THE FOUNDATION OF SERVICES MARKETING 2
BANK MARKETING 20
TOURISM MARKETING 29
HOSPITAL MARKETING 39
INSURANCE MARKETING 49
MUTUAL FUND MARKETING 63
TELECOMMUNICATIONS SERVICES 71
COURIER SERVICES 78
AUTOMOBILE SERVICES 87
THE FOUNDATION OF SERVICES MARKETING
Introduction:
What is a Service?
In economics and marketing, a service is the non-material equivalent of a good. Service provision has been defined as an economic activity that does not result in ownership, and this is what differentiates it from providing physical goods. It is claimed to be a process that creates benefits by facilitating either a change in customers, a change in their physical possessions, or a change in their intangible assets.
Dictionary definitions of "Intangible":
1. Lacking substance or reality; incapable of being touched or seen
2. Incapable of being perceived by the senses especially the sense of touch
3. (Of especially business assets) not having physical substance or intrinsic productive value
By supplying some level of skill, ingenuity, and experience, providers of a service participate in an economy without the restrictions of carrying stock (inventory) or the need to concern themselves with bulky raw materials. On the other hand, their investment in expertise does require marketing and upgrading in the face of competition that has equally few physical restrictions.
Key attributes of Services
Services can be described in terms of their main attributes.
Intangibility - They cannot be seen, handled, smelled, etc. There is no need for storage. Because services are difficult to conceptualize, marketing them requires creative visualization to effectively evoke a concrete image in the customer's mind. From the customer's point of view, this attribute makes it difficult to evaluate or compare services prior to experiencing the service.
Perishability - Unsold service time is "lost", that is, it cannot be regained. It is a lost economic opportunity. For example a doctor who is booked for only two hours a day cannot later work those hours— she has lost her economic opportunity. Other service examples are airplane seats (once the plane departs, those empty seats cannot be sold), and movie tickets (sales end at a certain point).
Lack of transportability - Services tend to be consumed at the point of "production" (although this doesn't apply to outsourced business services).
Lack of homogeneity - Services are typically modified for each client or each new situation (customized). Mass production of services is very difficult. This can be seen as a problem of inconsistent quality. Both inputs and outputs to the processes involved providing services are highly variable, as are the relationships between these processes, making it difficult to maintain consistent quality.
Labour intensity - Services usually involve considerable human activity, rather than a precisely determined process. Human resource management is important. The human factor is often the key success factor in service industries. It is difficult to achieve economies of scale or gain dominant market share.
Demand fluctuations - It can be difficult to forecast demand (which is also true of many goods). Demand can vary by season, time of day, business cycle, etc.
Buyer involvement - Most service provision requires a high degree of interaction between client and service provider.
Client-Based Relationships - Is based on creating long-term business relationships. Accountants, lawyers, and financial advisers maintain long-term relationships with their clients for decades. These repeat consumers refer friends and family, helping to create a client-based relationship.
Service delivery
The delivery of a service typically involves five factors:
· The service providers (e.g. the people)
· Equipment used to provide the service (e.g. vehicles, computers)
· The physical facilities (e.g. buildings, parking, waiting rooms)
· The client
· Other customers at the service delivery location
· Customer contact
The service encounter is defined as all activities involved in the service delivery process. Some service managers use the term "moment of truth" to indicate that defining point in a specific service encounter where interactions are most intense.
Many business theorists view service provision as a performance or act. The location of the service delivery is referred to as the stage and the objects that facilitate the service process are called props. A script is a sequence of behaviours followed by all those involved, including the client(s). Some service dramas are tightly scripted, others are more ad lib. Role congruence occurs when each actor follows a script that harmonizes with the roles played by the other actors.
In some service industries, especially health care, dispute resolution, and social services, a popular concept is the idea of the caseload, which refers to the total number of patients, clients, litigants, or claimants that a given employee is presently responsible for. On a daily basis, in all those fields, employees must balance the needs of any individual case against the needs of all other current cases as well as their own personal needs.
The service sector – the tertiary sector
The three-sector hypothesis is an economic theory that divides economies into three sectors of activity:
· Extraction of raw materials (primary)
· Manufacturing (secondary)
· Services (tertiary).
According to the theory the main focus of an economy's activity shifts from the primary, through the secondary and finally to the tertiary sector. The process is essentially positive, and relates to increase in quality of life, social security, blossoming of education and culture, higher level of qualifications, humanisation of work, and avoidance of unemployment.
Countries with a low per capita income are in an early state of development; the main part of their national income is achieved through production in the primary sector. Countries in a more advanced state of development, with a medium national income, generate their income mostly in the secondary sector. In highly developed countries with a high income, the tertiary sector dominates the total output of the economy.
Service Sector is also known as the tertiary sector of industry is one of the three main industrial categories of a developed economy, the others being the secondary industry (manufacturing), and primary industry (extraction such as mining, agriculture and fishing). Services are defined in conventional economic literature as "intangible goods". According to some economists, the service sector tends to be wealth consuming, whereas manufacturing is wealth producing. Sir Keith Joseph in his lecture Monetarism Is Not Enough, contrasted wealth producing sectors in an economy such as manufacturing with the service sector which tends to be a wealth consuming sector. He contended that an economy declines as its
wealth producing sector begins to shrink.
