of chains and franchising Pressures to improve productivity and quality More strategic alliances Marketing emphasis by nonprofits Innovative hiring practices

Some Impacts of Technological Change

Radically alter ways in which service firms do business:
with customers (new services, more convenience) behind the scenes (reengineering, new value chains)

Create relational databases about customer needs and behavior, mine databanks for insights Leverage employee capabilities and enhance mobility Centralize customer servicefaster and more responsive Develop national/global delivery systems Create new, Internet-based business models

Advances in IT (e.g., speed, digitization, wireless, Internet) Internationalization (travel, transnational companies)

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Defining the Essence of a Service

An act or performance offered by one party to another

Marketing Relevant Differences Between Goods and Services

An economic activity that does not result in ownership A process that creates benefits by facilitating a desired change in:
customers themselves physical possessions intangible assets

Distinguishing Characteristics of Services

Customers do not obtain ownership of services Service products are ephemeral and cannot be inventoried Intangible elements dominate value creation Greater involvement of customers in production process Other people may form part of product experience Greater variability in operational inputs and outputs Many services are difficult for customers to evaluate Time factor is more important--speed may be key Delivery systems include electronic and physical channels

Marketing Implications - 1
No ownership
Customers obtain temporary rentals, hiring of personnel, or access to facilities and systems Pricing often based on time Customer choice criteria may differ for renting vs. purchase--may include convenience, quality of personnel Cant own people (no slavery!) but can hire expertise and labor

Services cannot be inventoried after production

Service performances are ephemeraltransitory, perishable Exception: some information-based output can be recorded in electronic/printed form and re-used many times Balancing demand and supply may be vital marketing strategy Key to profits: target right segments at right times at right price Need to determine whether benefits are perishable or durable

Marketing Implications - 2
Customers may be involved in production process
Customer involvement includes self-service and cooperation with service personnel Think of customers in these settings as partial employees Customer behavior and competence can help or hinder productivity, so marketers need to educate/train customers Changing the delivery process may affect role played by customers Design service facilities, equipment, and systems with customers in mind: user-friendly, convenient locations/schedules

Marketing Implications - 3
Intangible elements dominate value creation
Understand value added by labor and expertise of personnel Effective HR management is critical to achieve service quality Make highly intangible services more concrete by creating and communicating physical images or metaphors and tangible clues

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Value Added by Tangible vs Intangible Elements in Goods and Services

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Salt Soft drinks CD Player Golf clubs New car Tailored clothing Furniture rental Fast food restaurant Plumbing repair Office cleaning Health club Airline flight Retail banking Insurance Weather forecast Intangible Elements

Marketing Implications - 4
Other people are often part of the service product
Achieve competitive edge through perceived quality of employees Ensure job specs and standards for frontline service personnel reflect both marketing and operational criteria Recognize that appearance and behavior of other customers can influence service experience positively or negatively Avoid inappropriate mix of customer segments at same time Manage customer behavior (the customer is not always right!)

Greater variability in operational inputs and outputs

Must work hard to control quality and achieve consistency Seek to improve productivity through standardization, and by training both employees and customers Need to have effective service recovery policies in place because it is more difficult to shield customers from service failures

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Marketing Implications - 4
Often difficult for customers to evaluate services
Educate customers to help them make good choices, avoid risk Tell customers what to expect, what to look for Create trusted brand with reputation for considerate, ethical behavior Encourage positive word-of-mouth from satisfied customers

Time factor assumes great importance

Offer convenience of extended service hours up to 24/7 Understand customers time constraints and priorities Minimize waiting time Look for ways to compete on speed

Important Differences Exist among Services

Distribution channels take different forms

Tangible activities must be delivered through physical channels Use electronic channels to deliver intangible, information-based elements instantly and expand geographic reach

Four Categories of Services Employing Different Underlying Processes

What is the Nature of the Service Act?
TANGIBLE ACTS

Who or What is the Direct Recipient of the Service?

DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS

People Processing
e.g., airlines, hospitals, haircutting, restaurants hotels, fitness centers

Possession Processing
e.g., freight, repair, cleaning, landscaping, retailing, recycling

The Services Marketing Mix

INTANGIBLE ACTS

Mental Stimulus Processing

e.g., broadcasting, consulting, education, psychotherapy

Information Processing
(directed at intangible assets)

e.g., accounting, banking, insurance, legal, research

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Elements of The Services Marketing Mix: 7Ps vs. the Traditional 4Ps

The 7Ps: (1) Product Elements

All Aspects of Service Performance that Create Value Core product featuresboth tangible and intangible elements Bundle of supplementary service elements Performance levels relative to competition Benefits delivered to customers (customers dont buy a hotel room, they buy a good nights sleep) Guarantees

Rethinking the original 4Ps Product elements Place and time Promotion and education Price and other user outlays Adding Three New Elements Physical environment Process People

The 7Ps: (2) Place and Time

Delivery Decisions: Where, When, and How Geographic locations served Service schedules Physical channels Electronic channels Customer control and convenience Channel partners/intermediaries

The 7Ps: (3) Promotion and Education

Informing, Educating, Persuading, and Reminding Customers Marketing communication tools
media elements (print, broadcast, outdoor, retail, Internet, etc.) personal selling, customer service sales promotion publicity/PR

Imagery and recognition

branding corporate design

Content
information, advice persuasive messages customer education/training

The 7Ps: (4) Price and Other User Outlays

Marketers Must Recognize that Customer Outlays Involve More than the Price Paid to Seller
Traditional Pricing Tasks Selling price, discounts, premiums Margins for intermediaries (if any) Credit terms Identify and Minimize Other Costs Incurred by Users Additional monetary costs associated with service usage (e.g., travel to service location, parking, phone, babysitting,etc.) Time expenditures, especially waiting Unwanted mental and physical effort Negative sensory experiences

The 7Ps: (5) Physical Environment

Designing the Servicescape and providing tangible evidence of service performances Create and maintaining physical appearances
buildings/landscaping interior design/furnishings vehicles/equipment staff grooming/clothing sounds and smells other tangibles

Select tangible metaphors for use in marketing communications

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7Ps: (6) Process

Method and Sequence in Service Creation and Delivery Design of activity flows Number and sequence of actions for customers Providers of value chain components Nature of customer involvement Role of contact personnel Role of technology, degree of automation

The 7Ps: (7) People

Managing the Human Side of the Enterprise The right customer-contact employees performing tasks well
job design recruiting/selection training motivation evaluation/rewards empowerment/teamwork

The right customers for the firms mission

fit well with product/processes/corporate goals appreciate benefits and value offered possess (or can be educated to have) needed skills (co-production) firm is able to manage customer behavior

Managing the 7Ps Requires Collaboration between Marketing, Operations, and HR Functions
Operations Management Customers Marketing Management

Comparing Goods and Services

Human Resources Management

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, bed & breakfast resort, rafting Travel airline, travel agency, theme park Others hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design

Why do firms focus on Services?

Services can provide higher profit margins and growth potential than products Customer satisfaction and loyalty are driven by service excellence Services can be used as a differentiation strategy in competitive markets

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What is Service? The New View

Service includes every interaction between any customer and anyone representing the company, including:
Dealers Web site and any e-channel Interaction Billing and Accounting Personnel

Service Can Mean all of These

Service as a product Customer service

Salespeople

Customer

Receptionists and Schedulers

Services as value add for goods Service embedded in a tangible product

Service Employees

Management and Executives

Characteristics of Services Compared to Goods

Examples of Goods Companies that are Expanding into Services

Intangibility

Heterogeneity
Boeing Kodak

Simultaneous Production and Consumption

Perishability

Challenges for Services

Defining and improving quality Ensuring the delivery of consistent 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 customization

Gaps Model of Service Quality

Customer Expected sevice Customer gap

Perceived service

Service delivery Company gap 1 Gap 3 Customer-driven service designs Customerand standards Gap 2 Company perceptions of consumer expectations Gap 4

External communications to customers

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The Services Marketing Triangle

Company

The Services Marketing Triangle

The company, customers and the providers.
Company-( can be also SBU ,or Dept or management) Providers ( can be firms employees, subcontractors, or outsourced entities who actually deliver the companys services)

External marketing efforts

Internal Marketing Enabling promises External Marketing Making promises

Efforts the firm engages in to setup its customers expectation and makes promises to customers regarding what is to be delivered.

Interactive marketing
Keeping promises. Here is where the promises are kept or broken by the firms employees , subcontractors, or agents.

Internal marketing
Providers Interactive Marketing Keeping promises Customers

Activities firm engages in to aid the providers in their ability to deliver on the service: recruiting, training, motivating, rewarding and providing equipment and technology.

Thank You

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