Annamalai University: M.B.A Marketing Management

348EN210
1 – 24
ANNAMALAI UNIVERSITY
DIRECTORATE OF DISTANCE EDUCATION
M.B.A Marketing Management

Second Year
PRODUCT AND SERVICES MARKETING

LESSONS : 1 – 24
Copyright Reserved
(For Private Circulation Only)
M.B.A MARKETING MANAGEMENT
Second Year
Editorial Board
Prof. Dr. E. Selvarajan

Dean
Faculty of Arts
Annamalai University
Annamalainagar
Dr. C. Samudhra Rajakumar Dr. C. Madhavi

Professor and Head Professor and Co-ordinator
Dept. of Business Administration Management Wing. DDE
Annamalai University Annamalai University
Annamalainagar Annamalainagar
Internal
Dr. V. Velmurugan Dr. S. Arulkumar
Assistant Professor Assistant Professor
Management Wing, DDE Management Wing, DDE
External
Dr. R. Thenmozhi
Professor and Head
Dept. of Management Studies
University of Madras
Chennai
Lesson Writers
Lessons : 1 to 12 Lessons : 13 to 16
Dr. S. Sriram Dr. A. Gobinath
Principal and Director Asst. Professor
Agri. School of Business Dept. of Business Administration
Dindigul Annamalai University
Annamalainagar
Lessons : 17 to 20 Lessons : 21 to 24
Dr. R. Rajendran Dr. P. Baskar
Asst. Professor Asst. Professor
Dept. of Business Administration Dept. of Business Administration
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Second Year
SYLLABUS
Objective
This course aims to teach marketing skills to the students on product and
services. Students will learn various perspectives of product and service marketing
through concepts and case implications.
Unit–I
Product – Definition – Classification– Product Mix – Product Mix Strategies –
Product Positioning – Product Diversification. New Product – Meaning – New
Product Development Process –Product Life Cycle – Stages – Product Life Cycle
Strategies – Success and Failure of New Products.
Unit–II
Branding – Definition – Brand Name – Brand Mark Vs Trade Mark – Brand
Equity – Brand Loyalty –Brand Extension Strategies – Characteristics of a Good
Brand – Family Brand Vs Individual Brand - Recent Development in Brand
Management – Trade Mark- Logo.
Unit–III
Packaging – Definition and Importance – Packaging Strategies – Packaging and
Labelling – Uses of Packaging – Developments in Packaging – Multiple Packaging -
Product Obsolescence – Style and Fashion – Fashion Cycle.
Unit–IV
Services Marketing – Origin and Growth – Classification of Services – 7 P’s of
Service Marketing – Service Quality Dimension – GAP Model – Services Marketing Mix.
Unit–V
Banking – Customer Service – Marketing Strategies for Banking Services – New
Trends in Banking Services – Educational Services – Public Utility Services.
Tourism Marketing – Tourism Pricing - Tourism Promotion – Tourism and
Government Administrative Systems
Travel Management – Need for Travel Management - Procedure of Travel
Management and its Methods - New Trends in Travel Management.
Unit–VI
Hospital Services – Supportive Services – Consumerism and Hospital Services
– Marketing of Health Services and Strategies – Promotion Strategies in Hospital
care Services,
Hotel Industry – Hotel Industry Vs. Tourism Industry – Supporting Services,
Accommodation Management – Licenses – Problems and Prospects of Hotel
Industry – Hotel Marketing – Meaning and Concept of Hotel Marketing – New
Trends in Hotel Marketing.
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Reference Books
1. Ramanuj Majundar, Product Management in India, Prentice Hall of India,
2007.
2. Subroto Sengupta, Brand Positioning Strategies for Competitive Advantage,
Tata McGraw Hill, 2005.
3. Charles Merle Crawford, C. Anthony Di Benedetto, New Product Management,
Tata McGraw Hill, 2008.
4. Adrian Palmer, Cathy Cole, Services Marketing: Principles and Practice,
Prentice Hall,1995.
5. Harsh Verma, Service Marketing, Global Business Press, 2012.
6. Pragati Mohanty, Hotel Industry and Tourism in India, Ashish Publishing
House, New Delhi, 2008.
7. A.K. Bhatia, Tourism Development, Sterling Publishers (P) Ltd., Bangalore,
2002.
8. Valeric Zeithaml, Services Marketing, Tata McGraw Hill, 2008.
9. Anandan, Product Management, Tata McGraw Hill, 2009.
10. Vasanthi and Ragu, Services Marketing, Himalaya Publishers, 2005.
11. S.Shajahan, Services Marketing, Himalaya Publishers, 2005.
Journals and Magazines
1. Journal of Marketing Information
2. Journal of Product and Brand Information
3. Indian Journal of Marketing
Web Resources
1. www.marketing91.com
2. www.ehow.com
3. www.marketing.com
4. www.marketing teacher.com
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SECOND YEAR
CONTENTS
Unit Lesson Page
Name of the Title
No. No. No.
I. 1. Product Management Fundamentals 1
2. Product Mix 10
3. New Product Development 18
4. Product Life Cycle 30
II. 5. Brand 36
6. Positioning 43
7. Brand Equity 52
8. Trade Mark and Logo 60
III. 9. Packaging Evolution 67
10. Packaging Features and Strategies 76
11. Labelling 82
12. Product Obsolescence, Fashion and Style 88
IV. 13. Services Marketing 97
14. Classification of Services 103
15. Services Marketing Mix 112
16. Quality Dimensions 128
V. 17. Banking – Customer Service – Marketing Strategies for Banking
139
Services
18. New Trends in Banking Services – Educational Services – Public Utility 147
Services
19. Tourism Marketing – Tourism Pricing - Tourism Promotion – Tourism 155
and Government Administrative Systems
20. Travel Management – Need for Travel Management - Procedure of 165
Travel Management and its Methods - New Trends in Travel
Management
VI. 21. Hospital Services 176
22. Marketing of Health Services 186
23. Hotel Industry 199
24. Hotel Marketing 212
UNIT - I
LESSON – 1
PRODUCT MANAGEMENT FUNDAMENTALS

Unit - I : Product and Services Marketing
Product – definition – classification – product mix – product mix strategies –
product positioning – product diversification – new product – meaning – new
product development process – product life cycle – stages – strategies – success and
failure of new products
1.1 INTRODUCTION
Product management is an integral part of marketing management.
Product management encompasses the whole range of activities pertaining to
product planning and management.
The most prominent tasks of product management are
 Continuous evaluation of present range of products for improvement
 Planned elimination of obsolete products
 Introduction of new products
 Devising an acceptable product concept, turning it into a physical product,
giving it a brand name, packing it, and positioning it in the market is what we
mean by product management.
1.2 OBJECTIVES
 To provide an overview of Product Management, this includes basic product
concepts like anatomy of a product, product types and value creation.
1.3 CONTENTS
1.3.1 Role of product manager
1.3.2 Emerging panorama of Indian market
1.3.3 Product
1.3.4 Types of product
1.3.5 Value creation
1.3.1 Role of Product Manager
Product manager is responsible for the planning activities related to the
product or product line.
Thus, the product manager’s job involves
A) Analysing the market/ customers/ competitors and turning this information into
marketing objectives and strategies for the product.
B) Product manager must get the organisation to support the marketing programs
recommended in the plan-which requires co-ordination with other areas of the
firm, such as R&D for product line extensions, manufacturing, marketing
research and finance.
13.2 Emerging Panorama of Indian Market
1. Demographic picture
Population Growth rate is given below. This shows enormous potential of India
1971 --- 2.20%, 2000 --- 1.74 %, 2012 --- 1.31 %
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2. The growing size of the urban market
The growing size of the urban market rate of urbanisation is quite high (30%
live in urban). This gives more scope for products which is part of infrastructure
development.
3. More literate buyers
More literate buyers from 19% in 1951 to 52% in 1991 to 61 % at present.
This has a say in market knowledge.
4. Changing pattern of income distribution
Changing pattern of income distribution – India has emerged as the 4th largest
in the world in purchasing power parity (PPP) terms after US, China & Japan.
5. Marketing opportunity
Marketing opportunity of young (20-40 years) & growing size of working
women’s& growing influence of children
a. 0-14 years: 29.3% (male 187,386,162/female 165,345,284)
b. 15-24 years: 18.2% (male 116,019,042/female 103,660,359)
c. 25-54 years: 40.2% (male 249,017,538/female 235,042,251)
d. 55-64 years: 6.8% (male 41,035,270/female 40,449,880)
e. 65 years and over: 5.6% (male 31,892,823/female 35,225,003)
Ref: http://www.indexmundi.com/india/demographics_profile.html
6. Retail boom
a. Organised retail is growing
b. Merchandising on the rise
This impacts product packaging, promotion.
7. Micro Finance Gaining importance
Downtrodden people now have better access for finance, and this reflects
financial inclusion.
8. Packing revolution
a. Demand for quality and convenience-based products will considerably influence
the aesthetic and quality norms of the Indian consumer and lead to better
consumption standards.
b. This is expected to stimulate greater consumption of branded products and
increase the use of rigid and flexible packaging.
c. It is estimated that more than 80% of the total packaging in India constitutes
rigid packaging, which is the oldest and the most conventional form of
packaging. The remaining 20% comprises flexible packaging.
9. Price – quality scope < -- > expanded
Today marketers can choose a particular price quality segment for a product &
design exclusively for that segment. A company can target either a high income
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category or middle class or at the bottom of the pyramid. There is scope for super
premium products and at the same time it is viable to cater lower strata as well.
10. Explosion of the media:
Latest revival of FM radio (example: Suryan / Hello FM / Radio Marche etc…)
leads to increased scope for communication.
11. Direct mail and home shopping
Netizens are on the rise i.e., more people are using internet. This has kindled
growth of digital marketing. People seek more information about the product,
company surfing net.
2. Event
Event or programme sponsorship --- fast pick up
There is a tendency to buy on credit - Change in attitude among people mind-
set. More people opt for credit purchase. This has given scope for EMI’s.
Some of the changes affecting product management
 The Web / Internet
 The data explosion
 Changes in the balance of market power
 Change in customer expectation
 Increased importance of customer retention program –more customer focus
 Increased global competition
 Faster technological obsolescence.
 Shorter product life cycles
Product
Philip Kotler, distinguished professor of international Marketing, defines a
product as anything offered to a market for acquisition, attention, use or
consumption that might satisfy a need or a want.
 Product is the bundle of benefits or satisfactions offered to a customer.
 It is a combination of characteristics – physical & psychological.
Product can be goods, services or ideas. Any product which is offered is likely
to provide both functional benefit and psychological benefit.
 Functional benefit means for what fundamental purpose the product is used.
For example, take a wrist watch. It should show right time. If it shows right
time, then it means it has addressed basic or core aspect of the product it was
intended.
 Psychological benefit is associated with status, acceptance, and happiness.
Let us continue with watch. It can be offered as analog, digital, different dials,
different straps etc. each giving different levels of satisfaction.
 Goods are looked as tangible item offered to the customer.
 Services are deeds, processes, and performances.
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 Ideas are a marketing attempt to
change the behaviour or perception
of the target segment.
There are 5 product levels
1. Core benefit
2. Basic product
3. Expected product
4. Augmented product
5. Potential product
1. Core benefit
The service or benefit the customer
is really buying
2. Basic product
The marketer must turn the core benefit into a basic product
3. Expected product
The marketer prepares an expected product, a set of attributes and conditions
buyers normally expect when they purchase this product
The marketer prepares an augmented product that exceeds customer
expectations.
Encompasses all the possible augmentations and transformations the product
or offering might undergo in the future.
Anatomy of a product
 Core benefits
 Tangible specifications
 Augmented features (Which increases the value/effectiveness)
Example 1 : Cement
Core benefit: Binding& Imparting strength.
Tangible specification: Grey cement/ white cement, Weight, Price, compressive
strength like 43/53 grade, Ordinary Portland Cement (OPC), Portland Pozzolona
Cement (PPC)
Augmented Features: High density Poly Ethylene (HDPE) packing/Paper
packing, Company / Brand name, Credit facility, after sales service
Example 2 : Medicine
Core benefit: To provide relief from ailment
Tangible specification: Tablet / syrup / Dispersible Tablets / aerosol /
capsule/Strength/ price
Augmented features: Bottle/Aluminium foil (packing),Company name/Brand name
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1.3.4 Types of Products
Products are classified on the basis of, what purpose it is purchased, where it
is used, when it is purchased (occasion), who is buying and using the product, how
it is purchased. This is basically done to facilitate to keep homogeneous groups so
that product marketing becomes easy.
General classification
 Consumer
 Industrial
Office chair is a consumer product when it is purchased for home. It is an
industrial product when used in a cinema hall.
Product classifications help us in developing suitable marketing programmes.
Each category is further classified, e.g., fast moving consumer goods, (FMCG), and
consumer durables.
1.3.4.1 Consumer Products
It is used by ultimate consumers / household in such form that they can be
used without further commercial processing.
Convenience Goods
Convenience goods are inexpensive products that require little shopping effort.
The following are the characteristics of convenience goods.
 Commodity / less brand loyalty
 Consumer-have-high product knowledge
 Low information search
 Easy substitution possible
 Very critical element is- Distribution (intensive)
 Mostly impulse/ spontaneous purchase
 Onus of promoting lies with manufacturer
Example: Grocery
Shopping Goods
 Are purchased after going around shops & comparing the different
alternatives.— Quality / price / fashion / style (Consumer -seeks information)
Example: Sarees, furniture
 Not purchased regularly – seasonal / Occasional
 Priced higher than convenience goods
 Intensive distribution not required.
 Product properly displayed & offered at many retail outlets.
Durable Goods
 Goods last for some time.
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Example: Refrigerator, TV etc…
 Requires more selling effort from salesman.
 After sales service / repair / guarantee…. Important consideration.
NON-DURABLE GOODS
 Goods get depleted on consumption.
Example: soft drinks, soaps
 FMCG**
 Purchased very often (repeat purchases)
 Quality / price
 Heavy advertisement
 Build up brand preference / loyalty.
Speciality Goods
Example: fancy goods, appliances, hi-end camera (Consumer—seeks more information)
 No reasonable substitutes
 Strong brand identification (Higher loyalty)
 Intensive consultation before actual purchase
 Price not a big constraint
 Make long deliberations before making final selection.
FMCG
 Usually non-durable convenience products
 Example: Soft drinks, toiletries, grocery items
 Usually spends min. effort to procure them
 Show low involvement
 Get wider choice
 Allured by host of inducements
 Frequent purchase
 Low margins
 Extensive distribution network
 High volume
 High stock turnover
Three classes of FMCG
Staples
Purchased on a regular basis. Routine but important products which find a
place in monthly purchase list like cereals, health drinks, napkin etc.
Few more examples
Toilet soap, detergent, sauce, toothpaste, wheat, rice, tea…
Impulse goods
Purchased without any planning.
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Example
Soft drinks, Chips, chocolates.
Emergency goods
Purchased when that particular need arises
Example
Medicines, ambulance service, lawyer, financial products like jewel loan
1.3.4.2 Industrial Products
Sold primarily for use in manufacturing other goods or for rendering some
service
Example
Machinery, components & raw materials
 Seller expected to have technical know- how
 Sold mainly thru’ sales force
 Industrial product also includes supplies & services
Example
Lubricant, typing paper (also marketed thru’ retail outlets)
 Industrial services include maintenance & repairs (AMC –Annual maintenance

contract)
Consumer Products Vs Industrial Products
Consumer Products Industrial Productions
 Requires Frequent Changes in Fashion and  Products are subjected to greater
Style. standardisation
 Advt.–very important tool in Promotion.  May not be that important
 Low value purchase  May not be.
 May not be that important  Personal selling and after sales service –
very IMP
 Very high competition  Competitive bidding based on price
competition
 Generally psychological satisfaction  Quality and tangible attributes.
 Require elaborate channels of distribution  Sold thru’ fewer outlets or directly by the org.
itself
1.3.5 Value Creation
While buying a product, a consumer wants value for his money. It is vital that
always, a product manager must ensure that his or her products should give more
benefits (value) than cost.
Value has parameters like
 Product value like utility, durability …
 Service value like promptness, doorstep service…
 Image value like perception, self-esteem…
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Cost has parameters like
 Monetary price
 Time cost to acquire the product
 Energy cost to use the product
 Psychic cost
The key benefits the product is going to provide the customers are core values.
Right value proposition has three important dimensions. As per Philip Kotler,
these three lead to different customer advantages – best product, best total cost and
best solutions, respectively.
Value based companies deliver products what they promise, nothing short of
whatever they promise.
1.4 REVISION POINTS
The most prominent tasks of product management are
 Continuous evaluation of present range of products for improvement
 Planned elimination of obsolete products
 Introduction of new products
There are 5 product levels
1. Core benefit
2. Basic product
3. Expected product
Products are classified on the basis of, what purpose it is purchased, where it
is used, when it is purchased (occasion), who is buying and using the product, how
it is purchased. This is basically done to facilitate to keep homogeneous groups so
that product marketing becomes easy. General classification is Consumer &
industrial products. There are sub classifications.
1.5 INTEXT QUESTIONS
1. Define product and how it is classified?
2. What are the components of the product?
3. Compare the characteristics of industrial product and consumer product.
1.6 SUMMARY
The term product includes goods, services and ideas. Products can be
classified as business and consumer products based on their end use. They can be
also subdivided as convenience products; shopping products etc. the components of
the product are core benefits, actual product and augmented product. The features
of the product are both functional and psychological. While buying a product, a
consumer wants value for his money. It is vital that always, a product manager
must ensure that his or her products should give more benefits (value) than cost.
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1.7 TERMINAL EXERCISE
1. Which increases value and/or 3. Purchased without planning
effectiveness a) Staple goods
a) Core product b) Industrial goods
b) Actual product c) Specialty goods
c) Augmented product d) Impulse goods
d) Classified product 4. FMCG
2. Used by ultimate consumers / a) Fast marketing consumer goods
household b) Fast moving consumer goods
a) Industrial product c) Full market coverage of goods
b) Consumer products d) From marketing companies go down
c) B2B
d) All of the above
1.8 SUPPLEMENTARY MATERIAL
1. Chunawalla .S.A., Product Management, Himalaya publishing house, 8/e, 2011.
2. Kirti Dutta, Brand Management principles & practices, Oxford, 2012.
1.9 ASSIGNMENT
1. Identify one consumer product and one industrial product of your choice.
Chart out the product anatomy.
1.10 SUGGESTED READING
1. Donald R. Lehmann,. Russel S. Winer, Product Management, Tata McGraw-
Hill Publishing Ltd., New Delhi, 4/e.
2. Ramanuj Majumdar, Product Management in India, Prentice Hall of India, 3/e,
2011.
3. Anandan C., Product Management, The McGraw-Hill, 2/e
1.11 LEARNING ACTIVITIES
1. Prepare a complete list of products you use. Classify the products.
1.12 KEYWORDS
 Goods
 Services
 Ideas
 Product
 Functional benefit
 Augmented product
 Consumer product
 Industrial product
 FMCG
 Staple product
 Value
H
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LESSON - 2
PRODUCT MIX
2.1 INTRODUCTION
Companies have to address different consumer needs. One product alone may not
be sufficient to cater the needs of target segments. Thus a product manager has to
plan for number of products to address the need. Here arises the complexity of
handling multiple products. This is essentially the basis of the concept of product mix.
Company should constantly monitor which product or product line gives them
profit, which product is eroding the bottom-line. Product line managers are
continually to monitor the contribution of different products/brand. Is, existing
product enough to give desired growth. Should we cater to more markets? Or
whether new products should be introduced. Are we going to sell in existing market
or new markets?
2.2 OBJECTIVES
 This lesson is aimed to make students and practitioners understand product
mix and diversification strategies.
2.3 CONTENTS
2.3.1 Product line decision
2.3.2 Product mix strategy
2.3.3 Strategic planning – new business
2.3.4 Integrative growth
2.3.5 Intensive growth
2.3.6 Diversification
2.3.1 Product Line Decision
Product item
Refers to a specific product / Brand offered by the company. Gillette’s Mach 3
is a product item.
Product line
Market loves variety. Product line is an expression used to describe a group of
closely related products - possessing common physical & technical characteristics,
may be distributed through the same channels.
Example
Lakme - line of cosmetics.
Usha - line of fans.
A line of product is often to meet various segments of customers.
Example: HUL‘s ?
Life buoy soap --- low Price
Lux soap --- Middle price
Pears soap --- premium Price.
Line stretching
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Line stretching occurs when product line (range) is lengthened. The stretching
could be upward, downward or both ways. This is a way of reacting or responding
to the changes demanded by the market.
Downward stretch
Companies may start with high end products, but later stretch downwards by
adding low-priced products.
Example
P&G’s Ariel detergent (premium segment).
Ariel bar introduced to tap lower segment market.
This type of downward line stretching is also called as Trading Down
Upward
Company operates in the lower end of the market. By upward stretch, it
proposes to enter the higher end.
Example
Lifebuoy soap (lower segment)
Lifebuoy liquid soap & Lifebuoy gold introduced. (Higher strata)
This type of upward line stretching is also called as Trading Up
Two ways
Company operates middle-end market. They can stretch their product line in
both the directions.
Example
ITC Ashoka group
5 star - elite / upper end
Comfort hotels - middle Budget hotels
Yatrinivas - lower end
Company should be careful in trading up or trading down using same brand
name, because it may affect the mind-set of current customers. If a different brand
name is used, the company must create awareness, do lot of promotion to attract
consumers to buy the new products and thus adds to the cost.
Line filling
Adding more items within the present product ranges within the segment.
Example
Cinthol / Cinthol fresh / Cinthol international
Line modernization
Overhaul the line completely or one at a time. It can be either style, technology…
Rather than developing a completely new product, management might do well
to take a fresh look at the organizations existing products. Often, improving an
established product, termed product alternation, can be more profitable and less
risky than developing a completely new one.
Line featuring
This has happened more with durable products. One or few items from a
product line will be selected or featured as Flagships to enhance the whole range.
Example
Hitachi atom a/c.
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Citizen Eco drive watches, Panasonic UHD TV
2.3.2 Product Mix Strategy
Set of all products offered for sale by a particular co – It’s a composite of
products offered for sale by a firm. It includes all product lines & product items
offered by co.
Various options are available for improving product mix. This can be done
either by adding new products in a particular product line or by adding new
product lines, thus widening its product mix.
Example
SONY TV range CTV/LCD/Plasma
Digital cameras
Handy cams
Play stations
Home Theatre
 Length – number of products in the product line
 Width/Breadth – number of product lines
 Depth – variety of sizes, colours, & models within each product in the product line
Companies increase the depth to attract buyers with different preferences and
to increase sales by further segmenting the market. Company introduces new line
related to the existing product mix, because the company would like to make use of
its strengths and experience.
The following example of Proctor & Gamble is given for illustration purpose
only. This may not reveal actual full range.
Product Mix (P&G)
Product Width / Breadth (5)
LINE 1 LINE 2 LINE 3 LINE 4 LINE 5
Fabri care Feminine care Hair care Health care Baby care
Ariel Whisper Pantene ProV Vicks Vaporub Pampers
Ariel fragrances (4 variants) (15 variants) (5 variants) (3 Variants)
(2 variants) Head & Vicks Inhaler
Ariel Front Shoulders Vicks formula44
O – Mat (18 variants) (6 variants)
(2 variants) Rejoice drops
Tide (9 variants) (3 variants)
Tide detergent Vicks Action
(5 variants) 500+
Tide bar
(3 variants)
Length 2 Length: 1 Length: 3 Length : 5 Length: 1
Depth: 12 Depth: 4 Depth: 42 Depth: 16 Depth: 3
Avg depth : 6 Avg depth : 4 Avg depth : 14 Avg depth : 3.2 Avg depth : 3
26-11-2016 Average length : 12/5 = 2.4 34
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Some of the product mix strategies are line extension/stretching, line filling,
line modernization.
Line modernization can be done by altering existing products and it can be
achieved through redesigning, changing flavour, colour etc.
Any addition or modification or deletion of product does not guarantee
business success. It may create confusion in the minds of people. When Coco cola
changed its taste it created ruckus among its loyal customers. Another important
aspect to be borne in mind is whether to make use of existing brand name or to give
a brand new name.
2.3.3 Strategic planning – New Business
2.3.4 Integrative Growth 0
A company can grow with its
integrative growth strategy which
includes backward integration, forward
integration or horizontal integration. It
can choose any one or combination of the
above said strategies.
a) Backward integration
Where a company decides to
manufacture products which it previously
purchased it is called as backward
integration.
Example
Reliance textiles → Rayon → Refinery → Oil exploration
b) Forward integration
Where a company decides to go forward into starting its own distribution
system from mere manufacturing it is called as forward integration. Example:
BATA, TITAN → direct company showroom
c) Horizontal integration
Where a company acquires another competitor is called as horizontal
integration. Example:
HLL (now HUL) — TOMCO (Brand – Hamam)
BIRLA — L&T Cement
HP — COMPAQ
VODAFONE — HUTCH
2.3.5 Intensive Growth
A company might pursue an intensive growth strategy which is given below.
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a) Market penetration strategy
Improving market share by improving sales in the existing markets by
improving distribution, filling gaps and by more effective advertising.
 Encourage current customers to buy more
 Attract competitor’s customers
 Convince nonusers to use the product
b) Market development strategy
Gaining more sales by introducing existing products in newer markets.
 Expand distribution channels
 Sell in new locations
 Identify the potential users
c) Product development strategy
Gaining more sales by developing INTENSIVE GROWTH – Ansoff Matrix
new products and introducing them in H I Ansoff created it in 1957 as a clear way to
existing markets. classify routes for business expansion
 Develop new features
 Develop different quality levels
 Improve the technology
2.3.6 Diversification
If a manufacturer offers more
than one product, it is described as
product diversification. Company
gains more sale by introducing new
products in new markets.
 Concentric diversification
 New products that have technological &/or marketing synergies with
existing product lines
 Appeal to different segment in the same product category - Category related
 Horizontal diversification
 New products that could appeal to its current customers even though the
new products are technologically unrelated to its current product line
 Image related
 Conglomerate diversification
 New businesses that have no relationship to the company’s current
technology, products or markets
 Unrelated
 Related diversification
Characteristics of related (both category and/or image) diversification are given
below.
 Very common
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 Less expensive
 Easier
 These constitute a product line
 Reasons for companies undertaking related diversification are
 To make more effective use of existing selling & distribution facilities
 To use its under-utilized production capacity
 To meet varied customer needs
 To take advantage of its existing reputation
 To increase the sale of existing products
Example
Gillette Company’s introduction of shaving gel is to increase sale of its other
existing shaving products like Razor
 Unrelated diversification
Characteristics of un-related diversification are given below.
 Not very common
 More expensive
 More challenges
 There can be many reasons which include required infrastructure facilities,
availability of technology, expertise, financial requirements etc...
Example Concentric Horizontal
Category Image
GODREJ -- In cosmetics
related related
 Steel
Colgate Colgate
 Furniture’s dental cream Colgate gel tooth brush
 Animal feed
Concentric Horizontal
 Popular locks Category Image Conglomerate
 White goods related related Unrelated
Integrated Diversification Sun feast Sun feast

Aashirvad John player
milky magic dream cream
Backward integration
Dr Sriram S
Where a co diversifies & manufactures products which it previously purchased

is called as backward integration.
Example
Reliance industries
Reliance textiles → Rayon → Refinery → Oil exploration
Forward integration
When a company decides to go forward into starting its own distribution
system from mere manufacturing is called forward integration.
Example: BATA
REVISION POINTS
Company should constantly monitor which product or product line gives them
profit, which product is eroding the bottom-line. Product line managers are
continually to monitor the contribution of different products/brand.
16
Product mix is ‘set of all products offered for sale by a particular co’ – It’s a
composite of products offered for sale by a firm. It includes all product lines &
product items offered by co.
Various options are available for improving product mix. This can be done
either by adding new products in a particular product line or by adding new
product lines, thus widening its product mix. Some of the product mix strategies
are line extension/stretching, line filling, line modernization.
A company can grow with its integrative growth strategy which includes
backward integration, forward integration or horizontal integration. It can choose
any one or combination of the above said strategies. If a manufacturer offers more
than one product, it is described as product diversification. Company gains more
sales by introducing new products in new markets
2.4 REVISION POINTS
1. Line extensions are very hard to resist in this competitive market environment
- comment
2. What is meant by product mix?
3. Explain the strategies that a company might follow to attain a profitable
product mix.
4. Explain various diversification strategies
5. Explain Ansoff’s matrix.
1. Explain various product lines with examples.
2. Take a company of your choice and prepare a chart if its product width and
breadth.
3. Elaborate various strategic planning for marketing growth.
2.6 SUMMARY
Product mix is the set of all products offered by the company. This includes
product item, product line, product depth, breadth or width.
Diversification is offering multiple products and it can be either related
products or unrelated products. If it is related, it can be either category related or
image related.
Ansoff proposed product strategies for growth. They are product development,
market development, market penetration, and diversification.
2.7 TERMINAL EXERCISES
1. Dannon Yogurt offers several 3. Where a co diversifies &

types of new yogurts, Fruit on the manufactures products which it
Bottom, Natural Flavours, and previously purchased is called as
Fruit Blends to name a few. This a. Forward integration
is an example of a _____ b. Backward integration*
a. Line extension* c. Amalgamation
b. Product modification d. None of the above
c. New category addition 4. If the company focus with current
d. Brand resonance products in current market
17
2. Honda uses the company name to a. Product development
cover different products such as b. Market development
automobiles, motorcycles, snow c. Market penetration*
blowers, and snowmobiles. This is d. Diversification
an example of _________ 5. Variety of sizes, colours, & models
a. Parent brand within each product in the product
b. Category expansion * line
c. Sub-brand a. Depth *
d. Line extension b. Length
c. Width
d. Breadth
2.8 SUPPLEMENTARY MATERIALS
Hill Publishing Ltd., New Delhi, 4/e
2. Michael J Etzel, Bruce J Walker, William J Stanton, Ajay Pandit, marketing,
Tata McGraw-Hill
2.9 ASSIGNMENT
1. Select a company of your choice. Draw a chart depicting the entire product mix.
2.10 SUGGESTED READINGS
1. Ramanuj Majumdar, Product Management in India, Prentice Hall of India,
3/e, 2011
2. C Anandan, Product Management, The McGraw-Hill, 2/e
3. S A Chunawalla, Product Management, Himalaya publishing house, 8/e, 2011
4. Kirti Dutta, Brand Management principles & practices, Oxford, 2012
Discuss with a supermarket manager regarding how he handles the challenge
of line extensions. In which product category are line extensions most common?
When new items are added to the line, how does the manager find space for the
new entries-by giving more space to this category, dropping other items carrying
this same brand, pruning other brands in this category, or some other means?
What criteria are used in making this decision?
2.12 KEY WORDS
 Product line
 Product item
 Line stretching
 Trading up/down
 Line filling
 Line featuring
 Product mix
 Ansoff matrix
 Diversification
 Integration
H
18
LESSON - 3
NEW PRODUCT DEVELOPMENT
3.1 INTRODUCTION
This lesson deals on basic concepts and strategies applicable to new product
development starting from idea generation till commercialisation.
Product manager has to take a call based on various things which includes
decision taken at product item level, brand product line level, category product line
level or at holistic product mix level.
3.2 OBJECTIVES
 The lesson aims to helps the student understand and appreciate concepts and
applications in new product development, the importance of product launch.
3.3 CONTENTS
3.3.1 Introducing new product offerings
3.3.2 New product development strategy
3.3.3 Stages in new product development
3.3.4 Product adoption
3.3.5 Product modification
3.3.6 Product deletion
3.3.7 Product/brand failure
3.3.1 Introducing new Product Offerings
People’s tastes and preferences are changing. Product life cycle is getting
shortened. New ideas are essential for responding to changing demand by the target
market and by pressure exerted by competitors. These changes are manifested in
decisions in all marketing areas including the development of new products.
The following reasons drive companies towards new products
 Many new products are likely to earn higher profits than older products,
provided the new product is having superior innovative qualities.
 New products can help reposition the company in customer’s minds. For
instance, a company that traditionally sold low priced products with few
features may shift customer’s perceptions about the company by introducing
products with more features and at a higher price bracket.
 Copycat is very much possible. Thus a company should always on the lookout
to improve/innovate products.
 Companies with limited depth in a product line may miss out on more sales
unless they can add new products to fill out the line.
 Companies can offset there weakness if they are into seasonal products by
introducing new products which can compensate seasonal sales fluctuations.
19
Introducing new product offerings include
 New product development
 Product launch
 Innovation & Diffusion
Categories of New Products
New to the World
Additions
Improvements
Repositionings
Cost reductions
Dr Sriram S
3.3.2 New Product Development Strategy

