The document discusses concepts related to services marketing such as new service development process, value addition to service products, market segmentation, service pricing policies, and customer loyalty. It provides details on each concept: The new service development process involves 7 stages - idea generation, screening, concept testing, business analysis, development, market testing, and product launch. Value can be added to core services through facilitating services like information and payment processing, and value-enhancing services like consultation and hospitality. Market segmentation involves dividing the total heterogeneous market into homogeneous segments based on factors like demographics and usage. Pricing strategies for services include cost-based, competitor-based, demand-oriented, and value-based pricing. Customer loyalty is classified

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Subject: SERVICES MARKETING
Concepts:
NEW SERVICE DEVELOPMENTPROCESS
VALUE ADDITION TO THE SERVICE PRODUCT
MARKET SEGMENTATION
SERVICE PRICING POLICY
PRICING STRATEGIESFOR SERVICES:
CUSTOMER LOYALTY:
CUSTOMER LOYALTY LADDER

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NEW SERVICE DEVELOPMENTPROCESS
Developing a new product shouldn’t feel like you’re fighting in the dark.
There’s an easier way. What you need is a structured road-map that gives your
business a clear path to follow.
Actually developing the tangible product or service is only a small part of the
new product development process, which includes the complete journey from
generating the initial idea to bringing the product to market.
New service development process:
Generationof ideas
screening
Testing the concept
Business analysis
Development
Market testing
Product launch

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1. Generation of ideas:
The development of a product will start with the concept. The rest of the
process will ensure that ideas are tested for their viability, so in the beginning
all ideas are good ideas (To a certain extent!)Ideas can, and will come, from
many different directions.
The best place to start is with a SWOT analysis, (Strengths, Weaknesses,
Opportunities and Threats), which incorporates current market trends.
2. Screening:
This step is crucial to ensure that unsuitable ideas, for whatever reason, are
rejected as soon as possible. Ideas need to be considered objectively, ideally by
a group or committee.
Specific screening criteria need to be set for this stage, looking at ROI,
affordability and market potential. These questions need to be considered
carefully, to avoid product failure after considerable investment down the line.
3. Testing the concept:
The ideas which continue the new service be translated into a specific feature
and attributes which the product or service will display concept testing is
usually done through marketing research involves presenting the idea or concept
to the target market and studying their actions to make necessary modifications
to the predict before
4. Business analysis:
At this stage, ideas which have been selected to the developed further require in
depth exploration and evaluation to the important task is to produce a formal
analysis of market potential of the ideas in terms of forecasting all aspects of
developing and launching services.
5. Practical development:
At this stage preparation are made for development and launching the service.
The service provides undertake the work of designing and supply of literature
and supporting materials.

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A detail marketing program is developed to cover all aspects of marketing mix
6. Market testing:
Marketing research is carried to test the concept, it is necessary to test the
market to reduce the risk. This may be done artificially by using panel of
consumers who will use the series at their residence or testing in the actual
market but in a small area may do it.
7. Product launch:
The precuts launch is the final stage and the organization now can make
decision on when to introduce the new service , where to whom and the service
moves from being purely cost, to bringing the revenue. At this stage major
decisions are taken regarding the timings of the launch the geographical
location of the launch and the specific marketing.
VALUE ADDITION TO THE SERVICE PRODUCT
C. Lovelock developed the flower of service which indicates the core service
surrounded by a cluster of facilitating and support services. It represents
basically two types of supplementary services. They are
Facilitating Supplementary services
• Information
• Order Taking
• Billing
• Payment
Value enhancing supplementary services
• Consultation
• Hospitality
• safekeeping
• Expectations

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1. Information:
Customers need information on various elements of a service for evaluation and
decision making.
Examples of information elements are
 Signboards to the service site
 Service performance hours
 Charges for services
 Alerting people
 Notices
 Conditions etc...
2. Order Taking:
The first step in transaction. Examples of order taking elements are
 Filling out applications for membership of
associations
 Subscription to a service
 Reservation of seats, tables, rooms and rentals
 Online, postal or telephonic order
3. Billing:
 Billing is important from the company’s as well as the customer’s point
of view.
 Customers expect accuracy, completeness and legibility in bills prepared
by service providers.
4. Payment:
Activities of payment system are
 cash handling
 cheque handling
 credit system
 coupon system
5. Consultation:

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 Consultation is directed at identifying and understanding customer’s
requirements so as to design and develop a tailored solution.
 It is offered generally to help customers use service, clarify doubts and
offer management/technical consultancy.
6. Hospitality:
Hospitality includes
 Greeting
 Enquiry and Reception
 Waiting facilities
 Bathrooms
 Food and Beverages etc...
7. Safekeeping:
Service organizations have to make arrangements for the safekeeping of
customer property.
Safekeeping includes
 Child care services
 Pet-care services
 Parking facilities
 Storage and baggage handling services etc...
8. Expectations:
 Service providers may be required to provide supplementary services
that are not routine to the customers on special considerations.
 Expectations may be allowed on special requests by the customers for
the advanced delivery of service under special circumstances.

