MARKETING OF SREVICES

MARKETING OF SERVICES : 

MARKETING OF SERVICES Meaning of service The tertiary sector of economy (also known as the service sector or the service industry) is one of the three economic sectors, the others being the secondary sector (approximately manufacturing) and the primary sector (extraction such as mining, agriculture and fishing). Services are deeds, processes and performance. It is the benefit which one party offers to another which does not result in ownership of anything. A service is the non-material equivalent of a good. “A service is 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 or may not be tied to a physical product.” Philip Kotler Service Sector in India today accounts for more than half of India‘ GDP. According to data for the financial year 2006-2007, the 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.

Characteristics of Service : 

Characteristics of Service Intangibility Resulting Marketing implication 1. Cannot be inventoried 2. Fluctuation in demand is difficult to manage 3. Cannot be displayed on shelf 4. Quality may be difficult for consumer to assess. 2. Variability or Heterogeneity Resulting Marketing Implication 1. Ensuring consistent service quality is difficult. 2. Quality depend upon many uncontrollable factor like ability of consumer to articulate their needs, presence of other customers.

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3. Inseparability or Simultenity Resulting Marketing Implication 1. Mass production is difficult. 2. Quality of service and customer satisfaction depend upon what happens in real time. 3. Customer is involved in production process and thus may affect the outcome positively or negatively. 4. PerishabilityResulting Marketing Implication1. Cannot be stocked2. Company require strong recovery strategies when things go wrong.

Difference between product and service : 

Difference between product and service Product Product is a physical good Product can be inventoried Product are homogeneous Product can be readily displayed on shelf Product is produced and consumed at d/f time Customer participation does not affect transaction. Employees does not affect the product outcome Mass production is easy Product can be returned or resold Service Service is an action Service cannot be inventoried Services are heterogeneous Service cannot be readily displayed on shelf Service is produced and consumed at same time Customer participation affect service transaction. Employees does not affect the service outcome Mass production is difficult Service cannot be returned or resold

Difference between product and service : 

Difference between product and service Product 10. There is sure knowledge that the product delivered matches what was planned and promoted. 11. Employees involved in producing product is not a matter of concern for customers. 12. Product quality depends on controllable factor. 13. Easy for consumers to asses the quality. 14. Transfer of ownership takes place Service 10. There is no sure knowledge that the service delivered matches what was planned and promoted. 11. Employees involved in producing service is a matter of concern for customers. 12. Service quality depends on many uncontrollable factor. 13. Difficult for consumers to asses the quality. 14. Transfer of ownership does not take place

Reasons for the growth of services in India : 

Reasons for the growth of services in India Economic Affluence Changing role of women Cultural Changes IT Revolution Development of market Unbundling Corporations Economic Liberalization Export potential

Classification of service : 

Classification of service 1 Based on the degree of customer involvement a) People Processing b) Possession Processing c) Mental Stimulus Processing d) Information Processing 2 Based on service Tangibility a) Highly Tangible b) Service linked to tangible goods c) Tangible goods linked to service d) Highly Intangible Based on Knowledge and Expertise required Professional service Non-professional service

Classification of service : 

Classification of service 4 Based on business orientation of service provider a) Not-for-profit organization b) Commercial organization Based on type of end user a) Consumer service b) Business to business service c) Industrial service

Customer Relationship Management : 

Customer Relationship Management “YOU CANNOT SHAKEHANDS WITH A CLENCHED FIST” -Golda Meir, Former Israel Prime Minister CRM is marketing-oriented towards strong lasting relationship with individual accounts Jackson Relationship marketing is attracting, maintaining and enhancing customer relationship Berry Therefore the primary goal of relationship marketing is to build and maintain a base of committed customer who are profitable for the organization

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Bucket theory of marketing by James L. Schorr Big Bucket as market. Sales, Advertising & Promotional campaign pour business into the top of the bucket. More effective are these the business will survive or bucket remain full There is hole in bucket. When operations go weak customer will be unsatisfied and start switching towards competitor. Therefore hole should be plugged. Traditional Marketing Vs Relationship Marketing Traditional Marketing Relationship Marketing 1. Focus on making sale Focus on making a customer loyal 2. Little customer service emphasis High customer service emphasis 3. Moderate customer contact High customer contact 4 .Customer satisfaction Customer retention

