Services Marketing1
Transcript of Services Marketing1
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Services Marketing
By
Prof. Ashok Kumar Patnaik
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Books for services marketing
Services marketing by Vasanti Venugopal andRaghu V.N., Himalaya
Services marketing by Ronald, Anthony and
Timmothy , Addison wesley Services marketing by Dr S. Shajahan, Himalaya
Services marketing Indian context byR.Srinivasan, PHI
Services marketing by Lovelock,Wirtz and Ken,PHI
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Learning Methodology
Conceptual Learning
Case studies/ Presentations
Projects Research Assignments
Home Assignments
10 February 2011 Prof. Ashok K. Patnaik - AIMS
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General perception
about services management
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General perception
about services management
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Household help
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Second industrial
revolution
Or Growth of service
industry
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Banking sector
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Railway / Rail road
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Insurance sector
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Service dominated economies
USA
JAPAN
UK
AUSTRALIA
CANADA
INDIA
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What is services?
Services are activities or benefits that one
party can offer to another that are essentially
intangible and do not result in the ownership
of anything.
This is how we see how services are different
from goods.
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Definition of services
A service is an economic activity that creates
value and provides benefits for customers at a
specific time and place,by bringing about a
desired change in, or on behalf of, the
recipient of the service.
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Philip Kotler
A service is any act or performance that one
party offers to another, which is essentially
intangible and does not result in the
ownership of anything. Its production may or
may not be tied to a physical product.
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Mahatma Gandhi
Consciously or unconsciously , every one of
us does render some service or other. If we
cultivate the habit of doing this service
deliberately, our desire for service will
steadily grow stronger and we will make not
only our own happiness, but that of the world.
The best way to find yourself is to loseyourself in the service of others
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Services and goods
Companies / Industry
± Goods/Product (deal with tangible dominants:
commodities, automobiles, FMCG etc.)
± Services (deal with intangible dominants : airlines,
consulting, teaching, advertisement agency etc.)
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GOODS
SEARCH
GOODS
PRIOR
PURCHASE/USE
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GOODS
EXPERENCEGOODS
ONLY AFTERBUYING OR AFTER
CONSUMPTION
INTANGIBLE
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PHYSICAL GOODS VS SERVICES
Tangible
Homogeneous
Production and distribution are
separated from consumption
A thing
Core value product in factory
Customers do not participate in
the production process
Can be kept in stock
Transfer of ownership
Intangible
Heterogeneous
Production, distribution and
consumption are simultaneous
processes
An activity or process
Core value produced in buyer-
seller interaction
Customer participates in
production
Cannot be kept in stock
No transfer of ownership
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Myths about services
Services industry produces services at the
expense of other sectors.
Services production is primarily labour intensive.
People satisfy their product needs before theneed for services or buy products first.
Services sector is cottage industry and pay very
low to employees. Services are only offered by government sector
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Types of services
Business services: Consulting, finance, banking
Trade services: Retailing, maintenance and
repair Infrastructure services: Communication and
transportation
Social/ Personal services: Restaurants, healthcare
Public administration: Education, government
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Growth of service sector
Affluence (Rs 238.8 in 1950,11934.5 in 1998 and 38084 in 2009, dinning
out habits, clubs, repairs and services, carpet and dry cleaning, banking and
investment, retailing and insurance )
Leaser time (travel agencies, resorts, hotels, entertainment)
Life expectancy (old age homes, nursing homes, health care)
Working females (home delivery, baby caring, domestic help,fast food
restaurants, marriage counseling, personal care )
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Growth of service sector
Product complexity (microwaves, computers, water purifiers- after
sale, maintenance/ repair services, training and education, sharing services etc.)
Lifes complexity (tax consultants, legal advisors, professional services,
courier services, travel etc)
Resource scarcity and ecology (pollution control agency, car
pool, water management etc)
Corporate crowd /New Young /Youth (advertising, recruitment
services, management counseling, marketing research, educational institutes, tutorialaids, picnic resorts)
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Factors stimulating
the services economy
Government policies
Social changes
Business trends Advances in information technology
Internationalization
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Factors stimulating
the services economy
Government policies
± Changes in regulation
± Privatization
± New rules to protect consumers, employees and
the environment
± New agreement on trade and services
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Factors stimulating
the services economy
Social changes
± Rising consumer expectations
± Immigration
± More people find themselves short of time
± Increasing desire for buying (experience vs things)
± Rising ownership of computer and mobile phones
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Factors stimulating
the services economy
Business trends
± Manufacturers add value through service and sellservices
± More strategic alliances ± Marketing emphasis
± Quality movement
± Emphasis on productivity and cost savings
± Growth of franchaising
± Innovative hiring practices
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Factors stimulating
the services economy
Advances in IT
± Convergence of computer andtelecommunications
± Greater bandwidth ± Miniaturisation of products
± Wireless networking
± Faster, more powerful software
± Digitization of text, graphics, audio and video
± Growth of internet users
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Factors stimulating
the services economy
Internalization
± More companies going global
± Increased international travel
± Internationsation mergers and alliances
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Major services categories as per GATS
Business services
Communication
Construction and engineering
Distribution Education
Environment
Finance
Health Tourism
Recreation
transport
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Financial services
Banking
Insurance
Leasing
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Shipping and distribution
Ocean carriers
Rail
Trucking Air fright
Wholesaling
Warehousing Distribution
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Professional and technical services
Technical licensing
Sales
Engineering design services Architectural design
Construction management
Legal services Accounting services
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Other producers services
Computer data processing
Communication services
Franchising
Advertising
Commercial real-estate consulting
Business travel
Security services
Postal services
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Consumer services
Retailing
Healthcare
Travel, recreation, entertainment Education
Home repair
Laundry etc.
