MM-403-SERVICE MARKETING

SAURABH GARG

Course Contents
The emergence of service economy; Nature of services; Difference in goods and service Marketing Challenges in service business Marketing framework for service business The service classification: Service product

development

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 The service consumer behavior Service management trinity :service vision and service strategy Quality issues and quality models; managing productivity and differentiation in a service organization: demand supply management

 Advertising branding and packaging of services Recovery management Relationship marketing Employee empowerment Customer involvement in service

WHY STUDY SERVICE MARKETING

YEAR

SERVICE SECTOR CONTRIBUTION TO INDIAN ECONOMY

TERTIARY SECTOR

GROWTH OVER PERIOD (% in services) +2.1 +9.6 +12.9 +8.6 +22.5 +12

1950-51 1960-61 1970-71 1980-81 1990-91 1999-2000 2001-2011

28.5 29.1 31.9 36.0 39.1 47.9 56.5

Indian Service Sector: An Overview

The services sector (financial and nonfinancial) attracted cumulative foreign direct investments (FDI) worth US$ 26,873 million between April 2000 and February 2011, accounting for 21 % of the total FDI inflows.

Department of Industrial Policy and Promotion (DIPP).

Indian Service Sector: An Overview

The INSURANCE sector to reach US$ 350-400 billion in premium income by 2020, making India
amongst the top 3 life insurance markets and top 15 non-life insurance markets by the year

Indian Service Sector: An Overview

The HEALTH services sectors sale is expected to grow by 19.8 % in 2011-12 driven by a healthy rise in sales. The sectors PAT increased by a whopping 107.1 % (Q3- 2010-11)

Indian Service Sector: An Overview

MEDICAL TOURISM in India has emerged as the fastest growing segment of tourism industry with 3,371 hospitals and around 754,985 registered practitioners.

Indian Service Sector: An Overview

The overall Indian IT- ITeS revenue has grown to US$ 63.7 billion in 2009-10 and an estimated US$ 76.1 billion in 2010-11, translating into a CAGR of 22.5 % from 2004-05 to 2010-11.

Indian Service Sector: An Overview

BANKING and FINANCIAL services, HEALTHCARE emerging as the most attractive sectors for the investors.

Indicators
TRANSPORT sector growth,
cargo handled at major ports (0.5%), cargo handled by the civil aviation (25.3%), passengers handled by the civil aviation (12.2%) in Q2 of 2010-11 over Q2 of 2009-10.

Indicators
COMMUNICATIONS sectors, the total stock of telephone connections registered growth 38.7 % in Q2 of 201011 over Q2 of 2009-10. Aggregate bank deposits, and bank credits have shown growth rates of 14.3 %, and 19.0 %, respectively in Q2 of 2010-11 over Q2 of 2009-10.

Indicators
The domestic HOSPITALITY sector is expected to see investments of over US$ 11 billion by 2012, with 40 international brands making their presence in the country in the next few years.
Foreign tourist arrivals (FTAs) during the period Jan-Mar 2011 were 1.73 million with a growth of 11.1 % over last year. In FTA a growth rate of 7.4 % in Mar 2011 over Mar 2010 was recorded.

Exports

India ranks 12th in commercial services exports.

Exports
The contribution of the services sector to the Indian economy has been manifold:
a 55.2 % share in gross domestic product (GDP), growing by 10 % annually contributing to about a quarter of total employment.

Investments

C-Edge, a joint venture of the country's largest bank SBI with Tata Consultancy Services (TCS), is getting anywhere anytime banking services to rural customers.

Investments
Reliance Industries Ltd (RIL) has announced its entry into financial services through a joint venture (JV) with the New York-based D E Shaw Group. The JV would draw upon the core competencies of both firms to develop a platform that can serve the growing needs of Indian companies and individuals.

Investments
The BCG Group plans to build a multidisciplinary health facility, BCG Healthsquare in Kochi, Kerala, by August 2011. The companys longterm plan is to set a 750,000 square feet health village with an estimated cost of US$ 88.91 million.