With advances in technology & intense competition, the creation of new
products is inevitable. PLC is getting shorter and consumer tastes are changing.
Companies have little time to develop and launch. Only 10% of the products
launched meets success commercially.
New products launched can be classified into 3 categories
a)Marketing innovations
Improvement in the products whose success was derived more from marketing
innovations such as packaging, branding, easy availability rather than any
significant change in the substance of the product itself. Example: Pan Parag,
Frooti, Shampoo Sachets.
b) Product Improvements
Improvement in the product derived from technology / design improvement on
existing products.
Example
Auto mobile -- 2 wheeler— TVS, Bajaj, Hero, Honda, Yamaha
Every company is improving its model in terms of riding comfort by improving
shock absorber, reducing emissions by adopting better engines etc...
c) Technological Innovations
Totally new concepts—It radically changes the consumption pattern as well as
life style.
Example
Vacuum cleaner, Scanners, Printers, Mixie, Grinder, Smart phones
Succeeded in view of their significant utility to the use
20
3.3.3 Stages in new Product Development
There are several stages in developing new products & introducing them.
These stages must be defined.
1. Ideas generation
2. Screening of ideas
3. Concept testing
4. Product Designing & Evaluation
5. Product testing
6. Test marketing
7. Product launching
8. Idea Generation
This step involves perspiration, inspiration & intuition.
The first step obviously is to get ideas with regard to possible new products. A
number of SOURCES often present ideas, suggestions & complains that lead to new
products.
 Customers, & Often more importantly, ex-or non-customers who reject
current products.
 Employees, especially the sales force.
 Suppliers
 Distribution channels
 Operations people, who often suggest ways to simplify a process
 R&D
 Design – field emerged very important.
 Entrepreneurs.
TECHNIQUES used in idea generation are listed below.
Brain storming sessions
Group exercise – Basically done to have flow of Ideas – good or bad.
Attribute listing
All major attributes of an existing product are jotted down. Each attribute will
be analyzed for modification. (Improvement/substitute/miniaturized etc…)
Forced relationships
A relationship is sought to be established among several objects.
CD player, Radio, Cassette, Amplifier, Speakers, USB ► Music system
TV, DTH receiver► LG/Videocon TV with DTH ready
TV, Computer ► Zenith pc (with TV Tuner)
Camera, Phone, Clock, Alarm, browsing ►New generation Cell Phones
a) Screening of Ideas
The ideas must be consistent with the company’s philosophy, objectives &
strategies & be in terms of the resources available in the organization.
21
In general the ideas are screened in terms of
 Possible profitability
 Good market potential (market size)
 Availability of production facility
 Availability of raw materials
 Availability of finance
 Availability of managerial ability
 Uniqueness of product
b) Concept Testing
It is imperative to get customer reactions to the product concept. {Word or
picture description might be sufficient. More concrete / physical presentation of the
concept will improve reliability of the concept test}. The main purposes of a concept
test are to
 choose the most promising from a set of alternatives
 get an initial notion of the commercial prospects of a concept
 find out who is most interested in the concept
 Indicate - what direction further development work should take?
Concept test includes – word/picture/physical presentation, data collection
which is diagnostic (why do you like/not like the product?) & predictive (would you
buy it if it cost x Rupees)
Data collection procedures fall in to the following 3 major categories.
 Surveys
 Are useful for getting large samples for projection purposes.
Example
1) Attitude (Is the product good/bad?)
2) Uniqueness / differentiation (How unique is this product?)
3) Relevance (How relevant is the product to you?)
4) Intention (Will you buy the product?)
 Focus groups
 Can be used to get detailed discussions of various aspects of the concept.
 Demonstration
 A popular way to present a concept is to gather a group of consumers present
them with a “story” about the new product & record their reactions.
Example
1. Do they understand the concept?
2. Do they believe the concept?
3. Is the concept different from other products in an important way?
4. If different, is the difference beneficial?
5. Do they like or dislike the concept? Why?
22
6. What could be done to make the product more acceptable?
7. How could they like to see the product (colour, size etc…)?
8. Would they buy it?
9. What price would they expect to pay for it?
10. What would their usage be in terms of volume?
11. Where would they shop for it?
Concepts in certain product categories are relatively ephemeral (popular for
only a short time): concept is based on image factors rather than factual service or
product differentiation especially in cosmetics, toiletries etc…
Once the concept conforms to the consumer requirements it is carried forward
to other stages of development.
c) Product designing & Evaluation
If the concept passes the test, we proceed to the making of a prototype. So far
we had only a description or crude make-up. This has to be converted in to a
product.
Prototypes are developed & tested:
a) Laboratory conditions
b) Field conditions
Any technical problems must be solved.
d) Product testing
Assuming initial concept screening results are positive & also have physically
produced the product the next step is then getting consumers to use it.
The purpose of a product test is to,
 Uncover product short comings
 Evaluate commercial prospects
 Evaluate alternative formulations
 Un covers the appeal of the product to various marketing segments
 Gain ideas for other elements of the marketing program.
Such test may be either branded (best for estimating sales) or
unbranded/blind (best for focusing on physical formulation/attributes)
3 Major types of product tests
a) First type
Initially such tests are usually conducted with small samples (often using
convenience samples, such as employees)
These initial tests are diagnostic & are directed towards eliminating serious
problems with the product as well as getting a rough idea of how good vis-à-vis
competitive products.
This phase find out how the product is actually used.
b) Second type
Limited-time horizon forced trial situation where customers are given the
product to use & asked for their reaction to it.
23
Stratified sample is used. Strata are usually either product category usage rate
(heavy, medium, light, none) or brand usually used.
c) Third type
Most elaborate form. Product is placed in homes / business setting (for
industrial products) for an extended period.
Advantage: Results allow both for initial expectation to wear out & for
problems that manifest themselves only over time to develop.
Diary will be maintained of the new / competitive products over the period of test.
Product tests are common in both consumer as well as B2B.
d) Market tests (Test marketing)
It is the limited introduction of a product & its marketing program basically to
determine how well the product will generate sales volume, market share & profits.
If the product passes functional & consumer tests the next step is test
marketing.
Product & marketing program are introduced into more realistic marketing
setting.
The purpose of such a test is to
 Predict sales & profits from a major product launch. Projections are typically
made for both market share & actual sales, appropriately adjusted to national
/ state levels.
 “Practice” so that marketing, distribution, & production skills are developed
before entering full-scale operations.
Before going for test marketing it is important to clearly define what
information is to be gathered & why before proceeding.
Action Standards: Standards for evaluating the results should be set up in
advance (continue the test, stop the test, revamp the product, and go national)
Where to test? – Location – representativeness of population
What to do? : Effort
What typically happens is that effort afforded is somewhat greater than the
comparable national effort.
How long?
Cost
Information gathering
Three approaches – Test marketing
Standard test markets
Selective cities—conduct full marketing campaign in these cities which
includes consumer / distributor surveys & other measures to gauge product
performance.
24
Results are used to forecast sales / profits / potential / & fine tune the
marketing program.
Draw back – Time consuming, expensive.
Controlled test markets
Done through a research firm which guarantees distribution of the test
product in controlled panel of stores in the test market cities.
Results flow in quickly because of guaranteed / forced distribution.
Simulated test markets
Done in a simulated shopping environment
The researchers then ask consumers the reasons for their purchase or non-
purchase.
Advantage: Cost effective, less time consuming & also keep the product out of
competitors view.
a) Product Launching / Commercialization
It refers to the decision to market the new product at the full scale of
operation.
Marketing expenditures – highest in the year of the launch (expressed in terms
of % of sales)
 Timing of the launch is very important.
Example
Soft drinks → Launched pre—summer months
Text books → Launched before the beginning of the academic section
Failure (e.g.) Pagers – Launched at same time – With cell phones in India
 Coverage i.e., where to launch the new product – in a single region, national
market or Intl market
(Depends on confidence, capital & capacity of the company)
3.3.4 Product Adoption
PLC and adoption of innovation is closely tied. From experience it is imperative
that more complex products requires more time for adoption compared to less
complex products. It also depends upon the preparedness/knowledge of the target
segment. Also, all marketing people should focus more on innovators and early
adopters and in that stage the company can price its products at maximum.
 Rapid changes – science & technology. Consumer is responding to these
changes – changing their habits – food / cloth / LS / change in social
customs….
 Innovation is not only to develop new products, but also to deliver old
products in a better & more efficient way.
 Innovation is newness in idea which is acceptable to the consumer.
25
 Left to themselves, consumers are satisfied with the available product,
consumers generally fail to be imaginative & cannot think beyond what is
provided to them. But there is always a latent demand. Success lies in
realising the latent demand & tapping it.
 Innovations take time to spread (diffusion) through the social system.
 Innovation diffusion process can be defined as the spread of a new idea from
its source of invention / creation to its ultimate users or adopters.
 Mass market approach → Earlier
 Heavy user target market → Later
 Innovator / Early adopters → Latest
Factors influencing the adoption process:
 People differ in readiness to try new products
 Influences – Personal / Cultural / SC / Family …
 Characteristics of the innovation affect rate of adoption
 Relative advantage (comparability)
 Compatibility
 Complexity
 Trialability
 Communicability
 Observability
Adopter Categorization on the Basis of Relative time of Adoption
Technology Deliberate Skeptical
Opinion leaders Tradition-bound
Enthusiasts: Pragmatists Conservatives
They are Opinion leaders Who adopt the Who are risk and resist the
venturesome and who carefully new technology averse, innovation until
enjoy tinkering search for new when its benefits technology shy, the status quo is
with new products technologies that are proven and a and price no longer
and mastering might give them a lot of adoption sensitive defensible
their intricacies dramatic has already
competitive taken place
21/2% advantage
Innovators
131/2% 34% 34% 16%
Early adopters Early majority Late majority Laggards

Time of Adoption of Innovations
Source: Tungsten, http://en.wikipedia.ord/wiki/Everett_Rogers. Based on Rogers, E. (1962) Diffusion of
Innovations, Free Press, London, NY, USA.
26
Stages in the adoption process
1) Awareness
2) Interest (information)
3) Evaluation
4) Trial
5) Adoption
6) Conformation (achieving buying continuity)
Marketer should know about the personality traits of innovators / early adopters
Example
Some traits are Sociable / High cognitive skills / Independent decision
makers…
Conclusion
One May like to add new product mix, it should be remembered that it is an
expensive process. However, it must be done & one must go through the proper
steps.
Not only new ideas be generated but they must also be properly evaluated.
Often the ‘concept’ itself must be tested before the company spends more
money on product development.
After the product is properly designed & it is felt that it is appropriate for the
market it must be actually tested in the market before the final decision is made to
launch the new product.
After the new product is launched it must be watched closely & marketing mix
decided to expand/extend the product life cycle.
3.3.5 Product Modification
Three possibilities are there.
1. Up gradation -
2. Different -- styling / ingredient change
3. Inferior – Substitution with low quality ingredient
In assessing the desirability of a product change, the reactions of three groups
are crucial.
 Loyal customers
 Occasional customers
 Current non customers.
Modifications can occur not just in physical product but can also be changing
channels of distribution / change in price / Advertisement focus / service /
packaging.
27
Customer Reaction Response Impact
Prefer Gain
Try Like Neutral

Loyal
Not
Like
Like Loss
No Try Like Loss
Prefer Gain
Trial sale
Try Like
Like gain
Occasional
Not Like Loss
No Try Loss
Prefer Gain
Trial sale
Try Like
Like gain
Non Customers
Trial sale
Not Like
gain
No Try Neutral
3.3.6 Product Deletion

When a product should be taken away from the market?
If the following thing happens..
 Slow sales
 Low / no profits
Consideration
 How customers of the old version will react?
 Issues related to cost & operation
 If any allocated costing system is used, dropping one version will adversely
affect the costs, and hence the profits, of other versions.
 Important consideration is the signal that dropping a version can send.
 Dropping a variant is an admission of failure and may be seen by customers or
distribution channels as an indication of reduced commitment to the product
category.
3.3.7 Product/Brand Failure
Underneath Market place is filled with corpses of failed branded products. Of
100 products introduced in the market only 10 succeeds. Others end as failures.
Why is it happening? Is it because of products? Or marketing flaw?
28
Products fails since it has not met the customer expectation. The question is
what is this expectation is. Every new product should satisfy the desire for a
change. All successful products, for example Maggi, VIP suitcase, Rin … changed
the consumer usage habits. To change habits, consumers should have tried the
product. Trial/test is very essential. After trial only, the question of change in
habits arise. Change in habits may lead to repeat purchases and brand success.
Reason – Why Products Fail?
 Lack of differential advantage
 Poor planning. Lack of alternative plan
 Lack of management enthusiasm
 Lack of organization’s expertise
 Assigning inadequate resources to market development
 Lack of genuine superiority
 Underestimating the competition
 Poor market research
 Poor timing of launch
 Technical problems.
3.4 REVISION POINTS
People’s tastes and preferences are changing. Product life cycle is getting
shortened. New ideas are essential for responding to changing demand by the target
market and by pressure exerted by competitors. Introducing new product offerings
include new product development, Product launch, Innovation & Diffusion.
New products launched can be classified into 3 categories namely marketing
innovation, product improvements and technology innovation. There are several
stages in developing new products & introducing them which includes Ideas
generation, Screening of ideas, Concept testing, Product Designing & Evaluation,
Product testing, Test marketing and Product launching
Modifications can occur not just in physical product but can also be changing
channels of distribution / change in price / Advertisement focus / service /
packaging.
1. Explain the categories of new product?
2. How are new products adopted?
3. Why is test marketing assuming importance?
4. Discuss the reasons for new product failures.
3.6 SUMMARY
New products can fall into one of the several categories like modified product,
totally new product. Only 10% of the new products introduced in the market
succeed. Product manager has to be very careful in introducing a new product. He
should ensure concept testing, product testing before full launch. Go error, drop
error should be remembered before taking any decision like either to drop the
product or to proceed for full commercial launch.
29
1. Concept testing is used to:
a) To decide whether to enter the market or not
b) To help decide whether to launch nationally or undertake a test market
c) To help glean something of customers' opinions about the product idea
before very much investment has been committed
d) To help customers try to understand how a product works prior to launch
2. Product testing takes place when
e) Test marketing results have been conducted
f) The firm has decided to launch the product
g) All R&D is complete
h) When prototypes are available*
3. The concept of a product platform is applicable when:
i) A family of products shares similar technology*
j) A family of products are grouped together
k) A family of products are promoted together
l) A family of products require similar patents
Tata McGraw-Hill
3.9 ASSIGNMENT
Think of any new service that would not be possible to develop new product by
these methods as discussed in the lesson, and may require additional steps or
different method. Justify your answer.
2. Ramanuj Majumdar, Product Management in India,, Prentice Hall of India,
3/e, 2011
Discuss with a large retail chain manager regarding the following.
a. What recently introduced product has been a failure or appears destined to fail?
b. Did this product, in retrospect, satisfy the criteria for adding a new product?
(both from middlemen’s and producer’s perspective)
3.12 KEY WORDS
 Concept test  Laggards
 Prototype  Product modification
 Test market  Product deletion
 Innovation  Product failure
 Adoption
H
30
LESSON - 4
PRODUCT LIFE CYCLE
4.1 INTRODUCTION
A product’s life cycle can have a direct bearing on a company’s survival. A life
cycle of a product consists of four stages: introduction, growth, maturity and
decline. If there is birth there will be death. Nothing is eternal. Objective of the
product or marketing manager is to lengthen the product life by performing various
marketing tasks.
4.2 OBJECTIVES
 This lesson will help the students to understand and appreciate the PLC
concepts and its marketing implications.
 PLC concept can be used to analyze
 A product category
 Cement
 A product form
 Grey cement / white cement
 A product
 Portland Pozzolona cement / Portland slag cement...
 A Brand
 Ultratec / Ramco / Sankar …
 Product category – have the longest life cycle
 Brand – can have short or long life cycle.
 Introduction & Growth phases are the early phases of the life cycle when
sales are growing rapidly
 Maturity represents a leveling off in sales &Decline phase represents the end
of the life cycle
Shapes of curve vary from product to product. In this typical life cycle, profit
curve for most new products is negative, signifying a loss, through much of the
introductory stage. Then it improves as company gets good volume of sales.
Introducing a new product at the proper time will help maintain a company’s
desired level of profit. PLC also has its limitations as it is more generic in nature.
Every stage has its own characteristics and it requires different marketing efforts.
4.3 CONTENTS
4.3.1 Introductory stage
4.3.2 Growth stage
4.3.4 Maturity stage
4.3.5 Decline/obsolescence stage
4.3.6 Product life cycle and marketing mix
4.3.7Identification of stages in a PLC
31
Stage of the product life cycle
Introduction Growth Maturity Decline
Total Industry
Sales revenue or profit
Sales Revenue
Total Industry
Profit
4.3.1 Introductory Stage

Launch of a product in the market with full scale marketing effort happens in
the introduction stage. The fundamental tasks for marketing team is to
 Create Customer awareness (to plan promotional expenses)
 To make the product Available (to plan distribution expenses)
 There will be no profits in the beginning.
Company’s has to work and plan its marketing efforts to create awareness,
ensure products are made available in the market, and try to encourage trial. If it is
sensory based products, sampling can be given. Product information is a must
especially if it is high involvement product.
1. Awareness
 To make know about the product
2. Information (interest stage)
 To create interest in the minds of the target segment.
3. Evaluation
 To give a feel of superior product in the minds of the target segment
4. Trial
 To create opportunities for the potential customer to try the product either
through trial or through demonstration
5. Adoption
 The new product’s acceptance by the consumers is called “adoption” Stage
6. Conformation (achieving buying continuity)
 To ensure repeat sales by appropriate service and follow-up.
32
Adoption categories
 Innovators --- First who venture to adopt a new product?
 Early adopters --- more of opinion leaders
 Early majority --- accepts the product before an average person does so
 Late majority --- accept mainly due to social pressure
 Laggards ----- Tradition bound & last to adopt
Each marketer has to study the characteristics of Innovators / Early adopters
in a given product category.
Marketing tasks (Introduction stage) The marketing tasks in rejuvenation are
 Define positioning.  Develop & qualify major product
 Achieve wholesale& retail improvement
distribution.  Reposition product via Advt.
 Create consumer awareness.  Achieve new distribution outlets
 Attract consumer trial.  Achieve consumer trial & conviction
 Achieve buying continuity.  Attract new users & new uses.
4.3.2 Growth Stage 4.3.5 Decline / obsolescence stage
 In case the product launch is This may due to several reasons
successful, the sale must pick up  Consumer taste changes
gradually / rapidly. The next stage  Improvement in technology
is then reached which is known as
 Introduction of better substitute
the “growth stage”.
 ↓ Profit
 ↑ Sale ------ very critical
 Retaining such a profit after this
 ↑ Profit ---- ↑ volume of production stage may be risky.
 ↓ Manufacturing cost per unit. Marketing tasks (Decline stage)
 The greatest contribution to sales in  Retarding attrition in user base.
the growth stage comes from new  Attracting ‘bargain ‘buyers
users.  Restricting product line
 ↑ Knowledge of both the buyers &  Reducing product costs
sellers during the growth stage.  Retarding distribution losses
Marketing tasks (Growth stage)  Maximising immediate profits
 ↑ User base 4.3.6 Product Life Cycle and Marketing
 Expanding distribution Mix
 Expanding shelf facings PLC concept is not a universal fact or
 ↑ Purchase frequency law. It is only - ideal concept. Taken as
 Ensuring adequate inventories at standard
w/s & retail levels The planning of marketing mix - is a
 Exploring line extensions part of overall marketing planning
4.3.4 Maturity Stage The Elements to be looked at are:
 When sales reach a plateau - is  Current marketing situation
called “maturity stage “or analysis
 Problems & Opportunities analysis
33
saturation.  Objectives
 Profits likely to stabilise / start  Marketing budgets
declining as more promotional effort  Sales volume
has to be made.  Cost / profit estimate
 Sales – very slow growth  Marketing strategy*
 Margins – Falling margin Marketing strategy*
Buyer has great knowledge about the  Target markets
product.  Market positioning
Marketing tasks (Maturity Stage)  Marketing expenditure levels
 Retaining current users Non static factors
 Attracting new users  Product
 Retaining distribution  Type of market
 Optimising product line &  Stage in evolution
packaging  Competitive conditions
 Optimising product costs.  Costs
 Rejuvenation efforts to be taken  Competition
preferably at the time of maturity  Consumer taste
stage.
as
Stage in life cycle Product

INTRODUCTION Rectify product deficiencies
GROWTH Focus on product quality
MATURITY Product adjustments for further brand differentiation
DECLINE Simplify product – line.
Seek new product uses.
Introduce changes to revitalize product.
as
Stage in Life Cycle Pricing Promotion Distribution

INTRODUCTION Highest Create awareness of products potential. Selective
Stimulate primary demand. distribution.
GROWTH High Selective advertising of brand. Extended
Heavy advt. To create image coverage.
MATURITY Moderate Build & maintain image. Seek close dealer
Sales promotions – facilitate relationships.
DECLINE Low Primary demand may again be cultivated. Selective
as
4.3.7 Identification of stages in a PLC

Forecasting method including smoothing moving averages can be used to
assess where we are heading.
Another method is 3 sigma method of tracing the product life cycle and stage
identification.
A control chart consists of three horizontal lines
34
 Central line - CL
 Upper control limit - UCL
 Lower control limit - LCL
 Obtain sales value preferably for last three years or more at some point
of time in PLC.
 Find the mean and standard deviation (σ) of the sample.
 The mean is taken as the standard line or central line
 UCL is mean+3σ
 LCL is mean-3 σ
Growth stage PLC Stage identification
If more points fall on or above the

UCL, then it indicates a shift from
introductory stage to growth stage.
ULC
Maturity stage
If points fall slightly more in LCL
than UCL range, then it indicates a CL
Sales
shift from growth stage to maturity

stage.
LCL
Decline stage
If more points fall below LCL,
then it indicates a shift from maturity
to decline stage. Time Period
4.4 REVISION POINTS

A life cycle of a product consists of four stages: introduction, growth, maturity
and decline.Each marketer has to study the characteristics of Innovators / Early
adopters in a given product category.Launch of a product in the market with full
scale marketing effort happens in the introduction stage. In case the product
launch is successful, the sale must pick up gradually / rapidly. The next stage is
then reached which is known as the “growth stage”. When sales reach a plateau - is
called “maturity stage “or saturation. If sales growth rate turns negative it indicates
“decline stage”. Either through forecasting or by 3 sigma method of tracing the
product life cycle and stage identification can be done.
1. What is product life cycle?
2. What are the characteristics of PLC?
3. What are the strategic marketing implications in various stages of PLC?
4. Explain how a product is identified with different stages in a PLC.
4.6 SUMMARY
Product life cycle has 4 stages namely Introduction, Growth, Maturity and
Decline. Graph is plotted by sales/profit of a product category over time, usually
35
years. Various stages in PLC helps company in deciding its strategies especially its
marketing mix. Introducing a new product at appropriate time will help maintain a
company’s desired level of profit. Not all products follow the same shape. PLC helps
in better product planning.
1. In which stage of the PLC should product strategy focus on process
modifications?
a) I ; b) G ; c) M* ; d) D
2. In which stage of the PLC should product strategy focus on forecasting
capacity requirements?
a) I ; b) G* ; c) M; d) D
3. A product’s life cycle is divided into four stages, which are
a) M, G, D, I; b) I, G, M, D*; c) G, I, D, M ; d) D, M, G, I
4. In which stage the price of the product is likely to be highest
a) Introduction* ; b) Growth ; c) Saturation ; d) Decline
Hill Publishing Ltd., New Delhi, 4/e.
3/e, 2011.
4.9 ASSIGNMENT
Take any industry. In that choose a product of your choice. Identify the sales
figure for a period of time. Find where it is placed in PLC. Please give your
marketing program to lengthen the product life cycle.
1. Anandan, C. Product Management, the McGraw-Hill, 2/e.
2. Chunawalla, S.A., Product Management, Himalaya publishing house, 8/e, 2011.
3. Kirti Dutta, Brand Management principles & practices, Oxford, 2012.
How might a company’s advertising strategies differ, depending on whether its
brand of a product is in the introduction stage or the maturity stage of its life cycle?
For this you can take brands of your choice.
4.12 KEY WORDS
 PLC
 Introduction
 Growth
 Maturity
 Rejuvenation
 Decline
H
36
UNIT - II
LESSON - 5
BRAND
5.1 INTRODUCTION
Choosing a name for a product may appear small, but it is not. Building a brand
driven culture is a lifelong commitment to a mindset and a way of life that takes time,
planning and perseverance that produces intangible outputs which include greater
customer satisfaction, reduced price sensitivity, fewer customer defections, a greater
share of customers’ wallets, more referrals, and a higher percentage of repeat
business (Knapp, 2000). Customers value their relationships with their branded
possessions and with marketing agents and institutions that own and manage the
brand (Alexander et al., 2002). The brand identity needs to focus on points of
differentiation that offer sustainable competitive advantage to the firm.
5.2 OBJECTIVES
 To understand the importance of naming the product and thus appreciate the
Branding concept.
5.3 CONTENTS
5.3.1 Branding
5.3.2 Branding decision
5.3.3 Selecting a brand name
5.3.4 Branding – advantages & disadvantages
5.3.5 Co-branding
5.3.1 BRANDING
“A name, term, sign, symbol or design, or a combination of these, that is
intended to identify the goods and services of one business or group of businesses
and to differentiate them from those of competitors”.
‘Interbrand’ - a leading branding consultancy - define a brand in this way:
“A mixture of tangible and intangible attributes symbolised in a trademark,
which, if properly managed, creates influence and generates value”.
As per AMA Brand name is a part of a Brand consisting of a word , letter ,
group of words or letters comprising a name which is intended to identify the goods
or services of a seller or a group of sellers and to differentiate them from those of
competitors.
Example
Himalaya toothpaste, Rexona soap
 Brand / Trade mark → Symbol used for the purpose of identification
 Trade mark is the legalised version of a brand.
 All trademarks are brands & include both the brand name & the pictorial design.
 Exclusive rights to use the brand in perpetuity (for-ever) -unlike the patents &
copyright laws which have expiry dates.
37
5.3.2 BRANDING DECISION
1) Should the product be branded at all?
Depends on
 Nature of the product
 Type of outlets envisaged.
 Perceived advantages of branding & the estimated costs of developing the
brand.
Example
Commodity product branding
Basmati rice→ Double Deer brand basmati rice.
Iodised salt → TATA.
Atta → Ashirvad, Pillsbury.
Dhal → Udhayam, Jayyam, Sree Gold
1) Who should sponsor the brand?
 Manufacturer’s brand / national brand.
 Middle man’s brand / private brand.
Example
Sarvodaya, Food world, other super bazaars, Retailers – Sarees (RMKV/ POTHYS)
2) What quality should be built into the brand?
Crucial decision & will decide the product positioning.
Example
Surf → Premium
Henkel → middle
Nirma → lower
3) Should each product be individually or family branded? Should other products be given
the same brand name?
Individual Names: Followed by HUL
Blanket Family Names / Umbrella Branding: Example: AMUL
Separate Family Names for set of Products:
Example
Nestle – Maggi (Noodles/soup/sauce), Nescafe, Nestle (Curd/butter)
Corporate Name combined with Individual Product Names
TATA (By and large follows… exceptions like West Side)
TATA Indica/TATA Tea/ TATA Salt etc…
Advantage of using family brand
Comparatively reduced promotional expenditure as the firm has to promote
only one brand which if successful would be able to sell the entire product line.
38
Disadvantage using family brand
It will be a very ill – advised strategy if the products being offered are of highly
uneven quality.
It may not be good strategy if the markets are quite dissimilar in terms of
consumer profile.
Each product cannot be given specific identity which may lead to its failure
4) Should 2 or more brands be developed in the same product category?
Example
 HUL -- soaps
 Lifebuoy --- low
 Lux ---- medium
Pears --- High
5) Should the established brand be given a new meaning (repositioning)?
Several market parameters might undergo a change
 Consumer preferences
 Identification of new needs etc…
 Any such change call for re look as to the original positioning of the product
still optimal or not.
 Stagnation / Decline in sales
 Need for re assessment of the original product positioning.
Example
Ice-creams - From young to adult.
5.3.3 Selecting a Brand Name
 Branding of a product is like naming a new born child. It basically serves to
identify the offering.
 Finding an appropriate name for a new product is a tricky job.
Firstly, the name should not be one which is already being used by another firm.
Secondly, the name should be one which satisfies several marketing criteria.
The following principles can be followed in selection of Brand name.
 A brand name can reflect directly or in-directly some aspect of the product.
Example
Burnol → Product something to do with burns.
 A brand name can be distinctive especially if the product requires such
distinction.
Example
Chancellor → Cigarette --- idea of status, power & opulent life style.
 Short, simple & easy to pronounce.
Example
Hamam, Vimal
 Easy to recognise & remember
39
Example
Sony, Lux, and Colgate
 Pleasing when pronounced.
 Not offensive, obscene or negative.
 Adaptable to packaging, labelling requirements and to any Advt. medium
 Contemporary.
 Legal protection is necessary.
Branding - Advantages & Dis-Advantages
a) 1 Buyers/social point of view
b) Sellers point of view
Buyers/Social point of view:
Advantages
1. Brand generally denotes uniform quality.
2. Shopping is easier.
3. Competition, over a period of time lead to quality improvement
4. Gives psychological satisfaction
5. Brands help in better dissemination of product knowledge.
6. Better knowledge can contribute to more scientific & rational decision
making.
Disadvantages
1. Since brand development cost money, product prices tend to go up.
2. Taking undue advantage of brand popularity, a manufacturer may reduce
quality gradually.
3. Manufacturers are likely to get higher returns than normal thru’ excessive
or strong brand loyalty.
Seller’s point of view
Advantages
1. Helps in product identification
2. It can carve out a niche for itself thru’ product differentiation
3. If brand loyalty can be developed, the firm will be able to exert quasi –
monopolistic power.
Disadvantages
 To obtain the advantages, it is necessary for the manufacturer to invest
resources in promoting the brand name. High investment is required.
Co-Branding
Co-branding is a marketing partnership between at least two different brands
which are independent providers of goods or services. This co-branding effort can
result in various type of promotions such as sponsorships or advertisements. The
association will benefit both the brands more when they come together, rather than
when they are promoted individually.
40
A typical example of an International co-branding exercise is when Dell
computers or HP computers advertise with Intel (or you can count it the other way
around). Intel as a processor is known for its computing power and hence is
assumed to be far above the rest. Naturally, when Dell claims that it has “Intel
Inside” this benefits the brand tremendously.
On the other hand, Intel itself cannot keep advertising its processor because
the processor on its own does not serve any function. It needs the whole computer
to advertise. Thus, this co-branding exercise has existed since years and will exist
for the coming years. This is because Intel and Dell when advertised alone, will
have lesser advantages as compared to when advertised together.
There are various forms of co-branding which are as mentioned below
 Same company co-branding – Products from within the same company are
co-branded – HUL can promote a packet of Knorr soup with a packet of Bru
coffee (both brands belonging to HUL)
 Joint venture co-branding – Giving discounts on selective Debit cards being
used with a brand. For example – Snapdeal offering 5% discount on HDFC
debit cards.
 Multiple co-branding – Wherein Multiple companies form an alliance to
promote their products. This might be for a PR exercise or any form of
promotion.
 Retail co-branding – When retailers tie up with each other to utilize resources
better. One of the common alliance is between KFC, Taco bell and Pizza hut
(all belonging to Yum Brands).
 One important aspect of Co-branding is that both the brands should have
equivalent Brand equity, otherwise it will not work. If one brand has lower
brand equity, then it is affecting the higher brand equity of the other brand it
is tying up with. If HUL for example ties up with a local brand, then HUL falls
in bad light and seems like a needy brand. So HUL will always do co-branding
with an equivalent brand – a brand from which it derives benefit (this is
business after all).
Some advantages to a co-branding exercise include
 Shared resources
 Reduced costs and hence higher margins
 Branding boost especially if both the brands are renowned
 Shared risk – All the risk is not borne by one brand
 Better sales and better customer relations
 Financing becomes easier as two brands are intertwined.
There are several disadvantages to a co-branding exercise
 If anything goes wrong, both the brands are affected
 Brand alliance might be positive or negative in consumers mind and might not
achieve the desired effect.
41
 If 1 brand enters too many co brand exercises, it dilutes itself, and hence the
other brands it has associated itself with.
 Consumers may prefer the bundling above the individual offering, thereby
dropping the value when the co-branding exercise ends.
 Consumers may not focus on the individual brand altogether, thereby causing
the co-branding exercise to fail.
Thus, keeping the above disadvantages in mind, Managers have to take the right
decision whenever it comes to co-branding exercises. The brands need to be aligned in
the right manner to give a positive impact in the market. This can be done in the
planning and tie up stage before the implementation of the co-branding exercise.
5.4 REVISION POINTS
A brand is a means of identifying and differentiating the products of an
organisation. Manufacturers must decide whether to brand their products and/or
sell under a middleman’s brand. Middlemen must decide whether to carry
producers’ brands alone or to establish their own brands as well. The use of co-
branding, placing two brands on a product or an enterprise is growing.
1. Is branding necessary?
2. What are the characteristics of a good brand name?
3. Differentiate between individual and family brand names. Which is best?
4. In what circumstances co-branding is preferred?
5.6 SUMMARY
A brand name consists of words, letters, and/or numbers that can be
expressed. A brand mark is the part of the brand that appears in the form of a
symbol, design, or distinctive colour or lettering. A trade mark is a brand that has
been adopted by a seller and given legal protection. A common brand name can be
used for all the products of the company. Individual brand name for is different
products can be given. Family brand name, individual brand name has its own
advantages and disadvantages. In case of core branding, if synergy can be achieved
the company can proceed in favour of co-branding. Utmost care has to be taken in
selecting a brand name.
1. Close up, Doordarshan, Frooti, Fair and Lovely, Band aid are the examples of
a) Descriptive Brand Name*
b) Suggestive brand name
c) Free Standing brand name
d) None
2. Watches sold as a Jewellery is related to
a) Titan Raga
b) Tanishq*
c) Swatch
d) Gold Plus
42
3. .…………………..includes visual signals of a brand – its character (e.g. Amul girl,
Pillsbury doughboy) and its logo. Both are elements of brand identity.
a) Brand attitude
b) Brand Image
c) Brand Symbol*
d) Brand Positioning
4. .………………….can be thought of as a perceptual map of in which, like products
of the same company (say, toothpaste) are positioned very close to one another
and compete more with one another than with brands of other companies.
a) Brand Comparison
b) Cannibalization*
c) Positioning
d) Brand Association
Tata McGraw-Hill
5.9 ASSIGNMENT
1. Prepare a chart of 50 power brands and identify how many individual, family
name, and combination names appear.
3/e, 2011
1. Do the following e brands possess the characteristics of a good brand?
5.12 KEY WORDS
 Amazon
 Snapdeal
 Bigbasket
 Flipcart
 Brand
 Brand name
 Brand mark
 Trade mark
 Family brand name
 Cobranding
H
43
LESSON – 6
POSITIONING
6.1 INTRODUCTION
Innumerable products & Brands are jostling for a position inside that limited
space. Differentiation is a broad issue that includes any way that a marketer can
distinguish his product from the field. Consequently there are many ways to do it.
1. Features – Capabilities
2. Fit – Tailoring
3. Styling – Functional, visual
4. Reliability – Warranties, return policies
5. Packaging – Colour, size, shape, protection
6. Sizes – clothing, appliances, computers, and luggage sizes
7. Service – Timeliness, courtesy, accuracy
8. Brand naming – labelling
The choice of any one of these product differentiation techniques affects the
entire marketing process, as it lays the groundwork for the promotional efforts. A
product can be differentiated from the competition by creative advertising and
promotion, even if competing products are physically identical.
Perceptual maps and positioning can help to differentiate the product.
Positioning is the battle for a place in the consumers mind. A Brand can hope at
best to occupy such a position as a tenant, for periods that will vary according to
the quality & quantity of marketing efforts behind that Brand.
KOTLER “The act of designing the company’s offer so that it occupies a distinct
& valued place in the mind of the target customers”.
ROSSER REEVES “Positioning is the art of selecting, out of a number of USP’s,
the one which will get you maximum sales
6.2 OBJECTIVES
 This lesson aims at understanding the importance of differentiating a product
from competitor’s products through positioning techniques.
6.3 CONTENTS
6.3.1 Product positioning strategy
6.3.2 Positioning stages
6.3.3 Product/brand positioning
6.3.4 Product positioning techniques
6.3.5 Product differentiation techniques
6.3.6 Repositioning
6.3.1 Product Positioning Strategy
The goal of a positioning strategy is to create a product-price position
attractive to target customers & a good source of cash flow for the business.
44
Achieving greater market share is a primary indicator of the success of a
marketing strategy
For a particular target price, a business needs to develop a position based on
either a low price or some source of differentiation & product positioning that is
meaningful to target customers
Intel – Product Positioning
Itanium Itanium
Xeon
Xeon
P
R Pentium
I
Pentium
C
E
Celeron
Celeron
DEMAND PERFORMANCE BENEFITS
Intel Pentium Processor by early 1990’s

