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Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai

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This document discusses services marketing and provides definitions and classifications of services. It introduces the 7 Ps marketing mix framework that is commonly used for services marketing. The 7 Ps include the traditional 4 Ps of product, price, place and promotion, as well as people, physical evidence and process. Services are discussed as being intangible, inseparable, variable, and perishable. Demand and supply management strategies for services are also covered, such as predicting demand, managing demand through various approaches, and managing supply through employee scheduling or subcontracting.

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SERVICES MARKETING PREPARED BY Dr.M.S.Balaji Associate Professor and Head Department of Business Administration Sourashtra College(Autonomous) Madurai-625004
Unit - I SERVICES MARKETING
Meaning ofService ⚫According to Kotler “ a service means any act or performance 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 typed to physical product.” ⚫According to Standon “Services are identifiable, intangible activities that are the main object of transaction designed to provide want satisfaction to customers”. This definitions exclude supplementary service that support the sale of goods or other services.
⚫Philip Kotler identifies 4 types of activities to recognise goods & services. 1. Pure product which has no service factor associated with them. E.g. Soap, Salt 2. Products with which services are or associated . E.g. Computers 3. A main service accompanying with minor services such as Train Journey 1st class A/C service. 4. A pure service E.g. Play home. ⚫This classification tells that “Services vary considerably over a range of factors including whether they are directed at business or individual consumers whether they require a customers physical presents and whether they are equipment intensive or people intensive.
Types of Service Types are classified on the basis of activity performance. The various types are as follows, 1. Marketable (Charged) Vs Unmarketable (Uncharged) 2. Producer services Vs Consumer services 3. The magnitude of the service in the product. a) Pure service b) Independent service added to the product c) Add value to the product 4. Degree of consumer participation More Less 5. Service based Continuous supply Casual supply 6. Machine oriented Vs Person oriented
Types of Service Based on the multi-dimensional approach the following services are identified 1. Transportation services. 2. Distribution services. 3. Financial services ( Banking & Insurance ) 4. Real estate services. 5. Communication and information services (Telecommunication & informational). 6. Public Utility & Government services. E.g. Public Welfare Department(PWD), Corporation, Municipal service, Panchayat service. 7. Defence services.
8. Educational service. 9. Hospitality services (Hotels, Tours & Travels) 10. Health care services (Hospitals & health insurance) 11. Legal services (Lawyer services, Auditor services) 12. Personal care services. 13. Professional care services (Consultancy & Projects) 14. Other non profit services.
Nature & Characteristics ⚫Goods Pre-production Marketing Production Post-production Marketing Consumption Create Consumer Induce Trail Demonstrate benefits Build Brand Preference Word of mouth communications Strong influence Weak influence
Nature & Characteristics ⚫Services Pre-production Marketing Post Production Marketing 7 P’s Production Consumption Create Consumer Induce Trail Demonstrate benefits Build Brand Preference Word of mouth communic ation Strong influence Weak influence
Characteristics of Services 1. Intangibility 2. Inseparability 3. Variability or Heterogeneity 4. Perishability 5. Ownership 1. Intangibility: The properties of service cannot be tasted and examined before purchase. The purchase is based on belief like reliability, personal care etc. The attributes of this service can be experienced only when it is availed. These forces problems to customers which are discussed below.
Problems to customers 1. Not possible to evaluate the competing services. 2. Quality of service can be assessed only by price. 3. Personal information has to by considered to accept or reject the services. 4. There is a perceived high level of risk involved. Hence tangible evidences like brochures, leave lets etc has to provided to reduce the customer uncertainty.
2. Inseparability ⚫In goods production and consumption in depend in nature. Producers produces in mass production. Therefore the benefit of scale of economy is availed. Under services production and consumption are inseparable. There is an active participation on the part of the consumer along with service provider in the process of product. The benefit can be realised only after the purchase of the services. E.g. Teaching, Lawyer & Auditor’s services. ⚫Hence consumer play an active participation and significant role during production.
3. Variability orHeterogeneity ⚫Service varies from customer to customer because of varied needs as inspections is not possible and hence service organisations are highly worried about quality control. ⚫Causes of Variation:  Production of service commences only at the time of consumption.  There is no chance to correct mistakes in services.  Type of service to be provided depends upon the customer needs.  It is not easy to fix standard service procedures.
⚫Effects: High response is there on the part of consumer. Consistent quality of service cannot be provided. Strong service brand cannot be developed. Solution: a) Simplify the service procedures. b) Mechanise the service operations wherever possible.
4. Perishability ⚫Products like machines, soaps can be stored but services like Room service, Flight service, Railway services cannot be preserved. ⚫Hence services are perishable in causes rate concern to service provider to maintained continuous demand. The loss from service can be overcome by price and promotion tools only.
5. Ownership ⚫Another feature of service is that ownership cannot be transferred as in the case of products. Service provider sell their service and consumer consumes it. ⚫Hence the consumer cannot own the service provided by the service providers.
Classification of Services ⚫Service type are classified on the basis of the activity performed by the service industry. The various classification are as follows. 1. Classification based on Ultimate user:- Book Service can be classified into the following categories: a) Consumer: Services which are directly provider to consumer to leisure, hair dressing, holidays, dry cleaning, laundry, package. b) Business to Business: advertising agencies, printing, accountancy, consultancy, photographic processing which provide service to business operation. c) Industrial: Plant maintenance & repair, installation. Project management.
2. Classification based on the level of Tangibility: The degree of tangibility of services can be used to classify services. a) Highly Intangible: E.g. Car, rental. Vending machines, telecommunications, b) Service linked to tangible goods: E.g. Domestic appliances repair, automobile services to enhance consumer appeal. c) Highly intangible: The offer consists of service like consultancy, legal service, psychotherapy, baby sitting, etc...., d) Major service linked with minor tangible goods services: E.g. Airline passenger buying transportation services without anything tangible to show for their expenditure.
3. Classification based on service option: service can be labour-intensive (People based) and equipment based services this can also be represented by the degree of conduct. a) People based services: high conduct clients presence with people. E.g. Educational institutional, medical services, restaurants, etc..., b) Equipment based Low conduct: Low conduct with people. E.g. Cinemas,Vending Machines (ATM) This classification implies that the higher the two dimensions, the greater the need for attention to the performance aspects of the service, specially if the audience is one place during the performance. E.g. Restaurant
4. Classification based on specialisation: The expertise and skill of the service provide can be dividend into the foreign characteristics. a) Professional services: E.g. Medical services, legal services, accountancy, etc..., b) Non-Professional services : Care taking services, casual labour etc.
5. Classification based on Profit orientation: The overall business orientation is a recognised means of classification. a) Non-profit orientation: Educational institutions like Government Schools and Colleges, Universities, Cultural organisational like orchestras, Zoos, Museums, Theatre groups, religious institutions like Temples, Churches etc, Philanthropic activities like welfare groups, Redcross research foundations, Oldage homes, organisations for social cause for cancers, environmental concerns, civil rights and civil clubs. Health care organisations like hospitals, health research organisations, World Health Organisation, Political activities by political parties or individual politicians. Government is also in the business of providing services although the extend of such involvement may vary widely from one country to another depending on traditional and political value.
b) Commercial or profit orientation: Banks, Airline tour operator's, hotel and Catering Services in this type of firms the orientation is to earn profit. 6. Classification based on External-Internal services to manufacturers: External Services: Many services are concerned with the distribution installation and upkeep of physical objects they include car repairs, landscape maintenance, computer installation etc. Internal Services: Covers a wide range of activities including recruitment, publications, legal services, payroll administrations, office cleaning, internal transport etc, if the same services are provided by the outside agencies it becomes external service. Thus it is highly difficult to classify the service sector as there are hidden services in this sector as Levitt puts there is no such things as service industries. There are only industries whose service components are greater or less than those of other industries everybody his in services.
7. Classification based on Customer – employee presence: Service organisations can be classified on the basis of presence of customers and employee during the service. They are a) Self Service: In this type of organisation we can find the presence of customer only. E.g. ATM, Self service restaurants etc..., b) Inter Personal Services: In this type of organisations there will be presents of both customer and employee. E.g. Educational institution. c) Remote Services: In this type of organisations there will presents of employee. E.g. Insurance company. The term service include a wide variety of ser services. The other service which are either consumed for reasons of business or for non business.
Differences between Products and Services Products Services Tangible Intangible Transfer of ownership No transfer of ownership Homogeneous Heterogeneous A thing An activity or process Production and distribution are separated from consumption Production, distribution and consumption are simultaneous processes. Core value produced in factory Core value is produced in buyer-seller interactions Can be kept in stock Cannot be kept in stock Quality control is possible (Standard Product) Difficult to control Production – storage – sale – consumer Sale, produced and consumed simultaneously
Requires physical distribution Does not require physical distribution. Mostly works with personal contact Attributes can be determined before the purchase. E.g. Colour, size, etc.., Difficult to evaluate in advance 4P’s in Marketing mix Product, Price, Promotion and Place 7 P’s (4 P’s + People, Physical Evidence and Process) in the marketing mix. Shelf-life days to years. Shelf-life zero Marketing traditional and external Marketing in non-traditional and largely internal Creation-Manufactured Delivered Ability to measure is objective Subjective
Managing Demand & Supply ⚫Service sector cannot pile output in the warehouse and a wait for demand is difficult for service sector industry because of the perishable nature of services which cannot be stored. ⚫Hence, it is difficult to match demand & supply but it should be managed for 2 reasons. 1. Below demand means Cost increase & Profit eroded. 2. Above demand means demand & supply are out of balance.
Managing Demand & Supply ⚫ Managing demand with capacity utilisation is undertaken in 3 ways. 1. Predicting Demand 2. Managing Demand 3. Managing Supply
Predecting Demand Managing Demand Managing Supply Managing Service Capacity Shaping Demand Inventory Demand Using Part-time employees Sharing Capacity Complement- -ary services Reservation system Product / Service Partitioning Demand Price Incentives Promotion Off-Season Demand Place Change ofLocation Increasing customer participation Scheduling work shift Sub- contracting Training employees
1. Predicting Demand ⚫It depends upon a thorough understanding of the customers & segments. Three sources of information about the customer are obtained as follows. iii. i. Historical sales data: means data collected from past sales. It is a rich source which provides a thorough understanding of customers. ii. Desk Research: It can reveal a lot of information which are published by the competitors about their strategies & performance. Customer survey: Through survey the necessary information may be collected. After collection of data and analysis, it is possible to find frequency of changes in demand.
Strategy formanaging demand or Management of demand to fitcapacityor supply orlevel-capacity strategies ⚫Demand can be managed in two ways. They are as follows. i. Shaping demand: Shaping demand is done through as follows. a) Product or Service: By partitioning demand, the demand can be managed. Service is heterogeneous in homogeneity. By doing so, the demand nature, divide the service market as per its can be managed, for example: Hotels doing regular business offering special offers in the weekends. b) Price: Price itself carries a message. Lower prices in the off-season can stimulate demand.
Price Price P1 P2 P2 P1 Q1 Q2 Quantity As per Q1 Q2 Quantity diagram the service market price conveys the message of quality offered and hence, price reduction leaves to quality reduction and elimination of customers. Therefore, differential price is used to manage demand. Prestige Product
c) Place: It is necessary to change location and timing offered for service delivery. For example: taxies opening of services in tourist location during peak period for pickup & delivery will stimulate demand. d) Promotion: Communication is used to create peak demand and through various promotional programmes like advertising, publicities, sales promotion techniques are used to stimulate demand. 2. Inventory demand: For filling the demand for the services we can use the following techniques:- a) Reservation system or Booking system: Pre sells the potential services. E.x. Reservation in the theatres, hotels, train tickets etc....,
b) Complimentary services: Instead of making the customer to wait, it can made productive & enjoyable by providing complimentary offers. E.x. 2 tickets for the price of 1 ticket. Strategies for managing supply or managing supply to follow demand Various techniques are as follows: 1. Changing the numbers & hours of personnel at work : It is better to appoint full time staff and allow flexible working hours (i.e.) hours of work which satisfies both the customers & employees , by doing so it is possible for as to have the required stuff to deal with the customer during peak hours. 2. Customer Participation: Problem of capacity can be removed when customers participate directly in the creation of services. E.x. Self-help super markets, fast food restaurants etc......,
3. Resource transfer or Cross-training: When one operation is busy, another operation may be idle, cross training of employees in several operation creates flexible capacity to meet localised peak demand. 4. Sub-contracting: This approach effectively turns fixed capacity into variable capacity. Sub contracting can be used whenever they required. 5. Share capacity: The service delivery often requires a large investment in equipment and facilities. During under utilisation period, it may be possible to find other uses for the capacity. E.x. Concert hall can be shared by musicians, comedians for guest lecture 6. Scheduling Work shift: By scheduling work shift carefully, the service supply can be made according to demand. E.x. Work shift scheduling is an important staff problem for call centres.
SERVICES MARKETING
Definition – Marketing mix The marketing mix refers to the blend of ideas, concepts and features which marketing management puts together to best appeal to their target market segments. Each target segment will have a separate marketing mix tailored to meet the specific needs of consumers in the individual segments. The marketing mix comprises of 4 elements namely, 1. Product 3. Promotion 2. Price 4. Place
Marketing mix bridges between marketing strategy and marketing tactics. In the service industry greater emphasis must be given on developing & implementing successful marketing programme to create and foster a customer needs.
Definition – Service Marketing mix Neil Borden, while quoting from an article of James Culleton, wrote that a marketer is viewed as a ‘decider’, or ‘artist’ ingredients’ who plans various or a ‘mixer of means of competition. “He may follow a recipe prepared by others, or prepare his own as he goes along, or adopt a recipe to the ingredients immediately available, or experiment with or invent ingredients no one else has tried.” If a marketer was a “mixer of ingredients”, what he designed was a marketing mix.
The following are the marketing mix components in service marketing. 1. Product 2. Pricing 3. Promotion 4. Place 5. People 6. Physical evidence 7. Process
1. Product The product here refers to the service offering. Although service products are essentially tangible, there are certain physical characteristics which consumers will assess in their evaluation of the product choice. They are 1. Attractiveness of the offering in terms of physical features, suitability of climate etc, 2. Facilities available and associated levels of quality. 3. Accessibility in terms of ease of getting there for the potential consumer.
While packaging the services the service providers have to consider the following aspects 1. Tangible aspects of service. 2. Intangible aspects of service. 3. Core and peripheral services.
2. Pricing Pricing in service industry is fairly complex issue because the price eventually paid by the consumer may be made up from the price charged by various independent service provides say, a package tour. The services are extremely perishable, they usually cannot be stored, and demand often fluctuates considerably. The service are intangible and higher the intangibility, the more difficult it is to determine price. Governments regulations may pose problem in the calculation of Price of service.
Prices to services are generally determined on 1. Cost basis 2. Competition basis 3. Demand basis them pricing policy are applicable to  Many of service marketing like discount & allowance skimming & penetration, one price & flexible pricing, price verses non price completion etc,.
3. Promotion Promotion is the third of the conventional 4P’s. Once a suitable product has been designed, a promotion strategy must be used to build an image and reputation, to differentiate each from their competitors, to generate interest and knowledge, to attract new customers and to generate customer loyalty. Promotional Tools: There are a number of promotional tools available in services marketing which can be combined to create effective promotional programmes.
Before deciding the tools for promotion, it is important to focus on the following: 1. Identification of segments 2. A unique selling proposition 3. Well defined target audience 4. Use of media and media scheduling to reach audiences. 5. Monitoring effectiveness. and evaluation of promotional
Advertising for services: Advertising is any kind of paid, non personal method of promoting by an identified organisation or individual. Advertising has limited potential in services when compared to goods which achieved a great degree of sophistication and maturity. For planning of promoting strategy, proper care should be taken to accommodate basic service characteristics and their implication in the marketing efforts.
The objectives of advertising in the service firms has been identified. They are 1. The service providers have to create an understanding of the firm in the minds of the customers by describing the firms services, activities and its area of expertise. 2. The service providers have to create a positive image for the firm. 3. The service providers have to build a strong sense of identification with the customers by converting his needs, values and attitudes. 4. The service providers have to create a positive background for the sales people to sell the services by providing all relevant information about the firm.
Personal selling:  Personal selling is essential when developing close relationship between the buyers & sellers.  In services marketing the problem with using personal selling is that, in certain types of service, the service cannot be separated from the performer.  Moreover, it is not a homogeneous service in which exact standards of performance can be specified.  In such circumstances, personal selling implies using an actual professional rather than a salesman to sell the service.  The firm of charted Accountant, Lawyers may send one of their Junior consultants depending on the type of customer being attempted.
The Insurance firms mainly depend on personal selling. Unlike many other components of the promotion mix, personal selling dialogue and offers a provides the basis for focused approach with immediate feedback. Nevertheless these benefits are not without cost as personal selling is generally more expensive than other elements of the mix and is more difficult to turn on and off. Attention must also be focused on important issues such as organisation, training and motivation of the sales force.
Sales Promotion:  Sales promotion is used predominantly to encourage trail and generate brand switching, although without support from other media it is unlikely to develop brand loyalty.  Palmer suggests that sales promotion is used to break down loyalty whereas advertising is used to build it up.  The range of sales promotion tools continues to increase and several have proved popular with financial services institutions.  Gifts are now commonly available to those who respond positively to a particular promotion. For example: Time share firm providing gift voucher for anyone who approach for time share.
