Service Marketing Notes1 Rejinpaul
Service Marketing Notes1 Rejinpaul
Service Marketing Notes1 Rejinpaul
Unit – I Introduction:
Introduction :
The turn of the century has seen profound changes in the global economy.
Services had played a crucial part in these changes, because the services are
become the way organizations met with their market. Already organizations
discovered that their survival no longer exclusively depends on their products they
offer, but also on the additional offerings they make to their customers that
differentiate from their competitors innovative organizations, offering new
services as well as unique customer services, are now succeeding in markets where
established organizations have failed (Lovelock and Patterson, 1998:4).
Kotler (1996) defines service as an activity that one party offers another
that is essential intangible and does not result in the ownership of anything.
Its production may or may not be tied to a physical product.
"Marketing is not an event, but a process... It has a beginning, a middle, but never
an end, for it is a process. You improve it, perfect it, change it, even pause it. But
you never stop it completely."
- Jay Conrad Levinson.
1. Higher Intangibility
2. Lack of Ability to store them for future Sale
3. Greater Interaction between the customer and the service Factory
4. Greater Variability in Service Delivery
5. Greater Variability among service customer’s Expectations
Service Economy:
Service economy can refer to one or both of two recent economic
developments. One is the increased importance of the service in industrialized
economies. Services account for a higher percentage of US GDP than 20 years
ago. The current list of Fortune 500 companies contains more service
companies and fewer manufacturers than in previous decades.
The term is also used to refer to the relative importance of service in a product
offering. The service economy in developing countries is mostly concentrated
in financial services, health, and education. Products today have a higher
service component than in previous decades. In the management literature this
is referred to as the sterilization of products. Virtually every product today
has a service component to it. The old dichotomy between product and service
has been replaced by a service-product continuum. Many products are being
transformed into services.
For example, IBM treats its business as a service business. Although it still
manufactures computers, it sees the physical goods as a small part of the
"business solutions" industry. They have found that the price elasticity of
demand for "business solutions" is much less than for hardware. There has been
a corresponding shift to a subscription pricing model. Rather than receiving a
single payment for a piece of manufactured equipment, many manufacturers
are now receiving a steady stream of revenue for ongoing contracts. James
Murrdock once said "When GDP are low...the service based economy must be
also."
1) Crawling Out (Pre 1980) – when early services scholars created and
defended the services marketing field;
Remarkable change has occurred in the services marketing field since the
publication of Fisk, Brown and Bitner (1993). To portray these
changes in the services field, we continue with a metaphorical approach,
but we shift the nature of the evolutionary metaphor from
biological evolution to social evolution.
Making Tools
Creating Language
BUILDING COMMUNITY:
CONCLUSION
Services in India
Today, the service sector contributes more than 50 percent to India's GDP.
This is a far cry from the situation a few decades back, when India was
basically an agricultural economy. This shift from manufacturing and
agriculture to services is being witnessed in countries all over the world. With
the increasing prominence of services in the global economy, Services
Marketing has become a subject that needs to be studied separately.
Marketing services is different from marketing goods because of the unique
characteristics of services, namely intangibility, heterogeneity, perishability
and inseparability.
The second level of the services address the nature of the services in terms of
the degree of tradability, to whom or what the action is directed, and the
degree of merchantability.
Learning Objectives:
Characteristics of a Service
What exactly are the characteristics of a service? How are services different
from a product? In fact many organisations do have service elements to the
product they sell, for example McDonald’s sell physical products i.e. burgers
but consumers are also concerned about the quality and speed of service, are
staff cheerful and welcoming and do they serve with a smile on their face?
There are five characteristics to a service which will be discussed below.
1. Lack of ownership.
You cannot own and store a service like you can a product. Services are used or
hired for a period of time. For example when buying a ticket to the USA the
service lasts maybe 9 hours each way , but consumers want and expect
excellent service for that time. Because you can measure the duration of the
service consumers become more demanding of it.
2. Intangibility
You cannot hold or touch a service unlike a product. In saying that although
services are intangible the experience consumers obtain from the service has
an impact on how they will perceive it. What do consumers perceive from
customer service? the location, and the inner presentation of where they are
purchasing the service?.
