Services MarketingServices Marketing

MBA-SEM-IIIMBA-SEM-III

TERM-01-2012TERM-01-2012

MODULE-02MODULE-02

MODULE-02AMODULE-02ADuration-4 Lectures.Duration-4 Lectures.

► FUNDAMENTALS OF SERVICE FUNDAMENTALS OF SERVICE MARKETINGMARKETING

► Assessing service marketing Assessing service marketing opportunities.opportunities.

► Expanded marketing mix for services .Expanded marketing mix for services .► Perceptions of services Perceptions of services ► Customer behavior specific to usage of Customer behavior specific to usage of

services services ► Service quality Determinants.Service quality Determinants.

The service sectorThe service sector

►The services sector has been growing The services sector has been growing at a rate of 8% per annum in recent at a rate of 8% per annum in recent yearsyears

►More than half of our GDP is accounted More than half of our GDP is accounted for from the services sectorfor from the services sector

►This sector dominates with the best This sector dominates with the best jobs, best talent and best incomesjobs, best talent and best incomes

““There are no such thing as There are no such thing as service industries.There are only service industries.There are only

industries whose service industries whose service components are greater or less components are greater or less than those of other industries. than those of other industries.

Everybody is in service.” Everybody is in service.”

-Theodore Levitt--Theodore Levitt-

What is services?What is services?

It is the part of the product or It is the part of the product or the full product for which the the full product for which the

customer is willing to see customer is willing to see value and pay for it.value and pay for it.

Difference between Difference between physical goods and physical goods and

servicesservicesPhysical goodsPhysical goods ServicesServices

tangibletangible intangibleintangible

homogeneoushomogeneous heterogeneousheterogeneous

Production and distribution are Production and distribution are separated from consumptionseparated from consumption

Production, distribution and Production, distribution and consumption are simultaneous consumption are simultaneous processesprocesses

A thingA thing An activity or processAn activity or process

Core value processed in factoryCore value processed in factory Core value produced in the Core value produced in the buyer-seller interactionbuyer-seller interaction

Customers do not participate in Customers do not participate in the production processthe production process

Customers participate in Customers participate in productionproduction

Can be kept in stockCan be kept in stock Cannot be kept in stockCannot be kept in stock

Transfer of ownershipTransfer of ownership No transfer of ownership/limited transfer No transfer of ownership/limited transfer of ownership/ of ownership/ conditional transfer of conditional transfer of ownershipownership. .

Services could meet Services could meet

►Personal needs – haircuts, tuition, Personal needs – haircuts, tuition, restaurants. restaurants.

►Business needs – courier services, Business needs – courier services, office cleaning services, delivering office cleaning services, delivering fresh flowersfresh flowers

Marketing Of Services-Marketing Of Services-

MARKETER IS VIEWED MARKETER IS VIEWED AS A AS A DECIDERDECIDER AN AN ARTIST ARTIST OR/& A OR/& A MIXER MIXER OF INGREDIENTS”OF INGREDIENTS”

Service MarketingService Marketing

►Creating a market for services offered Creating a market for services offered by market communication .by market communication .

Marketing MixesMarketing Mixes

►Traditional Mixes 4PsTraditional Mixes 4Ps

Product-Product-

PricePrice

PlacePlace

PromotionPromotion

The Four additional ‘P’s of The Four additional ‘P’s of Service MarketingService Marketing

►PeoplePeople►Physical evidencePhysical evidence►ProcessProcess►Productivity and quality managementProductivity and quality management

Integrated Services Marketing Integrated Services Marketing MixMix

- the 8Ps- the 8Ps

Customerservice/

ExperiencePlace

Promotion

People

PriceProduct

Physicalevidence

Processes

Productivity& Quality

Applying the Services Applying the Services Marketing MixMarketing Mix

• ProductProduct• PricePrice• PromotionPromotion• PlacePlace• Physical evidencePhysical evidence• PeoplePeople• ProcessProcess• Productivity & Productivity &

QualityQuality

• Customer valueCustomer value• CostCost• Explanation/Explanation/

CommunicationCommunication• ConvenienceConvenience• ConfirmationConfirmation• ConsiderationConsideration• Co-ordination/concernCo-ordination/concern• ExperienceExperience

Organisational perspective Customer perspective

Why Classify Services?Why Classify Services?