 Cash back offers are increasing in popularity and a number of building societies (real estate companies).  For example: Omkur estates Pvt Ltd., Bangalore offers Rs. 11000 cash back in the form of Fixed Deposit certificate maturing after 15 years.  Nirman shelters Pvt Ltd., Bangalore offers free steel and cement for the first 10 members who construct the building. Special concession for first time buyer are also in evidence as are coupons offering price discounts on mortgage and insurance products.  Recent growth of activity in the bank marketing(credit cards) has led to a variety of schemes aimed at encouraging sales brand switching.
 Example: Citi bank in connection with the Launch of “Suvidha” offered, 24 hour ATM’s free, shopping convenience free, with a minimum balance of just Rs.1000 etc..,  These type gifts, discounts, offers may be different from one firm to another and the type of service providers to another.  A doctor may charge lesser amounts as consultation fee on subsequent visits to encourage the patient’s loyalty, a paediatrician may send reminder cards to patents about their children’s pending inoculation, a car mechanic may send a reminder about the next service, a charted accountant or lawyer may offer his services for free the first two visits, insurance agent may pay two months premium as behalf of his client etc.
Publicity:  Publicity is a special form of public relation that involves news stories about an organisation or its products or services.  Like advertising, it involves an impersonal message that reaches a mass audience through the media.  Publicity is distinguished from advertising in many ways. It is not paid for, the organisation that is the subject of the publicity has no control over, and it appears as news and therefore has greater credibility than advertising. E.x. Insurance policy.
Public Relations: It has a wide variety of communication efforts to contribute to generally favourable attitudes and opinions towards an organisation and its products. Public relations can take many forms, including newsletter, annual reports, lobbing, and sponsoring of charitable or civil event. Public relations have become more sophisticated and uses a variety of tools to create and enhance a positive image of the institutions and its services for instance; seminars, speeches, in-house magazines and press release.
Personal Relations is involved with more than just customer relationships it is often handed at a corporate level rather than financial level thereby ensuring a consistent image. The corporate image is very important for a service organisation. Because the tendency of customers is to evaluate the quality of an intangible service though an assessment of the corporate image of the organisation. The development of a clear corporate image is increasingly viewed as an important element of competitive strategy and represents a valuable marketing asset particularly for service institutions.
4. Place Traditionally most services have been sold directly from producer to consumer. Middlemen are not used as service cannot be separated from the seller or when the services is created and marketed simultaneously. E.x. In case of medical care consultancy service and repair service are sold without the middlemen. If the middlemen are not used, it limits the geographical markets that the service provides can reach. Therefore the frequently used channel includes one agent middleman. For example: agent or broker is often used in the marketing of securities, travel arrangements entertainments and housing rentals.
The most important decision elements in the distribution strategy relates to the issue of ‘location’ of the service so as to attract the maximum number of consumers. Hence, Distribution management is concerned with two things: “availability and accessibility” The service provides must see that their products and service are available and accessible to the target market. For this purpose they have to design a channel strategy. In order to do undertaken to determine this, research, must be how and where potential customers prefer to buy the services.
Different distribution strategies may be selected to reflect the company’s overall objective. Even the firms in the same area of marketing operation may not have the same distribution strategy. E.x. Some to the tour operators may appoint agents to sell their services but others may sell their services by using ‘direct marketing’. The other decision variable in the distribution strategy is how to provide the service to a maximum number of customers in the most effective manner.
Franchising: A slowing number of services are now distributed through a fast emerging channel management called franchising. It is the granting another person or institution to exploit a trade name, trade mark or product in return for lump-sum payment or for royalty. This kind of franchising is widely used in services sector where some kind of homogeneity is possible. For example: In the case of fast foods restaurants, MC Donalds and KFC, beauty parlors like Shahanaz, International Hotel chains like Holiday Inn, Sheraton etc..., using this franchising strategy.
Integrated service system:  The other recent trend in distribution of services is that of integrated service system. In this system the service provides offer additional related services to the customers.  E.x. India Tourism Development Corporation which offers its customers both conducted tours and hotel facility, Hotel Ashoka offers “package tours” in which they take care of all facilities such as visa, foreign exchange, reservations, etc.....,  Thus in the distribution strategy, three decision variables are important to attract the maximum number of consumers. They are a) Location of the service b) Intermediaries and c) Cost-effectiveness.
5. People The ‘People’ component reflects the important role played People by individual in the provision of services. are also an important element in the specification of the marketing mix. Consumers will often not see anything tangible for their expenditure and the material benefits from many products. Indeed, the people component of services marketing mix is most commonly associated with personal selling, although, it overlaps with both promotion & distribution.
Service Personnel: It plays an important role in an organisation which provides services. The behaviour and attitude of the personnel providing services will have an influence, on the customer’s overall perception of the service and can distinguish between two actual service rendered and the human element involved in it. For example in a restaurant the manner in which the waiter behaves with the customer will be an important determinant in losing the customer forever or retaining him as a regular client.
It includes improvement in technology, retail design, systems and procedures programmes which relate to: 1. Emphasising the increasing need for high level of service and the importance of the customers. 2. Training staff with the skills and knowledge required to deal with customers effectively. 3. Motivating staff through monetary and non- monetary rewards. 4. Developing a new style of leadership and management.
Customers: Customers are a source of influencing other customers by word-of-mouth. E.x. In the case of professionals like Doctors, Lawyers, one satisfied customer will lead to a chain reaction, bringing in number of other customers. True, the service provides should ensure complete satisfaction of the existing customers.
6. Physical Evidence Physical evidence is one more marketing mix available to the service providers. The service firms must consciously make efforts to manage the physical evidence associated with their services. The need for physical evidence within the marketing mix arises directly from the typically intangible nature of the services. Physical entities can be successfully employed to describe the service product and its distinguishing qualities.
Types of Physical Evidence: 1. Peripheral evidence 2. Essential or dominate evidence 1. Peripheral evidence  It can be possessed by the consumer but has little independent value.  The peripheral physical evidence are often ignored, but in reality they are the real source of competitive differentiation..  E.x. Cheque book issued by the bank, Cinema tickets, stationary, notepads etc.
2. Essential or dominate evidence  It is the one which continue a dominant part of service facilities, which possessed by the consumer cannot be but has independent value.  E.x. A bank branch, car, aircrafts in airlines, hotel building, campus of a university etc.
7. Process The system by which target audience reserve delivery of service constitutes the process. The process by which the service is produced and delivered to the ultimate customer is critical to success of service operation. It is the process of adding ‘value’ or ‘utility’ to system inputs to create output which are useful to the customers. E.x. An airline markets the process of transportation, a restaurant product is the process of meal preparation.
Kinds of Delivery Process: 1. Line operations: The consumer moves through logically arranged operations which are arranged in a sequence. It is also called ‘assembly line’. The customer starts purchasing the items he needs and pays for them at the exit. This kind of delivery process is possible when the service provided is standardised and consumer’s requirements is of a routine nature.
Kinds of Delivery Process: This 2. Job-shop operations: appropriate for customised services. This operation applies when consumer requires a combination process is delivery of a of services using different sequences. E.x. Regular repair shops, hospitals and management restaurants, consultants, educational institutions.
Kinds of Delivery Process: 3. Intermediate Operations: This operation is useful when the type of service is rarely repeated. For example: firms and advertising, use this offering consultancy for projects kind of delivery system since each project or advertising campaign requires a unique set of input factors.
Services Product Introduction: The ‘product’ is the central component of any marketing mix. If it does not satisfied the needs of the target market, then the organisation lacks and effective basis for long term success in competitive market. Meaning of the Product: In terms of service we can define product as a bundle of benefit to the customers through the experience that is greater to the customers.
Definition: According to Diff, Simkin, Pride and Farrell who define a ‘product’ as: “a complexity of tangible and intangible attributes, including functional, social and psychological utilities or benefits. A product can be an idea, a service, a good or any combination of these three”.
Services Concept: The service concept is nothing but the differences between what an organisation offers in terms of its service and what benefits does its customers derive from it. The main ideas of the service concept: 1. Consumer benefit concept 2. Service offers 3. Service forms 4. Service Delivery forms
1. Consumer benefit concept:  It defines what benefits do consumer derive from a particular service package offered.  That customer benefit the starting point of service concept but the problem is that customer themselves may not have a clear idea of what they are seeking.  They may find it difficult to express or it may be a combination of several benefits.  Using the customer benefits as a starting point, the service concept defines the specific benefits which the service offers. For example: a centre for the performing arts may offer entertainment and recreation.
According to Groonroos, the service concept has to be defined at the levels. 1. Developing the service concept; 2. Developing a basic service package; 3. Developing an augmented service offering; and 4. Managing the service offer.
Service Offer:  This is the next step in giving specific shape and form to the basic concept.  In the above example the service concept is to provide entertainment but the service offer is concerned with specific element that will be used to provide entertainment such as Drama, Music, Dance etc...,.  In the category of music and concerts the choice may be vocal or instrumental these are the intangible element of the service offer.  There tangible elements of service offer is the physical infrastructure of the centre in terms of its seating capacity, comfortable seats, Air-conditioning, snack bars, the tangible elements can be controlled but Intangible elements cannot be controlled.
Service Forms: Another important area of decision-making is in what form should the service be made available to the customers. For instance, should all the shows of the centre be available in a package deal against a yearly membership fee or seasonal ticket or daily tickets? Thus service form refers to the various options relating to each service element. The manner in which they are combined gives shape to the service form.
Service Delivery System: The two main elements in a delivery system are the people and physical evidence. E.x.: Clerk in a bank represent the ‘people’ component, the cheque or withdrawal slip are elements of physical evidence. The physical evidence components have also been called ‘facilitating goods’ and ‘support goods’.
Service Package:  Packaging is increasingly used as a marketing tool. The package is perhaps the most important component of communication about the product.  What constitutes a successful package? The one that appeals to both the conscious mind and the sub-conscious mind of the consumer.  ‘Packaging’ service product means not only designing and develop, the ideal service but bring it together as a whole, with features such as branding and added tangible elements which will help to differentiate in the market place and attract customerss.
Tangible elements: 1. Items purchased by the customer . E.x. Meal in a restaurant. 2. Items whose status is altered by the service. E.x. Car repair, fitness club. 3. Peripheral items rather than main part of the package. E.x. Cinema ticket, cheque book, etc., 4. Items without which the service would not exist. E.x. Car, aircraft, restaurant. 5. Items that form a part of the process. E.x. Technology (Computers, ATM’s etc...,.)
Intangible elements: 1. The personal contact with the service personnel. 2. The atmosphere generated by the service environment. 3. Emotions felt by the customers. E.x. Peace of mind. Thus, the ‘basic service package’ describes the bundle of services that are needed to fulfil the needs of the target market.
Core Services and Peripheral Services Expected Services Augmented Services Accessibility Services Interaction with Service organisation Consumer Participation
 The core services which represents the core benefits .  The core services is the reason for being in the market.  E.x.: A college exists because it equips people with skills & abilities to manage organisations faculty expertise & the accumulated experience represents the core resource for supplying the benefits.  The core service offering is the necessary output of an organisation which are intended to provide the intangible benefits the customers are lokking for.  E.x. In hotel, hospitality is the core service and airlines they are the safety and reliable transportation.
Peripheral Services:  Peripheral services are those which are either, “indispensable for the execution of the core service or available only to improve the overall quality of the bundle”.  The peripheral service offer represents both the expected or tangible product and augmented product. Expected or Tangible services:-  Service always relate to the customer expectation of what kind of services are available to satisfy their needs.
Augmented Services:-  At the augmented level, service suppliers offer additional benefits to the customers that is beyond the tangible evidence.  E.x. After sales services, credit facilities etc..,.  The augmented services are those products which integrates the concepts of service process with the service offer.  Three distinct elements which along with the basic offer go into the creation of the augmented service product as components of the perceived service process are as follows:
Accessibility of the Services:-  Accessibility refers to the ease and convenience which a service can be purchased, used and received. Interaction with service organisation: with  The interaction between the service providers and its customers can be in terms of:  Interaction with other service interfaces (their expertise, skill attention, attitudes).  Interactions with other service interfaces (admission, evaluation, students enquiries, students evaluation office). Customers Participation:-  Customers participation is a concept which identifies the impact the receiver of the benefit has on the service he perceives.
Managing service offering:-  For the purpose of managing the service offer, product planning is necessary, other features like branding, quality management, product life cycle management, presents a great challenge for service industry. Product Planning and Development:-  The high perishability, fluctuating demand and inability to store services make product planning critically important to service marketers.  A service industry can expand or contract its ‘product mix’, after existing services, and trade up or down.  The company may want to increase its total volume, reduce seasonal fluctuations in volume or catch to changing buyer patterns such as the desire for one-stop shopping.
 For example: transport firms have working arrangements with airlines and hotels so that when customers fly to their destination, a car and room will be ready for use. Branding of services:-  The word ‘BRAND” is a name and/or marks intended to identify the product or service of different sellers or service providers.  According to Kotler, Brand “is a name, term, sign, symbol or design or combination of them which is intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors”  Branding plays a very important role in tourism marketing. E.x. Car rental firms, hotel chains ad airlines in particular employ tremendous efforts to ensure that their name is widely recognised in synonymous with quality, value or some other characteristic.  For the analysis of branding a systematic framework has been developed. It suggests identification of brand hierarchy as follows:
1. Corporate Branding :-  The main element in the brand is the name of the organisation itself or a division of the organisation.  This approach is generally very effective when the organisation’s product are closely related and generic image of the organisation is then seen to be applicable to all its products. 2. Dual Branding :-  Dual branding involves combination of product brand and corporate brand with the product brand being rather more dominant. 3. Brand dominant :-  This approach is the simple product brand which attempts to create a distinct identity for the product independent of the organisation which supplies it.
Life cycle concept  Products and services are often said to have “life cycles”.  Life cycle concept is a major factor in product management from new product information to old product disposal. The product or service life cycle comprises of four stages. They are 1. Launch or Introduction 2. Growth 3. Maturity 4. Decline
Introduction Growth Maturity Decline Time The life cycle is represented practically in terms of sales overtime Sales Product Life Cycle
1. Introduction :-  At the launch or introduction stage the product or service is very new.  Introduction takes time, and sales growth is slow.  In this stage profits are negative or low because the promotion will be intense and costly.  It is necessary if the service fails to meet initial targets.  This is a high risk stage, because the service has not yet proved that it will be successful and the costs of pre-launch development may be very high. So close monitoring is necessary.
2. Growth:-  If the new product satisfies the market, it will enter the “growth stage” .  The product or service life cycle growth stage is at which a product’s sales start increasing quickly.  At this stage revenues will increase and profitability may be achieved.  The long-term success of the service can be more easily assessed at this stage as market penetration increases.  It improves the core service and adds new services to augment the service.  It enters a new market segments known as maturity stage.
3. Maturity:-  As growth slows down, the overall volume of sales may reach a fairly steady plateau and enters a ‘maturity stage’.  This maturity stage lasts longer than the previous stages and it posses major challenges to the service providers.  Competition will probably be well established and promotion efforts reflect the battle between leading brands. stage the firm should consider  To remain in this modifying the market, product or service and marketing mix.
4. Decline:-  At some point, the popularity of a product or service will begin to die.  There will be decline in sales and profitability diminishes.  This may be due to new technologies a shift in consumer taste or increased competition.  As the sales and profit decline, some firms withdraw from the market or cut the promotion budget to reduce the price further or may decide to ‘maintain’ its brand without change in the hope that competitors will leave the industry or may decide to ‘reposition’ the brand to move back to growth stage or may decide to ‘sell’ it to another firm or may decide to ‘drop’ the product from the line.
Product Modification Product modification is often pursued in the maturity stage of the life cycle to attract new customers and differentiate the product from the competition. Product modification does not add to the product line as such but instead involves effectively replacing an existing service with a new and improved version. It is the process of product development which constitutes a process of modification resulting in the appearance of new but related product.
Advantages :- 1. Product modification aims to improve the performance of an existing product or service. 2. This may help in marketing the service easier to use. 3. It may improve the quality of service. 4. It may help in improving delivery system. 5. It may also helps in adding additional features.
Pricing
Meaning of Pricing :-  Economies defines price as a exchange value of a product or service always expressed in terms of money. It is referred to as an agreement between the buyer and seller in quantitative terms.  For the service providers price is a source of revenue and a prime determinant of profit.  For the buyer it stands for quality and quantity of service bought. Pricing:  Pricing is equivalent to the total service offering. This include the brand name, a package, delivery, other benefits and so on.  Pricing is the art of translating the qualitative offerings into quantitative terms (rupees and paise). The value of a unit service to customer at a point of time.
Objectives of Pricing :- 1. Financial Objectives: a) Profit Maximisation:-  Price is to maximise the profit – Long term objective, for service industry higher the price higher the profit.  E.x. 5 star hotels – high price for low volume of food b) Resource mobilisation:-  It refers to high prices to generate more surplus for reinvestment. c) Price and Profit stabilisation:-  Needs preventing price wars among competitors. d) Cash flow management:-  This objective to retain as much cash as possible within a given period of time
e) Predetermined profit level:-  Means the company expects the considerable return on capital employed by the service organisation. 2. Patronage Objectives:  It is also referred as CUSTOMER OBJECTIVE  There are many ways to do this because it is the most visible part of the presentation mix. a. To instil confidence in the customers by price stability. E.g. Hotel companies have a negotiated agreement with corporate for a fixed rate. b. “inducement to try” to enhance the image of the corporate by giving special offer to customer to try. c. To desensitise the customer to the price . Eg. Package deals i.e., Tour package (travel + accommodation + guide + food ) d. To differentiate one product with another – by providing on an added service.
