Introduction to Service

Marketing
Presented By:
Antra Singh
 Goods – Services - Products
• Goods – defined as objects, devices or things
• Services – defined as deeds, efforts or
performances
• Products – refers to both goods and services
• Ford has been long engaged in finance ( Ford
Credit) and in maintenance and car
components (Visteon)
• Eventually the company moved into car
insurance and general after sales care and web
retailing (fordjourney.com)
• It also formed a joint venture with Wingcast,
Qualcomm, a wireless electronics company
and Cartel, a telematics equipment supplier to
provide ‘in-vehicle’ navigational assistance,
internet and entertainment services.
• Fiat took over full control of Toro
Assicurazioni some years ago to provide
insurance and other financial services to its
customers.
• Rolls Royce has acquired aero engine repair
and maintenance companies worldwide.
• This aspect of marketing or servicization
phenomenon is termed as ‘service
encapsulation’
 Introduction to service economy
• Services account for 54% of the GDP and is
the fastest growing sector of the economy.
• Among the services ‘transport and
communications’ is fastest growing with
growth averaging 15.3% per annum
• Banking, insurance and business services grew
at 13.9%
• Zeithmal and Bitner defined services as ‘deeds,
processes and performances’
 Deeds – actions of service provider
 Processes – steps in the provision of services
 Performance – customer’s understanding of how
service has been delivered
• “ Any act or performance that one party can offer to
another that is essentially intangible and does not
result in the ownership of anything. Its production
may not be tied to a physical product”
– Kotler, 1991
 Goods and Services Continuum
• Goods and services offerings are being intermingled
in an unprecedented manner, in different proportions
are termed as goods and services continuum.
• Tangible Goods – soaps, toothpaste, salt
• Tangible goods with some services – washing
machine, refrigerator, water purifier
• Goods and services in equal manner – bar, restaurants
• Services with minor goods – airline services, ISPs
• Pure services – visit to gym, consultation visit to a
lawyer
 Scale of Market Entities
• It displays a continuum of products based on their tangibility
where goods are tangible dominant and services are intangible
dominants
• Tangible dominant typically involves a physical possession
• Intangible dominant involves only experience
• Tangible aspects of an intangible dominant product and the
intangible aspects of a tangible dominant product are an important
source of product differentiation and new revenue streams
• Adding service aspects to a product often transforms the product
from a commodity into an experience and increases the revenue
producing opportunities of the product dramatically
 Applicability of unique characteristics of services to
different types of services
Physical action to a person Hair Cut
Beauty Treatment
Medical Surgeries
Restaurant Food Service
Physical action to the object of a Repair and Maintenance of equipment
customer Interior Designing
Transportation of Goods
Non-physical action at the mind Advertising
Theatre
Lecturer/ Talks
Non-physical action directed at the Information Processing
data Consulting
 Characteristics of services
• Intangibility
• Inseparability/ Simultaneity
• Variability
• Perishability
 Intangibility

