This action might not be possible to undo. Are you sure you want to continue?
Products & Packaging, and Demand & Capacity Planning
PRODUCTS & PACKAGING FOR THE SERVICES
Service Product Level :
A “Product” is generally referred to as any goods or services, or in fact any of the ten entities that can be marketed. In the context of service marketing product means any service in its presentable form- simple or in combination with some frills. These extra things are generally referred to as the packaging of services, and the final presentable offering is known as a product. E.g., Financial Products, Insurance Products, Banking Products, etc. On the basis of the amount or the extent of packaging, we have four levels of products : 1. The Core Product : This is the basic minimum service which satisfy the need of the customer. 2. The Actual Product : This is the Core service with some tangible aspects of the service. 3. The Augmented Product : This is the actual product with some additional benefits that the customers need and the company satisfies them by superior service offers. 4. The Potential Product : Finally the company can still go further by finding out any potential or hidden areas of additional benefits & features (that can add value to the service offering) that can satisfy the customers. Ex. Core = A person hires a tax consultant for tax computation; Actual = the consultant may file the tax returns in addition; Augmented = the tax consultant may advise for tax savings & various investment methods available; Potential = in case of any dispute or case, the tax consultant may plead for his client in the court. Service Product Decisions : Service product decisions are nothing but the various market offers of the company at various points of time, like the starting of business, and later. The timing, the different markets, the different products, etc. A new company starting business may offer one product to a particular market, and later may add another product or another market or both, and so on. The following are the four possibilities : For Existing Product ↓ For Existing Markets → For New Markets → MARKET PENETRATION MARKET DEVELOPMENT For New Products ↓ PRODUCT DEVELOPMENT DIVERSIFICATION
1. Market Penetration : This is a kind of strategy where the service provider wants to sell more of its services to the existing markets to achieve a larger market share, but doesn’t try to change the product or the market. This involves the lowest risk amongst these four methods. This can be done in the following methods : a. Maintaining or increasing the market share of existing services by – 1
c. b. or allowing customer to pay thro’ credit cards. Promotional activities. like multinationals opening shops in other countries. etc. This involves the highest risk. on the basis of certain attributes of the products & services. This is done by many companies frequently. ii. ii. 4. Driving away the competitors by restructuring a mature market by making it unsuitable for them. iii. they are : a. c. etc. iv. like banks offering Insurance products.i. Market Development : Here the marketer tries to enter into new markets with the existing services. Entering a new geographical market. Reliance companies entering into MF business. It’s done to attract and retain the existing market. others don’t. Some companies allow their brands to be used by their franchisees on the basis of some agreement. Tata. like air travel reducing economy class fares to attract more passengers from 1st AC trains. An aggressive promotional activities. Providing club membership 2. New pricing Strategies. b. Simply. etc. 2 . a name is given to the attributes for easy identification. generation of confidence & repute. Ex. Inducing the existing customers to use the services frequently by – i. Multi-Product branding strategy is where the company uses the same brand for all its products & services. Diversification : This is the case where both the services are changed/modified/developed & the new markets are sought. This type of branding is whether the brand is owned by the manufacturer/original service provider or the licensed franchise. Aggressive advertising. Types of Branding : There are a few types of branding. This involves medium risk. Designing a suitable low price strategy. Inducing loyalty schemes. This involves medium risk. like – i. b. Entering into new market segments. and now offers unit linked (MF) policies. Brand repositioning. 3. Reliance group) use the same brand name for all its companies & products. like LICI offering risk cover added money back policies. ii. Branding in Services : A brand is an identification of certain products & services. Even some group companies (like Tata group. they have only dealers. The company can do it in the following ways : a.. Adopting or creating a new distribution channel. 1. Product / Service Development : Here it’s just the opposite – a new product/service is developed or an existing service is modified for the existing market. internet/mobile banking.
