A short course on services marketing july 2 k13

transcript

Short Course : July 2013By Prof S K Palekar

3 Sessions on Services MarketingAudience : PGDM – IM

The objective is to prepare you for consulting, business development and operations roles in IT and ITES industries

These slides will be put up on http://

Learning Objectives about Services

Introduction to services

How is it different than products

How do services create value for the customer

How can you compete in services

You can use services but cannot carry them and own

Service sector is fastest growing (Rs ‘000 Crores)Indian GDP

159244

104 154

280 480

209 243339

445554

1970 1980 1990 2000 2007

INDAGRI

Who is in Service !

Trading Government / Public Admn / Defense Banking & Insurance Transport of people and goods Communications Customer contact : reception, selling, telemarketing Personal service : teacher, waiter, hair stylist Installation and repair Housekeeping : Laundry, sweeping, floor care, polishing Health and patient care : nurses Entertainment and Tourism Housing : construction and fabrication, masons, guards Professionals : Lawyers, architects

“Boxed “ Products

“Intangible” Services

Generally there is neither a pure product, nor a pure service

HUL sells products but customers buy products + services

Customers of Dove soap need BOTH products and servicesService costs

Trade margins Advertising Transportation People Administration

You may be making a productBut customers want to buy services along with it

Fishermen : “More fish : less cost” solutionCummins : Diesel Engines

Promoters go and meet the fishermen and get acquainted Promoters explain type of engines and applicationsPromoters answer their queries and convince themDistributors stocks engines and spares and ensure availabilityDistributors take orders, invoice, collect paymentTechnical installs and trains After sales service for maintenance and repairs

Customers Buy Solutions involving Service.You may think you are selling products.

skpalekar@hotmail.com

Role of Service as a competitive weapon

My product best

My price lowest

I am close to you

Role of Service in a corporate turnaround

Scandinavian Airlines

Upper Part of Maslow’s Pyramid expands faster with affluence

Service

Tailored Suit

(S) Quality cannot be pre-inspected : largely intangible Tailor’s role is to measure, advise, stitch and make it look good on you.

(S) Quality depends on the quality of the tailor a bad tailor can ruin your suit. A good tailor can make you look good.

(P) Only a brief contact for measurement and trial is needed Except measurement and trial the customer is not needed

(S) Suit is made to order and customized A tailor makes to order and does not keep readymade products

Fabric is product but tailoring is largely a service.Tailoring cannot be scaled up quickly

Car Loan

(P) Interest rate and terms can be pre-inspected Interest rate and commercial terms are tangible

(P) Main value (Commercial Terms) not People dependent Response time, paper work, complaint resolution does depend on people.

(P) Customer presence is necessary only for a little time Filling out forms and giving documents

(P) Capacity to give loans is not perishableFront ( sales and reception ) capacity can get unutilized if no customer

Car Loan is a product. Can be scaled up quickly.

skpalekar@hotmail.com +9821046013

DUSHYANT CORPORATE TRAINERS

How Profit is Made

• Studying the market conditions • Selecting the right customers• Developing the right value proposition• Selecting the right delivery channels• To be different than the competition

• Purchasing efficiency• Downgrading specifications• Value engineering• Reduction of waste

Profit

The Process of Marketing

Whom to serve ? Whom to fight?

Create Attractive value? Capture some of it ?

Go to market & “sell” the valueUndertake value creation activities

Measure satisfactionMeasure Profit

Important Difference

In a product business the company creates a structure of high level and experienced specialist departments manned by experts to perform the tasks of discovering, diagnosing, designing and delivering at different locations and times and most of these are invisible to the customer.

In a service business many of these functions are done by the front line service providers : they assess, diagnose, design and deliver in real time at the location when the customer is present and watching

Discover Diagnose Design Deliver

Customer

Service Employees

Management

The job of management in services is to create context, culture & employees

“Service Value” is co-created between Customer & Service Employeesskpalekar@hotmail.com

Service Operations Model

Management

BuyerEmployee

A lot of value gets created in this interaction

Managing employeesTo make themManage customers

Managing customerExpectations and satisfaction

Employees is the “first market”. Poor marketing to them results into poor marketing ultimately

Selecting & Influencing employees.Based on knowledge or attitude?

