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R/TP/02 1 Issue C: Rev 00


Services have increasingly assumed an important role in the economic development of many countries, including India. Almost all developed countries and many developing countries are emerging as service economies or service societies. An economy is called a service economy when the contribution of the service sector to the GDP of the nation is more than 50 per cent. USA was the first economy to be declared as a service economy way back in 1948 with about 53 per cent contribution of the service sector to the GDP of the nation. There is an argument that the statistics of the service sector’s contribution in many countries is a gross underestimation of the truth, since the value of the services produced by manufacturers of goods in the industrial sector is not included in service output value. As such, there is a large ‘hidden service sector’ that is not classified under the service sector. Services are becoming a critical source of wealth in many ways to the economies. Economies experienced increase in employment with the growth in service sector. While employment in the manufacturing sector is receding every year, employment in the service sector is rising. Even in times of economic recession, unlike in the manufacturing sector, the service sector has kept employment up.

All human beings are service producers as well as consumers. We cannot imagine our life in the absence of services. Transportation, education, communication, health care, hospitality, entertainment, banking, information technology, electricity and a host of services have become a part of our lives. In fact, the concept of service is as old as humankind and began when man started serving himself (self-servicing). When a part of the society became affluent, it started utilizing the services of others at a price. Then services became a business proposition. Over the years, services have grown in different ways throughout the world. However, until the beginning of the 20th century, the focus of the economies was to produce more and more tangible goods and sell agricultural and manufactured products. Services such as accounting, banking, insurance and transportation were considered as support to the manufacturing units. In the beginning, throughout the world most services were in the public sector. Most organizations enjoyed the status of monopoly. The situation of excessive demand over supply and absence of competition or negligible competition led many service organizations to be insensitive to the marketing concept. The management and the marketing literature developed until the 1970s depicted manufacturing organizations and suggested that the same philosophies and technology be applied to the service organizations also.

between the goods and service may not be equal in all restaurants though both are important for the consumers. In a five-star hotel, service takes a prominent place when compared to food items, whereas in ordinary restaurants the proportion may be more or less equal. In case of fast food centres, food may take dominant position as compared to services. Therefore, there is a possibility of having a hybrid category of products, but it is uncommon to have a significant portion of such products in any economy. 4. Service with accompanying tangible goods: This is a marketing offer, in which the intangible part is dominant. People buy services but not the tangible goods involved in the production of services. The accompanying goods playa major role in the value assessment of service by the consumer. For example, people buy mobility service from a transport organization. To provide such service, transport organizations really need tangibles like buses, trucks, trains, helicopters, aeroplanes and the like. Although consumers of the mobility service do not buy the tangibles, the condition of the vehicle, interior and exterior, facilities, comfort, speed and so on, will playa major role in assessing the value of the service. The vast majority of the service products fall under this category. 5. Pure service: Pure service is a marketing offer, where consumers confine themselves to valuing only the service they receive and nothing else. Service without any support of goods can serve the purpose of the users and is capable of giving satisfaction to the consumers. Teaching, consultancy, idea selling and the like fall under pure service category. 1.1.1 Tangibility Spectrum The major factor that differentiates a service from a product is its intangibility. However, it should be noted that the line separating products and services is fast thinning down. Marketers today try to attach an element of service even to the products, to attract customers and enjoy their loyalty. For example, when a customer buys a car, he enjoys a free service for the first 3 years from the car company. According to Zeithaml and Bitner, intangibility plays a key role in determining whether an offering made by a marketer is a product or service. In some cases, the service provider also gives the customer a tangible element bundled together with his service. For

1.2 SERVICES DEFINED The following definitions present the perception of various personalities and associations responsible for contributing significant work over the last four decades, that is, from 1960 onwards, in services management and marketing. The American Marketing Association (1960): The American Marketing Association has taken a lead in defining services as “activities, benefits or satisfactions which are offered for sale or provided in connection with the sale of goods.” This definition provides a limited view of services. However, this was the first major attempt to identify services differently in valuing the output of a society. The definition does not provide for valuing services involved in producing the tangible goods. Regan (1963): Regan in his definition classified services into two categories. According to him “services represent either tangibles, yielding satisfaction directly (transport, housing) or intangibles, yielding satisfaction jointly when purchased either with commodities or other services “credit delivery”. An attempt is made through this definition to give a distinctive focus for such services that are offered directly to the consumers as products. Robert Judd (1964): According to Robert Judd, service is “a market transaction by an enterprise or entrepreneur where the object of the market transaction is other than the transfer of ownership of a tangible commodity.” In this definition three broad areas of services are recognized. They are: 1. Right to possess and use a product (rented goods business). 2. The custom creation, repair or improvement of a product (owned product services). 3. No product element, but an experience (non-goods services). An attempt was made through this definition to give an independent status to more and more services and to focus the attention of the researchers for further development. William J. Stanton (1974): A comprehensive view of services was provided by Stanton. According to him services are “separately identifiable, intangible activities which provide want satisfaction when marketed to consumers and/or industrial users and which are not necessarily tied to the sale of a product or another service.” This definition focuses upon several issues for recognition. They are:

Since services are intangible activity (ies) or benefit(s) produced by the service provider.3 INTRODUCTION TO SERVICES MARKETING The basic questions that confront everyone is why should there be a separate learning on services marketing? Are the marketing concepts and techniques that are developed (studied in the last semester course on marketing management) for the manufacturing sector not applicable to services? Do services require distinctive strategies in marketing? The answers to the questions provide the basic platform for an understanding of services marketing. its quality results in perception and value assessment by the consumer. distribution and consumption take place simultaneously in the case of services. Goods can be stored. Goods are tangible. in association with the consumer.4 CHARACTERISTICS OF SERVICES Services have basically six characteristics that greatly effect the design of marketing programmes. 1. Customers do not generally participate in the production of goods. transfer of ownership will not take place whereas in the case of goods it does take place.Services may be defined as intangible activities performed by persons or machines or both for the purpose of creating value perceptions among consumers. Ø Ø Ø Ø Services are intangible. The following are the differences between physical goods and services. 1. Ø Services cannot be stored. Goods are produced in the factory. Considering the core differences between goods and services. They are: . the three are separate and independent functions. Ø In the sale of services. Services are heterogeneous whereas goods are homogeneous. A different marketing approach is necessary for services marketing. because services differ from goods in many respects. Production. several characteristics of services can be identified. Ø Consumers are co-producers in services. Services are produced in buyer-seller interactions. In the case of goods.

Service organizations face major problems in standardizing and communicating the service standards because of this characteristic. the interaction between a server and a customer is essential for the former to take the order for food and serve it to the customer for consumption. It is almost impossible to have the same service from the same seller the second time. the production. some service organizations are able to reduce direct interactions by introducing new technologies. As a result.3 Variability Services cannot be separated from the service provider. Therefore. inner side. In fact.4. inventoried and then consumed.Areceptionist of a hotel cannot extend the same kind of smile to the customers during all her working hours. Since the delivery and consumption of a service are inseparable. For example. The experiences of passengers sitting on the window side. service organizations should take special care in training and motivating employees. the experiences of bus travelers vary with the seats they occupy. delivery and consumption of a service takes place simultaneously in the buyer-seller interactions. For example. customers tend to equate the quality of service offered by the organization with their interaction with its frontline employees.4. he should have a service production unit that offers the same service quality standards. However. front rear and rear of the bus will not be similar. Wherever the service provider intends to offer services. though they take the service simultaneously. courteous in the way they talk to customers and patient in dealing with queries. Front•line employees should be trained to be professional in their approach. This characteristic of a service creates problems to the marketer. 1. tele banking and ATM to minimize direct buyer-seller interactions.1.2 Inseparability A service is consumed by the customer as soon as it is delivered by the employee. Services are highly variable. No two customers can have exactly similar service even though they experience it simultaneously. For example. In the case of a hotel. Thus. production and consumption occur simultaneously in case of services as opposed to products which are manufactured. banking organizations have introduced the cheque facility. the interaction between patient and doctor is essential if the patient has to be treated for an illness. Services cannot be inventoried and need to be consumed immediately. While customers look for communication from the company relating to service standards for arriving at a . there has to be interaction between customers and employees of a service organization. particularly in the case of market expansion. the credit card facility.

methods and techniques are totally irrelevant to the service sector. The marketing challenges over and above the scope of goods marketing need to be addressed by the service firms with a different strategic approach.1: Marketing Challenges and Strategic Options in Services Marketing . health clubs. 1. the question of ownership doesn’t arise. when compared to producers of goods. This does not mean that traditional marketing philosophies.1. The strategic options listed in the table forms the essence of strategies practiced by the services marketers and they will be discussed in detail in due course of this course material.4. service providers face varied problems and challenges in marketing. In fact.is necessary. services marketing is nothing but application of traditional marketing philosophies to the service sector with changes required wherever. Table 1.6 No Ownership Service consumers will have experiences but not ownership. Thus. Customer dissonance (discussed in the last semester course on marketing Management) would be higher in the case of services than of goods. Since the services are intangible and perishable. Customization is one of the key strategies the service firms adopt to ensure efficient and effective participation of customers. Customer participation is active in services such as medical treatment. the fundamentals of marketing which you have studied in the last semester are the same to both the sectors. Due to the above mentioned characteristics of services. Convincing the customer with tangible goods on which he will have ownership through transfer of title is much easier than selling an experience where nothing remains after consumption. hairdressing. colleges and beauty care centres. What is required is to develop an adaptable mechanism to a different environment. But this characteristic will add to the problems of the service marketer. except the memory of it. keeping in view the service characteristics. The characteristics described above distinguish services marketing from goods marketing approach. The marketing challenges and strategic options due to service characteristics are presented in Table 1.

However. he proposed the following schematics: Thus. Smith dismissed the contribution of services to the process of value generation. he proposed that the production of goods leads to tangible output. in the late nineteenth Century. He emphatically stated that the generation of services is unproductive and thus devoid of any value creation. Alfred Marshall. however. both are value . has defined the important concept of value generation. corrected this notion of the role of services. Today we are aware that both goods and services satisfy different needs of customers. and hence. It is indeed difficult to convey the concept of value generation when no tangible ownership of a product seems to have been transferred. Doubts about the ability of the services sector to contribute significantly to the economic development and well-being of societies. another famous economist. Ø Customers are evaluating at every stage of service production ü ü ü ü Strategic Options Making the service process tangible to the Effective interactive marketing Management of movements of truth Effective internal marketing No Ownership Ø Nothing remains after consumption Ø Very less time to the consumer to evaluate the product Ø High consumer dissonance ü Making communication tangible ü Customer relationship marketing ü Managing high level of company image 1.5 EVOLUTION OF SERVICES SECTOR Adam Smith. This output or the finished product is consumed by the users. as the customer’s overt or latent needs are satisfied. Consumption leads to value generation. In his original theory. continued to exist till the twentieth century. a well-known economist of the late eighteenth century.Service Char• acteristics Intangibility Marketing Problems/ Challenges Ø Cannot be communicated easily.

Ø Walking erect Stage.4 per cent during 2005-06. They include consideration of service encounters. perceived service quality and customer satisfaction. They considered services as an offer tied up with physical product. They add three more P’s to the original marketing mix. The Indian economy has.took place prior to 1980 In this stage discussion centered around the need for a separate body of literature to deal with the specific problems of the services sector. real GDP accelerated from 7. They are people. Booms and Bittner developed their expanded marketing mix for services which took into account the distinctive characteristics. Ø Crawling out Stage . internal marketing and relationship marketing. real gross domestic product (GDP) registered a sharp increase in the fourth quarter (January-March) of 2005-06 benefiting from a pick-up in almost all segments of agriculture.from 1986 to 2000 Since 1986 there has been almost no discussion of whether services are different from goods. For the first time text books on services marketing began to be produced.between 1980 to 1986 Efforts were made to classify services more clearly and attention focused heavily on the crucial issue of managing quality in service operations. recorded an average growth of over 8 per cent in the latest three years (2003-04 to 2005-06). Services marketing academics and practitioners argued that services required special treatments as a result of their distinctive characteristics.contributors. service design. Donnelly highlighted differences between the marketing channels used for services and those used for physical goods and implications for marketing strategy. but rather the literature has focused on specific marketing problems on service organizations. thus. Zeithaml. Ø Scurrying Stage . the third quarter (October-December) of 2005-06. industry and services. process and physical evidence. . According to the revised estimates released by the Central Statistical Organization (CSO) in May 2006. and that existing marketing theories could. be applied to service organizations. Marketing traditionalist argued that service organization did not need a separate body of theory. Berry and Parasuraman developed their pioneering gaps model.5 per cent in 2004-05 to 8. and should.

Growth Rates of Real GDP (Base Year: 1999-2000) (Per cent) .

and it is growing fast. educated and fluent English-speaking workers (a legacy of British Colonialism) on the supply side and on the demand side. increased demand from foreign consumers interested in India’s service exports or those looking to outsource their operations. information technology enabled services. India’s IT industry.5% in 1951–80.8% in 2005 up from 15% in 1950. revamping management. accounted for only about 1% of the total GDP or 1/ 50th of the total services. including the threat of cheaper Chinese imports. It provides employment to 23% of work force. Services: India is fifteenth in services output. Excellent infrastructure in the service sector and the lowest communication cost has helped India to be a dominant player in these sectors. business process outsourcing) are among the fastest growing sectors contributing to one third of the total output of services in 2000. accounting for 53. Environmental Trend and Emerging Service markets . availability of a large pool of low cost. It has the largest share in the GDP.5% in 1991–2000 up from 4. despite contributing significantly to its balance of pyments. It has since handled the change by squeezing costs.faced with foreign competition. growth rate 7. The growth in the IT sector is attributed to increased specialization. focusing on designing new products and relying on low labor costs and technology. Business services (information technology. but highly skilled.

of service functions such as selling. sports and the like registered a significant growth in recent years. Companies started unbundling the organizations and taking the services from outside. the demand for special services has gone up. travel. The demand for health services. With the growth of competition and the pace of change in consumer exposure and expectations forced organizations to look for specialized services. entertainment. marketing research. financial advisers strategic advisers. . Hence. The marginal utility from goods has diminished.2 Reasons for Growth of Services in India The following are the reasons for growth of services in India. polybion laser services. People spend more and more on services. The concept of self reliance by way of minimizing or avoiding dependence on others was used by the firms to reduce uncertainties. HRD. As a result. to maintain confidentiality and to grow big. where highly professional and specialized services are available at a relatively low price. The following are the reasons identified for the growth in demand for services directly from customers: ü ü ü ü ü ü ü ü ü I c e s e in affluence nr a Mr e le u e time o is r I ce s n r a in g po otio r pr n of w r in g woman ok Go t h in th e p p la rw o u tio n of DN I K S (D u l e I c m e No Kids) ob no Ge te r c mle itie ra o px s of products Ge te r c mle itie ra o px s in life Ge te r c n e ra o c r n f r r s uc e s a c o eo r c r it y a d ecology n I ce s n r a in g n me r of n w products u b e I ce s n r a in g po otio r pr n of e r in g y u g an o n e r generation 1. Final Demand from Customers There is a growth in direct demand from customers for a variety of services. etc.6. advertising. labor welfare. The wave of specialist services during the last three decades changed management philosophies and encouraged them to outsource many services. atleast in a relative sense and services have grown in importance. a number of service organizations have come up in the world.

children’s education. States such as Karnataka. environment and ecological balance. resource scarcity and the imbalance of the ecology. The changed role of women is one example and the change in the family systems is another. posts. water pollution. There has been a marked change in the thought process relating to expenditure. IT became one of the key service businesses of the country. it is a process of development. have made IT as their most prioritized segment. investment. The emergence of the nuclear family system in place of the traditional joint family system creates a demand for a host of services—entertainment. during the last century the factors of change are prominent. Many state governments realizing the potential for this area. Thousands of crores of rupees are being spent on forestation. hospitality. education. healthcare. Some societies change faster. safeguarding rare animals and birds. Madhya Pradesh. greater industrialization and indiscriminate consumption has affected the natural resources. ü IT Revolution India has been occupying a vital position in the area of ‘information technology’ for the last fifteen years. transport and tourism. telecommunications. Maharashtra and Delhi have already achieved substantial progress in information technology. India has the largest software skilled population in the world. Tamilnadu. some at a medium pace and the others at a slower pace. However. protecting air. in fact. They have promoted several service organizations to take up social marketing. . time management and so on. Change is the underlying philosophy of culture. conserving of oil and energy and on research to develop new technologies that can promote very effective use of natural resources and safeguard the environment. Culture is not static. which has created a market for services. The pace of change in Indian culture is not uniform. The government and social organizations realize the negative effects of the environmental pollution. The influence of culture on the lifestyles of people is significant. Andhra Pradesh. It is expected that the IT-enabled services will have a bright future in the years to come.ü Cultural Changes Culture is an embodiment of values. traditions. Indians have proved their supremacy in the field to the world. leisure time perception. knowledge. taboos. The domestic market as well as the international market has grown substantially. habits and behavior that passes from generation to generation. to mention a few. ü Conservation of Natural Resources The growth of population.

The growth of health centres. ü Migration Rural to urban and semi-urban migration has been one of the reasons for the growth of services in India. Disinvestments and privatization policies made an end to the state owned monopolies in many service areas. marketing research. courier services and air transport witnessed intense competition due to the entry of multinational companies. The increased life expectancy is the result of the consciousness of people regarding health issues. Immunization campaigns. rentals. health-related information sites are the reflections of the growing demand for health care services. Migration to urban areas for want of jobs and livelihood resulted in the expansion of cities and townships. ü Economic Liberalization The economic liberalization process which started in 1991 brought in many changes in the Indian business scenario. The flow of time-tested service technology from various parts of the world changed the attitude of the Indian consumer towards service. insurance. advertising agencies. childcare campaigns. . telecommunications. Due to this. The banking sector.ü Increased Consciousness of Health Care The health care market has grown substantially in India. These changes led to a major shift in the competitive scenario. fitness clubs. Delicensing policies encouraged many entrepreneurs to establish business wherever they wanted. Liberal lending policies and lower interest rates motivated many people to become self-employed. transportation and infrastructure services are expanding rapidly. diagnostic centres. power projects. Urban placement services and personal services have also found increased demand. psychological counseling. businesses like real estate. campaigns on preventive medicine and family planning are some of the programmes intended to promote health care in rural India. medical counseling. Multinationals were permitted to enter the Indian market. hospitality services. The government as well as social organizations has taken up mass campaigns through different media to create awareness among illiterate persons and rural population on health care.

Ø Mental Stimulus Processing: In mental stimulus processing. Ø Information Processing: This type of service requires service personnel to collect information. For example. the students availing the services have to be present in person. insurance. the attention of the customer must be directed on the service in order to experience the service. postal service. if a person wants his car to be serviced. The employees of the firm then analyze the information and prepare reports in a way that allows the management of the company to formulate strategies to improve its sales. a market research firm hired by a company collects information from customers to know their opinion about the company’s products or services. Programming. In this case. courier service and freight transportation are other examples of such services. . the service is directed at the customer. Ø Possession Processing: The customer doesn’t require to be present to experience the service but has to submit his property to the service provider for the latter to deliver the service. data processing and data transmission. In people processing. and education and consultancy services. and wash and clean it thoroughly.Ø People Processing: The customer is highly involved in the service process and needs to be physically present in order to experience the service. analyze it. For example. For example. Information processing also takes place in services such as accounting. the service is directed at the possession and not at the customer. customer expectations and suggestions to improve the products/services. lodging and boarding services. check the gears. etc. educational services and fitness centers. Passenger transport services. entertainment. interpret and offer appropriate advice to the client. he has to leave it with the mechanic for some time to enable the mechanic to change the oil. legal services.cleaning services. the service is directed at the mind of the customer. brakes. For example. at a school or training center for dance. Laundry and dry. Other examples of services that involve people processing are health care centers. Other examples of such services are advertising. In possession processing. beauty saloons. a person taking career counseling from a professional counselor gets stimulated mentally to take the right decision or develop the right attitude.

3 Classification based on Skills and Expertise Required Services can be categorized as follows based on the skills and expertise required by the service provider to offer the service. For example. The service rendered by a doctor. For example. baby-sitting and housekeeping are examples of nonprofessional services and can be delivered without the need for formal training. the customer might not get anything tangible. except for the relaxing experience. He might smell the aromatic oils or feel relaxed while undergoing the massage. Airlines. an IT consultant or a corporate trainer are examples of professional services. 1.food and magazines to passengers. Ø Non-professional services: These services do not require the service provider to undergo any training to deliver the service.4 Classification based on the Business Orientation of Service Provider Services can be categorized based on the service provider’s purpose of doing business: Ø Not-for-profit organizations: These are the services in which the main objective of the service provider is to serve society and not to make profits. government schools and social service organizations are not in the business to make a profit. But does not get any tangible product. at a massage parlor. and market research firms provide clients with a detailed report of the research results. insurance firms and restaurants charge customers for the services they offer and attempt to continuously improve their services and profitability. 1. Ø Highly intangible: These are the services which do not provide customers with any tangible product. A pilot. Ø Professional services: These services require the service provider to be formally trained to deliver the service.7. Ø Commercial organizations: These are services in which the main objective of the service provider is to earn revenues and make profits. . For example.7.

place. At this stage. Take a stand question: A restaurant customer asks the waiter if the fish on the menu is fresh. require attention to additional strategic elements.Also. Although the fish was frozen. The waiter’s reasoning in effect is a rationalization that the ends justify the means. language loses its meaning. and the existing customer trends. the waiter answers “yes” because he knows it tastes great and the customer will love the chef’s sauce. 1. place and promotion (Which you have studied in detail in the last semester course on Marketing Management).thing. Take a stand. It violates all norms of trustworthi. the customer might have some kind of aversion to frozen food. price. Suggested answer: This is a clear ethical lapse. This reasoning has historically been used to justify the most hei.9 EXPANDED MARKETING MIX FOR SERVICES Strategies to market manufactured goods usually address the four elements of the marketing mix – product. when enough people do it. cyberspace and time (when. its size. The 8 P’s model highlights eight strategic decision variables for managers of service organizations. In accordance with Kant’s categorical imperative. information about the effects of external environmental factors is essential for the organization to develop measures to tackle any problems that may arise in the course of developing and launching the new service.nous behavior. process (the method and sequence in which an operating system works). But the distinctive characteristics of services. Noone feels good when tricked into doing some. its structure.ness and honesty. including the lack of inventories and customer involvement in production. Further. where and how to deliver services to customers). including: product elements (all components of the service performance that create value for customers. It would be better for the waiter to be honest with the customer but try to turn the fish’s disadvantage into an advantage by emphasizing the special sauce. the existing competition and their strategies should also be analyzed. In addition. productivity (how efficiently service inputs are transformed into value-added outputs) and quality (the degree to which customer needs. an organization also designs the service process through service blueprinting (will be discussed in the following units). people (customers and employees involved in . Present and future demand forecasts can prove to be extremely useful in helping the organization decide whether to launch the new service. satisfactions and wants are met).Business analysis involves defining the target market.

warranties and after-sale service. Service organizations will almost certainly need to adapt it in their strategy planning. The service product mix of such elements can vary considerably and may be seen in comparisons of service range between a small local building society and one of the largest in the country. The outline that follows therefore indicates some of the key areas to which marketing managers need to devote their attention in formulating their marketing mixes for services markets. Traditional Marketing Mix Ø Product The service product requires consideration of the range of services provided. discounts allowances and commissions. Thus the types of distribution channels used (e.g. Decisions cannot be made on one component of the mix without considering their impact upon the other components. Price may also pay a part in differentiating one service from another and therefore the customers perceptions of value obtained from a service and the interaction of price and quality are important considerations in many service price sub mixes. the quality of services provided and the level of services provided. terms of payment and credit. . travel agents) and their coverage are linked to the crucial issue of service accessibility. Ø Place The location of the service providers and their accessibility are important factors in services marketing. Also the precise elements and their importance within any marketing mix at any point in time will vary.elements in response to changing market circumstances and needs. Each element is considered in more detail in the following units. Inevitably there is much overlap and interaction between the various components of a marketing mix. Accessibility relates not just to physical accessibility but to other means of communication and contact. It is illustrative not comprehensive. Attention will also need to be given to matters like the use of branding. Ø Price Price considerations include levels of prices. or between a small hotel offering a limited menu range and a four star hotel offering a wide range of meals.

In this case other tangibles such as billing statements and appearance of the repair truck may be important indicators of quality. the customer. servicescapes are enhanced (or diminished) by sounds. report formats. lighting. signage. For first-time customers in particular. the intended market segments. Because services are intangible performances that are hard to evaluate in advance (or sometimes even after service delivery). and the appearance of employees and other customers all help create the atmosphere in which a service is delivered. letterhead. . In some cases it includes the physical facility where the service is offered. and any tangible components that facilitate performance or communication of the service. In other cases. the servicescape helps frame expectations about both the style and quality of service to be provided. such as telecommunication services. Scenery. special effects. business cards. smells. the physical facility maybe irrelevant. The servicescape involves the style and appearance of the physical surroundings where customers and service employees interact. Servicescapes can create powerful impressions on customers by positively affecting one or more of their five senses. Customers who come to a service factory experience the most powerful physical evidence or servicescape (will be discussed in detail in the following units). tastes.Ø People All human actors who playa part in service delivery and thus influence the buyer’s perceptions. music and other sounds. How these people are dressed. All of the human actors participating in the delivery of a service provide cues to the customer mg the nature of the service itself. just as they rely on the cues provided by the people and the service process. The physical evidence of service includes all of the tangible representations of the services such as brochures. In certain types of businesses. Ø Physical Evidence The environment in which the service is delivered and where the firm and customer interact. their personal appearance their attitudes and behaviors all influence the costumers perceptions of the service. customers tend to rely on clues provided by the servicescape to judge quality. and other customers in the service environment. the firm’s personnel. and equipment. for example. Physical evidence cues provide excellent opportunities for the firm to send consistent and. namely. Especially when consumers have little on which to judge the actual quality of service they will rely on these cues. strong messages regarding the organization’s purpose. and textures of physical surfaces. and the nature of the service. the retail bank branch facility.

The four new marketing-mix elements (people. a Rolls Royce rather than a Ford. physical evidence. the effectiveness approach to productivity is closely allied to service quality. To many people. who can conduct transactions with customers at arm’s-length without having to maintain an elaborate servicescape. quality can also be measured in terms of fitness for purpose. The growth of mail order (via catalogs) and telephone sales has increased productivity for some service firms. Certainly marketing managers in services markets need to undertake research about the markets and market segments for which their respective marketing mixes are shaped. stressing efficiency but neglecting effectiveness.10 SERVICE QUALITY There are many definitions of quality. the productivity goal shifts from efficiency to effectiveness. The latter is marketing and customer oriented.a large role in increasing the speed and convenience of service delivery and enhancing productivity. Productivity helps to reduce costs and quality is essential for differentiation and building customer satisfaction and loyalty. process and productivity) are included in the marketing mix as separate elements because they are within the control of the firm and any or all of them may influence the customer’s initial decision to purchase a service. while suppliers are happy with the reduction in costs and subsequent increases in productivity. . while McDonalds provide a quality fast food service. quality implies luxury or excellence. Under these circumstances. The focus of productivity can be shifted from its traditional focus on volume of output to one emphasizing value of output. The traditional elements as well as the new marketing mix elements will be explored in depth in the following units. and a Ford Escort is regarded by many owners as a quality family car. 1. then the transformation of inputs into outputs will be more productive. The former is operations and finance oriented. Developments in telecommunications and computer technology continue to have a significant impact on the way services are produced and delivered. The same is true for merchants who are using the Web for e-commerce. Because higher quality service creates more value for customers. However. Customers in all of these cases appreciate the speed and convenience of service delivery. If the same volume can be sold at higher prices without a comparable increase in input costs. Wherever possible the services marketing manager will need to research and analyses the characteristics of the markets served. as well as the customer’s level of satisfaction and repurchase decisions. Classical methods in measuring productivity often focus on outputs rather than outcomes. and in many senses quality is subjective.

The importance of quality is recognized every where the concept seems to refer to several different areas. quality of the process. quality of the product. Perceived service quality represents the customer’s judgment of an organization’s service based on their overall experience of the service encounter. The idea of quality here is subjective and will be strongly linked to the needs and expectations of the customer. namely. Understanding how customers arrive at this judgment . thus impacting on the quality of the service delivery process.is very important for services marketing management. Recently. quality has gained relevance in context of service industry with reference to customer needs and expectations. The customer’s overall judgment of service quality can be an evaluation of both the process and the outcome. Quality can be viewed from two points of view: 1.that is to say. The actual output of the service may be judged by the customer in terms of their expectations of the outcome or benefit. compared with the customer’s own expectations and desired benefits. From the point of view of the customer – service quality occurs only when the service firm provides services to the specifications that satisfy their needs. service quality is based on consumers’ . The evolution of quality concepts and movement had been the subject of operational managers in the manufacturing industry. Research has indicated that consumers make these decisions using a number of key criteria to judge the service. The three underlying themes of service quality are that service quality is more difficult to evaluate for services than for goods. how they decide whether or not they are satisfied with a particular service . This leads to an important idea in assessing quality from a services marketing perspective: perceived service quality. From the point of the service provider – to set up standards or specifications in the manufacturing process as well as the output which is totally objective and technical in nature? 2.in the service production. quality of the delivery system and quality as a general philosophy of the organization. Quality is a difficult concept to define in a single definition.

the consumer. and Zeithaml conducted extensive research in service quality and identified 10 dimensions used by consumers.1 Service Quality Dimensions Berry. 1. it is difficult to evaluate the level of service received.10. . Parasuram.

2 GAPAnalysis In 1985. This can be very important in the drive for service quality. 1.10. The study of this model should lead to an improved realization of the key issues at which service providers can influence the satisfaction of consumers. This training might include customer care programmes.the issues which impact on quality. By learning the flow of the model. ü Training Training needs to be undertaken to develop employees’ understanding of how they can deliver service quality.2) identifies five gaps that can cause unsuccessful service delivery. . and Berry developed a model of service quality. Communications should be designed to foster co-ordination and integration. and specific technical training to develop expertise in advising customers about the services offered. The model (shown in figure 1. what desired quality goals have been set and what their individual role is in achieving these targets. enabling employees to be responsive to their internal customers and suppliers. Internal communications can also be a useful tool in engendering a team spirit and in motivating personnel. Two of the most important components’ of internal marketing which are critical for any organization seeking to implement quality service are: ü Communication Communication internally may need to be improved to ensure that there are no breakdowns in communication between the elements within the organization which make up a particular service. Their model claims that the consumer evaluates service quality experience as the outcome of the gap between expected and perceived quality. The model emphasizes n the key requirements for a service provider delivering the expected service quality. Management should end self that every employee knows what the organization’s objectives are. as motivation and job satisfaction are key elements in the provision and maintenance of quality service. it is possible to exercise greater management control over the consumer relationships. Parasuram. Zeithaml. Training for personal development is also important.

assurance. Results from the two sections are then compared to arrive at “gap scores” for each of the five dimensions. E1. Obtained via four perception questions (P1-P4) . and a second 22. and empathy.3 SERVQUAL Dimensions SERVQUAL is a 44-item scale that measures customer expectations and perceptions regarding five service quality dimensions—tangibles. SERVQUAL consists of two sections: a 22-item section that records customer expectations of excellent firms in the specific service industry. c. The physical facilities at excellent companies will be visually appealing. E2.10. E4. E3. reliability. Materials associated with the service will be visually appealing in an excellent company.Gap – 4 (Gap between service delivery and external communication) Gap – 5 (Gap between expected quality and perceived quality) 1. Employees of excellent companies will be neat in appearance. Ø The Tangibles Dimension The SERVQUAL assessment of a firm’s ability to manage its tangibles Obtained via four expectations questions (E1-E4) Example: a. b. Excellent companies will have modern-looking equipment. responsiveness.item section that measures customer perceptions of a particular company in that service industry. d.

and security of its operations. E15: Customers of excellent companies will feel safe in their transactions. E14: The behavior of employees of excellent companies will instill confidence in customers. E10: Employees of excellent companies will tell customers exactly what services will be performed. E11: Employees of excellent companies will give prompt service to customers. d. E16: Employees of excellent companies will be consistently courteous with customers. c. Expectations .Example: a. E17: Employees of excellent companies will have the knowledge to answer customer questions. c. courtesy to its customers. b. E13: b. E12: Employees of excellent companies will always be willing to help customers. Expectation Questions (E14-E17) Example: a. Employees of excellent companies will never be too busy to respond to customer requests. d. Perception Questions (P10P13) Ø The Assurance Dimension The SERVQUAL assessment of a firm’s competence. Perception Questions (P14-P17) Ø The Empathy Dimension The SERVQUAL assessment of a firm’s ability to put itself in its customers place.

