Session+1 SVM

8/9/2019 Session+1 SVM

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Session 1

Introduction to

Services Marketing


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How Important is the Service Sector inOur Economy?

The services sector has been growing at a rate of 8% per annum inrecent years

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

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

In most countries, services add more economic value than agriculture,raw materials and manufacturing combined

In developed economies, employment is dominated by service jobsand most new job growth comes from services

Jobs range from high-paid professionals and technicians to minimum-wage positions

Service organizations can be any sizefrom huge global corporationsto local small businesses

Most activities by government agencies and nonprofit organizationsinvolve services


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Services dominate the United States Economy:GDP by Industry, 2004

Source: Bureau of Economic Analysis, May 2005

Finance, Insurance,Real Estate

20%

Wholesale andRetail Trade

16%

Transport, Utilities,Communications

8%Health

6%BusinessServices

5%

Other Services 13%

Government(mostly services)

12.4%

Manufacturing&

Construction 17.3%

Agriculture, Forestry,Mining, Construction 2.3%

SERVICES

Indias Service Sector: 53%est. of GDPAs per updated statistics for 2007


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Changing Structure of Employmentas Economic Development Evolves

Time, per Capita Income

Industry

Services

Agriculture

Source: IMF, 1997


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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 administrationrecruitment and training legal servicestransportation

catering and food servicescleaning and landscaping

Increasingly, these services are being outsourced


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Major Trends in Service Sector

Government Policies (e.g., regulations, tradeagreements)

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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Social-Demographical Reasons for Growth ofServices

- Affluence

- Leisure Time

- Life Expectancy

- Health Consciousness

- Product Complexity

- Lifes Complexity

- Resource Scarcity and

Ecology

- New Products


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Exercise 1: Lets BrainstormSome Impacts of Technological Change

Share some examples for each of the following:

Radically alter ways in which service firms do business:

Create relational databases about customer needs and behavior, minedatabanks for insights:

Leverage employee capabilities and enhance mobility:

Centralize customer servicefaster and more responsive:

Develop national/global delivery systems:

New Internet-based business models:


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Marketing RelevantDifferences BetweenGoods and Services


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Defining the Essence of a Service

An act or performance offered by one party to another

An economic activity that does not result in ownership

A process that creates benefits by facilitating a desiredchange 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 airline, travel agency, theme park

Others hair styling, pest control, plumbing, lawn maintenance, counseling services,

health club, interior design


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Value Added by Tangible vs IntangibleElements in Goods and Services

Fast food restaurantPlumbing repair

Office cleaningHealth club

Airline flight

Retail banking

Insurance

Weather forecast

Salt

Soft drinks

CD Player

Golf clubsNew carTailored clothing

Furniture rental

Lo Hi

Hi

Intangible Elements

There are no such thing as service industries.Thereare only industries whose service components are

greater or less than those of other industries.Everybody is in service. -Theodore Levit-


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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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Characteristics of ServicesCompared to Goods

Intangibility

Perishability

SimultaneousProduction

andConsumption

Heterogeneity


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Implications & Solutions of Intangibility

Challenges

Services cannot beinventoried

Services cannot be easilypatented

Services cannot be readilydisplayed or communicated

Solutions

Use of tangible clues

Strong Organizational

image

Use of personal source of

information


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Implications & Solutions of Heterogeneity

Challenges

Service delivery andcustomer satisfactiondepend on employee and

customer actions

Service quality depends onmany uncontrollable factors

There is no sure knowledgethat the service deliveredmatches what was plannedand promoted

Solutions

Customization

Standardization


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Implications & Solutions of Inseparability

Challenges

Physical connection of theservice provider to theservice

Customers participate inand affect the productionprocess

Customers affect eachother

Mass production is difficult

Solutions

Trained public contact

personnel

Consumer Management

Use of multi-sited

locations


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Implications & Solutions of Perishability

Challenges

It is difficult to synchronizesupply and demand with

services

Services cannot be

returned or resold

Solutions

Demand Strategy

-Creative Pricing

-Reservation System

-Development of Complementary

Services

-Development of Non-peak Demand

Supply Strategy

-Part-Time Employee-Capacity Sharing

-Advance Preparation

-Use of 3rd parties

-Increase in Customer Participation


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Categorizing Services


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Four Categories of ServicesEmploying Different Underlying Processes

People Processing Possession Processing

Mental StimulusProcessing

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

TANGIBLEACTS

INTANGIBLE

ACTS

DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS

What is the

Nature of the

Service 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

replacing people 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 newprocedures and how 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 for serviceperformance

Design process around customer

Choose convenient location

Create pleasing appearance, avoid

unwanted noises, smells Consider customer needs--info,

parking, food, toilets, etc.


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Implications of Service Processes:(3) Evaluating Alternative Delivery Channels

For 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 demandvarieswidely, problems arise becauseservice output cant be stored:

1. If demand is high and exceedssupply, 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 people

Managers should beconcerned about employeesappearance, social skills,technical skills

Other customers may enhanceor detract from serviceexperience--need to managecustomer behavior


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The ServicesMarketing Mix


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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

AddingThree New Elements

Physical environment

Process

People


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The 7Ps:(1) Product Elements

All Aspects of Service Performance that Create Value

Core product featuresboth tangible and intangibleelements

Bundle of supplementary service elements

Performance levels relative to competition

Benefits delivered to customers (customers dont buy ahotel 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 convenience

Channel partners/intermediaries


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The 7Ps:(3) Promotion and Education

Informing, Educating, Persuading, and Reminding Customers

Marketing 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 Outlays Involve

More than the Price Paid to Seller

TraditionalPricingTasks

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 providing tangibleevidence of service performances

Create and maintaining physical appearances

buildings/landscaping interior design/furnishings

vehicles/equipment

staff grooming/clothing

sounds and smells

other tangibles

Select tangible metaphors for use in marketingcommunications


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7Ps:(6) Process

Method and Sequence in Service Creation and Delivery

Design of activity flows

Number and sequence of actions for customers

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 welljob 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


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Managing the 7Ps Requires Collaboration betweenMarketing, Operations, and HR Functions (Fig. 1.7)

Customers

Operations

ManagementMarketing

Management

Human Resources

Management

Session+1 SVM

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