7 Ps of Services

Service Product

Marketing Strategy for Services

STRATEGY EXECUTION
7 Ps of Services Marketing Product

STRATEGY SELECTION Segmentation

Target Market Selection

Positioning

Price
Place Promotion Physical Evidence Process

People

Service Product
The Service Product Concept * Core benefit * Basic Service * Expected Service * Augmented Service * Potential Service

Service Product

The Flower of Service: Core Product

Surrounded by Cluster of Supplementary Services

FACILITATING SERVICES
Information Order taking

ENHANCING SERVICES
Consultation Hospitality

Billing
Payment

Safekeeping
Exceptions

Service Product

Branding Of Service Product Innovations Service Products: Bundled with Conventional Products & Standalone

Service Product
Service Life Cycle > Line of Visibility > Designing the Front Office: The Tangibles > Designing the Back Office: The Intangibles

Service Product

New Service Development

Major Service Innovations Major Process Innovations Product Line Extensions Process Line Extensions Supplementary Service Innovations Service Improvements Style Changes

1.
2. 3. 4. 5. 6. 7.

Place Distributing Services

Distribution of Supplementary and Core Services Information Processes Physical Processes

Method of Service Delivery

Nature of Interaction between Customer & Service Organization Customer goes to service organization Service organization comes to customer Single Site

Customer & service organization transact at arms length

Multiple Sites

Location Strategies

Wal Mart

Mc Donalds

Rural Initiatives by Banks

Has the Internet made Location a Redundant Variable?

Dissemination of information about a service Delivery or sale of a service using the net as a channel

Transcending Physical Constraints of Location Franchised Outlets Co- marketing Agents or Distribution Partners

Promotion

Advertising Strategies for Overcoming Intangibility

Generality Non searchability Abstractness Impalpability

Promotion

Set Clear Objectives for Marketing Communications

Who is our target audience? What do we need to communicate & achieve? How should we communicate this? Where should we communicate this? When do the communications need to take place?

Educational & Promotional Objectives in Service Settings

Create memorable images of companies & brands Build awareness & interest in an unfamiliar service Build preference- communicate strengths & benefits Compare with competitors Reposition relative to competing offerings Encourage trial- promotional incentives Reduce uncertainty & perceived risk Provide reassurance-service guarantees Familiarize customers- service processes Teach customers- to use service Recognize & reward valued customers & employees

Marketing Communications Mix for Services

Personal Communications Advertising Sales Promotion Publicity & Public Relations Instructional Materials Corporate Design

Promotion

Media Selection

Timing the Promotions

Promotion Budgets

Promotion - Trends

Increasing Use of Below-the Line Media

Co- branding

Pricing
Objectives Revenue & Profit Objectives Patronage & User Base-Related Objectives

Pricing
COST BASED PRICING FC, SVC, VC & Break Even Analysis Activity Based Costing

Pricing
VALUE BASED PRICING Net Value Enhancing Gross Value =>Pricing strategies to reduce uncertainty

Benefit Driven Pricing

Flat Rate Pricing

=>Relationship pricing =>Low cost leadership =>Managing the perception of value

Pricing

COMPETITION BASED PRICING

Cartels

Non price related costs of using competing alternatives are high. Personalization, customization and switching costs matter. Time and location specificity reduce choice.

Demand Variations & Capacity Constraints

Differential pricing Non peak demand Complementary services Reservation systems Part time employees Peak time efficiency Increased consumer participation Shared services Facilities for future Expansion

A Different Approach to Pricing (By Guiltinan)

The Service Base The Degree of Customisation Dominant Attributes

Segmentation

Pricing

Pricing of Financial Services

Pricing in Hyper Competitive Sectors

Confusion based Pricing

Bundling of Services with Goods or Other Services Pricing IT Services

PEOPLE-THE ESSENTIAL RAW MATERIAL

Designed and developed to deliver the quality dimensions such as
R A T E R

Reliability Assurance Tangibles Empathy Responsiveness

People

People Dealing with People Recruiting Employees

Front office jobs or Front line jobs requiring specific skill sets Service orientation

