Last day summary : Full Credit Services Marketing Course for MBA class 2014ective course jan 2014

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Summary

Service Marketing Elective Course : 14 sessions

for PGDM : January 2014

Prof S K Palekar S P Jain Institute of Management & Research

[email protected]

[email protected] http://marketing-eye.blogspot.com +91 9821046013 [email protected] Visit http://marketing-eye.blogspot.com [email protected] http://marketing-eye.blogspot.com +91 9821046013

Why study services marketing ? 55% of India’s GDP is in “Services”

There are no pure “Products”; nor pure “Services”. In practice, they come “mixed” in different proportions.

People spend more on services as they become more affluent. US economy produces 70% services. Reason : Maslow’s Theory of Needs.

Out of what you spend on HUL “products”;

45% is spent by HUL on buying services Namely : distributors, retailers, ad agencies, media, transportation

Services are everywhere.


We studied the case of

Dushyant Corporate Trainers

When something is obviously and seriously wrong, you need to look below the surface

and check if value is created and delivered to the customers.

In the board meeting the right questions were not asked !


Products For customers the value is essentially “inside the box”.

The companies take 6∑ approach of standardization and reducing the variation.

SENIOR MANAGEMENT ROLE : The value for the customer is created largely through extensive planning and oversight provided by experienced senior management of the company.

CUSTOMER IS OUTSIDE THE BUSINESS : Throughout this process the customer is outside the company. The writ of the management looms large and gets followed by everyone inside the company.

MANAGING THROUGH STANDARDIZATION : The company is managed in proactive mode by anticipating what the customers need and standardizing the specifications accordingly. Volume / batch operations in procurement and conversion.

MECHANIZATION : Is used extensively in the processes. The machinery is used to process materials and machines. The role of the machines is primary and the role of the workers operating those machines is secondary.


Services For customers the value is in “service encounter” .

The companies render customized / variable service in response to customers.

SENIOR MANAGEMENT ROLE : The main value for the customer is created largely through “service encounters” - interaction of the customer and the service provider in real time at the front line in a given location / servicescape.

CUSTOMER IS INSIDE : The customer is frequently on the premises and her expectations and demands drive the activity. Management’s writ and schedules become secondary. .

MANAGING THROUGH CUSTOMIZATION : The company is managed in a reactive mode by asking customers what they desire and then the company tries to deliver it in an individualized manner in real time at frontline.

MECHANIZATION : Since the value is created mainly through customization , machines have an intrinsic limitation : they cannot sense the customer and make her feel good. he role of employees is primary and the role of the machines is to assist the employees and the customers..

S K Palekar : Draft June 4, 2008 with inputs from Vinay

Differences in Products and Services

1. Products are pre-created, services are co-created – For producing services the presence of the customer is

important – Products can be created in an expert and planned manner. – Services need to be produced by front line in a spontaneous

manner 2. Machines are primary in production of products :

– People are primary sources of producing service 3. The role of management

– Product business : making products as specified and then transporting them to the customer for her use.

– Service business : making sure that the front line employees and the supporting servicescape is designed – and ready – for the kind of customers likely to be coming into the service location.

Service “Encounter”

The best value for the customers is created when the front line employee is trained, experienced and equipped enough to meet the expectations and demands of the customer in front of her.

SERVICESCAPE

SERVICESCAPE

What can the management do to improve the service “Encounters”?

The focus of the management in service business is therefore on managing of the employees : recruiting, inducting, training, motivating, retaining the employees and using them to coach and develop new employees. In service business the front line employees (and the front line supervisors who manage them) become the “First market” for the management. The route to satisfaction of the end customers is through training, empowerment, motivation, feedback to the front line employees. Managing of services therefore seems much like internal HR.


Components of an Encounter

1. Service customer – Comes with her own script, expectations from the service

business and her own personality and moods 2. Service Provider

– Also has her own script, expectations from the customer and her own personality and moods

3. Servicescape – The space, layout, interiors, fittings, equipment, color,

lighting etc that prevails and impacts the giving and receiving of service

4. Location and schedule 5. Other customers and service providers


Designing of a service facility

1. There are likely to be wide variations in – requirements, demands, expectations of the customers – ability, motivation, equipment, mood of service employees

2. High Scope for mismatch and complaints – Feedback : Detect problems proactively & avoid them – Complaints : Collect, review and acting on them

• Not only “customer recovery” but “future avoidance” too

3. Admission / Filtration / Segregation – Of customers in order to (a) discourage wrong customers

from coming in (b) create a mechanism to group customers so that they can be directed to a suitable service employee / servicescape / department

– Of service providers so that the necessary inputs can be given to them so that they can becomes trained and experienced


Case : Forbes Facility Services

How the standard process of marketing

Brought a B2B service company into profit.

