BBM-VI
SEM
Marketing
Management – IV (Services Marketing)
MYSURU UNIVERSITY
Syllabus
1.
Services Marketing: Meaning, Definition,
Nature and Scope – Characteristics of services – Classification of services –
Reasons for growth of Services – Role of Services in Economy.
2.
Marketing Mix for Services: Product, Price,
Physical distribution Promotion, People, Physical evidence, Process – Service
design and delivery.
3.
Service Failure and Recover: Service failure,
impact of service Failure and Recovery – types of customer actions – Guidelines
for effective service recovery system.
4.
Customer needs and expectations- Factors
Influencing customer behavior – service decision making process – Service
purchase and consumption – post purchase evaluation.
5.
Marketing of Other Services: Bank Services,
Tourism, Hotel, Insurance, Telecom and airline Services (nature and importance
only).
References:
1.
Marketing Services – Deepak Bhandari & Amit Misra
2.
Services Marketing – Valanic A Zeithaml & Ajay Pandit
3.
Services Marketing – Dr. Srinivasan
4. Dr. M.R.P. Singh
5. Prof. Harbhajan Bansal
Module 1 :-
Services Marketing
A service is an act or performance offered by one
party to another. They are economic activities that create value and provide
benefits for customers at specific times and places as a result of bringing
desired change.
Goods
- things you can touch - “tangible”
Services
– things you can’t touch - but you can see their effect “intangible”
services are not physical, they are intangible”
INTRODUCTION
In simple words,
services are deeds, processes, and performances. But, the increasing
interest in the services sector has been accompanied by considerable disagreement and debate as to what constitutes a service and whether service marketing is a distinctive subject area. In order to develop clarity on service as a concept,
it is
desirable to look at the way
various researchers and scholars have defined it over the years.
One of the first to define services was the American Marketing
Association which as early as in 1960 defined
services as “activities, benefits, or satisfactions which are offered for sale, or provided in connection with the sale of goods”. This definition took a very limited
view of services as it proposed that services are offered
only in connection with the sale of goods.
The other definition which was proposed
in 1963 by Regan suggested that “services
represent either intangible yielding
satisfactions directly
(transportation, housing
etc.), or intangibles yielding satisfactions
jointly when purchased either with commodities
or other services (credit, delivery, etc.)”.
In 1973 Bessom proposed that “for the consumer, services are activities offered for sale
that provide valuable benefits or satisfactions; activities that he cannot perform for himself or that he chooses not to perform
for himself”.
Kotler and Bloom
in 1984,
defined service as, “any activity
or benefit that one party
can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical
product”.
NATURE OF SERVICES
It is utmost important to explore the distinctive features of services,
because recognition of these
special characteristics will provide insights for enlightened and innovative
management. One reason
for the poor quality of service levels
across different service
industries is that managers
often tend to solve service
marketing problems with tools and techniques that are essentially meant for tangible
products. It happens because of inadequate understanding about the nature of services.
As our knowledge of the characteristics of services grows,
so does our ability to deal with them from both an
economic and marketing
perspective. Services have a number of unique characteristics that make
them
different from products.
Some of most commonly
accepted characteristics are as follows:
1.
Intangibility: The most basic
and universally cited characteristic of services is intangibility, because services
are performances or actions
rather than objects, they cannot
be
seen, felt, tasted, or touched in the same manner that we can sense tangible
goods. For example, when we buy a cake of soap, we can see, feel, smell and use to check
its effectiveness in cleaning. But, when we pay fees for a semester in the university, we are paying for the benefits of deriving knowledge, skills and education which is delivered
to us by teachers. Teaching is an intangible service. When we travel by a plane,
the benefit which we are deriving is a service (transportation) but, it has some tangible aspects such as the particular plane in which we fly (Boeing, Avro, Concorde,
etc.) and the food and drink
which are served.
2.
Inseparability: In most cases a service cannot
be separated from the person
or firm providing it. A service
is provided by a person who possesses a particular skill (singer,
doctor, etc.), by using equipment to handle a tangible product
(dry cleaning) or by allowing
access to or use of a physical infrastructure (hotel,
train, etc.). Services
are typically produced and consumed at the same time.
The relationship between production and consumption, therefore, dictates that production and marketing are highly integrated processes. The telephone company produces
telephone service while
the telephone user consumes it. A plumber has
to be physically present
to provide the service; the
beautician has to be available to perform the massage. The service
provider and the client
are often physically present when consumption takes place.
