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Service Management: 1 Services Marketing
Why study Services Marketing?
Service-based economies
Service imperative in manufacturing, technology & IT
Professional services
Services marketing different from products
Service equals profits
Introduction:
What are services? Deeds, processes & performances
Why services marketing?
Service & Technology
Characteristics of Services wrt Goods
Services Marketing Mix Customer Focus
What is a Service?
A form of product that consists of activities, benefits,
or satisfactions offered for sale that are essentially
intangible and do not result in the ownership of
anything.
Services are deeds, processes, and
performances- Valarie Zeithaml
Services:
Services- Haircut, Dr, TV, Email, laundry,
B-School- Education, library, canteen, placement, counseling, photocopying, ATM,
telecommunication, hostel, gym
Customer complaints- service quality- delayed response / delivery, rude / incompetent
staff, inconvenient systems / timings
Supplier concerns- skilled & efficient staff, training/retaining staff, customer spoilt for
choice
Service Industries:
H- Hospitality & Healthcare
E- Education & Entertainment
F- Financial Services
T- Telecom, Travel & Tourism
I- Insurance
Construction & real estate
Retail (worlds largest employer)
Utilities-hair styling, pest control, plumbing, clubs
Professional Services- counseling, consultancy, Legal
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Tangibility:
Tangible- see, taste, feel, hear, smell- pre purchase
Customers not sure about purchase outcome
Will service meet their expectations?
Product- seen pre-purchase, ascertain if needs met Customers use cues to overcome intangibility
Service quality- clean premises, crowds, opinionpeers, family & friends, important
Higher purchases- WoM, information from trusted sources more important
Price may indicate higher quality
Marketers add tangibility to intangible services
Highlight physical evidence- ambience, cleanliness, experience, surroundings
Dr waiting rooms
Hotel lobby
Goods versus Services:
Goods Services Implications
Tangible Intangible No inventory, patent,
display, pricing
difficult
Standardised Heterogenous Customers part of process,
Employee critical in
delivery, satisfaction
Consistency, variability key
issues
Production & consumptionseparate
Simultaneous Customers participate in,affect outcome
Employees affect outcome,
mass
production difficult
Non
perishable
Perishable Difficult to synchronise
demand supply,
cannot be returned, resold
Differences in goods & services:
Most products have service component, even 50%
Hotels- Food 25%, Balance- services, people, ambience
No ownership- Rented car, loaned money, booked hotel
No inventory- Transitory & perishable, not stocked
Intangible- Quality of labour, staff competence
Customers help/shape product- Self service- ATM, Co-op- Saloon, concert fans, library
Input/output variable- consumed as produced, delivered in real time, customer present-
time sensitive / critical
Evaluation difficult- treatment, repairs, accounts, advicecustomers lack knowledge dont
know what to expect
Patenting difficult No returns, synchronising demand-supply difficult
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Characteristics of Services:
o Intangibilityo Heterogeneityo Simultaneous Production & Consumptiono Perishability
Implications of Intangibility:
Not inventoried
Not easily patented
Not readily displayed / communicated
Pricing difficult
Reduce uncertainty- buyers look for physical cues
Quality inferred fromplace, people, equipment, communication material, symbols and
price
Service providers major task- manage physical evidence- tangibilize the intangible-
Evidence & presentation- transform intangible services into concrete benefits
Implications of Heterogeneity:
Service quality depends on many uncontrollable factors
Service delivery and customer satisfaction depend on employee and customer actions
There is no sure knowledge that the service delivered matches what was planned and
promoted
Inseparability & Variability:
Services-produced & consumed simultaneouslyClients present & interact during service production
Services highly variable, dependent on who provides them & when & where provided
Invest in good hiring and training procedures
Standardize service-performance process
Service blueprint flowchart depicting events & processes, to recognise potential fail points
Monitor customer satisfaction
Implications of Simultaneous Production and Consumption:
Customers participate in and affect the transaction
Customers affect each other
Employees affect the service outcome Decentralization may be essential
Mass production difficult Implications of Perishability:
Services cannot be stored, returned or resold
Demand fluctuation causes problems
Difficult to synchronize supply & demand with services
Demand side Supply side
Differential pricing Part-time employees
Non-peak demand Increased consumer participation
Complementary services Shared services
Reservation systems Facilities for future expansion
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Challenges for Services:
Defining & improving quality
Designing & testing new services
Communicating & maintaining a consistent image
Accommodating fluctuating demandMotivating & sustaining employee commitment
Coordinating marketing, operations & HR efforts
Setting prices
Balancing standardization & personalization
Ensuring consistent delivery quality
Traditional Mix:
Elements controlled by the firm
4Ps not suited to marketing intangibles
Overhaul as customer assumes significance Services dominance led to specialized services Marketing
4Ps 4Cs
Product Customer Value
Price Cost-benefit
Place Convenience
Promotion Communication
Services Marketing Mix:
Product- Core features + bundle of supplementary service elements wrt benefits desired
Place & Cyberspace- Place & delivery time importantphysical, e, direct, retail, mobile,home delivery
Process- To create & deliver product elements to customers important to design &
implement effective processes.