• Service cannot be stored

• Service cannot be patented legally and hence can be easily copied
by competitors.
• Service cannot be readily displayed or easily communicated to
customers leading to difficult in assessing the quality.
• Decisions regarding advertising and promotions are difficult.
• Pricing is difficult as it is hard to determine the actual cost of a
“unit of service” and price/quality relationship is complex.
• It is less efficient than goods production.
• Design of total service package is not possible.
For example: Services rendered by banks, restaurants, airlines etc. An
airline traveller cannot know the kind of experience he is going to have during a
flight at the time of making the purchase for the first time.
 Intangibility - Emerging Marketing
strategy
Some of the possible solutions to overcome intangibility
problems of services can be:
• Use tangible cues (for example see reading : Incredible
India Packs in a Cosmetic Touch)
• Stimulate manage and promote word of mouth
communication.
• Use personal sources of information more than non-personal
sources.
• Use post purchase communications
• Strengthening internal and external marketing.
• Use relationship marketing
• Create strong organisational image.
• Use cost accounting to help set prices.
 Inseparability
• It stands for inseparability of production and consumption
• Services are created (by the client/ user) and consumed (by client/user)
simultaneously and cannot be stored like goods.
• It involves the presence of customer, customer’s role as co-producer,
customer to employee and customer to customer interaction
• Centralized mass production is difficult if not impossible.
• Customer experience depends upon action of employees and interaction
between employees and customers.
• Operations need to be decentralized so that service can be delivered
directly to consumers in convenient locations.
• Due to simultaneous production and consumption, the customer
involvement is high and this may affect the outcome of the service
transaction.
• Involvement of other customers in the production process.
 Inseparability - Emerging Marketing
strategy
• Need strong selecting and training programmes for
public contact personnel
• Strong incentives and motivations to always satisfy
the customer
• Use multi-site locations.
• Innovating techniques of indirect interaction.
• Standardisation to maximum extent possible.
• Consumer Management
• Focus on personal attention
• Develop distribution network with quality control
mechanism
 Variability/Heterogeneity
• Standardisation is difficult to achieve.
• Hard to set up a quality control.
• Quality can be determined only after the
service has been performed.
• Not possible to communicate what exactly
the customer is going to receive.
 Heterogeneity - Emerging Marketing
strategy
• Stress standardisation and performance
• Focus on employee training programme, performance evaluation
and internal marketing.
• Consider licensing and other forms of credential requirements.
• Positioning variation as strength of innovation.
• Promote research and innovation.
• Customize services.
 Perishability
• Value is short lived.
• Cannot be inventoried
• Time pressure in sales
• Capacity is finite
For example: An airline seat on a particular
flight, if not sold cannot be stored for
sale during the next flight.
 Perishability - Emerging Marketing
strategy
• Demand forecasting and creative planning for
capacity utilization to achieve a closer match
between demand and supply.
• Use strategies to cope with fluctuating demand.
• Strong recovery strategies when things go wrong.
• Focus on competence and expertise
• Continuous study on demand patterns and
competitive parameters.
• Creative pricing like early bird specials.
Classification of services
 Differentiation between goods and
services
• Ownership
• Performance
• Customer involvement
• People as a part of the product
• Variability
• Evaluation
• Inventory
• Distribution channel
Factors – Growth of Service Sector
• Foreign Direct Investment
• Better living standards
• High disposable income
• Convenience factors
• Dual income households
• New technological devices
• Concern for productivity
 Challenges confronted by Service
Sector
• Infrastructure
• Technology
• Employees
• Consumers
• Competition
• Suppliers
 Critical factors for success
• Focus on customers
• Caring for employees
• Identification of value drivers
• Deploying technology to a firm’s advantage
• Demand management
• Adequate systems
 Services Marketing Mix
• Product Elements
• Price and other user outlays
• Place and Time
• Promotion and Education
• People
• Process
• Physical Evidence/ Environment
• Productivity and Quality
Services Marketing Environment
 Service Product

