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Basic Concepts of 'Services marketing'

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Basic Concepts of 'Services marketing'

  1. 1. SERVICES MARKETING Total concepts covered:16 no’s (respective author names also mentioned topic wise) By A.RAJA
  2. 2. 1. Positioning Strategies For Services 2. The Services Marketing Triangle 3. Relationship Marketing 4. Expanded Marketing Mix 5. Characteristics Of Services & Reasons For Growth Of Services In India 6. Basis For Market Segmentation 7. Customer Portfolio 8. Branding Of Service Product 9. Traditional Marketing Mix 10. New Service Development Process 11. Value Addition To The Service Product 12. New Service Development 13. Marketing Services Vs Physical Services 14. Approaches To Positioning Of Services In Competitive Market 15. The Concept Of Service Product 16. Factors Affecting Service Encounter CONCEPTS IN SERVICES MARKETING
  3. 3. POSITIONING Definition: According to Philip Kotler, “Positioning is the act of designing the company’s offering and image to occupy a distinct place in the target’s mind.” Positioning means Projecting the image of a product or a service in such a way that consumers perceive its value distinctively from that of competitive offers. Positioning strategies for Services
  4. 4. Positioning Strategies for Services 1. Attribute Positioning 2. Service Application Positioning News paper no.1 in circulation
  5. 5. 3. Service User Positioning 4. Competitive Positioning  Kiddy bank deposit scheme to children.  Educational loans to students.
  6. 6. 6. Price positioning 5. Quality Positioning
  8. 8. INTRODUCTION One of the most popular models for services marketing. CHRISTIAN GRONROSS has the credibility of developing the service triangle. He identifies 3 important groups playing a significant role in the accomplishment of organizational goals. The model suggests development of special marketing programme for company and its employees and customers.
  9. 9. INTERNAL MARKETING If we have a team of qualified people, our task of accomplishing goals is considerably simplified even if we find design, system and supportive services are not up to the mark. The working people should be given top preference for service generating organization to serve. The top management should make sure that the strategic decisions are very much proactive to the working people.
  10. 10. EXTERNAL MARKETING The success of customers rests on the customers. External marketing focuses on developing their awareness of customers. Increasing flow of information and sophisticated mode of transportation shape the level of expectation provided we find the discretionary income moving upward. Customers play a decisive role in construction of service portfolio mix.
  11. 11. INTERACTIVE MARKETING It is also known as “service encounter”. The service process not having an interactive base cannot be proactive. There are number of forces found instrumental in process such as supporting services, systems, techniques and tangibles.
  12. 12. Relationship Marketing : “Relationship marketing is to identify and establish , maintain enhance and when necessary terminate relationships with customers so that objectives regarding economic and other variables of all the parties are met”. This is achieved through mutual exchange and fulfilment of promises. -Christian Gronroos Ref: Christian Gronoroos : “Services Marketnig and Management” , Wiley India , New Delhi , 2010.
  13. 13. Identifying and establishing , maintaining nad enhancing customer relationship implies respectively that the process of marketing includes the following : 1. Market research : to identify potential and profitable customers to contact 2. Establishing : first contact with customer – relationship starts to emerge. 3. Maintaining : getting a share of customers wallet. 4. Enhancement : emotional connections - getting share of customers heart and mind –expanding wallet share. 5. Terminating :either customer discontinues or firms – re- established in future.
  14. 14. Benefits Of Relationship Marketing : To the firm : •Less distraction by competitors •Increased revenue •Customer retention •Word of mouth publicity To the customers : •Saves time •Enjoy highly personalized services •Better information regarding services provided
  15. 15. The Dark Side Of Relationships : 1. Either party or both may become lazy and neglect developments in the market place. 2. The customers choice are restricted in long term relationship. 3. Suppliers may be satisfied with having customers buying existing solutions and as a consequence neglect to invest in developing new and improved technologies and solutions. 4. The trust in one party in a relationship may be misused by the other party ,especially when problems occur.
