Tuesday, May 09, 2017

Introduction to Service Marketing

Unit – 1: Introduction to Service Marketing
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:
Basis
Services
Goods
Tangibility
Services are intangible in nature. They cannot be touched or hold.
Goods are tangible in nature. They can be touched and hold.
Separability
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.
Ownership
Services cannot be owned. They can be hired for a specific time period.
Goods can be owned.
Perishability
Services get perished after a specific time period. It cannot be stored for future use.
Goods can be stored for future use.
Heterogeneity
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.
Storability
Services cannot be stored.
Goods can be stored.
Existence
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.
Resale
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.

Reasons for growth of Service market in India
Phenomenal growth has been witnessed in the service sector in the past one decade. Both the developed as well as the developing countries have been making multidimensional efforts to market services in a right fashion. Innovative efforts have been devised both by the public and the private sector organizations to market services. The multi-faceted developments in the service sector and intense competition generated by the well established multinational and global corporations have been engineering a strong foundation for the application of modern marketing principles in the service marketing. Some of the potential reasons that have encouraged the growth of service sector are:
1.       Increased disposable income: Over the years as the Indian economy has grown the disposable income of masses has also shown an upward trend. Such a trend is also found in the developed as well as the developing countries. Developing countries like ours where the development oriented sector has opened new job opportunities and the liberalization of economy is opening new vistas, service marketing has become even more pertinent. The development of corporate sector makes way for the transformation of industrial economy because as the economy grows masses get an opportunity to earn more and when they earn more, it is quite natural that they want to spend more. The positive developments in the development sector thus open doors for an increase in the disposable income e.g. Theme Parks such as Essel World.
2.       Specialization: Specialization is the end result of the Division of Labour where individuals specialize in their respective fields. The in depth analysis of business shows that in reality it is the specialization and perfection that is driving the global economy. As the level of sophistication in the economic transformation process is increasing, advanced specialization in respective fields is the need of the hour. The organizations have now no option but to promote specialization since this helps them in making possible cost effectiveness. Exports and professionals like the management consultants, legal advisers, financial experts, technocrats play a decisive role in managing the affairs of an organization. Thus it would be right to mention that due to increasing specialization, a new breed of the service generating organizations is emerging, e.g. Tata consultancy agency provide tailor made solutions for top corporate problems. Another example can be of the consultancy services which provide expert guidance to corporate clients.
3.       Upcoming Fashion trends: New development in the corporate culture and the emergence of a well established services sector has influenced and changed the lifestyles of masses. People are receptive towards the new trends in the fashion that has resulted in the emergence of new tailor made service sectors such as hair dressing saloons, beauty parlour, jogging and fitness centres. It is not only the globalization of the industrial sector but even the globalization and westernization of culture, craze for western living conditions, temperament and values that show a big impact on the society, e.g. professionally organized fitness centres such as Health clubs.
4.       Information Boom: Recent inventions and innovations in the field of communications have bridged the gap in the global markets. It is the developed countries that are making efforts to build a superhighway for communications. The tremendous opportunity generated by new developments in the field of communications has influenced almost all the sectors, specifically the service sector. Dramatic changes have emerged in the advertising, fashion and professional services due to the developments in the information sharing and broadcasting. Example Interest & e-mail.
5.       Market Sophistication: Changes in the information sector is driving the sophisticated changes in the market where customer expectations are all time high. Changing westernized life styles has changed the hierarchy of needs and requirements of the individuals. The living conditions, food habits, the dresses and hair styles are changing. In nut shell the customers today are facing a whole new range of services available to them. Example – Opening up of fast food eating joints such as McDonalds, KFC, Domino’s and family day care are the end results of market sophistication.
6.       Professionalism in Education: Success of any organization more or less depends on the human assets which that organization has, hence the concept of employee reliability and performance orientation is gaining ground. The changing corporate culture advocates the presence of excellence in the work force which can only be achieved by imparting professional knowledge through professionally trained employees. The organizations that impart professionalism and the institutions preparing professionally sound human resources would get a profitable opportunity in this changing scenario. Excellence, perfection, professionalism would be the attractions which would require development of world class educational institutions for almost all the disciplines. Examples, Havard Business School University of Leeds, IIM figure 1.6. This has encouraged the development of tourism services, hotel services, banking services, insurance services, communication services, entertainment services, educational services Medicare services, consultancy services, and personal care services to gain ground.
Marketing Environment
The market environment is a marketing term and refers to all of the forces outside of marketing that affect marketing management’s ability to build and maintain successful relationship with target customers. The market environment consists of the Micro environment, Macro environment and the internal environment.
A. THE INTERNAL ENVIRONMENT: All factors that are internal to the organization are known as the ‘internal environment’. This includes all departments, such as management, finance, research and development, purchasing, operations and accounting. Each of these departments has an impact on marketing decisions. They are generally audited by applying the ‘Five Ms’ which are men, money, Machinery, Materials and Markets. The internal environment is as important for managing change as the external.
B. THE MICRO ENVIRONMENT: This environment influences the organization directly. It includes suppliers that deal directly or indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this context, micro describes the relationship between firms and the driving forces that control this relationship. It is a more local relationship, and the firm may exercise a degree of influence. The microenvironment refers to the forces that are close to the company and affect its ability to serve its customers. In includes the company itself, its suppliers marketing intermediaries, customer markets, competitors, and publics.
1.       The Suppliers: The suppliers of a company are also an important aspect of the microenvironment because even the slightest delay in receiving supplies can result in customer dissatisfaction. Marketing managers must watch supply availability and other trends dealing with suppliers to ensure that product will be delivered to customers in the time frame required in order to maintain a strong customer relationship.
