Service Marketing

CONTEMPORARY ISSUES IN
MARKETING
Prof. V.Y.Badave

Service Marketing
What is Service
Service is an act or performance that one party can offer to
another that is essentially intangible and does not result in
any ownership of anything. Its production may or may not be
tied to physical products.(Philip Kotler)
 It is based on relationship and value.
 It may be used to market a service or product

Why do we need to study Services Marketing?
 Upward trend in disposable income
 Income increasing in the past 20 years
 Developing country
 Liberalization
 Job Opportunities
 Demand increases with disposable income
 Increasing Specialization
Technology
Cost effective
Expert and professionals
Development of services, financial, banking

Changing Lifestyle
Development of corporate culture
Jogging, gym center
Adapting western culture: foreign brands
Increasing Literacy Rate
Professionalism in education
Information explosion
Government Regulations
 Consumer protection, KYC
Why do we need to study Services Marketing?

Reasons for growth of service sector
Increasing affluence(wealth)
More leisure(free time) time
Greater life expectancy(hope)
Greater complexity of the product
Higher percentage of working women
Increasing complexity of life
Increasing number of new products

Characteristics of Service Marketing
Intangibility
Inseparability
Variability
Perishability

Intangibility
Services are intangible means it cannot be seen, tasted felt, heard or smelled
before purchase.
Evaluation is a challenge
Intangibility is used in marketing to describe the inability to assess the value
gained from engaging in an activity using any tangible evidence
It draws inferences about:
Place
People
Equipment
Communication Material
Symbols
Price

Inseparability
Services are produced and consumed simultaneously.
Provider-client interactions is a special feature of service marketing.
In inseparability, key quality of services as distinct from goods
A live theatre performance, a makeover

Variability
It is otherwise called heterogeneity
Services are highly variable
The state or characteristic of being variable
Eg: service firms
A car servicing varies each time
Mc Donald’s consumables maybe standardized but a weekday or a
weekend maybe different.

Perishability
 Perishability means that services cannot be stored for later sale or use. In other
words, services cannot be inventoried. This is one of the most significant
characteristics of services, since it may have a major impact on financial results.
 Doctors or dentists often charge patients for missed appointments because the
service value has foregone. The value existed only at that particular point and
disappeared when the patient did not come.
 When demand is steady, the perishability of services is not a problem. However, in
case of fluctuating demand, service firms can have difficult problems.
 For this reason, transport companies own much more equipment than they would if
demand were even throughout the day: the demand during rush-hours needs to be
served at that specific time, it cannot be served later or earlier. Consequently,
service companies use various techniques for creating a better match between
demand and supply: Demand shifting.

Some Service Firms
Banking, Stock broking
Restaurants, Bars, Catering
Insurance
News and entertainment
Healthcare
Education
Professional(Architecture and Consulting)
Wholesaling and Retailing

Factors affecting development of Services Marketing
Organization size and Structure
Regulatory Bodies
Growth in service Industries
Customer/employer interaction
Service Quality
Specific sectors

Definition of Goods
Goods refer to the tangible consumable products, articles, commodities that are
offered by the companies to the customers in exchange for money. They are the
items that have physical characteristics, i.e. shape, appearance, size, weight, etc.
It is capable of satisfying human wants by providing them utility. Some items are
made for one-time use by the consumer while some can repeatedly be used.
Goods are the products which are traded on the market. There is a time gap in the
production, distribution, and consumption of goods. When the buyer purchases
goods and pays the price, the ownership is passed from seller to buyer.
Products are manufactured in batches, which produces identical units. In this
way, a particular product offered by the company will have the
same specifications and characteristics all over the market.
Example: Books, pen, bottles, bags, etc.

Definition of Services
Services are the intangible economic product that is provided by a person on the other
person’s demand. It is an activity carried out for someone else.
They can only be delivered at a particular moment, and hence they are perishable in
nature. They lack physical identity. Services cannot be distinguished from the service
provider. The point of sale is the basis for consumption of services. Services cannot be
owned but can only be utilized. You can understand this by an example: If you buy a
ticket for watching a movie at the multiplex, it doesn’t mean that you purchased the
multiplex, but you have paid the price of availing services.
Service receiver should fully participate when the service is provided. Evaluation of
services is a relatively tough task because different service providers offer the same
services but charges a different amount. It may be due to the method they provide
services is different or the parameters they consider in valuing their services vary.
Example: Postal services, banking, insurance, transport, communication, etc.

Key Differences Between Goods and Services
Goods are the material items that the customers are ready to purchase for a
price. Services are the amenities, benefits or facilities provided by the other
persons.
Goods are tangible items i.e. they can be seen or touched whereas services are
intangible items.
When the buyer purchases the goods by paying the consideration, the ownership
of goods moves from the seller to the buyer. Conversely, the ownership of
services is non-transferable.
The evaluation of services is difficult because every service provider has a
different approach of carrying out services, so it is hard to judge whose services
are better than the other as compared to goods.

Goods can be returned to or exchanged with the seller, but it is not possible to
return or exchange services, once they are provided.
Goods can be distinguished from the seller. On the other hand, services and
service provider are inseparable.
A particular product will remain same regarding physical characteristics and
specifications, but services can never remain same.
Goods can be stored for future use, but services are time bound, i.e. if not
availed in the given time, then it cannot be stored.
First of all the goods are produced, then they are traded and finally consumed,
whereas services are produced and consumed at the same time.
Key Differences Between Goods and Services

COMPARISON GOODS SERVICES
Meaning Goods are the material items that can be
seen, touched or felt and are ready for sale
to the customers.
Services are amenities, facilities, benefits
or help provided by other people.
Nature Tangible Intangible
Transfer of ownership Yes No
Evaluation Very simple and easy Complicated
Return Goods can be returned. Services cannot be returned back once
they are provided.
Separable Yes, goods can be separated from the
seller.
No, services cannot be separated from the
service provider.
Variability Identical Diversified
Storage Goods can be stored for use in future or
multiple use.
Services cannot be stored.
Production and
Consumption
There is a time lag between production
and consumption of goods.
Production and Consumption of services
occurs simultaneously.

