SERVICE MARKETING AND RETAIL MARKETING Shivaji University Syllabus

SERVICE MARKETING AND RETAIL MARKETING ishWAR Page 1
CHAPTER 1
Service Marketing
Services marketing is a specialised branch of marketing. Services marketing emerged as a
separate field of study in the early 1980s, following the recognition that the unique
characteristics of services required different strategies compared with the marketing of
physical goods.
Services marketing typically refers to both business to consumer (B2C) and business-to-
business (B2B) services, and includes marketing of services such as telecommunications
services, financial services, all types of hospitality, tourism leisure and entertainment
services, car rental services, health care services and professional services and trade services.
Service marketers often use an expanded marketing mix which consists of the seven Ps:
product, price, place, promotion, people, physical evidence and process. A contemporary
approach, known as service-dominant logic, argues that the demarcation between products
and services that persisted throughout the 20th century was artificial and has obscured that
everyone sells service. The S-D logic approach is changing the way that marketers
understand value-creation and is changing concepts of the consumer's role in service delivery
processes.
Definition of Service Marketing:
Service marketing is marketing based on relationship and value. It may be used to market a
service or a product. With the increasing prominence of services in the global economy,
service marketing has become a subject that needs to be studied separately. Marketing
services is different from marketing goods because of the unique characteristics of services
namely, intangibility, heterogeneity, perishability and inseparability.
In most countries, services add more economic value than agriculture, raw materials and
manufacturing combined. In developed economies, employment is dominated by service
jobs and most new job growth comes from services.
Jobs range from high-paid professionals and technicians to minimum-wage positions.
Service organizations can be of any size from huge global corporations to local small
businesses. Most activities by the government agencies and non-profit organizations involves
services.
The American Marketing Association, defines services as activities, benefits, or satisfactions
that are offered for sale or provided with sale of goods to the customer, that is, pre-sale and
after-sales services. Berry states, ‘while a product is an object, devise or physical thing, a
service is a deed, performance, or an effort’.

Characteristics/Features of Services:
1. Intangibility:
A physical product is visible and concrete. Services are intangible. The service cannot be
touched or viewed, so it is difficult for clients to tell in advance what they will be getting. For
example, banks promote the sale of credit cards by emphasizing the conveniences and
advantages derived from possessing a credit card.
2. Inseparability:
Personal services cannot be separated from the individual. Services are created and
consumed simultaneously. The service is being produced at the same time that the client is
receiving it; for example, during an online search or a legal consultation. Dentist, musicians,
dancers, etc. create and offer services at the same time.
3. Heterogeneity (or variability):
Services involve people, and people are all different. There is a strong possibility that the
same enquiry would be answered slightly differently by different
people (or even by the same person at different times). It is important to minimize the
differences in performance (through training, standard setting and quality assurance). The
quality of services offered by firms can never be standardized.
4. Perishability:
Services have a high degree of perishability. Unused capacity cannot be stored for future use.
If services are not used today, it is lost forever. For example, spare seats in an aeroplane
cannot be transferred to the next flight. Similarly, empty rooms in five-star hotels and credits
not utilized are examples of services leading to economic losses. As services are activities
performed for simultaneous consumption, they perish unless consumed.
5. Changing demand:
The demand for services has wide fluctuations and may be seasonal. Demand for tourism is
seasonal, other services such as demand for public transport, cricket field and golf courses
have fluctuations in demand.
6. Pricing of services:
Quality of services cannot be standardized. The pricing of services are usually determined on
the basis of demand and competition. For example, room rents in tourist spots fluctuate as
per demand and season and many of the service providers give off-season discounts.

7. Direct channel:
Usually, services are directly provided to the customer. The customer goes directly to the
service provider to get services such as bank, hotel, doctor, and so on. A wider market is
reached through franchising such as McDonald’s and Monginis.
Importance of Marketing of Services
Given the intangibility of services, marketing them becomes a particularly challenging and
yet extremely important task.
 A key differentiator: Due to the increasing homogeneity in product offerings, the
attendant services provided are emerging as a key differentiator in the mind of the
consumers. Eg: In case of two fast food chains serving a similar product (Pizza Hut
and Domino’s), more than the product it is the service quality that distinguishes the
two brands from each other. Hence, marketers can leverage on the service offering to
differentiate themselves from the competition and attract consumers.
 Importance of relationships: Relationships are a key factor when it comes to the
marketing of services. Since the product is intangible, a large part of the customers’
buying decision will depend on the degree to which he trusts the seller. Hence, the
need to listen to the needs of the customer and fulfill them through the appropriate
service offering and build a long lasting relationship which would lead to repeat sales
and positive word of mouth.
 Customer Retention: Given today’s highly competitive scenario where multiple
providers are vying for a limited pool of customers, retaining customers is even more
important than attracting new ones. Since services are usually generated and
consumed at the same time, they actually involve the customer in service delivery
process by taking into consideration his requirements and feedback. Thus they offer
greater scope for customization according to customer requirements thus offering
increased satisfaction leading to higher customer retention.
Importance of Service Marketing
Business owners who offer services to customers might not have a clear idea of how to
market those services. Product marketing tends to be straightforward with the ability to
provide a picture and point to specific features. Services marketing is equally important.
Without a marketing plan that targets the right types of clients, services providers might be
left waiting a long time for the phone to ring.
Identifying Benefits
When selling services, the benefits to consumers aren't always clear at face value. Selling a
car doesn't require a lot of basic features and benefits descriptions. Consumers understand
what a car does and usually have self-identified a need to have one. Selling a financial plan
doesn't tell a consumer a lot off the top. Many people might assume they don't even need the
service. This is one reason why services marketing is so important.

Good marketing for services identifies key benefits that consumers know they want or need,
but they may not have identified the services and benefits with a particular company's name.
For example, customers might want to pay off their home mortgage if they die so their
families can continue to live in the home. The customer might not realize that what he needs
is life insurance. By identifying benefits that solve specific consumer problems, service
providers are better able to get leads for new business.
Establishing Value
Another important reason to conduct services marketing is to establish the value of the
services. Consumers have a hard time justifying the costs of services because they don't walk
away with anything tangible in their hands. Service providers can adjust their consumer
opinion about their services by defining them as a value offer or a premium offer. This is seen
in investment brokerage firms where one firm offers discount trades, while another sells the
value of the information that will make someone more money over time.
When establishing value, the service provider weeds out any potential customers who don't
match the customer profile. A premium service provider who reduces the number of calls
taken from someone looking for discount services gives the company more time to focus on
delivering their premium product and finding more clients that fit the customer profile.
Create Brand Awareness
Many service providers often compete with similar providers in a congested industry. Think
about the number of insurance agencies that are in your locale or how many personal injury
attorney commercials you see on television. Service providers who conduct marketing
understand that they must do more than hang a shingle and open for business. If they want
customers, they need to develop a brand that customers go to today and remember tomorrow.
The tagline for many service providers helps achieve this important aspect of services
marketing. Allstate uses "You're in good hands." Merry Maids housecleaning service uses the
tagline "Relax. It's done." These are examples of service providers creating a brand
awareness so consumers identify them with that service. The more the brand is recognized,
the more likely people are to search for it directly when the need arises.

Difference betweenGoods and Services
Given below are the fundamental differences between physical goods and services:
Goods Services
A physical commodity A process or activity
Tangible Intangible
Homogenous Heterogeneous
Production and distribution are separation
from their consumption
Production, distribution and consumption are
simultaneous processes
Can be stored Cannot be stored
Transfer of ownership is possible Transfer of ownership is not possible
The 7 P’s of Services Marketing
The first four elements in the services marketing mix are the same as those in the traditional
marketing mix. However, given the unique nature of services, the implications of these are
slightly different in case of services.
1. Product: In case of services, the ‘product’ is intangible, heterogeneous and
perishable. Moreover, its production and consumption are inseparable. Hence, there is
scope for customizing the offering as per customer requirements and the actual
customer encounter therefore assumes particular significance. However, too much
customization would compromise the standard delivery of the service and adversely
affect its quality. Hence particular care has to be taken in designing the service
offering.
2. Pricing: Pricing of services is tougher than pricing of goods. While the latter can be
priced easily by taking into account the raw material costs, in case of services
attendant costs - such as labor and overhead costs - also need to be factored in. Thus a
restaurant not only has to charge for the cost of the food served but also has to
calculate a price for the ambience provided. The final price for the service is then
arrived at by including a mark up for an adequate profit margin.
3. Place: Since service delivery is concurrent with its production and cannot be stored or
transported, the location of the service product assumes importance. Service providers
have to give special thought to where the service would be provided. Thus, a fine dine
restaurant is better located in a busy, upscale market as against on the outskirts of a
city. Similarly, a holiday resort is better situated in the countryside away from the
rush and noise of a city.

