Services marketing Module 2

Marketing Infrastructure Services

Infrastructure Services Marketing

Module 1

Statistics of INDIA

GDP$1.847 trillion (nominal: 10th; 2011)[1]

$4.530 trillion (PPP: 3rd; 2011)[1]

GDP growth 5.5% (Q1, 2012)[2]

GDP per capita$1,514 (nominal: 139th; 2011)[1]

$3,652 (PPP: 125th; 2011)[1]

GDP by sector agriculture: 17.2%, industry: 26.4%, services: 56.4% (2011 est.)

Inflation (CPI) WPI: 7.81% (Sep 2012)[3]

CPI: 9.73% (Sep 2012)[4]

Populationbelow poverty line

29.8% (2010)(Note: 32.7% live on less than $1.25 a day68.7% live on less than $2 a day)[5]

Gini coefficient 36.8 (List of countries)Labour force 487.6 million (2011 est.)Labour forceby occupation agriculture: 52%, industry: 14%, services: 34% (2009 est.)

Unemployment 9.4% (2011 est.)[6]

Average gross salary $1,410 yearly (2011)[5]

Main industriestextiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software, pharmaceuticals

Ease of Doing Business Rank 132nd[7] (2012)External

Exports $299.4 billion (2011 est.)

Export goods petroleum products, precious stones, machinery, iron and steel, chemicals, vehicles, apparel

Main export partners UAE 13%, US 11.4%, China 6.3%, Singapore 5.3% (2011)Imports $461.4 billion (2011 est.)

Import goods crude oil, precious stones, machinery, fertilizer, iron and steel, chemicals

http://en.wikipedia.org/wiki/Gross_domestic_product


SERVICE MARKETING


SERVICES

“Service is an act or performance offered by one party to another that is essentially intangible and does not result in the ownership of anything.”


What are Services

• The Services Industry Journal defines “Service as any primary or complimentary activity that does not directly produce a physical product, that is, the non goods part of transactions between Buyer & seller”

• “Services are those which are separately identifiable essentially intangible activities, which provide want satisfaction when marketed to consumers and/or industrial uses and which are not necessarily tied to the sale of a product or another service” - Stanton


What are Services (Cont)

• A Service is an activity or benefit that one party can offer to another that is essentially tangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product – Kotler & Armstrong

• Services are deeds, processes & performances produced or coproduced by one entity or person for another entity or person


Changing structure of Employment as an Economy

Develops

Agriculture

Manufacturing

Service Industry

Time, Per Capita Income

*Source: Adapted from IMF , 1997 report


* Source: World fact book 2008


Value added by service Industry categories to the USA GDP

Estimated Size of Service sector in selected countries as a

percentage of GDP

Jersey (97%), Cayman (95%) Hong Kong (92%)Bahamas (90%), Bermuda (89%) , Luxembourg (86%)USA (79%) , Fiji (78%) , Barbados (78%) , Panama (78 %) , France (77 %), U.K. (76

%), Belgium ( 75%)Japan (72%) , Taiwan (71 %) , Australia (71%) , Italy (71%)Canada (70%) , Germany ( 69 %) , Singapore (67 %), Israel ( 67%)South Africa (65 %), Brazil (66%), Poland ( 65%), Switzerland (64%)Turkey (57%), Mexico (62%) , Croatia (61%) , South Korea ( 58%)Argentina ( 57%) , Russia (55%) , Philippines (54%) , India

( 55%)Malaysia (46%) , Chile (45%) , Thailand ( 44%)Indonesia (41%) , China (40%)Saudi Arabia (35%), Laos (27%)


Other Service concepts

Service Industries & Companies Their core product is Service.

Service as Products Intangible product offerings that customers value and pay

for. Sold by service and non-service companies.

Customer Service Service provided in support of company’s core products

(typically not charged for). It can occur over phone or internet

• Derived Service– It suggests that all products and physical goods are valued

for the services they provide.


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


Tangible versus intangible elements in goods and services


Increasing importance of Services

• Advances in technology • Growth in per capita income • A trend towards outsourcing • Deregulation • Increasing growth in retailing due to

increase in propensity to consumer


Need for Services Marketing

• In this consumer oriented scenario the service sector is growing rapidly. But there was a lack of innovative marketing on the part of service industry because of:

– Limited view of Marketing– Limited Competition– Non creative Management– Lack of Innovation in the Distribution of

Services


Need for Services Marketing (Cont)

• There is a growing market of services & increasing dominance of services in economies Worldwide & this tremendous growth & economic contributions of the service sector have drawn increasing attention to the issues & challenges of service sector industries Worldwide

• Services require a special understanding & unique marketing efforts by marketers.


