Service Marketing Lesson 1 PDF

SERVICE MARKETING  Chapter I Introduction to Service Marketing Objectives 1. Explain what services are and identify important trends in AGENDA services. 2. Explain the need for special...

SERVICE MARKETING  Chapter I Introduction to Service Marketing Objectives 1. Explain what services are and identify important trends in AGENDA services. 2. Explain the need for special services marketing concepts and practices and why the need has developed and is accelerating. 3. Explore the profound impact of technology on service.  Chapter I Introduction to Service Marketing 4. Explore the profound impact of technology on service. 5. Outline the basic differences between goods and services and the resulting challenges and opportunities for service business. 6. Introduce the expanded marketing mix for services and the philosophy of customer focus as powerful frameworks and themes that are fundamental to the rest of the text. “Services are going to move in this decade to being the front edge of this industry” - Former IBM CEO Louis V. Gerstner What are services? Services are deeds, processes, and performance provided or co-produced by one entity or person for another entity or person. Example: The services offered by IBM are not tangible things that can be touched, seen and felt, but rather are intangible deeds and performances provided and/or coproduced for its customers. To be concrete, IBM offers repairs and maintenance services for its equipment, consulting services for IT and e-commerce applications training services web design and hosting and other services. Service Industries, Service as a product, Customer Service and Derived Service Service as a product Represents a wide range of intangible product offerings that customers value and pay for in the market place. Customer Service It is also a critical aspect of what we mean by “service” Customer service is the service provided in support of a company’s core products. Derived Service Steve Vargo and Bob Lusch argue for a new logic for marketing that suggests that all products and physical goods are valued for the services they provide. What is the difference between GVA and GDP? The most important economic indicator, Gross Domestic Product (GDP) is mostly made up of GVA (see How GDP is Measured). GDP is GVA plus product Taxes (like VAT) minus product Subsidies. Taxes and subsidies are available for the economy as a whole but not for separate sectors like agriculture or manufacturing. Why service marketing? Why is it important to learn about service marketing, service quality, and services management? What are the differences in services versus manufactured-goods marketing that have led to the demand for books and courses on services? Many forces have led to the growth of services marketing, and many industries, companies and individuals have defined the scope of the concepts, frameworks, and strategies have define the field SERVICE-BASED ECONOMIES  SERVICE-BASED ECONOMIES It is a system that organizes the production and distribution of goods and services. Specifically, a service economy includes restaurants, hotels and other places where customers pay for what they consume or experience rather than buying physical objects. An economy can shift over time, such as the change that many nations experienced in the 19th century when industrialization caused a shift from agriculture to manufacturing. Many advanced economies are increasingly dependent on services and are shifting away from manufacturing. Examples of Service Economy: 1. Entertainment: films, music, video games, theatre and live shows 2. Safety and Security: security detail, door supervision, and emergency services 3. Healthcare: medical, surgical and cosmetic practices 4. Education: teaching or lecturing, private tuition and coaching 5. Consumer to consumer: marketplaces and babysitting 6. Convenience: product and grocery delivery, taxis and ride shares 7. Professional services: hairdressing and beauty, garden maintenance, cleaning, plumbing and electrical 8. Property management: management for your rental property or third-party fashion rentals 9.Financial services: investment advisory and international currency exchange 10. Waste management: rubbish collection and recycling services 11. Insurance: services that take on another's risks for a fee 12. Memberships and clubs: gym memberships and entertainment access, including theme parks 13. Design and engineering: the initial conceptualization and planning of products before manufacturing 14. Tourism: tour operations and booking (travel agents) Service as a Business Imperative in Goods-Focused Businesses Traditional service industries have evolved and become more competitive, the need for effective service management and marketing strategies has continued. Why are now companies choosing to focus on services? There are a number of reasons: 1. The commoditization of products in many industries has resulted in price and margin pressures on many physical goods. Services can help firms to customize their offerings, adding value to customers. Commoditization – is the process of converting products or services into standardized, marketable objects. 2. Second, customers are demanding services and solutions especially business-to- business markets. In many situations customers demand a solution to their problem or challenge that involve multiple products and services. They look to their providers to create and deliver these product-service solutions. Service as a Business Imperative in Goods-Focused Businesses 3. Third, services often have higher profit margins than products and can thus provide platforms for firm profitability. 