Internal Source : The firm employs several people who have developed a fair knowledge about the services. d. Multi-Branding strategy is where the company has different brand names for its different products. that the fixed cots are low & the variable costs are high for the goods. it becomes more critical to plan & develop a new idea of services. but if it is not. Hence. Brand mobility : People. Market survey. competition. the current market scenario. disadvantages. For this the help of market research (external) can be taken. brands change people. External Source : This is obtained from market feedback. Categories for New Service Developments : In the earlier section. The advantages. A well maintained MIS & marketing database can be also of immense importance. Finally the apex decision making body of the management selects & approves the service. expected return on investment. Jeevan Sanchay. people change brands. like LICI has given different brand names to its different products – Jeevan Suraksha. etc. Generation of Ideas : The first thing is to generate an idea of a service that is to be developed. Jeevan Dhara. consumers’ feedback & information. market research can help in this regard. Business Analysis & Design of Service : If everything is positive till now the idea of a new service is put to critical business analysis. a. it’s the reverse. The service marketers need to analyse several factors and adhere to some logical steps of procedures for this. their satisfaction. The following are the important steps : 3 .c. Combination brand name strategy is where the company brand name is combined with the product brand name like. This is not static. but for the services. They are given below : 1. SBI Silver Card. then the MR now can be used for knowing the customers’ or the market segment’s reaction to this service. then the concept is tested. and their change are all dependent on one another. available resources. Brands. They should be encouraged to give their suggestions & opinions for development of new ideas or for improvement of the existing services. Products improvements are for the existing market. Testing the concept : If the MR is already used in the earlier steps. 4. market. or the opinions/suggestions of the employees (internal) of the firm can be accepted & analysed. where all the ideas thus generated are pooled & all the information available are recorded. SBI Gold Card. technological developments are involved. etc. likings. 2. 2. Stating in the context of costing. Screening : This is the second step. etc. New Service Development Process : It’s seen generally. the break-even point is lower in case of goods than in case of services. market demand. Today MR is highly specialised & for a good price the firm can hire the best services to find out the market response to the new service. the customers. SBI Kissan Card. possible obstacles. market trend. b. etc. because of some inherent nature of the services. all these are put to detailed screening & discussion. 3. In both the cases. Major innovations are done for the new market. The change in one will cause the others to change. we came across the new product developments for both the existing & the new markets.
Subjectivity : There is a possibility of the service description getting limited to the knowledge of the person presenting it. They should watch their competitors – when a firm develops new things. Then the marketer can adopt the marketing strategy on the basis of the policies of the company. For the service marketing context we have generally four such distinct stages as given in the following : 1. premises. which need to be tackled properly : d. and the customers should try to understand all the aspects in a service description. Test marketing should be done before the actual launch of the services. This is known as the product/service life cycle. Depending on the feedback. it goes thro’ different stages of ups & downs in terms of revenue generation as the time passes. redeploying. external influencing factors. This is known as a roll-out process. pricing. the competitors don’t sit idle. modifications. Test Marketing : This step is used for further reducing the risk. then the firm can try another segment. then the launch takes place. This is known as a pilot project in the context of MR. If everything goes well at each step.a. If the test market is successful. Next. e. An incomplete or incompletely understood service description will adversely affect the service delivery & consumption. etc. This stage doesn’t earn any profit for the firm. 7. If the launch is successful in a particular segment. etc. The company may choose a smaller portion of the target segment (known as the test market) for this service where consumer feedback can be obtained immediately. the firm can make pre-launch adjustments. Incompleteness : The management. Analysis & design of the final service : Risk awareness & analysis are very important in this stage. packaging designs. Thus the whole situation changes. c. existing customer trends. where the service earns revenue & slowly the retune maximises. current & future potential of demand. The following risk areas related to service description have been envisaged by Lynn Shostack. of personnel. 5. hiring. Biased Interpretation : This happens when there is a misrepresentation of words whether intentionally or inadvertently. Introduction : The first stage is the launch of the service or the introduction in the market. Thus the product life cycle starts. At some point the cost is fully covered. f. rectifications. capacities. But this stage 4 . oversimplification must be avoided in describing the benefits & features of the services to be offered. Oversimplification : While communicating with the internal customers as well as external customers. This is due to the inadequate knowledge or bias of the presenter. between the management & the service personnel or between the service personnel & the customer. 6. the service is finally “launched”. Infrastructure Development : These are needed for the new products – they may be new / additional facilities. promotional. training. g. analysing the target market segment. b. employees. equipment. Service Launch : This is the last stage of new service launch. Product Lifecycle : After the product is launched. Analyse all the seven Ps of marketing mix. they know & develop matching services or other new ones. Hence it is suggested that the service design description should contain both verbal & visual clues and representation. At this stage firms should take another precaution.
