UNIT I

Services Marketing BA7013

II year III semester

UNIT I

The world economy is increasingly characterized as a services economy. This is because of the increased importance & the share of service sector in the economies of most developed & developing countries. There has been a rapid shift from agriculture to industry & then to the service sector. The shift has brought about a change in the definition of goods & services. Goods are no longer considered separate from services but represent an integral part of the product & this interconnectedness of goods & services is represented on a goods-services continuum.

Definition & characteristics of services:

According to the American Marketing Association a service is defined as activities, benefits & satisfactions which are offered for sale or provided in connection with the sale of goods.

Services are deeds, processes &performances provided or co produced by one entity or person for another entity or person. eg: IBM Global leader in IT, services & consulting ;Intangible deeds & performances are provided for its customers.

Services are all economic activities whose output is not a physical product or construction. It is generally consumed at the time it is produced & provides added value in forms such as convenience, amusement, timeliness, comfort or health that are essentially intangible concerns of its first purchaser.

Service industries: Services as products, customer service & derived service

Services- 4 categories

1. Service industry & company

2. Services as products

3. Customer service

4. Derived service

SERVICE INDUSTRIES & COMPANIES: Includes those industries & Companies are typically classified within service sector whose core product is a service.

PURE SERVICE COMPANIES: Taj palace hotels-lodging

Air India-transportation

Birla sunlife-Insurance & financial services

Fortis- healthcare

Columbia Asia health care

SERVICES AS PRODUCTS:

Services as products represent a wide range of intangible product offerings that customers pay for in the market place. Service products are sold by service companies & non-service companies such as manufacturing & technological companies .eg: IBM &HP offer IT consulting services to the marketplace competing with firms such as EDS, ACCENTURE, which are traditional pure service firms.

CUSTOMER SERVICE:

It is also a critical aspect of what we mean by service. It is the service provided in support of a companys core products. Cos typically do not charge for customer service provided. Many companies operate customer service call centers, often staffed around the clock. Quality customer service is essential to build customer relationships. It should not be confused with services provided for sale by the company.

DERIVED SERVICE: The value derived from physical goods is really the service provided by the good, not the good itself.eg: Computers provide information.

Historical evolution of service sectorService marketing is a relatively new phenomenon in the domain of marketing. It gained importance as a discipline towards the end of the 20th century. Services marketing first came into force in the 1980s when there was debate of whether the marketing of services was significantly different from that of products, and whether it should be classified as a separate discipline. Prior to this, services were considered as an aid to the production and marketing of goods, and were not deemed as having separate relevance on their own. The 1980s saw a shift in this thinking. As the service sector started to grow in importance in post-industrial societiesand emerged as a significant employer and contributor to those nations'GDPs, academia and marketing practitioners began to look at the marketing of services in a new light. Empirical research was conducted which brought to light the specific distinguishing characteristics of services. By the mid 1990s, services marketing were firmly entrenched as a significant sub-discipline of marketing with its own empirical research and data, growing significance in the increasingly service sector dominated economies of the new millennium. New areas of study in the field opened up and were the subject of extensive empirical research. This gave rise to concepts such as the product-service spectrum, relationship marketing, franchising of services, customer retention, and others.

Services in the modern economyAs consumers, we use services every day. Turning on a light, watching TV, talking on the telephone, catching a bus, visiting the dentist, posting a letter, getting a haircut, refuelling a car, writing a cheque or sending clothes to the cleaners are all examples of service consumption at the individual level. The institution at which you are studying is itself a complex service organisation. In addition to educational services, the facilities at todays colleges and universities usually comprise libraries and cafeterias, counselling services, a bookshop and careers offices, copy services, telephones and Internet connections, and maybe even a bank.

If you are registered at a residential university, additional services are likely to include halls of residence, health care, indoor and outdoor sports and athletic facilities, a theatre and, perhaps, a post office.

Unfortunately, customers are not always happy with the quality and value of the services they receive. People complain about late deliveries, rude or incompetent personnel, inconvenient service hours, poor performance, needlessly complicated procedures and a host of other problems. They grumble about the difficulty of finding sales assistants to help them in shops, express frustration about mistakes on their credit card bills or bank statements, shake their heads over the complexity of new self-service equipment, mutter about poor value and sigh as they are forced to wait for service or stand in queues almost everywhere they go.