Actual interaction, observation and demonstrated leadership

Nature of Service

IntangibleLow search attributes ( which can be inspected prior to purchase )

Person dependentHigh in experience attributes ( can be felt but not inspected )

Reputation / Reference dependent High in credence attributes ( cannot be felt also )

Needs each customer’s presence / inputCustomer and provider needed in the same place at the same time

Perishable Demand -Supply synchronization difficult , Capacity planning key.Peak and Lean times a regular phenomenon.

Standardization and efficiency of machines Customization and warmth of peopleskpalekar@hotmail.com

TYPES OF SERVICESBASED ON “CONTACT”

HIGH-END CONTACT SERVICES Professional services needing high level of education and experience

(architects, doctors, professors, lawyers, pilots) MID END CONTACT SERVICES

Technical services based on knowledge of technology. (nursing, tailoring, repairing). Or Customer care services involving personality and social skills (air hostess, handling complaints, salespersons, reception)

LOW END CONTACT SERVICES Routine services that can be performed by almost anyone with little

training. (cleaning, guard duty, door keeping)AUTOMATABLE SERVICES

Simple services which can be automated (shoe shine, vending packaged products, ticketing on the net, giving cash against cards)

Different types of persons needed for service

RARE EXPERTISE / JUDGEMENT / SKILLExpertise / Experience LawyerPerform Singer, Dancer, Teacher, Priest Judgment / Decision Doctor

MEDIUM EXPERTISE / JUDGEMENT / SKILLEmpathy Sales ExecutivesConversation / Sociability Customer Relation ExecutivesAwareness and Feedback Barber, Tailor

LOW EXPERTISE / JUDGEMENT / SKILLPhysique Laborer, Guard

High Contact Service Encounters

S E R V I C E S C A P E

MOODINTERACTION

PERSON

TRAINING / EXPECTATIONSRESOURCES

MOODSCRIPT / INTERACTION

M O M E N T O F T R U T H

PERSON

NEEDEXPECTATION

encounter

People-intensive Services

CostsMain investment and cost is in

selection, training, motivation & retention of people

People Selection Criteria Good social skills of dealing with customers individually

and to have a good EQ . In professional service you need judgment and experience.In performing arts you need flair, temperament

Trained to follow Consultative, diagnostic, solution providing, counseling

Customer orientation at the front endroutine / standard operating process at the back end

Equipment –Intensive Services

CostsMain investment and cost is in the machines

People Selection Criteria Good technical qualification / knowledge Trained to follow routine / standard operating process Dealing with the Customer : Transactional

Classificationautomated services

vending machines, automated car washesmonitored by unskilled labor

dry cleaning, door keepers, cleaningoperated by skilled labor

excavators, airline pilots,

Value embedded in encountersbetween doctor and patient

DIAGNOSIS

Value embedded in encountersbetween airline staff and passengers

CUSTOMER CARE

Value embedded in encountersbetween a singer and audience

ENTERTAINMENT

Value embedded in encountersbetween a priest and parish

High and Low Contact Service - 1

Location ( Where to locate )High contact : Convenient to customerLow contact : Near labor or Transportation source

Service Scape ( How to layout and do interiors)High contact : set up like a customer reception / contact / service

area. Presentable, inviting, facilitate interaction with staff, and waiting and serviceb.

Low contact : set up like a job work shop : for efficiency Quality Control

High Contact : customized benchmarks – customer present and actively influences – can see all Ps - defects and all

Low Contact : since there is no customer during production, it is possible to run using standard benchmarks and rework is possible to correct the defects

How the operations are organized ?High Contact : Pace is set by the location and time of customer

requests for service. Customer is present, sees process, intervenes, directs but also likes to see the process. A key issue is how to handle demand peaks and how to shape the demand

Low Contact : Customer is absent and is concerned with completion date and final result. He does not see the people and the process. Hence grouping (batching) and scheduling is possible. Pace can be set internally and can be the “average demand”.

