What are services? Comparative analysis: Product and service Characteristics of services Why market services?

Contribution of services marketing Services in developing countries Classification of services Concept in services marketing Myths about services
Service Sector Management

Role of services in modern economy

It affects the way in which we live & work Contributes towards the growth of the economy &

* * *

creates maximum employment opportunities. Opening of service economy means greater competition, which will in turn stimulate innovation through application of new & improved technologies. Optimum utilization of resources Accelerates capital formation Increases standard of living Investment in R & D better technology, increased speed, better efficiency, meeting increased supply, up to date MIS
Service Sector Management

Reasons for growth of services

(verma)

Higher disposable income , affluence Increasing specialization , competitive pressure Growing fashion consciousness ,urbanization Professionalism in fields (E.g. education) Information explosion Increased sophistication/civilized lifestyles Government activities cultural exchange policies, trade policies, global partnerships etc Women in work force Concern for environment Demographic shifts / Life expectancy Innovations , new products, product complexity

Service Sector Management

Factors stimulating the growth of service sector

Government policies-changes in regulation, LPG,

customerisation , new agreements on trade in services. Social changes-rising consumer expectations, more affluence, use of technology Business trends-Providing value, competition, stress on quality, Imp of marketing , Innovation Development in IT-computerisation , web connectivity, benefit of internet, wireless networking Internationalization / globalization-growth of MNC transnationals, Mergers alliances, acquisitions', international trade etc1
Service Sector Management

Services in developing countries

Huge untapped potential Basic services- healthcare, education not developed Quality of services- low No service delivery standards set Lack of market research Need for government intervention Proper channels to human, financial and intellectual resources needed Potential to contribute to countrys GDP and economic development
Service Sector Management

What are services?

Services are activities, benefits or satisfaction which are

offered for sale, and are provided in connection with the sale of goods improves the well being and functioning of people.

Service is action of an organization that maintains and

Payne has defined service as an activity which has some

element of intangibility associated with it, which involves some interaction with customers or property in their possession and does not result in transfer of ownership. processes, and performances that cannot be touched, seen or felt but can be experienced& which benefits and satisfies the consumer. Service Sector Management

In simple terms services are intangible deeds, activities,

services
PERFORMED BY INDIVIDUALS OR MACHINES IS AN SERVICE IS AN INTANGIBLE ACTIVITY, S ACT, DEED, DEED,ACTIVIT DEED, ACT, S ACT, EFFORT, EFFORT OR PERFORMANCE

SERVICES

RENDERED RENDERED FOR FOR PROFIT, PROFIT,BENEFIT R BENEFIT & & SATISFACTION SATISFACTION

RENDERED TO DIRECTED CUSTOMERS OR TO INANIMATE CUSTOMERS OBJECTS Service Sector Management

Some of the distinctive aspects that emerge from the above definitions are as follows; Services are intangible, however some of these may

include a final tangible component eg reports, notes They do not result in ownership of anything Services are activities performed by the provider Customer interaction & co-operation is integral to service creation,delivery and consumption. Services are actions bought for their ability to provide satisfaction or benefit Service production may be some times tied to goods and are an integral offerings of many manufactured goods for eg warranties, deliveries, installations
Service Sector Management

Four Categories of product as distinguished by Philips Kotler

A pure tangible good- eg tooth paste, salt rice where

no service accompanies product.

A tangible good accompanied by service- consumer

durables ,to enhance consumer appeal/satisfaction.

A major service accompanied by minor goods

&services- 1st class air travel, premium hotel stay.

A pure service- consultancy, teaching ,babysitting etc
Service Sector Management

The continuum of goods & services

Pure goods Combination of goods & services Pure services

In the world of marketing there are very few pure

products or services, instead the market offerings can be visualized to be falling on a continuum with two ends being tangible & intangible dominance . Shostack presented the idea of tangible & intangible scale to classify market offering as below Pure goods Goods major service minor Tangible & intangible equal Major services minor goods Pure services
Service Sector Management