The tertiary sector of industry involves the provision of services to businesses as well as final consumers. Services may involve the transport, distribution and sale of goods from producer to a consumer as may happen in wholesaling and retailing, or may involve the provision of a service, such as in pest control or entertainment. Goods may be transformed in the process of providing a service, as happens in the restaurant industry. However, the focus is on people interacting with people and serving the customer rather than transforming physical goods. Since the 1960s, there has been a substantial shift from the other two industry sectors to the Tertiary Sector in industrialised countries. The service sector consists of the "soft" parts of the economy such as insurance, government, tourism, banking, retail and education. In soft sector employment, people use time to deploy knowledge assets, collaboration assets, and process-engagement to create productivity (effectiveness), performance improvement potential (potential) and sustainability. Typically the output of this time is content (information), service, attention, advice, experiences, and/or discussion (also known as "intangible goods"). Other examples of service sector employment include:
· Franchising
· Restaurants
· Retailing
· Entertainment, including the record industry, music industry, radio, television and movies.
· News media
· Leisure industry/hotels
· Consulting
· Transport
· Healthcare/hospitals
Public utilities are often considered part of the tertiary sector as they provide services to people, while creating the utility's infrastructure is often considered part of the secondary sector, even though the same business may be involved in both aspects of the operation.
Services Marketing
A wide variety of activities labeled as services are practised by both profit-orientated organizations and non-profit orientated organizations. The success of these organizations depends on delivering excellent service quality and creating value to customers. Defining services is therefore not a simplistic task. Over the years service marketing literature has provided readers with an assortment of service definitions.
· According to Irons, pure services are intangible but they do usually add value to, or make available, a tangible product. They do not result in transfer of ownership and may leave only memories.
· Zeithaml and Bitner claim that in the simplest terms services are deeds, processes, and performances. Their broader definition states that services include all economic activities whose output is not a physical product, is generally consumed at the time it is produced, and provides added value in forms that are essentially intangible concerns of the purchaser.
· Kotler defines service as an activity that one party offers another that is essential intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product.
· Grönroos identifies a service as an activity or series of activities of a more or less intangible nature that normally, but not necessarily, takes place in interaction between the customer and service employees and/or physical resources or goods and/or systems of the service provider, which are provided as solutions to customer problems.
The conclusion derived from the above definition is that services deal with intangible components. The purchase of services does not necessarily result in physical transfer or ownership but still creates a bundle of benefits during or after the service interaction or experience.
Distinguishing between the tangible and intangible components of a service is extremely difficult. Therefore, separating the core service from the augmented service helps to simplify this task. The core service represents the fundamental benefits the service provide to satisfy customers’ needs. The augmented service incorporates the core service in addition to the tangible elements and all additional benefits of the service employed to satisfy customers’ needs. The core services are mostly intangible because of their lack of physical attributes, while augmented services provide the customer with the impression of the services’ tangibility component, because it can be seen, touched, and transferred to the customer.
Characteristics of Services/Salient features
The inherent differences that exist between goods and services result in unique management challenges for service organizations. Services possess five unique characteristics; namely intangibility, perishability, inseparability, variability, and lack of ownership, that differentiate them from goods.
These characteristics create distinctive challenges for service marketers in attracting new customers, and keeping existing customers. These characteristics are explained in the ensuing sections.
Intangibility
Intangibility is the dominant characteristic of services and is defined as the lack of tangible assets that can be seen, touched or smelled prior to purchase. However, services vary in the degree to which they are intangible and most services include some kind of tangible element.
The tangibility spectrum places highly tangible offerings at one end of the continuum and intangible services on the opposite end of the continuum. It is clear that very few offerings are totally tangible or intangible. The intangible characteristic of services present service marketers with several problems. The lack of physical attributes of services makes it difficult to display or communicate services readily and easily to customers. Customers often find it mentally difficult to grasp the service performance or experience without tangible evidence, which makes it difficult to diffuse. Services that rely intensely on customer involvement, present cost calculation difficulties that lead to price setting inadequacies for service marketers.
The Tangibility spectrum
These problems can, to a certain extent, be successfully resolved by reducing the intangibility of service offerings through stressing the tangibility components of offerings, stimulating word of mouth communication, creating a strong corporate communicate with customers, and using unique attributable cost and perceived value pricing. Service providers must always take into account the fact that customers use the tangible elements, such as the people who provide the service, the environment in which the service encounter takes place, the equipment used, and the price of the offering, to make assumptions about the quality of the service and to compare it to the offerings of other service providers.
Variability
Variability refers to the unwanted or random variable levels of service quality customers receive when they support an organization. The primary reason for variability is the human element present in the service process, accordingly sustaining the statement of Kotler, that the quality of service depends on the service provider. Because humans normally perform services, the chance of two service performances being the same is highly unlikely.
Different service employees will perform the same service process differently and the same service employee will provide a varying service under different circumstances or at different times. Nevertheless, the recipients of the service are also human, with their own unique demands and expectations of the service performance. Service marketers find it difficult to control the quality of the service performances because it is dependant on fallible employees as one of the main inputs
The reliance on people’s performances causes standardisation service processes to be almost impossible. The intentional or unintentional customisation of service processes and output performances by service employees for individual customers makes promotion of services very difficult.
Customers in general perceive the person who delivers the service “as the service”. As a result, service providers have the ability to alter the outcome and level of customer satisfaction. Service marketers are confronted with the challenge of controlling service quality because consistent quality service performances play a vital role in the survival of organizations. Service quality is profoundly dependent on the ability of customers to articulate their needs and level of service demands. Equally, service quality depends on the ability, and willingness of the service provider
to satisfy customers’ needs and demands. Organizations can put into practice service quality control and measurements by recruiting service-orientated employees and training them to provide a service that will meet or exceed customers’ expectations.
Inseparability
Inseparability refers to the simultaneous production and consumption of a service, thus it is often difficult to separate the service provider from the service performance. Customers are normally present at and during the service performance and play an active role in the service production process. The quality of the service performance is dependent on the interaction between the service provider and the customer.