MARKETING OF SERVICES

MARKETING SOCIETY OF KENYA BY B.W.MAINA

DEFINITION OF A SERVICE
An intangible product. Any act or performance that one party can offer to another that is intangible, and does not result in ownership of anything. The production of a service may or may not be tied to a physical product. A separately identifiable, intangible activity which provides want satisfaction when consumed and is not necessarily tied to the sale of a product or another service. Services are non-physical needs-satisfying products.

SERVICES: EXAMPLES
Services may be described as Personal (Consumer) or Commercial (Business) services. Consumer Services Education, Healthcare, Leisure, Financial, Legal, Transport, Tourism, Entertainment, Home maintenance, and other services that help the consumer. Commercial Services Repairs and maintenance, Consulting and Professional Advice, Leasing, Marketing Research, Advertising, Warehousing, Transportation, Insurance, Installation

CHARACERISTICS OF SERVICES AND MARKETING IMPLICATIONS

Services have unique characteristics namely: Intangibility Perishability Inseparability Heterogeneity

INTANGIBILITY

Services are intangible. This stems from the fact that services are performances. Unlike physical products, services cannot be seen, heard, smelled, or tasted before they are bought. Hence services cannot be verified with the five senses. They cannot be demonstrated or displayed without actually consuming them.

INTANGIBILITY: IMPLICATIONS
Customers are unable to judge the quality of a service before buying it. Marketing of services therefore requires imaginative personal selling. To reduce uncertainty, buyers conclude about the service quality from the people, place, equipment, price, symbols and other visible items that relate to the service which they see i.e. physical evidence e.g. cleanliness of a hotel or doctors office.

PERISHABILITY
Services are perishable or transient and cannot be stored. For instance, Empty seats in a stadium during a football game, or Empty seats on a flight, or Unoccupied hotel beds/rooms are lost business. This calls for proper demand management to match demand to supply and vice versa.

MATCHING DEMAND TO SUPPLY

To match demand to supply, a company can: Use differential pricing for different times i.e. charge more during peak hours and less for off-peak hours e.g. in transport Develop non-peak demand e.g. discount deals on airline tickets for off-peak seasons Develop complementary services e.g. provide entertainment at doctors waiting room such as watching information videos or TV Require clients to make reservations to ensure well spread out demand by appointment e.g hotels and airlines. Ask for non-refundable deposits when booking e.g. hotel room

MATCHING SUPPLY TO DEMAND

To match supply to demand a company can: Employ part-time workers to service peak demand. Ask employees to work overtime. Sub-contract work if possible. Introduce peak time efficiency routines with employees performing only essential tasks during peak hours leaving out non-essential tasks e.g. engaging paramedics to assist physicians during busy hours. Increase consumer participation in tasks e.g. encouraging them to fill in medical records or bagging their own groceries. Develop shared services e.g. time-sharing computers or sharing expensive medical equipment Develop facilities for future expansion e.g.buy adjacent land for hotel parking

INSEPARABILITY
Unlike physical products which can be produced for stock and consumed later, services are typically produced and consumed simultaneously. If a person renders a service, then the service provider is part of the service. Because the client is also present as the service is provided, it is critical to manage the interaction between the service provider and the client as both affect the service outcome. When clients have strong provider preferences, price is raised to ration the preferred providers time e.g. in case of entertainment and professional services where buyers are very interested in the specific service provider

HETEROGENEITY
Services are heterogeneous or variable They depend on who provides them, when, and where. It is difficult to standardize the output of different sellers of the same service. This calls for proper management of services to minimize variability.

HETEROGENEITY: MANAGEMENT
To control quality of service and minimize variability a company can: Invest in good human resource recruitment, selection and training. Standardize the service performance process within the organization. Ensure they have knowledge of all the processes involved in the provision of the service, how long they should take and what should be done if the time taken to deliver is longer than expected. Prepare a service charter/blueprint for staff and customers Monitor customer satisfaction through suggestion boxes, customer complaint systems, customer surveys, mystery shoppers to detect poor service for immediate correction.

CLASSIFICATION OF SERVICES
Most products contain some level of service. One component, however, will dominate Leading to the classification of a product as A good or a service.

