Course Outline: Services Marketing
Full Credit Course: 16 Sessions for PGPM 913 : Prof S K Palekar: 2014
Who Is The Course For
Services are the largest sector in the GDP of any nation and in India the services account for more than 50% of the GDP. The remaining pie is divided between manufacturing and agriculture. Services are everywhere. They get offered as a separate product and get paid separately like the pest control service. They are also offered in a bundled form like your going to a restaurant because you do not know how much is for the food and how much is for the ambiance and the service. You do not even know that you are purchasing services when you buy a computer - the advertising that is necessary to sell the product, the transportation and distribution that brings the product from China to the shop where you reach, the display and explanation provided by the retailer - are all services used by you but paid for by the manufacturer. Being so ubiquitous, you must understand how services need to be marketed and it is indeed very different from the marketing of physical products because the services do not have the touch and feel qualities that a product has.
What Will Be Covered
The course has 16
sessions divided into 8 modules : 2 sessions per module. Normally each module
will have a case given in advance so that two groups can present it to the
class. We shall be studying both B2C and B2B services.
We shall use the
case as an anchor around which specific concepts can be learnt.
The course will focus
on “vital few lessons” to be learned in the marketing of services and we will
try and strike a Of course the text book given to you has an ample coverage of
the topics and will satisfy your curiosity for more.
Cases
Expectations From The Students
The students are expected to come to the class after reading and
preparing as stated. During class the use of cell phones is prohibited.
Students should arrive in time, pay attention to the class and participate in
the discussions. If anyone wants to speak, s/he must raise a hand and speak
only when asked. You are encouraged to
bring reality into the class from your past experiences, from your market
visits and from reading newspapers and journals.
Course Evaluation
Terminal Examination 40%
weight
Case Presentations in class 20%
weight
Summarization assignment 20%
weight
Class Participation & Attendance 20%
weight
The COCO will divide this class into 4 groups called 1,2,3
and 4. While two groups present the case assigned, the remaining two will write
the class summaries.
Course Outline
- Module 1 (2 sessions ) Case : Dushyant Corporate Trainers
( B2B Educational Service )
Concepts : The triangle of Service Management
Concepts : Who designs / manages / improves the service - Module 2 ( 2 sessions ) Case : HUL vis-v-vis ICICI Bank
( Product vs services )
Concepts : Introduction to services management
Concepts : How is value created, how the costs are incurred - Module 3 ( 2 sessions )Case : Wallace Fort Hotel ( B2C Hospitality service )
Concept : Classification of services
Concept : how servicescape impacts service - Module 4 ( 2 sessions )Case : Coimbtore Financial Corporation
( B2B loans service )
Concept : Managing of people in services
Concept : How is performance is measured in services - Module 5 ( 2 sessions )Case : Surprise case / questions from the class
Q/A on summary so far - Module 6 ( 2 sessions ) Case : Forbes Facility Services
( B2B housekeeping service)
Concept : End-to-end demonstration of selling B2B service
Concept : Expectation and Performance of Service - Module 7 ( 2 sessions )Case : Dr Miroo Carpenter Eye Clinic ( B2C Professional Service)
Concept : Service Design
Concept : Service Blue printing - Module 8 ( 2 sessions )
Case : Xedtronic Pacemaker ( B2B medical devices )
Concept : Communication in service
Concept : Encounters and scripts and emotional labour
Each group should
have a maximum of 5 slides and they should be pre-loaded on the class PC desktop
before the class begins so that no time is wasted in connecting etc.The 1st
slide should have the group number & the names of the participants. Just
filling up the slides and time by repeating what is in the case is a waste of
time. Hence, show your understanding, interpretation. Focus on what action is
needed in specific terms. The time allotted for the presentation by each group
is 10 minutes only. The instructor will choose which person (only one) will
make the presentation. Hence all should be prepared to make the presentation. All
members of the group who are present in the class from the beginning will get
equal marks. People who are absent or who come later will not get these marks.
How to do class
summaries
The students need to
write – and submit to the instructor at the end of the class – a handwritten
summary of what they learnt in the class in their own words. This will be
a group assignment.
Module 1 ( September 1, 2014 )
INTRODUCTION
Before the case discussion explained "why all costs are ultimately labour costs" and then we studied 3 sectors of economy and how do they work.