4. Promotion: Since a service offering can be easily replicated promotion becomes
crucial in differentiating a service offering in the mind of the consumer. Thus, service
providers offering identical services such as airlines or banks and insurance
companies invest heavily in advertising their services. This is crucial in attracting
customers in a segment where the services providers have nearly identical offerings.
We now look at the 3 new elements of the services marketing mix - people, process and
physical evidence - which are unique to the marketing of services.
5. People: People are a defining factor in a service delivery process, since a service is
inseparable from the person providing it. Thus, a restaurant is known as much for its
food as for the service provided by its staff. The same is true of banks and department
stores. Consequently, customer service training for staff has become a top priority for
many organizations today.
6. Process: The process of service delivery is crucial since it ensures that the same
standard of service is repeatedly delivered to the customers. Therefore, most
companies have a service blue print which provides the details of the service delivery
process, often going down to even defining the service script and the greeting phrases
to be used by the service staff.
7. Physical Evidence: Since services are intangible in nature most service providers
strive to incorporate certain tangible elements into their offering to enhance customer
experience. Thus, there are hair salons that have well designed waiting areas often
with magazines and plush sofas for patrons to read and relax while they await their
turn. Similarly, restaurants invest heavily in their interior design and decorations to
offer a tangible and unique experience to their guests.
Product
Service products are conceptualised as consisting of a bundle of tangible and intangible
elements:
Core service: the basic reason for the business; that which solves consumer problems
Supplementary goods and services: supplements or adds value to the core product and
helps differentiate the service from competitors (e.g. consultation, safe-keeping,
hospitality, exceptions)
Facilitating services: (sometimes called delivery services): Facilitate the delivery and
consumption of the core service (are essential to delivery) (e.g. information provision,
order-taking, billing, payment methods)
Supporting services: support the core and could be eliminated without destabilising
the core.
The distinction between supplementary and facilitating services varies, depending on the
nature of the service. For instance, the provision of coffee and tea would be considered a
supporting service in a bank, but would be a facilitating service in a bed and breakfast
facility. Whether an element is classified as facilitating or supporting depends on the context.

Price
Service marketers need to consider a range of other issues in price setting and management of
prices:
 Price Charged: the traditional pricing decision.
 Timing of Payment: Given that customers are part of the service process and that some
customers remain in the process for days, months or even years (e.g. guest house, hotel
stay, university tuition), decisions must be made about whether to request payment at
time when the service encounter is initiated, during the encounter or on termination of an
encounter. Deposits, instalments and exit fees are all options that can be considered.
 Mode of Payment: Given that customers enter into long term relationships with service
providers, it is possible that some patrons will expect to be able to pay on account.
Payment options include: EFTPOS, direct transfer, cash/ credit cheque, invoice.
Many service firms operate in industries where price is restricted by professional codes of
conduct or by government influences which may have implications for pricing. It is possible
to identify three broad scenarios:
 Services subject to public regulation (e.g. healthcare, public transport)
 Services subject to formal self-regulation (e.g. universities, schools)
 Services Subject to regulation of marketplace (e.g. hospitality, tourism, leisure services)
In situations where the service is subject to some type of public regulation, government
departments may establish ceiling prices which effectively limit the amount that can be
charged.
The concept of a social price may be more important for service marketers. A social price
refers to "non financial aspects of price". Fine identifies four types of social price: Time,
Effort, Lifestyle and Psyche.[48] In effect, this means that consumers may be more acutely
aware of the opportunity costs associated with the consumption of a service. In practice, this
may mean that consumers of services experience a heightened sense of temporal risk.
The most widely used pricing tactics in services marketing are:
 High or low differential pricing
 Flexible pricing
 Diversionary pricing
 Offset pricing
 Guaranteed pricing
 Loss leader pricing
 Discounted pricing
Place
In making place decisions, there are several related questions which must be asked. What is
the purpose of the distribution program? Who are the customers? Who should the
intermediaries be?
 Purpose of Distribution: Mass distribution; selective distribution or exclusive distribution

 Number of levels in distribution channel: Direct distribution vs multi-marketing and
location decisions
 Intermediaries: Agents versus Resellers; Brokers and other parties; Surrogate Consumers
Service Encounter / Moment of Truth
A moment of truth is usually defined as an instance wherein the customer and the
organization come into contact with one another in a manner that gives the customer an
opportunity to either form or change an impression about the firm. Such an interaction
could occur through the product of the firm, its service offering or both. Various instances
could constitute a moment of truth - such as greeting the customer, handling customer queries
or complaints, promoting special offers or giving discounts and the closing of the interaction.
Moments of Magic: Favorable moments of truth have been termed as ’moments of magic’.
These are instances where the customer has been served in a manner that exceeds his
expectations. Eg: An airline passenger being upgraded to from an economy to a business
class ticket or the 100th (or 1000th) customer of a new department store being given a special
discount on his purchase. Such gestures can go a long way in creating a regular and loyal
customer base. However, a moment of magic need not necessarily involve such grand
gestures. Even the efficient and timely service consistently provided by the coffee shop
assistant can create a moment of magic for the customers.
Moment of Misery: These are instances where the customer interaction has a negative
outcome. A delayed flight, rude and inattentive shop assistants or poor quality of food served
at a restaurant all qualify as moments of misery for the customers. Though lapses in service
cannot be totally avoided, how such a lapse is handled can go a long way in converting a
moment of misery in to a moment of magic and creating a lasting impact on the customer.
Types of Service Encounters
A service encounter occurs every time a customer interacts with the service organization.
There are three general types of service encounters – remote encounters, phone encounters,
and face-to-face encounters. A customer may experience any of these types of service
encounters, or a combination of all three in his/her relations with a service firm.
1. Remote Encounter: Encounter can occur without any direct human contact is called as
Remote Encounters. Such as, when a customer interacts with a bank through the ATM
system, or with a mail-order service through automated dial-in ordering. Remote
encounters also occur when the firm sends its billing statements or communicates others
types of information to customers by mail. Although there is no direct human contact in
these remote encounters, each represents an opportunity for a firm to reinforce or establish
perceptions in the customer. In remote encounter the tangible evidence of the service and
the quality of the technical process and system become the primary bases for judging
quality. Services are being delivered through technology, particularly with the advent of
Internet applications. Retail purchases, airline ticketing, repair and maintenance
troubleshooting, and package and shipment tracking are just a few examples of services
available via the Internet. All of these types of service encounters can be considered
remote encounters.
2. Phone Encounters:- In many organizations, the most frequent type of encounter between
a customer and the firm occurs over the telephone is called as phone encounter. Almost all

firms (whether goods manufacturers or service businesses) rely on phone encounters in the
form of customer-service, general inquiry, or order-taking functions. The judgment of
quality in phone encounters is different from remote encounters because there is greater
potential variability in the interaction. Tone of voice, employee knowledge, and
effectiveness/efficiency in handling customer issues become important criteria for judging
quality in these encounters.
3. Face-to-Face Encounters: A third type of encounter is the one that occurs between an
employee and a customer in direct contact is called as Face-to-Face Encounter. In a hotel,
face–to–face encounters occurs between customers and maintenance personnel,
receptionist, bellboy, food and beverage servers and others. Determining and
understanding service equality issues in face–to–face context is the most complex of all.
Both verbal and non-verbal behaviors are important determinants of quality, as are tangible
cues such as employee dress and other symbols of service (equipment’s, informational
brochures, physical settings). In face–to–face encounters the customer also play an
important role in creating quality service for herself through his/her own behavior during
the interaction. For example, at Disney theme parks, face-to-face encounters occur between
customer and ticket-takers, maintenance personnel, actors in Disney character costumes,
ride personnel, food and beverage servers, and others. For a company such as, IBM, in a
business-to-business setting direct encounters occur between the business customers and
salespeople, delivery personnel, maintenance representatives, and professional consultants.
Service-Profit Chain Model
The service-profit chain model tries to link all the components required to make an
organization successful. According to this model, a company that performs well in one aspect
and poorly in another will eventually develop problems that affect the entire organization.
This working model highlights the importance of the links between quality management, a
good work force and exceptional service to the customer.
What is Service-Profit Chain?
According to the service-profit chain model, a connection exists between high profits,
customer loyalty and satisfaction and employee productivity and satisfaction. The application
of this model first considers profits generated by the loyalty of a customer. Under this model,
the customer's satisfaction directly impacts the customer's loyalty. This satisfaction results
from the value the customer receives from the company's satisfied and productive employees.
Employee satisfaction results from the support of upper management that understands the
needs of both the employees and the customers.
Customer Satisfaction Drives Customer Loyalty
Customer satisfaction does not equal customer loyalty. In order to gain customer loyalty, the
customer has to perceive value for money spent. The service-profit chain model recognizes
that a customer becomes loyal through this perceived value. Since customer expectations
constantly change, the organization must recognize and support these changes.

