Services Marketing
The service sector
The services sector has been growing at a rate of 8% per annum in recent years More than half of our GDP is accounted for from the services sector This sector dominates with the best jobs, best talent and best incomes
Difference between physical goods and services
Physical goods tangible homogeneous Services intangible heterogeneous
Production and distribution are separated from consumption
A thing Core value processed in factory
Production, distribution and consumption are simultaneous processes
An activity or process Core value produced in the buyer-seller interaction
Customers do not participate in the production process
Can be kept in stock Transfer of ownership
Customers participate in production
Cannot be kept in stock No transfer of ownership
There are no such thing as service industries. There are only industries whose service components are greater or less than those of other industries. Everybody is in service.
What is services?
It is the part of the product or the full product for which the customer is willing to see value and pay for it.
Characteristics of services
Intangibility Inseparability Perishability Variability
Goods - things you can touch tangible
Services - things you cant touch - but you can see their effect intangible
services are not physical, they are intangible
Service
A Service is a type of a product. a deed performed by one party for another Discussions about the marketing of goods apply to services as well. Services have special characteristics that make them different than products.
Service
A product without physical characteristics;
a bundle of performance and symbolic
attributes designed to produce consumer want satisfaction.
Tangible / Intangible Attributes
Tangible touch see taste smell Intangible cant see cant touch cant smell cant taste
Tangibility Spectrum
Goods and Services: Scale of Elemental Dominance
4 Characteristics of Services
1. Intangibility - u cant touch this 2. Production (or performing the service) and Consumption (using the service) happens at the same time
3. Heterogeneity - services are not
always delivered the same way
4. Perishability - cannot be put in
inventory or stored for later use
ie. You cant buy 2 haircuts
Characteristics of Services
1. Intangibility - u cant touch this
Services cannot be stored
Services cannot be protected through patents
Characteristics of Services 1. Intangibility - u cant touch this
Hard to explain and display Services if you cant see them
Prices are difficult to set - depends on customers expectations
Characteristics of Services 2. Inseparability of Production (or performing the service) and Consumption (using the service) - happens at the same time
Many people involved in delivering a service mass production of services is hard to do
Characteristics of Services 2. Inseparability of Production (or performing the service) and Consumption (using the service) - happens at the same time
Marketing Strategies Emphasize how much you train your people - so their ability to give you good service will be high Have many locations so customers can get to you ie. Insurance sales come to your home
Characteristics of Services 3. Heterogeneity - services are not always
delivered the same way It is very difficult to standardize services eg. A machine can make ice cream cones a standard size 100% of the time A person filling an ice cream cone with a scoop cannot do it the same amount each time, unless you use a machine to dispense the ice cream
Characteristics of Services 3. Heterogeneity - services are not always
delivered the same way It is very difficult to standardize services eg. A Taxi driver cannot drive you to the office in exactly the same time each day because the traffic patterns change eg. A travel agent can sell you a vacation package - but cannot guarantee you will like the trip exactly the same way another tourist did.
