Mktg of Services (Msk)

7/29/2019 Mktg of Services (Msk)

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MARKETING OF SERVICES

MARKETING SOCIETY OF KENYA

BYB.W.MAINA


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DEFINITION OF A SERVICE

An intangible product. Any act or performance that one party can offer

to another that is intangible, and does notresult in ownership of anything. The production

of a service may or may not be tied to a physicalproduct.

A separately identifiable, intangible activitywhich provides want satisfaction when

consumed and is not necessarily tied to the saleof a product or another service. Services are non-physical needs-satisfying

products.


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SERVICES: EXAMPLES

Services may be described as Personal (Consumer)

or Commercial (Business) services.

Consumer Services

Education, Healthcare, Leisure, Financial, Legal,

Transport, Tourism, Entertainment, Home maintenance,

and other services that help the consumer.

Commercial Services

Repairs and maintenance, Consulting and Professional

Advice, Leasing, Marketing Research, Advertising,

Warehousing, Transportation, Insurance, Installation


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CHARACERISTICS OF SERVICES

AND MARKETING IMPLICATIONS

Services have unique characteristics

namely:

Intangibility

Perishability

Inseparability

Heterogeneity


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INTANGIBILITY

Services are intangible. This stems from the fact that services are

performances.

Unlike physical products, services cannotbe seen, heard, smelled, or tasted beforethey are bought.

Hence services cannot be verified with the five

senses. They cannot be demonstrated or displayedwithout actually consuming them.


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INTANGIBILITY: IMPLICATIONS

Customers are unable to judge the qualityof a service before buying it.

Marketing of services therefore requires

imaginative personal selling. To reduce uncertainty, buyers concludeabout the service quality from the people,place, equipment, price, symbols and other

visible items that relate to the service whichthey see i.e. physical evidence e.g. cleanlinessof a hotel or doctors office.


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PERISHABILITY

Services are perishable or transient andcannot be stored.

For instance,

Empty seats in a stadium during a footballgame, orEmpty seats on a flight, orUnoccupied hotel beds/rooms

are lost business.This calls for proper demand management to

match demand to supply and vice versa.


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MATCHING DEMAND TO SUPPLY

To match demand to supply, a company can: Use differential pricing for different times i.e. charge more during

peak hours and less for off-peak hours e.g. in transport Develop non-peak demand e.g. discount deals on airline tickets for

off-peak seasons

Develop complementary services e.g. provide entertainment atdoctors waiting room such as watching information videos or TV Require clients to make reservations to ensure well spread out

demand by appointment e.g hotels and airlines. Ask for non-refundable deposits when booking e.g. hotel room


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MATCHING SUPPLY TO DEMAND

To match supply to demand a company can: Employ part-time workers to service peak demand. Ask employees to work overtime. Sub-contract work if possible. Introduce peak time efficiency routines with employees performing

only essential tasks during peak hours leaving out non-essentialtasks e.g. engaging paramedics to assist physicians during busyhours.

Increase consumer participation in tasks e.g. encouraging them tofill in medical records or bagging their own groceries.

Develop shared services e.g. time-sharing computers or sharing

expensive medical equipment Develop facilities for future expansion e.g.buy adjacent land for hotel

parking


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INSEPARABILITY

Unlike physical products which can be produced forstock and consumed later, services are typicallyproduced and consumed simultaneously.

If a person renders a service, then the service provider ispart of the service.

Because the client is also present as the service isprovided, it is critical to manage the interaction betweenthe service provider and the client as both affect theservice outcome.

When clients have strong provider preferences, price israised to ration the preferred providers time e.g. in caseof entertainment and professional services where buyersare very interested in the specific service provider


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HETEROGENEITY

Services are heterogeneous or variable

They depend on who provides them,when, and where.

It is difficult to standardize the output of

different sellers of the same service.

This calls for proper managementof services to minimize variability.


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HETEROGENEITY:

MANAGEMENTTo control quality of service and minimize variability acompany can:

Invest in good human resource recruitment, selectionand training.

Standardize the service performance process within theorganization. Ensure they have knowledge of all theprocesses involved in the provision of the service, howlong they should take and what should be done if thetime taken to deliver is longer than expected.

Prepare a service charter/blueprint for staff andcustomers

Monitor customer satisfaction through suggestion boxes,customer complaint systems, customer surveys, mysteryshoppers to detect poor service for immediate correction.


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CLASSIFICATION OF SERVICESMost products contain some level of service.

One component, however, will dominate

Leading to the classification of a product asA good or a service.