What is the STP Process?
About the STP process?
The STP process is an important concept in the study and application of marketing. The letters
STP stand for Segmentation, Targeting, and Positioning.
The STP process demonstrates the links between an overall market and how a company chooses
to compete in that market. It is sometimes referred to as a process, with segmentation being
conducted first, then the selection of one or more target markets and then finally the
implementation of positioning. The goal of the STP process is to guide the organization to the
development and implementation of an appropriate marketing mix, as highlighted in the
following diagram.

Definitions of segmentation, targeting and positioning
Market Segmentation can be defined as:
The process of splitting a market into smaller groups with similar product needs
or identifiable characteristics, for the purpose of selecting appropriate target
markets.
Targeting (or target market selection) refers to:
An organization’s proactive selection of a suitable market segment (or
segments) with the intention of heavily focusing the firm’s marketing offers and
activities towards this group of related consumers.
Positioning (which is sometimes referred to as Service positioning) is:
Positioning is the target market’s perception of the product’s key benefits and
features, relative to the offerings of competitive products.

STP Models
There are two alternate models that help marketing students understand the STP
process.
The introductory model simply uses the three letters of STP to highlight the core
elements of the process, namely segmentation, targeting and positioning.
This approach is shown in the following diagram

While this basic model is a good starting point for understanding the overall
process, there are a number of smaller steps that should also be understood,
which are outlined in the following diagram

Segmentation
 One of the common mistakes made by new
business owners is trying to please everyone. If
you try to impress every single consumer with
your products or services, you are almost certain
to fail.
 It is a much better strategy to market specifically
to certain segments of the market, rather than the
market as a collective whole. A small company
may choose to simply focus all of their offerings
within one market segment, while a larger
company may be able to develop a range of
products to suit the needs of buyers in various
segments.

Targeting
Now that you have some attractive segments in mind, the next step involves
zeroing in on the segments that you feel will be the most profitable for your
business. You likely will not be able to pursue all of the segments you picked
out, so targeting is an important part of the process.

Positioning
 In the final step of the process, you are going to figure out how to place your product
effectively in front of the market segments you selected. You need to think not only about
which marketing channels you are going to use, but also about how you are going to present
the products or services you wish to sell.

Managing Demand & Capacity
Since the services can’t be stored as an inventory for future use, and since
services are perishable, hence the demand becomes critical.
Once the demand is not supplied, it’s lost for ever.
The best marketer can do is to minimize to some extent by careful planning
and adopting some strategies.

Factors which affect demand fluctuation
 Expansion or Boom
Contraction and Recession
Technological Developments
Demographics
Natural and Other Disasters

At any given moment, a fixed-capacity service may face one of four
conditions :
Excess demand— The level of demand exceeds maximum available
capacity, with the result that some customers are denied service and
business is lost.
Demand exceeds optimum capacity— No one is actually turned away, but
conditions are crowded and all customers are likely to perceive a decline in
service quality
DEMAND / CAPACITY VARIATIONS

DEMAND / CAPACITY VARIATIONS
Demand and supply are well balanced at the level of optimum capacity—
staff and facilities are busy without being overtaxed, and customers receive
good service without delays
Excess capacity— Demand is below optimum capacity and productive
resources are underutilized, resulting in low productivity. In some instances,
this poses a risk that customers may find the experience disappointing or
have doubts about the viability of the service.

DEMAND PATTERNS
Marketers need to understand the pattern or way the demands behave, with
respect to time, place and person. Then the relevant strategies can be
developed.
Sketching Demand Patterns Companies need to keep a track record or log
book, where all the demands are recorded on daily, weekly, monthly,
seasonal, and yearly basis, and a graphical chart, sketch or a report can be
made. After a few years, a set of patterns can be accurately predicted.
Foreseeable / Predictable Cycles Then some easily predicted or
foreseeable cycle can be made. On that basis services can be planned. Ex.
Health check-ups in hospitals, in a lean

Random Demand Variations Some other service demands are not easily
predictable, or they occur randomly, even if the cause can be ascertained. Say
health care or insurance when a flood or earthquake occurs.
Demand Patterns by Market Segments Another more specialized database
keeping is done for different demand pattern of customers of different
segments. E.g., for a group of family the bonus time is holiday time, whereas
for another group this is insurance premium pay time.
DEMAND PATTERNS

CAPACITY CONSTRAINTS
Capacity of a company is defined as the ability to meet the demand and the
extent to which it can do it.
For production of goods this can be expanded or contracted easily. But for
services it is difficult, as four critical factors are involved. This needs to be
done with utmost care, planning, cost effective measures.
These are
Time, Equipment
Labour Facility.

Time
Time is limited and mostly specialized professionals have this constraints,
they can’t take up more than the time permits and have to be idle if there are
none.
This can be tackled by business houses by opening shop for extended hours
when the demand is more and vice versa.
Say doctors can have more consulting hours when there is demand. The
service providers must be willing to accept the change in situation. (Types of
Services – Legal, Consulting, Accounting, Medical)

Labour
Labour or workers are another area of constraint. Beyond the full work load
it’s hard to supply to more. On the other hand temporary employment is not
available sufficiently in skilled category.
This can be tackled by out sourcing the workers to a contractors who has a
large work force with him.
He can adjust between several companies, but again the difference in the
skill is a bottleneck. (Types of Services – Law Firm, Consulting Firm,
Accounting Firm, Health Clinic)

Equipment
• Like machinery, transport etc. are needed more in no. when there’s a
bigger demand. For a limited period a company can’t buy extra
equipment or machinery.
But these can be managed by careful planning – like having sufficient
equipment for the minimum level in a cycle say a year with
down/maintenance time, and out sourcing the additional demand by
accurate prediction as far as possible.
 (Types of Services – Network Services, Delivery services,
Telecommunications, Utilities, Health Club)