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Problems with services
Quality and value of services
Late deliveries
Rude or incompetent personnel Inconvenient service hours
Complicated procedures
Long queues
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Tangible & Intangible elements
Pure tangible goods (salt, bathing soap, cloths)
Tangible goods with accompanying services (cars,computer)
Hybrid (restaurants combining equal part of goods and services)
Major services with accompanying minor goodsand services (air travel, house cleaning)
Pure services (babysitting, psychotherapy,investment management)
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Customer as partial employee/ trainee
ATM services
Hairdressing Saloon
Laundromat Hotels
Colleges/ institutions
Hospitals
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Elements of Service management -1
Product elements (create value for customer)
Place, cyberspace and time (speed and
convenience in delivery of services)
Process (sequence of actions in performance)
Productivity and quality (transformation and
satisfaction)
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Elements of Service management-2
People (Nature of interaction & perception)
Promotion and education (benefit of services)
Physical evidence (appearance of building,interior, equipment, signs, staff members,
printed material, advertising & other visible
clues)
Price and other costs of services ( travel
expense, time, mental and physical efforts)
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Customers dont obtain ownership
Need to think of temp rentals rather rather
than permanent sales so, how best to price
such rentals.
Customer criteria are different for renting an
object instead of purchasing it.
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Service products are intangible
Consider how to create and communicate
tangible evidence
Understand how to stage the performance
and manage each step
Customer behavior and competency can help
or hinder productivity
Consider opportunities for self service
Design of service factors must be user friendly
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Other people may form part of the
product
Behaviour of employees and other customers
need to be managed
Recruit service personal who has technical
skill
Wise to mix different segments at same
location and time
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More variability in operational inputs
and outputs
Quality control for consistency
Go for standardisation
Replace employees by automation to reducevariability
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Services are difficult for customers to
evaluate
Need to develop trust between customer and
company
Educate customer to make them smart and
appropriate choice of services
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Absence of inventory after production
Mange demand levels
Manage capacity levels to meet demand
fluctuations and predicted demand
Right business at right time
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Time factor is relatively important
Must understand customer time constraints
and priorities
Understand that customer feels spending time
is a burden
Look for fast services, consider 24X7 services
or expand service hours
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Delivery system may involve both
electronic and physical channel
Consider the electronic delivery system for
information based services
Recognise new methods of service delivery
through use of IT
Use the system of point of consumption
model of delivering services
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Telephone services
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Social networking sites
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Health care
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Passenger transport
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Restaurants
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Laundry and dry cleaning
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Repair and maintenance service
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Babysitter
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Movie theater
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Security services
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Pet care
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Classification of services
Extent to which service processes are tangible Who or what is the direct recipient of the service
process?
The place and time of service delivery
Customization vs standardization
Nature of the relationship with customers
Extent to which demand and supply are in
balance Extent to which facilities, equipment and people
are part of service experience
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Service as a process
People processing involves tangible actions to
peoples bodies
Possession processing covers tangible actions
to customers physical possession
Mental stimulus processing refers to
intangible actions directed at peoples minds.
Information processing describes intangible
actions directed at a customers assets.
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Services directed at peoples bodies
Passenger transportation
Healthcare
Lodging
Beauty salons
Physical therapy
Fitness centers
Restaurants or bars
Funeral services
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Services directed at peoples minds
Advertising
Public relations
Arts and entertainment
Broadcasting and cable
Management consulting
Education
Information services
Music concerts
Religion services
Voice telephone
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Services directed at physical
possessions
Freight transportation
Repair and maintenance
Warehousing and storage
Office cleaning services
Retail distribution
Refueling
Landscaping or gardening
Disposal and recycling
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Services directed at intangible assets
Accounting
Banking
Data processing
Insurance
Data transmission
Insurance
Legal services
Research
Security investment
Software consulting
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HOME ASSIGNMENT-1
DEAD LINE FOR SUBMISSION OF PPTs THROUGH EMAIL BY
1800 HRS 15 SEPT 09
Email: [email protected]
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Format
History of the selected services Key players in World & in India
Services process flow chart
Customer profile/ type
Relationship with customer Products used during the service
Customer involvement status
Other key issues if any
Future of the service delivery etc.