Front Line Worker SkillsHigh Contact : Capable of interacting with customers, capable of

using judgment , capable of using his talentLow Contact : Only Technical skills are needed

Service ProcessHigh contact : Mostly front-room activities. The service may

change during delivery in response to customer.Low contact : Mostly backroom activities planned and executed

with minimal interference from customerService Package

High contact : Varies with customer : many choices and outcomesLow contact : Fixed, less extensive

Product –Service continuum

“Pure Product” “Pure Service” Teaching is almost pure service ( Mostly intangible )Meal in a sit down diner is both product ( food) and service ( 3Ps)Match box is almost a pure product

7 Ps of Marketing Mix” ( Way to influence the market ) 4 Ps : Product like : Product, Place ( Location ), Price, Promotion3 Ps : High contact like : People, Process, Physical Evidence / Proof

serviceProduct

INSPECTABLE

EXPERIENCED

BELIEVED

High Contact Service value creation

Customers are homogenized through filtration, access, fencing, selection

Service providers are selectedThrough filtration, access, fencing, selectionTo match with the expectations of the customers

Service providers are prepared to handle the jobCustomer expectations / scripts are communicatedService delivery process is taught

Servicescape is appropriate : Facilities and processes Keep in mind technical logic, customer logic and employee logicMechanism to handle complaints and counsel

The ultimate objective is The “service encounter" should be satisfying

for the customers as well as employees

In high contact service

Variations are commonOn both the sides !

Mismatch of expectations is commonComplaints should not be treated as exceptionsComplaint handling mechanismsCounseling is a regular business process

Customer recovery is an important process`

Positioning Marketing Mix

ProductProductPlacePricePromotion

ServicePeopleProcessPhysical Evidence ( Proof )

WHAT MAKES THE SERVICE BUSINESS WORK

Leadership provided from the top is an extremely valuable input in the working of a service business. Some of the great service organizations have become so because of the way theyselect employeesinduct them on the jobtrain themmotivate themprovide social gluerecognize themincentivize thempromote themdevelop them

Service Profit Chain Model

There is no absolute quality standard In service

Since there is nothing that can be objectively specified,People judge service subjectively by how they felt

Service Quality = Actual Service – Expected Service

Keys to customer satisfaction in services are

1. How to manage customer expectations

2. How to have a good service design

3. How to plan service delivery

4. Dealing with dissatisfied customers

5. Reducing the service gap

How to Manage customer expectations ?

Admission / filtration process that accepts customers whose expectations can be met / exceeded

Communicating with the customers so that the expectations are brought in line with what can be delivered

Rejecting customers whose expectations cannot be metGet existing customers to bring new customersGet existing customers to meet new customers

How to have a good service design?

What to plan ? Location, Layout, Fittings, Furnishings, Equipment,

Signage, Comfort, Lighting, Temperature, ColorsHow to plan ? Keep in mind

Positioning : who do you want to serve? Who competes for these customers ? How do you compete?

Logic : Customers, Employees, technical and legal demands.

How to Plan / Execute Service delivery ?( Service Marketing Mix )

Standard 4 Ps of productsPhysical / Material productPricePlace (location)Promotion ( communication to attract customers, manage

expectations and inform at site)

3 Ps of servicesPeople ( front line service providers, front line supervisors,

leaders up the line)Processes (of discovering needs, diagnosing what needs to be

done, designing a solution and deploying the solution)Proofs (because service is intangible, customers need evidence

and proof)

Dealing with dissatisfied customers

Service being intangible, there is an ample scope for interpretation and subjectivity on both sides - provider and receiver - and hence complaints is a normal phenomenon in the marketing of services.

How complaints are handled is a very important part of service marketing. Complaints - if not handled well - can lead to loss of customers but if they are handled well, they can lead to customers who spread good word about the company. This is called service recovery.

Constantly trying to reduce the "service gap”

Knowledge Gap : is between what the customer really wants vis-a-vis what the service provider thinks he wants

Planning Gap : is between what the service provider knows he must deliver vis-a-vis what he has planned to deliver

Delivery Gap is between what the service provider has planned to deliver vis-a-vis what he lands up delivering

Promise Gap is between what the service delivers vis-a-vis what he promises to deliver.

Service Gap Model

Customer Gap Provider Gap

Expected Service

Perceived Expectation Knowing

Satisfaction Design / SOP / Standards Planning

Deliver : Design / SOP / Standard Doing

Communicated to customers Promise

Perceived Delivery

Consumer Behavior in Services

RISKY : Higher perceived risk in buying a service.REAL TIME : Place of production and use is same.INCONSISTENT : Quality consistency difficult to achieve.CAPACITY : Not possible to use the capacity fully

A short course on services marketing july 2 k13

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