Service Management: 1 Services Marketing Why study Services Marketing?

Service-based economies Service imperative in manufacturing, technology & IT Professional services Services marketing different from products Service equals profits Introduction: What are services? Deeds, processes & performances Why services marketing? Service & Technology Characteristics of Services wrt Goods Services Marketing Mix Customer Focus What is a Service? A form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything. Services are deeds, processes, and performances- Valarie Zeithaml Services: Services- Haircut, Dr, TV, Email, laundry, B-School- Education, library, canteen, placement, counseling, photocopying, ATM, telecommunication, hostel, gym Customer complaints- service quality- delayed response / delivery, rude / incompetent staff, inconvenient systems / timings Supplier concerns- skilled & efficient staff, training/retaining staff, customer spoilt for choice Service Industries: H- Hospitality & Healthcare E- Education & Entertainment F- Financial Services T- Telecom, Travel & Tourism I- Insurance Construction & real estate Retail (worlds largest employer) Utilities-hair styling, pest control, plumbing, clubs Professional Services- counseling, consultancy, Legal

Tangibility: Tangible- see, taste, feel, hear, smell- pre purchase Customers not sure about purchase outcome Will service meet their expectations? Product- seen pre-purchase, ascertain if needs met Customers use cues to overcome intangibility Service quality- clean premises, crowds, opinionpeers, family & friends, important Higher purchases- WoM, information from trusted sources more important Price may indicate higher quality Marketers add tangibility to intangible services Highlight physical evidence- ambience, cleanliness, experience, surroundings Dr waiting rooms Hotel lobby Goods versus Services: Goods Tangible Services Intangible Implications No inventory, patent, display, pricing difficult Customers part of process, Employee critical in delivery, satisfaction Consistency, variability key issues Customers participate in, affect outcome Employees affect outcome, mass production difficult Difficult to synchronise demand supply, cannot be returned, resold

Standardised

Heterogenous

Production & consumption separate

Simultaneous

Non perishable

Perishable

Differences in goods & services: Most products have service component, even 50% Hotels- Food 25%, Balance- services, people, ambience No ownership- Rented car, loaned money, booked hotel No inventory- Transitory & perishable, not stocked Intangible- Quality of labour, staff competence Customers help/shape product- Self service- ATM, Co-op- Saloon, concert fans, library Input/output variable- consumed as produced, delivered in real time, customer presenttime sensitive / critical Evaluation difficult- treatment, repairs, accounts, advicecustomers lack knowledge dont know what to expect Patenting difficult No returns, synchronising demand-supply difficult

Characteristics of Services: o o o o Intangibility Heterogeneity Simultaneous Production & Consumption Perishability

Implications of Intangibility: Not inventoried Not easily patented Not readily displayed / communicated Pricing difficult Reduce uncertainty- buyers look for physical cues Quality inferred from place, people, equipment, communication material, symbols and price Service providers major task- manage physical evidence- tangibilize the intangible Evidence & presentation- transform intangible services into concrete benefits Implications of Heterogeneity: Service quality depends on many uncontrollable factors Service delivery and customer satisfaction depend on employee and customer actions There is no sure knowledge that the service delivered matches what was planned and promoted Inseparability & Variability: Services-produced & consumed simultaneously Clients present & interact during service production Services highly variable, dependent on who provides them & when & where provided Invest in good hiring and training procedures Standardize service-performance process Service blueprint flowchart depicting events & processes, to recognise potential fail points Monitor customer satisfaction Implications of Simultaneous Production and Consumption: Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production difficult Implications of Perishability: Services cannot be stored, returned or resold Demand fluctuation causes problems Difficult to synchronize supply & demand with services Demand side Differential pricing Non-peak demand Complementary services Reservation systems Supply side Part-time employees Increased consumer participation Shared services Facilities for future expansion

Challenges for Services: Defining & improving quality Designing & testing new services Communicating & maintaining a consistent image Accommodating fluctuating demand Motivating & sustaining employee commitment Coordinating marketing, operations & HR efforts Setting prices Balancing standardization & personalization Ensuring consistent delivery quality Traditional Mix: Elements controlled by the firm 4Ps not suited to marketing intangibles Overhaul as customer assumes significance Services dominance led to specialized services Marketing 4Ps Product Price Place Promotion Services Marketing Mix: Product- Core features + bundle of supplementary service elements wrt benefits desired Place & Cyberspace- Place & delivery time importantphysical, e, direct, retail, mobile, home delivery Process- To create & deliver product elements to customers important to design & implement effective processes. Productivity: how efficiently service inputs are transformed into outputs that add value for customers. Quality: the degree to which a service satisfies customers by meeting their needs, wants, and expectations. People: customers and employees who are involved in service production. Promotion and education: communication activities designed to build customer preference for a specific service or service provider. Provides information, persuades target customers, and encouraging them to buy. 4Cs Customer Value Cost-benefit Convenience Communication

Expanded Mix for Services -- The 7 Ps: People Major role in service delivery, influence buyer perceptions Personnel & customers in the service environment Physical Evidence The environment where service is delivered Where firm & customer interact Tangible components facilitating service performance/ communication Process Actual procedures, mechanisms, and flow of activities by which the service is deliveredthe service delivery and operating systems Expanded Marketing Mix for Services:

Expanded mix: People Employees Customers Communicating culture & values Employee research Physical Evidence Facility design Equipment Signage Employee dress Other tangibles Ways to Use the 7 Ps: Overall Strategic Assessment How effective is a firms services marketing mix? Is the mix well-aligned with overall vision and strategy? What are the strengths and weaknesses in terms of the 7 Ps? Specific Service Implementation Who is the customer? What is the service? How effectively does the services marketing mix for a service communicate its benefits and quality? What changes/ improvements are needed? Process Activity flow Number of steps Level of customer involvement