3. Volume Objectives:  These objectives are particularly prevalent in the hotel industry because it is such a highly ‘volume-sensitive’ business. The commonly used measures are as follows: a. Market Shares: The target market share means that portion of the industry sale which a company aspire to attain. Price is one of the factor which helps in attaining market share. Service providers prices the service less to enjoy the target market share. b. Customer Base: To build business by increasing the customer base. This is done usually by lowering price, either temporarily or in special promotion to attract more customer with the hope to make them as permanent customer. c. Turnover: To increase the turnover in a hotel industry or seat turnover in airline by lowering the price. d. New market: In the launch stage of PLC, pricing is used mainly to enter the new market by lowering the price. e. Contribution to fixed cost: it is made by incremental business – by lowering the price
Cost based Pricing Competition based Pricing Demand based Pricing
The company determines the price by adding the direct material cost, direct labour cost, overheads & percentage of profit. This method is used in advertising agency, consultancy, hotels, tours & travels. It is also called cost – plus – pricing. In case of professionals like lawyers, doctors, accountant etc., ‘fee for service’ is the service strategy used. It represents the cost of the time involved in providing the service. Cost based Pricing
In this method of pricing the price is fixed on the basis of the price fixed by other firms (competitions) in the same industry or market. This method is used under two circumstances 1. When services are standard that is when the same service is provided by all the service provider. 2. In oligopolies where there is a small number in large service providers such as airline industry.  In this type of market, any price offered by the company will be marched by competitors to avoid giving a low-cost sellers a distinct advantage. Competition based Pricing
Involves setting the prices defending on the customer perception of value that is prices are based on what customers will pay for the service provided. It is the buyers perception of total value that prompts the willingness to pay a particular price for a service. The customers’ questions like what benefits does the service provide? How important is each of these benefit to the others? How much is it worth to the customer to receive a particular benefit in a service? At what price will be service be economically acceptable to potential buyers? In what context is the customer purchasing the service? Based on these factors the services are priced. Demand based Pricing
Strategic issues of Pricing :-  A pricing strategy has to be designed which is compatible with the rest of the marketing mix. 1. Discounts and Allowances:  It refers to the reduction in the base price of a service. a) Quantity discounts: It means a reduction offered to customers who buy in large numbers. b) Functional discount: An offer given to the sub-agents for functions performed. c) Cash discount: Is a discount offered on immediate payment of cash for the service offered. d) Seasonal discount: Price reduction to customers who buy the services out of season.
Strategic issues of Pricing :- 2. Segmented Pricing Strategy:  It is selling a service of the same nature at different prices. The divisions may be: a) Customer Segmented: Different prices are paid by different customers for the same service. Eg. Students’ offer. b) Product from Pricing: different prices are charged for different forms of the same service. Eg. Tour package (travel + lunch + accommodation) c) Location Pricing: Prices for same service may vary from one place to another. Eg. Abacus tution fee for urban areas are more when come back to rural areas. d) Time Pricing: different prices at different times of the year.
Strategic issues of Pricing :- 3. New Service Pricing Strategy:  To develop a pricing strategy for new service offerings the following points have to be noted. 1. Price position sought by the service provider. 2. How novel is the offered service.  Depending upon the innovative services two distinct pricing strategies are adopted. a) Price Skimming Strategy: It refer to pricing the service at a higher level for the early adopters who are ready to pay & later cutting the price to reach new segments of the market. b) Saturation Pricing Strategy or Penetration pricing: That is pricing it initially low can be adopted to encourage customer to shift from competitors product and later increasing the price.
Strategic issues of Pricing :- 4. One Price Vs Flexible Price Strategy:  One price strategy refers to charging all the customers for the same service, the same price i.e., price refers to catalogue / price list or wall board.  Flexible price strategy refers to charging similar customer opting the same qualities of services at different price. Eg. If bargained, the customer has studied the market he can get same service at a lower price. a). Resale Price Maintenance: A service providers want to control the prices at which middlemen resell their services. Eg. More common with travel agency.
Strategic issues of Pricing :- 5. Service Portfolio Pricing: a) Optional additional services: It refers to linking the core service which is to be purchased by the customer with optional, additional services. Eg. Tour organiser getting a travel insurance policy done . b) Captive Service: it refers to the additional optional services that has to be purchased from the core service provider only. c) Competing Services: Within the service providers portfolio itself when a new service of the same nature as the existing service is to be offered, than the two services within the organisations portfolio became competing services. Thus, the existing services may suffer attract from the new service.
Strategic issues of Pricing :- Price building:  A number of services of connecting natures are bundled together and given a price tag, this is price bundling. It is commonly done to build customer relationships. Psychological Pricing:  It is perceived that price is used to say something about the product, i.e., if the price of the product is high than it should be of a good quality.  Another aspect of psychological pricing is the reference pricing, where the customer may refer the current price with the past or compare one service with another to access and justify the price to be paid.
Strategic issues of Pricing :- Tactical Pricing:  In this competitive business world is necessary to tactically use pricing to gain a market share.  It is difficult to draw a line of distinction between strategy and tactical pricing.  Tactical price assumes greater importance to highly competitive and undifferentiated service markets.  Tactical pricing can be in any of the following conditions: 1. It can provide short-term competitive advantage. By this it can attract new customers to just try the service once works casual because of reduction in prices. This tactics efficiently on customers who intend to make purchases and who are rational.
2. Tactical pricing may be used to balance the demand and supply of a service in the market. The prices can be discounted when supply is more and there is tough economic competition. Similarly prices can be increased to remove low-margin elements and to maximise their profits from high-margin lines. 3. An established service provider can use short-term tactical pricing to discourage new entrants into the market. 4. Differential pricing with respect to time, place and different customer segments can be adapted from strategic pricing to a tactical pricing programme. Eg. Off season discounts, senior citizen concessions etc.., 5. Tactical pricing programmes can be created to motivate the intermediaries. Eg. Giving a higher percentage of margin than the competitors.
Price Vs Non-price Competition:  In developing a marketing strategy, the organisation has to decide whether to compete primarily on the basis of price or non-price elements of the marketing mix. Price Competition:  Some of the organisations engage in price competition by regularly offering services priced as low as possible.  The firm can use price to compete by changing its prices or by reacting to price charges made by the competitors.
Non-price Competition:  In non-price competition, service provides maintain stable prices and attempts to improve their market positions by emphasising other aspects of their marketing programmes= other than price.  Using terms familiar in economic theory, we can differentiate price and non-price competition.  In price competition, service providers attempt to move up or down their individual demand curve by charging prices.  In non price competition, service provides attempt to short their demand curve to the right by means of product of differentiation, promotional activities or some other techniques.
An organisation's objectives determine the target of pricing policies. Thus, it is important to analyse the factors that influence pricing decisions. In general we can identify four important factors of price determination, they are: 1. What is the costs to produce a service? 2. What the consumers are ready to pay? 3. What are competitors charging? 4. What are the legal and social regulations effecting the price?
High P R I C E Low Ceiling Maximum price that consumers are ready to pay for the service In between the external and internal factors effect pricing Cost Minimum price at which the services can be offered. [Adopted fromAdrein Palmer, Principles of Services Marketing, p.238]
Factors Affecting Pricing Decisions: Internal Factors Organisational Policies Service differentiation Service cost Marketing mix Product / Service Distribution Channels Pricing Objectives External Factors  Demand Different group of Users Diff. points of Consumption Diff. Time of Production Competition Govt. policies
Promotion – Meaning » Promotion is used as a tool of communication informing customers about services to target market audience. » It facilitates the exchange process. » Effective communication are needed to inform customers about their role in the service delivery process. » Eg. Customers need to know where ATM cash dispensers are located and how they work or how to make reservations for a restaurant or seat at the theatre.
» Promotion plays an important role in informing, educating, persuading and reminding customers. » This role is very important in services. » It is given more importance because high degree of intangibility. » Promotion is used as there is no physical product or packaging to attract the attention of the potential customers.
Marketing Communication Mix » The traditional marketing function includes market communication activities such as sales, advertising and sales promotion. » What employees say, how they say, how they behave, how service outlets, machines and other physical resources look, and how they function and communicate with customers. » The communication effect may be Positive or Negative. » Marketing communication is itself a mix of four essential elements. They are shown in the following diagram.
Marketing Communication Mix Advertising Communica tion Mix Publicity Sales Promotion Personal Selling
Advertising: » Any form of non personal communication about a professional service firm and its service offerings that is sponsored by the firm or on the firm’s behalf. Personal Selling: » Personal communication with existing or prospective clients for the purpose of generating fees. Publicity: » Non-personal communication regarding a firm or its services that contain commercially significant view or favorable presentation in any media that is not sponsored by the firm or its agents.
Sales Promotion: » Any activity or material that is not advertising, publicity or personal selling which acts as an inducement to referral sources and or directly to existing and potential clients. » These four communications mix elements comprise the service marketer’s armoury for communicating with clients, potential clients and referral sources in order to directly or indirectly help create exchanges that may result in greater fee income for the firm.
Types of Communication 1. Personal Communication: It is a personalised communication. Customers come in direct contact to the service production and consumption process. Eg. Sales person. 2. Mass Communication(Impersonal): for example, advertising, brochures, and mass distributed sales letter. 3. Direct Communication: This is a personalised impersonal communications which is directed to named receivers. An example is sales letters addressed to the receivers personally. These three type of communications are part of the Traditional Marketing Functions.
4. Absence of Communication: when a firm decides not due to inform its customers about, say a delay or quality fault, this is not lack of communication. Instead, there is a distinct piece of information involved. This is perceived either immediately on the spot or later on. Moreover, absence of communication is frequently perceived as negative communication. 5. Interactive Communication: It refers to the communication between the buyer and seller during service production. Much of this is personal.
Communication Circle Word-of-mouth References Interactions Experiences Expectations / Purchases
Communication Circle 1. Expectations: A customer or potential customer has developed certain expectations. He will then decide to make a purchase. With this an ongoing customer relationship continues or new business is created. At this point the customers gets involved in interacting. 2. Interactions: Customer gets involved in interactions with the organisation and perceives the technical and functional quality dimensions of the services rendered. These interactions usually involve a high number of moments of truth or moments of opportunity.
3. Experience: Once the customer has been involved in interaction and has perceived the quality dimensions, it multiplies several times by means of word-of-mouth. If the message is communicated by the word-of-mouth is positive, customer expectations develop favourably. The customer with positive experience will return or continue to use the services on an ongoing basis. New potential customers get interested in the organisation and its offerings as a possible means of satisfying their needs and solving their problems.
4. References (and testimonials): represent an active way for the firm to use positive word-of-mouth in its marketing, thus capitalizing more effectively on potential sources of food word-of-mouth. The multiplier effect of word-of-mouth varies very much between industries and situations. And negative experiences tend to multiply by word-of-mouth quicker and more often than positive experiences do. powerful impact in Thus, word-of-mouth has a forming expectations of existing and potential customers and other publics.
Promotional Techniques » Seven promotional techniques are available to service marketers to motivate customers to purchase. » These approaches are 1. Samples 2. Price / Quantity promotions 3. Coupons 4. Sign-up rebates 5. Future discounts 6. Gifts premiums 7. Prize promotions
1. Samples: Sampling gives a customers a chance to try the service free of charge. Eg. Company gives its new product for free on purchase of its existing product. 2. Price / Quantity promotions: Limited time offers. Eg. Buy 1 Get 1 MTR Jamun mix free on seasonal times like Pongal, Diwali, etc.., 3. Coupons: Special offer for bearers of the coupons provided by the service/product providers. The coupons have been printed in newspapers or magazines. 4. Sign-up rebates: It may be offered by “Membership”. Service organisations that charge a preliminary sign-up fee for applying, enrolling, or making connections to a network.
5. Future discounts: Future discounts are widely used by airlines, hotels and rental car firms in competitive markets to stimulate brand loyalty among frequent travellers. 6. Gifts premiums: Gifts premiums are frequently used to add a tangible element to a service. For instances the credit card users get the benefit of points for every purchases made. These points can be exchanged for the gifts offered by a bank. 7. Prize promotions: Prize promotions introduce an element of chance, like a lottery. They are generally designed to encourage increased use of the service.
Objectives of Promotion 1. Objectives Targeted at Customers: » Increase awareness of a new or existing service. » Encourage trail of service » Encourage non-users to attend a demonstration of the service » Encourage non-users to make trail use of an existing service. » Persuade existing customers to:  Continue purchasing the service and not terminate use of the service or switch to a competing alternative;  Increase their purchase frequency of the services.  Commit to purchasing the service for an extended time period (thus taking the consumer out of the market for competing alternative) » Change the timing of customer demand for the service. » Reinforce advertising for the service and draw audience attention to it.
2. Objectives Targeted at Intermediaries: » Persuade intermediaries to deliver a new or new launched service. » Persuade existing intermediaries to provide additional push for the service, including point-of-sale merchandising. » Insulate intermediaries from consumer price negotiation at the point of purchase. » Insulate intermediaries from any temporary sales reduction that might result. » From a price increase. 3. Objectives Targeted at Competition: » Move offensively or defensively on a temporary basis against one or more competitors.
Criteria for selecting specific promotion technique: » A careful thought should be given in deciding whether or not a specific type of promotion can contribute usefully to marketing strategy. » Each situation must be examined on its merits. » The promotion techniques should be considered against the following criteria: 1. Overall marketing objectives 2. Nature of the service 3. Characteristics of target consumers 4. Nature and attitudes of intermediaries 5. Activities of competitors 6. Cost effectiveness 7. Integration with other marketing elements 8. Requirements for effective implementation 9.Measurement issues 10.Legal consideration
Guidelines for effective promotion management: » Promotion means informing, educating, persuading and reminding customers. » Promotion management employs a variety of tools for this purpose:  Advertising  Personal selling  Sales promotion  Publicity and  Point of purchase communication.
Advertising: » Any form of non personal communication about a professional service firm and its service offerings that is sponsored by the firm or on the firm’s behalf. Personal Selling: » Personal communication with existing or prospective clients for the purpose of generating fees. Publicity: » Non-personal communication regarding a firm or its services that contain commercially significant view or favorable presentation in any media that is not sponsored by the firm or its agents.
Sales Promotion: » Includes those marketing activities which act as incentives to simulate quick buyer action. i.e., coupons, free samples etc..., Point of Purchase Communication: » It includes displays, posters, signs that are designed to influence choice at the point of purchase.
Place in Service
Meaning: » The place refers to contact between the service provider and who gets the benefit of the service i.e., consumer. » Place is one of the important element of marketing mix. » This element in the marketing mix leads to identification of a suitable location. » In traditional marketing, place was considered as a centre of interaction between buyer and seller.
Factors influencing the decision in target market: » Market size structure by geographical resents. » Location of potentially attractive segments » Organisational objectives » Level of market coverage desired. » Number & type of competitors in region consumer » Local infrastructure, good public transport network » Distribution method road access facility,
Channel of Distribution: » Distribution concerned with transferring the service from producer to consumer. » It brings the firm and its customers together. » Traditionally, distribution is designed to deliver the goods/service through middleman to the consumer. But due to the changes in the market, it has undergone a radical change. But distribution can take place with or without intermediaries. » According to Revzan channel is “a pathway taken by goods as they flow from point of production to points of intermediate and final use”. » C. Glenn Walters defines a channel as, “a team of merchant and agent business institutions that combine physical movement and title movements of products in order to create useful assortments for specified markets”.
» First, a channel is a team rather than a random collection of institutions. » Second, some members are merchants and some are agents, every channel need not have agent, but every channel must have atleast one merchant. The reason is that only merchants have the rights of owner to move title. » Third, physical distribution in the channel reflects title flow. » Fourth, the objective of the channel is to reach the target markets. No single channel may attempt to reach all markets, but the end result of channel activity is some market. » Fifth, it creates assortments and distributes them. The assortment refers to the number of types of products necessary to satisfy the market. Both goods and services are part of the assortment, and each product is accompanied by price.
» Service intermediaries perform many important functions for the service principal. Service Principal Selling Intermediaries Selling Customers
» Intermediaries co-produce the service, fulfilling service principals promises to customers. Example: wholesalers, franchising and agents. » Service intermediaries make services locally available, providing convenience in time and place for the customer. » Service distribution focuses on identifying ways to bring the customer and principal or representatives together. » Consumer prefers to buy services from an intermediary who offers a wide choice, including competitors service. » Consumer trust the intermediaries and choose the services on the basis of intermediaries advice. » An intermediary often shares the risk with service provider. » Appointing independent intermediary can free up capital. » Once the primary service is completed, there may be a requirement for after-sales services to be provided. Example: Insurance.
Types of Channels Direct Channel Indirect Channel 1. Franchising 2. Agents 3. Brokers 4. Service wholesalers
Direct Channel: » Service organisation generally uses a direct channel. » This channel is used because of the inseparable nature of services and role of service provider in the service delivery process make this option due to the quality and customer care. » This kind of direct channel is generally costly because of the fixed cost incurred in infrastructure. » In this channel no intermediaries are involved and the service provider should sell its services directly.