Further challenges for Service Marketers

• How can service quality be defined & improved when the product is intangible

• How can new service be designed & tested effectively when the service is essentially an intangible process

• How can the firm be certain that it is communicating a consistent & relevant image when so many elements of marketing mix are present

• How does the firm accommodate the fluctuating demand when capacity is fixed & service itself is perishable


Further challenges for Service Marketers (Cont)

• How should prices be set when it is difficult to determine actual costs of production

• How can the balance between standardization & personalization be determined to maximize both the efficiency of the organization & the satisfaction of its customers

• How does the firm communicate quality & value to customers when the offering is intangible

• How can the organization ensure the delivery of consistent quality service


TRENDS IN SERVICES SECTOR

Service industry known as tertiary industry (primary – agri, mining; secondary – manufacturing)

Share of services, industry, and agriculture in India's GDP is 55.1 per cent, 26.4 per cent, and 18.5 per cent respectively

A KPMG survey of BRIC countries (Brazil, Russia, India and China), has revealed highest confidence among the service sector in India with 60% of the Indian firms expect rise in activity, a few notches above than that of China

New Markets and products categorizes create increased demand for services in many existing markets, making it more competition

intensive



Factors contributing to growth:

1. Government Policies – Govt. regulations, – Privatisation

2. Social Changes – Rising customer expectations– More affluence– Increased desire for buying experiences vs products



Factors contributing to growth:

3. Business trends– Mfrs. Adding value through services– Quality Movement– Growth of franchising

4. Advances in Information Technology– Growth of internet– Convergence of computers & telecommunications

5. Globalization– More cos. operating on transnational basis– International mergers & aquisitions



While almost all service sectors participated in this boom, growth was fastest in communications, banking, hotels and restaurants, trade and business services.


TRENDS IN SERVICES SECTORThe various sectors that combine together to constitute service

industry in India are:

• Trade • Hotels and Restaurants • Railways • Other Transport & Storage • Communication (Post, Telecom) • Banking • Insurance • Dwellings, Real Estate • Business Services • Public Administration; Defence • Personal Services • Community Services • Other Services


Marketing Mix to Extended Marketing Mix

• There have been attempts to develop an 'extended marketing mix' to better accommodate specific aspects of marketing.– For example, in the 1970s, Nickels and

Jolson suggested the inclusion of packaging.

– In the 1980s Kotler proposed public opinion and political power

– Booms and Bitner included three additional 'Ps' to accommodate trends towards a service or knowledge based economy:


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


GOODS AND SERVICES

Differences between goods & services

• Customers do not obtain ownership of services• Service products are ephemeral & cannot be

inventoried• Intangible element• Customers maybe involved in production

process • Other people part of product


GOODS AND SERVICES

Differences between goods & services

• Greater variability in operational inputs & outputs

• Services are difficult for customers to evaluate

• Time factor assumes more importance• Distribution channel take different

forms


Value Added by Tangible vs Intangible Elements in Goods and

Services

Fast food restaurant Plumbing repairOffice cleaning

Health clubAirline flight

Retail banking InsuranceWeather forecast

Salt

Soft drinksCD PlayerGolf clubsNew car

Tailored clothingFurniture rental

Lo Hi

Hi

Tan

gib

le E

lem

en

ts

Intangible Elements


CLASSIFICATION OF SERVICES

• A significant classification is based on process

(taking an input & transforming into an output)

• Marketers of services need to understand

nature of services to which customers are

exposed

• Services range from simple procedures to

highly complex activities



People Possession

People Processing Possession processing Tangible - Passenger transportation - Freight transportation actions

- Health care - Repair & maintenance - Lodging & Restaurant - Retail distribution

Mental stimulus Information processing Intangible - Advtg. & PR - Accounting & Bkg actions

- Education - Insurance & Legal - Entertainment & Arts - Software Consulting



1. People processing

– Customers must physically enter the service

system as they are integral part of process

– They must spend time interacting & co-

operating with service providers

– Process & output is important



2. Possession processing

– Providing treatment to possession. Customers

less physically involved

– Customer’s involvement – to drop item that needs

treatment, requesting the service, explaining

problem & later picking it up & paying the bill.

– If object to be processed is difficult to move then

“service factory” comes to customer



3. Mental stimulus processing

– These services interact with the customer’s minds

which has the power to shape their attitude &

behaviour. Core content is information

– Customers not physically present, but mentally

connected with information presented.