3. Inseparability
4. Perishibility
Services last a specific time and cannot be stored like a product for later use. If
travelling by train, coach or air the service will only last the duration of the
journey. The service is developed and used almost simultaneously. Again
because of this time constraint consumers demand more.
5. Heterogeneity
Tangibility
A product is tangible, which means the customer can touch and see the product
before deciding to make a purchase. Items such as packaging and presentation
may compel a customer to purchase a product. Services, on the other hand, are
not tangible, which can make them more difficult to promote and sell than a
product.
Relationship and Value
Products tend to fill a customer's need or want, so companies can use this to
sell a product. A service is more about selling a relationship and the value of
the relationship between the buyer and seller of the service. For example, a
car is something a buyer can touch and see as well as use. A service, such as
lifestyle coaching, for example, is not tangible. A lifestyle coach may be able
to assist clients in creating a life plan and implementing steps to transform his
life into one that the client wants to live, but it is not something tangible that
the client can place in his home and look at every day. Therefore, the client
needs to perceive the value of the service, which can be harder to get across.
Comparing Quality
Measuring the quality of a product is easier than measuring that of a service. If
a customer buys a cleaning product to clean the kitchen sink and it doesn’t do
the job, the customer knows the value of the product is zero. On the other
hand, it is harder to measure the quality of a service.
Return Factor
If a customer purchases a product and it doesn’t work as it is supposed to, the
customer can return the product for her money back or at least to receive a
store credit. A service is consumed as it is offered, so it lacks the return factor
that a product has. Some service providers overcome this by offering money-
back guarantees.
Ethics in Services Marketing
Market analysis services from Mapping Analytics help you know the
economic opportunity available to you in any geographic market. Whether
you sell to consumers, to businesses, or both, market sizing provides
intelligence you need to deploy sales and marketing resources effectively.
Classification of Services:
1. Nature of the organization
2. Nature of service
3. Customer relationship
4. Nature of demand
5. Service package
6. Delivery method
Price
In the determination of price, service marketers deal very much with the
same price issues as goods marketers. Subsequently, the differences present
itself when the intangible characteristic of services specifies that price
becomes a quality indicator. The art of successful pricing is to establish a
price level that is low enough for the exchange to represent good value to
customers, but high enough to allow service providers to achieve their
financial objectives (Palmer and Cole, 1995:222).
Distribution (Place)
that services are on hand when they want them, while accessibility is the
relative ease with which customers can conduct service processes with
Promotions
The promotion mix for the traditional marketing mix is usually broken down
People
People as an element in the service mix include all the human actors - the
firm’s employees (internal customers), the buyers (external customers),
and other customers who play a part in service delivery and influence
customers.
Processes
Physical evidence
The environment in which the service provider delivers the service and
where the customers and the organization interact, as well as any tangible
component that facilitates performance or communication of the service, is
referred to as physical evidence (Zeithaml and Bitner, 1996, 26).
Below are some trends that are shaping the marketing approach of service
companies:
• Focus on the Service Value. Customers want value for their money and
they expect that company’s offerings must be of prime quality at the
least possible price. This is opposite to the principle of business
operations. Companies will need more money to execute first-class
service because it requires investment on well-experienced employees
which eventually require higher salaries, high-end facilities, additional
employee trainings which all boils down to an increase operational
expenditures. Managers of service companies are tasked to design a
service model that are valuable to their customers but priced reasonably.
In the past, companies believe that as long as they are “big” in terms of
scale, size, and resources, their perceived value is high. This is no longer
true today. The best judge of your company’s value is your customers.
1. Identifiable
2. Accessible
3. sizeable
4. profitable
5. unique needs
6. Durable
7. measurable
8. compatible
Bases of Segmentation
1. Geographic
2. Demographic
3. Psychographic
4. Behaviouralistics
Advantage
Target Marketing:
Positioning
Approaches of Positioning
1. Introduction
2. Growth
3. Maturity
4. Saturation
5. Decline
Implementation
6. Service Development and Testing
7. Market Testing
8. Commerlisation
9. Post Introduction Evaluation
Blue Printing
The above 4 key actions areas are separated by 3 horizontal lines are
1. Line of interaction
2. Line of visibility
3. Line of internal Interaction
4. Vertical line cutting across
Blueprint Components
There are five components of a service blueprint. Our example shows a simple
blueprint for a one-night stay in a hotel. They are:
■ Customer actions. This include all the steps a customer takes during the
service delivery process. In a Service Blueprint, customer actions are usually
depicted in sequence, from start to finish. Customer actions are central to the
Service Blueprint, so they are described first.