Tangibility Spectrum
The term goods can be interchangeably used with

product, a product can be defined as a comprehensive package of goods or services or both, which adds value to the consumer.
Intangibility is the key characteristic of a service,

however there are few goods & services that are purely tangible or purely intangible.
Instead services tend to be more intangible than goods

and goods tend to be more tangible than services

Service Sector Management

Continuum of tangibility

Service Sector Management

Classification of services
Classification of services on the basis of customer involvement -People Processing-customer has to actively co-operate eg health care, beauty salons, being transported etc -Possession processing-service offered to physical objects-both living & inanimate, that belong to the customer. Eg courier, car repair/maintenance , dry cleaning -Mental stimulus processing-services that interacts with peoples minds, eg Psychotherapy, education, counseling. -Information processing-services that are highly dependent on effective collection and processing of information eg financial services ,medical diagnosis, M.R
Service Sector Management

 Classification on the basis of tangibility

Highly tangible-car rental , wending mac, ATM etc. Service linked to tangible goods- installation,

maintenance Tangible goods linked to services-restaurant, health care, education. Highly intangible-housekeeping, hairdressing etc Classified on the basis of expertise Professional- medicine, legal, accountancy, teaching Non professional- baby sitting, housekeeping. Profit-Orientedi)Non profit ii) commercial Based on end useri) consumer ii)Business to bussi iii)Industrial
Service Sector Management

 Major categories of services

Business and professional services banking,

insurance, accountancy, medicine, lawyers, advocates Infrastructural services roads, railways, motor transport, power, oil Public services police, defense Trade services wholesale & retail , distribution Personal services education, medical, gymnasiums, hotels, spas ,health Individual & group services beauty parlors, medical, coaching classes (education) Environment Finance- banking, insurance, investment Service Sector Management Travel , tourism, hospitality, recreation

Characteristics of services
Intangibilityvisualization, association, physical

representation and service marks, facts & figures. Perish ability over marketing, managing demand & supply. Heterogeneity (Quality aspect) Training of internal & external customers, automation, quality recruitment & selection, developing service minded culture. Inseparability/simultaneity (of creation and delivery)training internal customers, use of technology Ownership/Resell Quality measurementfeedback, monitoring. Nature of Demand (by season, by time e.g. peak Service Sector Management hours)

Some eg of service marks

Alliance group insurance --- the power on your side AT & T --- It is within your reach

British Airways--- The worlds favorite airline

Taj Business Hotels Nobody cares as much Discovery channel explore your world

Godrej promise of good living

Jet Airways the joy of flying Holiday Inn Hotels Be yourself

Service Sector Management

Comparative analysis: Product and service

Tangibility
Transferability (Physical transfer) Existence Heterogeneity Reselling
Service Sector Management

Generic difference between goods &services

Nature of the product

Customer involvement in the prod process

People as part of the product Quality control problems

Harder for customer to evaluate

Absence of inventories Importance of time factor Structure & nature of distribution channels

offered to physical
Service Sector Management

The molecular model

Helps us to understand the difference between

goods & services, highlighting the relationship between tangible & intangible component It has benefited managers to see the big picture of the firms service offering, he gets to appreciate the tangible & intangible offering & the customers needs better, thus preparing him to offer competitive features. Eg Indian railways & Prithvi theater

Service Sector Management

Molecular model for prithvi theatre

The performance

Method of delivery

Atmosphere, ambience

Stage props, scenery etc

Core service visit to a theatre

Theatre building

Ticket reservation service

Support equip, internet ,tele booking

Food, drinks, restaurants

Service Sector Management

Service marketing environment

(bhattacharjee)

External environment for service firms consists of

SLEPT factors: Socio-cultural factors--- Socio-cultural changes--* consumption * Beliefs & values --- Demographic changes--*age composition, * gender composition, * changing role of women. Services that received a big boost due to this factor are Retailing, health & personal care, education, BPO travel & transportation etc Legal factors- are the percolation of the political & govt factors, there are more laws & regulations for the service industry. Eg of legal implicationsclosure of BPOs, FERA guidelines, reservation of certain sectors, CRR,SLR, environmental guidelines etc Service Sector Management

 Economic factorsthe govt economic policies have

tremendous impact on mgt of service sector. An economy has a business cycle consisting of Recession * Recovery Growth Decline Some economic pointers of the impact on services --with globalization there has been a spurt in the demand for communication & information services. --with increased specialization there has been an demand for specialized services such as M.R, ERP, mgt consultancy, financial consultants etc --knowledge based economy
Service Sector Management

 Political factorsservice firms have been greatly

affected by the policies & decisions made by the government, the regressive tax regime on services contributed in damping growth Eg of impact of government policies is the leisure, travel & tourism industry, retail sector, education.
Technological factors-some technological

development which affected services: Universal product code Credit cards Electronic data capture Internet, ATMs with V-SAT, cellular phones Data mining & data warehousing technology Quick response inventory management system
Service Sector Management

