Wednesday, April 19, 2017

Service Marketing Notes

Meaning of Service
According to the economic point of view a service is an intangible commodity. That is, services are an example of intangible economic goods. A service is 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 physical product.
Definition of Services
According to American Marketing Association services are defined as “activities, benefits or satisfactions which are offered for sale or provided in connection with the sale of goods.”
According to Philip Kotler and Bloom services is defined 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.”

Characteristics of services
Services have mainly five unique characteristics compared to goods. In the marketing point of view these characteristics are very important, because these characteristics create several unique marketing problems.
1. Intangibility
2. Inseparability
3. Heterogeneity
4. Perishability and
5. Ownership

1. Intangibility: Intangibility is the primary characteristics that distinguish services from goods, i.e. the quality of not being able to touch, taste, see, smell or hear. Services such as education, insurance, medical etc cannot be physically possessed like tangible goods. Intangible services are more difficult for consumers to evaluate than tangible goods. When you buy bath soap, you can see it, feel it, touch it, smell it and use it to check its effectiveness in cleaning your body. But if you pay fee for a course in an education institution, you are paying for the benefit of deriving knowledge and education which is delivered to you by teacher community. In contrast to the bath soap, where you can immediately check its benefits, there is no way in the case of teachers. Because teaching is an intangible service.
2. Inseparability: Another characteristic of services is the inseparability, or indivisible nature of production and consumption. In most cases, a service cannot be separated from a person or a firm providing it. A service is provided by a person who possesses a particular skill (singer), by using an equipment to handle a tangible product (dry cleaning) or by allowing to access t or use of physical infrastructure (hotel). A plumber has to be physically present to provide the service. Goods can be produced in the factory, stocked and sold when order is placed. But since service is inseparable, both production and consumption occurs simultaneously.
3. Heterogeneity: Most of the services are rendered by people, and people are not always consistent in their performance. This inconsistency or variation in performance is referred to as the heterogeneity of services. Performance may vary from one individual to another individual or from one organisation to another organisation or even performance of a person in day time may not be same in night time In short the human element is very much involve in providing and rendering services and this makes standardization a very difficult task.
4. Perishability: Services cannot be stored and are perishable. Due to any reason, a few seats remain empty on a train, or a theatre cancels a particular live show of a drama, that particular service opportunity is lost forever. Restaurants are now charging for reservations which are not utilized. Charges may be made for missed appointments with consultants’ doctors and some education institutions levy the fee as students discontinue the course because of lapsing the seat.
5. Ownership: When you buy a product, you will become the owner of that product- be it a car, bus, bike, pen, computer or shirt. But in the case of service, you may pay for its use, not its ownership.

Classification of services
Services are classified into two groups, i.e. services in consumer markets and services in industrial market.
1. Services in consumer markets: The following services come under this category
A).Food services: Food services are offered by hotels, restaurants and catering services. Food is supplied in restaurants as well as delivered to customers’ residence. Catering agents supply food for occasions like wedding, engagements, birthday, conference etc.
b). Boarding and lodging services: These services are provided by hotels and lodges to the people who travel to distant places. Growing tourism has contributed to remarkable growth in boarding and lodging services.
c). Personal care services: These are the services provided to meet the personal care needs of customers like health, appearance, physical fitness etc. personal care service include service offered by beauty parlors, barbershops, gymnasiums, dry cleaners hospitals etc.
d).Entertainment service: These services include cinema, drama, dance, music, amusement park, cable, TV etc. There is an increasing tendency among the people to send more money on entertainment services.
e).Transport services: These include the services provided by railways, road transporting facilities, air transport such as flights and helicopters and water transporting services such as ships and boats.
f).Automobile services: These are services provided to the owners of automobile vehicles for their repair and maintenance. They are provided by units called service stations.
g). Communication services: These are services provided to help people to exchange4 information. These services include telephone, telegraph, e-mail, telex, fax etc. mobile phone and internet has revolutionalised the field of information communication.
h). Education service: Education service provides coaching to students in various disciplines and to prepare them for various examinations. These services are provided by schools, colleges and universities.
i). Insurance service: Insurance services are provided to protect people against the risk of loss of life and properties. Insurance companies sell various insurance policies in the field of life insurance and general insurance. They provide a sense of security to the policy holders.
j). Financial services: These are the services provided to the people to meet their varied financial needs. They are performed by various financial institutions like banks, NBFCs, Chitty companies, stock brokers, mutual fund companies etc. Their services include keeping of deposits, providing various types of loans, discounting bills, hire purchase financing stock broking etc.