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The Evolution of Customer Relationship Customers as strangers Customers as associates customers as friends customers as partners Benefits of CRM for customer and firms Benefits for Customers Confidence benefit Special treatment benefit Benefits for Firms Economic benefit Customer Behavior benefit Human Resource Management benefit

Service Quality : 

Service Quality The quality of expectations determines the quality of our action. -Andre Godin, French Socialist Acc to Philip B. Crosby “Quality is conformance to requirement” Acc to Parasuraman & Berry “Quality is exceeding what customer get from the service” Acc to Garvin there are 5 perspectives of quality User based approach – In this quality is defined from user perspective. Quality = Maximum Satisfaction 2. Product based approach- In this service fall shot of standard when any of its attributes is missing. D/F in quality = D/F in amt of attribute possessed by the service 3. Operations based approach- In this quality of service depends upon on the efficiency of the operations involved in service design and delivery

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4. Value based approach- In this Quality = value offered in return to price paid Quality = =Affordable Excellence 5. Transcedent approach – In this a person can assess the quality of service only when he repeatedly avails it Quality is a key factor for organization success and is imp. because of following 2 reason To win credibility and obtain repeat purchase To charge premium price Service quality dimensions or service quality drivers Parasuraman, Zeithaml & Berry identified 5 dimensions as drivers of service quality Reliability : Delivery on promise Responsiveness : Being willing to help Assurance : Inspiring trust & confidence Empathy : Treating customers as individuals Tangibles : Representing service physically

Satisfaction Vs Service Quality : 

Satisfaction Vs Service Quality Acc to Oliver “Satisfaction is consumer fulfillment response. It is a judgement that a product or service feature or product or service itself , provides a pleasurable level of consumption related fulfillment.” What determines customer satisfaction Product or service feature Consumer emotion Attribution for service success of failure Perception of equity or fairness Other consumers, family members & coworkers

Gaps Model of Service Quality : 

Gaps Model of Service Quality GAP – 1 Not knowing what customer expect Inadequate marketing research orientation Insufficient marketing research Research not focused on service quality Inadequate use of market research Lack of upward communication Lack of interaction b/w mgt. & customer Insufficient communication b/w Contact employees & managers Too many layers b/w contact personnel & managers Insufficient relationship focus Lack of market segmentation Focus on transaction rather than relationship Inadequate service recovery Lack of encouragement to listen to customer complaint Failure to make amendments when things go wrong Not appropriate recovery mechanism in place for service failure Customer Expectation Company Perception of Customer Expectation

GAP – 2 Not having the right service quality design and standard : 

GAP – 2 Not having the right service quality design and standard Poor Service Design Unsystematic new service development process Vague, undefined service design Failure to connect service design to service positioning Absence of customer driven service standard Lack of customer driven service standard Absence of process management to focus on customer requirement Inappropriate physical evidence and servicescape Failure to develop tangible in line with customer expectation Customer Driven Service Standard & Design Company Perception of Customer Expectation

GAP – 3 Not delivering to service design and standard : 

GAP – 3 Not delivering to service design and standard Customer Driven Service Standard & Design Deficiencies in HR policy Ineffective recruitment Role ambiguity & Role conflict Poor technology - job fit Inappropriate evaluation & compensation system Lack of empowerment & team work Customer do not fulfill roles Lack of knowledge regarding their roles Customer negatively impact each other Failure to match demand & supply Failure to smooth peaks & valleys of demand Over reliance to smooth demand Service Delivery

GAP – 4 Not matching performance to promise : 

GAP – 4 Not matching performance to promise Lack of integrated service marketing communication Tendency to view each external communication as independent Absence of interactive marketing in communication plan Absence of strong internal marketing program Ineffective management of customer expectation Absence of customer expectation management through all forms of communication Lack of adequate education for customer over promising In advertising In personal selling Inadequate horizontal communication D/f in policies across branches Insufficient communication b/w advertising and operations Service delivery External communication to customers