Productivity: how efficiently service inputs are transformed into outputs that add value forcustomers.
Quality: the degree to which a service satisfies customers by meeting their needs, wants,
and expectations.
People: customers and employees who are involved in service production.
Promotion and education: communication activities designed to build customerpreference for a specific service or service provider. Provides information, persuades target
customers, and encouraging them to buy.
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Expanded Mix for Services -- The 7 Ps:
People
Major role in service delivery, influence buyer perceptions
Personnel & customers in the service environment
Physical Evidence
The environment where service is deliveredWhere firm & customer interact
Tangible components facilitating service performance/ communication
Process
Actual procedures, mechanisms, and flow of activities by which
the service is deliveredthe service delivery and operating systems
Expanded Marketing Mix for Services:
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Expanded mix:
People Physical Evidence Process
Employees Facility design Activity flow
Customers Equipment Number of steps
Communicating culture &values
Signage Level of customerinvolvement
Employee
research
Employee dress
Other tangibles
Ways to Use the 7 Ps:
Overall Strategic Assessment
How effective is a firms 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?
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The Nature of A Service:
Courier
Advice and
Communication
Order Tracking Bill Statements
Supplies Problem Solving
Pick-Up Tracking
Documentation
Overnight
Transportation
and Delivery of
Packages
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Category Differences:
Role of advertising in brand-bui lding wil l tend to vary with category type
Consumer
Products
Consumer
Durables
Services Corporate
Lower values Higher values Indeterminate No value
Frequent purchase Infrequent Indeterminate Variable
Narrow/Broad
Target customer
Narrow Target
Customer
Variable Very wide/
variable
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Intangibility- Provide cues/ evidence Variability- Provide cues/ evidence Variability- Better service Inseparability- Manage the service encounter
Services cannot be stored- Manage the demand & supply
Service C Categories- Classification:
Who/ What is the direct recipient
What
is the
nature
of the
service
People Possessions
Tangible
actions
People processing(Directed at the body)
Possession processing(Directed at physical
possessions)
Healthcare, Hotels, Saloons,Clubs, Restaurants, Priests Transport, storage, petrolpumps, housekeeping,
retail, laundry,
Intangible
actions
Mental processing(Directed at peoples mind)
Information processing(Directed at intangibles)
Education, IT, Music,
Religion, Advertising, PR,
Arts, Cable, Consultancy,
Banking, Accounting,
Insurance, Legal,
Programming, Research,
The Services MarketingTriangle:
Overall- Focus on delivery & consistency at all 3 levels
Company (Management)
Internal Marketing External
Marketing
(Enabling the promise) (Setting the
promise)
Employees Customers
Interactive Marketing
(Delivering the promise)
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Services Management: 2- Gaps Model
Gaps Model- Service Quality:
The Customer Gap
The Provider Gaps:Gap 1not knowing what customers expect
Gap 2not having right service designs & standards
Gap 3not delivering to service standards
Gap 4not matching performance to promises
Putting It All Together: Closing the Gaps
The Customer Gap:
Customer Gap
Gaps Model of Service Quality:
Customer Gap:
difference between customer expectations & perceptions
Provider Gap 1 (The Knowledge Gap):
not knowing what customers expect
Provider Gap 2 (The Service Design & Standards Gap):
not having the right service designs and standards
Provider Gap 3 (The Service Performance Gap):
not delivering to service standards
Provider Gap 4 (The Communication Gap):
not matching performance to promises
Expected Service
Perceived Service
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Key Factors Leading to the Customer Gap:
Provider Gaps
Gap 1:Not knowing what customers expect
