Services Marketing

The service sector

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 (57%-60%) This sector dominates with the best jobs, best talent and best incomes

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

What is services?
It is the part of the product or the full product for which the customer is willing to see value and pay for it.

Service definitions
An activity or series of activities of more or less intangible nature that normally, but not necessarily, take place in interactions between the customers and service employees and/or physical resources or goods and/or systems of the system provider which are provided as solutions to customers problem - Gronroos (1990)

 Any activity or performance that one party can offer to another that is essentially intangible and does not result in ownership of anything. Its production may not be tied to physical product - Philip Kotler (1991)

What is a service?
It is intangible. It does not result in ownership. It may or may not be attached with a physical product

Services could meet

Personal needs haircuts, tuition, massage parlors Business needs courier services, office cleaning services, delivering fresh flowers

Most products have a service component

They could be Equipment based (kiosks, ATMs) People based varying skill levels

Characteristics of services
Intangibility Inseparability Perishability Variability

Intangibility
Physical intangibility ( taste, odor, feel) Mental intangibility ( grasp or measure..)

Implications of intangilbility
Services cannot be stored Services cannot be patented Services cannot be displayed Decision regarding advertising and marketing is difficult

Inseparability
Outlet accessibility can limit the area covered by the service. Image is important: Image affects the perception of the service.

Implications of inseparability
Cannot be mass produced at a central location Operations have to be decentralized so that the services can be provided directly to the customers

Perishability
Services cannot be stored or held in inventory. If not used when available, they go to waste.

Implications of perishability
Cannot be inventoried Short lived value of service There is lot of time pressure ( both for sales and operation)

Variability
Service quality tends to vary considerably. Haircut from your hair dresser vs. Big Mac

Implications of variability
Services cannot be standardized Difficulty in setting quality controls Difficulty in communicating the clients Determination of quality is possible only after the performance of the service

Difference between physical goods and services

Physical goods Services

tangible
homogeneous Production and distribution are separated from consumption

intangible
heterogeneous Production, distribution and consumption are simultaneous processes

A thing
Core value processed in factory Customers do not participate in the production process

An activity or process
Core value produced in the buyer-seller interaction Customers participate in production

Can be kept in stock Transfer of ownership

Cannot be kept in stock No transfer of ownership

Goods Tangible

Services Intangible

Resulting Implications Services cannot be inventoried Services cannot be patented Services cannot be readily displayed or communicated Pricing is difficult Service delivery and customer satisfaction depend on employee action Service quality depend on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted Customers participate and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult It is difficult to synchronize supply and demand with services Services cannot be returned or resold

Standardized

Heterogeneous

Production separate from Consumption

Simultaneous production and consumption

Non perishable

Perishable

The three additional Ps of Service Marketing

People Physical evidence Process

Product Physical good features Quality level Accessories Packaging Warranties Product lines Branding

Place Channel type Exposure Intermediaries Outlet locations Transportation Storage Managing channels

Promotion Promotion blend Sales people Number Selection Training Incentives Advertising Targets Media types Types of Ads Copy thrust Sales promotion Publicity Process Flow of activities Standardized Customized Number of steps Simple Complex Customer involvement

Price Flexibility Price level Terms Differentiation Discounts Allowances

People Employees Recruiting Training Motivation Rewards Teamwork Customers Education Training

Physical Evidence Facility design Equipment Signage Employee dress Other tangible Reports Business cards Statements Guarantees