Investments
Hospitality group EIH, which runs the Oberoi hotels, is actively looking to expand in Europe and intends to open three out of its next five hotels outside India even as it continues to see opportunities in the domestic market.

Investments
Delhi-based upscale hotel chain Lemon Tree Hotels plans to have at least 20 hotels of the four-star category operational in two years, as part of its strategy to tap the potential in cities in the North, West and South of India.

Investments
The Delhi Metro, the first metro train to Indira Gandhi International (IGI) airport, with coaches imported from Spain, will cover a 23 km stretch of the Airport Express Line. The line has been built at a cost of US$ 1.26 billion.

Services
There are no such thing as service industries. There are only industries whose service components are greater or less than those of other industries. Everybody is in service.

-Theodore Levitt-

Understanding Services

Activities, benefits and satisfactions, which are offered for sale or are provided in connection with the sale of goods A M A, Committee of Definitions ,1960

What is a service?
It is intangible. It does not result in ownership. It may or may not be attached with a physical product

Examples of Service Sector

UTILITY Electricity , water supply Legal and Defence services.Judiciary, Navy Air force, Army and Police Transport .Railways, Air Transport, Postal Distribution .Wholesale retailing etc

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Examples of Service Sector

Banking and Insurance.Private Public, Stock broking Entertainment..Theater, cinema, clubs, hotels, restaurants OthersHealth clubs, beauty parlors, domestic help, dry-cleaning, matrimonial services

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Understanding Services
Services include all economic activities whose output is not a physical product or construction, is generally consumed at the time it is produced, and provides added value in forms (such as convenience, amusement, timeliness, comfort or health) that are essentially intangible concerns of its first purchaser (Quinn, Baruch and Paquette, 1987).

Understanding Services
Services are deeds, processes, and performances. A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer.

Role of Service in our Economy

REASONS FOR GROWTH OF SERVICE INDUSTRY

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 Affluence.Increase in per capita Income..Personal security , interior design Leisure Time.Holiday , Entertainment Life Expectancy.old age homes , nursing homes Health Consciousness .health clubs , gyms

 Working Wives.packed foods , day care Product Complexity..microwave ovens , water purifiers , home computers Lifes Complexitytax consultants, legal advisors New Products..internet service providers

Difference between Services and Goods

Difference between physical goods and services

Physical goods tangible homogeneous Production and distribution are separated from consumption A thing Core value processed in factory Customers do not participate in the production process Can be kept in stock Transfer of ownership Services intangible heterogeneous Production, distribution and consumption are simultaneous processes An activity or process Core value produced in the buyer-seller interaction Customers participate in production Cannot be kept in stock No transfer of ownership

The Goods-Services Continuum

Canned Ready- AutoDraperies, RestRepairs: Air foods made mobiles Carpets aurant auto, house, travel clothes meals landscaping

Insurance, Consulting, Teaching

MOSTLY GOODS

MOSTLY SERVICES

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1. Intangibility: An Important and Unique difference.

Compare the difference between purchasing a movie ticket and purchasing a pair of shoes

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Tangibility Spectrum
Salt

Soft Drinks Detergents Automobiles Cosmetics Fast-food Outlets

Fast-food Outlets

Intangible Dominant

Tangible Dominant

Advertising Agencies Airlines Investment Management Consulting

Teaching

Marketing Problems caused by Intangibility

Lack of ability to be stored.results in constant demand and supply problems Lack of protection by patents Difficulty in Displaying or communicating serviceseg: Insurance Difficulty in pricing Services

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Possible Solutions to Intangibility Problems

The use of Tangible clues. The use of personal sources of information Creation of a strong brand image

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2. Inseparability
It refers to: The service providers physical connection to the service being provided The customer involvement in the service production process The involvement of other customers in the service production process
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3. Heterogeneity
Lack of ability to control the service quality before it reaches the consumers.