The Nature of A Service: Courier

Advice and Communication Order Tracking Overnight Transportation and Delivery of Packages Bill Statements

Supplies

Problem Solving

Pick-Up Documentation

Tracking

Category Differences: Role of advertising in brand-building will tend to vary with category type

Consumer Products Lower values Frequent purchase Narrow/Broad Target customer

Consumer Durables Higher values Infrequent Narrow Target Customer

Services Indeterminate Indeterminate Variable

Corporate No value Variable Very wide/ variable

Intangibility- Provide cues/ evidence Variability- Provide cues/ evidence Variability- Better service Inseparability- Manage the service encounter Services cannot be stored- Manage the demand & supply

Service C Categories- Classification: Who/ What is the direct recipient People Possessions People processing Possession processing (Directed at the body) (Directed at physical possessions) Healthcare, Hotels, Saloons, Transport, storage, petrol Clubs, Restaurants, Priests pumps, housekeeping, retail, laundry, Mental processing Information processing (Directed at peoples mind) (Directed at intangibles) Education, IT, Music, Banking, Accounting, Religion, Advertising, PR, Insurance, Legal, Arts, Cable, Consultancy, Programming, Research,

Tangible actions What is the nature of the service

Intangible actions

The Services Marketing Triangle: Overall- Focus on delivery & consistency at all 3 levels Company (Management) Internal Marketing Marketing (Enabling the promise) promise) External

(Setting the

Employees Interactive Marketing (Delivering the promise)

Customers

Services Management: 2- Gaps Model Gaps Model- Service Quality: The Customer Gap The Provider Gaps: Gap 1 not knowing what customers expect Gap 2 not having right service designs & standards Gap 3 not delivering to service standards Gap 4 not matching performance to promises Putting It All Together: Closing the Gaps The Customer Gap: Expected Service

Customer Gap

Perceived Service

Gaps Model of Service Quality: Customer Gap: difference between customer expectations & perceptions Provider Gap 1 (The Knowledge Gap): not knowing what customers expect Provider Gap 2 (The Service Design & Standards Gap): not having the right service designs and standards Provider Gap 3 (The Service Performance Gap): not delivering to service standards Provider Gap 4 (The Communication Gap): not matching performance to promises

Key Factors Leading to the Customer Gap: Customers xpectation Provider Gaps Gap 1: Not knowing what customers expect Gap 2: Not selecting right service designs & standards Gap 3: Not delivering to service standards Gap 4: Not matching performance to promises Customers Perception

Customer Gap

Key Factors Leading to Provider Gap 1: Customers expectation Inadequate marketing research orientation Insufficient, inadequate use, no service quality focus Lack of upward communication Poor interaction- management & customers Poor communication- contact employees & managers Too many layers- contact personnel & management Insufficient relationship focus No market segmentation Focus on transactions than relationships Focus on new customers than relationship customers Inadequate service recovery Not listening to customer complaints Failure to make amends when things go wrong No appropriate recovery mechanisms for service failures Company perception Of customer Expectations E

Key Factors Leading to Provider Gap 2: Customer-Driven Service Designs and Standards Poor service design Unsystematic new service development process Vague, undefined service designs Failure to connect service design to service positioning Absence of customer-driven standards Lack of customer-driven service standards Absence of process to focus on customer requirements Absence of formal process for setting service quality goals Inappropriate physical evidence and servicescape Failure to develop tangibles in line with customer expectations Servicescape design not meeting customer & employee needs Inadequate maintenance and updationg of servicescape Management Perceptions of Customer Expectations

Key Factors Leading to Provider Gap 3: Customer-Driven Service Designs and Standards Deficiencies in HR policies Ineffective recruitment, role ambiguity, role conflict Poor employee-technology job fit Inappropriate evaluation and compensation systems Lack of empowerment, perceived control, and teamwork Customers who do not fulfill roles Customers who lack knowledge of their roles & responsibilities Customers who negatively impact each other Problems with service intermediaries Channel conflict over objectives & performance Difficulty controlling quality and consistency Tension between empowerment and control Failure to match supply and demand Failure to smooth peaks and valleys of demand Inappropriate customer mix, price overreliance to smooth demand Service Delivery

Key Factors Leading to Provider Gap 4 Service Delivery Lack of integrated services marketing communications Tendency to view each external communication as independent Not including interactive marketing in communications plan Absence of strong internal marketing program Ineffective management of customer expectations Poor communication to manage customer expectation Lack of adequate education for customers Overpromising Overpromise- advertising, personal selling & physical evidence cues Inadequate horizontal communications Insufficient communication between sales and operations Insufficient communication between advertising and operations Differences in policies and procedures across branches or units External Communications to Customers

Gaps Model of Service Quality:

Services Management: 3- Focus on the Customer Consumer Behavior in Services: Search, Experience, and Credence- Properties Consumer Choice Consumer Experience Post experience Evaluation Understanding Differences Among Consumers Consumer Evaluation Processes for Services: Search Qualities attributes a consumer can determine prior to purchase of a product Experience Qualities attributes a consumer can determine after purchase (or during consumption) of a product Credence Qualities characteristics that may be impossible to evaluate even after purchase and consumption Issues to Consider in Examining the Consumers Service Experience: Services as processes Service provision as drama Service roles and scripts The compatibility of service customers Customer coproduction Emotion and mood Differences in Service Experience in U.S. and Japan Authenticity Caring Control Courtesy Formality Friendliness Personalization Promptness