Facility
These are mostly the infrastructure like premises, building, hotel rooms,
restaurant tables, class rooms, etc., which can’t be increased easily or quickly.
But to some extent they can be enhanced, like two shifts in the class rooms,
adding a few tables and rearranging them in a restaurant, adding more
compartments in a train, more flights for air travel, etc.
(Types of Services – Hotels, Restaurants, Hospitals, Airlines,

STRATEGIES TO MATCH DEMAND AND
CAPACITY
The most important job of the service marketer is balancing / matching the
demand and capacity. In a particular demand cycle there should be minimum
occasions for demand being more, or the idle capacity, with the least extra
cost. This can be done by shifting demand.
Demand Shift There are some services where the demand can be shifted, that
means the timings can be changed without much discomfort, like use of
telephone or internet etc. The prices are more during the peak period and less
in slack period.
But there is a limitation, it is not practical in a restaurant, if there is no
additional capacity, then the firm looses customer who go to another. There
are some other methods

Demand Shift
Varying the original services offer : Bigger service providers offering
smaller services during low demand period. Like marriage caterers offering
smaller parties of birthday, business gatherings etc.
Communicating with the customers : By the effective communication, the
service marketer can explain the practical situation to the potential
customers, so that they can shift their requirement timings. Again this is
applicable to a small portion of cases, where choices are available. Some
customers are by nature rush avoiders, so to some extent the nature takes
care of the shifting.

Altering the service delivery timings : Earlier banks used to work from 10
am to 2 pm. Now the scheduled banks have working hours 10 to 3.30, and
the new generation private banks have 9.30 to 4.30 timings, and some even
are open on Sundays. This is apart from the 24-hr ATMs.
Price differentiation : This concept works on the basis of the economy of
supply and demand. Having a differential pricing as mentioned earlier, say
for bars daytime is low priced. But here there is a limitation – it doesn’t
apply to many services or many customers. Also there is a danger of
attracting another segment or dissatisfying the target segment. The marketer
has to be very particular about the price sensitivity of the customers
Demand Shift

Services Marketing Mix
Services Marketing Mix:7 Ps for Services:-
Product
Price
Place
Promotion
People
Process
Physical Evidence

The service marketing mix is also known as an extended marketing mix and is
an integral part of a service blueprint design. The service marketing mix
consists of 7 P’s as compared to the 4 P’s of a product marketing mix. Simply
said, the service marketing mix assumes the service as a product itself.
However it adds 3 more P’s which are required for optimum service delivery.
The product marketing mix consists of the 4 P’s which
are Product, Pricing, Promotions and Placement. These are discussed in my
article on product marketing mix – the 4 P’s.
The extended service marketing mix places 3 further P’s which
include People, Process and Physical evidence. All of these factors are
necessary for optimum service delivery. Let us discuss the same in further
detail.
Services Marketing Mix

Product
The product in service marketing mix is intangible in nature. Like
physical products such as a soap or a detergent, service products cannot be
measured. Tourism industry or the education industry can be an excellent
example. At the same time service products are heterogenous, perishable and
cannot be owned.
The service product thus has to be designed with care. Generally service blue
printing is done to define the service product. For example – a restaurant blue
print will be prepared before establishing a restaurant business. This service
blue print defines exactly how the product (in this case the restaurant) is going
to be.

Place
Place in case of services determine where is the service product going to be
located. The best place to open up a petrol pump is on the highway or in the
city. A place where there is minimum traffic is a wrong location to start a
petrol pump. Similarly a software company will be better placed in a
business hub with a lot of companies nearby rather than being placed in a
town or rural area. Read more about the role of business locations or Place
element.

Promotion
Promotions have become a critical factor in the service marketing mix.
Services are easy to be duplicated and hence it is generally the brand which
sets a service apart from its counterpart. You will find a lot of banks and
telecom companies promoting themselves rigorously.
Why is that? It is because competition in this service sector is generally
high and promotions is necessary to survive. Thus banks, IT companies,
and dotcoms place themselves above the rest by advertising or promotions.

Pricing
Pricing in case of services is rather more difficult than in case of products.
If you were a restaurant owner, you can price people only for the food you
are serving. But then who will pay for the nice ambiance you have built up
for your customers? Who will pay for the band you have for music?
Thus these elements have to be taken into consideration while costing.
Generally service pricing involves taking into consideration labor, material
cost and overhead costs. By adding a profit mark up you get your final
service pricing. You can also read about pricing strategies.

People
People is one of the elements of service marketing mix. People define a
service. If you have an IT company, your software engineers define you. If
you have a restaurant, your chef and service staff defines you. If you are
into banking, employees in your branch and their behavior towards customers
defines you. In case of service marketing, people can make or break an
organization.
Thus many companies nowadays are involved into specially getting their staff
trained in interpersonal skills and customer service with a focus
towards customer satisfaction. In fact many companies have to undergo
accreditation to show that their staff is better than the rest. Definitely
a USP in case of services.

Process
Service process is the way in which a service is delivered to the end customer.
Lets take the example of two very good companies – Mcdonalds and Fedex.
Both the companies thrive on their quick service and the reason they can do
that is their confidence on their processes.
On top of it, the demand of these services is such that they have to deliver
optimally without a loss in quality. Thus the process of a service company in
delivering its product is of utmost importance. It is also a critical component
in the service blueprint, wherein before establishing the service, the company
defines exactly what should be the process of the service product reaching the
end customer.

The Service Process Defined
We can define the service process as the way in which a company works so
that a customer receives service. To standardize this in line with the
company’s identity and aims, managers will work on:
Determining procedures which contribute to the process
Allocating tasks and responsibilities
Formulating effective schedules and routines
Defining service mechanisms and process flows
The shape that the service process will assume will depend on two primary
factors:
The type of service process
The degree of customer contact

Types of Service Process
 1. Line operations
 Line operations progress in a linear fashion. Thus, the client passes through a sequential
experience beginning at point A, when they first enter the store or contact the business.
Now, service delivery passes through a number of processes before finalizing the
transaction.
 Although this is perhaps the simplest of the service processes to understand, it has
several drawbacks. If one element in the linear operation is flawed or bottlenecked, the
client will judge the service as a whole based on this weak area.
 It’s also not a service process that allows for much flexibility. That does make
controlling it easier, but it would only suit a standard offering that implements
repetitive processes with little or no variation. This type of service process is the easiest
to automate because it is so standardized. Every customer has a similar customer
experience, and the service process does not vary.

