MARKETING APPLICATIONS

Session 1

Some FACTS

Wal-mart is in the list of Fortune 500 GE derives almost 40% of its revenue from services In India service sector contributes 56% of GDP

Services dominate the United States Economy: GDP by Industry, 2001

Agriculture, Forestry, Mining, Construction 8% Manufacturing 14% Finance, Insurance, Real Estate 20% Wholesale and Retail Trade 16% Transport, Utilities, Communications 8%

Government (mostly services) 13% Other Services 11%

SERVICES

Business Services 5%

Health 6%

Source: Bureau of Economic Analysis, November 2002

Fastest growing services

Health care Higher education Entertainment Financial

New Generation services

Management consultancy Computer maintenance Recruitment services Management training Value-added telecom services Call centre/BPO

What is a SERVICE ?

A service is any act or performance one party can offer to another that is essentially intangible & does not result in the ownership of anything.

Its production may or may not be tied to a physical product

Defining the Essence of a Service

An act or performance offered by one party to another

An economic activity that does not result in ownership A process that creates benefits by facilitating a desired change in:

customers themselves

physical possessions
intangible assets

Distinguishing Characteristics of Services

Customers do not obtain ownership of services

Service products are ephemeral and cannot be inventoried Intangible elements dominate value creation Greater involvement of customers in production process Other people may form part of product experience Greater variability in operational inputs and outputs Many services are difficult for customers to evaluate Time factor is more important--speed may be key

Delivery systems include electronic and physical channels

Growth Factors

Economic,socio cultural & life style change Women taking up jobs Explosion of IT sector Advent of many new technical products Reforms & liberalization

Tasks involved

Understanding the nature of services Understanding the customer & his expectations Giving a shape to service Organizing delivery system Pricing strategy Promoting the services Extended marketing mix-7P`s Differentiation Quality & satisfaction

Differentiation parameters

Time Special offerings People Physical evidence Convenience

Marketing Scenario
Company

Internal Marketing

External marketing

Employees Interactive Marketing

Customers

Elements of The Services Marketing Mix: 7Ps vs. the Traditional 4Ps
Rethinking the original 4Ps

Product elements Place and time

Promotion and education

Price and other user outlays

Adding Three New Elements

Physical environment
Process People

The 7Ps: (1) Product Elements

All Aspects of Service Performance that Create Value

Core product featuresboth tangible and intangible elements Bundle of supplementary service elements Performance levels relative to competition Benefits delivered to customers (customers dont buy a hotel room, they buy a good nights sleep) Guarantees

The 7Ps: (2) Place and Time

Delivery Decisions: Where, When, and How

Geographic locations served Service schedules Physical channels Electronic channels Customer control and convenience Channel partners/intermediaries

The 7Ps: (3) Promotion and Education

Informing, Educating, Persuading, and Reminding Customers

Marketing communication tools

media elements (print, broadcast, outdoor, retail, Internet, etc.) personal selling, customer service sales promotion publicity/PR branding

Imagery and recognition

corporate design
information, advice persuasive messages

Content

customer education/training

The 7Ps: (4) Price and Other User Outlays

Marketers Must Recognize that Customer Outlays Involve More than the Price Paid to Seller
Traditional Pricing Tasks

Selling price, discounts, premiums Margins for intermediaries (if any) Credit terms

Identify and Minimize Other Costs Incurred by Users

Additional monetary costs associated with service usage (e.g., travel to service location, parking, phone, babysitting,etc.)
Time expenditures, especially waiting Unwanted mental and physical effort

The 7Ps: (5) Physical Environment

Designing the Servicescape and providing tangible evidence of service performances

Create and maintaining physical appearances buildings/landscaping

interior design/furnishings vehicles/equipment staff grooming/clothing sounds and smells other tangibles

Select tangible metaphors for use in marketing communications

7Ps: (6) Process

Method and Sequence in Service Creation and Delivery

Design of activity flows Number and sequence of actions for customers Providers of value chain components

Nature of customer involvement

Role of contact personnel Role of technology, degree of automation

The 7Ps: (7) People

Managing the Human Side of the Enterprise

The right customer-contact employees performing tasks well job design

recruiting/selection

training
motivation evaluation/rewards empowerment/teamwork

The right customers for the firms mission fit well with product/processes/corporate goals

appreciate benefits and value offered possess (or can be educated to have) needed skills (co-production) firm is able to manage customer behavior

Managing the 7Ps Requires Collaboration between Marketing, Operations, and HR Functions

Operations Management Customers

Marketing Management

Human Resources Management

The search for customer loyalty

Targeting, acquiring & retaining the right customers is at the core of many successful service firms. All businesses aspire to have a database of loyal customers.
Loyalty is described as a customers willingness to continue patronizing a firm purchasing & using its goods & services on a repeated & preferably exclusive basis & recommending the firms products to friends & associates.

What Makes Loyal Customers More Profitable?

Tend to spend more as relationship develops

customers balances may grow may consolidate purchases to one supplier Cost less to serve

less need for information and assistance make fewer mistakes Recommend new customers to firm (act as unpaid sales people or Customer Advocates)

Trust leads to willingness to pay regular prices vs. shopping for discounts

Franchising
Franchising has become a popular way to expand delivery of all 7Ps to multiple sites

Resources are limited

Long-term commitment of store managers is

crucial

Local knowledge is important

Fast growth is necessary to pre-empt competition

The 7 S Framework
Strategy Structure Shared Value Style System

Staff Skills