ELEMENTS OF SERVICE MARKETING MIX

1. Product
2. Price
3. Promotion
4. Place
5. People
6. Process
7. Physical evidence

Product- the product is anything that can be offered to market for attention, acquisition,
use or consumption that satisfy a want or need. It includes physical objects (TV), service
(banking), person (political person), place (holiday resort), organisation (Red Cross) and idea
(aid awareness).

CONCEPTUALIZATION OF THE SERVICE CONCEPT

Conceptualization of service product was described by the Donald Cowell in four steps.

1. Customer benefit concept- the customer is the starting point in manufacturing or

developing goods or services. The customer purchases the services because it offers
him certain benefits. In buying, the customers are not buying the goods or services
but instead they are buying certain benefits and values. It must be noted that when
a customer buys medicine he buys hope, when he goes on a tour he buys pleasure
not tour and so on.
2. Service concept- the service concept takes the customer benefit concept and
translates them in order to determine the aim and intention of the organisation. The
service concept is based on the idea that the actual services offered could be divided
into a number of levels that may relate to the customers need, satisfaction and
benefit.
a) Core service benefit level: this level consists of the basic service product that is
the benefit the customer is really buying. The core products are essentially those
products that define what kind of business they are in.
b) The expected service level: this level reflects the standard required or expected
by the customer to satisfy their needs and wants. It is the minimum set of
expectations a customer has about a product or the service which the marketer
must strive to satisfy. If the service offer fails at this level it will mean immediate
dissatisfaction.
c) The augmented level: it includes the fundamental services and benefits that
distinguish the company’s offer from the competitors offer. This product basically
 a formal product with some extra features attached to it. These value additions
are made in order to make the services more attractive to customers.
d) Potential level: the potential product focuses on the future. When a product
exceeds augmented level it comes at a pleasant surprise to their customer and
he is delighted leading to his loyalty towards the product.

3. Services offer and services package: service offer is the element that make up the
total service package. It includes both tangible and intangible components of service.
The service package includes all decisions involving the essential concept of the
service and the range of service provided.
The tangible elements include the main item purchased by the customers whereas
the intangible items include the contact with the service personnel, the ambiance of
the service environment and the customer’s mood.
4. Service delivery system: service delivery system spells the service that is provided to
the customer. It represents the interaction between the service provider and the
customer and between the customer and the service facility.
The service delivery system is a carefully designed blueprint which describes how the
services will be rendered to the customers.

SERVICE LIFE CYCLE

The different stages in the life cycle of product and services are more or less similar
and have common characteristics. They are as follows:

1. Introduction: at this stage the service is new as it is just launched its usage rate
will be low. The production cost is high but the sells being smaller the revenue is
low. Until the growth stage the service provider mostly operate from one
location.
2. Growth: there is rapid increase in the sales at this stage. The sales increase at
increasing rate as the consumers see the benefits in using the service. Promotion
is focussed in order to attract new users and retain repeat customers.
3. Maturity: the product or services enters the stage of maturity as the rate of
growth slows down. Here the sales are still increasing but increasing at
decreasing rate. The sales touch their peak and then it saturates at that level for
longer period of time. There is intense competition at this stage and the firm in
order to keep its market share may modify and improve the service quality.
4. Decline: the usage rate of services diminishes with the technological
advancement and changing consumer tastes. The service provider uses different
strategies at this stage.
PRICING IN SERVICES

Price is the significant element of the marketing mix because it is the only element that
produce revenue where as the other elements produce cost. Price reflects the value
attached to the service provider and it must correspond with the customer’s perception of
value. Service providers offer a range of services at different price levels to cater the needs
of different target segments that may have different levels of purchasing power.

FACTORS AFFECTING PRICING DECISIONS

Internal factors

a. Organisational factors: it refers to the internal arrangement for decision making.

b. Marketing mix elements: which includes the service offering the promotion,
people, process and physical evidence are important in determining the value for
money aspects in the service sector.
c. Positioning
d. Service cost: pricing policy should cover at least the basic cost.

External factors

a. Competition: this is more relevant in case of homogenous services like laundry,

vending machines etc.
b. Demand: the demand may vary for a number of reasons.
c. Regulatory factors: in many of the services, the prices are either administered or
controlled e.g. post and telegraph.

METHODS OF PRICING IN SERVICES

1. Cost based pricing: it is also called as cost-plus pricing. Under this method the
company determines the cost of service delivery as well as a pre-determined rate of
profit in order to arrive at a price. It is necessary to analyse all costs accurately and
differentiate between fixed and variable costs in order to use cost as the basis for
pricing decisions. This method of pricing is widely used in catering services and by
advertising agencies.
2. Demand based pricing: in this method of pricing the cost is not considered but the
service provider allows the demand to determine the price. Demand based pricing is
generally used where the services are price sensitive. The consumer perception of
the value of the service quality varies. Therefore successful demand based pricing is
 based on effective segmentation of market to achieve the maximum price from the
segment.
3. Competition based pricing: homogeneous services that are standardised without
special service attributes are the best examples of competition based pricing. In this
method of pricing price is determined on the basis of competitor’s price.