Internal or Micro environment factors

External customers/ consumers
Internal customer/ channel pattern/ providers Competitors- to gain competitive advantage ,a

service firm must do either of the following:--Provide product value but operate more efficiently than its rivals(lower cost ) --Operate in a unique way that creates greater product value & command premium price. Four different types of competition are:Direct, Indirect, substitute & new entrant competition. Suppliers Regulators
Service Sector Management

Marketing challenges of services

Narrow definition of marketing some service executives continue to define mkt as simply advt, sales promotion & P.R, where as crucial areas for a service firm are, new product development, pricing STP, customer service, service quality. Lack of appreciation for marketing skills the prevailing environment not only restricts the resources allocated to marketing but also inhabits the creativity of the service marketer. Different org structure-- service org should try and achieve an org structure which will integrate marketing & operational considerations, in order to ensure high level of service quality & satisfaction. Limited data on competitive performance Unlike consumer goods segment, the service sector is inhibited byService Sector Management lack of sufficient detailed market data

on a product to product basis, which would have enabled service provider managers & their advt agencies to tightly monitor the results of their efforts. Two key uses of market research data are :i) Determination of customer needs and preferences ii) Measures of service specific customer satisfaction. Problems in determining costs for pricing In comparison to manf firms it is more difficult to determine which fixed & operating costs are associated with which products especially when several services are being produced concurrently by the same organization. The basic difference between goods & services may lead to myriad other challenges & questions that marketer may face which can be as follows:Service Sector Management

 * How can product quality be defined& improved

when the product is intangible and not standardized. Eg beauty salon * How does the firm accommodate fluctuating demand when the capacity is fixed and the service itself is perishable eg theatre * How can the firm best motivate and select service employees who, because the service is delivered in real time become a part of the product itself. * How can a balance between standardization & personalization be determined to maximize both the efficiency of the org and the satisfaction of its customers as well as its employees. * How can the org protect new service concepts from competitors when service process cannot be patented legally. Management Service Sector

 * How can organizations ensure delivery of

consistent quality service when, both the organizations employees and customers themselves affect the service outcome.
The service Marketing Triangle

The challenges faced by the service managers can be conceptualized in the service marketing triangle. According to Gronross there are three types of marketing activities that must be successfully carried out for service org to succeed, namely external marketing, internal marketing and interactive marketing.
Service Sector Management

Types of marketing in service firms Service triangle

Service Firm

Internal marketing enabling the promise promise

Employees

External marketing setting the promise

Customers

Inter active mkt Interactive mkt

Internal marketing directed towards employees External marketing - directed towards consumers
Service Moment of truthSector Management

External marketing
Anything that is communicated to the customer before the

service delivery-that an org engages in the set up of its customers expectations & make promises to the customers regarding what is to be delivered. It includes advt, sales promotion, P.R,, sales management , direct marketing , the firms physical facilities & the process of service delivery.

Internal Marketing
It suggests a critical role which enables employees to keep

the promise that have been made to the customers. The employees are considered the first internal market for the org & every individual play an imp role in mkt of the service. It includes any efforts such as training,, customer knowledge, sales mkt knowledge ,motivation by the org to satisfy its customers
Service Sector Management

Internal marketing
Definition:- attracting, developing, motivating, and

retaining qualified employees through job products that satisfy their needs. Components of internal marketing: Motivation Co-ordination Information Education

Proposed Process of Internal Marketing Programs

Attract best talent Motivate

Impart knowledge
Emphasize on Team work Empower Reward
Service Sector Management

Interactive marketing or moment of truth

Emphasized by Scandinavian airlines system(SAS) &

has become popular as MOT or moment of truth Though companies strive to design effective service products, communicate its promise to the customers. Train, convince & enable its front line providers ,it is only the front line staff who keeps the promise. The provider becomes the face of the company & all their perception of quality & satisfaction entirely depends on the provider. Finally it is the responsibility of the provider to convey the sincerity of purpose & validity of promise that is to be kept, to put their best foot forward, smiling , being extra polite, going out of way to help the customer, to make their experience memorable. These encounters are termed as MOM or Moment of truth.eg train journey & SAS
Service Sector Management

The servuction model

Is used to illustrate factors that influence service

experience The experiential aspect of consumption becomes important when service firms provide complex bundle of benefits. All those who come in contact with the customer help in the service delivery & affect service encounter & experience This model is relevant in those services where there is a high degree of involvement of the consumer like ATM, buffet lunch, self service in petrol pumps etc Consumer tends to add their own bundle of benefits taking off Managementthe given offer. from Service Sector

Myths about services

A service economy produces services at the cost of

other sectors Service jobs are low paying & menial Service production is labor intensive & low in productivity Service is necessary evil for manufacturing firms Managing service is just as managing a manufacturing business. The growth of the government is the reason we are a service economy.

