Services marketing Module 2

Marketing Infrastructure Services

Infrastructure Services
Marketing
Module 1

Statistics of INDIA
$1.847 trillion (nominal: 10th; 2011)[1]
GDP
GDP growth

$4.530 trillion (PPP: 3rd; 2011)[1]
5.5% (Q1, 2012)[2]
$1,514 (nominal: 139th; 2011)[1]

GDP per capita
GDP by sector
Inflation (CPI)
Population
below poverty line
Gini coefficient
Labour force
Labour force
by occupation
Unemployment
Average gross salary
Main industries
Ease of Doing Business Rank
Exports

$3,652 (PPP: 125th; 2011)[1]
agriculture: 17.2%, industry: 26.4%, services: 56.4%
(2011 est.)
WPI: 7.81% (Sep 2012)[3]
CPI: 9.73% (Sep 2012)[4]
29.8% (2010)
(Note: 32.7% live on less than $1.25 a day
68.7% live on less than $2 a day)[5]
36.8 (List of countries)
487.6 million (2011 est.)
agriculture: 52%, industry: 14%, services: 34% (2009 est.)
9.4% (2011 est.)[6]
$1,410 yearly (2011)[5]
textiles, chemicals, food processing, steel, transportation
equipment, cement, mining, petroleum, machinery,
software, pharmaceuticals
132nd[7] (2012)
External
$299.4 billion (2011 est.)

Export goods

petroleum products, precious stones, machinery, iron and
steel, chemicals, vehicles, apparel

Main export partners

UAE 13%, US 11.4%, China 6.3%, Singapore 5.3% (2011)

Imports

$461.4 billion (2011 est.)
crude oil, precious stones, machinery, fertilizer, iron and
steel, chemicals

Import goods


SERVICE MARKETING


SERVICES
“Service is an act or performance offered by
one party to another that is essentially
intangible and does not result in the
ownership of anything.”


What are Services
• The Services Industry Journal defines “Service as any
primary or complimentary activity that does not directly
produce a physical product, that is, the non goods part of
transactions between Buyer & seller”
• “Services are those which are separately identifiable
essentially intangible activities, which provide want
satisfaction when marketed to consumers and/or
industrial uses and which are not necessarily tied to the
sale of a product or another service” - Stanton


What are Services (Cont)

• A Service is an activity or benefit that one party can offer
to another that is essentially tangible and does not result
in the ownership of anything. Its production may or may
not be tied to a physical product – Kotler & Armstrong
• Services are deeds, processes & performances
produced or coproduced by one entity or person for
another entity or person


Changing structure of Employment
as an Economy Develops
Agriculture

Share of Employment

Service Industry

Manufacturing

Time, Per Capita Income
*Source: Adapted from IMF , 1997 report


* Source: World fact book 2008


Value added by service Industry categories to
the USA GDP

Estimated Size of Service sector in
selected countries as a percentage of
GDP


Other Service concepts
 Service Industries & Companies
 Their core product is Service.

 Service as Products
 Intangible product offerings that customers value and pay for. Sold
by service and non-service companies.

 Customer Service
 Service provided in support of company‟s core products (typically
not charged for). It can occur over phone or internet

• Derived Service
– It suggests that all products and physical goods are valued for the
services they provide.


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


Tangible versus intangible elements in goods and
services


Increasing importance of Services
•
•
•
•
•

Advances in technology
Growth in per capita income
A trend towards outsourcing
Deregulation
Increasing growth in retailing due to increase in
propensity to consumer


Need for Services Marketing
• In this consumer oriented scenario the service
sector is growing rapidly. But there was a lack of
innovative marketing on the part of service
industry because of:
–
–
–
–

Limited view of Marketing
Limited Competition
Non creative Management
Lack of Innovation in the Distribution of Services


Need for Services Marketing (Cont)

• There is a growing market of services & increasing
dominance of services in economies Worldwide & this
tremendous growth & economic contributions of the
service sector have drawn increasing attention to the
issues & challenges of service sector industries
Worldwide
• Services require a special understanding & unique
marketing efforts by marketers.