PRICING STRATEGY:

1. New service pricing strategy: while launching a new there are two alternatives
pricing strategies.
a. Skimming strategy: in this the services are introduced at higher price. It is
assumed that the customers are more concerned about obtaining a quality
service rather than cost of the service. As the demand for the service falls, the
price level is reduced. E.g. mobile phones.
b. Penetration pricing: in this the services are priced low. The prices are kept low to
stimulate trial and thereby ensure customer loyalty.
2. Differential pricing/ market segmentation pricing: different market segment may
show different price elastic of demand. The pricing strategy adopted to cater these
groups is known as discriminatory pricing on the basis of market segmentation. It
may be done on the following basis.
a. Different time of consumption
b. Different point of consumption
c. Group of buyers.
3. Service mix pricing: in this the firms with multiple service offering that are more of
interrelate may adopt this strategy. It may resort to
a. Captive service: in this customer has no choice to get additional service offer
from the service provider along with the core service.
b. Competing services: in this the service firm competes with its own offering.
c. Optional additional service; in this, the service provider gives an option to the
customer to purchase the optional services along with the core services.
4. Price bundling: it means pricing and selling the services as a group rather than an
individual offering. In this the service firm will be able to sell all the products in the
service line.
5. Relationship pricing: in this type of pricing the lifetime value of the customer is
taken into account. The main objective is to encourage customer loyalty by
rewarding it,
6. Competitors pricing: services which are very price sensitive and where the core
benefits sought are largely similar, competition oriented pricing occurs frequently.
7. Marginal pricing: it is based on the concept of marginal cost and is particularly
relevant to service industry. The marginal cost is the cost of last unit of output and
may be very low.
SERVICE PROMOTION

Promotion is one of the seven elements of marketing mix. It is the communication link
between sellers and buyers for the purpose of influencing, informing, or persuading a
potential buyer's purchasing decision.

VARIOUS TOOLS USED IN SERVICE PROMOTION:

1. Advertising – advertising is a paid form of non-personal presentation and

promotion of ideas, goods or services by an identified sponsor. Advertising has a
major role in helping to deliver the desired positioning for the services.
Advertising media includes television, cinema, radio, newspapers, and
magazines/journals.
Some other forms of advertising are: brochures and booklets, posters and
leaflets, directories, bill boards, display signs etc.
2. Sales promotion- it is an activity intended to stimulate purchases by adding an
incentive to the inherent feature of the product or services offered.

There are different sales promotion tools available to the marketer but careful
thought should be given in deciding whether or not a specific type of promotion can
contribute usefully to the sales promotion tools:

a. Sampling.
b. Contest, games and sweep stakes.
c. Premium and gifts.
d. Trade fairs and shows.
e. Exhibitions and demonstration.
f. Coupons.
g. Rebates.
h. Trade-in-allowance.
i. Entertainment.

3. Personal selling- personal selling means personally persuading or adding a prospective

customer in purchasing a product or service or accepting or acting on an idea. Personal
selling is a powerful two-way form of communication that allows an interactive relationship
to be developed between the buyer and the seller.

4. Word of mouth- in services marketing, while promoting the services greater importance
is given to referral and word of mouth communication. Customers are often closely involved
in the delivery of a service and then they talk to other potential customer and share their
experiences.
5. Public relations and publicity- public relations means, the planned and sustained effort to
establish and maintain goodwill between an organization and its public. Publicity refers to
the communication about organization, product or services that is not paid for or sponsored
by the organization. It often takes the form of news reports and announcements.

Promotion tools in PR

a. Publicity through media

b. Sponsorship of events
c. Lobsbying
d. Corporate brochures- in house
e. Journals and other publicity material.
f. Public announcements and special publication.
g. Involvement in social and community initiatives.

6. Sponsorship- it involves investments in events or causes so that an organization can

enhance its reputation. One important advantage of sponsoring is that allows a company
avoid the general media clutter usually associated with advertising.

7. Direct marketing- it is an interactive system of marketing which uses one or more

measurable response and / or transaction at any location.

Today we call it direct relationship marketing because these direct marketers use direct
response advertising media to make a sale and learn about a customer whose name and
profile are entered in a customer database.

PLACE DECISIONS IN SERVICES

In services, the place decision depends on the location and use of distribution channel. The
main problem in the creation of channels for services is that they cannot be manufactured
in one place and distributed all over.
They can be offered from either a single outlet or multiple outlets. Common functions like
production, promotion and purchasing can be done at central point.
A number of services do not allow the use of intermediates in the distribution of the
service. E.g. a teacher or a surgeon cannot use an intermediary to provide his service. In
such cases the provider has to sell his services directly to the consumer.
The next option is the use of agents or brokers to sell the services. These intermediaries
work on commission basis or charge fees to the customer or the service firm. In insurance
selling, real estates, tours and travels agents are common.
The third option is known as franchising consist of signing an agreement between the
service organization and another individual or firm. The agreement permits the franchisee
to use the name and goodwill of the service firm. The franchisee sells the product of the
service firm and gets a fixed percentage on the sale.