2. Services in industrial market: The following services come under this category.
a). Financial services: Finance is essential for carrying out business operations. Companies require both short tem and long term finance. This finance is provided by commercial banks, merchant banks and other financial institutions. Investment companies guide firms in investing in share and bonds.
b) Insurance service: All business units are exposed to variety of risks. Insurance companies provide necessary protection against risk such as fire, marine losses, theft, accidents etc.
c). Transport services: Business units require transport services for moving men and materials to the factory and men finished goods from factory. These services are provided by various transport companies by means of trains, trucks, buses ships aero planes etc.
d). ware housing service: Warehousing services are required for keeping materials and finished goods until they are needed for use. Warehoused in public sector and private sector offer these services to the business units.
e). Advertising services: Advertising is the most commonly and widely used mode of promotion. Advertising agencies help the businessmen to plan and implement advertising campaigns. They also help to study the effectiveness of advertising.
f). Consultancy services: Consultancy services refer to advice given to management on various matters such as production, marketing, finance etc. Most of the business units especially small and medium sized depends on management consultancy firms to solve their problems.
g). Office services: Several types of services are required for the efficient functioning of business offices. These include Xeroxing, scanning, cleaning etc.
h). Engineering services: Engineering services include assistances given to business units in planning new projects, designing plants, construction of buildings, erection plant and machinery etc. these services are provided by sepecialised engineers.
i).HR services: HR services considered as the most important asset of a business concern. Proper selection and training of man power is essential for organizational development. Selection and training is often entrusted to specialized recruitment agencies.

Difference between Goods and Services
Generally, it is regarded that a good is a thing and a service is an act. In other words, goods represent the object ,or material whereas services are deed or a performance .Both services and goods are interlinked. For example, the airline passenger while availing the services of airport enjoy consumption of food, etc., So, it is comparatively difficult to conceive a pure service or pure good .A pure good gives benefits containing no element of service. Likewise, a pure service would contain no element of goods. Goods can be physically touched and verified . they can also be carried home and can be stored at a place .But services like banking, insurance, personal care, baby sitting, transportation etc., Cannot be stored at a place. The effects of services include, pleasure, entertainment, relieve from ailment etc. The differences between goods and services may be studies under the following heads:
Services are intangible in nature. They cannot be touched or hold.
Goods are tangible in nature. They can be touched and hold.
Services are inseparable in nature. Production, distribution, and consumption of service take place simultaneously.
Function of distribution and consumption of goods can be separated from the function of production.
Services cannot be owned. They can be hired for a specific time period.
Goods can be owned.
Services get perished after a specific time period. It cannot be stored for future use.
Goods can be stored for future use.
Services are more heterogeneous. It is very difficult to make each service identical.
Goods are less heterogeneous. It is possible to make each goods identical.
Services cannot be stored.
Goods can be stored.
Services are non-existent in nature. They can only be realised by availing them at the time of their production.
But goods are existent. So, the goods produced at one point are distributed by others at other points.
Services are not available resale.
But goods can be resold.
Small firm size
As services are not transportable, many service firms remain small in size.
But organisations marketing tangible goods are generally big in size and are able to realise the economies of scale.