– Recipients have to make investment of time



4. Information processing

– Information is most intangible but can be made

tangible by letters, reports, books

– Financial & professional services are strong examples

of collection & processing of information

– No requirement of personal contact with supplier of

service. Contact could be over e-mail, telephone.


IMPLICATIONS OF SERVICE PROCESS

1. Designing Service Factory (people proc.)

• When customers have to be physically present throughout

delivery, process must be designed with them in mind – right

from the moment they arrive the service factory.

• Choose convenient location

• These factors assume importance

– exterior & interior facilities,

– encounters with service personnel,

– interactions with self-service equipment

– characteristics of other customers



2. For possession-processing, mental-stimulus processing,

or information processing services, alternatives include:

1. Customers come to the service factory

2. Customers come to a retail office

3. Service employees visit customer’s home or workplace

4. Business is conducted at arm’s length through

- physical channels (e.g., mail, courier service)

- electronic channels (e.g., phone, fax, email, Web site)



3. Making most of Information Technology

– All services can benefit from IT, but mental

stimulus processing and information- processing

services have the most to gain.

– Remote delivery of information-based services

“anywhere, anytime”

– New service features through websites, email, and

internet (e.g., information, reservations)

– More opportunities for self-service



4. Balancing Supply & Demand

– Problems arise because service output can’t be

stored

– If demand is high and exceeds supply, business may

be lost. If demand is low, productive capacity is

wasted

– Services that process people & possession face more

capacity limitations. Increasing capacity entails huge

costs. Managing demand becomes more important.



5. People becoming part of Product

– When people become part of service, their

attitude, behavior & appearance can enhance

it or detract it

– Managers should be concerned about

employees’ appearance, social skills,

technical skills


Services Marketing Mix

• The preceding questions are some of the many raised by managers & marketers of services

• To address these questions, variety of tools & strategies are implemented, sometimes these tools are adaptations of Traditional Marketing tools.

• All principles of Marketing apply to services

• Traditional Marketing Mix – 4P Model


Traditional Marketing Mix

• Traditional marketing mix– Product– Price– Place– Promotion

• For services• Modifications in marketing mix required• Why?


Traditional Marketing Mix (Cont)

• Simultaneous production and consumption• People involved in service delivery process

– Hair dressers– Bank cashier– Doctor– Instructor

• Being intangible, customer look for ‘tangible cues’• Services marketers need to look for additional

variables to communicate and satisfy their customers.


Traditional Marketing Mix (Cont)

• How would you rate a hotel– Design and decor– Courtesy of employees– How prompt they attend your request.

• Do we need to expand traditional marketing mix to take care of this?


SERVICES MARKETING MIX i.e. 7 P’s of Marketing 1. Product2. Place & Time3. Promotion & Education4. Price5. Physical Environment6. Process 7. People


Extended Marketing Mix


Price• The price is the amount a

customer pays for the product.

• Determined by a number of factors including market share, competition, material costs, product identity and the customer's perceived value of the product.

• The business may increase or decrease the price of product if other stores have the same product.

• It will be in the form of Listed price, Discounts, Allowances, Payment period & credit


Product• Methods used to

improve/differentiate the product and increase sales or target sales more effectively to gain a competitive advantage e.g.– Extension strategies– Specialized versions– New editions– Improvements – real or

otherwise!– Changed packaging– Technology, etc.


Promotion• Promotion activities are

meant to communicate & persuade the target market to buy the company’s products

• This is done by:-– Advertising– Personal selling– Sales promotion- POS– Public Relations– Word of mouth – Viral

advertising• Above-the-line promotion - This

uses advertising media over which a firm has no direct control e.g. television, radio and newspapers

• Below-the-line promotion - This uses promotional media which the firm can control e.g. direct mail, sales promotions and sponsorship


Place• Place represents the

location where a product can be purchased.

• Products should be conveniently available for customers to buy

• ‘Places’ include:– Stores– Mail order– Telesales– Internet

• The use of e-commerce (promoting and selling on the internet) has grown massively over the last few years


Place (Cont)…

Manufacturers

Wholesaler

Retailers

Consumers

Wholesaler – buys in bulk from suppliers/manufacturers and then breaks this up to sell into smaller quantities to retailers

Retailer – a shop which sells products to the consumer. May be a customer of a wholesaler or manufacturer.

Consumer – uses the goods/servicesDirect selling occurs when the consumer buys directly from the manufacturer. The internet and factory shops allow this to happen.