Indirect Channel: » Service intermediaries take many forms in terms of their size, structure, legal status and relationship to the service principals. Because of this diversity attends at classification can become confused by it level of overlap present. » The type of intermediaries are 1. Franchise 2. Agents 3. Brokers 4. Wholesalers
1. Franchise: » The International Franchise Association defines a franchise operation as: a contractual relationship between the franchiser and franchisee in which the franchiser offers or is obliged to maintain a continuing interest in the business of the franchisee in such areas as know-how and training; wherein the franchisee operates under a common trade name, format or procedure owned by or controlled by the franchiser, and in which the franchisee has made or will make a substantial capital investment in his business from his own resources. » Example: Kumbakonam Degree Filter Coffee is now available in many cities of Tamilnadu.
Benefits Challenges Leverages the business format to gain expansion and revenues. Difficulty in maintaining and motivating franchisees. Maintains consistency in outlets Highly publicized disputes and conflicts Gains knowledge of local markets. Possibility of inconsistent quality that can undermine the company name Shares financial risk and frees up capital Control of customer relationship by intermediary. Summary of Benefits and Challenges for Franchiser of Service
Agents: » In common terminology, an agent is an intermediary who acts on behalf of a service provider(principals). » He is authorised to make agreements between customers and those principals. » Agents do not take titles to services but instead deliver the rights to them. » They have legal authority to market services as well as to perform other marketing functions on behalf of producers.
Types of Agents: » The role of the agent, is to facilitate buying or selling (or both), for which he is paid a commission. Selling agents: » These agents enter into contract to sell a service principal’s output, usually because the principal is not interested to sell. » Selling agents acts as a sales force with a difference. They know the market better than the service principal. There are typically entrusted with influence over price, terms, and conditions of sale.
Purchasing agents: » They also have long-term relationships with buyers evaluating and making purchases for them. » They are knowledgeable and provide helpful market information to clients as well as obtaining the best services and prices available. » Purchasing agents are frequently hired by companies and individuals to find art, antiques and rare jewellery.
Brokers: » Brokers bring buyers and sellers together assisting in negotiation. » They are paid by the party who hire them. while » They rarely become involved in financing or assuming risk. » They are not long-term representatives of buyers or sellers. » They do not take title to services but instead deliver the rights to them. » The most familiar examples are real-estate brokers, insurance brokers, and security brokers.
Benefits Challenges Reduced selling and distribution costs. Loss of control over pricing & other aspects of marketing Intermediary’s possession of special skills and knowledge Representation of multiple service principals. Wide representation Knowledge of local markets Customer choice Summary of Benefits and Challenges through Agents and Brokers
Services Wholesalers: » For services, the term is understood where an intermediary buys the right of a large volume of service transactions. » It is then broken down to smaller units of rights to s service for handling by retailers or other intermediaries. » Hotel booking agencies who buy large blocks of hotel accommodation earn their margin by buying in volume at low prices and adding a mark-up as a block booking is broken to smaller units for sale to retailers or agents. » A hotel wholesaler may in fact have some rights to return unsold accommodation to the hotels concerned.
Functions of Service intermediaries: » Service intermediaries perform a number of important functions on behalf of service producers (service principals). » The role of expectations of intermediaries vary according to the nature of the service in question. » Some of the most important functions are as follows: 1. Availability 2. Local availability 3. Sales support 4. Wide choice 5. Relationship 6. Risk 7. Free-up capital 8. After sales service
Availability: » As a co-producer of a service, an intermediary assists in making a service available to consumers at a place and time that is convenient to them. » An estate agent providing a cheque-cashing facility for a building society is assisting in the process of producing and making financial services available to consumers. Local availability: » Intermediaries help to make a service locally available. » A mortgage can be said to be created at the head office of a bank or building society where bulk funds are acquired and documentation produced.
Sales support: » Intermediaries usually provide sales support at the point of sale. For some customers of personal services, a two- way personal dialogue messages derived centrally from a service principal. Wide Choice: » Consumers may prefer to buy service from an intermediary who offers a wide choice, including those provided by competing service principals. Relationship: » Consumers may enjoy trusting relationships with intermediaries and prefer to choose between competing alternatives on the bias of the intermediaries’ advice.
Risk: » An intermediary as a co-producer of a service often shares some of the risk of providing a service. » This may happen when an intermediaries contributes some of his own capital to the past of acquiring a service Free-up Capital: » The use of independent intermediaries can free up capital which a service principal can reinvest in its core service production facilities. After sales service: » Once the initial service act is completed an after sale service should be provide, intermediaries can make this support more accessible to the consumer and assist the service principal as co-producer of the after sales support.
Customer role in service delivery: » At some level customer participation is inevitable in service delivery. » Due to the inseparable nature, services are produced and consumed simultaneously. » There are 3 major roles played by customers in service delivery: 1. Customer are productive resources. 2. Customers as contributors to quality, value and satisfaction. 3. Customers as competitors.
People in Service
Meaning: » It is the fifth element in service marketing mix. » It includes service personnel and also importance given to other peoples like customer who plays an important role in service delivery. » People management within the organisation is also given importance. » The importance attached to people management in improving the quality within the service organisation.
CUSTOMERS Management Support Support Personnel Technological/ knowledge support Contact Personnel Physical Component ServiceA Service B CUSTOMERS INTERACTIVE PART SUPPORT PART VISIBLE TO CUSTOMERS / FRONTSTAGE INVISIBLE / BACKSTAGE SERVICE PROCESS
EMPOWERING PEOPLE: » Empowerment is one of the most powerful tool to breakout the old logic. » Imagine employees who are highly committed is doing their best, eager to solve the problems faced in terms of quality, willing to offer solutions to customers on the front line. » All this sounds great, but the question is how to get there? » Empowerment is a term that has evolved for programs intended to promote these behaviours in employees and to push decision making and involvement to the front line.
» Empowerment appears to be the best approach to the service organisation where developing the relationship is given more importance. » Bowen and Lawler provide a more comprehensive definition of the term empowerment. They define it as sharing four organisational ingredients with frontline employees: 1. Information about the organisation’s performance. 2. Rewards based on the organisation’s performance. 3. Knowledge that enables employees to understand and contribute to organisational performance. 4. Power to make decisions that influence organisational direction and performance.
BENEFITS OF EMPOWEMENT: » Greater employee satisfaction » Greater customer satisfaction » Good ideas for improvement » Cost savings and productivity improvement.
Developing Customer Conscious Employee: HIGH CONTACT LOW CONTACT 1. People based services: Education, Restaurants, Hospitals, (a) Professional: Medical, Legal Services, Accountancy (b) Non-professional: Caretaking, Casual Labour 1. Equipment based services: Laundry, Cinema, Lathe Machines
Staff Recruitment and Selection: » The pre-employment relationship: Recruitment »The pre-employment relationship: Selection » The orientation and Socialisation » Appraisal and Rewarding »Award
Quality circle in service industry: STEERING COMMITTEE CHAIRMAN: President / Director MEMBERS: Vice –Presidents / General Managers Secretary Divisional QC Review Committee CHAIRMAN: Divisional Head MEMBERS: Department Heads / Co-ordinators Facilitator-Cum-Member-Secretary FACILITATOR Circle Leader Circle Members
Functioning of Quality Circle: » The quality circle functions in four stages: Selection of the problem Analyse the problem Solutions of the problem Suggestions
ServicesMarketing
Physical Evidence Meaning:  Physical evidence is the environment in which the service is delivered with physical or tangible commodities and where the firm and the customer interact.
Physical Facilities Physical Facilities Peripheral Evidence Essential Evidence
Peripheral Evidence:  This type of evidence can actually change hands during the service transaction as in the purchase of an airline ticket or the issuing of motor insurance cover note or a hotel room key.  The purchaser may become the owner of the item, but it is, worthless unless the airline does offer the flight required.  Peripheral evidence includes those items which confirm the service and also the items which are complementary to the service. Ex. Pepsi free with Pizza.
Essential Evidence:  Essential evidence is integral to the service offering and includes, for example, the facilities offered by a leisure centre or the items on display in an exhibition or museum which make a visit worthwhile.  Both these type of evidence combine with the organisation’s other marketing mix elements, especially promotion and people, to create an impression on customers and potential customers.  They also help to make the service more tangible.  The automobile association’s handbook and membership card are permanent, physical reminders of the organisation’s service. The technical standard of the mechanics and the quantity of spare parts carried are examples of the essential physical evidence which forms part of the service.
Physical Evidence:  Physical evidence will help the potential customer or user to evaluate the service offering.  The customer’s overall judgement of service quality depends upon the process and the outcome.  This is compared with the customer’s own expectations and desired benefits.  Their impression of quality will always be subjective and based on their individual perception of the physical evidence and other elements of the service offering.  This lead to an important idea in assessing quality from a services marketing perspective.
Perceived Service Quality:  Perceived service quality represents the customer’s judgement of an organisation’s service based on their overall experience of the service encounter.  A number of key criteria are use to make this judgement and the following list of examples shows clearly the importance of physical evidence and the service delivery process itself:  People: credibility, professionalism, efficiency, courtesy, approachability, accessibility, appearance, communication skills.  Process: timekeeping, dependability, trusted performance levels, promptness, efficiency.  Physical evidence: appearance of tangible aspects of the service, physical surroundings, smartness.
Marketing strategy in Services Introduction:  Strategy is a game plan for achieving its goals in these moments of truth the value to customer is created for them.  If they are not taken care of properly ‘the perceived service quality, service quality as perceived by the customer, is damaged and the service provider may easily lose business’.
An overview of a market – oriented strategy:  External marketing is the traditional marketing in which describe the normal work done by the company to prepare, price, distribute and promote the service to customers.  External marketing creates expectation by giving promises.  Internal marketing describe the work done by the company to train and motivate its employees to serve customers well.  Internal marketing is a top management responsibility, but it is also the responsibility of every manager and supervisor.
 Interactive marketing function, ‘fulfilling promises’ in the moments of truth of the buyer- seller interactions is the major aspect.  The ‘contact persons’ are most often the key to success. Thus interactive marketing is concerned with ‘keeping promises’.  It is the responsibility of operation and traditionaly non marketing function.
Corporate Strategy Service Concepts (Creative Expectations) By giving promises Responsibility of marketing specialists (Creative the Prerequisite for giving promises to customer) Responsibility of evenly managing and supervision External Marketing (Traditional Marketing) Internal Marketing Personal Needs The Moments of Truth Word-of-mouth Image Previous Experience Life Plan Personal needs Image Role Conflict & Ambiguity
Interactive Marketing (Keeping Promises Contact personnel) System & Physical Resources The customer & Fellow Customer Management Support Material Support & Support Personnel Technology and System Support Price Corporate / Local Image. Responsibility of operations personnel as part-timers.
External Marketing:  External marketing describes the normal work done by the company to prepare, price, distribute and promote the service to customers.  The external marketing function involving the traditional marketing efforts, such as market research, personal selling, advertising, direct mail, sales promotion, pricing and public relations by which the company gives promises.  These promises hopefully correspond with the personal need & wishes of the target group of customers.
Planning of Services:  The strategic marketing for services is not different from that of the manufacturing goods however they tend to differ keeping in view the specific consumer relevant characteristics of services.  Canton has differentiated various issues related to market planning if services with that of manufactured goods. These differences are as follows:
I. Channels of Distribution for Services:  As the services are intangible and inseparable, the distribution channels are available for goods marketing cannot be used.  In most of the services the channel is very short or direct.  The services are distributed either through direct sales or sometimes one middleman in case of travel agency and insurance.  Whether the service providers uses agents or middleman or sell direct, ‘location’ is a key factor in channel selection decision in view of potential market. Service Provider Agent or Broker Customer
II. Advertising in Services:  As the services are intangible, the customer is buying the performance of the service personnel.  Therefore, the advertising in service sector should not only restrict itself to encouraging consumption but also it should encourage employees to perform well (i.e., internal marketing).  The six basic guidelines to help in designing the effective advertising programme.  The advertising should - 1. capitalise on word-of-mouth. 2. provide tangible clues to the customers. 3. make the service offering easily understood. 4. have positive effects on contact personnel. 5. contribute to the continuity. 6. promise what is possible.
III. Promotion in Services Marketing:  In the execution of any type of consumer promotion schemes the service provider should carefully consider the six basic elements in service industry. They are as follows: 1. Price promotion can be used effectively and add excitement and involvement. 2. Sampling cannot be used frequently because of the cost of the service. 3. Premium are frequently tangibility. 4. Coupons are lesser in use. used to give an element of 5. Price promotion can be used effectively excitement and involvement. 6. Refunds and future discounts are not in practice. and add
IV.Selling in Services:  In selling the service provider should follow the following guidelines.  Sales personnel firstly should develop a personal relationship with the client.  Secondly, the service provider must adopt a professional orientation as the key to most service transactions in the buyer’s confidence in the seller’s ability to deliver the desired results.  Thirdly, a service sales personnel has to use indirect selling techniques because the service provider is promoting an intangible product.  Fourthly, the service provider has to build and maintain a favourable image.  Lastly, a service provider sells services and not a manufactured goods or product.
Internal Marketing: I. Introduction:  The effective implementation of marketing programmes requires co-ordinating the efforts of all employees.  Their co-operation is essential in realising strategies designed to increase productivity and customer service to gain and maintain competitive advantage. II. Customer Care:  Personnel are instrumental in the creation and provision of service quality and in doing so, they need to ‘care’ for the customers.  The concept of ‘customer care’ is concerned with customer satisfaction putting the customer first, anticipating needs and problems, tailoring products and services to meet needs and being ‘nice’to the customer.
 Customer care includes service to the customer, delivery or operations, employees relationships with customers and internal relationships between employees and management (Internal Marketing).  This process brings together marketing, operations management and human resource management. III.Internal Marketing – Definition:  According to Helen Woodruffe internal marketing is defined as “Treating with equal importance the needs of the internal market- the employees and the extend market through proactive programmes and planning to bring about desired organisational objectives by delivering both employees and customer satisfaction.
IV. Objectives of Internal Marketing: 1. Overall objectives. 2. Strategic level objectives. 3. Tactical level objectives. IV. Role of Internal Marketing: 1. Through internal marketing programmes it is possible to compete aggressively for additional market share. 2. It ensures that the personnel are committed to give best possible service and treatment to customers. 3. It brings people working in the organisation together to achieve the organisational goal. 4. Internal marketing can play an important role in motivating the personnel to perform their task in a better manner to achieve the corporate goal.
V. Components of Internal Marketing:  To enhance the knowledge understanding overall marketing orientation among: 1. Employees should consists of motivation; 2. Training and staff development; 3. Internal communication; 4. Internal marketing programmes.
VI. Steps in Developing Internal Marketing Programmes:  Helen Woodruffe has discussed an action plan for implementing internal marketing which encompasses the following steps: 1. Market definition 2. Market research 3. Market segmentation 4. Marketing action 5. Marketing communication 6. Marketing orientation.
1. Market definition:  Clearly defined to make sure that the providers & receivers of services can identify with the concepts of internal customers to satisfy their needs.  Each person is participating & serving in a clearly defined market.  The structure of the market is important with attention being paid to both formal and informal communication & power.  Internal marketing is based on the notion of communicating with internal & external markets, treating employees with customers.
2. Market research:  Market research collection, analysis is done in a systematic design, and reporting of data and findings relevant to a specific marketing situation facing the company.  Information should be continuously collected and analysed at all levels in the organisation. This helps to identify the opportunities both internally and externally.  The internal market research may include employee attitudes towards the organisation and its mission, level of job satisfaction assessing skill and knowledge needs and wants of employees.
3. Market Segmentation:  It is necessary to ensure most effective, accurate and appropriate targeting of internal marketing efforts.  Bar’s for market segmentation depends on market research.  The best method for segmenting the internal market may not be existing department or line management divisions as this can lead to a less unified approach.
4. Marketing Action:  This involves the selection and implementation of appropriate marketing activity to achieve optimum internal marketing success.  The main aim of internal marketing is to provide better internal communications, teamwork and employee empowerment.  To achieve these aims the organisation should take initiatives to assign the work to individuals and management teams.  Customer care programmes and staff training and development programmes should be undertaken.
5. Marketing Communication:  Good communication can play a key role in effective implementation of plans.  Accurate and timely communication of marketing information should be undertaken, both internal and externally.  This process should be targeted to motivate internal customers in the achievement of personal and organisational goal.  Communication among employees thrown in house magazines, regular team briefings and encouragement etc.
6. Marketing Orientation:  The ultimate goal of organisation should be to create an effective internal environment which is flexible and responsive and will nurtures common values and behaviour which in turn helps to achieve the organisation’s goal.  For this purpose the marketing objectives and mission of the organisation must be made clear to all the employees and clearly define the role of employees, so that it enable employees to see their own contribution in achieving the organisational goal.
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai
Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai

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Service Marketing_MSB.pptx- Dr.M.S.Balaji, Head & Associate Professor,Research Department of Business Administration, Sourashtra College, Madurai

  • 1. SERVICES MARKETING PREPARED BY Dr.M.S.Balaji Associate Professor and Head Department of Business Administration Sourashtra College(Autonomous) Madurai-625004
  • 2. Unit - I SERVICES MARKETING
  • 3. Meaning ofService ⚫According to Kotler “ a service means any act or performance 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 typed to physical product.” ⚫According to Standon “Services are identifiable, intangible activities that are the main object of transaction designed to provide want satisfaction to customers”. This definitions exclude supplementary service that support the sale of goods or other services.
  • 4. ⚫Philip Kotler identifies 4 types of activities to recognise goods & services. 1. Pure product which has no service factor associated with them. E.g. Soap, Salt 2. Products with which services are or associated . E.g. Computers 3. A main service accompanying with minor services such as Train Journey 1st class A/C service. 4. A pure service E.g. Play home. ⚫This classification tells that “Services vary considerably over a range of factors including whether they are directed at business or individual consumers whether they require a customers physical presents and whether they are equipment intensive or people intensive.