Suppliers of services often seem to have a very different set of concerns. Many complain

about how difficult it is to make a profit, how hard it is to find skilled and motivated

employees, or how difficult to please customers have become. Some firms seem to believe that the surest route to financial success lies in cutting costs and eliminating unnecessary frills. A few even give the impression that they could run a much more efficient operation if it werent for all the stupid customers who keep making unreasonable demands and messing things up!

Forces for change in service management Changing patterns of government regulation.

Relaxation of professional association restrictions on marketing.

Privatisation of some public and nonprofit services.

Technological innovations.

Growth of service chain and franchise networks.

Internationalisation and globalisation.

Pressures to improve productivity.

The service quality movement.

Expansion of leasing and rental businesses.

Manufacturers as service providers.

Need for public and nonprofit organisations to find new income.

Hiring and promotion of innovative managers.Goods Versus Services

Goods

Services

1) They are tangible in nature

1)They are intangible in nature

2)They can be inventoried or

2)services cannot be stored hence

Stored

they are perishable

3)They can take different stages

3)most of the services cannot be

i.e. from production &

separated i.e. production &

consumption

consumption are done

simultaneously

4)They producer provides the

4)Service provider performs the

identical types of products same service differently &

to all the customers

provide varying levels of

service from one time to anotherBasic difference between goods and services

Customers do not obtain ownership of services.

Service products are intangible performances.

There is greater involvement of customers in the production process.

Other people may form part of the product.

There is greater variability in operational inputs and outputs.

Many services are difficult for customers to evaluate.

There is typically an absence of inventories.

The time factor is relatively more important.

Delivery systems may involve both electronic and physical channels.Factors contributing to the growth of services sector in IndiaReasonEffectService effected

AffluencePer capita income Pest control, personal security, Interior design. Beauty parlors, event management etc.

Leisure timeTravel & HolidayTravel agencies, Hotels, entertainment, career prospects

Health ConsciousnessAwarenessHealth clubs, Spas, Old age homes , gyms, yoga, meditation

Working CouplesWorking wivesDay care centers, home delivery, packed food

Product complexityVariety availableWater purifiers, Microwaves, PC, (= AMC)

Life complexityLack of timeTax consultants, legal service, property advisors, and Investment advisors

Resource scarcity & EcologyNeed of conservationCar pools, water management, high rise apartments

New ProductsITPCO, pager, e- commerce , Internet service provider, mobile service providers, cyber caf

Characteristics of services & their marketing implicationsI) IntangibilityIt refers to the lack of tangible assets which can be seen, touched, smelled, heard or tasted prior to purchase. Services vary in the degree to which they are intangible. Such as a college education, air travel, & sporting events are highly intangible, which cannot be smelled or tasted prior to the purchase.

Marketing implications of intangibility feature of services:

Services cannot be inventoried

Services cannot be patented

Services cannot be readily displayed or communicated

Pricing is difficult

II) Heterogeneity

A distinguishing characteristic of services that reflects the variation in consistency from one service transaction to the next is called as heterogeneity.

Marketing implications of heterogeneity feature of services:

Service delivery and customer satisfaction depend on employee actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered matches what was planned and promoted

III) Simultaneous production & consumption of services Performing a service involves assembling and delivering the output of a mix of physical facilities and mental or physical labour. Often customers are actively involved in helping to create the service product either by serving themselves (as in using a launderette or withdrawing money from an automated cash machine (ATM)) or by cooperating with service personnel in settings such as hairdressers, hotels, colleges or hospitals. Under such circumstances, service firms have much to gain from trying to educate their customers so as to make them more competent.

Marketing implications of simultaneous production & consumption of services:

Customers participate in and affect the transaction

Customers affect each other

Employees affect the service outcome

Decentralization may be essential

Mass production is difficult

IV) Perishability

A distinguished characteristic of services in that they cannot be saved, their unused capacity, cannot be reserved & they cannot be inventoried.