CLASSIFICATION OF SERVICES (CONT)

Pure tangible goods that are not accompanied by services e.g. soap, salt, sugar, bread, toothpaste, etc. Tangible goods accompanied by services e.g. computers, cars and other technologically sophisticated goods where repairs, maintenance, operator training, installation advice etc may be required. Hybrid offers that have equal parts of goods and services e.g. restaurant: food and service equally important. Major services with smaller goods e.g. airline passengers who may get food, drinks, magazines, and newspapers. Pure service e.g. massage, baby-sitting, haircut, medical, legal advice

CLASSIFICATION OF SERVICES (2)

Services vary according to whether: They are equipment-based or labour-based Labour-based services e.g. education, hair dressing, dentistry are more susceptible to heterogeneity and marketers are often viewed as the service itself Hence strategies for selecting, training, motivating, and controlling employees are important for the success of the business A bad attitude from staff may damage the image of the firm and could cause customers to defect to rival companies e.g. airline Equipment-based services must be reliable e.g. ATMs, gym, transport

CLASSIFICATION OF SERVICES (CONT)

According to the degree of customer contact High contact services include healthcare, hotels, restaurants. Low contact services include theatres, home deliveries, dry cleaning, sports, car or TV repair High contact services require the presence of the consumer during production. Hence the physical appearance and ambience of the production facility may be a major component of the consumers evaluation of the service e.g. a dinner at a restaurant or bank service where queues are formed. Interpersonal skills of service providers are important.

CLASSIFICATION OF SERVICES (CONT)

According to the skills of the service provider Professional services e.g. legal advice, healthcare, accountancy etc. tend to be more complex and more highly regulated than nonprofessional services. For instance, in legal advice consumers may not know what the actual service will involve and how much it will cost until the service is completed since the product is situation-specific. Such service providers are usually highly regulated by law and/or professional associations.

CLASSIFICATION OF SERVICES (CONT)

According to the type of market or customer they serve: Consumer or Industrial. Consumer services include services such as child care, legal advice, entertainment, etc. Industrial services include consulting, marketing research, installation, leasing, repairs and maintenance The implications of this distinction are similar to those for all products

CLASSIFICATION OF SERVICES (CONT)

According to the goal of the service provider: Profit or not-for-profit. Non-business marketing includes marketing activities conducted by individuals and organizations to achieve some goal other than ordinary business goals of profit, market share or return on investment. Non-business marketing may be divided into non-profit organization marketing and social marketing. Non-profit organization marketing is the application of marketing concepts and techniques to organizations such as hospitals and colleges. Social marketing is development of programs designed to influence the acceptability of social ideas e.g. getting people to recycle plastics and newspapers

NON-BUSINESS MARKETING
In non-business marketing the objectives of the exchange may not be specified in financial terms but seek to get a certain response. Usually exchanges are facilitated through negotiation (mutual discussion) and persuasion (convincing and prevailing upon by argument ) Charitable organizations and supporters of social causes are major non-business marketers. Political parties unions, religious groups and student organizations also perform marketing activities. The beneficiaries of non-business organizations are their clients while shareholders are beneficiaries of profit firms. Non-business organizations must develop strategies by defining and analyzing their target market and creating and maintaining a marketing mix that appeals to that market. They serve a target public i.e. a collective of individuals who have an interest in or concern about an organization, a product or a social cause.

MARKETING STRATEGIES FOR SERVICE FIRMS

Until recently, service firms lagged behind manufacturing firms in their use of marketing. Small businesses e.g. barber shops and shoe repair firms, do not use formal management and marketing techniques. Professional service businesses e.g. law and accounting firms thought it was unprofessional to use marketing. Other service businesses e.g. colleges, hospitals and post office faced so much demand or so little competition that they saw no need for marketing. This has now changed and most service firms have embraced marketing subject to various regulations.

MARKETING MIX DECISIONS FOR SERVICE FIRMS

The traditional 4Ps of marketing works quite well for goods but additional elements require attention in service businesses. The extended marketing mix for services consists of 7Ps Product Price Place Promotion People Physical Evidence Process

PRODUCT DECISIONS
Product planning and development processes apply to services as well as physical goods. Market segmentation and product differentiation are also important in marketing of services. For instance: Use of 1st class and economy class on a plane with different pricing for each section. Use of different mobile phone tariffs. Development of different insurance policy covers to serve different market segments.