Third, SERVQUAL is based on Gap Theory, which can lead to biased results. Since both expectations and service evaluation are measured after the service experience, measurement of the expectations component will be biased. To reduce these problems, services should modify SERVQUAL to fit the specific industry being used. Consumer expectations should be measured prior to the service while the experience evaluation should be measured after the service. Case I: WILL YOU VISIT AGAIN Kumar booked a table in a restaurant for 12 people at the beginning of the Diwali period to celebrate the festive season with his family and friends. He had been a regular visitor to Royal Restaurant and had developed loyalty for this place famous for South Indian food. Most of his friends were from the South so he preferred to treat them at Royal Restaurant. Another reason for his selection was that the patron of Royal Restaurant, Ganesh knew him well. Since he was regular visitor, he was quite confident that this dinner would be a success. Three days before the scheduled get-together dinner Kumar spoke to Ganesh and asked him to increase the booking to 16. He looked busy but informed Kumar it would be quite in order and he looked forward to seeing Kumar and party later that week. As per programme, all Kumar’s friends met at his residence at 7 p.m. on the appointed day and after having a cup of coffee left for Royal Restaurant to be there at the scheduled time of 8.30 p.m. They were all relaxed and exchanged jokes on their way and reached the restaurant at 8.20 p.m. With slight difficulty, they located parking place at three different locations for the four cars in which they were traveling. The guests arrived at the restaurant on time and Kumar was taken aback to find that the table has been set only for 12 persons. Ganesh came over seeing a large group gathered around the small table laid in one corner of the dining room. Kumar reminded Ganesh of his earlier conversation which he had with him three days ago. He asked him to recollect that the booking had been increased from 12 to 16, and suggested that it may be an oversight that he had forgotten to set the table for 16 people. Kumar then asked him to reset the table immediately for 16 people to avoid any embarrassment to him and his guests.

SUMMARY A service firm, unlike a manufacturing firm, does not manufacture but rather performs something for the

customer. It delivers an experience that is intangible, heterogeneous, inseparable and imperishable in nature. Thus, marketing of services is different from the marketing of products and goods. In this unit different distinguishing characteristics of services: intangibility, inseparability, variability, and perishability are discussed. Changes in demographic, social and economic factors, as well as institutional and policy changes are some of the major factors that influence the growth of the service sector. The services marketing mix is the mix of marketing elements that help service firms to successfully operate the business. In addition to the 4 P’s of marketing goods (product, price, place and promotion), service firms are characterized by four additional P’s, namely people, physical evidence, process and productivity. Services can be classified based on the degree of customer involvement in the service delivery process, service tangibility, skills and expertise required, business orientation of the service provider, and type of end-user. Lovelock suggested that firms can market services better by dividing them into meaningful categories. According to Philip B. Crosby, “Quality is conformance to requirements.” However, service organizations should strive to enhance the quality of their service to exceed customers’ Improving service quality enables organizations to win credibility, enhance customer satisfaction, obtain repeat customers and even charge a premium price. To measure the quality of service offered, service organizations have to measure both the technical and functional components of the service. According to a research conducted by Zeithaml, Berry and Parasuraman, five important dimensions of service (as viewed by customers) that need to be evaluated are tangibles, reliability, responsiveness, assurance and empathy.



Over the years excellent companies have been known for adapting and responding to a continually changing marketing plan. They practice the art of market oriented management. Services marketing management represents marketing concept in action I.e. a preplanned demand management under consumer oriented marketing philosophy. Service firms need to think more consistently in marketing terms and the marketing concept. The service firm must be customer-oriented and must develop a competitive marketing strategy. Their strategy formulation, like that of the product-oriented firm consists of two steps: • Identifying target markets and their needs and • Developing a marketing mix that satisfies the unique needs of these target markets. Marketing Management Process for Services: Philip Kotler defines marketing Management as “Analysis, planning, implementation, and control of programmes, designed to create build and maintain beneficial exchange with target buyers for the purpose of achieving organizational goals”. In general terms, the marketing management process is the same in the marketing of services and tangible products (Figure 2.1). This unit very briefly explains the marketing management process, the foundation on which corporate and functional strategy is built.

Figure. 2.1 Marketing Management Process

te h ic in ll c n a l f c r s c n inlu n a to a f e c e th e imr v a po is tio s r ic s .” John E. marketing of services has picked up pace and became popular worldwide.g n of The process of identifying and evaluating services marketing opportunities gives rise to many new ideas. etc.2 CUSTOMER EXPECTATIONS AND PERCEPTIONS OF SERVICES “The consumer’s mind is still closed to us. home-banking. 2. Service organizations largely compete on the basis of the quality of service provided by them.” Philip Kotler Over the past few years. ev e . privatization! nationalization of industries. e . barcode scanning in retailing business. ttitu ü Political and legal factors can have an impact on the whole range of organizational activities through tax incentives. We can observe inputs to the box and the decisions made as a result. Bateson “Satisfaction is the level of a customer’s felt state resulting from comparing a product’s or service perceived performance standard against the customer’s expectations. G. ü F a y. Each of these opportunities must be studied in relevance to the company’s resources. While some companies successfully deliver quality service to their customers. also on prices set by tour operators for their overseas holidays etc. which impinge on its activities: ü Eo o i cnm c fc r a to b n in g s r ic s ak ev e s lik e inla n f tio .The immediate external environment includes suppliers and distributors with whom the organization deals directly and also its competitors whose activities would have a direct effect on its market position. th i r e a d e to lif e and their expectations and values. it is a “black box” that remains sealed. others are just clueless. but we can never know how the act of processing inputs (information) truly happens. ü Sc o ia l f c r s h v e an e f c t on th e c s mr a to a fe u to e s a d e p ye n mlo e s . ecag xhn e r te s h v e ima t on a a pc . Why is it that some companies are successful in providing quality service while others are not? Providing quality service is based on a . The uncontrollable external environment comprises of all those factors outside the organization.

While some policies require the parent’s life to be insured. These policies can be differentiated on the basis of the life insured. BLSI. insurance companies are willing to customize their policies according to the needs of their customers. ICICI Prudential’s Smart Kid.The opening up of the insurance sector in India has paved the way for private and foreign players to enter the Indian insurance industry. many insurance companies have come up with policies that cater to the needs of children. However. marriage and so on. ING Vysya have built this within their policies. According to this rider. On the other hand. Birla Sun Life’s My Child. and LIC’s Komal Jeevan. Insurance companies have realized the difficulties faced by middle-class individuals to pay for their child’s education. in order to survive in the market and retain customers. Allianz Bajaj’s Child Care. Insurance companies are trying to understand customer expectations and design their policies accordingly. AMP Sanmar’s Yuva Shree. Most of the policies have surrender value and some of them allow policyholders to take loans on the policies. HDFC’s Children’s Policy. Insurance companies have understood customer expectations clearly and most of them offer policyholders the sum assured (SA) along with a bonus at the time of maturity. the insurance policy will continue to be in force even if some calamity occurs. unit-linked plans like the one ‘offered by ICICI Prudential provide the policyholder with an option to withdraw sums of money at important junctures during the course of the child’s education or to avail the benefits during the last 5 years of the policy. . In addition. Jeevan Sukanya and Jeevan Kishore are some of the childcare plans available in the market. the others need the child’s life to be insured. Unlike earlier times. There is little difference in the pay-out-structure of the policy. and LIC’s Komal Jeevan offer this as a rider while HDFC. Thus. some insurance companies have introduced a critical rider in the form of Waiver of Premium to address the needs of policyholders during unforeseen adversities. most of the plans offer benefits to the child in case of the parent’s untimely death. They can choose a policy after deciding on the sum assured (SA) and comparing various schemes available on the basis of the pay-out structure and premium payments. Identifying and grabbing the opportunity available in the field of children’s education. present-day parents have many options to provide security for their children and to meet the demands of their children’s future.

the competition and the changing expectations of the market. At least two levels of expectations of service customers can be identified. you are also aware of the constraints in obtaining jobs-the vacancy positions in various companies. The knowledge of customer expectations helps the marketers to design comprehensive service packages that are capable of delivering satisfaction. Due to this reason you may hold a lower level expectation for the acceptance of the service. For example. This lower expectation is called as minimum service level.3 How Do Consumers Develop Expectations Customers will have different types of expectations about a service. As shown in Fig. Maximum service level is a blend of what the customer believes ‘can be’ and ‘should be’. five levels of performance might result.2 there is a zone of tolerance which will be between the desired service and adequate service. They are: ü Mx u a im m le e l and v ü M im in u m level. In the process of service production and consumption. However. Service marketers should know what the expectations of the customers are. your expectations in all likelihood would be a right job in a right location for the right salary. A customer’s expectations of adequate service change with his perception of the available alternatives for the particular service. train commuters in large cities such as Mumbai.2. the . 2. Customers’ expectations of adequate service increase in situations of an emergency.2. tend to get frustrated at even the slightest delay in the arrival of local trains when they need to move fast. when there is a service failure during heavy rains. However. if you take the services of your UG college placement cell. For instance. Minimum service level represents ‘the lowest tolerable expectation’ or the bottom level of performance acceptable to the customer.

perceived service alternatives. Though the basic determinants of behavior may be common for both goods and services as far as expectations. namely Ø Factors that influence customer expectations of desired service. 2. The marketers should have proper understanding of the behavioral characteristics of the consumers.Figure 2. variability and customer participation. is to develop and provide market offerings that satisfy consumers needs and wants and thereby ensure its own economic survival. their expectations. whether it is in manufacturing sector or in service sector. customer self-perceived service role. Ø Factors that influence customer expectations of adequate service and lastly. inseparability. the behavior of consumers will definitely be different. lead to differences in the consumer evaluation process in all stages of the buying process. These factors can be studied under various heads. These factors include personal emergencies. There is an argument that consumer’s behavior would not be different in the case of services. and predicted service.4 Factors That Influence Customer Expectations of Service Service providers should have knowledge of the factors that influence customer expectations of service.3 Factors that Influence Customer Expectations of Services The basic objective of any organization. ü Transitory service intensifiers are the factors. failure of a service . evaluation processes and purchase decision processes. evaluation and selection of services are concerned. which intensify or heighten the level of adequate service expectations of customers. Ø Factors that Influence Customer Expectations of Adequate Service Customer expectations of adequate service are influenced by various factors such as transitory service intensifiers. organizations need to fill the gap between customer expectations and customer perceptions. Towards this end.2. situational factors. Service characteristics such as intangibility. But services specialists do not agree with this argument.

Hence. Consider a situation where a customer wants to purchase medicines urgently on his credit card and the credit card company refuses to give acceptance. The adequate service expectations of customers increase when they think that there are alternatives available to fulfill the need. The first. with a topping different from the one he had ordered.provider to offer quality service the first time.time service failure by the pizza home delivery service will increase the service recovery expectations of the customer the next time he orders a pizza from the same service provider. Presence of transitory service intensifiers reduces the zone of tolerance and increases the adequate service expectations of a customer. This time. a customer in a big city who needs a loan to buy a house knows that he can get a loan from any of the nationalized or private banks or housing finance companies in the city. For example. However. the pizza is delivered at the customer’s doorstep an hour after he has ordered for it and that too. he will have high adequate service expectations than a customer who lives in a rural town with only a nationalized bank providing the requisite service. The self-perceived service role of a customer is the extent to which the customer perceives he is capable of shaping the service encounter and . or factors that push customers to take the help of a service. suppose a customer who is very hungry decides to try the service of a homedelivery provider of pizza who claims to deliver a pizza anywhere in the city limits within 20 minutes. ü A customer’s self-perceived service role also affects his/her adequate service level expectations. though there is credit amount available on the card. the customer will expect the service provider to deliver the pizza of his choice within the promised time. For example. ü Perceived service alternatives include customer perceptions of available alternatives that offer similar service. This will raise the adequate service level expectations of the customer.

2. the price that is set for a Taj Holiday package serves as an implicit service promise by the hotel group. In addition. For example. terrible.made by a service provider through advertisements. Through its pricing. the Taj group promises to deliver to the customer his/her money’s worth and influence both desired and predicted service expectations of the customer. recent . For example. a customer who has visited a McDonald’s outlet in New York. USA will desire and predict to receive service of the same standard at a McDonald’s outlet in Chennai.5 Criteria to Evaluate a Service based on Customers’ Service Expectations Customer service expectations involve evaluation of how a service provider delivers the service. personal selling. brochures and so on. For example. a customer’s opinion of a good. ü I plic t s r ic e p o is s m i ev r me : I p i t s r ic e po is mlic ev r me s a e n t r o e p i t s te e t x lic ta mn s made by a service provider but are tangible clues that give a customer an idea of how the service will be. process. Further. Plum job in the IT Valley Bangalore. For example. or bad service lies in his service experience. and physical evidence. The customer desires service that is commensurate with the pricing of the package. ü Ps t e pr ne a x e ie c : A cs m u to e r’s p s t e p r n a x e ie c e inlu n e f ec s h s i c re ur n t expectations of service. 2. candidates enrolling for the course will have increased desired and predicted service expectations. That is. All those who enroll for the software course at the institute will desire to obtain a job in the Bangalore city soon after they complete it. However. India.A customer’s service experience is controlled by his sensory impressions coupled with his intentions and mood at the time of the service encounter. customers predict to receive service of a particular standard due to the high price associated with it ü Wo d f-mu r -o o t h p b ity u lic : T e e in lu hs c d e v w s or o in n s of ie p io c s mr u to e s w o have already used the service. Tangibles related to a service are in the form of personnel of the service provider. or surveys conducted by experts. h the positive or negative opinion given by friends or relatives about a travel agency will influence a customer’s desired and predicted service expectations. heighten the desired and predicted service expectations of customers. the candidates doing the course begin to believe that the service provider will help them in getting a job in the Bangalore city. if a software-training institute advertises that doing a specific course at the institute can help one get a.

the division held a 10 percent share of the global market in 10Ls. help service providers take measures to manage customer expectations. has studied Aravind’s operations over the years. The manufacturing division of the hospital.8 million surgeries in a span of 26 years. in appreciation of the functioning of Aravind. make it affordable.Govindappa Venkataswamy (Dr.Aravind was a market.) Dr. leave alone eye surgeries. They did not know that they could regain their eyesight with a I5minute surgery (at Aravind a cataract surgery on an average took 10 to 20 minutes. Business Insight 2. It is better than the best.2: Aravind Eye Hospitals Imagine an organization providing eyesight to 13 million people. an organization performing nearly 1. While a cataract surgery costs US$ 1650 in a US hospital. US IOL Inc sold these lens at $100• $150 a piece. And your customers become your marketers. For them a cataract meant blindness. He observed that Aravind generated a 200 per cent return on capital employed. was one of the leading manufacturers of intraocular lenses (IOLs) in the world. explained his marketing philosophy “Give people a new experience. at US$ 10. The poor in India could rarely afford good eye health care.driving entity as it served the most unserved market . founder of Aravind Eye Hospitals.the poor. Aurolab. Aurolab sold the same quality of lens at US $4 . Aravind performed the same quality surgery in India.$6 per lens.2 describes how the Madurai-based Aravind eye hospital created a special image for itself by educating its patients on eye care and giving a meaning to their life. “We have a good medicine school at the University of Michigan. V).” . and they are amazed by what they saw at Aravind.Knowledge of the factors that influence customer expectations and the criteria on which customers base their evaluation of a service experience. and eventually you change the whole world. Business Insight 2. and often. a leading management thinker. While other manufacturers such as American Ophthalmic Laboratories. one that deeply changes their lives. In 2003. The organization in question is the Madurai based Aravind Eye Hospital (Aravind). According to him. great suffering in their lives. This organization was the single largest cataract surgery provider in the world in 2003. C K Prahalad.” he said.

The customer must invest time and mental effort to receive these services. These activities are quasi-manufacturing operations. managers must establish and enforce high ethical standards in service delivery. We examine each step involved in the consumer decision-making process and the environmental factors that influence consumer behavior. They also need to educate customers to participate effectively and efficiently in co-producing the service. psychology and economics.processing services. customers must physically enter the “service factory” and cooperate actively with service personnel and/or systems. and human resource management. Thus. we discuss the differences between the process through which a consumer evaluates goods and the one he/she uses for evaluating services. The main challenge for a service provider is to tangiblize the intangible characteristic of services. operations. their co-production role is not as great µ Mental stimulus processing refers to intangible actions directed at people’s minds.1 in the last unit have very different implications for marketing. µ People processing involves tangible actions to people’s bodies.behavior requires inputs from various disciplines such as sociology. Customers are less physically involved with this type of processing than with people. This means that managers must be aware of the effects of the physical environment. Technological advances in the new millennium have helped service providers to offer customized services to their customers. To receive this type of service. Offering customized and quality services is another challenge for service providers of today. and the process that he/she goes through. to evaluate the product/service prior to and even after its purchase and use. µ Possession processing involves physical actions to goods and other physical possessions belonging to the customer. and do not always involve simultaneous production and consumption. . and the effects front-line employees have on customers. In this part of this unit. but may not need to be physically present in the service provider’s factory. Consumer behavior deals with the study of the factors that influence a customer in purchasing a product/service. The four broad categories of service presented in Figure 1. Because these services have the capability to shape attitudes and influence behaviors.

Ø There is a change in the social environment of the customer especially with the rising consumer earnings and the sharply dropping savings rate resulting in increasing amounts of disposable income to be spent on product or service. He is the choice empowered customer who will be the decider of the fate of the product or service at the market place. With the opening up of the markets or the post liberalization period has resulted in many companies entering the markets with offerings of their goods and services. There is a new customer emerging today. Ø Marketers have also observed a change in the psychological behavior of consumers. Ø A satisfied customer will do the word of mouth advertising for the company and vice versa. Ø The challenge to the marketers is to determine the relative influence of the various factors and to adapt and apply skillfully the so called information to a proper marketing .This shows that there is always an attempt on the part of the marketer to understand and study “consumer behavior “. The consumer of yesteryears was a silent person who uncomplainingly purchases the goods from the market place. There is an increasing awareness among the consumers to the changes taking place around them resulting in an urge to purchase various goods and services. Ø They are continuously engaged in trying to probe and understand the complex consumer behavior better and respond by offering goods and services desired by them and then communicating about the same through the various communication media. This has made each marketer to realize that he has to constantly upgrade the consumers knowledge about his products by finding new dimensions. Ø Thus identifying customer needs and directing all marketing efforts at delivering customer value than competitors is the motto of the companies today. Ø On the other hand producers have realized that customers cannot be taken for granted and hence are putting all their efforts at manufacturing products tailored to met the consumers needs. This is because there has been a change in the physical behavior of the consumer.

This is because a customer does not know what they are going to receive until they have received it. etc. Routine purchases may not require all five stages. examining. The buyer senses a difference between his or her actual state and a desired state. thirst. It encourages the marketer to focus on the entire buying process rather than just the purchase decision. With hospitality and travel products personal sources and public sources of information are more important than advertisements. . However. marketers must determine the factors and situations that trigger consumer problem recognition. the value placed on additional information. ü Information Search: An aroused consumer may or may not search for more information. the ease of obtaining more information. extending the information or evaluation stages.G. The five stages are: ü Need Recognition: The buying process starts when the buyer recognizes a problem or need. and the satisfaction one gets from searching. observing. Information may come from any of several sources including: Ø Personal sources like friends. At this stage. certain variables may influence the process. or sex may initiate this need recognition. the amount of initial information. what brought these needs about. There are five basic stages through which consumers pass. Marketers can also show how their product is a solution to a problem. family. handling. and neighbors. The need can be triggered by internal and external stimuli. T. and Ø Public sources like restaurant reviews. Ø Experiential: product-trial. External stimuli like the smell of fresh bread initiates hunger or a commercial for Goa initiates the need for a vacation. How much searching a consumer does will depend upon the strength of the drive. For example. Acompany must design its marketing mix to make prospects aware of and knowledgeable about the features and benefits of its products or brands. They should research consumers to find out what kinds of needs or problems led them to purchase an item.The Buying Process begins long before and continues long after the actual purchase. and how they led consumers to choose this particular product. Internal stimuli like hunger.I. consumer-rating organizations. Ø Commercial sources like advertising packaging and sales people. A relatively large purchase may slow the process. Friday’s advertised its gift certificates as a solution to Christmas shopping. editorials in the travel section.

there is also an element of physical risk also involved in this case. At the same time. in case of products like alcohol or cigarette. they would be worried about the well-being of their child and the effects of hiring a baby sitter on the young mind. This may cause her to cancel dinner reservations and select a less expensive gift.Ø Physical risk: Physical risk involves the risk to the physical safety of the customer by using the product/service. For example.5000 for repairs. Mary may have an unexpected car problem that will cost Rs. Mary selected a Chinese restaurant since her boyfriend liked Chinese food. Similarly. when a customer decides to approach a psychiatrist for treatment. As an example of physical risk involved in consumption of services. first-time users will experience psychological risk of getting addicted to them. Ø Time risk: This is the risk that the time spent to search and locate a product/ service prior to its purchase may have been wasted. a customer’s decision to purchase a dress that does not suit her personality involves a social risk. ü Purchase Decision: In the evaluation stage. For example. Purchase intention is influenced by attitudes of others and unexpected situations. Further. . as the patient may be at the risk of losing his sight after undergoing the operation. there is a time risk involved in a customer’s decision to purchase a music system after having made an extensive search of all the• models available in the market before purchasing it. For example. Ø Social risk: This is the risk of having to face social embarrassment as a result of making a poor product/ service choice. Ø Psychological risk: Psychological risk is the risk of causing harm to one’s self image by making a bad product/service choice. For example. However. employing the services of an eye surgeon for correction of vision can be a good example. Similarly. For example. the consumer ranks brands in the choice set and forms purchase intentions. this decision of the customer involves social risk of becoming an object of ridicule among his acquaintances. Mary’s choice depended on the strength of another person’s attitudes toward her buying decision and on her motivation to comply with those wishes. the experience of a young couple hiring the services of a baby sitter for their baby involves psychological risk. when a customer purchases a pressure cooker. the decision involves a physical risk that its use may result in an accident. if the product/service does not conform to the customer’s expectations.

customers might spread negative word-of-mouth publicity. which are as described below. services. and norms are grouped under a social class. v. Sahara group in India uses the Indian Cricket team in its advertisements. interests. For example. ü S r ic e v e s a e in n ib r ta g l e in n tue . 2. Therefore. The various individuals who play an important role in the decision making process include the initiator (a person who first gets the idea of purchasing a particular product or service). but a whole lot of other people too have a say in the purchase decision. marketers should be careful in satisfying existing customers by meeting or exceeding their expectations. purchaser (a person who purchases the product) and user or consumer (a person who actually uses the product). For example. Thus.iii. influencer (a person whose opinions are given preference in making the [mal decision). Family: Purchases are often not made by individuals alone. values. behaviors. Marketers make use of reference group influences to develop advertisements by associating products. marketers offer products and services aimed at a social class of people.5 Implications for Service Providers Knowledge of the factors influencing consumer behavior has several implications for service providers. Social class: People having similar lifestyles. decision maker (a person who takes the final decision). Marketers need to recognize the role played by these various individuals in the purchase decision. iv. and affects their shopping patterns or the kind of products or services they purchase. hotels such as the Sheraton. the Hyatt and some Taj group hotels cater to the tastes of the elite class. information provider (a person who collects the information required to make a purchase decision). ü C s mr u to e s g th r a d r l y on inomtio a e n e fr a n o ta e d f o m b in r p r o a l s uc es n o r e s when making service purchase decisions. Otherwise. Reference groups: An individual uses the perspectives of a reference group as the basis for his actions. judgment and opinion.3. Their similarity in beliefs forms the basis for market segmentation. in order to target their marketing message at them. This provides an opportunity for service providers to market services having high credence . or some behaviors with some types of reference groups. C s mr a r u to e s r q ir e th e eu a s ta c s is n e of th e service provider to assess the value of a service with high credence qualities.

able to charge lower interest rates on loans and offer higher interest rates on savings accounts, all because most of their transactions are now done electronically. The cost per transaction through the Internet is 27 times less than a transaction via an ATM (Automatic Teller Machine), 54 times less than a transaction over the telephone, and 107 times less than a physical face-to-face transaction. How will customers react to these changes? Customers are slowly accepting and understanding the benefits of e-banking. Today, the nationalized banks too have converted most of their records into computerized forms, which enable them to retrieve data and offer quick services to the customers. Customers can now open an account, check their balance, transfer funds, pay bills, and obtain loans with a click of the mouse. They need not go personally to the bank for getting these done, unless they need to deal with high-end products like loans or savings investments, which require personal contact with the banker. The concept of ‘anytime banking, anywhere banking, anyplace banking’improves customer convenience. Transactions are processed in much less time. Further, to improve and offer better services to customers, banks like HDFC Bank have tied-up with cellular phone companies such as Airtel, Aircel, Vodofone, etc., enabling their customers to pay their bills through telephone or internet directly. However, the challenge for these banks lies in convincing and winning the trust of the customer. 2.3.6 Service Provision as Drama. Researchers and managers of service businesses have compared service provision with drama, observing that both aim to create and maintain a desirable impression before an audience, and both recognize that the way to accomplish this is by carefully managing the actors and the physical setting of their behavior. In fact, the service marketer must play many drama-related roles (including director, choreographer, and writer) to be sure the performances of the actors are pleasing to the audience. The Walt Disney Company explicitly considers its service provision a “performance,” even using show-business terms such as “cast member,” “onstage,” and “show” to - describe the operations at Disneyland and Walt Disney World.

to deliver the best possible service (i.e., if he or she is reading from the same script), the service performance is -likely to be successful. One of the factors that most influences the effectiveness of role performance is a script-, “coherent sequence of events expected by the individual, involving her either as a participant or as an observer.” Service scripts consist of a set of ordered actions, actors, and objects that, through repeated involvement, define what the customer expects Conformance to scripts is satisfying to the customer, while deviations from the script lead to confusion and dissatisfaction. Consider the script that you hold for the first day of class in a college course. Among the actions you expect are the following: (1) enter the classroom; (2) see other students in the room who are taking the class; (3) see the professor in the front of the room; (4) listen to the professor describe the course; (5) get a syllabus of the class; and (6) leave class early and start the actual education on the second class day. If a professor performs in accordance with the script you hold, you feel comfortable, familiar, and satisfied with the service encounter. Experiencing a script that is incongruent with this expected pattern leads to confusion and dissatisfaction. What if you showed up and there were no other students in the class with you the first day? What if the professor sent a graduate student instead of coming herself? Suppose the professor told you she hadn’t had time to write a syllabus? In these and other situations, negative departures from the customer’s expected script will detract from service performance. Positive discrepancies from the script are not as easy to specify-they may also de- tract or could “surprise” and add -to the service encounter. Suppose the college class we just discussed was filled to capacity on the first day. Would you interpret that as positive (a sure sign that the class was popular) or negative (a signal that personal attention from the professor may be reduced)? What if the professor was unusually friendly and so engaged students that they stayed to the end of the period on the first day of class? While some students might be delighted because the friendliness of the professor exceeded expectations, others might be disgruntled, having counted on more free time between classes. Still others may be suspicious, not trusting the friendliness because it doesn’t follow the expected pattern. More personalization or attention is not always better. In summary, departures from the customer’s expected script including provision. Of more of an attribute than expected, may detract from or add to the service experience.

serve the lunch,’ said Mahesh. ‘But we are working so hard in the kitchen despite the climate,’ said Radha. ‘We really cannot serve any faster,’ she added. ‘It’s not your fault’, said Ramesh kumar, ‘our business has grown by leaps and bounds in a year. However, I have just heard that a new restaurant is going to open in the neighboring building. Therefore, we may have to think of expanding and improving our facilities to stay in the competition.’ ‘We should go in for top class decor, fancy designer furniture, and swanky chairs. That would really push us up-market’, said Ramesh kumar. ‘Moreover, we will be able to charge much better prices for the food we serve. We can even buy new monogrammed ceramic cutlery to give us that distinct look, and have a well-dressed cashier with a computerized machine to take care of the money transactions.’ ‘We can buy some new kitchen equipment with electric stoves, stainless steel pots and pans and perhaps even the new Italian design smoke extractor. Many a time, customers do tend to complain about the charcoal smoke’, added Radha. ‘We can hardly afford to do all these things without borrowing a large sum of money from a financer. Even if we managed to do all that, we would have no choice but to either increase the charges considerably or reduce the food portions and economize in many other ways. We may even have to charge extra for the additional portions of rice or sambar that is currently free of charge for the limited meals customers’, said Ramesh kumar. I wonder if the crowd of office-goers who are our main customers will be able to afford all that. I always thought their main need was to be fed a substantial meal, as they are all very young and work long hours. I think they like our food because we serve healthy home-like food at prices that they can afford at their salary level. Deciding how to go about this expansion is a real problem. µ Comment on the above case and if you were Ramesh kumar, briefly list down the immediate steps you would take to fulfill the expectation of the customers. Also identify the desired and adequate s levels of service. What level of service would you plan to deliver? µ Based on your analysis and given the shortage of the funds, can you suggest what should be the main elements of the planned investment? Which investments can be avoided and for what reasons? Can you identify any services marketing opportunities that can be exploited by Ramesh kumar in the near future with out making further investment.


The resources and constraints of a marketer define the set of products/services that he can market for the consumption of the customers. an airline’s customers comprised business travelers. They do not provide any savings facility to the policy holder. Business Insight 2. a marketer should identify and select a segment that he is confident of serving better than his competitors. What constitutes a marketer’s ‘market segment’? A marketer’s ‘market segment’ consists of his existing as well as prospective customers whose needs. savings and pension. and their needs differed on various fronts like the time factor. tourists. occupations. It was reported that in the individual insurance segment. given his resources and constraints and thus emerge as a leading player in that segment. lifestyles. The segment comprising individual customers is further divided into four sub-segments •protection. Offering a single type of service to cater to all their needs would not be a feasible option and would also result in a dissatisfied customer base.” As given in the definition. Pension policies are products offered to customers as income during their years of retirement. This realization paved the way for marketers to define their ‘market segment’ in the total market. or behavior who might require separate products or marketing mixes. the fare. .4: Segmentation of the Indian Insurance Sector The life insurance market in India is divided into two customer segments: individual and corporate. characteristics. Savings products like endowment and money back policies provide a combination of protection and investment benefits. etc.4 shows the segmentation of the Indian insurance sector and how the private players are targeting the untapped rural markets. expectations. the investment products segment was growing rapidly as it provided long-term investment growth and insurance cover. investment. businessmen looked for a serene atmosphere and sharp maintenance of schedules. economic positions. Business Insight 2. the food served. While the tourists wanted a good deal and a great ambience. Investment products offer long-term investment growth and insurance cover. For instance. and expectations are different from the customers of other segments and match the resource.marketers realized that although similarities existed between certain customer groups. Kotler and Armstrong defined a market segment as “a group of consumers who respond in a similar way to a given set of marketing stimuli” and market segmentation as “the process of dividing a market into distinct groups of buyers with different needs. Protection products offer the customer only protection from risk. etc. students. the customers differed in terms of age. desires.constraint set of the marketer.

. income and educational levels. a couple aged around 60 may not have as much fun at an amusement park like MGM Dizee World. For example. Further. size and structure of family. For example.1 Demographic Segmentation Demographic segmentation is carried out on the basis of age. with the increasing educational and job opportunities in cities. Ø Age Marketers believe that people of the same age group behave in a similar manner and this belief has led them to segment the market according to age and market their products or services accordingly.2. Therefore. a restaurant can plan its seating arrangement by having more tables that can accommodate four members. the family size has decreased to just 3-4 members from 5-6 members a few decades ago. but a 20-year old would certainly be attracted.2.5: What women want in Rajasthan The Bhaskar Group has conducted a recent survey in the three cities of Rajasthan. Let us discuss each of these bases in detail. For example. it might not appeal to a 10-year old. behavioral analyses of customers at large. psychographics. as children below 12 years or teenagers would have. Products or services can be designed for a single segment or both the segments. Queensland. marketers can design their products or services to serve the needs of families with 3-4 members while providing the flexibility to serve more members if required. geography. Ø Sex Marketers can segment the market depending on the gender they would like to serve. Size and structure of family. young individuals are moving to the cities and marketers have an opportunity for designing their services accordingly. sex. This includes Jaipur. In India. when a marketer talks of the benefits of a health food. Table 2.2 Bases for Services Market Segmentation Markets can be segmented on the basis of demographics.1 gives a schematic representation of the bases for segmentation. Business Insight 2. 2. Marketers believe that customer wants and expectations change with age and as also their capacity to process information.4.4. and yet be flexible enough to be combined when they have to serve more than four customers.

