Services Marketing PDF

Service marketing is a specialized branch of marketing. Services marketing emerged as a separate field of study in the early 1980s, following the recognition that the unique characteristics of services required different strategies compared with the marketing of physical goods...

Service marketing is a specialized branch of marketing. Services marketing emerged as a separate field of study in the early 1980s, following the recognition that the unique characteristics of services required different strategies compared with the marketing of physical goods. refers to both business to consumer (B2C) and business-to-business (B2B) services, and includes marketing of services such as telecommunications services, financial services, tourism, health care services, and professional trade services. is an organizational function and a set of processes for identifying or creating, communicating, delivering value to customers, and for managing customer relationship in a way that benefit the organization and stake- holders. The process of services marketing includes the stages from its designing to delivery and post-delivery evaluation of the services in order to measure the customer satisfaction. Customers want to obtain benefits and are willing to pay for good experiences and solutions that add value to their lifestyle. Service marketers often use an expanded marketing mix which consists of the 7Ps: product, price, place, promotion, people, physical evidence and process. Services marketing is an organizational function and a set of processes for identifying or creating, communicating, and delivering value to customers and for managing customer relationship in a way that benefit the organization and stake-holders. Services are usually intangible economic activities offered by one party to another. A service encounter can be defined as the duration in which a customer interacts with a service. The customer's interactions with a service provider typically involve face-to-face contact with service personnel, in addition to interactions with the physical elements of the service environment including the facilities and equipment. As customers want to obtain benefits from the services, and are willing to pay for good experiences and solutions that add value to their lifestyle, services should have different characteristics to be able to satisfy different needs and wants for the customers. Intangibility Services do not have physical form and do not interact with any of our senses in a conventional way; they cannot be touched or held. Ownership cannot be transferred, value derives from consumption or experience, quality is difficult to evaluate prior to consumption or purchase. Inseparability Production and consumption cannot be separated (compared with goods where production and consumption are entirely discrete processes). Services are typically high contact systems and fewer opportunities to transact business. Perishability This means it can't be saved. Unlike physical goods, services cannot be stored or inventoried. Demand is subject to wide fluctuations, no inventory to serve between supply and demand; unused capacity cannot be reserved; high opportunity cost of idle capacity. Variability Services involve processes delivered by service personnel and subject to human variation, customers often seek highly customized solutions, services are variable in quality and substance. Service quality is difficult to manage; fewer opportunities to standardize service delivery. The unique characteristics of services give rise to problems and challenges in product marketing. Services are complex, multi-dimensional and multi-layered. Not only are there multiple benefits, but there are also a multiplicity of interactions between customers and organizations as well as between customers and other customers. Product or commodity is anything that is used to satisfy needs and wants of a society. Products are either Goods (tangible and visible) or Services (intangible and invisible). Search goods: are goods that can be evaluated prior to purchase or consumption. Consumers rely on direct product inspection and other information search activities to locate information that assists in the evaluation process. Most products fall into the search goods category (e.g. clothing, office stationery, home furnishings). Experience goods: are goods or services that can be accurately evaluated only after the product has been purchased and experiences. Many personal services fall into this category (e.g. restaurants, hairdresser, entertainment parks, travel, and holidays). Credence claims: are goods or services that are difficult or impossible to evaluate even after consumption has occurred. Evaluation difficulties may arise because the consumer lacks the requisite knowledge or technical expertise to make a realistic evaluation. Many professional services fall into this category (e.g. accountant, legal services, and medical diagnosis/treatment). These goods are called credence products because the consumer's quality evaluations depend entirely on the trust given to the product manufacturer or service provider. Free Goods: They are unlimited in supply. These have zero opportunity cost since consumption is not limited by scarcity. They have no prices, no factors of production are required to produce them. The air we breathe could also be seen as a free good along with water in a local river. Economic Goods: They are limited in supply. All goods we consume are economic goods including food, clothing, cars mobiles etc. except those few which fall under the category of free goods. Economic goods are either private goods or public goods.  Public goods: These are non-excludable, most times, non-rejectable as well (e.g. lighthouse or national defense, public beach or public park).  Non-excludable means no one can be stopped from the consuming the good if they are available to anyone in the society.  