People

• People – all people who directly or indirectly influence the perceived value of the product or service, including knowledge workers, employees, management and consumers.


Process• Procedures, mechanisms

and flow of activities which lead to an exchange of value.

• How do people consume services?

• What processes do they have to go through to acquire the services?

• Where do they find the availability of the service?

– Contact– Reminders– Registration– Subscription– Form filling– Degree of technology


Physical Environment• Physical evidence is the

material part of a service. • Strictly speaking there are no

physical attributes to a service, so a consumer tends to rely on material cues.

• There are many examples of physical evidence, including some of the following:

– Packaging. – Internet/web pages. – Paperwork (such as invoices,

tickets and despatch notes). – Brochures. – Furnishings. – Signage (such as those on

aircraft and vehicles). – Uniforms. – Business cards.


INTERDEPENDENCE OF MARKETING, OPERATIONS & HR

Customers

Operations Management

Marketing Management

Human Resources Management


SERVICE BUSINESS – AS A SYSTEMThree Overlapping Sub-systems

Service Operations (front stage and backstage)

• Where inputs are processed and service elements created.

• Includes facilities, equipment, and personnel

Service Delivery (front stage)

• Where “final assembly” of service elements takes place

and service is delivered to customers

• Includes customer interactions with operations and other customers

Service Marketing (front stage)

• Includes service delivery (as above) and all other contacts between service

firm and customers


SERVICE MARKETING SYSTEMHigh Contact Service

Service Delivery SystemOther Contact

Points

Service Operations System

Backstage Front Stage(Invisible) (Visible)

TheCustomer

TechnicalCore

Interior & ExteriorFacilities

Equipment

Service People

OtherCustomers

OtherCustomers

Advertising

Sales Calls

Market Research Surveys

Billing / Statements

Miscellaneous Mail, Phone Calls, Faxes, etc.

Random Exposure toFacilities / Vehicles

Chance Encounters with Service Personnel

Word of Mouth


SERVICE MARKETING SYSTEMLow Contact Service

Service Delivery System

Service Operations System Other Contact Point

Mail Self Serv. Equipment Phone, Website

Backstage Front stage

TechnicalCore

Customer

Advertising

Market Research Surveys

Word of Mouth

Customer


Theatre – A Metaphor for Service Delivery

• Service facilities is the stage on which drama unfolds.

Some cases customer’s own facilities provide stage.

• Stage can have minimal props or very elaborate

• Service dramas could be tightly scripted or

improvisational

• Settings change from one act to another

• Front stage personnel play roles of actors ( sometimes

wearing costumes) supported by backstage production

team


SERVICE PLANNING


Operating Assets(Facilities/Equipment, IT Systems, People, Op. Skills, Cost Structure)

SERVICE PLANNING

Corporate Objectivesand Resources

Service Delivery Process

Marketing Assets(Customer Base, Mkt.

Knowledge, Implementation Skills, Brand Reput.)

Service Marketing Concept

•Benefits to customer from core/ supplementary elements, style, service level, accessibility

•User costs/outlays incurred•Price/other monetary costs•Time•Mental and physical effort•Neg. sensory experiences

Service Operations Concept

•Nature of processes•Geographic scope of ops•Scheduling•Facilities design/layout•HR (numbers, skills)•Leverage (partners, self-service)•Task allocation: front/backstage staff; customers as co-producers


SERVICE PLANNING1. Starts with statement of objectives or mission at

corporate level

2. This mission leads to two types of analysis – SWOT

Analysis identifying strengths, weaknesses,

opportunities & threats on marketing & operations

fronts

– Market & Competitive Analysis

– Resource Allocation analysis – appraisal of firm’s resources,

how to allocate them & identifying additional resources


SERVICE PLANNING

3. Each analysis draws two statement of assets

a. Marketing assets statement which includes –

customer portfolio, market knowledge, marketing

implementation skill, product line, reputation of

brands & positioning strategies.

b. Operating assets statement which includes – Physical

facilities, equipment, Information technology, H.R.

(numbers & skill), alliances & partnerships, cost

structure


SERVICE PLANNING4. Statement of assets leads to creation of the following

concepts. This must be an interactive process.

a. Service marketing concept to clarify benefits to

customers & costs they shall incur

b. Service operating concept clarifies nature of

processes & how & when operating assets should be

deployed

5. Set of choices before the management in configuring

delivery process.

Services marketing Module 2

Education

Transcript of Services marketing Module 2