Further challenges for Service
Marketers
• How can service quality be defined & improved when the
product is intangible
• How can new service be designed & tested effectively
when the service is essentially an intangible process
• How can the firm be certain that it is communicating a
consistent & relevant image when so many elements of
marketing mix are present
• How does the firm accommodate the fluctuating demand
when capacity is fixed & service itself is perishable


Further challenges for Service Marketers (Cont)

• How should prices be set when it is difficult to determine
actual costs of production
• How can the balance between standardization &
personalization be determined to maximize both the
efficiency of the organization & the satisfaction of its
customers
• How does the firm communicate quality & value to
customers when the offering is intangible
• How can the organization ensure the delivery of
consistent quality service


TRENDS IN SERVICES
SECTOR
 Service industry known as tertiary industry (primary –
agri, mining; secondary – manufacturing)
 Share of services, industry, and agriculture in India's
GDP is 55.1 per cent, 26.4 per cent, and 18.5 per cent
respectively
 A KPMG survey of BRIC countries (Brazil, Russia, India
and China), has revealed highest confidence among the
service sector in India with 60% of the Indian firms
expect rise in activity, a few notches above than that of
China

Factors stimulating the transformation
of the service industry
Govt. Policies
1. Changes in
regulation s
2. Privatization
3. New rules to
protect customers,
employees, and the

environment
4. New agreements
on trade in services

Social Changes

Business Trends
1. Raising customer 1. Push to increase

expectation
2. More affluence
3. More people short
of time.
4. Increased desire
for buying
experience Vs things
5. Rising consumer
ownership of
computers, cell
phones, and high
tech equipment
6. Easier access to
more information
7.Growing but aging
population

the share holder
value
2. Emphasis on
productivity and
cost saving
3. Manufacturers
add value though
service and sell
services
4. More strategic
alliances and
outsourcing
5. Focus on quality
and customer
satisfaction
6. Growth of
franchising
7. Marketing
emphasis by
nonprofits

Advances in
Information
technology
1. Growth of
Internet
2. Greater
bandwidth
3. Compact
mobile
equipments
4. Wireless
networking
5. Faster more
powerful
software's
6. Digitization of
text, graphics,
audio & video

Globalization
1. More
companies
operating on
transnational
basis
2.Increased
International
travel
3. International
alliances and
merger
4. “Off shoring” of
customer service
5. Foreign
competitors
invade domestic
markets

New Markets and products categorizes create increased demand for services in
many existing markets, making it more competition intensive


TRENDS IN SERVICES
SECTOR
Factors contributing to growth:
1. Government Policies
– Govt. regulations,
– Privatisation

2. Social Changes
– Rising customer expectations
– More affluence
– Increased desire for buying experiences vs products


TRENDS IN SERVICES
SECTOR
Factors contributing to growth:
3.

Business trends
–
–
–

4.

Mfrs. Adding value through services
Quality Movement
Growth of franchising

Advances in Information Technology
–
–

5.

Growth of internet
Convergence of computers & telecommunications

Globalization
–
–

More cos. operating on transnational basis
International mergers & aquisitions


TRENDS IN SERVICES
SECTOR
While almost all service sectors
participated in this boom, growth
was fastest in communications,
banking, hotels and restaurants,
trade and business services.


TRENDS IN SERVICES SECTOR
The various sectors that combine together to constitute service
industry in India are:
•
•
•
•
•
•
•
•
•
•
•
•
•

Trade
Hotels and Restaurants
Railways
Other Transport & Storage
Communication (Post, Telecom)
Banking
Insurance
Dwellings, Real Estate
Business Services
Public Administration; Defence
Personal Services
Community Services
Other Services


Marketing Mix to Extended
Marketing Mix
• There have been attempts to develop an
'extended marketing mix' to better accommodate
specific aspects of marketing.
– For example, in the 1970s, Nickels and Jolson
suggested the inclusion of packaging.
– In the 1980s Kotler proposed public opinion
and political power
– Booms and Bitner included three additional
'Ps' to accommodate trends towards a service
or knowledge based economy:


