Professional Documents
Culture Documents
Professional Services
accounting, legal, marketing research, management consulting ,architectural
Financial Services
banking, investment advising, insurance
Others
hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design
Service as a business imperative in manufacturing and IT Deregulated industries and professional service needs Services marketing is different
IT
Globalization
trade in services
IT
Globalization
Rising consumer expectations Affluence Personal Outsourcing Increased desire for buying experiences vs.
things
IT
Globalization
shareholder value productivity and cost savings Manufacturers add value through service and sell
services
Advances in IT Globalization
Internet Greater bandwidth Compact integrated mobile equipment Wireless networking Faster, more powerful software Digitization of text, graphics, audio, video
IT
Globalization
More companies operating on transnational basis Increased international travel International mergers and alliances Offshoring of customer service Foreign competitors invade domestic markets
Advances in IT Globalization
New markets and product categories Increase in demand for services More intense competition
Success hinges on: Understanding customers and competitors Viable business models Creation of value for customers and firm
Salespeople
Customer
Service Employees
Renting portions of larger physical entity (e.g., office space, apartment) can form basis for service
Customers more closely engaged with service suppliers Time plays central role in most services Customer choice criteria may differ between rentals and outright purchases Services offer opportunities for resource sharing
Health Care
hospital, medical practice, dentistry, eye care etc
Professional Services
accounting, legal, marketing research, management consulting ,architectural
Financial Services
banking, investment advising, insurance
Others
hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design
Based on differences in nature of service act (tangible/intangible) and who or what is direct recipient of service (people/possessions), there are four categories of services:
People processing Possession processing
(Fig 1.10)
People Processing
a. b. c. d. Transported Lodged Restored to health Made more beautiful
Customers must:
physically enter the service factory co-operate actively with the service operation
Managers should think about process and output from customers perspective
Possession Processing
Possession Processing
a. b. c. d. Car repairing House cleaning Dry cleaning Sick pet treatment
Customers are less physically involved compared to people processing services Involvement is limited Production and consumption are separable
iii.
iv.
Psychotherapy
Entertainment
Information Processing
Information Processing
a. b. c. d. Accounting Law Marketing research Management consulting
Information is the most intangible form of service output, But may be transformed into enduring forms of service output Line between information processing and mental stimulus processing may be blurred.
Defining Services
Services
Are economic activities offered by one party to another Most commonly employ time-based performances to bring about desired results in: - Recipients themselves - Objects or other assets for which purchasers have responsibility
In exchange for their money, time, and effort, service customers expect to obtain value from
Access to goods, labor, facilities, environments, professional skills, networks, and systems; But they do not normally take ownership of any of the physical elements involved.
Value Added by Physical, Intangible Elements Helps Distinguish Goods and Services (Fig 1.16)
Services Pose Distinctive Marketing Challenges Marketing management tasks in the service sector differ from those in
the manufacturing sector. The eight common differences are:
Most service products cannot be inventoried Intangible elements usually dominate value creation
Differences, Implications, and Difference Implications Marketing-Related Tasks (1) (Table 1.1)
Most service products cannot be inventoried Intangible elements usually dominate value creation Services are often difficult to visualize & understand Customers may be involved in coProduction Customers may be turned away
Marketing-Related Tasks
Use pricing, promotion, reservations to smooth demand; work with ops to manage capacity Emphasize physical clues, employ metaphors and vivid images in advertising Educate customers on making good choices; offer guarantees Develop user-friendly equipment, facilities & systems; train customers, provide good support
Harder to evaluate service & distinguish from competitors Greater risk & uncertainty perceived
Interaction between customer & provider; but poor task execution could affect satisfaction
Difference
People may be part of service experience
Implications
Behavior of service personnel & customers can affect satisfaction Hard to maintain quality, consistency, reliability Difficult to shield customers from failures Time is money; customers want service at convenient times Electronic channels or voice telecommunications
Marketing-Related Tasks
Recruit, train employees to reinforce service concept Shape customer behavior Redesign for simplicity and failure proofing Institute good service recovery procedures
Operational inputs and outputs tend to vary more widely Time factor often assumes great importance
Chapter 1 Summary: Introduction to Services Marketing (1) Reasons for studying services
Service sector dominates economy in most nations Most new jobs are generated by services Powerful forcesgovernment policies, social changes, business trends, IT advances, and globalizationare transforming service markets
Chapter 1 Summary: Introduction to Services Marketing (2) Services present distinctive marketing challenges relative to goods, requiring:
Expanded marketing mix comprising 7Ps instead of traditional 4Ps
Service Blueprinting
A tool for simultaneously depicting the service process, the points of customer contact, and the evidence of service from the customers point of view.
Customer Actions line of interaction Visible Contact Employee Actions line of visibility Invisible Contact Employee Actions line of internal interaction Support Processes
Clearly defining the process to be blueprinted Clearly defining the customer or customer segment that is the focus of the blueprint Who should draw the blueprint? Should the actual or desired service process be blueprinted? Should exceptions/recovery processes be incorporated? What is the appropriate level of detail?
Service Marketers
creating realistic customer expectations:
service system design promotion
Operations Management
rendering the service as promised:
managing fail points training systems quality control
System Technology
providing necessary tools:
system specifications
Positioning of Services
Focused Strategies for Services
A business must set itself apart from its competition. To be successful it must identify and promote itself as the best provider of attributes that are important to target customers.