4. Many industries are highly competitive today and service can be a differentiator in a crowded market. Customer loyalty and customer satisfaction are driven in large part by service quality and service offerings. Service Equals Profits In the final decades of the 20th century, many firms jumped on the service bandwagon, investing service initiatives and promoting service quality as way to differentiate themselves from competitive advantage. Berry discovered through his research that these successful businesses share devotion to nine common service themes, among them values-driven leadership, commitment to investments in employee success, trust-based relationships with customers and other partners at the foundation of the organization. SERVICE AND TECHNOLOGY Information Technology is shaping the field and profoundly influencing the practice of service marketing. Together with globalization, the influence of technology is the most profound trend affecting services marketing today. New Service offerings A service offering is essentially defined as the range of services a company provides to its clients, encompassing solutions, expertise, and assistance tailored to meet diverse needs. Example: Ebay, Amazon, Smartphones, Lazada, Shopee New Ways to Deliver Service Technology is providing approaches for delivering existing services in more accessible, convenient, productive ways. Example Bill Payments, Inquiries, Checking Account Records, Order Tracking Enabling Both Customers and Employees Technology enable both customer and employees to be more effective in getting and providing services. Through self-service technologies, customers can serve themselves more effectively. Example: On-line banking Extending the Global Reach of Services Technology infusion results in the potential for reaching out to customers around the globe in ways not possible before. The Internet itself knows no boundaries, and therefore information, customer service, and transactions can move across countries and continents reaching any customer who has access the web. The Internet Is a Service All businesses and organizations that operate on the Internet are essentially providing services – whether they are giving information, performing basic customer service functions, facilitating transactions or promoting social interactions among individuals. Example: Facebook, bank transactions The Paradoxes and Dark Side of Technology and Service Paradox - a situation or statement that seems impossible or is difficult to understand because it contains two opposite facts or characteristics. Assimilation refers to the process through which individuals and groups of differing heritages acquire the basic habits, attitudes, and mode of life of an embracing culture. Efficacy – the power to produce a desired result.  Paradox Description Control/Chaos Technology can facilitate regulation or order, and technology can lead to upheaval or disorder Freedom/enslavement Technology can facilitate independence or fewer restrictions, and technology can lead to dependence or more restrictions. New/Obsolete New technologies provide the user with the most recently develop benefits of scientific knowledge, and new technologies are already or soon to be outmoded as they reach the marketplace Competence/Incompetence Technology can facilitate feelings of intelligence or efficacy, and technology can lead to feelings of ignorance or ineptitude. Efficiency/Inefficiency Technology can facilitate less effort or time spent in certain activities, and technology can lead to more effort or time in certain activities. Fulfills/Create Needs Technology can facilitate the fulfillment of needs or desires, and technology can lead to the development or awareness of needs or desires previously unrealized. Assimilation/Isolation Technology can facilitate human CHARACTERISTIC OF SERVICES Intangibility The most basic distinguishing characteristic of service is intangibility. Because services are performances or actions rather than objects, they cannot be seen, felt, tasted, or touch in the same manner that you can sense tangible goods. Resulting market implications: Intangibility presents several marketing challenges. Services cannot be inventoried, and therefore fluctuations in demand are often difficult to manage. Services cannot be easily patented, and new service concepts can therefore easily be copied by competitors. Heterogeneity Because services are performances, frequently produced by humans, no two services will be precisely alike. The employees delivering the service frequently are the service in the customer eyes, and people may differ in their performance from day to day or even hour to hour. Customer behavior will also introduce variability and uncertainties, resulting in heterogeneity of outcomes. Resulting Marketing Implications: Because service is heterogenous, organizations, and people, ensuring consistent service quality is challenging. Quality actually depends on many factors that cannot be fully controlled by the service supplier/ provider. Simultaneous Production and Consumption Whereas most goods are produced first, then sold and consumed, many services are sold first and produced and consumed simultaneously. Example: Automobiles vs. Restaurants Resulting Marketing Implications: Because services often (although not always) are produced and consumed at the same time, mass production is difficult. The quality of service and customer satisfaction will be highly dependent on what happens in “real time” including actions of employees the interactions between employees and customers themselves Perishability Perishability refers to the fact that services cannot be saved, stored, resold, or returned. Resulting Marketing Implications: A primary issue that marketers face in relation to service perishability is the inability to inventory. Demand forecasting and creative planning for capacity utilization are therefore important and challenging