Value
Value means different things to different people. Many individuals associate value with an
emotional aspect of the purchase based on experiences. For example, a company can create a
well-priced product that has exceptional guarantees. However, a customer might not consider
this product valuable enough to become a loyal customer. This is on of the reasons why
advertisers use different campaigns for the same product. People respond to stimuli
differently based on emotions and experiences.
Employee Productivity Drives Value
The workforce of a company can help to drive the company's profits. When an organization
has engaged, productive and highly satisfied employees, the organization will have a higher
chance of succeeding. Many types of businesses from service businesses to manufacturing
businesses sell products to customers. If the business's employees have a good working
knowledge of the product, the employees have a better ability to service and satisfy
customers. Product knowledge comes from both experience and longevity with a company.
New employees typically cannot relate to customers as effectively as employees with years of
experience working for the company. The service-profit chain model recognizes that
employee retention directly impacts customer satisfaction.
The service-profit chain establishes relationships between profitability, customer loyalty, and
employee satisfaction, loyalty, and productivity. The links in the chain (which should be
regarded as propositions) are as follows: Profit and growth are stimulated primarily by
customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely
influenced by the value of services provided to customers. Value is created by satisfied, loyal,
and productive employees. Employee satisfaction, in turn, results primarily from high-quality
support services and policies that enable employees to deliver results to customers.

Types of physical evidence:
(a) 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.
(b) 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.
Role of service physical evidence:
1. Make the Service more Tangible:
The bank credit card is an example of the tangible representation of the service, ‘credit’. The
use of a credit card means:
(a) The service can be separated from the seller;
(b) Intermediaries can be used in distribution thereby expanding the geographic area in
which the service marketer can operate;
(c) The service product of one bank can be differentiated from the service product of another
bank (e.g. through colour, graphics and brand names like Visa).
(d) The card acts as a symbol of status as well as providing a line of credit.
2. Make the Service Easier to Grasp Mentally:
There are two ways in which a service can be made easier to grasp mentally.
(a) Associate the service with a tangible object which is more easily perceived by
the customer.
This approach may be used in advertising messages where the intangible nature of service is
transferred into tangible objects representing that service. These may have more significance
and meaning for customers. It is easier for the customer to grasp what their service means
compared with competitors.
With this approach it is obviously vital to:
(a) Use tangible objects that are considered important by the customer and which are sought
as part of the service. Using objects that customers do not value may be counter-productive.

(b) Ensure that the ‘promise’ implied by these tangible objects in fact is delivered when the
service is used. That is, the quality of the goods must live up to the reputation implied by the
promise.
If these conditions are not met, then incorrect, meaningless and damaging associations can
be created.
(b) Focus on the Buyer-seller Relationship:
This approach focuses on the relationship between the buyer and the seller. The customer is
encouraged to identify with a person or group of people in the service organization instead of
the intangible services themselves.
Advertising agencies use account executives; market research agencies assemble client
teams; the Bank uses ‘personal’ bankers. All encourage a focus on people performing services
rather than upon the services themselves.
However before a service organisation can translate intangibles into more
concrete clues it must ensure that it:
(a) Knows precisely its target audience and the effect being sought by the use of such devices.
(b) Has defined the unique selling points which should be incorporated into the service and
which meet the needs of the target market.
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.
Multicultural marketing grew out of careful marketing research revealing how
different ethnic and demographic niches did not always respond favourably to mass-
market advertising. Virtually all human societies exhibit social stratification. This
stratification sometimes takes the form of caste system where members of different
castes are reared for specific roles and they cannot change their caste membership.

More frequently the stratification takes the form of social classes, relatively
homogeneous and enduring divisions in society that are hierarchically ordered and
whose members share similar values, interests, and behaviour.
In addition to cultural factors, a consumer’s behaviour is influenced by such social
factors as reference groups, family, and social roles and statuses A person’s reference
group consists of all the groups that have a direct (face-to-face) or indirect influence
on his/her attitudes or behaviour. Groups with a direct influence on a person are
called membership groups.
Some memberships groups are primary such as family friends, neighbours, and co-
workers with whom the person interacts fairly continuously and informally. Some
membership groups are secondary groups such as religious and professional groups
that tend to be more formal.
People are significantly influenced by their reference groups in at least three ways.
One, they expose an individual to new behaviours and lifestyles, influencing attitudes
and self-concepts (how one views oneself). Two they create pressures for conformity
that may affect actual product and brand choices Three, people are also influenced by
groups to which they do not belong aspirational groups are those a person hopes to
join, associative groups are those whose values or behaviours an individual rejects.
The buyer evaluates these elements together with the monetary cost to form the total
customer cost.
Manufacturers of products where group influence is strong must determine how to
reach and influence opinion leaders in these reference groups. An opinion leader is a
person who through informal, product-related communication, offers advice or
information about a specific product or product category Marketers try to reach
opinion leaders by identifying demographic and psychographic characteristics
associated with opinion leadership, while also identifying the media preferred by the
opinion leaders.
Buying roles and buying decisions constitute consumer decision-making behaviour.
A customer can adopt various buying roles like initiator, influencer, decider, buyer,
preparer, maintainer and disposer. A buyer’s decisions are also influenced by
personal characteristics.
These include the buyers age and stage in the life cycle; occupation and economic
circumstances; personality and self-concept; and lifestyle and values. Each person
has personality characteristics that influence his or her buying behaviour. Kotler has

defined brand personality as the specific mix of human traits that may be attributed
to a particular brand.
Servicescape
The servicescapes model is an applied stimulus-organism-response model (SOR model),
which treats the physical environment as the stimulus and the response is the behavior of
employees and customers within the physical environment. The servicescape performs four
important roles - packaging - presents the outward appearance to the public; facilitator -
guides the efficient flow of activities; socialiser - conveys expected roles to both employees
and customers and differentiator - serves as a point of difference by signalling which
segments of the market are served, positioning the organisation and conveying competitive
difference.
Physical environment as stimuli
The elements of the physical environment itself make up the inputs (stimuli). Environmental
inputs are sensory, spatial and symbolic. For convenience, these elements are normally
considered as three broad categories including:
Ambient conditions: Temperature, air quality, ambient noise, lighting, background
music, odor, etc.
Space/Function: Equipment such as cash registers, layout, furnishings and furniture,
etc. and the ways that these elements are arranged within the space
Signs, symbols and artefacts: Directional signage, personal artefacts (e.g. souvenirs,
mementos), corporate livery and logos, style of décor (including colour schemes),
symbols, etc.
Each element in the physical environment serves multiple purposes. For instance, furnishings
may serve a functional role in that they provide seating where patrons can wait for friends or
simply enjoy a quiet rest, but the construction materials may also serve a symbolic role in
which they communicate meaning through shared understandings. Plush fabrics and generous
drapery may signify an elegant, up-market venue, while plastic chairs may signify an
inexpensive, family-friendly venue. Signage may provide information, but may also serve to
assist customers navigate their way through a complex service environment. When evaluating
the servicescape, the combined effect of all the elements must also be taken into
consideration.
Process in servicemarketing
When customers enter a service firm they participate in a process. During that process,
customers become quasi-employees; that is they are partial producers and they have the
opportunity to see the organisation from the employee's perspective. To use a manufacturing
analogy, customers are able to examine 'unfinished goods' – that is faulty and defective
goods, glitches in the production system are in full view, with obvious implications for
customer enjoyment and satisfaction. In addition, customers interactions with both employees

and other customers becomes part of the total service experience with obvious implications
for service quality and productivity. Both customers and staff must be educated to effectively
use the process. Controlling the service delivery process is more than a simple management
issue. The customer's presence in the system means that the service process must be treated
as a marketing issue.
Three types of processes of relevance to service organization are:
(a) Line operations;
(b) Job shop operations;
(c) Intermittent operations.
Line Operations:
In a line operation there is an arranged sequence of operations or activities undertaken. The
service is produced by following this sequence. In manufacturing, an assembly line for
domestic appliances typifies this type of process; in services, a self-service restaurant typifies
this process.
In the latter people move through a sequence of stages although there is no reason why
customers should not remain stationary and receive a sequence of services. The high degree
of inter-relationship between different elements of a line operation mean that performance
overall is limited by performance at the weakest link in the system and hold-ups can arise
(e.g. a slow check-out operator in a self- service cafeteria).
Also it tends to be a relatively inflexible type of process although tasks in the process can be
specialized and made routine giving more speedy performance. This process is most suitable
in service organizations with high volumes of fairly continuous demand for relatively
standard kinds of service.
Job Shop Operations:
A job shop operation produces a variety of services using different combinations and
sequences of activities. The services can be tailored to meet varying customer needs and to
provide a bespoke service. Restaurants and professional services are examples of job shop
operations. While flexibility is a key advantage of this type of system it may suffer from being
more difficult to schedule, from being more difficult to substitute capital for labour in the
system and from being more difficult to calculate the capacity of the system.
Intermittent Operations:
Intermittent operations refer to service projects which are one off or only infrequently
repeated. Examples include the construction of new service facilities, the design of an
advertising campaign, and the installation of a large computer or the making of a major film.