 Intel Pentium Processor by early 1990’s.
 By mid 90’s new opportunities evolved for more powerful processors at higher
prices, which led Intel to design and introduce Xeon processor.
 Late 90’s lower price PC market emerged and main player was Intel’s
competitor Advanced micro devices.
 To tackle, Intel instead of reducing Pentium prices, introduced Celeron to
compete with Advanced micro devices at lower price pint.
 Intel also introduced more powerful Itanium processor at a price point higher
than Xeon’s.
6.3.2 Positioning Stages
 Determine consumers’ perceptions & evaluations of the product or service in
relation to competitors’.
 Identify competitors’ positions.
 Determine consumer preferences.
 Select the position.
45
 Monitor the positioning strategy
 A Perceptual map can be drawn in two or more dimensions (benefits &
attributes), which displays the position of products or brands in the
consumers’ mind.
 Marketing decisions like
 Product design
 Packaging
 Pricing
 Method of distribution
Depends on what position one wants
Perceptual map
A perceptual map is of the visual technique designed to show how the
average target market consumer understands the positioning of the competing
products in the market place. In other words, it is a tool that attempts to map the
consumer’s perceptions and understandings in a diagram.
The word ‘perceptual’ comes from the word ‘perception’, which basically refers
to the consumers’ understanding of the competing products and their
associated attributes. The most common presentation format for a perceptual map
is to use two determinant attributes as the X and Y axes of a graph, however there
are also other formats that are sometimes used.
http://www.segmentationstudyguide.com/understanding-perceptual-maps/perceptual-maps/
6.3.3 Product / Brand Positioning
 Positioning is the perception about the brand relative to the competitive
brands.
 Positioning is the art of creating a distinct image for a product in the mind of
the customers.
46
Purpose of positioning
 ↑Product ranges
 Identification of U S P.
 Consumers tend to differentiate between brands on their own way.
 Other marketing decisions like
1. Product design
2. Packaging
3. Pricing
4. Method of distribution
Depends on what position one wants.
Elements of positioning
 Consumers mentally rank the products in their mind along one or more
than one dimensions.
 The marketer’s task is to get his product on top of mind along some
significant dimension of purchase.
 Four distinct variables that affect the position of a given product
 The product
 The company
 The competition
 The consumer
6.3.4 Product Positioning Techniques
i) Specific product attributes: →Highlight specific feature / attributes.
e.g.: Promise tooth paste – Clove oil
Sun drop – sun flower oil
Dabur – Real
ii) Distinct benefits to users
e.g. : Vicks vaporub, Ponds cold cream. Santoor – beautiful skin – Younger skin
Fair & Lovely – for fairness
iii) Specific usage
e.g.: ATM—Automatic teller machine – any time money.
Captain cook Atta – give you tasty roties which you can enjoy with your
family.
iv) User category / application – Highlight product usage for a particular group
of users or new applications.
e.g.: Ramco cement – Masons / Engineers.
Rana tar—Steel
v) Product class association: When introducing new products.
E.g.: Milk food yogurt – It is not curd, its milk food yogurt (sweet curd)
Crystal Salt – “Salt means Crystal Salt”.
47
Price / Quality
e.g.: Nirma / Surf
vi) Positioning by reference groups: Sports personalities, film stars.
e.g.: Boost, Adidas etc…
vii) Packaging
Example
Frooti – Tetra pack
Pan Parag – tin package to small sachet
Velvette – sachet (at the time of launch)
Nescafe—Glass jars etc.
1 Litre / 500 ml cool drinks – In pet jars
viii) Non-functional – Emotional
Example
Bajaj scooters
6.3.5 Product Differentiation Techniques

1) Product features
E.g.: Swift – Safety aspects / Air bag in small car.
Ford Icon - Features
2) Performance quality
E.g.: Whisper ultra-thin– Superior absorbing Power & dry texture
Hero Honda bikes – Mileage
3) Exclusivity & style
E.g.: Tanishq from TITAN
Louis Phillip, Omega
4) Design
E.g.: Zodiac ties
RMKV -- Sarees
- Design – leather goods.
5) Product Range and Variety
E.g.: Lakme – range of cosmetics
Sony Range of Handy Cams
CIPLA – aerosol range
Bausch & Lomb – Ray ban.
6) Services Quality
E.g.: Eureka Forbes – Vacuum cleaners, Water purifiers.
Indian oil – (remember elephants carrying oil barrel in hilly terrain)
48
Gulf Air
7) Distribution
E.g.: TITAN, BATA
Product / Brand Re-Positioning
1) Increasing relevance to consumer
Example
LIPTON
Exotic & Foreign → Exotic & Indian
Exotic → Unusual, interesting & exciting (foreign origin)
Maharaja dish washer
International → National
Sophisticated → Functional
Your guests get Swiss cheese, Italian pizza you get stained glassware.
→ “Bye, Bye Kanta Bai”
 Visa
Pay the way The World does → World’s most preferred card → Visa power
 Bourn vita
Taste additive to milk → Extra nutrition Extra taste → Nutrition/ Mental stimulation
2. Increasing occasions for use

 Cadbury’s drinking chocolate:
Good Night cap (Night only) → happiest time of the Day (Any time)
 Burnol:
Curing burns → 3 in 1 (Burns / cuts / gashes)
 Odomos:
Indoor → Indoor + out door
 Vicks cough Drops:
Cough drops → Adult candy
 Vicks vaporub:
Child’s cold rub (at night) → Adult / child rub (any time during day)
 Zandu Balm → Head ache → Back ache
3. Search for a viable position
 Complan: Food for sick → Against Horlicks → for growing children
4. Making the Brand serious
 Saffola: Good for heart → Heart is not safe without Saffola
5. Falling sales
 Ambassador – Rugged road master (Rational) → Member of the family
(emotional)
49
Forhans: Good for gums (medicinal) → new feel freshness Forhans (cosmetics)
6. Bringing in new customers
 J & J Baby oil → for babies’ → Babies & Mothers
 J & J no more tears shampoo
Babies → those who wash regularly
 Cadbury’s Bytes
kids → Adults as well
 Ray-ban: Male → Female as well.
7. Making the Brand contemporary
 Dabur chyawanprash
Traditional → Traditional + Nutritional
 Dabur Honey
Purity → Nutrition + Health
 Onida
Neighbour’s Envy, Owner’s pride → World’s Envy, India’s Pride
8. Differentiating Brands from competitors
 Mint ‘O’
All mint, no hole vs. (Nestle) Polo → the mint with the hole
(Initial stages of launch)
 T V S Suzuki vs. Hero Honda (comparison initial stages)
 Pepsi Vs Coke
9. Changed market conditions
 Horlicks
Milk additive → Nutrition
 Milk maid
Whitener for Tea, Coffee → Maker of the Tastiest milk → Use in Dessert
Recipes topping for cakes, puddings
6.4 REVISION POINTS
Differentiation is a broad issue that includes any way that a marketer can
distinguish his product from the field. Perceptual maps and positioning can help to
differentiate the product. Positioning is the battle for a place in the consumers
mind. The goal of a positioning strategy is to create a product-price position
attractive to target customers & a good source of cash flow for the business.
1. Explain the significance of positioning with examples.
2. List down the factors influencing repositioning
3. Take an industry of tour choice and draw a perceptual map.
50
6.6 SUMMARY
For any specific target segment, a business needs to develop a tactical
marketing strategy for positioning its product with respect to product features and
price, and then marketing the product with respect to promotion and place.
Product positioning and differentiation are key parts of a successful marketing
strategy. How should a business position its products relative to customer needs
and competitors? And what source of differentiation is needed to make this product
position differently superior to competitor’s products? Low price differentiation is an
important position to develop for any business serving a price-sensitive market. For
markets in which differentiation is possible, a business could build its
differentiation around a product or packaging advantage, a service advantage, or an
advantage in brand reputation. To be successful, the differentiation underlying the
positioning strategy must be meaningful to target customers and sustainable (not
easily duplicated by competitors)
1. Lifebuoy – kills the germs you cannot see, is an example of
a) Competitors compete to introduce new expectations
b) There are usually many opportunities to add features and services to a
product
c) A product's full potential is rarely met
2. Differentiation strategy is pivotal if it
a) Reaches back to positioning strategy and forward to core capabilities
b) Reaches forward to positioning strategy and reaches back to core
capabilities*
c) Reaches forward to marketing strategy and reaches back to positioning
strategy
d) Reaches back to marketing strategy and forward to positioning strategy
3. .………………….can be thought of as a perceptual map of in which, like
products of the same company (say, toothpaste) are positioned very close to
one another and compete more with one another than with brands of other
companies.
a) Brand Comparison
b) Cannibalization*
c) Positioning
d) Brand Association
e) Emotional benefit related positioning
f) Functional benefit related positioning*
g) Usage occasion related positioning
h) Health related positioning
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4. As consumer expectations change a consequence of this for product
positioning is that:
a) What was once an additional extra feature can quickly become a standard
feature*
Tata McGraw-Hill
2. Moorthi YLR, Brand Management, The Indian context, Vikas publishing
6.9 ASSIGNMENT
1. How does a business such as McDonald’s develop a positioning strategy
around some aspect of service differentiation?
1. Roger j Best, Market based management, Eastern economy edition, PHI
2. Donald R. Lehmann, Russel S. Winer, Product Management, Tata McGraw-Hill
Publishing Ltd., New Delhi, 4/e
1. Find a magazine advertisement that communicates the position for a product
in each of the following products?
2. Home appliance
3. Airline
4. Cellular phone service
5. Hotel chain
6.12 KEY WORDS
1. Positioning
2. Repositioning
3. Differentiation
4. Perceptual mapping
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LESSON - 7
BRAND EQUITY
7.1 INTRODUCTION
Is there a way to measure return on brand investment? What return the
branding gives to a marketer? These questions form the basis of brand equity. It
can be considered as the incremental value added to the product due to the
existence of a brand name.
“Brand extension” refers to the use of a successful brand name to launch a
new or modified product in a new market. Virgin is perhaps the best example of
how brand extension can be applied into quite diverse and distinct markets.
“Brand image” refers to the set of beliefs that customers hold about a
particular brand. These are important to develop well since a negative brand image
can be very difficult to shake off.
“Brand equity” refers to the value of a brand. Brand equity is based on the
extent to which the brand has high brand loyalty, name awareness, perceived
quality and strong product associations. Brand equity also includes other
“intangible” assets such as patents, trademarks and channel relationships.
 Market share, growth rate, operating profit margin
 Satisfaction, lifestyle choice, loyalty – willing to pay more
 Liking, Emotional bonding - Fashion quotient or hype
 Association, Relevance
 Familiarity, Top of the Mind
Some of important branding terms used in the industry is given below.
 “Brand equity” refers to the Financialvalue of a brand.
 Brand equity is based on the extent to which the brand has high brand
loyalty, name awareness, perceived quality and strong product associations.
Brand equity also includes other “intangible” assets such as patents,
trademarks and channel relationships.
 Brand Attitude
 It is the attitude that consumers develop towards a brand on the basis of
their association (direct/indirect), with the brand.
 Brand Personality
 A set of human characteristics associated with the brand
 Brand Image
 Set of beliefs held about a particular brand
 Brand Gap
 The caused due to the difference between the brand identity established by
the company and the brand image perceived by the customers
 Brand Awareness
 It is the ability of a consumer to recognize or recall a brand as a member of
a particular product class category
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 Brand loyalty
 It is having a particular brand as the primary choice while making
purchase
 Brand audit
 A brand audit is a thorough examination of a brand’s current position in an
industry compared to its competitors and the examination of its
effectiveness.
 Brand Tracking
 The collection of information about the brand from customers at regular
intervals of time
 Brand Spiralling
 Using the traditional media to promote & attract consumers to an online
website
 Brand Line
 This includes all the products sold under a particular brand
 Brand extension
 When an existing brand name is used to launch a new product in a
different product category
7.2 OBJECTIVES
 This chapter aims to simplify the concept of brand equity and help the
students and or practioners to arrive at real brand equity.
7.3 CONTENTS
7.3.1 Tips to build brand loyalty
7.3.2 Aaker’s ten components of Brand Equity
7.3.3 How to find brand equity
7.3.4 Brand building
7.3.1 Tips to Build Brand Loyalty
 The reason why marketers attach so much importance to brand building is
because consumers develop an emotional bond that translates into loyalty.
This is a result of Brand equity, the value inherent in a brand name. Brand
equity is so powerful that the product is associated and remembered by the
brand name itself.
– For example, Xerox for photocopiers and Godrej for steel cupboards.
 "Under promise, over deliver!" Make sure your product and service always
gives customers more than they expect.
 Blatantly increase the frequency of any ad that has been tested to be
successful, until the point of no further return, and then ease off gradually.
 Remember that brand loyalty can be formed. Think of ways to tap into the
daily/weekly/monthly habits of your customer's behaviour. How can you
make your product or service part of your customer's routine?
 Make your customer a member. Give them a feeling of true ownership and the
pride in owning the product or service.
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 Answer your phone within the first three rings, and with a smile. Remember
that telephone etiquette is part of your brand.
 Educate your employees and/or contractors on the importance of being a part
of the brand, what that means and how they can impact customer opinion.
 If you can quickly and effectively build and sustain brand loyalty, the future of
your company is insured against competition.
7.3.2 Aaker’s Ten Components Of Brand Equity
The measure of each of the five components – loyalty, perceived
quality/leadership, association, awareness, and market behaviour are obtained by
measuring the various subcomponents.
Price premium could be measured by asking the customer how much price
premium they are willing to pay the brand. For measuring satisfaction data can
obtained on a suitable rating scale and it can then be analyzed. Perceived quality
can also be obtained on an interval scale. Leadership refers to leadership in sales or
innovation or in customer acceptance of the brand. It could be also captured using
rating scale. The association is seen as a sum of value which indicates functional
benefit of the product,brand personality,(positives and negatives of the
personality),and image of the organization associated with the brand. There are five
levels of awareness/recognition-recall,top-of-levels of awareness. The fifth
component, which is obtained from the market,comprises of market share and
distribution coverage,which hardly requires a survey.It is practically not possible to
consider all components. Hence, managers need to identify a set of relevent
components and they need to allot appropriate weights for them. A suitable
combination mechanism needs to be evolved to consolidate the data across
dimensions into one that represents brand equity. To measure any of the first four
components a questionnaire needs to be constructed appropriately.
• Price Premium
Loyalty
• Satisfaction
Perceived Quality/ • Perceived Quality