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Characteristics of Services
Intangibility Inseparability
PerishabilityHetrogeneity
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Intangibility
Marketing implications ± Cannot be stored
± No patent
± No ready display
± Communication problem
± Pricing difficulties
Strategies ± Tangible clues
± Personal sources
± Organisational image
± Post purchase communication
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Inseparability
Marketing implications
± Consumer involved in production
± No mass production
± Supply demand match
Strategies
± Selection and training of contact person
± Manage customers
± Multi-site locations
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Heterogeneitys
Marketing implications
± Standardization difficult
± Quality control difficult
Strategies
± Industrialize
± Customize
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Product in the marketing context is anything
which is offered to the market for exchange or
consumption. (style, aftersale services, credit)
Service is a bundle of features and benefits
and these benefits have relevance for a
specific target market.
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Marketing mix in services industry
Product in services (Ref: Philip Kotler) Core product
± The fundamental benefit (hotel- rest/sleep)
Basic product
± Basic functional attributes (room, bed & bathroom) Expected product
± Set of attributes/conditions (clean, towel, quietness)
Augmented product
± Beyond expectation (prompt room service, music, aroma) Potential product
± Factors to distinguish the product from others (all suitehotel)
Th l l f i ff d
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Three levels of service offered as a
productThe core services
Facilitating services
Supporting services
The services concept
Accessibility of the services
Consumer participation
Interaction
Corporate image
Word of mouth
Marketing
communication
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Pricing in services marketing
Services pricing generally follows the concept
of cost based or market pricing method.
The pricing of services is greatly influenced by
the basic service characteristics.
Customers dont need high quality service at
maximum price.
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Guidelines for services pricing
Pricing should be able to handle demand
fluctuation.(delaytill the period of low demand)
Service prices should be based on cost
It should provide value addition and quality
indication to the customer.
The pricing strategy should be such as to cope-
up with the degree of competition operating
within a certain geographic and time zone.
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Services pricing objectives
Support the planned market position for the
service product
Stage of the life cycle of the service product
Competitive situation (inter brand and other
substitute service products)
Strategic role of pricing in overall marketing
strategy
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Few examples:
Differential or flexible pricing
± Build primary demand during nonpeak time.
± Even out fluctuations in demand
e.g.
± Price time differentials (telephone services)
± Customer ability (housing loan)
± Time and Place differentials (discount at hotel
during offseason)
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Few examples:
Discount pricing
± To enable service production and consumption to
take place
± To encourage actions like early payments, bulkpurchase or peak usage
E.g.
±Rebates in the bill amount deposit given byelectricity company.
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Few examples:
Guarantee pricing
± To enable high quality operator to compete with
others
± To satisfy a customer seeking clear assurancebefore paying for it.
E.g.
±Employment agencies charge either or both theparties after the assignment gets over.
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Few examples:
Loss leader pricing
± To charge a reduced price for the first order with
a hope to get further business at better prices.
E.g
± To attract first time trials, a restaurant offer a
discount on the day of inauguration.
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Place or distribution
Products use traditional distribution channels
wholesalers, retailing and intermediaries.
Services must be created and sold at the same
time. So most of the services are distributed
through direct sales.
At best one agent or middleman is added to
it. (insurance, courier service and travelagency etc.)
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Promotion in services
Services consumers purchase with less
information than the product customers
Consumers of services will prefer personal
sources over impersonal sources of
information
The basic characteristics of service have
implications on communication strategy
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Service promotion objectives
Develop personal relationship with the client
Make a strong impression of competency,
honesty and sincerity
Should be able to use indirect selling
techniques
Manage to maintain a positive image by word
of mouth
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Sales promotion in services marketing
Sampling cannot be used frequently because of the cost of service
Premiums are frequently used to give an elementof tangibility
Price and quantity promotion can help ingenerating long term commitments fromconsumers
Prize promotions can be used effectively and add
excitement and involvement Refunds and future discounts are not much in
practice
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People or internal marketing
A service is a performance and it is usually
difficult to separate from the people
Employees are essentially the contact point
for customers in services
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Essentials of internal marketing
Compete aggressively for talent market share Offer a vision that brings purpose a meaning to
the workplace
Equip people with the skills ad knowledge toperform their service roles excellently
Bring people together to benefit from the fruits oteam play
Leverage the freedom factor
Nature achievement through measurement andrewards
Base job-product design decision on research orknow customer
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Physical evidence
A physical object is self defining; a service is
not .
A service is defined through environment,
communication and price
Physical environment
± Ambient factors
± Design factors
± Social factors
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Role of physical evidence
Shaping its first impression
Managing trust
Facilitating quality of service
Changing the image
Providing sensory stimuli
Socializing employees
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Process management
Process management is that it assures availabilityand consistent quality.
Process helps balancing service demand with
service supply. As there is no tangible product the operations
management is vital to deliver satisfactionbecause here the operations management would
decide how the process of service delivery wouldfunction, or in other words, the interactiveexperience that would deliver the servicebenefits to the customer.