2.       The Marketing Intermediaries: Marketing intermediaries refers to resellers, physical distribution firms, marketing services agencies, and financial intermediaries. These are the people that help the company promote, sell, and distribute its products to final buyers. Resellers are those that hold and sell the company’s product. They match the distribution to the customers and include places such as Wal-Mart, Target, and Best Buy. Physical distribution firms are places such as warehouses that store and transport the company’s product from its origin to its destination. Marketing services agencies are companies that offer services such as conducting marketing research, advertising, and consulting. Financial intermediaries are institutions such as banks, credit companies and insurance companies.
3.       Customers: Another aspect of microenvironment is the customers. There are different types of customer markets including consumer markets, business markets, government markets, international markets, and reseller markets. The consumer market is made up of individuals who buy goods and services for their own personal use or use in their household. Business markets include those that buy goods and services for use in producing their own products to sell. This is different from the reseller market which includes businesses that purchase goods to resell as is for a profit. These are the same companies mentioned as market intermediaries. The government market consists of government agencies that buy goods to produce public services or transfer goods to other who need them. International markets include buyers in other countries and includes customers from the previous categories.
4.       Competitors: Competitors are also a factor in the microenvironment and include companies with similar offerings for goods and services. To remain competitive a company must consider who their biggest competitors are while considering its own size and position in the industry. The company should develop a strategic advantage over their competitors.
5.       Public: The final aspect of the microenvironment is publics, which is any groups that has an interest in or impact on the organization’s ability to meet its goals. For example, financial publics can hinder a company’s ability to obtain funds affecting the level of credit a company has. Media publics include newspapers and magazines that can publish articles of interest regarding the company and editorials that may influence customers’ opinions. Government publics can affect the company by passing legislation and laws that put restrictions on the company’s actions. Citizen-action publics include environmental groups and minority groups and can question the actions of a company and put them in the public spotlight. Local publics are neighborhood and community organizations and will also question a company’s impact on the local area and the level of responsibility of their actions.
C. THE MACRO ENVIRONMENT: The macro environment refers to all forces that are part of the larger society and affect the microenvironment. This includes all factors that can influence and organization, but that are out of their direct control. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute products and new entrants. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology.
1.       The Demographic Environment: Demography refers to studying human populations in terms of size, density, location, age, gender, race and occupation. This is a very important factor to study for marketers and helps to divide the population into market segments and target markets. An example of demography is classifying groups of people according to the year they were born.
2.       The Economic environment: Another aspect of the macro environment is the economic environment. This refers to the purchasing power of potential customers and the ways in which people spend their money. Within this area are two different economies, subsistence and industrialized. Subsistence economies are based more in agriculture and consume their own industrial output. Industrial economies have markets that are diverse and carry many different types of goods. Each is important to the marketer because each has a highly different spending patterns as well as different distribution of wealth.
3.       The Natural Environment: The natural environment is another important factor of the macro environment. This includes the natural resources that a company used as inputs and affects their marketing activities. The concern in this area is the increased pollution, shortages of raw materials and increased governmental intervention. As raw materials become increasingly scarcer, the ability to create a company’s product gets much harder. Also, pollution can go as far as negatively affecting a company’s reputation if they are known for damaging the environment.
4.       The Technological Environment: The technological environment is perhaps one of the fastest changing factors in the macro environment. This includes all developments from antibiotics and surgery to nuclear missiles and chemical weapons to automobiles and credit cards. As these markets develop it can create new markets and new uses for products. It also requires a company to stay ahead of others and update their own technology as it becomes outdated. They must stay informed of trends so they can be part of the next big thing, rather than becoming outdated and suffering the consequences financially.
5.       The political environment: The political environment includes all laws, government agencies, and groups that influence or limit other organizations and individuals within a society. It is important for marketers to be aware of these restrictions as they can be complex. Some products are regulated by both state and federal laws. There are even restrictions for some products as to who the target market may be, for example, cigarettes should not be marketed to younger children.
6.       The Socio-cultural environment: The final aspect of the macro environment is the cultural environment, which consists of institutions and basic values and beliefs of a group of people. The values can also be further categorized into core beliefs, which passed on from generation to generation and very difficult to change, and secondary belief, which tend to be easier to influence. As a marketer, it is important to know the difference between the two and to focus your marketing campaign to reflect the values of a target audience.
Service Marketing Triangle
"Services marketing is about promises. Promises are made and promises are kept to customers. Service triangle is the strategic framework which "reinforces the importance of people in the ability of firms to keep their promises and succeed in building customer relationships" - (MJ. Bitner) A services triangle is made up of three types of marketing, namely:
a.       External marketing
b.      Interactive marketing and
c.       Internal marketing.
The triangle shows three interlinked groups that work together to develop, promote and deliver services. The key players are company, customers and the providers. Providers can be employees of the firm, subcontractors or outsourced entities who actually deliver the company's services.
External marketing sets up customers' expectations and makes promises to customers.
In interactive marketing or real-time marketing, promises are kept by the firms' employees, subcontractors or agents (service providers). If promises are not kept, customers become dissatisfied and may switch firms.
Internal marketing consists of the activities that management engages itself in order to aid the providers to deliver on the service promise - recruiting, training motivating and rewarding. All the three sides of the triangle should be properly aligned. They work together to ensure what is promised through the external marketing is delivered. To achieve this, the enabling activities should be aligned with the role of service providers.