Vinnie Jauhari and Kirti Dutta

 Service Product
• “Anything that can be offered to a market for
attention, acquisition, use, or consumption that
might satisfy a need or want. It includes physical
objects, services, place, organizations, and ideas”
Kotler et al., 2006
• In service marketing a product can be a vacation
package, a meal at the restaurant, a financial
service, a health service, educational service, etc.
 Service Offering
• Customers adopt a product based on the perception
that the benefits derived are worth more than the
cost of the product. Thus, service organizations
must develop and offer a service product that meets
or exceeds customer expectation.
• The design of the service product must thus address
three key components :
1. core product
2. augmented service offering (core + supplementary)
3. delivery process
Service offering for a Packaged Trip
 Service Product Levels
The five levels of service product the marketer needs to think about are:
1. Core or generic product/service: This is the most fundamental
product/service that customers purchase.
2. Basic product/service: This is how the marketer translates the core benefit
into a service product.
3. Expected product/service: This includes the attributes, such as design,
quality, packaging, etc., which customers expect when purchasing a
service product.
4. Augmented product/service: This includes the supplementary services the
marketer offers to differentiate their product offering from other players in
the same market segment.
5. Potential product/service: This consists of new ways of attracting and
satisfying the customers.
The various levels of Service Product –
Air Transportation
 Definition of a New Product
• New Product refers to:
 Original products
 Product Improvements
 Product modifications
 New brands that firms develop
 New Product Development
• Companies that have a new product strategy in place
are more successful than those that do not.
• New product development, in a conventional buying
environment, is largely driven by the need to
innovate. More profitable and faster growing firms
are found to engage in sustained innovative activities.
• Thus, product development is ‘An essential process
for competitive success, survival and renewal of
organizations’ (Brown and Eisenhardt 1995).
New Product Development Stages
• Idea generation (a systematic search for new ideas by an organisation
from customers, competitors, distributors, suppliers and other sources like
magazines, trade shows, seminars, etc)
• Idea Screening (to select more meritorious ideas from less promising
ones)
• Product idea ( a possible product that the company may launch in the
market)
• Product concept (a detailed version of the product idea stated in
meaningful consumer terms)
• Concept test (it is a technique used in market research to assess the
reactions of consumers to a new product or a proposed change to an
existing product)
• Business Analysis (exhaustive analysis of the business implications, such
as sales, costs and profit projections of the new product concept)
 Process for product replacement/
elimination
• Periodic review meeting
• Product review (New product opportunity,
Identifying weak products)
• Performance analysis
• Evaluation
• Decision
• Implementation
Product Life Cycle (PLC)
PLC - Characteristics
PLC Strategies
 Weakness of Product Life Cycle
Concept
• Product/ Service oriented
• Undefined concept
• No common shape
• Unpredictability
• Unclear implications
• Internal
 Branding
The American Marketing Association defines a
brand as :
‘A name, term, sign, symbol, or design, or a
combination of them, intended to identify the
goods or services of one seller or group of
sellers and to differentiate them from
competitors’
 Branding (contd.)
A brand can convey up to six levels of meaning :
• Attributes There may be features/attributes associated with the brand. For
example, a bank may list the services offered in its portfolio such as loans,
savings accounts, demat account, online transactions, etc.
• Benefits A brand represents functional and/or emotional benefits. For example, a
bank may offer a 24/7 service or ease of transactions.
• Values These relate to the product/service values. For example, ‘Made in
Switzerland’ for watches or ‘Made in Japan’ for electronics products evoke
feelings of trust.
• Culture A brand represents a culture. For example, Sony and Toyota represent
Japanese precision and quality.
• Personality A brand may project a personality of the consumer. For example, a
Diner’s Card is evidence of a customer’s long association with the bank.
• User A brand points out the categories of users. For example, tour operators
specifically target age groups of customers when they advertise travel packages
such as family destinations, honeymoon couples, etc.
 Branding (contd.)
Uses of Branding are:
• identification of source of product
• assignment of responsibility to product maker
• reduction of risk
• reduction of search costs
• promise, bond, or pact with maker of product
• symbolic device
• signal of quality.
 Branding Challenges
• To brand or not to brand There are instances in service segments such as home loans
and credit collection agencies, which work for leading banking brands, such as ICICI
and HDFC. On their own, they would find it difficult to sustain their operations.
• Brand sponsor decisions These decisions are about whether the brand would be a
manufacturer’s brand, distributor’s brand, or licensed brand. Firms such as Wills
Lifestyle have opened their own stores for retailing its brand of clothes. Superstores,
such as Marks and Spencers, retail products using their own brand names.
• Brand name decisions These decisions are related to whether individual names,
blanket family names, separate family names, or company trade names should be
combined with an individual product name.
• Brand strategy decisions These are related to brand positioning decisions (corporate
identity, endorsement, segmentation, unique attribute, competitor).
 Requirements for successful brand
building
• Evoke feeling of trust
• Trained manpower
• Service blueprint
• Physical evidence
• Mechanisms for consumers to reach the
service provider
• Connecting to consumers
 Pricing Strategies
for Services
Vinnie Jauhari and Kirti Dutta
 Introduction
• Pricing Strategy has a huge impact on the
firm’s offerings
• The attributes of services viz.: Intangibility,
