Services Marketing

Service Constructs
Module 1
 A New Services Marketing
Paradigm
The scale of changes -


 Emergence of the service economy

 The information society
 Introduction of new services
 Proliferation of smart devices
 Mass to one-to-one marketing to
customer relationship
management to CMR
2
 A New Services Marketing
Paradigm
… the Unfolding Reality
 Value mobility
 Shifting competitive advantage
 Rising transaction costs
 Customer analytics
 Rising tele-computing power
 Front - office reengineering

3
 Services Marketing Paradigm
Variables The Past Emerging Future
• Value Stable, stayed Mobile, may shift to
Creating with the firm competitors
Competencies
• Brand A marketing A Strategic Asset
Resource
• Perspective Functional & Holistic &Global
Domestic
• Database Segment Focus Individual Customer
Focus
• Approach to Mass marketing One to one marketing,
Marketing CRM
4
 The Service Revolution…
Unfolded
“The death of distance”


 Computerized kiosks dispensing

boarding passes
 Vending machines selling books
 Kodak-branded kiosks with bright
colored touch screens
 Parking tickets at Malls
 Interactive voice response units

5
Interfaces as the next frontier of
Competitive Advantage
 People dominant, Machine
dominant & Hybrids
 Why Service matters?
– In the economic context labour
flows to those tasks that deliver
the highest economic returns on
human talent
– Companies differentiate their
offerings not by what they sell
but by how they sell it
 The Labour scarcity paradox 6
– The 80/20 rule
Interfaces as the next frontier of
Competitive Advantage
 The rise of the (new) machines
– Roomba, the robotic vacuum cleaner
– Sony’s AIBO robotic dog
– Fidelity Investments: Back office : Front
office :: Factory : Sales
 Cost as a driving force
– 9.50 $ for a telephone enquiry
– 9.00 $ live by e-mail
– 5.00 $ on-line text chat
– 2.50 $ through e-mail and automated
assists
– 1.10 $ for IVR
FedEx $150 - million upgrade of handheld barco
shaves 10 seconds off each pick up saving $
– 0.50 $ website
– 0.25 $ automated e-mail response 7
 The Era of Total
Commoditization
 The 3-6-1 world of competitive dynamics
 Accelerating service life cycles
– E.g. world of fashion industry
 Speciality to commodity slide

L Extent of Competition H
H H

Price
differentiation
Gross Margin

L L
H L
Product / Image differentiation
 Growth Drivers - Services
 Increasing affluence
 Focus on leisure time
 Increased %age of women in the
labour force
 Greater life expectancy
 Greater complexity of products
and services
 Increasing complexity of life
 Changing social & cultural values 9
 Hierarchy of new service
categories
 Major service  Supplementary-service
innovations innovations
– E.g. WG Legal – E.g. Mela
fraternity restaurant in
Mumbai
 Major process
innovations  Service Improvements
– E.g. U21G  Style Changes
 Product-line – E.g. Indian
extensions 

– E.g. Ginger
 Process-line
extensions
– E.g. easylib.com
•
 Kotler distinguishes four
categories of ‘offer’ made to
customers
 A pure tangible good, such as
soap, toothpaste or salt. No
services accompany the product.
 A tangible good with
accompanying services to
enhance its appeal. e.g.
Computers
 A major service with 11
The Service-Product Continuum
Services Services Asset Rental Products Products
with with with value with
enablers products adding supporting
services services