Marketing implications of perishability feature of services:

It is difficult to synchronize supply and demand with services

Services cannot be returned or resold

Need for the study of services marketing

Size of Service Sector

The Services Sector contributes the most to the Indian GDP. The Sector of Services in India has the biggest share in the country's GDP, it accounts for more than 50% contribution

The various sectors under the Services Sector in India are construction, trade, hotels, transport, restaurant, communication and storage, social and personal services, community, insurance, financing, business services, and real estate.

Services marketing concepts and strategies have developed in response to the tremendous growth of service industries

Most new employment is provided by services

Strongest growth area for marketing

Deregulation and Services Marketing

Specific demand for services marketing concepts has come from deregulated

industries and professional services

Deregulatory moves by governments have affected service industries such as airlines,

banking, and telecommunications

As a result, marketing decisions that used to be tightly controlled by government are now partially, and sometimes totally, within the control of individual firms

List of economic servicesThe following is an incomplete list of service industries, grouped into rough sectors. Parenthetical notations indicate how specificoccupationsandorganizationscan be regarded as service industries to the extent they provide an intangible service, as opposed to a tangible good.

business functions (that apply to all organizations in general)

consulting customer service human resourcesadministrators (providing services like ensuring that employees are paid accurately)

childcare cleaning,repair and maintenanceservices

janitors(who provide cleaning services)

gardeners mechanics construction carpentry electricians(offering the service of making wiring work properly)

plumbing death care

coroners(who provide the service of identifyingcadaversand determining time and cause of death)

funeral homes(who prepare corpses for public display, cremation or burial)

dispute resolutionand prevention services

arbitration courtsoflaw(who perform the service of dispute resolution backed by the power of thestate) diplomacy incarceration(provides the service of keeping criminals out of society)

law enforcement (provides the service of identifying and apprehending criminals)

lawyers(who perform the services ofadvocacyand decision making in many dispute resolution and prevention processes)

mediation military(performs the service of protecting states in disputes with other states)

negotiation(not really a service unless someone is negotiating on behalf of another)

education(institutions offering the services of teaching and access to information)

library museum school entertainment(when provided live or within a highly specialized facility)

gambling movie theatres(providing the service of showing amovieon a big screen)

performing arts productions sport television fabric care

dry cleaning Self-service laundry(offering the service of automated fabric cleaning)

financial services accountancy banksandbuilding societies(offering lending services and safekeeping of money and valuables)

real estate stock brokerages taxpreparation

foodserviceindustry

personal grooming hairdressing manicurist/pedicurist body hair removal dental hygienist health care(all health care professions provide services)

hospitality industry information services

data processing databaseservices

Interpreting Translation risk management insurance security social services

social work transport Public utility electric power natural gas telecommunications waste management water industryRelationship between characteristics and quality of services deliveredServices are intangible, so customers cannot touch and feel a service before it is actually delivered. Hence, customers have to be provided with a sample of the service, so that they are able to understand the quality of the service. In case of restaurant or repair service, a customer cannot understand the quality of the service unless he/she experiences the service at least once. In order to give cues about the quality of the service, service providers communicate tangible cues like clean, shinning, well decorated and painted facilities and equipment to the customers. They might also give a free sample service, to communicate the quality of the service they provide.Services are delivered and consumed simultaneously during interactions between the customer and service personnel. In order to ensure that the interactions deliver value and are of a high quality, service personnel have to rehearse and practice the service script several times before delivering the actual service. They have to focus not only on what they deliver to customers, but also how they do so. For instance, restaurant and repair personnel have to learn and perform the service courteously with the customers; otherwise customers would be offended and dissatisfied with the service. Service personnel must learn to deliver the service with empathy and care to the customers.Services are perishable in nature. So services have to be tangiblised in the form of video demonstrations, tape records, testimonials, etc. so that customers can feel the quality of the service even when the actual service is not being delivered. As services perish once it is delivered, any mistake in the service provision would call for redoing that part of the service, which is called service recovery. Service recovery can lead to unnecessary expenditure for the service provider. So service providers have to learn and practice delivering the service right first time and each time. In short, they have to ensure that the services they provide are reliable in nature.Services are variable in nature as these are intangible and simultaneous in nature. Hence, the same service delivered by different people varies and the service provided by the same person at different times varies from time to time. Hence, service personnel have to learn the service script well and deliver the service strictly as per the service script in order to minimise the variability of the service and increase its reliability, dependability, credibility, consistency and accuracy. Customers perceive the restaurant service as reliablewhen they provide the same quality and level of service each and every time the customer purchases the service from the restaurant.

