fsm session 1
TRANSCRIPT
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WELCOME TO COURSE ON
FUNDAMENTALS OF SERVICEMANAGEMENT
Session 1
Ganesh Prabhu
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Learning Objectives
To develop in students set ofcompetencies and prepare them forcareers in the areas of service industry.
To enable the students acquire anunderstanding of the concept andmeaning of services management, therelationship process etc
To enhance students skills andknowledge in dealing effectively with aportfolio of services customers in abusiness setting.
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Text & Reference
Prescribed Text Lovelock Christopher ,Wirtz Jochen and Chatterjee
Jayanta, Service Marketing, Pearson EducationPublications,
Reference Books Hoffman K Douglas and Bateson John E.G.,
Essentials of Services Marketing: Concepts,Strategies and Cases, Thomson Publications.
Clow Kenneth E. and Kurtz David L., ServicesMarketing: Operation, Management and Strategy,New Delhi: Biztantra Publications
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FSM course plan
Session 1/2 Understanding Services (Ch 1/2)
Session 3 Strategic Issues in Services Marketing-
Positioning & targeting customers(Ch 3)
Session 4 Strategic Issues in Services Marketing-
Building Customer relations (Ch 12)Session 5 Strategic Issues in Services Marketing-
Managing Demand (Ch 9)
Session 6/7/8 Tools for Service Marketers (Ch 4,5,6,7)
Session 9/10 Challenges for Senior Management (Ch13,14,15)
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The service sector
The share of services in Indian GDP hasrisen from 30.5% in 1950-51 to 55.2% in2009-10
The services sector has been growing ata rate of > 8% per annum in recent years
This sector dominates with the bestjobs, best talent and best incomes
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What is a service?
It is the part of the product or the fullproduct for which the customer is willingto see value and pay for it.
It is intangible.
It does not result in ownership.
It may or may not be attached with aphysical product
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Any airline can take you from
place to place, but its whathappens to you between take-offand landing that makes the
differenceNaresh Goyal,Chairman Jet Airways
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Services are Different
Goods Services Resulting ImplicationsTangible Intangible Services cannot be inventoried.
Services cannot be patented.Services cannot be readily displayed or communicated.Pricing is difficult.
Standardized Hetero eneous Service delivery and customer satisfaction depend on
employee actions.Service quality depends on many uncontrollable factors.There is no sure knowledge that the service deliveredmatches what was planned and promoted.
Productionseparate fromconsumption
Simultaneousproduction andconsumption
Customers participate in and affect the transaction.Customers affect each other.Employees affect the service outcome.
Decentralization may be essential.Mass production is difficult.
Nonperishable Perishable It is difficult to synchronize supply and demand withservices.Services cannot be returned or resold.
Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, Problems and Strategies in Services Marketing,Journal of Marketing49 (Spring 1985): 33-46.
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Tangibility Spectrum
Tangible
Dominant
IntangibleDominant
SaltSoft Drinks
Detergents
Automobiles
Cosmetics
AdvertisingAgencies
AirlinesInvestment
ManagementConsulting
Teaching
Fast-food
Outlets
Fast-foodOutlets
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Defining the Essence of a Service
An act or performance offered by one party toanother
An economic activity that does not result inownership
A process that creates benefits by facilitating adesired change in:
customers themselves
physical possessions
intangible assets
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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,
ski resort, rafting
Travel airlines, travel agencies, theme park
Others:
hair styling, pest control, plumbing, lawnmaintenance, counseling services, health club
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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
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Internal Services
Service elements within an organization that facilitatecreation 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
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Major Trends in Service Sector
Government Policies (e.g., regulations, trade agreements)
Social Changes (e.g., affluence, lack of time, desire forexperiences)
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
Advances in IT (e.g., speed, digitization, wireless, Internet) Internationalization (travel, transnational companies)
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Some Impacts of TechnologicalChange
Radically alter ways in which service firms dobusiness: with customers (new services, more convenience)
behind the scenes (reengineering, new value chains)
Create relational databases about customer needs andbehavior, mine databanks for insights
Leverage employee capabilities and enhance mobility
Centralize customer servicefaster and moreresponsive
Develop national/global delivery systems
Create new, Internet-based business models
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The Services Marketing Triangle
InternalMarketing
Interactive Marketing
ExternalMarketing
Company(Management)
CustomersEmployees
enabling thepromise
delivering the promise
setting thepromise
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
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Ways to Use theServices Marketing Triangle
Overall StrategicAssessment
How is the service
organization doingon all three sides ofthe triangle?
Where are theweaknesses?
What are thestrengths?
Specific ServiceImplementation
What is being promoted
and by whom? How will it be delivered
and by whom?
Are the supporting
systems in place todeliver the promisedservice?
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Marketing RelevantDifferences BetweenGoods and Services
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Marketing Implications - 1 No ownership
Customers obtain temporary rentals, hiring of personnel, or access tofacilities and systems
Pricing often based on time
Customer choice criteria may differ for renting vs. purchase--mayinclude 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 benefitsare perishable or durable
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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
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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Marketing Implications - 3
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 personnelreflect both marketing and operational criteria
Recognize that appearance and behavior of other customers caninfluence service experience positively or negatively
Avoid inappropriate mix of customer segments at same time
Manage customer behavior (the customer is notalways 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 placebecause it is more difficult to shield customers from servicefailures
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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, ethicalbehavior
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 Distribution channels take different forms
Tangible activities must be delivered through physicalchannels
Use electronic channels to deliver intangible, information-
based elements instantly and expand geographic reach
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Important DifferencesExist among Services
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Four Categories of ServicesEmploying Different Underlying Processes
People Processing Possession Processing
Mental Stimulus
Processing
Information Processing(directed at intangible assets)
e.g., airlines, hospitals,
haircutting, restaurants hotels,
fitness centers
e.g., freight, repair,
cleaning, landscaping,
retailing, recycling
e.g., broadcasting, consulting,
education, psychotherapye.g., accounting, banking,
insurance, legal, research
TANGIBLE
ACTS
INTANGIBLE
ACTS
DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS
What is theNature of theService Act?