Leadership • Leadership
• Perceived Value
Association/
Differentiation • Brand Personality
• Associations
Awareness • Levels of awareness
• Market share
Market behaviour
• Distribution issues
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7.3.3 How to find brand equity?
It is the price at which a brand can be sold by an organisation to another.
There are various methods to find various equity.
 Cost based
 Discounting cash flow
 Price based
 Customer based
Cost Based
 Historical cost– Money spent on the brand till date.
 Replacement cost – Money req. to create a brand with similar turnover,
profitability, distribution reach, brand loyalty etc …
 Market value method – Comparing with the value that had been realised in a
comparable, current merger or acquisition.
Discounting Cash Flow Method
 Estimating cash flows that would accrue to a brand in future & converting
these to present value using the time-value of money.
 BE (Br.Eq.)=S1/ (1.20) +S2/ (1.20)² +S3/ (1.20)³ +……S10/ (1.20)¹°
 Discount is taken as 20% for 10 years period.
Brand contributionmethod
 K (integer)× (profit from the brand-profit for unbranded in the same category)
Inter-Brand method
 W=Weighted average of profit of last 3 yrs.
 P/E of the Company or industry.
 BS=Brand Strength →variable like leadership, stability etc..
 BE= W× (P/E) ×BS
Example
Average Profit= Rs.24.2 Cr.
P/E=15
BS =0.43 (pts. scored out of 100)
BE = 24.2×15×0.43=Rs.156.09 Cr.
Price Based
It uses the retail price of the brand as the basis for computing brand equity.
 Price premium method - Comparing the difference between the retail price of
the brand & the retail price of an un-branded product in the same category.
 Market share equalisation method – When price is raised beyond a point
people will switch over to other brands. (What are the prices at which the
market share for each of these brands is equal?)—very complex.
 Price premium at indifference - same logic as above: compare the prices of
brands at the point of indifference.
BE of X = {Revised price of X/price of competitor -1} ×100
Customer Based
Use some sort of attitudinal scale to arrive at a number that measure BE.
 Brand knowledge – Sum of awareness & Brand image.
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Parameters like – Brand recall, Strength of brand Attitudes etc…
Parameter Rating can be done in a 1 to 10 scale.
 Attribute – oriented – list all attributes
Example
Freshness
Fragrance
Long-lasting
Appearance
Desirability etc…
 Blind test – Brand name is not revealed to the customers and are subjected
to undergo with the use of products. To have subjective & objective attributes.
E.g.: hold goods for products which satisfies sensors like touch, smell, taste,
looks, and hearing.
7.3.4 Brand Building
Professor David Jobber identifies seven main factors in building successful
brands, as illustrated in the diagram below:
Quality
Quality is a vital ingredient of a good brand. Remember the “core benefits” –
the things consumers expect. These must be delivered well, consistently. The
branded washing machine that leaks, or the training shoe that often falls apart
when wet will never develop brand equity.
Research confirms that, statistically, higher quality brands achieve a higher
market share and higher profitability that their inferior competitors.
Positioning
Positioning is about the position a brand occupies in a market in the minds of
consumers. Strong brands have a clear, often unique position in the target market.
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Positioning can be achieved through several means, including brand name, image,
service standards, product guarantees, packaging and the way in which it is delivered. In
fact, successful positioning usually requires a combination of these things.
Repositioning
Repositioning occurs when a brand tries to change its market position to reflect
a change in consumer’s tastes. This is often required when a brand has become tired,
perhaps because its original market has matured or has gone into decline.
Communications
Communications also play a key role in building a successful brand. We
suggested that brand positioning is essentially about customer perceptions – with
the objective to build a clearly defined position in the minds of the target audience.
All elements of the promotional mix need to be used to develop and sustain
customer perceptions. Initially, the challenge is to build awareness, then to develop
the brand personality and reinforce the perception.
First-mover advantage
Business strategists often talk about first-mover advantage. In terms of brand
development, by “first-mover” they mean that it is possible for the first successful
brand in a market to create a clear positioning in the minds of target customers before
the competition enters the market. There is plenty of evidence to support this.
Think of some leading consumer product brands like Gillette, Coca Cola and
Sellotape that, in many ways, defined the markets they operate in and continue to
lead. However, being first into a market does not necessarily guarantee long-term
success. Competitors – drawn to the high growth and profit potential demonstrated
by the “market-mover” – will enter the market and copy the best elements of the
leader’s brand (a good example is the way that Body Shop developed the “ethical”
personal care market but were soon facing stiff competition from the major high
street cosmetics retailers.
Long-term perspective
This leads onto another important factor in brand-building: the need to invest
in the brand over the long-term. Building customer awareness, communicating the
brand’s message and creating customer loyalty takes time. This means that
management must “invest” in a brand, perhaps at the expense of short-term
profitability.
Internal marketing
Finally, management should ensure that the brand is marketed “internally” as
well as externally. By this we mean that the whole business should understand the
brand values and positioning. This is particularly important in service businesses
where a critical part of the brand value is the type and quality of service that a
customer receives.
Think of the brands that you value in the restaurant, hotel and retail sectors.
It is likely that your favourite brands invest heavily in staff training so that the face-
to-face contact that you have with the brand helps secure your loyalty.
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Brand building in emerging markets
US and European consumer goods companies have hit a wall in their home
markets; competition is fierce and growth minimal. But as these companies enter
the fast-growing emerging markets of Africa, Asia, and Latin America, they face an
equally harsh reality. The time-honoured techniques that have made them leaders
in developed markets—expensive brand building, frequent product enhancements,
and sophisticated marketing—are ill suited to the vast, but price-sensitive, middle
and low ends of emerging markets. A study of 23 product introductions in such
regions illuminates the operational and organizational approaches most likely to
succeed there.
The take-away Brand-name products will always capture their share of
affluent consumers. But in the low end of emerging markets, companies should
take their cues from local competitors: keep local managers in place, adhere to local
standards of quality, and maintain the autonomy—and the cost efficiency—of local
operations.
7.4 REVISION POINTS
“Brand equity” refers to the value of a brand. Brand equity is based on the
extent to which the brand has high brand loyalty, name awareness, perceived
quality and strong product associations. Brand equity also includes other
“intangible” assets such as patents, trademarks and channel relationships. As per
Aaker the measure of brand equity is can be made my computing each of the five
components – loyalty, perceived quality/leadership, association, awareness, and
market behaviour are obtained by measuring the various subcomponents.There are
various methods to find various equity.
 Cost based
 Discounting cash flow
 Price based
 Customer based
Professor David Jobber identifies seven main factors in building successful
brands which includes quality, positioning, repositioning, communications, first
mover advantage, long term perspective, and internal marketing.
1. Explain the ten components of brand equity according to Aaker.
2. How will you measure brand equity?
3. How can brand equity being built?
7.6 SUMMARY
Brands identify the maker of a product and allow consumers to have a
perceived value of a brand. Brand loyalty occurs when a customer is making
repeated purchase. Companies that build equity capitalize on such strong brands
by using them to launch new products in other categories, or serving other
customer segments in the same category, or serving the same customer segments
in the same category better. Brand extension is the use of an established brand
name in new product categories.
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1. …………defines what the brand thinks about the consumer, as per the
consumer.
[a) Brand attitude*; b) Brand positioning; c) Brand relationship; d) Brand image]
2. ………………includes two aspects of a brand – its associations and its
personality.
[a) Brand attitude; b) Brand positioning; c) Brand relationship; d) Brand image*]
3. …………………includes all that is linked up in memory about the brand. It
could be specific to attributes, features, benefits or looks of brand.
[a) Brand attitude; b) Brand Associations*; c) Brand relationship; d) Brand image]
4. A marketer need to understand that some ‘general traits’ of a brand name are:
[a) Easy to recognize; b) Easy to pronounce; c) Easy to memorize or recall;
d) All of the above*]
5. Xerox, Exxon, are the examples of
[a) Free Standing brand name*; b) Descriptive Brand Name;
c) Suggestive brand name; d) Bothe b and c]
6. Whisper, Visa, Tropicana, Surf, Limca, Crush, and Denim are the examples of
[a) Descriptive Brand Name; b) Suggestive brand name*;
c) Free Standing brand name; d) None of the above
7.9 ASSIGNMENT
1. Take any key merger and acquisition. Try to analyse how that particular
brand equity was arrived. Do you agree with it? If not substantiate with reason
and propose your own brand equity value.
2. Subrato sengupta, Brand positioning strategies, TATA McGraw-Hill
1. Select any brand of your choice. Collect past sales details, Product Price Vis a
Vis competition. Use any method to arrive at brand equity.
7.12 KEY WORDS
 Brand  Brand Attitude  Brand Awareness  Brand Spiralling
Associations  Brand Personality  Brand loyalty  Brand Line
 Brand identity  Brand Image  Brand audit  Brand extension
 Brand Elements  Brand Gap  Brand Tracking  Brand Mix
 Brand resonance
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LESSON - 8
TRADE MARK AND LOGO
8.1 INTRODUCTION
A trademark provides protection to the owner of the mark by ensuring an
exclusive right to use the mark to identify his goods or services, and/or to authorize
another entity to use that mark in return of consideration. The period of protection
usually last for ten years, but a trademark can be renewed indefinitely beyond the
time limit on payment of renewal fees. Trademark protection is enforced by the
Courts, which has the authority to prevent trademark infringement.
In a larger sense, trademarks promote initiative and enterprise worldwide by
rewarding the owners of trademarks with recognition and financial profit.
Trademark protection also hinders the efforts of unfair competitors, such as
counterfeiters, to use similar distinctive marks to market inferior or different
products or services. The system enables people with skill and enterprise to
produce and market goods and services in the fairest possible conditions, thereby
facilitating international trade.
In simple terms, trademark means registration of your brand name. Here, we
are trying to understand, how to protect our brand’s reputation by way of
registering our brand as a trade-mark.
In layman’s language, it is a visual symbol which may be a Name, Phrase,
Logo, Graphic, Smell, Sound Mark, Label, Device, Word signature, combination of
colours or numerical.
Trademark literally means, “This brand name is ours” and if any one dare to
use it to sell their products, we can sue them. Trademark identifies and
distinguishes the source of the goods or services of one business entity from those
of others.
If you’re starting a new business or trade, a logo, name or signature is the first
thing you choose to separate yourself from the rest. A “trademark” is that symbol
you will use to do so. Registering a trademark is a legal process provided for under
the Trade Marks Act, 1999.
8.2 OBJECTIVES
 This chapter focuses on importance of trade mark and how the same can be
registered.
8.3 CONTENTS
8.3.1 What is a logo?
8.3.2 Trademark
8.3.3 How is a trademark registered in India?
8.3.4 Trade mark protection
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8.3.1 What is a Logo?
A Logo is a design symbolizing ones organization. It is a design that is used by
an organization for its letterhead, advertising material, and signs as an emblem by
which the organization can easily be recognized, also called logotype. Logotype is a
graphic representation or symbol of a company name, trademark, abbreviation,
etc., often uniquely designed for ready recognition.
You may also think of a Logo as a simple visual mark to identify your company
product or service. There are different types of signs and emblems easily recognized
and associated with purposes. Now days, the most popular and successful
companies continue to say that "simpler is better", especially today when everything
is moving so fast you have less and less time to impress your customers. So it has
to be done in a very stylish manner yet remaining conservative so that it`s easier for
the eye to catch and the brain to memorize your logo design.
These days you also have to consider the reproduction cost. More detailed and
colourful logo designs are harder to reproduce and they of course cost more. You also
have to consider the size that your logo is going to be used at. The perfect logo design
will look great on a sign board as well as on a business card or on a pen for example.
We have talked about the general use of a logo. Now we are going to get into a
more detail look at the logo. There are some general types of logos: Iconic Logo -
Some kind of graphical element related to the business field or just an abstract
image, for example: Nike, AOL, Micheline. Logotype - Logo based only on the
company name. A unique font, or unique layout style can make a great logo, for
example: Sony, Coca-Cola, and IBM.
Let's talk about each kind separately. Iconic Logos can be very different. The classic
variation is to make the symbol fit any of the basic geometrical shapes. For example:
The best shapes to use are symmetrical geometrical shapes. They can be
placed almost anywhere and still maintain the balance; they are very easy to
handle.
It is still good to make the logo fit any kind of geometrical shape, it looks more
fit and balanced:
And at last there is no obligation in what kind of shape to use, you can use
any free form shape you want, but you have to be very careful with the placement,
so the logo doesn't look like it is falling apart or going to fall:
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By selecting the shape, you should consider how conservative and stable your
company wants to appear.
Selecting the concept
Now the most important part is to get the concept for a logo. It is almost the
same process as selecting the name. First you have to determine what your logo
should say about your company. There are many different ways to represent a
company.
 You may come up with an image related to a business like a house for a real
estate company, or a car for a car dealership
 You could use just an abstract image representing the company`s
philosophy. For example some kind of blocky image would suit a stable
trustful company or even just a pyramid. A very dynamic image with orbits
and swooshes, sparks, particles could be used for a very modern, young,
high-tech company to represent electrical activities or just cutting edge
meteoritic technology.
One very important thing is that not all businesses can be easily associated
with any kind of particular image. For example a programming company doesn't
have many images to be associated with (except a computer), so in this situation it
is recommended just to concentrate on an abstract image and just try to represent
the feel of the company's business rather than attempting to come up with a
symbolic image.
Some companies may be dealing with more than one business, so they would
prefer to have a more generic image, but still you can make it look more
technological by implementing straight lines in combination with curves, or make it
more corporate with more proportional, symmetrical and/or geometrical shapes.
People can easily memorize a simple logo design that have some kind of
symbolic meaning. Some companies use different mascots like the 'Tire Men' of
Michelin or the 'Beaver' for Roots. The challenge with the mascot is that for it to be
a good logo, and easy reproducible it should be very stylized and simplified as much
as possible.
Another major issue is that when people order a logo they want it to look like
some other well branded companies like McDonalds or AOL. Those are of course
great logos, but they are very recognizable only because they are well advertised.
When you come up with an image for your company you should already be thinking
about the best way to advertise your company towards the targeted audience. Your
logo should not just not just be noticeable and memorable, but should also be easy
accepted by the market.
What kind of feeling does a logo transmit just by standing alone and in a
crowd? Too many sharp edges can create a feeling of danger or caution. Also
consider your colours, so the logo design looks noticeable but not too intimidating.
A logo can be related to many different aspects of business, it just depends on
the purpose of the company and the marketplace. A logo can be related to a
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particular place, industry, or person. Also, consider your personal preference of
type of art. You can use any style of art style for a logo as long as it is unique, easily
reproducible, and is suitable for your market.
8.3.2 Trademark
A Trademark is a name, symbol, figure, letter, word, logo, or a combination of
these, in addition to smell as well as sound, adopted by a business, to identify and
distinguish their goods and services from others, and to imply their source of origin
as being from that business.
a) What kinds of trademarks can be registered in India?
The possibilities are almost limitless. Trademarks may be one or a
combination of words, letters, and numerals. They may consist of drawings,
symbols, three- dimensional signs such as the shape and packaging of goods,
audible signs such as music or vocal sounds, fragrances, or colours used as
distinguishing features.
In addition to trademarks identifying the commercial source of goods or
services, several other categories of marks exist. Collective marks are owned by an
association whose members use them to identify themselves with a level of quality
and other requirements set by the association. Examples of such associations
would be those representing accountants, engineers, or architects. Certification
marks are given for compliance with defined standards, but are not confined to any
membership. They may be granted to anyone who can certify that the products
involved meet certain established standards. The internationally accepted “ISO
9000” quality standards are an example of such widely-recognized certifications.
8.3.3 How is a trademark registered in India?
First, an application for registration of a trademark must be filed with the
appropriate national or regional trademark office. The application must contain a
clear reproduction of the sign filed for registration, including any colours, forms, or
three-dimensional features. The application must also contain a list of goods or
services to which the sign would apply. The sign must fulfil certain conditions in
order to be protected as a trademark or other type of mark. It must be distinctive,
so that consumers can distinguish it as identifying a particular product, as well as
from other trademarks identifying other products. It must neither mislead nor
deceive customers or violate public order or morality.
Finally, the rights applied for cannot be the same as, or similar to, rights
already granted to another trademark owner. This may be determined through
search and examination by the national office, or by the opposition of third parties
who claim similar or identical rights.
 In India, The Government specifies 45 different classes under which service
product of a business fall. We should know before applying for a trademark
under, which class product/service of the business falls.
 Trademark registered in India will not be valid all over the world. We should
register our trademark in individual countries, depending upon the legislation.
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 A single trade mark can be used for services belongs to different class, for that
we have to file single application for different class of services but fees for
filling in each class will increase every time just like we are filling a single
application for one trademark.
 The Trade Marks Registry was established in India in 1940. The Statute Laws
of Trade Marks in India was governed by the Trade and Merchandise Marks
Act, 1958. This Act now has been replaced by the Trade Marks Act, 1999 and
the rules made there under.
 The Head office of the Trade Marks Registry is at Mumbai and branch offices
are at Ahmadabad, Chennai, Delhi and Kolkata.
 For the International registration under the Madrid Protocol, an international
registration wing is set up in the Head office of the Trade Mark Registry in Mumbai.
 The Controller General of Patents, Designs and Trade Marks heads the Trade
Mark Registry offices and functions as the Registrar of Trade Marks.
 Trade Mark is different from a copyright or a patent geographical indication.
So, now let us discuss about the procedure of registering a trademark.
Searching for a Trade Mark (Brand Name)
Before starting trademark registration process, we or any third party
professional on our behalf must conduct a trademark search. Trademark search
will help us in providing information about similar trademark that has already been
registered with the trademark registry.
How to do Search?
An online database is available on the website of Comptroller General of Patent
Design and Trademarks, where search can be done by professionals and non-
professionals. The database contains all the applications submitted to the
concerned office including applied, objected, registered and expired Trade Marks.
Trade Marks search provides valuable information to the user. To do search on
above page of the website, following steps require –
 We have to select “Search Type” from the drop-down list.
 Type the key word which “starts with” and
 Enter the class out of 45 different classes.
You will find your desired result and you may also change your search
criteria if required.
Filing of Trade Mark Application
After completion of Trade Mark search, the application can be filed with the
Trade Mark Registrar office. This application should be filed along with a fee for the
Trade Mark registration and it can be filed with one of the five Trade Mark registry
offices by hand or online
A Trade Mark application requires the following information
 Name and Address of Trade Mark owner
 Logo
 Description of Goods or Services
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 Classification of Trade Mark
 Date, since Trade Mark is used
Online filing of Trade Mark Application Form
E-filing procedure of Trade Mark application is as follows –
 Step–1: First get registered. Registration can be done to (1) Proprietor /
Applicant (2) Agent or (3) Attorney
 Step–2: Add digital signature
 Step–3: After completion of registration process, confirmation will be send to
registered e-mail id for further action and reference.
After filing Trade Mark application with registrar, an allotment number is
provided within one to two working days but in case of e-filing of application, an
application allotment number is allotted immediately. After getting trade mark
allotment number, the owner can affix the TM symbol next to logo. Application
status can also be tracked online through online trademark search facility
When the application is accepted by Trade Mark registrar, the proposed
trademark gets published in Trademark journal. If no objections are filed within 90
days of that publication, the Trademark will be registered within 12 weeks.
Registration
If there are no objections or oppositions for the Trademark registration
application filed, the Trademark registration certificate will be issued and this
Trademark will be considered as a registered Trade Mark of the owner. The ®
symbol can now be placed next to logo or Trademark.
a) How Extensive is Trademark Protection in India?
Almost all countries in the world register and protect trademarks. Each
national or regional office maintains a Register of Trademarks which contains full
application information on all registrations and renewals, facilitating examination,
search, and potential opposition by third parties. The effects of such a registration
are, however, limited to the country (or, in the case of a regional registration,
countries) concerned.
In order to avoid the need to register separately with each national or regional
office, WIPO administers a system of international registration of marks. This
system is governed by two treaties, the Madrid Agreement Concerning the
International Registration of Marks and the Madrid Protocol. A person who has a
link (through nationality, domicile or establishment) with a country party to one or
both of these treaties may, on the basis of a registration or application with the
trademark office of that country, obtain an international registration having effect
in some or all of the other countries of the Madrid Union. At present, more than 60
countries are party to one or both of the agreements.
8.4 REVISION POINTS
A trademark provides protection to the owner of the mark by ensuring an
exclusive right to use the mark to identify his goods or services, and/or to authorize
another entity to use that mark in return of consideration. A Logo is a design
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symbolizing ones organization. It is a design that is used by an organization for its
letterhead, advertising material, and signs as an emblem by which the organization
can easily be recognized, also called logotype.
1. What is a logo?
2. What kinds of trademarks can be registered in India?
3. How is a trademark registered in India?
4. How extensive is trademark protection in India?
8.6 SUMMARY
A Trademark is a name, symbol, figure, letter, word, logo, or a combination of these,
in addition to smell as well as sound, adopted by a business, to identify and distinguish
their goods and services from others, and to imply their source of origin as being from that
business. Logo is a symbol and is part of trade mark. A logo can be related to many
different aspects of business, it just depends on the purpose of the company and the
marketplace. A logo can be related to a particular place, industry, or person.
1. Nike has the distinctive "swoosh" logo, the "Just Do It" slogan, and the "Nike"
name based on a mythological goddess. These items are called _____.
[a) Brand equities; b) Brand value; c) Brand elements*; d) Brand resonance]
2. All products marketed by Heinz carry the brand name 'Heinz'. This is an
example of:
[a) Individual names; b) Blanket family names *; c) Corporate name combined
with individual product names; d) Separate family name for all product]
1. https://www.logobee.com/feature3.htm
8.9 ASSIGNMENT
1. Go to the government website. Try to find out the steps involved in registering
trade mark and logo.
Publishing Ltd., New Delhi, 4/e.
2. Chunawalla S.A., Product Management, Himalaya publishing house, 8/e, 2011.
3. Madhu Sudan Goel, Posted on January 8, 2016, filed in: Information
Technology.
1. Take top 10 brands. Analyse the logo. In what way you think logo has
impacted you. Also discuss with people and get their opinion about their
perception towards logo.
8.12 KEY WORDS
 Trade mark;  Logo;  Logotype
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UNIT - III
LESSON - 9
PACKAGING EVOLUTION
9.1 INTRODUCTION
In ancient times, food was produced and consumed locally so there was no
need for packaging. But as the civilizations grew, the need to contain, protect, and
transport food supplies became critical. Primitive man used vessels and containers
made of natural materials in form of tree leaves, bamboo, lotus leaves, palm leaves,
gourds, coconut shells, shells and animal skin. Later on, as minerals, ores and
chemicals were discovered, metals and pottery were developed leading to use of new
materials including fabrics, ceramics, metals, lacquer ware, wood ware, jade ware,
and certain types of paper. Steam engines marked the beginning of Industrial
Revolution.
Industrial revolution created a sudden demand for better products as trade
flourished and more goods became available to consumer. Since materials were
expensive, packaging was limited to luxury goods only. The period during and after
WWI saw a remarkable number of packaging innovations like moulded glass,
cardboard boxes, metal cans, and cellophane that made packaging commonplace.
This pushed manufacturers to establish an identity to sell to consumers.
The Great Depression marked the rise of supermarket culture and it
drastically changed distribution and consumption patterns worldwide. This
behavioural change of self-service model called for packaging to assume the role of
a ‘silent-salesman’. Post WWII consumerism enjoyed the conveniences offered by
the single use-and-throw materials that heralded with the discovery of aluminium
foil, and plastics.
The rise of digital technologies in later half of 20th century allowed
businesses to scale rapidly and become global. With unprecedented competition,
packaging came to be the way of differentiating product on the shelf. As much as
packaging has become essential to the business, it is also recognized as a threat to
the environment. And hence much research continues not just to find new
materials, but also to find optimal and sustainable solutions.
In last couple of decades, advances in personal computing, and mobiles have
significantly transformed consumer behaviour and thus their expectations. With
access to information every time, everywhere, they value engaging experiences that
provide a utility or novelty. Since the birth of barcodes, many digital technologies
have continually been tested to bring reforms to retail experiences. And once again
product packaging is at the centre of these developments.
With the rising notion of the Internet of Things, coupled with advances in
mobile computing, Radio frequency identification (RFID), Augmented Reality, and
Biosensors, we are at the tipping point where delightful digital experiences will
position product packaging as an ESP or Emotional Selling Point.
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9.2 OBJECTIVES
 This lesson is likely to help the student to understand and appreciate
evolution/development of packaging.
9.3 CONTENTS
9.3.1 Early age packing materials
9.3.2 Era of dual use packing
9.3.3 Building brand identity
9.3.4 The Era of silent salesman
9.3.5 Convenience as motivation
9.3.6 The rise of digital
9.3.1 Early age Packaging Materials
The conclusive summary of historic development of packaging above suggests
a lot of patterns across several decades. Let’s dive deep into each of those time
periods to have a better understanding of these patterns. It is interesting to see how
the innovations, while trying to meet consumer needs, periodically shaped
consumer behaviours too.
As a result of the Industrial Revolution, there were significant innovations in
improving manufacturing processes and materials. Most materials used for storing
products included wood crates, barrels, cloth, and glass — were primarily rigid and
expensive. But manufacturers of high value goods saw packaging as a reflection of
the quality of their products, and hence there was a palpable interest in finding new
and cheaper ways to make a trade more appealing.
1. Glass
In 1200 B.C. glass was pressed into moulds to make cups and bowls. The
techniques to blow glass continued to evolve and split moulding was developed in
17th century allowing for irregular shapes. Since 19th century, glass is primarily
used to package medicines, spirits, liquids, and other high value goods.
2. Metals
In 1200 A.D. the process of tin plating was invented in Bohemia. Tin was the
first metal that economically allowed use of metals in packaging, soon it was used
to make tin cans and tin foils. In early 1800s Nicholas Appert, found that food
sealed in tin containers and sterilized by boiling could be preserved for long
periods. Over a period of time, this established metal packaging as a food grade
packaging material.
In 1830s, tin boxes were used for selling cookies, chocolates, and tobacco
products. Soon after, first soft metal tubes were produced in 1841 to be used for
artist paints and they gained instant popularity.
3. Paper
In 1690, first paper mill in the U.S. was built near Philadelphia. At that time
paper was hand-made out of parchment and rags, both of which were expensive
and limited in supply.
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In 1796, Lithography was invented Alois Senfelder in Munich. This enabled
printing of black-and-white illustrations on printed labels. One-colour lithographed
or letterpress labels were widely used on glass bottles, metal boxes and early
paperboard boxes. Colour printing or chromolithography was invented in 1837 and
became popular soon after manufacturers realized its potential.
First paper making cylinder machine was installed in 1817 by Thomas Gilpin
in Delaware used to make paperboards and other forms of paper used in packaging.
This gave birth to ‘flexible packaging’. Mechanization made paper plentiful but cost
limited its use until paper could be made commercially from wooden pulp in 1850s.
The invention of paper bag making machine in by Francis Wolle in 1852 further
pushed use of paper in packaging.
9.3.2 The Era of Dual Use Packaging: 1860’s, 1870’s, 1880’s
The second wave of Industrial Revolution began during this time and with
major developments in railroads, trade suddenly flourished. Materials and
processes during this time were still expensive and laborious. During this time
packaging was primarily seen as a way of storage, and reserved for only high value
goods like jewellery, gift items, shoes, and premium foods. As the materials were
indispensable, they were structurally designed to serve a function after product
use. Thus, dual use packaging was a solution to command high price and assure
ingenuity of the manufacturing quality.
Tobacco pack reused as picnic lunch box — Dixie Queen
Flour sacks repurposed as dress materials — Bemis Bro
More innovations during this period
1866 — First printed metal boxes were made for Dr. Lyon’s tooth powder. Metal
tear-strip was also invented during this time. Further innovations in sealing the
packaging to preserve goods, continued during this period.
1867 — Process for deriving cellulose fibre from wood pulp was developed.
Wood being cheap and plentiful, this fibre source rapidly replaced cloth fibres as
the primary source of paper fibre. Today, virtually all paper has wood pulp as the
source of cellulose fibre.
1879 — Robert Gair accidently invented paperboard cartons when a metal rule
normally used to crease bags shifted in position and cut the bags. Gair concluded
that cutting and creasing paperboard in one operation would have advantages; the
first automatically made carton, now referred to as “semi-flexible packaging,” was
created. Such folding cartons or “tubular cartons” dominate the dried, processed
food market.
9.3.3 Building Brand Identity : 1890’s, 1900’s, 1910’s:
With rising trade, the phrase “let the buyer beware” became popular since
inferior and impure quality products were disguised and sold to uninformed
customers by counterfeits. This posed serious threat to original manufacturers and
they began to mark their product with their identification to alert potential buyers.
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But that was not sufficient, so manufacturers turned to use packaging in
innovative ways to establish their brand identity.
Branded Packaging — Uneeda Biscuit
In 1896, National Biscuit Company invested $1 Million in creating an identity
for Uneeda Biscuits to take on its rival Cracker Jacks. Uneeda Biscuits were
wrapped inside a waxed paper liner inside a tray-style paper carton, and the
colourful brand-printed wrapper featured a boy in a raincoat to emphasize the
moisture barrier. This allowed preserving biscuits for longer periods and they can
now be transported easily in a clean unit-size package.
The Uneeda Biscuit package is often cited as the birth of consumer packaging
because of its widespread distribution and the dramatic effect that folding cartons
were to have on retailing business in the century to come. The carton packaging
also represented the power of brand advertising that relied on packaging as a sales
tool tied to an easily recognizable identity advertised in magazines, and on the
billboards.
Packaging Shape as an Identity — Coca-Cola
In early 1900s, Coca Cola found that a straight-sided bottle wasn't distinctive
enough and that Coca-Cola was becoming easily confused with ‘copycat’ brands.
Glass manufacturers were approached to come up with a unique bottle design for
Coca-Cola. The Root Glass Company of Terre Haute, Indiana, designed with the
famous contour shape, which won enthusiastic approval from Coca-Cola in 1915
and was introduced in 1916. The new bottle design instantly became an integral
part of the brand identity and is today one of the most recognized icons in the
world — even in the dark.
1890 — Michael Owens invented first automatic rotary bottle-making machine.
Suddenly, glass containers of all shapes and sizes became economically attractive
for consumer products, and from the early 1900s until the late 1960s glass
containers dominated the market for liquid products.
1894 — Thompson and Norris produced the first double-faced corrugated boxes
that prevented material from stretching during transportation. Corrugated boxes
played an essential role in developing mass distribution throughout the 20th century.
9.3.4 The Era of “Silent Salesman”: 1920’s, 1930’s, 1940’s:
In the early part of the 19th century, retailers played an important role in
making a trade happen. Food items were sold in loose, and needed wrapping and
weighing. This meant that consumer had to wait while their orders were made up.
But the rise of cheap and clean packaging solutions had solved this problem to a
large extent and retailer’s role in facilitating a trade started to marginalize. This
allowed for huge retail chains to come in where products were displayed on the
shelf, and consumer themselves had to make a purchase choice. The big chains
had a price advantage, and were slowly gaining momentum.
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But immediately after The Great Depression, supermarkets became a
dominant force and marked a major shift in the consumer behaviour.
Manufacturers once again turned to product packaging to be the silent salesman —
differentiating from competition and affecting a sale.
Shifting Shopping Behaviour — Piggly Wiggly
Clarence Saunders’ Piggly Wiggly stores are widely credited with introducing
self-service shopping chain in U.S. in early 1920s. Consumers were given shopping
baskets and asked to pick what they needed and made it an immediate success.
Increasing Visual Appeal — Flexography
Most packaging till this period leaned on distinct typographic treatments to
create a visual identity. Due to limitations of letterpress printing, product
packaging could only be embraced with illustrative painted imagery to define the
contents, it was not truly an interpretation or an honest impression of the product
contents. It was after the invention of aniline printing technology in late 1920s that
packaging materials afforded visual information with a higher degree of accuracy,
reproducing impressions of actuality realistically. The aniline printing used aniline
dye on rubber blocks and the technique allowed printing on any kind of substrate
including corrugated boards, milk cartons, paper bags, folding cartons and metallic
films. This technique later on came to be known as Flexography, and is now the
default for package printing.
1920s — Nutritional value of canned foods gradually approached that of the
fresh product. For consumers, the choice between fresh or canned food increasingly
became a question of taste, preference, and convenience.
1924 — DuPont bought licensed exclusive rights to make and sell Cellophane
in U.S. The cellophane sheet was a clear, transparent protective layer wrapped over
primary packaging, to prevent product from moisture and extend its shelf life.
1931—Aluminium foil was packaged in appropriate sizes and thicknesses, in
both rolls and sheets a decade after first aluminium foil laminated carton was
produced. It started being used as an institutional wrap primarily for use by hotel,
restaurant, and hospital kitchens.
1930s and 1940s — The years preceding World War II, amidst a climate of
escalating industry consolidation, were also a time of tremendous innovations for
synthetics like vinyl, ethylene, and acrylic, PVC, Nylon, Teflon, Polystyrene, and
Polyethylene happened, each of which transformed several industries and heralded
the rise of Plastic Age in years to follow.
9.3.5 Convenience as the Motivation : 1950S, 1960S, 1970S
Post World War II, the consumer market exploded with the continuous
innovations in aluminium and plastics. Owing to mega efforts of giants like DuPont,
Dow Chemicals, and the likes — shinier, sturdier, cleaner, more flexible, and
modern looking materials were available at cheaper price compared to traditional
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materials. This provided impetus to re-invent existing packaging solutions and
plastics and metal cans took over majority of consumer packaging, while paper was
limited in use and glass reserved for high value products only.
Convenient Lifestyles — use & throw
Soon after invention of aluminium foil in 1954, disposable or use-and-throw
packaging materials became increasingly acceptable.
Medicines in blister packs — Enovid
In 1957, when Enovid was introduced to treat menstrual disorders and
infertility, the idea of medicine pills was born. Continuing the trend,
pharmaceutical companies developed unique packaging in order to distinguish
their product from those of their competitors and build brand loyalty.
Explosion of the Toxins — Plastics
DuPont and Dow Chemical’s augured the rapid rise of plastics as they were
used for textiles, tyres, toys, paints, electronics, and as packaging material,
affecting all aspects of life. While the widespread use of plastics made a lot of
economic sense, its environmental effects were soon apparent.
1950 — Polyethylene was invented to be used as cable shielding material, but
soon it outgrew its original use and was used to make products such as food and
garbage bags, packaging films, and milk containers. In less than a decade, the
demand for PE grew from 5 million pounds to 1.2 billion pounds at the end of 1960.
1960 — Reynolds and Alcoa made all-aluminium cans out of one piece of
metal. This solved the problem of weights of cans, now only a lid needed to be
attached. This provided impetus for invention of rip-off closure and the pop-top lids
on aluminium cans.
1977 — Polyethylene Terephthalate (PET) invented as material for beverage
packaging is today one of the most commonly used plastics.
9.3.6 The Rise of Digital : 1980’s, 1990’s, 2000’s
This era was marked by the rise in computing abilities and the evolution of
printing technologies as a result. Digital printing technologies, coupled with
innovative transactional capabilities provided an unprecedented speed of execution
and rapid scaling of business became possible.
While the growing fascination with plastics lead to innovation in packaging
shapes and materials, it meant other materials like paper and glass found
themselves limited in its use for packaging. This widespread adoption of plastics
paved way for use-and-throw behaviour, and non-decomposable packaging waste
became primary constituent of landfills as a result.
As a result, finding sustainable materials and optimizing waste became a
prime agenda, heavily influencing the package design. Now a days, it is a business
imperative to reduce the amount of packaging for products not just for its financial
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benefits, but the emotional connect it offers for consumers — making them feel good
about their choice.
Rise of Barcodes
Barcodes have existed since 1950s, but the first commercial U.P.C. scanner
was installed in 1974 at a Marsh’s supermarket in Troy, Ohio and the first product
to have a bar code included on packaging was a packet of Wrigley’s Gum. Since
then, barcodes have become the default checkout processing technology and have
revolutionized the retail industry.
The World of Digital Publishing
In early 1980s, Adobe, Aldus, Apple, and Hewlett-Packard each produced key
technologies that allowed professional desktop publishing to overtake package
printing. Owing to the benefits of identical and easy duplication, digital printing
presses started to take over traditional printing methods by late 1980s.
The Smartphone Revolution
With the introduction of smart phones, consumers use their devices to get
product information, compare options and deals, and also to place orders and track
post purchase behaviours.
Packaging as a System — Target RX Bottles
Target’s clear RX bottles were the first to use graphic communications on
packaging as a system to benefit consumers. The bottles had different colour rings
to help identify different members of the family and both sides of bottle label had
clear prescription details printed on them.
Flexible Packaging
Flexible packaging consists of multi-layer laminated sheets of plastics (Poly Vinyl
Chloride - PVC, Low Density Poly Ethylene -LDPE, High Density Poly Ethylene -HDPE,
Biaxial oriented polypropylene -BOPP, and Biaxial oriented polyester -BOPET), paper,
cloth, or metal foils that are used separately or in combination for various packaging
applications. However, this article discusses flexible packaging as laminates of plastics
that have a unique set of properties that ensure toughness, moisture resistance, aroma
retention, gloss, grease resistance, heat sealability, printability, low odour and taste.
These find use in packaging food, tea, coffee, spices, chewing tobacco, bakery,
confectionary, oils, and in certain other non-food applications such as household
detergents, health and personal care, soaps, and shampoos.
Causes of Flexible Packaging
 Protection: Flexible Packaging gives total consumer protection by keeping the
product clean and protecting it from pilferage and adulteration
 Barrier: It provides good barrier properties against moisture and gases and
protects food from damage and wastage
 Convenience: It provides convenience of handling and disposal after use
 Cost Saving in Material: Flexible Packaging is light — a one kilogram oil pack
weighs less than 10 grams compared to at least a 40 gram HDPE jar or 32-35
gram of PET, thereby giving tremendous saving in raw material cost.
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 Cost Saving in Storage and Transport: It fits closely to the shape of the
contents and saves cost of storage and transport.
 Savings in Raw Material Consumption: Tremendous saving in raw material
consumption, serving the national cause by extension of usage at least times
four times.
 More per Pack: It provides much more product per a given amount of
package. Good examples include coffee, nuts and snacks that come in foil
brick packs and pouches rather than in cans or jars; juice sold in pouches
rather than in rigid containers, and household cleaner refills that come in thin
pouches rather than in glass bottles.
 Smaller Units Possible: Thus the option to buy only the required quantity at
a time.
 Conservation of Energy: Considerable conservation of energy for conversion.
For a steel coffee can to be efficient as a foil brick pack, the can would have to
be recycled at a rate of 85 per cent. However, steel cans are currently being
recycled at a rate of about 45 per cent.
 Important in Lifestyles: Convenience foods, individually packed small
servings, microwaveable meals, “easy opening” packaging, secure packaging
for pharmaceuticals and hazardous substances, are all examples of packaging
playing a role in assisting and promoting our lifestyles.
 Builds Brands: Helps product manufactures enhance brand images, increase
sales and realize new market opportunities
9.4 REVISION POINTS
Industrial revolution created a sudden demand for better products as trade
flourished and more goods became available to consumer. Post WWII consumerism
enjoyed the conveniences offered by the single use-and-throw materials that
heralded with the discovery of aluminium foil, and plastics. This era was followed
by the rise in computing abilities and the evolution of printing technologies as a
result. Digital printing technologies, coupled with innovative transactional
capabilities provided an unprecedented speed of execution and rapid scaling of
business became possible.
1. How packaging evolved?
2. Explain flexible packaging and its advantages.
3. Name the products which is used for packaging and its applications.
9.6 SUMMARY
In olden day’s glass, metals and paper were predominantly used as packaging
material. Various inventions in the area of technology changed the paradigm of
packaging like use and throw aluminium foils, blister pack. Plastic became part
and parcel of life even though it has an impact in ecological systems. Now digital
printing is very much used in packaging.
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1. Packaging is used for:
a) Protection
b) Safety
c) Both (a) and (b)
d) None of the above
2. Activities carry by company to design and produce a differentiated container
for particular product is classified as
a) Guarantees
b) Warranties
c) Labelling
d) Packaging
3. Formal statement by manufacturer of product regarding its performance is
classified as
a) Guarantees
b) Warranties
c) Labelling
d) Packaging
1. https://medium.com/digital-packaging-experiences/the-evolution-of-packaging-
57259054792d#.2q9hbtwd0
2. http://papermart.in/2010/11/30/indias-growth-story-advantages-for-the-
packaging-industry/
3. https://packaging.indiabizclub.com/info/packaging_industry_in_india
4. http://www.euromonitor.com/packaging-industry-in-india/report
9.9 ASSIGNMENT
1. Take food industry. List down the packaging materials used. Try to explore the
developments happened over years of time.
1. Try to collect information about jute and come out with concrete ideas about how
jute can be used as packaging material.
9.12 KEY WORDS
 Dual use packaging
 Flexible packaging
 RFID
 PET
 HDPE
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LESSON - 10
PACKAGING FEATURES AND STRATEGIES
10.1 INTRODUCTION
Packaging is a component of both ‘product’ and ‘advertising’. Packaging is the
integral part of the product and at the same time plays an important role in the
saleability of the product. Packaging is no longer a mere outer covering for the
protection of the product; it is very much a contributing factor to its increasing
marketability.
How cloth is to man, package is to the product.
 Demand for quality and convenience-based products will considerably influence
the aesthetic and quality norms of the Indian consumer and lead to better
consumption standards.
 This is expected to stimulate greater consumption of branded products and
increase the use of rigid and flexible packaging.
 It is estimated that more than 80% of the total packaging in India constitutes
rigid packaging, which is the oldest and the most conventional form of
packaging. The remaining 20% comprises flexible packaging.
 Rigid packaging constitutes glass bottles, aseptic bottles, metal cans, aerosol
cans, battery cell cans, aluminium collapsible tubes, injection moulded plastic
containers made of PVC, PET, HDPE, paperboards, and corrugated boxes.
 Flexible packaging contains multi-layered laminated sheets of single or a
combination of substrates such as plastic, paper or aluminium. Flexible
packaging finds varied use because of its ability to provide strength, moisture,
resistance, aroma retention, gloss, grease resistance, heat retention, scalability,
printability and low odour.
 Plastic is facing pressure because of issues of environmental protection and safe
disposal. These issues act as a major impediment in flexible packaging
becoming an all-pervasive medium.
 Paper and paperboard, on the other hand are environment friendly and also
enjoy the advantages of easy handling and efficient process implementation.
 Moreover, flexible packaging mandates additional capital requirements and
technical know-how for efficient manufacturing operations.
 Currently, India is ranked 15th in the world for its paper and paperboard
consumption and is expected to improve its rank in the future. Paper is the
fastest growing substrate segment with a growth rate of 6-7%. The total demand
for paper currently is estimated to be around 6 mn tones, of which about 40% is
consumed by the packaging industry.
 Laminated products including form-fill-seal pouches, laminated tubes and tetra
packs are growing at around 30% pa.
 Packaging is the art, science & technology of preparing goods for transport
and sale. Many marketers have called packaging a 5thP along with 4’p’s
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 The primary package is the one that holds the product such as tooth paste
tube. The secondary package is the wrapper or exterior carton hat
contains primary package. Technical dimension – Packaging materials, pack
design
Art of product designis linked to consumer motivation & Buyer behaviour.
Packing
Packaging and packing are the activities related with product plan. Some are
found to have used them in separate sense. Mainly packing is wrapping a
commodity or binding it in a suitable way for transporting, storing and handling.
The task of keeping, putting, wrapping, or binding commodity in sack, cloth,
paper, box, can, bottle etc. according to the nature of product is called packing.
10.2 OBJECTIVES
 This lesson is likely to help the student to understand and appreciate concepts
and applications of packaging.
10.3 CONTENTS
10.3.1 Salient features of packaging
10.3.2 Functions of packaging
10.3.3 Classification of packaging
10.3.4 Negative impact of packaging
10.3.1 Salient Features of Packaging
 Attractive packaging is an effective POP& it stimulates sales.
 “Cloths make the man” So also does the package make the product.
 It is more relevant for impulse product.
 Vehicle to carry manufacturer’s name, brand name, trade mark etc…
 It serves as source information.
 It helps in achieving product differentiation.
 Enhance the value of the product
10.3.2 Functions of Packaging
Basic functions of packaging are
 Protection
 Appeal
 Performance
 Convenience
 Cost effectiveness
1. Protection
 Breakage / damage due to rough mechanical or manual handling during
transportation.
 Extremes of climatic conditions which can lead to melting, freezing
 Contamination – Bacterial, dirt or chemical elements.
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Example
 Cadburys: → Forced to change its packaging – double wrapper due to
formation of worms in the chocolate,
Absorption of moisture or odours of foreign elements.
Loss of liquid or vapour
Pilferage during transit or storage
2. Appeal
 Attract attention
 Tell the product story
 Build confidence
 Look clean & hygienic
 Convenient to handle
 To carry out
 To store & to use
 Reflect good value.
Product package plays an important role in implementing sales promotion
campaigns.
1. Money – off pack: A “fresh” – announcing special price discount being offered.
2. Coupon – pack: A coupon – placed in the package.
3. Pack – in – premium: Gift is packed with in the original product package.
4. Premium package: Specially made package having either a re-use or prestige value.
5. Self – liquidator: Buyer to send a number of packages as evidence of buying
for same rewards / reduction in price.
6. Other – applications:
 To improve Shelf life of the product
 To avoid direct price comparison
Example
Maggi ketch up in 400 Gms
Protinex in 200 Gms
3. Performance
 It must be able to perform the task for which it is designed.
Example
Asthalin Inhaler – Cipla
Gel Pen - Reynolds
Body spray – Axe
Dragon Liquid Balm- Amrutanjan
HIT → GODREJ Sara lee
Gillette shaving foam/cream
(If the package fails then the product is useless.)
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4. Convenience
 to stock
 to display
 not waste shelf-space
 Retains its looks during the shelf-life.
 Master package / cartons are easy to dispose of.
5. Cost Effectiveness
 Varies → industry to industry
< 1% in engineering industry to > 10% in cosmetics industry
It is not enough to consider only the costs of package…
Cost in the chain consist of
 Package costs incurred in inward delivery to the factory when the product is
purchased from outside.
 Storage & handling costs of the empty packages
 Filling costs including Q.C & handling of filled packages.
 Storage costs of the filled packages.
 Transport cost for distributing filled packages.
 Insurance cost for the transit period.
 Losses due to breakage / spoilage of the product
10.3.3 Classification of Packaging
Family packaging
If a manufacturing firm uses same type and same design of package for all
kinds of its products, this is called family packaging.
For example, if a producer uses same or common design of package for
different types of soaps, it is called family packaging. This is also called 'product
line packaging' or 'packaging the product line'. This works as family brand. If
any new product is added to the product line, its promotional value is related with
old product. However, the use of family packaging is suitable only for the
producers, which are same in use and equal in quality.
Reusable packaging
The package or container, which can be used for any other purposes, is called
reusable packaging. Cheese packed bottle can be used to put juice, oil or pickle
after the cheese has been finished. The reusable packaging motivates consumers to
buy product again and again to make good set of reusable containers.
Multiple packaging
Multiple Packaging - the practice of placing several units of a product
(chocolate bars, soups, yogurt, etc.) in one container when offering them for sale in
order to increase total sales, to help introduce a new product or to win consumer
acceptance.
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Negative Impact of Packaging
We have discussed about the various uses of packaging. Let us see the
problems or demerits of packaging.
 Packaging depletes natural resources. This happens especially by firms which
is engaging in making larger-than-necessary containers. However, to overcome
this problem, is to make right sized containers and by also using recycled
materials in packaging.
 Forms of packaging that are health hazards. Take the case of aerosols. It uses
chlorofluorocarbon - CFC as propellants. CFCs were eventually discovered to
pose a serious environmental threat. Studies, especially those of American
chemists F. Sherwood Rowland and Mario Molina and Dutch chemist Paul
Crutzen, indicated that CFCs, once released into the atmosphere, accumulate
in the stratosphere, where they contribute to the depletion of the ozone layer.
Stratospheric ozone shields life on Earth from the harmful effects of the
Sun’s ultraviolet radiation; even a relatively small decrease in the stratospheric
ozone concentration can result in an increased incidence of skin cancer in
humans and genetic damage in many organisms. In the above case instead of
aerosols, pump dispensers can be used to minimize hazards.
 Disposal of used packages. Consumers desire for convenience in the form of
use-and-throw containers conflicts with their stated desire for a clean
environment. Some discarded packaging wind up as litter, others add to solid
waste in landfills. This menace can be tackled by using biodegradable
materials in packaging
 Deceptive packaging. A common problem is that the package size conveys the
impression of containing more than the actual contents. Government
regulations plus greater integrity on the part of business firms regarding
packaging have alleviated this concern to some extent.
 Expensive packaging. Even in seemingly simple packaging, such as soft drinks,
as much as one-half the production cost is for the container. Packaging can be
in tetra pack, PET bottles or canister. Each has its own cost implications.
 Marketing executives are challenged to address these criticisms. At the same
time, they must retain or even enhance the positive features of packaging, such
as product protection, consumer convenience, and marketing support.
9.4 REVISION POINTS
Packaging is a component of both ‘product’ and ‘advertising’. Packaging and
packing are the activities related with product plan. Some are found to have used
them in separate sense. Mainly packing is wrapping a commodity or binding it in a
suitable way for transporting, storing and handling Basic functions of packaging
are Protection, Appeal, Performance, Convenience, Cost effectiveness.
1. Packaging can be considered as 5th ‘P’ in the Marketing Mix. Comment
2. What are the functions of packaging?
3. How packaging can be classified?
4. What are the criticisms of packaging?
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9.6 SUMMARY
Packaging includes all activities of designing and producing the container for a
product. For the product, packages serve to prevent breakage, exposure to light,
air, protect from getting contaminated, leakages and to hold the product for
presentation in store. Packaging serves an important facilitative role in the use of
the product. It also acts as a communication tool or medium.
There is a paradigm shift in package technology. New packing materials have been
introduced and it has revolutionized the way products are marketed and consumed. The
negatives of packaging have to be borne in mind in designing the packaging.
1. A “fresh” – announcing special price discount being offered.
[a) Money – off pack*; b) Coupon – pack; c) Pack – in – premium;
d) Premium package]
2. Gift is packed with in the original product package.
a) Money – off pack; b)Coupon – pack; c) Pack – in – premium*
b) Premium package
3. Specially made package having either a re-use or prestige value.
a) Money – off pack; b) Coupon – pack; c) Pack – in – premium*
d) Premium package
4. Buyer to send a number of packages as evidence of buying for same rewards /
reduction in price.
a) Self – liquidator; b) Coupon – pack; c) Pack – in – premium*
Premium package
9.9 ASSIGNMENT
1. Visit a nearby self-service store. List excellent five and worst five packages. On
what basis you evaluated it. You cross check with three more persons
including store manager whether they are in same wavelength as you.
1. Select 5 products. Analyse how the packaging affects the environment. Is it
really adding value to the product? Come out with remedies.
9.12 KEY WORDS
 Packing  Protection  Family package
 Reusable package  Multiple package
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LESSON - 11
LABELLING
11.1 INTRODUCTION
Sellers must label their products. The label may be simple tag attached to the
product or an elaborately designed graphic that is part of the package. The label is
likely to have certain information in addition to the brand name as per law. How
dress is to human, label is to product. Similarly the shape or design of the product,
colour and quality is very vital for the success of the product.
11.2 OBJECTIVES
 This lesson helps student to understand the importance and legal aspects of
labelling.
11.3 CONTENTS
11.3.1 Label
11.3.2 Legal dimensions of packaging
11.3.3 Trademark licensing
11.3.4 Design, colour, and quality
11.3.5 Warranty and guarantee
11.3.1 Label
A label is the part of a product that carries information about the product and
the seller.
‘Display of written, printed or graphic matter on the container or the package
of the container’.
There is a close relationship among labelling, packaging, and branding.
a) Functions Of Labelling
Labels perform several functions and it is as follows
 Identification of products, brands
 Provide information like ingredients
 Provide easy clarity regarding classification through different colour marks
like Green is for vegetarian, red mark means non-vegetarian, brown means
egg added…
 It gives information regarding when it is manufactured and its shelf life.
 How the product has to be consumed/used
 Product quantity details, storage details are also provided.
b) Types of Labels
Labels can be divided in four types. They are brand label, grade label,
descriptive label and informative label.
1. Brand label
If only brand is used on package of a product, this is called brand label.
Brand itself is expressed in label. Brand label is put on some cloth. It tells the name
of the cloth, e.g., 'Sanforised'. Similarly, label is used on soap
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Example
Lux, Hamam, Rexona etc.
2. Grade label
Some products have given grade label. Grade label shows the grade of the
product. It shows the quality of products by words, letters, or figure. A, B, C, D
grade can be put on peas packed into cans. Similarly, grade label can be mentioned
as 1,2,3,4 grades for packed wheat. Some firms may use labels as good, better, best
etc. on their products.
3. Descriptive label
Descriptive label give information about the feature, using instruction,
handling, security etc. of the products. Descriptive label is used for the products
whose grade cannot be differentiated.
4. Informative label
Informative label gives information about the product. Using method and
security of the product, name of the producer, manufactured date, expiry date,
name of intermediary, additional instructions regarding the use of the product etc.
are mentioned in informative label.
Descriptive label gives general information about the product whereas
informative label gives maximum information about the product including its use,
manufacturer etc.
11.3.2 Legal Dimension of Packaging – labelling requirement
Requirements of labeling is listed below. The label should have the
 Picture of the product, accurate as to size, colour & appearance.
 Description of raw products used along with method of processing.
 Directions for use, including cautions against misuse.
 Possible adverse effects, if any
 Brand name.
Statutory requirements - Generally related to
 Net weight, when packed
 Date of manufacturing - DOM.
 Date of expiry - DOE
 Maximum retail price - M R P including / excluding local taxes.
 Design, colour, and quality.
 Directions for use, including dosage requirements
 Directions for storage.
 Contraindications if any
11.3.3 Trademark Licensing
This is a licensing arrangement. The owner of a trademark grants permission
(a license) to other firms to use its brand name and brand mark on their products.
A licensee, which is the company that receives a license, ordinarily pays a royalty of
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about 5% of the wholesale price of each item bearing the licensed trademark. The
royalty percentage may vary depending on the amount of equity connected with the
brand offered by a licensor, which is the company that owns it.
Products with considerable brand equity have strong potential for trademark
licensing, also called brand licensing.
Owners of well-known brands are interested in licensing their trademarks for
various reasons:
 It can be very profitable. There is little expense for the licensor. However, to
protect the reputation of its trademark, licensor must set criteria for granting
licenses and monitoring the licensing agreements.
 There is a promotional benefit. The licensor’s name gets circulated far beyond
the original trademarked item. This generates both cash and cachet.
Licensing also offers promise to potential licensees. Specific reasons for
acquiring a trademark license are:
 The likelihood of new-product success may be improved. It’s a lot easier for an
unknown firm to get both middlemen and consumers to accept its product if it
features a well-known trademark.
 Marketing costs may be reduced. In a way it’s like taking a name with brand
recognition and applying your merchandise without having to do the
advertising and brand building that is so expensive.
Example
DOLBY Digital. Used by many theatres, cell phones…
11.3.4 Design, Colour, and Quality
Whenever we talk about product packaging and labelling it is incomplete
without discussing the design, colour, and quality.
a) Design
This refers to the arrangement of elements that collectively form a good or
service. Good design can improve marketability of a product by making it easier to
operate, upgrading its quality, improving its appearance – aesthetics, and/or
reducing production costs. Off late design is receiving more attention. This is one
way of differentiating with competitors. Proper design can add to the customer
base. For example, features for handicaps in a vehicle, building. Thus companies
are called upon to design products that are easily used by all consumers, including
disabled individuals, the burgeoning number of senior citizens, and others needing
special considerations. This approach is termed as universal design. This can be
applicable from furniture’s to electronic equipment’s. Design that’s a hit with
consumers can produce a giant return for a firm.
In order to be successful, a product must go beyond its functional utility. It
must have ergonomic tractability, usability, feasibility, aesthetic sensibility and
image congruity. All these dimensions are to be considered from the view point of
both the firm and the customer.
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b) Colour
Like design, product colour often is the determining factor in a customer’s
acceptance or rejection of a product, whether it is a dress, a table, or an
automobile. Besides aesthetic appeal colours are used to convey product
personality.
 Red → Excitement, Hot, Passion, Power
 Women’s make up, Eveready batteries …
 Blue → Royal blue, Respect, Authority
 IBM, Intel …
 Green → Eco friendly, Cool, Lively, Natural
 Hamam, Margo, Suzlon ….
 Yellow → Warmth, Playfulness
 Children dresses ….
 Brown → Earthiness, Masculine, Relaxed, Suave (someone who is suave is
polite, confident, and relaxed, sometimes in an insincere way)
 Men’s shoes, Portfolio bags ….
In countries like USA pink is associated with baby girl products. Blue is
associated with baby boy products. Colours are extremely important for packaging
as well as for the product itself.
c) Quality
There is no need for discussion on product quality as it is the fundamental
criteria for product success. But what is product quality? How it can be defined?
One person may like a product, but some other person may dislike it. It is not that
easy to define product quality. Personal tastes and expectation have a role to play.
In general a product is said to have good quality if it meets or surpasses consumer
expectations. Optimal quality means that the product provides the consumer with
an experience that meets, but does not exceed, expectations. As it is difficult to
replicate by competitors many company would like to project their products
through quality differentiation. ISO, CE, ISI, Agmark are some quality related
certifications.
11.3.5 Warranties and Guarantees
All sellers are legally responsible for fulfilling a buyer’s normal or reasonable
expectation expectations. Warranties are formal statements of expected product
performance by the manufacturer. Products under warranty can be returned to the
manufacturer or designated repair centre for repair, replacement, or refund.
Whether expressed or implied, warranties are legally enforceable. Many sellers offer
either general guarantees or specific guarantees. A company such as
Procter& Gamble promises general or complete satisfaction without being more
specific- if you are not satisfied for any reason, return for replacement, exchange, or
refund” Guarantees reduce the buyer’s perceived risk. They suggest that the
product is of high quality and that the company and its service performance are
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dependable. They can be especially helpful when the company or product is not
that well known or when the product’s quality is superior to competitors.
11.4 REVISION POINTS
The label may be simple tag attached to the product or an elaborately designed
graphic that is part of the package. The label is likely to have certain information in
addition to the brand name as per law. Labels can be divided in four types. They
are brand label, grade label, descriptive label and informative label. Products with
considerable brand equity have strong potential for trademark licensing, also called
brand licensing. Product packaging and labelling is incomplete without design,
colour, and quality. Warranties are formal statements of expected product
performance by the manufacturer. Products under warranty can be returned to the
manufacturer or designated repair centre for repair, replacement, or refund.
1. Define labelling
2. Explain the functions of labelling
3. Explain the types of labels
4. Explain the significance of design, colour, and quality in marketing of
products.
11.6 SUMMARY
A label is the part of a product that carries information about the product and
the seller. Labels perform several functions. First, the label identifies the product or
brand-for instance, the name Frooti stamped on mango juice. The label might also
grade the product. The label might describe the product: who made it, where it was
made, when it was made, What it contains, how it is to be used, and how to use if
safely. Finally, the label might promote the product through attractive graphics.
Many consumer criticisms of marketing relate to packaging and labelling. As a
result, there are several legal aspects regulating these activities. One way to satisfy
customers and gain a differential advantage is through product design, which refers
to the arrangement of elements that collectively form a good or service. Physical
products must be packaged and labeled. Well-designed packages can create
convenience value for customers and promotional value for producers. In effect,
they can act as “five-second commercials” for the product. Warranties and
guarantees can offer further assurance to consumers.
1. Gives general information about the feature, using instruction, handling,
security etc. of the products.
a) Brand label
b) Grade label
c) Descriptive label*
d) Informative label
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2. Gives detailed information about the feature, using instruction, handling,
security, additional instructions regarding the use of the product etc. of the
products.
a) Brand label
b) Grade label
c) Descriptive label
d) Informative label*
3. It shows the quality of products by words, letters, or figure like A, B, C, D or
1,2,3,4
a) Brand label
b) Grade label*
4. If only brand is used on package of a product, this is called __________
a) Brand label*
b) Grade label
http://marketinglord.blogspot.in/2012/06/types-of-labels.html
11.9 ASSIGNMENT
1. Please collect different types of labels and paste in a chart. Check how much of
theory given in the chapter is applicable to understand different types of labels.
1. S A Chunawalla, Product Management, Himalaya publishing house, 8/e, 2011.
2. M J Etzel, B J Walker, W J Stanton, A Pandit, Marketing concepts and cases
1. Select one product and indicate how you would improve its design.
11.12 KEY WORDS
 Labeling
 Brand label
 Grade label
 Descriptive label
 Informative label
 Warranty
 Guarantee
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LESSON - 12
PRODUCT OBSOLESCENCE, FASHION AND STYLE
12.1 INTRODUCTION
This is the practice of modifying products so that those that have already been
sold become obsolete before they actually need replacement. For example Nokia
1100. Product may be in working condition. But lot of touch smart phones have
come to the market making Nokia 1100 redundant.
12.2 OBJECTIVES
 This chapter aims in understanding planned product obsolescence. It also tries
to make the student understand style, fashion cycle.
12.3 CONTENTS
12.3.1 Product obsolescence
12.3.2 Planned product obsolescence
12.3.3 Fashion & style
12.3.4 Fashion cycle
12.3.5 Fashion adoption process
12.3.1 Product Obsolescence
Product obsolescence refers to the time and state in which a piece of
technology or product ceases to be useful, productive or compatible.
The moment the returns from the product becomes unviable the product
reaches a stage of obsolescence. This may happen due to various things like
availability of better technology, change in consumer mindset etc. as PLC is getting
shortened companies have an assessment of PLC for its products. Maximum profit
margin for the company happens in introduction and growth stage. After that
margin is likely to fall. That may put pressure on profitability as well as market
share. In today’s context company should introduce new products at appropriate
time and also plan to phase out the existing products.
Planned Product obsolescence may occur when a company stops producing,
marketing or supporting a sold or developed product.
Product obsolescence is an estimation of the end of a product’s operational
lifecycle. Generally, product obsolescence is measured before or during the product
development phase and is estimated using past and future technological and
industry growth statistics.
In computing, hardware and software become obsolete once they are
superseded by newer, better versions. For hardware components, computing power,
internal architecture, memory speed and other related parameters become factors
used to evaluate product obsolescence criteria, whereas for a software product,
enhanced functionality, security, platform compatibility and operating system (OS)
support are used to evaluate the operational lifecycle.
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a) What is Planned Obsolescence?
Planned obsolescence is when a product is deliberately designed to have a
specific life span. This is usually a shortened life span. The term planned
obsolescence can be achieved either through technological obsolescence or by style
obsolescence.
Technological obsolescence
The product is designed to last long enough to develop a customer’s lasting
need. The product is also designed to convince the customer that the product is a
quality product, even though it eventually needs replacing. In this way, when the
product fails, the customer will want to buy another, up to date version.
Take for example a washing machine. Planned obsolescence means that the
washing machine may be designed to last about two years, before it breaks down
outside the guarantee time. Most of the components / parts have been
manufactured from quality materials with the exception of some vital parts. Two
years after purchase, the washing machine will only need minor inexpensive
repairs. However, between 4 to 5 years the vital parts begin to wear out and a
replacement machine is required.
For planned obsolescence to work, the customer must feel that he/she has
had value for money. Furthermore, he/she must have enough confidence in the
manufacturer/company, to replace the original washing machine with the modern
equivalent machine, from the same manufacturer.
Planned obsolescence is sometimes designed into a product, in order to
encourage the customer to buy the next upgrade. A good example of this is a mobile
phone. Mobile phones are often designed with only current technology in mind,
despite the manufacturer’s knowledge of future technological developments. For
instance, a mobile phone may have USB / connections / jack plugs, which fit
current products, such as head phones and computers. This means that the phone
is not future proof. The manufacturer may already be working on updated phones,
which connect using different sizes of USB ports / connections. Although the
current phone can be upgraded with software, eventually the ‘old’ USB /
connections / jack plugs will make the product obsolete. The customer will need a
new phone, even though there may be nothing wrong with his / her existing phone.
The old phone becomes obsolete.
Designers following the philosophy of ‘Built In Obsolescence’, ask themselves,
‘how can a product be designed so that it breaks down quite quickly, but it still
leaves customer confidence in the product and manufacturer intact’.
Planned obsolescence can be regarded as bad for the environment, because it
leads to products being ‘dumped’ by customers, so that new updated products can
be acquired. The quandary that good designers face, is to design desirable
products, with components / parts that can be recycle or reused, when the product
is thrown away, by fashion/style conscious consumers.
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Style obsolescence
Superficial characteristics of a product are altered so that the new model is
easily differentiated from the previous model. Style obsolescence, Sometimes called
“psychological” or “fashion” obsolescence is intended to make people feel out-of-
date if they continued to use old models. Products subject to this type of
obsolescence including clothing, Furniture, and automobiles. A guide to both the
retailer and customer, highlighting when a food product is safe to eat and at its
best. Further examples are disposable cutlery and soft drinks bottles, which are
manufactured cheaply and designed to be used once / twice. These products are
sometimes manufactured from biodegradable polylactide (PLA), which can be
thrown away and yet is safe for the environment.
12.3.2 Planned obsolescence and fashion
Consumers seem to constantly searching for “what’s new” but not “too new.
They want newness-new product, new styles, and new colours. However, they want
to be moved gently out of their habitual patterns, not shocked out of them.
Consequently, many manufactures use a product strategy of planned obsolescence.
Consumers often satisfy their thirst for newness through fashion, and product of
fashions relies heavily on planned obsolescence.
12.3.3 Fashion and Style
Those who work in fashion marketing and merchandising are responsible for
choosing which apparel items appear on the racks at retail stores. People in this
field decide which products will be hot each season and how to market those items
in the competitive world of retail. Professionals who work in fashion marketing and
merchandising examine fashion trends, help retailers stock fashion lines,
coordinate sales, and promote goods. While you wouldn't actually design clothing
as a marketing and merchandising professional, you'd still be responsible for
helping designers by ensuring that their lines sell.
A style is a distinctive manner of construction or presentation in any art, product,
or endeavour. Thus we have styles in automobiles, in furniture, and in music.
A fashion is any style that is popularly accepted or purchased by successive groups
of people over a reasonably long period of time. Not every style becomes a fashion.
Fashion reflects the society and it has been influenced by wars, conquests,
laws, religion, and the arts. Individual personalities have also had an impact on
fashion. Ever Fashion follows a cycle, and Fashion cycle has no specific measurable
time period. Some styles sustain for longer period or some die out soon and some
styles come back years after it was declined. So we can say fashion changes with
time and has always been evolving to fit the taste, lifestyle and demands of society.
12.3.4 Fashion Cycle
The way fashion change is described as fashion cycle. Before we understand
the fashion cycle it is important to know the following terms- Cycle: - Period of time
or life span during which fashion exists. Style: - Particular look, shape or type of
apparel. Fashion: - Style that is popular during a period of time. The fashion cycle
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is usually depicted as a bell- shaped curve encompassing five stages: -
Introduction, Rise in popularity, Decline in popularity, and
Rejection. Consumers are exposed very season to a multitudes of new styles
created by designers or launched by big clothing brands. It is seem some styles are
rejected immediately by the buyers on retail level, where as some styles are
accepted for a time, as demonstrated by consumers purchasing and wearing them.
With trend reports in news papers and fashion channels showing latest trends
many women who consider themselves fashionable, or up to date with what’s new,
go out each season to assess what's needed in order to keep her wardrobe relevant.
Then designers also are constantly going back in time for inspiration. Each season
a new version of the old era is tapped and we see a few small changes to looks that
have all walked down the catwalks before.
Stages of a Fashion Cycle
(Measured in Sale Volume)
Acceptance
Peck
Rise
Decline
Increase
Introduction Rejecon
Introductory Acceptance Rejection (TIME)
phase phase phase
A Fashion Cycle
1. Introduction of a style: Every designer each season works on a new collection,
interpret their research into apparel. Every style has some different elements like
line, shape, colour, fabric. The first stage of the cycle where the new style is
introduced may or may not be accepted by the consumers. Every style is reviewed
at design centre Tand in fashion shows. New styles are usually introduced in high
price level. Usually a new style created by a designer is worn by the selected people
who can afford it, and mostly these people are Fashion Leaders like celebrities and
rich people who loves to experiment and try out new styles to grab the attention of
media. Such styles as they are expensive are produced in a small quantity.
2. Increase in popularity: A new style worn by a celebrity or famous personality,
seen by many people and it may draw attention of buyers, the press, and the
public. Most designers also have prêt line that sells at comparatively low prices
and can sell their designs in quantities. Manufacturers adopt design and styles
to produce with less expensive fabric or less details. The adaptations are made
for mass production.
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3. Peak in popularity: Styles at this stage is most popular. When production of
any style is in volume, it requires mass acceptance. The manufacturers carefully
study trends because the consumer will always prefer clothes that are in the
main stream of fashion. When a fashion is at height of its popularity, it may be
in such demand that many manufacturers copy it or produce adaptations of it
at many price levels. Length at this stage determines if the fashion becomes
classic or Fad.
4. Decline in popularity: A time comes after the mass production of a few styles
people get tired and began looking for new styles. They still wear the particular
style but are not willing to buy them at the same price. With the launch of new
collection every season the popularity of the style of the previous seasons
declines. Fashion is over saturated or flooded the market. Retail stores put such
decline styles on sale rake as off season sale or clearing sale.
5. Dejection period: It is the last phase of the cycle. Some consumers have already
turned to new looks, thus beginning a new cycle. The rejection or discarding of a
style just because it is out of fashion is called consumer obsolescence. Since
consumers are no more interested manufactures stop producing the same and
the retailers will not restock the same styles. Now it’s time for a new cycle to
begin.
Length of the Cycles’ or Fashion Movements
Fashion cycle has no specific measurable time period. Ongoing motion of
fashion in the fashion cycle is a movement. Fashion movement is affected by –
 Economic or social factors
 Invention of better technology, better fabrics in apparels
 Advertising of the product
Rate of the movement varies with each fashion. Short time to peak in
popularity, other takes longer some declines slowly, others swiftly.
Peck Peck
Decline Rise
Rise Fad Decline Classic
(TIME)
Classic and Fad Styles
Cycles for Fad and Classic, Compared with normal fashion cycle.
(Solid line represents normal Cycle)
Classics: Fashion that always remains in the Rise Stage of the Fashion Cycle
is known as classic. The styles that remain more or less accepted for an extended
period. These styles never become completely obsolete. Example: Classic shirt,
Jeans Tailored suit.
Fad: Also known as short- lived fashion and can hold the attention of the
consumer for a very short period. The consumer group is very small and the
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garments are low priced and flood the market in very short time. The consumer gets
tired of the designs due to market saturation and they die out soon.
Recurring Cycles
Rise Peck Decline Long Period Rise Peck Decline