The culture has become more relaxed. All over the country today. The women were in the age group of 20-35 years. which have supported further transformations in present day Rajasthani woman. These women want to work. yet keep family values in mind while pursuing their dreams. It was found that there have been various changes in the infrastructure of the country. Elaborating the terms. They are critical of practices such as dowry. watch TV and listen to radio. they have had the opportunity to study further. The main aim was to help them to understand the women better here so that it could help design accurate communications for the specific brands. but do not make work a priority. the study says that the ambivalent women are conflicted and confused.Kota and Jodhpur. The study has divided the Rajasthani women in three broad categories. They seek guidance to make the right decisions in life. They want to increase their social circle. but their family takes up a lot of their time. Their relationships with their husbands and children are important to them. but sometimes find them restrictive as well. and love marriages are being accepted. The study was conducted on urban married and unmarried women in the SEC A and B segment. a division of Quantum Market Research. The new series is branded as ‘Revelations’. There is mass mobilization against the exploitation of women and increasing opportunities for education. early marriage and discrimination against . the fusionist and the rooted. In their pre-marriage days. These include ambivalent. They are aware of their surroundings and regularly read to keep up with the current scenario. They are confused because they like some of the past practices. The research study has been conducted by Q Market Research. They have high aspirations in life. nuclear families have evolved. They are at the crossroads of accepting new influences and new challenges. They read newspapers. The fusionist women are balanced and practical. The group says that one of the prime reasons to conduct this survey in Rajasthan was this sector can be said to be least understood by the media planners and advertisers. The group believes that this study will give a better understanding of the women folk in the state. the selfworth of women has been enhanced because they have become more economically independent.

people are migrating from rural areas to cities due to the increasing education and career opportunities in cities. marketers aim to find out the basic characteristics of a consumer that could influence his purchase decisions. 2. For example. marketers should also analyze the behavioral changes of the population that has migrated. marketers divide the market on the basis of the life-style and personality of their customers.6 shows how leading handset manufacturers segment the Indian market based on the lifestyle of their customers. they will be equipped with an understanding of their customers’ way of life. This will make a difference to marketers of specific services or products. the lifestyle of a young and single professional will be entirely different from that of a person who has just retired from service. This in turn will help them design their products or services accordingly. their activities.4. which is full of life .2. body massage etc. In this type of segmentation. a customer looking for fun and frolic will be attracted to a holiday that provides entertainment in a place like Goa. In this example. opinions and beliefs. This type of segmentation also helps marketers to effectively design their marketing mix for the customers. For example. Business Insight 2. Further. Further. Similarly. while the retired person might think of investment options that will provide him with a steady income. In addition.3 Psychographic Segmentation Through psychographic or life-style segmentation. a customer who seeks to have a quiet and relaxing vacation will be attracted by a holiday package that offers yoga..a national basis. markets can be segmented on the basis of density of population or the climatic conditions across regions. the young professional might be more keen on spending than saving. Ø Life-style Marketers can gain valuable insights into the buying behavior of their customers by analyzing their lifestyles. Ø Personality Marketers can design products or services that appeal to the personality types of their customers. in a serene setting like the backwaters of Kerala. For example. leading to an increase in the population of the metros in the country. interests.

T-Segment: Finally. users view the handset as an extension of their personality. Marketers should gather adequate information on the various benefits that different types of people are looking for and then assess the ability of their product or service to deliver those benefits. R-Segment: Similar to Nokia’s Trendsetters and Motorola’sAccompli. • • • A-Segment: Individuals who are using the mobile for the first time and prefer an easy-to-use instrument are classified under theA-segment. Time port:This segment. However. The fact that the members of this segment cannot do without a mobile phone makes it the ‘assured’ segment. when a couple decides to go in for an insurance policy. the T-segment is defined by individuals who require their instruments to have some class and style.5 Benefit Segmentation This segmentation divides the customer base on the basis of the benefits sought. 2. Motorola has a segmentation model which is quite similar to that of Nokia. That is. • • • • Accompli: Early adopters (Trendsetters in Nokia) are referred to as Accompli by Motorola and all advanced models are aimed at this segment. it could look at interim benefits and long-term benefits. This is primarily the entry-level segment. For example. V: Individuals who view their mobile phones as an extension of their personality and. primarily uses the mobile phone to enhance productivity at work and in business. Talk about: This segment again is similar to Nokia’s Social Contact segment. Similar to Motorola’s V.segment. define the V . prefer a model that makes a strong statement. . this segment comprises tech-savvy individuals who prefer their instruments to be feature rich and trendy.4. which uses the mobile phone predominantly to keep in touch. the customers are grouped according to the benefits that they are looking for when consuming a product or service.2. similar to Nokia’s Hi-fliers. therefore.high-profile celebrities. Ericsson has a straightforward and simple segmentation. industrialists and other high “net worth” individuals.

The tenth group is called ‘sidelined citizens’.2 shows the nine segments identified by the Forester Research Inc. Forester Research Incorporation has developed a ten-category segmentation scheme. might not have any knowledge about this and might not like going for the show.2. though a music lover. which is also called ‘technogrality’. Marketers identify people under different segments based on various factors like their awareness or knowledge for the product or service. The sidelined citizens are those individuals who have no interest at all in technology. Marketers are trying to identify the customer groups that have the willingness as well as the ability to use the latest technology.4. application of technology and the financial position of the consumers. 2. These are attitude towards technology. His father. a young music fan might know every detail of an upcoming Bryan Adams show and be determined to attend it. Ø Buyer readiness and marketing factors Market segmentation based on buyer readiness divides customers based on their willingness to buy and likelihood of purchasing a certain product or service. For example. . Table 2. Identification of segments was based on the interaction of three variables.Ø Loyalty Segmentation This segmentation divides customers on the basis of the degree of their loyalty toward a certain product or service. Marketers should consider price and product or service availability while segmenting the market based on customer loyalty.6 Technographic Segmentation The market for technology related services has been on a tremendous rise during the last one-and-ahalf decade. their liking and preference for it and their conviction to purchase it.

Ideally. Further. marketers should also study the factors influencing buyer behavior in terms of individual and group behavior and family lifestyles. a very niche segment like young graduates working in shifts (especially those in the BPO and related sectors). a large segment that has the capability of earning and sustaining profits should be targeted. Ø Substantiability Marketers should choose their market segments in such a way that the returns on investment are earned quickly.5 illustrates these requirements. and product groups. Figure 2. . if a service is aimed at attracting the teenager segment. For example. then the advertisements should be developed keeping the target segment in mind.like frequency. might not be a good choice. mode of payment. volume. Marketers should use those bases that can track the segments with varying preferences or needs. The marketers should develop a marketing mix that is economical and reaches the chosen segment effectively. Ø Accessibility This refers to a firm’s ability to effectively reach out to the market segments through various distribution and promotion channels. Ø Actionability This refers to the ability of firms to effectively design and manage marketing mixes in order to attract and serve different segments. For example. from their existing customer database. In addition. these segments should exhibit variations in their market behavior and respond differently to marketing mixes that are designed on an individual basis.

the benefits associated with this approach are numerous as it increases total sales when compared to the undifferentiated marketing approach. higher market research costs. For example. Enhanced customer satisfaction ensures repeat purchases and brand loyalty. .A company with limited resources adopts this approach and aims to serve only a few segments by catering to the specific needs of customers in those segments. and international traveler segment.5 MARKET TARGETING AND SELECTION Target market is a group of customers (people or organizations) for whom a seller designs a particular marketing mix. Ø Concentrated Marketing Approach The concentrated marketing approach. aims to serve limited segments in the total market. Companies adopting this approach try to satisfy the consumers of each segment by identifying their buying patterns and designing their products or services accordingly. the airlines from the earlier example may opt to serve the business traveler segment. distribution and promotional costs due to the specialization of operations.Ø Differentiated Marketing Approach The differentiated marketing approach. domestic traveler segment. aims at targeting consumers of various segments by offering different products or services for each segment. additional research and development expenditure. engineering expenses. also known as the single-segment strategy. This approach might prove to be successful if the brand name is wellknown in the market and consumers from each segment identify the product or services offered with the brand. However. and might design its marketing mix to cater to the needs of the consumers of all the three segments. A company aims to tap the entire market by serving each segment and thus become a market leader. and higher promotional costs due to specific advertising targeted at each segment. also known as the product-variety marketing approach. It also helps a company gain the overall industry leadership as it caters to different segments of the market. 2. Following guidelines may be observed when selecting a target market. This approach also reduces the production. The company has to bear the higher costs involved in developing separate marketing mixes for each segment in terms of higher production costs.

and distance-education students and then compare the data based on their ability to earn profits for the institution to choose its target segment. a fitness and beauty center that targets young women who are figure and health conscious is likely to earn more profits than just offering services to women of all ages. For example. if the segments are not large enough or currently not profitable. and would be beneficial for it in the long-run.5. Targeting is an essential part of marketing because of its ability to group customers with similar needs and serve them even at individual levels. companies those are manufacturing products like weight-loss pills that are targeted at the figure conscious women segment are being criticized for the side effects of such pills. the institution should go a step further to identify which segment has high growth potential. targeting has been exposed to some criticism on ethical lines and this is due to its intense focus on certain customer groups without considering aspects like product harmfulness and consumer vulnerability.2 On What Basis do Marketers Target the Identified Segments? We shall now discuss the criteria used by marketers to evaluate market segments for targeting. 2. marketers use segment size and growth potential. Lately however. To a large extent. . an educational institution should collect the current data for full-time students. For example. part-time students. On the other hand. its structural attractiveness. Ø Segment size and growth potential The size of the different segments in the market should be compared on the basis of their present capacity and their future potential as well. and their compatibility with the objectives and resources of the company. For example. Researchers say that the purpose for which targeting is used has certain limitations and it should be used keeping customer safety and well-being at the top of the priority list. and the company objectives and resources as the bases to decide their target markets.Marketers compare the segments based on their attractiveness in terms of their ability to earn and sustain profits.

one segment. This situation increases the competition between the players as they try to produce better quality products or services than their competitors in order to attract new customers and retain existing ones.3 Targeting Strategies Once the segmentation exercise is complete and the company has completed the analysis of the different segments in terms of their attractiveness. understands their needs better and gains greater expertise. the company will have immense knowledge about the specific wants and needs of the customers and eventually serve them better than those targeting various segments. based on its size. For example. Ø Company objectives and resources Evaluation of a segment alone. financial and other resources necessary for effective operation in the segment. a software firm catering to the needs of only those players in the logistics business. should have the necessary resources to serve the needs of business travelers. However.5. growth potential and structural attractiveness is insufficient while choosing the target segment. . 2. an airline that aims to serve the business class and to top the list in the business traveler segment nationally and internationally. growth potential and their fit with the company objectives and resources. It might need to have the requisite number of trips between business destinations and the ability to operate smoothly at peak business hours and other similar facilities. For example. It is essential that the segment features match the company objectives and resources. and the company should have the required human. A segment should match the company’s long term objectives in terms of its growth potential and structural attractiveness. this situation might affect the profitability of the players in the industry. The company has to decide on its target and the strategy to be adopted. it has to identify how it is going to target the segments. A firm may use any of the following targeting strategies discussed below: ü Single-segment strategy This is also known as the concentrated approach of targeting the market segments.demand a superior quality of products or services. when compared to a firm that caters to all segments. The firm following this approach targets only . develops a single marketing mix and eventually gains specialization in that segment. However.

movie is released for the overseas market with the local language subtitles, it is an example of adopting a differentiated marketing mix to cover those segments of the market. 2.5.4 Guidelines for Selecting Target Market Ø The target market should be consistent, should meet the goals of the organization.

For example A tourism organization which is leading in group tours can not suddenly target individuals as their target effectively. Ø Organization should look for markets that are consistent with the resources. If an organization offering can be reached through mass media advertising like TV or press campaigns and the expenditure can not be afforded, the offering will not take off. If a target market requires high level of knowledge and sales skills by the service provider and it has not taken steps to provide knowledge and sales skills, it should not target this market. For example A small tourism organization might be successful in targeting corporate customers with six figure salaries who need high level of personal care. It will be highly expensive for this organization to compete with an organization which is catering to mass market. Ø An organization should look for markets which will generate not sufficient sales volume but profit volume. For example The courier service that targets the cost-conscious customers by offering them heavy reductions might find it self doing a brisk-business but losing money on eighty percent of its accounts. While targeting market-the basic concept of customer satisfaction at a profit should always be kept in mind. Ø An organization should look for a target market where the number and size of competitor is small.

Business Insight 2.8 provides you how a new matrimonial site establishes its place in the market by adopting a new targeting strategy.

SUMMARY Delivering quality service consistently gives a competitive edge to service organizations. It requires an understanding of customer expectations and the types of expectations. Further, knowledge of factors influencing the desired service level, adequate service level, and zone of tolerance will help service organizations consistently meet and exceed service expectations of customers. While evaluating service offered by an organization, customers compare perceived quality of service with the expected quality of service. Therefore, service organizations should have knowledge about customer perceptions and the influence of factors such as service encounter, service evidence, image of the service organization, and price of the service on customer perceptions. The intangibility property of services makes it difficult for customers to search for information, make a purchase decision, or even evaluate the service experience. This is due to the presence of more experience and credence qualities than search qualities in services. Hence, service providers need to deliver value added services to their customers to provide them a superior service experience. Decision-making is involved in every purchase decision, whether it is to purchase a product or a service. The decision making process in thee purchase of a service involves various steps such as need perception, search for information and the perceived risk, evaluation of the generated alternatives, the purchase decision and the post-purchase evaluation. Further, the decision making process of the customer is influenced by external factors like his family, culture, subculture, reference groups and tile social class to which he belongs. Marketers are innovating several ways to make service experiences memorable for the customer. They are also trying to retain old customers since this is more profitable to the company than attracting new customers. Observing buyer behavior patterns helps marketers to target customers in a better way. The technological advances and globalization’ of economy make it possible for service providers to design new ways of providing their services. Companies have realized that though no two customers have the same preferences or needs at the same time, some of their purchasing patterns are similar. Therefore, marketers identify groups of customers who exhibit similar needs and offer products and services to



The term ‘product’ is widely used to refer to a market offering of any kind. In its broadest sense this may be anything from the physical- a tin of baked beans or a television set - to the abstract-an idea or a moral issue. As discussed in the earlier units Generally, most products are made up of a combination of physical elements and services. This is true in services marketing, where the service offering can include tangible features, such as food in a restaurant, or be a ‘pure’ service, intangible in nature. Services as already discussed in the first unit cannot be photographed, touched, verified and tried out. A service product is a bundle of features and customer benefits. It is very difficult to describe what a service product is. According to Lynnshostack, there are four risks of attempting to describe services in words alone. They are Ø Ø Ø Ø Over simplification Incompleteness Subjectivity (based on personal experience and exposure) and Biased interpretation.

Service consumers generally tend to express the service experience in a simple form. It is often incomplete because the customer experience cannot be translated into words. Differences in attitudes, exposure and ability to participate and perceive make the consumers subjective and biased while describing a service. When asked to describe the experience of a two-and-a-half hour motion picture, no customer can describe every movement in detail. While designing the product, service organizations have to consider these four risks which influence both the customers and the service providers (contact employees). Unless the employees of the organizations as well as the customers understand the service product properly, it is not possible to produce quality service. Designing new services is a challenging task because it requires thinking about processes, people and experiences as well as outputs and benefits (Christopher Lovelock, 2001). This understanding portrays the wider scope of a services product and its management. A product can be defined as an idea, a service, or a good that involves a mix of tangible and intangible elements, which aim to satisfy consumers. It is traded for money or any other trading unit which has some value attached to it. Why doesn’t a customer hesitate

For example. Ø The Expected Product At the third level. For example. are . This is the core service offered by the consultant. the traveler normally will settle for whichever hotel is most convenient or least expensive. fresh towels. constitute the actual basic product. the marketer prepares an expected product. packaging. he expects the consultant to calculate the tax to be paid on his income. when a company hires the services of a reputed Consultant like McKinsey. However. Hotel guests expect a clean bed. marketers should first decide on the core benefits the company has to offer its customers. etc. the packaging and the brand name accompany the core service of consultation. a set of attributes and conditions buyers normally expect when they purchase this product. marketers have designed products that offer multiple and customized benefits in order to attract and retain customers. customer service.. Therefore. working lamps. some special features and design. and brand name. quality. Therefore. He may even offer suggestions on various investment tools to increase the customer’s tax savings. Ø The Actual Basic Product The tangible aspects attached to the service. installation support. quality level. delivery. the tax consultant might offer to file the tax returns on behalf of the customer and spare him the trouble of waiting in long queues. along with the service. Warranty.Ø The Core Benefit The core benefit of any product is to satisfy the basic needs of a customer. due to heavy competition and very little to differentiate between different players. For example. This facilitates the delivery of core benefits to the customers. Ø The Augmented Product The intangible aspects that support a service constitute the augmented product along with the actual product. and a relative degree of quietness. design. when a customer hires the services of a tax consultant. The characteristics of actual products are features. marketers should develop the actual product after the core benefit has been decided. Because most hotels can meet this minimum expectation. These are developed around the actual and core products to satisfy the customer.

.3. The flower consisting of eight petals. caretaking and exceptions are enhancing supplementary services (Fig. The facilitating supplementary services include information. 3. billing and payment whereas consultation. four of them are facilitating supplementary services and the other four are enhancing supplementary services.1 The Flower of Service Christopher Lovelock developed the flower of service. hospitality.1. order taking. which indicates the core service surrounded by a cluster of supplementary services.2).

Frontline employees of the service firm should respond quickly by deviating from the normal procedures to handle such a situation. Pick up. Service firms also need to educate the market. Activities such as cash handling. Bills and receipts. Indicating the changes. Transportation. Directions on using core and supplementary services. Goods packaging. Installation of goods. service firms face unexpected situations. Parking facilities. customers have to take action on payment. in favor of the service provider. Activity summaries. The following are the examples of information elements: Sign boards to service site. exceptions need to be granted. for evaluation and purchase decision making.2 The Flower of Service Customers need information on various elements of a service. on special considerations. Exceptions also need to be granted to facilitate problem solving.Ø Information Figure 3. Exceptions may be allowed on special requests by the customers for advance delivery of service in special circumstances. Charges for services. Cleaning and ensuring a healthy ambience. The payment system should facilitate customers to get easy and convenient payment of their dues. credit system and coupon system are part of the payment system. Customers expect accuracy. conditions for sale. Sometimes the information is required by law. for example. Ø Payment After the billing is done. Safe keeping includes: Baby care and pet care service. . Many a time. Service performance hours. cheque handling. warnings. Alerting people. Companies may provide periodic statements of account to customers or allow customers to complete bills by themselves (self billing) for greater transparency in the process. Ø Exceptions Service providers may be required to provide supplementary services that fall outside the routine to the customers. Delivery. completeness and legibility in bills prepared by the service providers. In case of accidents and emergencies. Security and safe deposit services. Notices. reminders and notification of changes. Storage and baggage handling services. and prepare and persuade the potential buyers for taking purchase decisions. Reservation information. Ø Billing Billing is important from the company’s as well as the customer’s point of view. Documentation. Conditions of sale / service.

The software industry is the best example for indicating this style. 3. As a result of the change dynamics. The pace of change in the environment and market dynamics does not permit any service organization to plan and manage the various stages in the service life cycle. Service firms try to extend the maturity period of the service as it could generate some profit to the organization.3. the life of a service is becoming shorter and shorter. service firms seriously consider dropping the service product. Most service firms try to terminate the service packages in the fastest possible timeframe to introduce a new service in its place. as a result. the sales curve slides down at a faster rate. Although service life cycle concepts help in planning and control of the life of a service. the stages in the product life cycle and the possible strategies that can be adopted by the marketers in the different stages of the life cycle. The increased expenses on these areas reduce the profit margin and. Competition will be severe and the firms need to invest heavily to face competitive threats in the areas of service modernization and sales promotion. Ø Decline stage During this stage. The profit curve goes upwards and reaches its peak during the period. Ø Maturity stage This stage of the service life is marked by stabilization in turnover and downward tendency of profit curve. The end of the period indicates declining growth rate in sales and increased intensity of competition.3 NEW SERVICE DEVELOPMENT Managing the organization’s service portfolio.2 SERVICE LIFE CYCLE As discussed in the last semester course on Marketing Management. are . the profit curve will experience a downward slide. the services is also no exception. The end of the period is marked by an increased rate of decline in sales and the profit curve reaches its lowest level. they have very limited application in formulating a future oriented service strategy. Service firms strive hard to stretch this period to the longest possible. The Marketers believe that every service product that takes birth will die after some time. and developing and positioning new services. profits evaporate and soon the service becomes a loss generating one. Sales reach their peak with the beginning of the period and then slowly slide down. The concern of the firms now is to maximize the benefits from a new product in the shortest possible time rather than to visualize or to work on strategies for an extended life. Profit starts declining at the end of the period. As soon as the service product reaches this stage.

Ø Improvements and revisions of existing products A company may modernize its products by adding new values or replacing the existing products with improved ones.3. there can be six categories of new products.3 Steps in the Development of a New Service One of the distinctive characteristics of service is that the production and consumption of a service should take place simultaneously. The new product development According to Booz. Ø New to the world products The products are really innovative and the world has not witnessed such products earlier. Allen and Hamilton. An idea is the . Ø Repositioning The existing products of a company may be targeted to new markets or new market segments. Ø Additions to the existing product line A company may add new products to the established product lines in order to strengthen the product lines.functions critical to the organization’s success. These products create an entirely new market. A company may add a new business to the existing one and enter an established market for the first time. Ø Cost reductions Companies may develop new products that are capable of providing similar performances at a lower cost than that of earlier products. 3. Ø New product lines The products are not new to the market but new to the company. The production process is Ø Idea Generation The first step in the new service development process is the generation of new ideas.

customers buying services are more expressive than those buying manufactured goods because they have direct interaction with the service provider. The character develops only when an idea is applied to an organization or to a situation. A combination of changes in a few attributes of a service package generates a noticeable difference in consumers’ value perception. Proper motivational and reward schemes also need to be designed for the purpose. the number of attributes-facilitating service attributes and supporting service attributes-will be listed out in detail and the possible improvements for each attribute will be explored. Service firms should design channels to receive ideas from various sources. undoubtedly. Under this approach. are a major source for developing new ideas. The other sources of ideas include support personnel. Relationship marketing( will be discussed in section 4. Generally. The frontline people. is a good idea. pooling of ideas should be the only objective. Figure 3. Ideas generally do not have a character of good or bad.8 in the fourth unit) contributes a lot in this direction. The most scarce product in today’s competitive world. Next to these sales personnel. Therefore. who are in direct contact with the customers and who involve themselves physically and psychologically in the production of services. managers concerned should have an open mind and should not be evaluative at this point. competitors.fundamental base for any product. they have to depend upon ideas that improve existing offerings. customers occupy the chief position as sources of ideas. professional organizations. While collecting ideas. They should look for a maximum number of ideas from various sources. Service firms are pressurized to introduce new service packages. The need for more and more new ideas is pressing in a service firm. researchers and social organizations. Very often it is difficult to get breakthrough ideas. Service attribute analysis is one technique that helps service organizations to get ideas for further improvement in the process.4 New Service Development Process .

The strategic plan will find out answers to the following questions: ü ü ü ü ü ü ü ü ü W o a e th e ta g t consumers? h r re Wa t is th e s e of th e market? h iz Wa t is th e c me h o p titiv e s u tu tr c r e a d th i r behavior? n e Wa t is th e p s n h o itio in g strategy? Wa t is th e pic h r in g strategy? Wa t is th e d tr u h is ib tio n strategy? Wa t a e th e lo g te m sales? h r n r What is the expected market share? Wa t a e th e poi t g a . second. pay back period and risk analysis. a preliminary marketing strategy has to be developed. sales in the introductory. Besides customers.µ Cne o cp t Testing The new service concept developed could be tested by presenting the concept through appropriate target consumers and by eliciting their views and opinions. projected profit and loss account for the first five years. Business analysis helps managers to rank the screened ideas. Business analysis includes estimation of first time sales and repeat sales. cost estimation. the preferential order of influence of various processes and so on.n h r rf o ls lo g te m as wl l as s o t term? r e hr Ø Business Analysis The management of a service firm would like to know the business attractiveness of the service proposal. the concept has to be tested with the employees of the organization. third. the broad and strong consumer appeals. estimation of profits. purchase intention level. Until now pre-paid card users could only get roaming on incoming calls and had to pay Rs 50 as activation fee. . fourth and fifth year. Business Insight 3. the shortcomings in the concept. Ø Marketing Strategy Development After the successful testing of the concept. ability and willingness in performing the service. product life cycle analysis.Airtel users can also now avail of full roaming facility on its pre-paid card at no extra activation fee.Airtel customers also will have to pay no charge for sending an MMS tillApril end. The results of the concept testing will help the management to find out the need gap level. so as to assess their understanding. It will provide an opportunity to develop a service package close to the expectations of the target consumers.1: Airtel unveils new services Bharti Group’s cellular brand Airtel has launched free multimedia messaging services (MMS) for its subscribers and a pan-India GPRS (General Packet Radio Services) for corporate customers.

picture or video. 3. A service blueprint also provides evidence to the customers on the basis of which they develop service expectations. It also depicts a systematic arrangement of different service points and the means by which services are performed.2 Reading a Service Blueprint Some standards have to be followed in preparing a service blueprint so that there is consistency in developing and reading it. The package comes for Rs 600 a month. The various elements discussed in the above section are separated in a service blueprint by three horizontal lines (Refer Figure 3. µ Line of interaction: The first horizontal line shows the points of interaction between the service . It is intended to provide a clear picture of the service process to different people involved in the service production and consumption process.5). If no standards are followed. For example. This notation helps in understanding a blueprint.4. The blueprint visually depicts the roles of customers and employees. 3. a hotel may provide training for its service personnel (both onstage and backstage) on the aspects of service creation and delivery. These services will enable subscribers to access e-mail and surf the Internet on laptops using their GPRS mobile phone. Bharti as yet does not have a GPRS package for the entry-level retail subscribers unlike Hutch and BPL which have introduced basic GPRS services at Rs 99 and Rs 200 a month respectively. This training is a support process. For its GPRS services. Airtel is focusing on corporate customers exclusively. it might be difficult for an organization to understand a blueprint prepared a few months/years earlier. In designing a service blueprint. The decision theory provides an analytical approach to describe such processes that require judgment in relation to choices to be provided for personalized or customized services.8 million subscribers to send and receive free messages in the form of voice.The scheme will allowAirtel’s 2. It helps the people involved to understand various processes of service without any confusion or ambiguity and enables them to act accordingly with confidence. managers often make use of the decision theory.4 SERVICE BLUEPRINT A service blueprint is a picture or map that portrays the service accurately.

µ L e of v ib in is ility : T e s c n d h riz n h eo o o ta l lin . µ Line of internal interaction: The third horizontal line is the line of internal interaction. which divides the internal processes that assist the service personnel in producing and delivering the service when a vertical line passes through a horizontal line. If a vertical line passes through a horizontal line. Figure 3. it represents an internal service encounter. it shows that a direct contact between a customer and service provider has taken place.personnel and the customer.5 Simplified Example. This line divides the onstage and backstage employee actions. d id s th e service processes that are visible to the customer from those that take place iv e backstage.Blueprinting a Hotel Visit (extract only) . lin e of v ib e is ilit y.

These illustrations clearly establish the importance of tangibles or physical evidence in the services sector. and so on. both employees and customers will be given adequate importance. Based on usage.1 Service Scape A service represents the physical environment designed in a service outlet. satisfaction. the exterior. expectations. and other behavior. Research studies have proved that the design of the service scape influences customer’s choice. The service scape should contribute to social interactions between and among customers and employees. Therefore. In the case of hospitals. educational institutions and banks. signboards. Physical Evidence Physical evidence is everything that a company physically exhibits to the customer. The basic principle that guides the design is user friendliness.5. service companies should first identify the users of the service scape. services scapes can be classified into three types • self service. 3. certificates. vehicles. It includes the physical environment of the service outlet. interpersonal service and remote service. Physical evidence provides tangible cues to customers to develop service quality expectations. The nature of the service activity and service consumption experience sought by consumers will influence the design of a service scape. The physical environment facilitates performance of service by the service provider as well as the service customers. ATMs. all tangibles like machinery. If the service firm is focusing on a self-service environment. the customer performs most of the activities and very few employees are involved. µ Interpersonal services In this type of service scape. it has to attract the right market segment and offer easy-to-use facilities. fast-food centres and movie theatres are examples of self-service environments. µ Self-service In a self-service environment. In this part of this unit we will discuss the elements of physical evidence and their significance for service providers. the interior. receipts. furniture. stationery. . satisfy and facilitate both employees and customers simultaneously. service personnel. the service scape must be planned to attract. communication materials.

Business insight 3. The store does not believe in aggressive marketing. This reduces the brush aspect significantly. Landmark. It has around 40. Noise may be from inside or outside. all in an airconditioned environment. If the noise is from inside.000 customers. It irritates customers when spaces are crowded and someone constantly brushes against them. customer preferences and comfort are the first priority. the marketing team has a clear program . The store conducts activities. For instance. Its monthly newsletter is mailed to over 17. Tangible elements accompanying service Brand Business insight 3. One can grab a coffee.2: Physical Evidence at Landmark Landmark is one of the most well-known retail bookstores in the country. Another interesting aspect is ‘adjacencies’.coming up with a certain number of events at every store every year. travel books are placed next to management books.2 explains how the well known bookstore. care must be taken to reduce the effect by using . A lot depends on details like how books are placed to suit customer needs. enhances customer experience by using physical evidence. For the store. Ø Noise: The noise level ranging from absolute silence to high-decibel sounds will have an influence on the behavior. providing areas to sit and browse. but unavoidable (noise generated in operating machines for service processes). creating more value for the customer’s time.000 titles at any given point of time. little baskets and trolleys to hold books they provide value-added services. Bringing up something new constantly An assurance of pollution-free air can also become a selling proposition for service companies. Let us see how the store offers “physical evidence” to its customers. At Landmark. like “pictionary” contests and an annual fair with Santa Claus. browse through books and music. as many businesspersons are frequent travelers. but by offering promotions targeted at loyal customers. increasing significantly the store’s offerings. Landmark organizes customer experience enhancing promotions and interactive sessions with authors like Arundhati Roy.µ µ µ µ µ µ Physical environment Modes and content of communication Price of the service Appearance and conduct of service personnel. with soothing music playing in the background. aimed at making the place reader-friendly.

Ø Music: Music is a very powerful stimulator of feelings in human beings. If music is arranged. People have different preferences in music. Some like classical. some like old. it is better to avoid such a location or to use sound-proof material to minimize the disturbance. If it is from outside. positive behavior can be expected.sound-proof material or keeping the customer contact point away from the sound generator place. and some like new. Ø Smell: People have different likings as far as smell is concerned. . A right combination will make the environment pleasant. some like western. while taking into consideration the preferences of the customer groups.