  16. 16. COCA-COLA AND RELATIONSHIP MARKETING: Coca-Cola and American Patriotism : Coca-Cola has been a patriotic symbol in America ever since the company started supporting American soldiers during World War II by shipping cases of Coke to military bases abroad. Coke was giving a helping hand in times of adversity and quickly became very dear to the soldiers who missed their homes. To them, Coke was far more than a consumer product.
  17. 17. Coca-Cola’s Friendly Twist Campaign The brand launched a campaign in Colombia whereby college freshmen received bottles of Coke on their first day on campus. Nothing too creative you say, however, there is a twist . The caps of these bottles could only be opened when clicked together with another cap. This encouraged students to collaborate in order to open their bottles of Coke, and therefore facilitated starting conversations between strangers on a day when students usually are a bit lonely and don’t know anyone yet.
  18. 18. Coca-Cola Hello Happiness Phone Booths: Dubai employs thousands of South Asian blue-collar workers who came to the UAE in order to sustain their families back in their home countries. Making an average of $6 a day, these workers cannot afford to make international calls to their families. This is where Coca-Cola comes in as an enabler to these people with the Hello Happiness Phone Booths. In exchange for a Coca-Cola bottle cap, these booths allow the workers to make 3-minute international calls to their home countries.
  19. 19. Marketing Mix Process Physical Evidence People Expanded Marketing Mix Expanded Marketing Mix Source: S .M. Jha
  20. 20. PEOPLE Employees  Recruiting  Training  Motivation  Rewards Customers  Education  Training
  21. 21.  People are a key factor in a hotel business.  The receptionists, the porters, the housekeepers, the waiters and waitresses and even the doorman play an incremental role in promoting the business. PEOPLE IN HOTEL MARKETING
  23. 23. PHYSICAL EVIDENCE  Equipment  Facility Design  Signage  Employee Dress  Business Cards
  24. 24. PHYSICAL EVIDENCE IN HOTEL MARKETING  The hotel business considerably rests on projection through tangibilisation of outstanding properties.  Aesthetic management plays a significant role in the tangibilisation process.
  26. 26. PROCESS Flow of activities  Standardized  Customized Number of steps  Simple  Complex
  27. 27. PROCESS IN HOTEL MARKETING The services processed for customers include booking, cancellation, room service, food supply… we find a lot of people in the processes that take place right from the entry of the customer to the hotel to their exit from the hotel.
  29. 29. ‘Service’ definition: According to Philip Kotler and Bloom defined Service as “any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything .Its production may or may not be tied to a physical product.” Pg no:6 CHARACTERISTICS OF SERVICES & REASONS FOR GROWTH OF SERVICES IN INDIA Reference : Services Marketing By K.Rama Mohana Rao
  30. 30. 1.Intangibility: Services are intangible i.e. they cannot be seen, tasted, felt, heard or smelt before they are bought unlike physical products. Ex: A Woman who purchases services in a beauty parlour for a facial cannot foresee the exact result. 2.Variability: Services are highly variable. No two customers can have exactly similar service even though they experience it simultaneously. Ex: The experiences of bus travellers vary with the seats they occupy. Characteristics of Services Pg no:8
  31. 31. 3.Perishability: Services perish. They cannot be stored. Ex: A Train that leaves the railway station half full means that the service of the empty half remains unused. 4.Inseperability: Services cannot be separated from the service provider. In fact the production, delivery and consumption of a service takes place simultaneously in the buyer-seller interactions. However , some service organizations are able to reduce direct interactions by introducing new technologies. Ex: Banking organizations have introduced the cheque facility, the credit card facility, tele-banking and ATM facility etc. Cont…
  32. 32. 5.No Ownership: Service consumers will have experiences but not ownership. Since the services are intangible and perishable, the question of ownership doesn’t arise. Ex: Hospitality services, Hotel services … 6.Customer Participation: Service production is not a one-sided activity. Customers are co-producers of service. The production quality of the service greatly depends upon the ability, skill and performance of the employee as well as the ability and performance of the customer. Ex: IT services Cont…