- Agriculture / Cultivation / Growing : the differentiation is due to genetic and biological differences (better seeds, better animals to breed, better cows to milk) and due to ecological conditions (soil, climate). In both the cases, the idea lies in "selecting" the right seeds and right soil etc. The importance of materials (fertilizers) and of people is not as much. And of course the timing has to be right. As you can see, managers cannot create many important factors in agricultural (except through breeding and selection). The increase in the output is through better genetics, better selection and better timing. The pace of value creation is decided by nature and cannot be speeded up.
- Manufacturing : the differentiation is due to specifications of materials and how they are processed through machines and methods. These main value creators are supported by people : low level people operate machines and high level people operate the system. The increase in the output is through more machines and procuring more materials and creating more mfg facility and better technology. The value production can be speeded up.
- Services : the main value creators are how individual customers are serviced in a customized way through front line service providers. Since what is expected and also what is expected is never objective and specific it is important that the expectations and delivery matches. The value is created mainly through people assisted by the servicescape, process, location. The pace of value creation depends on the extent of availability of trained manpower.
As you can see, the way to manage these three sectors of economy is very different. Most of the management literature has developed based on "Industrial revolution" in manufacturing. That is why you need to study services separately.
As society gets more prosperous, citizens climb up the Maslow’s hierarchy of needs and the services sector becomes more important because the products normally lie at the bottom of the hierarchy (Physiological Needs).
In use, people combine products with services because they need solutions. You may be making only products but the customers use solutions.
Dushyant Case
Group 1 and 2 presented "Dushyant". Even the class agreed that Group 2 presented far better than Group 1. Group 2 gets 9 our of 10. Group 1 gets 6 out of 10.
Instead of the question asked in the case "What should Dushyant and Dinesh do?"; we flipped the question and asked what did they not do all along ?
The class did not apply the marketing model : was there a profit and was there a customer satisfaction? It is clear that there is no profit but why there was no measurement of student satisfaction, trainer satisfaction, repeat batches, references?
Why there is no evidence of "strategy" ( conscious selection of market, value proposition, connection) ? Why there is no evidence of "situation assessment" ? What questions could have been asked about the strategy and about the situation assessment?
Finally, how come a very good trainer himself could not develop an organization to impart the kind of training he knew how to do? Herein lies a very important principle of services management : since much of the service value happens between the frontline service providers and the customers; the management cannot do much except to keep the front line ready to meet and serve customers properly. Service marketing seems like training or HR because the route to the customer is through the frontline.
Conceptual Discussions
Took example of Ciez car launch in 2014. The (strategy) specs must have been finalized in 2012 and the situation assessment must have happened in 2011. The marketing process must have involved a lot of time of many senior managers, many deliberate meetings and iterations. In product business the top management gets a chance to get extensively involved in satisfying the customer through the "value in the box".
On the other hand, the customer in service business needs to be satisfied on the fly, in real time and when no support and managerial staff are present - and even if they are, they cannot intervene and help - and the service provider needs to undertake DDDDD alone and on the spot and get it right the first time. There is no time to iterate or rework because everything is happening when the customer is watching how he is served. (Discover, Diagnose, Design, Deploy and Deliver).
TRIANGLE OF SERVICE BUSINESS
Service business is much more front line dependent than the product business. In services the machines help the people. In products it is the opposite. In services business the people need to be set right. In product business the machines need to be set right.
MARKETING MIX IN SERVICE BUSINESS
Product Marketing Mix has 4 Ps but for services there are 3 additional Ps ( People, Process and Proof). The "Proof" is also called as "Physical Evidence".
- - - - - -
We
began touching the subject of how service businesses are organized differently.
We continue from there…
---------------------------------------------------------------------------------------------------------
INTRODUCTION
Before the case discussion explained "why all costs are ultimately labour costs" and then we studied 3 sectors of economy and how do they work.
- Agriculture / Cultivation / Growing : the differentiation is due to genetic and biological differences (better seeds, better animals to breed, better cows to milk) and due to ecological conditions (soil, climate). In both the cases, the idea lies in "selecting" the right seeds and right soil etc. The importance of materials (fertilizers) and of people is not as much. And of course the timing has to be right. As you can see, managers cannot create many important factors in agricultural (except through breeding and selection). The increase in the output is through better genetics, better selection and better timing. The pace of value creation is decided by nature and cannot be speeded up.
- Manufacturing : the differentiation is due to specifications of materials and how they are processed through machines and methods. These main value creators are supported by people : low level people operate machines and high level people operate the system. The increase in the output is through more machines and procuring more materials and creating more mfg facility and better technology. The value production can be speeded up.
