Service Marketing

Lecture: 1

Introduction to services Marketing

As consumer's we use services every day. Turning a light, listening to the radio, talking on the
telephone, taking a bus, getting a haircut, or sending clothes to the cleaners are all examples of
service consumption at the individual level. Businesses and other organizations are also
dependent on a wide array of services, usually purchasing on a much larger scale than individuals
or household.

Unfortunately, customers are not always happy with the quality and value of the services they
receive. People complain about late deliveries, incompetent personnel, inconvenient services
hours, needlessly complicated procedures, long queues, and a host of other problems.

Suppliers of services, who often face stiff competition, sometimes appear to have a very different
set of concerns. Many owners and managers complain about how difficult it is to make a profit, to
find skilled and motivated employees, or to please customers.

Fortunately, some suppliers know how to please their customers while also running a productive,
profitable operation, staffed by pleasant and competent employees.

Structure of the service sector:

The services sector is remarkably diverse. It comprises a wide array of industries that sell to
individual consumers and business customers, as well as to government agencies and nonprofit
organizations.

Service makes up the bulk of today's economy and also account for most of the growth in new
jobs. Unless you are already predestined for a career in a family manufacturing or agricultural
business, the probability is high that you will spend your working life in service organizations.

The size of the service sector is increasing in almost all economies around the world. As national
economy develops the relative share of employment among agriculture, industry, and services
changes dramatically. Even in emerging economies, service, like Bangladesh service output is
growing rapidly and often represents a t least half of the GDP.
Why is the service sector growing?
In numerous countries, increased productivity and automation in agriculture and industry,
combined with growing demand for both new and traditional services, have jointly resulted in a
continuing increase over time in the percentage of the labor force that is employed in services.
There is a hidden service sector within many large corporations that are classified by government
statisticians as being in manufacturing, agricultural, or natural resources industries. These so
called internal services cover a wide range of activities, including recruitment, legal and accounting
services, payroll administration, office cleaning, supply chain management, adverting, and many
other kind services. Organizations are increasingly choosing to outsource the internal services can
be performed more efficiently by a specialist subcontractor.

Technology is a key driver of service innovation:

The term technology, as commonly used, refers to the practical application of cutting edge tools
and procedures. Innovative service providers are interested in how they can use new technological
developments to automate and speed up processes, reduce costs, facilitate service delivery, relate
more closely to their customers and offer them more convenience, add appeal to existing products,
and make it possible to develop new types of services.

At least five types of technology have implications for a broad array of service industries. These are
the technologies of power and energy, materials, physical design, methods of working and
information technology. The application of one type of technology in any service industry often
involves others in a supporting role. When people speak of "high technology" they are usually
referring to modern applications derived from research and development in the physical sciences.
IN recent years, the focus has been on IT and, specifically, the merger of computer and
telecommunications technology that facilitated the development of wireless services and the
Internet, whose best-known components are e-mail and the World Wide Web.

What is service?
A service is an act or performance offered by one party to another. Although the process may be
tied to a physical product, the performance is transitory, often intangible in nature, and does not
normally result in ownership of any of the factors of production.
A service is an economic activity that creates value and provides benefits for customers at specific
times and places by ringing about a desired change in, or on behalf of the recipient of the services.
Customers do not obtain ownership of services:

Perhaps the key distinction between goods and services lies in the fact that customer usually
derive value from services without obtaining ownership of any tangible elements; exceptions
include food services and installation of spare parts during delivery of repair services. In many
instances, service marketers offer customers the opportunity to rent the use of a physical object,
such as a rental car or a hotel room; to hire the labor and expertise of people; to rent, as a loan, a
sum of money.

Service products are ephemeral and cannot be inventoried:

Because a service is a deed or performance, it is ephemeral -transitory and perishable and so
cannot usually be stocked as inventory after being produced. Although facilities, equipment, and
labor cab be held in readiness to create the service, these elements simply represent productive
capacity, not the product itself. If there is no demand during a given time period, unused capacity is
wasted. During periods when demand exceeds capacity, customers may be sent away
disappointed or asked to wait until sufficient capacity is available to serve them.

Intangible elements dominate value creation:

Although services often include important tangible elements, such as hotel beds, restaurant meals,
spare parts installed daring repairs and bank cards and checkbooks, intangible elements- including
the labor and expertise of service personnel-dominate the creation of value in service
performances.