Factors promoting service sector

FOREIGN DIRECT INVESTMENTS BETTER LIVING STANDARDS HIGH DISPOSABLE INCOME

CONVENIENCE FACTOR
DUAL INCOME HOUSEHOLD NEW TECHNOLOGICAL DEVICES CONCERN OF PRODUCTIVITY

Challenges confronted by service sector

INFRASTRUCUTRE TECHNOLOGY EMPLOYEES

CONSUMERS
COMPETITION SUPPLIERS

Macro environment factors that affect the service market

POLITICAL ECONOMICAL SOCIAL

TECHNOLOGICAL

POLITICAL
ECOLOGICAL/ ENVIRONMENTAL ISSUE CURRENT / FUTURE LEGISLATIONS OF THE HOME MARKET GOVERNMENT POLICIES

HOME MARKET LOBBYING/ PRESSURE GROUPS

FUNDING GRANTS AND INITIATIVES

ECONOMICAL
ECONOMY SLOWDOWN INTEREST AND EXCHANGE RATES TAXATION SPECIFIC TO PRODUCTS/ SERVICES

BUYING AND SPENDING POWER OF THE CUSTOME

ECONOMY TRENDS AND SITUATION

SOCIAL
LIFESTYLE TRENDS CULTURE BRAND , COMPANY & TECHNOLOGY IMAGE

CONSUMER ATTITUDES & OPINIONS

CONSUMER BUYING PATTERNS

TECHNOLOGICAL
COMPETING TECHNOLOGY DEVELOPMENT REPLACEMENT OF TECHNOLOGY/ SOLUTIONS TECHNOLOGY ACCESS/ PATENTS

Service triangle

The framework has 6 relationships

The service firm strategy must be communicated to its customers The service strategy also be communicated to firm employees There should be consistency in the service strategy and the systems that are developed to run day to day operation to achieve strategic goals The impact of organizational systems on the customer The importance of organizational system and employee efforts The interaction between customer and service provider

Service triangle marketing model

References :
Valarie Ziethaml, Mary Bitner, Dwayne Gremler, Ajay Pandit, 4th Ed, Services marketing- Integrated Customer Focus Across the Firm. McGraw Hill companies Christopher Lovelock, Jochen Wirtz, Jayanta Chatterjee, Service Marketing-

People, Technology, Strategy, 6th Ed, Pearson

Vinnie Jauhari, Kirti Dutta, Services- Marketing, Operations and Management, Oxford Higher Education

MANAGING SERVICES MARKETING MIX

MOD-2

CONTENTS
Customer gap GAPS Model of service quality Managing the gaps for enhanced service quality SERVQUAL Service blue print

CUSTOMER GAP
EXPECTED SERVICE CUSTOMER GAP
PERCEIVED SERVICE

Gaps Model of Service Quality

CUSTOMER

Expected service
Customer Gap

Perceived service Service delivery Gap 3 Gap 1 Gap 2

COMPANY

Gap 4 Customer driven service designs and standards

External communication to customers

Company perceptions of consumer expectations

THE PROVIDER GAPS

Gap 1- Not knowing what customers expect Gap 2- Not selecting the right service designs and standards Gap 3- Not delivering to service standards

Gap 4- Not matching performance with promises

GAP 1: NOT KNOWING WHAT CUSTOMER EXPECT

EXPECTED SERVICE

COMPANY PERCEPTION OF CONSUMER EXPECTATION

Causes for Gap 1

Inadequate marketing research orientation Lack of upward communication Insufficient relationship focus Inadequate service recovery

Gap 2: Not having right service quality design

and standard
CUSTOMER DRIVEN SERVICE DESIGN AND STANDARS

MANAGEMENT PERCEPTION OF CUSTOMER EXPECTATIONS

Causes for Gap 2

Poor service design Absence of customer driven standards Inappropriate physical evidence and servicescape

Gap 3: Not delivering to service design and

standards
CUSTOMER DRIVEN SERVICE DESIGN AND STANDARS

SERVICE DELIVERY

Causes for Gap 3

Deficiencies in human resource policies Customer who do not fulfill roles Problems with service intermediates Failure to match supply and demand

Gap 4: Not matching performances with

promises
SEVICE DELIVERY

EXTERNAL COMMUNICATIONS TO THE CUSTOMERS

Causes for Gap 4

Lack of integrated service marketing communications Ineffective management of customer expectations Overpromising Inadequate horizontal communications

SERVQUAL
Reliability Responsiveness Assurance Empathy Tangibles

SERVICE DESIGN & SERVICE BLUE PRINT

Service Design
Service design is a process across 4 Ds Discover Define Develop Deliver

It is about understanding the client, organization and market, develop ideas, translate them into feasible solutions and to help in implementing them

Characteristics of service design

Service design represent client perspective Service design addresses unique features of the services Service design integrates expertise from various disciplines Service design is interactive Service design is ongoing

Different kind of expertise included in service design

Management Product development Human resources Process management Quality management Strategy

 Marketing Communications Public relations Branding Price Promotion

 Research Psychology Ethnography Market research Observation Testing

 Design Interaction design Interface design Experience design Interior design Sensualization Product design Participatory design

Challenges of service design

Oversimplification Incompleteness Subjectivity Biased interpretation

Stages in new service development

Front end planning o Business strategy development or review o New service strategy development o Idea generation o Concept development and evaluation o Business analysis