The scale of such projects makes their management a complex task. Such projects provide an
appropriate field for the ready transfer of many project control and scheduling techniques
like Critical Path Analysis. The scale and infrequency of these projects make them different
in kind from line and job shop operations.
B. The Degree of Contact:
Managing service operations with a high level of customer contact with the service delivery
process presents different challenges compared with those systems where there is a low level
of customer contact. The amount of customer contact has an effect on may of the decisions
operations managers have to make. These kinds of systems (high contact or low contact)
have an effect upon service operations and have implications for managers of service
systems.
Service blueprint
The service blueprint is a technique originally used for service design and innovation, but
has also found applications in diagnosing problems with operational efficiency. The service
blueprint is an applied process chart which shows the service delivery process from the
customer's perspective. The service blueprint has become one of the most widely used tools
to manage service operations, service design and service positioning.
A simple way to think about blueprints is as a process chart which consists of inputs, process
and outputs.
Inputs (raw materials) → Process (transformation) → Outputs (finished goods)
Service blueprints include actions and the amount of discretion for varying each step
A service blueprint is always constructed from the customer's perspective. A typical service
blueprint identifies:
 Customer Actions: The steps that customers take as part of the service delivery
process.
 Front-stage (Visible Contact Employee) Actions: Steps taken by contact employees as
part of the face-to-face service encounter.
 Back-stage (Invisible Contact Employee) Actions: (The 'line of visibility' separates
the front-stage and back-stage actions). Non-visible steps taken by contact employees
behind the line of visibility. e.g. taking a hotel or restaurant reservation by telephone.
 Support Processes: Activities carried out by employees who are not contact
employees, but whose actions are required for the service to be delivered.
 Physical Evidence: Tangible elements associated with each step that has the potential
to influence customer perceptions of the service encounter e.g. uniforms, delivery
vans
 Inventory (if required): the amount of inventory build up required for each step
 Line of Visibility: Line that separates front-stage and back-stage actions
Optional inclusions – depending on intended application:

 Line of Interaction which separates customer actions from service provider actions
 Line of Internal Interaction which separates the back office and the support process
 Line of Implementation which separates management zone from the support zone.
That is management are responsible for planning and controlling while support
activities include preparation.
Yet other scholars and practitioners have recommended adding different lines including
 Line of Order Penetration which separates customer-induced activities from
customer-independent activities
 Minimum expected wait times
 Potential bottlenecks and/or fail points
Applications
Service blueprinting has three main applications: simple representation; diagnosing
operational deficiencies and service design (planning for structural change or new service
development).
(1) Simple Representation
 A basic application for blueprints is as a simple form of representing or codifying
what is actually occurring in the current operation. In visual form, the blueprint can be
used in training programs, employee manuals to help clarify service processes.
Blueprints may be used in market research as a means of helping respondents to
visualise aspects of a service that may be the focus of an investigation. Blueprints can
also be used in employee training programs and manuals to assist staff to visualise the
service process and the relationships between steps in the process.
(2) Diagnosing Operational Deficiencies
 Blueprints have also found widespread applications as diagnostic tools designed to
uncover operational weaknesses. A number of scholars have championed the
diagnostic value of blueprints.
 The blueprint can be analysed in terms of the appropriateness of physical evidence
provided at each contact point as well as the suitability of contact personnel in relation
to activities. In the event that any deficiencies are identified by the blueprinting
process, management can develop operational standards for critical steps in the
process.
(3) Service design: Planning for Structural Change/ New Service Development
 Shostack's original intention was that blueprinting be used as a planning tool. Using a
simple diagrammatic representation of the process, management could pose "What
if?" type scenarios and reconfigure the service process in the blueprint form, without
causing major disruptions in real time. For example, a planner might ask, What if we
give employees wider latitude? What if we reduce latitude by scripting every step?
What if we reduce complexity by combining two or more steps into a single
procedure? What if we add complexity by having different contact staff take
responsibility for each step?

Service process matrix
The Service Process Matrix is a classification matrix of service industry firms based on the
characteristics of the individual firm's service processes.
The Service Process Matrix can be useful when investigating the strategic changes in service
operations. In addition, there are unique managerial challenges associated with each quadrant
of the matrix. By paying close attention to the challenges associated with their related
classification, service firms may improve their performance.
The classification characteristics include the degree of labor intensity and a jointly measured
degree of customer interaction and customization. Labor intensity can be defined as the ratio
of labor cost to plant and equipment. A firm whose product, or in this case service, requires a
high content of time and effort with comparatively little plant and equipment cost would be
said to be labor intense. Customer interaction represents the degree to which the customer can
intervene in the service process. For example, a high degree of interaction would imply that
the customer can demand more or less of some aspects of the service. Customization refers to
the need and ability to alter the service in order to satisfy the individual customer's particular
preferences.
The vertical axis on the matrix, as shown in Figure 1, is a continuum with high degree of
labor intensity on one end (bottom) and low degree of labor intensity on the other end (top).
The horizontal axis is a continuum with high degree of customer interaction and
customization on one ends (right) and low degree of customer interaction and customization
on the other end (left). This results in a matrix with four quadrants, each with a unique
combination of degrees of labor intensity, customer interaction and customization.
The upper left quadrant contains firms with a low degree of labor intensity and a low degree
of interaction and customization. This quadrant is labeled "Service Factory." Low labor
intensity and little or no customer interaction or customization makes this quadrant similar to
the lower right area of the Product-Process Matrix where repetitive assembly and continuous
flow processes are located. This allows service firms in this quadrant to operate in a fashion
similar to factories, hence the title "Service Factory." These firms can take advantage of
economies of scale and may employ less expensive unskilled workers as do most factories.
Firms classified as service factories include truck lines, hotels/motels, and airlines.

The upper right quadrant contains firms with a low degree of labor intensity but a high degree
of interaction and customization. The upper right quadrant is labeled "Service Shop."
Hospitals, auto repair shops and many restaurants are found in this quadrant.
The lower left quadrant contains firms with a high degree of labor intensity but a low degree
of interaction and customization. This quadrant is labeled "Mass Service." Mass service
providers include retail/wholesale firms and schools.
Finally, the lower right quadrant contains firms with a high degree of labor intensity and a
high degree of interaction and customization. The lower right quadrant is labeled
"Professional Service." This quadrant is similar to the upper left section of the Product-
Process Matrix where job shops and batch processes are found. Doctors, lawyers,
accountants, architects, and investment bankers are typical service providers that tend to be
labor intense and have a high degree of customer interaction and customization.
Service Quality
The Gap Model/SERQUAL
The model's developers originally identified ten dimensions of service quality, but after
testing and retesting, some of the dimensions were found to be auto correlated and the total
number of dimensions was reduced to five, namely - reliability, assurance, tangibles, empathy
and responsiveness. These five dimensions are thought to represent the dimensions of service
quality across a range of industries and settings. [11] Among students of marketing, the
mnemonic, RATER, an acronym formed from the first letter of each of the five dimensions is
often used as an aid to recall.
Businesses use the SERVQUAL instrument (i.e. questionnaire) to measure potential service
quality problems and the model of service quality to help diagnose possible causes of the
problem. The model of service quality is built on the expectancy-confirmation
paradigm which suggests that consumers perceive quality in terms of their perceptions of
how well a given service delivery meets their expectations of that delivery.[12] Thus, service
quality can be conceptualised as a simple equation:
SQ = P- E
where;
SQ is service quality
P is the individual's perceptions of given service delivery
E is the individual's expectations of a given service delivery
When customer expectations are greater than their perceptions of received delivery, service
quality is deemed low. When perceptions exceed expectations then service quality is high.
The model of service quality identifies five gaps that may cause customers to experience poor
service quality. In this model, gap 5 is the service quality gap and is the only gap that can be
directly measured. In other words, the SERVQUAL instrument was specifically designed to
capture gap 5. In contrast, Gaps 1-4 cannot be measured, but have diagnostic value.