Segmentation of Services
Market segmentation is the sub- dividing of market into homogeneous sub section of customers , where any sub section may conceivable be selected as a market target to be reached with a distinct market mix. The marketer has to identify his targeted customers (segments ). For example, a motorcycle manufacturing company has to identify their market segments, like female officers, teenage college students, and middle aged customers. After identifying the segments the marketer ( manufacturer ) has to understand their tastes and expectations. In the case of female customers, they need not use much power full vehicles, like that the teenagers demand most powerful and stylish vehicles and the middle aged customers need vehicles having more mileage.
Benefits of market segmentation
No one can satisfy all people all time, can satisfy some people all the time or all people for some time. This concept is reflected in market segmentation:
1. Facilitates proper choice of target market
2. Helps distinguish one customer group from another within a given market
3. Facilitates effective tapping of the market, adapting the offer to the target
4. The “ divide and rule” concept as a strategy of dividing markets for conquering them
5. Helps crystalise the needs of the target buyers and bring out more predictable responses from them, helps develop marketing programs on a more predictable base, helps develop marketing offers that are most suited to each group
6. Helps specialization required in products/services , distribution , promotion, and pricing for matching the customer group and developing marketing offers and appeals that match the needs of such groups.
7. Makes marketing effort more efficient and economic, helps to identify less satisfied segments and concentrate on them to improve level of satisfaction
8. Helps to concentrate efforts on the most production and profitable segments instead of frittering them away over irrelevant or unproductive or unprofitable segments
9. Brings benefits to the customer as well, in various ways
10. When segmentation attains high sophistication, customers and companies can choose each other and stay together.
Steps in the Segmentation Process
Five major steps are involved in dividing markets into meaningful segments, although these steps and their description may vary from one situation to another.
a. Define and analyze the market—determine market parameters (based on characteristics that may include or exclude customers from a group) within organization’s mission and business definition, as well as its strategic intent.
b. Identify and describe potential segments—decide on the most useful dimensions or variables for selecting members of potential market segments; then aggregate customers into homogeneous groups, develop a profile of the characteristics of each group, etc.
c. Select the segment(s) to be served—select segments by evaluating against predetermined criteria, then rank according to the organization’s ability to serve the market profitably while providing customer satisfaction.
d. Determine the product positioning strategy—determine the best “fit” between a product and a market according to features most desired by customers; consider competitors’ positioning strategies, organizational goals, and the market situation.
e. Design and implement the marketing program—develop a tactical plan (marketing mix) and determine objectives for the marketing program; all elements of the marketing mix must be consistent with the selected positioning strategy.
Bases of segmentation (Factors of service market segmentation)
Service Market segmentation dividing the Hetrogenous market into homogenous sub-units. Heterogeneous means mass marketing, which refers people as a people. Homogeneous means dividing the market into different sub units according to the tastes and preferences of consumers. The following are the popularly used bases for segmenting service markets.
a) Geographic Segmentation It is the simplest way of segmenting the market. Under this approach, the market will be divided into various geographical units. Companies generally use the marked divisions such as nations, states, regions, cities and towns to get the benefits of already existing database resources at a very low price. Geographic segmentation reflects in the identification of cultural groups, climatic differences, resource combinations, demand supply gaps, religion and race. It provides opportunity to the service stalls to explore distinctive opportunities for product development as well as product differentiation.
b) Demographic Segmentation Demography is the study of population. Under this approach, the market will be divided into segments based on various demographic variables such as age, family size, gender, family life cycle, income, occupation, education, religion, race, nationality and social class. The differences in consumer responses based on the demographic variables are studied and accordingly segmentation plan is worked out. The demographic variables are the most popular basis for differentiating customer groups. Wants, preferences, user status and usage rates are mostly associated with demographic variables. In addition, demographic variables are easier to measure.
c) Psychographic Segmentation This approach is more focused than geographic and demographic approaches. Under this approach, consumers are divided into groups based on lifestyle, personality and values. Many a time, the consumer belonging to the same geographic and demographic group may exhibit different psychographic profiles. People belonging to the same demographic group may vary in their activities, opinions, value perceptions and interests. To use this basis of segmentation, service providers have to develop a sound database on the psychographics of the market in order to make the service offer more focused.
d) Behavioural Segmentation For this approach, consumers are divided into groups based on their knowledge, attitudes and use or response to a service. The variables used under this segmentation are occasions, benefits, user status, usage rate, loyalty status, buyer readiness stage and attitude towards the service.
e) Techno graphic Segmentation The market for technology related services has been on a tremendous rise during the last one-and-a-half decade. Marketers are trying to identify the customer groups that have the willingness as well as the ability to use the latest technology. Forester Research Incorporation has developed a ten-category segmentation scheme, which is also called 'technogrality'. Identification of segments was based on the interaction of three variables. These are attitude towards technology, application of technology and the financial position of the consumers.
Consumer Behavior in service
All of us buy different services for various reasons. One person may prefer to go to a restaurant for good food while the other may opt for an exclusive restaurant, for status. One person may prefer to read ‘The Times of India’ early in the morning, while the other may prefer to read the same newspaper after coming back from the office. There are women who don’t go to beauty parlors at all, whereas there are others who go regularly. Similarly, there are many such examples telling us that people show different behavior in buying and using different products and services.