- Services : the main value creators are how individual customers are serviced in a customized way through front line service providers. Since what is expected and also what is expected is never objective and specific it is important that the expectations and delivery matches. The value is created mainly through people assisted by the servicescape, process, location. The pace of value creation depends on the extent of availability of trained manpower.
Activity
|
Key Inputs
|
Manufacturing
|
·
Material
·
Process
·
Machine
·
People
|
Agriculture
|
·
People
·
Seed (DNA)
·
Soil (climate)
·
People
|
Services
|
·
People
·
Process
·
Equipment
·
Location
|
As you can see, the way to manage these three sectors of economy is very different. Most of the management literature has developed based on "Industrial revolution" in manufacturing. That is why you need to study services separately.
As society gets more prosperous, citizens climb up the Maslow’s hierarchy of needs and the services sector becomes more important because the products normally lie at the bottom of the hierarchy (Physiological Needs).
In use, people combine products with services because they need solutions. You may be making only products but the customers use solutions.
Dushyant Case
Group 1 and 2 presented "Dushyant". Even the class agreed that Group 2 presented far better than Group 1. Group 2 gets 9 our of 10. Group 1 gets 6 out of 10.
Instead of the question asked in the case "What should Dushyant and Dinesh do?"; we flipped the question and asked what did they not do all along ?
The class did not apply the marketing model : was there a profit and was there a customer satisfaction? It is clear that there is no profit but why there was no measurement of student satisfaction, trainer satisfaction, repeat batches, references?
Why there is no evidence of "strategy" ( conscious selection of market, value proposition, connection) ? Why there is no evidence of "situation assessment" ? What questions could have been asked about the strategy and about the situation assessment?
Finally, how come a very good trainer himself could not develop an organization to impart the kind of training he knew how to do? Herein lies a very important principle of services management : since much of the service value happens between the frontline service providers and the customers; the management cannot do much except to keep the front line ready to meet and serve customers properly. Service marketing seems like training or HR because the route to the customer is through the frontline.
Conceptual Discussions
Took example of Ciez car launch in 2014. The (strategy) specs must have been finalized in 2012 and the situation assessment must have happened in 2011. The marketing process must have involved a lot of time of many senior managers, many deliberate meetings and iterations. In product business the top management gets a chance to get extensively involved in satisfying the customer through the "value in the box".
On the other hand, the customer in service business needs to be satisfied on the fly, in real time and when no support and managerial staff are present - and even if they are, they cannot intervene and help - and the service provider needs to undertake DDDDD alone and on the spot and get it right the first time. There is no time to iterate or rework because everything is happening when the customer is watching how he is served. (Discover, Diagnose, Design, Deploy and Deliver).
Product
|
Services
| |
Discover
|
Management
|
Employee
|
Diagnose
|
Management
|
Employee
|
Design
|
Management
|
Employee
|
Deploy
|
Employee
|
Employee
|
Deliver
|
Employee
|
Employee
|
TRIANGLE OF SERVICE BUSINESS
Service business is much more front line dependent than the product business. In services the machines help the people. In products it is the opposite. In services business the people need to be set right. In product business the machines need to be set right.
MARKETING MIX IN SERVICE BUSINESS
Product Marketing Mix has 4 Ps but for services there are 3 additional Ps ( People, Process and Proof). The "Proof" is also called as "Physical Evidence".
- - - - - -
MODULE 1 : VALUE CREATION : PERSPECTIVE : In a service business like
Dushyant’s what did they not do? The answer is that they focused mainly on the
financial dashboard but they did not “open the engine” and asked the real
questions related to value creation. Because the two outputs of marketing
(profit for the company and the satisfaction for the customer) arise out of the
very basic and fundamental question of “whether the value (willingness to pay) is
getting created for the customer from the costs incurred by the company”. Show the
marketing chart as consisting of “value” as an output, the starting point as
the “value for whom and his circumstances” and the main body of marketing as “value
creating mechanism”. The value creating mechanism in products resides in the
whole organization where the value (which is embedded in the boxed products) is
created very deliberately with inputs from experts and over a period of time. In
the development of value creating products, there may be input taken from the
customer but customer is not on the premises to guide the value creation
exercise because what is sought to be developed is a standard product made to
stock. In services the input from the
customer is much more direct : he is present at least a part of the process if
not during the whole time – and the service needs to be created by the
frontline staff without any expert help or without getting time to study much
because the service is provided in real time on-line. Thus the aim of the management
of the service business is not to directly produce end-service but to create
front liners who will be able to produce value for their customers while
directly interacting with them. This is called as the triangle of service
management.
