Services Marketing DMGT510 Edited by: Hitesh Jhanji SERVICES MARKETING Edited By Hitesh Jhanji Printed b y EXCEL BOOKS PRIVATE LIMITED A-45, Naraina, Phase-I, New Delhi-110028 for Lovely Professional University Phagwara SYLLABUS Services Marketing Objectives: The objective of this course is to acquaint the students to the uniqueness of the services characteristics and its marketing implications. The intent of the course is to discuss, measure and analyze several facets in the area of services marketing essential for the success of a service sector firm. Introduction to Services Marketing, Understanding Service Characteristics, Product versus Services, Classification of Services, Services Marketing Environment. 7Ps of Services Marketing Mix, Purchase Process for services.
Customer Expectations and Perceptions of Services through Marketing Research, CRM in services. Service Quality issues and Models on Service Quality. The Service Segmentation, Targeting, Positioning a Service in the marketplace, Understanding Positioning Maps, Developing Service Blueprint. Service Product & Operation, Understanding Employees and Customers Role in Service Delivery 7.
Pricing of Services, Delivering Service through Intermediaries, distribution growth options, Internationalization in distribution 8. Developing Integrated Communication Program, Designing Servicescapes 9. Competitive Marketing Strategy, Developing Service Recovery Strategies, Managing Demand, Supply and Productivity, Managing waiting Lines, CONTENT Unit 1: Introduction to Services Marketing 1 Tanima Dutta, Lovely Professional University Unit 2: Service Marketing Environment 20 Tanima Dutta, Lovely Professional University Unit 3: The Service Marketing Mix and Purchase Process 37 Tanima Dutta, Lovely Professional University Unit 4: Customer Expectations and Perceptions of Services through Marketing Research 56 Tanima Dutta, Lovely Professional University Unit 5: Customer Relationship Management in Services 80 Sukhpreet Kaur, Lovely Professional University Unit 6: Service Quality 99 Pretty Bhalla, Lovely Professional University Unit 7: Service Segmentation and Targeting 120 Pretty Bhalla, Lovely Professional University Unit 8: Market Positioning and Blueprinting in Services 138 Pretty Bhalla, Lovely Professional University Unit 9: Service Product and Operation 154 Gopika Juneja, Lovely Professional University Unit 10: Role of Employees and Customers in Service Delivery 182 Gopika Juneja, Lovely Professional University Unit 11: Pricing of Services 196 Gopika Juneja, Lovely Professional University Unit 12: Distribution of Services 214 Gopika Juneja, Lovely Professional University Unit 13: Promotions and Servicescapes in Services 234 Hitesh Jhanji, Lovely Professional University Unit 14: Service Strategies 256 Hitesh Jhanji, Lovely Professional University Tanima Dutta, Lovely Professional University Unit 1: Introduction to Services Marketing Unit 1: Introduction to Services Marketing Notes CONTENTS Objectives Introduction 1.2 Understanding Service Characteristics 1.1 More Intangible than Tangible 1.2 Simultaneous Production and Consumption 1.3 Less Standardised and Uniform 1.4 Classification of Services 1.8 Further Readings Objectives After studying this unit, you will be able to: Describe the concept of services marketing Define services Discuss the service characteristics Distinguish between products and services Classify services Introduction As India moves increasingly toward a services economy, marketers need to know more about marketing service products. On a simplistic note, one can say that services are activities or benefits that one party can offer to another that are essentially intangible and do not result in the ownership of anything.
Thus we see how services are different from goods. During the past decade services have increasingly assumed an important role in the Indian economy. Ever since this trend was set in the nineties, services have gained dominance. The competition, simultaneously, in service organisations, is becoming intense and severe.
As a result these organisations have to have a more professional approach to managing their businesses. Perhaps it is in this context that the role of marketing is gaining importance in service organisations. In this unit, you will be introduced to the concept of services. LOVELY PROFESSIONAL UNIVERSITY 1 Services Marketing Notes 1.1 Defining Services One of the first to define services was the American Marketing Association, which, as early as in 1960, defined services as “activities, benefits, or satisfactions which are offered for sale, or provided in connection with the sale of goods.” This definition took a very limited view on services as it proposed that services are offered only in connection with the sale of goods.
The other definition which was proposed, in 1963, by Regan suggested that “services represent either intangibles yielding satisfaction directly (transportation, housing), or intangibles yielding satisfaction jointly when purchased either with commodities or other services (credit, delivery)”. For the first time services were considered as pure intangibles capable of providing satisfaction to the customer which could be marketed like tangible products. Robert Judd defined service as “a market transaction by an enterprise or entrepreneur where the object of the market transaction is other than the transfer of ownership of a tangible commodity”. Lehtinen, in 1983, defined services as “an activity or a series of activities which take place in interactions with a contact person or a physical machine and which provides consumer satisfaction.” Kotler and Bloom, in 1984, defined services 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.” Gummesson highlighting the intangible nature of services defined “services as something which can be bought and sold but which you cannot drop on your foot.” This definition also pointed out one basic characteristic that the services can be exchanged even though they are not tangible. According to Gronross, “a service is an activity or series of activities of more or less intangible nature that normally, not necessarily, take place in interactions between the customer and service employees and/or physical resources or goods and/or system of the service provider, which are provided as solution to customer problems.” Caselet Myths about Service Industries here are certain myths about services sector. It is because of these myths that people T are unable to relate the role and contribution of the services sector in the economy. The first myth is that a service economy produces services at the expense of other sectors.
