Transcript The Services Marketing Mix

Introduction to Services
Management
Ms. Kiran Sharma
How Important is the Service Sector
in Our Economy?
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In most countries, services add more economic
value than agriculture, raw materials and
manufacturing combined
In developed economies, employment is
dominated by service jobs and most new job
growth comes from services
Jobs range from high-paid professionals and
technicians to minimum-wage positions
Service organizations can be any size—from
huge global corporations to local small
businesses
Most activities by government agencies and
nonprofit organizations involve services
Examples of Service Industries
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Health Care
◦ hospital, medical practice, dentistry, eye care
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Professional Services
◦ accounting, legal, architectural
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Financial Services
◦ banking, investment advising, insurance
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Hospitality
◦ restaurant, hotel/motel, bed & breakfast
◦ ski resort, rafting
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Travel
◦ airline, travel agency, theme park
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Others
◦ hair styling, pest control, plumbing, lawn maintenance, counseling services,
health club, interior design
Services dominate the Economy in
most nations – USA
Agriculture, Forestry,
Mining, Construction 2.3%
Finance, Insurance,
Real Estate
20%
Manufacturing 17%
Government
(mostly services)
13%
Wholesale and
Retail Trade
16%
Other Services 11%
SERVICES
Business
Services
6%
Health
6%
Transport, Utilities,
Communications
8%
Source: Bureau of Economic Analysis, May 2005
Service Sector – Indian Economy
Ranks 15th in services
 Provides employment to 23% of total
workforce in the country.
 Contributes most to Indian GDP 54%
 Construction, hospitality, transport, food
and beverages services, communication,
insurance, financing …….
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Services
Services – “acts, deeds, performances, or
efforts”
 Goods – “articles, devices, materials,
objects, or things”
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Defining Services
Are economic activities offered by one
party to another, employing time based
performances to bring about desired
results.
 Services customers expect to obtain
value from access to goods, professional
skills but they do not normally take
ownership of any physical elements.
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Why study Services?
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Service-based economies
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Service as a business imperative in
manufacturing and IT
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Deregulated industries by the government
and professional service needs
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Services marketing is different
Service equals profits
But “Service stinks”
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Major Trends in Service Sector
Government Policies (e.g., regulations, trade
agreements)
 Social Changes (e.g., affluence, lack of time, desire
for experiences)
 Business Trends
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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
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Create relational databases about customer
needs and behavior, mine databanks for better
insights
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Enabling both customers and employees
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Centralize customer service—faster and more
responsive
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Extending the global reach of services
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The Internet is a services
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The dark side of technology and service
Marketing Relevant
Differences Between
Goods and Services
Characteristics of Services
Compared to Goods
Intangibility
Heterogeneity
Simultaneous
Production
and
Consumption
Perishability
Implications of Intangibility
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Services cannot be inventoried
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Services cannot be easily patented
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Services cannot be readily displayed or
communicated
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Pricing is difficult
Implications of Heterogeneity
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Service delivery and customer satisfaction
depend on employee and customer
actions
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Service quality depends on many
uncontrollable factors
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There is no sure knowledge that the
service delivered matches what was
planned and promoted
Implications of Simultaneous
Production and Consumption
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Customers participate in and affect the
transaction
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Customers affect each other
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Employees affect the service outcome
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Decentralization may be essential
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Mass production is difficult
Implications of Perishability
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It is difficult to synchronize supply and
demand with services
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Services cannot be returned or resold
Distinguishing Characteristics of Services
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Customers do not obtain ownership of services
Service products cannot be inventoried
 Intangible elements dominate value creation
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Greater involvement of customers in production
process
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Other people may form part of product experience
Greater variability in operational inputs and outputs
 Many services are difficult for customers to evaluate
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Time factor is more important--speed may be key
 Delivery systems include electronic and physical
channels
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Marketing Implications - 1
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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
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Services cannot be inventoried after
production
◦ Service performances are ephemeral - perishable
◦ Balancing demand and supply may be vital marketing
strategy
Marketing Implications - 2
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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
◦ Design service facilities, equipment, and systems with
customers in mind: user-friendly, convenient locations/schedules
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Intangible elements dominate value creation
◦ Understand value added by labor and expertise of personnel
◦ Effective HR management is critical to achieve service quality
Value Added by Tangible vs. Intangible
Elements in Goods and Services
Hi
Salt
Soft drinks
CD Player
Golf clubs
New car
Tailored clothing
Fast food restaurant
Plumbing repair
Office cleaning
Health club
Airline flight
Life Insurance
Internet banking
Lo
Intangible Elements
Hi
Marketing Implications - 3
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Other people are often part of the service product
◦ Achieve competitive edge through perceived quality of
employees
◦ 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!)
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Greater variability in operational inputs and outputs
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Service execution differs among employees
Between same employees and different customers
Between one time of the day to another
The attitude, transaction speed, and quality of performance vary
greatly.