ROLE OF CUSTOMER IN THE DISTRIBUTION SYSTEM

In the service management system the customer plays a dual role. One as the receiver of
the service and other as the participator in the system.
The customer’s participation at three different levels i.e. low, medium and high. The level of
participation varies. It will be according to the nature of service delivered and the
interaction required for the effective delivery of service.
In low level participation, only the customer’s physical presence is required and the service
provider performs the service.
In case of middle level participation, the customer has to provide information about his
requirements so that the requirements are customised.
In high level participation, the customer has to participate in the service production process
otherwise the outcome of the service will not be fulfilled.

PEOPLE IN SERVICES

In services business, the service provider reflects the organizational realities. It is through
the interaction with the staff, that the customer forms an opinion of the organization. A
service firm may have latest equipments and all the facilities but yet it may not be able to
provide satisfactory customer service due to lack of interpersonal relationship between the
service provider and customer. In such cases, the customer develops negative attitude
towards the organisation. Therefore it is necessary that the service marketers should
develop a high level of interpersonal skills and customer-oriented attitude in the employees.

TYPES OF SERVICE PERSONNEL

Services can be labour intensive i.e. people based or equipment based. In any type of
service, the customer comes in direct contact with the service provider and therefore the
classification of personnel from the viewpoint of marketing would be customer contact and
non-personnel contact employees.

A) CUSTOMER CONTACT EMPLOYEES: they are known as frontline staff as they come
in direct contact with the customers in the process of service delivery. E.g. front
office staff, waiters, airhostess etc.
The degree of the personnel customer contacts varies so we have:
 1. High contact personnel: they are required when the physical presence and
interaction of the customer with the employees is for a longer time like hospitals,
educational institutions, restaurants.
2. Low contact personnel: they are required when the physical presence and
interaction with the customer is for a lesser time, example, retailing, post office.
3. Skilled and professional: e.g. doctors, lawyers, engineers.
4. Non-professionals: e.g. courier delivery boys, waiters, helpers etc.

B) NON-CONTACT EMPLOYEES
Those employees who contribute to the service delivery but do not come with the
customers are called non-contact employees. They are actually support personnel.
They possess high technical skill and are highly competent in their work.
The technical support personnel operate at the back stage and are not visible to the
customer.

SERVICE PROCESS
The service process refers to how a service is provided or delivered to a customer.
Delivery system is a creative process. It begins with a service concept and strategy to
provide a service.
Designing a service process involves issues such as location facility, design and layout
for effective design and layout for effective customer and work flow, procedure and
job definitions for service providers, extent of customer involvement, measures to
ensure service quality, equipment selection and adequate service capacity.

SERVICE PROCESS PALNNING

The following strategic decisions and design elements must be considered in the
service planning process.
1. Basic technological decision
2. Conversion or materials decision
3. Specific equipment decision
4. Process flow decision
a. Blue prints
b. Flow charts
c. Front and back office
d. Layouts
e. Benchmarks
5. People decision.
1. Basic technological decisions: in some cases, technology exists but not in
consumerised form. So the question arises: whether the technology available can be
developed to provide the materials, processes and equipment to deliver the service?
For example, at one time it was possible to design printed electronic circuits on small
chips, but the specific equipments required to produce the chips were beyond the
state of the art. In the same way telephone was invented in 1876, but the technology
came in use for consumer 15years later when the telephone dial was invented.

2. Conversion/ Material decision: the decision on conversion process is complex as it

depends on technological and market factors as well as economic considerations.
There are many alternative processes and materials that will satisfy the design
specifications. When each person or machine supplying a service is dedicated to
providing that specific service efficiency is achieved.

3. Specific equipment decision: technology selection is an important decision for any

firm. It must fully support the design of the product or service as it creates the
demand and requirements for all other parts of the operating system.

4. Process flow decision: it is related to conversion/ materials decision and specific

equipment decision. The process flow decision is developed on the basis of flow
process charts, blue prints, layouts and benchmarking.