3.
Heterogeneity: Since services are performances, frequently produced by human
beings, no two services will be precisely
alike. The human element is very much involved in providing and rendering
services and this makes standardization a very difficult
task to achieve. The doctor who gives us complete attention
in one visit may behave a little differently in next visit. The new bank clerk who encases
our cheques may not be as efficient as the previous
one and we may have to spend
more time for the same activity. This is despite the fact that rules and procedures have been laid down to reduce the role of
the human element and ensure
maximum efficiency. Airlines,
banks, hotels, etc.
Services are heterogeneous across time, organizations, and people and as a result,
it is very difficult to ensure consistent service quality. Quality actually depends on many factors that
cannot be fully controlled by the service
supplier, such as the ability of the consumer
to articulate his or her needs, the ability
and willingness of personnel to satisfy those needs,
the presence (or absence) of other customers, and the level of demand for the service.
4.
Perishability:
Perishability refers to the fact that services
cannot be saved, stored, resold, or returned. Since services are deeds,
performances or acts whose production and consumption takes place simultaneously, they tend to perish in the absence of consumption. Goods can be stored and sold at a later date in the absence of a customer. Services, on the other hand, go waste if they are not consumed. A seat on an airplane
or in a restaurant, an hour of a professor’s time, or telephone line capacity not used cannot be reclaimed and used or resold at a later time.
A primary issue that marketers
face in relation to service perishability is the inability to hold
inventory. Demand forecasting and creative planning for capacity
utilisation are, therefore, important and challenging decision areas. The fact that services cannot typically
be returned or resold also implies a need for strong recovery strategies when things do go
wrong.
5.
No Transfer of Ownership:
When we buy a product, we become its owner-be it a pen,
book, shirt, TV or Car. In the case of a service, we may pay for its use, but we never own it. By buying a ticket one can see the evening film show in local cinema theatre; by paying the required charges we can have a marketing
research firm survey into the reasons for our
product’s poor sales performance, etc. In case of a service, the payment is not for purchase, but only for the use or access to or for hire of items or facilities; and transfer of ownership
does not take place.
6. Simultaneity: Services can’t be delivered to
customers or users. Services don’t move through the channel of distribution.
For availing the services, it is essential that the users are brought to the
providers or the providers go to the users. It is right to say that the
services have limited geographical areas.
7.
Quality
measurement:
The
quality of service requires another toll for measurement. We can’t measure it
in terms of service level. It is very difficult to rate or quantify the total
purchase. For example, we can quantify
the food served in a hotel but the way a waiter or a carrier services it or
overall environment or behavior of others staff can’t be ignored while rating
the total process. Hence we can determine the level of satisfaction at which
the users are found satisfied. A firm sells atmosphere, conveniences,
consistent quality, status, anxiety, moral ect.
8. Nature
of demand: While
going through the features of services, we can’t underestimate the factors
related to the nature of demand. Generally the services are found of
fluctuating nature. Particularly during the peak season, we find an abnormal
increase in the demand. For example, the mobility of passenger is found
increased, especially during the marriage season on during an important
festival. The tourists prefer to go the tourist spots or resorts especially
during summer when we find the weather condition stable.
Differences between physical
goods and services
|
Physical Goods
|
Services
|
|
A thing
|
An activity or process
|
|
Tangible
|
Intangible
|
|
Homogeneous
|
Heterogeneous
|
|
Production and distribution
are
separated
from consumption.
|
Production, distribution and consumption are simultaneous process.
|
|
Core value produced in factory
|
Core value produced in
buyer-seller
interactions.
|
|
Customers do not participate in the
production process.
|
Customer may participate
in the production
|
|
Can be kept in stock.
|
Cannot be kept in stock.
|
|
Transfer of ownership.
|
No transfer of ownership.
|
CLASSIFICATION OF SERVICE
The service
sector can best be characterized by its diversity. Service organisations range in size from huge international corporations in such fields as airlines, banking, insurance,
telecommunication, hotel chains,
and freight transportation to a vast array of locally
owned and operated
small businesses, including restaurants,
laundries, taxis,
and numerous
business to business services. Franchised service outlets- in fields ranging from
fast food to book keeping- combine the marketing characteristics of a large chain that offers a standardized product with local ownership and operation
of a specific facility.