  33. 33. A Few Reasons for growth of Services in India  Export Potential Development of Markets IT Revolution Economic Affluence Increased Consciousness of Health Care Pg no:22
  34. 34. BASIS FOR MARKET SEGMENTATION Market Segmentation: The process of dividing and sub dividing a large homogenous market in to clearly identifiable segments having similar needs, wants or demand characteristics. Source: k Ram Mohan Rao
  35. 35. BASIS OF MARKET SEGMENTATION  Geographic segmentation  Demographic segmentation  Psychographic segmentation  Behavioral segmentation
  36. 36. GEOGRAPHIC SEGMENTATION  It is simplest way of segmenting the market.  Under this approach market will be divided in to various geographical units such as states, regions, cities and towns to get the benefits at low price.  This segmentation helps in identification of cultural groups, demand- supply gaps, religion and race.  It provides opportunities for service stalls for product development as well as product differentiation. Ex: seasonal products
  37. 37. DEMOGRAPHIC SEGMENTATION  It is the study of population. Under this a[approach market is divided in to segments based on various demographic variables such as age, family, size, income, occupation, education and social class.  The demographic variables are most popular basis for differentiating customer groups and these variables are easy to measure. Ex: Banking & Cosmetics and perfumes
  38. 38. PSYCHOGRAPHIC SEGMENTATION  under this approach consumers are divided in to groups based on lifestyle, personality and value.  People belonging to the same demographic may vary in their activities, opinions, value and perceptions.  To use this segmentation, service providers have to develop a sound database on the psychographics of market in order to make service offer more focused. Ex: Frozen food manufacturers & Car manufacturers
  39. 39. BEHAVIORAL SEGMENTATION  In this consumers are divided in to groups based on their knowledge, attitudes and response to a service.  The variables used under this segmentation are occasion, benefits user status, usage rate and loyalty status. Ex: restaurant
  40. 40. A customer portfolio is the collection of mutually exclusive customer groups that comprise a business’s entire customer base. An appropriate customer portfolio
  41. 41. The success rate of marketing professionals while developing personal relationship with the customers and potential customers would, of course, be high when they have an in-depth knowledge of the portfolio of an appropriate customer. In the context of marketing when we make use of the term portfolio, our focus should be on developing a mix in which we find inclusion of profitable customers.
  42. 42. We cannot negate that different segments offer a different value for a service generating organization. An anatomy of different segments keeping in view the short and long term effects is to be done by marketing professionals. Personal relationship with customers is required to be established.
  43. 43. BRANDING OF SERVICE PRODUCT Branding begins with giving an identity to the service beyond the one it has within trade circles. Consumers feel that they are getting more in a branded service than otherwise. It creates a mental patent. Brand is derived from Norse verb “brand re” which means “to burn”. Branding has now become one of the strategic weapons of business. Ref. service marketing by k.Ram mohana rao
  44. 44. BRANDING A brand is a name, term, sign, symbol or design or a combination of these, intended to identify the goods or services of one seller or a group of sellers and to differentiate them from those of their competitors. -American Marketing Association
  45. 45. SERVICE Service characteristics such as intangibility, variability and perish ability make branding a strategic requirement to promote beliefs and values in the target market. Most service companies promote product brand names along with corporate branding.
  46. 46. BENEFITS OF BRANDING The following are the benefits of branding service: Provides corporate identity and recognition. Provides an opportunity to distinguish the competitive products. Helps customers to develop value perceptions. Helps in developing customer relationships. Builds up long-term equity to the concern, Market penetration becomes easy New service offers get quick response.
  47. 47. BRANDING DECISIONS Service firms need to decide whether to brand their service packages or not, because requires consistent quality performance and accessibility. The cost of branding must be less than the premium that a marketer can get out of it. Keeping in view the competition from unbranded local service outlets, the service firms should be able to provide greater value perceptions to the customers in branded services.