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MARKET SEGMENTATION
According to William. J.Stanton, “Market Segmentation consists of taking the
total heterogeneous market for a product and dividing it into several sub-market
or segments, each of which tends to be homogeneous in full significant
aspects.”.
An example would be people wanting cars, but different types of cars. The
different types of cars may be luxury, sports, or SUV's.
Process of Market Segmentation:
1. Identify bases for segmenting the market
↓
2. Develop profiles of resulting segments
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3. Develop measures of segment attractiveness
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4. Select the target segments
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5. Ensure that the Target segments are compatible
1. Identify bases for segmenting the market:
Market segmentation is the act of subdividing the market into a group or groups
of people who have similar needs within the group, but dissimilar needs across
the groups. An example would be people wanting cars, but different types of
cars. The different types of cars may be luxury, sports, or SUV's.
2. Develop profiles of resulting segments:
Once the segments have been identified it is critical to develop profiles to them.
In consumer markets these profiles usually involve demographic
characterisations or psychographic or usage segments. Of most importance in
this stage clearly understands how and whether the segments differ from each
other in terms of their profiles. If they are not different from each other, the

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benefits to be derived from segmentation, that is, from more precisely
identifying sets of customers, will not be realised.
(Usage Segmentation - This is the subdivision of the market based on how
often a consumer uses the product. They will be categorized into those who do
not use the product, those who use it a little, and those who are considered
heavy users.)
3. Develop measures of segment attractiveness:
The fact that segments of customers exist does not justify a firm’s choice of
them as targets. Segments must be evaluated in terms of their attractiveness.
The size and purchasing power of the segments must be measurable so that the
company can determine if the segments are worth the investment in marketing
and relationship costs associated with the group. The chosensegments also must
be accessible, meaning that advertising or marketing vehicles must exist to
allow the company to reach the customers in the segment.
4. Select the target segments:
Based on the part on evaluation criteria, the services marketer will select the
target segment or segments for the service. The firm must decide if the segment
is large enough and trending toward growth. Market size will be estimated and
demand forecasts completed to determine whether the segment provides strong
potential. Competitive analysis, including an evaluation of current and potential
competitors, substitute products, and services, and relative power of buyers and
suppliers, will also help in the final selection of target segments. The firm must
decide whether serving the segment is consistent with company objectives and
resources.
5. Ensure that the Target segments are compatible:
This step, of all the steps in segmentation strategy, is arguably more critical for
service companies than for goods companies. Because services are often
performed in the presence of the customer, the services marketer must be
certain that the customers are compatible with each other. If during non peak

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season a hotel chooses to serve two segments that are incompatible with each
other
Ex: families who are attracted by the discounted prices and college students on
their spring break-it may find that the two groups do not merge well. It may be
possible to manage the segments in this example so that they do not directly
interact with each other, but if not; they may negatively influence each others
experiences, hurting the hotels future business.
SERVICE PRICING POLICY
1. Penetration pricing: Penetration pricing is a marketing technique in which a
company offers a new product at a price significantly lower than its
competitors. Once it has gained a large market share and customer base, the
company begins to increase the price of the product. Companies sometimes use
this technique when offering a new product, such as a new technology, to
encourage customers to try the product.
2. Price skimming is a pricing strategy in which a marketer sets a relatively
high price for a product or service at first, and then lowers the price over time.
3. Odd-Even Pricing: Odd-even pricing is a pricing strategy involving the last
digit of a product or service price. Prices ending in an odd number, such as
$1.99 or $78.25, use an odd pricing strategy, whereas prices ending in an even
number, such as $200.00 or 18.50 use an even strategy.
4. Price discounting: A valuation approach where items are sometimes initially
marked up artificially but are then offered for sale at what seems to be a reduced
cost to the consumer. For example, a retail store business might offer discount
pricing on all of its apparel items for a limited time period in order to attract
new customers and boost sales.