decision areas. The fact that services cannot be typically returned or resold also implies a need for strong recovery strategies when things do go wrong. SERVICE MARKETING MIX The service marketing mix is also known as an extended marketing mix and is an integral part of a service blueprint design. It consists of 7 P’s which are product, price, place, promotions, people, process and physical evidence. The service marketing mix consists of 7 P’s as compared to the 4 P’s of a product marketing mix. Simply said, the service marketing mix assumes the service as a product itself. However it adds 3 more P’s which are required for optimum service delivery. The product marketing mix consists of the 4 P’s which are Product, Pricing, Promotions and Placement. These are discussed in my article on product marketing mix – the 4 P’s. The extended service marketing mix places 3 further P’s which include People, Process and Physical evidence. All of these factors are necessary for optimum service delivery. Let us discuss the same in further detail. Product The product in service marketing mix is intangible in nature. Like physical products such as a soap or a detergent, service products cannot be measured. Tourism industry or the education industry can be an excellent example. At the same time service products are heterogenous, perishable and cannot be owned. Place Place in case of services determine where is the service product going to be located. The best place to open up a petrol pump is on the highway or in the city. A place where there is minimum traffic is a wrong location to start a petrol pump. Similarly a software company will be better placed in a business hub with a lot of companies nearby rather than being placed in a town or rural area. Read more about the role of business locations or Place element. Promotion Promotions have become a critical factor in the service marketing mix. Services are easy to be duplicated and hence it is generally the brand which sets a service apart from its counterpart. You will find a lot of banks and telecom companies promoting themselves rigorously. Why is that? It is because competition in this service sector is generally high and promotions is necessary to survive. Thus banks, IT companies, and dotcoms place themselves above the rest by advertising or promotions. Pricing Pricing in case of services is rather more difficult than in case of products. If you were a restaurant owner, you can price people only for the food you are serving. But then who will pay for the nice ambiance you have built up for your customers? Who will pay for the band you have for music? Thus these elements have to be taken into consideration while costing. Generally service pricing involves taking into consideration labor, material cost and overhead costs. By adding a profit mark up you get your final service pricing. You can also read about pricing strategies. People People is one of the elements of service marketing mix. People define a service. If you have an IT company, your software engineers define you. If you have a restaurant, your chef and service staff defines you. If you are into banking, employees in your branch and their behavior towards customers defines you. In case of service marketing, people can make or break an organization. Thus many companies nowadays are involved into specially getting their staff trained in interpersonal skills and customer service with a focus towards customer satisfaction. In fact many companies have to undergo accreditation to show that their staff is better than the rest. Definitely a USP in case of services. Process Service process is the way in which a service is delivered to the end customer. Lets take the example of two very good companies – Mcdonalds and Fedex. Both the companies thrive on their quick service and the reason they can do that is their confidence on their processes. On top of it, the demand of these services is such that they have to deliver optimally without a loss in quality. Thus the process of a service company in delivering its product is of utmost importance. It is also a critical component in the service blueprint, wherein before establishing the service, the company defines exactly what should be the process of the service product reaching the end customer. Process Service process is the way in which a service is delivered to the end customer. Lets take the example of two very good companies – Mcdonalds and Fedex. Both the companies thrive on their quick service and the reason they can do that is their confidence on their processes. On top of it, the demand of these services is such that they have to deliver optimally without a loss in quality. Thus the process of a service company in delivering its product is of utmost importance. It is also a critical component in the service blueprint, wherein before establishing the service, the company defines exactly what should be the process of the service product reaching the end customer. Physical Evidence The last element in the service marketing mix is a very important element. As said before, services are intangible in nature. However, to create a better customer experience tangible elements are also delivered with the service. Take an example of a restaurant which has only chairs and tables and good food, or a restaurant which has ambient lighting, nice music along with good seating arrangement and this also serves good food. Which one will you prefer? The one with the nice ambience. That’s physical evidence. Several times, physical evidence is used as a differentiator in service marketing. Imagine a private hospital and a government hospital. A private hospital will have plush offices and well dressed staff. Same cannot be said for a government hospital. Thus physical evidence acts as a differentiator. THANK YOU