MODULE 2 : VALUE CREATION :
INPUTS FROM THE BUSINESS : We studied the business models of HUL and ICICI Bank
to understand if it is possible to infer from the annual report whether it is a
product business. By and large it can be concluded that the product business is
oriented towards purchasing materials and transforming their form and then
transporting them to the customers or to the outlets from where the customers
will pick them up. Products are standardized and manufactured in advance and
inventory is kept in various places to meet the anticipated customer demand. Service
is a customized business and needs customer interaction for which the customer
travels to the service location (or vice versa sometimes) where service
providers and servicescape is ready to serve them. Since the customers deal
directly with you in the service business there is far more variation and –
instead of inventory – capacity and a bench of providers is kept ready to serve
to meet the customer demand. In product business there is a problem of “Excess
Inventory or lost sales”. In service business there is a problem of “Excess
capacity or lost sales” problem. Capacity management is a big issue in
services.
After seeing all of this, we understood that there is no “pure product”
or “pure service” business. In reality each business is a combination of both
because ultimately the customers demand a solution (products plus services coming
together). Even for a seemingly product company like HUL, their job is not only
to make soap but services like transportation, stocking, displaying, selling
and advertising must be added to the soap to make it sell. Same thing for
Cummins, the fishermen will not buy the diesel engines for mechanizing their
boats unless someone creates awareness, generates referrals, appoints service
centers, gives demonstrations, provides sources of finance .. all of these are
services.
---------------------------------------------------------------------------------------------------------
8 Differences :
High & Low Contact Services
High & Low Contact Services
HIGH CONTACT
|
LOW CONTACT
| |
Location
|
CUSTOMER -CENTRIC LOCATION : Needs to be located close and convenient for the customers
|
WORK-CENTRIC LOCATION :
Needs to be where factors of production like land, labor and materials
are close and cheap. It should be close and convenient to the employees
and suppliers.
|
Facility Layout
|
CUSTOMER -CENTRIC LAYOUT :It
should be based on how the customers behave : how they like to
approach, enter, wait, be served and leave. It should be also easy for
the employees to serve the customers. It needs to presentable. The
rhythm will be dictated by the customers' arrival and pace.
|
WORK-CENTRIC LAYOUT :
This layout should enable the work to get done easily. Generally the
customer will not be present when such work is done and hence the rhythm
of work can be scheduled in batches.
|
Quality Control
|
CUSTOMER-DEFINED QUALITY METRICS : Since
the customer is present, the quality cannot be measured against
industry standards, but against customers' expectations. These
standards are subjective and hence variable. Therefore the main standard
is whether the customer is satisfied. This may mean you need to change
the people and the processes as the customers change.
|
STANDARD METRICS : Because
the customer is not present, the standards can be more objective, You
can benchmark yourself against industry standards. You can correct
defects and rework is possible.
|
Capacity
|
NEED MORE IDLE CAPACITY : Excess capacity is required to handle peaks in
demand
|
NEED LESS IDLE CAPACITY : Can be planned for the average demand
|
Front Line Worker Skills
|
HUMAN AND DOMAIN SKILLS : Must be able to interact well with customers and use judgment in decision making
|
ONLY DOMAIN SKILLS : Technical Skills
|
Rhytham
and Schedule |
CUSTOMER PRESENCE MAKES SCHEDULING DIFFICULT : Essentially depends on the customer who is present on the premises and forces his pace and schedule on the service.
|
CUSTOMER ABSENCE MAKES SCHEDULING EASY : The customer is concerned mainly with the end date and is not present on the premises hence the rhythm can be set to a schedule.
|
Service Process
|
DRIVEN BY CUSTOMER :Driven
by the customer and consists mainly of the front-end activity.
Service may change during delivery in response to customer.
|
DRIVEN BY INTERNAL CRITERIA AND SCHEDULE : Driven by batching and internal criteria. Not much interference from the customer.
|
Service Offer
|
MORE RANGE : More variations may be needed
|
LESS RANGE : Fixed, less extensive
|
It is clear that the "cost to serve" per person is higher in high contact service.
High contact service is effective (satisfying) but not efficient
High contact service needs "broad band" providers and deft handlng
High contact service difficult to scale up
High contact service is effective (satisfying) but not efficient
High contact service needs "broad band" providers and deft handlng
High contact service difficult to scale up
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