Module 1: INTRODUCTION

TO

SERVICES

Objectives for Module 1:Objectives for Module 1:Introduction to ServicesIntroduction to Services

• Explain what services are and identify service trends

• Explain the need for special services marketing concepts and practices

• Outline the basic differences between goods and services and the resulting challenges for service businesses

• Introduce the service marketing triangle• Introduce the expanded services marketing mix• Introduce the gaps model of service quality

Services

• A type of economic activity that is intangible, is not stored and does not result in ownership. A service is consumed at the point of sale. Services are one of the two components of economics, the other being goods.

Introduction

• Services are deeds, processes and performance

• Intangible, but may have a tangible component

• Generally produced and consumed at the same time

• Need to distinguish between SERVICE and CUSTOMER SERVICE

Challenges for ServicesChallenges for Services

• Defining and improving quality• Communicating and testing new services• Communicating and maintaining a consistent image• Motivating and sustaining employee commitment• Coordinating marketing, operations and human

resource efforts• Setting prices• Standardization versus personalization

Why do firms focus on Services?

• Services can provide higher profit margins and growth potential than products

• Customer satisfaction and loyalty are driven by service excellence

• Services can be used as a differentiation strategy in competitive markets

Why study Services Marketing?

• Service-based economies

• Service as a business imperative in manufacturing and IT

• Deregulated industries and professional service needs

• Services marketing is different

• Service equals profits

Overview: Why Services Matter

• Services dominate India and worldwide economies

• Services are growing dramatically• Service leads to customer retention and

loyalty• Service leads to profits• Services help manufacturing companies

differentiate themselves

What is Service? The Old View

• Service is a technical after-sale function that is provided by the service department.

Old:Service =wrench time

Old view of service =Customer Service Center

What is Service? The New View

• Service includes every interaction between any customer and anyone representing the company, including:

Customer

Examples of Service IndustriesExamples 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

Characteristics of ServicesCompared to Goods

Intangibility

Perishability

SimultaneousProductionandConsumption

Heterogeneity

Implications of Intangibility

• Services cannot be inventoried

• Services cannot be easily patented

• Services cannot be readily displayed or communicated

• Pricing is difficult

Implications of Heterogeneity

• Service delivery and customer satisfaction depend on employee and customer actions

• Service quality depends on many uncontrollable factors

• There is no sure knowledge that the service delivered matches what was planned and promoted

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 is difficult

Implications of Perishability

• It is difficult to synchronize supply and demand with services

• Services cannot be returned or resold

Challenges for Services• Defining and improving quality• Ensuring the delivery of consistent quality• Designing and testing new services• Communicating and maintaining a consistent image• Accommodating fluctuating demand• Motivating and sustaining employee commitment• Coordinating marketing, operations, and human resource

efforts• Setting prices• Finding a balance between standardization versus

customization

Comparing Goods and Services

network administration

network technical support

network equipment

nonproductive operations by end user

(downtime, file management, etc.)

administration

technical support

desktop hardware

yard operations, railroad administration,

other

train operations

Infrastructure

freight car services

locomotive services

locomotives

other

finance

repair

insurance

gas

used car purchase

new car purchase

total expenditure:5X product costs

total expenditure:21X product costs

total expenditure:5X product costs

100%

80%

60%

40%

20%

0%

annual cost of PC use: $6,259

total annual cost of rail operations: $29 billion

average annual household expenditure: $6,064

Personal Computers

Locomotives Automobiles

The sale of a product accounts for only a small portion of overall revenues.

Providing services to customers is where the real money is.

Where the Money in Manufacturing Is: Services

Source: GartnerGroup, Association of American Railroads, Federal Highway Administration Office of Highway Information Management. (Railroad expenditures are for Class 1 railroads.)

Myths of Services That for some time now the services sectors cover just about everything

that counts in modern economic growth has been obscured by a number of pervasive myths. We have to erase these myths in order to achieve sound evidenced based policies. The seven most dangerous myths are the subject of this paper.

• Services are non-productive – they don’t create wealth• Essential services must remain public services • The expansion of services in the economy is a result of reclassification, not

substantive changes in our economy• Service sector jobs are low skill and low wage • The expansion of the service sector drives down productivity growth • Service sector innovation investment is low• Public sector innovation can’t be measured

Most of these myths have persisted long after their expiry from the economic literature and the weight of evidence should have expunged them.