Introduction Rejection Introduction Rejection
(TIME)
Recurring Fashion Cycle
Fashion Designers draw inspirations from past. It has been noted that styles
reappears years later and is reinterpreted for a new time. A change in element is
normal like change in the silhouette or proportion may recur and is sometimes
interpreted with a change in fabric and detail. Many nostalgic looks are drawn by
designers from the 1940s, 50s, 60s, 70s & 80s. However, the use of different
fabrics, colours, and details make the looks unique in every creation.
Fashion –Adoption Process
The fashion adoption process reflects the concepts of cultural, social-class,
and reference-group influences on consumer buying behaviour and the diffusion of
innovation. One way of doing this is to purchase a product that is fashionable in
the group you want to be like.
Thus the fashion adoption process is a series of buying waves that arise as a
particular style is popularly accepted in one group, and another, until it finally falls
out of fashion. This movement, representing the introduction, rise, popular
culmination, and decline of the markets acceptance of a style, is referred to as the
fashion cycle. A case can be made that synthetic fibres such as polyester in clothing
and convertible model of automobile are two products that have run the full fashion
cycle. There are three theories of fashion adoption
 Trickledown, where a given fashion cycle flows down wars through several
socioeconomic levels.
 Trickle –across, where the cycle moves horizontally and simultaneously within
several socioeconomic levels.
 Trickle-up, where a style first becomes popular at lower socio economic levels
and then flows upward to become popular among higher levels.
Traditionally, the trickle-down theory has been used to explain the fashion-
adoption process. As an example, designers’ of women’s apparel first introduce a
style to opinion leaders in the upper socioeconomic groups. If they accept the style,
it quickly appears in leading fashion stores. Soon the middle-income and then the
lower –income markets want to emulate the leaders, and the styles appears in
bargain-price stores and finally is no longer considered fashionable.
The trickle-up process also explains some product-adoption processes.
Consider how styles of music such as jazz and rap became popular. Also look at
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blue denim pants and jackets, athletic footwear, even pasta in the 1990’s, and so-
called urban clothing over the past several years. They all have one thing in
common. They were popular first with lower socioeconomic groups, and later their
popularity “trickled up” to higher-income markets.
Today the trickle-across theory best explains the adoption process for most
fashions. It’s true that there is some flow downward, and obviously there is an
upward flow. But, by means of modern production, communication, and
transportation, companies can disseminate style information and products so
rapidly that all social levels can be reached at about the same time.
Recognizing this accelerated adoption process, most apparel manufacturers
produce a wide variety of essentially one style. They also produce distinct qualities
of the same basic style so as to appeal to different income groups. For example,
within a few weeks of the beginning of the fall season, the same style of dress(but at
different quality levels) appears in (1) small, exclusive dress shops appealing to the
upper social class, (2) large department stores aiming at the middle class, and
discount houses and low-price women’s ready-to-wear chain stores, where the
target is the portion of the lower class and has some disposable income.
Within each class, the dresses are purchased early in the season by the
opinion leaders-innovators. If the style is accepted, its sales curve rises as it
becomes popular with the early adopters and then with the late adopters.
Eventually, sales decline as the style loses popularity. This cycle is a horizontal
movement, occurring virtually simultaneously within each of several socioeconomic
levels.
Product obsolescence refers to the time and state in which a piece of
technology or product ceases to be useful, productive or compatible. Planned
obsolescence is when a product is deliberately designed to have a specific life span.
This is usually a shortened life span. The term planned obsolescence can be
achieved either through technological obsolescence or by style obsolescence. A
fashion is any style that is popularly accepted or purchased by successive groups of
people over a reasonably long period of time. Not every style becomes a fashion. The
fashion cycle is usually depicted as a bell- shaped curve encompassing five stages: -
Introduction, Rise in popularity, Decline in popularity, and Rejection. Fashion
cycle has no specific measurable time period. Rate of the movement varies with
each fashion. Short time to peak in popularity, other takes longer some declines
slowly, others swiftly. Fashion that always remains in the Rise Stage of the Fashion
Cycle is known as classic. The styles that remain more or less accepted for an
extended period. Fad is also known as short- lived fashion and can hold the
attention of the consumer for a very short period. The fashion adoption process
reflects the concepts of cultural, social-class, and reference-group influences on
consumer buying behaviour and the diffusion of innovation. There are three
theories of fashion adoption
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 Trickle down, where a given fashion cycle flows down wars through several
socioeconomic levels.
 Trickle –across, where the cycle moves horizontally and simultaneously within
 Trickle-up, where a style first becomes popular at lower socio economic levels
and then flows upward to become popular among higher levels.
1. What is planned obsolescence?
2. How product abandonment decisions can be improved?
3. What is the relationship between planned obsolescence and fashion?
4. Explain fashion cycle and adoption process.
12.6 SUMMARY
Planned obsolescence is a controversial product strategy, built around the
concepts of style, fashion, and the fashion cycle. Fashion – essentially a sociological
and psychological phenomenon-follows a reasonably predictable pattern. With
advances in communication and production, the fashion –adoption process has
moved away from traditional trickle-down pattern. Today the process is better
described as trickle-across. There also are examples of fashions trickling up.
Managing a product, such as expensive apparel, through a fashion cycle may be
even more challenging than adjusting another type of product’s strategies during its
life cycle.
1. Also known as short- lived fashion and can hold the attention of the consumer
for a very short period.
[a) Fashion; b) Classic; c) Fad*; d) Cycle]
2. Fashion that always remains in the Rise Stage of the Fashion Cycle is known
as ___________.
[a) Fashion; b) Classic*; c) Fad; d) Cycle]
3. _________, where a given fashion cycle flows down wars through several
socioeconomic levels
[a) Trickle-up; b) Trickle-down*; c) Trickle-across; d) Trickle-over]
4. __________, where the cycle moves horizontally and simultaneously within
[a) Trickle-up; b) Trickle-down; c) Trickle-across*; d) Trickle-over]
5. ____________, where a style first becomes popular at lower socio economic
levels and then flows upward to become popular among higher levels.
[a) Trickle-up*; b) Trickle-down; c) Trickle-across; d) Trickle-over]
1. http://www.technologystudent.com/prddes1/plannedob1.html
2. https://www.techopedia.com/definition/24635/product-obsolescence
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12.9 ASSIGNMENT
1. What products, other than apparel and automobiles, stress fashion and style
in marketing? Do styles exist among business products?
2. M J Etzel, B J Walker, W J Stanton, A Pandit, Marketing concepts and cases
Describe the kinds of people who are most likely to be found in
 The Innovator category of adopters and
 The late-majority category
12.12 KEY WORDS
 Product obsolescence
 Planned product obsolescence
 Style
 Fashion
 Classic
 Fad
 Trickle-up
 Trickle-across
 Trickle-down
H
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UNIT - IV
LESSON - 13
SERVICES MARKETING
13.1 INTRODUCTION
This chapter of the text provides you the foundation needed to begin your
study of services marketing. The chapter further identifies introduction to services,
meaning, up to-to date trends, issues, characteristics, origin and growth of service
sector.
13.2 OBJECTIVES
 To enrich the readers about services marketing.
 Highlight the need for special services marketing concepts and practices.
 Outline the origin and growth of service sector and service economy.
13.3 CONTENTS
13.3.1 Services – Introduction
13.3.2 Historical Perspectives
13.3.3 Contemporary Perspectives
13.3.4 Origin and Growth
13.3.5 Global Characteristics
13.3.1 INTRODUCTION
Services are everywhere we turn, whether it be travel to an exotic tourism
destination, a visit to the doctor, a church service, a trip to the bank, a meeting with
an insurance agent, a meal at our favourite restaurant, or a day at school. More and
more countries, particularly the so-called industrialized countries, are finding that
the majority of their gross domestic products are generated by their service sectors.
However, the growth of the service sector does not just lie within traditional service
industries such as leisure and hospitality services, education and health services,
financial and insurance services, and professional and business services. Traditional
goods producers such as automotive, computer, and numerous other manufacturers
are now turning to the service aspects of their operations to establish a differential
advantage in the marketplace as well as to generate additional sources of revenue for
their firms. In essence, these companies, which used to compete by marketing
“boxes” (tangible goods), have now switched their competitive focus to the provision of
unmatched, unparalleled customer services.
Ample evidence exists which documents this transition from selling “boxes” to
service competition. Traditional goods-producing industries such as the automotive
industry are now emphasizing the service aspects of their businesses such as low
APR financing, attractive lease arrangements, bumper-to-bumper factory
warranties, low maintenance guarantees, and free shuttle services for customers.
Simultaneously, less is being heard about the tangible aspects of vehicles such as
acceleration, and vehicle styling. Similarly, the personal computer industry
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promotes in-home repairs, 24-hour customer service, and leasing arrangements;
and the satellite television industry is now boasting the benefits of digital service,
pay-per-view alternatives, and security options to prevent children from viewing
certain programming.
13.3.2 Historical perspectives
Adam Smith's seminal work, The Wealth of Nations (1776), distinguished
between the outputs of what he termed "productive" and "unproductive" labour. The
former, he stated, produced goods that could be stored after production and
subsequently exchanged for money or other items of value. But unproductive
labour, however "honourable, useful, or... necessary" created services that perished
at the time of production and therefore didn't contribute to wealth.
French economist Jean-Baptist Say argued that production and consumption
were inseparable in services, coining the term "immaterial products" to describe
them. In the 1920s, Alfred Marshall was still using the idea that services "are
immaterial products.”
In the mid nineteenth century John Stuart Mill wrote that services are
"utilities not fixed or embodied in any object, but consisting of a mere service
rendered ...without leaving a permanent acquisition."
13.3.3 Contemporary perspectives
When services marketing emerged as a separate sub-branch within the
marketing discipline in the early 1980s, it was largely a protest against the
dominance of prevailing product-centric view. In 1960, the US economy changed
forever. In that year, for the first time in a major trading nation, more people were
employed in the service sector than in manufacturing industries. Other developed
nations soon followed by shifting to a service based economy. Scholars soon began
to recognize that services were important in their own right, rather than as some
residual category left over after goods were taken into account. This recognition
triggered a change in the way services were defined. By the mid twentieth century,
scholars began defining services in terms of their own unique characteristics,
rather than by comparison with products.
The following set of definitions shows how scholars were grappling with the
distinctive aspects of service products and developing new definitions of service.
1. Goods are produced: services are performed." (Rathmell, 1966)
2. "A service is an activity or a series of activities which take place in interactions
with a contact person or a physical machine and which provides consumer
satisfaction." (Lehtinen, 1983
3. "The heart of the service product is the experience of the consumer which
takes place in real time... it is the interactive process itself that creates the
benefits desired by the consumer." (Bateson, 1992)
4. "Services are deeds, processes and performances." (Zeithmal and Bitner,
1996)
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5. "Services are processes (economic activities) that provide time, place, form,
problem-solving or experiential value to the recipient." (Lovelock, 2007)
6. "The term 'service'... is synonymous with value. A supplier has a value
proposition, but value actualization takes place during the customer's usage
and consumption process." (Gummesson, 2008)
7. The American Marketing Association defines “services marketing as an
organisational function and a set of processes for identifying or creating,
communicating, and delivering value to customers and for managing customer
relationship in a way that benefit the organisation and stake-holders. Services
are (usually) intangible economic activities offered by one party to another.
13.3.4 Origin and growth
Three distinct stages in the evolution of services marketing
1. The ‘Crawling Out’ stage which took place prior to 1980;
2. The ‘Scurrying About’ stage between 1980 and 1986;
3. The ‘Walking Erect’ between 1986 and 2000.
4. The ‘Galloping’ stage from 2000 till date.
Crawling Out Stage
In the ‘crawling out’ stage discussion cantered on the need for a separate body
of literature to deal with the specific problems of the service sector. Specific areas of
marketing theory were examined and found to be insufficient or inappropriate when
it came to handling service sector problems and concerns. Donnelly, for example,
highlighted the differences between the marketing ‘channels’ used for services and
those used for physical goods and implications for marketing strategy.
Marketing traditionalists argued that service organisations did not need a
separate body of theory, and that existing marketing theories could, and should, be
applied to service organisations. They argued that services could not be defined
tightly enough to deserve special treatment and, in many instances, were so closely
linked to the physical product that they needed to be considered as part of the
‘offer’ when developing marketing strategy. For example, the after sales service
guarantee supplied with a motor car could be valued as highly as the interior
design features of the car itself.
Distinctive Characteristics of Service
Services Marketing academics and practitioners argued that services required
special treatment as a result of their distinctive characteristics; intangibility,
inseparability, heterogeneity and perish ability. These characteristics were outlined
during the ‘crawling out’ stage.
Intangibility refers to the fact that a large component of many service offers is
immaterial or intangible and cannot be presented in a concrete manner to
consumers prior to purchase. A customer cannot touch an aerobics class, for
example, prior to taking part, and can only make a full assessment of the quality of
the service offered after having attended the class.
Inseparability refers to the notion that, in many service operations, production
and consumption cannot he separated, that is, a service is to a great extent consumed
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at the same time as it is produced. For example, although the hairdresser may prepare
in advance to carry out the service (i.e. gather the necessary equipment, undergo
specialized training, etc.), most of the hairdressing service is produced simultaneously
as the customer consumes the service (i.e. sits in the chair).
Heterogeneity is closely linked to inseparability as it is very difficult to apply
quality standards to services to ensure an identical service output, when so much
depends on the cooperation and participation of individual customers. Perishability
refers to the fact that unlike physical goods, services cannot be stored. An
appointment with a dentist, in contrast, at a given time on a given day, cannot be
stored and offered again to customers.
Scurrying About Stage
In the ‘scurrying about’ stage between 1980 and 1985 efforts were made to
classify services more clearly and attention focused heavily on the crucial issue of
managing quality in service operations. Zeithaml, Berry and Parasuraman
developed their pioneering ‘gaps model’ of service quality which highlighted the
importance of Efforts made to assess quality in services.
Other topics emerged as being particularly important to the management of
service organisations, including a better understanding of the components of the
‘service encounter’ (i.e. the interpersonal aspects of the service), ‘relationship
marketing’ and ‘internal marketing’.
Booms and Bitner developed their expanded ‘marketing mix’ for services which
took into account the distinctive characteristics of service identified in the ‘crawling
out’ stage: intangibility, inseparability, heterogeneity and perishability. Booms and
Bitner added three more Ps to this original marketing mix to make it more
appropriate to services; People, Process and Physical evidence. For the first time
textbooks on Services Marketing began to be produced, establishing it more firmly
as a legitimate field of academic study.
Walking Erect Stage
In the ‘walking erect’ stage since 1986, there has been ‘almost no discussion of
whether services are different from goods, but rather the literature has focused on
specific marketing problems of service organisations’. They include consideration of
Service Encounters, Service Design, Perceived Service Quality and Customer
Satisfaction, Internal Marketing and Relationship Marketing.
Galloping Stage
In the ‘Galloping’ stage since 2000, there has been an increase in the growth of
the service sector and services are the main contributors to the GDP of the country.
13.3.5 Global services era are characterized
1. Economies and labour force figures that are dominated by the service sector.
2. More customer involvement in strategic business decisions.
3. Products those are increasingly market-focused and much more responsive to
the changing needs of the marketplace.
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4. The development of technologies that assist customers and employees in the
provision of services.
5. Employees who have been provided with more discretionary freedom to
develop customized solutions to special customer requests and solve customer
complaints on the spot with minimal inconvenience.
6. The emergence of new service industries and the “service imperative” where
the intangible aspects of the product are becoming more and more the key
features that differentiate products in the marketplace.
Characteristics of Services Compared to Goods:
There is a general agreement that differences between goods and services exist
and that the distinctive characteristics discussed in this section result in
challenges for managers of services. It is also important to realize that each of the
characteristics could be arranged on a continuum similar to the tangibility of the
spectrum. That is, services tend to be more heterogeneous, more tangible, more
difficult to evaluate than goods, but the differences between goods and services are
not black and white by any means.
Table 4.1 Goods versus Services
Goods Services Resulting Implications
Tangible Intangible Services cannot be inventoried
Services cannot be easily patented
Services cannot be readily displayed
Standardized Heterogeneous Service delivery and customer
satisfaction depend on employee
and Customer actions
Production separate Simultaneous Production Customers participate in and affect
From consumption and Consumption the transaction Customer affects
each other
Non Perishable Perishable Services cannot be returned or
resold
1. Majority of GDP are generated by Service Sectors.
1. The production and consumption were ___________ in services.
2. What are the Characteristics of Services?
13.6 SUMMARY
This lesson has set the stage for further learning about services marketing by
presenting information’s on changes in the world economy and business practices
that have driven the focus on service. The lesson presented a broad definition of
services, and it drew distinctions among pure services, value – added services,
customer service, and derived services. Building on this fundamental
understanding of services, the lesson went on to present he key characteristics of
services, Contemporary perspectives, Historical perspectives, and Characteristics of
Services Compared to Goods.
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1. _____________are deeds, processes and performances.
2. The ‘Crawling Out’ stage which took place prior to _________
a. 1980 b. 1970 c. 1990 d. 1960
3. The ‘Scurrying About’ stage between __________ and ________
a. 1980 & 1986 b. 1990 & 1996 c. 1997 & 2000 d. 1986 &1990
4. The ‘Walking Erect’ between
a. 1986 & 2000 b. 1980 & 1985 c. 1975 & 1980 d. 1970 & 1975
5. The ‘Galloping’ stage from _____
a. 2000 b. 1990 c. 1980 d. 1970
6. The most important characteristics of services are
a. Heterogeneous b. Homogeneous c. Standardised d. Unique
a. Product b. Services c. Technology.
1. Anderson, Eugene W., and Mittal (2000), “Strengthening the Satisfaction –
Profit Chain”, Journal of Service research, Vol-3, No. 2.
13.9 ASSIGNMENT
1. Try a service you have never tried before on the internet. Analyse the benefits
of service. Was enough information provided to make the service easy to use?
How would you compare this service to other methods of obtaining the same
benefits?
1. Christopher lovelock, Jochen writz, and Jayanta chatterjee (2007) 6 th edition,
Pearson Prentice Hall, India.
2. Valarie A Zeithamal, Dwayne D Gremeler, Mary Jo Bitner, and Ajay Pandit,
(2010), Tata McGraw Hill edition.
1. Develop two different customer scripts, one for a standardised service and one
for a customized service. Map all key customer steps of this script across all
three stages of service consumption. What are the differences between the
standardized and customized services?
13.12 KEY WORDS
1. Service, intangibility, inseparability, heterogeneity and perish ability, tangible,
intangible, Heterogeneous, Standardized.
H
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LESSON - 14
CLASSIFICATION OF SERVICES
14.1 INTRODUCTION AND CLASSIFICATION
The service sector can best be characterized by its diversity. Service
organisations range in size from huge international corporations in such fields as
airlines, banking, insurance, telecommunication, hotel chains, and freight
transportation to a vast array of locally owned and operated small businesses,
including restaurants, laundries, taxis, and numerous business to business
services. Franchised service outlets- in fields ranging from fast food to book
keeping- combine the marketing characteristics of a large chain that offers a
standardised product with local ownership and operation of a specific facility.
14.2 OBJECTIVES
 After going through this lesson, you will be able:
 To understand the concept, nature and types of services
 To understand the role of services in an economy. 
14.3 CONTENTS
14.3.1 Services
14.3.2 Nature of Services
14.3.3 Reason for growth of services
14.3.1 Services
Researchers have directed much attention to the development of classification
systems for services. Such classification schemes help service managers to cross
their industry boundaries and gain experience from other service industries which
share common problems and have similar characteristics. Solutions to problems
and breakthroughs in similar service industries can then be applied by managers to
their own service businesses. Ever since marketing researchers started defining
services, they also proposed their classification. The first one was proposed as early
as 1964 and the last, as late as 1989. Summary of these classifications has been
given in table 1.2 and 1.3.
Table 1.2
Summary of Proposed Schemes for Classifying Services (1964-1980)
Author Proposed Classification Comment
Judd (1964) 1. Rented goods services (right to own and First two are fairly specific but third
use a good for a defined time period) category is very broad and ignores
2. Owned goods service (custom repair services such as insurance, banking,
improvement of goods owned by the legal advice and accounting.
customer)
3. Non-goods services (personal, experience
or “experiential possession”
Zeithmel (1974) 1. Type of seller No specific application to services
2. Type of buyer could apply equally well to goods
3. Buying motives
4. Buying practice
5. Degree of regulation
Shostack* (1977) Proportion of physical goods and Offers opportunities for multi
intangible services contained attribute modelling. That there are
Emphasises within each product “package” few pure goods or pure services.
Sasser et. al.*
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(1978)
Hill (1977) 1. Services affecting persons vs. those Emphasises nature of service
affecting goods benefits and (in 5) variations in the
2. Permanent vs. temporary effects of the service delivery / consumption
service environment.
3. Reversibility vs. non-reversibility of these
effects
4. Physical effects vs. mental effects
5. Individual vs. collective services
Thomas (1978) 1. Primarily equipment based
a. automated (e.g., car wash) Although operational rather than
b. monitored by unskilled operators Marketing in orientation, provides a
(e.g., movie theatre) useful way of understanding product
c. operated by skilled personnel (e.g., attributes.
airline)
Chase (1978) Primarily people-based Recognises that product variability is
harder to control in high contact
a. unskilled labour (e.g., lawn care)
services because customers exert
b. skilled labour (e.g., repair work) more influence on timing of demand
c. professional staff (e.g., lawyers, and service features due to their
dentists) greater Involvement in the service
process.
Kotler (1980) Extent of customer contact required in Synthesizes previous work,
service delivery recognizes differences in purpose of
a. high contact (e.g., health care, hotels, service organisation.
restaurants)
b. low contact (e.g., postal service,
wholesaling)
Lovelock(1980) 1. People based vs. equipment based Synthesizes previous classification
and adds several new schemes.
2. Extent to which client’s presence
Proposes several categories within
necessary
each classification. Concludes that
3. Meets personal needs vs. business needs defining object served is most
4. Public vs. private, for-profit vs. non- fundamental classification scheme.
profit Suggests that valuable marketing
5. Basic demand characteristics insights would come from combining
-object served (persons vs. property) two or more classification schemes in
-extent of demand/supply a matrix.
-discrete vs. Continuous relationships
between customers and providers
6. Service content and benefits -extent of
physical goods content -extent of
personal service content
-single services vs. bundle of services -
timing and duration of benefits
7. Service delivery procedures -multisite vs.
single site delivery allocation of
capacity (reservations vs. first come,
first served)
-independent vs. collective consumption
-time defined vs. task defined
transactions -extent to which
customers must be present during
service delivery
• Source: Christopher H Lovelock : “Classifying Services to Gain Strategic Marketing
Insights”, Journal of Marketing, Vol. 47, Summer 1983, pp. 11-12.
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Table 1.3 : Summary of Proposed Schemes for Classifying Services (1983 -1989)
Lovelock 1. The nature of the service act Provides a series of Classifications
(1983) which together illustrate the complete
a. Tangible actions to people or things
nature of services and provide useful
b. Intangible actions to people or things Background information for
2. Relationships with customers managerial purposes.
a. Continuous delivery
b. Discrete transactions
c. “Membership” relationships
d. No formal relationships
3. Customisation and judgement in service
delivery
a. Judgement exercised by customer
contact persons
b. Customisation of services
4. Nature of demand in relation to supply
a. Extent to which supply is
constrained
b. Extent of demand fluctuations
5. Methods of service delivery
a. single or multi site delivery
b. service delivered on provider’s or
customer’s premises
Schmenner 1. Degree of interaction and Recognises that some services
(1986) Customisation may be more customised and
a. Low involve a higher degree of labour
b. High intensity and may help the
2. Degree of labour intensity reader to understand the
a. Low strategic and tactical options
b. High available.
These classifications not only demonstrate the diversity of services but also
suggest how important it is in a specific situation to carefully analyze the detailed
nature of the service operation. The general characteristics of services remain
unchanged irrespective of the nature of service business where the customer is
always a person or group of persons; the service is perceived more or less
intangibly, some kind of interaction between the customer and some parts of the
production system of the service provider-including personnel, technology, or both –
always occurs, and some kind of input from the customer is always required in the
process.
The classifications do not suggest that a specific service is so unique that the
basic fundamentals of managing services do not apply to them. However, they do
lay emphasis on various aspects of service operation, types of resources to be used
and how to manage the process depending on the nature of service and the
interface with the customers.
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14.3.2 NATURE OF SERVICES
It is utmost important to explore the distinctive features of services, because
recognition of these special characteristics will provide insights for enlightened and
innovative management. One reason for the poor quality of service levels across
different service industries is that managers often tend to solve service marketing
problems with tools and techniques that are essentially meant for tangible
products. It happens because of inadequate understanding about the nature of
services. As our knowledge of the characteristics of services grows, so does our
ability to deal with them from both an economic and marketing perspective.
Services have a number of unique characteristics that make them different from
products.
Some of most commonly accepted characteristics are as follows:
(i) Intangibility: The most basic and universally cited characteristic of services
is intangibility, because services are performances or actions rather than objects,
they cannot be seen, felt, tasted, or touched in the same manner that we can sense
tangible goods. For example, when we buy a cake of soap, we can see, feel, smell and
use to check its effectiveness in cleaning. But, when we pay fees for a semester in the
university, we are paying for the benefits of deriving knowledge, skills and education
which are delivered to us by teachers. Teaching is an intangible service. When we
travel by a plane, the benefit which we are deriving is a service (transportation) but, it
has some tangible aspects such as the particular plane in which we fly (Boeing, Avro,
Concorde, etc.) and the food and drink which are served.
The broad definition of services implies that intangibility is a key determinant
of whether an offering is or is not a service. While this is true, it is also true that
very few products are purely tangible or purely intangible. Instead, services tend to
be more intangible than manufactured products, and manufactured products tend
to be more tangible than services.
Intangibility presents several marketing challenges. Services cannot be
inventoried, and therefore fluctuations in demand are often difficult to manage. It
cannot be patented legally, and new service concepts can, therefore, easily be
copied by competitors. It cannot be readily displayed or easily communicated to
customers, so quality may be difficult for consumers to assess. The actual costs of
a ‘unit of service’ are hard to determine and the price/quality relationship is
complex.
(ii) Inseparability: In most cases a service cannot be separated from the
person or firm providing it. A service is provided by a person who possesses a
particular skill (singer, doctor, etc.), by using equipment to handle a tangible
product (dry cleaning) or by allowing access to or use of a physical infrastructure
(hotel, train, etc.). Services are typically produced and consumed at the same time.
The relationship between production and consumption, therefore, dictates that
production and marketing are highly integrated processes. The telephone company
produces telephone service while the telephone user consumes it. A plumber has to
be physically present to provide the service, the beautician has to be available to
perform the massage. The service provider and the client are often physically
present when consumption takes place.
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Generally, most goods are produced first, then sold and consumed. On the
other hand, services are usually sold first and produced and consumed
simultaneously. Sasser observed that the firm is unable to store or transport
services that only direct distribution is possible, thereby potentially limiting the
number of markets that firm can cover. Apart from the stress laid on ‘right place’
and ‘right time’ in case of distributing goods, there is additional importance given to
the performance of service in the ‘right way’ as well. Another outcome of
simultaneous production and consumption is that service producers find
themselves playing a role as part of the product itself and as an essential ingredient
in the service experience for the consumer.
Since services often are produced and consumed at the same time, mass production
is difficult if not impossible. The quality of service and customer satisfaction will be highly
dependent on actions of employees and the interactions between employees and
customers. It is not usually possible to gain significant economies of scale through
centralization. Usually operations need to be relatively decentralised so that the service can
be delivered directly to the consumer at convenient locations. Since the customer is
involved in and observes the production process, and thus may affect (positively or
negatively) the outcome of the service transaction.
(iii) Heterogeneity: Since services are performances, frequently produced by
human beings, no two services will be precisely alike. The human element is very
much involved in providing and rendering services and this makes standardization a
very difficult task to achieve. The doctor who gives us complete attention in one visit
may behave a little differently in next visit. The new bank clerk who en cashes our
cheques may not be as efficient as the previous one and we may have to spend more
time for the same activity. This is despite the fact that rules and procedures have been
laid down to reduce the role of the human element and ensure maximum efficiency.
Airlines, banks, hotels, etc. have a large number of standardized procedures. Human
contact is minimal in the computerised reservation systems, but when we go to the
hotel there will be a person at the reception to hand over the key of the reserved room.
The way that person interacts with us will be an important factor in our overall
assessment of the service provided by the hotel. The rooms, the food, the facilities may
be all perfect, but it is the people interacting with us who make all the difference
between a favourable and unfavourable perception of the hotel. Heterogeneity also
results because no two customers are precisely alike; each will have unique demands
or experience the service in a unique way. Thus, the heterogeneity connected with
services is largely the result of human interaction (between and among employees and
customers) and all of the vagaries that accompany it.
Levitt argues that owing to the industrialisation of services, their production
can no longer be viewed as being heterogeneous. Attempts have been made to
improve productivity in the service sector by introduction of technology. Uniformity
can be achieved by substituting equipment and machinery for labour. Hostage
suggested that service firms could also reduce variability by training the service
providers in appropriate responses to each customer situation. They can also
monitor customer satisfaction through suggestion and complaint system so that
poor service can be detected and corrected.
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Services are heterogeneous across time, organisations, and people and as a
result, it is very difficult to ensure consistent service quality. Quality actually
depends on many factors that cannot be fully controlled by the service supplier,
such as the ability of the consumer to articulate his or her needs, the ability and
willingness of personnel to satisfy those needs, the presence (or absence) of other
customers, and the level of demand for the service. Because of these complicating
factors, the service manager cannot always know for sure that the service is being
delivered in a manner consistent with what was originally planned and promoted.
(iv) Perishability: Perishability refers to the fact that services cannot be
saved, stored, resold, or returned. Since a service are deeds, performances or acts
whose production and consumption takes place simultaneously, they tend to perish
in the absence of consumption. Goods can be stored and sold at a later date in the
absence of a customer. Services, on the other hand, go waste if they are not
consumed. A seat on an airplane or in a restaurant, an hour of a professor’s time,
or telephone line capacity not used cannot be reclaimed and used or resold at a
later time.
A primary issue that marketers face in relation to service perishability is the
inability to hold inventory. Demand forecasting and creative planning for capacity
utilisation are, therefore, important and challenging decision areas. The fact that
services cannot typically be returned or resold also implies a need for strong recovery
strategies when things do go wrong. Kurtz and Boone observed that the utility of
most services is short lived; therefore, they cannot be produced ahead of time and
stored for periods of peak demand. The perishability of services is not a problem
when demand is steady because it is easy to staff for the service in advance. When
there are wide fluctuations in demand there should be a highly flexible production
system or idle productive capacity. Sasser has described several strategies for
producing a better match between demand and supply in a service business. On the
demand side, the firm can make use of differential pricing, cultivating non-peak
demand and developing complementary services. On the supply side, for effective
matching with demand, the firm may hire part time employees to serve peak
demand; peak-time efficiency routines can be introduced, facilities for future
expansion can be developed, and increased consumer participation can be
encouraged.
(v) No Transfer of Ownership: When we buy a product, we become its
owner-be it a pen, book, shirt, TV or Car. In the case of a service, we may pay for its
use, but we never own it. By buying a ticket one can see the evening film show in
local cinema theatre; by paying wages one can hire the services of a chauffeur who
will drive his car; by paying the required charges we can have a marketing research
firm survey into the reasons for our product’s poor sales performance, etc. In case
of a service, the payment is not for purchase, but only for the use or access to or for
hire of items or facilities; and transfer of ownership does not take place.
14.2.3 REASONS FOR GROWTH OF SERVICES
Manufacturing industries grew because they produced tangible goods which
satisfied man’s physiological needs of food, shelter and clothing. As the basic need
was fulfilled there was demand for improved satisfaction, and this led to a
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proliferation of variations of the same product and a number of companies involved
in its manufacture. The growth of service industries can be traced to the economic
development of society and the socio-cultural changes that have accompanied it.
Changing environmental forces brought out the various types of services in
forefront of the economy. These environmental forces separately or in combination
create new type of service. The following environmental factors are responsible to
make a new service.
(i) Consumer affluence: Due to the fast rise in the income of consumers, they
are attracted towards the new areas like clubs, health clubs, domestic services,
travel and tourism, entertainment, banking, investment, retailing, insurance,
repairs, etc. and these are growing much faster than ever before. There is a
significant change in the pattern of family expenditure.
(ii)Working women: During the recent times a large number of women have
come up in a variety of professions. The work performance of women in most of
services sector like bank, insurance, airlines, etc. is highly appreciable. In short,
women are getting involved in almost all male dominated activities. Due to
increasing involvement of women in commercial activities, the services like
domestic activities, fast food restaurants, marriage counselling, personal care,
financial services, retailing, etc. have emerged in the recent times.
(iii) Double income no kids (DINK): Dinks are the working couples who have
consciously postponed parenthood plans indefinitely or in an increasing number of
cases, have decided not to have any children ever. The dink culture is getting stronger
and spreading wider day by day. The realisation that parenthood is likely to result in
more commitments at home and demands on their time, thereby slowing down their
career plans and ambitions, make them postpone their parenthood plans. Whatsoever
be their life style, they have double income and no kids, resulting in the emerging and
enhancing of services like, entertainment, hotels and restaurants, career institutes,
domestic services, travel resorts, personal care, etc.
(iv)Leisure time: People do get some time to travel and holiday, and therefore,
there is a need for travel agencies, resorts, hotels and entertainment. There are others
who would like to utilise this time to improve their career prospects, and therefore,
there is a need for adult education, distance learning, part time courses, etc.
(v)Greater life expectancy: According to the World Development Report and
World Human Resource Index, the life expectancy of people has increased significantly
all over the world barring few developing countries. It may be due to the advancement
in the medical technology, and greater awareness about health and education. Greater
life expectancy invites opportunities in services like hospitals, Nursing Homes,
entertainment, leisure services, investment banking and so on.
(vi) Product innovations: In the changing time the consumers have become
more conscious of quality than cost. They need high quality goods at par with
international standards. Having this in mind the manufacturers have focused their
attention on quality improvement, innovations, etc. In this process many more
services have emerged on account of product innovation. Some of them are
servicing services, repairs, computer, training and development, education, etc.
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(vii) Product complexity: A large number of products are now being
purchased in households which can be serviced only by specialised persons e.g.
water purifiers, microwave oven, computers, etc., giving rise to the need for
services. The growing product complexities create greater demand for skilled
specialists to provide maintenance for these complex products and brings out other
services like expert advice, consultancy services, etc.
(viii) Complexity of life: Certain product and services have made human life
more comfortable and complex as well. Also, life itself has become more complex
due to the socio-economic, psycho-political, technological and legal change. This
has brought about the emergence of services like legal aid, tax consulting,
professional services, airlines, courier services, insurance, banking, etc.
(ix) New young youth: Every new generation has its own characteristics and
enjoys a different life style. There is a lot of difference between the generations in
respect to their living conditions/ styles, maturity, thinking, attitudes, behaviour,
beliefs, satisfactions, performance values and so on. Today’s generation with all
these changes provide more opportunities to services like entertainment, fast food,
computers, travel, picnic resorts, educational institution, counselling, retailing, etc.
(x) Resource scarcity and ecology: As the natural resources are depleting
and need for conservation is increasing, we have seen the coming up of service
providers like pollution control agencies, car pools, water management, etc.
(xi) Corporate crowd: The phenomena of globalisation, privatisation and
liberalisation coupled with faster urbanization have created the corporate world
crowd and its support services. This crowd is responsible in bringing the new
services, and redefining the old ones. The services like hotels and restaurants,
banking, insurance, travel and tourism, advertising, airlines, courier services,
marketing research, health care, legal services, etc. will emerge and flourish more
and more.
1. It is important to explore the features of services because it provide insights
for innovative management.
1. What are the reasons for growth of services?
2. What are the characteristics of services?
14.6 SUMMARY
It is now obvious that most economies, the world over, are increasingly
becoming service economies and, therefore, there is a need to manage services in
the best possible way. Services are activities which are intangible in nature;
therefore, standardization is one of the major issues in services. Also, services are
typically delivered by employees of the service providers; therefore, there is also a
need to manage the human resources. In addition, unlike in the manufacturing
sector where production, distribution and consumption are separate activities, in
service sector these three are simultaneous processes. In fact services are so varied
and diverse that one needs to classify them to identify selected areas which need to
be managed strategically.
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1. __________ refers to the fact that services cannot be saved, stored, resold, or
returned.
a. Perishablity b. Tangibility c. Heterogeneity d.
Inseparability
2. The quality of service and customer satisfaction will be highly dependent on
actions of employees and the interactions between _________ and customers.
a. Employees b. Employer c. Manufacturer d. None of
these.
1. Bitner, Mary Jo, (1995), “Building Service Relationships: It’s about promises.”
Journal of the Academy of Marketing Science, Fall, Vol. 23 No.4, Page 246 -
251.
14.9 ASSIGNMENT
1. What are the main reasons for the growing share of the service sector in all
the major economies of the world?
2. What types of services do you think are (a) most affected and (b) least affected
by the problem of variable inputs and outputs? Why?
1. Ravi Shanker, ‘Services Marketing: The Indian Perspective’, Excel Books.
2. Lovelock, ‘Services Marketing: People, Technology, Strategy’, Pearson
Education.
3. Zeithaml and Bitner, ‘Services Marketing: Integrating Customer Focus Across
the Firm’, Tata McGraw Hill.
4. Rust, Zahorik, and Keiningham, ‘Service Marketing’, Addison Wesley.
5. Fitzsimmons and Fitzsimmons, ‘Service Marketing: Operations, Strategy, and
Information Technology’, McGraw Hill.
1. Roughly calculate your budget for an average month. What percentage of your
budget goes for services versus goods? Do the services you purchase have
value? In what sense? If you had to cut back on your expenses, what would
you cut out?
14.12 KEY WORDS
1. Service, Intangibility, Inseparability, Heterogeneity, and Perish ability.
H
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LESSON - 15
SERVICES MARKETING MIX
15.3.1 INTRODUCTION
Marketing mix is the set of important internal elements that make up an
organisation’s marketing programme. The marketing mix concept is a well
established tool used as a structure by marketers. It can be defined as the elements
an organisation controls that can be used to satisfy or communicate with
customers. The phrase ‘marketing mix’ was first used by Neil H. Borden. The
concept had its genesis in the classic work of James Culliton on the management of
marketing costs. Borden suggested twelve marketing mix variables in the context of
manufacturers. Borden’s concept of marketing mix was given due recognition in
marketing theory and the concept of marketing mix was accepted as the set of
marketing tools that a firm uses to pursue its marketing objectives in the target
market, influenced by specific environmental variables.
It was McCarthy who summed up the twelve elements of Borden’s marketing
mix into 4Ps - product, price, place (i.e. distribution), and promotion. He even
clarified that the customer is not a part of the marketing mix, rather, he should be
the target of all marketing efforts. The activities in service marketing are different ,
and often do not fall in the conventional marketing mix (4Ps) classification, though
many marketing concepts and tools used by goods marketers hold good in services
with some change in focus and importance. The traditional marketing mix became
inadequate for service industries because of the following reasons:
 The concept of marketing mix as such was developed for manufacturing
industries and was more oriented to deal with goods marketing situations.
 Marketing practitioners in service sector found that it did not address their needs.
 Due to differences in characteristics of physical products and services, marketing
models and concepts had to be developed in direction of the service sector.
Keeping in view the inadequacy of conventional marketing mix to address the
service situations, it needs to be modified and broadened. A seven Ps framework for
services has been proposed. These elements of marketing mix for services are
product, price, place, promotion, people, physical evidence and process. It is
important to elaborate these Ps in order to have an understanding of a specific
combination of these elements to arrive at the marketing strategy for service firms.
A detailed account of each of these elements of marketing mix is as follows:
15.3.2 OBJECTIVES
 To explain traditional marketing mix comprising of product, price, place and
promotion as applied to service organizations. 
 To discuss the extended marketing mix which incorporates traditional
marketing mix as well as three more 3 Ps namely people, process and physical
evidence. 
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15.3.3 CONTENTS
15.3.1 Product
15.3.2 Price
15.3.3 Place
15.3.4 Promotion
15.3.5 People
15.3.6 Physical evidence
15.3.7 Process
163.3 Product
A product is an overall concept of objects or processes which provide some
value to customer; goods and services are subcategories which describe two types
of product. Thus, the term product is frequently used in a broad sense to denote
either a manufactured good or a service. In fact, customers are not buying goods or
services - they are really buying specific benefits and value from the total offering.
So, the most important issue in service product is what benefits and satisfaction
the consumer is seeking from the service. From the point of view of a restaurant’s
manager, the restaurant simply provides food. But, the customers coming to the
restaurant may be seeking an ‘outing’ - an atmosphere different from home,
relaxation, entertainment or even status. The marketing of services can be a
success only if there is a match between the service product from the customer’s
view point and the supplier’s view point. To find this match it is desirable to analyse
the service at the following levels:
(i) Customer benefit concept: The service product which is offered in the
market must have its origin in the benefits which the customers are seeking. But,
the problem is that customers themselves may not have a clear idea of what they
are seeking, or they may find it difficult to express or it may be a combination of
several benefits and not a single one. Over a period of time, the benefits sought may
also change. This change in customer may come about by a satisfactory or
unhappy experience in utilising the service, through increased sophistication in
service use and consumption, and changing expectations. All these make the issue
of marketing a service product more complex.
Service concept: Using the customer benefits as starting point, the service
concept defines the specific benefits which the service offers. At the generic level,
the service concept refers to the basic service which is being offered. A centre for
performing arts may offer entertainment and recreation. But, within this broad
framework, there can be specific choice paths for satisfying the entertainment
objectives, such as, drama, musical concerts, mime, poetry recitation, dance, etc.
Defining the service concept helps in answering fundamental question - ‘what
business are we in?’
Service offer: After defining the business in which we are operating, the next
step is to give a specific shape and form to the basic service concept. In the case of
centre for the performing arts, the service concept is to provide entertainment. The
service offer is concerned with the specific elements that will be used to provide
entertainment; drama, music, mime, dance. In the category of musical concerts the
choice may be vocal or instrumental, with vocal whether light or classical,
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Hindustani, Carnatic or Western. While these represent the intangible items of the
service offer, the physical infrastructure of the centre, in terms of its seating
capacity, seating comfort, quality and acoustics, provision for air-conditioning,
snack bar and toilets are the tangible items. The tangible aspects can be controlled
by offering the best possible benefit, but the quality and performance of the actors,
singers, musicians cannot be controlled.
Service forms: In what form should the services be made available to the
customers is another area of decision making. Should all the shows of the centre be
available in a package deal against an annual membership fee or seasonal ticket?
Should there be daily tickets with the consumer having the freedom to watch any
one or more performances being staged on that particular day? Should each
performance have a separate entrance ticket, with a higher priced ticket for a well-
known performer? Service form refers to the various options relating to each service
element. The manner in which they are combined gives shape to the service form.
(v) Service delivery system: When we go to bank to withdraw money, we
either use a cheque or a withdrawal slip in which we fill all the particulars and
hand it over to the dealing assistant, who after verifying the details, gives us money.
The cheque or with-drawal slip and the dealing assistant constitute the delivery
system. In case of airlines, the aeroplane, pilot, crew members, airport, etc. are the
elements of delivery system. The two main elements in a delivery system are the
people and the physical evidence. The competence and public relations ability of a
lawyer represents the ‘people’ component, while his office building, office door,
letter head, etc., are all elements of the ‘physical evidence’ component. The physical
evidence components have also been called facilitating goods or support goods.
These are the tangible elements of the service and they exert an important influence
on the quality of the service as perceived by the consumers. Delivering an
intangible at a level consistently is a complex issue. The experience in two flights of
the same airline is not the same. The visit to a bank on two occasions brings
different experiences. The consumer’s service experience is, as such, a result of
provider-customer interaction, atmosphere, emotional stress, anxieties, surprises,
etc. It is because of these delivery factors (varying at different points of time) that no
two customer experiences are identical. This variability of experience is attributable
to the inability of the service firms to deliver the intangible uniformly.
Service firms must learn to manage intangibles. They need to go beyond the
technical skills of employees or the tangible output. Service levels should be set in
accordance with the desired customer satisfaction. The answer to ‘what customer
expects’ should be sought. And it is not an easy answer because the subjective
nature of the customer expectations often vitiates the whole exercise.
15.3.2 PRICE
Pricing is one factor that has received much less attention in service firms.
Pricing decisions in services are approached in a not-very-sophisticated manner.
The role price plays in the marketing strategy is lesser known in service firms than
in manufacturing firms. Even in Britain, the United States and some other
developed economies where more people are employed in the provision of services
than in the direct production of material goods, the marketing of services in
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general, and their pricing in particular, are relatively neglected aspects of
management studies.
Though price is one of the Ps in the marketing mix of firms, its use as a
purposive marketing tool has been limited to a few marketers. Most marketers tend
to adopt a passive approach and commit many mistakes in pricing their goods and
services. “The most common mistakes are these: pricing is too cost-oriented; price
is not revised often enough to capitalize on market changes; price is set
independent of the rest of marketing mix rather than as an intrinsic element of
market positioning strategy, and price is not varied enough for different product
items and market segments”.
Unlike in manufactured goods, where price has one common name across a
wide range of goods, such as, fruits, clothes, computers, cars, etc.; price in services
goes by different names. The services are diverse. The extent of their diversity can
be gauged by the names by which the price is called in services. In table 1, some
terms referring to price in different services are listed.
Almost every service has its own price terminology.
Table 1 : Price Terminology for Selected Services
Service Terminology Service Terminology
Advertising Commission Insurance Premium
Brokerage service Commission Legal service Fee
Consultancy Fee Property/ Rent
Accommodation
Employee Services Salary Road use Toll
Education Tuition fee Recreational service Ticket charge/money,
Admission charge
Financial Services Interest/charge/ Share/Stock service Brokerage/Commission
commission
Guest speaker Honorarium Transport Fare
Health care Fee Utilities Tariff
Source : Donald Cowell, “The Marketing of Services”, Heinemann, London.