2. Job Shop Operations
This type of service model provides customer satisfaction by tailoring the
service to the client’s needs. For example, a professional organization such
as a law firm or a bespoke service such as that which a carpenter may
provide is only open to a limited level of standardization. Each client’s
needs will vary to some degree, and the service process must, therefore,
vary accordingly.
Being able to offer flexibility makes this model attractive, but it can
complicate scheduling and workflows.

3. Intermittent Operations
Some service projects are unique and seldom repeated. For example,
construction projects or branding initiatives would fall under this category.
In most instances, the projects themselves are of a relatively large scale.
They will involve bringing together several elements so that they can work
harmoniously.
Planning will be key, and managers would evaluate each project
independently in order to determine what process flows would contribute to
the final result: providing the desired service to its clients. Critical path
analysis is often used in this context.

What is a service blueprint?
First introduced in 1984 by G. Lynn Shostack in the Harvard Business
Review, service blueprint diagrams visually map out the steps in a service
process, making it easier to design a new process or to document and
improve an existing one.
While simpler than UML (Unified Modeling Language)
and BPMN (Business Process Model and Notation), service blueprints offer
a flexible, focused look at an organization’s service processes and include
the customer’s perspective. However, service blueprints aren’t just
another customer journey map. Both do include similar information––they
draw from customer research and aggregate findings into sample scenarios–
–but service blueprints have a wider scope.

Customer journey maps focus on what customers experience when they
interact with a service or business, from specific actions or touchpoints to
pain points.
Service blueprints go several steps deeper and combine the customer’s
experience with all employee actions and support processes that may or may
not be visible to the customer.

Physical Evidence
The last element in the service marketing mix is a very important element.
As said before, services are intangible in nature. However, to create a better
customer experience tangible elements are also delivered with the service.
Take an example of a restaurant which has only chairs and tables and good
food, or a restaurant which has ambient lighting, nice music along with good
seating arrangement and this also serves good food. Which one will you
prefer? The one with the nice ambience. That’s physical evidence.
Several times, physical evidence is used as a differentiator in service
marketing. Imagine a private hospital and a government hospital. A private
hospital will have plush offices and well dressed staff. Same cannot be said
for a government hospital. Thus physical evidence acts as a differentiator.

Role of service evidence
A distinction is made in services marketing between two kinds of
physical evidence:
(a) Peripheral evidence;
(b) Essential evidence.

Peripheral Evidence
Peripheral evidence is actually possessed as part of the purchase of a service. It
has however little or no independent value. Thus a bank cheque book is of no
value unless backed by the funds transfer and storage service it represents.
An admission ticket for a cinema equally has no independent value. It merely
confirms the service. It is not a surrogate for it. Peripheral evidence ‘adds to’ the
value of essential evidence only as far as the customer values these symbols of
service.
The hotel rooms of many large international hotel groups contain much peripheral
evidence like directories, town guides, pens, notepads, welcome gifts, drink packs,
soaps and so on. These representations of service must be designed and developed
with customer needs in mind. They often provide an important set of
complementary items to the essential core service sought by customers.

Essential Evidence
Essential evidence, unlike peripheral evidence, cannot be possessed by
the customer. Nevertheless essential evidence may be so important in its
influence on service purchase it may be considered as an element in its
own right. The overall appearance and layout of a hotel; the ‘feel’ of a
bank branch; the type of vehicle rented by a car rental company; the type
of aircraft used by a carrier are all examples of physical evidence.

Stimulus Response Model
The starting point to understand buyer behaviour is the stimulus-response model.
Marketing and environmental stimuli enter the buyer’s consciousness. The buyer’s
characteristics and decision process lead to certain purchase decisions. The
marketer’s task is to understand what happens in the buyer’s consciousness
between the arrival of outside stimuli and the buyer’s purchase decision.
A consumer’s buying behaviour is influenced by cultural, social, and
personal factors. Cultural factors exert the broadest and deepest influence.
Culture is the fundamental determinant of a person’s wants and behaviours.
Each culture consists of smaller subcultures that provide more specific
identification and socialization for their members. Subcultures include
nationality religion, racial groups, and geographic region.

Characteristics that affect customer behaviour
The first stage of understanding buyer behaviour is to focus on the factors that
determine he “buyer characteristics” in the “black box”.

What is International Marketing?
 International marketing (IM) or global marketing refers to marketing
carried out by companies overseas or across national borderlines. This strategy
uses an extension of the techniques used in the home country of a firm.
 It refers to the firm-level marketing practices across the border including
market identification and targeting, entry mode selection, marketing mix, and
strategic decisions to compete in international markets.

International environmental forces
Marketing controllables: The successful manager constructs a marketing
program designed for optimal adjustment to the uncertainty of the business
climate.
Domestic uncontrollables: This includes home-country elements that can
have a direct effect on the success of a foreign venture: political forces, legal
structure, and economic climate.
Foreign uncontrollable: The problem of uncertainty is further complicated
by a frequently imposed “alien status” that increases the difficulty of
properly assessing and forecasting the dynamic international business
climate.

 Thus a strategy successful in one country can be rendered ineffective
in another by differences in
political climate,
staged of economic development,
level of technology, or
other cultural variation.
International environmental forces

International marketing
International marketing is often not as simple as marketing your product to
more than one nation. Companies must consider
Language barriers,
ideals, and
customs in the market they are approaching.

International Business Entry Strategies
In an increasingly globalized world, many businesses may find international
expansion to be an attractive option for market expansion. Entering a
foreign market is not easy however, and there are multiple options for any
company looking to enter a foreign market. A company can enter a new
country in several ways:
As an exporter;
Through a licensing agreement;
In a joint venture; or
By way of a wholly owned subsidiary.
It is important for managers to understand these different entry strategies before
entering a new country.

