Lecture notes on Marketing of Services

lecture notes on marketing of financial services and marketing of services. how marketing of services is different from marketing of products pdf free download
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Dr.NoahHarper,United Kingdom,Professional
Published Date:17-07-2017
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Unit 1 MARKETING OF SERVICES – Service is the action of doing something for someone or something. It is largely intangible (i.e. not material). A product is tangible (i.e. material) since you can touch it and own it. A service tends to be an experience that is consumed at the point where it is purchased, and cannot be owned since is quickly perishes. A person could go to a café one day and have excellent service, and then return the next day and have a poor experience. In this Unit we will be understand the following about service:- Key Economic Indicators about India What is Services? Introduction - Growth of the Service Sector The Concept of Service - Characteristics of Services Classification of Services Designing the Service Introduction Key Economic Indicators about India  GDP: 691 billion  Growth: Estimated 7-8 percent or higher in 2005-06; 7 percent in 2004-05  Breakdown: Services equal 50 percent of the GDP; industry and agriculture equal 50 percent  Ranking: 10th largest economy in the world and one of its fastest growing; fourth largest in purchasing-power parity terms  Per capita income: 640 in 2004-05, (almost double the figure of two decades ago). Of the 1.1 billion people, 39 percent live on less than 1 per day  Purchasing power: In 2005, approximately 170-300 million people had growing purchasing power, thus creating a growing middle-class consumer population  Youth Power: Over 58 percent of the Indian population is under the age of 20. That is over 564 million people, nearly twice the total population of the United States India At A Glance  Population: 1.1 billion (Urban population - 28.4 percent)  Retail Mkt. Size: 286 billion (only 3.9 percent is organized retail). Retail trade is booming in the country due to increasing disposable incomes of middle and upper middle class  Growth of Malls: 375 shopping malls by 2007 from 25 in 2003; Estimated space: 90 million sq.ft.  Growing Middle-class: 300 million and estimated to be growing at 5 percent annually  Did you know that India..... - is the world's second largest small car market - is one of only three countries that makes its own supercomputers - is one of six countries that launches its own satellites; one hundred of the Fortune 500 have R & D facilities in India - has the second largest group of software developers after the U.S. - lists 5,000 companies on the Bombay Stock Exchange; only the NYSE has more - is the world's largest producer of milk, and second largest producer of food, including fruits and vegetables Services marketing Services marketing is marketing based on relationship and value. It may be used to market a service or a product. Marketing a service-base business is different from marketing a product-base business. There are several major differences, including: 1. The buyer purchases are intangible 2. The service may be based on the reputation of a single person 3. It's more difficult to compare the quality of similar services 4. The buyer cannot return the service 5. Service Marketing mix adds 3 more p's, i.e. people, physical environment, process service and follow-through are keys to a successful venture. When one markets a service business, one must keep in mind that reputation, value, delivery of "Managing the evidence" refers to the act of informing customers that the service encounter has been performed successfully. It is best done in subtle ways like providing examples or descriptions of good and poor service that can be used as a basis of comparison. The underlying rationale is that a customer might not appreciate the full worth of the service if they do not have a good benchmark for comparisons. However, it is worth remembering that many of the concepts, as well as many of the specific techniques, will work equally well whether they are directed at products or services. In particular, developing a marketing strategy is much the same for products and services, in that it involves selecting target markets and formulating a marketing mix. Thus, Theodore Levitt suggested that "instead of talking of 'goods' and of 'services', it is better to talk of 'tangibles' and 'intangibles'". Levitt also went on to suggest that marketing a physical product is often more concerned with intangible aspects (frequently the `product service' elements of the total package) than with its physical properties. Charles Revson made a famous comment regarding the business of Revlon Inc.: `In the factory we make cosmetics. In the store we sell hope.' Arguably, service industry marketing merely approaches the problems from the opposite end of the same spectrum. In economics and marketing, a service is the non-material equivalent of a good. Service provision has been defined as an economic activity that does not result in ownership, and this is what differentiates it from providing physical goods. It is claimed to be a process that creates benefits by facilitating either a change in customers, a change in their physical possessions, or a change in their intangible assets. By supplying some level of skill, ingenuity, and experience, providers of a service participate in an economy without the restrictions of carrying stock (inventory) or the need to