introduction to services management ms. kiran sharma
TRANSCRIPT
Introduction to Services Management
Ms. Kiran Sharma
How Important is the Service How Important is the Service Sector in Our Economy?Sector in Our Economy?
In most countries, services add more economic value than agriculture, raw materials and manufacturing combined
In developed economies, employment is dominated by service jobs and most new job growth comes from services
Jobs range from high-paid professionals and technicians to minimum-wage positions
Service organizations can be any size—from huge global corporations to local small businesses
Most activities by government agencies and nonprofit organizations involve services
Examples of Service IndustriesExamples 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◦ airline, travel agency, theme park
Others◦ hair styling, pest control, plumbing, lawn maintenance,
counseling services, health club, interior design
Services dominate the Services dominate the Economy in most nations – Economy in most nations – USA USA
Source: Bureau of Economic Analysis, May 2005
Finance, Insurance, Real Estate 20%
Wholesale and Retail Trade 16%
Transport, Utilities, Communications 8% Health
6%Business Services 6%
Other Services 11%
Government(mostly services) 13%
Manufacturing 17%
Agriculture, Forestry,Mining, Construction 2.3%
SERVICES
Service Sector – Indian Service Sector – Indian EconomyEconomyRanks 15th in servicesProvides employment to 23% of
total workforce in the country.Contributes most to Indian GDP
54%Construction, hospitality,
transport, food and beverages services, communication, insurance, financing …….
ServicesServicesServices – “acts, deeds,
performances, or efforts”Goods – “articles, devices,
materials, objects, or things”
Defining ServicesAre economic activities offered by
one party to another, employing time based performances to bring about desired results.
Services customers expect to obtain value from access to goods, professional skills but they do not normally take ownership of any physical elements.
Why study Services?Why study Services?Service-based economies
Service as a business imperative in manufacturing and IT
Deregulated industries by the government and professional service needs
Services marketing is differentService equals profitsBut “Service stinks”
Major Trends in Service SectorMajor Trends in Service Sector Government Policies (e.g., regulations,
trade agreements) Social Changes (e.g., affluence, lack of
time, desire for experiences) 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)
Some Impacts of Technological Some Impacts of Technological ChangeChange
Create relational databases about customer needs and behavior, mine databanks for better insights
Enabling both customers and employees
Centralize customer service—faster and more responsive
Extending the global reach of services The Internet is a servicesThe dark side of technology and service
Marketing Relevant Differences Between Goods and Services
Characteristics of ServicesCharacteristics of ServicesCompared to GoodsCompared to Goods
Intangibility
Perishability
Simultaneous
Productionand
Consumption
Heterogeneity
Implications of Implications of IntangibilityIntangibilityServices cannot be inventoried
Services cannot be easily patented
Services cannot be readily displayed or communicated
Pricing is difficult
Implications of Implications of HeterogeneityHeterogeneityService delivery and customer
satisfaction depend on employee and customer actions
Service quality depends on many uncontrollable factors
There is no sure knowledge that the service delivered matches what was planned and promoted
Implications of Simultaneous Implications of Simultaneous Production and ConsumptionProduction and ConsumptionCustomers participate in and affect
the transaction
Customers affect each other
Employees affect the service outcome
Decentralization may be essential
Mass production is difficult
Implications of Implications of PerishabilityPerishabilityIt is difficult to synchronize
supply and demand with services
Services cannot be returned or resold
Distinguishing Characteristics of Distinguishing Characteristics of Services Services
Customers do not obtain ownership of servicesService products cannot be inventoried Intangible elements dominate value creationGreater involvement of customers in production
processOther people may form part of product
experienceGreater variability in operational inputs and
outputsMany services are difficult for customers to
evaluateTime factor is more important--speed may be keyDelivery systems include electronic and physical
channels
Marketing Implications - 1Marketing Implications - 1No ownership
◦ Customers obtain temporary rentals, hiring of personnel, or access to facilities and systems
◦ Pricing often based on time ◦ Customer choice criteria may differ for renting
vs. purchase--may include convenience, quality of personnel
◦ Can’t own people (no slavery!) but can hire expertise and labor
Services cannot be inventoried after production◦ Service performances are ephemeral -
perishable◦ Balancing demand and supply may be vital
marketing strategy
Marketing Implications - 2Marketing Implications - 2Customers 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◦ 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
Value Added by Tangible Value Added by Tangible vs.vs. Intangible Elements in Goods Intangible Elements in Goods and Servicesand Services
Fast food restaurantPlumbing repair
Office cleaningHealth club
Airline flightLife Insurance
Internet banking
Salt
Soft drinksCD Player
Golf clubs
New car
Tailored clothing
Lo Hi
Hi
Ta n
gibl
e E
lem
ents
Intangible Elements
Marketing Implications - 3Marketing Implications - 3Other people are often part of the service product
◦ Achieve competitive edge through perceived quality of employees
◦ Recognize that appearance and behavior of other customers can influence service experience positively or negatively
◦ Avoid inappropriate mix of customer segments at same time
◦ Manage customer behavior (the customer is not always right!)