Customer Expectation : 

Customer Expectation Meaning Customer Expectation are belief about service delivery that serves as standard or reference points against which performance is judged. Because customer compare the performance with their expectation as Standard , knowing customer expectation is the 1st and most critical step. Being wrong about what customer expect means Loosing customer where other company will hit the target Expanding money, time and resources that don’t count for customers Not surviving in the competitive market Possible levels of customer expectation Ideal expectation Normative “should” expectation Experience based norms Acceptable expectation Minimum tolerable expectation

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Customer expectation of service are of two types Desired Service – Service that a customer hope to receive and gets delighted if he / she gets it. Adequate Service – Minimum level of service a customer is willing to accept and the customer will be highly dissatisfied if the service falls below this level. Zone of Tolerance – The extent to which customer willing to accept the variation b/w desired and adequate service is called zone of tolerance. Service below adequate service – Customer frustrated Service above desired service – customer delighted Different customer possess different zone of Tolerance Zone of Tolerance vary for different service dimension

Factors affecting customer expectation : 

Factors affecting customer expectation Factors affecting desired service level Lasting service intensifier Derived service expectation Personal service philosophy Personnel needs Factors affecting adequate service level Temporary service intensifier Perceived service alternative Self perceived service role Situational factor Predicted service Factors affecting desired and adequate service level Explicit service promise Implicit service promise Word – of- mouth communication Past experience

Segmentation : 

Segmentation A segment is a group of consumers who respond in a similar way towards marketing stimuli. Market segmentation is a process of dividing a market into smaller groups of buyers with distinct needs, characteristics, or behavior who might require separate product or marketing mix. Requirements for effective segmentation Measurable Accessible Substantial Differentiable Actionable

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Basis for market segmentation 1. Geographic segmentation Nation, state, Region, Cities, Density 2. Demographic Segmentation Age, Gender, Family size, Income, Occupation, Education, Religion, Nationality 3. Psychographic Segmentation Personality, Lifestyle 4. Behavioral Segmentation Occasion - Regular or Special Occasion Benefit User Status – non user, ex-user, potential user, first time user User Rates – Heavy , Medium or Light User Loyalty Status – Hard Core, Soft Core, Switcher

Targeting : 

Targeting Targeting is the process of estimation and comparison of the previously identified segments for selecting one or more segments. A target market consists of a set of buyers who share common needs or characteristics which that the company decide to serve. Various Targeting Strategies Single Segment Concentration Selective Specialization Product specialization Market Specialization Full Market Coverage

Positioning : 

Positioning “ Positioning is not what you do to a product. It is what you do to the minds of the prospects.” Positioning is the act of designing the company’s offering or image to occupy a distinct place in the minds of the target market. Positioning strategies Attribute Positioning Benefit Positioning Use Positioning User Positioning Category Positioning Quality / Price Positioning

Marketing Mix : 

Marketing Mix Concept of marketing mix is being coined by Neil H. Borden in the year 1962. It consists of 4 P’s namely Product Price Place Promotion But in case of services because services are intangible, Perishable and heterogeneous 3 additional P’s are added and is known as expanded or augmented marketing mix. Product Core level Secondary level

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Price Higher price is associated with better quality. In service fixed cost is high and variable cost is low. Price of the same service can be changed according to demand . Place Promotion People Process Physical Evidence

Product Developing Intangible Service Product : 

Product Developing Intangible Service Product When the product is intangible it is called service. Service as a product has two levels. Core Level Secondary Level Types of New Service Major or Radical Innovation Start up business or process line extension Service line extension Service Improvement Style Changes

Service Product Design : 

Service Product Design Market Penetration Product Development Market Development Diversification Existing service New Service Existing Market New Market

New Service Development Process : 

New Service Development Process Business Strategy Development or Review New Service Strategy Development Idea Generation Screen ideas against new service strategy Concept Development and Evaluation Test Concept with customers and employees Business Analysis Test for profitability and feasibility Service Development and Testing Conduct service prototype test Market Testing Test service and other marketing mix elements Commercialization Post Introduction Evaluation