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CLASSIFICATION OF SERVICES

(CONT) Pure tangible goods that are not accompanied by

services e.g. soap, salt, sugar, bread, toothpaste, etc. Tangible goods accompanied by services e.g.

computers, cars and other technologically sophisticatedgoods where repairs, maintenance, operator training,installation advice etc may be required.

Hybrid offers that have equal parts of goods andservices e.g. restaurant: food and service equallyimportant.

Major services with smaller goods e.g. airlinepassengers who may get food, drinks, magazines, andnewspapers.

Pure service e.g. massage, baby-sitting, haircut,medical, legal advice


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(2) Services vary according to whether: They are equipment-based or labour-based Labour-based services e.g. education, hair dressing,

dentistry are more susceptible to heterogeneity and

marketers are often viewed as the service itself Hence strategies for selecting, training, motivating, andcontrolling employees are important for the success ofthe business

A bad attitude from staff may damage the image of the

firm and could cause customers to defect to rivalcompanies e.g. airline Equipment-based services must be reliable e.g. ATMs,

gym, transport


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(CONT) According to the degree of customer contact

High contact services include healthcare, hotels,restaurants.

Low contact services include theatres, home deliveries,

dry cleaning, sports, car or TV repair High contact services require the presence of the

consumer during production.

Hence the physical appearance and ambience of the

production facility may be a major component of theconsumers evaluation of the service e.g. a dinner at arestaurant or bank service where queues are formed.

Interpersonal skills of service providers are important.


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(CONT)According to the skills of the service provider Professional services e.g. legal advice,

healthcare, accountancy etc. tend to be morecomplex and more highly regulated than non-

professional services. For instance, in legal advice consumers may not

know what the actual service will involve andhow much it will cost until the service is

completed since the product is situation-specific. Such service providers are usually highlyregulated by law and/or professionalassociations.


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(CONT)According to the type of market or customer they

serve: Consumer or Industrial.

Consumer services include services such as

child care, legal advice, entertainment, etc. Industrial services include consulting, marketingresearch, installation, leasing, repairs andmaintenance

The implications of this distinction are similar tothose for all products


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(CONT) According to the goal of the service provider: Profit or

not-for-profit. Non-business marketing includes marketing activities

conducted by individuals and organizations to achievesome goal other than ordinary business goals of profit,market share or return on investment.

Non-business marketing may be divided into non-profitorganization marketing and social marketing.

Non-profit organization marketing is the application ofmarketing concepts and techniques to organizationssuch as hospitals and colleges.

Social marketing is development of programs designedto influence the acceptability of social ideas e.g. gettingpeople to recycle plastics and newspapers


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NON-BUSINESS MARKETING

In non-business marketing the objectives of the exchange may notbe specified in financial terms but seek to get a certain response.

Usually exchanges are facilitated through negotiation (mutualdiscussion) and persuasion (convincing and prevailing upon byargument )

Charitable organizations and supporters of social causes are majornon-business marketers.

Political parties unions, religious groups and student organizationsalso perform marketing activities.

The beneficiaries of non-business organizations are their clientswhile shareholders are beneficiaries of profit firms.

Non-business organizations must develop strategies by defining andanalyzing their target market and creating and maintaining amarketing mix that appeals to that market. They serve a targetpublici.e. a collective of individuals who have an interest in orconcern about an organization, a product or a social cause.


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MARKETING STRATEGIES FORSERVICE FIRMS

Until recently, service firms lagged behind manufacturingfirms in their use of marketing.

Small businesses e.g. barber shops and shoe repairfirms, do not use formal management and marketing

techniques. Professional service businesses e.g. law and accounting

firms thought it was unprofessional to use marketing.

Other service businesses e.g. colleges, hospitals andpost office faced so much demand or so little competitionthat they saw no need for marketing.

This has now changed and most service firms haveembraced marketing subject to various regulations.


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MARKETING MIX DECISIONS

FOR SERVICE FIRMS The traditional 4Ps of marketing works quite well for

goods but additional elements require attention inservice businesses.

The extended marketing mixfor services consists of 7Ps

Product Price Place Promotion People

Physical Evidence Process


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PRODUCT DECISIONS

Product planning and development processesapply to services as well as physical goods.

Market segmentation and product differentiation

are also important in marketing of services. Forinstance:

Use of 1st class and economy class on a

plane with different pricing for each section.

Use of different mobile phone tariffs. Development of different insurance policy

covers to serve different market segments.


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SERVICE ENVIRONMENT Consumer perception is very important in

service provision.