1. The first gap is the difference between consumer expectations and management
perceptions of consumer expectations. Research shows that financial service organizations
often treat issues of privacy as relatively unimportant, whilst consumers consider them
very important.
2. The second gap is the difference between the management perceptions of consumer
expectations and service quality specifications. Managers will set specifications for service
quality based on what they believe the consumer requires. However, this is not necessarily
accurate. Hence many service companies have put much emphasis on technical quality,
when in fact the quality issues associated with service delivery are perceived by clients as
more important.
3. The third gap is the difference between service quality specification and the service
actually delivered. This is of great importance to service where the delivery system relies
heavily on people. It is extremely hard to ensure that quality specifications are when a
service involves immediate performance and delivery in the presence of the client. This is
the case in many service industries: for example, a medical practice is depending on all the
administrative, clerical and medical staff performing their tasks according to certain
standards.
4. The fourth gap is the difference between service delivery intention and what is
communicated about the service to customers. These established expectations within the
customer may not be met. Often this is the result of inadequate communication by the
service provider.
5. The fifth gap represents the difference between the actual performance and the customer
perception of the service. Subjective judgement of service quality will be affected by many
factors, all of which may change the perception of the service which has been delivered.
Thus a guest in a hotel may receive excellent service throughout his stay, apart from poor
checking out facilities. But this last experience may damage his entire perception of the
service, changing his overall estimation of the quality of the total service provided from
good to poor.

Summary of Gaps with Diagnostic Indications
Gap Brief description Probable Causes
Gap 1
The Knowledge
Gap
Difference between the
target market’s expected
service and management’s
perceptions of the target
market’s expected service
 Insufficient marketing research
 Inadequate upward communications
 Too many layers of management
Gap 2
The standards Gap
Difference between
management’s perceptions
of customer expectations
and the translation into
service procedures and
specifications
 Lack of management commitment to
service quality
 Employee perceptions of infeasibility
 Inadequate goal setting
 Inadequate task standardisation
Gap 3
The Delivery Gap
Difference between service
quality specifications and
the service actually
delivered
 Technical breakdowns or malfunctions
 Role conflict/ ambiguity
 Lack of perceived control
 Poor employee-job fit
 Poor technology- fit
 Poor supervision or training
Gap 4
The
Communications
Gap
Difference between service
delivery intentions and
what is communicated to
the customer
 Lack of horizontal communications
 Poor communication with advertising
agency
 Inadequate communications between
sales and operations
 Differences in policies and procedures
across branches or divisions of an entity
 Propensity to overpromise

CHAPTER 2
7 P’s of Tourism and Hospitality management
Product
Tourism product in marketing is referred to as any product or service related to tourism like
transportation, accommodation, restaurants, attractions, shops, landscapes and etc. Sometimes
in tourism, products are free of cost as compared to other fields as natural beauty of one's
country , friendliness of local peoples and participation in the local festivals are free of cost
for tourists. 4 A's plays an important role in explaining the product -1. attractions 2.
accommodation 3. amenity 4. accessibility. Attractions are the most important tool in tourism
as these are only attractions by which tourists travel to particular destinations. Destination
places must have their own historic monuments, museums, gardens, landscapes, carnivals,
cultural events, national parks and forests and all activities which are carried out by tourists in
those particular destinations which differentiate the destination from other destinations.
Accessibility is another important factor in tourism as if tourist places/ product is not easily
accessible people generally are not interested in traveling to those places. This requires good
transportation system and availability of restaurants and other facilities near to tourist
attractions. Amenities are another significant factor describing the easy availability of
services on the tourist places like public toilets, restaurants and cafes, retail shops, telecoms
and other necessary facilities and the last and important one is accommodation.
Accommodation also plays an important role in making the image of the destination as
tourists want relaxation after their trips so they must be provided with good and standard
quality hotels, hostels, apartments and B &B. Apart from that increasing trend of camping
and backpacking is forcing tourism destinations to create and to provide facilities on those
sites. And the emerging 5th A of product is awareness- It describes the awareness regarding
the particular product or destination which should be created in the minds of people. One
must know what he/she is selling and receiver must know what they are receiving. Tourism
products must be of standard value as it creates the image of destinations on the minds of
customers and it is highly related to word of mouth marketing. Positioning the product into
the market is one of the most important and difficult task in tourism as one requires lot of
knowledge and specialization in this field. Product positioning is the way in which product is
presented in market to target different audience. It is of two types objective positioning and
subjective positioning. Objective positioning is the type in which product is presented to
target market according to their needs and preferences while on the other hand in subjective
positioning the originality of that destination/product is not altered according to preferences
of customers. Overall success of marketing plan is directly related with the product
/destination.
Price
In tourism price is defined as the combination of monetary and non monetary prices.
Monetary prices are the prices for entrance to destinations, donations for local and
environment causes and etc while on the other hand non monetary costs are costs other than
money example how much time it was taken to reach that destination, risks during the
journey, future benefits etc. Main objectives of price setting are survival, target return on
investments, increase market share, price and profit stabilization, profit maximization and
maintaining the image of the organization. While setting the prices it should be kept in mind
that product pricing is highly influenced by internal and external factors. Internal factors

influencing price are organizational costs, marketing mix, product differentiation, product
costs, product life cycle and functional positioning. External factors influencing price are
product demand, competition, economic conditions and the buyer behavior. The procedure
for implementing the price model in tourism marketing consists of following steps- (a)
Planning- In tourism marketing first question in the minds of business man's come in mind is
how much money to be charged for that particular product in tourism. Planning in tourism
requires the estimation of own costs, its benefits to tourists, what profits it will bring to you
(b) After planning next step is research for setting price this is very important to know the
market size, demand and supply, income, lifestyles, family size and obviously latest trends. A
part from that before setting prices knowing your competitor’s prices and services which
they are offering is of immense importance. (c) Once you finished your research and setting
the prices next step is to implement them. (d) After implementing there comes the price
control. You have to monitor and control the prices of products according to the trends. (e)
last step is evaluation finally you have to evaluate the profits and loss and to do modifications
in the pricing strategy if necessary. Normally systematic approach to pricing has 8 steps as
discussed below- 1. you have to identify who are your potential customers 2. estimation of
demand and supply 3. observation of competitor's prices 4. alternative basic prices 5.
calculation of net prices for manufacturers 6. calculation of expected profit 7. estimation of
total costs and 8. deep analysis of the each major segment. In tourism there are two pricing
strategies profit and non profit oriented. Non profit oriented strategy is further divided into
two types status oriented and status quo oriented. In status oriented normally prices are kept
very low to get the attention of vast people and to attract tourists to particular destinations in
large numbers while in status quo oriented prices are kept by companies which are very
stable and when there are changes in the wants and needs of customers.
Place
Place is the important marketing mix element as before traveling to other destinations tourists
perceive the image of the destinations in their minds. The main variables of place are
transportation, merchandising and channels of distribution. Transportation is important in
particular destinations so that tourists can easily travel from one part of attraction to another.
There should be proper, economical, rapid and dependable mode of transportation for them.
Rails, roads, motor trucks, inland water ways, railway express and airways should be
developed according to easily mobility from one tourist place to another. Easily allocation of
shopping malls, restaurants and cafes should be located near to tourism attractions to fulfill
the needs of tourists. It should be kept in mind that when people travels from one place to
another they have certain perceptions about that places in their minds. They should be
provided with high standard of hotels, hostels and apartments to be located near to the tourist
attractions for the convenience of the visitors. Place must have its own distinctiveness and
uniqueness as compared to other destinations, which attracts the tourists to that place and
tourism board has to maintain that image with the help of local people. Cleanliness is another
important factor which affects the tourism. People always prefer to travel to neat and clean
places to maintain their hygiene while on travel. It lies in the hands of the government and
other public and private sectors to build the image of any particular destination and before
doing that they have to consider all pull factors of the destination and their potential in
attracting tourism. There are lot of places in this world which are lying undisturbed by the
humans because of no marketing efforts regarding those places. Active education and
awareness regarding the particular place/ destination is crucial for visitors to travel to that
place. Creation of day and night markets near to tourist places not only drive tourists in large
numbers to that particular place but its also important in creating employment opportunities
for local communities. Good infrastructure, high speed trains and better connectivity through

