CLASSIFICATION OF SERVICES

Classification based on the nature of service act

Tangible actions towards customers Passenger transportation Health care Beauty saloon Restaurants

Tangible actions towards customers’ possessions Freight transportation Industrial equipment repairs Laundry and dry cleaning Lawn care Veterinary care

Classification based on the nature of service act (contd..)

Intangible actions towards customers’ intellect Education Broadcasting Theaters Museum

Intangible actions towards customers’ assets Banking Legal services Accounting Security insurance

Classification based on the nature of service act (contd..)

Key questions: Does the customer need to be present

physically throughout the services? Does the customer have to be present

only to initiate or terminate the transaction?

Is customer’s presence not required at all?

Is a customer changed as a result of the service?

Classification based on the type of relationship the customer has with the service provider Continuous delivery/Membership related

Insurance Telephone subscription College enrollment Banking Trade associations

Continuous delivery/Without formal relationship Radio station Police protection Public highway

Classification based on the type of relationship the customer has with the service provider (contd..) Discrete transaction/ Membership related

Long distance phone calls Theater series subscriptions Commuter ticket or pass

Discrete transaction/ without formal relationship Car rental Mail service Toll highway Pay phone Movie theater Public transportation

Classification based on the type of relationship the customer has with the service provider (contd..) Key questions:

Can anything be done to move informal to member relationship?

Where can there be tradeoff between pricing and usage rates?

Classification based on the scope for customization and judgment in service delivery High judgment/ High customization

Professional services Surgery Beautician Plumber

High judgment/Low customization Education Preventive health care programs College food services

Classification based on the scope for customization and judgment in service delivery Low judgment/High customization

Telephone services Hotel services Retail banking

Low judgment/Low customization Public transportation Routine appliance repair Movie theater Spectator sports

Classification based on the scope for customization and judgment in service delivery Key questions:

Is it desirable to limit customization and get benefited by standardization and economies of scale?

Should customization be increased to reach wide range of customers?

Should service be simplified so that less judgment is required by the contact person?

Should service be updated in order to capitalize on the expertise of the staff?

Classification based on the nature of demand and supply for the service

Peak demand met without major delay/Wide fluctuation Electricity Natural gas Telephone Hospital maternity services Police and fire emergencies

Peak demand met without major delay/Narrow fluctuations Insurance Legal services Banking Laundry and dry cleaning

Classification based on the nature of demand and supply for the service

Peak demand met with delay/ wide fluctuations Accounting and tax preparations Passenger transport Hotel, Motel Restaurant Theater

Peak demand met with delay/ narrow fluctuations Similar to without delay but where the scale of

operations is very small comparitively

Classification based on the nature of demand and supply for the service

Key questions: What is the nature of demand fluctuation? Does

it have a predictable cycle? What are the underlying causes for these

fluctuations? Could marketing effect a change? What opportunities exists to change the level of

supply? Should alternative strategies be adapted for

adopting differential pricing? Should a new mix of strategies be experimented

with, involving both capacity and price?

Classification based on the method of service delivery

Customer to organization/ Single site Theater Saloon

Customer to organization/Multiple sites Bus services Fast food chain

Organization to customers/Single site Lawn care service Pest control Taxi

Classification based on the method of service delivery

Organization to customers/Multiple site Mail delivery Emergency repairs

At an arm distance/Single site Credit card company Local TV station

At an arm distance/Multiple site Broadcast network Telephone company

Classification based on the method of service delivery

Key questions: Should the service be delivered at a

single site or multiple sites? What is the most convenient type of

transaction for the customers? Would the service quality improve or

deteriorate with the type of change in interaction?

Can suitable intermediaries be used in order to establish multiple outlets?

MARKETING MIX

Elements of the service marketing mix

Product Price Promotion Place People Process Physical evidence

Product ( Service package) Services are products. Even though

intangible, they are things Consumer services:

Shoe repair, dry cleaning and clothing alterations

Shopping services: Insurance, banking, airline travel and

automotive repairs Specialty services:

Legal services, medical care, hair styling

Conceptualization of the service concept

Customer benefit concept: Customers are not buying goods. They

are buying specific benefits and values Purchase bundle comprises of:

Physical items- tangible elements that come with services

Sensual benefits- those experiences which hits one or more of customer’s senses ex: aroma, taste, ambiance.

Psychological benefits- which are determined by the customer subjectively.