Exporting
Exporting is the simplest method of entering a foreign market. By exporting
to a foreign country, a company is able to enter this country without actually
establishing itself in the country. The company must simply manufacture
products that can then be shipped to the foreign country. Exporters can take
two forms, direct exporters and indirect exporters. Direct exporters sell
directly to foreign buyers and may have sales teams in those countries.
Indirect exporters rely on domestic intermediaries who broker the
relationship with foreign buyers.

Licensing
Licensing is a good strategy for a company that has an in demand product
or brand, but lacks the resources to expand internationally. When a
company licenses its products in a foreign country, it sells the rights to
manufacture the product in a foreign country to another manufacturer.
This means that a company does not need to invest in developing the
market but can simply collect payment from a foreign firm.

Joint Venture
A joint venture involves entering a new market with a local partner. Joint
ventures have the advantage of providing companies with a partner who
knows the local environment well. This means that there is less risk of
failing due to an inability to understand local customs, laws or culture. The
disadvantage of a joint venture is that it does not give a company total
control over the operation; the firm must be able to work well with its
foreign partner to succeed.

Wholly Owned Subsidiary
Entering a foreign market with a wholly owned subsidiary involves
creating a local firm without the aid of a local partner. There are two ways
of doing this.
The first is through what is called greenfield development. This involves
creating a new organization in the foreign country from the ground up.
 The second method is what is referred to as brownfield development.
This involves purchasing an existing company in a foreign country.
Brownfield developments can be beneficial because they offer local
expertise, but they can be difficult because there may be resistance from
those in the company to new ownership.

Online Sales
Many companies will attempt to enter foreign markets indirectly, by
targeting foreign consumers on the internet. Similar to exporting,
companies retain their physical operations in their native countries, but
ship products overseas. However, whereas in exporting, companies
contract with local businesses, with the Internet they take orders directly
from consumers. One advantage to this mode is that it is relatively cheap,
entailing only the cost of a website and marketing. The downside is that it
is often less effective than establishing a physical presence in the foreign
market. Consumers may be deterred due to shipping costs, duties and
taxes that may be levied by their government and the length of time it
takes for their order to arrive.

Export Procedures And Documents
The exporting activity involves several commercial and regulatory
procedures.
These procedures also involve considerable documentation
requirements.
The export documentation involves the preparation of the specified
number of copies of the prescribed documents pertaining to the
different procedures.

Preliminaries Steps
IEC number :- Importer Exporter Code The IEC numbers are
normally allotted by the regional licensing authorities.
Membership cum registration:- Membership of certain bodies will
help the exporters in a number of ways
Inquiry and offer:- An inquiry is a request from a prospective importer
to be informed of the terms and conditions of sale.
Confirmation of order :- Once the negotiation are completed and
conditions are acceptable to the buyer and seller, the buyer may place
and order with the exporter.

Export license :- The exports of some items are banned and of some items
controlled by means of licenses, though many items are permitted to be
exported freely
Finance :- If the exporter require pre-shipment financial assistance, he
should take the necessary steps to obtain it.
Production/procurement of goods :- Once the order is confirmed, the
exporter should take necessary steps to ensure the timely availability of the
goods of the specifications required and execute the export order promptly.
Preliminaries Steps

Shipping space :- As soon as the export order is confirmed, the
exporter should contract the shipping companies which have sailings for
the port to which goods have to be sent and book the required shipping
space.
Packing and marketing : once the goods are ready, they are packed
and marked properly.
Quality control and pre-shipment inspection : Needless to say, goods
should be exported only after ensuring that they are of proper quality.
Excise clearance : As a matter of policy, the government has granted
excise duty exemption for export products.
Preliminaries Steps

Customs Formalities
Goods may be shipped out of India only after Customs clearance has
been obtained.
Following documents to the customs authorities,
1.Shipping bill
2.Declaration regarding truth or statement
made in the shipping bill
3.Invoice
4.GR form (Guaranteed Remittance.)

5.Export license
6.Quality control inspection certificate
7.Original contract, wherever available or correspondence leading to
contract
8.Contract registration certificate
9.Letter of credit
10.Packing list
11.AR-4 form (clearance of excisable goods files an application )
12.Any other documents
Customs Formalities

Principal Export Documents
1.Commercial invoice
2.Packing list
3.Bill of lading
4.Combined transport document
5.Certificate of inspection/quality control
6.Insurance certificate/policy
7.Certificate of origin
8.Bills of exchange and shipment advice

Auxiliary Documents
1.Performa invoice (A preliminary bill of sale sent to buyers in advance
of a shipment or delivery of goods.)
2.Intimation for inspection
3.Shipping instructions
4.Insurance declaration
5.Shipping order
6.Mate Receipt (Document signed by an officer of a ship
evidencing receipt of a shipment onboard the ship.)
7.Application for certificate of origin
8.Letter to the bank for collection/negotiation of documents.

Global Strategy
 A global strategy is one that a company takes when it wants to compete and expand in
the global market. In other words, a strategy businesses pursue when they wish to
expand internationally. A global strategy refers to the plans an organization has
developed to target growth beyond its borders. Specifically, it aims to increase the sales
of goods or services abroad.
 ‘Global strategy’ is, in fact, a shortened term that covers three
strategies: international, multinational, and global. Companies must pursue strategies
in those three areas if they wish to expand internationally.
 According to the Cambridge Dictionary, a global strategy is:
 “A detailed plan for how a business or product can be successful in all parts of the
world.”
 ”The process of planning how a business or product can be successful around the
world.”

Product
General marketing concept describes how to sell more of a product with an
aim to meet the needs of our target market. In international markets this
includes considering various factors like customer's cultural backgrounds,
religion, buying habits and levels of personal disposable income.
In some circumstances a firm adapts their product and marketing mix
strategy to satisfy the local requirements and demands that cannot be
changed.