A) Service blue print: a service blue print is flow chart of the service process. It is
the picture of the service system. It conveys the service concept by showing the
service at an overview level. It shows how each job or department functions in
relation to the service as a whole. The blue printing exercise also gives the
managers the opportunity to identify the potential point of failure and design
“foolproof” procedures so that they may not occur again.
B) Service mapping/ flow charting: flowcharting can be applied to any type of
service when a management needs to gain a better understanding of how the
service is created and delivered. It is also known as service mapping when
planning a new or revised process and prescribing how ought to function.
Developing a flow chart begins by identifying each interaction that a particular
type of customer has while using a specific service. Managers should distinguish
between the core products and supplementary elements.
C) Front and back office: the front office is that part of the system which is directly
experienced and visible to the customer. This is the place where the actual
service is performed. That part of the system from which the office if excluded is
the back office. E.g. kitchen in a restaurant is not visible to the customer. There
are certain services like banks where the back office is visible to the customer.
 D) Layouts: the layouts of a service organisation can be process layout, product
layout or group layout. In process layout the resources are arranged according to
the particular state in the process that is to be applied to the customer.
In product layout the requirements of specific group of customers are identified
and only than the resources are sequentially set-up so that the customers flow
through the system and move from one system to another until the service is
complete. E.g. car servicing.
Group layout is a composite to batch and flow and embraces the advantages of
both. The group layout approach is generally more customer focussed and given
satisfaction to the employees.
E) Benchmarking: the word benchmark means “standard or point of reference”.
Benchmark is related to the company’s product, services and practices.
Benchmarking is required by the company to have market leadership in the
industry and competitive advantages over others due to its enhanced
performance. It is just a process of continuous improvement over a company’s
manufacturing process, distribution process, advertisement process, consumer
satisfaction process and so on.
F) People decision: the decision regarding the people means determining the
number of people, their skills, and the labour cost. A firm may have
sophisticated technology but it is the people who manage them and therefore in
people decision knowledgeable and motivated work force cannot be overlooked.

PHYSICAL EVIDENCE

Generally a service transaction involves the interaction of the service provider with the
customer in a service environment.

Physical evidence is termed as “the environment in which the service is delivered and where
the firm and customer interact; and any tangible commodities that facilitate performance
communication of the service.”

Physical evidence includes

a. Physical facilities
b. Physical environment
c. Social settings

a. Physical facilities- on the basis of physical evidence like building, furniture, equipment,
stationary etc the potential customer’s forms an impression about the service organization.

Physical evidence includes essential evidence and peripheral evidence. Essential evidence is
the technical facilities without which the service delivery is not possible. Peripheral evidence
can actually change hands during the service transaction, they include stationery, brochures
etc. Though services can perform without these items, still they can be used to enhance the
corporate image.

B) Physical environment: it includes

 Ambience
 Space
 Decor and artifacts
Ambience: this includes temperature, lighting, noise, music, scent and colour. All these factors affect
the way the people think, feel and respond to a particular service setting.

Space: people need space around them to feel comfortable. Ease of access, good visibility,
proximity of linked services will help to make the customer feel comfortable.

Decor and artifacts:

Decor:
signs, symbols and artifacts are the important components of decor. Signs represents the
first encounter the customer has with the service firm. It influences the first impression. E.g.
parking, entrance and exit.
Symbols are used to judge the expertise of the service provider. Certificates hanged on the
wall are symbols of achievement and may provide reassurance to the customer.

Artifacts:
The style of decor can generally create an impression of cheap, serious, cheerful and
expensive. Artifacts like original oil painting may indicate success.

C) Social settings: the appearance of the service personnel is the major aspects of the social
setting that influences the consumers’ attitude about the service personnel.
The concept of appearance shows whether the employees appear to be friendly and
approachable, caring, professional and confident.
MARKET SEGMENTATION AND SERVICE POSITIONING

Definitions of market segmentation:

According to Philip Kotler, market segmentation means “the act of dividing a market
into two distinct groups of buyers who might require separate products or marketing
mixes”.

Features:

(a) Dividing the total market: Market segmentation is dividing the total market into
small parts on certain well-defined bases.
(b) Marketing objectives: The aim of market segmentation is sales promotion,
consumer satisfaction and achieving the marketing objectives.
(c) Division into submarkets: Segmentation is the process of dividing the total market
into the number of submarkets for efficient marketing.
(d) Rational segmentation: segmentation is useful for selecting target markets and
promoting sales in that specific market by using an appropriate combination of 4 Ps.
(e) Sales promotion: Segmentation facilitates the introduction of suitable marketing mix
for each segment in order to promote sales in each segment.
(f) Target strategy: Market segmentation is better than market aggregation as the
current marketing trend is shifting from mass marketing strategy to target marketing
strategy.

Need for market segmentation:

(1) Market segmentation is needed to concentrate attention on a specific target market

and to achieve better results in terms of turnover, profit and consumer satisfaction.
(2) In order to adjust marketing mix as per the need and requirements of specific group
of consumer market segmentation is required. Advertising and marketing appeals
can be made effectively through market segmentation.
(3) Market segmentation is needed for the introduction of strategy of divide and
conquers. Different market segments needs different marketing strategies.
(4) Market segregation acts as a base of present consumers oriented market philosophy.
It is needed in order to select and concentrate marketing efforts on specific target
market.
(5) Market segmentation is need as wants and desires of consumers are not uniform.
Market segmentation is the only appropriate answer.
(6) Different market segments have different price perceptions and different pricing
strategies need to be adopted in order to suit the needs of different segments.
(7) Market segmentation provides information regarding suitable timing for advertising
and sales promotion measures in different segments. A company can use such
information purposefully for sales promotion in different segments.
 Essentials of Effective Market Segmentation

(1) Heterogeneity of consumers: heterogeneity of consumer means different from each

other. Consumers purchasing a product or service should not have uniform as
segmentation will not be possible.
Heterogeneity as regards income, social status, cultural backgrounds, likes and dislikes are
useful for rational segmentation of consumers.

