SERVICES MARKETING INTRODUCTION SELL THE FOLLOWING PRODUCTS Salt

SERVICES MARKETING INTRODUCTION

SELL THE FOLLOWING PRODUCTS Salt Soft Drinks Detergents Automobiles Cosmetics. Fast-food Outlets Fast-food Outlets Advertising Agencies Airlines Investment Management Consulting Teaching

Characteristics of Services Compared to Goods Intangibility Heterogeneity Simultaneous Production and Consumption (Inseparability) Perishability

Characteristics of Services Compared to Goods Tangibility Spectrum Salt Soft Drinks Detergents Automobiles Cosmetics. Fast-food Outlets Tangible Dominant Intangible Dominant Fast-food Outlets Advertising Agencies Airlines Investment Management Consulting Teaching

Essence of Service � An act or performance performed by one party to another � An economic activity that does not result in ownership

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 � Travel ◦ airline, travel agency, theme park � Others ◦ hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design

DEFINITION : SERVICES Chirstopher Lovelock : Services are economic activities offered by one party to another, most commonly employing time-based performances to bring about desired results in recipients themselves or in objects or other assets for which purchasers have responsibility.

PHYSICAL GOODS PRODUCTION STORAGE SALE CONSUMPTION

SERVICES SALE PRODUCED & CONSUMED AT SAME TIME

Services : Characteristics

1. Intangibility Problems • Lack of service inventories • Lack of patent protection • Difficulty in displaying or communicating services • Difficulty in pricing services Solutions • Use of tangible clues • Use of personal source of information • Creation of a strong organizational image

2. Inseparability Problems • Physical connection • Involvement of customers in the production process • Involvement of other customers in the production process • Special challenges in mass production Solutions • Selecting & training public contact personnel • Consumer management • Use of multi-site locations

3. Heterogeneity Problems • Difficult to standardize service quality control Solutions • Customization • Standardization

4. Perishability Problems • Higher demand than maximum availably supply / optimal supply level • Lower demand than optimal supply level • Demand & supply at optimal levels Solutions • Creative pricing • Reservation system • Development of complementary services • Development of non peak demand

5. Lack of ownership � Customer has access to but not ownership of activity or facility � Stress advantages of non-ownership (eg. Easier payment systems)

DISTINGUISH : GOODS & SERVICES Basis Goods Services Tangibility Goods are tangible. Can be patented Services are intangible. Cannot be patented Transfer of ownership Possible Not possible Perishability Less Perishable. It can be stored as inventory Highly perishable. Cannot store for future use Heterogeneity Goods can be standardized. Less heterogeneity High heterogeneity. Difficult to standardize Reselling Possible Not possible Production & consumption Takes place at different places Both process take place simultaneously

DISTINGUISH : GOODS & SERVICES Basis Goods Services Customer relationship Low High Marketing mix 4 P’s – Traditional marketing mix 7 P’s – Extended marketing mix Customer Involvement Low High Mass Production Easy Difficult

SERVICES ECONOMY Economy Agriculture Industrial Services

Evolution of Services Marketing Crawling out stage prior to 1980 Marketing channels Marketing theories Identified characteristics of services 2. Scurrying about stage : 1980 -1986 - Services classification - Managing quality in service operations- GAP model - Expanded marketing mix - Service encounter, Relationship marketing, Internal marketing etc. , - Emergence of Service marketing 1.

3. Walking erect stage : 1986 -2000 Focus on marketing problems of services Service encounters, Service design, perceived service quality, customer satisfaction, Internal marketing & Relationship marketing. 4. Galloping stage : 2000 till date Increase in growth of service sector Main contributors to GDP of the country.

Services Economy : Components Service Sector Related activities Wholesale and Retail trade Sales to business / individuals Transportation & Warehousing Transportation or storage. Modes : Air, Water, Rail, Road & Pipeline Utilities Establishments that provide electricity, natural gas, steam, water, sewage removal Information Establishments that produce and distribute information and provide the means to distribute or transmit these products and / or process data Financial Activities Finance & Insurance Engaging in financial transactions Real estate, rental & leasing Selling or allowing the use of assets Government Public Administration

Service Sector Related Activities Professional & Business Services Professional, scientific & technical Legal advice, accounting, architectural, engineering, computer services, consulting, health care, research & others Management of companies and enterprises Undertake a decision making role in the company or enterprises Administrative support & Waste management Performing routine support activities for other organisation Education & health services Education Provide instruction & training Health care and social assistance Provide medical care & social assistance Leisure & Hospitality Arts, entertainment & recreation Accommodation & food services Services to meet cultural, entertainment and recreational interests

Forces Transforming the Service Economy Social Changes Business Trends Advances in IT Government Policies ● New markets and product categories ● Increase in demand for services ● More intense competition Innovation in service products & delivery systems, stimulated by better technology Customers have more choices and exercise more power Success hinges on: ● Understanding customers and competitors ● Viable business models ● Creation of value for customers and firm Globalization

Forces Transforming the Service Economy (1) Social Changes Business Trends Advances in IT Government Globalization Policies ● Changes in regulations ● Privatization ● New rules to protect customers, employees, and the environment ● New agreement on trade in services

Forces Transforming the Service Economy (2) Social Changes Business Trends Advances in IT Government Policies Globalization ● Rising consumer expectations ● More affluence ● Personal Outsourcing ● Increased desire for buying experiences vs. things ● Rising consumer ownership of high tech equipment ● Easier access to more information ● Migration ● Growing but aging population

Forces Transforming the Service Economy (3) Social Changes Business Trends Advances in IT Government Policies Globalization ● Push to increase shareholder value ● Emphasis on productivity and cost savings ● Manufacturers add value through service and sell services ● More strategic alliances ● Focus on quality and customer satisfaction ● Growth of franchising ● Marketing emphasis by nonprofits

Forces Transforming the Service Economy (4) Social Changes Business Trends Advances in IT Government Globalization Policies ● Growth of Internet ● Greater bandwidth ● Compact mobile equipment ● Wireless networking ● Faster, more powerful software ● Digitization of text, graphics, audio, video

Forces Transforming the Service Economy (5) Social Changes Business Trends Advances in IT Government Globalization Policies ● More companies operating on transnational basis ● Increased international travel ● International mergers and alliances ● “Offshoring” of customer service ● Foreign competitors invade domestic markets

Reasons : Growth – Service sector Increase in Affluence More leisure time Working women Growth in population of DINKS Greater life expectancy Greater complexity of products Greater complexity in life Greater concern for resource scarcity & Ecology Increasing number of new product Young generation Cultural changes Technology – Key driver Consciousness of healthcare Migration Economic liberalization

SERVICES MODEL � Service Triangle Management Framework � Molecular Model � Servuction Model � Services triangle Marketing model � Six market model

1. Service Triangle Management Framework A. Industrial management model Focus : Revenues & operating cost Ignores : Role personnel play – customer satisfaction & sustainable profits. Beliefs : Difficult to find good employees Better to rely on technical machines / systems Employees are indifferent, unskilled, incapable of fulfilling any duties.

B. Market focused management model Focus : To serve customers / Service delivery Beliefs : Firms should be organized Framework : Depicts 6 key relationships

6 KEY RELATIONSHIPS 1. 2. 3. Firms service strategy communicated to the customer Service strategy communicated to firm’s employees Focus on consistency of service strategy & systems developed to run day to day operations

� 4. Impact of organisational system upon customers. � 5. Importance of organisational systems & employee efforts � 6. Customer/service provider interaction.

MOMENTS OF TRUTH ( MOT ) The quality of these interactions is the source of customer satisfaction. Jan Carlzon, CEO, Scandinavian Airline System � Interaction between customer and service provider give rise to service encounters or critical incidents.

2. Molecular Model - G. Lynn Shostack � Pictorial representation of the relationship between the tangible and intangible elements of a firm’s operation

3. Servuction Model - Langeard et al � Depicts the factors that influence the service experience I a. Contact personnel Eg. Parking attendants, Receptionist, hostesses I b. Service providers Eg. Waiter, Dentist, Physician, Instructors

THE SERVUCTION MODEL Other customers Servicescape Customer Invisible organizations and systems Contact personnel/ Service providers

� III Other customers Invisible organisation systems - Rules, regulations & processes upon which organisation is based.

THE SERVUCTION MODEL IV Servicescape - Use of physical evidence to design service environment Ambient conditions : Eg. Room temperature& Music Inanimate Objects : Eg. Assist firm in completing tasks such as furnishings & business equipment Physical evidence : Eg. Sign / symbols and personal artifact

4. Services Triangle Marketing Model

3 entities : Service transaction I The company II The customer III The provider (Internal customers) Eg. Employees, franchisees, channel partners, distributors, wholesalers, retailers etc. ,

Types of marketing : 3 entities Game of promises I External marketing : “Makes promises” II Internal marketing : “Keeps promises” III Interactive marketing : “Enables promises”

5. Six market model : (Proposed by Adrian Payne) 1. 2. 3. 4. 5. 6. Customer Markets Referral Markets Influence Markets Recruitment Markets Supplier Markets Internal Markets

Challenges : Service Marketing ◦ Most service products cannot be inventoried ◦ Intangible elements usually dominate value creation ◦ Services are often difficult to visualize and understand ◦ Customers may be involved in co-production ◦ People may be part of the service experience ◦ Operational inputs and outputs tend to vary more widely ◦ The time factor often assumes great importance ◦ Distribution may take place through nonphysical channels

Issues : Service Marketing I Marketing issues A. Managing Differentiation 1. Services premises 2. Packaging 3. Service personnel 4. Tools and equipment use 5. Customers 6. Convenience B. Managing productivity C. Managing service quality

II Ethical issues 1. Aggressive promotion 2. Invasion of privacy 3. Misleading claims backed by poor service performance III Communication issues 1. Management of technology 2. Management for budgetary provisions for communication 3. Management of communication content

Differences, Implications & Marketing related tasks Difference § Most service products cannot be inventoried § Intangible elements usually dominate value creation § Services are often difficult to visualize & understand § Customers may be involved in co. Production Implications § Customers may be turned away § Harder to evaluate service & distinguish from competitors § Greater risk & uncertainty perceived § Interaction between customer & provider; but poor task execution could affect satisfaction Marketing-Related Tasks § Use pricing, promotion, reservations to smooth demand; work with ops to manage capacity § Emphasize physical clues, employ metaphors and vivid images in advertising § Educate customers on making good choices; offer guarantees § Develop user-friendly equipment, facilities & systems; train customers, provide good support

Differences, Implications & Marketing related tasks Difference § People may be part of service experience § Operational inputs and outputs tend to vary more widely § Time factor often assumes great importance § Distribution may take place through nonphysical channels Implications § Behavior of service personnel & customers can affect satisfaction § Hard to maintain quality, consistency, reliability § Difficult to shield customers from failures § Time is money; customers want service at convenient times § Electronic channels or voice telecommunications Marketing-Related. Tasks § Recruit, train employees to reinforce service concept § Shape customer behavior § Redesign for simplicity and failure proofing § Institute good service recovery procedures § Find ways to compete on speed of delivery; offer extended hours § Create user-friendly, secure websites and free access by telephone