01 -intro to services

What are services?Comparative analysis: Product and

service Characteristics of services

Why market services?Contribution of services marketing

Services in developing countriesClassification of services

Concept in services marketingMyths about services

Service Sector Management

Role of services in modern economy

It affects the way in which we live & workContributes towards the growth of the economy

& creates maximum employment opportunities.Opening of service economy means greater

competition, which will in turn stimulate innovation through application of new & improved technologies.

Optimum utilization of resources* Accelerates capital formation* Increases standard of living* Investment in R & D – better technology,

increased speed, better efficiency, meeting increased supply, up to date MIS


Reasons for growth of services (verma)

Higher disposable income , affluenceIncreasing specialization , competitive pressureGrowing fashion consciousness ,urbanizationProfessionalism in fields (E.g. education)Information explosionIncreased sophistication/civilized lifestylesGovernment activities – cultural exchange

policies, trade policies, global partnerships etcWomen in work forceConcern for environmentDemographic shifts / Life expectancyInnovations , new products, product complexity


Factors stimulating the growth of service sector

Government policies-changes in regulation, LPG, customerisation , new agreements on trade in services.

Social changes-rising consumer expectations, more affluence, use of technology

Business trends-Providing value, competition, stress on quality, Imp of marketing , Innovation

Development in IT-computerisation , web connectivity, benefit of internet, wireless networking

Internationalization / globalization-growth of MNC transnationals, Mergers alliances, acquisitions', international trade etc1


Services in developing countriesHuge untapped potentialBasic services- healthcare, education not

developedQuality of services- lowNo service delivery standards setLack of market researchNeed for government interventionProper channels to human, financial and

intellectual resources neededPotential to contribute to country’s GDP

and economic developmentService Sector Management

Service marketing environment (bhattacharjee)

External environment for service firms consists of SLEPT factors:

Socio-cultural factors---- Socio-cultural changes--* consumption * Beliefs

& values--- Demographic changes--*age composition, *

gender composition, * changing role of women.Services that received a big boost due to this

factor areRetailing, health & personal care, education, BPO

travel & transportation etcLegal factors- are the percolation of the political

& govt factors, there are more laws & regulations for the service industry.

Eg of legal implications—closure of BPOs, FERA guidelines, reservation of certain sectors, CRR,SLR, environmental guidelines etcService Sector Management

Economic factors—the govt economic policies have tremendous impact on mgt of service sector. An economy has a business cycle consisting of –

Recession* RecoveryGrowthDeclineSome economic pointers of the impact on services--with globalization there has been a spurt in the

demand for communication & information services.

--with increased specialization there has been an demand for specialized services such as M.R, ERP, mgt consultancy, financial consultants etc

--knowledge based economyService Sector Management

Political factors—service firms have been greatly affected by the policies & decisions made by the government, the regressive tax regime on services contributed in damping growth-

Eg of impact of government policies is the leisure, travel & tourism industry, retail sector, education.

Technological factors-some technological

development which affected services:—Universal product codeCredit cardsElectronic data captureInternet, ATMs with V-SAT, cellular phonesData mining & data warehousing technologyQuick response inventory management system


Internal or Micro environment factorsExternal customers/ consumersInternal customer/ channel pattern/ providersCompetitors- to gain competitive advantage ,a

service firm must do either of the following:---Provide product value but operate more

efficiently than its rivals(lower cost )--Operate in a unique way that creates greater

product value & command premium price.Four different types of competition are:-Direct, Indirect, substitute & new entrant

competition. SuppliersRegulators


Major categories of servicesBusiness and professional services – banking,

insurance, accountancy, medicine, lawyers, advocates

Infrastructural services – roads, railways, motor transport, power, oil

Public services – police, defenseTrade services – wholesale & retail ,

distributionPersonal services – education, medical,

gymnasiums, hotels, spas ,healthIndividual & group services – beauty parlors,

medical, coaching classes (education)EnvironmentFinance- banking, insurance, investmentTravel , tourism, hospitality, recreation


What are services?Services are activities, benefits or satisfaction

which are offered for sale, and are provided in connection with the sale of goods

Service is action of an organization that maintains and improves the well being and functioning of people.

Payne has defined service as an activity which has some element of intangibility associated with it, which involves some interaction with customers or property in their possession and does not result in transfer of ownership.