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4.Perishability
Services cannot be inventoried

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Classifying Services

Basis for Classification

End user
Consumer: leisure, hairdressing, personal finance, package holidays. Business to business: advertising agencies, printing, accountancy, consultancy. . Industrial: plant maintenance and repair, work wear and hygiene, installation, project management.

Service Tangibility
The degree of tangibility of a service can be used to classify services: Highly tangible: car rental, vending machines,telecommunications. Service linked to tangible goods: domestic appliance repair, car service. Highly intangible: psychotherapy, consultancy, legal services.
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People-based Services
Services can be broken down into labour-intensive (people based) and equipment-based services. This can also be represented by the degree of contact: People-based services - high contact: education, dental care, restaurants, medical services. Equipment-based -low contact automatic car wash,launderette, vending machine, cinema.

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The expertise and skills of the service provider can be broken down into the following categories: Professional: medical services, legal services, accountancy, tutoring. Non-professional: babysitting, care taking, casual labor.

Expertise

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Profit Orientation
The overall business orientation is a recognized means of classification: Not-for-profit: The Scouts Association, charities, public sector leisure facilities. Commercial: banks, airlines, tour operators, hotel and catering services.

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NEW PRODUCT DEVELOPMENT

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What is a New Product?

A new product is a product that is new to the company introducing it even though it may have been made in some form by the other. Any product that consumers treat as an addition to the available choices could be considered as a new product.
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ROUTES OF NEW PRODUCTS DEVELOPMENT

New to the world products:New products that create an entirely new market. New product lines : New products that allow a company to enter an established market for first time. Additions to the existing product lines : New products that supplement to companys established product lines.( package sizes , flavors etc.)
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ROUTES OF NEW PRODUCTS DEVELOPMENT

Improvement and revisions of existing products : New products that provide improved performance. Repositioning : Existing products that are targeted to new markets or market segments. Cost reductions : New products that provide similar performance at lower cost.
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Why New Product ?

Growth and Expansion of the company. Higher profit margins. Utilization of existing capacity. Competitive pressure.

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Stages in New Product Development

Step 1

IDEA GENERATION

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SOURCES OF NEW IDEAS

Internal sources:
Basic research. Production deptt. Sales people. Top management.

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SOURCES OF NEW IDEAS

External sources : Secondary sources of information. Competitors. Customers. Distributors. Foreign markets.
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Step 2 Idea Screening

All good ideas are not equally promising. Resource constraints. Screening Methods : Checklist method. Idea rating method.
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 Drop error occurs when the company dismisses an otherwise good idea because of lack of vision of its potentialities. Ford recognize the promise of an automobile but he did not realize the need to segment the market into price and performance categories which was fully capitalize by General Motors of 3/13/2012 Saurabh Garg 61

 Go Error : It occurs when the company lets a poor idea to proceed to development and commercialization stages. Absolute failure. Partial product failure Relative product failure.
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 Absolute failure. Resulting in loss of money and its sales do not cover even variable costs. Partial product failure. That results in loss of money but its sales cover variable costs and some of fixed costs. Relative product failure. That yields a profit which is lower than companys normal rate of profit.
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Step 3 Business Analysis

It is an in-depth study of the estimated economic feasibility of new product ideas. Demand analysis Cost analysis Profitability analysis

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Step 4 Product Development

During the development stage the product idea is converted into tangible physical product. This

involves design and formulation of the product and development of a technical and commercial method of manufacture.
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 Technical development aspect :

Applied engineering research. Manufacturing method research.

Market development aspect:

Product concept testing Developing other elements of marketing mix.
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STEP 5 Test Marketing

Test Marketing is the controlled experiment done in a limited but carefully selected part of the whole market . It is the actual conduct of marketing campaign within a limited market for a period that is hoped to be long enough to indicate its probable success on a large scale and indefinite basis. 3/13/2012 Saurabh Garg 67

 To improve knowledge of potential product sales. To pretest alternative marketing plans. To predict product faults. To know reaction of competitors.