■ Backstage actions taken by employees that are not visible to the customer.
The next part of the Service Blueprint is the “backstage” invisible actions of
employees that impact customers. Actions here are separated from onstage
service delivery by the line of visibility. Everything above the line of visibility is
seen by the customer while everything below it is invisible. In our hotel
example, these actions included taking the food order (accurately) and
preparing a quality meal.
Vertical lines are drawn on the blueprint to show how various activities and
processes interact to deliver the service to the customer.
Now that you have a basic understanding of the parts of a Service Blueprint,
and what one looks like, think about developing a blueprint for a precision
agriculture service for your business. The first step will be to define all the
steps in delivering the service you want to blueprint. If you are trying to
differentiate your service offering to different customer segments, it will be
helpful to blueprint each approach. Once you have chosen the service you want
to blueprint, all the customer actions involved in the service are placed on the
blueprint in the Customer Actions section.
My example of a hotel stay blueprint shows only the basic steps in the customer
experience. An overview blueprint like this is a good place to start, but you will
likely need to add more detail at key steps where you suspect improvement
could occur. Blueprinting is a very flexible tool, and you can add additional
detail as you identify potential shortfalls and hopefully moments of delight in
the delivery of the service. Remember — you want to capture the end-to-end
customer service experience from the customer’s point of view in the blueprint.
Thinking about the precision agriculture service you selected, who are the
onstage employees that deliver the service? No doubt there are several, from
sales agronomists who consult with the customer to your office staff who
schedule the service to applicators who drive equipment in the customer’s field.
What are the behind-the-scenes processes they rely on to deliver a memorable
experience to the customer? Where can gaps occur that prevent a smooth
trouble-free experience? Are there places that appear to meet customer needs,
but could still be improved anyway to begin exceeding needs?
Service blueprinting will identify areas where a service could be refined. If you
introduced new elements into the service delivery, would that create more
customer satisfaction and help you differentiate yourself from competitors?
• Reliability
• Responsiveness
• Assurance;
• Empathy, and
Positioning of Service
Positioning your service is the first step in the marketing process. More
specifically - defining your best target client. Once you do that tailoring the
rest of your marketing mix becomes pretty straight forward.
When defining a target niche, identifying too wide a base, means you specialize
in none. Think of Sears.. the original low cost department store. In their
Halcyon days they dominated the landscape... but over the years Sears added
more and more services to appeal to more and different clients... adding
better fashions to their lower cost items for example. Next thing they knew,
along came Walmart, Target, and Home Depot. These new competitors all
focused and stole customers from Sears. The take away - narrowing your sights
can establish a beach head and increase your success.
One more thing about niches - do the difficult thing. That is, focus on being
able to service the niche that requires greater skills. It reduces competition for
those specific clients... and prospects in all the niches that are easier to serve
will implicitly know you can fulfill their needs... So focusing can actually
broaden your prospect pool.
Designing Service Delivery System
Design
We are surrounded by things that have been designed—from the utensils we eat
with, to the vehicles that transport us, to the machines we interact with. We
use and experience designed artifacts everyday. Yet most people think of
designers as only having applied the surface treatment to a thing conceived by
someone else. Eli Blevis created an illustration to emphasize the gulf between
the general public’s notion of design and designer’s views of design (Blevis et
al., 2006) (see Figure 19.1).
Figure 19.1 – A caricature of the popular conception of design vs. all other
concepts.
Ultimately, everything that has not come from nature has been designed—it
just may not have been consciously designed. As early as 1938, Moholy-Nagy
described design as more than just facade making. He suggested that design
was “a complex and intricate task … and the integration of technological,
social and economic requirements, biological necessities, and the
psychophysical effects of materials, shape, color, volume, and space’’ (Moholy-
Nagy, 1938). Most design definitions also include planning as a critical element.