rails, buses and airway must be developed in tourist regions. People are traveling to particular
destinations only when those places meet their interests and its the duty of government,
tourism board and local peoples to create and to provide those facilities so that travelers not
only remember the experience but also finds a chance to travel to same destinations next
time. Destination places must possess trade intermediates like travel agents and tour guides to
access tourists in their journeys and to provide them information and other materials like
maps, booklets during their journeys so they can aware of their destinations . Volunteer
services must be included in the places just to assist the tourists if they have any problems.
Promotion
Promotion is the main element of marketing mix. Communication mix for promotion are
advertising, sales promotion, public relations and personnel selling. Definition of advertising
as given by American Marketing Association is :
“Any paid form of non- personal presentation of ideas, goods, or services by an identified
sponsor”
As tourism is the vast phenomenon normally advertisement in tourism is created by national
government of countries and by tourism boards. Advertising is of four types-1. indoor
advertising media, outdoor advertising media, direct advertising media and display
advertising media. Before choosing the form of media one must be aware of the following
questions in their mind that who are the target market, what are their demands, how to catch
their attention and in which form they will be impressed. In indoor advertising media is the
media which conveys the messages to the houses of the target market. Main forms of this
advertising are newspaper's, magazines, TV radio and films. Outdoor advertising media
catches the attentions of audiences when they are outside their houses. In this type there
comes posters, printed displays, sky-writing and electric signs. Direct advertising covers all
forms of printed advertisements examples are post cards, catalogs, sales letters, stores
publications etc. Display advertising is the form of advertising which are presented before the
audiences examples are exhibitions and fairs. Sales promotion is the another form in
promotion it is the type which coordinates and supplement the personal selling and
advertising so to increase the sales. It can be done by creating the identity, through
partnerships, travel agents and by online networking. In order to increase the sales one must
have to create the brand for that destination. It should be of such type so that it can describe
what the particular destination is offering in just few words. Partnership are also helpful in
increasing the sales as companies have enough funds to promote the destinations on the
bigger levels. Travel agents are the gateways to the particular destinations as they are selling
vast number of packages to customers at reasonable prices. Posting about your product and
doing publicity online also helps in improving the sales. Personal selling in tourism is the
presentation of information regarding tangible and intangible products. Mainly travel agents,
tour guides, workers behind the counter, resort representatives etc plays important role in
personal selling as they are directly contacting and provides tourists information regarding
their needs and facilities. PR in tourism targets the national, regional and state wise media to
promote a destination. Today promotion has become the most integral part in tourism as one
cannot imagine the marketing without promotion.
People
People in tourism refers to all people and workers whom tourists interact during their visit to
particular destinations. When tourists travel any destination the first thing upon arriving there
is their interaction with local people. Behavior of local people has directly influence on the
minds of tourists. The way they were treated and served during their journey's plays

important role in shaping the particular destination's image. For this destinations, require
particular skills, manners and polite behavior in handling the tourists-that’s why lots of
restaurants and hotels are employing those people who are skilled, groomed and clean.
Tourists generally share their experiences about their visits and their services and how they
were being treated by local people during their journeys. Suppose tourists went to restaurant
and if waiter/waitress behave with them rudely or if nobody cares about them often tourists
don't visit those places and this is the negative point for destinations. Tourists while traveling
to other countries must remember that in each country people have their own different type
traditions and cultures so they must respect those traditions rather making fun of local people
activities. In tourism all local people or whether they are retail shop owners, hotel
representatives, restaurant managers, workers, tour guides etc all have important role in
tourism. Tourism helps people in exchanging their ideas and knowledge. People have
different roles in tourism they can be employees, management, culture and customer service
people. In tourism people represents the culture of the country by creating specific touch on
the minds of tourists. The way they speak and handle the customers are the driven forces of
tourism. They must have to possess relevant knowledge and training regarding the product
and the services which they are selling to their customers. Tour operators must have to use
their top standard quality and knowledge in their services to increase the repeat visit to
particular destination. Tourism is the major employment sector which has the capacity to
employ large number of people whether in hotels, restaurants, airports, retail shops etc and
active steps should be taken by government of destination countries to increase the number of
jobs for their people in this sector so as to lower the unemployment rate and to provide better
services and facilities to its customers. Popularity of any destination lies in the hands of local
government marketing efforts, its attractions and its amazing people’s. Many services and
products intourism are supported by Customer services. Its only in the hands of employees
how to save the reputation of any firm by the way they handle complaints. Normally people
likes to buy any product from the people they like so role of people in tourism is important
and vital. For better knowing any country's culture its better to know its people first as they
are the gateways to their culture and traditions.
Process
In tourism, businesses offer services. Process in tourism means to implement such strategies
to make the life of any business easier so that people can get what they want in easy manner.
For example - if person want to purchase holiday vacation to any destination. First people
will search online websites offering holidays to particular destinations. After from those
websites they will choose only one website offering best and easy services. After they will
look for offerings and tour packages to their choice of destinations. After choosing tour
packages they book that tour and air tickets and get ready for tour. This is the example o f
process in tourism marketing. Generally talking process is the action applied by the
companies to deliver and to provide information regarding their products in a relevant and
easy manner. Another example is of travel operators they offer wide services and tour
packages according to needs of clients. Tour operators help them in finding destinations
according to their choices and helps them in everything from their pick up from airports to
accommodation at destinations. In tourism process is the mean of conveying messages,
services and information to customers in a easy manner so that customers can easily access
those particular products. Every organization in tourism have different processes. From hotels
to restaurants, from tour operators to retail shops every company and business has their own
different types of processes which creates impressions on the minds of people by the way
they deliver their products. Main key elements in process are planning, system & procedures,
documentation, quality control& feedback & reviews. Planning is important as it describes

how you will deliver the product into the market. Systems and procedures are the backbones
of any company on which success of any company depends. Documentation is helpful in
fueling the company by providing necessary information to your clients. Quality control in
the process means that the product which you are delivering should be of consist and and
high quality. Feedback & reviews are helpful in knowing the current situation of your
company and its services. Process has inputs, throughout and outputs. It includes direct and
indirect processes. Direct activities adds the values to customer's as they experience the
service. Indirect activities supports the services before and after the process has been
delivered. In making any process product can be tailored according to the needs of customers
experiencing similar interests. Process are important in marketing mix as these are the ways
by which companies deliver their products and customers receive those products in a efficient
and in easy manner. Processes takes into account all marketing mix In short words we can
describe process as something experienced by your customers at different points of time.
Physical evidence
In tourism as tourism products are intangible as before purchasing any service, people can't
touch, feel and see those destinations. They perceive the image of services and products in
their minds before travelling to any destinations before travelling. They perceive regarding
their accommodations, hotels, restaurants, appearance of vehicles and its people. Before
purchasing any services normally people are not sure about whether they will like particular
destination or not. Physical evidence is the environment or facilities and services which they
experience upon reaching the destinations. Physical evidence is the environment in which
normally sales takes place and where product is consumed by customers. Physical evidence is
related to another important factor like physical environment around the product/service,
Ambiance, Spatial layout and corporate branding. Physical environment is the environment
surrounded where services are consumed by people. For example if someone goes to
restaurant apart from having meals physical environment also plays important role in repeat
visits. Example, there are 2 restaurants, in one restaurant there is no music just tables and
chairs and meals should be served to them. On the other hand in 2nd restaurant on same street
meals are served to clients with optional music and entertainment for them and interior of the
restaurant is surrounded with appropriate and attractive lights, paintings and decorations.
Although prices of 2nd restaurant will be little higher than 1st restaurant customers will prefer
going to 2nd restaurant because of its physical environment. Ambiance is another factor in
physical evidence. It describes the use of colors, fragrances, music and level of noises at the
consumption area. Spatial layouts define the way in which the furniture is set up in the
particular places. Arrangement in churches is different as compared to that of restaurants.
Similarly in hotels there is different arrangement for furniture set up. Last one is corporate
branding- it means that image for any identity and organization must be supported by signs
and symbols so that customers can easily understand what exactly the place is offering.
Physical evidence includes the tangible products like beds, wifi connections, meals,
buildings, interior of any service, packaging, brouchers, uniform of the employees etc. Well
dresses and nice employees make first impression on the minds of tourists travelling to other
destinations. Sometimes people are confused before visiting any places whether that place
will be according to their interests and their needs. To fulfill these needs various companies
are providing pictures and information regarding the destination places and in these cases
websites act as a physical evidence for customers. In short words we can say that physical
evidence is the environment which matches with the perceptions of customer regarding that
product/destination.