Frontline Service Personnel: Source of Customer Loyalty and Competitive Advantage

Frontline is an important source of differentiation and

competitive advantage. It is:
a core part of the product the service firm the brand

Frontline also drives customer loyalty, with employees

playing key role in anticipating customer needs, customizing service delivery and building personalized relationships

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

11 - 28

Role Stress in the Frontline

3 main causes of role stress:
Person vs. Role: Conflicts between what jobs require and

employees own personality and beliefs

Organization vs. Customer: Dilemma whether to follow

company rules or to satisfy customer demands

Customer vs. Customer: Conflicts between customers

that demand service staff intervention

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

11 - 29

Emotional Labor

The act of expressing socially desired emotions during

service transactions (Hochschild, The Managed Heart)

Three approaches used by employees

surface acting deep acting spontaneous response

Performing emotional labor in response to societys or

managements display rules can be stressful

Good HR practice emphasizes selective recruitment,

training, counseling, strategies to alleviate stress

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

11 - 30

HR Function in Services

Motivation on the job

People as Brand Ambassadors Back office employees

Infosys BPO sector

Train Service Employees Actively

The organizational culture, purpose & strategy Interpersonal & technical skills Product/ service knowledge

Empower the Front Line

Measuring Productivity of People in Service Organizations

Assessing quality Quantity X Quality of Service Output Quantity X Quality of Input

Core themes in PEOPLE management

The service encounter THE

MOMENT OF TRUTH

THE SERVICE MENTALITY AND THE SERVICE PERSONALITY

Cycle of Failure
Customer turnover Repeat emphasis on attracting new customers Failure to develop customer loyalty

Low profit margins

Narrow design of jobs to accommodate low skill level

High employee turnover; poor service quality No continuity in relationship for customer Use of technology to control quality Employee dissatisfaction; poor service attitude Emphasis on rules rather than service

Payment of low wages Employees become bored Minimization of training

Customer dissatisfaction

Minimization of selection effort

Employees cant respond to customer problems

Source: Schlesinger and Heskett

Cycle of Success
Low customer turnover Repeat emphasis on customer loyalty and retention Customer loyalty

Higher profit margins Broadened job designs

Lowered turnover, high service quality

Continuity in relationship with customer

Employee satisfaction, positive service attitude

Train, empower frontline personnel to control quality

Extensive training High customer satisfaction

Above average wages Intensified selection effort Source: Heskett and Schlesinger

Wheel of Successful HR in Service Firms

3. Motivate & Energize your people

1. Hire the right people

Service Excellence & Productivity

2. Enable your people

The Wheel of Successful HR in Service Firms

Leadership that:
Focuses the entire organization on supporting the frontline Fosters a strong service culture with passion for service and productivity Drives values that inspire, energize and guide service providers

1. Hire the Right People

Be the preferred employer & compete for talent market share Intensify the selection process

3. Motivate & Energize Your People

Utilize the full range of rewards

Service Excellence & Productivity 2. Enable Your People

Empower Frontline Build high performance service delivery teams Extensive Training

The Inverted Organizational Pyramid

Customer Base Top Mgmt Middle Mgmt Frontline Staff Frontline Staff

Middle Mgmt & Top Mgmt Support Frontline Inverted Pyramid with a Customer & Frontline Focus

Traditional Organizational Pyramid

Legend:

= Service encounters, or Moments of Truth.

Virtuous Circle

Virtuous Circle

An investment in your employees ability to provide superior service to customers can be seen as a virtuous circle. Effort spent in selecting and training employees and creating a corporate culture in which they are empowered can lead to increased employee satisfaction and employee competence. This will likely result in superior service delivery and customer satisfaction. This in turn will create customer loyalty, improved sales levels, and higher profit margins. Some of these profits can be reinvested in employee development thereby initiating another iteration of a virtuous cycle.

Physical Evidence and The

Servicescape

Because services are intangible, customers often rely on tangible cues, or physical evidence, to evaluate the service before its purchase and to assess their satisfaction with the service during and after consumption.