  • 5. Types of Service Types are classified on the basis of activity performance. The various types are as follows, 1. Marketable (Charged) Vs Unmarketable (Uncharged) 2. Producer services Vs Consumer services 3. The magnitude of the service in the product. a) Pure service b) Independent service added to the product c) Add value to the product 4. Degree of consumer participation More Less 5. Service based Continuous supply Casual supply 6. Machine oriented Vs Person oriented
  • 6. Types of Service Based on the multi-dimensional approach the following services are identified 1. Transportation services. 2. Distribution services. 3. Financial services ( Banking & Insurance ) 4. Real estate services. 5. Communication and information services (Telecommunication & informational). 6. Public Utility & Government services. E.g. Public Welfare Department(PWD), Corporation, Municipal service, Panchayat service. 7. Defence services.
  • 7. 8. Educational service. 9. Hospitality services (Hotels, Tours & Travels) 10. Health care services (Hospitals & health insurance) 11. Legal services (Lawyer services, Auditor services) 12. Personal care services. 13. Professional care services (Consultancy & Projects) 14. Other non profit services.
  • 8. Nature & Characteristics ⚫Goods Pre-production Marketing Production Post-production Marketing Consumption Create Consumer Induce Trail Demonstrate benefits Build Brand Preference Word of mouth communications Strong influence Weak influence
  • 9. Nature & Characteristics ⚫Services Pre-production Marketing Post Production Marketing 7 P’s Production Consumption Create Consumer Induce Trail Demonstrate benefits Build Brand Preference Word of mouth communic ation Strong influence Weak influence
  • 10. Characteristics of Services 1. Intangibility 2. Inseparability 3. Variability or Heterogeneity 4. Perishability 5. Ownership 1. Intangibility: The properties of service cannot be tasted and examined before purchase. The purchase is based on belief like reliability, personal care etc. The attributes of this service can be experienced only when it is availed. These forces problems to customers which are discussed below.
  • 11. Problems to customers 1. Not possible to evaluate the competing services. 2. Quality of service can be assessed only by price. 3. Personal information has to by considered to accept or reject the services. 4. There is a perceived high level of risk involved. Hence tangible evidences like brochures, leave lets etc has to provided to reduce the customer uncertainty.
  • 12. 2. Inseparability ⚫In goods production and consumption in depend in nature. Producers produces in mass production. Therefore the benefit of scale of economy is availed. Under services production and consumption are inseparable. There is an active participation on the part of the consumer along with service provider in the process of product. The benefit can be realised only after the purchase of the services. E.g. Teaching, Lawyer & Auditor’s services. ⚫Hence consumer play an active participation and significant role during production.
  • 13. 3. Variability orHeterogeneity ⚫Service varies from customer to customer because of varied needs as inspections is not possible and hence service organisations are highly worried about quality control. ⚫Causes of Variation:  Production of service commences only at the time of consumption.  There is no chance to correct mistakes in services.  Type of service to be provided depends upon the customer needs.  It is not easy to fix standard service procedures.
  • 14. ⚫Effects: High response is there on the part of consumer. Consistent quality of service cannot be provided. Strong service brand cannot be developed. Solution: a) Simplify the service procedures. b) Mechanise the service operations wherever possible.
  • 15. 4. Perishability ⚫Products like machines, soaps can be stored but services like Room service, Flight service, Railway services cannot be preserved. ⚫Hence services are perishable in causes rate concern to service provider to maintained continuous demand. The loss from service can be overcome by price and promotion tools only.
  • 16. 5. Ownership ⚫Another feature of service is that ownership cannot be transferred as in the case of products. Service provider sell their service and consumer consumes it. ⚫Hence the consumer cannot own the service provided by the service providers.
  • 17. Classification of Services ⚫Service type are classified on the basis of the activity performed by the service industry. The various classification are as follows. 1. Classification based on Ultimate user:- Book Service can be classified into the following categories: a) Consumer: Services which are directly provider to consumer to leisure, hair dressing, holidays, dry cleaning, laundry, package. b) Business to Business: advertising agencies, printing, accountancy, consultancy, photographic processing which provide service to business operation. c) Industrial: Plant maintenance & repair, installation. Project management.
  • 18. 2. Classification based on the level of Tangibility: The degree of tangibility of services can be used to classify services. a) Highly Intangible: E.g. Car, rental. Vending machines, telecommunications, b) Service linked to tangible goods: E.g. Domestic appliances repair, automobile services to enhance consumer appeal. c) Highly intangible: The offer consists of service like consultancy, legal service, psychotherapy, baby sitting, etc...., d) Major service linked with minor tangible goods services: E.g. Airline passenger buying transportation services without anything tangible to show for their expenditure.
  • 19. 3. Classification based on service option: service can be labour-intensive (People based) and equipment based services this can also be represented by the degree of conduct. a) People based services: high conduct clients presence with people. E.g. Educational institutional, medical services, restaurants, etc..., b) Equipment based Low conduct: Low conduct with people. E.g. Cinemas,Vending Machines (ATM) This classification implies that the higher the two dimensions, the greater the need for attention to the performance aspects of the service, specially if the audience is one place during the performance. E.g. Restaurant
  • 20. 4. Classification based on specialisation: The expertise and skill of the service provide can be dividend into the foreign characteristics. a) Professional services: E.g. Medical services, legal services, accountancy, etc..., b) Non-Professional services : Care taking services, casual labour etc.
  • 21. 5. Classification based on Profit orientation: The overall business orientation is a recognised means of classification. a) Non-profit orientation: Educational institutions like Government Schools and Colleges, Universities, Cultural organisational like orchestras, Zoos, Museums, Theatre groups, religious institutions like Temples, Churches etc, Philanthropic activities like welfare groups, Redcross research foundations, Oldage homes, organisations for social cause for cancers, environmental concerns, civil rights and civil clubs. Health care organisations like hospitals, health research organisations, World Health Organisation, Political activities by political parties or individual politicians. Government is also in the business of providing services although the extend of such involvement may vary widely from one country to another depending on traditional and political value.
  • 22. b) Commercial or profit orientation: Banks, Airline tour operator's, hotel and Catering Services in this type of firms the orientation is to earn profit. 6. Classification based on External-Internal services to manufacturers: External Services: Many services are concerned with the distribution installation and upkeep of physical objects they include car repairs, landscape maintenance, computer installation etc. Internal Services: Covers a wide range of activities including recruitment, publications, legal services, payroll administrations, office cleaning, internal transport etc, if the same services are provided by the outside agencies it becomes external service. Thus it is highly difficult to classify the service sector as there are hidden services in this sector as Levitt puts there is no such things as service industries. There are only industries whose service components are greater or less than those of other industries everybody his in services.
  • 23. 7. Classification based on Customer – employee presence: Service organisations can be classified on the basis of presence of customers and employee during the service. They are a) Self Service: In this type of organisation we can find the presence of customer only. E.g. ATM, Self service restaurants etc..., b) Inter Personal Services: In this type of organisations there will be presents of both customer and employee. E.g. Educational institution. c) Remote Services: In this type of organisations there will presents of employee. E.g. Insurance company. The term service include a wide variety of ser services. The other service which are either consumed for reasons of business or for non business.
  • 24. Differences between Products and Services Products Services Tangible Intangible Transfer of ownership No transfer of ownership Homogeneous Heterogeneous A thing An activity or process Production and distribution are separated from consumption Production, distribution and consumption are simultaneous processes. Core value produced in factory Core value is produced in buyer-seller interactions Can be kept in stock Cannot be kept in stock Quality control is possible (Standard Product) Difficult to control Production – storage – sale – consumer Sale, produced and consumed simultaneously
  • 25. Requires physical distribution Does not require physical distribution. Mostly works with personal contact Attributes can be determined before the purchase. E.g. Colour, size, etc.., Difficult to evaluate in advance 4P’s in Marketing mix Product, Price, Promotion and Place 7 P’s (4 P’s + People, Physical Evidence and Process) in the marketing mix. Shelf-life days to years. Shelf-life zero Marketing traditional and external Marketing in non-traditional and largely internal Creation-Manufactured Delivered Ability to measure is objective Subjective
  • 26. Managing Demand & Supply ⚫Service sector cannot pile output in the warehouse and a wait for demand is difficult for service sector industry because of the perishable nature of services which cannot be stored. ⚫Hence, it is difficult to match demand & supply but it should be managed for 2 reasons. 1. Below demand means Cost increase & Profit eroded. 2. Above demand means demand & supply are out of balance.
  • 27. Managing Demand & Supply ⚫ Managing demand with capacity utilisation is undertaken in 3 ways. 1. Predicting Demand 2. Managing Demand 3. Managing Supply
  • 28. Predecting Demand Managing Demand Managing Supply Managing Service Capacity Shaping Demand Inventory Demand Using Part-time employees Sharing Capacity Complement- -ary services Reservation system Product / Service Partitioning Demand Price Incentives Promotion Off-Season Demand Place Change ofLocation Increasing customer participation Scheduling work shift Sub- contracting Training employees
  • 29. 1. Predicting Demand ⚫It depends upon a thorough understanding of the customers & segments. Three sources of information about the customer are obtained as follows. iii. i. Historical sales data: means data collected from past sales. It is a rich source which provides a thorough understanding of customers. ii. Desk Research: It can reveal a lot of information which are published by the competitors about their strategies & performance. Customer survey: Through survey the necessary information may be collected. After collection of data and analysis, it is possible to find frequency of changes in demand.
  • 30. Strategy formanaging demand or Management of demand to fitcapacityor supply orlevel-capacity strategies ⚫Demand can be managed in two ways. They are as follows. i. Shaping demand: Shaping demand is done through as follows. a) Product or Service: By partitioning demand, the demand can be managed. Service is heterogeneous in homogeneity. By doing so, the demand nature, divide the service market as per its can be managed, for example: Hotels doing regular business offering special offers in the weekends. b) Price: Price itself carries a message. Lower prices in the off-season can stimulate demand.
  • 31. Price Price P1 P2 P2 P1 Q1 Q2 Quantity As per Q1 Q2 Quantity diagram the service market price conveys the message of quality offered and hence, price reduction leaves to quality reduction and elimination of customers. Therefore, differential price is used to manage demand. Prestige Product
  • 32. c) Place: It is necessary to change location and timing offered for service delivery. For example: taxies opening of services in tourist location during peak period for pickup & delivery will stimulate demand. d) Promotion: Communication is used to create peak demand and through various promotional programmes like advertising, publicities, sales promotion techniques are used to stimulate demand. 2. Inventory demand: For filling the demand for the services we can use the following techniques:- a) Reservation system or Booking system: Pre sells the potential services. E.x. Reservation in the theatres, hotels, train tickets etc....,
  • 33. b) Complimentary services: Instead of making the customer to wait, it can made productive & enjoyable by providing complimentary offers. E.x. 2 tickets for the price of 1 ticket. Strategies for managing supply or managing supply to follow demand Various techniques are as follows: 1. Changing the numbers & hours of personnel at work : It is better to appoint full time staff and allow flexible working hours (i.e.) hours of work which satisfies both the customers & employees , by doing so it is possible for as to have the required stuff to deal with the customer during peak hours. 2. Customer Participation: Problem of capacity can be removed when customers participate directly in the creation of services. E.x. Self-help super markets, fast food restaurants etc......,
  • 34. 3. Resource transfer or Cross-training: When one operation is busy, another operation may be idle, cross training of employees in several operation creates flexible capacity to meet localised peak demand. 4. Sub-contracting: This approach effectively turns fixed capacity into variable capacity. Sub contracting can be used whenever they required. 5. Share capacity: The service delivery often requires a large investment in equipment and facilities. During under utilisation period, it may be possible to find other uses for the capacity. E.x. Concert hall can be shared by musicians, comedians for guest lecture 6. Scheduling Work shift: By scheduling work shift carefully, the service supply can be made according to demand. E.x. Work shift scheduling is an important staff problem for call centres.
  • 36. Definition – Marketing mix The marketing mix refers to the blend of ideas, concepts and features which marketing management puts together to best appeal to their target market segments. Each target segment will have a separate marketing mix tailored to meet the specific needs of consumers in the individual segments. The marketing mix comprises of 4 elements namely, 1. Product 3. Promotion 2. Price 4. Place
  • 37. Marketing mix bridges between marketing strategy and marketing tactics. In the service industry greater emphasis must be given on developing & implementing successful marketing programme to create and foster a customer needs.
  • 38. Definition – Service Marketing mix Neil Borden, while quoting from an article of James Culleton, wrote that a marketer is viewed as a ‘decider’, or ‘artist’ ingredients’ who plans various or a ‘mixer of means of competition. “He may follow a recipe prepared by others, or prepare his own as he goes along, or adopt a recipe to the ingredients immediately available, or experiment with or invent ingredients no one else has tried.” If a marketer was a “mixer of ingredients”, what he designed was a marketing mix.
  • 39. The following are the marketing mix components in service marketing. 1. Product 2. Pricing 3. Promotion 4. Place 5. People 6. Physical evidence 7. Process
  • 40. 1. Product The product here refers to the service offering. Although service products are essentially tangible, there are certain physical characteristics which consumers will assess in their evaluation of the product choice. They are 1. Attractiveness of the offering in terms of physical features, suitability of climate etc, 2. Facilities available and associated levels of quality. 3. Accessibility in terms of ease of getting there for the potential consumer.
  • 41. While packaging the services the service providers have to consider the following aspects 1. Tangible aspects of service. 2. Intangible aspects of service. 3. Core and peripheral services.
  • 42. 2. Pricing Pricing in service industry is fairly complex issue because the price eventually paid by the consumer may be made up from the price charged by various independent service provides say, a package tour. The services are extremely perishable, they usually cannot be stored, and demand often fluctuates considerably. The service are intangible and higher the intangibility, the more difficult it is to determine price. Governments regulations may pose problem in the calculation of Price of service.
  • 43. Prices to services are generally determined on 1. Cost basis 2. Competition basis 3. Demand basis them pricing policy are applicable to  Many of service marketing like discount & allowance skimming & penetration, one price & flexible pricing, price verses non price completion etc,.
  • 44. 3. Promotion Promotion is the third of the conventional 4P’s. Once a suitable product has been designed, a promotion strategy must be used to build an image and reputation, to differentiate each from their competitors, to generate interest and knowledge, to attract new customers and to generate customer loyalty. Promotional Tools: There are a number of promotional tools available in services marketing which can be combined to create effective promotional programmes.
  • 45. Before deciding the tools for promotion, it is important to focus on the following: 1. Identification of segments 2. A unique selling proposition 3. Well defined target audience 4. Use of media and media scheduling to reach audiences. 5. Monitoring effectiveness. and evaluation of promotional
  • 46. Advertising for services: Advertising is any kind of paid, non personal method of promoting by an identified organisation or individual. Advertising has limited potential in services when compared to goods which achieved a great degree of sophistication and maturity. For planning of promoting strategy, proper care should be taken to accommodate basic service characteristics and their implication in the marketing efforts.
  • 47. The objectives of advertising in the service firms has been identified. They are 1. The service providers have to create an understanding of the firm in the minds of the customers by describing the firms services, activities and its area of expertise. 2. The service providers have to create a positive image for the firm. 3. The service providers have to build a strong sense of identification with the customers by converting his needs, values and attitudes. 4. The service providers have to create a positive background for the sales people to sell the services by providing all relevant information about the firm.
  • 48. Personal selling:  Personal selling is essential when developing close relationship between the buyers & sellers.  In services marketing the problem with using personal selling is that, in certain types of service, the service cannot be separated from the performer.  Moreover, it is not a homogeneous service in which exact standards of performance can be specified.  In such circumstances, personal selling implies using an actual professional rather than a salesman to sell the service.  The firm of charted Accountant, Lawyers may send one of their Junior consultants depending on the type of customer being attempted.
  • 49. The Insurance firms mainly depend on personal selling. Unlike many other components of the promotion mix, personal selling dialogue and offers a provides the basis for focused approach with immediate feedback. Nevertheless these benefits are not without cost as personal selling is generally more expensive than other elements of the mix and is more difficult to turn on and off. Attention must also be focused on important issues such as organisation, training and motivation of the sales force.
  • 50. Sales Promotion:  Sales promotion is used predominantly to encourage trail and generate brand switching, although without support from other media it is unlikely to develop brand loyalty.  Palmer suggests that sales promotion is used to break down loyalty whereas advertising is used to build it up.  The range of sales promotion tools continues to increase and several have proved popular with financial services institutions.  Gifts are now commonly available to those who respond positively to a particular promotion. For example: Time share firm providing gift voucher for anyone who approach for time share.
  • 51.  Cash back offers are increasing in popularity and a number of building societies (real estate companies).  For example: Omkur estates Pvt Ltd., Bangalore offers Rs. 11000 cash back in the form of Fixed Deposit certificate maturing after 15 years.  Nirman shelters Pvt Ltd., Bangalore offers free steel and cement for the first 10 members who construct the building. Special concession for first time buyer are also in evidence as are coupons offering price discounts on mortgage and insurance products.  Recent growth of activity in the bank marketing(credit cards) has led to a variety of schemes aimed at encouraging sales brand switching.
