Introduction to Service Marketing

INTRODUCTION TO SERVICE MARKETING

Definition for service

Service is an act or performance offered by one party to another that essentially intangible and does not normally result in ownership of anything. Its product may or may not be tied the physical product. 

Philip Kotler

E.g.: transportation, electricity.

DIFFERENCE BETWEEN GOODS AND SERVICES:

CHARACTERISTICS OF SERVICE MARKETING:

1.  INTANGIBLE: Services are performance or actions rather than objects. They cannot be seen, tasted or touched.

E.g. Surgery, Examination

2.  HETROGENITY: Since services are performances produced by human

Beings, no two services will be alike. (it differs from hour to hour, day to day) customers are not same E.g. Tax accountant may provide different service to two customers

3. SIMULTANEOUS PRODUCTION AND CONSUMPTION: Services are sold first and then produced and consumed simultaneously

E.g. In a restaurant the services are sold first and the dinner experience is produced and consumed at the same time

4. PERISHABILITY: Services referred to the fact that it cannot be saved, Stored or returned

E.g. A seat in an airplane

NATURE OF SERVICE:

Diag: Understanding the nature of service act

SCOPE OF SERVICE MARKETING

A service business is one where the perceived value of the offering to the buyer is determined more by the service rendered than the product offered. In this way the nature and scope of services pose different challenges for managers in service businesses. Such businesses include those that provide an almost entirely intangible offering, such as legal services, health care and cleaning services and businesses that offer both services and products such as restaurants and retail outlets.

The definition and scope of the service concept is wide and can mean any or all the following: Table 1.1: Scope of services

Service activities            Service as a concept

Customer service           A service organization

Service-based activities           As a core product

Added value activities             As an augmented product

As product support

As an act

(a). Service as an organization: It is the entire business or not-for-profit structure that resides within the service sector. For example, a restaurant, an insurance company a charity.

 (b). Service as core product: The commercial outputs of a service organization such as a bank  account, an insurance policy or a holiday.

 (c). Service as product augmentation: any peripheral activity designed to enhance the delivery of a core product. For example, provision of a courtesy car, complimentary coffee at the hairdresser.

 (d). Service as product support: Any product or customer-oriented activity that takes place after the point of delivery. For example, monitoring activities, a repair service, up-dating facilities.

 (e). Service as an act that is service as a mode of behavior such as helping out and giving advice.

However from a market or consumer point of view the relative importance of different components of

the service offering can range vastly from one customer to another. So a service must be considered from the point of view of many types of customers. For example, two people may pay the same amount for a service but may be paying for different aspects of the service. A business person may dine regularly in an expensive, upmarket restaurant because of the convenience to their place of work and the perceived status of entertaining guests there. Other customers of the same restaurant may eat there regularly because of the excellent food, modern décor and menu choice.

SERVICE ECONOMY

Meaning of service economy:

The size of the service sector is increasing in virtually all countries around the world. In emerging economies, the service output is growing rapidly and often represents at least half of the GDP. Thus, Service economy is growing. As a national economy develops, the relative share of employment between agriculture, industry (including manufacturing and mining).The service economy in developing countries like India is mostly concentrated in  financial services, health, and  education.

FACTORS CONTRIBUTING TO THE GROWTH OF SERVICE SECTOR

1. GOVERNMENT POLICIES:

It is Govt. which makes mandatory for price levels, distribution strategies, defining procedure attributes.

Another important action taken by the Govt.‟s “Privatization” means the policy of transformcompanies.

The transformation of such operations like telecoms, airlines has led to restructuring cost cutting and more market focused.

PROS OF PRIVATIZATION:

a. Increase the efficiency

b. Increase in profits

New change will require services firm to change their marketing strategy, operational procedures, and HR policies.

2. SOCIAL CHANGES

Now a day there is a drastic change, two members are working, which requires to hire individuals to perform tasks that used to be performed by a house hold member.

E.g. Child care

Laundry

Food preparation

Combinations of changing life styles like

√Higher income

√Declining prices for many high technology products –made for people to by computers.

√Mobile phone etc.

Increased imaginations into countries –U.S, Canada and Australia.

3. BUSINESS TRENDS

Many professional associations have been forced by Govt. to remove long-standing bars on adv and promotional activities.

Franchising has become wider spread in many service industries.

Licensing of independent entrepreneurs to produce and sell a branded service according to tightly specified procedures.

4. ADVANCES IN IT:

Changes come from the integration of computers and tele-communication

More powerful software enables firm to create databases that combine information about customers with details of all their transaction, so that they can be used to predict new trends, segment the market, new marketing opportunities.