7 P’s of Marketing of Financial Services (Banking, Insurance,
Mutual Fund & Portfolio Management Services)
1. Product Mix
The banks primarily deal in services and therefore, the formulation of product mix is
required to be in the face of changing business environment conditions. Of course the
public sector commercial banks have launched a number of policies and programs for
the development of backward regions and welfare of the weaker sections of the society
but at the same time it is also right to mention that their development-oriented welfare
programs are not optimal to the national socio-economic requirements. A proportional
contraction in the number of customers is found affecting the business of public sector
commercial banks. The changing psychology, the increasing expectation, the rising
income, the changing lifestyles, the increasing domination of foreign banks and the
changing needs and requirements of the customers at large make it essential that they
innovate their service mix and make them of worked class. The development of new
generic product, especially when the business environment is regulated is found a
difficult task. However, it is pertinent that banks formulate a package in tune with the
changing business conditions. Against this background, we find it significant that the
banking organizations minify, magnify, combine and modify their service mix.
In the formulation of service mix, the banks can follow two guidelines, first is related to
the processing of product to market needs and the second is concerned with the
processing of market needs to product. In the first process, the needs to the target
market are anticipated and visualized and therefore, we expect the prices likely to be
productive. In the second process, the banks react to the expressed needs and therefore
we consider it reactive. It is essential that every product is measured up to the accepted
technical standards. This is because no consumer would buy a product, which contains
technical faults. Technical perfection in service is meant prompt delivery, quick disposal,
and presentation of right data, right filing, proper documentation or so. If computers
start disobeying, the command and the customers get wrong facts, the use of technology
would be a minus point, and you don’t have any excuse for your faults. Marketing aims
not only offering but also at creatinginnovating the servicesschemes found new to the
competitors vis-a vis- to the customers. The enhanced customer patronage would be a
reward to the bank. The additional attractions, the product attractiveness would be a
plus point of your mix, which would help you in many ways. This makes it essential
that the banking organizations are sincere to the innovations process and try to enrich
their peripheral services much earlier than the competitors. We also find the product
portfolio of the banks. While formulating the services mix, it is also pertinent that the
bank professionals make possible affair synchronization of core and peripheral services.
To be more specific, the peripheral services need an intensive care since the core services
are found by and large the same. Innovating the peripheral services thus app ears to be
an important functional responsibility of marketing professionals. We can’t deny the
fact that if the foreign banks have been getting a positive response; the credibility goes to
their innovative peripheral services. Thus, the formulation of product mix is found to be
a difficult task that requires world-class professionalism.
2. Promotional Mix:
Promotion mix includes advertising, publicity, sales promotion, word – of – mouth
promotion, personal selling and telemarketing. Each of these services needs to be

applied in different degree. These components can be useful in the banking business in
the following ways:
Advertising Advertising is paid form of communication. Banking organizations use this
component of the promotion mix with motto of informing, sensing and persuading the
customers. While advertising it is essential to be aware of key decision making areas so
that instrumentally helps banks at micro and macro levels.
Suitable vehicle:
There are a number of devices to advertise, such as broad cast media, telecast media and
print media. In the face of the budgetary provisions, it is necessary to select a suitable
vehicle. For promoting the banking business, the print media is found to be economic as
well as effective.
Telemarketing: The telemarketing is a process of promoting the business with the help
of sophisticated communication network. Telemarketing is found instrumental in
advertising the banking services and the banking organizations can use this tool of the
promotion mix both for advertising and selling. This minimizes the dependence of
banking organizations on sales people and just a counter or center as listed in the call
numbers may service multi- dimensional services. Telemarketing is likely to play an
incremental role in marketing the banking services. The leading foreign banks and even
some of the private sector commercial banks have been found promoting telemarketing
and they have been getting positive results for their efforts.
Word-Of- Mouth:
Much communication about the banking services actually takes place by word- of-
mouth information, which is also known as word- of- mouth promotion. The oral
publicity plays an important role in eliminating the negative comments and improving
the services. This also helps the banker to know the feedback, which may simplify the
task of improving the quality of services. This component of promotion mix is not to
influence budget adversely or generate additional financial burden. By improving the
quality of services and by offering small gifts to the word- of- mouth promoters, bankers
can get more business command in their area.
The above facts make it clear that such kind of promotion is influenced by a number of
factors. The most dominating factor is the quality of services offered. The bank
professionals, the frontline staff and the senior executives should realize that
degeneration in quality would make this tool effective.
3. Price Mix:
In the formulation of marketing mix, the pricing decisions occupy a place of outstanding
significance. The pricing decisions include the decisions related to interest and fee or
commission charged by banks. Pricing decisions are found instrumental in motivating
or influencing the target market. The RBI regulates the rate of interest and the Indian
Banks‟ Association controls other charges. In our country, the price mix is more
important because the banking organizations are also supposed to sub serve the
interests of the weaker sections and the backward regions. Also in making the pricing
decisions, the Government Of India instrumentalists or commands everything as a
shadow policy maker. This also complicates the price mix for banking sector. Pricing
policy of a bank is considered important for raising the number of customers vis-à-vis
the accretion of deposits. Also the quality of service provided has direct relationship
with the fees charged. Thus while deciding the price mix customer services rank the top
position. Banks also have to take the value satisfaction variable in to consideration. The

value and satisfaction cannot be quantified in terms of money since it differs from
person to person. Keeping in view the level of satisfaction of a particular segment, the
banks have to frame the pricing strategies.
The banking organizations are required to frame two- fold strategies. First, the strategy
is concerned with interest and fee charged and the second strategy is related to the
interest paid. Since both the strategies throw a vice- versa impact, it is important that
banks attempt to establish a correlation between two. It is essential that both the buyers
as well as the sellers have feeling of winning.
4. The People
Sophisticated technologies no doubt, inject life and strength to our efficiency but the
instrumentality of sophisticated technologies start turning sour id the human resources
are not managed in a right fashion. We can’t deny the fact that if foreign banks are
performing fantastically; it is not only due to the sophisticated information technologies
they use but the result of a fair synchronization of new information technologies and a
team of personally committed employees. The moment they witness lack of productive
human resources even the new generation of information technologies would hardly
produce the desired results. In addition to the professional excellence, the employees
working in the foreign banks are generally value- based. Thus we accept the fact that
generation of efficiency is substantially influenced by the quality of human resources.
The quality for banking sector is an aggregation of all the properties, which are found
essential for generating the efficiency and projecting a fair image. Even efficiency
essentially is supported by ethical dimension, humanity and humanism. The
development of human resources makes the ways for the formation of human capital.
Human resources can be developed through education, training and by psychological
tests. Even incentives can inject efficiency and can motivate people for productive and
qualitative work.
5. The Process
• Flow of activities: all the major activities of banks follow RBI guidelines. There has to
be adherence to certain rules and principles in the banking operations. The activities
have been segregated into various departments accordingly.
• Standardization: banks have got standardized procedures got typical transactions. In
fact not only all the branches of a single-bank, but all the banks have some
standardization in them. This is because of the rules they are subject to. Besides this,
each of the banks has its standard forms, documentations etc. Standardization saves a
lot of time behind individual transaction. • Customization: There are specialty counters
at each branch to deal with customers of a particular scheme. Besides this the custome rs
can select their deposit period among the available alternatives. • Number of stores:
numbers of steps are usually specified and a specific pattern is followed to minimize
time taken.
• Simplicity: in banks various functions are segregated. Separate counters exist with
clear indication. Thus a customer wanting to deposit money goes to „deposits‟ counter
and does not mingle elsewhere. This makes procedures not only simple but consume
less time. Besides instruction boards in national boards in national and regional
language help the customers further.

• Customer involvement: ATM does not involve any bank employees. Besides, during
usual bank transactions, there is definite customer involvement at some or the other
place because of the money matters and signature requires.
6. The Physical Evidence
The physical evidences include signage, reports, punch lines, other tangibles,
employee‟s dress code etc. The company‟s financial reports are issued to the customers
to emphasis or credibility. Even some of the banks follow a dress code for their internal
customers. This helps the customers to feel the ease and comfort Signage: each and
every bank has its logo by which a person can identify the company. Thus such signages
are significant for creating visualization and corporate identity.
Tangibles: banks give pens, writing pads to the internal customers. Even the passbooks,
chequebooks, etc reduce the inherent intangibility of services. Punch lines: punch lines
or the corporate statement depict the philosophy and attitude of the bank. Banks have
influential punch lines to attract the customers. Banking marketing consists of
identifying the most profitable markets now and in future, assessing the present and
future needs of customers, setting business development goals, making plans-all in the
context of changing environment.
Advertisements
The bank is a financial institution which accepts deposits and lends that money to its
customers. As banks deal with their customers 'finances, banking is a high- involvement
service. Therefore banks need to win the trust of their customers. Based on the customer
profiles, banks segment their market into retail banking, corporate banking, personal
banking etc.
Depending on customer needs for finance, the market can also be segmented into trade
finance, consumer finance, etc. For the banker to derive maximum returns and enhance
his market position the marketing mix has to be effectively managed. The products
offered by a bank may be in the core or augmented form. The core products offered by a
bank include a savings bank account or a housing loan.
The augmented product includes services like internet banking, ATMs, 24-hour
customer service etc. These augmented services help the banker differentiate his service
offering from those of his competitors. In the pricing of banking services, determining
the interest rates plays an important role, as these rates in turn determine the revenues
and profits of the bank.
The multiple sources of revenue for today's banks include annual charges for core
services and augmented services, penalties, commissions for cross selling and charges
for payment of utility bills, apart from the differential interest rate. The basic pricing
strategy in banks is based on risk-return pay-offs. However, the competitor and
customer reaction have to be taken into consideration while initiating a price change.
The place element of the marketing mix refers to making the services available and
accessible to customers. Improvements in the availability and accessibility of services
have changed the process of banking. Technological innovations have given rise to
modern channels like the Internet, which have helped banks increase business volumes
and attract new customers. ATMs and credit and debit cards offer convenience to
customers and have also improved the efficiency of banking operations. These changes
have helped banks tackle the challenges of services marketing. The promotion or
communication mix in banking refers to varied strategies like personal selling,