(1)Sustainability: the size of segment is an important dimension. An identified

Segment should be large into design a distinctive marketing programme for itself.
Sustainability is not only measured in size but also in terms of probability.

Benefits that are expected from segmentation should always be more than the

Estimated expenditure from the special marketing efforts that are required.

(2) Accessibility: market segment selected for use should be easily accessible to the
marketing firm. The marketing mix can be used effectively only when the segment is
easily approachable through advertising, sales promotion, better quality product and
so on.
(3) Measurability: different variables such as reach, social status and purchasing power
are used for market segmentation. Such variables must be clearly measurable for
dividing the consumers.
(4) Positive response: the segment drawn by the marketing firm should be rational to
have positive response from the prospective consumers. Suitable study about the
possible response should be made.
(5) Servicing the segment: once a segment is established there is a need to provide
regular service to the consumers and also to attract the new buyers. Satisfactory
servicing establishes consumer loyalty.

Service providers should also study the consumer behaviour in terms of their
loyalty. Consumers are sometimes divided into four categories according to the
customers loyalty pattern.

(a)Hardcore loyalty: those who buy service from two or three service providers at all the time
irrespective of the service delivery quality.

(b) Soft core loyal: those who buy service from two or three service providers and do have
regards for the service delivery quality.
 (c) Shifting loyal: those who buy the service is shifting from one to another service

provider frequenty and have high service delivery quality consciousness.

(d) Switchers: Those who always buys the service from the different service providers.

Switchers continue the least loyal category.

PROCESS OF MARKET SEGMENTATION IN SERVICE:

There are basically three desirable alternatives for a service organization to target market selection:

1. Undifferentiated marketing approach: under this approach the service organization aims at
capturing mass packet with a single package. The marketers pursue mass distribution and
mass promotion of one product or service for all the buyers. Generally public sector
monopolies follow this approach. Services as primary education, primary health, law and
order services and judiciary services follow this approach in our country.
2. Differentiated marketing approach: markets are generally heterogeneous in nature with
varied cultures, lifestyles and economic backgrounds. The service providers identifies
separate segments in the market and develops separate marketing mix programmes
targeting each segment. for instance, national dailies like the Indian Express fine tune their
contents by adding one or two pages covering local news items, towards achieving
differentiated marketing goals.
3. Concentrated marketing approach: the service provider identifies a separate market
segments but develops and concentrates his efforts only on one or two segments in order to
provide desired service. For example, driving schools generally in posh localities.

In order to maximize the net financial gains many service firms do not depend on an undifferentiated
marketing approach. In the past, monopolies have adapted the market aggregation approach.
However, the deregulation and privatization leading to a greater competition, former monopolies
are becoming aware of the importance of specific market segments. A very good example is the
entry of various private communications basic service providers onto the Indian Telecommunications
market, once the sole market of the Department of Telecommunication.

Marketing research is done in order to identify the segments for effective and efficient targeting,
thus avoiding the pitfalls and trail error approach. Long term planning of various marketing activities
can be performed by a proper ongoing analysis of the selected segments. This helps in developing
new services aimed at satisfying the needs of a particular lucrative and viable market segment which
is also known as niche marketing.

MARKET TARGETING IN SERVICE:

Market targeting deals with evaluating the attractiveness of the segment and selecting some of the
segments that the organization would like to serve. Hence segmentation is more of the analysis of
the customers, whereas targeting is the managerial decision as to whom to serve among the various
identified segments.

The most important marketing issue for any type of business organization is to recognize some
identified market segments offer much better opportunities compare to others. Here the concept of
market positioning evolves. It is all about creating a lasting perceptions in the mind of the service
seekers about the values, effectiveness and efficiency of the service and the service provider with
respect to competition which brings valuable returns to the service provider.
CUSTOMISATION:

There are different approaches towards mass customization:

(1)Customizing the service around the standard core:

A standard core service can be customized through addition of features or through creative delivery
options. For example, hotel accommodation can be customized through addition of features or by
offering variation in rooms.

(2)Creating customizable services:

The designing of the same service, provided by the service provider for everyone can be customized
by the customer in person. ATMs and automated ticketing are examples of this type of
customization service.

(3)Offering point of delivering customization:

The service providers allows customer to communicate what is required by the customers at the
point of service delivery. The service is customized in real time by employee to feet those needs, for
example professional services, health care, counseling and personal care services.

(4)Offering standard modules that can be combined in unique ways:

Here the service provider offers different components of different standard modules in order to
form a unique service required by the customers. This approach is used by tour companies that offer
the traveller different vacation components like hotels, airlines, destinations length of stay that they
can combine to design their unique trip. This creates a unique vacation package and a unique trip for
a single customer.
MARKET POSITIONING IN SERVICES:

Market positioning involves the identification of competitive position for the service
required by the service seekers and the creation or adoption of the service marketing mix to
fit the position.