concern themselves with bulky raw materials. On the other hand, their investment in expertise does require marketing and upgrading in the face of competition which has equally few physical restrictions. Providers of services make up the Tertiary sector of industry. Definition: A service is an intangible product involving a deed, performance, or an effort that cannot be physically possessed. Dominant component is intangible. Includes rental of goods, alteration and repair of goods owned by customers, and personal services. Major differences between goods and services are:  Intangibility  Inventoryover/under booking restaurant capacity  Inseparabilityof production and consumption  Inconsistency/Consistency The use of marketing by service firms Has been limited to:  Many service firms stress technical expertise, therefore have lagged in their use of marketing.  Many service firms are small, marketing expertise cannot be hired.  Strict licensing/legal restrictions limit competition and need for marketing.  Service associations have prohibited marketing.......Lawyers until 1977; when the US Supreme court struck down such prohibitions as against freedom of speech...Jacoby & Meyers et al.  High esteem of professionals, do not need marketing. A number of professionals have a dislike for marketing and a lack of understanding. Use of marketing is likely to increase rapidly in the near future....due to competition etc. Characteristics of Services Intangibility They cannot be seen, handled, smelled, etc. There is no need for storage. Because services are difficult to conceptualize, marketing them requires creative visualization to effectively evoke a concrete image in the customer's mind. From the customer's point of view, this attribute makes it difficult to evaluate or compare services prior to experiencing the service Prior to purchase, much service promotion must rely on performance attributes which can only be measured after a purchase experience (tangible goods have search qualities). Also professional services have credence qualities. Need to use promotion to help customers perceive a service as highly tangibility.  develop tangible representation of the service, ie credit card serves as the physical product with own image and benefits. Make advertising easier. Airlines use an aircraft. Travellers umbrella.  develop a brand imageseek out U Haul as opposed to a truck service  word of mouth very important due to intangibility.  offer discounts and free samples/service to customers who encourage friends to come.  offer tangible benefits in sales promotions, must be consistent with customers needs/wants  establish a clear product position, ie 24 hour outside service for repair of industrial equipment. Intangibility also presents pricing problems. How should an auto mechanic charge for his/her services? Visibility of the service may be a problem. Although a problem may have been fixed, you don't understand why? . Need to explain the time needed for repair, and functions that were performed if you want the repair to be more tangible. Psychological role of price is magnified since customers must rely on price as the sole indicator of service quality when other quality indicators are absent. Perishability – Unsold service time is "lost", that is, it cannot be regained. It is a lost economic opportunity. For example a doctor that is booked for only two hours a day cannot later work those hours— she has lost her economic opportunity. Other service examples are airplane seats (once the plane departs, those empty seats cannot be sold), and theatre seats (sales end at a certain point). Inventory Services cannot be stockpiled. Need to avoid excess unsatisfied demand and excess capacity leading to unproductive use of resources. To resolve inventory issues:  market services to segments with different demand patterns  market new services having counter cyclical demand patterns from existing services  market new services to compliment existing services  market service extras at non-peak times  market new services not affected by existing capacity constraints  train personnel to do multiple tasks  hire PT employees during peak hours  educate consumers to use service at non peak hours  offer incentive, ie. reduce price at non peak times, this will not work in all instances, ie, travel at non peak hours. Lack of transportability – Services tend to be consumed at the point of "production" (although this doesn't apply to outsourced business services). Lack of homogeneity Services are typically modified for each client or each new situation (customised). Mass production of services is very difficult. This can be seen as a problem of inconsistent quality. Both inputs and outputs to the processes involved providing services are highly variable, as are the relationships between these processes, making it difficult to maintain consistent quality. Labour intensity – Services usually involve considerable human activity, rather than precisely determined process. Human resource management is important. The human factor is often the key success factor in service industries. It is difficult to achieve economies of scale or gain dominant market share. Demand fluctuations – It can be difficult to forecast demand (which is also true of many goods). Demand can vary by season, time of day, business cycle, etc. Buyer involvement – Most service provision requires a high degree of interaction between client and service provider. Inconsistency Lawn care service cannot mow a lawn precisely the same way each time, but need to make