The creation of wireless networks and transfer of electronic equipments such as cell phones to lap tops and scanners, to allow sales and customer service personnel to keep in touch.

5. INTERNATIONALISATION AND GLOBALIZATION:

A strategy of international expansion may be driven by a sector for new markets or by the need to respond to existing customers who are traveling abroad in greater numbers.

When companies set up operations in other countries they often prefer to deal with just a few international suppliers rather than numerous local firms.

The net effect is to increase competition and to encourage the transfer of innovation in both products and processes from country to country.

CHALLENGES AND ISSUES IN SERVICE MARKETING

(a).         Tangibility

A product is tangible, which means the customer can touch and see the product before deciding to make a purchase. Items such as packaging and presentation may compel a customer to purchase a product. Services, on the other hand, are not tangible, which can make them more difficult to promote and sell than a product.

(b).         Relationship and Value

Products tend to fill a customer's need or want, so companies can use this to sell a product. A service is more about selling a relationship and the value of the relationship between the buyer and seller of the service. For example, a car is something a buyer can touch and see as well as use. A service, such as lifestyle coaching, for example, is not tangible. A lifestyle coach may be able to assist clients in creating a life plan and implementing steps to transform his life into one that the client wants to live, but it is not something tangible that the client can place in his home and look at every day. Therefore, the client needs to perceive the value of the service, which can be harder to get across.

(c).         One Versus Many

Marketing products tends to involve multiple products that make up the line. For example, cleaning product manufacturers tend to market not just one cleaning product. Instead, they have a line of cleaning products to serve the various needs of their customers. Services, on the other hand, typically have a single option. It can be harder to promote and sell the reputation of one single service over the benefits of many different products.

(d).         Comparing Quality

Measuring the quality of a product is easier than measuring that of a service. If a customer buys a cleaning product to clean the kitchen sink and it doesn‟t do product is zero. On the other hand, it is harder to measure the quality of a service.

(e).         Return Factor

If a customer purchases a product,thecustomerandcan returnit thedoes product for her money back or at least to receive a store credit. A service is consumed as it is offered, so it lacks the return factor that a product has. Some service providers overcome this by offering money-back guarantees.

MARKETING CHALLENGES OF SERVICES:

Managing, growing, and profiting with both product and service businesses are challenging tasks. But the challenges are different from one to the other. Listed below are some of the most common and difficult challenges of growing and .managing consulting, professional, or technology service businesses that    don‟t   necessary   apply   to   product   business

(a). Clients can‟t see or touch services before conceptualize and evaluate from the client perspective, creating increased uncertainty and perception of risk. From the firm‟s perspective, service in quality, and set price.

(b). Services are often produced and consumed simultaneously: This creates special challenges in service quality management that product companies do not even consider. Products are tested before they go out the door. If a product has quality problems while in production the company can fix them and customers are none the wiser. Service production happens with the customer present, creating a very different and challenging dynamic.

(c).         Trust is necessary: Some level of trust in the service organization and its people must be established before clients will engage services. This is as important, sometimes more important, than the service offerings and their value proposition.

(d).         Competition is often not who you think: Competition for product companies are other product companies. Competition for service companies are often the clients themselves: Sure, sometimes you find yourself in a competitive shootout (some firms more than others), but often the client is asking „should   we   engage   this   service;-house‟at.all‟   and   „i

(e).         Brand extends beyond marketing: Brand in service businesses is about who you are as much as what you say about yourself. And internal brand management and communications can be equally as vital to marketing success as are external communication.

(f).          Proactive lead generation is difficult: Many service companies have tried, and failed, at using lead generation tactics that work wonders for product companies. Implemented correctly, traditional product techniques, such as direct marketing and selling, can work for services, but the special dynamics of how clients buy services must be carefully woven into your strategy.

(g).         Service deliverers often do the selling : Many product companies have dedicated sales forces. For services, the selling is often split between sales, marketing, professional, and management staff.

(h).         Marketing and sales lose momentum:  Most product companies have dedicated marketers and sellers. They market and sell continuously, regardless of the revenue levels they generate. In many services companies the marketers and sellers also must manage and deliver. This can often lead to the Services Revenue Rollercoaster-wide swings between revenue and work overflow, and revenue and work drought.

(i). Passion is necessary yet elusive: The more passion, spirit, hustle, and desire your staff brings to the organization every day, the more revenue and success you will have. The correlation between staff passion and financial success is direct and measurable