Who or What is the Direct Recipient of the Service?
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Implications of Service Processes(1) Seeking Efficiency May Lower Satisfaction
Processes determine how services are created/deliveredprocess change may affect customer satisfaction
Imposing new processes on customers, especially replacingpeople by machines, may cause dissatisfaction
New processes that improve efficiency by cutting costs may hurt
service quality
Best new processes deliver benefits desired by customers
Faster
Simpler
More conveniently
Customers may need to be educated about new procedures andhow to use them
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Implications of Service Processes:(2) Designing the Service Factory
People-processing servicesrequire customers to visit theservice factory, so:
Think of facility as a stage forservice performance
Design process around customer
Choose convenient location
Create pleasing appearance, avoidunwanted noises, smells
Consider customer needs--info,parking, food, toilets, etc.
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Implications of Service Processes:(3) Evaluating Alternative Delivery
ChannelsFor possession-processing, mental-stimulus processing,
orinformation processing services, alternatives include:
1. Customers come to the service factory
2. Customers come to a retail office
3. Service employees visit customers home or workplace
4. Business is conducted at arms length through
- physical channels (e.g., mail, courier service)- electronic channels (e.g., phone, fax, email, Web site)
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Implications of Service Processes:(4) Balancing Demand and Capacity
When capacity to serve islimited and demand varieswidely, problems arise becauseservice output cant be stored:
1. If demand is high and exceeds
supply, business may be lost
2. If demand is low, productivecapacity is wasted
Potential solutions:
- Manage demand- Manage capacity
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Implications of Service Processes:(5) Applying Information Technology
All services can benefit from IT,but mental-stimulus processingand information-processingservices have the most to gain:
Remote delivery of information-based services anywhere,anytime
New service features throughwebsites, email, and internet
(e.g., information, reservations)More opportunities for self-
service
New types of services
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Implications of Service Processes:(6) Including People as Part of the
Product
Involvement in servicedelivery often entailscontact with other peopleManagers should be
concerned about employees
appearance, social skills,technical skills
Other customers mayenhance or detract fromservice experience--need tomanage customer behavior
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The ServicesMarketing Mix
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Overview of Marketing Strategy Planning Process
PlaceProduct
Price Promotion
C
External Market EnvironmentTechnologies Political and Legal Cultural and Social Economic
Narrowing down to focused strategy with quantitative and qualitative screening criteria
CustomersNeeds and other
Segmenting
Dimensions
CompanyObjectives
&
Resources
CompetitorsCurrent
&
Prospective
Segmentation &
Positioning
Segmentation &
TargetingS.
W.
O.
T.
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Elements of The Services Marketing Mix:7Ps vs.the Traditional 4Ps
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
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The 7Ps:(1) Product Elements
All Aspects of Service Performance that CreateValue
Core product featuresboth tangible andintangible elements
Bundle of supplementary service elementsPerformance levels relative to competition
Benefits delivered to customers (customersdont buy a hotel room, they buy a good
nights sleep)Guarantees
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The 7Ps:(2) Place and Time
Delivery Decisions: Where, When, and How
Geographic locations served
Service schedules
Physical channels
Electronic channels
Customer control and convenienceChannel partners/intermediaries
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The 7Ps:(3) Promotion and Education
Informing, Educating, Persuading, and RemindingCustomersMarketing 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
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The 7Ps:(4) Price and Other User Outlays
Marketers Must Recognize that Customer OutlaysInvolve
More than the Price Paid to SellerTraditional 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 toservice location, parking, phone, babysitting,etc.)
Time expenditures, especially waiting
Unwanted mental and physical effort
Negative sensory experiences
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The 7Ps:(5) Physical Environment
Designing the Servicescape and providingtangible
evidence of service performancesCreate and maintaining physical appearances
buildings/landscaping
interior design/furnishings
vehicles/equipment
staff grooming/clothing
sounds and smells other tangibles
Select tangible metaphors for use inmarketing communications
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7Ps:(6) Process
Method and Sequence in Service Creation andDelivery
Design of activity flows
Number and sequence of actions forcustomers
Providers of value chain components
Nature of customer involvement
Role of contact personnel
Role of technology, degree of automation
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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
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Managing the 7Ps Requires Collaborationbetween Marketing, Operations, and HR
Functions
Customers
OperationsManagement
MarketingManagement
Human ResourcesManagement
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CIA 1
GROUP FORMATION & TASKBEFORE THE NEXT SESSION
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Industries that I want the class tostudy
1. Tourism Industry in India2. Hotel industry in India
3. Airline Industry in India
4. Telecom Industry in India5. Courier industry in India
6. Education industry in India
7. Retail industry in India8. Hospital Industry in India
9. Banking Industry in India
10.Insurance Industry in India
I d i h I h l
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Industries that I want the class tostudy
As we go through the sessions, everysession there will be a few presentations/discussions
Next session please come with a 5slide ppt
This should cover Basic industry landscape- size, key players
etc Analysis of Services Marketing Triangle in
each industry
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