Janet Murray, author of Hamlet on the Holodeck, describes the designer’s role
as making ‘‘something new that fits in with what already exists or changes it in
a positive way.’’ This description of design is consistent with Herbert Simon’s
seminal work in which he says, ‘‘Everyone designs who devises courses of
action aimed at changing existing situations into preferred ones’’ (Simon, 1996).
Marty Neumeier simplifies further by suggesting that ‘‘design is change’’
(Neumeier, 2009). Of course, change (or the process of change) can be changed.
That is, change can be designed; thus, design can be designed.
Service designers must account for the complexity of service resources that
must be accessible to the appropriate participants to design the service
experience for themselves. Methods that service designers use to address this
complexity in particular are service ecologies, experience prototyping, and
service blueprinting. Service ecologies are maps of the participants and entities
affected by a service and the relationships between them. Ecologies or
mappings of the research findings reveal new opportunities and inspire ideas,
and they help to establish the overall service concept (livejwork, 2004).
Experience prototyping brings the service experience to life. First designers,
and then stakeholders in the experience, act out the service experience with
specific roles and rough props. This is similar to Brenda Laurel’s design
improvisation (Laurel, 2003). The goal is theater that enables the designers to
better understand the contextual level of the design experience. This
understanding is crucial because experience emerges from the activity of
persons acting in a setting and is embedded in context and ongoing social
practices.
G. Lynn Shostack developed service blueprinting. She states, ‘‘a service
blueprint allows a company to explore all the issues inherent in creating or
managing a service.’’ She goes on to explain that there are four aspects to the
blueprint. They are process identification, isolation of fail points, establishing
the time frame, and analyzing profitability (Shostack, 1984). We have extended
this approach to include opportunities for service innovations that are derived
from immersive research.
Service Channels
Services too therefore have multiple channel levels. To know about each level
you can view my post on Channel levels – Consumer and industrial marketing
channels. The same marketing channel system applies to services as well as
products.
However a new concept being especially used in the services sector is the
Information highway channels. Simply said these information highways combine
multiple forms of data carrying capacity (Internet = Videos + Software + Audio
+ Images whereas Phone = Voice)
Thus service sector channels and their establishment for a service based
organization also presents its own challenges.
Service Pricing
Pricing Your Services
The good news is you have a great deal of flexibility in how you set your prices.
The bad news is there is no surefire, formula-based approach you can pull off
the shelf and apply in your business. Pricing services is more difficult than
pricing products because you can often pinpoint the cost of making a physical
product but it's more subjective to calculate the worth of your counsel, your
staff's expertise, and the value of your time. You can, however, use some of
the same underlying pricing guidelines to figure out your costs and operating
expenses plus your target profit in setting your price for services.
• Materials cost. These are the costs of goods you use in providing the
service. A cleaning business would need to factor in costs of paper
towels, cleaning solutions, rubber gloves, etc. An auto repair business
would tally up the cost of supplies, such as brake pads or spark plug,
which are being installed by service people. You may want to include the
material list with your estimate in bidding for a job.
• Labor cost. This is the cost of direct labor you hire to provide a service.
This would be the hourly wages of your cleaning crew and/or a portion
of your mechanic's salary and benefits while they were providing the
service for your customer. The SBA recommends using a time card and
clock to keep tabs on the number of hours of labor involved in providing
each service for a customer.
• Overhead costs. These are the indirect costs to your business in
providing services to customers. Examples include labor for other people
who run the firm, whether administrative assistants or human resources
personnel. Other overhead costs include your monthly rent, taxes,
insurance, depreciation, advertising, office supplies, utilities, mileage,
etc. The SBA suggests that a reasonable amount of these overhead costs
should be billed to each service performed, whether in an hourly rate or
a percentage. One important thing to note: don't just depend on figures
from last year to determine your overhead costs. You need to charge
customers rates that cover your current costs, including higher salaries
to employees, inflation, etc.