Promotion
Unlike international product decisions, an enterprise can either accustom or
standardize their promotional strategy and message. Promotional messages
in countries should be accustomed due to differences in language, political
climate, cultural attitudes and religious practices in different region. A
promotional strategy used in one country could be offensive when used in
another. Every side of promotional brief needs to be analyzed followed by
planning.
For example, people in China believe red to be a lucky color and this color is
also worn by Indian brides. Similarly, white is worn by mourners in India
whereas, brides in China and United Kingdom wear white.

Pricing
Pricing on an international level is a very difficult task. It takes into account the
traditional price i.e. the cost of the product in the local market including fixed and
variable rates. It also determines the competition prevailing in the market
between a particular company’s products and similar products of other
companies.
Apart from these factors, an enterprise should consider additional factors like −
 The cost of transport Tariffs or import duties
 Exchange rate fluctuations Personal disposal incomes of the target market
 The currency they want to be paid in and
 The general economic situation of the country and how this will influence pricing
 The internet has created more difficulties for the sellers as customers can now compare
the prices of the products they are buying with similar products existing in the market.

Place
 This component of marketing mix is completely about product or service distribution to
the consumer, at the right place and at the right time. Distribution of goods in a
developed market like United States probably includes goods being shipped in a chain
from the producer to wholesalers and onto retailers for consumers to buy from.
 In an international market, number of countries offering same products with different
varieties is more as compared to national market.
 For example, in Japan there are probably five different types of wholesalers engaged in
the distribution chain. Businesses will be required to examine the distribution chains for
each nation they would like to work with. They will also need to analyze and verify who
they would like to sell their products and services to - businesses, retailers, wholesaler or
directly to customers.
 Before designing an international marketing mix, an enterprise should conduct PEST
analysis for every participating nation they would like to operate in. This assists them in
identifying the major components of the marketing mix that can be standardized and
which components will need adjustments to suit local needs.

INTRODUCING NEW PRODUCTS IN
INTERNATIONAL MARKETS
In business and engineering, new product development (NPD) is the
term used to describe the complete process of bringing a new product or
service to market.
There are two parallel paths involved in the NPD process : one involves
the idea generation, product design, and detail engineering ; the other
involves market research and marketing analysis.
Companies typically see new product development as the first stage in
generating and commercializing new products within the overall strategic
process of product life cycle management used to maintain or grow their
market share.

Categories of new products
Six categories of new products in terms of their newness to the company and
to the market place
New-to-the-world products :- New products that create an entirely mew market
New product-lines :- New products that allow a company to enter an established
market for the first time
Additions to existing product-lines :- New products that supplement a company’s
established product lines (package sizes, flavors, so on)
Improvements or revisions to existing products :- New products that provide
improved performance or greater perceived value and replace existing products
Repositioning :- Existing products that are targeted to new markets or new market
segments
 Cost reductions :- New products that provide similar performance at lower cost

Issues in new product development
 The companies need the development of original products, product improvements,
product modifications & new brands on a consistent basis to survive competition but
most new products fail.
• New-product failure
– nearly 80% of new packaged consumer goods & line extensions fail
– nearly 33% of new industrial products fail at launch
• New successful products
– are unique superior products
• higher quality, new features & offer higher value
– have well-defined concept
• by carefully defining and assessing the target markets, product requirements &
benefits
To remain successful companies must continuously develop new products - but the
odds weigh heavily against success. The solution lies in strong new-product planning

Global Pricing Strategies
International Pricing Compared to Domestic Pricing
International Pricing Framework
Pricing Approaches for International Markets
 Cost-based Pricing
Full-cost Pricing
Marginal cost pricing
Market-based Pricing

International Pricing Compared to
Domestic Pricing
 In International markets, however, pricing decisions are much more complex,
because they are affected by a number of additional external factors, such as
 Fluctuation in Exchange Rates
 Accelerating Inflation in Certain Countries
 Use of alternative payment methods such as leasing, barter and counter-trade

Pricing Approaches for International
Markets
The various approaches/ strategies used for pricing in international markets are as:
1. Cost-based Pricing
2. Full Cost Pricing
3. Marginal Cost Pricing
4. Market-based Pricing

Cost-based Pricing
Costs are widely used by firms to determine prices in international markets
especially in the initial stages.
 Generally, new exporters determine export prices on ‘ex-works’ price level and
add a certain percentage of profit and other expenses depending upon the terms of
delivery.
It is a popular myth that costs determine the price, specially in international
markets.

Social Marketing
 Marketing, being a social and managerial process, it must have social environmental
approach, unfortunately very few business organisations cared for it. Social Marketing
came into being as a separate discipline in the 1970s as a result of the acceptance of
environmental approach by the Western countries.
 Now days, social marketing principles are being used in developing countries in areas
such as health promotion, population control environment conservation, economic
development, racism and human rights.
 Social Marketing is not a new phenomena as its roots can be seen in development
strategies, social reform campaigns in olden days. In ancient Greece and Rome anti-
slavery campaigns were launched. During industrial revolution period, campaigns were
launched to grant voting rights to woman and abolition of child labour in Great Britain.

 Social Marketing is a process of changing behaviour and attitudes of the public
(Target group) for achieving social, economical, political and business objectives.
Social Marketing refers to the development of awareness among consumers,
organisations (i.e. social, political, business etc.) and general public regarding long
term interests of the business world.
 Philip Kotler and Gerald Zaltman defined social marketing as “ the design,
implementation and control of programmes calculated to influence the acceptability
of social ideas and involving considerations of product designing, pricing,
communication, distribution and Marketing research”
Social Marketing

Commercial Marketing convinces consumers to buy different types of products
and services on the same line, people can be convinced to adopt social marketing
products such as health care, education or social reforms.
Andreasen defines social Marketing as “the application of commercial Marketing
technologies to the analysis’ planning, execution and evaluation of programmes
designed to influence to voluntary behavior of target audiences in order to
improve their personal welfare and that of their society
Social Marketing

Social Marketing is also referred as societal Marketing. It aims at achieving the
following objectives:-
Satisfaction of Customer needs.
Improvement of quality of life.
Implementation of long term policy for customers and society’s welfare.
Freedom from all sorts of pollution and ecological destructions
Social Marketing

Objectives of Societal Marketing Concept
To maintain a long-term relationship with customers.
To create a better image in the society for the company than it’s competitors.
To carry out its social responsibilities.
Developing community awareness towards its brands.
To carry out its social responsibilities.
To increase the consumer base and market share.