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


GOODS AND SERVICES
Differences between goods & services
•
•
•
•
•

Customers do not obtain ownership of services
Service products are ephemeral & cannot be
inventoried
Intangible element
Customers maybe involved in production process
Other people part of product


GOODS AND SERVICES
Differences between goods & services
•
•
•
•

Greater variability in operational inputs &
outputs
Services are difficult for customers to
evaluate
Time factor assumes more importance
Distribution channel take different forms


Value Added by Tangible vs Intangible
Elements in Goods and Services
Hi

Salt

Soft drinks
CD Player
Golf clubs
New car
Tailored clothing
Furniture rental

Fast food restaurant

Lo

Plumbing repair
Office cleaning
Health club
Airline flight
Retail banking
Insurance
Weather forecast
Intangible Elements

Hi


CLASSIFICATION OF
SERVICES
• A significant classification is based on process
(taking an input & transforming into an output)
• Marketers of services need to understand nature
of services to which customers are exposed
• Services range from simple procedures to highly

complex activities


CLASSIFICATION OF
SERVICES
People

Possession

People Processing
Possession processing
- Passenger transportation
- Freight transportation
- Health care
- Repair & maintenance
- Lodging & Restaurant
- Retail distribution

Tangible
actions

Mental stimulus
- Advtg. & PR
- Education
- Entertainment & Arts

Intangible
actions

Information processing
- Accounting & Bkg
- Insurance & Legal
- Software Consulting


CLASSIFICATION OF
SERVICES
1. People processing
–

Customers must physically enter the service system
as they are integral part of process

–

They must spend time interacting & co-operating
with service providers

–

Process & output is important


CLASSIFICATION OF
SERVICES
2. Possession processing
–

Providing treatment to possession. Customers less
physically involved

–

Customer‟s involvement – to drop item that needs
treatment, requesting the service, explaining
problem & later picking it up & paying the bill.

–

If object to be processed is difficult to move then
“service factory” comes to customer


CLASSIFICATION OF
SERVICES
3. Mental stimulus processing
–

These services interact with the customer‟s minds
which has the power to shape their attitude &

behaviour. Core content is information
–

Customers not physically present, but mentally
connected with information presented.

–

Recipients have to make investment of time


CLASSIFICATION OF
SERVICES
4. Information processing
–

Information is most intangible but can be made tangible by
letters, reports, books

–

Financial & professional services are strong examples of
collection & processing of information

–

No requirement of personal contact with supplier of service.

Contact could be over e-mail, telephone.


IMPLICATIONS OF SERVICE
PROCESS
1.

Designing Service Factory

(people proc.)

•

When customers have to be physically present throughout
delivery, process must be designed with them in mind – right from
the moment they arrive the service factory.

•

Choose convenient location

•

These factors assume importance
–

exterior & interior facilities,

–

encounters with service personnel,

–

interactions with self-service equipment

–

characteristics of other customers


PROCESS
2.

For possession-processing, mental-stimulus processing, or
information processing services, alternatives include:

1. Customers come to the service factory
2. Customers come to a retail office
3. Service employees visit customer‟s home or workplace
4. Business is conducted at arm‟s length through
- physical channels (e.g., mail, courier service)
- electronic channels (e.g., phone, fax, email, Web site)


PROCESS
3.

Making most of Information Technology
–

All services can benefit from IT, but mental
stimulus processing and information- processing services have
the most to gain.