Tangibility spectrum

Services tend to be more intangible than manufactured products, and manufactured products tend to be more tangible than services. For example, the fast-food industry, while classified as a service, also has many tangible components such as the food, the packaging, and so on. A useful way to distinguish a service from a product is to place them on a scale from tangible-dominant to intangible-dominant when more than half the value comes from service element.

SHAPE \* MERGEFORMAT

Impact of technology on Banking industry.Automated Teller Machines (ATM) It has been estimated that there are around 400,000 ATMs worldwide out of which 1,00,000 are located in Japan alone. ATMs allow the user to perform upto 150 kinds of transactions ranging from simple cash withdrawals and deposits, to fund transfer to trading in stocks to buying mutual funds to something mundane like payment of electricity bills, booking air-tickets and making hotel reservations.(Technology in Banking

Image Processing As financial services including capital markets and banking are highly document intensive, image processing technology can have a far reaching impact for such applications for its less paper handling characteristics.( Virtual Bank The customer activated terminal (CAT) or Kiosk is an interactive multimedia display unit, housed in a small enclosure, typically consisting of a computer workstation, monitor, video disk player and a card reader. It allows the customers to browse through information and use the available banking services at their own speed.

Electronic Funds Transfer at Point of Sale (EFTPOS) While travelers cheques meant pay-now- buy-later and credit cards had buy-now-pay- later advantages, EFTPOS or debit cards signify buy- now-pay-now but without cash transaction. The user presents his ATM card when he buys goods and the EFTPOS system immediately debits his bank account.( Home Banking Smart phones with screen built-in modems and programmable microprocessors let the customer access a variety of financial services from home.

Electronic Data Interchange (EDI) EDI typically denotes paperless financial transactions across the locations. The companies can now operate their bank accounts through corporate banking terminals in their own offices which are linked to the bank computers. Companies can thus carry out transactions like transferring funds, managing its cash flow, opening letters of credit, etc. without any paper work.( Smart Cards The Processor type smart cards with in-built integrated circuits (ICs) or micro-chips offer a wide range of transactional opportunities even from remote areas. The smart cards are extensively being used for employee clocking in, withdrawing cash from ATM, using pay-phones, payment of various bills, etc.

