MMK COLLEGE OF COMMERCE & ECONOMICS

Subject: Service Sector Management Topic: Services Marketing Environment Submitted to: Prof. Laila Report Compiled By: Ashish Anil Matai Class: TYBMS B Roll No: 119

SERVICES MARKETING ENVIRONMENT Contents

Introduction Service Definition & Meaning What should be classified as a service ? Services Marketing SWOT Analysis PEST Analysis Developing a Services Marketing Program Characteristics of Services Classification of Services Service Marketing Triangle

Introduction
One of the major megatrends of recent years has been the phenomenal growth of services. Today every business is a service business : you are not a chemical company, you are a chemical services business. In world economy today the contribution of various sectors is : Service Sector Industrial Sector Agriculture Sector various sectors is : Service Sector Industrial Sector Agriculture Sector : 56-% : 26-% : 18-% : 65-% : 30-% : 5-%

In U.S. the contribution of service sector is 74-%. In India the contribution of

The growth of service industries can be traced to the economic development of society and the socio-cultural changes that have accompanied it. Sometimes the growth of a specific service industry is the result of a combination of several reasons. The major reasons for the growth of service industries are given below: Increasing affluence More leisure time Higher percentage of women in labor force Greater life expectancy Greater complexity of products Increasing complexity of life

1. 2. 3. 4. 5. 6.

7. 8.

Greater concern about ecology and resource scarcity Increasing number of new products

Sectoral Growth in 2009-10 : ( % ) : 40-% : 35-% : 35-% : 20-%

Insurance Internet Adv. Organized Retailing Live Entertainment

Therefore, with increasing importance of service sector, the marketing activities have assumed importance. In fact today many workers in the manufacturing sector computer operators etc. are really service providers. In a way, they makeup a Service Factory, providing services to the Goods Factory.

Service Definition & Meaning

According to Philip Kotler Service is any act or performance that one party can offer to another that is essentially intangible and does not result in any ownership of anything. Its production may or may not be tied to physical products. It is intangible. It does not result in ownership. It may or may not be attached with a physical product A service is any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. Increasingly, however, manufacturers, distributors, and retailers are providing value-added services, or simply excellent customer service, to differentiate themselves.

A service is an activity or series of activities of more or less intangible nature that normally not necessarily take place in interaction between the customer and service employee and or physical resources or goods and/or system of the service provider which are provided as solution to the customer problem In short services are the activities benefits or satisfaction which are offered for sale are provided in connection with sale of goods.

What should be classified as a service ?

The answer isnt always apparent because invariably services are marketed in conjunction with goods. A company may sell a combination of goods and services. Therefore, it may be helpful to think of every product as a mix of goods and services located on a continuum ranging from mostly goods to mostly services. A Goods - Services Continuum (Categories of Service Mix) : (Mostly Goods) canned foods ready made clothes automobiles draperies carpets restaurant meals repairs air travels insurance & teaching (Mostly Services). The service component can be a minor or a major part of the total offering. We distinguish five categories of offerings : Pure tangible good Tangible good with accompanying services Hybrid Major service with accompanying minor goods & services Pure service

o o o o o

For marketing purposes, it is useful to separate services into two categories.

In the first are services that are the main purpose or object of a transaction rent a car from a company Hertz the company makes a car available (a tangible good), but what you are purchasing is accessibility to transportation a service. Because you are buying the use of the car, not the car itself, this is a service transaction. In the second category are services that support or facilitate the sale of good or another service. Thus, when you rent the car from Hertz, you can also obtain collision insurance, the use of a cellular phone, and an electronic navigational service. These are called supplementary or support services because you obtain them only in conjunction with renting the car. Scope of Services : Using a broad definition of transactions and customers, it is appropriate to recognize both for-profit and non-business services organizations. For profit services firms sell to consumers or other businesses with profitable operations as a primary goal in the following examples : Housing & other structures, household operations, recreation & entertainment, personal care, medical & health care, private education, professional business services, financial services, transportation, communication etc. Non business services organizations are of two types One type is not for profit (N-F-P) services organizations & has shown tremendous growth & the other for profit business Educational, cultural, religious, charitable &philanthropic, social concerns, professional & trade, social, health care, political.

What is Services Marketing or Marketing of Services?

Services marketing are a sub field of marketing, which can be split into the two main areas of goods marketing (which includes the marketing of fast moving

consumer goods (FMCG) and durables) and services marketing. Services marketing typically refers to both business to consumer (B2C) and business to business (B2B) services, and includes marketing of services like telecommunications services, financial services, all types of hospitality services, car rental services, air travel, health care services and professional services. The range of approaches and expressions of a marketing idea developed with the hope that it be effective in conveying the ideas to the diverse population of people who receive it. Services are economic activities offered by one party to another. Often timebased, performances bring about desired results to recipients, objects, or other assets for which purchasers have responsibility. In exchange for money, time, and effort, service customers expect value from access to goods, labor, professional skills, facilities, networks, and systems; but they do not normally take ownership of any of the physical elements involved. The marketing environment surrounds and impacts upon the organization. There are three key perspectives on the marketing environment, namely the 'macroenvironment,' the 'micro-environment' and the 'internal environment'.