µ Space/function Figure 3. Three kinds of internal responses get generated in them. They are: cognitive responses. . the presence of certificates and photographs. Dowell and Gamble described service environment in the following ways: Ø An environment surrounds. The service scape influences the nature and quality of customer-employee interactions. Environmental variables such as physical proximity and seating arrangements have an influence on customer. they look for environmental clues for initial help. Ø Cognitive responses are influenced by beliefs. friendship formation. Ø Emotional responses are influenced by the mood of the individual and also the attitude he has developed against the service firm. Signs. The quality of the materials used in the construction of physical structures at work. the way in which the individual categorizes the stimulation and the symbolic meanings he develops for the stimuli. Research studies have confirmed that the environmental conditions will influence such social behaviors as small group interactions.employee interactions and also customer-customer interactions. Ø Physiological responses include pain. Social interaction is an important dimension of physical environment. aggression. The appearance. symbols and artefacts influence the forming of the firs impressions of customers. enfolds and engulfs and one can only participate in it.7 Service scape Dimensions The living space and functional support facilities form an important part of the service scape. emotional responses and physiological responses. The physical environment will have an impact on the behavior of both customers and employees. participation. The interplay of these factors finally result in customer response or employee response. movement and physical fitness. comfort. The following are the influencing factors with regard to space/ function on the behavior of employees and customers. the floor coverings and architectural values communicate symbolic meanings and create an aesthetic impression. When customers are not familiar with the service environment. behavior and number of service personnel and the quality and quantity of other customers have a psychological impact on the social behavior of the customers. withdrawal and helping.

overhead projector screen.3). Market segmentation has thus become a possibility. VCR TV and Slide Projector. Service companies can go closer to the customer through service differentiation and can offer delightful experience.Ø The environment has a definite impact on the senses in more than one way. service channel. service personnel. Its conference hall accommodates 200 people and has facilities like microphones. It has banquet halls offering the most modern facilities and a recreation and health centre. DAY Every individual has different needs and wants. To be successful it must identify and promote itself as the best provider of attributes that are important to target customers. color TV. accessibility. Service differentiation facilitates this. mini-bar and hair dryer. Service differentiation means providing meaningful changes in service offer that add value to the customer and are capable of generating quality perceptions distinct from competitive offers. customer participation. Goa for a holiday. tangibles used. It has 337 rooms that are centrally air-conditioned and have facilities like fax machine. It has a tastefully designed Mediterranean restaurant with a display kitchen.6 COMPETITIVE DIFFERENTIATION OF SERVICES A business must set itself apart from its competition. Ø Peripheral and central information is always present in the environment. From these examples.GEORGE S. Ø It is impossible to build an environment which does not have any impact. 3. it also offers suitable facilities for business people. There is an enormous scope for differentiating the facilitating . markets are bound to be heterogeneous. Companies that make attempts to meet customer needs closely are likely to win the market. Therefore. people do not expect hundred per cent suitability and tend to compromise on minor issues. The major service differentiators are: the Basic Service Package (BSP). it can be observed that hotels in India concentrate on both aesthetics and utilitarian functions to suit their businesses. interaction. Mumbai is known as the commercial capital of India. ü Basic service package: One of the key areas of service differentiation is the design of the BSP itself. Consumers prefer such products that closely match their needs and wants. However. voice mail. Internet. service image and service recovery (Table 3. The Oberoi Hotel in Mumbai is located at the centre of the city and offers a beautiful view of the Arabian Sea.

franchisees or electronic channels. Service recovery: Inspite of a careful and cautious approach. Sify launched its cyber cafes in the metros first to tap the ‘largest segment of Internet surfers (or ‘Netizens.ü Service personnel: Human resource plays a pivotal role in service production.’ as it called them) through its iWay centers. iWay centers provided a soothing ambience and friendly service. the differentiated advantage of an organization will add to its profit margin. Though some services can be provided through machines.4: Satyam’s i-way Sify is a part of Satyam Computers Pvt Ltd. Service image: The image of the company at the corporate level and also at the local level differentiates in value perception by the customers. or the value of the differential attribute offered is unique when compared to that offered by its competitors. ü Distinctive: The product/service attribute offered by a firm is not offered by its competitors. the extensive. In fact.3 build or are capable of building a distinctive image of the organization. the skill and expertise of channel members and their performance are the areas where differentiation is a possibility. companies should differentiate their products / services from those of their competitors to survive in the market. exclusive and selective coverage of the channel. Unlike the ordinary crowded cyber cafes. and provided cyber cafe visitors with a whole new experience of browsing the Internet. The variables listed in Table 3. Business Insight 3. deficiencies in service is not an exception to any service organization. with today’s cut-throat competition. one of India’s premier IT companies. ü ü As mentioned earlier. ü Service channel: The choice of channels such as agents. For example. The first step towards differentiation is to decide the number of benefits and attributes on which a firm wants to differentiate its products/services from those of its competitors. The iWay centers sported a plush look and had ergonomically designed cubicles that were sufficiently closed to provide and distribution. (Satyam). Differentiating attributes for a product service should meet the following criteria: ü Important: Customers in the target group view the difference offered by the firm as very important and attach high value to it. Business Insight 3. as no other firm offers the differential benefit in such a way. ü Superior: The firm makes the product/service an obvious choice for the customers to opt for. Successful companies adopt recovery strategies to win the customers and also use such strategies to differentiate their service offerings from that of their competitors.4 gives an example of how an Internet service provider has differentiated its services from the rest in the market. ü Communicable: The difference in the offer of the firm should be easily explained and communicated to . brokers. Acompany can use various differentiation strategies when it aims to uniquely position its products/ services in its customer’s mind. they cannot be viewed as perfect substitutes to the human resources. a hotel offering free pick up and drop facility at the airport is differentiating its service based on the convenience and price factors as the customers have to hire a taxi otherwise.

the customers. The key to a successful positioning strategy is to promote the feature which the company is best at and which exactly matches the needs of the customer. Another challenge for service providers is to sustain the differentiation advantage by not allowing competitors to imitate the advantage. consumers find that differentiation of services can be more difficult and complex. Successful positioning makes it easier for the . Therefore. McDonalds has a global presence and when it is entering a new market. For example. well-mannered customer care executive at a bank and that of a harsh and ill-mannered customer care executive. ü Affordable: Customers should be able to pay for the difference in service/product being offered by the firm. it can use its reputation to attract the customers. These offerings are communicated by a vast number of advertising messages promoting different features of the services.7. ü Profitable: A firm should be able to offer the difference to the customer without losing out on its own profitability. Because of intangibility and other features associated with services. Positioning is particularly important for services in the market of the 1990s. companies are striving to learn the secrets behind successful positioning. where it is objectively or subjectively differentiated in a positive way over competing offerings. For example. Therefore. Offering differentiation to service customers is a major challenge to the service providers because of the intangible nature of services. the service personnel can also create differentiation of service in the minds of customers. To maximize its potential a company should position itself in its core market segments. wants its customers to perceive its products or services in relation to those of its competitors. Companies that are not well positioned suffer in the competitive market with a low market share and low profit margins. ü Preemptive: The difference offered by a firm should be such that it cannot be copied by its competitors easily.1 The Importance of Positioning of Services Positioning involves both launching new brands into the marketplace (new brand positioning). companies use their reputation in order to differentiate their services from that of their competitors. 3. Therefore. and repositioning old brands. It is concerned with the differentiation of products and services and ensuring that they do not degenerate into a commodity. service providers should choose differentiation strategies that cannot be copied by competitors easily. On the other hand. customers can easily differentiate between the services of a pleasant. As a result of competitive pressure the consumer is becoming increasingly confused by the huge offering of services within each market sector.

Positioning involves giving the target market segment the reason for buying your services and thus underpins the whole marketing strategy. Positioning is a strategic marketing tool which allows managers to determine what their position is now.customer to see a company services as being different from others and exactly what is wanted. what they wish it to be and what actions are needed to attain it. . by considering positions. It also allows consideration of competitors’ possible moves and responses so that appropriate action can be taken. It also offers guidelines for development of a marketing mix with each element of the mix being consistent with the positioning. It therefore helps influence both product development and the redesign of existing products. The concept is often considered at the product level although it is also relevant at the product sector and organizational level. It permits market opportunities to be identified. which are not met by competitors’ products.

The Taj group is trying to position some of its hotels in the ‘value for money’ category. cultural heritage. advertisements featuring the tagline. ‘God’s Own Country. For example. however. food. lakes. have to be careful in designing their positioning strategies and avoid some of the associated pitfalls. Companies. beaches. .’ began appearing in the print and electronic media in India. backwaters. Business Insight 3. Business Insight 3. Thus research needs to identify the salient attributes which determine the selection of a service. it is termed confused positioning. cities.5: God’s Own Country In the early-1990s. backwaters. Some brands are under positioned when they fail to provide a strong benefit or reason for the customer to choose them. The state reportedly became one of the places with the ‘highest brand recall. Irrelevant positioning is when the brand fails to attract any customers because of offering irrelevant and redundant features/benefits. the organization’s efforts to ‘sell’ Kerala to Indians as well as foreigners began paying off. boathouses and its feature. they marketed every aspect of the state from the towns. Further. canals. convenience of flight times and standards of food and beverage. But many airlines have similar standards of safety. Over the next few years. wildlife and even the centuries old tradition of health care through Ayurveda.µ Quality/price positioning: A service is positioned in the market as possessing a certain quality standard or at a particular price. It is termed doubtful positioning when a company promises something and the customer doubts its capacity or the brand’s capacity. so passengers’choice of airline will actually be based on other characteristics such as comfort. Kerala’s government concentrated on marketing attractions such as lagoons.’ thanks to its unique positioning and targeting efforts. some brands are over positioned for a very narrow segment and so many potential customers fail to notice it. On the other hand. When a brand communicates two or more contradicting features/ benefits.5 shows how a particular state tourism board in India has positioned its state to the global tourists. some of the Oberoi• Hilton hotels are positioned as high quality. The campaign was run by the Kerala Tourism Development Corporation (KTDC) and was intended to promote the South Indian state of Kerala as a tourist destination. During the early and mid 1990s. high-price hotels. The advertisers projected Kerala as ‘the place to be’ and highlighted its natural beauty and cultural heritage as its unique selling propositions.

Where a range of attributes are identified. A range of analytical research techniques. depending upon how the data were elicited and which statistical procedures were used. so will not be discussed further here. The reality is that other service providers in the express parcel industry may provide a faster service but may be perceived as being slower. statistical procedures exist for combining these attributes into aggregate dimensions. the analysis showed that two factors accounted for 86 per cent of the discrimination amongst 14 figures. Such dimensions are referred to by various names such as principal components. discriminate function analysis. factors. on a positioning map. These include perceptual mapping. For example. rather than the services marketing manager. can be used to identify the salient attributes. First. factor analysis. multi-dimensional scales. A number of approaches can be used to identify salient attributes which can then be used to develop a positioning map. Products or services are typically plotted on a two dimensional positioning map such as figure 3.1 Identification and Location of Attributes on Positioning Map The positioning process involves the identification of the most important attributes and location of various companies’ services. 3. Usually two dimensions are used on positioning maps and these often account for a large proportion of the ‘explanation’ of the customer’s preferences.8 as given below: . etc. multiple correlation and regression analysis.7. for these attributes. and trade off and conjoint analysis.3. research needs to be undertaken to identify the salient attributes and specific benefits required by the target market segment. An express parcel service scoring high on the speed dimension is one that is perceived as fast. These tools are in the province of the market researcher.This will form the basis of the positioning. in a marketing study. What is important here is the customer’s perception of the benefits that are delivered by these relevant attributes. most of them computer based..

or derived from further research. Maps can also use a combination of objective and subjective attributes. A positioning study for. a bank used a positioning which positioned three banks on an objective dimension of ‘best interest rates on loans’ and a subjective attribute ‘friendly/ courteous service’. This technique does not explicitly identify the axes used and these need to be inferred. to avoid possible bias. It should be noted that the existence of a vacant space in a positioning map does not necessarily infer a viable positioning.8 PRICING OF SERVICES “A customer perception of what is a ‘reasonable price’ is more important than what you want to charge for your product or service. It’s creating this perception of value that tells the customer . 3. in determining what characteristics they use to evaluate the services offered. not price. “ . Often a second group of respondents is used.the price is right. The positioning map can be used to identify potential gaps in the market including where there is a demand but little competition (if such a position exists).produce a positioning map that reflects the perceived extent of psychological distance between them. And the customer decides what’s reasonable based on perceived value for money. Positioning maps can be based on either objective attributes or subjective attributes. In addition to identifying where different companies’ products are positioned on the map we are also concerned with where are the areas of core demand.

Personal reference price consists of the price last paid. reference prices cannot provide adequate clues to the customer. Often customers use personal reference prices. The absence of ownership transfer compels the customer to assess the value of the service before its production and consumption. Therefore.” Scott Gillespie. and so on makes the output of the service variable. consumers can leisurely verify and compare with substitutes and can take a purchase decision after production.Noel Peebles. earns profitable margins for the company and at the same time. Service firms generally explore the variable nature of the services to have greater flexibility in the configurations of service. combinations and permutations lead to complex price structures. the price most frequently paid or the average of all prices paid for similar service offerings. Under these circumstances.A large number of varieties. Travel Analytics An important element of the marketing mix and the one that brings in revenue for a company is pricing. “Sell your Business the Easy Way” “Only by reducing their costs can any of the major airlines rationally afford to reduce their prices. it will be a financial disaster. If airlines reform pricing first. He has to refer to the price list of the Indian Railways. Reference prices may not be accurate for the customers due to the following reasons: . µ Input and output variability The invariable change in the combination of service provider. customer. Companies must ensure that their pricing structure covers the costs incurred to produce a service. time taken. price output relations vary significantly. CEO. A railway clerk cannot immediately tell you the cargo tariffs for various goods. The pricing strategy developed by a company can either help the company reap the maximum profits or throw it out of business. tools and equipment used. Author. provides the maximum value to the customers. An LIC agent cannot quickly tell you the premiums of various policies without referring to the price table. µ No ownership of services It is more difficult to calculate the costs involved in creating an intangible service than in producing a physical good. µ Price value relations Often customers are not aware of costs of services and are unable to assess price. In the case of goods.value relationship.

As such. ü Unlike goods. accuracy of reference prices is not possible. µ Influence of non-monetary costs The role of non-monetary costs is very significant in services. search . place to place and situation to situation.ü The needs of individual customers vary from time to time. If customers want to compare prices. Non-monetary costs are the sources of sacrifices perceived by customers.Alternative services cannot be compared simultaneously. similar services cannot be offered at a single outlet. They include time costs. they must go to individual outlets.

ü Va ia l e pricing r b This is particularly relevant in industrial and business-to-business markets where individual contracts are priced according to specification. begin with a price skimming policy then reduce the price as competitors enter the market to defend the organization’s position and attract new customers. Frequently.new market situations where a proportion of consumers are always prepared to pay more for new. thus penetrating the market and gaining substantial market share. or distinctive in some way from competitive offerings. ü M e d pricing ix This is based on the above two pricing strategies. New entrants would be unlikely to succeed by charging high prices. such as the fast food restaurant business in India by the MNC’s in the initial stages. The total costs are computed then the price determined by adding on some required margin or ‘mark up’. ü C s . the price reduces after a period as the products become more popular and sales volume increases. innovative goods. ü P n t aio e er t n pricing In this case the price is set at a low level in order to attract high volume sales. The price skimming approach can help speed up the payback period.lu ot p s pricing Here pricing is based on the costs of producing the good or providing the service. Service providers such as . or international airlines. bringing the mobile phone within reach of ordinary consumers. the actual product (the telephone) has reduced in price over time since initial introduction to the market and the service (mobile communications) charges have also reduced. This approach has a number of weaknesses in that it considers neither the competitive situation nor the market potential. new. For new products and services the payback period is lengthy but with the advantage of establishing a strong market position. Prices may be set too high against those of competitors to attract customers or may not be set high enough to exploit demand. especially if the product or service is innovative. pricing would have to be attractive in comparison with the competition to penetrate the market. The example given previously of mobile communications typifies this approach. Mobile telephones are an example of this. the strategy is especially suitable for use when entering highly competitive markets.

and flat rate pricing. benefit driven pricing.3 Value Strategies in Pricing of Services How can a service provider improve his pricing strategies so that they reflect the value delivered to the customers? In order to answer this question. r ü Satisfaction Based Pricing This pricing method is adopted by service companies to remove the uncertainty in the minds of customers caused by the intangible characteristic of services.a e a f c nb s d pricing. Rla n h e tio s i p pricing. mid. In these circumstances. Hairdressers or theatres might offer reduced prices to senior citizens or students on certain days or for certain shows.and high-season or by time period. Let us now discuss these three: . Differential pricing may be seasonal. These strategies can be used in isolation or in combination.ü D f r nia if e e t l pricing Another form of promotional pricing of particular concern to service marketers is differential pricing. There are four strategies that can be used to create and communicate value to the customers. and r in C n e ie c o vn n e pic r in g a e the four strategies and are discussed in detail here. 3. This tactic is used to attract more business in slack periods or to attract particular groups of customers to make up demand at particular times. hence the price of rail fares in peak periods compared with off-peak periods. ü ü ü ü S tis a tio . service providers should be in a position to determine what constitutes value for their target customers. the differential price charged may be based on marginal pricing. when demand is likely to be low.8. demonstrating again how more than one approach may be combined in creating the ideal pricing strategy for an organization. Service companies try to remove this uncertainty by adopting the strategies of service guarantees. reflecting the different prices charged for the same holidays in low-. where different prices are charged for the same service at different times or to different customers. Ef ie c f ic n y pic g . They should then communicate this value to the customers through their pricing structure.

Bengali. µ Price Bundling Companies that adopt the price bundling strategy offer two or more services at a time to their customers. Parsi. It serves people speaking Telugu. Further. In this strategy. Assamese.Find your Dream Partner!! Bharat Matrimony. Business Insight 3. It provides services on a regional basis. This enables service providers to reduce the costs involved in delivering a second service to another customer. Oriya.new customers and nurturing a good relationship with them. Long term contracts and price bundling are two methods that are followed by service providers under this strategy. Sindhi and Gujarathi. with customers going back to them to avail of their special offers and discounts. it offers convenience to customers as they need not go through the whole process or visit another service . among others. most of the strategies used by service providers are copied by their competitors. Punjabi. Therefore.6 –Bharat matrimony. µ Long term Contracts Service providers often adopt this strategy to maintain relationships with existing customers and to attract new ones. Shopper’s Stop offers a (First Citizen) membership to its regular customers. Its services have tied up many singles around the world in marriage. However. The service provider is assured of repeat business and the customers are also benefited in the process as they find a dependable service provider. service providers should closely analyze customers’ needs and competitors’ moves to decide on the incentives they would like to offer to the customers. For example. which entitles them to special discounts and schemes offered by the retail store. . service providers often offer price and non-price incentives to customers for entering into long term contracts with them. It provides basic matrimonial services like match making where a member can register for free on the website and can search through other profiles of his choice. Kannada. The retail store gets repeat business. People residing anywhere in the world can access its services with just a click of the mouse.com is a website that provides matrimonial services to Indian singles settled worldwide.com . Marwadi. Tamil.

Figure 3.4 Total Customer Value of the Services Delivered Total Customer Value (TCV) is the sum of variables that the customers attach specific values in relation to a service. The assessment of the value depends upon the intensity of the need of a customer or a group of customers at a given situation. Support services provide an opportunity to gain competitive advantage for service providers. .7 & 3.3. The following are some of the values consumers generally try to measure in a service: µ Core service value This value is commonly assessed in every service. without much effort.9 Components of Customer Delivered Value ( CDV) µ Supporting services value The additional services associated with the core service. Business Insight 3. is a value to the customers.8.8 provides how the marketers of mobile phones & Marketer of ISP are trying their level best for value addition to their service products.

The kiosks will offer music downloads on your mobile or ipod. The service will enable the individual to pick up a ticket to the most recent movie. The company is entering into revenue share tie-ups with e-commerce players for the business. petrol pumps and other retail points. The company plans to have around 97. The group plans to have 900 Internet kiosks in the first phase of its launch. They further clarify by saying that there is a lot of information on hospitals on the Internet. Smile Interactive is looking at offering healthcare services online. Besides retail opportunity in the digital world. and Tyroo. These kiosks will come up in the grocery stores in the neighbourhood store. It will also house railway and airline tickets as well. the self-serve ads outfit have already attracted strategic investors. The company further says that group wants to promote medical tourism. You could also pick up the flight ticket that you had to take.8: Internet comes round the corner Smile Interactive Technology Group is all set bring the e-commerce business in the facilities. The company says that the service is popular with consumers who wish to buy stuff off the Net but are shy of using their credit cards. this will be transferred through a bluetooth but the consumer will have to pay a price. The kiosk will also be able to print a picture that has been kept in your digital camera or phone for some time. Smile Interactive Technology was known as Smile Studio earlier. for a start it will have the kiosk inside grocery stores. it was launched as a complete web solutions company and an incubation centre for entrepreneurs keen to do business in the digital space.Business Insight 3. The service will allow the foreigners can search for information and even book their hospitals and surgeries online. .000 assisted e-commerce kiosks across the country in the next three years. Two of the companies that it incubated — Quasar. The company says that it wants to help the consumers to make use of the e-commerce option that is available to the consumer today. The company plans to overcome this fear that the consumer has for using the Internet. The company further states that Indians are not always comfortable using the Internet. the digital marketing and online advertising agency. malls. Smile Interactive will put up kiosks — 900 across the country. The Internet at present has around 14 million connections in the country. which is still less considered with the world proportion.

While selecting a service. This is an inevitable factor for many services. fear of uncertainty and so on.All these anxieties constitute psychic costs. consumers may have some fears-fear of not understanding the service. Customers may not identify all Business Insight 3. the assessment will be automatic for them. waiting. Service customers may add energy cost as non-monetary cost to the total customer cost. consumers may perceive other non•-monetary costs related to a specific service.in for obtaining adequate or satisfactory information is a cost for consumers. Time definitely carries some opportunity cost.9: Broadband to be redefined by TRAI The Telecom Regulatory Authority of India (TRAI) has taken a tough stance responding to complaints . accuracy of result. most people preferred to obtain tickets by waiting in a queue at manned counters due to the psychological fear relating to operations. weight being carried and so on. participating in a crowd of other customers. The TCV will be compared with the TCC by each and every customer. and the image cost (in case of failure. because the service provider cannot control the length of time it will take for a customer to be serviced and the number of customers to serve. The total waiting time of customers will add to the cost of the service from the customer’s point of view. how will the other customers rate their abilities?) in operating the machine. the convenience costs may be more in a particular means of transport service when compared to other means of transport. µ Energy cost The energy costs include the loss of physical energy in traveling to the service outlet. fear of rejection. Though customers may not know or have the methodology to measure the cost items as well as value items in accurate terms. Search costs may be monetary or non-monetary or sometimes partly monetary and partly non-monetary. When vending machines were introduced by the Southern Railways in Chennai. µ Other costs Apart from the above. µ Psychic cost Psychological costs are the most painful non-monetary costs incurred while receiving services. µ Time cost Consumers may be required to wait for some time for some services. For example.

At present in countries like France and others the minimum broadband speed is defined with 512kbps. This has come as good news to a lot of subscribers of broadband. in Hungary to 256 kbps. One of the biggest advantages for the subscriber will be that he will be able to achieve a lot of high definition services which requires a minimum speed of four to six mbps. There has been a paper released by the regulator as well which discusses the whether the present level of 256kbps.from harassed consumers who are offered “broadband” at speeds much slower than those stipulated by the government. tele-medicine and video streaming and others. . The organization has mentioned that there has been promise by operators saying that they will abide by the law. The organization has written to operators saying they can no longer advertise broadband services that say they offer up to 256 kbps speeds. TRAI to meet the grievances of the consumer as directed all operators to clearly mention the minimum guaranteed download speeds in various packages. which suggest the wrong speed. The TRAI has asked the operators to reform their ads. thereby circumventing the rules by offering services at far lower speeds. while in China all internet users other than dial-up and wireless are considered broadband users. If the directive by TRAI is able to achieve the desired results then this will be good news for the subscribers of broadband in India. which is defined as the minimum broadband connection speed in India can be raised to bring it at par with the international standards. In US the speed is limited to 200 kbps. This will be especially useful for consumers who have been complaining that their broadband connection of 256 kilo bites per second (kbps) is not fast enough to play video games or download movie clips quickly. This will include the services like movies.


Competitor pricing:

As discussed earlier in the unit, service providers should have an idea of the pricing structure of competitors, especially in the case of price sensitive services. For example, if a photographer charges Rs.100 for developing and printing a roll and another a few yards away charges RS.110, not many would bother about the difference. However, when a bank offers a housing loan at an 8 percent interest rate and another offers it at 9 percent, customers would certainly be attracted to the former. Service companies also focus on other elements of the marketing mix to win over customers. At the same time, a company cannot set very high prices for its services unless its offering is unique and distinct from those of competitors. µ Marketing mix:

The other elements of the marketing mix have an influence on the price. The price should be an indication of the value derived by the customer, as already discussed. Price sensitive services should be communicated properly to the customers through suitable promotional activities. Further, price discounts, sales, price-cuts, etc., should also be communicated to the customers. The place where premium services are offered is also linked to the price a company can charge as also the quality of service offered by service personnel. For example, the staff at the Ritz Carlton offer premium customer service and also charge high prices. Finally, the process and the physical evidence should reflect the price charged and the value offered by the service. µ Regulatory factors:

Government policies and guidelines of trade associations have an effect on the prices charged by companies in the industry. For example, the Department of Telecommunications (DoT) regulates the prices charged by BSNL for telecommunications in India. µ Positioning:

The customer perceptions of a service, his evaluation of the service standards and his assessment of the service value also depend on the positioning strategy adopted by a company. For example, if a company positions its services in the premium range, then

Mr. Pathak initiated the efforts. He talked to teachers, who expressed their wholehearted cooperation in his efforts. He got the same promise of cooperation from the students. Mr. Pathak offered all supporting facilities liberally. The director reasonably expected that there would be some improvement. He reviewed the condition after a month. There was no improvement at all. He talked informally again with both the students and faculty. The teachers informally complained that students are not there though they are ready to take up the classes. On the other hand, students complained that teachers are not coming to the classes. Both the parties are not willing to give a formal complaint to the director on the issue. Mr. Pathak realized that the serious attempt is required for the purpose. As a first step he started understanding the development in the institute over a period of time. After a thorough analysis he found that the following factors are important. 1. Increase in the number of teaching faculty. Workload per teacher has reduced from 12 hours a week to 6 hours a week. 2. Increase in research, consultancy and extension services of the faculty. 3. Change in the qualification of the students – the percentage of engineering graduate getting admission has increased each year. 4. Promotion to a higher position at young age. However, the director could not find anything about placement as there was no record available in this respect. Having gone through all these details the director decided to refer this case to a marketing professional. This director thought that external consequences needed to be emphasized more to take corrective actions. Marketing orientation is required to strengthen and develop the institute. µ Can you identify any services marketing problems? µ Comment on the approach of Mr. Pathak µ Suppose the case were referred to you how would you help Mr. Pathak. Summary An understanding of the various product levels namely, core benefit, basic product level,, actual product level, augmented product level, and potential product level helps a company to recognize and meet the customer needs at each level. Further, when developing competitor pricing, the other elements of the marketing mix, namely product, place, promotion, people, process and physical evidence, regulatory factors, and positioning are some of the issues that should be considered when developing a pricing strategy.

Concept application questions µ Review recent bills that you have received from service businesses, such as those for telephone, car repair, cable TV, credit card, etc. Evaluate each one against the following criteria: (a) general appearance and clarity of presentation, (b) easily understood terms of payment, (c) avoidance of confusing terms and definitions, (d) appropriate level of detail, (e) unanticipated (“hidden”) charges, (f) accuracy, and (g) ease of access to customer service in case of problems or disputes. Choose a service with which you are familiar and create a simple flowchart for it. Define the front stage and back stage activities. Select a service organization and determine its pricing policies. In what respects are they similar to or different from what has been discussed in this unit? Choose an industry you are familiar with (like fast food restaurants or grocery stores) and create a Positioning Map (perceptual map), showing the competitive positions of different companies in the industry.




The classification of organizations based on this criterion is as follows: µ Low contact service: In this kind of service. Therefore. the fifth element in the service marketing mix applies not only to personnel but it recognizes the role of the participants both employees and customers in the service delivery process. A service firm may have all equipment and technical facilities. the organization in the eyes of the customer and they are the marketer”. According to some authors “people”. and yet may not able to provide satisfactory customer service.1 CLASSIFICATION OF SERVICE PERSONNEL Ø Though all service organizations are characterized by an interaction between their service personnel and customers.THE PEOPLE – THE FIFTH P In organization manufacturing tangible foods. mechanic shops. the interaction between the service organization and a customer lasts for a short period. the level of interaction varies from one organization to another and from one executive to another within the same organization. the service personnel reflect the organizational realities. Fast food outlets.UNIT 4 4. the customer develops negative attitude towards the firm. away from customers. involve low . In service business. 4.0 INTRODUCTION. etc. it is through the interaction with the staff. service marketers need to develop a high level of interpersonal skills and customer oriented attitude in employees. as we look at a marketing mix variable as controllable element. personnel come in contact with the customers in the process of production and consumption of services. in the absence of clues from tangible products the customer will form an impression of the organization from the behavior and attitudes of its staff. But. This level of interaction can be one of the bases for the classification of service organizations as well as service personnel. In services. The inseparable nature of service emphasizes the point that the human element forms an important aspect in the service industry. This may be due to the lack of interpersonal relationship between the service provider and customer. In such cases. beauty clinics. They are particularly important in those situations where. and the customer forms an opinion of the organization. the personnel perform their duties in the factories. According to Zeithaml and Bittner “the service employees are – the service. we deal with management of people within the organization as a key task.

a chef in a restaurant does not usually interact with customers. the technician may be called to talk to him/her customer and understand the problem better. they might interact with customers under some special circumstances. µ Management: The management of an organization rarely interacts with customers directly. when presenting a new dish for special guests. Interaction happens only in exclusive situations when the management wants to get customer feedback or when the customer is a high net worth important person like a corporate customer. For example. the chef may personally interact with the guests to explain the preparation. Their primary function is to design and create a tangible or intangible product/service to suit customers’ requirements. However. a technician who repairs the air conditioning systems at a company showroom does not usually interact with the customers. Therefore. the ingredients and the nutritional value of the dish. µ Md r t o ea e c n c t pro nl o ta es ne : T e e p rs n e hs e on l in ra te c t w h it c s mr u to e s only occasionally. For example. An example of contact personnel are the customer care executives of a service organization. µ Spo u p r t s ff : T e e p rs n e ta hs e on l p rfo m s p o t fu c n s a d do e r upr n tio n n t come into contact with customers at all. they interact with customers only in special cases. if a customer finds it difficult to explain the problem in technical terms to the front-office personnel. . For example. However.and try to solve their problems. customers do not interact with an accountant o or an HR executive in a hotel. µ Back office staff: The primary function of these personnel is to perform all those activities that enable the front-line service personnel to deliver quality service to customers. However. Otherwise. For example. the Chairman of an airline might interact with customers on flight to gather feedback about its services. he might meet a corporate customer who contributes a good percentage of revenues to the airline and whose relationship is critical for its business.

In addition to these two participants in the service setting. By controlling the service encounter. firms must be aware of some important motivational job characteristics. Within the service setting. As already stated the amount of control desired .1 Job Characteristics Customer contact employees in the service industry serve in a boundary spanning role or a role of linking an organization or business with its environment through interaction between members of the organization and members of the environment. the firm can increase productivity of employees and the cost efficiency of its operation.2. The result is a three. Individuals want control over their and the things that happen to them. These characteristics are: Skill Variety: Degree or range of abilities required by an employee to do a job Task identity: Degree that a job has identifiable units of work with visible outcomes Task significance: Degree of impact an employee perceives his or her job has on the lives of others inside or outside of the organization Autonomy: Degree of freedom and discretion an employee has in his or her work design Feedback: Degree of direct clear information an employee receives from superiors concerning the effectiveness of his or her performance. the firm would like to control the service situation.way fight for control.2. the firm has an interest in how the service is performed. To perform the service properly. high quality work for the success of the service firms.2 Control Issue A critical element in the customer contact position is the issue of control. In designing service jobs. Increasing firm and service personnel control Firms and service personnel must have some control of a service encounter to ensure the service is performed properly. 4. Empathy: Ability of an employee to identify with the feelings or thoughts of another employee or customer. customers must surrender some control of their lives in order for the service to be performed. customer contact personnel would like to have maximum control. To ensure the employees perform the service properly. To ensure they get the service they want. Purchasing of nonprofessional services requires customers to surrender some control during the service encounter. Support personnel to be motivated to perform consistent.4. customers want to keep as much control as they can. although usually not as much.