–

Remote delivery of information-based services “anywhere,
anytime”

–

New service features through websites, email, and internet
(e.g., information, reservations)

–

More opportunities for self-service


PROCESS
4. Balancing Supply & Demand
–

Problems arise because service output can‟t be
stored

–

If demand is high and exceeds

supply, business

may be lost. If demand is low, productive capacity is
wasted

–

Services that process people & possession face
more capacity limitations. Increasing capacity entails
huge costs. Managing demand becomes more


PROCESS
5. People becoming part of Product
–

When people become part of service, their attitude,
behavior & appearance can enhance it or detract it

–

Managers should be concerned about employees‟
appearance, social skills, technical skills


Services Marketing Mix
• The preceding questions are some of the many
raised by managers & marketers of services
• To address these questions, variety of tools &
strategies are implemented, sometimes these
tools are adaptations of Traditional Marketing
tools.
• All principles of Marketing apply to services
• Traditional Marketing Mix – 4P Model


Traditional Marketing Mix
• Traditional marketing mix
–
–
–
–

Product
Price
Place
Promotion

• For services
• Modifications in marketing mix required
• Why?


Traditional Marketing Mix (Cont)

• Simultaneous production and consumption
• People involved in service delivery process
– Hair dressers
– Bank cashier
– Doctor
– Instructor
• Being intangible, customer look for „tangible
cues‟
• Services marketers need to look for additional
variables to communicate and satisfy their
customers.


Traditional Marketing Mix (Cont)

• How would you rate a hotel
– Design and decor
– Courtesy of employees
– How prompt they attend your request.
• Do we need to expand traditional marketing mix
to take care of this?


SERVICES MARKETING
MIX i.e. 7 P‟s of Marketing
1.
2.
3.
4.
5.
6.
7.

Product
Place & Time
Promotion & Education
Price
Physical Environment
Process
People


Extended Marketing Mix


Price
•

•

•

•

The price is the amount a
customer pays for the
product.
Determined by a number of
factors including market
share, competition, material
costs, product identity and
the customer's perceived
value of the product.
The business may increase
or decrease the price of
product if other stores have
the same product.
It will be in the form of Listed
price,
Discounts,
Allowances, Payment period
& credit


Product
• Methods
used
to
improve/differentiate
the product and increase
sales or target sales
more effectively to gain a
competitive
advantage
e.g.
–
–
–
–

Extension strategies
Specialized versions
New editions
Improvements – real or
otherwise!
– Changed packaging
– Technology, etc.


Promotion
•

•

Promotion activities are
meant to communicate &
persuade the target market
to buy the company‟s
products
This is done by:–
–
–
–
–

•

•

Advertising
Personal selling
Sales promotion- POS
Public Relations
Word of mouth – Viral
advertising
Above-the-line promotion - This
uses advertising media over
which a firm has no direct
control e.g. television, radio and
newspapers
Below-the-line promotion - This
uses promotional media which


Place
• Place represents the
location where a product
can be purchased.
• Products should be
conveniently available for
customers to buy
• „Places‟ include:
–
–
–
–

Stores
Mail order
Telesales
Internet

• The use of e-commerce
(promoting and selling on
the internet) has grown
massively over the last
few years


Place (Cont)…

Manufacturers
Wholesaler – buys in bulk from suppliers/manufacturers and
then breaks this up to sell into smaller quantities to retailers

Wholesaler
Retailer – a shop which sells products to the consumer.
May be a customer of a wholesaler or manufacturer.

Retailers
Consumer – uses the goods/services
Direct selling occurs when the consumer buys directly from the manufacturer. The
internet and factory shops allow this to happen.

Consumers


People
• People – all people who
directly or indirectly
influence the perceived
value of the product or
service, including
knowledge workers,
employees, management
and consumers.


Process
•

•
•

•

Procedures, mechanisms
and flow of activities which
lead to an exchange of
value.
How do people consume
services?
What processes do they
have to go through to
acquire the services?
Where do they find the
availability
of the service?
–
–
–
–
–
–

Contact
Reminders
Registration
Subscription
Form filling
Degree of technology


Physical Environment
•
•

•

Physical evidence is the
material part of a service.
Strictly speaking there are no
physical attributes to a service,
so a consumer tends to rely on
material cues.
There are many examples of
physical evidence, including
some of the following:
–
–
–
–
–
–
–
–

Packaging.
Internet/web pages.
Paperwork (such as invoices,
tickets and despatch notes).
Brochures.
Furnishings.
Signage (such as those on
aircraft and vehicles).
Uniforms.
Business cards.