SERVICE ENVIRONMENT
Consumer perception is very important in service provision. Design of physical environment influences consumer perceptions and impressions for services such as banks, retail stores, and professional services.

SERVICE ENVIRONMENT FOR BANKS

A study of service environments identified 5 environmental variables very important to bank customers: Privacy both visually and verbally, with enclosed offices and transactions privacy. Efficiency/Convenience transaction areas that are easy to find, directional signs. Ambient background conditions temperature, lighting, noise, music. Social conditions the physical appearance of other people in the bank environment incuding customers and personnel. Aesthetics colour, style, use of materials, and artwork.

PRICING DECISIONS
In setting the price, it is important to consider pricing objectives, intensity and elasticity of demand and the prevailing competition. Prices could be cost-based or market-based. Differential pricing could be used. Price perception is important in positioning services and perceptions of unfairness will affect consumers perceptions of product value provided by the purchase.

PLACING DECISIONS
Services are typically produced, bought and consumed simultaneously. You cannot separate the service from the service provider (inseparability concept). Hence, the service provider is an important part of the service e.g. doctor, lawyer, footballer, hair dresser.

PROMOTION DECISIONS
Promotion of services may include the use of advertising, personal selling, sales promotion and publicity. Since services are intangible, physical objects are used to communicate the message about services.

PEOPLE
Because services are provided by people, the selection, training and motivation of employees can make a huge difference in customer satisfaction. Ideally employees should exhibit competence, a caring attitude, responsiveness, initiative, problem-solving ability and goodwill. Service personnel should also be properly empowered.

PHYSICAL EVIDENCE
Companies try to demonstrate their service quality through physical evidence and presentation. This could consist of appearance of service personnel, appearance of facilities, and tools or equipment used to provide service. A hotel, for instance, will develop a look and observable style of dealing with customers that carries out its intended customer value proposition, whether it is cleanliness, speed, or some other benefit. A doctor will be clean, well-dressed and with proper equipment for medical examination

PROCESS
Service companies can choose among different processes to deliver their service. Restaurants have, for instance, developed such different formats as cafeteria-type, fast food, buffet and candle-light service. In delivering lectures overhead or LCD projectors, white boards, chalk boards or flip charts could be used.

SERVICE ENCOUNTERS
Service marketing requires not only external marketing but also internal and interactive marketing This is the case for instance with cleaning and maintenance services, financial and banking services, and restaurant industry.

INTERNAL MARKETING
This describes the work done to train and motivate employees to serve customers well. All organizations employees should practice marketing including treating their internal customers properly.

EXTERNAL MARKETING

This describes the normal work done by the Organization to prepare, price, distribute, And promote the service to customers.

INTERACTIVE MARKETING
This describes the employees skills in serving the client. The perceived quality of a service depends heavily on the buyer-seller interaction during the service encounter. The service quality depends on both the service deliverer and the quality of the delivery. The client judges the service quality by its technical quality e.g. Was the surgery successful? and also by its functional quality e.g. Did the surgeon show concern and inspire confidence? Service providers must therefore deliver high touch as well as high tech.

DEALING WITH COMPETITION

With the rise in competition, service companies need to increase their competitive differentiation, quality and productivity.

MANAGING DIFFERENTIATION
Intense price competition in service industry has made it necessary for service marketers to differentiate their services from competition. While price competition is still important as evidenced, for instance, by the success of budget-priced airlines where many fliers appear to care more about travel costs than service, or where incomes are low, differentiation of service is important to overcome competition and prosper in the long run. The alternative to competition then is to develop a differentiated offer, delivery and image.

DIFFERENTIATIATION OF OFFER
The offer can include innovative features that set the companys offer apart from competitors offers. Most service innovations are, however, easily copied primarily due to absence of patents to protect firms e.g. ATMs, credit cards, and branchless banking. However, the service company that innovates regularly usually gains a succession of temporary advantages and an innovative reputation. The company can also introduce secondary service features to support the primary service package offered. In the airline industry various carriers introduced such secondary service features as movies and telephone services; hotels offer support computers and internet services to those who need them.