MICRO ENVIRONMENT

 This environment influences the organization directly. It includes suppliers that deal directly or indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this context, micro describes the relationship between firms and the driving forces that control this relationship. It is a more local relationship and the firm may exercise a degree of influence.

MACRO ENVIRONMENT
This includes all factors that can influence an organization but that are out of their direct control. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute products and new entrants. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology.

SWOT ANALYSIS
SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. In SWOT, strengths and weaknesses are internal factors. A strength could be: Your specialist marketing expertise.

A new, innovative product or service. Location of your business. Quality processes and procedures. Any other aspect of your business that adds value to your product or service. A weakness could be: Lack of marketing expertise. Undifferentiated products or services (i.e. in relation to your competitors). Location of your business. Poor quality goods or services. Damaged reputation. An opportunity could be: A developing market such as the Internet. Mergers, joint ventures or strategic alliances. Moving into new market segments that offer improved profits. A new international market. A market vacated by an ineffective competitor. A threat could be: A new competitor in your home market. Price wars with competitors. A competitor has a new, innovative product or service. Competitors have superior access to channels of distribution. Taxation is introduced on your product or service.

SWOT Analysis Examples

Example 1 - Strengths - Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.

- Weaknesses - Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control. - Opportunities - To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region. - Threats - Being number one means that you are the target of competition, locally and globally.

Example 2 - Starbucks SWOT Analysis. - Strengths - Starbucks Corporation is a very profitable organization, earning in excess of $600 million in 2004. - Weaknesses - Starbucks has a reputation for new product development and creativity. - Opportunities - New products and services that can be retailed in their cafes, such as Fair Trade products. - Threats - Starbucks are exposed to rises in the cost of coffee and dairy products. Example 3 - Nike SWOT Analysis. - Strengths - Nike is a very competitive organization. Phil Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets. - Weaknesses - The organization does have a diversified range of sports products. - Opportunities - Product development offers Nike many opportunities. - Threats - Nike is exposed to the international nature of trade. Example 4 - Indian Premier League (IPL) SWOT Analysis.

- Where will you find the Mumbai Indians, the Royal Challengers, the Deccan Chargers, the Chennai Super Kings, the Delhi Daredevils, the Kings XI Punjab, the Kolkata Knight Riders and the Rajasthan Royals? - In the Indian Premier League (IPL) - the most exciting sports franchise that the World has seen in recent years, with seemingly endless marketing opportunities (and strengths, weaknesses and threats of course!). Example 5 - Bharti Airtel SWOT Analysis. - Weaknesses - An often cited original weakness is that when the business was started by Sunil Bharti Mittal over 15 years ago, the business has little knowledge and experience of how a cellular telephone system actually worked. So the start-up business had to outsource to industry experts in the field.

PEST Analysis
It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning. The organization's marketing environment is made up of: 1. The internal environment e.g. staff (or internal customers), office technology, wages and finance, etc. 2. The micro-environment e.g. our external customers, agents and distributors, suppliers, our competitors, etc. 3. The macro-environment e.g. Political (and legal) forces, Economic forces, Sociocultural forces, and Technological forces. These are known as PEST factors.

Political Factors
The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:

1. How stable is the political environment? 2. Will government policy influence laws that regulate or tax your business? 3. What is the government's position on marketing ethics? 4. What is the government's policy on the economy? 5. Does the government have a view on culture and religion? 6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

Economic Factors
Marketers need to consider the state of a trading economy in the short and longterms. This is especially true when planning for international marketing. You need to look at: 1. Interest rates. 2. The level of inflation Employment level per capita. 3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.

Socio-cultural Factors
The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include: 1. What is the dominant religion? 2. What are attitudes to foreign products and services? 3. Does language impact upon the diffusion of products onto markets? 4. How much time do consumers have for leisure? 5. What are the roles of men and women within society?

6. How long are the population living? Are the older generations wealthy? 7. Do the population have a strong/weak opinion on green issues?