► Differences among services affect customer Differences among services affect customer behaviourbehaviour

► Help to understand what the service Help to understand what the service organisation actually does organisation actually does

► What sorts of processes are involvedWhat sorts of processes are involved► Where do customers fit into the operationWhere do customers fit into the operation► Useful in benchmarkingUseful in benchmarking► Classification helps marketers develop Classification helps marketers develop

different strategies for different types of different strategies for different types of servicesservices

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,

landscaping, 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?

Purchase process for services

Awareness of need

Information search

Evaluation of alternative

service suppliers

Request service from chosen supplier

Service delivery

Evaluation of service performance

Future intentions

prepurchasestage

Service encounterstage

Post purchasestage

Needs &expectations

Clues to service quality

Expectation vs.Perception

Factors that Influence Factors that Influence Customer Expectations of Services Customer Expectations of Services

Predicted Service

Explicit & Implicit Service Promises Word-of-Mouth Past ExperienceDesired Service

ZONE OF

TOLERANCE

Adequate Service

Personal Needs

Beliefs about What Is Possible

Perceived Service Alterations

Situational Factors

Source: Adapted from Zeithaml, Parasuraman & Berry

Components of Customer Components of Customer ExpectationsExpectations

►Desired Service Level:Desired Service Level: wished-for level of wished-for level of service quality that customer believes can and service quality that customer believes can and should be deliveredshould be delivered

►Adequate Service Level:Adequate Service Level: minimum minimum acceptable level of service acceptable level of service

►Predicted Service Level:Predicted Service Level: service level that service level that customer believes firm will actually delivercustomer believes firm will actually deliver

►Zone of Tolerance:Zone of Tolerance: range within which range within which customers are willing to accept variations in service customers are willing to accept variations in service deliverydelivery

Qualities of servicesQualities of services

►Search qualitiesSearch qualities►Experience qualitiesExperience qualities►Credence qualitiesCredence qualities

Intangible Attributes, Variability, and Intangible Attributes, Variability, and Quality Control Problems Make Quality Control Problems Make

Services Hard to EvaluateServices Hard to Evaluate

► Search attributes – Search attributes – Tangible characteristics Tangible characteristics that allow customers to evaluate a product before that allow customers to evaluate a product before purchasepurchase

► Experience attributes – Experience attributes – Characteristics that Characteristics that can be experienced when actually using the servicecan be experienced when actually using the service

► Credence attributes – Credence attributes – Characteristics that are Characteristics that are difficult to evaluate confidently even after difficult to evaluate confidently even after consumptionconsumption

► Goods tend to be higher in search attributes, Goods tend to be higher in search attributes, services tend to be higher in experience and services tend to be higher in experience and credence attributescredence attributes

► Credence attributes force customers to trust Credence attributes force customers to trust that desired benefits have been deliveredthat desired benefits have been delivered

How Product Attributes Affect How Product Attributes Affect Ease of Evaluation) Ease of Evaluation)

Source: Adapted from Zeithaml

Most Goods

High in search attributes

High in experience attributes

High in credence attributes

Difficult to evaluate

Easy to evaluate

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Determinants of service Determinants of service qualityquality

►Reliability – delivering on promisesReliability – delivering on promises►Responsiveness – willing to helpResponsiveness – willing to help►Assurance – inspiring trust and Assurance – inspiring trust and

confidenceconfidence►Empathy – individualising customersEmpathy – individualising customers►Tangibles- physical representationTangibles- physical representation