Service Blueprinting : 

Service Blueprinting Blueprint Components Physical Evidence Customer action and Line of interaction Onstage contact Employee action Line of Visibility Backstage contact Employee action Line of internal interaction Support Process

Service Pricing : 

Service Pricing “ The key to making the sale is to communicate VALUE! Do it so strongly---- that the price seems reasonable in relation to the product or service you’re offering” Pricing is the mechanism by which sales are transformed into Revenues Key characteristics of pricing in Services Price is a measure of service quality Difficulty in comparing service prices Price vary with demand Role of non monetary cost Time cost Search cost Convenience cost Psychological cost

Pricing objectives : 

Pricing objectives Survival Profit / Revenue Maximization Prestige Product / Quality Leadership Approaches to pricing services Cost based pricing Demand based pricing Competition based pricing

Four meanings of perceived value : 

Four meanings of perceived value Value is low price Value is everything i want in a service Value is the quality i get for price i pay Value is all that i get for all that i give

Pricing strategies when customer means value is low price : 

Pricing strategies when customer means value is low price Discounting Odd- Pricing Synchro – Pricing Penetration Pricing Pricing strategies when customer means value is everything Prestige Pricing Skimming Pricing

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Pricing strategies when customer means value is the quality I get for the price I pay Value Pricing Market segmentation Pricing Pricing strategies when customer means value is all that I get for all that I give Price Bundling Result Based pricing

Place ---- Distribution of Services : 

Place ---- Distribution of Services It refers to the location where the service is provided. Service Transaction Customer calling service outlet Service firms calling customer Service provider and customer transacts at arms length Distribution Strategies Extensive Distribution Selective Distribution Exclusive Distribution

Strategic Issues in Service Distribution : 

Strategic Issues in Service Distribution Proximity Image Parking Facility Convenience Accessibility Service Provider Service firms need to select such service provider who are capable of managing service outlet effectively and provide quality service to the customer. Service firms may opt for direct distribution or through middleman there are two marketers Service Principal – The originator of service Service Deliverer- Distributor of service and he becomes the co producer of service.

Channels of Distribution : 

Channels of Distribution 1. Direct Distribution- Here directly service is given to the customer without any intermediary. Advantages 1. Control 2. Healthy customer relationship 3. Flexibility and Confidentiality Disadvantages 1. Financial Risk 2. Lack of Knowledge 2. Franchising – The franchisers are authorized to distribute services to the customers on behalf of service principal.

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Advantages 1. Business Expansion and Revenue Gains 2. Consistency in Outlets 3. Knowledge of Local Market 4. Sharing Financial Risk and Less Investment Burden Disadvantages 1. Problems in maintaining and Motivating Franchisees 2. Quality Inconsistency may affect company image 3. Control of Customer relationship by franchisee. 3. Agents and Brokers – An agent is an intermediary who act on behalf of a service principal with the customer and is authorised to make agreements between the principal and the customer. A Broker is an intermediary who brings buyers and sellers together while assisting in negotiation.

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Advantages 1. Low selling and distribution cost 2. Specialized skills and knowledge of agents and brokers 3. Wider representation in market 4. Knowledge of local market Disadvantages 1. loss of control on pricing by service principal when agents and brokers are empowered to negotiate on pricing. 2. When independent agent represent multiple supplier therefore special focus may not be provided to any one of the service principal. 4. Electronic Channels

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Advantages 1. Quality Control 2. Low Cost 3. Customer convenience 4. Wider Distribution Disadvantages 1. No control over electronic equipment 2. Inability to customize 3. Customer Involvement

Service Promotion : 

Service Promotion Promotion includes strategies and techniques in the process of promoting the service. The objective of promotion can be To increase awareness of new service offering and encourage customer to try. To differentiate service offer from competitors. Communicate and portray the benefits of service available. Persuade customer to buy or use the services. Build and maintain the overall image of the service organization. Elements of Promotion Mix Advertising- Any paid form of non personal communication by an identified sponsor. Advertising can be 1. Informative advertising 2. Persuasive advertising 3. Reminder advertising 4. Reinforcement advertising