Service concept The general benefits the service provider

will offer Core benefits Expected benefits Augmented services Potential services

Service offer and service package It spells out in more detail those services

to be provided, how they will be provided and to whom

It is the elements that make up the total service package, including both the tangible and intangible components of the service.

Service delivery system How the service is provided to the

consumer. This speaks about the interaction

between the customer and the service provider and the interaction between the customer and the service facility.

It is a carefully designed blueprint that describes how the service is rendered to the customers.

Analysis of the service

Basic framework, services are classified into: Core services Secondary services

But, the managerial perspective classifies it as: Core service: is the reason for being in the business Facilitating services: they are the support services

which are used to add value to the core service. Reception, check-in service etc

Supporting service: are used as a means of competition only. Without them, the core service can be used but the total service package may be less attractive.

Price

A customer pays for some product or service because of its ability to satisfy some specific need or want.

Price is the value attached to the product by the service provider and it must compliment with the value attached by the consumer

Managerial tasks in pricing involves Establishing pricing objectives Identifying the factors governing the

price Determining the methods of pricing Formulation of pricing strategies and

policies

Price is service is also called as Professional service- fees or

retention charges Transport- fare Insurance- premium Clubs- subscription, membership Hotel- tariff, rent etc

Special issues to be considered Since service is intangible, many service firms

portray their quality as the value for the customers’ money

A service provider always uses price as a tool to manage the demand

In certain cases, a customer may have to spend time, exert physical efforts or bear psychic cost. So the marketer has to include these intangible aspects of the cost related factors while fixing the price

In some service industries especially public sector, price cannot be used as a tactical tool as the Govt. determines the price

Pricing strategies

Most marketers use competitive pricing

Some firms who like to ration the supply would charge a higher price than the market price

Higher price can also serve as an indication about the higher perceived quality

Pricing strategies

Flexible pricing is more prevalent in service sector than in other fields

Some service firms either do not have a fixed price list or do not follow it in making price quotations

Some firms mainly try to meet competition, some firms attempts to use tables of standard costs and a few even attempt to bargain with the customers.

Most service marketers appear to have a definite profit margin in mind when quoting prices

A Pricing decision maker should consider: Set annual profit and sales margin Target a definite price margin while

quoting prices for each job Determine and understand their cost

structure Review and update their price schedules

regularly Work to secure higher rather than lower

average price Strive for greater price flexibility

Promotion

It is a combination of strategies that an organization uses to communicate the service benefits to customers and influence them to buy their services

They don’t sell any of their products. Instead, they sell the dreams and experience that the customer would want to have by availing a service

McDonald’s, makemytrip.com, axis bank etc

Promotion mix

Advertising Personal selling Direst mails Sales promotion Publicity Word of mouth Corporate identity

Advertising

Experience Beliefs Values Policies Process Customer oriented aspects

Personal selling

The service provider has to be utmost knowledgeable

Telephone orders Outbound tele-marketing Sales support staff Delivery personnel

Direct mails

Medicines Medical insurance These direct mails also play the role

of follow-ups to track the response of the customers to the promotional activities of the company

Sales promotion

Sampling, display, demonstration becomes difficult

Premiums Contests Sign-up rebates

Publicity

News release Stage activities Press conferences Sponsorship

Word of mouth

Customers are closely involved in service delivery and they tend to talk about their service experience to the potential customers

An outsider promoting a company without any monetary gains can add more value and trust in the minds of the prospective customers

Corporate identity

Refers to the use of distinctive colours, symbols

Lettering in prominent visible elements such as: Signage Vehicle Uniform Stationary

To provide a unifying and recognizable theme linking all the firm’s operations

Place

Place no more means a geographical location where buyers and sellers meet.

But in services, service being intangible, the service provider has to be present at the time of the delivery of services.

At the same time, certain services like mail and ATM do not require the presence of the service provider

Distribution is he provision of personal service and information to the customer. It adds value to the service

The strategies involved in making the services available and accessible to the customer, will focus on two major factors: Where should he service be made

available- the choice of location? Who should deliver the service- the

choice of channel?

Importance of location in pricing Who the target customers are? What is the degree of interaction required

between the provider and customer in the delivery of the service?

To what extent convenience of accessibility will affect customer decision making regarding use of the service?

Is the service technology-based or people-based? How do competitors operate their service? Can new system and technology be used to

improve existing location decision?