Design of physical environment influences

consumer perceptions and impressions for

services such as banks, retail stores, and

professional services.


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SERVICE ENVIRONMENT

FOR BANKSA study of service environments identified 5 environmental variablesvery important to bank customers:

Privacy both visually and verbally, with enclosed offices andtransactions privacy.

Efficiency/Convenience transaction areas that are easy to find,directional signs.

Ambient background conditions temperature, lighting, noise,music.

Social conditions the physical appearance of other people in the

bank environment incuding customers and personnel. Aesthetics colour, style, use of materials, and artwork.


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PRICING DECISIONS

In setting the price, it is important to considerpricing objectives, intensity and elasticity ofdemand and the prevailing competition.

Prices could be cost-based or market-based. Differential pricing could be used.

Price perception is important in positioning

services and perceptions of unfairness willaffect consumers perceptions of product

value provided by the purchase.


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PLACING DECISIONS

Services are typically produced, bought

and consumed simultaneously.

You cannot separate the service from theservice provider (inseparability concept).

Hence, the service provider is animportant part of the service e.g. doctor,

lawyer, footballer, hair dresser.


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PROMOTION DECISIONS Promotion of services may include the use

of advertising, personal selling, sales

promotion and publicity. Since services are intangible, physical

objects are used to communicate the

message about services.


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PEOPLE Because services are provided by people, the

selection, training and motivation of employeescan make a huge difference in customer

satisfaction. Ideally employees should exhibit competence, a

caring attitude, responsiveness, initiative,problem-solving ability and goodwill.

Service personnel should also be properly

empowered.


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PHYSICAL EVIDENCE Companies try to demonstrate their service

quality through physical evidence andpresentation.

This could consist of appearance of service

personnel, appearance of facilities, and tools orequipment used to provide service. A hotel, for instance, will develop a look and

observable style of dealing with customers that

carries out its intended customer valueproposition, whether it is cleanliness, speed, orsome other benefit.

A doctor will be clean, well-dressed and withproper equipment for medical examination


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PROCESS Service companies can choose among

different processes to deliver their service.

Restaurants have, for instance, developed

such different formats as cafeteria-type,fast food, buffet and candle-light service.

In delivering lectures overhead or LCD

projectors, white boards, chalk boards orflip charts could be used.


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SERVICE ENCOUNTERS Service marketing requires not only

external marketing but also internal andinteractive marketing

This is the case for instance with cleaning

and maintenance services, financial and

banking services, and restaurant industry.


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INTERNAL MARKETING This describes the work done to train and

motivate employees to serve customers

well. All organizations employees should

practice marketing including treating their

internal customers properly.


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EXTERNAL MARKETING

This describes the normal work done by theOrganization to prepare, price, distribute,

And promote the service to customers.


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INTERACTIVE MARKETING This describes the employees skills in serving the client. The perceived quality of a service depends heavily on

the buyer-seller interaction during the service encounter. The service quality depends on both the service

deliverer and the quality of the delivery. The client judges the service quality by its technicalqualitye.g. Was the surgery successful? and also by itsfunctional qualitye.g. Did the surgeon show concern andinspire confidence?

Service providers must therefore deliver high touch aswell as high tech.


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DEALING WITH COMPETITIONWith the rise in competition, service

companies need to increase their

competitive differentiation, quality andproductivity.


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MANAGING DIFFERENTIATION Intense price competition in service industry has

made it necessary for service marketers todifferentiate their services from competition.

While price competition is still important as

evidenced, for instance, by the success ofbudget-priced airlines where many fliers appearto care more about travel costs than service, orwhere incomes are low, differentiation of serviceis important to overcome competition andprosper in the long run.

The alternative to competition then is to developa differentiated offer, delivery and image.


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DIFFERENTIATIATION OF OFFER The offer can include innovative features that set the

companys offer apart from competitors offers. Most service innovations are, however, easily copied

primarily due to absence of patents to protect firms e.g.ATMs, credit cards, and branchless banking.

However, the service company that innovates regularlyusually gains a succession of temporary advantages andan innovative reputation.

The company can also introduce secondary servicefeatures to support the primary service package offered.

In the airline industry various carriers introduced suchsecondary service features as movies and telephoneservices; hotels offer support computers and internetservices to those who need them.


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DIFFERENTIATION OF SERVICEDELIVERY

Service companies can differentiate their

service through delivery in three ways:

Through people having more able and

reliable customer-contact people thancompetitors have.