  • 52.  Example: Citi bank in connection with the Launch of “Suvidha” offered, 24 hour ATM’s free, shopping convenience free, with a minimum balance of just Rs.1000 etc..,  These type gifts, discounts, offers may be different from one firm to another and the type of service providers to another.  A doctor may charge lesser amounts as consultation fee on subsequent visits to encourage the patient’s loyalty, a paediatrician may send reminder cards to patents about their children’s pending inoculation, a car mechanic may send a reminder about the next service, a charted accountant or lawyer may offer his services for free the first two visits, insurance agent may pay two months premium as behalf of his client etc.
  • 53. Publicity:  Publicity is a special form of public relation that involves news stories about an organisation or its products or services.  Like advertising, it involves an impersonal message that reaches a mass audience through the media.  Publicity is distinguished from advertising in many ways. It is not paid for, the organisation that is the subject of the publicity has no control over, and it appears as news and therefore has greater credibility than advertising. E.x. Insurance policy.
  • 54. Public Relations: It has a wide variety of communication efforts to contribute to generally favourable attitudes and opinions towards an organisation and its products. Public relations can take many forms, including newsletter, annual reports, lobbing, and sponsoring of charitable or civil event. Public relations have become more sophisticated and uses a variety of tools to create and enhance a positive image of the institutions and its services for instance; seminars, speeches, in-house magazines and press release.
  • 55. Personal Relations is involved with more than just customer relationships it is often handed at a corporate level rather than financial level thereby ensuring a consistent image. The corporate image is very important for a service organisation. Because the tendency of customers is to evaluate the quality of an intangible service though an assessment of the corporate image of the organisation. The development of a clear corporate image is increasingly viewed as an important element of competitive strategy and represents a valuable marketing asset particularly for service institutions.
  • 56. 4. Place Traditionally most services have been sold directly from producer to consumer. Middlemen are not used as service cannot be separated from the seller or when the services is created and marketed simultaneously. E.x. In case of medical care consultancy service and repair service are sold without the middlemen. If the middlemen are not used, it limits the geographical markets that the service provides can reach. Therefore the frequently used channel includes one agent middleman. For example: agent or broker is often used in the marketing of securities, travel arrangements entertainments and housing rentals.
  • 57. The most important decision elements in the distribution strategy relates to the issue of ‘location’ of the service so as to attract the maximum number of consumers. Hence, Distribution management is concerned with two things: “availability and accessibility” The service provides must see that their products and service are available and accessible to the target market. For this purpose they have to design a channel strategy. In order to do undertaken to determine this, research, must be how and where potential customers prefer to buy the services.
  • 58. Different distribution strategies may be selected to reflect the company’s overall objective. Even the firms in the same area of marketing operation may not have the same distribution strategy. E.x. Some to the tour operators may appoint agents to sell their services but others may sell their services by using ‘direct marketing’. The other decision variable in the distribution strategy is how to provide the service to a maximum number of customers in the most effective manner.
  • 59. Franchising: A slowing number of services are now distributed through a fast emerging channel management called franchising. It is the granting another person or institution to exploit a trade name, trade mark or product in return for lump-sum payment or for royalty. This kind of franchising is widely used in services sector where some kind of homogeneity is possible. For example: In the case of fast foods restaurants, MC Donalds and KFC, beauty parlors like Shahanaz, International Hotel chains like Holiday Inn, Sheraton etc..., using this franchising strategy.
  • 60. Integrated service system:  The other recent trend in distribution of services is that of integrated service system. In this system the service provides offer additional related services to the customers.  E.x. India Tourism Development Corporation which offers its customers both conducted tours and hotel facility, Hotel Ashoka offers “package tours” in which they take care of all facilities such as visa, foreign exchange, reservations, etc.....,  Thus in the distribution strategy, three decision variables are important to attract the maximum number of consumers. They are a) Location of the service b) Intermediaries and c) Cost-effectiveness.
  • 61. 5. People The ‘People’ component reflects the important role played People by individual in the provision of services. are also an important element in the specification of the marketing mix. Consumers will often not see anything tangible for their expenditure and the material benefits from many products. Indeed, the people component of services marketing mix is most commonly associated with personal selling, although, it overlaps with both promotion & distribution.
  • 62. Service Personnel: It plays an important role in an organisation which provides services. The behaviour and attitude of the personnel providing services will have an influence, on the customer’s overall perception of the service and can distinguish between two actual service rendered and the human element involved in it. For example in a restaurant the manner in which the waiter behaves with the customer will be an important determinant in losing the customer forever or retaining him as a regular client.
  • 63. It includes improvement in technology, retail design, systems and procedures programmes which relate to: 1. Emphasising the increasing need for high level of service and the importance of the customers. 2. Training staff with the skills and knowledge required to deal with customers effectively. 3. Motivating staff through monetary and non- monetary rewards. 4. Developing a new style of leadership and management.
  • 64. Customers: Customers are a source of influencing other customers by word-of-mouth. E.x. In the case of professionals like Doctors, Lawyers, one satisfied customer will lead to a chain reaction, bringing in number of other customers. True, the service provides should ensure complete satisfaction of the existing customers.
  • 65. 6. Physical Evidence Physical evidence is one more marketing mix available to the service providers. The service firms must consciously make efforts to manage the physical evidence associated with their services. The need for physical evidence within the marketing mix arises directly from the typically intangible nature of the services. Physical entities can be successfully employed to describe the service product and its distinguishing qualities.
  • 66. Types of Physical Evidence: 1. Peripheral evidence 2. Essential or dominate evidence 1. Peripheral evidence  It can be possessed by the consumer but has little independent value.  The peripheral physical evidence are often ignored, but in reality they are the real source of competitive differentiation..  E.x. Cheque book issued by the bank, Cinema tickets, stationary, notepads etc.
  • 67. 2. Essential or dominate evidence  It is the one which continue a dominant part of service facilities, which possessed by the consumer cannot be but has independent value.  E.x. A bank branch, car, aircrafts in airlines, hotel building, campus of a university etc.
  • 68. 7. Process The system by which target audience reserve delivery of service constitutes the process. The process by which the service is produced and delivered to the ultimate customer is critical to success of service operation. It is the process of adding ‘value’ or ‘utility’ to system inputs to create output which are useful to the customers. E.x. An airline markets the process of transportation, a restaurant product is the process of meal preparation.
  • 69. Kinds of Delivery Process: 1. Line operations: The consumer moves through logically arranged operations which are arranged in a sequence. It is also called ‘assembly line’. The customer starts purchasing the items he needs and pays for them at the exit. This kind of delivery process is possible when the service provided is standardised and consumer’s requirements is of a routine nature.
  • 70. Kinds of Delivery Process: This 2. Job-shop operations: appropriate for customised services. This operation applies when consumer requires a combination process is delivery of a of services using different sequences. E.x. Regular repair shops, hospitals and management restaurants, consultants, educational institutions.
  • 71. Kinds of Delivery Process: 3. Intermediate Operations: This operation is useful when the type of service is rarely repeated. For example: firms and advertising, use this offering consultancy for projects kind of delivery system since each project or advertising campaign requires a unique set of input factors.
  • 72. Services Product Introduction: The ‘product’ is the central component of any marketing mix. If it does not satisfied the needs of the target market, then the organisation lacks and effective basis for long term success in competitive market. Meaning of the Product: In terms of service we can define product as a bundle of benefit to the customers through the experience that is greater to the customers.
  • 73. Definition: According to Diff, Simkin, Pride and Farrell who define a ‘product’ as: “a complexity of tangible and intangible attributes, including functional, social and psychological utilities or benefits. A product can be an idea, a service, a good or any combination of these three”.
  • 74. Services Concept: The service concept is nothing but the differences between what an organisation offers in terms of its service and what benefits does its customers derive from it. The main ideas of the service concept: 1. Consumer benefit concept 2. Service offers 3. Service forms 4. Service Delivery forms
  • 75. 1. Consumer benefit concept:  It defines what benefits do consumer derive from a particular service package offered.  That customer benefit the starting point of service concept but the problem is that customer themselves may not have a clear idea of what they are seeking.  They may find it difficult to express or it may be a combination of several benefits.  Using the customer benefits as a starting point, the service concept defines the specific benefits which the service offers. For example: a centre for the performing arts may offer entertainment and recreation.
  • 76. According to Groonroos, the service concept has to be defined at the levels. 1. Developing the service concept; 2. Developing a basic service package; 3. Developing an augmented service offering; and 4. Managing the service offer.
  • 77. Service Offer:  This is the next step in giving specific shape and form to the basic concept.  In the above example the service concept is to provide entertainment but the service offer is concerned with specific element that will be used to provide entertainment such as Drama, Music, Dance etc...,.  In the category of music and concerts the choice may be vocal or instrumental these are the intangible element of the service offer.  There tangible elements of service offer is the physical infrastructure of the centre in terms of its seating capacity, comfortable seats, Air-conditioning, snack bars, the tangible elements can be controlled but Intangible elements cannot be controlled.
  • 78. Service Forms: Another important area of decision-making is in what form should the service be made available to the customers. For instance, should all the shows of the centre be available in a package deal against a yearly membership fee or seasonal ticket or daily tickets? Thus service form refers to the various options relating to each service element. The manner in which they are combined gives shape to the service form.
  • 79. Service Delivery System: The two main elements in a delivery system are the people and physical evidence. E.x.: Clerk in a bank represent the ‘people’ component, the cheque or withdrawal slip are elements of physical evidence. The physical evidence components have also been called ‘facilitating goods’ and ‘support goods’.
  • 80. Service Package:  Packaging is increasingly used as a marketing tool. The package is perhaps the most important component of communication about the product.  What constitutes a successful package? The one that appeals to both the conscious mind and the sub-conscious mind of the consumer.  ‘Packaging’ service product means not only designing and develop, the ideal service but bring it together as a whole, with features such as branding and added tangible elements which will help to differentiate in the market place and attract customerss.
  • 81. Tangible elements: 1. Items purchased by the customer . E.x. Meal in a restaurant. 2. Items whose status is altered by the service. E.x. Car repair, fitness club. 3. Peripheral items rather than main part of the package. E.x. Cinema ticket, cheque book, etc., 4. Items without which the service would not exist. E.x. Car, aircraft, restaurant. 5. Items that form a part of the process. E.x. Technology (Computers, ATM’s etc...,.)
  • 82. Intangible elements: 1. The personal contact with the service personnel. 2. The atmosphere generated by the service environment. 3. Emotions felt by the customers. E.x. Peace of mind. Thus, the ‘basic service package’ describes the bundle of services that are needed to fulfil the needs of the target market.
  • 83. Core Services and Peripheral Services Expected Services Augmented Services Accessibility Services Interaction with Service organisation Consumer Participation
  • 84.  The core services which represents the core benefits .  The core services is the reason for being in the market.  E.x.: A college exists because it equips people with skills & abilities to manage organisations faculty expertise & the accumulated experience represents the core resource for supplying the benefits.  The core service offering is the necessary output of an organisation which are intended to provide the intangible benefits the customers are lokking for.  E.x. In hotel, hospitality is the core service and airlines they are the safety and reliable transportation.
  • 85. Peripheral Services:  Peripheral services are those which are either, “indispensable for the execution of the core service or available only to improve the overall quality of the bundle”.  The peripheral service offer represents both the expected or tangible product and augmented product. Expected or Tangible services:-  Service always relate to the customer expectation of what kind of services are available to satisfy their needs.
  • 86. Augmented Services:-  At the augmented level, service suppliers offer additional benefits to the customers that is beyond the tangible evidence.  E.x. After sales services, credit facilities etc..,.  The augmented services are those products which integrates the concepts of service process with the service offer.  Three distinct elements which along with the basic offer go into the creation of the augmented service product as components of the perceived service process are as follows:
  • 87. Accessibility of the Services:-  Accessibility refers to the ease and convenience which a service can be purchased, used and received. Interaction with service organisation: with  The interaction between the service providers and its customers can be in terms of:  Interaction with other service interfaces (their expertise, skill attention, attitudes).  Interactions with other service interfaces (admission, evaluation, students enquiries, students evaluation office). Customers Participation:-  Customers participation is a concept which identifies the impact the receiver of the benefit has on the service he perceives.
  • 88. Managing service offering:-  For the purpose of managing the service offer, product planning is necessary, other features like branding, quality management, product life cycle management, presents a great challenge for service industry. Product Planning and Development:-  The high perishability, fluctuating demand and inability to store services make product planning critically important to service marketers.  A service industry can expand or contract its ‘product mix’, after existing services, and trade up or down.  The company may want to increase its total volume, reduce seasonal fluctuations in volume or catch to changing buyer patterns such as the desire for one-stop shopping.
  • 89.  For example: transport firms have working arrangements with airlines and hotels so that when customers fly to their destination, a car and room will be ready for use. Branding of services:-  The word ‘BRAND” is a name and/or marks intended to identify the product or service of different sellers or service providers.  According to Kotler, Brand “is a name, term, sign, symbol or design or combination of them which is intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors”  Branding plays a very important role in tourism marketing. E.x. Car rental firms, hotel chains ad airlines in particular employ tremendous efforts to ensure that their name is widely recognised in synonymous with quality, value or some other characteristic.  For the analysis of branding a systematic framework has been developed. It suggests identification of brand hierarchy as follows:
  • 90. 1. Corporate Branding :-  The main element in the brand is the name of the organisation itself or a division of the organisation.  This approach is generally very effective when the organisation’s product are closely related and generic image of the organisation is then seen to be applicable to all its products. 2. Dual Branding :-  Dual branding involves combination of product brand and corporate brand with the product brand being rather more dominant. 3. Brand dominant :-  This approach is the simple product brand which attempts to create a distinct identity for the product independent of the organisation which supplies it.
  • 91. Life cycle concept  Products and services are often said to have “life cycles”.  Life cycle concept is a major factor in product management from new product information to old product disposal. The product or service life cycle comprises of four stages. They are 1. Launch or Introduction 2. Growth 3. Maturity 4. Decline
  • 92. Introduction Growth Maturity Decline Time The life cycle is represented practically in terms of sales overtime Sales Product Life Cycle
  • 93. 1. Introduction :-  At the launch or introduction stage the product or service is very new.  Introduction takes time, and sales growth is slow.  In this stage profits are negative or low because the promotion will be intense and costly.  It is necessary if the service fails to meet initial targets.  This is a high risk stage, because the service has not yet proved that it will be successful and the costs of pre-launch development may be very high. So close monitoring is necessary.
  • 94. 2. Growth:-  If the new product satisfies the market, it will enter the “growth stage” .  The product or service life cycle growth stage is at which a product’s sales start increasing quickly.  At this stage revenues will increase and profitability may be achieved.  The long-term success of the service can be more easily assessed at this stage as market penetration increases.  It improves the core service and adds new services to augment the service.  It enters a new market segments known as maturity stage.
  • 95. 3. Maturity:-  As growth slows down, the overall volume of sales may reach a fairly steady plateau and enters a ‘maturity stage’.  This maturity stage lasts longer than the previous stages and it posses major challenges to the service providers.  Competition will probably be well established and promotion efforts reflect the battle between leading brands. stage the firm should consider  To remain in this modifying the market, product or service and marketing mix.
  • 96. 4. Decline:-  At some point, the popularity of a product or service will begin to die.  There will be decline in sales and profitability diminishes.  This may be due to new technologies a shift in consumer taste or increased competition.  As the sales and profit decline, some firms withdraw from the market or cut the promotion budget to reduce the price further or may decide to ‘maintain’ its brand without change in the hope that competitors will leave the industry or may decide to ‘reposition’ the brand to move back to growth stage or may decide to ‘sell’ it to another firm or may decide to ‘drop’ the product from the line.
  • 97. Product Modification Product modification is often pursued in the maturity stage of the life cycle to attract new customers and differentiate the product from the competition. Product modification does not add to the product line as such but instead involves effectively replacing an existing service with a new and improved version. It is the process of product development which constitutes a process of modification resulting in the appearance of new but related product.
  • 98. Advantages :- 1. Product modification aims to improve the performance of an existing product or service. 2. This may help in marketing the service easier to use. 3. It may improve the quality of service. 4. It may help in improving delivery system. 5. It may also helps in adding additional features.
  • 100. Meaning of Pricing :-  Economies defines price as a exchange value of a product or service always expressed in terms of money. It is referred to as an agreement between the buyer and seller in quantitative terms.  For the service providers price is a source of revenue and a prime determinant of profit.  For the buyer it stands for quality and quantity of service bought. Pricing:  Pricing is equivalent to the total service offering. This include the brand name, a package, delivery, other benefits and so on.  Pricing is the art of translating the qualitative offerings into quantitative terms (rupees and paise). The value of a unit service to customer at a point of time.
  • 101. Objectives of Pricing :- 1. Financial Objectives: a) Profit Maximisation:-  Price is to maximise the profit – Long term objective, for service industry higher the price higher the profit.  E.x. 5 star hotels – high price for low volume of food b) Resource mobilisation:-  It refers to high prices to generate more surplus for reinvestment. c) Price and Profit stabilisation:-  Needs preventing price wars among competitors. d) Cash flow management:-  This objective to retain as much cash as possible within a given period of time
  • 102. e) Predetermined profit level:-  Means the company expects the considerable return on capital employed by the service organisation. 2. Patronage Objectives:  It is also referred as CUSTOMER OBJECTIVE  There are many ways to do this because it is the most visible part of the presentation mix. a. To instil confidence in the customers by price stability. E.g. Hotel companies have a negotiated agreement with corporate for a fixed rate. b. “inducement to try” to enhance the image of the corporate by giving special offer to customer to try. c. To desensitise the customer to the price . Eg. Package deals i.e., Tour package (travel + accommodation + guide + food ) d. To differentiate one product with another – by providing on an added service.
