Introduction to Services

Marketing

Module I
Faculty: J.Rai, IIPM-School of Management, Kansbahal 1
 Module – I Overview
• Importance of Service sector.
• Why study service marketing.
• “Service”.
• Nature of Services.
• Characteristics of services
• Goods vs Services
• Service Mix
• Classification of services
• Service marketing framework
• Challenges in Service
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Faculty: J.Rai, IIPM-School of Management, Kansbahal 2
The Service Management Decision Framework

W h a t B u sin e ss A r e W e In ?

W h a t S e r v ice P r o ce sse s C a n B e U s e d in W h o A r e O u r C u s to m e r s a n d H o w S h o u ld
O u r O p e r a ti o n ? W e R e l a t e to T h e m ?

W h a t S h o u l d b e th e C o r e a n d S u p p l e m e n ta r y
E l e m e n t s o f O u r S e r v i c e P r o d u c t?

W h a t P r ice S h o u ld W e C h a r g e H o w S h o u ld W e C o m m u n ic a te W h a t
fo r O u r S e r v ic e s ? O u r S e r v i c e H a s to O ff e r ?

W h a t A r e th e O p tio n s fo r D e liv e r in g H o w C a n W e B a l a n c e P r o d u c ti v i t y
O u r S e r v ice ? a n d Q u a lity ?

H o w S h o u l d W e M a t c h D e m a n d a n d P r o d u c ti v e C a p a c i t y ?

W h a t A r e A p p r o p r ia te R o le s fo r P e o p le a n d Te c h n o lo g y ?

H o w C a n O u r F ir m A ch ie v e S e r v ice L e a d e r s h ip ?
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Faculty: J.Rai, IIPM-School of Management, Kansbahal 3
How Important is the Service Sector in
Our Economy?

• In most countries, services add more economic value than

agriculture, raw materials and manufacturing combined
• In developed economies, employment is dominated by service
jobs and most new job growth comes from services
• Jobs range from high-paid professionals and technicians to
minimum-wage positions
• Service organizations can be any size—from huge global
corporations to local small businesses
• Most activities by government agencies and nonprofit
organizations involve services

Module I
Faculty: J.Rai, IIPM-School of Management, Kansbahal 4
Why Study Services Marketing?

• Significantly different from goods marketing

• Relatively new discipline with a strong
interdisciplinary base
• Importance of services sector
– 70% - 80% GDP in highly dev. economies
– Service sector in India approx 50%

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 5
 Evolving of Services
• Changing pattern of government regulations.
• Privatization of some public/ nonprofit service
• Technological innovations.
• Internationalization & Globalization.
• Expansion of leasing & rental business.
• Manufacturers as service providers.
• Hiring of employees.

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 6
What is a Product?
Anything that can be offered to a market for
attention, acquisition, use, or consumption
and that might satisfy a want or need.

– Includes: Goods, services, events,

persons, places, organizations, ideas, or
some combination thereof.

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 7
What is a Service?
• An act or performance offered by one party to another
(performances are intangible, but may involve use of
physical products)

• An economic activity that does not result in ownership

• A process that creates benefits by facilitating a desired

change in customers themselves, physical possessions, or
intangible assets

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 8
Government Sector

Courts
Employment. Exchanges Services
Hospitals
Municipal Services
Post Office
Schools, Colleges etc

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 9
Business Sector

Airlines
Banks Services
Insurance
Management
Consultants
Lawyer's
Doctors
Motion Pictures

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 10
Manufacturers

Computers Operators
Legal Staff Services
Accountants
Administrative Staff
Supportive Staff
Security Staff

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 11
“ Something that can be bought and
sold but which cannot be dropped on
your foot !”

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 12
 Examples of Service Industries

• Health Care
– hospital, medical practice, dentistry, eye care
• Professional Services
– accounting, legal, architectural
• Financial Services
– banking, investment advising, insurance
• Hospitality
– restaurant, hotel/motel, bed & breakfast,
– ski resort, rafting
• Travel
– airlines, travel agencies, theme park
• Others:
– hair styling, pest control, plumbing, lawn maintenance, counseling
services, health club
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Faculty: J.Rai, IIPM-School of Management, Kansbahal 13
Internal Services

• Service elements within an organization that facilitate creation of--or

add value to--its final output
• Includes:
– accounting and payroll administration
– recruitment and training
– legal services
– transportation
– catering and food services
– cleaning and landscaping
• Increasingly, these services are being outsourced
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Faculty: J.Rai, IIPM-School of Management, Kansbahal 14
 Need For Services & Products
Old Age Care