George S. Day, Market Driven Strategy , New York: The Free Press
Fully focused: Limited range of services to narrow and specific market e.g. Nike, Adidas, Ferrari, BMW,AUDI Opportunities
Developing recognized expertise in a well-defined niche may provide protection against wouldbe competitors Allows firms to charge premium prices
Risks
Market is too small to generate needed volume
Service focused
Narrow range of services to fairly broad market As new segments are added, firm needs to develop knowledge and skills in serving each segment Example: Starbucks Coffee Shop
Unfocused
Broad markets with wide range of services Many service providers fall into this category Danger becoming a jack of all trades and master of none
Market Segmentation
Market Segmentation
Firms vary widely in their abilities to serve different types of customers A market segment is composed of a group of buyers sharing common characteristics, needs, purchasing behavior, and consumption patterns
Principles of Positioning
What is value proposition for our current service products, and market segments?
What customers do we serve now, and which ones would we like to target?
How well do target customers perceive our service products as meeting their needs?
What does our firm stand for in the minds of current and potential customers?
Avoid trap of investing too heavily in points of differences that are easily copied!
Competitor Analysis
Understand competitors strengths and weaknesses
Anticipate responses to potential positioning strategies
High Service
Sheraton
Atlantic
Moderate Service
Italia Castle
Grand
Moderate Luxury
Action?
Regency High Service PALACE Shangri-La No action? Moderate Service
Atlantic
Sheraton Italia Castle Alexander IV Airport Plaza
Less Expensive
Action?
PALACE Financial District No action?
Inner Suburbs
Castle
Italia
Alexander IV Atlantic Airport Plaza
Moderate Luxury
Predictions can be made of how positions may change in light of future developments
Charts and maps can facilitate visual awakening to threats and opportunities, suggest alternative strategic directions
RELATIONSHIP MARKETING
is a philosophy of doing business, a strategic orientation, that focuses on keeping current customers and improving relationships with them does not necessarily emphasize acquiring new customers
thus, the focus is less on attraction, and more on retention and enhancement of customer relationships
Social benefits:
familiarity social support personal relationships
Source: F. F. Reichheld, Loyalty and the Renaissance of Marketing, Marketing Management, vol. 2, no. 4 (1994), p. 15.
Companys most profitable customers, typically heavy users of the product, not overly price sensitive, willing to invest in and try new offerings, and committed customers of the firm Profitability levels are not as high, perhaps because customers want price discounts that limit margins or are simply not as loyal. May be heavy users who minimize risk by working with multiple vendors. Essential customers that provide the volume needed to utilize the firm' capacity but their spending levels, loyalty, and profitability are not substantial enough for special treatment Customers who are costing the firm money. They demand more attention than they are due given their spending and profitability and are sometimes problem customerscomplaining about the firm to others and tying up firm resources.
Relationship Bonds:
financial bonds social bonds customization bonds structural bonds
Negotiation flow
To sell the right to use a service
Product flow
To develop a network of local sites
Payment
Pay by bank card Direct debit
Consultation
Conduct e-mail dialog Use expert systems
Billing
Receive bill Make auction bid Check account status
Order-Taking
Core
Make/confirm reservations Submit applications Order goods, check status
Exceptions
Make special requests Resolve problems
Hospitality
Record preferences
Safekeeping
Track package movements Check repair status
CORE: Use Web to deliver information-based core services
Today
For flexible, responsive service operations: 24/7 service, 24 hours a day, 7 days a week, all around the world
Smart cards
- Store detailed information about customer - Act as electronic purse containing digital money
Electronic channels can be offered together with physical channels, or replace physical channels
What is a Service?
A service is any act of performance that one party can offer another that is essentially intangible and does not result in the ownership of anything; its production may or may not be tied to a physical product.
Service Distinctions
Equipment-based or people-based Service processes Clients presence required or not Personal needs or business needs
Renting portions of larger physical entity (e.g., office space, apartment) can form basis for service
Customers more closely engaged with service suppliers Time plays central role in most services Customer choice criteria may differ between rentals and outright purchases Services offer opportunities for resource sharing
Symbols
Price
Factors Leading to Customer Switching Behavior Pricing Inconvenience Core Service Failure Service Encounter Failures
Ethical Problems
Involuntary Switching
Assurance: the knowledge and courtesy of employees and their ability to convey trust and confidence.
Tangibles: the appearance of physical facilities equipment, personnel, and communication material.
Service-Quality Model
Provider Gap 1: Not knowing what customers expect Provider Gap 2: Not selecting the right service designs and standards Provider Gap 3: Not delivering to service standards Provider Gap 4: Not matching performance to promises
Customer Perceptions
Provider Gap 1
CUSTOMER Expected Service Perceived Service COMPANY Gap 1: The Listening Gap
Provider Gap 2
CUSTOMER
COMPANY
Customer-Driven Service Designs and Standards Gap 2: The Design and Standards Gap Company Perceptions of Consumer Expectations
Provider Gap 3
CUSTOMER
COMPANY
Provider Gap 4
CUSTOMER
COMPANY
How are we doing overall in closing the four company gaps? Which gaps represent our strengths and where are our weaknesses?
Financial success in capacity-constrained business is a function of managements ability to use productive capacity as efficiently and profitably as possible.
Excess capacity
Excess capacity
TIME CYCLE 2
Managing Capacity
Managing Capacity
Enables more people to be served at same level of capacity Stretch and shrink:
Offer inferior extra capacity at peaks (e.g., bus/train standees) Use facilities for longer/shorter periods Reduce amount of time spent in process by minimizing slack time
Cross-train employees
Use part-time employees Customers perform self-service