Technological Factors
Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points: 1. Does technology allow for products and services to be made more cheaply and to a better standard of quality? 2. Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc? 3. How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc? 4. Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

Developing a Services Marketing Program

Marketing business & non-business services includes the same business elements as marketing goods. Whether its focus is goods or services, every organization should first define and analyze its markets, identify segments, & select targets - & then finally design a coordinated marketing mix around a differential advantage that will create the position the organization desires. However, some important differences between goods and services influence these marketing decisions the most important differences are : Intangibility Inseparability Variability Perishability Ownership

Characteristics of Services
Intangibility : Because of this, it is impossible for prospective customers to sample, feel, see, hear, taste or smell a service before they buy it. Consequently, a companys promotional program must be explicit about the benefits to be derived from the service, rather than emphasizing the service itself. The following promotional strategies may be used to suggest service benefits & reduce the effect of intangibility. Therefore, the service providers task is to manage the evidence to tangibilise the intangible. Visualization : e.g. carnival cruise lines depicts the benefits of its cruises with ads. that show people happy dancing, dining, playing games & visiting exotic places. Association : by connecting the service with a tangible good, person, object or place, a particular image can be created. Professional sports teams are linked with cities/regions to give them an identity. Merrill Lynch uses the symbol of a bull to imply strength & leadership. Physical Representation : LIC of India, uses the symbol of two hands protecting a diya to suggest security or protection. Documentation : there are two forms of documentation past performance & future capability. A hospital can document its past performance by pointing out in its ads., how many babies have been born & cared for in its obstetrics department. Another hospital may choose to stress its capability by highlighting the specialized equipment it has for any emergency during the delivery of a baby.

Websites are available tool in reducing the intangibility of a service. They make it possible for marketers to present extensive information, use animation and sound, & answer a site visitors specific questions via e-mail. The web has increased the quantity & quality of available information and thereby improves the customers understanding of the service. Suppose a bank wants to position itself as the fast bank, it could tangibilize this positioning strategy through a number of marketing tools. Place - physical setting must connote quick service with clean exterior/interior & other things to show quick movement of business. People - sufficient no. of people to manage the work load efficiently and quickly. Equipment - like computers, fax & copying machines. Communication material - like text & photos should suggest efficiency & speed. Symbols - name & symbol should suggest fast service. Price - the bank could advertise that it will deposit Rs100/- in the account of any customer who waits in line for more than five minutes. Inseparability : Services typically cannot be separated from the creator seller of the service. Moreover many services are created, dispensed & consumed simultaneously fast food drive-up window employee, a physical therapist, automatic teller machine. From marketing standpoint, inseparability limits distribution. When clients have strong provider preferences, price is raised to ration the preferred providers limited time. Several means can be attempted to overcome this limitation: - To work with larger groups - Can learn to work faster spend 30 minutes instead of 50 minutes with each patient - Train people to do less important work themselves

Variability : Because they depend on who provides them and when & where they are provided, services are highly variable. Therefore to overcome this problem, service firms can take three steps toward quality control. Investing in good hiring & training procedures. Better trained personnel exhibits six characteristics - competence, courtesy, credibility, reliability, responsiveness & communication. Standardizing the service performance process throughout the organization. It is helped by preparing a service blueprint that depicts events & processes in a flowchart, with the objective of recognizing potential fail points. Monitoring customer satisfaction through suggestion & complaint systems, surveys & comparison. Perishability :- It creates potential imbalances in supply and demand more so when the demand for many services fluctuates considerably by season, by day of the week, and by hour of the day Perishability and the resulting difficulty of balancing supply with fluctuating demand poses promotion, product planning, scheduling and pricing challenges to services executives. Some organizations have developed new uses for idle capacity during off seasons e.g. during the summer, ski resorts operate their ski lifts for hikers & sight seers. Marketers have developed several strategies for producing a better match between demand & supply in a service business. On the demand side - Differential pricing - will shift some demand from peak to off peak periods. - Non-peak demand - can be cultivated. - Complimentary services - can be developed during peak time to provide alternatives to waiting customers. - Reservation systems - are a way to manage the demand level. On the supply side

- Peak-time efficiency routines - can be introduced wherein employees perform only essential tasks during peak periods. - Increased consumer participation - can be encouraged. - Shared Services - can be developed , hospitals can share medical equipment purchases. - Facilities for future expansion can be developed. - Pat-time employees - can be hired to serve peak demand. Ownership : Usually there is no transfer of ownership of anything in a service. There is no transfer of any tangible object as in product marketing. What is purchased by customers is just the use of, or access to the facility or service. The buyer does not become the owner of anything like in the case of buying a car, TV, fridge, etc.. In product marketing. Marketing Strategies for service firms : Traditional four Ps marketing approaches work well for goods, but additional elements require attention in service business three additional Ps for service marketing - People, Physical evidence, Process. Most services are provided by people the selection, training, & motivation of employees can make a huge difference in customer satisfaction exhibit competence, a caring attitude, responsiveness, initiative, problem solving ability and goodwill. Demonstrate service quality through physical evidence & presentation. Service companies can choose among different processes to deliver their evidence restaurants developed different formats as cafeteria style, fast-food buffet & candle light service. In view of complex nature of service industry, service marketing requires not only external marketing but also internal and interactive marketing external

marketing refers to the normal work to prepare, price, distribute and promote the service to customers. Internal marketing describes the work to train & motivate employees to serve customers well. Interactive marketing describes the employees skill in serving the client. Because the client judges service not only by its technical quality (e.g. was the surgery successful ?) but also by its functional quality (e.g. did the surgeon show concern and inspire confidence, service providers must deliver high touch as well as high tech. Service companies face three tasks : Increasing competitive differentiation Service quality & Productivity