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STEP 6 Commercialization
It is the actual introduction of the product into the market place , with all the related decisions and resource commitments. Entire market versus selected segments. Crash versus roll out introduction.
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 Crash introduction. It is the full scale commercialization of new product as quickly as possible. The resources needed to move into target markets are immediately committed. Roll out introduction. Target markets are decided geographically and initially the new product is introduced only in one or few areas.
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The Service Consumer Behavior

Consumer Behaviour
This is defined as the actions & beliefs that guide a person to purchase a particular product or service. The emphasis on services by companies across the worlds has lead to a growth in the expectations of customers today.

The purchase decisions of customers are not made in isolation, but rather they are influenced by environmental factors such as culture, social class, family & other factors

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The study of CB requires inputs from various disciplines, such as sociology, psychology & economy. CB deals with the study of the factors that influence a customer in purchasing a product, service and the process that he goes through, to evaluate the product/service prior to & even after its purchase & use.
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THE CONSUMER BUYING PROCESS :

Marketing scholars have developed a five stage model of the buying decision process. It's not necessary that all the stages are involved in all decision processes. Depending on the level & views of the decision any stage can be skipped or changed in order of implementation.
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 1. Problem / Need Recognition when the buyer recognises a problem or a need may be triggered by an internal or external stimuli. Marketer are good in arousing these stimuli by understanding circumstances which trigger them.

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 2. Information Seeking (Pre-purchase Search) when an aroused consumer seeks more & detailed information. Active Information Search searching for all possible sources of info like reading materials, phoning a friend, visiting stores, websites, etc. Marketers must understand the major sources of info & their relative type & nature of influence on the final purchase decision.

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 These sources fall into four major groups : i. Personal sources family, friends, neighbors, acquaintances. ii. Commercial sources advertising, sales persons, dealers, packaging, displays, iii. Public sources mass media, consumer rating organizations iv. Experiential sources handling, examining, using the products.
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 3. Evaluation of Alternatives this involves selection of a few best choices available by a systematic, conscious & rational basis.

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 4. Purchase Decision / Behaviour the consumer forms an intention to buy the most preferred brand in a given category of products.

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Decision process involves

i. Total set all brands available in a category of products, ii. Awareness set the consumer comes to know only a subset of these brands, iii. Consideration set the consumers initial buying criteria match these brands and he gathers more info, iv. Choice set finally a few will remain which may be all acceptable as a buy, v. Final Decision this brand is finally decided to be purchased.
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 In executing a purchase decision the consumer may make up to 5 sub decisions : i. Brand decision - which company & brand, ii. Vendor decision - which shop & place iii. Quantity decision what quantity, iv. Timing decision when to buy, v. Payment decision cash, credit, instalment, credit/debit card.

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 5. Post Purchase Behaviour / Evaluation After purchasing the product the consumer will experience some level of satisfaction / dissatisfaction. A marketers job is to carefully monitor the following: a. Post purchase satisfaction the buyers satisfaction is a function of closeness between its expectation & the products perceived performance.

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 i. If performance falls short of expectation, then the customer is disappointed, ii. If performance meets the expectation, then the customer is satisfied, iii. If performance exceeds the expectation, then the customer is delighted.

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 b. Post purchase actions the level of satisfaction / dissatisfaction with the product shall decide the consumers subsequent behavior : i. Satisfied consumers may repeat the purchase, may recommend to others to buy ii. Dissatisfied consumer may abandon or return or exchange the product. They may even take public action or legal action. They may stop buying the product (exit option) or warn others not to buy (voice option).
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Factors Influencing Consumer Behaviour

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 1. Culture : Culture consists of values, norms, roles & customs shared by members of a society. It differs from place to place. The culture of a place plays a vital role in determining the value & attitude of the people of that place, and in turn their purchase behaviour So the marketers should have an understanding of the culture of different places, in which they like to market services.