Characteristics of Services 4. Perishability - cannot be put in
inventory or stored for later use ie. You cant buy 2 haircuts Demand fluctuates and changes, sometimes depending on the season, or weather
eg. Taxi in the rain, vacation in summer
Service Providers
service providers examples MasterCard insurance telephone services cable services ISPs - internet service providers airlines, first class, economy class banks
Managing Service quality
Gap between management perceptions and consumer expectations Gap between management perceptions and service quality specifications Gap between service quality specifications and service delivery Gap between service delivery and external communication Gap between expected service and perceived service
Determinants of service quality
Reliability delivering on promises Responsiveness willing to help Assurance inspiring trust and confidence Empathy individualising customers Tangibles- physical representation
Moments of truth
It is the customer service encounter Every positive or negative experience of the consumer would have fall-out on the overall service experience
In services, the last experience remains uppermost in your mind. Therefore, it is not enough to be good, you have to be consistently good
Services Monitoring
Continuous auditing of competitor service levels versus own company Importance - performance analysis
Customer Service Expectations
Desired Service the wished for service Adequate Service the service that would be acceptable
Zone the Tolerance and the of desired service Difference between
adequate service
Recovery
Dont Ignore customer Blame customer Leave customer to find for himself Downgrade Act as if nothing is wrong pass the buck Do Acknowledge problem Explain causes Apologise Compensate/upgrade Lay out options Take responsibility
Adaptability
Dont Promise and fail to keep them Show unwillingness to try Embarrass the customer Laugh at the customer Avoid responsibility Do Recognise the seriousness Acknowledge Anticipate Accommodate Adjust Explain rules/policies
Coping
Dont Take customers dissatisfaction personally Let customers dissatisfaction affect others Do Listen Try to accommodate Explain Let go of the customer
Customer complaints
It pays to resolve customer complaints On an average only 5 % dissatisfied customers complain. Others simply go over to the competitor A satisfied consumer speaks to an average of 3 people on his her experience A dissatisfied consumer gripes to on an average 11 persons about his/her unpleasant experience
Companies that pay importance to resolving customer complaints
Pay attention to quality and training of manpower recruited Have clear benchmarks on service quality and communicate to employees Take remedial steps to improve customer satisfaction and prevent repeats of customer dissatisfaction Have a data base on customer complaints that is periodically analysed and policies adjusted
Managing Service Productivity
Giving quality service is an expensive business Not every consumer is willing to pay extra for service quality Service providers would have to find their optimum service quality/cost ratios Can technology substitute part of the labour content? Can customers substitute part of the labour content? Making services obsolete by product innovations
Towards a Strategic Classification of Services
Services can be strategically classified according to the following five dimensions (Lovelock, 1983) What is the nature of the service act? What type of relationship does the service organization have with its customers? How much room is there for customization and judgment from the service provider? What is the nature of demand and supply for the service? How is the service delivered?
MARKET SEGMENTATION TARGETING AND POSITIONING
Segmentation, Targeting, and Positioning Segmentation, targeting, and positioning together comprise a three stage process. We first (1) determine which kinds of customers exist, then (2) select which ones we are best off trying to serve and, finally, (3) implement our segmentation by optimizing our products/services for that segment and communicating that we have made the choice to distinguish ourselves that way.
MARKET SEGMENTATION TARGETING AND POSITIONING
MARKET SEGMENTATION TARGETING AND POSITIONING INTRODUCTION: - The market for any product is normally made up of several segments. A market after all is the aggregate of consumers of a given product. And, consumer (the end user the end user), who makes a market, are of varying characteristics and buying behavior. There are different factors contributing for varying mind set of consumers. It is thus natural that many differing segments occur within a market. In order to capture this heterogeneous market for any product, marketers usually divide or disintegrate the market into a number of sub-markets/segments and the process is known as market segmentation .
MARKET SEGMENTATION TARGETING AND POSITIONING
Thus we can say that market segmentation is the segmentation of markets into homogenous groups of customers, each of them reacting differently to promotion, communication, pricing and other variables of the marketing mix. Market segments should be formed in that way that difference between buyers within each segment is as small as possible.
ATTRIBUTES OF EFFECTIVE SEGMENTATION
Market segmentation is resorted to for achieving certain practical purpose. For example, it has to be useful in developing and implementing effective and practical marketing programmes. For this to happen, the segments arrived at must meet certain criteria such:a. Identifiable ;The differentiating attributes of the segments must be measurable so that they can be identified
b Accessible: The segments must be reachable through communication and distribution channels. c Sizeable; The segments should be sufficiently large to justify the resources required to target them. A very small segment may not serve commercial exploitation. d profitable: There is no use in locating segments that are sizeable but not profitable. e Unique needs : To justify separate offerings, the segments must respond differently to the different marketing mixes. f Durable: The segments should be relatively stable to minimize the cost of frequent changes.