Managing Service qualityManaging Service quality

BY REDUCING THE GAPS-BY REDUCING THE GAPS-► GapGap between management perceptions and between management perceptions and

consumer expectationsconsumer expectations► GapGap between management perceptions and between management perceptions and

service quality specificationsservice quality specifications► GapGap between service quality specifications between service quality specifications

and service deliveryand service delivery► GapGap between service delivery and external between service delivery and external

communicationcommunication► GapGap between expected service and between expected service and

perceived serviceperceived service

Service quality is Service quality is directly proportional directly proportional

to employee to employee satisfactionsatisfaction

Satisfied employees will Satisfied employees will produce satisfied customersproduce satisfied customers

►MoraleMorale►MotivationMotivation►MoodMood

When customers visit a When customers visit a service establishmentservice establishment

Their satisfaction will be influenced byTheir satisfaction will be influenced by►Encounters with service personnelEncounters with service personnel►Appearance and features of service Appearance and features of service

facilities – exterior and interiorfacilities – exterior and interior► Interactions with self service Interactions with self service

equipmentequipment►Characteristics and behavior of other Characteristics and behavior of other

customerscustomers

Managing Service EncountersManaging Service Encounters

► Service encounter:Service encounter: A period of time during A period of time during which customers interact directly with a servicewhich customers interact directly with a service

► Moments of truth:Moments of truth: DefiningDefining points in service points in service delivery where customers interact with delivery where customers interact with employees or equipment employees or equipment

► Critical incidents: Critical incidents: specific encounters that result specific encounters that result in especially satisfying/dissatisfying outcomes in especially satisfying/dissatisfying outcomes for either customers or service employeesfor either customers or service employees

Types of complainersTypes of complainers

►PassivesPassives►VoicersVoicers► IratesIrates►ActivistsActivists

Customer complaintsCustomer complaints

► It pays to resolve customer complaintsIt pays to resolve customer complaints► On an average only 5 % dissatisfied On an average only 5 % dissatisfied

customers complain. Others simply go over customers complain. Others simply go over to the competitorto the competitor

► A satisfied consumer speaks to an average A satisfied consumer speaks to an average of 3 people on his her experienceof 3 people on his her experience

► A dissatisfied consumer gripes to on an A dissatisfied consumer gripes to on an average 11 persons about his/her average 11 persons about his/her unpleasant experienceunpleasant experience

Companies that pay Companies that pay importance to resolving importance to resolving

customer complaintscustomer complaints► Pay attention to quality and training of Pay attention to quality and training of

manpower recruitedmanpower recruited► Have clear benchmarks on service quality Have clear benchmarks on service quality

and communicate to employeesand communicate to employees► Take remedial steps to improve customer Take remedial steps to improve customer

satisfaction and prevent repeats of satisfaction and prevent repeats of customer dissatisfactioncustomer dissatisfaction

► Have a data base on customer complaints Have a data base on customer complaints that is periodically analysed and policies that is periodically analysed and policies adjustedadjusted

Managing Service Managing Service ProductivityProductivity

► Giving quality service is an expensive businessGiving quality service is an expensive business► Not every consumer is willing to pay extra for Not every consumer is willing to pay extra for

service qualityservice quality► Service providers would have to find their Service providers would have to find their

optimum service quality/cost ratiosoptimum service quality/cost ratios► Can technology substitute part of the labour Can technology substitute part of the labour

content?content?► Can customers substitute part of the labour Can customers substitute part of the labour

content?content?► Making services obsolete by product Making services obsolete by product

innovationsinnovations

In services, the last In services, the last experience remains experience remains

uppermost in your mind. uppermost in your mind. Therefore, it is not enough Therefore, it is not enough to be good, you have to be to be good, you have to be

consistently goodconsistently good

AssignmentAssignment

►CASE STUDY - Ginger HotelsCASE STUDY - Ginger Hotels