 Implementation o Service development and testing o Market testing o Commercialization o Post introduction evaluation

New service strategy matrix

Markets Offerings Current customers New customers

Existing service

Share building

Market development

New service

Service development

Diversification

*Ansoffs Matrix

True understanding of market needs Higher value with the resource available Changes organizational culture New perspective on future development Higher effectiveness Higher efficiency Connects organization and clients Higher quality experiences as basis of success Differentiation against competition Brand affinity

Service design benefits:

Service blueprint
A Service Blueprint is a picture or a map that accurately portrays the service system so that the different people involved in providing it can understand and deal with it objectively regardless of their roles or their individual points of view.

The three important contents of an Service Blueprint

Process Evidence Points of contact

Steps involved in building service blueprint

Identify the process to be blueprinted Identify the customer or segment targeted Map the process from customer point of view Map contact employee actions, onstage and backstage Link customers and contact person needed to support functions Ask for evidence of service at each customer action step

Structure of a Service Blueprint

Advantages of Service Blueprinting

Brings clarity to the service delivery process Enables identification of critical incidents, which contribute or damage the consumer experience Provides insight on areas where employees need to be trained Enables further improvement of the process Helps to put coordination activities in perspective

CONSUMER AND BUYING BEHAVIOR

MOD 3

Qualities of services
Search qualities Experience qualities Credence qualities

PROPERTIES OF OFFERINGS
SEARCH QUALITIES :
Attributes that a consumer can determine before purchasing. They include colour, feel, style, price, fit, hardness, & smell. Goods like automobiles, furniture, jewelry, & clothing have high search quality because prepurchase determination & evaluation of their attributes is possible. Goods high in search quality can easily be evaluated.

 EXPERIENCE QUALITIES
Attributes that can be discerned only after purchase or during consumption. Vacations and restaurant meals have high experience quality because their attributes cannot be known or assessed until they have been consumed. They are more difficult to evaluate.

 CREDENCE QUALITY
Includes the characteristics that the consumer finds almost impossible to evaluate even after purchase & consumption. Wheel alignment in automobiles, a surgery have high credence quality. Most difficult to evaluate because the consumer may be unaware of or may lack sufficient knowledge to appraise the level of satisfaction

Stages in Consumer Decision Making & Evaluation of Services

Need Recognition

Information Search

Evaluation of alternatives

Purchase & Consumption

Post purchase Evaluation

Need Recognition
1. Physiological needs-Biological needs such as food, water, and sleep. 2. Safety and security needs-Shelter, protection, and security. 3. Social needs-Affection, friendship, and acceptance. 4. Ego needs-Prestige, success, accomplishment, and self-esteem. 5. Self- actualization-Self-fulfillment and enriching experiences.

Information Search
Use of personal sources-friends and experts Non-personal sources-mass or selective media Perceived risk-Intangible, nonstandardised, and usually sold without guarantees or warranties.

Evaluation of Service Alternatives

Evoked Set

Service Purchase & Consumption

Emotion and Mood Service provision as Drama Service Roles and Scripts Compatibility of Service Customers

Post Purchase Evaluation

Attribution of Dissatisfaction
Innovation diffusion Brand loyalty

Consumer behavior model (consumer decision making process)

EKB Model Black Box model Nicosia model

EKB model (Engel Kollat Blackwell)

Five distinct aspects in consumer decision making in EKB Model

Input Information processing Decision process Decision variables External factors

Black Box

INPUT

Black Box

OUTPUT

Black Box Model

Black box model

Stimuli Customer characteristics Responses

Nicosia Model

Changing dynamics of the Indian consumers

Income growth Increased disposable income Women participating in the workforce Education and health services Entertainment Comfort with technology
Technology babies ( 8-19 years of age) Impatient aspirers (20-25 years of age) Balance seekers (26-50 years of age) Arrived veterans (51-60 years of age)

Factors influencing buying behavior

Cultural factor Social factor Personal factors Psychological factors

Cultural factors
Culture is a complex whole which includes knowledge, belief, art, moral, custom and any other capabilities and habits acquired by man as member of the society
External material culture Internal material culture Subculture Social class

Social factors
Reference groups Family

Personal factors
Age Customer lifestyle Stage of family life cycle
Married couples Child bearing families Families with pre school children Families with school children Families with teenagers Families as launching centers (first child gone to last child leaving home) Middle aged parent (empty nest to retirement) Aging family members (retirement to death of both spouses)