Societal Marketing Concept Advantages
and Benefits
It helps to build a better image for the company.
It gives a competitive advantage over the competitors.
Useful in customer retention and long-term relationships.
Increases sales and market share.
Facilitate expansion and growth in the long term.
Products and company policies should prioritize social welfare and society in
general.
Economic resources are properly used.
Societal marketing raises the living standard of people in society.
It ensures economic planning more significant and more fruitful to society.

Importance of Societal Marketing
Concept
Societal Marketing is very important to society, the environment, and
businesses. This concept was developed in order to tackle the consumerism and
profit only the motive of business.
The societal marketing concept helps to maximize profits for the organization
and creates a long-term relationship with customers.
It encourages developing products that benefit society in the long run and
satisfies consumers.

Marketing Information System
The Marketing Information System refers to the systematic collection,
analysis, interpretation, storage and dissemination of the market
information, from both the internal and external sources, to the marketers
on a regular, continuous basis.
The marketing information system distributes the relevant information to
the marketers who can make the efficient decisions related to the
marketing operations viz. Pricing, packaging, new product development,
distribution, media, promotion, etc.
Every marketing operation works with the conditions prevailing both
inside and outside the organization, and, therefore, there are several
sources ( viz. Internal, Marketing Intelligence, Marketing Research)
through which the relevant information about the market can be obtained.

Components of Marketing Information System

 Internal Records: The Company can collect information through its internal records
comprising of sales data, customer database, product database, financial data, operations data,
etc.
 Marketing Intelligence System: The marketing intelligence system provides the data about
the happenings in the market, i.e. data related to the marketing environment which is external to
the organization. It includes the information about the changing market trends, competitor’s
pricing strategy, change in the customer’s tastes and preferences, new products launched in the
market, promotion strategy of the competitor, etc.
 Marketing Research: The Marketing Research is the systematic collection, organization,
analysis and interpretation of the primary or the secondary data to find out the solutions to the
marketing problems. Several Companies conduct marketing research to analyze the marketing
environment comprising of changes in the customer’s tastes and preferences, competitor’s
strategies, the scope of new product launch, etc. by applying several statistical tools. In order to
conduct the market research, the data is to be collected that can be either primary data or the
secondary data
Components of Marketing Information
System

Marketing Information System – Scope
 Strategy Implementation
MIS helps in product launches, authorizes the co-ordination of marketing
strategies, and is an integral part of Sales Force Automation (SFA), Customer
Relationship Management (CRM), and customer service systems implementations. It
permits decision makers to more effectively manage the sales force as well as customer
relationships.
 Strategy Development
Information needed to develop marketing strategy is also provided by MIS. It
supports strategy development for new products, product positioning, marketing
communications (advertising, public relations, and sales promotion), pricing, personal
selling, distribution, customer service and partnerships and alliances. MIS gives the
foundation for the development of information system-dependent e-commerce strategies.

Market Monitoring
MIS enables the identification of emerging market segments, and the
monitoring of the market environment for changes in consumer behaviour,
competitor activities, new technologies, economic conditions and governmental
policies at the time of using market research and market intelligence.
Wider Applications
Under modern marketing ideologies, MIS includes operational, sales and
marketing process-oriented systems, which serve in daily marketing operational
activities such as direct mailing (database marketing), telemarketing and operational
sales management. The users are middle management and operative sales and
marketing personnel.

 Support Management and Decision Making
Marketing information systems support management decision making.
Management has five distinct functions and each of them needs support from MIS. These
are planning, organising, co-ordinating, decision-making and controlling.
 Functional Integration
MIS the co-ordination of activities within the marketing department and between
marketing and other organisational functions like engineering, production, manufacturing,
product management, finance, logistics, and customer service.

Marketing Information Procedure
 Steps # 1. Define the System :- The system for which design is to be made has to be
defined; in terms of elements, the relationship and its boundaries. The system may be
the complete organisation consisting of all functions or only one or several functions.
 Steps # 2. Source and Frequency Identification:- Once the information needs have
been assessed, the source of this information and the frequency of reporting have to be
identified. The source could be both external and internal, whereas the frequency could
be based on the occurrence of the event or by exception.

 Steps # 3. Formats of MIS:- There are two formats which are very important, viz.-
(a) Research assessment sheet :- Contains information like marketing decisions, parameters,
frequency, source, and the format code.
(b) Marketing activity evaluation sheet :- Contain the items, relationship, standard, actual,
variance, and reason.
The first format is useful from the information point of view while the second format could be
used for control.
 Steps # 4. Implementation:- The steps needed for implementing the newly designed
Marketing Information System could be-
(a) Prepare marketing research plan (b) Train the research staff
(c) Prepare operating schedule (d) Evaluate and modify the research system
Marketing Information Procedure

Marketing Research
The Marketing Research is the systematic collection, analysis, and
interpretation of data pertaining to the marketing conditions.
The basic reason for carrying out the marketing research is to find out the
change in the consumer behavior due to the change in the elements of the
marketing mix (product, price, place, promotion).
The marketers need to know about the changing trends in the market viz.
Changes in the customer’s tastes and preferences, the new products launched in
the market, prices of the competitor’s product, the close substitutes of the
product, etc.