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 2. Sub-Cultures : Sub-Cultures are smaller divisions in a society with similar norms, values, behaviour patterns, which make them distinct from the main culture. As lifestyle, geography, ethnicity, race & religion form the basis for the sub-culture.

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 3. Social Class : People having similar lifestyles, interest, values, behaviours, & norms are grouped under a social class. Their similarity in beliefs forms the basis for market segmentation, and effects their shopping patterns or the kind of products / services they purchase. Thus, marketers offer products & services aimed at the social class of people.
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 4. Reference groups : An individual uses the perspectives of a reference group as the basis for his actions, judgement & opinion. Marketers make use of reference group influences to develop ads by associating products/services or some behaviours with some types of reference groups.
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 5. Family : Purchases are often not made by individuals alone, but a whole lot of other people too have a say in the purchase decision. Marketers need to recognise the role played by these various individuals in the purchase decision, in order to target their marketing message at them.
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 BUYING DECISION PROCESS : Marketers are interested in understanding how consumers make buying decision,especially who makes the decision, type of buying decision & the steps involved in the buying process. Often it is found that its a complex process with several influencing factors controlling it. The following are the five distinguishable roles people play :

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 1. Initiator the person who first suggests the idea of buying the product or service. 2. Influencer the person whose view, opinion or advice influences the decision. 3. Decider the person who decides on any component of a buying decision whether to buy, what to buy, how to buy, when to buy or how much to buy. 4. Buyer the person who makes the actual purchase. 5. User the person who finally uses or consumes the product or services.
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 CUSTOMER EXPECTATIONS & PERCEPTIONS Philip Kotlers definition of Satisfaction : Its the level of a customers felt state resulting from comparing a products or services perceived performance standard against the customers expectations. Understanding Customer Requirements : 3/13/2012 Saurabh Garg 94

 Simply stated we have three things : 1. Perception : What the customer knows about a product / service, 2. Expectation : What the customer expects from the product / service when he buys, 3. Satisfaction : What the customer gets after using it both mentally & physically as compared to what he has expected in a positive way. Or it is the difference between what he gets & what he expects.

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Types of Services & Expectations :

1. Adequate Services : This is the minimum level of service that the customers are willing to accept from a service provider, and is based on customers perception of what level of service is available to them. Customers are heavily dissatisfied or disappointed if the level of service is below the adequate level of expectations. And if this is met then satisfaction occurs. This level sometimes may change due to specific situations & the customers perception of available alternatives.
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 2. Desired Services : This level is above the minimum level of service and is the level of expectation which the customers desire or hope. This level is a function of the customers exposure of better services, knowledge & information about services. If this level is met or exceeded then the customer is delighted. This level may change depending on situation and from customer to customer.

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 3. Predicted services : This level is somewhere in between the adequate & desired levels of services and are decided by several external factors, like situation, time, place, past experience, etc. And this in turn affects the level of adequate service. 4. Zone of Tolerance : The difference or the gap between the adequate & desired levels of services is the Zone of Tolerance and just plain satisfaction occurs here.

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 Implication for Service Provider : Knowledge of the factors influencing CB has several implications for service providers

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 1. Customers gather & rely on information obtained from personal sources when making service purchase decisions. Marketers should be careful in satisfying customers by meeting or exceeding their expectations.Otherwise, customers might spread negative wordof-mouth publicity.

 2. Time being a crucial factor in gaining ahead of the competitors, customers in the new millennium are willing to trade off money against time. Service providers, thus compete on the basis of time taken to deliver the service. Transportations & logistic services that are time bound provide new opportunities for service providers to differentiate themselves from their competitors.

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 3. The intangibility characteristics of service provides a good opportunity and can be well exploited by service providers to provide services on line. Unlike in physical goods, services can be offered electronically. 4. Customers in the new millennium demand both quality & customisation simultaneously. This possesses a challenge for service providers as both these aspects have different requirements. Quality requires standardisation while customisation requires variability. However, marketers can meet this challenge by being a little creative.
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THANKS
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