Stages in family life cycle

Characteristics

Relevance of purchasing

Married couples

Relative independence, present and future oriented Youngest child under 6, limited independence, future oriented Young child, dependent future oriented Independent child, high income level Children independent and earning Children independent, no children at home

Furnishing apartments, travel, clothing, appeal to togetherness Goods and services geared towards the child, family oriented items Savings, home , education, insurance Home, luxury, education, family vacations Retirement, travel, home, luxuries Health, luxuries, self gratification

Child bearing couples

Families with school children Families with teenagers Families as launching centers Middle aged/ aging family members

Consumer lifestyle
Lifestyle:
is a constellation of individual characteristics that reflect certain behaviors, such as participation in social groups and relationship with significant others, commitment to certain behaviors and a central life interest

SRI Internationals VALS framework

Innovators Thinkers Achievers Experiencers Believers Strivers Makers Survivors

Innovators
They are successful, sophisticated and have high self esteem. Image is important to them, not as evidence of status or power but an expression of their personality Eg: owning an Rolls Royce, using a chartered flight

Thinkers
Motivated by ideals, thinkers have moderate respect for the status quo institutions of authority and social decorum, but are open to new ideas Eg; people taking the services of Indian Airlines

Achievers
They lead a goal oriented lifestyle, motivated by the desire for achievement. They have many wants and needs and are very active in consumer market place People opting for tutorials supporting their education, short term programs of premier institute

Experiencers
Self expression is the prime motivator. Young enthusiastic and impulsive customers, they quickly become enthusiastic about new possibilities but equally quick to cool. These avid consumers are heavy spenders Services from KFC, Caf Coffee Day

Believers
They are conservative and conventional people with concrete beliefs based on traditions. Opting for familiar products and established brands, the believers are predictable consumers People purchasing groceries from the traditional mom & pop shop (Kiranas)

Strivers
Trendy and fun loving, strivers are motivated by achievements. They are also concerned about the opinions and approvals of others and like to demonstrate their ability to win over peers People taking international tour plans,

Makers
They are practical people who are motivated by self expression. Makers have constructive skills and value self sufficiency. They are suspicious of new ideas and big businesses People who seek lots of alternatives to carry out their living

Survivors
Leading narrowly focused lives, survivors are cautious consumers.. They represent a modest markets for most products and services People availing the services of low cost saloons, retail outlet, public transport etc..

Psychological factors
Perception Beliefs and attitudes Learning Consumer motivation

Perception
It is the meaning that consumer ascribe to what they see around. The meaning that is given is influenced by
Past experience or learning Preconceived notions, prejudice and assumptions Expectations and personality Family background, previous acculturation, values, beliefs and other social factors Genuine knowledge and awareness

Customer perception
Influenced by two factors External factor Internal factor

External factors
Size Position Movement Repetition Intensity Contrast Color Directionality Directionality Format Isolation Novelty Learned attention including Stimuli Attractive spokesperson Scene changes

 Size: the size of the stimulant like an advertisement in newspaper, magazine or bill board has a direct bearing on the degree of perception (giant balloons, giant cut outs) (Image) Position: the position of the advertisement or communication as a stimulant also ensures its distinctiveness Movement: the human eye tends to seek and lock onto anything that has a movement, even it happens to be at the periphery of the vision Repetition: of a message not only ensures more audience but also helps memory retention and reinforcement amongst those who have been exposed to the message before Intensity: to capture the attention of the audience, viewers and the customers, all marketers use bright sound, psychedelic lighting, neon lights and glowing lights Contrast: when most communication is in a seamless flow of color and patterns, human perception tends to capture contrasty images quicker ( Image 1, Image 2) Color: color pictures are more noticed for their depth and variety than the black and white combinations which are considered dull and monotonous (Image )

 Directionality: the eyes tend to follow the direction and leads given by elements in the stimuli like in racy advertisement Format: in retail store, visual merchandising plays a key role in heightening the perception about the merchandise (Image) Isolation: when a service marketer separates a stimulus object from others, making them distinctive . Isolation factor works in enhancing the perception (Image) Novelty: customers tend to notice any offer or communication that is different from what they normally tend to expect. (Image) Learned attention including stimuli: Attractive spokesperson: Scene changes: