Getting Started on Services Marketing

Services Dominate the Modern Economy  Around the world, the service sector is experiencing near revolutionary change. Innovators constantly launch new ways to satisfy existing needs and to meet needs that we did not even know we had.

 HSBC Holdings, one of the world’s largest banking groups, is turning to its own backyard, Asia, in search of profit and growth after two decades of expansion in the US and Europe.  This policy shift is sharply focused on expanding the personal or retail business of HSBC (bank) in major Asia markets because sustained high growth in many Asian economies has increased the demand for banking services.

 NBC Asia, a subsidiary of the National Broadcasting Company, has launched CNBC Asia, a 24-hour business and financial news network offering news coverage from three continents. Its service includes round-the-clock information for the world’s leading stock markets comprising a constant stream of news, trading updates, market indications, etc.

Contribution to GDP agriculture: 12.3% industry: 32.6% services: 55.1% (2010 est.) agriculture: 3.9% industry: 25.5% services: 70.6% (2010 est.)

agriculture: 1.2% industry: 22.2% services: 76.6% (2010 est.) agriculture: 1.3% industry: 27.2% services: 71.5% (2010 est.)

agriculture: 10.2% industry: 46.9% services: 43% (2010 est.) agriculture: 0.9% industry: 55.5% services: 43.6% (2010 est.)

Most New Jobs are Generated by Services  Employment is predicted to continue shrinking in manufacturing, mining, and agriculture in many different countries.  Some of the fastest growth is expected in knowledge-based industries such as professional and business services, education, and health services.

Powerful Forces are Transforming Service Markets  Service markets are shaped by government policies, social changes, business trends, advances in information technology, and internationalization. Collectively, these forces are reshaping demand, supply, the competitive landscape, and even customers’ styles and decision making.

Government Policies Business Trends Social Changes Advances in IT Globalization Innovation in service products & delivery systems, stimulated by better technology Customers have more choices and exercise more power Success hinges on: ● Understanding customers and competitors ● Viable business models ● Creation of value for customers and firm ● New markets and product categories ● Increase in demand for services ● More intense competition Transforming the Service Economy

 Customer needs and behavior are evolving, in response to changing demographics and lifestyles. Thus, managers of service organizations need to focus more sharply on marketing strategy if they hope to meet – or even anticipate – these needs with services that customers see as offering value.

 Customers are a vital source of ideas, not only for new products but also for improvements to existing ones.  By working with R&D experts, and with operations and HR managers, marketers may be able to create new service features that customers will value.

What is Service? A type of economic activity that is intangible, is not stored and does not result in ownership. A service is consumed at the point of sale. Services are one of the two key components of economics, the other being goods. A service is an act or performance offered by one party to another. Although the process may be tied to a physical product, the performance is essentially intangible and does not usually result in ownership of any of the factors of production. (Lovelock)

How Services Differ from Goods  Customers do to obtain ownership of services  Service products are intangible performances  Greater involvement of customers in the production process  Other people may form part of the product  More variability in operational inputs and outputs  Many services are difficult for customers to evaluate  Absence of inventories after production  Time factor is relatively more important  Delivery systems may involve both electronic and physical channels

Services Pose Distinctive Marketing Challenges DifferenceImplicationsMarketing-Related Tasks Most service products cannot be inventoried Customers may be turned away or have to wait  Smooth demand through promotions, dynamic pricing, and reservations  Work with operations to adjust capacity Intangible elements usually dominate value creation  Customers can’t taste, smell, or touch these elements and may not be able to see or hear them  Harder to evaluate service and distinguish from competitors  Make services tangible through emphasis on physical clues  Employ concrete metaphors and vivid images in advertising, branding Services are often difficult to visualize and understand  Customers perceive greater risk and uncertainty  Educate customers to make good choices, explain what to look for, document performance, offer guarantees

Services Pose Distinctive Marketing Challenges DifferenceImplicationsMarketing-Related Tasks Customers may be involved in co-production  Customers interact with provider’s equipment, facilities, and systems  Poor task execution by customers may hurt productivity, spoil service experience, curtail benefits  Develop user-friendly equipment, facilities, and systems  Train customers to perform effectively; provide customer support People may be part of the service experience  Appearance, attitude, and behavior of service personnel and other customers can shape the experience and affect satisfaction  Recruit, train, and reward employees to reinforce the planned service concept  Target the right customers at the right times, shape their behavior

Services Pose Distinctive Marketing Challenges DifferenceImplicationsMarketing-Related Tasks Operational inputs and outputs ten to vary more widely  Harder to maintain consistency, reliability, and service quality or to lower costs through higher productivity  Difficult to shield customers from results of service failures  Set quality standards based on customer expectations; redesign product elements for simplicity and failure- proofing  Institute good service recovery procedures  Automate customer- provider interactions; perform work while customers are absent The time factor often assumes great importance  Customers see time as a scarce resource to be spent wisely; dislike wasting time waiting, want service at times that are convenient  Find ways to compete on speed of delivery, minimize burden of waiting, offer extended service hours

Services Pose Distinctive Marketing Challenges DifferenceImplicationsMarketing-Related Tasks Distribution may take place through nonphysical channels  Information-based services can be delivered through electronic channels such as the internet or voice telecommunications, but core products involving physical activities or products cannot  Seek to create user- friendly, secure websites and free access by telephone  Ensure that all information- based service elements can be downloaded from site

A Framework For Developing Effective Service Marketing Strategies Understanding Customer Needs, Decision Making, and Behavior in Service Encounters Building the Service Business Model Managing the Customer InterfaceImplementing Profitable Service Strategies

Framework Building The Service Model Develop service concept: core & supplementary elements Select physical & electronic channels for service delivery Set prices with reference to costs, competition & value Value Exchange The Value Proposition The Business Model Educate customers & promote the value proposition Position the value proposition against competing alternatives

Design and manage service processes Balance demand against productivity capacity Plan the service environment Manage service employees for competitive advantage Framework Managing the Customer Interface

Framework Implementing Profitable Service Strategies Create customer relationship and build loyalty Plan for service recovery and create customer feedback systems Continuously improve service quality and productivity Organize for change management and service leadership

8P’s of Service Marketing Product Elements Promotion and Education Physical Environment Productivity and Quality People Process Price and Other User Outlays Place and Time