intro to marketing

1. Services Marketing

2. The service sector
 The services sector has been growing at a
rate of 8% per annum in recent years
 More than half of our GDP is accounted for
from the services sector
 This sector dominates with the best jobs,
best talent and best incomes

3. “There are no such thing as
service industries.There are only
industries whose service
components are greater or less
than those of other industries.
Everybody is in service.”
-Theodore Levitt-

4. What is services?
It is the part of the product or the full product for which the
customer is willing to see value and pay for it.
Services are deeds, processes and performance.
Intangible, but may have a tangible component.
Generally produced and consumed at the same time.
Service is any act or performance that one party can offer to
another that is essentially intangible and does not result in any
ownership of anything. Its production may or may not be tied to
physical products..Philip Kotler

5. Difference between physical
goods and services
Physical goods Services
tangible intangible
homogeneous heterogeneous
Production and distribution are
separated from consumption
Production, distribution and
consumption are simultaneous
processes
A thing An activity or process
Core value processed in factory Core value produced in the buyer-seller
interaction
Customers do not participate in the
production process
Customers participate in production
Can be kept in stock Cannot be kept in stock
Transfer of ownership No transfer of ownership

6. Characteristics of services
 Intangibility
 Inseparability
 Perishability
 Variability

7. Implications of Intangibility
 Services cannot be inventoried
 Services cannot be patented
 Services cannot be readily displayed
or communicated
 Pricing is difficult

8. Implications of Heterogeneity
 Service delivery and customer satisfaction
depend on employee actions
 Service quality depends on many
uncontrollable factors
 There is no sure knowledge that the service
delivered matches what was planned and
promoted

9. Implications of Simultaneous Production
and Consumption
 Customers participate in and affect
the transaction
 Customers affect each other
 Employees affect the service outcome
 Decentralization may be essential
 Mass production is difficult

10. Implications of Perishability
 It is difficult to synchronize supply and
demand with services
 Services cannot be returned or resold

11. Reasons behind the growth of the
Service Industry
 Increasing affluence
 More leisure time
 Higher percentage of working women
 Complex products
 Complexity of life

12. Service Marketing Triangle
SSM An Indian Perspective C.
Bhattacharjee

13. Table 1-3
Expanded Marketing Mix for
Services
PRODUCT PLACE PROMOTION PRICE
Physical good
features
Channel type Promotion
blend
Flexibility
Quality level Exposure Salespeople Price level
Accessories Intermediaries Advertising Terms
Packaging Outlet location Sales
promotion
Differentiation
Warranties Transportation Publicity Allowances
Product lines Storage
Branding

14. PEOPLE PHYSICAL
EVIDENCE
PROCESS
Employees Facility design Flow of activities
Customers Equipment Number of steps
Communicating
culture and values
Signage Level of customer
involvement
Employee research Employee dress
Other tangibles
Table 1-3 (Continued)
Expanded Marketing Mix for
Services

15. The three additional ‘P’s of
Service Marketing
 People
 Physical evidence
 Process

16. Determinants of service quality
 Reliability – delivering on promises
 Responsiveness – willing to help
 Assurance – inspiring trust and confidence
 Empathy – individualising customers
 Tangibles- physical representation

17. Service quality is directly
proportional to employee
satisfaction

18. Marketing Challenges of Services
 Intangibility
 Services cannot be stored
 Trust building
 Brand management
 Competition
 Physical evidence
 Marketing and sales loose momentum

19. Business Environment
 Internal environment
 External environment
Micro Environment
Macro Environment

20. Service Marketing Environment

21. Micro Environment
 Corporate Resources
 Customers
 Suppliers
 Competitors
 Marketing intermediaries

22. Macro Environment
 Economic environment
1. Industrial policy
2. Trade policy
3. Foreign exchange policy
4. Fiscal policy
5. Monetary policy
6. Foreign investment and technology policy

23. Macro Environment ctnd….
 Political environment
 Legal/ regulatory environment
 Technological environment
 Socio-cultural environment

24. PEST Analysis

25. Porters Five Force Model

26. 26
Examples of Service Industries
Health Care
– hospital, medical practice, dentistry, eye care
Professional Services
– accounting, legal, architectural
Financial Services
– banking, investment advising, insurance
Hospitality
– restaurant, hotel/motel, bed & breakfast,
– ski resort, rafting
Travel
– airlines, travel agencies, theme park
Others:
– hair styling, pest control, plumbing, lawn maintenance, counseling
services, health club

27. 27
Tangibility of goods and services

28. 28
Classification of Services
Based on Degree Of Cust. Involvement
( Lovelock)
1. People Processing
2. Possession Processing
3. Mental Stimulus Processing
4. Information Processing

29. People Processing
 If the customers want the benefits that a people-
processing service has to offer, they must be prepared
to spend time operating actively with the service
provider.
 The output from these services, whose period of
delivery can vary from minutes to months, is a customer
who has reached her destination, or satisfied his
hunger, or is now sporting clean and stylishly-cut hair,
or has had a couple of night’s sleep away from home, or
is now in better physical health.
 It is important for managers to think about process and
output in terms of what happens to the customer
because that helps them to identify what benefits are
being created.