 Define the Problem-The foremost decision that every firm has to undertake is to
find out the problem for which the research is to be conducted. The problem must be
defined adequately because if it is too vague, then it may result in the wastage of
scarce resources and if it is too narrow, then the exact conclusion cannot be drawn.
In order to define the problem appropriately, each firm must have a clear answer to
the questions viz. What is to be researched (content and the scope)? And Why the
research is to be done (decisions that are to be made)?
 Develop the Research Plan– This step involves gathering the information relevant
to the research objective.
 Collect the Information: This is one of the most expensive methods of marketing
research. At this stage, the researcher has to adopt the methods to collect the
information, he may find it difficult to gather the correct information because of the
respondent’s biasedness, unwillingness to give answers or not at home.
Marketing Research

Analyze the Information: Once the information is collected the next step is to
organize it in such a way that some analysis can be obtained. The researchers
apply several statistical techniques to perform the analysis, such as they compute
averages and measures of dispersion. Also, some advanced decision models are
used to analyze the data.
Present the Findings: Finally, all the findings and the research are shown to the
top management level viz. Managing director, CEO, or board of directors to
make the marketing decisions in line with the research.
Make the Decision: This is the last step of the marketing research, once the
findings are presented to the top level management it is up to them either to rely
on the findings and take decisions or discard the findings as unsuitable.
Marketing Research

 Exploratory Market Research: The researcher uses the exploratory research when he has
a very little information about the research problem and needs to gain insights about it
before finding the solutions to it. It requires the researcher to clear his concept, gain
insights, formulate problems, eliminate impractical ideas and formulate a hypothesis to
check the relevancy of the research design. This can be done by using the secondary data,
i.e. information available both inside and outside the organization, conducting observational
studies, consulting experts, and processing feedback from the marketplace and surveys.
 Descriptive Market Research: The descriptive research is concerned with testing the
hypothesis to find out the accurate answers of the research problem. Such as, who are the
prospective buyers of the product?, How the products are consumed?, What fraction of the
population uses the product?, What is the demand forecast? And who are the potential
competitors? The objective of the descriptive market research is to measure the frequency
with which the things occur and the extent to which the variables under study are
correlated.
Types of Marketing Research

 Causal Market Research: The causal market research is conducted to establish the
cause-and-effect relationship between the variables, such as if the packaging of the
product is changed then what will be its effect on the product durability? Thus, this
research is carried out to explain the facts that why a certain change in one variable is
observed due to the change in the other.
 Predictive Market Research: As the name suggests, the predictive research is
conducted to forecast or predict certain market variable for which the research is
designed. Such as predicting the future sales, projection of growth, test market to predict
the success of a new product, defining of firm’s product line, etc.

 The marketing research can be further classified on the basis of the type of data
generated and the degree of mathematical accuracy required as:
 Qualitative Market Research
 Quantitative Market Research
 Thus, there are several types of marketing research that an organization adopts on the
basis of its pursued objectives and the form of data generated.

Applications of Marketing Research
 Product Research :- Marketing research may be used in the area of product planning
and development like, to evaluate new product ideas, to evaluate the need to change
existing product mix, for testing the new product acceptance, testing product
positioning, package testing in terms of aesthetic appeal, protection for the product, and
Ability to withstand transportation and stocking.
 Advertising Research :- Marketing research may be used in many ways in the area of
advertising. It may be used for copy testing.
Marketing research may be used to examine the important element of advertising copy
like the basic theme, ideas, appeals, headlines, assessment of its attention value,
communication clarity, memory value, conviction value, etc.
Marketing research may be applied to determining the most cost-effective media plan
for ascertaining advertising effectiveness and audience measurement.
It may also be used for media research, motivation research, and measuring the
effectiveness of the advertising campaign.

 Distribution Research :- The broad areas of distribution research includes
identification of existing and potential distribution channels, selection of appropriate
intermediaries, determination of channel Expectations, reduction of distribution cost,
motivation for channels of distribution, measuring and evaluating the performance of
the channels and different intermediaries, measuring relative effectiveness of different
channels, assessment of dealer support and reason of conflict.
 Pricing Research :- The objective of this research is to find out the price Expectations
of consumers and their reactions and responses to different price levels of product to
ascertain elasticity of demand. It also includes ascertaining elasticity of demand. It
also includes determining the price expectations of consumers in different market
segments, testing the alternative price strategies, the evolution of competitors pricing
strategies, the study of the factors affecting pricing decisions, to know consumer
psychology on pricing and evolution of firms pricing policies and strategies.

 Consumer Research :- Consumer research deals with a variety of questions about
consumer characteristics and behavior. The basic purpose of this research is to develop a
better understanding of its customers by the company.
Consumer research may be conducted by the company to determine the composition of
the product’s customers, to find out the locations of customers, to determine
demographic characteristics of present and potential customers, to determine
psychographic characteristics of consumers, to identify buying motives, to know
consumption pattern of consumers, reasons of consumers dissatisfaction, shifting
consumption pattern, brand preferences and for preparing consumer profile.

 Market Research:- The objective of this research is to gather facts about the market of
the company and the identification of forces operating in the market.
The scope of market research includes assessment of market Trends, determination of
the size of present and potential market of the company, evolution of the impact of
government legislation, policies and schemes on the performances of marketing operations
of the company and to ascertain to strengths and weakness of competitors marketing
programs, policies, and strategies.
Market research may also be used for the determination of the market share of the
Company, sales forecasting for the future period, market segmentation to be used for
product differentiation strategy in an effective manner.

 Sales Research :- The basic purpose of sales research is to find out the sales potential of
the company’s products and the evolution of the company’s sales performance. Proper
investigation may be conducted for many subjects in sales research.
These subject May cover formulation of sales territories; measurement of sales
performance of personnel in terms of volume and profits; revision of sales territories;
evolution of sales methods; determination of sales quotes and other standards of
performance for sales personnel; finding out suitable methods of compensation to
sales personnel; measures to enhance motivation and morale of sales personnel.
 Marketing Environment Research :- This is a very important area of marketing
research. The basic purpose of this is to assess environment fitness of the firm.
Keeping in view the changes taking place in macro environment factors such as
demography, economic conditions, government policies, legal factors, Technology,
social and cultural factors, it is assessed that what changes are required in corporate
goals, objectives, product mix, pricing, and business strategies

Service Marketing

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Service Marketing

Similar to Service Marketing (20)

Recently uploaded

Recently uploaded (20)

Service Marketing