Services Marketing BBA36MM2 Unit I PDF

Services Marketing BBA36MM2  Chapter 1 Introduction to Services Marketing  Internal Services Service elements within an organization that facilitate creation of--or add value to--its final output Includes: accounting and payroll administration recruitment...

Services Marketing BBA36MM2  Chapter 1 Introduction to Services Marketing  Internal Services Service elements within an organization that facilitate creation of--or add value to--its final output Includes: accounting and payroll administration recruitment and training legal services transportation catering and food services cleaning and landscaping Increasingly, these services are being outsourced  Major Trends in Service Sector (Fig. 1.3) Government Policies (e.g., regulations, trade agreements) Social Changes (e.g., affluence, lack of time, desire for experiences) Business Trends Manufacturers offer service Growth of chains and franchising Pressures to improve productivity and quality More strategic alliances Marketing emphasis by nonprofits Innovative hiring practices Advances in IT (e.g., speed, digitization, wireless, Internet) Internationalization (travel, transnational companies) Some Impacts of Technological Change Radically alter ways in which service firms do business: with customers (new services, more convenience) behind the scenes (reengineering, new value chains) Create relational databases about customer needs and behavior, mine databanks for insights Leverage employee capabilities and enhance mobility Centralize customer service—faster and more responsive Develop national/global delivery systems Create new, Internet-based business models  Marketing Relevant Differences Between Goods and Services  Defining the Essence of a Service An act or performance offered by one party to another An economic activity that does not result in ownership A process that creates benefits by facilitating a desired change in: customers themselves physical possessions intangible assets  Distinguishing Characteristics of Services Customers do not obtain ownership of services Service products are ephemeral and cannot be inventoried Intangible elements dominate value creation Greater involvement of customers in production process Other people may form part of product experience Greater variability in operational inputs and outputs Many services are difficult for customers to evaluate Time factor is more important--speed may be key Delivery systems include electronic and physical channels  Marketing Implications - 1 No ownership Customers obtain temporary rentals, hiring of personnel, or access to facilities and systems Pricing often based on time Customer choice criteria may differ for renting vs. purchase--may include convenience, quality of personnel Can’t own people (no slavery!) but can hire expertise and labor Services cannot be inventoried after production Service performances are ephemeral—transitory, perishable Exception: some information-based output can be recorded in electronic/printed form and re-used many times Balancing demand and supply may be vital marketing strategy Key to profits: target right segments at right times at right price Need to determine whether benefits are perishable or durable  Marketing Implications - 2 Customers may be involved in production process Customer involvement includes self-service and cooperation with service personnel Think of customers in these settings as “partial employees” Customer behavior and competence can help or hinder productivity, so marketers need to educate/train customers Changing the delivery process may affect role played by customers Design service facilities, equipment, and systems with customers in mind: user-friendly, convenient locations/schedules Intangible elements dominate value creation Understand value added by labor and expertise of personnel Effective HR management is critical to achieve service quality Make highly intangible services more “concrete” by creating and communicating physical images or metaphors and tangible clues  Marketing Implications - 3 Other people are often part of the service product Achieve competitive edge through perceived quality of employees Ensure job specs and standards for frontline service personnel reflect both marketing and operational criteria Recognize that appearance and behavior of other customers can influence service experience positively or negatively Avoid inappropriate mix of customer segments at same time Manage customer behavior (the customer is not always right!) Greater variability in operational inputs and outputs Must work hard to control quality and achieve consistency Seek to improve productivity through standardization, and by training both employees and customers Need to have effective service recovery policies in place because it is more difficult to shield customers from service failures Marketing Implications - 4 Often difficult for customers to evaluate services Educate customers to help them make good choices, avoid risk Tell customers what to expect, what to look for Create trusted brand with reputation for considerate, ethical behavior Encourage positive word-of-mouth from satisfied customers Time factor assumes great importance Offer convenience of extended service hours up to 24/7 Understand customers’ time constraints and priorities Minimize waiting time Look for ways to compete on speed Distribution channels take different forms Tangible activities must be delivered through physical channels Use electronic channels to deliver