Significance of Service Marketing
Proper marketing of services contributes substantially to the process of development. If innovative marketing principles are followed in services marketing, the socio-economic transformation will take place at a much faster rate. In future, the service sector would operate in a conducive environment offering great potential. If the opportunities are properly utilised by the service sector, it will lead to an all round development of the economy. The significance of the service economy may be discussed under the following headings:
1. Generation of employment Opportunities The components of the service sector are wide and varied. For example, the service sector includes personal care services, education services, medicare services, communication services, tourism services, hospitality services, banking services, insurance services, transportation services, consultancy services, etc The organised and systematic development of the service sector would create enormous employment opportunities.
2. Optimum Utilisation of Resources: India is bestowed with rich resources. Particularly, the human resources available in India favour the growth of the service sector. While the labour content in most manufacturing activities is dropping steadily with use of technology, the labour content in the service sector is comparitively high. As India is rich in human resources, service sector can grow steadily. Moreover, service sector offers excellent export opportunities too. In fact, the important agenda of the World Trade Organisation (WTO) is opening up of market for services. So, by exploiting these factors, India can maximise its services export.
3. Capital Formation: There are indications that Services will grow more rapidly in the near future. Economic, social and political factors signal an expansion of the service sector. Investments and job generations are far greater in the service sector compared to manufacturing. If investments are made in the service sector, it will contribute to the nation-building process. With increased developmental activities, the per capita income increases which, in turn, facilitates capital formation. Performance of profitable services can absorb higher investments, thereby accelerating the rate of capital formation.
4. Increasing the Standard of Living The standard of living of the people in any country would be decided on the basis of quality and standard of products consumed or services availed in the day-to-day living. Any development is transparent only when the living conditions of the masses improve. When compared with developed countries, the standard of living in India is far from satisfactory. Standard of living cannot be improved by offering more opportunities for earnings. On the other hand, the standard of living is determined by the availability of goods and services for citizens and a wise spending on them. The development of services industry is sure to promote the standard of living of the people.

5. Use of Environment-friendly Technology: Now-a-days, almost all services are found technology-driven. Developed countries are making full use of latest technology while rendering services. Technologies used by service generating organisations such banks, insurance companies, tourism, hotel services, , mmunicatiW1 services. and. education services are not detrimental in any way to the environment. On the contrary, technologies used in manufacturing organisations may have harmful effects on the environment. So, services industry do not pollute the environment which is indeed laudable.

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