low production. low GDP. we call it boom. and the firm needs disproportionately more resources to keep going. but also to the potential consumers for fear of consequence. In the last 15-18 years the world has seen the fastest development in three areas – Computers. The best a marketer can do is to minimise to some extent by careful planning & adopting some strategies. floods. The following are the factors which affect demand fluctuation : 1. and also revenue. 2. We have a huge BPO Industry here giving services to the developed world. it’s lost for ever. wars. but all these add up the costs & a matching revenue is not forthcoming. Slowly. Decline : This is the final stage of the life cycle of a product/service. Demand Patterns : 5 . the customers’ satisfaction will give rise to growth in demand. increase efficiency. At some point. but they prefer to spend less & save more for the uncertainties of the future. people have less purchasing power. terrorist attacks. more inflation. (2) English speaking workforce. Expansion or Boom : This is just the reverse of contraction & boom. It happens due to the depression in the economy. In a highly competitive market. the firm can seek to modify services. This needs no elaboration. which is known as depression. Some people may have money. Growth : If the factors are favourable. because of the various factors the demand decreases which reduces the revenue & profit margin. 4. there will be some competition sooner or later. etc. etc. Internet & Telecommunications. like big accidents. cyclone. hence the demand becomes critical. breakout of dreaded diseases. The firm can further spend some amount for the promotion & ads. then the second stage is the growth stage. 3. and demand for goods & services is less. try to tap other segments. 2. People have more purchasing power. 4. where the economic activities are more. The brand awareness is prominent. overall economic growth is there.is used for establishing the product in the market by carefully monitoring the performance. Demographics : The best example is the BPO Industry in India. Once the demand is not catered. Natural & other Disasters : Another important factor is the natural calamities & disaster. In such a state. MANAGING DEMAND & CAPACITY Concept of Demand in Services : Since the services can’t be stored as an inventory for future use. the feel good factor is there. If it remains for a longer period. Contraction & Recession : Contraction refers to a decrease in growth of economy or in economic activity. This is known as the maturity stage. because (1) Inexpensive & (2) skilled man power. and since services are perishable. and the demand for the services increases. The best thing to do is to discontinue with the service and develop & launch a new one – and the whole cycle starts all over again. These have a tremendous affect not only to the sufferers. Maturity : If a firm is doing well in a particular service & in a particular segment. 5. So at a point the growth ceases. which have revolutionalised the way we live. So things decline. 3. the market share becomes optimum & profit margins are higher. efficiency & quality improvements. less unemployment. Technological Developments : This is one of the biggest source of demand in goods & services. This are visible when we have more unemployment.