Service Sector Management

Consumer Behavior
Difference between evaluation process between

goods & services Customer decision making process Implication for service providers Service gap & Zone of tolerance Customer expectationTypes, factors influencing customer expectations, Managing & Exceeding service expectations. Customer PerceptionFactors influencing perception ( service encounter, service evidence, image & Price) Strategies for influencing customer Perception
Service Sector Management

 Categories of qualities of consumer goods or

services Search quality- these attributes can be determined even before purchase of product. For e.g color, style, price, hardness etc. Goods are high in search quality & services being in-tangible are low in search qlty. Experience quality- attributes that can be discerned after or during purchase or consumption. For e.g vacation, restaurant meal etc. or through others who have experienced it. Credence qualities- Difficult or impossible to evaluate even after consumption or usage, due to the tech, lack of expertise or nature of service it is difficult to evaluate. For e.g heart surgery, kidney transplant, dental service, auto repairs, etc.
Service Sector Management

 Conclusion- goods & services high is search

quality are easily evaluated & that which are high in experience qualities are somewhat difficult & those high in credence qualities are very difficult to evaluate.

Service Sector Management

 Customer decision making process involves

four main sub-processes:i) Search for the informationa)Use of sources-

personal & non personal b) greater Perceived risk-as services are intangible, non- std, no warranties. ii) Evaluation of alternatives-depends on emotions & moods of consumer & availability of alternatives. iii) Purchase & consumption-dramatizing the service experience, compatibility of service customer. iv) Post purchase evaluation- Attribution of dissatisfaction ,customer loyalty
Service Sector Management

Implication of the difference for service providers --Word of mouth plays an imp role in the marketing of services as consumer rely more on personal sources. --Since perceived risk is more in purchase of services companies should design strategies to reduce risk, e.g std of offering, training to employees. --Since moods & emotions have an impact on the way information is absorbed & retrieved, marketer should be aware & attempt to influence them in a +ve way. --Control should be exerted on unruly customer who cause dissatisfaction not only to themselves but to fellow customers by specifying limits. --Service marketers should provide incentives while introducing new services to speed up adaptation --Service providers should research customer demands & expectation especially for unprofessional services
Service Sector Management

Service gap
Primary objectives of service provider is to develop &

provide offerings that satisfy consumer needs & expectations, thereby ensuring survival To remain competitive & survive in today's business env companies need to understand consumer behavior thoroughly

Service marketers need to be able to close the gap

between expectations & perceptions of the consumer as shown in the following fig:Expected service

Service gap
Perceived service
Service Sector Management

Customer expectations & perceptions

Understanding the customers wants , perception &

expectations is crucial, if customers perception of service recd is less than expected it will lead to dis- satisfaction thus customer should be given more than his expectation (customer delight)
Customer expectationsformed from variety of influencing

factors such as past exp, current needs, feed back. Types of service expectations- ( two levels of expectations) a) desired level-which he hopes to receive but may not be always possible (eg business school ) b) adequate level-it is the minimum tolerable expectation or the lower level of expectation or the service that the customer will accept.
Service Sector Management

Zone of tolerance
The variation between desired service & adequate

service is called as zone of tolerance, it is the extent to which customers recognize & are willing to accept this variation. A performance below the tolerance zone will frustrate the customer & above it will delight him. One may consider the zone of tolerance as a range or window in which customer does not particularly notice service performance.
e.g banking. airlines

Limit of expectation Zone of tolerance

Desired service
Adequate service
Service Sector Management

Managing customer expectations

Customers main expectations of service are quite

simple & basic, they expect companies to do what they are supposed to do, they expect fundamentals not fancies, performance not promises.
Service org can manage expectations by managing

the following 3 things

Ensuring promise reflect reality Performing the promised service reliably Communicating effectively with customers.
Service Sector Management

Exceeding service expectations

It involves delighting & surprising the customers by giving them more than they expect, it helps in intensifying customer loyalty & ruling out competitive options
Foll are some of the things that companies can do: Strive constantly to provide additional customer value in

every transaction Use a flexible service envelop around the core service to generate surprise benefits Constantly surpass the benefits that the customer has built around the service Treat the customer as if he is the most imp customer and offer personalized package.
Service Sector Management

Customer Perception
It may be defined as the process by which people select, organise & interpret information to form a meaningful picture of the world.