the service as efficient and consistent as possible. Remedyuse technology to help make the service provider more consistent...or replace workers with technology :) Inseparability Leads to direct (short) channels of distribution. In some cases it is possible to use intermediaries, travel agents, ATMs etc. Close provider-customer relationshipemployee interpersonal skills very important. "relationship managers", quality of relationships determines the probability of continued interchange with those parties in the future. Customers may become loyal to a particular employee as opposed to the company, prevalent in the advertising industry. Therefore must make sure that multiple employees are capable of performing the same tasks. Classification of services Service ontology for service Economic service classifications bundling Function Combine services into groups Divide whole spectrum of existing services into smaller groups Grouping Company- and domain-specific Global rules (hold for the whole rules business service industry) rules Any type of dependency Classification criteria that Nature of grouping between services differentiate rules (e.g. difference, similarity) one service from another Abstraction Instances of services (e.g., ABN- Abstract classes of services (e.g., Amro insurance services) level of reasoning private unemployment insurance) The extent of services in the economy US is the worlds first service economy. More than 75% of the workforce in the private sector is employed in the service industry. Accounts for more than 3bn in output and contribute 60% of GNP. 60% of services are consumed by the final consumer. The increase in the service sector is a result of LT growth in the US economy deriving demand for additional services  Travel  Financial services  Entertainment  Personal care etc. Dual income families need for convenience. Increase in health awareness. Illustration of Service Marketing Marriot Hotels: Offer different services for different segments of their target market. Great attention paid to product positioning. Rely on research, publicity, TV advertising, use of well conceived slogans and greater personal attention to consumers. Quick resolution to customer problemsoverbooking, long customer lines, unresponsiveness, discourteous staff. Hotels now offer alternative accommodations for over booking, computerized check out systems, express check outs, serving free drinks, provide baggage handling etc. Service delivery The delivery of a service typically involves five factors:  The service providers (e.g. the people)  Equipment used to provide the service (e.g. vehicles, cash registers)  The physical facilities (e.g. buildings, parking, waiting rooms)  The client  Other customers at the service delivery location The service encounter is defined as all activities involved in the service delivery process. Some service managers use the term "moment of truth" to indicate that defining point in a specific service encounter where interactions are most intense. Many business theorists view service provision as a performance or act (sometimes humorously referred to as dramalurgy, perhaps in reference to dramaturgy). The location of the service delivery is referred to as the stage and the objects that facilitate the service process are called props. A script is a sequence of behaviours followed by all those involved, including the client(s). Some service dramas are tightly scripted, others are more ad lib. Role congruence occurs when each actor follows a script that harmonizes with the roles played by the other actors. In some service industries, especially health care, dispute resolution, and social services, a popular concept is the idea of the caseload, which refers to the total number of patients, clients, litigants, or claimants that a given employee is presently responsible for. On a daily basis, in all those fields, employees must balance the needs of any individual case against the needs of all other current cases as well as their own personal needs. Under English law, if a service provider is induced to deliver services to a dishonest client by a deception, this is an offence under the Theft Act 1978. Service-Goods continuum The service-goods continuum The dichotomy between physical goods and intangible services should not be given too much credence. These are not discrete categories. Most business theorists see a continuum with pure service on one terminal point and pure commodity good on the other terminal point. Most products fall between these two extremes. For example, a restaurant provides a physical good (the food), but also provides services in the form of ambience, the setting and clearing of the table, etc. And although some utilities actually deliver physical goods — like water utilities which actually deliver water — utilities are usually treated as services. In a narrower sense, service refers to quality of customer service: the measured appropriateness of assistance and support provided to a customer. This particular usage occurs frequently in retailing. List of economic services The following is an incomplete list of service industries, grouped into rough sectors. Parenthetical notations indicate how specific occupations and organizations can be regarded as service industries to the extent they provide an intangible service, as opposed to a tangible good.  business functions (that apply to all organizations in general) o consulting o customer service o human resources administrators (providing services like ensuring that employees are paid accurately)  