Researchers have directed much attention
to the development of classification systems for services. Such classification schemes help service managers to cross their industry
boundaries and gain experience from other service
industries which share common problems and have similar characteristics. Solutions
to problems and breakthroughs in similar service industries
can then be applied by managers to their own service businesses. Ever since marketing
researchers started defining services,
they also proposed
their classification. The first
one was proposed
as early as 1964 and the last,
as late as 1989.
Summary of Proposed Schemes for Classifying Services (1964-1989)
|
Author
|
Proposed Classification
|
Comment
|
|
Judd (1964)
|
1.
Rented
goods services (right to own and
use a good for a defined time period)
2.
Owned
goods service (custom repair improvement of goods owned by the customer)
3. 3.Non-goods services (personal,
experience or “experiential
possession”
|
First two
are fairly specific but
third category is very broad and
ignores services such as
insurance, banking, legal
advice and accounting.
|
|
Zeithmel
(1974)
|
1. Type of seller
2. Type of buyer
3. Buying motives
4. Buying practice
5. Degree of regulation
|
No specific application
to
services could apply equally
well to goods
|
|
Shostack*
(1977)
|
Proportion
of physical goods and intangible
services contained
|
Offers opportunities for
multi attribute modelling.
|
|
Emphasises
Sasser et. al.* (1978)
|
within each
product “package”
|
That there
are few pure
goods or pure services.
|
|
Hill (1977)
|
1. Services
affecting persons vs.
those affecting goods
2. Permanent
vs. temporary
effects of service
3. Reversibility vs non-reversibility
of these effects
4. Physical effects vs. mental
effects
5. Individual vs. collective services
|
Emphasises nature of
service benefits and (in 5) variations in the
service delivery / consumption environment.
|
|
Chase (1978)
|
Primarily people-based
a. unskilled labour (e.g., lawn care)
b. skilled labour (e.g., repair work)
c. professional staff (e.g., lawyers, dentists)
|
Recognises that product varia-bility is harder to control in high
contact services because custo-mers exert more influence on timing of demand
and service features due to their greater involvement in the service process.
|
|
Kotler (1980)
|
Extent of customer contact required in service delivery
a. high contact (e.g., health care, hotels, restaurants)
b. low contact (e.g., postal service, wholesaling)
|
Synthesizes previous work, recognizes differences in purpose of
service organisation.
|
|
Lovelock (1980)
|
1. People
based vs. equipment based
2. Extent to which client’s presence necessary
3. Meets personal needs vs. business needs
4. Public vs. private, for-profit vs. non-profit
|
Synthesizes previous classifi-cation and adds several new schemes.
Proposes several categories within each classifi-cation. Concludes that
defining object served is most fundamen-tal classification scheme.
|
|
Schmenner (1986)
|
1. Degree of interaction and
Customisation
a. Low
b. High
2. Degree of labour
a. Low
b. High
|
Recognises that some services may be more customised and involve a
higher degree of labour intensity and may help the intensity reader to
understand the strategic and tactical options available.
|
|
Vandermerwe & Chadwick (1989)
|
1. Degree of consumer/ producer interaction
a. Lower
b. Higher
2. Relative involvement of goods
a. “Pure” services
b. Services with some goods or
delivered through goods
c. Services embodied in goods
|
Recognises the importance and role of goods components in service
business.
|
These classifications not only demonstrate
the diversity of services but also suggest
how important it is in a specific situation to carefully analyze the detailed
nature of the service
operation. The general characteristics of services remain unchanged irrespective of the nature of service business where the customer is always a person or group of persons; the service is perceived more or less intangibly, some kind of interaction between the customer and
some parts of the production system of the service provider-including personnel,
technology.
REASONS FOR GROWTH OF SERVICES
Manufacturing industries grew because they produced
tangible goods which satisfied
man’s physiological needs of food, shelter
and clothing. As the basic
need was fulfilled there was demand for improved satisfaction, and this led to a proliferation of variations of the same product and a number of companies involved
in its manufacture. The growth of
service industries can be traced to the economic development of society and the socio- cultural changes that have accompanied it. Changing
environmental forces brought out the various types of services
in forefront of the economy. These
environmental forces separately or in combination create new type of service. The following
environmental fac-
tors are responsible to make a new service.
(i)
Consumer affluence: Due to the fast rise in the income of consumers, they are attracted
towards the new areas like clubs, health
clubs, domestic services, travel and tourism,
entertainment, banking, investment, retailing, insurance, repairs, etc. and these are growing
much faster than ever before. There is a significant change in the pattern of family expenditure.