INTERDEPENDENCE OF
MARKETING, OPERATIONS & HR
Operations
Management

Marketing
Management

Customers

Human Resources
Management


SERVICE BUSINESS – AS A SYSTEM
Three Overlapping Sub-systems
Service Operations (front stage and backstage)
•

Where inputs are processed and service elements created.

•

Includes facilities, equipment, and personnel

Service Delivery (front stage)
•

Where “final assembly” of service elements takes place
and service is delivered to customers

•

Includes customer interactions with operations and other customers

Service Marketing (front stage)
•

Includes service delivery (as above) and all other contacts between service
firm and customers


SERVICE MARKETING SYSTEM
High Contact Service
Service Delivery System
Other Contact Points
Other
Customers

Service Operations System
Interior & Exterior
Facilities

Technical
Core

Equipment

The
Customer

Service People

Backstage
(Invisible)

Front Stage
(Visible)

Other
Customers

Advertising
Sales Calls
Market Research
Surveys
Billing / Statements
Miscellaneous Mail,
Phone Calls, Faxes, etc.
Random Exposure to
Facilities / Vehicles
Chance Encounters
with Service Personnel
Word of Mouth


SERVICE MARKETING SYSTEM
Low Contact Service
Service Delivery System
Service Operations System

Other Contact Point
Advertising

Mail
Technical
Core

Self Serv.
Equipment

Customer
Customer

Market Research
Surveys
Word of Mouth

Phone,
Website

Backstage

Front stage


Theatre – A Metaphor for Service
Delivery
• Service facilities is the stage on which drama unfolds.
Some cases customer‟s own facilities provide stage.
• Stage can have minimal props or very elaborate
• Service

dramas

could

be

tightly

scripted

or

improvisational
• Settings change from one act to another
• Front stage personnel play roles of actors ( sometimes
wearing costumes) supported by backstage production


SERVICE PLANNING


SERVICE PLANNING
Corporate Objectives
and Resources
Marketing Assets

Operating Assets

(Customer Base, Mkt. Knowledge,
Implementation Skills, Brand Reput.)

(Facilities/Equipment, IT Systems,
People, Op. Skills, Cost Structure)

Service Marketing Concept

Service Operations Concept

•Benefits to customer from core/
supplementary elements, style,
service level, accessibility

•Nature of processes
•Geographic scope of ops
•Scheduling
•Facilities design/layout
•HR (numbers, skills)
•Leverage (partners, self-service)
•Task allocation: front/backstage
staff; customers as co-producers

•User costs/outlays incurred
•Price/other monetary costs
•Time
•Mental and physical effort
•Neg. sensory experiences

Service Delivery
Process


SERVICE PLANNING
1.

Starts with statement of objectives or mission at

corporate level
This mission leads to two types of analysis – SWOT

2.

Analysis identifying strengths, weaknesses,
opportunities & threats on marketing & operations
fronts
–

Market & Competitive Analysis

–

Resource Allocation analysis – appraisal of firm‟s resources,
how to allocate them & identifying additional resources


SERVICE PLANNING
3.

Each analysis draws two statement of assets

a.

Marketing assets statement which includes – customer
portfolio, market knowledge, marketing implementation
skill, product line, reputation of brands & positioning
strategies.

b.

Operating assets statement which includes – Physical
facilities, equipment, Information technology, H.R.
(numbers & skill), alliances & partnerships, cost
structure


SERVICE PLANNING
4.

Statement of assets leads to creation of the following

concepts. This must be an interactive process.
a.

Service marketing concept to clarify benefits to
customers & costs they shall incur

b.

Service operating concept clarifies nature of
processes & how & when operating assets should be
deployed

5.

Set of choices before the management in configuring
delivery process.

Services marketing Module 2

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