  48. 48. Once it is decided to brand a service, there are at least four important decisions a company has to make in branding. They are: Should the company’s own brand be promoted or a sponsor be found for branding? What should be quality of the brand? Corporate brand or independent product brand or mix? Should the existing brand name be extended or a new brand built?
  49. 49. MEANING One of the most basic concepts in marketing is the marketing mix, defined as the elements an organization controls that can be used to satisfy or communicate with customers. The traditional marketing mix is composed of the four p’s of marketing such as product, place, promotion and price. Traditional Marketing Mix Ref:Services Marketing Written By Valarie A Zeithaml And Ajay Pandit
  50. 50. TRADITIONAL MARKETING MIX Traditional marketing mix is also called as the four p’s of marketing mix. Those are  Product  Place  Promotion  price
  51. 51. PRODUCT  Physical good features  Quality level  Accessories  Packaging  Warranties  Product lines
  52. 52. PLACE  Exposure  Intermediaries  Outlet locations  Transportation  storage
  53. 53. PROMOTION sales people Selection Training Incentives  Sales promotion  publicity
  54. 54. PRICE  Flexibility  Price level  Terms  Discounts
  55. 55. Developing a new product shouldn’t feel like you’re fighting in the dark. There’s an easier way. What you need is a structured road-map that gives your business a clear path to follow. Actually developing the tangible product or service is only a small part of the new product development process, which includes the complete journey from generating the initial idea to bringing the product to market. New service New service development process Reference Book “Services marketing “by S M JHA Himalaya publishing house
  56. 56. Generation of ideas screening Testing the concept Business analysis Development Market testing Product launch New service development process
  57. 57. GENERATION OF IDEAS  The development of a product will start with the concept. The rest of the process will ensure that ideas are tested for their viability, so in the beginning all ideas are good ideas (To a certain extent!)Ideas can, and will come, from many different directions.  The best place to start is with a SWOT analysis, (Strengths, Weaknesses, Opportunities and Threats), which incorporates current market trends.
  58. 58. SCREENING This step is crucial to ensure that unsuitable ideas, for whatever reason, are rejected as soon as possible. Ideas need to be considered objectively, ideally by a group or committee. Specific screening criteria need to be set for this stage, looking at ROI, affordability and market potential. These questions need to be considered carefully, to avoid product failure after considerable investment down the line.
  59. 59. TESTING THE CONCEPT  The ideas which continue the new service be translated into a specific feature and attributes which the product or service will display concept testing is usually done through marketing research involves presenting the idea or concept to the target market and studying their actions to make necessary modifications to the predict before
  60. 60. BUSINESS ANALYSIS  At this stage, ideas which have been selected to the developed further require in depth exploration and evaluation to the important task is to produce a formal analysis of market potential of the ideas in terms of forecasting all aspects of developing and launching services.
  61. 61. PRACTICAL DEVELOPMENT  At this stage preparation are made for development and launching the service. The service provides undertake the work of designing and supply of literature and supporting materials.  A detail marketing program is developed to cover all aspects of marketing mix
  62. 62. MARKET TESTING  Marketing research is carried to test the concept , it is necessary to test the market to reduce he risk. This may be done artificially by using panel of consumers who will use the series at their residence or testing in the actual market but in a small area may do it.
  63. 63. PRODUCT LAUNCH  The precuts launch is the final stage and the organization now can make decision on when to introduce the ne service , whereto whom and the service moves from being purely cost, to bringing the revenue. At this stage major decisions are taken regarding the timings of the launch the geographical location of the launch and the specific marketing.