In the purchase of any particular service six distinct roles are played. These are:
i) Initiator: The person who has a specific need and proposes to buy a particular service.
ii) Influencer: The person or the group of people who the decision maker refers to or who advise. These could be reference groups, both primary and secondary. It could be even secondary reference group like word of mouth or media, which can influence the decision maker.
iii) Gatekeepers: The person or organization or promotional material which acts as a filter on the range of services which enter the decision choice set.
iv) Decider: The person who makes the buying decision, irrespective of whether he executes the purchase himself or not. He may instruct others to execute. It has been observed at times, more typically in house hold or family or individual related services, one member of the family may dominate in the purchase decision.
v) Buyer: The person who makes the actual purchase or makes bookings for a service like travel, hotel room, hospital, diagnostic lab, etc.
vi) User: The person who actually uses or consumes the product. It can be other than the buyer. In a number of services, it has been observed that users are also the influencers.
Factors influencing buyer behavior
There are a number of factors or variables which affect the buying behavior. For example; people go on holiday during the vacation time so vacations become a variable. A person may visit an exclusive restaurant during ‘happy hours’, which he does not visit normally. In this case the marketing efforts of the organization (sales person and the scheme) become the factor influencing to buy. Similarly, there are other factors which affect the buying decision. These factors can be classified into four major categories, namely:
1. Situational Factors: The situational factors influencing the buying behavior are, the influence of time pressure in product and brand choice, the atmosphere of the retail outlet, occasion of purchase etc. For example, if you are traveling, then demand for lodging and boarding will obviously be there.
2. Socio Cultural Factors: Buyers or consumers do not take buying decision or the decision not to buy, in a vacuum. Rather, they are strongly influenced by Socio Cultural factors.
a) Cultural Factors: Children acquire from their environment a set of beliefs values, and customs which constitute culture. These beliefs, values and customs go deeper and deeper as a person grows. Therefore, it is sometimes said that culture is learnt as a part of social experience. The various sub-categories within a culture can be identified based on religion, age, gender, occupation, social class, geographical location etc. This classification is significantly relevant from the consumer behavior point of view
b) Reference Groups: There are certain groups to which people look to guide their behaviour. These reference groups may guide the choice of a product but may not be the brand. Peer groups and the peer pressure have generally been observed to play an important role in the purchase of credit cards, cell phones, etc. The knowledge of reference group behaviour helps in not only offering substitutes but also in pricing and positioning them. It is important to note that there are ‘negative’ reference groups also and some persons don’t want to associate themselves with these groups. The negative reference groups guide the behaviour in terms of “what not to do”.
c) Family: The family is another major influence on the consumer behaviour. The family consumption behaviour to a large extent depends on the family life cycle. The stages in family life cycle include bachelorhood, newly married, parenthood with growing or grown up children, post-parenthood and dissolution. Knowledge of these stages helps greatly in knowing the buying process. Often family members play a significant role in the purchase of a particular service, for example it’s the teenage children who influence the parents to decide on a destination and middle aged buy more of insurance services than the younger ones.
3. Psychological Factors
a) Perceptions: It is the process by which buyers select, organize and interpret information into a meaningful impression in their mind. Perception is also selective in which only a small part is perceived out of the total what is perceptible. Buyer’s perception of a particular product greatly influences the buying behaviour. For example, if the buyer’s perception of a product is not positive it requires much harder efforts from the marketing or sales person to convince the buyer on the qualities of the product and thus suggesting him to purchase it.
b) Attitude: An attitude is a learned predisposition to respond in a consistently favourable or unfavorable manner with respect to a market offer (i.e. a brand, a particular shop or retail outlet, an advertisement, etc.). Attitude is a dispositional term indicating that attitudes manifest themselves in behaviour only under certain conditions. Knowing a buyer’s attitude towards a product without knowing the personal goals is not likely to give a clear prediction of his behavior.
c) Motivation: Motivation is the driving force within individuals that compel them to action. This driving force is subconscious and the outcome of certain unfulfilled need. Needs are basically of two types. First, the ‘innate needs’ those needs an individual is born with and are mainly physiological. They include all the factors required to sustain physical life e.g., food, water, shelter, clothing, etc. Secondly, the ‘acquired needs’ those which a person acquires as he/she grows and these needs are mainly psychological, like love, fear, esteem, acceptance etc. For any given need, there could be a variety of goals.
4. Personal Factors
a) Personality: Personality can be described as the psychological characteristics that determine how an individual will react to his or her environment. There are a number of dimensions (personality traits) against which an appreciation of an individual’s personality can be developed. Each personality trait denotes two absolute points and a person’s personality characteristics can be identified somewhere between those two absolute points, indicating the proximity to either of the two.
b) Life Style: Lifestyle as distinct from social class or personality is nothing but a person’s pattern of living and is generally expressed in his/her activities, interests and opinions. Life styles suggest differences in the way people opt to spend on different products differently. Life style variables (psychographics variables) help a firm to identify the ‘Inner consumer’ or the feelings of the consumer about their products which needs to be stressed in advertising campaigns.

c) Demographic Factors: Buyer’s demographic factors like age, gender, education, occupation, etc. also have influence on the purchase behaviour. These factors are very much significant in the study of behaviour of buyers. For example, fast food outlets are more patronized by the teenagers than the elderly persons- example of age as a factor; air travel is more used by the executives than the factory workers-examples of occupation as a factor.