Senior Citizen
Home
Wheel Chair

Dental Care

Dental Chair
Dental Equipments

Photography

Camera
Films
Printing

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 15
 Module I
Faculty: J.Rai, IIPM-School of Management, Kansbahal 16
 The Nature of A Service
“ The service product is
essentially a bundle of
activities, consisting of
the core product - which
in Federal Express’ case
consists of transporting
packages overnight and
delivering them next
morning to the
addressee, plus a cluster
Fed Ex Example of supplementary
services.”
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Faculty: J.Rai, IIPM-School of Management, Kansbahal 17
 The Nature of A Service

The Example of Federal Express

Advice and
Communication
Bill Statements
Order Taking
Overnight
Transportation Problem Solving
Supplies and Delivery of
Packages
Tracking
Pick-up
Documentation

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 18
Characteristics of Services

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 19
 INVEN
TORY

INSEPARABILITY

INCONSISTENCY

INTANGIBILITY
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Faculty: J.Rai, IIPM-School of Management, Kansbahal 20
 Intangibility
No physical attributes
Nobody cares
As much ..Taj
Impossible to
taste
feel
I’ve got a piece
hear Of rock…
smell before buying Prudential

Cant be easily displayed

Macdonald ..the
Family restaurant
Inference from place,people
price,symbols…..
University Degree
tangible evidence of
Transform intangibility to knowledge acquired
tangibility Module I
Faculty: J.Rai, IIPM-School of Management, Kansbahal 21
 Tangibilising the Intangibles:
Strategies

Visualization
Association
Physical Representation
Documentation
People Involvement
Place Advantage
Promotion
Branding

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 22
 Tangibilising the Intangibles

Visualization

Hotels depicting benefits of dinning

at restaurant through Advertisement

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 23
Tangibilising the Intangibles

Association

Air India Used Friendly Maharaja

Shah Rukh with Air-tel

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 24
Tangibilising the Intangibles

Physical Representation

Citibank credit Card in Gold or Platinum

Symbolizes wealth & Status

Airlines Dress Symbolizes visibility,

reliability and cleanliness

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 25
 Tangibilising the Intangibles

Documentation

Citing fact & figures in support of

performance

• Major Awards Won By Jet Air

• % Of People Preferring Jet Air

• Number. One Company in Market Share

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 26
Tangibilising the Intangibles

People Involvement

People are often Critical Element in service

Delivery

Training People To be courteous in Hotel

for Service Delivery

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 27
Tangibilising the Intangibles

Place Advantage

The clean, well laid down interiors of a

Hotel Room depicts the quality of service

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 28
Tangibilising the Intangibles

Promotion

Personal Care through

Promotion Campaigns offers
life long Assurance scheme

Module I
Faculty: J.Rai, IIPM-School of Management, Kansbahal 29
Tangibilising the Intangibles

Branding
The family Restaurant

Branding helps in differentiation of the

service from competitors

The world on time

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 30
Tangibility of goods and services

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 31
 Product qualities affect ease of evaluation

Easy to Difficult to
evaluate evaluate
Clothing
Furniture

Vacation
Motor vehicle

Medical surgery
Lawn Fertiliser

Legal services
Computer repair

Consultancy project
Restaurant meals

High in search High in experience High in credence

qualities qualities qualities
Module I
Faculty: J.Rai, IIPM-School of Management, Kansbahal 32
 Heterogeneity
(Variability/Inconsistency )
• service quality varies across service encounters
• service encounter is the interaction between service
employee and customer
– ‘moments of truth’
• service people are central to service delivery
• service is delivered in ‘real’ time

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 33
 Inconsistency
Different services

Performance of an Artist

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 34
 Implications of Strategies for
Inconsistency Inconsistency
• customer surveys and feedback
 Service delivery and
customer satisfaction • training in interpersonal and
depend on employee technical skills
actions • provide product knowledge
 Service quality depends • ensure back-stage systems
on many uncontrollable support front line staff
factors • use standardisation strategies
 There is no sure – franchising, scripts
knowledge that the • build quality into all processes
service delivered
matches what was
planned and promoted Module I
Faculty: J.Rai, IIPM-School of Management, Kansbahal 35
 Module I
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 Module I
Faculty: J.Rai, IIPM-School of Management, Kansbahal 37
 Inseparability

•It can not be separated from the creator-seller of

•The product simultaneous production and consumption
•The customer is involved (partial employee)
•Other customers may be present