A useful way to distinguish between goods and services is to place them on a scale from tangible
dominant to intangible dominant. Clearly, there are some potentially ambiguous products toward
the center of this scale. One suggested economic test of whether a product should be regarded as
a goods or services is whether more than half the value comes from the service elements. At a full
service restaurant, for example, the cost of the food itself may account for as little as 20-30 percent
of the price of the meal. Most of the value added services comes form food preparation, and
cooking, table service, the restaurant environment, and facilities such as parking, toilets etc.
Customers may be involved in the production process:
Many services require customers to participate in creating the services product. Customer
involvement can take the form of self-services, as in withdrawing money from an automated tailor
machine, or cooperation with service personnel in such settings as hairdressers, hotels, colleges,
or hospitals. Under such circumstances, customers cab be thought of as partial employees and
service firms have much to gain form trying to train their customers to make them more competent
and productive.
Changing the nature of the production process often affects the role that customers are asked to
play in that processes. In your own role as a service consumer, you know that although your main
interest is in the final output, the way in which your are treated during service delivery can also
have an important impact on your satisfaction. When customers are required to visit the service
delivery site, that facility should be in a convenient location and open at times that suit customer'
needs. Customers are more likely to return if they find that buildings and equipments are designed
in way that make them user friendly and reasonable attractive to visit.

Other people are often part of the product:

The difference between one service and another often lies in the quality of employees who serve
the customers. This is especially so in many high-contact services, in which customers not only
come into contact with service personnel but also rub shoulders with other customers. As a result,
the type of customers who patronize a particular service business can shape the nature of the
service experience.

The services marketing mix:

Product elements: Managers must select the features of both the core product-either a goods or a
service-and the bundle of supplementary service elements surrounding it, with reference to the
benefits desired by customers and how well competing products perform. In short, we need to be
attentive to all aspects of the service performance that have the potential to create value for
customers.
Place and time: Delivering product elements to customers involves decisions on the place and
time of delivery as well as on the methods and channels used. Delivery may involve physical or
electronic distribution channels or both, depending on the nature of the service being provided. Use
of messaging services and the internet allows information based services to be delivered in cyber
cafe for retrieval wherever and whenever it suits the customer. Firms may deliver service directly to
customers are becoming important determinants in service delivery strategy.

Promotion and education: No marketing program can succeed without effective communications.
This component plays three vital roles: providing needed information and advice, persuading target
customers of the merits of a specific product, and encouraging them to take action at specific
times. In services marketing much communication is education in nature, especially for new
customers. Companies may need to teach these customers about the benefits of the service,
where and when to obtain it, and how to participate in service processes. Communications can be
delivered by individuals, such as salespeople and front-line staff, or through the media, such as TV,
radio, newspapers, magazines, posters, brochures, and Web sites.

Price and other user outlays: This component addresses management of all the outlays incurred
by customers in obtaining benefits from the service product. Consequently, services marketing
strategy is not limited to the traditional pricing tasks of determining the selling price to customers,
setting margins for any intermediaries, and establishing outlays the customers are likely to incur in
purchasing and using a service. These outlays may include additional monetary costs, time
expenditures, unwanted mental and physical effort, and exposure to negative sensory experiences.

Physical environment: The appearance of buildings, landscaping, vehicles, interior furnishing,

equipment, staff members, signs, printed materials, and other visible cues all provide tangible
evidence of a firm's service quality. Service firms need to manage physical evidence carefully, as it
can have a profound impact on customers' impressions.

Process: Crating and delivering product elements to customers require the design and
implementation of effective processes. A process is the method and sequence of actions in the
service performance. Badly designed processes often lead to slow, bureaucratic and ineffective
service delivery, and result in dissatisfied customers. Similarly, poor processes make it difficult for
front line staff to do their jobs well resulting in low productivity and increased likelihood of service
failure.

People: Many services depend on direct interaction between customers and a firm's employees.
The nature of these interactions, such as getting a haircut or talking to a call center staff, strongly
influences the customer's perceptions of service quality. Service quality is often assessed based on
customers' interactions with front-line staff, and successful service firms devote significant effort to
recruiting, training, and motivating these employees.

Linking the marketing, operations, and human resources functions:

Marketing cannot operate successfully in isolating from other functions in a service business. Three
management functions play central and interrelated roles in meeting customer needs, namely,
marketing, operations, and human resources. Service firms must understand the implications of the
seven components of the services marketing mix in order to develop effective strategies. Firms
whose mangers succeed in developing integrated strategies will have a better change of surviving
and prospering.

Figure: Interdependence of marketing, operations and Human resource management