child care  cleaning, repair and maintenance services o janitors (who provide cleaning services) o gardeners o mechanics  construction o carpentry o electricians (offering the service of making wiring work properly) o plumbing  death care o coroners (who provide the service of identifying corpses and determining time and cause of death) o funeral homes (who prepare corpses for public display, cremation or burial)  dispute resolution and prevention services o arbitration o courts of law (who perform the service of dispute resolution backed by the power of the state) o diplomacy o incarceration (provides the service of keeping criminals out of society) o law enforcement (provides the service of identifying and apprehending criminals) o lawyers (who perform the services of advocacy and decisionmaking in many dispute resolution and prevention processes) o mediation o military (performs the service of protecting states in disputes with other states) o negotiation (not really a service unless someone is negotiating on behalf of another)  education (institutions offering the services of teaching and access to information) o library o museum o school  entertainment (when provided live or within a highly specialized facility) o gambling o movie theatres (providing the service of showing a movie on a big screen) o performing arts productions o sexual services (where legal) o sports o television  fabric care o dry cleaning o laundromat (offering the service of automated fabric cleaning)  financial services o accounting o banks and building societies (offering lending services and safekeeping of money and valuables) o real estate o stock brokerages o tax return preparation  foodservice industry  hairdressing  health care (all health care professions provide services)  information services o data processing o database services o language interpretation o language translation  risk management o insurance o security  social services o social work  transport o Service Car Rental  utilities o electric power o natural gas o telecommunications o waste management o water industry The services marketing mix Cowell states that what is significant about services are the relative dominance of intangible attributes in the make-up of the ―service product‖. Services are a special kind of product. They may require special understanding and special marketing efforts. The provision of the continuing education contains the element of the tangible and intangible. It usually provides a learning materials (physical good) and also numbers of the service activities (teaching processes, contact with customers, organisation of the courses, etc.). The distinction between physical and service offering can, therefore, be best understood as a matter of degree rather that in absolute terms. The continuing education is service –based since the value of this product is dependent on the design and delivery of the CE courses rather than the cost of the physical product (teaching materials, CDs, etc.). The services marketing mix is an extension of the 4-Ps framework. The essential elements of product, promotion, price and place remain but three additional variables – people, physical evidence and process – are included to 7–Ps mix. The need for the extension is due to the high degree of direct contact between the CE providers and the customers, the highly visible nature of the service process, and the simultaneity of the production and consumption. While it is possible to discuss people, physical evidence and process within the original-Ps framework (for example people can be considered part of the product offering) the extension allows a more thorough analysis of the marketing ingredients necessary for successful services marketing. People – because of the simultaneity of production and consumption in services the CE staff occupy the key position in influencing customer‘s perceptions of product quality. In fact the service quality is inseparable from the quality of service provider. An important marketing task is to set standards to improve quality of services provided by employees and monitor their performance. Without training and control employees tend to be variable in their performance leading to variable service quality. Training is crucial so that employees understand the appropriate forms of behaviour and trainees adopt the best practises of the andragogy. Physical evidence – this is the environment in which the service is delivered and any tangible goods that facilitate the performance and communication of the service. Customers look for clues to the likely quality of a service also by inspecting the tangible evidence. For example, prospective customers may look to the design of learning materials, the appearance of facilities, staff, etc. Process – this means procedures, mechanism and flow of activities by which a service is acquired. Process decisions radically affect how a service is delivered to customers. The service in CE includes several processes e.g. first contact with customers, administrative procedure regarding course delivery, preparation, delivery and evaluation of the courses. The following guideline can be useful for successful CE management:  ensure that marketing happens at all levels from the marketing department to where the service is provided  consider introducing flexibility in providing the service; when feasible customize the service to the needs of customers  recruit high quality staff treat them well and communicate clearly to them: their attitudes and behavior are the key to service quality and differentiations  attempt to market to existing customers to increase their use of the service, or to take up new service products  sep up a quick response facility to customer problems and complaints  employ new technology to provide better services at lower costs  use branding to clearly differentiate service offering from the competition in the minds of target customers The differential advantage and branding Only few products are unique. Often the challenge lays in finding a way to differentiate your products from a rival‘s near-identical offerings. The basic question says: ―How can I get an advantage over the competition?