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MARKETING OF SERVICES MBA-MK-01 UNIT-1

SERVICES:Activities, benefits or satisfactions which are offered for sale or provided in connection with the sale of goods. Service is a marketing transaction by an enterprise or entrepreneur where the object of the market transaction is other than the transfer of ownership of a tangible commodity. Difference Between Product and Service Marketing:A different marketing approach is necessary for service marketing, because services differ from goods in many respects. Following are the differences between physical goods and services. 1. Services are intangible. Goods are tangible. 2. Services are heterogeneous whereas goods are homogeneous. 3. Services are produced in buyer-seller interaction. Goods are produced in the factory. 4. Production, distribution and consumption take place simultaneously in case of services. In case of goods, the three are separate and independent functions. 5. Consumers are co producers in services. Customers do not generally participate in the production of goods. 6. Services cannot be stored. Goods can be stored. 7. In the sale of services, transfer of ownership will not take place whereas in case of goods it does take place. CHARACTERISTICS OF SERVICES:1. 2. 3. 4. 5. 6. Intangibility Inseparability Variability Perishability Customer participation No ownership

Classification of Services:On the basis of operational perspective we categorise services in four ways. 1. People Processing:- These services are targeted and directed at themselves. To receive these services, customers must physically enter the service system. In these services customer involvement is necessary. Example- health care services. 2. Possession Processing:- Customers are less physically involve with this type of service. Example- freight transportation. 3. Mental Stimulus Processing:- These services interact with peoples minds. Anything touching peoples minds has the power to shape attitudes and influence behaviour. Receiving these services requires an investment of time on the part of customer. Physical presence of customer is not necessary. Example- educational services. 4. Information Processing:- Information is the most intangible form of service output, but it may be transformed into more tangible forms represented by letters, reports, books, tapes etc. Example- accounting, banking and data processing etc. Other Classification of Services:1:- On the Basis of Market Segment:a) Final consumer for example coaching, car wash b) Organisational consumer for example management consulting, machinery repair. 2:- Degree of Tangibility:a) Highly tangible for example car rental, vending machine. b) Services linked to tangible goods. For example domestic appliance repair, car service. c) Highly Intangible for example psychotherapy, legal services. 3:- On the basis of skill of service provider:a) Professional like medical service, legal service. b) Non professional like caretaking, casual labour.

4:- Goals of the provider:a) Not for profit like charities, NGO b) Commercial like banks, airlines. 5:- By degree of regulation:a) Highly regulated like hospitals and insurance services b) Limited regulated like catering. c) Non regulated like house painting, lawn care. 6:- By degree of customer contact:a) High contact like universities, hotels etc. b) Low contact like lawn care, automated car wash.

Customer Relationship Management:CRM is attracting, maintaining and enhancing customer relationship. It is an integrated effort to identify, maintain and build a network with individual consumers and to continuously strengthen the network for the mutual benefit of both sides through interactive, individualised and value added contacts over a long period of time. Importance of CRM:1:- CRM helps in making a loyal customer. 2:- Through CRM product benefits are focused. 3:- It facilitates high customer contact. 4:- It helps in building relationships with customers. 5:- It helps in maintaining relationship. 6:- It also helps in enhancing the relationship.

Service Marketing System:A service business is a system made up of three overlapping elements. 1. Service Operations:- Whereby inputs are processed and the elements of the service products are created. Like a play in theatre, the visible components of service operations can be divided into those relating to the actors or service personnel and those relating to the stage set or physical facilities and other tangibles. 2. Service Delivery:- It is concerned with where ,when and how the service product is delivered to the customer. 3. Service Marketing:- In addition to the service delivery element, other elements contribute to the customers overall view of service business. These elements are communication effort by advertising and sales departments, telephone calls and letters from service personnel. Service Encounters:A service encounter is a period of time during which the customers interact directly with a service. There are two types of service encounters. First are high contact services and second are low contact services. Example of high contact services are hair dressing, medical services etc. Examples of low contact services are insurance and internet banking etc. Service Quality:Service quality means the degree of excellence in service performance. Consumer perceives the quality of a service by experiencing the consumption process and by comparing the experience with their expectations. Determinants of Service Quality:1. 2. 3. 4. 5. 6. 7. 8. Reliability Responsiveness Competence Access Courtesy Communication Credibility Security