Gap 2:Not selecting right service designs & Customer Gap
standards
Gap 3:Not delivering to service standards
Gap 4:Not matching performance to promises
Key Factors Leading to Provider Gap 1:
Inadequate marketing research orientation
Insufficient, inadequate use, no service quality focus
Lack of upward communication
Poor interaction- management & customers
Poor communication- contact employees & managers
Too many layers- contact personnel & management
Insufficient relationship focus
No market segmentation
Focus on transactions than relationships
Focus on new customers than relationship customers Inadequate service recovery
Not listening to customer complaints
Failure to make amends when things go wrong
No appropriate recovery mechanisms for service failures
Customers
xpectation
Customers
Perception
Customers expectation
Company perception Of customer
Expectations
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Key Factors Leading to Provider Gap 2:
Poor service design Unsystematic new service development process
Vague, undefined service designs
Failure to connect service design to service positioning
Absence of customer-driven standards
Lack of customer-driven service standards
Absence of process to focus on customer requirements
Absence of formal process for setting service quality goals
Inappropriate physical evidence and servicescape
Failure to develop tangibles in line with customer expectations
Servicescape design not meeting customer & employee needs
Inadequate maintenance and updationg ofservicescape
Key Factors Leading to Provider Gap 3:
Deficiencies in HR policies
Ineffective recruitment, role ambiguity, role conflict
Poor employee-technology job fit
Inappropriate evaluation and compensation systems
Lack of empowerment, perceived control, and teamwork
Customers who do not fulfill roles
Customers who lack knowledge of their roles & responsibilities
Customers who negatively impact each other
Problems with service intermediaries
Channel conflict over objectives & performance
Difficulty controlling quality and consistency Tension between empowerment and control
Failure to match supply and demand
Failure to smooth peaks and valleys of demand
Inappropriate customer mix, price overreliance to smooth demand
Customer-Driven Service Designs and Standards
Management Perceptions of Customer Expectations
Customer-Driven Service Designs and Standards
Service Delivery
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Key Factors Leading to Provider Gap 4
Lack of integrated services marketing communications Tendency to view each external communication as independent
Not including interactive marketing in communications plan
Absence of strong internal marketing program
Ineffective management of customer expectations
Poorcommunication to manage customer expectation
Lack of adequate education for customers
Overpromising
Overpromise- advertising, personal selling & physical evidence
cues
Inadequate horizontal communications
Insufficient communication between sales and operations Insufficient communication between advertising and operations
Differences in policies and procedures across branches or units
Gaps Model of Service Quality:
Service Delivery
External Communications to Customers
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Services Management: 3- Focus on the Customer
Consumer Behavior in Services:
Search, Experience, and Credence- Properties
Consumer Choice Consumer Experience
Post experience Evaluation
Understanding Differences Among Consumers
Consumer Evaluation
Processes for Services:
Search Qualities
attributes a consumer can determine prior to
purchase of a product
Experience Qualitiesattributes a consumer can determine after
purchase (or during consumption) of a product
Credence Qualities
characteristics that may be impossible to evaluate
even after purchase and consumption
Issues to Consider in Examining the Consumers Service Experience:
Services as processes
Service provision as drama
Service roles and scripts
The compatibility of service customers
Customercoproduction
Emotion and mood
Differences in Service Experience in U.S. and Japan
Authenticity
Caring
Control
Courtesy Formality
Friendliness
Personalization
Promptness
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