Movies / Domino’s AT&T Pizza Hut Videos and

Music on CDs
Demand

Kingfisher Investment Spice Jet Corporate Microsoft

Banking Banking

12
Characteristics of Services

13
 Tangibility Spectrum
Salt
Soft Drinks
Detergents
Automobiles
Fast-food
Outlets
Intangible
Dominant

Tangible
Dominant Fast-food
Outlets
Advertising
Agencies
Airlines
Investment
Management
Consulting
Competing on the Intangibles
Core Memory Intangible Expectation
Offering
Domino’s: Fast Actions
30-minute sGuarantee
delivery
Pizza Hut: delivery
Great taste timegreatframe of 30
Testimonial
service
pizza no-
Indigo: Fun and pay for & minutes
looking sticket
regarding
Toll free
product
frills
Kingfisher Professional full flight taste
cheap trip tasting
extras
 pricing low
Preflight
delivery
transport transportati pizza
serviceat call
service
on home
lounges setup
properly High

boxed and quality

handled
 Evolution of a Service Market
Stage 1: Stage 2: Stage 3: Stage 4:
Invent Benefits Expand Value Differentiate Reinvent or
Value Drift

Value
offered
to
Market
Niche

Shading in the novas shows the degree of commodity

perception among customers
 Growth Map
Types of New Products / Services
New Ventures
Types of Investments
Ventur
New-to-the World e
Services Capita
l
New-to-the
Company
Services / Growth
Acquisitions Capita
l

New Platforms /
New Ancillary
Services / Low-
Strategic Partners Risk
Capital

Line Extensions /
Improvements / Income
Cost Reduction Reinvestment

Core Types of Markets

Offeri
ng New Marketing New Market
Niches / Channels New
Programs / Market / Broader Noncore Business
Market Restructuring Buyers Categories / Diversification
Extensions / Redefined
Repositioning Businesses / New
Customer Types
The Nature of the Service Act

18
 The Nature of the Service Act
Extent to Which
People Are
Part of the Service
High
Experience
• Nursing Home • Personal Tuition
• Haircut

• Good Restaurant
facilities and equipment are part of the Service
• Management Consulting
Experience
4-Star Hotel
•
• Airline Travel (Econ.) • Telephone Banking
• College Education •Retail Banking
• Department Store
High •Retail Banking
Low
• Dry Cleaning
• Motel
• Insurance
• Car Repair
• Supermarket
• Fast Food • Postal Service • Cable TV
• Movie Theater • Lawn Care
• Public Transit • Electronic Banking
• Credit Card

Low 19
Source: LoveLock (1996, pg. 38)
Concept of Tangibility

Degreeof
20
 Method of Service Delivery
Natureof interaction Availability of ServiceOutlets
betweencustomer and
SO
Single Site Multiple Sites

Customer goes to SO  Theatre  Bus service

 Barber shop  Fast food
chain

SOcomes to customer  Lawn care  Mail delivery

 Pest control

Customer &SOinteract  Credit card  Telephone

atarms length company
21
Customization & Judgement in
Service Delivery
Extentto which Extentto whichservice
customer contact characteristics areCustomised
personnel exercise
Judgement
High Low
High •Surgery •Preventive Health
•Legal Services Program
•Education

Low •Telephone •Public

Service Transportation
•Good Restaurant •Movie Theatre
22
Demand & Supply Dynamics
Extentto which Extentof demandfluctuations
supply is over time
constrained
Wide Narrow

Peakdemandmet • Electricity • Banking

withoutamajor • Hospital • Legal Services
delay Maternity Unit

Peakdemand • Passenger • Same as

regularly exceeds transportation above but with
capacity • Hotels insufficient
capacity for
base level of
business 23
 Relationship with Customers

Natureof M em bership Noform al

Service relationship relationship
Delivery
Continuous •Telephone •Radiostation
Deliveryof subscription •Policeprotection
Service •College
enrollment

Discrete •Pre-paidlong •Carrentals

Transactions distancecalls •Mail services
•Toll Highway

24
Marketing Intangible Products &
Product Intangibles – Serducts &
Prodices
 Intangibility of all products
 Buying promises
 Importance of impressions
 The ties that bind
 ‘Goods are produced, services are
performed’
 ‘Customers usually don’t know
what they are getting until they
don’t get it’ 25
The Marketing Mix for Services
 Product
 Price
 Place
 Promotion
 People
 Process
 Physical
26
Evidence