Heterogeniety, Imperishability and
Inseparability makes things more complex
• Demand, Revenue and Capacity determines
pricing of any service
 Pricing Objectives
• Maintenance of existing customers
• Attraction of new customers
• Customer’s need satisfaction
• Cost coverage
• Creation of prestige for the firm
• Long term survival
• Service Quality Leadership
• Achievement of satisfactory profits
• Sales Maximisation
• Market Development
• Achievement of Satisfactory market share
• Determination of fair prices by customers
• Profit Maximisation
• Sales stability in the market
Pricing Tripod
•
Methods
Cost-oriented pricing
of pricing services
 Full cost pricing (takes into account fixed as well as variable costs)
 Marginal cost pricing (Direct costs can be recovered and the full costs can be recovered after a certain
period of time)
 Target return pricing (Price is determined at a point that yields the firms’ target rate of return on investment)
 Contribution analysis (Deviation from breakeven analysis where only direct costs of a product/service are
taken into consideration)
• Competitor-oriented pricing
 Going rate pricing (Pricing is per the competition)
 Competitive bidding (Bid is offered to the lowest bidder)
• Marketing-oriented pricing
 Marketing strategy
 Price quality relationships
 Product line pricing
 Negotiating margins
 Political factors
 Costs
 Effect on distributors/ retailers
 Competition
 Value to customers
 4 methods of estimating value to
customers
• Buy response method (this estimates directly the value that
customers place on a product by asking them if they are
willing to buy at various price levels)
• Trade off analysis (it measures the trade off between price
and other product features so that their effects on product
preference can be established)
• Experimentation (attempts to place a service at scale, at
different locations at varying prices)
• Analysis of the economic value to the customer (if a firm
can provide higher economic value to the customer, it can
charge a higher price)
 Revenue Management
• It is a sophisticated approach to managing supply and demand
under varying degrees of constraint
• It involves setting prices according to predicted demand levels
among different market segments
• It is important in value creation as it ensures better capacity
utilisation and reserves available capacity for higher paying
segments.
• Airlines and hotels in particular have become adept at varying
their prices in response to the price sensitivity and needs of
different market segments at different times of day, week or
season.
 Designing fairness into Revenue
Management
• Design price schedules and fences that are clear, logical
and fair
• Use high published prices and frame fences as discounts
• Communicate consumer benefit of revenue management
• Use bundling to “hide” discounts
• Take care of loyal customers
• Use service recovery for to compensate for overbooking
 Managing Distribution
Channels in Service Industry
 Distribution
• Distribution includes the flow of services from service
provider to customer and can be performed by service
providers themselves or by a service intermediary, such as
a travel agent booking tickets on major airlines for
customers.
• The network through which distribution takes place is
known as the distribution channel and consists of
independent organizations involved in the process of
making a service available for consumption by customers.
Factors affecting choice of distribution
channels
• Distribution holds an important position in the
purchase of all the three types of services. The
distribution factors affecting their choice can
be divided into:
• factors affecting the choice of service provider
by customers
• factors affecting the choice of distribution
channels by service providers.
 Factors affecting choice of Service
provider by customer
• Outlet type
• Outlet numbers
• Accessibility
• Location
 Factors affecting choice of distribution
channels by service provider
• Resource consideration
• Choice of intermediaries
• Market need
Choice of intermediaries
 Strategies for distribution
• Intensive distribution – this strategy enables the service
provider to make available its services through as many
service providers or outlets as possible
• Selective distribution – the service provider chooses some
intermediaries to make available its service to the customers
• Exclusive distribution – the number of intermediaries is
limited, it involves sole dealing arrangements between the
service producer and the retailer
• Franchising – it involves selling a business service to an
independent investor who has working capital
 Managing distribution channels
• Selection (choice of channel members)
• Motivation (to act as franchisees)
• Training (to maintain the standards expected of them)
• Evaluation (to provide an insight into the functioning of the channel
intermediary)
• Managing Conflict
– Horizontal conflict (difference in opinion between channel members at
the same level)
– Vertical conflict (disagreement between different levels of the same
channel)
 Effect of the internet
• Internet is an effective marketing tool for
hospitality and travel companies.
• The Internet is an effective distribution system
allowing for the purchase of services from any
corner without visiting the store or service
provider.
• The online payment system further facilitates
the purchase of services.
 GDS (Global Distribution System)
• In the 1960s, GDS was first developed by the airline industry
to keep track of flight schedules, availability, and prices. The
conceptualization of the Sabre system began in 1953 with a
chance meeting between American Airlines President C.R.
Smith and R. Blair Smith, a senior sales representative for
IBM, on an American Airlines flight from Los Angeles to
New York.
• Their conversation about the travel industry sparked the idea
of a data processing system that would create a complete
airline seat reservation and make all the data instantly
available electronically to any agent, at any place.
• Thus Sabre was developed.
Strategies for Promotion for
Service Sector
 Promotion
• Promotion is defined as:
‘The managerial process of communication an
organization has with its target audience to
generate attitudinal and behavioral responses and
facilitate exchanges for mutual benefit.’
 Need for marketing communicaiton