In simple terms services are intangible deeds, activities, processes, and performances that cannot be touched, seen or felt but can be experienced& which benefits and satisfies the consumer.Service Sector Management

services


SERVICES

PERFORMED BY INDIVIDUALS OR MACHINES

RENDERED FOR PROFIT, BENEFIT & SATISFACTION

DIRECTED TO CUSTOMERS

S

SERVICE IS AN ACTIVITY, DEED, ACT, EFFORT OR PERFORMANCE

S

IS AN INTANGIBLE DEED,ACTIVITACT, EFFORT, PERFORMANCE

R

RENDERED FOR PROFIT,BENEFIT & SATISFACTION

IS AN INTANGIBLE ACT, DEED, EFFORT OR PERFORMANCE

RENDERED TO CUSTOMERS OR INANIMATE OBJECTS

Some of the distinctive aspects that emerge from the above definitions are as follows;-

Services are intangible, however some of these may include a final tangible component eg reports, notes

They do not result in ownership of anythingServices are activities performed by the providerCustomer interaction & co-operation is integral

to service creation,delivery and consumption.Services are actions bought for their ability to

provide satisfaction or benefitService production may be some times tied to

goods and are an integral offerings of many manufactured goods for eg warranties, deliveries, installationsService Sector Management

Four Categories of product as distinguished by Philips KotlerA pure tangible good- eg tooth paste, salt rice

where no service accompanies product.

A tangible good accompanied by service- consumer durables ,to enhance consumer appeal/satisfaction.

A major service accompanied by minor goods &services- 1st class air travel, premium hotel stay.

A pure service- consultancy, teaching ,babysitting etc


The continuum of goods & services

In the world of marketing there are very few pure products or services, instead the market offerings can be visualized to be falling on a continuum with two ends being tangible & intangible dominance .

Shostack presented the idea of tangible & intangible scale to classify market offering as below

Pure goodsGoods major service minorTangible & intangible equalMajor services minor goodsPure services


Pure goods

Combination of goods & services

Pure services

Tangibility SpectrumThe term goods can be interchangeably used

with product, a product can be defined as a comprehensive package of goods or services or both, which adds value to the consumer.

Intangibility is the key characteristic of a service, however there are few goods & services that are purely tangible or purely intangible.

Instead services tend to be more intangible than goods and goods tend to be more tangible than services



Continuum of tangibility

Classification of services

Classification of services on the basis of customer involvement

-People Processing- customer has to actively co-operate eg health care, beauty salons, being transported etc

-Possession processing- service offered to physical objects-both living & inanimate, that belong to the

customer. Eg courier, car repair/maintenance , dry cleaning

-Mental stimulus processing- services that interacts with peoples minds, eg Psychotherapy, education, counseling.

-Information processing- services that are highly dependent on effective collection and processing of information eg financial services ,medical diagnosis, M.R Service Sector Management

Classification on the basis of tangibilityHighly tangible- car rental , wending mac, ATM

etc.Service linked to tangible goods- installation,

maintenanceTangible goods linked to services-restaurant, health

care, education.Highly intangible- housekeeping, hairdressing etcClassified on the basis of expertiseProfessional- medicine, legal, accountancy, teachingNon professional- baby sitting, housekeeping.Profit-Oriented—i)Non profit ii) commercialBased on end user—i) consumer ii)Business to bussi iii)Industrial


Characteristics of servicesIntangibility—visualization, association, physical

representation and service marks, facts & figures. Perish ability– over marketing, managing demand

& supply. Heterogeneity (Quality aspect)– Training of

internal & external customers, automation, quality recruitment & selection, developing service minded culture.

Inseparability/simultaneity (of creation and delivery)-training internal customers, use of technology

Ownership/ResellQuality measurement—feedback, monitoring.Nature of Demand (by season, by time – e.g. peak

hours)Service Sector Management

Some eg of service marksAlliance group insurance --- “the power on

your side”AT & T --- “It is within your reach”British Airways--- “ The worlds favorite

airline”Taj Business Hotels– “Nobody cares as

much”Discovery channel– “explore your world”Godrej – “promise of good living”Jet Airways– “the joy of flying”Holiday Inn Hotels– “ Be yourself”


Comparative analysis: Product and serviceTangibility

Transferability (Physical transfer)

Existence

Heterogeneity

ResellingService Sector Management

Generic difference between goods &servicesNature of the productCustomer involvement in the prod processPeople as part of the productQuality control problemsHarder for customer to evaluateAbsence of inventoriesImportance of time factorStructure & nature of distribution

channelsoffered to physical


Marketing challenges of servicesNarrow definition of marketing— some service

executives continue to define mkt as simply advt, sales promotion & P.R, where as crucial areas for a service firm are, new product development, pricing STP, customer service, service quality.

Lack of appreciation for marketing skills— the prevailing environment not only restricts the resources allocated to marketing but also inhabits the creativity of the service marketer.

Different org structure-- service org should try and achieve an org structure which will integrate marketing & operational considerations, in order to ensure high level of service quality & satisfaction.

Limited data on competitive performance— Unlike consumer goods segment, the service sector is inhibited by lack of sufficient detailed market data


on a product to product basis, which would have enabled service provider managers & their advt agencies to tightly monitor the results of their efforts. Two key uses of market research data are :-

i) Determination of customer needs and preferencesii)Measures of service specific customer satisfaction.Problems in determining costs for pricing— In

comparison to manf firms it is more difficult to determine which fixed & operating costs are associated with which products especially when several services are being produced concurrently by the same organization.

The basic difference between goods & services may lead to myriad other challenges & questions that marketer may face which can be as follows:-


* How can product quality be defined& improved when the product is intangible and not standardized. Eg beauty salon

* How does the firm accommodate fluctuating demand when the capacity is fixed and the service itself is perishable eg theatre

* How can the firm best motivate and select service employees who, because the service is delivered in real time become a part of the product itself.

* How can a balance between standardization & personalization be determined to maximize both the efficiency of the org and the satisfaction of its customers as well as its employees.

* How can the org protect new service concepts from competitors when service process cannot be patented legally.


* How can organizations ensure delivery of consistent quality service when, both the organizations employees and customers themselves affect the service outcome.

The service Marketing Triangle

The challenges faced by the service managers can be conceptualized in the service marketing triangle.

According to Gronross there are three types of marketing activities that must be successfully carried out for service org to succeed, namely external marketing, internal marketing and interactive marketing.


Types of marketing in service firmsService triangle

Internal marketing – directed towards employees

External marketing - directed towards consumers

Moment of truthService Sector Management

Service Firm

Employees Customers

Internal marketing enabling the promiseInternal marketing enabling promise

External marketing setting the promise

Inter active mktInteractive mkt

External marketingAnything that is communicated to the customer

before the service delivery-that an org engages in the set up of its customers expectations & make promises to the customers regarding what is to be delivered.

It includes advt, sales promotion, P.R,, sales management , direct marketing , the firms physical facilities & the process of service delivery.

Internal Marketing• It suggests a critical role which enables employees

to keep the promise that have been made to the customers.

• The employees are considered the first internal market for the org & every individual play an imp role in mkt of the service.

• It includes any efforts such as training,, customer knowledge, sales –mkt knowledge ,motivation by the org to satisfy its customers


Internal marketingDefinition:- attracting, developing, motivating, and

retaining qualified employees through job products that satisfy their needs.

Components of internal marketing:-MotivationCo-ordination InformationEducation

Proposed Process of Internal Marketing ProgramsAttract best talentMotivate Impart knowledgeEmphasize on Team workEmpowerReward


Interactive marketing or moment of truthEmphasized by Scandinavian airlines system(SAS)

& has become popular as MOT or moment of truth

Though companies strive to design effective service products, communicate its promise to the customers. Train, convince & enable its front line providers ,it is only the front line staff who keeps the promise.

The provider becomes the face of the company & all their perception of quality & satisfaction entirely depends on the provider.

Finally it is the responsibility of the provider to convey the sincerity of purpose & validity of promise that is to be kept, to put their best foot forward, smiling , being extra polite, going out of way to help the customer, to make their experience memorable. These encounters are termed as MOM or Moment of truth.Service Sector Management

The molecular modelHelps us to understand the difference

between goods & services, highlighting the relationship between tangible & intangible component

It has benefited managers to see the big picture of the firms service offering, he gets to appreciate the tangible & intangible offering & the customers needs better, thus preparing him to offer competitive features.