Marketing Implications - 4
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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
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Time factor assumes great importance
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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, informationbased elements instantly and expand geographic reach
Four Categories of Services
Employing Different Underlying Processes
What is the
Nature of the
Service Act?
TANGIBLE
ACTS
INTANGIBLE
ACTS
Who or What is the Direct Recipient of the Service?
DIRECTED AT PEOPLE
DIRECTED AT POSSESSIONS
People Processing
Possession Processing
e.g., airlines, hospitals,
haircutting, restaurants hotels,
fitness centers
e.g., freight, repair,
cleaning, retailing, recycling
Mental Stimulus
Processing
e.g., broadcasting, consulting,
education, psychotherapy
Information Processing
(directed at intangible assets)
e.g., accounting, banking,
insurance, legal, research
The Services
Marketing Mix
Elements of The Services Marketing Mix:
“7Ps” vs. the Traditional “4Ps”
Rethinking the original 4Ps
 Product elements
 Place and time
 Promotion and education
 Price and other user outlays
Adding Three New Elements
 Physical environment
 Process
 People
Expanded Mix for Services -The 7 Ps
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Product
Price
Place
Promotion
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
other customers in the service environment.
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Physical Evidence
◦ The environment in which the service is delivered and where the firm
and customer interact, and any tangible components that facilitate
performance or communication of the service.
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Process
◦ The actual procedures, mechanisms, and flow of activities by which the
service is delivered—the service delivery and operating systems.
Expanded Marketing Mix for Services
The 7Ps: (1)Product Elements
All Aspects of Service Performance that Create Value
 Core product features—both tangible and
intangible elements
 Bundle of supplementary service elements
 Performance levels relative to competition
 Benefits delivered to customers (customers
don’t buy a hotel room, they buy a good night’s
sleep)
 Guarantees
The 7Ps:(2) Place and Time
Delivery Decisions: Where,When, and How
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Geographic locations served
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Service schedules
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Physical channels
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Electronic channels
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Customer convenience
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Channel partners/intermediaries
The 7Ps:(3) Promotion
Informing, Educating, Persuading, and Reminding Customers
 Marketing communication tools
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media elements (print, broadcast, outdoor, retail, Internet, etc.)
personal selling, customer service
sales promotion
publicity/PR
Imagery and recognition
◦ branding
◦ corporate design
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Content
◦ information, advice
◦ persuasive messages
◦ customer education/training
The 7Ps: (4) Price
Marketers Must Recognize that Customer Outlays
Involve More than the Price Paid to Seller
Traditional Pricing Tasks
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Selling price, discounts, premiums
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Margins for intermediaries (if any)
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Credit terms
Identify and Minimize Other Costs Incurred by Users
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Additional monetary costs associated with service usage (e.g., travel to
service location, parking, phone, baby sitting,etc.)
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Time expenditures, especially waiting
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Unwanted mental and physical effort
The 7Ps:(5) Physical Environment
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Create and maintaining physical appearances
◦ buildings/landscaping
◦ interior design/furnishings
◦ vehicles/equipment
◦ staff grooming/clothing
◦ sounds and smells
◦ other tangibles
7Ps:(6) Process
Method and Sequence in Service Creation and Delivery
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Design of activity flows
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Number and sequence of actions for customers
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Nature of customer involvement
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Role of contact personnel
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Role of technology, degree of automation
The 7Ps: (7) People
Managing the Human Side of the Enterprise
 The right customer-contact employees performing tasks well
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job design
recruiting/selection
training
motivation
evaluation/rewards
empowerment/teamwork
The right customers for the firm’s mission
◦ fit well with product/processes/corporate goals
◦ appreciate benefits and value offered
◦ possess (or can be educated to have) needed skills (co-production)
Managing the 7Ps Requires Collaboration between
Marketing, Operations, and HR Functions
Operations
Management
Marketing
Management
Customers
Human Resources
Management
Challenges for Services
 Defining and improving quality
 Designing and testing new services
 Communicating and maintaining a consistent
image
 Accommodating fluctuating demand
 Motivating and sustaining employee
commitment
 Coordinating marketing, operations, and human
resource efforts
 Setting prices
 Ensuring the delivery of consistent quality
Traditional Marketing Mix
 All
elements within the control of the firm
that communicate the firm’s capabilities
and image to customers or that influence
customer satisfaction with the firm’s
product and services:
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Product
Price
Place
Promotion
Ways to Use the 7 Ps
Overall Strategic Assessment
Specific Service Implementation
◦ How effective is a firm’s services
◦ Who is the customer?
marketing mix?
◦ What is the service?
◦ Is the mix well-aligned with
◦ How effectively does the
overall vision and strategy?
services marketing mix for a
◦ What are the strengths and
service communicate its
weaknesses in terms of the 7 Ps?
benefits and quality?
◦ What changes/ improvements
are needed?