1: Types of Conflict in Service Organization µ E p y m lo e e conflict: 4. careful recruitment of the right kind of personnel is an important step. recognizes that employees and potential employees are .Table 4.2. Internal marketing1.4 Staff Selection and Recruitment As the value of staff rates so highly in service organizations.

review job description and person specification. a desirable or even essential quality for all jobs. The human resources management function can support advice and guide line management in this area. Develop job profile . Consider internal sources Consider using specialist recruitment agency Advertise . for example. can also be used to attract the people who share the organization’s ideals and standards. Organizations seeking to attract excellent service personnel can consider using the same tools and techniques that they use to attract customers. The person specification can be adapted to place emphasis on customer and service orientation. Marketing activities should be aimed at these internal markets in the same way as when marketing to external clients. the basic steps are as follows: (they have been listed only in nutshell owing to the reason that you have studied in detail in the last semester course on Human Resources Management) Ø Preliminary stage µ µ Identification of vacancy (may be a new post or replacement. Programmes designed to generate interest in the organization. through sponsorship and PR( Public Relations). Recruitment should not be left solely to the human resources management function but should be seen as a powerful tool in itself for enhancing and maintaining the organization’s standing and image.internally and externally Process applications Screen applications for shortlist µ µ µ µ µ .customers of the organization’s internal market and their needs and wants should be considered in the same light as those of external clients. While many sources of information exist detailing approaches and techniques for recruitment.

but also in recruitment. privatization and the introduction of a quality culture geared to customer care has led to different personnel requirements. say. Additionally. These are: . Such organizations have to compete more and more in the external marketplace. The rate of legislative changes.the staff . it can help create personal job satisfaction and can overcome difficulties associated with change. accountancy and marketing management. not just in terms of maintaining their services against competing private service providers. such as teachers and lawyers. In a situation where demand for certain skills outstrips supply. 4. to bring them to the required standard. a different approach to recruitment may need to be found.5 Training and Development Training is needed on more than one level. charities have to offer competitive salaries. such as in. They are often hampered or constrained in their strategy by existing practices which may be outdated or inappropriate and other influences including: µ µ µ µ Traditional low rates of Pay Cutbacks Tightly structured pay scales Conditions of service.low. The training opportunities offered by an organization may be influential in attracting and retaining personnel. in. for example. Essentially there are three stages in managing the training of the human resources . To recruit appropriately qualified personnel. at a broader level.paid sectors so a sense commitment may be desirable personal attributes. The degree of specialization required will govern the potential marketplace for recruits. at its basic level it may be needed to impart knowledge about a particular aspect of the organization or job. Some services obviously require staff with certain qualifications.2. which sometimes occurs. it gives focus and direction for the future to employees and also plays a communications role within the organization. for example when introducing new technologies. Charities have sometimes experienced difficulties in attracting experienced managerial staff as applicants are sensitive to the moral issues involved in receiving high salaries from charitable bodies.of the organization. or in highly specialized areas. however.service training for potential applicants. affecting organizations in the public sector brought about by compulsory competitive tendering.

there are a number of ways in which these wide-ranging aspects of human resources management can be translated into effective strategies for service Ø Training and development µ Identification of training needs. human resources management plays a very central role within an organization. the responsibilities of human resources managers include the following: µ Recruitment and selection µ Training and development µ µ µ µ µ µ µ µ µ µ µ µ Setting up new modes of operation.6 Human Resources Management Issues When the people in an organization represent its most valuable asset.2. quality circles Management of change Team briefings.Resources Management even though the commitment and initiation of such programmes must be led by top management and involve all line management and employees. industrial relations. or training and development. then the task of looking after those people is equally important as financial. insurance) Appraisal schemes Pay structures Staff development and support Trade Union liaison Conditions of service Discipline and grievance procedures Termination issues (redundancy. In practical terms. . Typically.g. managers need: ü A thorough understanding of the needs of the directors. 4. communications strategies Staff suggestion schemes Internal communicationsAdministration (pensions. e. managers and employees throughout the organization ü C a r id n ic tio le e tif a n w h og n a n it r a iz tio a l g a s a d o je tiv ol n bc e s U d r ta d n e s n in g of the needs and wants of external customers Close co-operation with other functional managers. If the human resource task is to be handled effectively. They are all concerned with human resources management. operations or marketing management. The managers who look after the people within an organization may be grouped under the headings: personnel. ill-health) Capability Additionally.

Reward systems for competence/ qualifications/performance. Provision and communication of benefits packages. together with personal and job goal specification . Publication of staff magazine and other internal communications. allowing for feedback from staff.µ µ µ Development and implementation of training programmes. Suggested elements for a customer service audit include evaluation and review of personnel issues and performance measures. Support for individual staff development. Integration between training and other functions. Ø Pay structure and benefits µ µ µ Establishment of salary structure and reviews. instilling ownership for quality issues. Transmission of new ideas and initiatives. and its close relationship with customer service can be seen. Management development programme evaluation. The broad nature of the function is clear. µ Communicating to employees the nature of responsibility for quality. Ø Quality µ Liaison with functional managers on quality initiatives. The above list contains suggestions for human resources management. however.all areas where integration with human resources . Ø Communications µ µ µ µ Internal marketing. Ensuring that staff are always kept informed and in touch. Involvement in implementing programmes for quality. pensions. the actual task will differ between organizations.

traditional practices may no longer be applicable as telephone banking and insurance services have shown. for example.is it process dependent (usually the case with highly intangible services such as legal representation) or equipment based (such as vending machines or dry cleaning). computing and so on( Studied in the last semester course on Production Management). In other cases. this seems a simple decision . as opposed to waitress service. the types of processes and the steps involved in planning a service processes. These include: µ Customer participation in the process The level of involvement or participation of the customer in the service process . There are certain specific characteristics of service process design and implementation however which should be considered. µ Location of service delivery Should the process be carried out at the service provider’s premises or at the customer’s home? For some services.3. . take-away food and financial consultancy can all be delivered to the customer at home if required. while dry cleaning or a theatrical performance will be carried out at a specialist outlet or venue. 4.plumbing or carpet cleaning should be carried out at the customer’s home. Travel arrangements can be made without visiting a travel agent and services as diverse as hair dressing. µ The service itself The service itself . without the need for any branches on the high street. implemented and monitored are really no different from those mentioned relating to the fields of manufacturing.in a self-service restaurant.process design and implementation.1 Designing Service Processes The principles by which service delivery processes can be designed.

etc. operations management. most efficient and cost. Process has been defined differently by various disciplines like computer programming. decision theory. According to all these disciplines. which would help in achieving different results to produce the desired outputs. the head offices integrated their databases with the branch offices. to take place. Business Insight 4. The new process takes only 10 minutes and requires less documentation.effective manner possible ü To enable service quality to be monitored and benchmarks to be put in place thus allowing accurate measurement of both quality and productivity ü To f c a a ilit t e s ff tr in ta a in g a d e a l e in iv u l n nb d id a s to c r y ar r s o s ilit e p nib y f r individual stages of the service transaction and delivery o ü To reduce the amount of divergence thus enabling accurate budgeting and Manpower planning etc. a passenger was required to submit an application to the branch office.ü To ensure that the service is carried out in the fastest. The whole process would take upto 10-days and involved a lot of documentation. the basic idea or the core concept remains the same. leading to low costs and very little possibility of error.. 4.2 Spectrum of Service Processes Much as we have thought of manufacturing enterprises in terms of different kinds of production processes. all service companies have made efforts to increase convenience for their customers. in addition to marketing. leading to inconvenience to customers and increasing the possibility of errors.1 shows how the process of reserving a ticket against frequent flier miles has become simple over the years. Earlier. Though the technology used differs.3.1 Simple Processes With increasing competition. including marketing. Business Insight 4. which made the process easier. . a process should involve logical steps that can be broken down to increase efficiency. The employees at the branch office would process the application and get the ticket. to book a ticket against frequent flier programs. It should have an element of flexibility. we can also think of service operations in terms of distinct processes. Later.

materials. but a rather low degree of interaction with or customization for the consumer. and upgrade their systems to offer services through the Internet. Most of these decisions are taken while planning the service process. schools. Hospitals and repair services of all types are prime examples of service shops. people. as provided by doctors. architects. lawyers. and the like.or customization for . consultants. . Let us now discuss the important decisions to be taken by a service provider in planning a service process. much as a line flow operation gives way to a job shop operation when customization is required in manufacturing. For example. and wholesaling are examples of mass services.3.the consumer increases. and equipment in serving his clientele. banks that are planning to introduce Internet banking should analyze the available technologies. 4. mass service gives way to professional service. Retail operations.3 Planning a Service Process A service provider has to take many decisions regarding the use of technology. ü Professional Service If the degree of interaction increases or customization becomes the watchword. µ Technology: A service provider needs to look into different aspects of the available technology and the extent to which it needs to be upgraded for delivering the desired services at the expected quality. which is in turn determined by the type of service offered and customer requirements. the service factory gives way to the service shop. ü Mass Service Mass service processes have a high degree of labor intensity. retail banking.ü The Service Shop As the degree of interaction with .

The main aim of these strategies is to make the products and services available and accessible to customers whenever they want to make a purchase. 4. and coffee shop in such a way that it increases the productivity of airport personnel by reducing the time and efforts involved. security check equipment. customers attach importance to the service location. it should be pleasant and encouraging for the service employees as well as the customers. inventory. passenger and visitor lounges. They perceive it as an evidence of the quality of service offered.4 DISTRIBUTION OF SERVICES – THE PLACE – THE FOURTH P Place. and increasing customers’convenience. location of the service outlets. µ Layout design: Layout involves decisions regarding both production process and front office layout. and also offers convenience to customers. and transportation. whether decision-making is to be centralized or decentralized and how the organization is to be structured. They also determine whether an informal or formal organizational structure is to be adopted.µ Service location: As services are intangible in nature. In the case of tangible goods. production is separate from consumption. Therefore. µ Organizational structure: Decisions under organizational structure determine the element to which processes need to be standardized. ticketing counters. As part of ‘place’. deals with the development of distribution strategies. The factors influencing distribution of services differ significantly from those of tangible goods. . Finally. An ideal design uses the space available to the maximum extent. the ‘fourth P’ of the marketing mix. For example. foreign banks and private banks in India today look entirely different from the old nationalized banks. service providers should choose a location that is easily accessible to customers. minimizing the movement of goods/people. company needs to make decisions relating to the channels of distribution like its geographical coverage. has a good infrastructure and the right atmosphere. the layout at an airport should place the luggage weighing equipment. check-in counters. For example.

µ Customers calling service outlets In this type of transaction. the market and the objectives of the company. 4. . telecom services. There are three distribution strategies available to service organizations.4. consumers need not move from their premises whether it is home or office to avail of the service. security services. credit card services and so on. health clubs and so on. there is no need to have personal contact and face-to-face encounter between the service provider and the service consumer. Service companies may adopt different strategies depending upon the service product.In this part of this unit we will discuss the significance of location in services and the various channels available for distribution of services. personal services and so on. we will study the strategies for effective service delivery through intermediaries. For example. µ Service firms calling customers In such a transaction. The employees of the service organization call on the customers and perform the service at the desired location. The service provider creates a conducive environment with good service care and infrastructural facilities to facilitate service production and consumption. For example. Services can be produced and consumed with the help of tangibles and equipment provided for the purpose. beauty care centres. customers have to go to service outlets to avail of the service. µ Service provider and consumer transact at arms length In such a transaction. ‘selective distribution’ and ‘exclusive distribution’. cellular services.1 Service Transactions Transactions in services can be broadly categorized into three groups. postal services. For example. theatres. Finally. We will also discuss the concept of direct distribution and methods to distribute through key intermediaries. They are: ‘extensive distribution’. educational institutions.

A service outlet without adequate parking facilities is less likely to attract customers. safety and security and so on. particularly in cities and metros. 12.000 lunches from homes and delivers them to harried students.30 pm on the dot. water and sanitation. Unless you live in Mumbai. . µ Convenience The location of the service outlet should be convenient for customers. of course. µ Competitive advantage The effect of the competition cannot be ignored while taking any decision in services. Business Insight 4. What should we learn from this unique. where a small army of ‘Dabbawallahs’ picks up 175. It’s either a packed lunch or junk food grabbed from a fast food outlet.500 semi-literate members providing a quality door-to-door service to a large and loyal customer base. hot meal from home? Most managers don’t have a choice. that is.000 packages within hours. other shopping facilities. the meals in the lunch boxes to the office goers in Mumbai. The location that provides an adequate qualitative supply of these services is more suitable for service organizations. And now you can even order through the Internet. Convenience is often measured in terms of public transport.2 provides a classic view of the excellence in distribution of services products. The Business Insight 4. Served hot. simple and highly efficient 120-year-old logistics system? Hungry kya? What would you like: pizza from the local Domino’s (30 minute delivery) or a fresh. The Mumbai Tiffin Box Suppliers Association is a streamlined 120-year-old organization with 4.µ P r in g facility ak Parking facility is becoming an important locational factor.2 Mumbai’s amazing Dabbawallahs Four thousand five hundred semi-literate Dabbawallahs collect and deliver 175. managers and workers on every working day. µ Accessibility to other services A service outlet requires a host of other services and infrastructural facilities such as electricity. At your desk. telecommunications. The location that provides competitive advantage can be preferred.

MTBSA’s system is like the Internet. one mistake for every eight million deliveries is the norm. mistakes rarely happen. Elegant logistics In the Dabbawallahs’ elegant logistics system. using 25 kms of public transport. each Dabbawallahs would have concentrated on locating only those 40 tiffins under his charge. The Internet relies on a concept called packet switching. and re-assembled at their destination. These packets are then ferried in bursts. even get misdirected or lost in cyberspace. Akola. elders . How do they achieve virtual sixsigma quality with zero documentation? For one. In a way. Packet switching maximizes network density. So whenever there is a vacancy. independent of other packets and possibly taking different routes. and by 12. Dabbawallahs belong to the Malva caste. Secondly. Ambegaon. and almost certainly not arrive on time. across the country or the world. the system limits the routing and sorting to a few central points. but there is a downside: your packets intermingle with other packets and if the network is overburdened. Who are the Dabbawallahs? Descendants of soldiers of the legendary Maharashtrian warrior-king Shivaji. In packet switched networks. assemble and arrange 40 tiffins onto a crate.can carry no more than 35-40 tiffins. wherever they come from. a simple color code determines not only packet routing but packet prioritizing as lunches transfer from train to bicycle to foot. and this specialization makes the entire system efficient and error-free. According to a Forbes 1998 article. During the earlier sorting process.30 pm they are delivered to offices. “We believe in employing people from our own community. Junnar and Maashi. and arrive in Mumbai from places like Rajgurunagar. packets can collide with others. Typically it takes about ten to fifteen minutes to search. 10 km of footwork and involving multiple transfer points. each with its own coded address which directs its routing. voice or data files are sliced into tiny sachets.

but members within a group do not. for reasons of economy. Each group is also responsible for day-to-day functioning. especially bank staff. From his earnings of between Rs 5.000 to Rs 6. more important. And this is the benchmark that every group tries to achieve.webrishi. Money is collected in the first week of every month and remitted to the mukadam on the first Sunday.000. Building a clientele The range of customers includes students (both college and school). maintaining records of receipts and payments. acquiring new customers. rely on the Dabbawallahs to deliver a home cooked mid. Some are solicited by Dabbawallahs on railway platforms. managers. managerial layers or explicit control mechanisms. entrepreneurs of small businesses. And. One Dabbawallahs could collect 40 tiffins in the same time that it takes another to collect 30.Their key responsibility is sorting tiffins but they play a critical role in resolving disputes. which means that the four Vile Parle groups vie with each other to acquire new customers.000 per month which is divided equally even if one Dabbawallahs has 40 customers while another has 30.com to access the service. It is assumed that one Dabbawallahs can handle not more than 30-35 customers given that each tiffin weighs around 2 kgs. depending on location and collection time. Groups compete with each other. It’s common sense. every . points out one Dabbawallahs. hygiene. Service charges vary from Rs 150 to Rs 300 per tiffin per month. Today customers can also log onto the website www. a twenty member group has 675 customers and earns Rs 100. He then divides the money equally among members of that group. and training junior Dabbawallahs on handling new customers on their first day. caste and dietary restrictions or simply because they prefer whole-some food from their kitchen. Typically. The rationale behind the business model is to push internal competitiveness. there is no organizational structure. Addresses are passed on to the Dabbawallahs operating in the specific area.day meal. The process is competitive at the customers’ end and united at the delivery end. Each group is financially independent but coordinates with others for deliveries: the service could not exist otherwise. who then visits the customer to finalize arrangements. New customers are generally acquired through referrals. and mill workers. They generally tend to be middle-class citizens who.

Though the service distributor does not perform the normal functions of the product distributor like storing. the following can be the functions. 4. E. They offer advice to the customers and guide them to choose the service that matches their need. These intermediaries used are known as distribution or marketing channels. 2. As a co-producer of a service. which a service distributor can perform: 1. 4. namely. the service provider. The intermediaries may perform services of many service principals and thereby provide a retailing function for customers.g.5 CHANNEL FUNCTIONS OR FUNCTIONS OF SERVICE INTERMEDIARIES Two service marketers are involved in delivering service through the intermediaries. E. 3. place and convenience utilities to the target customers. and the intermediaries.provide time. service providers use intermediaries to market and sell their services. The intermediaries often share the risk of providing the service when they contribute their own capital to acquire the equipment and deliver the service. The service provider creates the service concept and the service distributor interacts with the customer in the actual execution of the service. They collect feedback from the customers regarding the service rendered. 5. after-sales service etc. The intermediaries provide sales support at the point of sale.g. Thus.6 CHANNEL DECISIONS In situations where direct marketing of services is not feasible. 4. Intermediaries provide after sales support to the customers making the service more accessible. Often intermediaries provide wider choice of services including that of the competitors.the service principal (the service firm) and the service deliverer/distributor (the intermediary). 6. transporting. there are three participants in the service delivery process. customer. More so in the case of franchisee where he represents the service firm. . Tour operators and financial service agents. an intermediary assists in making the service available to customers at a place and time that is convenient to them. An insurance agent who gives advice about making a claim and handles much of the paper work involved in making the claim.

many cellular companies like Airtel. they have to maintain the service standards developed by the principal owner. Services are distributed through sellers’ and buyers’ agents or brokers as in stock broking and portfolio management. McDonald’s. operate through their franchisees across the world. but will also advises friends and colleagues against opting for its services.Some service providers continue to sell their services directly to the customer. Figure 4.2 gives a diagrammatic representation of various channels available to the service providers. Intermediaries also form a bridge between the company and the customers. NIIT and Aptech for example. For example. real estate. if a customer is not happy with the service provided at the franchisee of a training institute. For example. For example. or through franchises as in education and fast food etc. Figure 4. A customer’s perception of a company depends on the relationship that the intermediaries maintain with him.e. travel.2: Channel Options for Service Providers Intermediaries also playa role in co-producing the service. he would not only avoid that institute in future. etc. and hotel businesses or through agents or brokers as in insurance. as in management consulting. . i. Intermediaries benefit the customers by saving them time and offering than the convenience of utilizing the services. However.. McDonald’s franchisees follow the service standards set by the franchiser.

The company can ensure a strong relationship with the customers. their motivation and their performance. thereby enjoying the different benefits of loyal customers. due to budgetary constraints. Further. It improves clarity in communication between the service personnel and the customers. In addition. µ Flexibility and confidentiality: In distribution channels like franchising. direct distribution helps the service providers maintain the confidentiality of their core competencies without the need to share them with other distributors. In direct distribution. The service provider can monitor the operations directly and check their compliance with the service standards. This flexibility in service delivery helps to customize the service. the company can have direct control over the recruitment of staff. the franchisee has to strictly follow the rules’ laid by the franchiser to maintain the set service standards. Direct distribution is disadvantageous in the following ways: µ Financial risk: Service companies face financial challenges when they desire to expand their business without the support of franchisees or agents. µ Healthy customer relationships: Direct distribution helps in maintaining healthy and strong relationships with customers. They are required to make huge capital investments and may be forced to compromise on some aspects like promotion or research and development for new services. like repeat business and positive word-of-mouth publicity. This might result in a few dissatisfied customers moving away or shifting to competitors.µ Control: A service company enjoys greater control on its operations and services through direct distribution. . bridging gaps and removing any scope for misunderstanding. the service provider is free to make changes to the service or the service location according to his convenience or the customers’ desires. It can also maintain high quality and greater consistency in its service offerings when compared to a franchise.

the company is also planning to beef up its distribution network across the country. the franchiser’s investment burden gets reduced significantly.4 provides how Philips opted to go for franchisee expansion to increase the presence in the market.000 and direct dealers from 2. Such feedback helps improve the performance of the company. relating to specific issues of local markets.000 within a year who will cater to 75 distributors across the country as the Eye-Fi tech products are targeted at the mass market.4: Philips goes in for more franchisee operated showrooms The Rs 1. The company is currently talking to the Benzer Group of Companies (BGC) to set up a Philips outlet within their ‘Centre-One’ Mall. This information helps the organization to develop market-oriented service packages.667-crore Philips India Ltd is planning to expand the number of franchisee-operated showrooms called ‘Philips Arena’ from 12 to 25 in all major cities to promote its entire range of products across the country within a year. Business Insight 4. Business Insight 4.such as 14-inch and 20-inch CTV bracket from this month. Also service companies can get feedback from customers through franchisees on various dimensions of service quality. In order to promote these products.000 to 12. quickly and with useful interpretation. . The company has already set up a Philips outlet at Big Bazaar. Therefore. The company plans to increase the number of small retailers from 7. The company is also planning to extend the integration of its ‘Eye-Fi’ technology from 21-inch and above category to the entry levels . ü Sharing financial risk and less investment burden Franchisees invest money and other resources to arrange for the required equipment and personnel for performing service as per the specifications of the franchiser. The company proposes to invest Rs 25 crore on releasing advertisements on Philips’ CTVs this year compared to the previous year’s ad spends of Rs 16 crore.ü Knowledge of local markets Greater reach of the market provides adequate information back through the franchisee.500 to 3.

Telephone and television have been the original channels of distribution through the electronic media. in pricing and other aspects of marketing when the agents and brokers interfere and prevail over the producers as well as consumers (for example. However.ü Low selling and distribution cost Agents and brokers work on commission basis. Customers may chose known intermediaries for providing service. the company can get required information relating to local markets. Knowledge of local markets Agents and brokers operate within specific locations. new additions to this distribution channel include . Customer confidence will be high when they take service through a known broker or agent. There will be loss of control. 4. ü Customer choice There may be a number of authorized agents and brokers relating to a service in a location.4 Electronic Channels Service companies that adopt electronic channels for distribution do not require direct interaction with customers. ü Specialized skills and knowledge of the agents and brokers Persons who choose to be agents and brokers will generally possess specialized skills in persuading people. real estate business). is more reliable. generally. Service companies can exploit those skills in their favor without any additional cost. Such skills are mostly inherent and inherited. naturally.6. Service companies need not employ permanent sales force for the purpose. there are some challenges service organizations have to face in using agents and brokers as intermediaries. The information provided by these intermediaries. Selling and distribution costs are directly linked with sales revenue when agents and brokers are used. have knowledge on various local issues and possess the talent to exploit their knowledge for making sales. represent multiple service principals and as such special focus may not be provided to anyone of the service principals. The agency network of LIC of India is an example of this. Some of the brokers and agents. ü Wider representation in the market Service companies can appoint many brokers and agents and can have a wider representation in the market. Through agents and brokers.

Further. Further. . µ Increased customer convenience: Electronic channels of distribution have increased the convenience of customers. This has increased the bargaining power of the customer. he will reduce the stress on the service provider and get the relevant information and tickets online. This has increased price competition among the service providers and the bargaining power of the customer. µ Increased bargaining power of the customer: The customer can refer to the prices and services offered by different service providers online. in addition to being cost effective. µ Ability to customize services and gain quick feedback: Electronic channels of distribution enable service companies to offer customized. For example. They are also a cost efficient way of getting feedback. µ E t n iv xe s e distribution: Electronic channels of distribution allow a company to contact many customers as well as intermediaries. the service providers can get feedback from customers faster than from other channels. they also provide instant answers to customer queries online. Further.Let us now discuss the benefits of the electronic channels of distribution: µ Lower costs: Electronic channels of distribution cost less to the service provider than personal selling. services to the customers. compare them and make the purchase decision. franchisers find that electronic communication with franchisees motivates the franchisees better. The disadvantages involved in electronic channel of distribution are as follows: µ U c nr lle no t o d p ic e competition: r Electronic channels of distribution have enabled the customer to purchase services for the price he/she wants to pay. if a customer decides to book flight tickets online. online reservation of movie tickets saves the time of customers and the efforts involved in getting the tickets. For example.

I just don’t know which half. The new site will have an Intranet blog. which it has announced recently. which will drive the eyeballs on the site. The dealers will also be allowed to upload pictures and videos in this section. persuading and influencing consumer behavior. sales promotions.7 DESIGNING COMMUNICATIONS MIX FOR PROMOTING SERVICES “I know half of my advertising is wasted. there is an increase in the digital ad spending by the group. which will be accessible only to dealers. Communications within the marketing context involves informing. The group says that about 12-15 per cent of the total marketing spends in 2007 went to digital media. The current Lee site has user generated blogs. A link will be created on the site. Apart from providing brand related information to consumers. The revamped site will have a product information section called Lee Collection and a Download section which will allow users to download wallpapers. 4. An Integrated communications program is the coordinated use of the various communication mediums to accomplish is central objective. jingles and the Lee television commercial.com. they are planning to raise it to 20 per cent. where an online retail store to sell Lee products will be set up.It is not only the website that is going through a change. organizations must have a fully integrated communications programme. . The new website will be promoted through Lee’s TVC and radio spots. The company plans to endorse e-commerce on the revamped site. Lee is planning to introduce business oriented networking among its dealers in India. and personal selling. Online promotion of the website will be done by search marketing. It will be used to share information related to products and sales among various dealers.” JohnWanamaker To successfully market a service. Communications include the promotional options of advertising. which will also be there in the revamped version. which will take users to Indiatimes. and in 2008.

2 Steps in Effective Communication Communication is an interactive dialogue between the company and its customers that takes place during the pre-selling. (Dealt only in nutshell owing to the reason that the same is discussed in detail in the last semester course on marketing management) Ø Identifying the target audience: The audience may be potential buyers or current users. Companies can now communicate through traditional media (newspapers. fax machines. Knowledge follows the awareness stage and is the connection of the advertising to the branded product or service.7. Here the producer will strive to identify (c) (d) . Preference would be the next advertising objective. or those who influence it. or purchases (a) (b) Awareness of the product can be in several stages and will take time to establish. The target audience may be in any of six buyer readiness states: awareness. There are six steps in developing effective communications. selling. consuming. radio. preference. Liking is the third stage. Awareness must be a continuous process to solicit new customers.) By decreasing communication costs. if a customer were considering a steakhouse for dinner. the new technologies have encouraged more companies to move from mass communications to more targeted communication and one-to-one dialogue. The customer may like the product but not prefer it. The customer must know that such product will serve particular needs. knowledge. telephone. the marketing communicator must decide what response is sought. television). For example. liking. those who make the buying decision. and post consuming stages. Ø Determine the communication objectives: Once a target audience has been defined. Here the message of the advertising is to create an acceptance of the product to the evoked set of responses. conviction. and pagers. as well as through newer media forms (computers.4. cellular phones. the object of the advertising might be for the restaurant to become one of the options for this customer.

posters). how they felt about the message. and likeability. First. or visited the store. Or they can create opinion leaders and manage word-of-mouth. what points they recall. talked to others about it. Events . and other mass media to opinion leaders and then to the less active sections of the population. Ø Select the message sources: Messages delivered by highly credible sources are persuasive. such as hotel and restaurant lobbies. flow from television. and their past and present attitudes toward the product and company.Designed environments that create or reinforce the buyer’s learning toward purchasing a product. Non personal communication affects buyers in a two-step flow. Ø Measure the communications’ results: The communicator must evaluate the effect of the message on the target audience. . atmosphere. how many people bought a product. like press conferences and public tours staged to communicate messages to the target audience. b. broadcast media (radio and TV) and display media (billboards. magazines. and direct mail). Non personal communication channels affect buyers directly and include media. The following are some examples the communicator can use to measure the results. signs. trustworthiness. who may in turn influence others to buy. Three factors make a source credible: expertise. such as whether they remember the message.• • Personal influence carries great weight for products that are expensive or risky. Companies can take several steps to put personal communication channels to work by selling their products to well-known people or companies. magazines. how many times they saw it. For example. • Media – Print media (newspapers. and events. • • • Atmosphere .Occurrences staged to communicate messages to target audiences.

. Advertising and Service Characteristics: Services possess four unique characteristics.Role of Advertising:1) Informative advertising:. Table 4. 3) Reminder Advertising:.2 shows the options available to the services marketers with the advertising tool in the promotion mix.It provides information to an audience about a service.It involves an effort by the advertiser to convince consumers of a particular point of view.It attempts to persuade viewers to either purchase a service or inquire about it. inseparability. perishability. Advertising can be used to reduce the negative impact of these characteristics. Eg:. Eg:. Eg:. and variability can be beneficial to service firms in the following ways: Ø It can increase the probability of a purchase by the consumer Ø Consumer expectations are more clearly defined and understood by the consumer Ø The perceptions of service quality are normally enhanced since the consumer know what to except Ø The level of customer satisfaction with the service increases since consumer go into the service experience with more knowledge about what will happen.It involves the use of cues in an advertising to enhance brand and firm recall.A service retailer uses a billboard to promote the brand name and prove the location of the facility 4) Action inducing advertising:.Aservice retailer offers a 40% off coupon in its advertisements to encourage customers to patronize the store. Business Insight 4.A service retailer advertises its operating hours and store locations 2) Persuasive Advertising:.A service retailer advertises it offers the highest quality service of anyone in town. Decreasing intangibility. Eg:.7 provides an illustration about the marketers adopting new novel ways of reaching the message to the public.

mobile outdoor methods can help retain interest given the fact that it can be seen at different places and can also help reach a larger number of people. Service firms use sales promotion techniques. it is difficult to draw a line that divides the employees as sales personnel and others. There are. trade shows and so on. µ Personal selling If organizations establish communication channels through their sales force with the target market. gifts. Personal selling is face-to-face communication. However. . M Cons. A Mumbai-based outdoor advertising agency. sales personnel are not the contact employees involved in service production and delivery. Feedback can be spontaneous and customers can clarify doubts on the spot. They are also used to stimulate customer needs beyond the threshold level and thereby generate new demand for the service. But everyone contributes to sales. However. A large agency network is an extraordinary strength and distinctive competency of the corporation. Sales promotion can be implemented through other components of promotional mix. Some sell on a full-time basis and some on part-time basis. generally. premiums. to manage demand to the level of supply. the sales force of LIC protect its unique position. Industry analysts say this trend will increase in 2003 as it is cost-effective. of course. Inspite of the market being flooded with private organizations and MNCs. coupons. Life Insurance Corporation of India uses personal selling to reach the market that comprises millions of customers. It may not be possible for any other organization to build such a large sales force and manage it in a short period. exhibitions. The sales force is used to attract the market to the service outlet and/or to build the image of the organization. Not all service firms can afford to have such a large network of sales personnel. Discounts. this approach has a limited application as it is very costly as well as difficult to reach the mass market. are some of the techniques of sales promotion. it is called personal selling. some exceptions.does not attract much attention after a certain time. has come up with this new channel of mobile advertising using a number of trucks. µ S le s promotion a Sales promotion includes techniques that stimulate demand in a market during a short period and has measured responses. In the case of service firms. All employees in a service organization are marketing employees.

7. customers can be motivated and their doubts about the service offer clarified. transport and technology in recent years promoted the direct marketing concept as one of the promotional tools. They provide information by taking into consideration the anxiety levels of the customer. it is called direct marketing. Direct sales offers through sky shops on television. Word-of-mouth communication is not a controllable variable. Direct marketing is not a recent concept. Service providers can use direct marketing for promoting services. . The revolutionary changes that took place in the areas of communication system and networking information technology. either directly or indirectly. 4. It has the capability of creating excellent results for the company and if not handled properly may create disastrous results. Each of the five components of promotional mix have distinctive capabilities( that you have discussed in detail in the last semester course on marketing management)and also limitations of suitability.4 Word-Of-Mouth Communication (WOM) Word-of-mouth communication is considered the most powerful communication channel in services marketing.µ D e t marketing ir c When intermediaries are not involved between producers and consumers. direct contact of customers through mail. Organizations can influence the sources. The effectiveness of a promotional campaign depends upon how efficiently the mix is designed. The major task for service firms is to design a proper mix of these components. The following are the sources for generating word-of-mouth communication: ü Contact employees Contact employees of the service generally engage in informal discussion with the customers. By transmitting the service process and other features and options through the electronic media. Marketers should identify the sources of word-of-mouth and develop appropriate strategies. to generate a positive market image. e-commerce and so on are examples. Direct mail to a prospect initiates need gratification process. It is one of the alternatives for the producer to reach the market. The inclusion of direct marketing as a component in promotional mix is a recent phenomenon. Customers tend to give greater importance to the informal information provided by contact employees.