advertising, discounts, and publicity etc. used by present day banks to promote their
service offerings.
7. People
People also play an important role, even though their role has been eclipsed by technology in
the recent past. Process determines the efficiency of banking operations and thus the service
quality in a bank. Physical evidence includes the infrastructure and buildings not only in
branch offices, but also the ATMs or other places of interaction. Even the quality of cheque
books and mailers to customers forms physical evidence.
The banking industry has changed drastically over the past decade. The banking reforms and
the opening of the economy to foreign and private banks have improved the working of the
public sector banks. This has resulted in improved service to the customers of the banking
industry. Increased competition and technology have enhanced the quality of service offered
to the customers and also improved the returns for bankers.
7p’s of Healthcare
Product
To begin with, develop the habit of looking at your product as though you were an outside
marketing consultant brought in to help your company decide whether or not it’s in the right
business at this time. Ask critical questions such as, “Is your current product or service, or
mix of products and services, appropriate and suitable for the market and the customers of
today?”
Whenever you’re having difficulty selling as much of your products or services as you’d like,
you need to develop the habit of assessing your business honestly and asking, “Are these the
right products or services for our customers today?”
Is there any product or service you’re offering today that, knowing what you now know, you
would not bring out again today? Compared to your competitors, is your product or service
superior in some significant way to anything else available? If so, what is it? If not, could you
develop an area of superiority? Should you be offering this product or service at all in the
current marketplace?
Prices
The second P in the formula is price. Develop the habit of continually examining and
reexamining the prices of the products and services you sell to make sure they’re still
appropriate to the realities of the current market. Sometimes you need to lower your prices.
At other times, it may be appropriate to raise your prices. Many companies have found that
the profitability of certain products or services doesn’t justify the amount of effort and
resources that go into producing them. By raising their prices, they may lose a percentage of
their customers, but the remaining percentage generates a profit on every sale. Could this be
appropriate for you?
Sometimes you need to change your terms and conditions of sale. Sometimes, by spreading
your price over a series of months or years, you can sell far more than you are today, and the
interest you can charge will more than make up for the delay in cash receipts. Sometimes you

can combine products and services together with special offers and special promotions.
Sometimes you can include free additional items that cost you very little to produce but make
your prices appear far more attractive to your customers.
In business, as in nature, whenever you experience resistance or frustration in any part of
your sales or marketing activities, be open to revisiting that area. Be open to the possibility
that your current pricing structure is not ideal for the current market. Be open to the need to
revise your prices, if necessary, to remain competitive, to survive and thrive in a fast-
changing marketplace.
Promotion
The third habit in marketing and sales is to think in terms of promotion all the time.
Promotion includes all the ways you tell your customers about your products or services and
how you then market and sell to them.
Small changes in the way you promote and sell your products can lead to dramatic changes in
your results. Even small changes in your advertising can lead immediately to higher sales.
Experienced copywriters can often increase the response rate from advertising by 500 percent
by simply changing the headline on an advertisement.
Large and small companies in every industry continually experiment with different ways of
advertising, promoting, and selling their products and services. And here is the rule:
Whatever method of marketing and sales you’re using today will, sooner or later, stop
working. Sometimes it will stop working for reasons you know, and sometimes it will be for
reasons you don’t know. In either case, your methods of marketing and sales will eventually
stop working, and you’ll have to develop new sales, marketing and advertising approaches,
offerings, and strategies.
Place
The fourth P in the marketing mix is the place where your product or service is actually sold.
Develop the habit of reviewing and reflecting upon the exact location where the customer
meets the salesperson. Sometimes a change in place can lead to a rapid increase in sales.
You can sell your product in many different places. Some companies use direct selling,
sending their salespeople out to personally meet and talk with the prospect. Some sell by
telemarketing. Some sell through catalogs or mail order. Some sell at trade shows or in retail
establishments. Some sell in joint ventures with other similar products or services. Some
companies use manufacturers’ representatives or distributors. Many companies use a
combination of one or more of these methods.
In each case, the entrepreneur must make the right choice about the very best location or
place for the customer to receive essential buying information on the product or service
needed to make a buying decision. What is yours? In what way should you change it? Where
else could you offer your products or services?

People
The final P of the marketing mix is people. Develop the habit of thinking in terms of the
people inside and outside of your business who are responsible for every element of your
sales and marketing strategy and activities.
It’s amazing how many entrepreneurs and businesspeople will work extremely hard to think
through every element of the marketing strategy and the marketing mix, and then pay little
attention to the fact that every single decision and policy has to be carried out by a specific
person, in a specific way. Your ability to select, recruit, hire and retain the proper people,
with the skills and abilities to do the job you need to have done, is more important than
everything else put together.
7 P’s of Education Industry
1. Product
 The tangible product delivered by educational industry are various certificates that are
issuedbyinstitute oruniversityaftersuccessfulcompletionof course.
 The intangible products delivered by educational industry are knowledge, skill & experience
to candidates.
 For e.g.,productscan be MBA course,Engineeringdegree,etc.
2. Price
 Price is determined by a number of factors including reputation of the institution ,
competition, service quality, placement, private or public ownership, infrastructure, facilities
provided, location of the institute, mode of education, brand name of the educational
institutionetc.
 Here,price reflectsthe qualityof servicesprovidedtothe students.
 For e.g.,price of EngineeringisaroundRs.50,000 to Rs.500,000 per year.
3. Place
 Place represents the location where an educational institute is established. It is often
referredtoas the service centre.
 If the institute is located at a Metro city, it will provide much more competitive edge, than if
it islocatedinrural place.
 Locationalsoaffectsthe price & promotional activityof thatinstitute.
 For e.g. educational institutes from Mumbai, Delhi, Pune, etc are more prestigious than
otherinstitutes.

4. Promotion
 Positive word-of-mouth communication has been found the best tool for promotion of
educationindustry.
 Outdooradvertisinginformof printmedialike hoarding,banners,etcare used.
 Now-a-days, institutions are using digital marketing techniques like SMS, e-mails, social
media,etcforpromotion
5. People
 Here, the people mean teaching fraternity and non-teaching community directly and
indirectlyassociatedwiththe servicesrenderedtothe students.
 Satisfaction and retention of the students solely depends on the way the teachers are, in a
positiontodelivertheirbestservicestostudents.
 For e.g.Professors,GuestLecturer,LabAssistant,Librarian,SecurityGuard,etc.
6. Process
 The way service providers render services to the students, plays a pivotal role in gaining the
competitiveadvantages.
 If the service process is hassle free, simple, understandable, student friendly and technology
based,itwill definitelymake the institutionwithdifference.
 For e.g.processof teaching,processof practical learning,processof placement,etc.
7. Physical Evidence
 It is the direct sensory experience of a service that allows a student to measure whether he
or she has receivedadequatefacilitiesby the educational institution.
 It might include state-of-art technology, building, parking facility, play ground, gymnasium,
swimming pool, indoor stadium, transportation facility, hostel, class rooms, computer
laboratory, canteen, library, number of books and journals, different modern teaching aid
etc.
7 P’s of Entertainment /PVR cinemas
PRODUCT
The customer comes to a cinema hall for, along with the attendant experience of PVR. The expected
product in PVR’s case world be ambience, hygiene, parking, candy bar etc. PVR has augmented its
product offerings luxury cinema with exclusive auditoriums, fally reclining seats & many more, but

SERVICE MARKETING AND RETAIL MARKETING Shivaji University Syllabus

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