The Services Marketing TriangleThe Services Marketing Triangle

Internal Marketing

Interactive Marketing

External Marketing

Company(Management)

CustomersEmployees

“enabling thepromise”

“delivering the promise”

“setting thepromise”

Ways to Use the Ways to Use the Services Marketing TriangleServices Marketing Triangle

Overall Strategic Assessment• How is the service

organization doing on all three sides of the triangle?

• Where are the weaknesses?

• What are the strengths?

Specific Service Implementation• What is being promoted

and by whom?

• How will it be delivered and by whom?

• Are the supporting systems in place to deliver the promised service?

Company

CustomersProviders

Technology

The Services Triangle The Services Triangle and Technologyand Technology

Services Marketing Mix:Services Marketing Mix:7 Ps for Services7 Ps for Services

• Traditional Marketing Mix

• Expanded Mix for Services: 7 Ps

• Building Customer Relationships Through People, Processes, and Physical Evidence

• Ways to Use the 7 Ps

Traditional Marketing MixTraditional 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

Expanded Mix for Services --Expanded Mix for Services --the 7 Psthe 7 Ps

• Product• Price• Place• Promotion

• People• Process• Physical Evidence

Expanded Marketing Mix for Expanded Marketing Mix for ServicesServices

PRODUCT PLACE PROMOTION PRICE

Physical goodfeatures

Channel type Promotionblend

Flexibility

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms

Packaging Outlet location Salespromotion

Differentiation

Warranties Transportation Publicity Allowances

Product lines Storage

Branding

PEOPLE PHYSICALEVIDENCE

PROCESS

Employees Facility design Flow of activities

Customers Equipment Number of steps

Communicatingculture and values

Signage Level of customerinvolvement

Employee research Employee dress

Other tangibles

Expanded Marketing Mix for Expanded Marketing Mix for ServicesServices

Ways to Use the 7 PsWays to Use the 7 Ps

Overall Strategic Assessment

• How effective is a firm’s 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?

Services Marketing Triangle Applications Services Marketing Triangle Applications ExerciseExercise

• Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle?

• How is each type of marketing being carried out currently?

• Are the three sides of the triangle well aligned?• Are there specific challenges or barriers in any of

the three areas?

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

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

Expanded Mix for Services –The 7 Ps

• Product• Price• Place• Promotion

• People– All human actors who play a part in service delivery and thus influence the

buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment.

• 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.

• Process– The actual procedures, mechanisms, and flow of activities by which the service

is delivered—the service delivery and operating systems.

Expanded Marketing Mix for Services

Ways to Use the 7 Ps

Overall Strategic Assessment– How effective is a firm’s

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?

Service Quality

• Moments of Truth

Each customer contact is called a moment of truth.

You have the ability to either satisfy or dissatisfy them when you contact them.

A service recovery is satisfying a previously dissatisfied customer and making them a loyal customer.

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Reliability: Perform promised service dependably and accurately.

Example: receive mail at same time each day.

Responsiveness: Willingness to help customers promptly.

Example: avoid keeping customers waiting for no apparent reason.

Quick recovery, if service failure occurs

Dimensions of Service Quality

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Assurance: Ability to convey trust and confidence.

Give a feeling that customers’ best interest is in your heart

Example: being polite and showing respect for customer.

Empathy: Ability to be approachable, caring, understanding and relating with customer needs.

Example: being a good listener.

Tangibles: Physical facilities and facilitating goods.

Example: cleanliness.

Dimensions of Service Quality (Cont.)