Non-rejectable means that the consumer does not have a choice of whether to consume the commodity or not. The availability of public goods to one person does not violate the right of others to consume the same product. Private goods: Private goods are those bought and consumed by individual consumers or firms for their own benefit. Most of the goods we consume on a daily basis are private goods. Foods, cars, TV, education, etc. all are examples of private goods regardless of whoever is producing i.e. private or public sector. While some services may possess a number of search attributes (tangible dimensions), most services are high in experience or credence properties. The primary objective of service producers and marketers is identical to that of all marketers: to develop and provide offerings that satisfy consumer needs and expectations, thereby ensuring their own economic survival. In other words, service marketers need to be able to close the customer gap between expectations and perceptions. To achieve this objective, service providers need to understand how consumers choose and evaluate their service offerings. Customers buy goods and services to meet specific needs, and they evaluate the outcomes of their purchases based on what they expect to receive. The shift in consumer behavior and attitudes provides opportunities for service companies that understand and meet changing needs, continuing to adapt their offerings over time as needs evolve. Customers’ expectations about what constitutes good service vary from one business to another. Situational factors The influence of time pressure in service, brand choice, the atmosphere of the service outlet, occasion of purchase, etc. affects consumer behavior For example, if you are traveling, then demand for lodging and boarding will obviously be there. Socio-cultural factors Buyers or consumers are strongly influenced by cultural and social factors. Children acquire from their environment a set of beliefs values and customs which constitute culture. These beliefs, values and customs go deeper and deeper as a person grows. Therefore, it is sometimes said that culture is learned as a part of social experience. The various sub-categories within a culture can be identified based on religion, age, gender, occupation, social class, geographical location, etc. Reference groups There are certain groups to which people look to guide their behavior. These reference groups may guide the choice of a product but not necessarily the brand. They play an important role in the purchase of credit cards, cell phones, etc. The knowledge of reference group behavior helps in not only offering substitutes but also in pricing and positioning them. Family The family is another major influence on consumer behavior. Family consumption behavior, to a large extent, depends on the family life cycle. Knowledge of these stages helps greatly in knowing the buying process. Often family members play a significant role in the purchase of a particular service. Psychological Factors Perception It is the process by which buyers select, organize and interpret information into a meaningful impression in their minds. Perception is also selective when only a small part is perceived out of the total of what is perceptible. Buyer’s perception of a particular service greatly influences buying behavior. Attitude An attitude is to respond in a consistently favorable or unfavorable manner with respect to a market offer (i.e., a brand, a particular shop or retail outlet, an advertisement, etc.). Attitude is a dispositional term indicating that attitudes themselves in behavior only under certain conditions. Knowing a buyer’s attitude towards a product without knowing the personal goals is not likely to give a clear prediction of his behavior. Motivation Motivation is the driving force within individuals that compels them to action. This driving force is subconscious and the outcome of certain unfulfilled needs. Needs are basically of two types- first, the ‘innate needs’ are those needs with which an individual is born and they are mainly physiological. They include all the factors required to sustain physical life e.g., food, water, shelter, clothing, etc. Secondly, the ‘acquired needs’ are those which a person acquires as he/she grows and these needs are mainly psychological, like love, fear, esteem, acceptance, etc. Personal factors Personality Personality can be described as the psychological characteristics that determine how an individual will react to his or her environment. Life style Life style as distinct from social class or personality is nothing but a person’s pattern of living and is generally expressed in his/ her activities, interests and opinions. Life style suggests differences in the way people opt to spend on different products or services differently. Demographic factors Buyers' demographic factors like age, gender, education, occupation, etc., also influence his/her purchase behavior. In sum, knowledge on all such dimensions of the consumer will help in understanding his needs and wants and also help in integrating all these elements in service offer which the consumer wants. (2)  The 7 P’s of Services Marketing The first four elements in the services marketing mix are the same as those in the traditional marketing mix. However, given the unique nature of services, the implications of these are slightly different in case of services. 1. Product: In case of services, the ‘product’ is intangible. Moreover, its production and consumption are inseparable. Hence, there is scope for customizing the offering as per customer requirements and the actual customer encounter therefore assumes particular significance. 2. Pricing: Pricing of services is more difficult than pricing of goods. While the product can be priced easily by considering the raw material costs, but in case of services attendant costs such as labor and overhead costs. Presentation, consumer beliefs, and rarity of expertise in the service provided can all affect the price of a service. Thus a restaurant not only has to charge for the cost of the food served but also has to calculate a price for the ambience provided. A company that produces goods has an easier time setting a price for its products than a service provider. Goods cost an amount of money to manufacture, package, and ship. 3. Place: Since service delivery is related to its production and cannot be stored or transported, the location of the service product is importance. Service providers have to give special thought to where the service would be provided. 4. Promotion: Service providers offering identical services such as airlines or banks and insurance companies investing heavily in advertising their services. This is crucial in attracting customers in a segment where the services providers have nearly identical offerings. 5. People: People are a defining factor in a service delivery process, since a service is inseparable from the person providing it. Thus, a restaurant is known as much for its food as for the service provided by its staff. The same is true of banks and department stores. Consequently, customer service training for staff has become a top priority for many organizations today. 