Positioning is concerned with the competitive differentiation and is used to advantageously

fit to he service provider and its service to a market segment. One can differentiate on the
basis of subjective criteria like image and communication, or objective criteria like the
elements of the marketing mix. In the airline industry, British Airways has created a position
based on its excellence punch line, “The world’s favourite airline”.

Positioning is a strategic marketing tool that allows managers to determine the

organization’s current position. It per mist market opportunities to be identified influences
service development and redesign of existing services.

The key tool to a successful positioning strategy is to promote the features which the service
provider is best in and which exactly matches the needs of the service seeker.

THE NEED FOR POSITIONING:

Most of the leading service organizations have started to recognize the importance of
positioning for their service offerings. Service providers are identifying their key market
segments and are also determining how service seekers should perceive both their
organization and its services.

The concept of positioning steps from the basic idea of identifying needs and fulfilling those
needs of the customers and also from increased recognition of the importance of corporate
image. Developing the concept a little further over the years, service providers are now
involved in identifying improved ways of creating service appeals and are focusing on the
concept of Unique Selling Proposition.

Positioning is largely a communication issue dealing with the psychology service seeker. It
focuses on achieving a desirable position in the service seeker. It looks into cosmetic
changes like the name, price or package, etc., for securing a unique position in the service
seeker’s mind. Price, distribution, people, processes, customer service, and the service itself
can all affect a service provider’s positioning in addition to promotion.
STEPS IN DEVELOPING A POSITIONING STRATEGY

Service positioning involves a series of steps:

(1)Determining the levels of positioning

(2)Identification of key attributes of importance to selected segments

(3)Location of attributes on a positioning map

(4)Evaluating positioning options

(5)Implementing positioning

(1)Determining the levels of positioning:

The first step is to determine which level or levels are to receive explicit positioning attention. Some
organizations have placed a different emphasis on these levels at a different point of time. For
example, some Indian banks are currently reemphasizing corporate positioning, rather than service
positioning.

(2)Identification of key attributes of importance to selected segments:

Once the level or levels of positioning are determined, specific attributes to the chosen market
segments gains importance. In particular, the purchasing decisions made by the service seeker
should be considered. For example, the purpose for using the insurance service may change the set
of criteria either for business insurance or personal insurance by different
service seekers.

The service seekers will make a choice between various alternative services based on perceived
differences between them. These may not necessarily be the most important attributes of the
service. For example,

A passenger using a particular airline may rank safety as the most important feature. But many
airlines have similar safety standards, so based on other characteristics such as comfort,
convenience of flight times, standard of food served on flight or the crew courteousness.

(3)Location of attributes on a positioning map:

 Usually two dimensions are used on positioning maps to explain the service seeker’s preferences.
Services are typically plotted on a two-dimensional positioning map that can used in order to identify
the position of the competitor services in relation to the selected attributes.

The analysis can be further developed by drawing separate positioning maps for each of the market
segments. An illustrative positioning map is shown in the above figure for better understanding.
Service seekers in each market segments may will show these different positions. The positioning
map can be used to identify potential gaps in the market where there is a demand but little
competition.

POSITIONING MAP

Positioning maps can be based on objective attributes, subjective attributes, and both the objective
and subjective attributes. For example, banks positioning map shows the objective dimensions of
best interest rates on loans on one axis and a subjective attribute being friendly/courteous service.
The figure given below highlights this positioning map.

High interest rates on loans

Bank C
Bank E

Core Demand

Bank D
Bank A

Bank H Bank F

Bank B Bank G

Low interest rates on loans

In the illustration, Bank D wishes to reposition itself to core demand area for a better positioning
alternative. To this, the bank needs to understand why the positioning map shows its position in its
present status and how it should communicate to its target market about the repositioning for
better viability and best delivery of service to the service seekers

(1) Evaluating position options: According to Ries and Trout, there are three positioning
options:
(a) Strengthening current position against competitors: This often involves avoiding
head on confrontation/competition with the market leader and strengthening by
through consolidation of the current position by better delivery of services.
 (b) Identifying an unoccupied market position: this strategy involves identifying the gap
in the market that was not occupied by a competitor, and fulfilling those needs of
the service seekers through better service delivery.
(c) Repositioning the competition: this strategy involves frequent repositioning in order
to attain a better position as compared to the competitor’s position.
Once a service provider has identified where the organization os presently
positioned, it needs to determine how to enhance or sustain this position relative to its
competitors.

(2) Implementing positioning: The need for communicating how a service provider and
its service positioned with the service seekers is very important. This shows that all
the elements of the service provider, its staff, policies and image need to reflect a
similar image that conveys the desired position to the marketplace.
The positioning strategy should be examined from time to time in order to
ensure that it does not become outdated and that it is still relevant to the target market
segment. The marketing mix is the key to implementing an effective positioning strategy.
The marketing mix design to implement the positioning must be based on the target
segments.