‖ When your products are better than those of your competitors, and when customers recognize this superiority, you have a real advantage. Few organisations are in this position. Most find that there is a little or nothing to distinguish their own products from competitor‘s. To gain competitive advantage, uncover not just differences but also attributes that customer‘s value. Make sure the differences are meaningful to customers, so that your product is preferable to the others available. Often it is the little things that count. Customers may choose your product over a competitor‘s identical product because they prefer your lecturers or because you give them coffee while delivery of the courses. Pay attention to details that could make a difference. A genuine customer-centric approach will differentiate you from competitors. Show your commitment to customers and ensure that staffs are emphatic. Review company systems and processes to make them more customers focused. Team Assignment – differentiate your product Answering the following questions, try to identify the differential advantage of your CE centre 1. Why should customers buy from us rather than from our competitors? 2. What makes us different from our competitors? 3. How are we better than our rivals? 4. What strengths do we have that we can effectively capitalize on? Strong, well-known products provide companies with a real competitive advantage. Use the power of branding to imbue your products with personality and meaning, ensuring they achieve a prominent position in the marketplace. The right name helps to sell products and service. It bestows individuality and personality, enabling customers to identify with your offerings and to get to know them. It makes products and services tangible and real. Choose name that enhance your company image and that are appropriate for the products and its positioning in the marketplace. Establish trust in your brand and customers will remain loyal. Branding means developing unique attributes so that your products are instantly recognisable, memorable, and evoke positive association. Some brands have a solid and reliable personality, others are youthful and fun. Choose your company and product name, corporate colours, logo, design and promotional activity to help convey a personality and build a brand. Customers should be able to look at one of your products and assimilate all that you stand for in a second by recalling the brand values. But remember: A strong brand is not a substitute for quality but an enhancement to it. The service attributes are e.g. friendless, creativity, courtesy, helpfulness and knowledgeability. The creation of a corporate identity is a vital element of branding. Present an integrated, strong, instantly recognisable, individual image that is regarded in a positive way by your customers, and seize every opportunity to strengthen your corporate identity. It is important to maintain corporate identity consistently by issuing written guidelines for staff. Marketing strategy A strategy gives business a defined route to follow and a clear destination. Build a marketing strategy and you will ensure that marketing is a long-term way of working, not a one-off activity. A marketing strategy provides organisation with shared vision of the future. All too often, an organisation will perform a marketing task, such a direct mail shot, then sit back and see what happens. A strategic approach will ensure that you maximise returns on your marketing spending and boost the profits of your organisation. Strategic marketing manager  has a clear picture of the future  anticipates changes in the market  works towards clear long/term goals Non-strategic marketing manager  lives day to day without planning  reacts to changes in the market  has only short-term objectives During the creating of the marketing strategy the marketing manager should proceed as follows: 1. create the team 2. review current situation 3. set objectives 4. plan action 5. implement strategy 6. review strategy Create your team The first steps during preparation of the marketing strategy are the hardest part. It is important to bring together a strong team to help to prepare the marketing plan. The strategic elements must be understood by every member of team in order to assure the marketing success. It is important to involve the people whose function touches on marketing, and those whose job involves considerable customer contact. Before embarking on your marketing strategy, establish common ground by agreeing definitions and purpose. Build the team unity; perhaps by organizing an away day at a pleasant venue to discuss shared marketing issues and concerns. Show that you recognise the contribution each team member can offer. Review current situation - perform a SWOT analysis  SWOT (Strengths, Weaknesses, Opportunities and Threats)

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