The fact is that many service industries are major purchasers of manufactured goods. Take the example of airlines, fast food outlets, educational institutions, etc., which buy so much of manufactured products. The second myth is that service production is primarily labour intensive. In fact, a number of service sectors like healthcare, hospitality, etc., are capital intensive.
Productivity are therefore equally important in service organisations as returns on capital employed will be one of the major determinants of success. The third myth about services is that people satisfy their product needs before the need for services. This is also not true. Research findings of a study revealed that people value services as much as products; however, they may buy services in a less cyclical way, as compared to goods.
2 LOVELY PROFESSIONAL UNIVERSITY Unit 1: Introduction to Services Marketing The fourth myth about the services sector is that service businesses are ‘cottage industries’ Notes and service jobs are low paying. If you check the list of Fortune 500 companies you will be surprised to see the number of service companies figuring in this list. The other myth about the service sector is that services are only offered by the government sector. The fact is that on the one hand public services, like telephones, health care, power generation and distribution, etc., are being privatised and on the other hand large enterprises are entering into services sector.
Take the example of Escorts into health care, Tatas in power distribution, etc. In fact the service organisations are quite varied and different from each other. First category includes the public agency sector for example post offices, police and fire departments, water and electricity authorities, etc. The second group is made up of the private non-profit sector running charities, foundations, old age homes or various societies involved in issues related to women, literacy, family welfare, etc.
Next comes the business sector comprising banks, hotels, airlines, travel agencies, tour operators, courier services, insurance, consultancy – legal management or medical. Lastly, it is the sector which provides services to those involved in manufacturing. This includes those firms providing security personnel, accountants and auditors, computer operators and software consultants which help manufacturing firms in their operations. In addition, there are a number of other types of services which are emerging in the western society.
These range from, on a charge, the availability of a baby sitter to a group of hippies making the party colourful. In India also such services are emerging whether they are a troupe of young boys and girls doing a music-cum-dance show on a birthday or wedding, house maintenance services, real estate brokers, security, etc. This definition takes into account the following important features of services: Services are by and large “activities” or they are series of activities rather than things. As a result services are intangible.
They take place in the interaction between the customer and the service provider, which means that services are produced and consumed simultaneously. Customer has a role to play in the production process as the services are provided in response to the problems of customers as solution. Self Assessment State whether the following statements are true or false: 1. Services are offered only as complementary or in a package with sale of goods.
Services can be both tangible and intangible. Customers play an important role in delivery of services.2 Understanding Service Characteristics As our knowledge of the characteristics of services grows, so does our ability to deal with them from both an economic and marketing perspective. Services are intangible, inseparable, variable, and perishable. Each characteristic poses problems and requires strategies to deal with those problems.
LOVELY PROFESSIONAL UNIVERSITY 3 Services Marketing Notes Figure 1.1: Service Characteristics Source: http://nceffacilityops.com/wpimages/wp9108a739.jpg Intangibility means that unlike goods, services can’t be seen, touched and felt, tasted or smelled or even heard before they are purchased. Inseparability suggests that services are produced, distributed, and consumed simultaneously. In the case of manufactured goods, production takes place in the production unit; thereafter the goods are kept in inventory and transported to the distribution outlet from where the consumers pick them up for consumption. Heterogeneity means that services delivered generally vary in quality, time consumed in delivery, and the extent of service provided.
Since people deliver most services, they are variable. Perishibility means that services can’t be stored. Example: For Airlines, in a particular flight, vacant seats remain unsold, whereas in the case of manufactured goods, unsold items can be put into inventory and can be sold the next day. Marketers have to find ways to ‘tangibalise’ the ‘intangible’ to increase the productivity of providers who are inseparable from the product; to standardise the quality in the face of variability; and to influence demand movements and supply capacities better in the face of service perishibility.
Services are relatively intangible, produced and consumed simultaneously and often less standardised than goods. These unique characteristics of services have specific marketing implications and accordingly service marketer must adopt appropriate marketing strategies. Although service industries are quite heterogeneous (ranging from beauty salons to utilities), Berry identified some significant characteristics of services, which are shown in the following table: 4 LOVELY PROFESSIONAL UNIVERSITY Unit 1: Introduction to Services Marketing Notes Table 1.1: Characteristics of Services Service Marketing Implications Strategies Characteristics Intangibility Cannot be stored Tangible clues No patents Personal sources No ready display WOM Communication problem Organisational image Pricing difficulties Cost accounting for prices Post purchase comm. Inseparability Consumer involved in Selection and training of contact production person No mass production Manage consumer Supply demand match Multi-site location Heterogeneity Standardisation difficult Industrialise Quality control difficult Customise Perishability No inventorisation Cope with fluctuating demand Better match through process 1.1 More Intangible than Tangible A good is an object, a device, a thing.
A service is a deed, a performance, an effort. When a good is purchased, something tangible is acquired; something that can be seen, touched, perhaps smelled or worn. When a service is purchased, there is generally nothing tangible to show for it.