Eg Indian railways & Prithvi theater


Molecular model for prithvi theatre


The servuction modelIs used to illustrate factors that influence

service experienceThe experiential aspect of consumption

becomes important when service firms provide complex bundle of benefits.

All those who come in contact with the customer help in the service delivery & affect service encounter & experience

This model is relevant in those services where there is a high degree of involvement of the consumer like ATM, buffet lunch, self service in petrol pumps etc

Consumer tends to add their own bundle of benefits taking off from the given offer.


Myths about servicesA service economy produces services at

the cost of other sectorsService jobs are low paying & menialService production is labor intensive & low

in productivityService is necessary evil for manufacturing

firmsManaging service is just as managing a

manufacturing business.The growth of the government is the

reason we are a service economy.


Consumer Behavior- sub topicsDifference between evaluation process

between goods & services Customer decision making processImplication for service providersService gap & Zone of toleranceCustomer expectation—Types, factors

influencing customer expectations, Managing & Exceeding service expectations.

Customer Perception—Factors influencing perception ( service encounter, service evidence, image & Price)

Strategies for influencing customer Perception


Categories of qualities of consumer goods or services-

Search quality- these attributes can be determined even before purchase of product. For e.g color, style, price, hardness etc. Goods are high in search quality & services being in-tangible are low in search qlty.

Experience quality- attributes that can be discerned after or during purchase or consumption. For e.g vacation, restaurant meal etc. or through others who have experienced it.

Credence qualities- Difficult or impossible to evaluate even after consumption or usage, due to the tech, lack of expertise or nature of service it is difficult to evaluate. For e.g heart surgery, kidney transplant, dental service, auto repairs, etc.Service Sector Management

Conclusion- goods & services high is search quality are easily evaluated & that which are high in experience qualities are somewhat difficult & those high in credence qualities are very difficult to evaluate.


Customer decision making process involves four main sub-processes:-

i) Search for the information—a)Use of sources-personal & non personal b) greater Perceived risk-as services are intangible, non- std, no warranties.

ii)Evaluation of alternatives-depends on emotions & moods of consumer & availability of alternatives.

iii)Purchase & consumption-dramatizing the service experience, compatibility of service customer.

iv)Post purchase evaluation- Attribution of dis-satisfaction ,customer loyalty


Implication of the difference for service providers--Word of mouth plays an imp role in the marketing of

services as consumer rely more on personal sources.--Since perceived risk is more in purchase of services

companies should design strategies to reduce risk, e.g std of offering, training to employees.

--Since moods & emotions have an impact on the way information is absorbed & retrieved, marketer should be aware & attempt to influence them in a +ve way.

--Control should be exerted on unruly customer who cause dissatisfaction not only to themselves but to fellow customers by specifying limits.

--Service marketers should provide incentives while introducing new services to speed up adaptation

--Service providers should research customer demands & expectation especially for unprofessional services


Service gapPrimary objectives of service provider is to

develop & provide offerings that satisfy consumer needs & expectations, thereby ensuring survival

To remain competitive & survive in today's business env companies need to understand consumer behavior thoroughly

Service marketers need to be able to close the gap between expectations & perceptions of the consumer as shown in the following fig:-

Service gap


Expected service

Perceived service

Customer expectations & perceptionsUnderstanding the customers wants , perception

& expectations is crucial, if customers perception of service recd is less than expected it will lead to dissatisfaction thus customer should be given more than his expectation (customer delight)

Customer expectations—formed from variety of influencing factors such as past exp, current needs, feed back.

Types of service expectations- ( two levels of expectations)

a) desired level-which he hopes to receive but may not be always possible (eg business school )

b) adequate level-it is the minimum tolerable expectation or the lower level of expectation or the service that the customer will accept.Service Sector Management

Zone of toleranceThe variation between desired service &

adequate service is called as zone of tolerance, it is the extent to which customers recognize & are willing to accept this variation. A performance below the tolerance zone will frustrate the customer & above it will delight him. One may consider the zone of tolerance as a range or window in which customer does not particularly notice service performance.

e.g banking. airlines

Limit of expectation

Zone of toleranceService Sector Management

Desired service

Adequate service

Managing customer expectations

Customers main expectations of service are quite simple & basic, they expect companies to do what they are supposed to do, they expect fundamentals not fancies, performance not promises.

Service org can manage expectations by managing the following 3 things

Ensuring promise reflect realityPerforming the promised service reliablyCommunicating effectively with customers.