Impact of technology on Insurance industryE-Insurance Today various insurance companies are providing facilities to their clients. They can check the balance premium, maturity date, dues and outstanding of their policy. They are provided various new information regarding new policy. The customer can pay the premium amount of their policy from the e- insurance option. E-CRM Insurance industry is a data-rich industry, and thus, there is a need to use the data for trend analysis and personalization. It is very difficult to interact with each and every person to whom the insurer wants, and in the insurance sector the customer relationship management is base. Thus with the help of e-crm insurer are taking knowledge about their customer and providing information directly to them. It also reduces the cost of marketing which increases the profit of business.Role of information technology in Services MarketingInformation Technology (IT) revolution takes places everywhere. Organizations implementing IT are able to provide better services and thereby able to improve their businesses manifold. In earlier days IT has enormously been used in manufacturing sector regarding product designing and development, product modification etc. Now-a-days the importance of IT has been strongly felt and applied in the services sector.Application of IT in HospitalsThe hospital management is taking place with the application of IT. Starting from the reception by recording a patient's name, the IT has been used everywhere in an hospital. A patient's record comprising his name, age, sex, disease found, blood group, height, weight, blood pressure level, etc. has been maintained as database in a computer in the hospital. So whenever the patient arrives his previous record can be verified. Similarly when the surgeries take place, the hospitals use computers and specialized software for judgement of diseases/problems and for curing the diseases. For billing purposes also the computers have been used widely in hospitals.Application of IT in Pharmaceutical ShopsBecause of the increase in competition, IT has also been applied in pharmaceutical shops. Whenever any medicine enters the shop, all the information related to the medicine its name, quantity, manufacturing date, expiry date, its content, price and other information can be entered into a computer system. Whenever the sales take place, computerized billing would be provided to the customers. The bill would carry plenty of information for the benefit of customers indicating the name of the medicine, quantities purchased by them, its price, manufacturing and expiry date. Whenever any medicine has been sold the software created would also give indications to the manager/supervisor of a pharmaceutical shop related to the number of quantities sold, number of quantities available in the shop and the computer also warn them regarding the date of expiry.Application of IT in Educational InstitutionsThe Government of India has come out with a statement stating that Information Technology (IT) is India's tomorrow. Hence the educational institutions have to use IT for teaching the children. Latest hardware and software can be used and the latest computer languages and packages have to be taught to the students. It is not enough if student of computer science alone has been taught about IT, but also the students of other disciplines have to be taught about IT. Because, the application of IT takes place everywhere.Application of IT in Share TradingGone are the days when stock brokers use to shout at the trading hall of a stock exchange quoting their price? Now-a-days with the help of computer terminal and internet connection, purchasing and selling of share takes place everywhere. A client can look at the transactions taking place through the computers. The volume of the shares traded and the turnover has got consistently improved because of the online share trading.Application of IT in BankingTremendous improvement has taken place in the Indian banking sector because of the IT revolution. All the private and foreign banks have gone for 100 percent computerization. At a rapid fast, the government owned nationalized banks are also improving their number of computerized branches. With the help of computerization, the transaction takes place at a faster rate and the waiting time of a customer in a queue is getting minimized. E Banking is emerging in the Indian banking sector. The banks provide the facility of internet banking, phone and mobile banking with the help of IT. All the branches of a bank are networked. The networking also takes place between two or more branches in order to provide easy accessibility for a customer. The cost incurred on infrastructure, furniture and employees has got decreased because of the application of IT.

Application of IT in Advertising Agencies'Creativity' is the slogan chanted in Ad Agencies. Creativity involves doing things differently. Things can be done differently with the help of IT. The Ad Agencies use lot of software for creating advertisements. Lot of animations and graphics can be done using IT tools.Application of IT in Marketing Research AgenciesMarketing Research (MR) agencies involve in lot of research activities starting from research survey on product development till distribution and measurement of customer response. Gone are the days of manual analysis of data. The MR agencies use sophisticated statistical software packages for data analysis and interpretation. Some of the statistical software packages are created by their own for customized problems. Hence, application of IT tools take place in full swing at MR agencies.Application of IT in Indian RailwaysThe Indian Railways has the proud of being the 'largest employer'. The application of IT has provided various benefits for the Indian Railways and its passengers. With the issue of computerized railway tickets, the errors have been minimized. A passenger can book the train ticket from any part of the country. A passenger can also book the train ticket at his convenient place, as the online reservation system has been introduced.Application of IT in other services sectorNow-a-days the reservation for film shows take place through online ticket booking. The cinema theatres in order to avoid queues and unnecessary rush follow the system of online ticket booking so that through internet anyone can book tickets at their convenient places. In order to reduce the queue, computerization takes place in petrol bunks also. Computerization ensures speedier billing and reduces the queue in petrol bunks. In Regional Transport Offices, computerization ensures prompt and quick delivery of service to the peoples. The leading libraries are also computerized these days. Application of IT tools provides various benefits for the libraries and readers. The books available in the libraries and those on circulation can easily be found. The issue and return date can easily be identified and other information related to the library can also easily be sought. IT also paves way for online shopping. Websites likeAmazon.com: Online Shopping for Electronics, Apparel, Computers, Books, DVDs & more,fabmart.cometc. provide online shopping facilities. Online hundi system has been introduced by some of the leading temples in India. With the help of online hundi system, those interested in donating amount to these temples can remit their amount with the help of credit card numbers through internet.Challenges and issues in services marketingChallenges are integral part of any business environment. It gets more complex with services because of its nature and the participants in it. Therefore, the features of services are its challenges itself. To begin with, let us look at the traditional challenges or the challenges that are imbibed in the nature of services itself. 1. Intangibility: The service is not physical in nature, thus service marketers have no physical evidence to support their claim of the services. Example: A Portfolio manager has only empirical data to prove his words of service levels and not anything in substance. 2. Inconsistency: Services delivered generally vary in quality based on different situations so they are not always consistent. Example, A pizza delivery boy may deliver pizza at your home in 20 minutes and also sometimes on 30th minute. 3. Inseparability: Services and customers cannot be separated. Thus service marketer has to transact or be present at the time of service delivery because it is produced and consumed at the same time. Thus service marketers face a big challenge to deliver on time due to this feature. 4. Perishibility: Services perish with the delivery. Thus service marketers do not have evidence of the service provided. They rely on feedback from customer which may vary due to customers mood. Further there are various other traditional challenges of service marketing such as ownership issue, as there is no ownership transfer in ownership.