Ø If two-thirds or three-quarters of your ad budget is not available to place your ad after production costs.5 Steps for Success in External Marketing Service companies need to follow certain guidelines in the development of communication programmes. Packaging. Ø Read and respond to customer letters and phone calls. if possible. Ø Making time-limited offers is one of the best spurs to sales. Ø Put yourself on all your mailing lists. “It is human nature to think wisely and act foolishly”. 6. put it aside for a few days. Thad D. Ø Have friends do the same and give you an honest feedback. Then review it. Put yourself in the customer’s shoes.all can effectively influence the emotional side of a decision. 3. Don’t forget the emotional side of decision making. Ø Write it down. rethink your advertising plan. music. such as national holidays and company anniversaries. 2. to see how the average customer is treated. . 4. graphics. Ø Make sure your goal is actionable and measurable.7. Ø Shop from your company anonymously. but will the customer? Have your ads been reviewed by someone who is not familiar with your services? Ø After developing your ad. Ø Use special occasions. to limit the time of the offer.4. Ø Ask your employees to read it and then restate it in their own words to be sure they understand it. Shelly Porges in their article on ‘Marketing and Communication Tools for Service Marketers’ suggest the following ten guidelines for communication campaigns. casting. with special reference to services: 1. Ø Make sure everyone in your organization knows what the goal is. Make sure you’re not ‘talking to yourself’ in your ads. Anatole France once said. Ø You know what you mean. Don’t starve your media budget. Define your goal clearly and focus on it. 5. Peterson and K. Does it still make sense? Time is a sales tool-limit it. Ø Limit the number of major goals you have each year.

relationship marketing is to identify and establish. most people would like a bank which understands their personal needs and suggests suitable investment options. a service representative of the organization provides only the service sought by the customer.8.4. CRM is marketing-oriented towards strong lasting relationships with individual accounts (Jackson). They would prefer it to a bank which provides excellent service. but treats them as just one of its many customers. For example.1 What is CRM? In marketing literature. and when necessary terminate relationships with customers (and other parties) so that the objectives regarding economic and other variables of all parties are met. Their employees attempt to sell their service considering it to be a one time process. maintain and enhance. This is achieved through a mutual exchange and fulfillment of promises” (Christian Gronroos). In this kind of marketing. “(The purpose of) . maintain and build a network with individual consumers. whether he needs some other service. He is not interested in gaining the loyalty of the customer.enhancing customer relationships. The following are some of the definitions of CRM. These two terms are used to reflect a variety of themes and perspectives relating to customer management.. Relationship marketing is an integrated effort to identify. individualized and value-added contacts over a long period of time (Shani and Chalasani).. and to continuously strengthen the network for the mutual benefit of both sides through interactive. maintaining and enhancing customer relationships (Berry). He does not make any effort to get to know whether the customer is satisfied with the service. The method of marketing in which a service organization or its employees communicate with the customer only when he approaches it for service is called transaction marketing.in multi-service organizations . or would like to come back again for the service. the term Customer Relationship Management (CRM) and Relationship Marketing (RM) are used interchangeably. Organizations which adopt the transactional style of marketing can be said to be lacking foresight.2 Traditional Marketing Vs Relationship Marketing Traditional marketing is transaction oriented and as such it is also called transaction marketing. the fact that the personal touch and focus on the customer is lacking affects the organizations and they often end up losing their customers. . “Relationship marketing is attracting. 4.”(Berry and Parasuraman). Even though they may offer quality service. Relationship marketing is attracting. maintaining and .8.

these skillful efforts will be of little use if the company suffers from high customer churn (gaining new customers only to lose many of them).8. relating to keeping or dropping a given product or service relationship. service companies need to do the following: ü I e tif y th e n e d f r r la n h dn e o e tio s ip s in d f r n t a e s of business if e e ra operations ü C lle o c t d t a a d inomtio a n fr a n r la e tin g to th e prospects ü Cr f ll aeu y s r tin c u iz e th e lis t of prospects ü Ds e ig n po r m e r ga m s f r b ild o u in g relationships ü Develop plans for approach and re-approach ü Develop packages for maintaining relationships ü Dv lo p packages for enhancing ee relationships ü Tr i n p r o n a es n e l in relationship marketing ü Ds e ig n th e s s m . inr s u tu y te f a tr c r e a d s p o t s r ic n upr ev e s th t a f c t e relationships a ilita ü E e u e th e programme xc t ü Ds e ig n a f e b c k system eda ü C lle o c t f e b c k a d mk e n c s a eda n a e es r y improvements 4. Buys more as the company introduces new products and upgrades existing products 3.4 Customer Retention The trend in marketing towards building relationships with customers continues to grow and marketers have become increasingly interested in retaining customers over the long run. a highly satisfied customer 1.3 Essentials of Relationship Marketing In order to make relationship marketing workable. Stays loyal longer 2. Attracting new customers requires substantial skill and effort. Companies do spend a lot of money through different media to attract new customers to the business. Marketing analysts have identified satisfaction as a key determinant in a consumer’s decision making. However. The key to customer retention is to offer continuous satisfaction to customers.4. According to Philip Kotler.8. Talks favorably about the company and its products .

the lifetime value of all the consumer products and services you will personally use over the next 25 years is worth Rs.000 times the value of a single pack of cigarettes. roughly 7. It means if a customer keeps buying the same product over his entire lifetime. Therefore. According to the agency. it adds up to a tidy sum. Quick problem solving and empowering the frontline to solve problems are very important directions for the service organizations to follow. it adds upto Rs.8. there is a possibility of things going wrong. They should develop an orientation that ‘the customer who complains is your friend’. Under such circumstances. Marketers are looking for ways to keep in touch with their customers by providing a personal touch and building informal relationships. Powering RM is the concept of lifetime value of a customer. Relationship marketers leverage their databases to convert potential buyers into customers and then build a long-term alliance with them through a range of insightful targeted programmes. The continuing relationship with customers over a long period helps an organization to gain values in four different parameters: . In service business. 25 crore over the same period of time. sometimes.10 lakh over a 10 year period. Specific customer needs are brought into the organizational system to design new ways and to improve the offerings to the clients. Structural bonds are created by providing highly customized service to the clients. 1. sc o ia l a d s r c u a n t ut r l bonds The strategy is to develop structural bonds along with financial and social bonds. that is. a recovery strategy needs to be designed for retaining customers.4 crore and if you add the value of the products whose buying you will influence. service firms should track and anticipate recovery opportunities.are customized to fit individual needs. Hindustan Thomson Associates’ research shows that the lifetime value of a onecigarette smoker is Rs. 1. Effective recovery is essential to save and even build relationships. 4. ü F ac l in n ia .5 Lifetime Value of Customers In relationship marketing (RM) every customer is considered as a special target.

µ Take action through a third party (consumer protection group. µ Aa d b n o n th s s p lie r a d d c u g i up n is o ra s rv e ic e (negative word-of mouth). µ Time When consumers find a reliable seller they need not waste time searching for various other sellers. The risk of defection is high. especially when there are a variety of competing alternatives. e o e r po l th ep e fro m u in g th e s Following through the sequence of possible reactions. This model suggests at least four major courses of action: µ Do nothing µ C m la o pi n tho g h s m e ma s to th e s rv ru o en e ic e firm. µ In absentia purchase A continuous rapport with the seller enables the customer to communicate his/her likes. . µ Search The information search costs and energy costs gets minimized. leav•ing the customer anything from furious to delighted. customers seek sellers’ support in taking purchase decisions. 4. dislikes or preferences. without personally going out for the service. µ Credit Customers may seek liberal credit without security from a known seller. consumer affairs or regulatory agencies. The advice of a known seller provides greater support to the consumer. He may manage to get the products at home.4 depicts the courses of action available.µ Reliability Customers want to build relations to find a reliable source of supply and service. µ Exchange A known seller accepts return of defective goods or executes recovery in the case of service without any difficulty. µ Support Many a time.9 CUSTOMER RESPONSE TO SERVICE FAILURES What options are open to customers when they experience a service failure? Figure 4. we can see a variety of end-results. civil or criminal courts).

The problem fits a pattern of failure rather than being an isolated incident. Effective service recovery requires thought• ful procedures for resolving problems and handling disgruntled customers. service organizations get a second chance to rectify any mistake that occurred during the delivery of service in the first instance.1. and yields data that can be inte2grated with other measures of performance to assess and improve the service system”. firms don’t always react in ways that match their advertised promises). because even a single service problem can destroy a customer’s confidence in a firm under the following conditions: The failure is totally outrageous (for instance. If the problem is resolved and the customer is satisfied. he may give up his attempts to switch to competitors. blatant dishonesty on the part of the supplier). The recovery efforts are weak.when things go wrong for the customer (unfortunately. If the company continues to provide high quality service. effectively resolves customer problems. classifies their root cause(s). By adopting a service recovery system. It is critical for firms to have effective recovery strategies.5 Components of an effective Service Recovery System 4. “Service recovery is a process that identifies service failures.1 Guidelines for Effective Problem Resolution According to Tax and Brown. it might succeed in earning a loyal customer.9. This loyal customer could tell his friends and relatives . Figure 4. serving to compound the original problem rather than correct it.

telling customers how the organization plans to proceed shows that corrective action is being taken. then either a monetary payment of offer of equivalent service in kind is appropriate. The model calls for a special marketing programme between the company and its employees which is termed as internal marketing. µ Persevering to regain customer goodwill When customers have been disappointed. Nobody likes being left in the dark. Fig. µ Keep customers informed of progress. such action may also help to reduce the risk of legal action by an angry customer. When customers did not receive the service outcomes that they paid for. Gronroos has identified three important groups that play critical roles in successfully accomplishing organizational goals. one of the biggest challenges is to restore their confidence and preserve the relationship for the future. 4. When instant solutions aren’t possible.10 THE SERVICES TRIANGLE One of the most popular strategic models for services marketing was developed by Christian Gronroos. The model is called the service triangle model. They are company (top management). It suggests the design of three marketing programmes as the integral parts of the services marketing programme. Uncertainty breeds anxiety and stress. The model proposes a three-dimensional approach for the development of the overall marketing strategy. People tend to be more accepting of disruptions if they know what is going on and receive periodic progress reports. In many cases. It also sets expectations as to the time frame (so don’t over promise!). employees and the customers. µ C n id os e r compensation. not only to defuse their anger but also to convince them that actions are being taken to avoid a recurrence of the problem. what customers want most is an apology and a commitment to avoid similar problems in the future. 4.µ Clarify the steps needed to solve the problem. or suffered serious inconvenience and/or loss of time and money because the service failed.6 presents the services marketing model. Outstanding recovery efforts can be effective in building loyalty and referrals. This may require perseverance and follow through. The second marketing programme is between the . Service guarantees often layout in advance what such compensation will be.

The customers need to play an active role in the service production process. consumers should be given training so as to promote qualitative participation and high level of customer perceived quality. Internal marketing can make or break a company. Marketing should be part of the philosophy of the organization. however. In addition. simultaneously and efficiently. with adequate support services. The hotel must have a staff who will perform well during moments of truth. ( Dealt in detail in the section 4. Marketing in the Services industries must be embraced by all employees.1 Role of Internal Marketing in Service Delivery Marketing aimed internally at the firm’s employees. This is an important phrase in services marketing. in the process of service production and consumption should also be mentioned. ( Dealt in detail in the previous units) 4. employee satisfaction decreases. for both customers and employees. The service process needs to be facilitated between the two parties. The ultimate aim of external marketing is to prepare the customer to participate in the service production and consumption.problems) if any. The Services industry is unique in that employees are part of the product.7) Ø Interactive Marketing Internal marketing and external marketing prepare the stage for actual interaction between employees and customers. Internal marketing has two benefits: customer satisfaction and employee satisfaction. tangibles. Internal marketing is marketing by a service firm to train effectively and motivate its customer-contact employees and all the supporting service people to work as a team to provide customer satisfaction. it cannot be left up to the marketing or sales department.10. If necessary. when customer satisfaction increases. if possible. The goal of interactive marketing is to facilitate efficient production and consumption process and to create positive and satisfactory experiences. The interaction between employees and service firms and their customers are also called ‘service encounters’. techniques and other support materials. Some employees who leave companies do so because of the poor level of service being given to customers and the . There is a two-way relationship between customer satisfaction and employee satisfaction. There is considerable evidence that employee retention and customer retention are related. and the marketing function should be carried out by all line employees. there is also a relationship between quality and employee satisfaction. When customer satisfaction decreases. employee satisfaction increases. systems.

Additionally. The customers are now at the top of the organization and corporate management is at the bottom of the structure. µ Development of a Marketing Approach to Human Resource Management. For employees. transportation.care facilities are attractive attributes as well. ü Creating jobs that attract good employees: Managers must use the principles of marketing to attract and retain employees. and attitude than on education. the attitude the employee displays as he ir or she delivers the service experience. In this type of organization. ü Te m o k a wr : In c ma ie o pn s th t pa tic e in r a l mr e g a rc te n a k tin e p y mlo e e makes an error. energy. everyone is working to serve the customer. flexible working hours. ü A h in g process: The service product is. parking. Managers should examine the problem of burnout to reduce the turnover rate. selection. just as they examine the needs of customers. and to emphasize that all employees are empowered to do what is necessary to meet guest expectations. ability to work with others. Using a marketing approach to develop positions and company benefits helps to attract and maintain good employees. in a conventional organizational structure is that everyone is working for their bosses. To test for behaviors such as a sense of humor. at least in part. pay. and friendliness. the marketing mix is the job. benefits. Hence. The cost of employee turnover is undoubtedly high. and training strategies. When a company has a service culture. other employees try to cover it before the guest notices. Southwest Airlines strongly believes inherent attitudes cannot be changed in people. such as prestige and perceived advancement opportunities. For example. Advertising should be developed with prospective employees in mind. They must research and develop an understanding of their employees’ needs. This idea means that service firms place more emphasis on personality. the organizational chart is turned upside down. hours and intangible rewards.to demonstrate appreciation for employees. building a positive image of the firm for present and future employees and customers. training. and very little attention is paid to the customer. For example. child. Southwest’s interview process includes group interviews where applicants tell jokes and role-play a variety of situations to demonstrate team work and the capacity to act spontaneously. The problem with this type of organization is that everyone is concerned with satisfying people above them in the organization. service organizations need to hire for attitude and train for skills. For example. McDonald examined the problem of burnout at management levels and reduced this problem from 36% to 21% annually. location. if o e n . good health insurance. Furthermore. In . and experience in their recruitment.

and encouraging employees to try the company’s products and services. Communication must be designed to give them frequent feedback on their performance. Review Questions 1. Discuss why these conflicts occur. Hospitality organizations can communicate with their employees by employee newsletter. Sheraton. . What marketing and management challenges are raised by the use of intermediaries in a service setting? In what ways do the objectives of services communications differ substantially from those of goods marketing? Define internal marketing and discuss how a firm can use it. 8. 3. 7. Discuss how a service business can develop customer-focused personnel. technology (database which is readily accessible to employees). personal communication. For example. 9. 2. in-house newsletter. Most reward systems in the hospitality and travel industry are based on meeting cost objectives and achieving sales objectives. Taj and other major hotel companies survey their guests to determine their satisfaction level with individual attributes of the hotel. Identify the conflicts faced by employees of a service firm. Why is the ‘people’ element of the marketing mix so important in services marketing? Compare and contrast the role of customer contact personnel and support personnel. The results of any service measurement should be communicated to employees. 6. 4. µ Implementation of a Reward and Recognition System. What is meant by “distributing services”? How can an experience or something intangible be distributed? Cite the advantages and disadvantages of franchising as a distribution growth strategy Specify the ways a service firm or service personnel can increase their control during the service encounter. 5. Marriott.communicating with customers is through customer-contact employees. An internal marketing program includes service standards and methods of measuring how well the organization is meeting these standards. Employees must know how they are doing to perform effectively. A few companies are now starting to give rewards based on customer satisfaction.

Organizations can also save on the time and effort involved in attracting new customers. persuade. customer participation and the service itself -whether it is technology based or process based. it conveys the service quality provided by the service provider. The objectives of a firm’s communication mix often relates directly to the service offering’s stage within the PLC. ‘place’. and electronic channels are the main types of distribution channels of a service provider. they opt for various forms of intermediaries. publicity. enhancing corporate image. Internal marketing is a process in which organizations consider employees as internal customers and strive to satisfy their needs and requirements at work so that they. A variety of special considerations that pertain to services must be addressed when developing the communication mix.determines how a service should be created and delivered to the customer. offer quality service to external customers. public relations. Internal marketing plays an active role in retaining customers as well as employees. The complete communication programs of an organization constitute promotional mix. Service organizations aim to deliver services through direct distribution. and direct marketing. Communication strategy is one of the key components of a firm’s overall marketing mix. involves various efforts made by the service organizations to make the services accessible and available to the customers. implementing change management and ensuring the organization’s success. divergence. When service providers cannot deliver services through direct distribution. sales promotion. and/or remind consumers about the services being offered. Its role is to inform. namely. Berry and Parasuraman defined relationship marketing as a process of attracting. advertising. agents and brokers. Customers can reduce their time and search costs and avoid anxiety by selecting services from a known supplier. Franchisees. service location. Further. . The fourth element of the marketing mix. and stamps an image of the service company in the customer’s mind. Relationship marketing benefits customers as well as organizations. in turn. These are personal selling. maintaining and enhancing relationships with customers. where a service provider visits the customer or a customer visits a service provider. The characteristics of service process include complexity. Service location plays an important role in service delivery.

This unit examines some important services in India and analyses the services operations from the marketing point of view so that you will enhance you level of understanding and can make use of the concepts discussed in the earlier units to improve your organizations in future. and.UNIT 5 5. pathological labs. the role of healthcare marketing has increased. nursing homes and private hospitals. Considering healthcare a commercial industry was beyond imagination even for the best business analysts.0 INTRODUCTION As discussed in the earlier units the services sector has registered a substantial growth during the last two decades in India. In those times. as per the expectations of industrialists and economists. competition has intensified. The application of modern services marketing principles will certainly enhance the internal and external efficiency of service companies and enable them to deliver quality services to the customers. health clinics etc. directly and in collaboration with the private corporate giants of India. . healthcare meant a government hospital or a private dispensary that provides medical facilities. leading to privatization and private participation in service sectors. Under these circumstances. service companies of India have no other option but to adopt the marketing approach to achieve organizational objectives. healthcare was provided mainly by the Government. Gone are the days when doctors were very few and patients were treating them like gods. fitness centers. physiotherapy centers. has further forced the sector to be market oriented. With the change in government policy. But now with mushrooming of private clinics. Today. There was a time when healthcare meant only hospitals. 5. in a developing country like India. ambulance services. they could afford to choose their patients and how to treat them. Initially when only doctors were available at far-flung places or only in government hospitals.1 HEALTHCARE SERVICES Healthcare services have changed tremendously. Though it emerged as a full-fledged industry in the West a long time ago. Its growth prospects are very high. With increase in competition. They also have to recognize the distinctions between marketing approaches followed by manufacturing organizations and service organizations. they can ill afford to treat them with disdain. the word ‘healthcare’ encompasses a much broader meaning and embraces many other allied services like diagnostic services. The entry of multinational corporations. corporate hospitals in India have just started making their mark.

Company officials said the franchisee model outlets are likely to come up in towns like Rohtak. Business insight 5. Karnal. Today. how a fitness clinic VLCC decided to expand through franchisee mode which is discussed in the earlier units. Unani. Meerut. Trichy. which till recently was a state monopoly. is still conventional in its approach. but also a commercial activity and comes under the purview of the Consumer Protection Act. It currently has 100 company-owned centres across the country. In contrast. . It said it has created all necessary backbone infrastructure such as strong R&D. the mainstream medicine. alternate medicine. Pranic healing. Moga. The awareness among people to be fit and look good is more in tier II and tier III cities in comparison with what it was a few years ago. The company will invest in training the staff. This is the first time that VLCC has chosen the franchisee route for expansion. Udaipur. Interestingly. The proposed franchisee model will involve an investment of between Rs 30 and Rs 40 lakh depending upon the city and the size of the outlet. healthcare is not just a profession.corporate hospitals in Tamilnadu. Reiki etc. Business Insight 5. which has always been in the hands of private people. 1986.1 provides. People are willing to spend more on healthcare services company officials said.1: VLCC in expansion mode Vandana Luthra Curls and Curves (VLCC) Group plans to expand its healthcare chain through the franchisee route and is focusing on smaller towns with a population of between 100 million and 500 million. like Homeopathy. is moving towards corporatization at full throttle. popularly known as Allopathic/English medicine. so that we can support our franchisee outlets well and ensure their scalability. However. Coimbatore etc. Nature cure. Phagwara. government and other hospitals where services are provided free of cost are exempted from the purview of the Act. Even the personal care spend in those areas is going up. Ayurveda. training facilities. The company plans to have 55 outlets in the first phase and another 145 by the end of 2009. Naturopathy. The uniqueness of the Indian healthcare system is the presence of various streams of alternate medicine. technology and R&D support. owing to the tremendous growth potential.

“However. To achieve excellence in healthcare services the following strategies need to be employed.C) Gurmit Singh Chugh. an open. Others say cost differentials in other treatments could get far more attractive going upto any figure between 200 percent and 800 percent. The complete package will cost less than what one has to pay for the medical charges alone.heart surgery that run upto $70. Afghanistan.in Europe or America.2 Strategies to Achieve Excellence in Global Health Care Services There has been no concerted efforts to market India as a healthcare destination though it has always attracted thousands of patients from abroad. competence level of physicians has surpassed that of their western counterparts.000 in United States. . there used to be a big gap between the launch of technology and the technical competence of physicians in the West and India. cost $3. marketing manager.000 in the best of Indian hospitals. “In terms of costs. Medical treatment can be done in India at a fraction of the cost at which it is done abroad . a subsidiary of the $3 billion Boston Scientific Corporation.000 in the United Kingdom. 5.” says Bali of Workhardt adding.” “tens of thousands of people travel to Indian cities from neighboring countries for something as simple as a cataract removal to complicated treatments like heart and kidney replacement surgeries. It is identified as the next big foreign exchange earner attracting patients from South East Asia. patients can benefit by 30 percent to 50 percent in just tertiary care procedures by visiting hospitals like ours. depending on the types of procedures. and upto $150. In the late 1980s and early 1990s most medical traveler coming to India were from the Arab Countries. in other European. Africa and South East Asia. of Boston Scientific International BV. patient can visit different tourist destinations in India.” D) Low cost of treatment is undoubtedly the other big attraction.000 to $10. But today there is a significant number from the US nations. Middle East or America. cardiology. “even patients from next-door South-East Asia countries coming to our hospitals for bypass surgeries save 35 percent in spite of their airfare.” he said. Besides providing you medical treatment. “Five-six years back. For instance.1. the Middle East and Africa. over a period of time. Multispecialty hospitals in India offer a wide choice for the patients.” Health Sectors in India has improved tremendously in the part 15 years.

Medication errors are one of the leading causes of deaths in hospitals. is introducing the universal ‘EAN. The system can also act as a damage containment tool by enabling fast recall of harmful. “said Reddy. “We have great potential in terms of technical skills. (IOM) has estimated that as many as . Once implemented.UCC system will enable automated and unique identification of all hospital supplies. will soon be a reality in India. the EAN. Business Insight 5. This data can be instantly and accurately accessed for rendering emergency treatment. developed by EAN International (Brussels) in collaboration with the healthcare sector. blood and blood products. thus reducing error and processing time. surgical implants and medical supplies. a non-profit organization set up by various industry bodies and the Union Ministry of Commerce to promote global supply chain standards. reduced medication errors. all these and more. and updated hospital supplies inventories. expired or spurious products from the market.2 provides insight to the role of a non-profit organization in improving the quality of healthcare services in India. Patients in hospitals will also get identified through ‘barcoded’ wristbands that will carry a unique identifier which links to the hospital from where the patient’s detailed medical history can be traced. pharmaceutical companies. drug stores and blood banks across the country and major hospitals have expressed interest in adopting the globally recognized EAN. tracking and tracing of pharma drugs. safer blood supplies. US. A report by the NationalAcademy of Sciences’ Institute of Medicine. Business Insight 5. “Indeed India has tremendous potential to become a healthcare destination. These barcode standards. will help streamline healthcare supply chains across the country. EAN India has already initiated discussions with various State and private hospitals. EAN India.UCC standards.2: To streamline healthcare services — EAN India introduces barcode standards Enhanced patient safety.UCC’ barcode standards in the country’s healthcare sector. speedier and accurate billing and documentation. We only need to work on the perception of foreigners towards India to achieve our goals.Indian health care industry comprises roughly 4 percent of the country’s GDP. could achieve a growth rate 13 percent annually in the next six years.

These services help give a tangible effect to the intangible nature of the services provided. Patients prefer a friendly doctor who gives personal attention. doctors who have their private practice.services like maintenance of the case history of patients. in the sense that the service provider should be easily accessible to the patients. Doctors and technicians. diet. form the core of this knowledge base. many hospitals run their own medical and nursing schools to train staff according to their requirements. but at the same time. and also the right attitude. They can refer their patients to these hospitals for diagnosis. hygienic and meticulous. support staff like nurses and housekeeping personnel should be well-mannered. Corporate hospitals can also use ambulances to offer immediate care to patients in emergency conditions. People include patients. The support and assurance of the doctor is the best medicine for the patient and cures him largely. many hospitals also conduct customer education programs to enable patients and the attendants to appreciate the value and quality of healthcare. Healthcare is also a knowledge-based industry. Apart from maintaining quality staff. In order to provide quality treatment and support services. For example. stores. Patients also play a role in service delivery. should be adequately protected from pollution. Therefore. Ø People Mix Without people. security etc. apart from being technically qualified. pharmacy. Ø Place Mix Place is one of the key elements. work as visiting/ consultant doctors for corporate hospitals. . Other doctors too can refer their patients to corporate hospitals. and the staff who treat and take care of those patients. billing and support operations like laundry. it is important for corporate hospitals to attract and retain doctors with excellent knowledge and skills. Corporate hospitals can distribute their services using the services of doctors and private clinics. gentle. surgeries etc. to a doctor who treats them as commodities and deals with all of them alike. registration. healthcare as an industry cannot exist or survive. It is impossible to have an efficient delivery if the patient is not either confident or supportive. who take care of the diagnosis and treatment of patients. as they do not have adequate facilities for specialized services. So. Patients should be provided utmost care as their recovery depends not just on the medical treatment but also on the human touch provided by the support staff.

Providing online consultation is also fast gaining popularity in the West. then the patient becomes an inpatient. Membership cardholders are given treatment at concessional rates. regular wards etc. security etc. the overheads. depending on the facilities provided to them. cost of equipment and infrastructure. viz. A satisfied and happy customer is the best ambassador of healthcare marketing. Affiliated academic institutions educate and train healthcare professionals and research institutions concentrate on discovering and developing new concepts. salaries and wages of the doctors. the patient can avail of the services as an outpatient. The processes for these two services are little different. Services for inpatients are spread over operation theaters. Many hospitals follow differential pricing policies. Ø Price Mix Pricing healthcare services is done keeping in view the cost of running the hospital. diet for the in-patients. Administrative work like registration. Ø Process Mix Services are provided under two broad categories. is carried on by the staff assisting the line officers. . Every person playing a part in the delivery of health care services should understand that they are there because of the patients/customers and not vice versa. Alternate medicine is not yet fully commercialized. If the doctor says that simple medication is required. nurses and the administrative staff. quality of service and the income levels of the patients. some hospitals run mobile clinics to provide patients easy access to their services. it may take some time for the masses to welcome such innovative concepts. The basic process however starts with reporting at the reception at the appointed time and meeting the doctor concerned for diagnosis and treatment. Patients opting for general wards and private wards are also charged different rates. if the doctor says that the patient needs special continuous care and needs to be admitted to the hospital. emergency units. services for inpatients and those for outpatients. It should be remembered that mouth to mouth publicity is the most important publicity. Apart from the in-house treatment.latest technologies like close circuit cameras. intensive care units. where technical awareness is comparatively low. so services are provided for nominal prices. stores. though in India. Corporate affairs are managed by professionals specially appointed for this purpose. bed occupancy. maintenance of the patient records. However.

the hotel industry has grown in size.2. In the parlance of hospitality industry. if possible. Though most of the hotel operations are being same. The segmentation of the market is largely based on the affordability of the customer. toilets. occasion. A number of hotels have come up in various parts of the world to facilitate the people who are traveling. rooms with beds and other facilities. In countries where tourism is progressive. Over the years. delight them. a hotel should design a marketing mix strategy. The hotel industry is dependent on tourism and travel industries.2. hospitality services are also progressive. The other criteria used by hotels include the purpose.1 Hotel Services A hotel is a home away from home where all the facilities and services are available on payment. customers are regarded as guests. It is the key factor to attain success and to the very existence of the industry. . The following are the basic dimensions of the marketing mix of hotel services: Ø Product Mix The core service offered in a hotel is hospitality. Hospitality is a commercial proposition. The marketing of hospitality services includes designing the product.1 Services Marketing Mix of Hotel Industry Keeping in mind the focused target segment. the aim of getting guests satisfaction can be achieved only through assured high quality service. the physical environment. pricing. and together they constitute the hospitality industry. 5. loyalty and so on.1. place. The facilitating services (or goods) are: a well-constructed and secure building. The growth and development of the tourism sector is reflected in the development of hospitality services. The services offered are mostly market segment specific.of expectations of guests in the hotel industry is steadily increasing and they are becoming harder to please and even harder to retain. Now we will discuss each industry with their significant role in developing the national economy strategies adopted by them and their services marketing mix in detail. Personalized service is the only counting factor to improve the arrival of new guests and make them as our guests for ever. promotion and process. 5. The ultimate goal of the marketing programme is to offer quality services that satisfy the customers and. individual or group.

consumers definitely keep the pricing of the competitors as reference prices. while arriving at a price decision. . specialized furniture. wall hangings. air quality. The management of the hotel should be flexible and innovative while designing the interiors and introduce modifications to add value perceptions without causing much disturbance to the routine. suites. Customers’ perceptions of the ambience determine expectations of the quality of service. However. it is necessary to assess the impact of pricing of the competitive offers on the consumer decision-making process. The problems are not only in arriving at pricing decisions. Room tariffs are fixed for various categories of accommodation such as single occupancy. for special events and for special parties organized inside and outside the hotel. Though services are not closely comparable. The architectural values. The exterior influences the expectations of the quality of services that customers are likely to receive from the hotel. The decision on pricing is very critical and complex because of the presence of a large number of elements with individual features in the basic service product. lighting.quality relationships.The exterior of the hotel creates the first impression on the customers. signage. Prices are also fixed for various food items offered in the restaurants. Pricing can also be used to manage the demand fluctuations in this service. Hoteliers generally take special care while designing the interiors. The reception and the signage should be customer friendly. non• air-conditioned rooms. double occupancy. Besides establishing price. Ø Price Mix Prices are fixed for various services as well as tangibles in hospitality services. Special tariffs may be offered to the customers fro business and trade to promote loyalty. The design of the exterior should be capable of attracting the attention of the prospective buyers of the service. but also in communicating price to customers and influencing them to develop value perceptions of the rates. During slack seasons. and layout are all parts of the interior of the hotel. air-conditioned rooms. hotels may offer seasonal discounts. the prices of similar offers from competition must also be considered. Consumers are likely to give more weightage to the value they receive. placing of articles. Hence value pricing is highly appropriate for hospitality services. Cost plus pricing is not very relevant in hospitality services since consumers do not have an idea of the various costs involved in the service offering and the level of efficiency of the management in managing the costs. conference/ function halls and so on.

Advertising in print media as well as electronic media are widely used by large hotels. Some hotels organize special events to attract customers. Major as well as minor moments are capable of influencing the quality perceptions of the customers. The employees of the hotel are in a tight situation since they cannot afford to displease either of the parties. meetings and special programmes are strategies to create publicity. without any additional financial commitment to the customer. employees are faced with problems. and direct marketing as the components of the promotion mix. The existing customer may plead for an extension of stay in the hotel for some personal reasons. Human resource policies are to be designed keeping in view the requirement of the job and the challenges associated with it Employees should be given a clear picture of their roles and responsibilities and team work has to be promoted. and also tendering an apology for the deficiency in service. An integration of internal an external marketing is necessary for the process to be effective. The customer who has arrived finds deficiency in service after realizing that the reserved accommodation is not available and may pick up a quarrel with the service personnel. the accommodation may not yet be available. public relations. personal selling. A customer may reserve accommodation well in advance. Hotels try to build and maintain relations with business houses so that official visitors make use of their hospitality services. need service personnel who are courteous. On many occasions. Such situations. Customers experience many moments of truth during their stay in a hotel. Ø Promotion In the marketing of hospitality services customers have to be drawn to the service outlet. Sponsoring events. They have to explore the possibilities of satisfying both the parties and arrive at a decision on the spot without losing much time. Interactive marketing is of vital significance in hospitality services. External marketing has a major share in the success of this service business. exhibit empathetic behavior and use common sense. Under such circumstances the contact service personnel are expected to come out with a recovery strategy. When he arrives. An effective communication campaign for creating awareness and persuading customers to visit and stay in the hotel is necessary. Hoteliers use advertisements. owing to uncontrollable circumstances. Many hotels announce price discounts and other benefit packages for individuals and families during weekends as room occupancy during weekends generally low. in the light of severe competition. sales promotion. by offering a better package. Interaction with employees generate many moments of significance. Sales promotion helps to create demand during slack periods. . publicity.Recovery from service deficiencies is a major challenge in managing hospitality services.