P r o c e s s O f C r e a t i n g V a l u e f o r T h e C u s t o m e r a n d P r o f i t F o r T h e C o m p a n y

I s C a l l e d M a r k e t i n g P r o c e s s

The Marketing Process in Forbes Facility 1. Analyzed

Different customers at different stages of evolution and needs

2. Choice Customers with large floor plates and mission-critical cleaning

3. Value Proposition We look after your workplace leaving you to focus on your main tasks We bring not only men but machines, methods and materials too We create a service level agreement - charge on per square foot basis

4. Customer connect (Go-To-Market) Use of questionnaires for prospecting Communication concepts for customers and employees Measuring customer satisfaction in every shift Setting customer satisfaction and retention goals Customer focused organization structure and systems Alignment of customer promises to internal motivation plans Quotation system , Scope control system

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Marketing Mix in Services The Mix comes out of “Positioning” Exercise

1. Marketing Mix has both product (4Ps) and service components (3Ps). – Marketing Mix for Products : Product, Place, Price,

Promotions – Marketing Mix for Services : People, Process, Proof

2. Positioning Questions – Which customers / applications are targeted – What are the customers doing currently – What is our offer – How is it better than what they are doing currently


Case : Coimbtore Financial Corporation

A product business is made profitable by having a right portfolio

Of products, materials and conversion systems.

A service business is made profitable by having a right portfolio Of people and servicescapes.

The concept of “Service Profit Chain”

Service Profit Chain Model

Virtuous Cycle Between Employees and Business

Vicious Cycle Between Employees and Business


Case : Eureka Forbes

Demonstration of “Service Profit Chain”

How Eureka Forbes treats its sales employees as its “first market”

And creates positioning as well as promotional materials for the employees

as if they were customers:


Case : Carpenter’s Eye Clinic & Nursing Home

Designing a service facility

SELECTING CUSTOMERS

SELECTING SERVICE PROVIDERS SELECTING SERVICE SCAPE AND ACTIVITY

LOGICS : CUSTOMER, EMPLOYEE, TECHNICAL


Types of Services

1. AUTOMATABLE SERVICES – Simple services like shoe shine, vending, ticketing, ATMs,

portals. Where machines create value 2. LOW END SERVICES

– can be performed by anyone with little training like cleaning, guarding, door keeping. Physical work creates value

3. MID-END SERVICES – requires deliberate training effort to some extent : Technical

services like nursing, tailoring, repairing, polishing and customer services like air hostesses, call center agents, salespersons. Technical / Interaction skills create value.

4. HIGH-END PROFESSIONAL SERVICES – needs specialized education and experience like architects,

doctors, professors, lawyers, pilots. High level of training and experience creates value

S K Palekar : July 2011 : Welspun Anjar

How do the customers behave in service business ?

And how service marketers create strategies according to these?

Higher Perceived Risk

- Cannot judge before buying. - Cannot sample or display. - Once happy, stick to it.

STRATEGY Depend more on referrals.

Create brand names and the look of the facilities to judge by. Satisfy customers to create a loyalty.

Place Of Production & Use Same.

- Service is delivered in real time. - When others are also watching. - Cannot grow fast because cannot scale up facilities fast. - Bottleneck is training and development.

STRATEGY Franchise network as a route to expand.

Training and development is a key process. Facilities can be streamlined to use less labor in service delivery.

Consistency Difficult To Achieve.

- Service is delivered in different and decentralized locations. - Not possible to supervise all the time. - How to ensure uniformity is a problem. - Service process cannot be halted /reworked before consumer sees it.

STRATEGY Educated employees understand standards better.

Create and train in uniform procedures. Industrialize service through automation.

Customization and inconsistency are 2 sides of the same coin.

Not possible to Utilize Capacity Fully

Facility geared up for peak load remains idle the rest of the time

STRATEGY Differential pricing for peak and non-peak times.

Make wait comfortable. Increase off peak demand.

Reservations to smoothen the schedule. Use part-time employees for peak periods.

Staff does routine (non-customer) work during non-peak times. Customers undertake to do part of the work in peak time.

Ownership Not Possible

Cannot own, store.

STRATEGY

Highlight the advantages of not owning. Create an illusion of ownership through clubs etc.

Give incentives for frequent use.

S K Palekar : July 2011 : Welspun Anjar

Thank You