Introduction:
service is a perishable commodity. Eg any trian going with empty seats and has lost the
revenue opportinity ever . service is an intangible personal experience thatcannot be stored nor
transferd from person two another,instead production and consumption takes place
simultaneously .when ever the demand for a service falls short of the capacity to serve,the result is
idle servers and idle facilities.
As inventory of services cannot be kept. 4 possibilities might arise:
1.Excess demand
2.Demand exceeds optimum capacity:
3.Demand and suppply are at the level of optimum capacity.
4.Excees capacity.
The seriousness of the prodlem will depend on the extent of demand fluctuations over time and the
extend to which there are constraints in supply.
Some types of organisations like hospital,restaurrants, telecommunication, transportation,etc.will
experience wide fluctuations in demand while other organisations like banking, insurance etc. will
have narrow fluctuations.
In case of some organisations like telephone and electricity peak demand can usually be met even
when demand fluctuates.while for some other organisations like theatres,hotels etc.peak demand
may frequently exceed capacity.

DEMAND FORECASTING:
The main purpose of forecasting is making aood estimates. In order to plan resources, it is first
necessary to have some assessment of the level of activity requiredof those resources. The better
the assessment, the better the quality of planning.
Goods forecasts are an essential input to all type of productive systems as hey form the basis for
planning. Few siuations are as follow:

1.Fixed capaity with widely fluctuating demand:

 When a firm is under such situation then it must establish policies to prevent idle facilities when
the demand is normally low.it must also find ways for treating the customer when the demand
exceeds supply.

2.Service systems that cannot carry inventories:

Most of the service ae intangible and ae consumed simultaneously during production.in such
cases the capacity must be very closely matched to demand.if the supply is delayed the service may
lead.

3.sharing capacity:
Sharing capacity is a recent innovation in service industries. Excess capacity which is over and
above the utilised capacity for the present level of activity can be hired or shared.

DEMAND PATTERN BY MARKET SEGMENTS:

Disaggregation of demand by market segmentation is possible if an organisation has

detailed records on customer transactions or the analysis may reveal that the demand from
one segment is predictable whereas the demand is relatively random from another
segment.
E.g. for a bank the current a/c holders may come daily at predictable time whereas saving
a/c holders may visit the bank at random intervals.

Random demand fluctuations:

Random variations in demand are there in every kind of service. E. g. health related events
like heart attacks and birth or death all increase the demand of hospital services but the
level of demand generally cannot be determined in advance. In the same way natural
disasters such as floods, fire, droughts and earthquakes, etc. can dramatically increase the
need for services such as health care, insurance, etc.

Predictable Cycles:
Variations in demand can be caused by many factors. Some are predictable while some are
not. Tourism services have peak periods at certain holidays and at weekend day.

Charting Demand Pattern:

Those organisations which have computerised customer information systems can do the
charting demand over relevant periods. If seasonality is a suspected problem then graphing
should be done for from the past year.

Managing Constraints on Capacity:

Demand cannot be controlled perfectly. Efficient management of resources needs that the
firm should consider the changing capacity by increasing it to meet higher demand and
contract it when the demand is low. Depending on the type of service, service firms are
faced with various constraints.
1. Time: In case of some services, the primary constraint on service production is time.Eg.a
lawyer or a hairdresser all sell their time. The profit are lost if their time is not used
productively. In same way time cannot be created if there is excess demand.
Time is the major constraint from the point of view of individual service provider. Time
capacity can be increased by operating for longer hours. This cannot be an option if the time
does not match the customers need.
However, if they are kept away from peak demand periods, the overall productivity will be
improved.

2. Labour: In case of labour intensive unit the number of service provider is large. here,
labour or staffing levels can be the primary capacity constraint. A Law firm, consulting firm
or repairs maintenance contractor all face the problem.

3. Equipment: Equipment may be critical constraint for service firms. In case of

transportation, the trucks or the planes required to service demand may have capacity
limitations. Especially during festivals summer vacations the delivery service providers are
faced with this problem telecommunication face equipment constraints when everyone
wants to use the telephone lines at the peak hours. L
They can be kept free from doing repetitive task. In many kinds of firms computers
automate ordering and billing activities and kept track of customer’s purchased history. This
has transformed operations performed by clerical staff.

4. Facilities: Most of the service firms are faced with the problem of limited facilities.
Education institution like schools and colleges are constrained by the number of rooms and
the number of seats in each class. Physical facilities are very difficult to adjust. Adding a
building or a room or an aircraft tends to increase the capacity but then it will add to the
cost. However a service firm with a multiple outlet may be able to accommodate excess
demand at one unit by sending the extras to another unit.
STRATEGIES FOR MANAGING CAPACITY TO MATCH DEMAND:

The demand may be too high or too low. When demand is too high the capacity can be
altered by:

a) Stretching time, labour, facilities & equipments.

b) Cross train the employees.
c) Request over – time from the employees.
d) Rent or shares facilities.
e) Hire part-time employees.
f) Subcontract or out sources service, When the demand is too low, the capacity can be
altered by:
a. Performing maintenance, renovations.
b. Schedule vacations.
c. Schedule employee training.
d. Lay-off employees.