Modes of selling

Directly to the customers Use an intermediary who act on

behalf of the buyer or seller- the intermediary may be an agent or a contracted franchise

People

The problem lies in the inseparability of the production consumption interface

The satisfaction of not only the recipient of the service, that is the customer, but also the providers of the service, that is the company’s own personnel becomes extremely important

Different roles of the service personnel Primary- where the service is actually

carried out by the service provider Ex: Teachers, Consultants, Doctors, Lawyers etc

Facilitating- where employees facilitate the service transaction and participate in it. Ex: Bank counter staff, Waiter at a hotel, Front office personnel, compounder etc

Ancillary- where the employees helps to create the service exchange but is not part of it. Ex: travel agent, insurance agent etc

Level of presence of the service personnel Customer contact employees-

These come in contact with the customers in the process of the service delivery

They are also called as the frontline staff or “boundary spanners”

These have a great influence on the customers’ perception about the service as the customers try to find tangibility of service in them

As they influence the customers a lot, they are marketers too

There might be either high contact or low contact

Support personnel or non-contact personnel- These do not come in contact with the

customers Chefs in the hotel, laundry staff in the

hotel etc They possess high technical skill and

have high competency level They may be management support or

technical support Without these people the customer

contact employees cannot perform

Human resource planning in service involves: Hire the right people Develop people to deliver service quality Provide needed support system Retain best people

Internal marketing The key element of healthy business, is the

individual contribution of every employee, both contact and support to the ultimate result of increase in company value

Process

It is concerned with the way in which the service is delivered How the personnel delivers the service Added value of the service becomes an important

competitive weapon in differentiating the service Ex: Banks. Storing money is the basic activity

but they introduced so many added services like ATMs, Debit Cards, Over drafts etc

Many benefits from service occur not so much as a result of what is offered, but, in the way in which it is offered

Designing a service process Location Facility design and layout for effective

customer and work flow Procedure and job definitions for service

providers Measures to ensure service quality Extent of customer involvement in the

service delivery Equipment selection if it is equipment

based service delivery

Physical evidence

Since the service is intangible, it is important for the client to search for tangible or physical clues which enable them to evaluate the service

Physical evidence verifies either the existence or the completion of a service

Categorization

Peripheral evidence- Is usually possessed as part of the

purchase of a service It has little or no independent value Ex: a Cheque book, an ATM card,

Napkins etc

Essential evidence- It cannot be possessed by the consumer It may be so dominant in its impact on

service purchase and use that it must be considered virtually an element in its own right

Ex: transport vehicle, office premise, staff uniform etc

product place promotion Price people Process Physical evidence

Physical attributes

Channel type Promotion blend

Flexibility Employee research

Flow of activities-customized/standardized

Facility design

Quality level Outlet location Sales people: number, selection, training, incentives

Price level Training No. of steps- simple/complex

Aesthetics

Product lines Intermediaries Advertising: targets, media types, types of ads

Terms Motivation Level of customer involvement

Functionality

Branding Segmentation Sales promotion

Differentiation Rewards Ambient conditions

Positioning Franchising Publicity Discounts Teamwork Equipment

New services Managing channels

Direct marketing

allowances Communicating culture and values

Signage

Motivating channel members

Employee uniform and appearanceBusiness card

Statementguarentees

CONSUMERS IN SERVICE INDUSTRY

Introduction

Consumer purchased goods/services based on their mental and economic forces.

The mental forces creates desires and wants to satisfy pride, fear, love, fashion etc

Economic forces included the purchasing power

Fundamentals of marketing concept: The service provider should first

determine the needs and expectations of the target group of customers

Organize the input to deliver the service

Achieve customer satisfaction to earn profits

Managing customer relationship and building loyalty

Service firms’ problems:

How to create and deliver superior service?

How to sustain service improvement efforts- in short, how to build “customized” organization?

Model of buyer behaviour

marketing stimuli other stimuli buyer's black box buyer's response

product economic buyer characteristics buyer's

decision making process

product choice

price technology dealer choice

place cultural

purchase timing

promotion political buyer's response

Buyer characteristics

Cultural factors Values, practices, customs, social class etc

Social factors Family, friends, relatives, colleagues, reference groups etc

Personal factors Age, life cycle stage, occupation, economic

circumstances, life style etc Psychological factors

Motive, perception, learning etc How do customers learn about the services offered for sale? How do they learn to recognize and recall these products

and services? What process they develop in buying and consuming habits?

Buyer decision making process