30. Possession Processing
 Possession processing services include
transport and storage of goods, wholesale and
retail distribution, and installation, removal and
disposal of equipment;
 In short, the entire value-adding chain of
activities during the lifetime of the object in
question.
 Customers are less physically involved with this
type of service than with people-processing
services.

31. Mental Stimulus Processing
 Services that interact with people’s minds include
education, news and information, professional advice,
psychotherapy, entertainment and certain religious
practices.
 Service such as entertainment and education are often
created in one place and transmitted by television or
radio to individual customers in distant locations.
 Since the core content of all services in this category is
information-based (whether it is much, speech or visual
imagers), they can easily be converted into digital bits,
recorded for posterity and transformed into a
manufactured product, such as a compact disc,
videotape, or audio-cassette-much like any other
physical good-or delivered via the Internet.

32. Information Processing
 Information processing has been revolutionized by the use of
computers. However, not all information is processed by machines.
 Among the services that are highly dependent on effective
collection and processing of information are financial and
professional services such as accounting, law, market research,
management consulting and medical diagnosis.
 The extent of customer involvement in both information and mental
stimulus processing services is often determined more by tradition
and a desire to meet the supplier face-to-face, than by the needs of
the operational process.
 As technology improves and people continue to become more
comfortable with videophones or the Internet, we can expect to see
a continuing shift away from face-to-face transactions.

33. 33
Four Categories of Services
Employing Different Underlying Processes
People Processing Possession Processing
Mental Stimulus
Processing
Information Processing
(directed at intangible assets)
e.g., airlines, hospitals,
haircutting, restaurants hotels,
fitness centers
e.g., freight, repair, cleaning,
landscaping, retailing,
recycling
e.g., broadcasting, consulting,
education, psychotherapy
e.g., accounting, banking,
insurance, legal, research
TANGIBLE
ACTS
INTANGIBLE
ACTS
DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS
What is the
Nature of the
Service Act?
Who or What is the Direct Recipient of the Service?

34. 34
Marketing Framework
3 C’s
Customers Competitors Company
S
(Segment)
T
(Target)
P
(Position)
MarketIntelligence
4 P’s
Product
Price Place
Promotion

35. Why Study Service Operations?
• Service firms are a large percentage of the
economies of industrialized nations and it’s
growing
– 80% of the US economy (employment and GDP)
• There is little focus on services in the
academic world. Gain a competitive edge.
• Not all management tools that are
appropriate for manufacturing are
transferable into a service environment

36. The Importance of Service Sector
 Historically service is defined by what it is
not:
 Services are not
 Goods Producing  Manufacturing &
Construction
 Extraction  Agriculture, forestry, fishing &
mining
 Services  Retailing, Wholesaling,
Transportation, Financial services, etc.
 Nowadays service is ubiquitous.

37. Role of Services in an Economy

38. Definition of Service Firms
Service Enterprises are Organizations that
Facilitate the Production and Distribution
of Goods, Support Other Firms in Meeting
Their Goals, and Add Value to Our
Personal Lives.
- James Fitzsimmons

39. Bell’s Stages of Economic
Development
 Preindustrial
 Industrial
 Postindustrial
Features
Society Game Pre-
dominant
Activity
Use of
Human
Labor
Unit of Social
Life
Standard of
Living
Measure
Structure Technology
Pre-
Industrial
Against
Nature
Agriculture,
Mining
Raw Muscle
Power
Extended
Household
Subsistence Routine,
Traditional,
Authoritative
Simple hand
tools
Industrial Against
fabricated
nature
Goods,
Production
Machine
tending
Individual Quantity of
Goods
Bureaucratic
,
Hierarchical
Machines
Post-
Industrial
Among
Persons
Services Artistic,
Creative,
Intellectual
Community Quality of
life in terms
of health,
education,
recreation
Interdepende
nt, Global
Information

40. 2
Historical US Employment by Economic
Sector
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1800 1850 1900 1950 2001
Year
PercentofWorkforce
Extraction
Goods Producing
Service Producing