Modern challenges for service marketers are the concepts that play an important role in service delivery by a service marketer. 1. Gaps Model: Gaps model discusses the gap between customers expectation of services and service marketers perception of the customer. This results in incorrect designing and standards of service product. Further, this results in inappropriate service delivery and finally communication gap due to incorrect service product design and delivery. This makes service marketer overvalue or undervalue customer expectations. 2. Setting standards due to customization: It is very difficult for a service marketer to define standards due to customization of the service product. For example, we have ISO standards in products and Egmark for products that define standardization. However, for services, the service delivery varies from place to place, from person to person. The topic focuses on challenges due to changing business environment. Thus let us now look at the emerging challenges of the service marketing and how the modern service marketer handles these challenges. 1. 4th Dimensional approach to management: Service marketers need to be proactive and focused on all aspects of customer perception, whether internal or external. Fourth dimensional approach is the suppliers, distributors, customers, employees all are to be cared and focused with responsiveness. 2. Managing Social media: Social media influence is very contagious. For the matter of fact: 78% of people trust recommendations of other consumers- AC Nielson; Trust in advertisement report, 2009. Thus making it challenging for service marketers to influence customer behaviour by facts and advertisement as people have a platform now to communicate and discuss brands and products. 3. Prosumer Concept: Consumer is not just consumer now, with social media and mass media development, service marketer cannot ignore the customer. Customer now participates in production of goods. Example; customer feedback forums over social media, complaints all are tracked and focused by service marketers to understand customers and their requirements. 4. Mass marketing becomes Niche marketing: As markets are getting saturated, selection of right mode of marketing is extremely important due to focus on R.O.I in advertisements. Example: Dell Generated $6.5 million sales from twitters in 2010.

5. Managing interactive markets: Markets are interactions now, not merely transactions. Thus service marketer has to focus on reputation management, complaint resolutions etc to make sure service disruptions are not exaggerated in media and to other consumers. This service marketer needs to be proactive in handling reputation and complaints. We can see development of programmes related to reputation management. Example: Om Logix, a marketing consultancy company has programmes such as Online Reputation Management to meet these challenges of organisations. Thus we discussed about few of the emerging issues that service marketer face in the challenging business environment. Service marketer should keep few aspects in mind in this challenging business environment to be successful. A few of them are briefly discussed here. 1. Learn more about consumers: Its time that service marketer knows their customer even better. Run Customer relationship programmes (CRM), gather customer feedback, knowledge, tastes, after sales service etc. 2. Be clear and authentic: False claims and big brand ambassador do not earn huge bucks anymore. Its interactive market due to development in communication networks. Example: Airtel rebranding failed even after 200 cr. of advertisement budget, where as their HFZ (Har Ek Friend Zaruri) campaign of Airtel at a cost of 35 cr. made gave higher viewer penetration and R.O.I as compared. 3. Create audience driven engagement programmes: This will promote healthy interactions among customers and also customers feel engaged with the brands. This creates loyalty. Example: In March 2010, when HBO planned Bond month focusing on Bond movies for the month of march, It attracted popularity by having Dress the Bond girl concept online, which engaged people visiting HBO website with average user engagement of 15 minutes.4. Make social media work for organization: Understand the potential of social media and leverage it sophistically to make it work positively for the business.

1