Service Sector Management

Factors that influence customer perception

There are four primary factors, these are service

encounter, evidence of service, image & price 1. Service encounter:- for any customer a clear impression of the service occurs when the customer interacts with the service & starts using the service. Types of service encounters Remote encounters Phone encounters Face to face encounters Sources of satisfaction & dis- satisfaction Recovery Adaptability Spontaneity coping Service Sector Management

2. Service evidence:-Due to the intangible nature of the services customer searches for evidence in every interaction that they have with the organization. Customer will experience three types of service evidences: People Process Physical evidence These three are not mutually exclusive, rather they are interrelated 3. Image:- a favorable image is an asset to an org, because it can impact perception of quality, value & satisfaction 4. Price:- it is a visible indicator of service level & quality , it sends clues about the service. Service Sector Management

Strategies for influencing customer perception

Aim for customer satisfaction in every service

encounter
Reinforce perception by managing the evidence of

service
Communicate realistically & use customer

experience to reinforce images

Use price to enhance customer perceptions of

quality & value

Service Sector Management

Buying Roles
Decision making role Initiator Influencer

Gatekeeper
Decider Buyer

User
Types of buying behavior Complex buying behavior

Dissonance-reducing buyer behavior

Habitual buying behavior Variety seeking buying behavior
Service Sector Management

Market segmentation
Process of market segmentation in services service

provider has three alternatives: Undifferentiated segment no recognition of

distinct segment known as market aggregation. Eg laundry, courier etc

Company

Service Marketing Mix

Undifferentiated Market

Customers

Service Sector Management

 Differentiated Marketing approach separate market

segment identified and separate marketing mix developed to target the segment. Eg tours & travels, insurance etc
Marketing Mix 1 Segment 1

Marketing Mix 2
Company

Segment 2
Segment 3 Segment 4 Segment 5
Customers

Marketing Mix 3 Marketing Mix 4 Marketing Mix 5

Service Sector Management

 Concentrated marketing approach separate segment

is identified, but efforts are concentrated on only one or two specific segment. Eg driving school

Segment 1 Segment 2
Company

Service Marketing Mix

Segment 3 Segment 4 Segment 5

Customers

Service Sector Management

Basis for market segmentation

Demographic segmentation:- age, gender, income, family,

education, occupation ,size of family etc. eg insurance, investment banks, travel & tourism, hotels, health food.
Geographic :- scope factors local , regional , state etc

features factor density of population, climate related.

Psychographic:- social class, lifestyle, personality eg

hotels, health clubs, pubs, investment banks etc

*
Service Sector Management

 Behavioral Segmentation:-

Benefit Segmentation- on the basis of benefit sought

Purchase occasion reasons behind purchase

User status Segmentation usage pattern i.e first time, regular users. Usage Rate- Frequency of use Loyalty Segmentation- hard core, soft core, shifting loyalists, switchers
Service Sector Management

Positioning of services
It involves establishment of a competitive position. It is largely a communication issue dealing with psychology

of the service seeker. It deals with identifying the need of the customer and fulfilling it by identifying a unique selling proposition. It offers an opportunity to create a differentiation in the minds of the service seeker
Levels of positioning: Industry positioning

Organizational positioning
Service sector positioning Individual service positioning
Service Sector Management

Bank

Transaction Services

Lending services

Investment services

Protection services

Service Sector Management

Implementing positioning
Ensure recall value Service should stand out distinct from its competitors Positioning should be evaluated from time to time, less it

does not become outdatedrepositioning Marketing mix is the key to implementing an effective positioning strategy egby way of The service itself The price The promotion The place Process People Physical evidence
Service Sector Management

 Key characteristics of effective positioning It should be meaningful It should be believable

It must be unique
It needs to keep competitors out & not draw them in.

Steps in developing positioning strategy

Determining level of positioning Identifying the key attributes of importance to

selected segment Location of attributes on position map Evaluating position options

Service Sector Management