Module I
Faculty: J.Rai, IIPM-School of Management, Kansbahal 38
Implications of Strategies for
Simultaneous Production inseparability
and Consumption
• manage the service encounter
 Customers participate – scripts and roles
in and affect the – front-line staff need both
transaction technical and interpersonal
skills (recruit & train)
 Customers affect
– educate the customer
each other
(provider –marketer)
 Employees affect the • manage customer interactions
service outcome
• manage the physical evidence
 Decentralization may • develop customer service
be essential policies and service recovery
procedures
 Mass production is
difficult
Module I
Faculty: J.Rai, IIPM-School of Management, Kansbahal 39
Services are typically produced
And consumed simultaneously
oCo-production.. dentist/patient

oIsolated production.. T.V.serial

oSelf-services… ATM, weighing Machine

Module I
Faculty: J.Rai, IIPM-School of Management, Kansbahal 40
 Inventory
•Services cannot be stored
•Need to manage supply
Empty seats at 10 am
and demand flight to Bombay does
not mean Seats may be
available in the next
flight

Empty seats in a
stadium for a
Cricket game can not
be carried
To the next game
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Faculty: J.Rai, IIPM-School of Management, Kansbahal 41
Strategies for Dealing With Inventory (Perishability)

Result Of Demand Variability

Match Capacity by Shifting demand— Sunday open

Adjusting Prices- lowering or increasing prices

Stretch the existing Capacity- 24hrs banking

Stretching Facilities- adding manpower/machines

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 42
Goods Vs Services

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 43
Basic Differences between
Goods and Services

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 44
 Services Marketing Mix
Traditional Marketing Mix

• All elements within the control of the firm that communicate

the firm’s capabilities and image to customers or that
influence customer satisfaction with the firm’s product and
services:
– Product
– Price
– Place
– Promotion
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Faculty: J.Rai, IIPM-School of Management, Kansbahal 45
An expanded marketing mix for services

Product
People (service)
Process
Place,
Place &
cyber- Customers Price
Price
Time
space & Customers
Customers
time

Promotion

Physical evidence

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 46
People
– All human actors who play a part in service
delivery and thus influence the perceptions: namely
the firm’s personnel, the customer, and other
customers in the service environment.

customer
service employees
other customers

Module I
Faculty: J.Rai, IIPM-School of Management, Kansbahal 47
 Physical Evidence
– The environment in which the service is delivered
and where the firm and customer interact, and any
tangible components that facilitate performance or
communication of the service.

•Atmosphere, décor, music etc.

•equipment
•facilities
•uniforms
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Faculty: J.Rai, IIPM-School of Management, Kansbahal 48
Process
– The actual procedures, mechanisms, and flow of
activities by which the service is delivered—the
service delivery and operating systems.

service delivery systems

•back stage
•front stage
procedures
policies

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 49
Expanded Marketing Mix for Services

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 50
 Classification of Services
Based on Degree Of Cust. Involvement
( Lovelock)
3. People Processing
4. Possession Processing
5. Mental Stimulus Processing
6. Information Processing

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 51
Some other classification includes-
• The degree of tangibility.
• Whether customer directed/possessions.
• Time and place of delivery.
• Level of Customization/Standardization.
• Relationship with customer.
• Demand supply fluctuation.
• Interaction with people.

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 52
 Four Categories of Services
Employing Different Underlying Processes

What is the Who or What is the Direct Recipient of the Service?

Nature of the
DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS
Service Act?
TANGIBLE People Processing Possession Processing
ACTS
e.g., airlines, hospitals, e.g., freight, repair, cleaning,
haircutting, restaurants hotels, landscaping, retailing,
fitness centers recycling

INTANGIBLE Mental Stimulus Information Processing

ACTS
Processing (directed at intangible assets)

e.g., broadcasting, consulting, e.g., accounting, banking,

education, psychotherapy insurance, legal, research
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Faculty: J.Rai, IIPM-School of Management, Kansbahal 53
 Service
Marketing Framework: Analysis

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 54
 The Services Marketing Triangle

Company
(Management)

Internal External
Marketing Marketing
“enabling the “setting the
promise” promise”

Employees Interactive Marketing Customers

“delivering the promise”
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Faculty: J.Rai, IIPM-School of Management, Kansbahal 55
 Ways to Use the
Services Marketing Triangle

Overall Strategic Assessment Specific Service Implementation

• How is the service • What is being promoted and by
whom?
organization doing on all
three sides of the triangle? • How will it be delivered and by
whom?
• Where are the weaknesses?
• Are the supporting systems in
• What are the strengths? place to deliver the promised
service?

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 56
 Marketing Framework

3 C’s
Customers Competitors Company
Market Intelligence

S T P
(Segment) (Target) (Position)

Product Promotion
4 P’s
Price Place Module I
Faculty: J.Rai, IIPM-School of Management, Kansbahal 57
 Challenges for Services

• Defining and improving quality

• Communicating and testing new services

• Communicating and maintaining a consistent image

• Motivating and sustaining employee commitment

• Customer Relation Management.

• Bridging Demand- Supply

• Coordinating marketing, operations and human resource efforts

• Setting prices

• Standardization versus personalization

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Faculty: J.Rai, IIPM-School of Management, Kansbahal 58
 Module I
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