  64. 64. Value Addition through Supplementary services: C. Lovelock developed the flower of service which indicates the core service surrounded by a cluster of facilitating and support services. It represents basically two types of supplementary services. They are Facilitating Supplementary services • Information • Order Taking • Billing • Payment Value Enhancing supplementary services • Consultation • Hospitality • safekeeping • Expectations Value addition to the service product REF: Ram Mohan Rao. k : “ Services Marketing”
  65. 65. 1. Information: Customers need information on various elements of a service for evaluation and decision making. Examples of information elements are  Signboards to the service site  Service performance hours  Charges for services  Alerting people  Notices  Conditions etc.. 2. Order Taking: The first step in transaction. Examples of order taking elements are  Filling out applications for membership of associations  Subscription to a service  Reservation of seats, tables, rooms and rentals  Online, postal or telephonic order
  66. 66. 3. Billing:  Billing is important from the company’s as well as the customer’s point of view.  Customers expect accuracy, completeness and legibility in bills prepared by service providers. 4. Payment: Activities of payment system are cash handling  cheque handling credit system coupon system
  67. 67. 5. Consultation:  Consultation is directed at identifying and understanding customer’s requirements so as to design and develop a tailored solution.  It is offered generally to help customers use service, clarify doubts and offer management/technical consultancy. 6. Hospitality: Hospitality includes  Greeting  Enquiry and Reception  Waiting facilities  Bathrooms  Food and Beverages etc..
  68. 68. 7. Safekeeping: Service organizations have to make arrangements for the safekeeping of customer property. Safekeeping includes  Child care services  Pet-care services  Parking facilities  Storage and baggage handling services etc.. 8. Expectations:  Service providers may be required to provide supplementary services that are not routine to the customers on special considerations.  Expectations may be allowed on special requests by the customers for the advanced delivery of service under special circumstances.
  69. 69. New service development meaning New service development concerns all the activities involved in realizing new service opportunities including product or service design, business model design and marketing. AUTHOR: CHRISTOPHER LEVELOCK|JOCHEN WIRTZ|JAYANTA CHATTERJEE. PAGE NO:89-91
  70. 70. Some of the service categories of new services 1) Major service innovation 2) Product line extensions 3) Style changes 4) Process line extensions 5) Service improvements
  71. 71. Major service innovation Major service innovations are new core products for markets that have not been previously defined. They usually include both new service characteristics and radical new process. Example include fed ex’s introduction of overnight nationwide, express package delivery in 1971.
  72. 72. Product line extensions Product line extensions are additions to current product lines by exiting firms. The first company in a market to offer such a product may be seen as an innovators. these new services may be targeted at existing customer to service a broader array of needs or designed to attract new customers with different needs. Style changes represent the simplest type of innovation, typically no changes in either processes or performance. Style are often highly visible create excitement and may motivate employees. Style changes
  73. 73. Service improvement are the most common type of innovation. They involve modest changes in the performances of current products,incliding improvement to either the core product or existing supplementary. Service improvements Process lineextensions Process line extensions are less innovative than process innovations but often represent distinctive new ways of delivering existing products so as to either offer more convenience and a different experience for existing customers or a attract new customers who find traditions approach unappealing.
  74. 74. Marketing services Services are (usually) intangible economic activities offered by one party to another. 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 marketing is a sub-field of marketing, which can be split into the two main areas of goods marketing and services marketing. Services marketing typically refers to both business to consumer (B2C) and business to business (B2B) services, and includes marketing of services such as telecommunications services, financial services, all types of hospitality services, car rental services, air travel, health care services and professional services. marketing services vs physical services
  75. 75. marketing Physical goods A product is tangible any item you can physically touch, has packaging and usually a shelf life. Goods are basically objects or products which have to be manufactured, stored, transported, marketed and sold. Goods are items that are tangible such as books, pens, salt, shoes, hats and folders.