Classification of Services
There are a number of ways in which services can be classified. Some of them are mentioned here. 1. On the basis of the END USER the services can be classified into following categories: - Consumer : leisure, hairdressing, personal finance and package holidays - Business to Business: advertising agencies, printing, accountancy, Consultancy - Industrial: Plant Maintenance and repair, workwear and hygiene, installation and project management.

2.

The DEGREE OF TANGIBILITY can be used to classify a service. - Highly tangible: car rental, vending machines, telecommunications - Service linked to tangible goods: domestic appliance repair, car service. - Highly tangible: psychotherapy, Consultancy , legal services.

3.

Services can be broken down into LABOR INTENSIVE (PEOPLE based) and EQUIPMENT based services. This can also be represented by degree of contact. People based services: high contact : education, dental care, restaurants and medical services Equipment based: low contact: automatic car wash, launderette, vending machine, cinema.

4.

The EXPERTISE and SKILLS of the service provider can be broken down into the following categories: - Professional: medical services, legal services, accountancy, tutoring. - Non Professional: baby sitting, care taking, and casual labor.

5.

The overall BUSINESS ORIENTATION ( PROFIT) is a recognized means of classifications: - Not for profit: The Scouts Association, charities, and public sector leisure facilities. - Commercial: banks, airlines, tour operators, hotel and catering services

Christopher Lovelock gives another classification of services based on the customer involvement in production process: People processing: tangible actions to peoples bodies, such as airline transportation, haircutting and surgery. Customers need to be physically present throughout service delivery in order to receive the desired benefits of such services. It is important to figure the process and output to identify the benefits created. Also some non- financial costs are to be identified such as time, mental and physical effort and even tear and pain that customers incur in obtaining these benefits. Possession Processing: Tangible actions to goods and other physical possessions, such as air freight, lawn mowing, and janitorial services. In these instances, the object requiring processing must be present, but the customer need not be. Mental Stimulus Processing: intangible actions directed at peoples mind, such as broadcasting and education. In this instance the customers must be present mentally but can be located either in specific service facility or in a remote location connected by broadcast signals or telecommunication linkages. Services that interact with peoples mind have the power to shape attitudes and influence behavior. So when the customer is in a position of dependency or there is a potential for manipulation, strong ethical standards and careful oversight is required. This type of service can easily be converted to digital bits or analog signals, recorded for prosperity, and transformed into a manufactured product, such as a compact disc, videotape, or audio cassette, which may then be packaged and marketed much like any other physical good. Information Processing: Intangible actions directed at intangible assets, such as insurance, investment banking, and Consulting. For these services, no direct involvement with the customer may be needed, once the request for the service is initiated. Services highly dependent on effective collection and processing of

information include financial services, accounting, law, marketing research, management consulting, medical diagnosis and a variety of other professional services. Tradition and a personal desire to meet the supplier than often determine the extent of customer involvement in such services more by the needs of operation process.

Service Marketing Triangle

In a triangle, all three sides are essential to complete the whole. For services all three marketing activities, represented by the sides of the triangle, are critical to success; without one of the sides in place, the triangle, or the total marketing effort, cannot be optimally supported. Each side represents significant challenges, as also approaches and strategies for dealing with each other. FedEx Corporation is an example of a company that has all sides of the triangle well aligned. 13 With respect to external marketing, FedEx is a master. They understand their customers, do extensive market research (2,400 customer surveys per quarter), measure customer satisfaction daily (through their service quality indicator, or SQI), and listen to customers. Promises are communicated effectively to the marketplace through winning advertising messages and consistent statements by their people. Interactive marketing-keeping promises-is at the heart of FedEx's strategy. The book-length "Manager's Guide," given to every FedEx manager, states that "Each customer contact is a moment of truth that conveys an image of Federal Express." A shared goal within the company is that every one of these service encounters be flawless from the customer's point of view. The folks that deliver

FedEx's premises directly (drivers, front-line telephone people, business logistics consultants) all know - that 100 percent success in interactive marketing is the goal. FedEx also knows that 100 percent success is not possible unless all of these providers are enabled to provide quality service through technology, rewards, support systems, and empowerment. Open communication with employees is another key to successfully rallying them around new initiatives and opportunities aimed at building business. As a result of its support and fair treatment of employees, employee loyalty at FedEx is very high, and promises to customers can be kept.