monthly. For a limited period a company can’t buy extra equipment or machinery. for a group of family the bonus time is holiday time. Say doctors can have more consulting hours when there is demand.Marketers need to understand the pattern or way the demands behave. seasonal.. which can’t be increased easily or quickly. Health Clinic) 3. Demand Patterns by market segments : Another more specialised database keeping is done for different demand pattern of customers of different segments. they can’t take up more than the time permits and have to be idle if there are none. Time : Time is limited and mostly specialised professionals have this constraints. building. etc. Labour : Labour or workers are another area of constraint. 4. Schools) Strategies to Match Demand & Capacity : 6 . even if the cause can be ascertained. Accounting Firm. Equipment : Like machinery. as four critical factors are involved. whereas for another group this is insurance premium pay time. For production of goods this can be expanded or contracted easily. Consulting Firm. cost effective measures.. But these can be managed by careful planning – like having sufficient equipment for the minimum level in a cycle say a year with down/maintenance time. are needed more in no. with respect to time. This are done with utmost care. This can be tackled by out sourcing the workers to a contractors who has a large work force with him. like two shifts in the class rooms. Theatres. Airlines. more flights for air travel. & yearly basis. (Types of Services – Law Firm. planning. On the other hand temporary employment is not available sufficiently in skilled category. Random demand variations : Some other service demands are not easily predictable. (Types of Services – Legal. He can adjust between several companies. This can be tackled by business houses by opening shop for extended hours when the demand is more & vice versa. But to some extent they can be enhanced. sketch or a report can be made. Hospitals. But for services it is difficult. 3. (Types of Services – Hotels. and out sourcing the additional demand by accurate prediction as far as possible. On that basis services can be planned. Medical) 2. Sketching demand patterns : Companies need to keep a track record or log book. and a graphical chart. adding more compartments in a train. weekly. Network Services. Restaurants. Beyond the full work load it’s hard to cater to more. After a few years. but again the difference in the skill is a bottleneck. transport etc. The service providers must be willing to accept the change in situation. or they occur randomly. in a lean spell. Health Club) 4. Consulting. class rooms. restaurant tables. E. Facility : These are mostly the infrastructure like premises. 1. Foreseeable cycles : Then some easily predicted or foreseeable cycle can be made. adding a few tables & rearranging them in a restaurant. Health check-ups in hospitals. hotel rooms. place & person. Utilities. 2. (Types of Services – Delivery services. Ex. when there’s a bigger demand. etc. Telecommunications. Then the relevant strategies can be developed. where all the demands are recorded on daily. Accounting. Capacity Constraints : Capacity of a company is defined as the ability to meet the demand and the extent to which it can do it. a set of patterns can be accurately predicted. Say health care or insurance when a flood or earthquake occurs. 1.g.
Bring the service to the customer. The prices are more during the peak period and less in slack period. Communicating with the customers : By the effective communication. Modify Hours of operation. 3. Charge full price for the service – no discounts. facilities & equipment. There are some other methods : a. Now the scheduled banks have working hours 10 to 3. like use of telephone or internet etc. business gatherings etc. DEMAND TOO LOW Use sales & ads to increase business from current market segments. Altering the service delivery timings : Earlier banks used to work from 10 am to 2 pm. Varying the original services offer : Bigger service providers offering smaller services during low demand period. d. if there is no additional capacity.30 timings.30. so that they can shift their requirement timings. Offer incentives to customers for usage during nonpeak times. Take care of loyal or regular customers first. and some even are open on Sundays. or the idle capacity. Adjusting capacity to meet demand : As discussed earlier. But here there is a limitation – it doesn’t apply to many services or many customers. c. Demand Shift : There are some services where the demand can be shifted. DEMAND TOO LOW Perform maintenance. Also there is a danger of attracting another segment or dissatisfying the target segment. the service marketer can explain the practical situation to the potential customers. Some customers are by nature rush avoiders. Advertise peak usage times & benefits of non-peak use. This can be done as already given and by shifting demand : 1. Modify the service offering to apply to new market segments. Like marriage caterers offering smaller parties of birthday. say for bars daytime is low priced. The marketer has to be very particular about the price sensitivity of the customers 2. b. Again this is applicable to a small portion of cases. where choices are available. with the least extra cost. Offer discounts or price reduction. There is a limitation. Strategies for Flexing Capacities to match Demand : DEMAND TOO HIGH Stretch time. that means the timings can be changed without much discomfort. Price differentiation : This concept works on the basis of the economy of supply & demand. then the firm looses customer who go to another. In a particular demand cycle there should be minimum occasions for demand being more. renovations.30 to 4. and the new generation private banks have 9. Having a differential pricing as mentioned earlier. 4.The most important job of the service marketer is balancing / matching the demand & capacity. Strategies for Shifting Demand to match Capacity : DEMAND TOO HIGH Use signage to communicate busy days & times. 7 . labour. This is apart from the 24-hr ATMs. it is not practical in a restaurant. so to some extent the nature takes care of the shifting.