DIFFERENTIATION OF SERVICE DELIVERY

Service companies can differentiate their service through delivery in three ways: Through people having more able and reliable customer-contact people than competitors have. Superior and attractive physical environment in which the service is delivered. Superior delivery process e.g. use of visual aids

DIFFERENTIATION OF IMAGE
Image is a key differentiating factor since service is intangible Service companies can differentiate their images through symbols and branding. Making the consumer link a specific image with a specific brand name is important e.g. a bank using the symbol of a lion might convey an image of strength. What image do the Safaricom, Telcom, Kenya Railways brands convey? It is also worth noting that during peak demand hours, the interactive quality of services often declines because both the customer and the service provider are hurried and under stress and service image could decline. Demand could be changed for instance through differentiated pricing as explained above.

MANAGING SERVICE QUALITY

Delivering higher quality service than competitors is a major way of differentiating a firms offer from competition. Outstanding service gives companies a portent competitive advantage that leads to superior sales and profit performance. Service quality refers to the customers perception of how well a service meets or exceeds their expectations. When perceived performance is equal to expected the customer is satisfied but when perceived performance exceeds expected performance the customer is delighted. The key then is to try and exceed customer quality expectations.

MANAGING SERVICE QUALITY (CONT)

The expectations are based on past experiences, word of mouth, and service firms advertising. You must therefore keep your promises. Promise only what you can deliver but deliver more than you promise to win and retain customers. The key to customer retention is customer satisfaction. Indeed customer retention is a good measure of service quality. When customers are satisfied they will remain loyal to the company and make repeat purchases while influencing others to become the companys customers. Remember also that service quality is judged by the customer not the organization. Hence it is important to know what customers expect. Focus group research could be used to discover customers expectations.

MANAGING SRVICE QUALITY (CONT)

In the event of service problems, it is important to ensure a good service recovery process as this can turn an angry customer into a loyal one To ensure this, empower front line service employees by giving them authority, responsibility and the incentives they need to recognize, care about and attend to customers needs. Also empower them to handle complaints so as to save time since, for most customers, time is of the essence and they do not want to waste time by being kept waiting unnecessarily or transferred through several departments. Let the frontline staff act as ambassadors and information gatherers for the company.

DETERMINANTS/DIMENSIONS OF SERVICE QUALITY

There are five determinants or dimensions of service quality: Tangibles The appearance of physical facilities, tools, equipment, service personnel and communication materials. Reliability The ability to perform the promised service consistently, dependably, and accurately. Responsiveness The willingness and readiness of employees to provide the service promptly and to help customers. Assurance The knowledge, competence and courtesy of employees and their ability to convey trust and confidence. Empathy The provision of caring and individual attention to customers.

CHARACTERISTICS OF QUALITY
Quality is largely subjective; it is judged by the customer. Like beauty it is in the beholders eye. Hence: Different customers may want and expect different things. Quality is relative to customer expectations and cannot be measured in absolute terms. Quality is distinctive. Different quality needs may be met through product differentiation and market segmentation. Quality is dynamic. Expectations change time due to experience and environment. Quality requires care by the provider.

FEATURES OF WELL-MANAGED SERVICE COMPANIES

Well-managed companies have common features and practices as follows: They are customer-focused with clear and distinctive strategy for satisfying customers needs that wins enduring customer loyalty. Have a history of top management commitment to quality serving as role models. Set high service quality standards e.g. zero defects or answering the phone within 2 rings.

FEATURES OF WELL-MANAGED SERVICE COMPANIES (cont)

Watch and monitor both their own and competitors service performance closely using methods such as customer surveys, suggestions, mystery shopping and complaint systems. Communicate their concerns about service quality o employees and provide performance feedback. Handle customer complaints promptly. Audit employee satisfaction regularly i.e. internal marketing to support employees and reward good performance. Set up systems for service delivery to reduce variation in service delivery.

MANAGING PRODUCTIVITY
It is important for a service company to manage productivity so as to keep costs down in order to lower prices to consumers and also make profits. To increase service productivity the company could: Train current employees better. Hire new employees who will work harder and better for the same pay. Standardize production and introduce equipment for service provision e.g. ATMs, dish washing equipment. Encourage customer participation in service provision e.g. filling forms at hospitals, sorting mail before delivering to post office, bagging own purchases, etc.

MARKETING OF SERVICES
THE END THANK YOU

B.W.MAINA