Introduction to Services Marketing

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-

It is the part of the product or the full product for which the customer is willing to see value and pay for it. The services sector has been growing at a rate of 8% per annum in recent years More than half of our GDP is accounted for from the services sector This sector dominates with the best jobs, best talent and best incomes

What is a Service

A Service is a type of a product. a deed performed by one party for another Discussions about the marketing of goods apply to services as well. Services have special characteristics that make them different than products.

Importance of services

In all parts of the world, the service sector is on an all time boom. It has a contribution of 54% in Indias GDP, and this is excepted to grow in the future. All businesses today offer services bundled with the marketing of goods to derive a competitive edge in the market over similar and competing products.

Phenomenal Growth attributes to

Rapid increase in per capita income Double income families Increase in leisure Changed life style Increased Life expectancy Increased complexity in life Specialization in Profession & Business

Important features

Lack of Physical output or construction. Benefit to the receiver from the service rather than the product offered. The intangible nature of services. The possible combination of services with the production of goods. Marketing of an idea or a concept.

Contribution of Services to GDP

-- Generally contribution of Service to Gross Domestic Product of a nation increases as its economy develops

Country China Brazil India

Service contributes 40.0% of GDP 54.0 60.7 Canada 68.5 Japan U.K.

73.1 73.4 U.S. 78.6

Tangible / Intangible Attributes

Tangible touch see taste smell

Intangible cant see cant touch cant smell cant taste

Goods and Services: Scale of Elemental Dominance

The goods and service continuum

Tangible Goods : Do not offer any amount of services. Toothpaste, salt, soaps etc are examples. Customers purchase these products on the merit of the advantages of the tangible parts. Tangible goods with some services : In some cases, customers require some knowledge about installation, training about the use of products, after sales service. The spread of the word of mouth depend upon these attributes. Examples are consumer durables, computers, cars etc.

Goods and services in near equal measures : People have different reasons for choosing a bar or a restaurant. For some, the equality of food and cocktails is the key, for some others the ambiance is the key. Here, to satisfy a customer, a hotel should provide excellent food (tangible ) and service ( atmosphere, hospitality ).

Service accompanied by minor goods: Some industries provide services (airlines ) accompanied by some amount of products (food, soft drinks etc ) ISPs provide the service of internet. In association they also give CD of games, utilities etc.

Pure services, not accompanied by goods : Some companies deliver a pure service like consultation, gym etc. Here, there is no other consideration by buyers but the purchase depends purely on the service quality.

Service Classifications
Service Equipment-based People-based

Automated

Monitored by relatively unskilled operators

Operated by skilled operators

Unskilled labor

Skilled labor

Professionals

Vending machines Automated car washes ATM

Motion picture theaters Dry cleaning Taxis

Electric utilities Airlines Computer network installation

Lawn care Security guards Janitorial services

Appliance repair Plumbing Catering

Lawyers Managing consultants Accountants

Special Characteristics of Services

Intangibility

Inconsistency
(Heterogeneous)

Inseparable
Simultaneous Production and Consumption

Inventory
(Perishability)

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

INTANGIBILITY

Pure services cannot be assessed by sight, feel, smell, taste etc. Emphasis on processes rather than outcomes Can only assess a service after it has been consumed Services purchases may be perceived as more risky than goods

Implications of Intangibility

Services cannot be inventoried Services cannot be patented Services cannot be readily displayed or communicated Pricing is difficult

VARIABILITY ( Inconsistent )

Each producer-consumer encounter may be unique May be little opportunity for quality control to maintain consistency It is often easy to adapt services to the specific needs of individual consumers

Implications of Heterogeneity

Service delivery and customer satisfaction depend on employee actions Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted

INSEPARABILITY

Production of a service cannot be separated from its consumption Consumers are co-producers of a service Makes quality control more difficult Has implications for accessibility to services

Implications of Simultaneous Production and Consumption

Customers participate in and affect the transaction Employees affect the service outcome Decentralization may be essential Mass production is difficult

PERISHABILITY

Services cannot be stored If capacity is not used, the opportunity to sell it is lost forever Supply and demand must be carefully matched Mismatch between supply and demand can impact directly on consumers

Implications of Perishability

It is difficult to synchronize supply and demand with services Services cannot be returned or resold

Service Marketing Triangle

-- Service marketing is all about promises promises made and promises kept to satisfaction of customers.