Now that you understand what it costs you to provide a service, what your
competitors are charging, and how customers perceive the value of your
services, it's time to figure out whether to charge an hourly rate, a per-project
rate, or try to negotiate a retainer for your services. This may be
predetermined by your industry and the type of service pricing that
predominates in your sector. For example, lawyers tend to charge hourly rates
for their services, although those rates can vary. Many construction firms
charge a project fee and require that one third be paid up front, another third
be paid at the half-way point, and the remaining third be paid upon completion.
In a service business, your biggest costs are usually your people costs -- salaries,
benefits, etc. If you are having a hard time selling services at an acceptable
profit, the problem may be that your employee costs are too high rather than
the price is too low. You may want to also re-evaluate your overhead costs to
determine whether there are other cuts you can make to bring your price down
and your profit margin up. "Look at your expenses and see where you can cut,"
Toftoy advises.
Resurrecting a Relic
Marketers claim that tangible positionings, those based on functional attributes
and benefits, worked well back in the '50s and '60s—when buyers were
generally more open to marketing and advertising, there were fewer brands
and less marketing clutter, and positioning possibilities were limitless. They
argue that intangible positionings were born out of necessity in the '90s when
product differences seemed to disappear in many categories and all brands
started to look the same. And they maintain that marketing communications
rooted in an intangible positioning can be just as effective as tangible
positionings were decades ago. We don't argue that intangible positionings are
by definition problematic, but we do argue that marketers are missing
significant opportunities if they a priori eliminate tangible positionings from
consideration. It is a misguided notion that they aren't relevant any more.
n fact, some of the most powerful, category dominating brands have tangible
positionings: Disney with wholesome family entertainment, ExxonMobil with
fast and friendly service, FedEx with guaranteed next-day delivery, Grey Goose
with the best-tasting vodka, and Southwest with no frills/low priced air travel.
Other challenger brands are the envy of their competition: Apple with easy-to-
use products, Citizens Bank with rapid and responsive service, Green Mountain
Energy with clean and green power, and Target with fashionable but affordable
goods. Marketing communications founded on a tangible positioning can yield a
return on investment of 10%-15% and higher (significantly higher than we've
seen with intangible campaigns), exactly as it did in the '50s and '60s.
The list shouldn't be limited under any circumstance. Even consider seemingly
nutty ideas such as "impresses my neighbors" and "official hospital of the
Pittsburgh Steelers."
At this stage, don't mistake what people state is important for motivating
power; they are different. Researchers often ask respondents to rate
characteristics of a hospital or medical practice on a 5-point scale, ranging
from (1) not important at all to (5) extremely important. This is a surefire way
to a marketing misfire. The reason is simple: People tend to grade the most
generic, tangible, rational, socially acceptable characteristics (e.g., "has four
wheels" for a car, "has doctors who really care" for a hospital) as the most
important. Using importance scores as a guide to positioning will more often
than not send marketers in the wrong direction.
+4 Extremely desirable
+3 Very desirable
+2 Somewhat desirable
+1 Slightly desirable
0 Neither desirable nor undesirable
-1 Slightly undesirable
-2 Somewhat undesirable
-3 Very undesirable
-4 Extremely undesirable
Compare your brand with your competitors' brands, on the most motivating
attributes and benefits. The best positioning opportunities are those that are
highly motivating and on which a brand enjoys advantages relative to
competitors. The brand strategy matrix below illustrates how to use motivating
power and brand perceptions to identify the best opportunities. The value of
the strategy is ranked from 1 (the most valuable) to 7 (the least valuable).
Evaluate the feasibility and profitability of different opportunities. Carefully
go through the short list of positioning options that emerges from the analysis,
and assess each one in these terms. Having "doctors from the best medical
schools" might be highly motivating, but not affordable or realistic for a
hospital to implement.
Without a strong positioning, health services firms risk becoming just another
indistinguishable drop in a sea of choices. Developing a positioning guided by
consumers' insights—not conventional wisdom about what kind of strategy
works best in today's marketplace—is the key to moving them toward your
brand.
Service Marketing Strategies for Hospitality, Tourism, Financial, Logistics,
Educational, Entertainment and public utility information technique
services – Case Studies