(ii)
Working
women: During the recent times a large number of women have come up in a
variety of professions. The work performance of women
in most of services sector
like bank, insurance, airlines,
etc. is highly appreciable. In short, women are getting involved in almost all male dominated activities. Due to increasing involvement of women in commercial activities, the services like domestic activities, fast food restaurants, marriage counselling, personal
care, financial services,
retailing, etc.
(iii)
Double
income no kids (DINK): Dinks are the working couples who have consciously postponed parenthood
plans indefinitely or in an increasing number of cases, have decided
not to have any children ever. The dink culture is getting stronger and spreading wider day
by
day. The realisation that parenthood is likely to result in more commitments at home and
demands on their time, thereby
slowing down their career plans and ambitions,
make them postpone
their parenthood plans. Whatsoever be their life style, they have double
income and no kids, resulting in the emerging and enhancing of services like, entertainment, hotels and restaurants, career institutes, domestic services,
travel resorts, personal care, etc.
(iv)
Leisure
time: People do get some time to travel and holiday, and therefore, there is a need for travel agencies, resorts,
hotels and entertainment. There are others who would like to
utilise this time to improve
their career prospects, and therefore, there is a need for adult
education, distance learning, part time courses,
etc.
(v)
Greater life expectancy: According to the World Development Report and World Human Resource
Index, the life expectancy of people has increased significantly
all over the world barring few developing countries. It may be due to the advancement in the medical technology, and greater awareness about health
and education.
Greater life expectancy invites opportunities in services like hospitals, Nursing Homes, entertainment, leisure services, investment banking
and so on.
(vi)
Product
innovations:
In the changing time the consumers have become more conscious of quality
than cost. They need high quality
goods at par with international standards. Having this in mind the manufacturers have focused
their attention on quality
improvement, innovations, etc. In this process
many more services have emerged on
account of product innovation. Some of them are servicing
services, repairs, computer,
training and development,
education, etc.
(vii)
Product complexity:
A large
number of products are now being purchased in households which can be serviced only by specialised persons water purifiers, microwave oven, computers,
etc, giving rise to the need for services. The growing product
complexities create greater demand for skilled specialists to provide maintenance for these complex products
and brings out other services
like expert advise,
consultancy services, etc.
(viii)
Complexity
of life:
Certain product and services have made human life more
comfortable and complex as well. Also, life itself has become more complex due to the
socio-economic, psycho-political, technological and legal change. This has brought
about the emergence of services like legal aid, tax consulting, professional services, airlines,
courier services, insurance, banking,
etc.
(ix)
New
young youth:
Every new generation has its own characteristics and enjoys a different life style. There is a lot of difference
between the generations in respect to their living conditions/ styles, maturity, thinking,
attitudes, behaviour, beliefs, satisfactions,
performance values and so on. Today’s
generation with all these changes provide
more opportunities to services like entertainment, fast food,
computers, travel, picnic
resorts, educational institution, counseling, retailing, etc.
(x)
Resource scarcity
and ecology: As the natural
resources are depleting
and need for conservation is increasing, we have seen the coming up of service providers
like pollution control
agencies, car pools, water management, etc.
(xi)
Corporate crowd: The phenomena of globalisation, privatisation and liberalisation
coupled with faster urbanization have created the corporate
world crowd and its support services. This crowd is responsible in bringing the new services, and redefining the old
ones. The services
like hotels and restaurants, banking, insurance, travel and tourism,
advertising, airlines, courier
services, marketing research,
health care, legal services, etc. will emerge and flourish more and more.
ROLE OF SERVICES IN ECONOMY
There is a growing market for services and increasing dominance of services in economies
worldwide. Services are a dominant force in countries
around the world as can be seen in the
global feature.
The tremendous
growth and economic contributions of the service
sector have drawn increasing attention
to the issues and problems of service sector industries. There was a time when it was believed that the industrial revolution was the only solution
to the problems of poverty, unemployment and other ills of society. Now, however, the service sector promises to fulfill the task. Services
touch the lives of every person every day whether
it is in the field of food services,
communication, leisure services, maintenance services, travel,
amusement parks, to name only a few.
Services are increasingly being used by the corporate
as well as the household
sector. This emphasis on
services and its increasing use has not happened
overnight - it started in the twentieth
century especially after the end of World War II. Due to large scale destruction during the war,
a lot of economic activities had to be carried out to bring the war torn economies back on road.