intangible, information-based elements instantly and expand geographic reach Value Added by Tangible vs Intangible Elements in Goods and Services Hi Salt Soft drinks CD Golf clubs Player New car Tangible Elements Tailored clothing Furniture rental Fast food restaurant Plumbing repair Office cleaning Health club Airline flight Retail banking Insurance Weather forecast Lo Intangible Elements Hi Differences, Implications, and Marketing-Related Tasks (1) (Table 1.1) Difference Implications Marketing-Related Tasks Use pricing, promotion, Most service Customers may be and products turned away reservations to smooth cannot be inventoried demand; work with ops to manage capacity Harder to evaluate Intangible service and distinguish Emphasize physical clues, elements from competitors employ metaphors and vivid usually dominate images in advertising value creation Educate customers on Greater risk and uncertainty perceived making good choices; offer Services are often guarantees difficult to visualize and understand Develop user-friendly Interaction equipment, facilities, and Customers may be between systems; train customers, involved in co- customer and provider; provide good support production but poor task execution could affect satisfaction Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 26  Differences, Implications, and Marketing-Related Tasks (2) (Table 1.1) Difference Implications Marketing-Related Tasks People may be part Behavior of service Recruit, train employees to of personnel and customers reinforce service concept service experience can affect satisfaction Shape customer behavior Hard to maintain quality, Redesign for simplicity and Operational inputs consistency, reliability failure proofing and Difficult to shield Institute good service outputs tend to vary customers from failures recovery procedures more widely Time is money; Time factor often Find ways to compete on customers want service assumes great speed of delivery; offer at convenient times importance extended hours Electronic channels or Distribution may take Create user-friendly, voice telecommunications place through secure websites and free nonphysical channels access by telephone Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 27 Expanded Marketing Mix for Services Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 30  Services Require An Expanded Marketing Mix Marketing can be viewed as: o A strategic and competitive thrust pursued by top management o A set of functional activities performed by line managers o A customer-driven orientation for the entire organization Marketing is the only function to bring operating revenues into a business; all other functions are cost centers The “8Ps” of services marketing are needed to create viable strategies for meeting customer needs profitably in a competitive marketplace Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 31  The 8Ps of Services Marketing Product Elements Place and Time Price and Other User Outlays Promotion and Education Process Physical Environment People Productivity and Quality Fig 1.9 Working in Unison: The 8Ps of Services Marketing Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 32  The 8Ps of Services Marketing: (1) Product Elements Embrace all aspects of service performance that create value Core product responds to customer’s primary need Array of supplementary service elements o Help customer use core product effectively o Add value through useful enhancements Planning marketing mix begins with creating a service concept that: o Will offer value to target customers o Satisfy their needs better than competing alternatives Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 33  The 8Ps of Services Marketing: (2) Place and Time Delivery decisions: Where, When, How Geographic locations served Service schedules Physical channels Electronic channels Customer control and convenience Channel partners/intermediaries Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 34  Place -7 am to 11 PM ( few places 24 x 7) -Helps consumers to save time -@ Urban / Busy locations ( Condominiums/ office locations) -Experimenting with delivery option in few locations in India -84,000+ physical outlets globally/ 50+ outlets in India -Good ambience and lighting -Run through franchisee model  The 8Ps of Services Marketing: (3) Price and Other User Outlays Marketers must recognize that customer outlays involve more than price paid to seller Traditional pricing tasks: o Selling price, discounts, premiums o Margins for intermediaries (if any) o Credit terms Identify and minimize other costs incurred by users: o Additional monetary costs associated with service usage (e.g., travel to service location, parking, phone, babysitting, etc.) o Time expenditures, especially waiting o Unwanted mental and physical effort o Negative sensory experiences Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 35  Price -Charges additional convenience charges globally - However in India, they are charging lower than the competition/substitute prices  SERVICES MARKETING MIX- PHYSICAL EVIDANCE PHYSICAL EVIDANCE McDonald's counter Well dressed employees Computerised order processing Security at the entrance Clean and tidy Comfortable ambiance We judge quality on above parameters  Physical evidence Well dressed employees ( in Uniform) Computerised billing Price reading machines Security at the entrance Clean and tidy Comfortable ambiance Sign boards Store location in prominent places  available globally in 84K stores Identify Different