REASONS FOR MARKET SEGMENTATION
A segment-orientated marketing approach generally offers a range of advantages for both, businesses and customers. 1.Facilitates proper choice of target marketing: 2.Higher Profits 3.Facilitates tapping of the market, adapting the offer to the target
Example of Ford: - Ford has gained useful insights through segmentation and adapted its offer to suit the Indian target market. For the Indian segment Ford made some changes in its cars in comparison to their European version. Modifications such as: a. Higher ground clearance to make the car ground clearance to make the car compatible to the rougher road compatible to the rougher road surface in India b. Stiffer rear springs to enable negotiating the ubiquitous potholes on Indian roads.
c. Changes in cooling requirement, with greater airflow to the rear. d. Higher resistance to dust. e. Compatibility of engine with the quality of fuel available in India. f. Location of horn buttons on the steering wheel. As Indian motorists use horn
4.Inspiring Innovation 5.Makes the marketing effort more efficient and economic 6.Benefits the customer as well
BASES FOR SEGMENTATION
Bases for segmentation in consumer market:Consumer market can be segmented on the following customer characteristics 1.Geographic Segmentation. 2.Demographic Segmentation. 3.Psychographic Segmentation. 4.Behaviouralistic Segmentation
1.Geographic Segmentation.
a. Region: - Segmentation by continent / country / state / district / city b. Size: Segmentation on the basis of size of a metropolitan area as per its population size. c. Population density: - Segmentation on the basis of population density such as urban / sub-urban / rural etc. d. Climate:- Segmentation as per climatic condition or weather
2.Demographic Segmentation.
a. Age (dominant factor):-Segmentation is done on the basis of age of person. Example Titan has segmented its product according to different age group of person. Titans product segmentation on the bases of age:-Titan Fastrack( for the younger segment) Steel-1077SM01(for elder person and professional)
2.Demographic Segmentation.
b.Purchasing power (dominant factor):- Segmentation done on the basis of purchasing power of the customer. Examples of different car segment based on purchasing power are :-
Maruti 800 (Budget Car Segment) 1.90 to 3 lakh
Compact car segment (3.5 to 5 lakh)
2.Demographic Segmentation.
Premium car segment-
Super luxury saloon segment-
2.Demographic Segmentation.
c.Occupation d.Gender (dominant factor) :- Product can be segmented for male and female e.Family Size. f.Family life cycle. g.Nationality. h.Religion.
3)PsychographicSegmentation
a.Activities. b.Interests. c.Opinions. d.Attitudes. e.Values
4)Behaviouralistic Segmentation : - Markets can be segmented on the basis of buyer behaviour as well. Since all Segmentation is in a way related to buyer behavior, one might be tempted to ask why buyer behavior-based segmentation should be a separate method. It is because there is some distinction between buyers characteristics that are reflected by their geographic, demographic and psychographic profiles, and their buying behaviour. Marketers often find practical benefit in using buying behaviour as a separate segmentation base in addition to bases like geographic, demographics, and psychographics.
MARKET TARGETING
INTRODUCTION: - There was a time when finding the best customers was like throwing darts in the dark. Target marketing changed all that...Today's intelligent marketers know that finding their best prospects and customers hinges on well thought out targeted marketing strategies. Target market is a business term meaning the market segment to which a particular good or service is marketed. It is mainly defined by age, gender, geography, socio-economic grouping, or any other combination of demographics. It is generally studied and mapped by an organization through lists and reports containing demographic information that may have an effect on the marketing of key products or services.
DECISIONS INVOLVED IN TARGETING STRATEGY INCLUDE:1. which segments to targeting. 2. how many products to offer. 3. which products to offer in which segments.
TARGETING STRATEGY DECISIONS ARE INFLUENCED BY:
Market maturity. Diversity of buyers' needs and preferences. Strength of the competition. The volume of sales required for profitability
Positioning strategy
Once the target markets are notified, the organizations are required to position their services keeping in mind choice of members of the target market. According to an expert To succeed in our over communicated society a company must create a position in the prospects mind, a position that takes into consideration not only a companys own strengths and weaknesses but those of its competitors as well.
Positioning strategy
In a highly competitive environment there is a risk that customers will perceive little real difference between competing alternatives and so make their choices based on price. Positioning strategy is concerned with creating and maintaining distinctive differences that will be noticed and valued by those customers with whom the firm would most like to develop a long term relationship.
Positioning strategy
Successful positioning requires managers to understand both their target customers preferences and the characteristics of there competitors offerings.
Positioning strategy
The objectives of positioning are: (1) To create a distinct place of a service in the minds of potential customers. (2) To provide a competitive edge to a service to convey attractiveness of the service to target market. (3) To place an intangible service within a more tangible frame of reference. (4) To help in service development and redesign of existing services.
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