Pricing is important because it has a direct bearing on sales and profits of an
organisation. Therefore, price cannot be determined in isolation without keeping in
mind the sales it would generate and the profit it would earn. Generally, a trade-off
is observed between the sales and the profit. A lower price of product or service is
capable of generating higher sales at low profit per unit. Similarly, a high price
would result in greater profit margins but the product or service may not sell that
much. Pricing arithmetic is not simple. There are a number of factors that influence
the pricing decisions of a firm. It is important for a firm to consider the customers,
the marketing offer, competition, legal framework, and social and technological
environment while setting the price.
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Pricing methods and practices tend to vary widely in service industries. Unlike
goods which may bear similarities in processes, competition, output, raw material,
labour, etc.; service industries are laden with diversity. On the spectrum of variety
and uniqueness; services are unique, both in their own character and in their
difference from one another. This service character does not allow standardisation
of pricing across various service categories. A household service supplier, banking
company, hairdresser, transporter, etc.; because of their unique character, tend to
consider their pricing in a variety of ways.
In determining the prices of services, the one characteristic which has great
impact is their perishability and the fact that fluctuations in demand cannot be met
through inventory. Hotels and airlines offering lower rates in off-season and lower
telephone charges for outstation calls after peak hours are examples of how pricing
strategy can be used to offset the perishable characteristics of services.
Another characteristic of services that creates a problem in price
determination is the high content of the intangible component. The higher the
intangibility, the more difficult it is to calculate cost and greater the tendency
towards non-uniform services, such as fees of doctors, management consultants,
lawyers, etc. In such cases, the price may sometimes be settled through negotiation
between the buyer and seller.
On the other hand, in services such as dry cleaning, the tangible component is
higher, and the service provided is homogeneous. It is easier to calculate the cost
on a unit basis and have a uniform pricing policy. In general, the more unique a
service is, the greater the freedom to fix the price at any level. Often the price may
be fixed according to the customer’s ability to pay. In such cases price may be used
as an indicator of quality.
The third characteristic to be kept in mind while determining prices is that in
many services, the prices are subject to regulations, either by the government or by
trade associations. Bank charges, electricity and water rates, fare for rail and air
transport in India are controlled by the government. In many other cases, the trade
or industry association may regulate prices in order to avoid undercutting and
maintain quality standards. International air fares are regulated by international
agreement of airlines, sea freight fares are regulated by shipping conferences. In all
such cases, the producer has no freedom to determine his own price.
The two methods which a service organisation may use to determine prices are
cost-based pricing and market-oriented pricing. In the former, the price may be
regulated by the government or industry association on the basis of the cost
incurred by the most efficient unit. Such a pricing strategy is effective in restricting
entry and aiming at minimum profit targets. The market-oriented pricing may
either be a result of the competition or customer-oriented. In case of competition-
oriented pricing, the price may be fixed at the level which the competitor is
charging, or fixed lower to increase market share. Customer-oriented pricing varies
according to the customer’s ability to pay.
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The pricing tactics that may be used to sell services are
i) Differential or Flexible Pricing: It is used to reduce the ‘perishability’
characteristic of services and iron out the fluctuations in demand. Differential
price implies changing different prices according to:
 customer’s ability to pay differentials (as in professional services of
management consultants, lawyers);
 price time differentials (used in hotels, airlines, telephones where there is
the concept of season and off-season and peak hours); and
 place differential used in rent of property-theatre seat pring (balcony
tickets are more expensive than front row seats) and houses in better
located colonies command higher rent.
ii) Discount Pricing: It refers to the practice of offering a commission or
discount to intermediates such as advertising agencies, stock brokers,
property dealers for rendering a service. It may also be used as a promotional
device to encourage use during low-demand time slots or to encourage
customers to try a new service (such as an introductory discount).
iii) Diversionary Pricing: It refers to a low price which is quoted for a basic
service to attract customers. A restaurant may offer a basic meal at a low price
but one which includes no soft drink or sweet dish. Once the customer is
attracted because of the initial low price he may be tempted to buy a drink or
an ice-cream or an additional dish. Thus, he may end up buying more than
just the basic meal.
iv) Guaranteed Pricing: It refers to pricing strategy in which payment is to be
made only after the results are achieved. Employment agencies charge their
fee only when a person actually gets a job, a property dealer charges his
commission only after the deal is actually transacted.
v) High Price Maintenance Pricing: This strategy is used when the high price
is associated with the quality of the service. Many doctors, lawyers and other
professionals follow this pricing strategy.
vi) Introductory Pricing: It is one in which an initial low price is charged in the
hope of getting more business at subsequently better prices. The danger is
that the initial low price may become the price for all times to come.
vii) Offset Pricing: It is quite similar to diversionary pricing in which a basic low
price is quoted but the extra services are rather highly priced. A gynaecologist
may charge a low fee for the nine months of pregnancy through which she
regularly checks her patient, but may charge extra for performing the actual
delivery and post-delivery visits.
viii) Competitive parity pricing: Prices are set on the basis of following those set
by the market leader.
ix) Value based pricing: Prices are based on the service’s perceived value to a
given customer segment. This is a market driven approach which reinforces
the positioning of the service and the benefits the customer receives from the
service.
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x) Relationship Pricing: Prices are based on considerations of future
potential profit streams over the lifetime of customers. Relationship
pricing follows closely the market oriented approach of value-based
pricing but takes the lifetime value of the customer into account.
15.3.3 Place
In order to bring the products to the customer, the marketer has to work with
distribution channels that are the interdependent set of organisations involved in
the process of making the goods or services available. Service marketers, like goods
marketers, also have to handle distribution channel problems. They too, have to
make their services available to target customers without which marketing cannot
take place. Because of intangibility of services, they cannot be stored, transported
and inventoried. Similarly, because of inseparability, that is, in case of services
production cannot be separated from selling, services must be created and sold at
the same time. These characteristics of services make distribution strategy more
complex and difficult.
There are three critical issues that must be sorted out while evolving the
distribution channels for a service:
(i) Location of the service: Location is concerned with the decisions a firm
makes about where its operations and staff are situated. The importance of location
for a service depends upon the type and degree of interaction involved. When the
customer has to go to the service provider, location becomes very important. For a
service business such as a restaurant, location may be one of the main reasons for
patronage. In this type of interaction, service providers seeking growth can consider
offering their services at more than one location. Where the service provider can go
to the customer, site location becomes much less important provided it is
sufficiently close to the customers for good quality service to be received. In some
circumstances, the service provider has no discretion in going to customer as
certain services must be provided at the customer’s premises. This is the case with
a wide range of maintenance services such as, lift repair, cleaning services etc.
However, when the customer and service organisation transact at arm’s length
location may be largely irrelevant. Customers are not concerned with where the
physical locations are of suppliers of services such as electricity, telephone or
insurance. There are three important questions that would help service provider in
deciding where to locate service:
 How important is the location of the service to the customers?
 Is the service, technology - based or people-based?
 How important are complementary services to the location decision?
The selection of location and site for a service depends on a number of factors
and tradeoffs among benefits and costs. The table 2 depicts the critical factors
affecting the location decisions, vary from one service to another.
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Table 2 : Critical factors affecting choice of location
Critical factor Services
Convenience Retail stores, health centres, banks, repair services,
theatres, personal care.
Cost Operating Speciality shops, wholesalers, clerical services.
Proximity with competition to Furniture, fast food, antique shops, tailors,
share Support system availability designers.
Hotels, jewellers, tourism.
Geographic of environmental Beach resorts, Ski resorts
factors Business climate
Business Climate Insurance companies, private educational
institutions, gambling resorts.
Communication networks Banks, financial services.
Transport facilities Mail order houses, couriers, ware houses.
Source : Harsh V. Verma, “Marketing of Services”, (Delhi; Global Business Press), 1993, p. 62.
(ii) Channels through which services are provided: The second decision
variable in the distribution strategy is whether to sell directly to the customers or
through intermediaries. Traditionally it has been argued that direct sales are the
most appropriate form of distribution for services. Whilst this form of distribution is
common in some service sectors, e.g., professional services, companies in other
areas of the service sector are increasingly seeking other channels to achieve
improved growth and to fill unused capacity.
Many services are now being delivered by intermediaries and these can take a
variety of forms. The broad channel options for services are direct sales, agent or
broker, sellers’ and buyers’ agents, franchises or contracted service deliverers, etc.
Table 2.3 provides an illustrative list of the intermediaries who sell services.
Table 2.3
Typical intermediaries for services
Service Intermediaries
Hotels Travel agents, tour operators, airlines
Airlines Travel Agents, hotels
Life Insurance Agents
Shares Stock Brokers
Employment Employment agencies
Financial Services Banks, financial institutions
Source : L. Johari “Marketing of services : Conceptual framework”, (New Delhi : IGNOU Study
Material on Service marketing) 1996, pp-22.
(iii) How to provide service to maximum number of customers: The third
decision variable in the distribution strategy is how to provide the service to a
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maximum number of customers in the most cost-effective manner. Some of the
innovations in the area are:
 Rental or leasing-leasing or rental offers an easy solution for companies which
want to expand and diversify but do not have the necessary resources to buy
the required plant and machinery. This trend is now also becoming popular in
services. Today we have the concept of time-sharing for holiday resorts.
 Franchising-franchising is the granting of rights to another person or institution
to exploit a trade name, trade mark or product in return for a lump-sum
payment or a royalty. In service industries franchises operate in the area of
hotels, restaurants, car rentals, fast food outlets, beauty parlours, travel
agencies, couriers, computer education, etc.
 Service integration - recent times have also witnessed the growth of an
integrated service system. Hotels offer local tours and airlines offer holiday
resort services. Travel agencies offer ‘package tours’ in which they take care of
all formalities such as visa, foreign exchange, reservations, local travel, etc.
All these trends highlight the importance of using innovative methods to
overcome the inherent characteristics of service products which make their
distribution a complex affair.
15.3.4 Promotion
The promotion element of the services marketing mix forms a vital role in
communicating the positioning of the service to customers. Promotion adds
significance to services; it can also add tangibility and help the customer make a
better evaluation of the service offer. The fundamental difference which must be
kept in mind while designing the promotion strategy is that the customer relies
more on subjective impressions rather than concrete evidence. This is because of
the inherent nature of services. Secondly, the customer is likely to judge the quality
of service on the basis of the performer rather than the actual service. Thirdly, since
it is difficult to sample the service before paying for it, the customers find it difficult
to evaluate its quality and value. Thus, buying a service is a riskier proposition
than buying a product. So, the service marketers must design a promotion strategy
which helps the customers overcome these constraints.
George and Berry have identified six guidelines for services advertising which
really are applicable to most elements of the communication mix. These apply to a
wide range of service industries, but not to all of them, because of the
heterogeneous nature of services.
 Provide tangible clues: A service is intangible in the sense that a performance
rather than an object is purchased. Tangible elements within the product
surround can be used to provide tangible clues, e.g. seating comfort in aircraft.
 Make the service understood: Services may be difficult to grasp mentally
because of their intangibility. Tangible attributes of the service can be used to
help better understand the service offered, e.g. credit cards.
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 Communication continuity: This is important to help achieve differentiation
and present a unifying and consistent theme over time. McDonalds and Disney
logo provide good examples of such continuity.
 Promising what is possible: Service firms need to deliver on their promises. If a
promise such as fast delivery cannot be consistently met, it should not be made
at all, e.g. Domino’s Pizza.
 Capitalising on word of mouth: The variability inherent in services contributes
to the importance of word of mouth. Word of mouth is a vitally important
communication’s vehicle in services, as evidenced by the way we seek personal
recommendations for lawyers, accountants, doctors, bankers, etc.
 Direct communications to employees: In high contact services
communication should be directed at employees to build their motivation, e.g.
cabin crew of airlines.
The promotion mix of services include the following elements
(i) Advertising: It is any kind of paid, non-personal method of promotion by an
identified organisation or individual. The role of advertising in services
marketing is to build awareness of the service, to add to customer’s knowledge
of the service, to help persuade the customer to buy, and to differentiate the
service from the other service offerings. Relevant and consistent advertising is
therefore, of great importance to the success of the marketing of the service.
Advertising has a major role in helping deliver the desired positioning for the
service. Since the core product is intangible it is difficult to promote, and
therefore, service marketers frequently choose tangible elements within the
product for promotion. Thus, airlines promote the quality of their cuisine, seat
width, and the quality of their in-flight service. Certain services such as
entertainment, transportation, hotel, tourism and travel, insurance, etc. have
been advertising heavily in newspapers, magazines, radio, TV to promote
greater usage and attract more customers. However, certain service
professionals such as doctors and lawyers had rarely used advertising as a
means of increasing their clientele. But, this situation is changing and one can
occasionally see an advertisement in the daily newspaper giving information
about the location and timings that a particular doctor is available for
consultation. These advertisements may also carry the message ‘Honorary
doctor to the president of India’ or ex-director of a prestigious medical college,
etc. Such messages help create a positive image and credibility.
(ii) Personal selling: Personal selling has a vital role in services, because of the
large number of service businesses which involve personal interaction between
the service provider and the customer, and service being provided by a person,
not a machine. The problem with using personal selling to promote services is
that in certain types of services, the service cannot be separated from the
performer. Moreover, it is not a homogeneous service in which exact standards
of performance can be specified. In such situations, personal selling implies
using an actual professional rather than a salesman to sell the service. A firm of
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management consultants may send one of its consultants for soliciting new
business. This kind of personal selling is certainly effective but also very
expensive. One way of making personal selling more cost effective is to create a
derived demand by tying up with associated products and services. A
management consultant may associate with a bank, so that the bank
recommends his name as a consultant to any new entrepreneur coming for a
loan. A chain of hotels may team up with an airline to offer a concessional
package tour. The other way is to maintain a high visibility in professional and
social organisations, getting involved in community affairs and cultivating other
professionals so as to maximize personal exposure and the opportunities for
getting work from new sources. Personal selling has a number of advantages
over other promotion mix elements, such as,
 Personal contact- Three customer contact functions have been identified; selling,
servicing and monitoring. These personal contacts should be managed to ensure
that the customer’s satisfaction is increased or maintained at a high level.
 Relationship enhancement- The frequent and sometimes intimate contact in
many service businesses provides a great opportunity to enhance the
relationship between the seller/service provider and the customer.
 Cross selling- The close contact frequently provides the opportunity for cross-
selling other services. The sales persons are also in a good position to
communicate details of other services which they may offered to customers.
(iii) Sales promotion: In the case of services, the sales promotion techniques
which are used are varied and various in number. Traditionally, sales
promotion has been used mainly in the fast moving consumer goods market.
However, in the recent past we have seen a trend for many service firms to use
sales promotion. Sales promotion tools are aimed at these audiences:
 Customers - Free offers, samples, demonstrations, coupons, cash refunds,