1992 crores in the year 1988.01 crores – accounting for 2. curios and handicrafts.74 25. The Indian tourism industry has worked very hard to put up tourism infrastructure in the country for attracting overseas tourists in the last couple of years and its result were noticeable in the year 2006-07 when the total tourist inflow stood around less than five million.8 12. It was Rs. It has an employment generation potential of 1.3: ‘Tourism will improve’ The Associated Chambers of Commerce has a strong belief in India’s tourism industry’s future. repairs of all tourist sites wherever possible through central assistance and many more similar initiatives will help the trend continue.000 crores and goods and services purchased worth Rs.000 crores to the national economy – foreign exchange earnings are Rs. 37.5 2010(expected) >100 (Figures include visitors from Bangladesh and Pakistan and business travelers) On an average. tourism at present is contributing to more than Rs. There have been gradual improvements of tourist inflow which is a result of renovation works. hospitality and tourism sectors can leverage great potential .000 crores which includes transport. 25.2 6. The hotel industry which is directly linked to tourism is responsible for 50% of foreign exchange earnings from tourism.2 27. 8640 crores in 1995 and just Rs. the tourist inflow will exceed 10 million as result of smoother land connectivity by to the tourist sites and roads leading to them would improve a great deal. says V N Dhoot. chairman of ASSOCHAM. According to ASSOCHAM estimates by 2010. jewellery. Also a recent study by the Chambers reveals that the aviation. silk handloom.Year 1951 1961 1971 1981 1991 1997 2001 2003 Tourist inflow (In lakhs) 0.5% of the total labor force.8 23.17 5. Business Insight 5.8 16. 12.

some tourist companies target the elite and design luxury packages studded with unique attractions. Also. Special programs like “Destination India’ on Discovery Channel helps in promoting various tourist destinations. These advertisements should include the various products and facilities offered by the destination. and the objectives of the tourism company. etc. magazines. the number of competitors existing in the market and their prices. . including the hidden costs. Malaysia. The print media may include advertisements in newspapers. i. pricing also depends on the demand patterns. Further. Promoting via television includes advertising in various national and international channels. For instance Indian Tourism Development Corporation’s concentrated promotion effort is titled as ‘Incredible India’ to attract foreign tourists. television. etc. to penetrate into the market or to serve the up-market segment. game shows telecast on TV offer complementary’ packages to various tourism destinations as gifts to their participants. In such cases. entertainment programs. Tourism companies normally tie-up with hotels and travel companies or airlines to promote their services.e. However. For example. a low or reasonable price can be a winning proposition for the tourist operator. This will increase awareness of the tourist destination and also promote the services of the tourist operator. the Internet. and the ways in which a customer can reach the spot. and offer discounted packages to their loyal customers. Srilanka and Singapore have. for example. The tourism companies should ensure that they effectively communicate these prices to the target audience through appropriate promotional activities. remarks of the customers who have already visited the place. Others design economy packages to suit the needs of the average traveler. They can also tie up with retail stores. credit card companies. In India too. the prices should cover the investments made in developing and attracting tourists to the destination. radio. different states try to promote their tourism industry using the print and television media.Ø Price Mix The price of a tourist package should be decided after the costs involved are analyzed. use these two media extensively to promote their tourism industry. Ø Promotion Mix A tourism package can be promoted through the print media. the income level of the potential customers in the market segment. etc.

They have to manage three stages in the process: They are: pre-tour preparatory process. These processes are influenced by economic. Therefore. and guiding the tourists should be pleasant and friendly. without any hurdles. managing. It is Herculean task for the tourists. considered by Hindus to be a holy place. tour process. they look for someone to relieve them from the burden. their dependency on the service provider for generating a value experience will be very high. Ø Process Mix A tourist expects that his/her tour programme right from the beginning to the end of the programme should pass freely from stage to stage. tools. legal administrative and infrastructural system of various regions and cultural. Tourists get away from their comfortable normal routine. it adds to • the value of the services provided to the customers.Ø People Mix The people involved in promoting. The way the entire service environment responds to the customer needs and requirements reflects the efficiency of the process management. These people interact with customers and their behavior determines how customers evaluate a tourist destination. The government has an important role to play in ensuring that the right people interact with the tourists. Such unpleasant encounters can put tourists off. Therefore. For example. to make all the arrangements on own. the government should take steps to prevent beggars and small time hawkers from pestering the tourists. The systems. . demographic and psychographic factors of the tourists. policies. in India. people and other support services need to be customer friendly. The tourists feels relaxed and can concentrate on exploring new values in the programme. procedures. When service firms take on the responsibility of these processes and perform much better than what an individual tourist can do. equipment. Varanasi or Kasi. The service providers’ role in facilitating these three processes is pivotal. The management of service process aims at simplifying customer interactions and customer participation in the service process. Especially in a country like India. and return process. An important aspect is that they should have complete knowledge about their job and should provide information to the tourists whenever required. is replete with pandas or pandits who bargain and literally force tourists to pay them. The government should also take care to ensure that tourists are provided proper guidance and information by tourism authorities.

Road transportation in India is governed by individual states. Delhi and Hyderabad have started metro trains for the benefit of travelers commuting within the city. They are governed by the Railway Ministry of the Government of India. the frequency of trains. Airline travel is not within the reach of the common man in India till the year 2003. the prices of the state government owned road transportation services are set by the government with the public’s interest in mind. which unlike the other luxury trains. In cities like Chennai and Mumbai. adequate and well coordinated passenger services to the public on sound business principles. the prices charged. India Walks will assist Mapple Hotels in designing and conducting various off-board activities.2. After liberalization. The transportation industry can be divided into roadways. railways. Both possess their respective strengths and weaknesses.3 Logistics Services Industry The transport sector plays a key role in the socio – economic development of a country. The railways are the second major mode of transportation chosen by the people in India. There were also many restrictions on foreign flights flying over the country and permission had to be obtained from the concerned authorities for that. stay on land and food. Recently. The objective of the Public Transport Undertakings is to provide efficient. etc.The unique facility the train offers is its satellite supported television. could provide the tourists with live feed of news and other programmes beamed by various channels. the managing partner of the Golden Chariot. The number of new trains or routes. Most of the lower and middle-class people travel by train in India. Before liberalization. On the other hand. Some individual state governments have given licenses to private travel service providers. The two dominant public transport modes in India are rail and road. 5. has appointed heritage-walks provider India Walks as its cultural coordinator. The package will cost $350 a day. economic. While railways are more cost effective for . This increased competition among the domestic airlines in the country and with the foreign airlines. Mapple Hotels. there are a number of local trains. Air India and IndianAirlines were the only airways operating in the country. are all the responsibilities of the central government. who set their own prices. and airways. including selection and training of guides. the scenario changed completely and the country opened itself up to many private airways to operate their own fleet in the country. which help the huge populations to commute within the city. which includes the travel.

Domestic and international traffic have seen an acceleration of growth in recent years. an increase of 304%. Increase in the last few years have been particularly striking.65 million and it runs some 11.000 trains everyday. until 2010. a special consulting and research practice.5% year-on-year) and 22. Domestic traffic has consequently doubled in the space of three years. to make an Indian Railways (IR) a leading passenger carrying railway in the world. In the 12 months to 31st March.Indian Railways are the largest rail network in Asia and the world’s second largest under one management. From a mere 93 million tones of originating freight traffic in 1950-51.4 million international passengers (up 15. 2007.2 billion.000 passenger trains. Its work force is 1. Freight traffic on Indian Railways has registered an impressive growth in the last four decades. Table 5. . This follows domestic traffic growth of 28% the previous year and 20% the year before.2: Services Marketing Mix of Railways µ Airlines in India – an overview For the airlines services domestic market size is expected to cross 60 million and international traffic 40 million by the end of 2010. This has been despite the ever increasing pressure of passenger traffic which increased during the same period from 1.28 billion passengers carried to 4. including 7. airlines carried 35 million domestic passengers (up 39. Railways carried nearly 376 million tones in 1992-93.1%). The domestic market size is expected to cross 60 million and international traffic 40 million by the end of 2010. projects domestic traffic will grow at 25-30% per annum and international traffic at 15%. The Centre for Asia Pacific Aviation.

The new airline is the largest in the country. Recently. and with respect to newer standards and recommended practices. and a further 111 aircraft on order. The Indian government is shortly expected to grant permission for the development of a major cargo hub in centrally located Nagpur. cold storage facilities. offering seamless connectivity to passengers. The merger is in keeping with the industry trend of moving towards consolidation to achieve synergies and reduce costs. Ø Freight and Logistics India’s increasing international trade. a number of new Air Services Agreements have been initialed/signed based on modern practices in civil aviation sector. state-of-the-art cargo terminals. with a fleet size of almost 120 comparable to other airlines in Asia. and electronic data interchange systems. India’s economic development will require the support of dedicated freight cities with multi-modal interchanges. The merged airlines will be able to offer an integrated schedule from interior points in India to various international destinations and vice versa. as well as in high-value manufacturing. Air Services Agreements with some countries were signed some time back and required updating in view of the changing circumstances and developments in international civil aviation. New dedicated cargo airlines are planning to launch shortly. Massive investment plans in the organized retail sector. The formal merger of the two airlines has been completed in August 2007 and integration of operations will proceed in a phased manner over the next two years.Ø Air India-Indian Airlines Merger The Government has merged the two state-owned carriers into a new company. . will continue to drive demand for airfreight and logistics. and will enable these two airlines to pool their resources. face competition and establish new benchmarks for efficiency and reliability. The merged entity will have an integrated national and international footprint. all major international express freight operators are reporting strong growth in the Indian market. A larger and stronger public sector national carrier will also increase regional connectivity to hitherto under-serviced and un-serviced destinations. Ø New Air Services Agreement The signing of a new Air Services Agreement is the first milestone to achieve for the purpose of establishing air connectivity with new countries. will require the support of sophisticated logistics facilities. achieve synergies. which will strengthen their operations. combined with a strong domestic economy. Meanwhile.

increased choice of customers. advanced information technology volatility of markets. due to competitive environment. free market orientation and globalization there has been tremendous increase in inflows and outflows of funds into and out of and Indian financial sector. innovation and introduction of new financial product. deregulation. the activities in financial service sector have witnessed rapid growth and have also led to the emergence of innovative financial services and entry of new players in Indian financial system.3: Services Marketing Mix of Airways 5. The financial service has assumed greater significance. Table 5. will in a way redefine air travel. global trading practices. sophistication of market and customers. In this transaction period. These factors have posed new challenges to the financial service sector.Passengers will get to select their choice of programmes from over 250 hours of video and 150 hours of audio programming.4 inch monitor. The function started playing a critical role in the success of the players. as their products and services are more or less uniform and have less intrinsic difference. pricing of financial ü Deregulation in the financial service sector-gives rise to emergence of various spurious companies and many malpractices in the stock and capital market has badly affected the activities of the financial sector. branding and product advertising in all classes. financial market. . which will cut down travel time between the two cities.3 FINANCIAL SERVICES In the changing economic scenario of India with deregulation. competition. growing volume of financial transaction. The NonStop service. Consequently. In First Class passengers will be able to view video programmes on a 23-inch monitor. in Executive Class on a 15 inch monitor and in Economy Class on a 10. integration of global. the issue to be addressed by the financial services. for an aggressive strategy for survival are financial research.

And you don’t even need to stir a muscle for any of this. for instance. As India’s economy continues on a scorching growth path. Fact is. especially those in the mutual fund and banking verticals. Business Insight 5. This can only get worse as the insurance sector is likely to see 20 additional players entering the market (there are 16 in the fray currently). adoption of new organization structure strengthening of the information system and technology and drastic changes in the financial sector. with revenues growing at a 50-60 per cent clip. the financial sector is likely to witness a huge shortage of manpower in 2008 as a herd of new companies are slated to enter this lucrative market. Coping with fast growth rate of communication. adding heft to your wallet and desirability to your profile. . Coping with advanced information technology in the function. Take the insurance business. more and more people are saving money that needs servicing.7: Growth of Financial Services sector If you work in the financial services sector. Moreover. new entrants. As a result. are not afraid to resort to widespread poaching in order to fill their rosters. ü ü ü ü Integration of global market and growing volume of financial transaction. multimedia etc. Many of the existing could not cope with new environment. the rest of the 15 companies in this arena have been in existence for about nine years and are short of talent at both entry and senior level positions. Apart from LIC. companies in this sector are thriving. chances are that 2008 is going to be an especially fruitful year for you.7 substantiates the growth and importance of financial services sector in the coming years. High level of volatility of the financial market.ü Increased competition from global market and domestic market has threatened the survival of many industries. Others have met the challenges with better management talent. Business Insight 5.

The Indian banking has finally worked up to the competitive dynamics of the ‘new’ Indian market and is addressing the relevant issues to take on the multifarious challenges of globalization. self service counters are now encouraged. Allahabad bank was started in the year 1865 and Punjab national bank in 1895. give instructions for fund transfers. Government and RBI policies affects the banking sector sometimes looking into the political advantage in a particular party. Various banks in the cooperative sector . In India banking has been existed in one form or the other from time to time. to attract the farmers votes. The latest development in technological in computer and telecommunication have encouraged the bankers to changes the concept of branch banking to any time to anywhere banking. Credit card facility has encouraged an era of cashless society. Some of the banks have also started home banking through telecommunication facilities and computer technology by using terminals installed at customers home and they can make the balance inquiry. If the FDI limits are relaxed then more FDI are brought in India through banking channels. Banking is as old as authentic history and the modern commercial banking are traceable to ancient times. Simple queries are now answered by automatic voice recorders. Banks that employ IT solutions are perceived to be ‘futuristic’ and proactive players capable of meeting the multifarious requirements of the large customer’s base. If in budget savings are encouraged more deposits will attract the banks and in turn they can lend more money to the agricultural sector and industrial sector. These are also called as electronic purse. Private Banks have been fast on the uptake and are reorienting their strategies using the internet as a medium The Internet has emerged as the new and challenging frontier of marketing with the conventional physical world tenets being just as applicable like in any other marketing medium. The government declares some measures to their benefits like waiver of short term agricultural loans. By doing so the profits of the bank get lower down. The use of ATM and internet banking have allowed anytime anywhere banking facilities. etc… The union budget affects the banking sector to boost the economy by giving certain concessions or facilities. The present era in banking may be taken to have commenced with establishment of bank of Bengal in 1808-09 under the government charter and with government participation in share capital. etc…through ECS we can receive the dividends and interest directly to our account avoiding the delay or chance of loosing the post. The banks have now started issuing smartcards or debit cards to be used for making payments. therefore booming the economy. currency accounting machines. get the statement of accounts. Today master card and visa card are the two most popular cards used world over.

credit. p o e . h mo e e u y loans ü Overdrafts. Some of these services are ü Nt . cash credits. virtual.o 4h u r c s m u to e r c r e service a ü Anytime and anywhere banking (where the customer is allowed to conduct transactions in any of the bank’s branches) ü Add-on debit and credit cards ü . d b t card ei ü S la y s v g s account a r a in ü Cr e ur n t account ü F e d deposits ix ü Rc r in e ur g deposits ü L a s lik e tw o w e le r.A product mix refers to all the products offered for customers by a particular seller. AT . h m . mb e hn o ile . challans ü P b c lim u li ite d c ma ie o pn s ’ p b c is u e u li s services To meet customer expectations and satisfy their needs. smart cards ü q it Payment services of utility bills ü Av o d is r y a d c nu n n o s lta c y services ü Dp s r e o ito y services ü Selling or cross-selling of products like bancassurance. p r o a on he o e es n l . New and innovative products are being offered to customers to meet their varying needs. prospectus of other institutions ü Tr n f a s e r of mn y tho g h d mn d da ts . mb e A TM b n in M o il ak g . Most of the following products are commonly offered by today’s banksü Sv g s a c u t a in con . charge. h m e banking o ü 2. The product mix of a large bank may include a large number of services. c e k oe ru e a rf hc s . providing the customers all the financial services under one roof. these basic products need to be augmented with supplementary services.

The average male female population. The caste. Such locations are ideal for setting up of bank branches.e.In these days of intense competition in the banking sector. Thus the industrial structure determines the kind of financial transactions that could take place in a particular location. Ø Place Mix Place mix is the location analysis for banks branches. 4. business activities taking place at a particular location. The Trade Area: The trade area is a very important factor determining the place where a bank branch should be set up. Industrial Structure: This is nothing but a combination of the trade area analysis and the commercial structure. Some of the important factors affecting the location analysis of a bank are: 1. 3. culture and customs. These factors are very important for a bank as the help them decide the kind of business the branch will get. The average spending and saving habit of the people. religion. This includes: The income level of the population. Mark up pricing This is a pricing technique wherein the cost of the service is determined and a small margin is added to it and then the final price is offered to the customers. However the industrial structure focuses more on the kind of industries operating in a particular location. diamonds or for that case even the stock market. The average age. Commercial Structure: The commercial structure refers to the level of commercial activities i. The higher the level of business activities taking place in a particular location the more preferable it is for setting up a bank branch. It is very necessary a bank to situated at a location where most of its target population is located. it is becoming increasingly difficult for marketers to differentiate their service offerings from those of their competitors. Population Characteristics: The demography of a place is a very important factor. This type of pricing is the not very popular since in the banking sector it is not very easy to arrive at the cost of the service. . 2. For example a particular location maybe a huge trading place for textiles. There are number a factors affecting the determination of the location of the branch of bank. For example an area like SIPCOT is marked with a lot of electronic manufacturing units. Thus most banks use a combination of mark – up pricing and going rate pricing.

Ø Promotion Mix Promotion is nothing but making the customer more and more aware of the services and benefits provided by the bank. Two of the fastest growing modern tools of communicating with the customers are: Internet Banking and Mobile Banking Different options of promotion mix commonly adopted for the banking services . The banks today can use a lot of new technology to communicate to their customers.

or other well – wishers the words a process should be such that the customer is easily able to understand and easy to follow. The more innovative the sales promotions the more positive are the results. Most banks today have a separate Public Relations department. fairs and shows. However primarily it is considered as a responsibility of the various bank managers to develop a steady and strong relationship with their present customers as well as potential customers. However it is more important in banking for the only reason that this is a service where trust plays a very important role. Some of the most popular sales promotions techniques are gifts. The main reason for this is that banking is a service in which trust plays a very important role. If a particular bank’s services are recommended by one’s friends.Public Relations: In today’s competitive scenario developing strong public relations is very important for any bank to be successful. Personal Selling: Personal selling is found to be one of the most effective and popular form of promoting bank business. Also he gives the customers any kind consultation he might need. He provides the customers all the information seeked by him. contests. Let’s take for example the process for application for a car loan. Today if particular banks formalities are long and the procedure very complicated the overall process fails and the customer may not be inclined towards using that banks services. Word – of – mouth Promotion: This form of promotions is not only very effective in banking services but in any kind of service. Sales Promotion: Sales promotions are basically giving the customers some additional benefits maybe at times just some small gifts in order to promote the schemes. Now this mainly involves 3 things. Representative tries to persuade the customers to go for the scheme provided by the bank by telling him all the benefits. This can be done by a constant follow – up action. discounts and commission. additional allowance. entertainment and traveling plans for bankers. Here the process may . low interest financing etc. it is very important that the sales promotions benefits are designed in such a manner that they are better than those of the competitors. In personal selling a bank representative goes to the customers and explains the scheme to the customers. ü Po u in r dc g of po e r documents rp ü Filling up of application form ü Paying for the initial down payment. relatives.

The customer should be given options as to how he would like to pay by Cheques or by credit card. 2. Once again the amount should be very competitive not very high above the regular rates prevailing in the markets. Finally the payment of initial amount. Physical evidence refers to all those factors that helps make the process much easier and smoother. or the location of the place for depositing Cheques. the application form must in a language best understood by the customers and it should not be very lengthy one demanding a lot on unnecessary information. Thus it is very necessary that the customer is asked for the minimum but most necessary document and not other unnecessary documents. It is very necessary the place is designed in such a manner so as to ensure maximum convenience to the customer and cause no confusion to him. The smaller and simpler the procedures the better the process and the customer will be more satisfied. If the customer is asked to produce a number of forms out of which some may not be necessary at all. He will try with some other service provider. In case of application form. For example in case of a bank the physical evidence would be the placement of the customer service executive’s desk. . Ø Physical Evidence Physical evidence is the overall layout of the place. How the entire bank has been designed. 3.fail in the following cases: 1.

3%. only 25% insurance population of India estimated around 314 millions in 1999 has been able to get Insurance Cover. The husband starts looking thoughtful. The ad opens on the shot of a couple watching television in their house. Even ICICI prudential has decided to make some noise about its health insurance products. European union 25%.7% share of the Global Insurance Premium. Watching this on TV. While the insurance premium as a Percentage of GDP was 52% for UK. Prior to this it was just MediClaim. It was only 9% in India in 1999. the husband presents his wife with ICICI Prudential’s Health Insurance Policy (with a health-care guarantee of 20 years) and the wife gets all misty eyed.3% for India. earlier in the year. Business Insight 5. it is only 0. 3) The penetration of insurance is also assessed by a ratio of the insurance premium to the Gross Domestic Savings. Hence obviously the penetration of the insurance is lowest here. based on ‘Jeetey Raho’. she blames it on the ü Cttl e & L e to a iv s c k insurance ü Eg e r n in ein g insurance ü Mr e c r a in . the television character wouldn’t have had to face any problems. Lowe. 35% for other European and American Countries. the wife remarks that had she had health insurance.a g o insurance . The share of India in world market in terms of gross insurance premium is again very small for intance while Japan has 31%. The market has now seen Bajaj Allianz and Star Health in the realm. In the sphere of Life insurance. 4) 5) Business Insight 5. South Africa 2. Such Insurance Cover in the developed countries of Europe & America has been extended to around 90 to 95 of the total population.8: Give way to health Insurance If you think that this is the new kid on the block. it was only around 2% in India in 1999. Hence even this index indicates low level of insurance penetration in India. a corporate thought coined by its agency.9% for UK and France. ICICI Prudential Life Insurance has released a commercial for its health plans. Next. and the wife teases him that it’s only a TV show. The soap opera they are watching has a woman pleading with her husband’s boss for a loan for a health-related emergency in her family.8 provides the tremendous potential available for the marketer in the health insurance sector. then you are not aware of the slew of health insurance products that are available in the market. When her husband asks her why she is getting emotional. Canada 1.

AIG. in an age group of 25-30 years. Premium: Premiums are the periodic payments usually monthly or quarterly that the policy holder pays to the insurance company to purchase and keep a policy in force. companies have resorted to brand building.g. but this probability would increase for a higher age group of 45-50 . The mortality table indicates the probability of a person dying in a particular age group. The basis on which the insurance company decides the amount of premium to be paid by each person is determined mainly by 3 factors: Mortality Tables: All insurance companies refer to different mortality tables. traditional Indian players like LIC and GIC have also used brand building to give the foreign players a tough fight. investment or tax saving. the probability might be just two. These tables differ from country to country. Ø Price Mix In the insurance business. If separate policies are offered to customers to meet their different needs.The basic marketing strategy of marketers in a competitive market has been to identify the special needs of customers and target them in the individual segment. In a marked departure from the earlier scenario when most insurance players were regarded as the same. it may not be very difficult to increase volumes. Not to be left behind. the pricing decisions are concerned with the premium charged against the policies. MetLife and ING have put a lot of effort into this exercise. For e. As the market has become highly competitive and the products have very little to differentiate one from another. most customers see insurance as a means of security. For instance. a specially designed auto-accident insurance policy could be targeted at drivers and mechanical workers who are exposed to accidents. today’s insurance companies give due importance to brand building. interest charged for defaulting the payment of premiums & credit facilities. Global insurance majors like Allianz. For example in case of life insurance according to the policy it may be the amount payable during the endowment term of the policy or until the death of the life assured whichever is earlier. commission charged for underwriting & consultancy services.

Multiple cars or policies: When you have more than one car on an insurance policy. they do most of their driving in a day. Fire and Marine Insurance Pricing: The principle of utmost good faith is applicable even for fire and marine insurance. Because you use the company for all of your auto insurance needs. The pricing in case of fire and marine insurance is done on the basis of: Type of Building: In case of a building the rate of premium also depends on the type of construction. If it is wood construction the insurance premium is low as the cost in constructing a wood building is low in comparison to a concrete building which has higher premium amount. most companies will give you what is known as a multiple line discount. and the more often you do it. your rates will be higher than if you live in a town. Likewise. the insurance company may refuse to pay the compensation if it learns about the previous occurrence of fire which was not disclosed at the time of taking the policy. Past Experience: If a fire or marine insurance company has a past experience of settling a claim successfully then.: If a trader while taking a fire insurance policy does not disclose the previous occurrence of fire in the factory. the company can even pinpoint a neighborhood. Distance and amount of driving you do: Most car insurance companies ask prospective clients how far. they reward you. The person who commutes 45 minutes to work every day is going to pay more than the person who drives 10 minutes to work. Sometimes. there is another fire. the credibility of the company increases and it charges higher premium for similar policies. a college student who walks to class. . If you live in a large city. E. Location of your car: Car insurance companies rate areas according to the number of accidents or thefts that occur in a specified amount of time in that area.g. The thinking is that further you have to drive. and to where. and subsequently after taking policy. the more likely you are to have an accident. The customers are assured that the company will be able to handle the claim well as it was done in past and hence they are ready to pay higher premium. and drives home three or four times a year will cost less than the college student who spends 30 minutes commuting to and from campus each day.

this was a new avenue.ups with multiple insurance players.9 provides the glimpses of the various innovative practices adopted in Indian Insurance services distribution. Pepsodent took a cue and tied-up with New India Assurance for dental insurance for its customers. Postal Department: Insurance companies can tie up with the postal department to sell and distribute various insurance covers. Tie-Ups With FMCG Marketers: Besides their own initiatives. Tie-Ups With Multiple Insurance Players: Lord Krishna Bank (with ICICI Prudential and Bajaj Alliaz) and Development Credit Bank (with Birla Sun Life and TATAAIG) entered into tie. Electronic Channels: In the last decade. A few of which are discussed below. numbers of technological advances have taken place due to immense use of EDI (Electronic Data Interchange). he gets the insurance of the car free from the Maruti Company itself. E. Selling Through Corporates: Insurance can be sold through corporates too.000 personal accident cover with its 200 gram pack. I. II.25. This would certainly require upfront training costs.g. usiness Insight 5.: When a customer purchases a Maruti car. Business Insight 5. . The result of this channel’s popularity gained a momentum: between 15 percent and 30 percent of aggressive insurance player’s policy distributions are coming from this intermediary route. the insurance products are sold through the banks network of branches.9: Innovations in Indian Insurance Services Distributions The opening of Indian Insurance Market lead to many experiments and innovations in Insurance Distributions.Partner SellingBancassurance: In bancassurance. through an FMCG marketer. Thus this is termed as selling insurance through corporates.A creative route it adopted was to tie-up with TATA AIG. to offer Rs. as the postal employees in turn need to educate and sell the concept and benefits of insurance to the people in rural areas. players are also benefiting from intense competition in other industries. For TATAAIG.

WhileAviva has partnered with Lakshmi Vilas bank to reach out to rural SHGs (Self-help Groups). X Tie-Ups For Rural Market : To make up for lack of infrastructure in rural markets.AB Jeevan Abhaya. HDFC Standard and ING Vysya.Similarly. IX Tie-Ups With Banks: Apart from bancassurance. Jammu and Kashmir and Karnataka to provide insurance to their government employees. To provide cover to Khadi weavers.101 crore premium in 2002-2003). players are entering into a spate of partnerships with groups operating there. several insurance marketers are entering into agreement with banks to provide cover to their customers. LIC. their group presence in housing finance through subsidiary is a captive channel for cross. the balance being the insured artisan’s contribution.promotion and distribution. for example.VIII. . ICICI Prudential has tied-up with a spate of NGOs 9BASIX. For SBI Life. ICICI Prudentials. the institution and government contribute 87. XI Postal Insurance : When it comes to rural reach. Distributed and promoted by more than 30 Khadi Boards across the country. post office network is difficult to match. the government owned KVIC (Khadi and Village Industries Commission) has launched Khadi Karigar Janashree Bima Yojana. National Insurance has entered into agreements with the state government of Haryana.250 to Rs. Birla Sun Life’s Policy insures savings account holders ofAndhra bank for annual premium ranging from Rs. Hiring outside agents for the first time. Shepherded and CASPOR amount others)/ Many of these SHGs and NGOs aid villagers to pool their resources for everyone’s benefit. through its policy called Dhanam Life provides cover to Dhanalakshmi Bank’s account holders. It is expanding its portfolio of insurance products by adding money bank and single premium policies to tits existing endowment ones. the department is targeting a seven-fold increase in rural premium income within four years (it collected Rs.5 percent of the premium. Metilife. Tie-Ups With Home Loan Providers : Birla Sun Life provides insurance to Cititbank’s Home Loan customers. XII Tie-Ups With State Government Bajaj Allainz ventured to cover Amarnath Yatra pilgrims in association with J&K Bank.800.

or as independent agents selling for several companies. also referred to as producers. Lawyers: The insurance industry employs relatively few people in professional or related occupations. Computer systems analysts. develop. and they determine the appropriate premium for each policy. Underwriters evaluate insurance applications to determine the risk involved in issuing a policy. Insurance sales agents. For example. and obtain referrals. selling for one company. Actuaries study the probability of an insured loss and determine premium rates. selling policies to individuals and businesses. or captive agents. computer programmers. design. These lawyers also review regulations and policy contracts. and program the systems that support the day-to-day operations of the insurance company. They decide whether to accept or reject an application. . the process mix includes the various interactions that take place between the insurance agent and the customer in the process of selling the policy to the customer till the settlement of claims. Customers: People mix not only includes employees but also customers. assist with claims. but those who are so employed are essential to company operations. especially when large claims may be involved. agents are able to update coverage. Actuaries: These represent a relatively small proportion of employment in the insurance industry.Underwriters: Underwriting is another important management and business and financial occupation in insurance. Ø Process Mix In case of insurance sector. insurance companies’ lawyers defend clients who are sued. but they are vital to the industry’s profitability. Nurses and other medical professionals advise clients on wellness issues and on medical procedures covered by the company’s managed-care plan. The customers are to be treated with respect and courtesy. and computer support specialists: These are needed to analyze. ensure customer satisfaction. Insurance sales agents: About 15 percent of wage and salary employees in the industry are sales workers. Through regular contact with clients. may work as exclusive agents.

It is used to create awareness and transmit information in order to gain a response from the target market. 10.com) all have websites from which people can get the information about their products. This is because terms and conditions of the policy differ for different customers due to differences in medical conditions of customers in case of life insurance and due to differences in nature of goods and mode of transportation in case of marine and fire insurance. which consists of the terms and conditions of the policy. Normally its ads are published in leading newspapers and magazines.iciciprudential. the insurance agent meets the customer to provide him a policy document. especially outside the railway station or at the backside of the bus. Brochures: Companies provide brochures to the customers so that they can have a look on various schemes and their prices. After the twelve days period.com ) . various schemes. Forms of advertising used in insurance services are as follows: News Papers and Magazines: LIC give ads in the news papers and magazines round the year to continue its brand image and also when new products are introduced. Television: Companies like LIC. The insurance agent then regularly collects the premium from the customer whenever the premium becomes due. 11. and lots of other information. Then.9. Hoardings: LIC put its hoardings where there is a mass flow of people. When Met Life was introduced it has put his hoardings on the side of the train. to target huge number of people. a reconfirmation is taken by the agent from the customer that he agrees with the terms and conditions of the policy. .licindia. Radio: ICICI Prudential advertises on 92. Ø Promotion Mix Advertising: It is a paid form of non-personal communication. Electronic media: Insurance companies also advertise its services in the Electronic media like: Internet (Websites): Companies like LIC (ww w.5 red FM. People can also purchase the product through this website. advertise on television to make people aware of their products and services. An average twelve days time is taken by the company to verify the submitted documents. prices. Met Life India. ICICI (www.