Perceived Service Quality

Word of mouth

Personal needs

Past experience

Expectedservice

Perceivedservice

Service Quality Dimensions

ReliabilityResponsiveness

AssuranceEmpathyTangibles

Service Quality Assessment1. Expectations exceeded ES<PS (Quality surprise)2. Expectations met ES~PS (Satisfactory quality)3. Expectations not met ES>PS (Unacceptable quality)

Gaps in Service Quality

Word -of-mouthcommunications

Personal needs Past experience

Expected service

External communications to consumers

Perceived service

Service delivery (includingpre- and post-contacts)

Translation of perceptions intoservice quality specifications

Management perceptions of consumer expectations

GAP 5

GAP 3

GAP 2

GAP 1 GAP 4

Customer

Provider

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Service Quality Gap Model

Customer

Perceptions

Customer

Expectations

Service

Delivery

Service Standards

ManagementPerceptions of Customer Expectations

Managing the Evidence

Conformance Service Design

Understanding the Customer

Customer Satisfaction GAP 5

Customer / Marketing Research

GAP 1

Conformance GAP 3

Communication GAP 4

Design GAP 2

Gaps in Service QualityGap1: Market research gap

Management may not understand how customers formulate their expectations from past experience, advertising, communication with friends

Improve market researchFoster better communication between employees and its frontline

employeesReduce the number of levels of management that distance the customer

Gap 2: Design gap Management unable to formulate target level of service to meet

customer expectations and translate them to specificationsSetting goals and standardizing service delivery tasks can close the gap

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Gaps in Service Quality (Cont.)Gap 3: Conformance gap

Actual delivery of service cannot meet the specifications set by managementLack of teamworkPoor employee selectionInadequate trainingInappropriate job design

Gap 4: Communication gapDiscrepancy between service delivery and external communication

Exaggerated promises in advertisingLack of information provided to contact personnel to give

customers

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Gaps in Service Quality (Cont.)

Gap 5: Customer expectations and perceptions gapCustomer satisfaction depends on minimizing the

four gaps that are associated with service deliveryCompanies try to measure the gap between

expected service and perceived service through the use of surveys.

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Scope of service quality

View quality from five perspectives Content – are standard procedures being followed?

Process – is the sequence of events in the service process appropriate?

Structure – are the physical facilities and organizational design adequate for the service?

Outcome – what change in the status has the service effected? Is the consumer satisfied?

Impact – what is the long-range effect of the service on the consumer?

Marketing Challenges in the Service Business

• There are some inherent challenges in marketing a service business, but they can be overcome. When marketing services, you apply the same marketing mix principles used for products: place, price, promotion and product -- which is your service. Added to this mix are emphases on people, process and physical evidence. Develop a plan that carefully considers these essentials so you can identify the challenges and devise strategies to overcome them.

Marketing Challenges in the Service Business (Cont.)

• IntangibleOne of the most obvious challenges in marketing services is that you are selling something intangible. People can touch and see a product and are exchanging money for something they need and can take home to use. Conversely, people only see the results of a service, which may not always be immediate. It requires faith on the customers’ part that they will get the desired results for their money. For example, if you own a cleaning service, you have to convince your customers to trust you that their homes will be cleaned to their satisfaction.

Marketing Challenges in the Service Business (Cont.)

• Demonstrating EmpathyConvince your customers in your marketing efforts that you understand their problems and are offering a solution. Do this using people, processes and physical evidence. For example, if you and your employees have families and work full time, this identifies with working families who have no time for housecleaning. Before-and-after pictures in your marketing materials, such as your website, brochures and advertising, are all physical evidence. Finally, you may need to interact personally with customers multiple times as part of the marketing process to establish a relationship and convince them you understand their needs.

Marketing Challenges in the Service Business (Cont.)

• Competitive PricingHow you price your services is an important marketing element. You need to be competitive, so research several competitors’ prices to gauge what your prospective customers expect to pay. Then assess your costs -- your overhead such as rent, insurance, salaries and supplies -- to determine if you can meet your costs and make a profit with that pricing. Consider bundling extra features with your services to differentiate your company and garner a higher price. For example, you can offer to wax floors as part of your service, or do laundry as part of a bonus package.

Marketing Challenges in the Service Business (Cont.)

• PeopleAs a services company, marketing your people, including you, is paramount. A service is consumed when it’s purchased or produced -- just the results or effects linger, and sometimes temporarily. For example, your customer’s home will get dirty again, so the result of your cleaning delivery is temporary. The client may or may not call you again based on the overall experience. How your people performed that service will impact repeat business. The relationship is also important; follow up with your customer with personalized notes or a telephone reminder as part of your marketing tactics.

“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

In services, the last experience remains uppermost in your mind. Therefore, it is not

enough to be good, you have to be consistently good.

Service quality is directly proportional to employee satisfaction

Thank You