1 service marketing
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This document discusses marketing of services. It notes that the service sector contributes over half of GDP in developed economies like the US and India. It defines a service as an intangible act or performance offered by one party to another. Key characteristics of services include intangibility, lack of ownership, variability, and involvement of customers. The marketing mix for services, called the 7Ps, expands on the traditional 4Ps to include physical environment, process, and people. Loyalty programs aim to acquire and retain profitable customers over the long run. Franchising is discussed as a way to expand service delivery across multiple sites using local knowledge.
1 service marketing
- 2. Some FACTS… Wal-mart is in the list of Fortune 500 GE derives almost 40% of its revenue from services In India service sector contributes 56% of GDP
- 3. Services dominate the United States Economy: GDP by Industry, 2001 Source: Bureau of Economic Analysis, November 2002 Finance, Insurance, Real Estate 20% Wholesale and Retail Trade 16% Transport, Utilities, Communications 8%Health 6% Business Services 5% Other Services 11% Government (mostly services) 13% Manufacturing 14% Agriculture, Forestry, Mining, Construction 8% SERVICES
- 4. Fastest growing services… Health care Higher education Entertainment Financial
- 5. New Generation services… Management consultancy Computer maintenance Recruitment services Management training Value-added telecom services Call centre/BPO
- 6. What is a SERVICE ? “ A service is any act or performance one party can offer to another that is essentially intangible & does not result in the ownership of anything.” Its production may or may not be tied to a physical product
- 7. 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
- 8. 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
- 9. Growth Factors Economic,socio cultural & life style change Women taking up jobs Explosion of IT sector Advent of many new technical products Reforms & liberalization
- 10. Tasks involved… Understanding the nature of services Understanding the customer & his expectations Giving a shape to service Organizing delivery system Pricing strategy Promoting the services Extended marketing mix-7P`s Differentiation Quality & satisfaction
- 11. Differentiation parameters… Time Special offerings People Physical evidence Convenience
- 13. 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
- 14. 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
- 15. The 7Ps: (2) Place and Time Delivery Decisions: Where, When, and How Geographic locations served Service schedules Physical channels Electronic channels Customer control and convenience Channel partners/intermediaries
- 16. The 7Ps: (3) Promotion and Education Informing, Educating, Persuading, and Reminding Customers Marketing communication tools media elements (print, broadcast, outdoor, retail, Internet, etc.) personal selling, customer service sales promotion publicity/PR Imagery and recognition branding corporate design Content information, advice persuasive messages customer education/training
- 17. The 7Ps: (4) Price and Other User Outlays Marketers Must Recognize that Customer Outlays Involve More than the Price Paid to Seller Traditional Pricing Tasks Selling price, discounts, premiums Margins for intermediaries (if any) Credit terms Identify and Minimize Other Costs Incurred by Users Additional monetary costs associated with service usage (e.g., travel to service location, parking, phone, babysitting,etc.) Time expenditures, especially waiting Unwanted mental and physical effort
- 18. The 7Ps: (5) Physical Environment Designing the Servicescape and providing tangible evidence of service performances Create and maintaining physical appearances buildings/landscaping interior design/furnishings vehicles/equipment staff grooming/clothing sounds and smells other tangibles Select tangible metaphors for use in marketing communications
- 19. 7Ps: (6) Process Method and Sequence in Service Creation and Delivery Design of activity flows Number and sequence of actions for customers Providers of value chain components Nature of customer involvement Role of contact personnel Role of technology, degree of automation
- 20. The 7Ps: (7) People Managing the Human Side of the Enterprise The right customer-contact employees performing tasks well 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) firm is able to manage customer behavior
- 21. Managing the 7Ps Requires Collaboration between Marketing, Operations, and HR Functions Customers Operations Management Marketing Management Human Resources Management
- 22. The search for customer loyalty • Targeting, acquiring & retaining the right customers is at the core of many successful service firms. All businesses aspire to have a database of loyal customers. Loyalty is described as a customer’s willingness to continue patronizing a firm purchasing & using its goods & services on a repeated & preferably exclusive basis & recommending the firm’s products to friends & associates.
- 23. What Makes Loyal Customers More Profitable? Tend to spend more as relationship develops customer’s balances may grow may consolidate purchases to one supplier Cost less to serve less need for information and assistance make fewer mistakes Recommend new customers to firm (act as unpaid sales people or Customer Advocates) Trust leads to willingness to pay regular prices vs. shopping for discounts
- 24. Franchising Resources are limited Long-term commitment of store managers is crucial Local knowledge is important Fast growth is necessary to pre-empt competition Franchising has become a popular way to expand delivery of all 7Ps to multiple sites
- 25. The 7 S Framework… Strategy Shared Value Skills Structure Staff System Style