• Differentiate
• Remind
• Inform
• Persuade
Communication Process
Elements of promotion mix

© Oxford University Press 2009. 72

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Factors influencing Promotion Mix
selection
• Resource available and cost of promotional tool
• Market size and concentration
• Customer information needs
• Push versus pull
• Product life cycle
• Buyer readiness stage
Promotion Planning Strategy

© Oxford University Press 2009.

All rights reserved.
• Marketing Objectives
 Brand awareness
 Brand knowledge
 Brand attitude
 Sales
 Distribution
• Budget allocation
 Affordable method
 Percentage of sales method
 Competitive parity method
 Objective and task method
Advertising
 Advertising
• Advertising is a paid form of communication by
the service provider with its target audience to
facilitate exchanges (of services or information)
with its stakeholders.
 5 Ms of Advertising
• Mission
• Money
• Message
• Media
• Measurement
The advertising process
Personal Selling
 Personal Selling
• Personal selling involves selling the product of
the service organization through the sales force.
This involves maintaining a sales force and hence
a sales department, the personnel of which are
involved in direct contact with the customers
Personal selling process
Sales Promotion
 Sales Promotion
• ‘Sales promotion consists of short-term
incentives to encourage the purchase or sale of
services’,
(Kotler et al. 2006).
Sales promotion process
 Promotional tools
• Coupons
• Packages
• Reward points and premiums
• Deals
• Price offs
• Special offers
• Live demonstrations and roadshows
• Kiosks and free service camps
• In-store competitions
• Point-of-purchase material
• Contests
• Scratch cards
Direct marketing
 Direct marketing
• Originally, direct marketing attracted customers by
contacting them without involving any
intermediaries. Thus, salespersons were also a part of
direct marketing. However, with the introduction of
media, such as telephone, television, and the Internet,
the concept was redefined.
• ‘An interactive system of marketing that uses one or
more advertising media to affect a measurable
response and/or transaction at any location’
(Kotler et al. 2006).
Direct marketing process
 Tools for direct marketing
• Direct mail
• Telemarketing
• Catalogue marketing
• Inserts
Public relations and publicity
 Public relations and publicity
• ‘The management of communication and
relationships, to establish goodwill and mutual
understanding between an organization and its
public’
Jobber, 2001
Public relations and publicity process
 Major tools
• Corporate advertising
• Seminars
• Lobbying
• Donations
• Publicity
E-marketing
 E-marketing
• Internet is a global medium and the companies using it are
potentially addressing global audience (Wymbs 2000).
• This is because the use of Internet is growing at a fast rate not
only in India but also worldwide.
• What took the radio 38 years and TV 13 years, Internet did in five
years, i.e., reach an audience of 50 million users (Lagrosen 2005).
• The World Wide Web has revolutionized the communication
process, be it information search, product purchases, etc. The
Internet provides unlimited opportunities—many of them still
unexplored—for the marketing of goods and services.
• The growing use of Internet across the globe adds to the
opportunities offered by it.
 E-marketing
• The Internet has a limitation in marketing products,
as consumers cannot physically see the product
before purchasing.
• In services marketing, due to the different
characteristics of services like intangibility and
inseparability, Internet has an added advantage.
• Better quality of pictures can be placed on the
website, giving a feel of the ambience and the
services to be provided.
 Coordination in marketing
communication
• Service promised
• Communicated message
• Internal communication
• Guarantees