-- So framework of service may be split into three arms viz. * making the promise * enabling the promise & * delivering the promise
Management

Internal Marketing (enabling the promise)

External Marketing ( making the promise)

Contact employee Interactive Marketing (delivering the promise)

Customers

External Marketing of Services Comprises of activities through which company makes promises to customers about service like Advertising, Sales Promotion, Pricing, Availability etc.
In addition, promises are made by Contact employees during interactions Proper design and dcor of service area (ambience) Development of service process ( blueprint) Effective external marketing involves consistent and realistic promises which the company can keep. And not overpromises that raise customers expectation thereby leads to dissatisfaction and poor customer relationship.

Internal Marketing Company has to develop a service blueprint depicting step by step progress of service process. Company should impart on- and off-the-job training to contact employees who will actually deliver the service.
Company should equip contact employees with suitable tools, requisite knowledge and skills so as to provide service satisfactorily. Company should ensure proper motivation and control of contact employees so that they remain in ship-shape to provide satisfactory service.

Interactive Marketing It is unique of Service Marketing that the customer interacts with contact employee (i.e. service provider) in delivering the promised service, unlike products where customers only consume or use the product without interacting during its manufacture.
Hence it is essential that contact employee is equipped with skills, knowledge, tools and motivated to do his best in service delivery. For same reasons Ambience i.e. arena where service is delivered should be congenial for both players.

Technology is fast emerging as the fourth apex of Service Triangle for customer satisfaction, giving it the shape of a Pyramid.

Strategy for Customer Satisfaction through Quality Service Delivery Key aspect of this strategy is that the contact employees should be willing and also able to deliver quality service. So successful service-providing companies endeavor to build teams of customer-oriented, service-minded contact employees in Internal Marketing process through : * hiring right persons * developing them to deliver quality service * provide them with needed tangibles including motivation & * retaining best people.

Extended Marketing Mix

Marketing mix are elements that marketer uses to satisfy or communicate with customers. Traditionally, marketing mix composes of 4 Ps viz. Product, Price, Place (distribution) and Promotion. These elements are interrelated and collectively help in delivering satisfaction to customers in selected segments at profit to organization. Services are intangible, quite often, customers use the ambience i.e. building, lawns or accompanying tangibles - equipments in operation theatre of hospital to gauge the level of service experience.

Extended Marketing Mix

Realizing importance of these additional variables in service marketing , marketers have taken three additional elements as Service Marketing Mix elements viz.: People Human actors who play role in service delivery to influence customers service experience and perception like employees, customers etc. Physical Evidence Environment where service is delivered or service-provider and customer interact, the ambience, facility design, equipments, employee -dress, logo, business card and other tangibles. Process Actual procedures, mechanism, flow of activities and equipments by which service is delivered.

Major Challenges in Service Marketing

1. Delivery of service consistently at same level of quality -- Because services produced by providers are not consistent -- And services cannot be mass-produced -- So delivery of high quality service becomes costlier. 2. Wide fluctuation in demand of service --Demand for hotel accommodation, tables at restaurant, public transport etc vary greatly with time. 3. Designing of new services is a challenge to marketers --Identifying precisely what is wanted by customers is complex so requires intensive market research.

4. Role of Service-providers -- Most of services are produced and delivered when in close proximity of customer so right selection, training and motivation of service-providers is essential.

5. Wider Competition -- Todays employee / franchisee may become tomorrows competitor. -Attrition rate is high in service industry particularly among skilled service-providers.