Superior and attractive physical environment

in which the service is delivered. Superior delivery process e.g. use of visual aids


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DIFFERENTIATION OF IMAGE Image is a key differentiating factor since service is intangible Service companies can differentiate their images through symbols

and branding. Making the consumer link a specific image with a specific brand

name is important e.g. a bank using the symbol of a lion mightconvey an image of strength.

What image do the Safaricom, Telcom, Kenya Railways brandsconvey?

It is also worth noting that during peak demand hours, the interactivequality of services often declines because both the customer and theservice provider are hurried and under stress and service imagecould decline.

Demand could be changed for instance through differentiated pricingas explained above.


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MANAGING SERVICE QUALITY Delivering higher quality service than competitors is a

major way of differentiating a firms offer fromcompetition.

Outstanding service gives companies a portentcompetitive advantage that leads to superior sales and

profit performance. Service quality refers to the customers perception of

how well a service meets or exceeds their expectations. When perceived performance is equal to expected the

customer is satisfied but when perceived performance

exceeds expected performance the customer isdelighted.

The key then is to try and exceed customer qualityexpectations.


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MANAGING SERVICE QUALITY(CONT)

The expectations are based on past experiences, word of mouth,and service firms advertising.

You must therefore keep your promises. Promise only what you can deliver but deliver more than you

promise to win and retain customers. The key to customer retention is customer satisfaction. Indeed customer retention is a good measure of service quality. When customers are satisfied they will remain loyal to the company

and make repeat purchases while influencing others to become thecompanys customers.

Remember also that service quality is judged by the customer not

the organization. Hence it is important to know what customersexpect. Focus group research could be used to discover customers

expectations.


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MANAGING SRVICE QUALITY(CONT)

In the event of service problems, it is important to ensurea good service recovery process as this can turn anangry customer into a loyal one

To ensure this, empower front line service employees bygiving them authority, responsibility and the incentives

they need to recognize, care about and attend tocustomers needs.

Also empower them to handle complaints so as to savetime since, for most customers, time is of the essenceand they do not want to waste time by being kept waiting

unnecessarily or transferred through severaldepartments. Let the frontline staff act as ambassadors and

information gatherers for the company.

S S O S


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DETERMINANTS/DIMENSIONSOF SERVICE QUALITY

There are five determinants or dimensions of service quality: Tangibles The appearance of physical facilities, tools, equipment,

service personnel and communication materials. Reliability The ability to perform the promised service consistently,

dependably, and accurately.

Responsiveness The willingness and readiness of employees toprovide the service promptly and to help customers.

Assurance The knowledge, competence and courtesy ofemployees and their ability to convey trust andconfidence.

Empathy The provision of caring and individual attention tocustomers.


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CHARACTERISTICS OF QUALITY Quality is largely subjective; it is judged by the customer.

Like beauty it is in the beholders eye. Hence:

Different customers may want and expect different

things.

Quality is relative to customer expectations andcannot be measured in absolute terms.

Quality is distinctive. Different quality needs may be metthrough product differentiation and market segmentation.

Quality is dynamic. Expectations change time due toexperience and environment.

Quality requires care by the provider.

FEATURES OF WELL MANAGED


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FEATURES OF WELL-MANAGEDSERVICE COMPANIES

Well-managed companies have commonfeatures and practices as follows:

They are customer-focused with clear and

distinctive strategy for satisfying customersneeds that wins enduring customer loyalty.

Have a history of top management commitmentto quality serving as role models.

Set high service quality standards e.g. zerodefects or answering the phone within 2 rings.

FEATURES OF WELL MANAGED


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FEATURES OF WELL-MANAGEDSERVICE COMPANIES (cont)

Watch and monitor both their own and competitorsservice performance closely using methods such ascustomer surveys, suggestions, mystery shopping andcomplaint systems.

Communicate their concerns about service quality oemployees and provide performance feedback.

Handle customer complaints promptly.

Audit employee satisfaction regularly i.e. internalmarketing to support employees and reward good

performance. Set up systems for service delivery to reduce variation in

service delivery.


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MANAGING PRODUCTIVITY It is important for a service company to manage

productivity so as to keep costs down in order to lowerprices to consumers and also make profits.

To increase service productivity the company could: Train current employees better. Hire new employees who will work harder and better for

the same pay. Standardize production and introduce equipment for

service provision e.g. ATMs, dish washing equipment.

Encourage customer participation in service provisione.g. filling forms at hospitals, sorting mail beforedelivering to post office, bagging own purchases, etc.


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MARKETING OF SERVICESTHE END

THANK YOU

B.W.MAINA

Mktg of Services (Msk)

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