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2. Sales Promotion- It consists of collection of incentives tools, mostly short term designed to stimulate quicker or greater purchase of particular service. Consumer Promotion Tools Samples Coupons Cash Refund Offers ( Rebate) Price Pack ) Cents- off deals) a. Reduced price pack b. Bundled price pack 5. Premiums (Gifts) 6. Frequency program

Publicity and Public Relations : 

Publicity and Public Relations Public relation involves a variety of programmes designed to promote or protect a company’s image. It is meant to maintain a good relations with general public at large. A company PR activity might include press release , press conference, newsletters and articles for the company . Direct Marketing It involves contacting the existing and potential customers directly through telemarketing, direct mail and online marketing without employing any intermediary in the process. Personal Selling Involves persuading an existing or a potential customer through oral communication to purchase the service offering of the company.

Strategies for Effective Promotion : 

Strategies for Effective Promotion Effective Planning a) Which services to promote b) Who would be the target customer c) What will be the value added d) Is the timing right for promotion e) Who is benefited from promotion f) How to differentiate a promotional campaign 2. Focused Objectives 3 .Perfect Timing 4. Differentiated Campaign 5. Regular evaluation of Campaign

PEOPLE : 

PEOPLE “People are your most important assets are wrong. The right people are your most important assets” - Jim Collins “ Controlling men is like handling a piece of string. If you push it, it will go anywhere. If you lead it, You can make it go anywhere you want” - Dwight D. Eisenhower Classification of Service Personnel On the basis of level of customer interaction a) Low Contact Service b) High Contact Service 2. On the basis of type of service provided and skills required a) Consumer Service Employees b) Professional Service Employees

Strategies for delivering Service Quality through People : 

Strategies for delivering Service Quality through People Hire the Right People Compete for the best people Hire for service competencies and service Inclination Be the preferred employer Develop people to deliver service quality Train for technical and interactive skills Empower employee Promote team work Provide needed support system Measure internal service quality Provide support technology and equipment Develop service oriented internal process

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4. Retain the best people a) Treat employees as customer b) Measure and reward strong service performers

Physical Evidence : 

Physical Evidence Physical evidence refers to the environment in which the firms and the customer interact, and any tangible commodities that facilitate performance and communication of service . Types of Physical Evidence Essential Evidence Peripheral Evidence Elements of Physical Evidence Physical Environment a) Layout b) Atmosphere c) Aesthetics

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2. Modes and Content of Communication 3. Price 4. Appearance and conduct of service personnel 5. Tangibles products accompanying services 6. Corporate Identity Benefits of Physical Evidence Increased Productivity Creating good impression Increased Credibility Service Quality Management

Communication : 

Communication “ Life is for one generation; a good name is forever”. - Japanese Proverb Communication is most visible and audible of marketing activities, but its value is limited unless is used intelligently in conjunction with other marketing efforts. There is a need for coordination in marketing communication through service marketing triangle A company adopt various ways in communicating its offering to the customers. Ensuring uniform message from all the sources is a major challenge fro service marketer. Therefore company using multiple channels to disseminate information need to be certain that customer received uniform message.

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Company Upward comm. Advertising Downward comm. Sales Promotion Direct Marketing Employees Customer Personal Selling Customer service center Internal Marketing External Communication Interactive Marketing

Approaches for integrated service marketing communication : 

Approaches for integrated service marketing communication Inadequate management of service promise Approaches to manage it Create effective services advertising Coordinate external communication Make realistic promises Offer service guaranties 2. Inadequate management of customer expectation Approaches to manage it Offer choices Negotiate unrealistic expectation

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3 . Inadequate customer education Approaches to manage it Prepare customer for service process Conform performance to standards or expectations 4. Inadequate internal marketing communication Approaches to manage it Create effective vertical communication Create effective horizontal communication Create cross functional teams Offer service guaranties