World War II marked as milestone
in the explosive rise of service industries. Throughout the second half of the twentieth
century services industries have attained considerable growth in most western
nations. After Green Revolution and Industrial
revolution, the next possible popular revolution will be in the field of service sector.
In Green revolution the man learnt to use, exploit and interact with nature (i.e., land and
natural resources). In Industrial revolution man learnt
to use, exploit
and interact with equipment’s and machines
for development. In case of services, man is learning to use,
exploit and interact with other man-made resources for development.
In the present day world the service
sector is growing
at a phenomenal rate and termed as
‘sunrise sector of the economy’. Table depicts the share of services
in GDP as compared with agriculture and industry dividing the world in three groups; low income, middle
income and high income.
Table Share of Service Sector
in GDP
Major Sector Players
(in percentage)
Agriculture Industry Services Total
Low Income 25 39 36 100
Middle Income 12 36 52 100
High Income 02 32 66 100
World Total 05 32 63 100
Source: World Bank, World Development Report 1997.
There is another report mentioned
in Table which clearly indicates
the increasing trend of services in GDP in most of the
cases among the Asian Nations.
Today service industries are the source of economic leadership. Many developed countries are now termed as service
economy. Table depicts the percentages
of Gross Domestic Product by industry of origin for some selected countries
representing both developed
and developing economies for
1999.
GDP by Industry of Origin in 1999 (in percentage)
|
Country
|
Agriculture
|
Industry
|
Services
|
|
USA
|
2
|
26
|
72
|
|
UK
(1998)
|
2
|
31
|
67
|
|
France
|
2
|
26
|
72
|
|
Mexico
|
5
|
27
|
68
|
|
Republic of Korea (1998)
|
6
|
43
|
51
|
|
Brazil
|
9
|
29
|
62
|
|
China
|
17
|
50
|
33
|
|
Indonesia
|
20
|
45
|
35
|
|
India
|
28
|
25
|
46
|
Raising the standard of living of people through
services; service sector
may well symbolise the third and possibly the most important
revolution of recent times. The standard of living of people will not increase only through capital
formation, economic
transformation and national income, indeed it is also important that masses are aware of the living style and behaviour. Service sector creates and expands job opportunities.
Percentage of Employment in Service
Jobs
|
Countries
|
|
|
Year
|
|
|
|
|
|
1980
|
|
1991
|
1996
|
|
USA
|
67.1
|
|
71.0
|
|
80.0
|
|
Canada
|
67.2
|
|
70.8
|
|
73.8
|
|
Belgium
|
64.3
|
|
70.1
|
|
73.3
|
|
Australia
|
64.7
|
|
69.7
|
|
73.3
|
|
UK
|
60.4
|
|
67.7
|
|
70.0
|
|
Israel
|
63.3
|
|
66.0
|
|
69.3
|
|
France
|
56.9
|
|
63.6
|
|
65.7
|
|
Finland
|
52.2
|
|
60.1
|
|
64.7
|
|
Japan
|
54.5
|
|
58.1
|
|
60.3
|
|
Italy
|
48.7
|
|
57.7
|
|
60.1
|
|
India
|
20.2
|
|
22.4
|
|
37.6
|
Looking at the trend of growth of service
sector it may be concluded that future belongs to services.
SERVICES IN INDIA
Services lie at the very hub of economic activity
in any society. Our welfare and the welfare of our economy
are now based
on services. Almost all countries of globe look interested in utilizing this sector
of the economy. For the developing countries like India,
the need of the hour is to assign due weightage to the development of service sector. The service sector is assuming
increasing importance in the Indian
economy.
In the recent past, we have seen the transition from agrarian
nature of economy to agro-
based industry to industrial growth,
now we tend to think
in terms of developing the service sector. Probably
it is because this sector can create more jobs at a low cost. Service
sector has significant contribution for income generation and employment creations. In India,
service sector is one of the fastest growing sectors
today. It provides
more than 55 per cent of the jobs and about 40 per cent export is from service sector. The service sector dominates the Indian economy today, contributing more than half of our national income.
SELF ASSESSMENT QUESTIONS
1.
What do you mean
by services? How
do
services differ from products?
2.
Do you think that classification of services helps in developing the marketing
strategy better? How?
3.
Discuss the important characteristics of services with suitable examples.
4.
Discuss the reasons
of growth of service sector.
5.
Write a detailed note on role of service
sector in economy.
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