prizes, contests and warrantees.
 Intermediaries- Discounts, advertising allowances, cooperative advertising,
distribution contests and awards.
 Sales force- Bonuses, awards, contests and prizes for best performer.
A number of activities can be undertaken which aim at providing incentive to
encourage sales. A doctor may charge lesser amount as fee on subsequent visits
to encourage patient’s loyalty, a car mechanic may offer a guarantee for repairs
undertaken up to three months, a chartered accountant may offer his services
free for the first two visits to allow the customer to evaluate his work.
In services, sales promotion techniques are also used to offset their
perishability characteristic, e.g., family discounts offered by hotels in off-season
in which two children under twelve are allowed free of charge. Sales promotion
helps to overcome the problem faced by customers in evaluating and judging
the quality before making the purchase, thus, it reduces the risk associated
with the purchase.
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(iv) Publicity: It is unpaid for exposure which is derived by getting coverage as a
news or editorial item. It is possible to get publicity when the service which one
is offering is unique and, therefore, newsworthy, by holding a press conference
in which offered ser-vices can be associated with some issues of greater social
relevance or by involving the interest of the newspaper or its staff in covering
the service. The important point about publicity is that the choice of newspaper,
magazine and journal should be correct. The vehicle which is chosen must be
credible and enjoy a reputation of being trustworthy. A wrong choice of media
vehicle will result in adverse publicity.
(v) Word of mouth: One of the most distinctive features of promotion in service
businesses is the word of mouth communications. This highlights the
importance of the people factor in services promotion. Customers are often
closely involved in the delivery of a service and then talk to other potential
customers about their experiences. Research points to personal
recommendations through word of mouth being one of the most important
information sources. Where people are the service deliverers personal
recommendation is often the preferred source of information. Thus, word of
mouth can have a more important impact than other promotion mix elements
in a number of services, including professional and health care services.
Positive or negative word of mouth communication will then influence the
extent to which others use the service. However, negative experiences tend to
have a greater impact than positive experiences. Customers who are dissatisfied
tend to tell more than twice as many people of their poor experiences as those
who are satisfied relate good experiences.
15.3.5 People
In services, ‘People’ refers to all human actors who play a part in service
delivery and thus influence the buyer’s perceptions; namely, the firm’s personnel,
the customer, and other customers in the service environment. All of human actors
participating in the delivery of a service provide clues to the customer regarding the
nature of the service itself. How these people are dressed, their personal
appearance, and their attitudes and behaviours all influence the customer’s
perception of the service. If the service personnel are cold and rude, they can
undermine all the marketing work done to attract the customers. If they are friendly
and warm, they increase customer satisfaction and loyalty. Employee behaviour is
often an integral part of the service product. This is not true in a manufacturing
operation, where employee behaviour may affect product quality, but is not a part
of the product.
People constitute an important dimension in the management of services in their
role both as performers of services and as customers. People as performers of service
are important because, a customer sees a company through its employees. The
employees represent the first line of contact with the customer. They must, therefore,
be well informed and provide the kind of service that wins customer approval. The firm
must recognise that each employee is a salesman for the company’s service. If these
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employees are not given training in how to go about face-to-face customer contact, the
entire marketing effort may not prove to be effective. The importance of customers in
services stems from the fact that most services imply active and involved customer-
organisation interface. In many service situations, customers themselves can also
influence service delivery, thus affecting service quality and their own satisfaction.
Customers not only influence their own service outcomes, but they can influence other
customers as well. People can be subdivided into:
(i) Service personnel: Service personnel are important in all organisations but
more so in an organisation involved in providing services. The behaviour and
attitude of the personnel providing the service is an important influence on the
customer’s overall perception of the service and he can rarely distinguish between
the actual service rendered and the human element involved in it. Customer
contact is very important concept in services, which refers to the physical presence
of the customer in the system. The extent of contact refers to the percentage of time
a customer ought to be in the system out of the total time it takes to serve him. The
low contact services include bank, post offices or retailing and the high contact
services include hotels, educational institutions, restaurants and hospitals.
Services with high contact are more difficult to control and manage because a
longer customer contact is more likely to affect the time of demand, and nature of
service and its quality; whereas, in low contact services such contact has much less
impact on the service. Therefore, the high contact personnel must be dexterous in
public relations and inter-personal skills, and the low contact personnel must have
high technical and analytical attributes. The quality and performance of service
personnel can be improved through:
 Careful selection and training of personnel;
 laying down norms, rules and procedures to ensure consistent behaviour;
 ensuring consistent appearance; and
 reducing the importance of personal contact by introducing automation and
computerization wherever possible.
(ii) Customers: Customers are important because they are a source of
influencing themselves, being actively involved in service delivery, and other
customers as well. In case of doctors, lawyers, consultant’s one satisfied customer
will lead to a chain reaction, bringing in his wake a number of other customers. So,
it’s an important task of service marketers to ensure complete satisfaction of the
existing customers. The kind of customers that a firm attracts exerts an important
influence on prospective customers. The prospective customer may feel attracted
towards the organisation e.g., club, restaurant, school, because it has his type of
customers or the customer may turn away if he perceives the existing customers to
be a kind with whom he would not like to associate.
4.3.8 Physical Evidence
It refers to the environment in which service is delivered and where the firm
and customer interact, and any tangible components that facilitate performance or
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communication of the service. The physical evidence of service includes all of the
tangible representations of the service such as, brochures, letterhead, business
cards, report format, signage, equipment, etc.
Packaging importance stems from the fact that it is what comes in between the
product and the customer’s eye. The product package is a visual representation of
the whole marketing effort. The customer judgement and evaluation are often based
on the product packaging.
Physical evidence is to a service, what the packaging is to a product. In
services, the product itself being intangible, the need is to tangibles it as far as
possible. Thus, physical entities can be successfully employed to describe the
service product and its distinguishing qualities. Since the potential customers form
impressions about the service organisations on the basis of physical evidence, like
building, furniture, equipments, stationery and brochures, it becomes imperative
that the marketers manage the physical evidence in a manner that reinforces the
proposed position and image of the organisation.
Cleanliness in a doctor’s clinic, the exterior appearance and interior decor of a
restaurant, the comfort of the seating arrangement in a cinema hall, adequate
facility for personal needs at the airport, all contribute towards the image of the
service as perceived by the customer. The common element in these is that they are
all physical, tangible and controllable aspects of a service organisation. There may
be two kinds of physical evidence:
(i)Peripheral evidence: It is actually possessed as a part of the purchase of
service but by itself is of no value. An airline ticket, cheque book, or receipt for a
confirmed reservation in a hotel are examples of peripheral evidence. A cheque book
is of value only if customer has money in the bank, without that it is of no
significance. Peripheral evidence adds on to the value of essential evidence, such as
writing pad, pen, match box, complimentary flowers and drinks, etc. in a hotel,
which customer may take away. Such evidence must be designed keeping in mind
the overall image which the organisation wishes to project and the reminder value
of the evidence in its ability to remind the customer about the organisation.
(ii) Essential evidence: Whereas the peripheral evidence is possessed and taken
away by the customer, the essential evidence cannot be possessed by the customer; the
building, its size and design, interior layout and decor, logo, etc. of the organisations are
constituents of essential evidence. The essential evidence is a very critical input in
determining the atmosphere and environment of the service organisation.
Physical evidence can be used to build strong association in the customers’ minds
and service can be differentiated from the competitor’s similar offering. By making the
service more tangible and making it easier for the customer to grasp the concept of the
service, marketers can create the ideal environment for the service offering.
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4.3.7 Process
Process in services refers to the actual procedures, mechanisms, and flow of
activities by which the service is delivered- the service delivery and operating
systems. In a service organisation, the system by which customer receives delivery
of the service constitutes the process. In fast food outlets the process comprises
buying the coupons at one counter and picking up the food against that at another
counter. The process of a delivery function which can be compared with that of
operations management implies the conversion of input into the finished product.
But, in a service organisation, there is no clear cut input or output. Rather, it is the
process of adding value or utility to system inputs to create outputs which are
useful for the customers.
The process by which services are created and delivered to the customer is a
major factor within the services marketing mix, as services customers will often
perceive the service delivery system as part of the service itself. Thus, decisions on
operations management are of great importance to the success of the marketing of
the service. In fact, continuous coordination between marketing and operations is
essential to success in most services businesses. Identification of process
management as a separate activity is a prerequisite of service quality improvement.
The importance of this element is especially highlighted in service businesses where
inventories cannot be stored. Through the introduction of automatic teller
machines (ATMs) banks have been able to free staff to handle more complex
customer needs by diverting cash only customers to the ATMs. If the processes
supporting service delivery cannot, for example, quickly repair equipment following
a breakdown or provide a meal within a defined period, an unhappy customer will
be the result. This suggests that close cooperation is needed between the marketing
and operations staff who are involved in process management. By identifying
processes as a separate marketing mix element, its importance to service quality is
duly recognized.
1. the marketing mix concepts is a well established tool used as a structure by
marketers.
2. A product will provide some value to customers.
1. What is service marketing mix?
2. What are the pricing tactics that may be used to sell services?
15.6 SUMMARY
Service industries have typically lagged behind manufacturing firms in
adopting and using marketing concepts. But, this is now changing. One of the most
basic concepts in marketing is the marketing mix. The traditional marketing mix is
composed of the four P’s: product, price, place (distribution) and promotion. The
specific nature of services i.e., intangibility, heterogeneity, inseparability and
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perishability has service marketers to adopt the concept of an expanded marketing
mix for services. In addition to the traditional four P’s, the service marketing mix
includes people, physical evidence, and process.
1. _________ to the practice of offering a commission or discount to intermediates.
a. Diversionary Pricing b. Discount pricing c. Promotional pricing
d. Guaranteed pricing
2. _____________to pricing strategy in which payment is to be made only after the
results are achieved.
a. Diversionary Pricing b. Discount pricing c. Promotional pricing
d. Guaranteed pricing
1. Innis, Daniel E, and La lade, Bernard J., (1994), “Customers Service: The key
to Customer Satisfaction”; Journal of Business Logistics, Vol. 15 iss.I, 1-27.
15.9 ASSIGNMENT
1. Do you think ‘physical evidence’ really matters in marketing of services?
Explain.
2. What do you think are the main reasons for including the element of ‘People’
in the marketing mix for services?
1. Ravi Shanker, ‘Services Marketing: The Indian Perspective’, Excel Books.
2. Lovelock, ‘Services Marketing: People, Technology, Strategy’, Pearson
Education.
3. Zeithaml and Bitner, ‘Services Marketing: Integrating Customer Focus Across
the Firm’, Tata McGraw Hill.
4. Rust, Zahorik, and Keiningham, ‘Service Marketing’, Addison Wesley.
5. Fitzsimmons and Fitzsimmons, ‘Service Marketing: Operations, Strategy, and
Information Technology’, McGraw Hill.
1. Choose a service company with which you are familiar and show how each of
the elements of services marketing applies to a specific product.
15.12 KEY WORDS
1. Marketing Mix: Product, Price, Place and Promotion, People, Physical
Evidence, Process
H
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LESSON - 16
QUALITY DIMENSIONS
16.1 INTRODUCTION
In the present times, no marketer can ignore the importance of services.
However, merely providing the service is not source of competitive advantage
because every marketer is providing the same. In order to outsmart the
competitors, it is important that ‘better’ service is provided to the customers. The
issue of improving customer focus concerns the relationship between the ser-vice
organization and its customers.
16.2 OBJECTIVES
After reading the lesson you will able to
 To know the meaning of service quality
 To understand various dimensions of service quality
 To understand the meaning of service Gaps
16.3 CONTENTS
16.3.1 Defining service quality
16.3.2. Process vs. Technical outcome quality
16.3 3. Dimensions of service quality
16.3 4. Gaps in service quality
16.3.1 Defining service quality
Being an intangible concept, defining service quality poses a lot of problems. It
is very difficult to quantify the abstract elements of service quality, which are highly
idiosyncratic and customer-specific. Several attempts have been made to define the
same. However, the most commonly accepted definition of service quality is:
Service quality is the delivery of excellent or superior service
relative to customer expectations. - Zeithaml and Bitner

This is the simplest way to understand service quality, although this definition
is far from being adequate. In general terms, quality is defined as ‘conformance to
standards’. Therefore, when service measures up to some predefined parameters of
performance, it is said to be of higher quality. The real issue is in identifying these
parameters of performance and then measuring the service in relation to these
parameters. For example, for some person, waiting for 15 minutes at a bank
counter is ‘OK’, while it may be ‘too much’ for another. If a teller disposes off the
customer in 10 minutes, the first customer would be very delighted, but the second
customer will be protesting for the delay. The problem for the banker would lie in
establishing the ‘normal’ time, which a customer should wait at the counter.
Despite these short-comings, a lot of research has been done to understand service
quality and now it is quite possible to quantify the same.
130
This involves consideration of the relation-ship marketing approach. The
relationship marketing concept brings quality, customer service and marketing
together. The specific linkage between these elements are shown in Figure 1.
Marketing
Marketing
Establishing customer Bench marketing

service levels after Quality from
consumer research customers’ perspective
Product/
Customer Service
Service Quality
Integrating process
and people in total
quality concept
Figure 1: Linkages between quality, customer service and marketing
Just as many service companies have not been as successful as they would
have liked in achieving a customer focus through their marketing activities, so
success has evaded many organizations in their quality and customer service
initiatives. Despite the advent of the concepts like TQM (Total Quality Management)
and ISO etc., many service organizations continue to address quality primarily on
the basis of an operations perspective concerned with conformance to
specifications, rather than customer-perceived quality. However, any viewpoint of
services, if imposed by the marketers, without considering the customers’
perspective, is bound to fail the marketplace. Right approach to marketing starts
from the customer and re-mains with the customer. Before discussing the concept
of quality in relation to services, it is pertinent to define the same.
16.3.2 Process Vs. Technical Outcome Quality
Ultimately, consumers judge the quality of services on their perceptions of the

technical outcome provided and on how that outcome was delivered. For example, a
patient will judge the quality of services of a doctor by how well his sickness was
cured, and also the quality of the process. The doctor’s diagnosis and treatment
would constitute the technical dimension of quality. Process quality would include
such things as the doctor’s timeliness, his responsiveness in attending to the
patient, empathy for the patient, courtesy and listening skills. Similarly, a
restaurant customer will judge the service on his perceptions of the food and on
how the meal was served and how the employees interacted with him. In this
example, the food would constitute the technical dimension of the quality while
employees’ behaviour would be the process dimension of the quality.
If the service has a specific outcome, for example, getting fully cured by the
doctor, the customer can judge the effectiveness of the service on the basis of that
out-come. However, many services offered by lawyers, doctors, engineers, teachers,
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accountants, scooter and automobile repair etc. are highly complex and a clear
outcome is not always evident. In these situations, the technical quality of the ser-
vice - the actual competence of the provider or effectiveness of the outcome - is not
easy for the customer to judge. The customer may never know for sure whether the
service was performed correctly or even if it was needed in the first place. For
example, a car mechanic may charge any amount for repairing even for a small
defect because of the ignorance of the customer. A doctor can extract any amount
out of a patient’s pocket for his advice. A customer’s satisfaction or dissatisfaction
would be known only after he has consumed the service.
The existence of both process and outcome quality can also explain why an
MD doctor with superb knowledge and degree can fail to compete effectively with
RMP doctor, who can deliver superior interpersonal quality as well. In this example,
if customers cannot judge the technical quality of the outcome effectively (or even if
they can, but they believe other equally competent doctors are available), they will
base their quality judgments on process dimensions such as the doctor’s ability to
solve problems, his ability to empathize, whether he meets deadlines, and his
courtesy.
When customers cannot accurately evaluate the technical quality of a service,
they form impressions of the service including its technical quality from whatever
sources exist, using their own “shorthand” or cues that may not be apparent to the
provider. Consider the services that college professors provide to their students.
Most students are in school to learn what they do not know. However, not knowing
the subjects they are studying does not prevent them from making judgments
about their professors. Cues such as the tangibles that accompany the service
(overheads and other presentation materials) the professor’s appearance of
nervousness, the degree of confidence communicated, or even whether the
professor starts and ends class on time are used to infer competence.
Understanding the cues used to signal the presence or absence of technical quality
allows professors and other marketers some control over their customers’
impressions. These two dimensions of service quality highlight the subjective
nature of quality assessments. Generally, the consumers face difficulty in
distinguishing between ‘good’ and ‘bad’ quality.
Their judgements are subjective and depend upon how well they are treated by
the service provider. The service provider’s image also has an important role in
shaping customer’s perception of service quality and their satisfaction or
dissatisfaction, resulting thereof. A lot of research has been done to identify and
understand the factors that influence service quality.
16.3.3 Dimensions of Service Quality
It has been found that customers do not perceive quality as a one-dimensional
concept. The customers’ assessments of quality include perceptions of multiple
factors. For example, it has been suggested that the following eight dimensions of
quality are applied to all goods and services:
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1. Performance,
2. Features,
3. Reliability,
4. Conformance,
5. Durability,
6. Serviceability,
7. Aesthetics, and
8. Perceived quality.
The dimensions of quality are meaningful when applied to categories of products
(for example durable goods, packaged good services. There is a lot of diversity in these
dimensions of service quality, when applied to different products. For example, take
the case of two services - teaching and medical service. The diversity of the dimensions
of service quality can be shown in the form of the table 2.
Education Services Medical Services