Exceeding service expectations

It involves delighting & surprising the customers by giving them more than they expect, it helps in intensifying customer loyalty & ruling out competitive options

Foll are some of the things that companies can do:Strive constantly to provide additional customer

value in every transactionUse a flexible service envelop around the core

service to generate surprise benefitsConstantly surpass the benefits that the customer

has built around the serviceTreat the customer as if he is the most imp customer

and offer personalized package.


Customer PerceptionIt may be defined as the process by which

people select, organise & interpret information to form a meaningful picture of the world.


Factors that influence customer perceptionThere are four primary factors, these are

service encounter, evidence of service, image & price

1. Service encounter:- for any customer a clear impression of the service occurs when the customer interacts with the service & starts using the service.

Types of service encounters—Remote encountersPhone encountersFace to face encountersSources of satisfaction & dis- satisfactionRecoveryAdaptabilitySpontaneitycoping Service Sector Management

2. Service evidence:-Due to the intangible nature of the services customer searches for evidence in every interaction that they have with the organization.

Customer will experience three types of service evidences:-

PeopleProcessPhysical evidenceThese three are not mutually exclusive,

rather they are interrelated3. Image:- a favorable image is an asset to an

org, because it can impact perception of quality, value & satisfaction

4. Price:- it is a visible indicator of service level & quality , it sends clues about the service.Service Sector Management

Strategies for influencing customer perception

Aim for customer satisfaction in every service encounter

Reinforce perception by managing the evidence of service

Communicate realistically & use customer experience to reinforce images

Use price to enhance customer perceptions of quality & value


Buying RolesDecision making roleInitiatorInfluencerGatekeeperDeciderBuyerUserTypes of buying behaviorComplex buying behaviorDissonance-reducing buyer behaviorHabitual buying behaviorVariety seeking buying behavior


Market segmentationProcess of market segmentation in services–

service provider has three alternatives:-

Undifferentiated segment– no recognition of distinct segment– known as market aggregation. Eg laundry, courier etc

Company Customers


Service Marketing

Mix

UndifferentiatedMarket

Differentiated Marketing approach —separate market segment identified and separate marketing mix developed to target the segment. Eg tours & travels, insurance etc

Company Customers


Marketing Mix 1

Marketing Mix 2

Marketing Mix 3

Marketing Mix 4

Marketing Mix 5

Segment 1

Segment 2

Segment 3

Segment 4

Segment 5

Concentrated marketing approach —separate segment is identified, but efforts are concentrated on only one or two specific segment. Eg driving school

Company Customers


Service Marketing

Mix

Segment 1

Segment 2

Segment 3

Segment 4

Segment 5

Basis for market segmentation

Demographic segmentation:- age, gender, income, family, education, occupation ,size of family etc. eg insurance, investment banks, travel & tourism, hotels, health food.

Geographic :- scope factors– local , regional , state etc features factor– density of population, climate related.

• Psychographic:- social class, lifestyle, personality eg hotels, health clubs, pubs, investment banks etc

*


• Behavioral Segmentation:-Benefit Segmentation- on the basis of benefit

sought

Purchase occasion – reasons behind purchase

User status Segmentation– usage pattern i.e first time, regular users.

Usage Rate- Frequency of use

Loyalty Segmentation- hard core, soft core, shifting loyalists, switchers


Positioning of servicesIt involves establishment of a competitive position.It is largely a communication issue dealing with

psychology of the service seeker.It deals with identifying the need of the customer

and fulfilling it by identifying a unique selling proposition.

It offers an opportunity to create a differentiation in the minds of the service seeker

Levels of positioning:-Industry positioningOrganizational positioningService sector positioningIndividual service positioning


Implementing positioningEnsure recall valueService should stand out distinct from its

competitorsPositioning should be evaluated from time to time,

less it does not become outdated—repositioningMarketing mix is the key to implementing an

effective positioning strategy eg—by way ofThe service itselfThe priceThe promotion The placeProcessPeoplePhysical evidence


Key characteristics of effective positioningIt should be meaningfulIt should be believableIt must be uniqueIt needs to keep competitors out & not draw

them in.

Steps in developing positioning strategyDetermining level of positioningIdentifying the key attributes of importance to

selected segmentLocation of attributes on position mapEvaluating position options