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5. Bundle pricing: In this pricing companies sell a package or set of goods or
services for a lower price than they would charge if the customer bought all of
them separately. Common examples include option packages on new cars, value
meals at restaurants and cable TV channel plans.
6. Prestige pricing, also known as premium pricing, is a pricing strategy where
prices are consciously kept higher than normal for the entire product life cycle.
Ex: Nike is a company that uses prestige pricing effectively, where prices are
set higher than normal because lower prices will actually hurt sales.
7. A bid price is the highest price that a buyer (i.e., bidder) is willing to pay for
a good. It is usually referred to simply as the "bid".
8. Loss Leadership Pricing: In this type of pricing, the basic or fundamental
services are priced at quite a low level. However, if the client needs higher level
or additional services, he has to pay premium prices.
PRICING STRATEGIES FOR SERVICES:
1.cost based pricing
2. Competitor based pricing
3. Demand oriented pricing
4. Value-Based pricing
1. Cost based pricing: Cost based pricing is one the method of determining the
selling price of a product or service by the company, wherein the price of a
product or service is determined by adding a profit element (percentage) in
addition to the cost of making the product or service.
2. Competitor based pricing:

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i) Going Rate Pricing: Setting a price for a product or service using the
prevailing market price as a basis. Going rate pricing is a common practice with
homogeneous products with very little variation from one producer to another,
such as aluminium or steel.
ii) Sealed bid pricing: This is the system of tenders and quotations where bids
are received from service providers.
iii) Pricing below the competition: Here the new entrant service provider will
price his offers below the competition with the full intention of increasing his
market share at the time of consideration.
iv) Pricing above the competition: The kind of pricing works only for
premium or very distinctive services.
3. Demand based pricing: Demand-based pricing, also known as customer-
based pricing, is any pricing method that uses consumer demand - based on
perceived value - as the central element.
4. Value based pricing: Value-based pricing is the setting of a product or
service's price based on the benefits it provides to consumers. By contrast, cost-
plus pricing is based on the amount of money it takes to produce the product.
Companies that offer unique or highly valuable features or services are better
positioned to take advantage of value-based pricing than companies with
products or services that are relatively indistinguishable from those of their
competitors.
CUSTOMER LOYALTY:
Customer loyalty is the degree to which customers experience positive feelings
for and exhibit positive behaviours toward a company/brand.

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This definition reflects an attribute or characteristic about the customer that
supports both attitudinal and behavioural components of loyalty.
Categories of customer loyalty:
Premium Loyalty or True Loyalty:
Premium loyalty, the most leverageable of the four types, prevails when a high
level of attachment and repeat patronage coexist. This category of loyal
customers proves to be a strong competitive tool in the hands of a company as
these customers patronise the company and its products regardless of
insignificant price changes and competitive offers available to them.
Latent Loyalty:
A high relative attitude combined with low repeat purchase signifies latent
loyalty. This type of loyalty refers to consumers who might not purchase often
from a brand (usually because its products/services are set at a seasonal or high-
ticket price), but when they do purchase, they always purchase from the one
brand.

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Inertia Loyalty
A low level of attachment coupled with high repeat purchase produces inertia
loyalty. This customer buys out of habit. It’s the “because we’ve always used it”
or “because it’s convenient” type of purchase. In other words, non-attitudinal,
situational factors are the primary reason for buying. This buyer feels some
degree of satisfaction with the company, or at least no real dissatisfaction. This
loyalty is most typical for frequently bought products. It’s exemplified by the
customer who buys gas at the station down the street, dry cleaning from the
store down the block and shoe repair from the nearby cobbler.
No Loyalty
For varying reasons, some customers do not develop loyalty to certain products
or services
Ex: A manager of a travel agency who goes anywhere in town to get a haircut,
so long as it costs him Rs.100 or less and he doesn’t have to wait. He rarely
goes to the same place two consecutive times. To him, a haircut is a haircut
regardless of where he receives it.
CUSTOMER LOYALTY LADDER
Customer Loyalty Ladder is a systematic way of classifying customers of an
organization into five different categories depending upon the business level
engagement of customers with the organization.

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1. Suspects:
They are the potential customers for an organization. They may be aware of the
promotional campaigns of the organization but are currently doing no business
with that organization.
2. Prospects:
They are the ones who have been impressed with the organization’s promotions
and are in serious consideration of buying products of the organization.
The organization must treat them cordially and solve all of their doubts.
3. Customers:
They have bought products of the organization for the first time and are
currently using them. The organization must extend them all possible after-sales
assistance in order to pacify their concerns.
4. Clients:
They are doing business repetitively with the organization and are willing to
foster the engagement in future.
5. Advocates:
They are not only doing repetitive business with an organization but are also
recommending the organization to their own acquaintances. They are the most
valuable players and the organization must treat them royally with the highest
priority.