Elements of Physical Evidence

SERVICESCAPE Facility Exterior
Exterior design
Signage Parking

OTHER TANGIBLES

Business cards
Stationery Billing statements

Landscape
Surrounding Environment

Reports
Employee dress Uniforms Brochures Web pages

Facility Interior
Interior design
Equipment Signage Layout

Virtual servicescape

Types of Servicescapes

Servicescape Use

Self service environment Remote service Interpersonal services

Complexity of the Servicescape

Lean Elaborate

Roles of The Servicescape

Package Facilitator Socializer Differentiator

Physical Evidence Strategy

Recognize the Strategic Impact of Physical Evidence Map the Physical Evidence of Service Clarify Roles of the Servicescape Assess and Identify Physical Evidence Opportunities Be prepared to Update and Modernize the Evidence Work Cross-Functionally

DESIGNING SERVICE PROCESSES

McGraw-Hill/Irwin

2003 The McGraw-Hill Companies, Inc., All Rights Reserved.

SERVICE DESIGN CHALLENGES

Four Risks Inherent to Describing Services 1. Oversimplification

2. Incompleteness
3. Subjectivity 4. Biased Interpretation

Source: G. Lynn Shostack, "Designing Services That Deliver," Harvard Business Review, January-February 1984, pp. 133-139.

DESIGNING THE SERVICE PROCESS

Service Concept: Focuses on satisfying the

customer.

Service Content: Defines what is included in the services itself. Service Style: Describes how the service will be delivered.

DESIGNING THE SERVICE PROCESS SERVICE CONCEPT

Service Operation Service Experience

Service Outcome
Value of the Service

Source: Johnston, R., Clark G., 2001. Service Operations Management, Prentice Hall, Harlow, England. Source: Clark, G., Johnston R., Shulver M., 2000. Exploiting the service concept for service design and Development. In: Fitzsimmons J., and Fitzsimmons M. (Eds), New Service Design, SAGE Publications, Thousand Oaks, CA, pp 71-91.

DESIGNING THE SERVICE PROCESS

SERVICE CONTENT
Steps that are followed to serve customers.
Points in the process at which workers might need to make decisions.

Points in the process at which customers might need to wait.

PROCESS FLOW DIAGRAM: CUSTOMERS PERSPECTIVE

Enter

Give Name to Hostess

Wait to be Seated

Review Menu

Wait to Place Order

Wait to Receive Order

Place Order

Eat

Wait for Check

Pay Check

Wait for Change

Leave

Service Blueprint
A tool for simultaneously depicting the service process, the points of customer contact, and the evidence of service from the customers point of view.
Process
Service Blueprint Points of Contact Evidence

SERVICE BLUEPRINT COMPONENTS

Physical Evidence

______ ______ ______

______ ______ ______

______ ______ ______

Customer

Line of interaction
(onstage)

Contact Person

Line of visibility
(backstage)

Line of internal interaction

Support Processes

SERVICE BLUEPRINT OF RESTAURANT SERVICE

Physical Evidence

Parking Lot

Waiting area

Dining area

Menu, Special boards

Serving trays, Dishes Food

Menu, Special boards

Serving trays, Dishes Food

Bill

Customer

Enter restaurant

Give name to hostess

Go to table

Review Menu

Place order

Receive food

Eat

Review Menu

Place dessert order

Eat

Pay check

Receive change

Leave restaurant

Line of interaction
(onstage)

Contact Person

Greet party

Show Party to table

Provide menu

Take order

Serve beverages

Serve meal

Clear dishes

Provide dessert menu

Take Dessert Order

Serve dessert

Provide check

Bring change

Line of visibility
(backstage)

Check table availability

Place order in kitchen

Pick up order

Place order in kitchen

Pick up order

Process payment

Line of internal interaction

Prepare Meal Inform waiter Prepare dessert

Support Processes

Service Blueprint

Identifying Fail Points: Setting Service Standards

Improving Reliability of Service Processes by Failure Proofing

* Fail Safe Methods for Service Personnel * Fail Safe Methods for the Customer

Service Process Redesign

Eliminating non-value adding steps Shifting to self-service Delivering direct service Bundling services Redesigning the physical aspects of service processes