Physical evidence in the following service Amusement Park Pediatrician's clinic Cinema Hall Dating application  The 8Ps of Services Marketing: (4) Promotion and Education Informing, educating, persuading, reminding customers Marketing communication tools o Media elements (Internet, Social, Search, Display, Video, print, broadcast, outdoor, retail, the, etc.) o Personal selling, customer service o Sales promotion o Publicity/PR Imagery and recognition o Branding o Corporate design Content o Information, advice o Persuasive messages o Customer education/training Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 36  Promotion ( Communication) Largely through Instore experience Using electronic channels ( Youtube, Influencers/ Social media marketing ) POP displays Sign-boards Outdoor PR and media publicity Sales personnel educating/ selling  The 8Ps of Services Marketing: (5) Process How firm does things may be as important as what it does Customers often actively involved in processes, especially when acting as co-producers of service Process involves choices of method and sequence in service creation and delivery o Design of activity flows o Number and sequence of actions for customers o Nature of customer involvement o Role of contact personnel o Role of technology, degree of automation Badly designed processes waste time, create poor experiences, and disappoint customers Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 37  Process  Self-service outlet  Demand estimation and replenishment is calculated using data analysis process Logistics and supply-chain process are well laid out Billing/cancellation processes done electronically  PROCESS The actual procedure, mechanism, and flow of activities by which the service is delivered –the service delivery and operating systems.  PROCESS Bank Cash withdrawal process earlier Visit to the bank Present cheque Debit your account Go to cashier Get cash  PROCESS Bank Cash withdrawal process -Problems faced by Customers Customers have to visit bank Traffic / parking problems Rush in the branch Waiting Customers not satisfied How to improve the process? PROCESS SOLUTION LIES IN THE PROCESS DOMINO’S PIZZA DELIVERY PROCESS  The 8Ps of Services Marketing: (6) Physical Environment Design servicescape and provide tangible evidence of service performances Create and maintain physical appearances o Buildings/landscaping o Interior design/furnishings o Vehicles/equipment o Staff grooming/clothing o Sounds and smells o Other tangibles Manage physical cues carefully— can have profound impact on customer impressions Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 38  The 8Ps of Services Marketing: (7) People Interactions between customers and contact personnel strongly influence customer perceptions of service quality The right customer-contact employees performing tasks well o Job design o Recruiting o Training o Motivation The right customers for firm’s mission o Contribute positively to experience of other customers o Possess—or can be trained to have— needed skills (co-production) o Can shape customer roles and manage customer behavior Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 39  SERVICES MARKETING MIX- PEOPLE People All human actors who play a part in service delivery and thus influence the buyer’s perceptions. Namely the firm’s personnel, the customer, and the other customers in the service environment. How people are dressed, Personal appearance, their attitude and behaviour, the importance varies from service to service  SERVICES MARKETING MIX- PEOPLE People FM Broadcast Person not visible Dress not that critical How he speaks is critical Doctor performing surgery How famous is he/she Courtesy Communication How he encourages patient Performance starts after patient is seated Role of people vary from service to service  Identify and explain how roles played by people impacts in the following services Airlines Hospitals Coffee shop Higher Education Institutions  SERVICES MARKETING MIX- PHYSICAL EVIDANCE PHYSICAL EVIDANCE The environment in which the service is delivered and where the firm and customer interact. Any tangible components that facilitate performance or communication of the service. ‘Tangible’ representation of the service such as brochures, letterheads, business cards, signage, equipment The 8Ps of Services Marketing: (8) Productivity and Quality Productivity and quality must work hand in hand Improving productivity key to reducing costs Improving and maintaining quality essential for building customer satisfaction and loyalty Ideally, strategies should be sought to improve both productivity and quality simultaneously—technology often the key o Technology-based innovations have potential to create high payoffs o But, must be user friendly and deliver valued customer benefits Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 40  The Services Marketing Triangle Based on three key components: organizations, providers, and customers. Linking these components: internal marketing, external marketing, and interactive marketing. The Services Marketing Triangle (cont’d) Marketing Must Be Integrated with Other Management Functions Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 41 Marketing Must Be Integrated with Other Management Functions (Fig 1.10) Three management functions play central and interrelated roles in meeting needs of service customers Operations Marketing Management Management Customers Human Resources Management Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 42