Greater variability in operational inputs and outputs◦ Service execution differs among employees◦ Between same employees and different customers◦ Between one time of the day to another◦ The attitude, transaction speed, and quality of
performance vary greatly.
Marketing Implications - 4Marketing Implications - 4Often 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,
ethical behavior◦ Encourage positive word-of-mouth from satisfied
customersTime 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 physical
channels◦ Use electronic channels to deliver intangible,
information-based elements instantly and expand geographic reach
Four Categories of Services Four Categories of Services Employing Different Underlying Employing Different Underlying ProcessesProcesses
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, retailing, recycling
e.g., broadcasting, consulting,education, psychotherapy
e.g., accounting, banking, insurance, legal, research
TANGIBLE ACTS
INTANGIBLEACTS
DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS
What is the Nature of the Service Act?
Who or What is the Direct Recipient of the Service?
The Services
Marketing Mix
Elements of The Services Elements of The Services Marketing Mix:Marketing Mix: “7Ps” “7Ps” vs.vs. the Traditional “4Ps” the Traditional “4Ps”
Rethinking the original 4PsProduct elementsPlace and timePromotion and educationPrice and other user outlays
Adding Three New Elements
Physical environmentProcessPeople
Expanded Mix for Services --Expanded Mix for Services --The 7 PsThe 7 Ps Product Price Place Promotion People
◦ All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment.
Physical Evidence◦ The environment in which the service is delivered and where
the firm and customer interact, and any tangible components that facilitate performance or communication of the service.
Process◦ The actual procedures, mechanisms, and flow of activities by
which the service is delivered—the service delivery and operating systems.
Expanded Marketing Mix for Expanded Marketing Mix for ServicesServices
The 7Ps: (1)Product The 7Ps: (1)Product ElementsElements
All Aspects of Service Performance that Create Value
Core product features—both tangible and intangible elements
Bundle of supplementary service elements
Performance levels relative to competitionBenefits delivered to customers
(customers don’t buy a hotel room, they buy a good night’s sleep)
Guarantees
The 7Ps:(2) Place and The 7Ps:(2) Place and TimeTime
Delivery Decisions: Where, When, and How
Geographic locations served
Service schedules
Physical channels
Electronic channels
Customer convenience
Channel partners/intermediaries
The 7Ps:(3) PromotionThe 7Ps:(3) PromotionInforming, Educating, Persuading, and Reminding
CustomersMarketing 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
The 7Ps: (4) PriceThe 7Ps: (4) Price
Marketers Must Recognize that Customer Outlays Involve More than the Price Paid to Seller
Traditional 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 to service location, parking, phone, baby sitting,etc.)
Time expenditures, especially waiting Unwanted mental and physical effort
The 7Ps:(5) Physical The 7Ps:(5) Physical EnvironmentEnvironment
Create and maintaining physical appearances◦buildings/landscaping
◦interior design/furnishings
◦vehicles/equipment
◦staff grooming/clothing
◦sounds and smells
◦other tangibles
7Ps:(6) Process7Ps:(6) Process
Method and Sequence in Service Creation and Delivery
Design of activity flows
Number and sequence of actions for customers
Nature of customer involvement
Role of contact personnel
Role of technology, degree of automation
The 7Ps: (7) PeopleThe 7Ps: (7) PeopleManaging 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 firm’s mission◦ fit well with product/processes/corporate goals◦ appreciate benefits and value offered◦ possess (or can be educated to have) needed skills (co-
production)
Managing the 7Ps Requires Collaboration Managing the 7Ps Requires Collaboration between Marketing, Operations, and HR between Marketing, Operations, and HR FunctionsFunctions
Customers
Operations Management
Marketing Management
Human Resources Management
Challenges for ServicesChallenges for ServicesDefining and improving qualityDesigning and testing new servicesCommunicating and maintaining a
consistent imageAccommodating fluctuating demandMotivating and sustaining employee
commitmentCoordinating marketing, operations,
and human resource effortsSetting pricesEnsuring the delivery of consistent
quality
Traditional Marketing MixTraditional Marketing MixAll elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services:◦ Product◦ Price◦ Place◦ Promotion
Ways to Use the 7 PsWays to Use the 7 Ps
Overall Strategic Assessment◦ How effective is a firm’s
services marketing mix?◦ Is the mix well-aligned
with overall vision and strategy?
◦ What are the strengths and weaknesses in terms of the 7 Ps?
Specific Service Implementation◦ Who is the customer?◦ What is the service?◦ How effectively does the
services marketing mix for a service communicate its benefits and quality?
◦ What changes/ improvements are needed?