UNIT I INTRODUCTION SERVICES MARKETING

Service

Any act of performance that one party can offer 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. -Kotler

There are no such things as service industries.

There are only industries whose service components are greater or less than those of other industries.

Everybody is in service
-Theodore Levitt

What is the Service Economy?

Education and Health Services Financial Activities

Other Services

Wholesale and Retail trade Transportation And Utilities

Service Economy

Government

Information Leisure and Hospitality

Professional and Business services

Differences between Physical goods & Services

Tangible Homogeneous Production & Distribution are separated from consumption A thing Core value produced in factory Customers do not participate in the production process Can be kept in stock Transfer of ownership Intangible Heterogeneous Production, distribution and consumption are simultaneous An activity or process Core value produced in buyer seller interactions Customers participate in the production Cannot be kept in stock No transfer of ownership

Characteristics of Services
Intangibility - Lack of tangible assets which can be seen, touched, or smelled prior to purchase. Perishability - Inability of a service to be inventoried or stored. Inseparability - Simultaneous production and consumption of a service. Variability - Unwanted or random levels of service quality customers receive when they patronize a service firm.

 Customer participation Customers are not controllable Production quality also depends upon customer's knowledge and ability to participate Customers are evaluating at every stage of service production No Ownership -Nothing remains after consumption Very less time to the consumer to evaluate the product High consumer dissonance

To Reduce Intangibility
Stress tangible cues. Use personal sources of information. Stimulate word-of-mouth communications. Create strong corporate image. Encourage employees to communicate with customers.

To Reduce Perishability
Increase supply to match demand. Decrease demand to match supply. Manipulate both demand and supply to match capacity.

To Reduce Inseparability
Automate service. Emphasize selection and training of employees. Develop process to manage customers. Open multiple sites.

To Reduce Variability
Industrialize the service. Standardization of procedures. Customization of service.

Evolution of Services sector

Production

Tangible Output

Value Generation

Evolution of Services Marketing

Crawling out stage Scurrying stage Walking erect stage Galloping Stage - took place prior to 1980 - between 1980 to 1986 - from 1986 to 2000 - from 2000 to till date

Factors contributing to the growth of services in India

Movement to information age Shift to industrialized economy Aging population Working wives Longer life expectancies Increased leisure time High per capita income Changing social and cultural values Advances in technology Product complexities

Changing Structure of Employment as Economic Development Evolves

Agriculture Services

Industry

Time, per Capita Income

CLASSIFICATION OF SERVICES

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

INTANGIBLE ACTS

Mental Stimulus Processing

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

Information Processing
(directed at intangible assets)

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

CLASSIFICATION OF SERVICES GATS ( General Agreement on Trade in Services ) 155 services

Business services Communication Construction and engineering Distribution Education Environment

Finance Health Tourism Recreation Transport

Classification based on the Service Tangibility

Highly tangible Service linked to tangible goods Tangible goods linked to services: Highly intangible

Classification based on Skills and Expertise Required

Professional services Non-professional services

Classification based on the Business Orientation of Service Provider

Not-for-profit organizations Commercial organizations

Classification based on the type of End-User

Consumer services Business to Business (B2B) services Industrial services

Service Market Potential

A service market potential is an estimate of the maximum possible sales opportunities present in a particular market segment and open to all sellers of a good or service during a stated future period.

Expanded Marketing Mix for Services

Product Physical good feature, quality level, accessories, packaging, warranties, product line, branding, service lines and after sales service Flexibility, Price level, Terms, Differentiation, Discounts, Allowances, Commissions, Perceived Value Channel type, Exposure, Intermediaries, Outlet Locations, Transportation, Storage, Managing Channels, Accessibility, Coverage Promotion blend, Sales people number, selection, training, incentives, Advertising Targets, media types, types of ads, copy thrust, Sales promotion, Public Relations, and Publicity

Price

Place

Promotion

People

Employees recruiting, training, motivation, rewards, teamwork, Customer education training, Communicating culture and values, Employees research, Attitudes
Flow of activities, Standardardized, Customized, Number of steps, simple, complex, level of customer involvement, Policies, Procedures, Employee discretion, Customer involvement Facility design, aesthetics, functionality, ambient conditions, Equipment, Signage, Employee dress, Reports, Business cards, Statements, Guarantees, Furnishing, Colour, Layout, Noise level Value addition, Speed of service Delivery Cost reduction, Efficiency, Effectiveness, Ease of availing service etc.

Process

Physical evidence Productivity and Quality

Perspectives on Service Quality

Transcendental: Quality = excellence. Recognized only through
experience

Product-Based: Quality is precise and measurable User-Based: ManufacturingBased:

Quality lies in the eyes of the beholder Quality is conformance to the firms developed specifications Quality is a trade-off between price and value

Value-Based:

THE DIFFERENCE BETWEEN CUSTOMER SATISFACTION AND SERVICE QUALITY

Customer Satisfaction short-run, transaction specific measure Service Quality

long-run overall evaluation of the firms performance

looks at how firms should perform

measures a higher standard of service delivery

expectations drive service quality perceptions

Underlying Principles of Service Quality

Service quality more difficult to evaluate Based on consumers perceptions Comparison of expectations to service received

Service Qualities
Search Qualities Experience Qualities Credence Qualities

 Search Qualities Tangible characteristics that allow customers to evaluate a product before purchase Experience Qualities Characteristics that can be experienced when actually using the service Credence Qualities Characteristics that are difficult to evaluate confidently even after consumption Goods tend to be higher in search attributes, services tend to be higher in experience and credence attributes Credence attributes force customers to trust that desired benefits have been delivered

Service Quality Evaluation

Most Goods Most Services

Clothing

Restaurant meals

Computer repair

Haircut

Legal services

High in search attributes

High in experience High in credence attributes attributes

Complex surgery

Motor vehicle

Foods

Chair

Entertainment

Lawn fertilizer

Easy to evaluate

Difficult to evaluate

Service Quality Dimensions -Berry, Parasuram, and Zeithaml

Tangibles Reliability

Responsiveness
Competence Courtesy

Service Quality Dimensions -contd..

Credibility Security

Access
Communication Understanding the customer

Measuring Service Quality: RATER Dimensions

Reliability- Ability to perform the promised service dependably and
Accurately

Assurance- Knowledge and accuracy of employees and their ability

to convey trust and confidence

Tangibles- Appearance of physical facilities, equipments,

personnel advertising communication material

Empathy - Caring, individualized attention the firm provides its

customers

Responsiveness - Willingness to help customer and provide

prompt service

GAP Model of Service Quality

Word-of-mouth communications Consumer Personal needs Expected service Gap 5 Perceived service Service delivery (including pre- and post-contacts) Gap 3 External communiGap 4 cations to consumers Past experience

Gap 1 Marketer

Translation of perceptions to service-quality specifications Gap 2 Management perceptions of consumer expectations

SERVQUAL Dimensions
SERVQUAL is a 44-item scale that measures customer expectations and perceptions regarding five service quality dimensions--tangibles, reliability, responsiveness, assurance, and empathy. SERVQUAL consists of two sections: a 22-item section that records customer expectations of excellent firms in the specific service industry, and a second 22-item section that measures customer perceptions of a particular company in that service industry. Results from the two sections are then compared to arrive at "gap scores" for each of the five dimensions.

MEASURING SERVICE QUALITY: SERVQUAL

Diagnostic tool used to determine gap scores
The larger the gap, the lower the service quality evaluation 44 Item Scale the Compares Should to Perceptions

SQ consists of five dimensions

Tangibles Responsiveness Empathy Reliability Assurance

SERVQUAL: The Tangible Dimension

Firms ability to manage its tangibles E1: Excellent companies will have modern looking equipment E2: The physical facilities at excellent companies will be visually appealing E3: Employees of excellent companies will be neatappearing E4: Materials associated with the service (such as pamphlets or statements) will be visually appealing in an excellent company

SERVQUAL: The Tangible Dimension

P1: XYZ has modern-looking equipment P2: XYZs physical facilities are visually appealing P3: XYZs employees are neat in appearance P4: Materials associated with the service are visually appealing at XYZ

Reflects the consistency and dependability of the firms performance E5: When excellent companies promise to do something by a certain time, they will do so. E6: When customers have a problem, excellent companies will show a sincere interest in solving it. E7: Excellent companies will perform the service right the first time. E8: Excellent companies will provide their services at the time they promised to do so. E9: Excellent companies will insist on error-free records.

SERVQUAL: The Reliability Dimension

SERVQUAL: The Responsiveness Dimension

The willingness or readiness of employees to provide the service E10: Employees of excellent companies will tell customers exactly what services will be performed. E11: Employees of excellent companies will give prompt service to customers. E12: Employees of excellent companies will always be willing to help customers. E13: Employees of excellent companies will never be too busy to respond to customer requests.

SERVQUAL: The Assurance Dimension

Reflects the competence of the firm, the courtesy extended to its customers, and the security of its operations E14:The behavior of employees of excellent companies will instill confidence in customers. E15: Customers of excellent companies will feel safe in their transactions. E16: Employees of excellent companies will be consistently courteous with customers. E17: Employees of excellent companies will have the knowledge to answer customer questions.

SERVQUAL: The Empathy Dimension

The ability to experience anothers feelings as ones own E18:Excellent companies will give customers individual attention. E19:Excellent companies will have operating hours convenient to all their customers. E20:Excellent companies will have employees who give customers personal attention. E21:Excellent companies will have the customers best interest at heart. E22:The employees of excellent companies will understand the specific needs of their customers.

Criticism of SERVQUAL
Length of the Questionnaire
Expectation and perception questions seem redundant Whats the value of including the expectation set?

Validity of the Five Dimensions

Questions need to be adjusted to fit specific industry under examination Measurement issues

Predictive Power
Ability to predict consumer purchase intentions