India has a vast number of IT professional with a very knowledge and also they are cheap as compared to labor from other country. no one can doubt the quality. high-speed data networks (LAN. The IT industry has gradually evolved from a product-based industry to a service• based one.4 per cent.). US faced a big problem called the Y2K and due to shortage of good labor they had to outsource the solution from India.4 per cent in 2003-04 and 2. Marketing IT services should aim at providing quality customer service and maximizing customer satisfaction at the lowest delivery cost. IT expenditure by US banks has recorded a compounded annual growth rate of 8. A large number of multinationals started setting up their software development centers in India due to availability of good labor at a good price.09 per cent in 2002-03 and this is growing fast.Indian IT industry alone has already crossed the 20 $billion mark. One of the important characteristics of IT industry is that it is exclusively knowledge-based and has thrived in countries with talented resources. Financial services have been the major users of IT and communication technologies.1 The Indian Scenario of the IT Services IT has been prevalent in India for a long time but the real importance and the global recognition is has been a very recent phenomenon. The main function of Information Technology (IT) is to serve the information needs of society and thereby contribute to the user’s productivity and efficiency. ISDN etc. INFOSYS have been ISO 9001 certified. WIPRO. Seeing this opportunity the Indian software firms started offering their service from India dedicated to specific US clients. WAN. and SEI/CMM V level certified. India’s share in the world software and services market has increased to nearly 3. Year 2000 an important year for the Indian IT firms. Once again Indian firms proved that they were indeed the best. The Management Information System (MIS).4. open systems. the industry also needs good financial . Considering the huge potential of India’s IT and software service sector in the global market the growth projection in this service segment is just mind boggling. distributed computing devices. Remember the Y2K virus. IT in India has been continuously growing after liberalization in 1991.5 per cent in 2004-05 from 2. RDBMS have been important development milestones in IT with major impact on financial services. However. By this time India was only preferred due low cost but now when most IT companies like TCS. It is an economy-dependent industry in the sense that it performs well when the economy experiences a boom and suffers when the economy is in recession. 5. It has become one of the most competitive industries in the global economy. Since then there is no looking back and India is today known as the king of IT.

At the same time. In ITES exports.000 people. are very important in the IT industry. it will also create significant entrepreneurial and employment opportunities in support services.000 people.00.3 Services Marketing Mix of IT Services Keeping in view the rapid pace of development in technology and the short shelf life of the products. IT services will create employment for 4. administrative. will employ over 2 million people directly and create indirect employment opportunities for at least an additional 2 million people by 2008.50.00 jobs) and administration (contributing roughly 80. educational and manufacturing processes.5 million people. especially with the latest developments in communication technology. The brand name and existing products and clients can be used to assure the customer and reduce the perceived risk.000 to 1. HR (contributing 1. government.4. along with recruiting and training the right people. Ø Product Mix The products and services which make up the IT industry are many and varied. providing physical evidence to the customer is very difficult. The IT industry which currently employs 0. some of the segments creating the greatest number of jobs will be customer care (contributing 37.000 to 390. However. place is not a constraint for providing services.000 jobs and the domestic market will employ about 650. Components of IT: ü Computer technologies ü Communication technologies ü Computer technologies . adoption of the right processes. the pricing and process mechanisms differ from other services.000 jobs).The industry will create enormous employment opportunities in the country.40. will the industry provide direct employment to 2 million people. Keeping in view the peculiarities of the industry. being used by all manner of organizations in business.60. fast and continuous product/service development. scientific. technical.000 to 1. the products and technology services opportunity will contribute around 1. Similarly.000 jobs). Not only. competitive pricing of products/services and promotion of these. 5.40.

Models like Capability Maturity Model (CMM) are developed to test the efficacy of the process in an organization. News items and press releases on introduction of new services or on successful completion of projects also promote the services of a company in the market. conducting seminars and workshops to educate and train people in latest technologies. Such models help detect problem areas and take measures to correct them to ensure the quality of the product. preparing a project plan. Delivery of services can be either on. Ø Process Mix The process of manufacture and delivery of quality service at the lowest possible cost is very important in the IT industry. In fact. Advertising through hoardings displayed at public places has also become popular. In addition to media-based advertising. assessing and capturing customer requirements. testing it and delivering it to the customer. Microsoft and NIIT use print media to communicate with customers while IBM and Microsoft use the television extensively to promote their services.site or off-site depending on the project. developing the software to meet the objectives. it is true for any service industry. especially in commercial cities and business centers. Oracle. The production process involves understanding the nature of the project. The service quality totally depends upon the employee giving the service. providing quality service to the customer is the best promotional strategy. TCS. For example. are also gaining importance. as word-ofmouth publicity and client appreciation can bring more business for the customer. industrial exhibitions like IT expos etc. More than all these measures. Web-based promotion is also quite common in the IT industry. The means of promotion most commonly adopted by the IT industry is media based advertising.Ø Promotion Mix Promotion should stimulate demand by moving the product and services towards customers. Ø People Mix 1) Employees – The service provider always has to do a perfect job analysis of each and every job and accordingly select a person whose personality best suits the job. That is the reason why job . Other certifications like ISO also help to assure the quality of the manufacture and delivery of services.

The importance of having a good education and building a . The situation still remains the same in most poor and lower middle-class families where earning their daily bread takes priority over education. that will pay a vital role in identifying the worthiness of the company. people ignored the importance of education.5 EDUCATIONAL SERVICES In the past. Last. The first was that the demand far exceeded the supply of service. 3. Developers comes to the Customer: This could be very well explained with the HP example. the marketing of education in India had little significance. However. This was because of three reasons. Gone are the days when students joined the nearby school or college and decided to earn a bachelor’s degree to secure jobs. it has a total corporate feel to it. innovations in technology and privatization of educational services have led to dramatic changes in the field. since the Indian economy was more dependent on agriculture. 5. Hence the representative of the company also have to absolutely formal in their behavior with the customer and HP follows this rule. The reasons for this transformation are plenty. Now when a customer goes to developer it is the ambience of the office etc. Today’s youth are keen on having a good career and making a mark. But mostly they are the ones who approach the customers where at that point of time their dressing and their language and their voice quality is an important cue through which the customers might judge the company as a whole. HP does not actually believe in encounters with the customers. it was the people’s perception that it was the duty of the government to provide this service to the people. corporatization of education. radical changes have been taking place in the arena of educational services. The growing awareness of the importance of education among the masses. financials etc.For Example: India Infoline it totally deals with information regarding any company’s working share price. but not the least. 2. Companies going to software development: For example Infosys when a client wants to develop a software for its information transfer or any other purpose it will personally go to Infosys with its requirements and Specifications. However at its retail outlets it does. Second. over the years.

The system provides few incentives to perform. and making a larger number internationally competitive research universities. A corps of dedicated and able teachers work at the IITs and IIMs.trained university graduates have permitted the country to move ahead. India has survived with an increasingly mediocre higher education system for decades. Taiwan. Other Asian countries are also upgrading higher education with the aim of building world class-universities. Many IIT graduates. well trained in technology. with a semblance of normality. Student unrest and occasional faculty agitation disrupt operations. Another significant group. coordinate examinations. Now as India strives to compete in a globalized economy in areas that require highly trained professionals. faculty administrators are able to provide teaching. careful analysis. They need good data. India’s large educated population base and its reservoir of at least moderately well. decides to earn MBAs in India because local salaries are higher — and are lost to science and technology. Perhaps half leave the country immediately upon graduation to pursue advanced study abroad — and most do not return. China in particular is heavily investing in improving its best universities with the aim of making a small group of them world class in the coming decade. but the lure of jobs abroad and in the private sector make it increasingly difficult to lure the best and brightest to the academic profession. have chosen not to contribute their skills to the burgeoning technology sector in India. Even the small top tier of higher education faces serious problems. and several government agencies are involved in higher education policy. which is a major designer and producer of IT hardware. There is no field of higher education research. Bureaucratic inertia hampers change. In China. The lack of accountability means that teaching and research performance is seldom measured. Nevertheless. A stunning 86 per cent of students in science and technology fields from India who obtain degrees in the United States do not return home immediately following their study.The rise in the number of part-time teachers and the freeze on new full-time appointments in many places have affected morale in the academic profession. and award degrees. But the competition is fierce.” Academic institutions and systems have become large and complex. Few in India are thinking creatively about higher education. So far. is considering merging several of its top technological universities to create an “Asian MIT. more than two-dozen higher education research centres. of about 30 per cent. the quality of higher education becomes increasingly important. and creative ideas. Those in government as well as academic leaders seem content to do the “same old thing.” .

For e. offering the right product assumes a lot of significance. soft skills. Since education sector is a very broad area as mentioned earlier. The course-wise intake and infrastructure is also decided by the university. the extent of coverage. Within that area the university may establish education centres and/or give course-wise recognition to the colleges promoted by the private sector or social and charitable associations. to narrow down the scope of education in this section the higher education system of education is considered for discussion.choose their marketing mix carefully to survive the tough competition and fluid market conditions and eventually thrive in the market. Ø Place Mix Universities offer educational services not only on the campus but also through affiliated colleges. Therefore. if an institute offers a training program in hardware technology. For instance. our CDE of Anna University provided you the power point presentations ( PPTs) of the course material to enhance and ease the understanding of the subject. This would help the institute attract students and also charge high fees. Marketers also attach some supplementary services to augment the product and enhance the service experience of the customers. Ø Product Mix The product in the education service market is the entire package offered to the student in terms of the topics to be covered. the attention given to each student. number of classes.to• -date. service providers in India and Eastern Europe are including courses on foreign languages. the duration of the course. etc.. The area coverage of a university is decided by the state government.g. The affiliation committees appointed by the university (course- . An educational institution has to ensure that its syllabi are comprehensive and up. For example. You are advised to gain understanding in the other systems of education also as mentioned in the earlier sections. As more and more new and unconventional areas are offering job opportunities. personality development and communication skills as part of their curriculum. it is essential that it offers courses on the latest technologies in the industry. education service marketers are required to introduce the necessary changes in the curriculum to equip the students suitably. The affiliated colleges are allowed to make admissions based on the prescribed eligibility criteria and admission procedure. sensing the huge opportunities in BPO industries. covering the basics of the subjects and related current issues as well.

Faculty requirement. The respective state governments and the funding organizations will contribute substantially to the university finances. The fee structure is decided by the management of the university for some courses and for other courses the state level bodies such as State Council for Higher Education in consultation with the universities and the colleges offering such courses decide the fees. Some universities collect fees annually. For example. In certain professional courses like Engineering and Medicine the state government is fixing the fees for the course. after considering the demand of the course and the cost of executing the course. Effective promotion will act as an effective tool for an education institution and help in Business Insight 5. The payment system may vary from university to university. after considering the following facts: Demand for the course.each other. payment seats and charge competitive market prices from the students for some professional courses. Pricing of competitors. They can do this by providing incentives like attractive consultancy assignments and encouraging them to go in for higher studies. Universities are forced to introduce self-finance courses. Ø Promotion Mix Promotion plays an important role in education services marketing today. the services are offered at reasonable prices when compared to private institutions. In order to provide quality education even to the economically weaker sections of the society.10: Distance Education Programmes – A Comparison of Advertisements . the services offered by the public sector universities are highly subsidized. Universities under the public sector are not profit-oriented organizations. Justice Raman Committee. appointed by the Government of Tamilnadu is fixing the tuition fees for the different professional courses. However. in recent years universities all over the country are facing serious financial crisis. Infrastructure requirement. and Development costs. Therefore. when there is immense competition in the sector. Maintenance costs. it is important for education marketers to safeguard their talent and motivate them to remain committed. some collect each semester and some collect the total fees at the beginning of the course. The fee structure of various courses is modified whenever the institutions feel it necessary. Hence. Ø Price Mix The management committee of a university decides the fee structure for various services.

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One seeks knowledge to improve the quality of life.. television shows. Please refer Business Insight 5. Entertainment today. It stresses on the fact that it may not be easy to find a chance to play cricket in the prevailing system. Khel rag-rag main. the highest priority of the human being is how to get entertained. Iraden hain pakke. etc. Education. chess and several others. Business Insight 5. are more recent and upcoming means of entertainment in India. sports. Entertainment services constitute a part of the media services and include entertainment through movies. which help a person feel entertained and relaxed. and animation. The outdoor campaign has already broken and the TVC will be on air on November 8. Indian Cricket league better known as ICL is an Essel Group venture. ICL – Sapne Manzil Tak’. These include the services that are involved in the production. all lead to the quest for higher and sophisticated entertainment. competitions pertaining to indoor and outdoor games such as badminton. The advertising campaign will run in three phases from November 7 till December 16. go-karting. 5.11). music. Also included in entertainment services are the marketing of sports events such as cricket. television shows. clothing and shelter. music. hockey. Post-food. constitute the physical evidence. ‘Khel hai bada. live entertainment shows and bowling alleys. It highlights the journey that is possible from a small town or village to a cricket stadium and encourages amateur cricketers to realize their dream. Once . earning money. theme parks. The campaign has been released for the league’s first Twenty20 cricket tournament is slated to begin on November 30 and carry on till December 16 2007. ICL – Sapne Manzil Tak’. Multiplexes. The quality of life improves when the basic requirements of life are supplemented with entertainment in some form or other. The outdoor campaign says. and ‘Dum jigar main.6 ENTERTAINMENT SERVICES Entertainment services include all those services. dictates our lives. The first phase introduces the brand proposition of ICL with Kapil Dev as the brand ambassador. Malls. swimming.11: ICL starts its campaign Indian Cricket League has recently unveiled it new logo along with a campaign. careers. (See business Insight 5.10 and try to identify the physical evidence shown in the different advertisements. distribution and marketing of movies. Entertainment centers. The position line for ICL states: ‘Sapne Manzil Tak’. and football matches. leisure. tennis. but ICL recognizes individual talent and provides the wherewithal to nurture it.etc.

The entertainment industry is basically an intellectual property.200 crore by 2011. India is now the largest producer of films in the world.Thereafter.driven sector with small to large players spread across the length and breadth of the country.100 crore to Rs 51.000 films in more than 30 different languages and dialects. with the foreign media too evincing interest in investing in Indian publications. translating into a cumulative growth of 18 per cent in the next five years. The Indian film industry was not granted an . as was the trend in the last three years.” Significantly.6. “The industry is getting increasingly corporatised. a number of incremental improvements took place within the motion picture industry. distribution and exhibition companies are coming out with initiatives to set up more digital cinema halls in the country. Some of the industry players were able to graduate into the next phase of industry evolution by reinventing themselves. 5. the entertainment and media industry saw the maximum flow of foreign investment in 2006. “The television industry revenues are expected to grow from the current size of Rs 19.500-crore mark by 2011.2 Glimpses of the Indian entertainment Industry ü T e Id h n ia n F m Industry il Films are the most popular form of entertainment. Another 22 proposals are pending with the Ministry. is expected to touch the Rs 17. the film industry has produced more than 75. prepared by PricewaterhouseCoopers.800 crore to Rs 23. the television sector is expected to continue to contribute the largest share. The print media too is projected to grow from the current size of Rs 12.6. television and live entertainment.400 crore. mirroring a 13 per cent annual growth. This sentiment is boosted by the growing interest in India among the global investor community.900 crore by 2011. music. estimates that the industry could balloon to Rs 1 lakh crore by 2011. Since 1931. The film industry. with 13 proposals cleared by the Ministry of Information and Broadcasting during the year. A FICCI report on the industry. implying a 22 per cent cumulative annual growth in the next five years.1 FICCI report on the Indian Entertainment Industry A comprehensive survey conducted by the FICCI (Federation of Indian Chambers of Commerce and Industry) reveals that the segment of service sector which is fast emerging as a sunrise sector is the Entertainment Industry covering film. Several film production. 5.” the report said. Among the segments in the industry. broadcast. which is currently placed at Rs 8.

D and E between the age group of 1545yrs. Then about a decade ago STAR India Pvt. in terms of number of films produced.5. The size of the South Indian film industry is bigger than the Hindi film industry. It targets SECAto B1 individuals within the age group of 15-45yrs. Anumber of entertainment companies are springing up in Mumbai.3 Radio Mirchi. C. Mid-day’s Go 92. India Today’s 93.0 FM.Bollywood in Mumbai and Kollywood in Chennai. B. C category between the age group 18-35yrs. It targets SEC A. B. English and Hindi. C category in the 25+ age group. The English MB see it as a station that plays only Hindi bollywood music and the Hindi MB see it as a station that plays a good mix of Hindi music. B. entered into the privatization arena with Radio City in Bangalore. Red FM targets an audience in the SEC A. This is a fit in terms of content and TG. In Mumbai privatization of FM channels was pioneered by the Times Group a year later who launched their station 98.ranging from content creation to actual delivery of entertainment. Ltd.R. Radio Mirchi’s brand identity is defined by 95% Hindi music and 5% international music.) had a monopoly in the radio industry. Each of these stations has a different positioning and caters to a different set of target audience: Go 92. ü Radio Till recently All India Radio (A. opportunities await for potential entrepreneurs to jump onto the bandwagon and reap the first-mover advantage in a number of segments . The brand identity is all about hot music. .5 Red FM and Gautam Radia’s Win 94.India is home to two thriving entertainment clusters .6. being the second biggest entertainment cluster. personality jockeys and late night talk shows. The English MB (music buffs) perceive it as a radio station that plays good English music and airs eloquent RJ’s whereas the Hindi MB dismiss it because its too English centric in its approach. These included STAR’s Radio City 91. Chennai.I. being the only broadcaster. Radio City on the other hand has a TG audience of SEC A.5 plays English music and Westernized Hindi music. Others were quick to follow suit and very soon there were four other private channels that came about.

the total number of raids was over 250. Saregama India has been test marketing the service for over two months now. By December end. According to PWC the Indian music industry suffers a loss of 55 per cent. In 2006. apart from the 0.3 million music tracks it owns under its banner. The number of Internet subscribers is estimated to be around 35 to 50 million users. 27 per cent of the total connections are broadband connections and are expected to account for 75 per cent of the connections by 2010. the pricing for Internet downloads vary.14: Indian music market eyes the online sales The Indian music industry is gearing up to increase its online sales. which is close to Rs 200 crore. The user can either download the entire album or a few songs depending on individual preferences. then users will have to pay an additional of Rs 12 for every extra five minutes. Companies like T-Series and Sony BMG have their tracks available in association with other portals like MSN. There are media experts who say that the music companies would have to break the mindset of people to start paying for the music rather than the free download. If the song exceeds the time. T-Series have made a total of over 5 million tracks available on their own websites and other portals for full song downloads in a bid to monetise their content through the internet. The songs will be available on the company-owned website for around Rs 12 for five minutes. Currently.000 songs will soon be available for download. and fight piracy. At present there are over 25. In most cases.000 songs will be available for the online download. Tips says that within the next year there will be over 25. during which nearly 1. The company hints that there maybe a paid model also introduced soon. Sony Connect. The reasons maybe for much the growing demand for the MP3 players and ipods can be routed as one of them.6 million tracks it has acquired. .Business Insight 5.4 million CDs and over 2 million VCDs were seized. Saregama India. There are experts who believe that the companies are opting for the Internet route as most of the sales in the music industry is getting deeply affected by the piracy. If we take the industry as a whole then the companies like Sony BMG. This increase has now paved a way for the music industry to look for making music available online. Hungama Mobiles among other portals. it plans to make available 4.

Live events are very popular in India also. but the place also offers low budget monsoon packages and special deals on weekends. There are now more modern retail formats such as supermarkets and malls. Often held in large stadiums and auditoriums they attract large crowds. Elton John. which include the standard roller coaster and adventure themes. It offers thrilling and scintillating rides and games. ushering in a revolution in shopping in India. Both international and national artists use them as a vehicle to generate awareness. and small shops that sold limited varieties of products. This international-style theme park and amusement centre situated close to Gorai Beach is perfect for a one-day holiday. They vary from fashion shows to music concerts to award ceremonies. Screen Awards and The Indian Television Awards. reigned supreme. Award ceremonies include the Filmfare Awards. and attractions. . The Water Kingdom is said to be the largest of its kind inAsia. ü Theme Parks Essel World. plus a water world section where kids can literally run amok. Essel World offers over 40 exciting rides. Special ferries get you across to the park and the entrance fee normally takes care of a fixed number of rides.ü Live Events Live events are a very popular form of entertainment in the developed world. Some of the musical events held in recent times include. The whole concept of shopping has altered in terms of format and consumer buying behavior. They work as a tool to promote specific individuals and organizations and are a great form of publicity. Summer is usually crowded. Several companies are setting up exclusive showrooms and large format stores such as Westside and several others are expanding. India has seen a growth in all these events. the first and foremost amusement park is located on Gorai Island on 64 acres of green lands. that stocked everything from groceries to stationery. There is a movement now from the unorganized to the organized sector. ü Shopping Malls The world of retail merchandising has come a long way since the days when general stores. Roger Waters and Bryan Adams to name a few. games.

The Masterminds behind Adlabs in India Adlabs has been promoted by Manmohan Shetty and Vasanji Mamania. The firm is not strictly a media player in the sense that it does not produce films or television content. The company intended to go one step further and get into the exhibition of films. 90 & Rs. Adlabs has been a consistent performer over the years and is highly profitable. It is offering 44 lakh equity shares of Rs 5 each at a premium of Rs 115 per share. well-illuminated layout. Rates: In the multiplex averages between Rs. The company has to its credit some recent big budget films such as Mohabatein. The company came out with its maiden public issue aggregating Rs 52. The company initially started out with the processing of advertising films from which it derived its name and then moved on to processing feature films.80 crore. Ø Price Mix Fame-Adlabs uses differential or flexible pricing for its Multiplex theatres. It is connected to the media industry by virtue of it being one of the foremost motion pictures processing company in the country with a market share of 60 per cent in western India. Fiza. The supplementary products / services are enormous like the Video Games Parlor & the Food Court. The ambience is pleasant with centrally air conditioning. Adlabs processes films for leading production houses and has been conferred the National Award for Best Cinematography four times. Ø Product Mix -Service Product / Service Package: The Core Competency here is screening of movies. Zubeida and Kaho Na Pyar Hai among others.A recent upcoming media company to hit the markets is Mumbai-based Adlabs Films. The prices are popularly estimated to be extremely .120 depending upon the box office performance of the movies screened. For this the company built a four-cinema multiplex in Mumbai and India’s first IMAX dome theatre. Fame Adlabs is well known for its Dolby Digital Sound. Good options for food like the Cafeteria where you get food made in hygienic conditions. Mission Kashmir.

The customer is the King there. Therefore. the Fame caters to the crème de la crème of the crowd in the Mumbaikars that patronize the theater. these people are treated to the best of quality and productivity by the employees. its limited accessibility is very considerate towards the people that determine its success. The customer arrives to Fame by car and first goes to the ‘pay n park’ to park the car. keeping in mind. In the interval the customer will mostly come out to eat or drink something from the cafeteria.Ø Physical Evidence Ambient factors • Air conditioning • Excellent ventilation Design factors • Uniform appearance • Extensive parking lot • Spacious interiors Social factors • Well dressed employees • Courteous • Genial • Elite and up market crowd • Family atmosphere Ø Process Mix The process is a sequence of actions to deliver the service to the customer. The customer goes back to the screening area to continue the movie. The customer then moves on to the ticket window to purchase the ticket for the movie he is interested to watch. The service for the multiplex goes as far as actually delivering the tickets to the client’s home so as to limit the customer’s trouble in actually booking the tickets in advance. Here the usher at the door checks for the tickets. . Then the customer enters the building. In this case the following is the process followed by Fame. Ø Productivity & Quality Undoubtedly. Then the customer will move on to the screening area and watch the movie. The theater.

at large. that it is generally expected to focus the concerns more on promotion of the collective interest of the society. Hence. as is usually the case with the latter. These are cost of service. . The other marketing mix variables are more or less similar to other services. competitive price . banking services. air. For the other public utility services the services marketing mix have been given in nutshell. ü Cost of Service Cost of service suggests that the public utility rates should be based on those relevant costs. they argued that the rates charged should lie somewhere in between cost of production and value of service. than just profit maximization. telecommunication. electricity. from the pricing of private goods. Some of the services mentioned above have been discussed in the earlier sections. which are necessary. in many respects. The special feature of public utility services is its pricing. waterways…). for pricing public utilities. transportation (rail. value of service. Insurance services and so on. Principles of Public Utility Services Pricing Most of the studies in economics of public utility agree on four major principles of public utility pricing. Public Utility Services Pricing Pricing of public utility services (like urban transport) differs. reasonable and prudently incurred. which may largely vary from the cost. came under heavy criticism by economists on the ground that it did not give enough weight to value of service to a customer. To narrow down the scope of coverage of this particular section telecommunication services and the Indian postal services are discussed in detail.As mentioned above the scope of public utility services is very broad and includes postal (including Courier and telegraph). This is because. where as it is entirely different for the price mix which is discussed below. fire control services. road. and social principles. ü Value of Service Using cost as a sole criteria.

instead of competing with other players in the cluttered market. it ep s a w u e s to c m u ic t llo sr o mn a e µ L n g D ta c e s rv e o is n e ic s : L n g d ta c e s rv e s c n be fu e r o is n e ic a rth d id d in o N D and ILD services. price.1 Services Marketing Mix of Telecommunication Services Unlike manufacturing organizations that focus on the four P’s of the marketing mix. The various products and services offered by telecom industry are discussed below. NLD (National Long Distance) services allow a customer to iv e t L communicate with people residing anywhere in the country. A new policy for Internet Service Providers (ISPs) was announced in 1998 allowing independent services providers to enter the sector ending the earlier monopoly of VSNL. people. physical evidence and process. An Independent Telecom RegulatoryAuthority of India (TRAI) was setup in 1997. This has also helped some of the players create a market for their services. service organizations need to concentrate on seven P’s. Fixed wireless service offers more mobility than the fixed landline but that also has its own limits. product.1. i. However. Fixed land line/wireless services offer following services to customers: µ S o t d ta c e s rv e hr is n e ic s : T e e s r ic hs ev e w h p o l e within a given region. . Let us discuss how telecom service providers attempt to design these seven P’s to constitute appropriate marketing mix and face the challenges in the telecom industry: Ø Product Mix Technology and the changing needs of customers have prompted the telecom industry to introduce different products.to compete with DOT (Department Of Telecommunication).7.e. 5. promotion. ILD (International Long Distance) services allow the customer to communicate with people residing anywhere in the world. Fixed land line/wireless services Fixed landline service allows customers to communicate only from a particular place. place. telecom players are forced to continuously introduce innovative services to sustain and thrive in the highly competitive market. The common landline connection offered by BSNL and other players is the basic service. services and their variations to the customer.

Ø Place Mix When DOT/BSNL was the only service provider. The customer can make the payment by cash/cheque/credit card at one of the service provider’s outlets. videotext. customers pay a fixed amount as rent and the usage charges at the end of the billing period. but the telecom companies are struggling to make profits.paid. The price of the card covers the rent fixed by the service provider plus the cost of certain amount of airtime. airways. a detailed bill is prepared and sent to the customer. etc. That is. competition based or demand-based pricing. service providers offer two options to customers. Though initially.Video telecom services They include video conferencing. hotels. customers had to go to different locations for different services. The total amount to be paid by a customer per month depends on the rent and the services used by him.paid and post-paid. For example. railways. that of post. educational institutes and government departments. In the fixed line industry. BSNL and MTNL for example allow their customers to make online payment. BSNL and Reliance is now making prepaid service available for landline users also. Bill payments were accepted in local telephone exchange office located . which has led to low prices of the services. banks. Most service providers in the telecom industry today are resorting to competition based pricing. customers buy a card available from retail outlets to activate or recharge their service. Some service providers also allow online payment through Internet. videophone. Applications for new telephone connections or for transferring a connection from one place to another were accepted only in one major telephone exchange located in the city. customers have only one option of payment. Ø Price Mix Service providers can use cost-based. depending on the number of calls made by the customer and other services used by him. This has proved to be quite beneficial for the customers. They are used by various service providers including road transportation. In cellular industry. pre. corporates. In case of postpaid service. In case of prepaid service. prepaid service was available only for mobile phone users. Airtel offers different cards with different amounts of airtime and allows its customers to choose from them depending on their need.

Reliance Infocomm. This can be a major . It has a computerized system that receives complaints from customers round the clock and service personnel attend the customer within 24 hours. shops and organizations identifying people in need of a phone connection and quality service. he got it within three days. quality service to customers. 30 lakhs to one crore on building its service outlets. an updated directory is provided to all subscribers free of cost. The fact that it was the only service provider resulted in excessive load as well as complacency. A user cannot judge the quality of the service offered by a service provider unless he uses it. mobile service providers do not provide such directory because mobile phones are considered personal devices. Ø Physical Evidence Telecom service is intangible. Telecom service providers also focus on the voice instrument given to customer. Reliance Info invests about Rs. Now BSNL has also improved its service processes. However. its sales executives visited individual homes. Telecom service providers also send detailed bills on request. When Tata Teleservices entered telecom sector. it gave sleek and attractive looking phone instruments to its subscribers to compete with the phone instruments supplied by BSNL at that time. This has brought a change in the working of the telecom industry as a whole. Telecom service providers however offer some tangible products to customers to service as physical evidence. describing the number called. amount of time spent on the call and the charges incurred. If a customer asked for a phone connection. The new private players emphasized customer satisfaction. Later. however. When Tata Teleservices entered the telecom industry. However. makes the information about mobile numbers and names and addresses of its subscribers available on reliance network.days together even after customers reported a problem. Telecom service providers also focus on ambience of their service outlets. with the entry of private players like Tata Tele services into the industry. They provide customers with a telephone directory that includes names and addresses of all their subscribers. BSNL also began to focus on the looks of phone instruments given to customers. things changed. continuous. They ensured that their service personnel answer customer queries promptly and professionally and attend to their problems immediately. They should however ensure that errors are not committed in billing. One can also obtain the bill information by contacting the number provided for the purpose. Ø Process Mix Telecom service providers should offer reliable. Every year.

over 4500 courier shops have mushroom in the past few years and begun to pose a threat. reliability Blue Dirt and caring Elbee. the SkyPak picked up and by the mid-80s. In a decade the business grew at a phenomenal rate of 30-40% annually. SkyPak-TNT (Broken up recently) Blue Dirt-Federal Express and Elbee-United Parcel Service. This monopoly was broken in 1980 when SkyPak came in market and promised safe delivery of items. Secondly. As a result each courier companies are encashing on this market with innovative marketing strategies. recent business has mostly entailed handling documents. after tie up with the international couriers. Situation in market place has alerted considerably since the time when these big companies enter the fray decade ago. Today the organized market is of around Rs 2500 crore. Soon. even without courier companies providing any foolproof guarantee to the customer for the safe delivery of their documents. 25% by unorganized sector and 10% is with postal services. The organized sector has become conscious of need to curve our distinct niches through strategic changes in their marketing game plan. like value add-ons. However. the postal department also launched Speed Post in 1986. Tie up with the international service provide a common identification in the global sense and consistency internationally. Though. many other companies. Courier services were launched in 1980 and promised to deliver packages and urgent documents in time. TNT. markets are increasingly realizing that age of the generic selling is over. By this time. First. Major part 65% is captured by organized sector. But it was not long before companies become realizing that there was money to be made from the non-document segment too. One had to live with its postal imperfection and with no compensation for the non delivery or misplacement of items. the business has grown. number of player in arena has grown rapidly. Today the major tie up includes DHL-Air Freight. The feasible route that most companies are adopting is to tie up with the foreign affiliate. there are still handful of companies in organized sector holding a major share of market. Table 5. Thirdly. Noticing the boom. 6: Services Marketing Mix of Postal and Courier Services . Although their advertising still harps on reach DHL and skyPak. small and big. their profit jumped from lakhs in 1985 to crores by 1987. mushroomed.Speed post and courier services Till the late seventies in India. a consumer of mail transfer had no choice but to depend on post office.

Table 5.The following tables 5.8 shows the services marketing mix of some other public utility services.8: Services Marketing Mix of Electricity Services 362 .7: Services Marketing Mix of Fire Control Services Table 5.7 and 5.

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