  • 103. 3. Volume Objectives:  These objectives are particularly prevalent in the hotel industry because it is such a highly ‘volume-sensitive’ business. The commonly used measures are as follows: a. Market Shares: The target market share means that portion of the industry sale which a company aspire to attain. Price is one of the factor which helps in attaining market share. Service providers prices the service less to enjoy the target market share. b. Customer Base: To build business by increasing the customer base. This is done usually by lowering price, either temporarily or in special promotion to attract more customer with the hope to make them as permanent customer. c. Turnover: To increase the turnover in a hotel industry or seat turnover in airline by lowering the price. d. New market: In the launch stage of PLC, pricing is used mainly to enter the new market by lowering the price. e. Contribution to fixed cost: it is made by incremental business – by lowering the price
  • 104. Cost based Pricing Competition based Pricing Demand based Pricing
  • 105. The company determines the price by adding the direct material cost, direct labour cost, overheads & percentage of profit. This method is used in advertising agency, consultancy, hotels, tours & travels. It is also called cost – plus – pricing. In case of professionals like lawyers, doctors, accountant etc., ‘fee for service’ is the service strategy used. It represents the cost of the time involved in providing the service. Cost based Pricing
  • 106. In this method of pricing the price is fixed on the basis of the price fixed by other firms (competitions) in the same industry or market. This method is used under two circumstances 1. When services are standard that is when the same service is provided by all the service provider. 2. In oligopolies where there is a small number in large service providers such as airline industry.  In this type of market, any price offered by the company will be marched by competitors to avoid giving a low-cost sellers a distinct advantage. Competition based Pricing
  • 107. Involves setting the prices defending on the customer perception of value that is prices are based on what customers will pay for the service provided. It is the buyers perception of total value that prompts the willingness to pay a particular price for a service. The customers’ questions like what benefits does the service provide? How important is each of these benefit to the others? How much is it worth to the customer to receive a particular benefit in a service? At what price will be service be economically acceptable to potential buyers? In what context is the customer purchasing the service? Based on these factors the services are priced. Demand based Pricing
  • 108. Strategic issues of Pricing :-  A pricing strategy has to be designed which is compatible with the rest of the marketing mix. 1. Discounts and Allowances:  It refers to the reduction in the base price of a service. a) Quantity discounts: It means a reduction offered to customers who buy in large numbers. b) Functional discount: An offer given to the sub-agents for functions performed. c) Cash discount: Is a discount offered on immediate payment of cash for the service offered. d) Seasonal discount: Price reduction to customers who buy the services out of season.
  • 109. Strategic issues of Pricing :- 2. Segmented Pricing Strategy:  It is selling a service of the same nature at different prices. The divisions may be: a) Customer Segmented: Different prices are paid by different customers for the same service. Eg. Students’ offer. b) Product from Pricing: different prices are charged for different forms of the same service. Eg. Tour package (travel + lunch + accommodation) c) Location Pricing: Prices for same service may vary from one place to another. Eg. Abacus tution fee for urban areas are more when come back to rural areas. d) Time Pricing: different prices at different times of the year.
  • 110. Strategic issues of Pricing :- 3. New Service Pricing Strategy:  To develop a pricing strategy for new service offerings the following points have to be noted. 1. Price position sought by the service provider. 2. How novel is the offered service.  Depending upon the innovative services two distinct pricing strategies are adopted. a) Price Skimming Strategy: It refer to pricing the service at a higher level for the early adopters who are ready to pay & later cutting the price to reach new segments of the market. b) Saturation Pricing Strategy or Penetration pricing: That is pricing it initially low can be adopted to encourage customer to shift from competitors product and later increasing the price.
  • 111. Strategic issues of Pricing :- 4. One Price Vs Flexible Price Strategy:  One price strategy refers to charging all the customers for the same service, the same price i.e., price refers to catalogue / price list or wall board.  Flexible price strategy refers to charging similar customer opting the same qualities of services at different price. Eg. If bargained, the customer has studied the market he can get same service at a lower price. a). Resale Price Maintenance: A service providers want to control the prices at which middlemen resell their services. Eg. More common with travel agency.
  • 112. Strategic issues of Pricing :- 5. Service Portfolio Pricing: a) Optional additional services: It refers to linking the core service which is to be purchased by the customer with optional, additional services. Eg. Tour organiser getting a travel insurance policy done . b) Captive Service: it refers to the additional optional services that has to be purchased from the core service provider only. c) Competing Services: Within the service providers portfolio itself when a new service of the same nature as the existing service is to be offered, than the two services within the organisations portfolio became competing services. Thus, the existing services may suffer attract from the new service.
  • 113. Strategic issues of Pricing :- Price building:  A number of services of connecting natures are bundled together and given a price tag, this is price bundling. It is commonly done to build customer relationships. Psychological Pricing:  It is perceived that price is used to say something about the product, i.e., if the price of the product is high than it should be of a good quality.  Another aspect of psychological pricing is the reference pricing, where the customer may refer the current price with the past or compare one service with another to access and justify the price to be paid.
  • 114. Strategic issues of Pricing :- Tactical Pricing:  In this competitive business world is necessary to tactically use pricing to gain a market share.  It is difficult to draw a line of distinction between strategy and tactical pricing.  Tactical price assumes greater importance to highly competitive and undifferentiated service markets.  Tactical pricing can be in any of the following conditions: 1. It can provide short-term competitive advantage. By this it can attract new customers to just try the service once works casual because of reduction in prices. This tactics efficiently on customers who intend to make purchases and who are rational.
  • 115. 2. Tactical pricing may be used to balance the demand and supply of a service in the market. The prices can be discounted when supply is more and there is tough economic competition. Similarly prices can be increased to remove low-margin elements and to maximise their profits from high-margin lines. 3. An established service provider can use short-term tactical pricing to discourage new entrants into the market. 4. Differential pricing with respect to time, place and different customer segments can be adapted from strategic pricing to a tactical pricing programme. Eg. Off season discounts, senior citizen concessions etc.., 5. Tactical pricing programmes can be created to motivate the intermediaries. Eg. Giving a higher percentage of margin than the competitors.
  • 116. Price Vs Non-price Competition:  In developing a marketing strategy, the organisation has to decide whether to compete primarily on the basis of price or non-price elements of the marketing mix. Price Competition:  Some of the organisations engage in price competition by regularly offering services priced as low as possible.  The firm can use price to compete by changing its prices or by reacting to price charges made by the competitors.
  • 117. Non-price Competition:  In non-price competition, service provides maintain stable prices and attempts to improve their market positions by emphasising other aspects of their marketing programmes= other than price.  Using terms familiar in economic theory, we can differentiate price and non-price competition.  In price competition, service providers attempt to move up or down their individual demand curve by charging prices.  In non price competition, service provides attempt to short their demand curve to the right by means of product of differentiation, promotional activities or some other techniques.
  • 118. An organisation's objectives determine the target of pricing policies. Thus, it is important to analyse the factors that influence pricing decisions. In general we can identify four important factors of price determination, they are: 1. What is the costs to produce a service? 2. What the consumers are ready to pay? 3. What are competitors charging? 4. What are the legal and social regulations effecting the price?
  • 119. High P R I C E Low Ceiling Maximum price that consumers are ready to pay for the service In between the external and internal factors effect pricing Cost Minimum price at which the services can be offered. [Adopted fromAdrein Palmer, Principles of Services Marketing, p.238]
  • 120. Factors Affecting Pricing Decisions: Internal Factors Organisational Policies Service differentiation Service cost Marketing mix Product / Service Distribution Channels Pricing Objectives External Factors  Demand Different group of Users Diff. points of Consumption Diff. Time of Production Competition Govt. policies
  • 121.
  • 122. Promotion – Meaning » Promotion is used as a tool of communication informing customers about services to target market audience. » It facilitates the exchange process. » Effective communication are needed to inform customers about their role in the service delivery process. » Eg. Customers need to know where ATM cash dispensers are located and how they work or how to make reservations for a restaurant or seat at the theatre.
  • 123. » Promotion plays an important role in informing, educating, persuading and reminding customers. » This role is very important in services. » It is given more importance because high degree of intangibility. » Promotion is used as there is no physical product or packaging to attract the attention of the potential customers.
  • 124. Marketing Communication Mix » The traditional marketing function includes market communication activities such as sales, advertising and sales promotion. » What employees say, how they say, how they behave, how service outlets, machines and other physical resources look, and how they function and communicate with customers. » The communication effect may be Positive or Negative. » Marketing communication is itself a mix of four essential elements. They are shown in the following diagram.
  • 126. Advertising: » Any form of non personal communication about a professional service firm and its service offerings that is sponsored by the firm or on the firm’s behalf. Personal Selling: » Personal communication with existing or prospective clients for the purpose of generating fees. Publicity: » Non-personal communication regarding a firm or its services that contain commercially significant view or favorable presentation in any media that is not sponsored by the firm or its agents.
  • 127. Sales Promotion: » Any activity or material that is not advertising, publicity or personal selling which acts as an inducement to referral sources and or directly to existing and potential clients. » These four communications mix elements comprise the service marketer’s armoury for communicating with clients, potential clients and referral sources in order to directly or indirectly help create exchanges that may result in greater fee income for the firm.
  • 128. Types of Communication 1. Personal Communication: It is a personalised communication. Customers come in direct contact to the service production and consumption process. Eg. Sales person. 2. Mass Communication(Impersonal): for example, advertising, brochures, and mass distributed sales letter. 3. Direct Communication: This is a personalised impersonal communications which is directed to named receivers. An example is sales letters addressed to the receivers personally. These three type of communications are part of the Traditional Marketing Functions.
  • 129. 4. Absence of Communication: when a firm decides not due to inform its customers about, say a delay or quality fault, this is not lack of communication. Instead, there is a distinct piece of information involved. This is perceived either immediately on the spot or later on. Moreover, absence of communication is frequently perceived as negative communication. 5. Interactive Communication: It refers to the communication between the buyer and seller during service production. Much of this is personal.
  • 131. Communication Circle 1. Expectations: A customer or potential customer has developed certain expectations. He will then decide to make a purchase. With this an ongoing customer relationship continues or new business is created. At this point the customers gets involved in interacting. 2. Interactions: Customer gets involved in interactions with the organisation and perceives the technical and functional quality dimensions of the services rendered. These interactions usually involve a high number of moments of truth or moments of opportunity.
  • 132. 3. Experience: Once the customer has been involved in interaction and has perceived the quality dimensions, it multiplies several times by means of word-of-mouth. If the message is communicated by the word-of-mouth is positive, customer expectations develop favourably. The customer with positive experience will return or continue to use the services on an ongoing basis. New potential customers get interested in the organisation and its offerings as a possible means of satisfying their needs and solving their problems.
  • 133. 4. References (and testimonials): represent an active way for the firm to use positive word-of-mouth in its marketing, thus capitalizing more effectively on potential sources of food word-of-mouth. The multiplier effect of word-of-mouth varies very much between industries and situations. And negative experiences tend to multiply by word-of-mouth quicker and more often than positive experiences do. powerful impact in Thus, word-of-mouth has a forming expectations of existing and potential customers and other publics.
  • 134. Promotional Techniques » Seven promotional techniques are available to service marketers to motivate customers to purchase. » These approaches are 1. Samples 2. Price / Quantity promotions 3. Coupons 4. Sign-up rebates 5. Future discounts 6. Gifts premiums 7. Prize promotions
  • 135. 1. Samples: Sampling gives a customers a chance to try the service free of charge. Eg. Company gives its new product for free on purchase of its existing product. 2. Price / Quantity promotions: Limited time offers. Eg. Buy 1 Get 1 MTR Jamun mix free on seasonal times like Pongal, Diwali, etc.., 3. Coupons: Special offer for bearers of the coupons provided by the service/product providers. The coupons have been printed in newspapers or magazines. 4. Sign-up rebates: It may be offered by “Membership”. Service organisations that charge a preliminary sign-up fee for applying, enrolling, or making connections to a network.
  • 136. 5. Future discounts: Future discounts are widely used by airlines, hotels and rental car firms in competitive markets to stimulate brand loyalty among frequent travellers. 6. Gifts premiums: Gifts premiums are frequently used to add a tangible element to a service. For instances the credit card users get the benefit of points for every purchases made. These points can be exchanged for the gifts offered by a bank. 7. Prize promotions: Prize promotions introduce an element of chance, like a lottery. They are generally designed to encourage increased use of the service.
  • 137. Objectives of Promotion 1. Objectives Targeted at Customers: » Increase awareness of a new or existing service. » Encourage trail of service » Encourage non-users to attend a demonstration of the service » Encourage non-users to make trail use of an existing service. » Persuade existing customers to:  Continue purchasing the service and not terminate use of the service or switch to a competing alternative;  Increase their purchase frequency of the services.  Commit to purchasing the service for an extended time period (thus taking the consumer out of the market for competing alternative) » Change the timing of customer demand for the service. » Reinforce advertising for the service and draw audience attention to it.
  • 138. 2. Objectives Targeted at Intermediaries: » Persuade intermediaries to deliver a new or new launched service. » Persuade existing intermediaries to provide additional push for the service, including point-of-sale merchandising. » Insulate intermediaries from consumer price negotiation at the point of purchase. » Insulate intermediaries from any temporary sales reduction that might result. » From a price increase. 3. Objectives Targeted at Competition: » Move offensively or defensively on a temporary basis against one or more competitors.
  • 139. Criteria for selecting specific promotion technique: » A careful thought should be given in deciding whether or not a specific type of promotion can contribute usefully to marketing strategy. » Each situation must be examined on its merits. » The promotion techniques should be considered against the following criteria: 1. Overall marketing objectives 2. Nature of the service 3. Characteristics of target consumers 4. Nature and attitudes of intermediaries 5. Activities of competitors 6. Cost effectiveness 7. Integration with other marketing elements 8. Requirements for effective implementation 9.Measurement issues 10.Legal consideration
  • 140. Guidelines for effective promotion management: » Promotion means informing, educating, persuading and reminding customers. » Promotion management employs a variety of tools for this purpose:  Advertising  Personal selling  Sales promotion  Publicity and  Point of purchase communication.
  • 141. Advertising: » Any form of non personal communication about a professional service firm and its service offerings that is sponsored by the firm or on the firm’s behalf. Personal Selling: » Personal communication with existing or prospective clients for the purpose of generating fees. Publicity: » Non-personal communication regarding a firm or its services that contain commercially significant view or favorable presentation in any media that is not sponsored by the firm or its agents.
  • 142. Sales Promotion: » Includes those marketing activities which act as incentives to simulate quick buyer action. i.e., coupons, free samples etc..., Point of Purchase Communication: » It includes displays, posters, signs that are designed to influence choice at the point of purchase.
  • 144. Meaning: » The place refers to contact between the service provider and who gets the benefit of the service i.e., consumer. » Place is one of the important element of marketing mix. » This element in the marketing mix leads to identification of a suitable location. » In traditional marketing, place was considered as a centre of interaction between buyer and seller.
  • 145. Factors influencing the decision in target market: » Market size structure by geographical resents. » Location of potentially attractive segments » Organisational objectives » Level of market coverage desired. » Number & type of competitors in region consumer » Local infrastructure, good public transport network » Distribution method road access facility,
  • 146. Channel of Distribution: » Distribution concerned with transferring the service from producer to consumer. » It brings the firm and its customers together. » Traditionally, distribution is designed to deliver the goods/service through middleman to the consumer. But due to the changes in the market, it has undergone a radical change. But distribution can take place with or without intermediaries. » According to Revzan channel is “a pathway taken by goods as they flow from point of production to points of intermediate and final use”. » C. Glenn Walters defines a channel as, “a team of merchant and agent business institutions that combine physical movement and title movements of products in order to create useful assortments for specified markets”.
  • 147. » First, a channel is a team rather than a random collection of institutions. » Second, some members are merchants and some are agents, every channel need not have agent, but every channel must have atleast one merchant. The reason is that only merchants have the rights of owner to move title. » Third, physical distribution in the channel reflects title flow. » Fourth, the objective of the channel is to reach the target markets. No single channel may attempt to reach all markets, but the end result of channel activity is some market. » Fifth, it creates assortments and distributes them. The assortment refers to the number of types of products necessary to satisfy the market. Both goods and services are part of the assortment, and each product is accompanied by price.
  • 148. » Service intermediaries perform many important functions for the service principal. Service Principal Selling Intermediaries Selling Customers
  • 149. » Intermediaries co-produce the service, fulfilling service principals promises to customers. Example: wholesalers, franchising and agents. » Service intermediaries make services locally available, providing convenience in time and place for the customer. » Service distribution focuses on identifying ways to bring the customer and principal or representatives together. » Consumer prefers to buy services from an intermediary who offers a wide choice, including competitors service. » Consumer trust the intermediaries and choose the services on the basis of intermediaries advice. » An intermediary often shares the risk with service provider. » Appointing independent intermediary can free up capital. » Once the primary service is completed, there may be a requirement for after-sales services to be provided. Example: Insurance.
  • 150. Types of Channels Direct Channel Indirect Channel 1. Franchising 2. Agents 3. Brokers 4. Service wholesalers
  • 151. Direct Channel: » Service organisation generally uses a direct channel. » This channel is used because of the inseparable nature of services and role of service provider in the service delivery process make this option due to the quality and customer care. » This kind of direct channel is generally costly because of the fixed cost incurred in infrastructure. » In this channel no intermediaries are involved and the service provider should sell its services directly.