  76. 76. Difference Between Marketing Services versus physical services Tangibility Inseparability Perishability Trust Wants and needs
  77. 77. Returnability Time Relationships Elements
  78. 78. POSITIONING OF SERVICES IN COMPETITIVE MARKET: Services that vary in their configuration according to the goods service continuum have to be positioned according to the degree of tangibility or intangibility as one move across the tangibility spectrum(goods service continuum). This necessitates the development of advanced form of positioning process especially for services. Approaches to positioning of services in competitive market Source: Services Marketing by Nargundkar
  79. 79. APPROACHES TO POSITIONING OF SERVICES: There are a variety of ways in which positioning can be arrived at. Some major ways of dong this are discussed below.  Positioning by Features  Positioning By Comparison
  80. 80. POSITIONING BY BENEFIT TO CUSTOMER  Positioning as an expert  Positioning by endorsement
  81. 81. POSITIONING THROUGH GUARANTEES  Positioning through smart taglines  Positioning by value price
  82. 82. THE SERVICE PRODUCT CONCEPT Potential Service Augmented Service Expected Service Basic Service Core Benefit The Concept of Service Product Source: Rajendra Nargundkar
  83. 83. CORE BENEFIT Core benefit is what the buyer is really buying. It is solution or benefit which a customer is looking for while going for a service.
  84. 84. EXAMPLES  when you are buying a ticket for a movie, the core benefit is …
  85. 85. EXAMPLES  the core benefit when we are buying the services of a software firm is … The Technical Quality
  86. 86. EXAMPLES  When you buy an airline ticket, the core benefit is …
  87. 87. BASIC SERVICE  The intangible service through which the core benefit is received is called the Basic Service.  Consumers expect these services to be present in any offering.
  89. 89. EXPECTED SERVICE  These are the service qualities that customers expect to get when they purchase services.
  91. 91. AUGMENTED SERVICE  The Augmented Service consists of the measures taken to differentiate the services from competitors, and provide them with service quality beyond their expectations.
  92. 92. Example Providing suits to overnight passengers in an airline or providing facilities like a business center in the airline lounge
  93. 93. POTENTIAL SERVICE  This level includes all the augmentation and the futuristic product developments.  At this stage, the firm tries to find out better ways of delighting customers.
  95. 95. Meaning of service encounter “ The service encounter is a period of time during which a consumer directly interacts with a service.” Services encounters are where promises are kept or broken and where the proverbial rubber meets the road – Some times called “real – time marketing” It is from these services encounters that customers build their perceptions. From the author Valarie a ziethaml maryjobitner Dwayne d gremler ajay pandit
  96. 96. Types of service encounter There are three general types of services encounters: Remote encounters, phone encounters and face to face encounters. Remote encounters: When customer interacts with a bank through the ATM system, with a retailer through its internet website, or with a mail ordered service through automated touch phone ordering. In remote encounters the tangible evidence of the service and the quality of the technical processes and systems become the primary base for judging quality. Eg Airline ticketing, repair and maintenance trouble shooting and package and shipment tracking.
  97. 97. Phone Encounter: The judgment of quality in phone encounters is different from remote encounters because there is greater potential variability in the interaction. E.g Bank insurance companies information bureaus and friendship firms use telephone encounters to sell their services. Face to face encounters: A third type of encounters is the one that occurs between an employee and a customer in direct contact. Both verbal and nonverbal behaviors are important determinants of quality issues in face-to-face contexts is the most complex of all.
  98. 98. Factors affecting service encounter
  99. 99.  Recovery - Employee response to service Delivery System Failures The first theme includes all incidents in which there has been failure of the service delivery system and an employee is requires to respond in some way to consumer complaints and disappointments. The content or form of the employee’s response is what causes the customer to remember the event either favorably or unfavorably. Eg : An Airplane flight that is delayed six hours.  Adaptability – Employee Response to Customer Needs and Requests: A Second theme underlying satisfaction in service encounters is how adaptable the service delivery system is when the customer has special needs or requests that place demand on the process. External Customers and internal customers alike are pleased when the service provider puts forth the effort to accommodate and adjust the system to meet their requirements.
  100. 100. Spontaneity – Unprompted and Unsolicited employee Actions: When There is no system failure and no special request or need, customers can still remember service encounters as being very satisfying or very dissatisfying. Satisfying incidents in this group represent very pleasant surprise for the customer ( Special attention being treated like royalty) Coping – Employee Response to problem customers In this group came to light when employees were asked to describe services encounter incidents in which true customers were either satisfied or dissatisfied.