1. Customers Involvement: By converting certain operations to

self-service like buffets at restaurant & fast food joints the firm can divert its own
personnel to other functions. Self-services firm lose a certain measures of control
over services quality when the customers are asked to perform key functions.
2. Using part-time Employees: Part-time help can supplement
regular employees when the peaks of the activity are persistent & predictable. A
ready part-time labour pool is available from the college students & others who are
interested in the supplementing their primary sources of income. Another source is
off duty personnel placed on stand-by. Hospitals & Airlines often pay their personnel
to be on stand-by. They are there to be ready for work if needed.
3. Cross Training Employees: Some services consist of various
operations. At time when one operation is too busy the other operation may be idle.
Cross training employees to do the tasks in various operation creates flexible
capacity to meet demand. For an example, we see at supermarket when the queues
develop at the cash registers, the mangers call on the stockers to operate registers
until the queues reduce. In the same way during slacks periods some of the cashiers
are busy stocking shelves.
4. Modify or Move Facilities & Equipments: Sometimes it may
be possible to modify the existing capacity to meet the demand fluctuations. For an
example, the new Boeing 777 aircraft is so flexible that t can be reconfigured within
a hours to accommodate extra number of seats allocated to one, or two or three
classes. Thus the plane can be quickly modified to modify to match the demand
arising from the different market segments.
5. Sharing Capacity: A large investment in equipment & facilities
exist in a service delivery system. At the time of underutilization, it may be possible
 to find other use from the capacity. Airlines are a good example. At the small
airports, airlines shares the same baggage’s handling equipments, ground personnel
etc. It is a common practice for some airlines to lease their airlines shares the same
baggage handling equipments, ground personnel etc. It s a common practice for
some airlines to lease their aircraft to other airlines during the off season.
6. Stretch Existing Capacity: In order to match the demand the
existing capacity of services resources can be expanded. Under such
circumstances no new resources are added but people, facilities &
equipments are asked to work harder so that the demand can be made.
7. Schedule “Down time” During Low Demand: If during the
peak period people, equipment & facilities are bowing used at maximum
capacity than it is necessary to schedule the repairs, maintenances &
renovation during off periods. For Employees, vacations & training can also
be arranged during this period.

STRATEGIES FOR MANAGING DEMAND TO MATCH CAPACITY:

1. Partitioning of demand: the demand for services is often grouped into random arrivals and
planned arrivals. E.g. at the Doctor’s clinic the walk-in patients arriving are the more then
those with appointments. Appointment can be controlled. But walk-in demand is
uncontrollable. We often find that the inflow of patients is higher on weekdays than
weekend.
2. Vary the service offering: depending on the seasons of the year, day of the week, or time of
the day, we can change the nature of the service offering. care should be taken in
implementing strategies to change may easily imply and require alteration in other
marketing variables such as promotion pricing and staffing in order to match the new
offering. Until and unless these new additional marketing mix variables are altered
effectively to support the offering the strategy may not work.
3. Developing complementary services: complementary services are basically offered in order
to occupy waiting customers. The Indian Restaurant has discovered the benefits of
complementary services by adding a bar to the restaurant. The customers can enjoy food
and drinks separately as well as together.
4. Promoting off-peak demand: During off seasons holiday resorts use their premises as
retreat location for business groups. In the same way in order to encourage long distance
dialling the telephone companies offer lower rates at nights.
5. Pricing incentives: in order to smoothen the demand on the service process, prices can be
raised during peak times and lower, at non-peak times. Movies have matinee special at
hotels offers lowest rate during weekends.
6. Communication with customers: another way for shifting demand is to communicate with
the customer and let them know peak demand period so that they can choose to use the
services at alternative times and avoid crowding.
7. Modifying timing and location of service delivery: extending the walking hours and working
on weekends can meet customers demand.
8. advertising in sales promotion : it can be used emphasize different service benefits during
different service periods i.e. peak and slow periods. Advertising messages can also be used
to remind customers bout the peak demand times and promotion offers during the off
season.

STRATIGIES WHEN DEMAND AND CAPACITY CANNOT BE MATCHED:

1. Reservations & Appointments: Examples: Airlines, Railways, Healthcare, Hospitals,

Doctors, etc.
2. Waiting Lines.
3. Triage – Means Sorting: Example: Emergency rooms are given on the basis of critical
need & not in order of arrival
4. Delaying Services Delivery: Next day or next week or until capacity becomes
available.

YIELD MANAGEMENT:

Yield management is the process of the allocating the right type of capacity to right kind of
customer at the right prices in order to maximize revenue or yield.

In case of airlines, due to perishable nature of airline seats offering a discount on fares to
fill the vacant seats becomes attractive. Yield management attempts to allocate the fixed
capacity of seats on a flight in order to match the potential demand in various markets
segments in a profitable manner.

Services firms who show the following characteristics can use yield management:

1. Fluctuating Demand.
2. Products sold in advance
3. Low marginal sales cost & high marginal capacity change cost.
4. Relatively fixed capacity
5. Ability to segment the market.
6. Perishable inventory.