41. Growth of Services

42. Distribution of GDP in the US Economy
Product Services
Physical
Information
6%
10%
31%
53%
37%
63%
84%16%
D
BA
C

43. a. Preindustrial
 In U.S , during year 1800
 Employment in extraction field
 Agriculture is the most prominent. More than 80% workforce in
Agriculture sector
 Service occupations mostly were domestic servants and sailors
 Family relationships and tradition important but education and
innovation are not
 Quality of life dependent on nature

44. b. Industrial
 Year 1900 to 1950
 Important activity  Goods production
 Quality of Life  Measured by accumulation of goods. “He who dies
with the most toys, wins”
 Focus was on maximizing the productivity of labor and machines
 Extreme division of labor
 Dehumanizing jobs hence labor unions were formed
 “Manual workers” outnumbered “white collar workers”

45. c. Postindustrial
 Year 1950 onwards
 Service producing industries increased from 50% to 80% in US
 Health, Education, & recreation predominates and it determines
Quality of Life
 A small subset of the service economy called “experiences”
will be a dominant economic force
 Information rather than muscle was the focus; workers value
based on judgment, creativity & theoretical reasoning
 New paradigms are required to manage service industries.

46. New Experience Economy
 Service undergoing transformation from
the traditional concept of a service
transaction to one of an experience.
 Eg: Disney World, Starbucks, etc.
Economy Agrarian Industrial Service Experience
Function Extract Make Deliver Stage
Nature Exchangeable Tangible Intangible Memorable
Attribute Natural Standardized Customized Personal
Method of
Supply
Stored in Bulk Inventoried Delivered on
demand
Revealed over
time
Seller Trader Manufacturer Provider Stager
Buyer Market User Client Guest

47. Reasons for transformation from
industrial to post industrial era
 Natural development of services such as
transportation & Utilities to support industrial
development
 Population growth & mass consumption of goods
increase wholesale & retail trade along with
banking, real estate, & insurance
 Higher income means higher demand for durables
& services, proportion spent on food & home
decreases. (Similar to Maslow’s Hierarchy)

48. 3
What is Operations?
 The transformation process that turns inputs into
outputs, that is, the act of combining people, raw
materials, technology, etc. into useable services
and products
 Who is in the operations function?
 The people who actually make a product or
perform a service
 Typically operations has the largest number
of employees of any functional area
Importance of studying “operations” in
services

49. Opportunities in Service Sector
 Vast & untapped opportunities to improve
service businesses.
 Only manufacturing is being considered for
a time being.
 Imbalance exists which creates a huge
opportunity

50. Operations in the Service Sector
 Many products: Combination of Goods and Services
 Services
 Repair and Maintenance
 Government
 Food and Lodging
 Transportation
 Insurance
 Trade
 Financial
 Real Estate
 Education
 Legal
 Medical
 Entertainment and Other professional Occupations

51. Classification frameworks
 Classification helps in finding
commonalities
 Similarities helps in finding insights
 Well known classifications
 Customer Contact Model
 Service Process Matrix (Proposed by
Schmenner)

52. Customer Contact Model
 Services are classified according to the amount of
customer contact
Pure Services Mixed Services Quasi-Mfg. Manufacturing
Medical
Restaurants
Transportation
Branch offices Home offices
Distribution centers
• Guiding Principle:







timeCreationService
TimeContactCustomer
fEfficiencyPotential
__
__
1_
High Contact Low Contact

53. Service Process Matrix
Professional Service
•Doctors
•Lawyers
•Accountants
•Architects
Mass Service
•Retailing
•Wholesaling
•Schools
•Retail Aspects of
Commercial Banking
High
Service Shop
•Hospitals
•Auto Repair
•Other Repair Services
Service Factory
•Airlines
•Trucking
•Hotels
Low
HighLow
Degree
of Labor
Intensity
Degree of Interaction and Customization

54. Low Labor
Intensity
 Challenges for managers
 Capital decisions
 Technological advances
 Managing peak/non-peak demand
 Scheduling service delivery
High Labor Intensity
 Challenges for managers
 Hiring, training
 Methods development
 Employee welfare
 Scheduling workforces
 Control of far-flung locations
 Managing growth
Low Interaction/Customization
 Challenges for managers
 Marketing
 Making service “warm”
 Attention to physical surroundings
 Managing fairly rigid hierarchy with
need for standard operating procedures
High Interaction/Customization
 Challenges for managers
 Fighting cost increases
 Maintaining quality
 Reacting to consumer intervention in process
 Managing flat hierarchy with loose subordinate-
superior relationships
 Gaining employee loyalty

55. Module I
Faculty: J.Rai, IIPM-School of
Management, Kansbahal 55