6. Process: The process of service delivery is crucial since it ensures that the same standard of service is repeatedly delivered to the customers. 7. Physical Evidence: Since services are intangible in nature, most service providers strive to incorporate certain tangible elements into their offering to enhance customer experience. Thus, there are doctors clinics that have well designed waiting areas often with magazines and comfort sofas for patients to read and relax while they await their turn. Similarly, restaurants invest heavily in their interior design and decorations to offer a tangible and unique experience to their guests.  IMPORTANCE OF SERVICES MARKETING  Relationships Relationships are a key factor when it comes to the marketing of services. Since the product is intangible, a large part of the customers’ buying decision will depend on the degree to which he trusts the seller. Hence, the need to listen to the needs of the customer and fulfill them through the appropriate service offering and build a long lasting relationship which would lead to repeat sales and positive word of mouth.  Customer Retention Given today’s highly competitive scenario where multiple providers are retaining customers is even more important than attracting new ones. Since services are usually generated and consumed at the same time, they actually involve the customer in service delivery process by taking into consideration his requirements and feedback. Thus they offer greater scope for customization according to customer requirements thus offering increased satisfaction leading to higher customer retention. Services Marketing Triangle The Services Marketing Triangle is a strategic marketing model. It provides a visual way of understanding the importance of people in a services business. This triangle (or Services Triangle) shows the key actors involved in marketing a service business. It also shows the key marketing activities that occur between those actors. It emphasizes on the division of the marketing tasks into following three categories based on the required skills, strategies and priorities for service marketing: The model is based on the fact that all services businesses are about promises. The business makes promises to its customers through external marketing. The business facilitates its employees to keep those promises through internal marketing. Finally, the business delivers its promises with interactive marketing. Before we look at the model it is important to note that we are only concerned with the marketing of services. The model does not apply to products. We define services using these criteria:  Intangible: you cannot see, taste, or touch them.  Inseparable: you cannot separate production from consumption.  Perishable: you cannot store them, save them, or return them.  Heterogeneous: you cannot mass produce them as they are unique. Services businesses are marketed on promises. These are the promises we make to customers and whether we keep or fail to keep those promises. The Services Marketing Triangle is a visual strategic model. It reinforces the importance of people in a company’s ability to keep its promises. The Services Marketing Triangle shows the key marketing activities that happen between the key actors within services businesses. Each actor works together to develop, promote, and deliver a company’s service. As you can see from the diagram we represent actors by the points of the triangle. Our actors are:  Company: refers to the leadership team of the company.  Employees: refers to all employees, including subcontractors who deliver the company’s service.  Customers: refers to all customers and potential customers of the company. The lines between the points show the different types of marketing that must occur:  Internal Marketing: occurs between the company and its employees.  External Marketing: occurs between the company and its customers.  Interactive Marketing: occurs between the employees and the customers. Within services business, we view employees as internal customers. They are a market which we must please first as a company. The leadership team should be focused on satisfying its employees so that they want to better serve customers. The internal marketing connects the company with the employees where the employees are assisted, guided and trained for providing the services to the customers. The employees are introduced to the organizational goals, and their queries or problems are resolved. The best performers are even appreciated through the performance reward system. Also involves motivating employees to work as a team to make customers satisfied. This is obviously true for customer service representatives. It can equally be applied to all employees. This results in everyone, at all levels of the organization, being empowered to deliver great customer service. The key components of internal marketing include:  Motivating employees  Teaching customer satisfaction techniques  Communicating company goals regularly  Management of change  Training staff on how to use the company’s services  Good pay and working conditions Companies use external marketing to make promises to customers. External marketing is any communication to customers (or potential customers) that happens before service delivery starts. Here the company reaches out to the target consumers through website, advertisements, social media and other relevant platforms, to keep the business rolling. The forms of external marketing include:  Advertising  Personal selling  Public relations (PR)  Direct marketing We use external marketing to achieve many aims including:  Creating awareness.  Setting price expectations.  Setting service level expectations.  Informing customers if any prerequisites that must be in place before they can use the service. Interactive marketing occurs when employees and customers interact. The success of interactive marketing depends upon the proper execution of internal and external marketing. Each significant interaction between an employee and a customer is known as a service encounter. Interactive marketing is important because it establishes both short-term and long-term satisfaction. That is, if the customer is satisfied with the service they received in the short-term, they are more likely to be satisfied over the longer term.