9. Tangibles Understanding Customer Expectations:When service organisations understand how services are evaluated by consumers in terms of quality, it is possible to design strategies and influence them in a desired direction. The service quality indicates that what customers assess through their own measurement criteria based on their expectations and perceptions of a service experience. Service organisations therefore have to manage the concept from the customers point of view. In order to develop service marketing programs it is necessary to understand what consumers are really looking for and what and how they evaluate a service? In order to understand customer expectation, it is necessary to know how customers perceive quality. There are four factors which form the customer expectations. 1. Market Communication:- Service firms communicate through direct and indirect channels to the target market relating to the features and specialities of the BSP. This is the promise the service provider makes with the customer. 2. Image:- image of a service firm at the corporate level as well as the local level influences the expectations of the customers. 3. Word of Mouth Communication:This is an informal communication channel. Word of mouth communication is considered to the most powerful, particularly in case of services. 4. Customers Needs:- The need intensity of consumers influences the expectations . a relax customers may expect quality of high level compared to customer who is in hurry. Zone of Tolerance :- The zone of tolerance is the extent to which customer recognise or is willing to accept the variation between the two level of expectation, that is the maximum level and minimum level.

Service Expectation
Needs and wants Derived expectati ons of others Personal expectati on Minimum Level Maximum Level Marketing stimulation Word of Mouth Communica tion

Zone of Tolerance

Past experience

Service choice Emergencies

Participation abilities in Service production

Situational factors

Fig: Determinants of Consumer Expectations

Level of Service Performance 1. 2. 3. 4. 5. Exceeding maximum expected level Maximum service level Adequate service level Minimum service level Below minimum level

Customer Response Highly satisfied Satisfied Indifferent Dissatisfied Highly dissatisfied

Maximum service level is a blend of what the customer believes can be and should be. Minimum service level represents the lowest tolerable expectations or the bottom level of performance acceptable to the customers. If the performance of the service is below the minimum level, customer will be frustrated and highly dissatisfied. On the other hand, if the service performance exceeds the maximum level, customers will be delighted. When the performance of service falls in the tolerance zone, customers do not particularly notice the service performance. Only when the service performance is outside the tolerance zone, the service gets the customers attention either in positive or negative way. Example:- Withdrawal of money from bank. Market Segmentation for Services:1. Undifferentiated marketing:- Under this approach service organisations aim at capturing mass markets with a single package. The marketers pursue mass distribution and mass promotion of one product for all the buyers.

Service marketing offer

Target market (all consumers)

2. Differentiated marketing:It is the process of dividing of heterogeneous markets into segments. It should be insured while segmentation that each segment is homogeneous in all significant characteristics.

Service package1 Service package2 Service package3

Market segmentation 1 Market segmentation 2 Market segmentation 3

Basis of Segmentation:1:- Geographic Segmentation:- Under this approach, the market will be divided into various geographical units such as nations , states, regions etc. 2:- Demographic Segmentation:- Under this approach, the market will be divided into segments based on various demographic variables such as age , family size , family lifecycle , gender , income, and occupation etc. 3:- Psychographic Segmentation:- Under this approach, consumers are divided into groups based on lifestyle , personality and values. 4:-Behavioural Segmentation:- For this approach consumers are divided on the basis of certain variables like occasions, benefits, user status, usage rate etc.. 5:- Technographic Segmentation:- Marketers are trying to identify the customer groups that have willingness as well as ability to use the latest technology. Targeting of Services:1:- Customer self selection:- Here the service is offered or advertised for the whole market. So all the customers are targeted for a particular service. It means customers are free to accept or reject according to their requirements. 2:- Controlled coverage:- In this strategy a particular service is exposed towards only selected and limited customers. So in this case a service is offered or advertised for only selected customers. Positioning of Services:1:- Service attributes:- A company can position the service attributes such as facilitating service and the supporting service. 2:- Service benefits:- This strategy focuses upon the distinctive benefits the consumer can get with the use of service.

3:- Service application positioning:- The service company makes the consumer identify the service needs or desire and the suitability of the service offered to satisfy his or her need or desire. 4:- Service user positioning:- A service company may identify the target group and position the service as the best for them. 5:- Competitive positioning:- The positioning may be against the competition or away from the competition. 6:- Quality positioning:- It focuses on the quality leadership of the firm. 7:- Price positioning:- Positioning is to communicate the best value for the price the consumers pay.