  • 152. Indirect Channel: » Service intermediaries take many forms in terms of their size, structure, legal status and relationship to the service principals. Because of this diversity attends at classification can become confused by it level of overlap present. » The type of intermediaries are 1. Franchise 2. Agents 3. Brokers 4. Wholesalers
  • 153. 1. Franchise: » The International Franchise Association defines a franchise operation as: a contractual relationship between the franchiser and franchisee in which the franchiser offers or is obliged to maintain a continuing interest in the business of the franchisee in such areas as know-how and training; wherein the franchisee operates under a common trade name, format or procedure owned by or controlled by the franchiser, and in which the franchisee has made or will make a substantial capital investment in his business from his own resources. » Example: Kumbakonam Degree Filter Coffee is now available in many cities of Tamilnadu.
  • 154. Benefits Challenges Leverages the business format to gain expansion and revenues. Difficulty in maintaining and motivating franchisees. Maintains consistency in outlets Highly publicized disputes and conflicts Gains knowledge of local markets. Possibility of inconsistent quality that can undermine the company name Shares financial risk and frees up capital Control of customer relationship by intermediary. Summary of Benefits and Challenges for Franchiser of Service
  • 155. Agents: » In common terminology, an agent is an intermediary who acts on behalf of a service provider(principals). » He is authorised to make agreements between customers and those principals. » Agents do not take titles to services but instead deliver the rights to them. » They have legal authority to market services as well as to perform other marketing functions on behalf of producers.
  • 156. Types of Agents: » The role of the agent, is to facilitate buying or selling (or both), for which he is paid a commission. Selling agents: » These agents enter into contract to sell a service principal’s output, usually because the principal is not interested to sell. » Selling agents acts as a sales force with a difference. They know the market better than the service principal. There are typically entrusted with influence over price, terms, and conditions of sale.
  • 157. Purchasing agents: » They also have long-term relationships with buyers evaluating and making purchases for them. » They are knowledgeable and provide helpful market information to clients as well as obtaining the best services and prices available. » Purchasing agents are frequently hired by companies and individuals to find art, antiques and rare jewellery.
  • 158. Brokers: » Brokers bring buyers and sellers together assisting in negotiation. » They are paid by the party who hire them. while » They rarely become involved in financing or assuming risk. » They are not long-term representatives of buyers or sellers. » They do not take title to services but instead deliver the rights to them. » The most familiar examples are real-estate brokers, insurance brokers, and security brokers.
  • 159. Benefits Challenges Reduced selling and distribution costs. Loss of control over pricing & other aspects of marketing Intermediary’s possession of special skills and knowledge Representation of multiple service principals. Wide representation Knowledge of local markets Customer choice Summary of Benefits and Challenges through Agents and Brokers
  • 160. Services Wholesalers: » For services, the term is understood where an intermediary buys the right of a large volume of service transactions. » It is then broken down to smaller units of rights to s service for handling by retailers or other intermediaries. » Hotel booking agencies who buy large blocks of hotel accommodation earn their margin by buying in volume at low prices and adding a mark-up as a block booking is broken to smaller units for sale to retailers or agents. » A hotel wholesaler may in fact have some rights to return unsold accommodation to the hotels concerned.
  • 161. Functions of Service intermediaries: » Service intermediaries perform a number of important functions on behalf of service producers (service principals). » The role of expectations of intermediaries vary according to the nature of the service in question. » Some of the most important functions are as follows: 1. Availability 2. Local availability 3. Sales support 4. Wide choice 5. Relationship 6. Risk 7. Free-up capital 8. After sales service
  • 162. Availability: » As a co-producer of a service, an intermediary assists in making a service available to consumers at a place and time that is convenient to them. » An estate agent providing a cheque-cashing facility for a building society is assisting in the process of producing and making financial services available to consumers. Local availability: » Intermediaries help to make a service locally available. » A mortgage can be said to be created at the head office of a bank or building society where bulk funds are acquired and documentation produced.
  • 163. Sales support: » Intermediaries usually provide sales support at the point of sale. For some customers of personal services, a two- way personal dialogue messages derived centrally from a service principal. Wide Choice: » Consumers may prefer to buy service from an intermediary who offers a wide choice, including those provided by competing service principals. Relationship: » Consumers may enjoy trusting relationships with intermediaries and prefer to choose between competing alternatives on the bias of the intermediaries’ advice.
  • 164. Risk: » An intermediary as a co-producer of a service often shares some of the risk of providing a service. » This may happen when an intermediaries contributes some of his own capital to the past of acquiring a service Free-up Capital: » The use of independent intermediaries can free up capital which a service principal can reinvest in its core service production facilities. After sales service: » Once the initial service act is completed an after sale service should be provide, intermediaries can make this support more accessible to the consumer and assist the service principal as co-producer of the after sales support.
  • 165. Customer role in service delivery: » At some level customer participation is inevitable in service delivery. » Due to the inseparable nature, services are produced and consumed simultaneously. » There are 3 major roles played by customers in service delivery: 1. Customer are productive resources. 2. Customers as contributors to quality, value and satisfaction. 3. Customers as competitors.
  • 167. Meaning: » It is the fifth element in service marketing mix. » It includes service personnel and also importance given to other peoples like customer who plays an important role in service delivery. » People management within the organisation is also given importance. » The importance attached to people management in improving the quality within the service organisation.
  • 168. CUSTOMERS Management Support Support Personnel Technological/ knowledge support Contact Personnel Physical Component ServiceA Service B CUSTOMERS INTERACTIVE PART SUPPORT PART VISIBLE TO CUSTOMERS / FRONTSTAGE INVISIBLE / BACKSTAGE SERVICE PROCESS
  • 169. EMPOWERING PEOPLE: » Empowerment is one of the most powerful tool to breakout the old logic. » Imagine employees who are highly committed is doing their best, eager to solve the problems faced in terms of quality, willing to offer solutions to customers on the front line. » All this sounds great, but the question is how to get there? » Empowerment is a term that has evolved for programs intended to promote these behaviours in employees and to push decision making and involvement to the front line.
  • 170. » Empowerment appears to be the best approach to the service organisation where developing the relationship is given more importance. » Bowen and Lawler provide a more comprehensive definition of the term empowerment. They define it as sharing four organisational ingredients with frontline employees: 1. Information about the organisation’s performance. 2. Rewards based on the organisation’s performance. 3. Knowledge that enables employees to understand and contribute to organisational performance. 4. Power to make decisions that influence organisational direction and performance.
  • 171. BENEFITS OF EMPOWEMENT: » Greater employee satisfaction » Greater customer satisfaction » Good ideas for improvement » Cost savings and productivity improvement.
  • 172. Developing Customer Conscious Employee: HIGH CONTACT LOW CONTACT 1. People based services: Education, Restaurants, Hospitals, (a) Professional: Medical, Legal Services, Accountancy (b) Non-professional: Caretaking, Casual Labour 1. Equipment based services: Laundry, Cinema, Lathe Machines
  • 173. Staff Recruitment and Selection: » The pre-employment relationship: Recruitment »The pre-employment relationship: Selection » The orientation and Socialisation » Appraisal and Rewarding »Award
  • 174. Quality circle in service industry: STEERING COMMITTEE CHAIRMAN: President / Director MEMBERS: Vice –Presidents / General Managers Secretary Divisional QC Review Committee CHAIRMAN: Divisional Head MEMBERS: Department Heads / Co-ordinators Facilitator-Cum-Member-Secretary FACILITATOR Circle Leader Circle Members
  • 175. Functioning of Quality Circle: » The quality circle functions in four stages: Selection of the problem Analyse the problem Solutions of the problem Suggestions
  • 177. Physical Evidence Meaning:  Physical evidence is the environment in which the service is delivered with physical or tangible commodities and where the firm and the customer interact.
  • 179. Peripheral Evidence:  This type of evidence can actually change hands during the service transaction as in the purchase of an airline ticket or the issuing of motor insurance cover note or a hotel room key.  The purchaser may become the owner of the item, but it is, worthless unless the airline does offer the flight required.  Peripheral evidence includes those items which confirm the service and also the items which are complementary to the service. Ex. Pepsi free with Pizza.
  • 180. Essential Evidence:  Essential evidence is integral to the service offering and includes, for example, the facilities offered by a leisure centre or the items on display in an exhibition or museum which make a visit worthwhile.  Both these type of evidence combine with the organisation’s other marketing mix elements, especially promotion and people, to create an impression on customers and potential customers.  They also help to make the service more tangible.  The automobile association’s handbook and membership card are permanent, physical reminders of the organisation’s service. The technical standard of the mechanics and the quantity of spare parts carried are examples of the essential physical evidence which forms part of the service.
  • 181. Physical Evidence:  Physical evidence will help the potential customer or user to evaluate the service offering.  The customer’s overall judgement of service quality depends upon the process and the outcome.  This is compared with the customer’s own expectations and desired benefits.  Their impression of quality will always be subjective and based on their individual perception of the physical evidence and other elements of the service offering.  This lead to an important idea in assessing quality from a services marketing perspective.
  • 182. Perceived Service Quality:  Perceived service quality represents the customer’s judgement of an organisation’s service based on their overall experience of the service encounter.  A number of key criteria are use to make this judgement and the following list of examples shows clearly the importance of physical evidence and the service delivery process itself:  People: credibility, professionalism, efficiency, courtesy, approachability, accessibility, appearance, communication skills.  Process: timekeeping, dependability, trusted performance levels, promptness, efficiency.  Physical evidence: appearance of tangible aspects of the service, physical surroundings, smartness.
  • 183. Marketing strategy in Services Introduction:  Strategy is a game plan for achieving its goals in these moments of truth the value to customer is created for them.  If they are not taken care of properly ‘the perceived service quality, service quality as perceived by the customer, is damaged and the service provider may easily lose business’.
  • 184. An overview of a market – oriented strategy:  External marketing is the traditional marketing in which describe the normal work done by the company to prepare, price, distribute and promote the service to customers.  External marketing creates expectation by giving promises.  Internal marketing describe the work done by the company to train and motivate its employees to serve customers well.  Internal marketing is a top management responsibility, but it is also the responsibility of every manager and supervisor.
  • 185.  Interactive marketing function, ‘fulfilling promises’ in the moments of truth of the buyer- seller interactions is the major aspect.  The ‘contact persons’ are most often the key to success. Thus interactive marketing is concerned with ‘keeping promises’.  It is the responsibility of operation and traditionaly non marketing function.
  • 186. Corporate Strategy Service Concepts (Creative Expectations) By giving promises Responsibility of marketing specialists (Creative the Prerequisite for giving promises to customer) Responsibility of evenly managing and supervision External Marketing (Traditional Marketing) Internal Marketing Personal Needs The Moments of Truth Word-of-mouth Image Previous Experience Life Plan Personal needs Image Role Conflict & Ambiguity
  • 187. Interactive Marketing (Keeping Promises Contact personnel) System & Physical Resources The customer & Fellow Customer Management Support Material Support & Support Personnel Technology and System Support Price Corporate / Local Image. Responsibility of operations personnel as part-timers.
  • 188. External Marketing:  External marketing describes the normal work done by the company to prepare, price, distribute and promote the service to customers.  The external marketing function involving the traditional marketing efforts, such as market research, personal selling, advertising, direct mail, sales promotion, pricing and public relations by which the company gives promises.  These promises hopefully correspond with the personal need & wishes of the target group of customers.
  • 189. Planning of Services:  The strategic marketing for services is not different from that of the manufacturing goods however they tend to differ keeping in view the specific consumer relevant characteristics of services.  Canton has differentiated various issues related to market planning if services with that of manufactured goods. These differences are as follows:
  • 190. I. Channels of Distribution for Services:  As the services are intangible and inseparable, the distribution channels are available for goods marketing cannot be used.  In most of the services the channel is very short or direct.  The services are distributed either through direct sales or sometimes one middleman in case of travel agency and insurance.  Whether the service providers uses agents or middleman or sell direct, ‘location’ is a key factor in channel selection decision in view of potential market. Service Provider Agent or Broker Customer
  • 191. II. Advertising in Services:  As the services are intangible, the customer is buying the performance of the service personnel.  Therefore, the advertising in service sector should not only restrict itself to encouraging consumption but also it should encourage employees to perform well (i.e., internal marketing).  The six basic guidelines to help in designing the effective advertising programme.  The advertising should - 1. capitalise on word-of-mouth. 2. provide tangible clues to the customers. 3. make the service offering easily understood. 4. have positive effects on contact personnel. 5. contribute to the continuity. 6. promise what is possible.
  • 192. III. Promotion in Services Marketing:  In the execution of any type of consumer promotion schemes the service provider should carefully consider the six basic elements in service industry. They are as follows: 1. Price promotion can be used effectively and add excitement and involvement. 2. Sampling cannot be used frequently because of the cost of the service. 3. Premium are frequently tangibility. 4. Coupons are lesser in use. used to give an element of 5. Price promotion can be used effectively excitement and involvement. 6. Refunds and future discounts are not in practice. and add
  • 193. IV.Selling in Services:  In selling the service provider should follow the following guidelines.  Sales personnel firstly should develop a personal relationship with the client.  Secondly, the service provider must adopt a professional orientation as the key to most service transactions in the buyer’s confidence in the seller’s ability to deliver the desired results.  Thirdly, a service sales personnel has to use indirect selling techniques because the service provider is promoting an intangible product.  Fourthly, the service provider has to build and maintain a favourable image.  Lastly, a service provider sells services and not a manufactured goods or product.
  • 194. Internal Marketing: I. Introduction:  The effective implementation of marketing programmes requires co-ordinating the efforts of all employees.  Their co-operation is essential in realising strategies designed to increase productivity and customer service to gain and maintain competitive advantage. II. Customer Care:  Personnel are instrumental in the creation and provision of service quality and in doing so, they need to ‘care’ for the customers.  The concept of ‘customer care’ is concerned with customer satisfaction putting the customer first, anticipating needs and problems, tailoring products and services to meet needs and being ‘nice’to the customer.
  • 195.  Customer care includes service to the customer, delivery or operations, employees relationships with customers and internal relationships between employees and management (Internal Marketing).  This process brings together marketing, operations management and human resource management. III.Internal Marketing – Definition:  According to Helen Woodruffe internal marketing is defined as “Treating with equal importance the needs of the internal market- the employees and the extend market through proactive programmes and planning to bring about desired organisational objectives by delivering both employees and customer satisfaction.
  • 196. IV. Objectives of Internal Marketing: 1. Overall objectives. 2. Strategic level objectives. 3. Tactical level objectives. IV. Role of Internal Marketing: 1. Through internal marketing programmes it is possible to compete aggressively for additional market share. 2. It ensures that the personnel are committed to give best possible service and treatment to customers. 3. It brings people working in the organisation together to achieve the organisational goal. 4. Internal marketing can play an important role in motivating the personnel to perform their task in a better manner to achieve the corporate goal.
  • 197. V. Components of Internal Marketing:  To enhance the knowledge understanding overall marketing orientation among: 1. Employees should consists of motivation; 2. Training and staff development; 3. Internal communication; 4. Internal marketing programmes.
  • 198. VI. Steps in Developing Internal Marketing Programmes:  Helen Woodruffe has discussed an action plan for implementing internal marketing which encompasses the following steps: 1. Market definition 2. Market research 3. Market segmentation 4. Marketing action 5. Marketing communication 6. Marketing orientation.
  • 199. 1. Market definition:  Clearly defined to make sure that the providers & receivers of services can identify with the concepts of internal customers to satisfy their needs.  Each person is participating & serving in a clearly defined market.  The structure of the market is important with attention being paid to both formal and informal communication & power.  Internal marketing is based on the notion of communicating with internal & external markets, treating employees with customers.
  • 200. 2. Market research:  Market research collection, analysis is done in a systematic design, and reporting of data and findings relevant to a specific marketing situation facing the company.  Information should be continuously collected and analysed at all levels in the organisation. This helps to identify the opportunities both internally and externally.  The internal market research may include employee attitudes towards the organisation and its mission, level of job satisfaction assessing skill and knowledge needs and wants of employees.
  • 201. 3. Market Segmentation:  It is necessary to ensure most effective, accurate and appropriate targeting of internal marketing efforts.  Bar’s for market segmentation depends on market research.  The best method for segmenting the internal market may not be existing department or line management divisions as this can lead to a less unified approach.
  • 202. 4. Marketing Action:  This involves the selection and implementation of appropriate marketing activity to achieve optimum internal marketing success.  The main aim of internal marketing is to provide better internal communications, teamwork and employee empowerment.  To achieve these aims the organisation should take initiatives to assign the work to individuals and management teams.  Customer care programmes and staff training and development programmes should be undertaken.
  • 203. 5. Marketing Communication:  Good communication can play a key role in effective implementation of plans.  Accurate and timely communication of marketing information should be undertaken, both internal and externally.  This process should be targeted to motivate internal customers in the achievement of personal and organisational goal.  Communication among employees thrown in house magazines, regular team briefings and encouragement etc.
  • 204. 6. Marketing Orientation:  The ultimate goal of organisation should be to create an effective internal environment which is flexible and responsive and will nurtures common values and behaviour which in turn helps to achieve the organisation’s goal.  For this purpose the marketing objectives and mission of the organisation must be made clear to all the employees and clearly define the role of employees, so that it enable employees to see their own contribution in achieving the organisational goal.