The first step is to segment the market based on customer needs and their ability & willingness to pay. but it can be done to a considerable extent. the maximum possible customer satisfaction with the maximum return / profit is known generally as the Yield Management. Rent or share facilities. Rent or share equipment. Request over-time work from employees. to the right kind of customer. In other words it is to find the best balance at any time amongst the prices charged. Hire part-time employees. But in simple arithmetic we have : (YIELD) = (ACTUAL REVENUE) = (POTENTIAL REVENUE) = (YIELD) = (ACTUAL REVENUE) ÷ (POTENTIAL REVENUE). Lay-off employees. and a decision as to how to tackle the situation. ( % CAPACITY UTILISATION) × ( % PRICE REALISATION). Yield management process : a. 2. Creating Demand Inventory : There are some special cases where an inventory can be created for the demand for services. like queuing & reservation systems. Reservation system : like railway travel. c. 1. Schedule employee training. Definition : Yield Management is defined as the process of allocating the right kind of capacity. Schedule vacations. Sub-contract or out source activities. Queuing system : like waiting for turn in a dental clinic. [(ACTUAL CAPACITY USED) ÷ (MAXIMUM CAPACITY)] × [(AVERAGE ACTUAL PRICE) ÷ (MAXIMUM PRICE). Yield Management : For marketing services. This can be a complex mathematical model. b. the demand can’t be matched with capacity to a high level. the target segment. 1. (MAXIMUM CAPACITY) × (MAXIMUM PRICE). the capacity & resources used to get the best possible financial returns.Cross-train the employees. The second step is to collect the information regarding highs / lows of demand & capacity. (ACTUAL CAPACITY USED) × (AVERAGE ACTUAL PRICE). ( % YIELD) = 2. at the right price so as to maximise the revenue or yield. The third step is to take advantage of varying needs by using the differential pricing system 8 . The method by which a firm manages to have the minimum gap in demand / capacity.
. others may resent the rules & restrictions on their own discretion. 5. b. Application areas of yield management : 4. Challenges & Risks using Yield Management : Yield management improves revenues. d. © Himansu S M / Written Sep-2006. e. Loss of competitive focus : Yield management may result in over focussing on profit maximisation & inadvertent neglect of aspects of the service that provide long term competitive success. f. While airlines & some large hotel chains & shipping companies do have such centralisation. But it is not without its disadvantages. b. an organisation must have centralised reservations. This concept also helps the organisation manage inventory at an optimum level and thus avoid market share erosion or revenue dilution. how they should make decisions. other similar organisations may have decentralised reservation systems and thus find it difficult to operate a yield management system effectively. how it works. Customer education is thus essential in an effective yield management programme. when the customers are willing to pay. It demonstrates the ability of the management to sell its service at a higher price. d.3. than someone else. c. they may perceive the pricing as unfair. whereas yield management balances the two factors. It helps in fixing the prices in the discounted category using the demand levels forecast earlier. Customer Alienation : If customers learn that they are paying a higher price for service. Inappropriate Organisation Yield Management Function : To be most effective yield management. Employee morale problems : Yield management systems take much guess work and judgement away from sales reservations people. particularly if they don’t understand the reason. The following are a few of the advantages : a. Employees need to understand its purpose.g. c. It also helps the management determine the break-up of services to be sold at full value and at a discounted price. Although some employees may appreciate the guidance. Benefits of yield management : Yield management is to balance the demand & capacity in a profitable way. Lack of employee training : Extensive training is required to make a yield management system work. They are the following : a. and how the system will affect their jobs. Incompatible incentive & reward system : Employees may resent yield management systems if these don’t match the incentive structures. E. Published Feb-2010 9 . many managers are rewarded on the basis of capacity utilisation or average rate charged. Customers can be further alienated if they fall victim (and are not compensated adequately) to overbooking practices that are often necessary to make yield management systems work effectively.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.