Knowledge of Teacher Skill of Doctor
Campus Facilities at hospital
Classroom Cleanliness and hygiene
Audio-Visual Aids Past record
Reputation Reputation
Placement Medical Instruments
Table 2: Dimension of service quality
Research done by Zeithaml and Berry has identified five basic key areas of ser-
vice quality, which seem to fit in for most of the services. These key areas of ser-vice
quality and their respective components are shown in Table 2 in pictorial.
Key area of
Components of key areas
service quality
Reliability Ability to perform the service dependably
and accurately
Responsiveness Willingness to help customers and
provide prompt service
Assurance Employees’ knowledge and courtesy and
their ability to inspire trust and
confidence
Empathy Caring, individualised attention given to
customers
Tangibles Appearance of physical facilities,
equipment, personnel, and written
materials
Table 3: Key areas of service quality
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These dimensions represent how consumers organize information about
service quality in their minds. On the basis of exploratory and quantitative
research, re-searchers have found these five dimensions relevant for many services,
including banking, insurance, appliance repair and maintenance, securities
brokerage, long-distance telephone service, automobile repair service. The
dimensions are also applicable to retail and business services. These dimensions
are discussed in detail in the following discussion.
Reliability
Out of the five dimensions of service quality, reliability has been consistently
found to be the most important determinant of perceptions of service quality. It is
defined as the ability to perform the promised service dependably and accurately. It
is an indicator of how a company delivers its promises about delivery, service
provision, problem resolution, and pricing. Customers want to do business with
companies that keep their promises, particularly their promises about the core
service attributes. For example, in railway time table Shatabdi Express leaves a
station at say 1430 hours. Reliability will be the measure of whether Indian
Railways will be able to adhere to its promised departure time or not.
All firms need to be aware of customer expectations of reliability. Firms that do
not provide the core service, that customers think they are buying, fail in the eyes
of their customers in the most direct way. The importance of reliability is further
dramatized by the finding that customers’ expectations for service are likely to go
up when the service is not performed as promised. When service failures occur,
customers’ tolerance zones are likely to Shrink and their adequate and desired ser-
vice levels are likely to rise. For example, the expected core service of railways is
transportation. Hence Shatabadi has to leave the station at promised 1430 hours. If
it is late by, say more than say 30 minutes every day, customers are likely to lose
faith in the service and may resort to airlines or use their own car.
Responsiveness
Responsiveness is the willingness of the service providers to help customers
and to provide prompt service. This dimension emphasizes attentiveness and
promptness in dealing with customer requests, questions, complaints, and
problems. There are strong similarities between the employee behaviours noted in
those critical ser-vice encounters and the responsiveness dimension of service
quality. Responsiveness is communicated to customers by the length of time they
have to wait for assistance, answers to questions, or attention to problems.
Responsiveness also captures the notion of flexibility and ability to customize the
service to customer needs. For example, if a customer wants to know the exact
departure time of Shatabadi, the rail fare, facilities available, Indian Railways has
to provide for the same. If a customer rings up inquiry office and nobody picks up
the phone, the service is likely to be viewed negatively by the customer. The
customer will feel neglected.
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To excel on the dimension of responsiveness, a company must be able to view
the process of service delivery and the handle the requests queries or complaints of
from the customers. It must be able to understand customers’ point of view rather
than impose its own point of view. Standards for speed and promptness that reflect
the company’s view of internal process requirements may be very different from the
customer’s requirements for speed and promptness.
Assurance
Assurance is defined as employees’ knowledge and courtesy and the ability of
the firm and its employees to inspire trust and confidence. This dimension is likely
to be particularly important for services that the customer perceives as involving
high risk and/or about which they feel uncertain about their ability to evaluate
outcomes, for example, banking, insurance, brokerage, medical, and legal service.
Trust and confidence may be embodied in the person who links the customer
to the company, for example securities brokers, insurance agents, lawyers,
counsellors. In such service contexts the company seeks to build trust and loyalty
between key contact people and individual customers. The “personal banker”
concept captures this idea-customers are assigned to a banker who will get to know
them individually and who will coordinate all of their banking services.
In the early stages of a relationship, the customer may use tangible evidence to
assess the assurance dimension. Visible evidence of degrees, honours, and awards
and special certifications may give a new customer confidence in a professional
service provider. Even in the public sector banks, the concept of personal banking
and customizing the services is gaining popularity. Despite heavy marketing of
private sector banks, people feel assumed of the security only with the public sector
banks. This is the ‘assurance’ dimension, encompassing trust and confidence.
Empathy
Empathy is defined as the caring, individualized attention the firm provides to
its customers. The essence of empathy is conveying, through personalized or
customized service, that customers are unique and special. Customers want to feel
understood by and important to firms that provide service to them. Personnel at
small service outlets often know customers by name and build relationships that
reflect their personal knowledge of customer requirements and preferences. When
such a small firm competes with larger firms, the ability to be empathetic may give
the small firm a clear advantage.
In business-to-business services, customers want supplier firms to
understand their industries and issues. Many small computer consulting firms
successfully compete with large vendors by positioning themselves as specialists in
particular industries. Even though larger firms have superior resources, the small
firms are perceived as more knowledgeable about customer’s issues and needs and
able to offer more customized services.
Tangibles
Tangibles are defined as the appearance of physical facilities, equipment,
personnel, and communication materials. All of these provide physical
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representations or images of the service that customers, particularly new
customers, will use to evaluate quality. Every service has an element of tangibility,
although its significance may vary. For example, in medical services, hospital,
equipment, medicines are the tangible dimensions. Despite being of very high value,
the service is incomplete in absence of a skilled doctor. Alternatively, despite having
a skilled doctor, a hospital is likely to be rejected if it is dirty and unhygienic.
Service industries that emphasize tangibles in their strategies include hospitality
services where the customer visits the establishment to receive the service, such as
restaurants and hotels, retail stores, and entertainment companies. Tangibles are
often used by service companies to enhance their image, provide continuity, and
signal quality to customers.
16.3.4 Gaps In Service Quality
Quality can be viewed from two perspectives - internal and external. Internal
quality is based on conformance to specifications. External quality is based on
relative customer-perceived quality. The important point is that quality must be
seen from the customer’s viewpoint, not the company’s. It is essential that quality
be measured from the customer’s perspective, not from what managers within a
company think their customers’ views are:
Several reasons have been identified as to why it is unsafe to rely on
managerial opinions of customer perceptions. These include the following:
1. Management may not know what specific purchase criteria users consider
important. For example, customers frequently identify key purchase criteria not
identified by management. Even when the criteria are correctly identified,
management may misjudge the relative importance of individual criteria.
2. Management may misjudge how users perceive the performance of competitive
products on specific performance criteria. These differences in perception of
performance may exist for the most basic of criteria.
3. Management may fail to recognize that user needs have evolved in response to
competitive product developments, technological advances, or other market or
environmental influences.
Gap model
A model has been developed by Parasuraman and his colleagues which helps
identify the gaps between the perceived service quality that customers receive and
what they expect. The model identifies five gaps:
Gap No. Dimension of Gap

1. Consumer expectation and management perception
2. Management perception and service quality expectation
3. Service quality specification and service deliver consumers
4. Service delivery and external communications to consumers
5. Expected service and perceived service
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The model showing These Gaps is shown as figure 8.3
A. Parasuraman, V. A. Zeithaml and L. L. Berry, ‘A conceptual model of services quality and its
implications for future research’, Journal of Marketing, vol. 49, Autumn 1985.
Gap - I
The first gap is the difference between consumer expectations and
management perceptions of consumer expectations. Research shows that financial
service organization soften treat issues of privacy and confidentiality as relatively
unimportant, whilst consumers considered them very important.
In India, very little research is done by the companies to know the customers’
expectations. Often, management believes that their estimate of what customers
want is final. They make as error of judgment at this stage. The customers
themselves are also to be blamed because they do not protest or complaint, when
they do not get the desired service. This keeps the management in dark and they
continue to live by their belief that what they think is correct.
For example, advert the coming of private telephone companies, the PSUs
never bothered to listen to their customers. This kept the customers dissatisfied
and the private players were able to make a rapid entry into the market by taking
the ad-vantage of this gap of the PSU telecom service provider.
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Gap - II
The second gap is the difference between the management perceptions of
consumer expectations and service quality specifications. Managers will set
specifications for service quality based on what they believe the consumer requires.
How-ever, this is not necessarily accurate. Hence, many service companies put
much emphasis on technical quality, when in fact the quality issues associated
with service delivery are perceived by clients as more important.
For example, some foreign banks believe that the customers will maintain high
minimum balance (to the tune of Rs. 10000/-) in their accounts. This is too heavy
an amount for any bank, which aspires to become a “mass” bank and not remain a
“class” bank. Probably, these banks extrapolate the minimum balance maintained
by the customers in foreign countries. In India, same specifications cannot work.
Gap - III
The third gap is the difference between service quality specification and the
service actually delivered. This is of great importance to services where the delivery
system relies heavily on people. It is extremely hard to ensure that quality
specifications are met when a service involves immediate performance and delivery
in the presence of the client. This is the case in many service industries: for
example, a medical practice is dependent on all the administrative, clerical and
medical staff performing their tasks according to certain standards. The practice
may set a goal of a maximum fifteen-minute patient waiting time, however, a doctor
who keeps a poor schedule will upset the system for all of the staff.
For example, it happens in most government offices in India that one or more
dealing clerks are on leave or do not process the files, leading to delay in the
decisions. This upsets the whole working of the office.
Gap - IV
The fourth gap is the difference between service delivery intention and what is
communicated about the service to customers. This establishes an expectation
within the customer which may not be met. Often this is result of inadequate
communication by the service provider.
Indian Railways is a good example to show this gap. Late arrival of trains is
more of a routine than being an exception. Even the clerk at the reception is unable
to tell the exact time of delay. No officer of the railways takes any responsibility for
the delay.
Gap - V
The fifth gap represents the difference between the actual performance and the
customers’ perception of the service. Subjective judgement of service quality will be
affected by many factors, all of which may change the perception of the service,
which has been delivered. Thus a guest in a hotel may receive excellent service
throughout his stay, apart from poor checking out facilities. But this last
experience may damage his entire perception of the service, changing his overall
estimation of the quality of the total service provided from good to poor.
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Advantages of gap model
The gap model has following advantages:
 It provides a framework for understanding the factors of service quality.
 It helps in identifying shortfalls in service quality.
 It suggests the means to fill the gaps.
Limitation of gap model
The problem of the gap model lies in defining and quantifying various
specifications to identify these gaps.
1. The customer assessment of service quality include the perception of multiple
factors.
2. The difference between customer expectations and perception is known as
GAP.
1. What is GAP? Explain with help of model.
2. What are the various dimensions of Service Quality?
16.6 SUMMARY
Service quality has great potential of offering competitions advantage to the
marketers. Being a highly intangible concept, it is amenable to different
interpretation. However, there are several common dimensions of service quality,
which have been identified by the researches. Many firms have also developed
specific techniques for improving service quality.
1. ________is defined as the ability to perform the promised service dependably and
accurately.
a. Reliability b. Responsiveness c. Empathy d. Tangibles
2. ________is the willingness of the service providers to help customers and to
provide prompt service.
a. Responsiveness b. Empathy c. Tangibles d. Assurance
3. _________is defined as the caring, individualized attention the firm provides to its
customers.
a. Empathy b. Tangibles c. Assurance d. Reliability
4. _________are defined as the appearance of physical facilities, equipment,
personnel, and communication materials.
a. Tangibles b. Quality c. Benchmarking d. Empathy
5. _________is defined as employees’ knowledge and courtesy and the ability of the
firm and its employees to inspire trust and confidence.
a. Assurance b. Tangibles c. Reality d. Empathy
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1. Cronin, J.T. and Taylor S. A., “Measuring Service Quality: An examination and
Extension,” Journal of Marketing, 1992. 56(3).
16.9 ASSIGNMENT
1. Think about a service you receive. Is there a gap between your expectation and
perception of that service? What do you expect that you do not receive?
2. If you were the manager of a service organization and wanted to apply the gaps
model to improve service, which gap would you start with? Why? In what order
would you proceed to close the gaps?
3. Which of the four provider gaps do you believe is hardest to close? Why?
1. Christoper lovelock, Jochen writz, and Jayanta chatterjee (2007) 6 th edition,
Pearson Prentice Hall, India.
2. Valarie A Zeithamal, Dwayne D Gremeler, Mary Jo Bitner, and Ajay Pandit,
(2010), Tata McGraw Hill edition.
1. Interview a non profit or public sector organisation in your area ( it could be
some part of your school if it is a state school). Find out if the integrated gaps
models of service quality framework make sense in the context of its
organisation.
16.12 KEY WORDS
1. Service quality, Technical quality, service quality.
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UNIT – V
LESSON - 17
BANKING – CUSTOMER SERVICE – MARKETING STRATEGIES FOR

BANKING SERVICES
17.1 INTRODUCTION
A bank is a financial institution that accepts deposits from the public and
creates credit. Customer service means different things in different industries, but
it always boils down to the same basic elements – providing superior levels of
service to patrons, constituents and clients. In the banking industry, where
technology continues to evolve the way we handle personal and business finances,
quality customer care includes keeping pace with both live and digital options for
handling everything from simple to complex transactions. This lesson also gives an
outline into marketing strategies for banking services.
17.2 OBJECTIVES
After studying this lesson, you will be able to understand:
 What is banking?
 Functions of Banking
 What is customer service and Customer service provided by banking sector
 What is marketing strategy and its nature and characteristics?
 Marketing Strategies for Banking Services
17.3 CONTENTS
17.3.1 Banking
17.3.2 Customer Service
17.3.3 Marketing Strategies for Banking Services
17.3.1 BANKING
Definition
Banking has been defined as “Accepting for the purpose of lending &
investment, of deposit of money from the public, repayable on demand order or
otherwise and withdraw able by cheque, draft or otherwise.”
Meaning
Banking means transacting business with a bank; depositing or withdrawing
funds or requesting a loan etc.
17.3.2 Customer Service in Banks
Customer service means different things in different industries, but it always
boils down to the same basic elements – providing superior levels of service to
patrons, constituents and clients. In the banking industry, where technology
continues to evolve the way we handle personal and business finances, quality
customer care includes keeping pace with both live and DIGITAL OPTIONS for
handling everything from simple to complex transactions.
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Industry Knowledge
Not everyone has an in-depth understanding of banking products and services,
so a detailed, current knowledge of the industry is vital to providing high-quality
customer service. This includes familiarizing yourself with all of your institution's
offerings, including:
 Checking and savings options.
 Certificates of deposit.
 College savings plans.
 Individual retirement accounts
 Tax and estate planning.
 Business, personal, home and auto loans.
 Lines of credit and other credit products.
 Safe deposit boxes.
 Financial planning.
Not only should you be aware of what products your bank offers, but
you should be well-versed and able to talk intelligently with customers
about the benefits and features of all products. Good customer service
also means being able to evaluate specific and highly individualized
customer needs and make informed recommendations that suit those
needs.
Clear Communication Skills: It is vital to quality customer service in the
banking industry that you are able to deliver often complex or confusing financial
information to customers in terms they can understand. Avoid industry lingo, and
instead, provide explanations in layman’s terms. Make sure patrons are following
what you say, pausing to ask questions to ensure their understanding the
information you’re providing. Some areas of banking that can be confusing include:
 Calculating interest rates.
 Understanding various forms of overdraft protection.
 Determining which loan products are best.
 Understanding credit scores.
 Protecting against or recovering from identity theft.
 Utilizing online and remote banking options.
 Personal Skills
Money is a sensitive topic for many people, and having exceptional people
skills can help you be a valuable customer service-focused employee. You may find
yourself in situations where you have to explain why a loan application will be
denied, why a mortgage can’t be processed or why overdraft fees are eating away
someone’s nest egg. Being clear and concise and offering explanations and options,
all while maintaining a degree of empathy, can make you a customer-service asset.
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Tech-Literacy
With banking options continually being tweaked by changes in technology, a
good banking-customer-service representative will be able to help customers
understand how to use what can be difficult-to-understand tools. Here are some
ways to be of service:
Rather than tell a customer they can use the ATM for deposits and
withdrawals, demonstrate how the machine works, how to establish and enter a
personal identification number and note the costs associated with withdrawing
funds from a non-institution ATM location.
Instead of telling people to download the mobile app so they don’t have to come
into the branch, offer to walk them through the steps on their personal device so
they understand what to do at each point of the transaction. Don’t simply hand a
patron a brochure that discusses loan products. Instead, describe the options that
are tailored to meet the customer's specific needs.
In-Person Customer Service Skills: While many people choose to use ATMs,
direct deposit and mobile apps to handle their banking transactions, there are still
people who prefer or feel safer, with in-person transactions. Embrace these
individuals with a positive attitude, a smile, a greeting and personalized service,
especially if you have regular customers who come to your branch on a frequent
basis. You’re likely to gain a customer for life.
1.3.3. MARKETING STRATEGIES OF BANKING
Bank Marketing Strategy
The marketing strategy of a business consists of certain components which, as
a blend is named as marketing mix. The marketing mix of a bank is considered as
its marketing strategy as this mix or the combination of this mix varies with the
situation or environment.
The marketing mix of a bank consists of seven component sub mixes: product,
price, place, promotion, process, people and physical evidence. These are
considered as the 7 P’s or 7 elements of bank marketing strategy. In addition to the
first 4 P’s of ordinary marketing, 3 more P’s are applicable in the case of bank
marketing. These seven P’s are not much effective in isolation. An appropriate blend
of these P’s is necessary for a well-orchestrated marketing strategy. Banking
professionals’ excellence in blending these sub-mixes gives the best result in the
form of satisfaction to customers and profit to the organization.
Product – The First ‘P’
A product is anything that can be offered to a market for attention,
acquisition, use or consumption that might satisfy a want or need.8 It is a bundle
of utilities consisting of various product attributes and accompanying services. The
services are of intangible nature and banking services are of that nature. The
banking professionals are expected to develop different dimensions of products so
that the banking services are made attractive, innovative and competitive. Since
banks have customers from different walks of life, a single product specification will
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not be attractive for all. Service/product of an optimal mix of core and peripheral
dimensions will raise the attraction of the product. Generally banking products are
grouped under three different heads: Core products, Formal products and
Augmented products/Peripheral services. Core products are those products in
which a banker is engaged in business. For a bank, core products are savings
banks, term deposits, current accounts, cash credits, overdrafts, term loans and so
on. Formal products are made up of a combination of two or more core products
and they have a strong marketing content to meet some customer needs. Unfixed
Deposit scheme 9 of Citi Bank is an example for this. The Augmented product is a
Formal product with some ancillary benefits or peripheral services attached to it.
For example in many banks when one opens a savings bank account he gets
an ATM Card or Credit Card. The different services of a bank form the product mix
of the bank. The formulation of a sound product mix is very essential to survive and
compete in the market.
Price – The Second ‘P’
Price is the interest, fees and commission charged and paid by the bank. Price
will determine the profitability of the banks. In a highly regulated market, banks
have little option in deciding the prices. In the regulated market, the RBI prescribed
deposit and lending interest rates and the Indian Banks Association took decision
regarding other charges. Naturally, Indian Banks have not felt any need to develop
their own pricing strategy. But the situation has steadily changed to deregulated
market due to liberalisation. Through RBI’s credit policy commencements
substantial deregulation has brought in, and now banks have flexibility in their
pricing policy. Thus, liberalisation has brought in almost complete freedom to the
banks to decide the price according to market situations.
Place – The Third ‘P’
This ‘P’ signifies placing or distribution of services to the ultimate customers.
The service mix of banks moves through different distribution channels, such as,
the branches, the executives and the staff. A suitable location/ point for the
establishment of a bank branch is very important. It should give conveniences and
comfort to the customers. As far as possible, services should reach the doorsteps of
the customers. The behavioural profile and efficiency of the bank personnel is also
equally important. No gap in the distribution process would occur that will hinder
smooth flow of services since inconveniences to customers would act as a
demotivational tool that will result in deserting a bank.
Conveniences inside the premises also attract customers to the bank. It should
be neat, clean and well furnished. There are many well equipped and air-
conditioned branches for many banks. But many others lack proper space, filled
with old and worn-out furniture and look unattractive. Effective marketing requires
good appearance and comfortable surroundings.
Technology has been in extensive use to reach customers now. Strategic
alliance with other players in the field for providing banking services is another
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strategy under place mix. Through this, there is a possibility for covering wider
geographical area through other established banks, especially for new banks with
limited number of branches. Special counters for certain segments of customers
like pensioners, specialized branches for special customers like Non- Resident
Indians, exporters etc. and single window concept are now in the offing. Mobile
offices and officers which are reaching to customers are in use in many banks.
Promotion – the Fourth ‘P’
The fourth ‘P’, promotion plays an important role in promoting banking
business. It communicates with the customers/prospective customers on almost all
the aspects of the marketing mix like advantages of different products, details of
how it is delivered, details on the interest and commission paid and charged by the
bank etc. Simultaneously, it persuades the prospective customers to bank’s
products. Thus marketing promotion has two basic objectives – first one to inform
the prospective customers and second one to persuade them. This could be in
various shapes like advertisement, personal interaction and sales campaign. Or this
could be a combination of various promotional instruments. Basically there are four
important components for promotion strategy, such as:
 Advertising
 Sales Promotion
 Publicity and
 Personal Selling
While formulating a promotion mix, optimal blending of all the four elements is
necessary to succeed in informing, persuading, reminding and reinforcing
customers.
Advertising
Traditional meaning of advertising is that it is a paid form of non-personal
presentation and promotion of ideas, goods and services by an identified sponsor. It
is a paid form of persuasive communication. In bank marketing it is the bank
which directly talks about itself, and pays for doing so. Here the bank tells the
prospective customer the merits of its products and how it satisfies the customer.
Earlier public sector banks were prohibited from advertising through media. But
now they have the freedom to advertise, along with private and foreign banks, their
product launch, brand building and their corporate philosophy.
Sales Promotion
Sales promotion, the next component of the promotion mix, is found effective
in motivating the customers and the employees of the bank. It comprises of short
term activities intending to boost the banking business. It helps a bank in
increasing its market share by helping to launch a new scheme/service or by
supporting an ailing or modified one. Moreover, sales promotion activities are
attention-raisers that will influence prospective customers. If advertising is aimed
to increase loyalty towards a brand, sales promotion techniques are intended to
increase the actual immediate purchase by existing or prospective buyers. The tools
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of sales promotion in banks may be in the form of gifts, contests, fairs and shows,
discounts and commissions, low interest financing, entertainment and travelling
and additional allowance
Personal selling
Personal selling is an important component of promotion mix. It is very much
instrumental in promoting banking business. It is a function of informing the
prospective customers and persuading them to purchase products through
personal communication in an exchange situation. In personal selling inter-
personal or two–way communication happens and that makes way for a feedback.
Moreover, personal selling may be interchanged with persuasion, in meaning, and
persuasion has an effective role in the banking business. Personal selling becomes
very much effective in improving the quality of banking services since the bankers
have a command on it. This art of telling-and-selling is known as personal selling in
which an individual, based on his/her expertise, attempts to transform the
prospects into customers.11 It is a form of direct selling.
Public Relations and Publicity
The next component, public relations, occupies an outstanding place in the
promotion of banking services. In banking services the development of rapport with
customers plays an incremental role in getting the business or keeping the
business. It is a two–way communication system to develop mutual understanding
between a banking organisation and its customer. It is the way to inform the public
about the organisational programmes and activities, so as to create the best public
reputation. Most probably it is in the form of a press release to newspapers and
banking magazines or financial news so as to create the interest of customers. In
banks there is a Public Relations Department and Public Relations Officers. The
other components of public relations are press bits distributed during press
conference, speeches, seminars, annual reports, charitable donations,
sponsorships, community relations and lobbying the noted personalities, VIPs etc.
Process – the Fifth ‘P’
The organisational activities or processes of a typical banking concern were
mostly designed during the traditional banking period. In the present scenario of
reforms basic changes in banking systems and procedures are necessary for
achieving customer satisfaction. The need of the hour is more customer-friendly
and marketing-oriented processes that will give uniqueness to the product. For this
the work-flow in a bank branch should be customer-oriented so as to give
maximum convenience to the customers. Similarly, the present reporting system of
sending too many reports/statements should be abolished to reduce the workload
of the bank staff. Some bankers have already taken this issue in their consideration
while introducing information and communication technology based systems and
procedures.
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People - The Sixth ‘P’
People are an important component of bank marketing strategy as human
factor is very influential in services marketing. As the inseparability principle is
applicable in bank marketing, the services and service providers are not separable
in banks. So the quality of service provided by a bank depends on the quality of
people available to the bank. Only quality people can generate efficiency and
improve productivity. A fair synchronisation of dedicated and committed team of
efficient professionals and new information technology could perform fantastically
to produce the best result as in some foreign banks and private banks. Human
resource development is the way for the formation of human capital. Since the
banking services are intended for customer satisfaction, it is imperative that the top
executives at the apex level should give due consideration for their human capital
and the people at the counter.
Physical Evidence –The Seventh ‘P’
Like all service products, banking products are also intangible. Making it
tangible is a major duty of the banker and for that he uses the instrument of
physical evidence in different forms in banks. Proper upkeep of branch premises
and interior decoration of branches are originally part of place strategy but which
have relevance from the standpoint of physical evidence also. Most of the banks in
India accepted this fact with enthusiasm and there is a new look and convenience
for many bank branches. Another area of physical evidence is the stationery items
like cheque book, pass book supplied to customers and other stationery materials
in use. These items may be redesigned to look attractive, clear and convenient to
customers. An attractively designed product brochure, a catchy brand name for a
product, timely supply of statement of account etc. will make the products tangible.
Bank: “Accepting for the purpose of lending & investment, of deposit of money
from the public, repayable on demand order or otherwise and withdraw able by
cheque, draft or otherwise.”
Banking means transacting business with a bank; depositing or withdrawing
funds or requesting a loan etc.
Customer Service: : Checking and savings options, Certificates of deposit,
College savings plans, Individual retirement accounts, Tax and estate planning,
Business, personal, home and auto loans, Lines of credit and other credit products,
Safe deposit boxes and Financial planning.
17.5. INTEXT QUESTIONS
1. What is banking? Enumerate various customer services provided by banks.
2. Describe a marketing strategy for banking services.
17.6 SUMMARY
Banking has been defined as “Accepting for the purpose of lending &
investment, of deposit of money from the public, repayable on demand order or
otherwise and withdraw able by cheque, draft or otherwise.” Bank provides
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customer services like, Generating awareness about various banking products,
technologies and cross selling products.
1. __________ and Lending are the prime jobs of Bank".
2. Marketing strategy of Bank covers
a. 4Ps b. 5Ps c. 6Ps d. 7Ps
3. Anything that can be offered to a market for attention, acquisition, use, or
consumption that might satisfy a want or need is called as:
a. idea. b. demand. c. product. d. service.
1. http://work.chron.com/customer-service-banking-12283.html
2. fiuindia.gov.in/files/released.../banking_regulation_act.html
3. https://www.ngdata.com/10-bank-marketing-strategies/
17.9 ASSIGNMENT
1. Develop a marketing strategy for a Multinational Private Bank with special
emphasis to Southern India.
1. Principles and Practices of Banking (2nd Edition), IIBF, Macmillan, 2008.
2. Principles and Practices of Banking, (3rd Edition) JAIB, Macmillan, 2015
1. List out various banking services provided by bank in India
2. Does leading private and public sector bank develop and follow the same
strategy? Substantiate your view with examples.
17.12 KEY WORDS
1. Banking, Customer Services, Marketing Strategies for Banking Services.
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LESSON – 18
NEW TRENDS IN BANKING SERVICES – EDUCATIONAL SERVICES –
PUBLIC UTILITY SERVICES
18.1 INTRODUCTION
A bank is a financial institution that accepts deposits from the public and
creates credit. Customer service means different things in different industries, but
it always boils down to the same basic elements – providing superior levels of
service to patrons, constituents and clients. In the banking industry, where
technology continues to evolve the way we handle personal and business finances,
quality customer care includes keeping pace with both live and digital options for
handling everything from simple to complex transactions. This lesson also gives an
outline into marketing strategies for banking services.
18.2 OBJECTIVES
After studying this lesson, you will be able to understand:
 What is banking?
 Functions of Banking
 What is customer service and Customer service provided by banking sector
 What is marketing strategy and its nature and characteristics?
 Marketing Strategies for Banking Services
18.3 CONTENTS
18.3.1 Recent Trends in Electric Power Sector:
18.3.2 Water Supply and Sanitation: Key Challenges and Emerging Policy Priorities
18.3.3 Recent Trends in Telecommunication Industry:
18.3.4 Recent Trends in Education
18.3.5 New Trends in Banking Service:
18.3.6 New Trends in Banking Service:
The Indian banking industry is not lagging behind, it has started providing
services electronically over the internet. These services rendered over electronic
media include:
1. Electronic Payment Services
E Cheques
Now-a-days we are hearing about e-governance, email, e-commerce, e-tail etc.
In the same manner, a new technology is being developed in US for introduction of
e cheque, which will eventually replace the conventional paper cheque. India, as
harbinger to the introduction of e-cheque, the Negotiable Instruments Act has
already been amended to include; Truncated cheque and Echeque instruments.
2. Real Time Gross Settlement (RTGS)
Real Time Gross Settlement system, introduced in India since March 2004, is
a system through which electronics instructions can be given by banks to transfer
funds from their account to the account of another bank. The RTGS system is
maintained and operated account within two hours.
3. Electronic Funds Transfer (EFT)
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Electronic funds transfer is a system of processing and communication of
payment through electronic methods. EFT assumes greater significance in the
banking system as the RBI also encourages the commercial banks to adopt this
technique. Inter and intra bank transfers of funds are now made through this EFT
mechanism. Transactions of high value i.e., at least more than one lakh is now
made through this cost effective and quick system of settlement.
Normally, payments are made through cash, cheques, drafts and credit cards.
The latest in this process are the debit card system, charge, digital cash, and
electronic purse and so on.
4. Electronic Clearing Service (ECS)
Electronic Clearing Service is a retail payment system that can be used to
make bulk payments/receipts of a similar nature especially where each individual
payment is of a repetitive nature and of relatively smaller amount. This facility is
meant for companies and government departments to make/receive large volumes
of payments rather than for funds transfers by individuals.
5. Automatic Teller Machine (ATM)
Automatic Teller Machine is the most popular devise in India, which enables
the customers to withdraw their money 24 hours a day 7 days a week. It is a device
that allows customer who has an ATM card to perform routine banking
transactions without interacting with a human teller. In addition to cash
withdrawal, ATMs can be used for payment of utility bills, funds transfer between
accounts, deposit of cheques and cash into accounts, balance enquiry etc.
6. Electronic Data Interchange (EDI)
Electronic Data Interchange is the electronic exchange of business documents
like purchase order, invoices, shipping notices, receiving advices etc. in a standard,
computer processed, universally accepted format between trading partners. EDI
can also be used to transmit financial information and payments in electronic form.
7. Shared Payment Network System (SPNS)
SPNS installed by the IBA in the city of Mumbai, enables electronic banking
service like cash transactions, extended hours of banking, utility payments,
cheques, point of sale facilities by the SPNS can go to any ATM linked to S
8. Tele Banking
Tele Banking facilitates the customer to do entire non-cash related banking on
telephone. Under this devise Automatic Voice Recorder is used for simpler queries
and transactions. For complicated queries and transactions, manned phone
terminals are used.
9. Phone Banking
Bank on phone, provides easy access for customers to have large businesses
through telephones. Data are exchanged over the phone regarding any queries, to
issue instructions on balance transfer, statement of account, cheque- book, stop
payments, new schemes, interest rates etc. at any convenient time and place. Tele
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banking has gone a long way in providing maximum customer satisfaction within
the limited infrastructure
10. Credit Cards
These plastic cards enable customers to spend whenever he/she wants within
the prescribed limits and pay later. Debit card is a prepaid card with stored value,
whereas credit card is post-paid with fixed limits. It is seen that spending is higher
through debit cards than with credit cards currently CITY Bank and time bank
have started with Debit cards and now other banks are also following these to
launch their own cards.
11. D-Mat Accounts
Transacting shares business through electronic media is called D-Mat.
Investor opens an account called Demat Accounts with DPS. They get shares in
electronic form. Then they send the actual shares to the investor. Investor pays for
the opening, maintenance and collection of shares. This has reduced the paper
work, bad deliveries; loss of shares and less transaction cost. However delays in
demating, higher cost charged by the investors has not given a good start for the
growth and scope of Demat in India. Depository.
2.3.2. Recent Trends in Education
1. Digital Content Continues to Boost Adaptive Learning
Adaptive learning is, essentially, the personalization of learning for every
student. It allows students to take in information in a far more focused manner, at
their own pace, and tailored to their personal understanding, learning languages,
and so forth. Digital learning increases the possibility for this by allowing teachers
to redirect some learning to the online world; this allows personal time spent
between the teacher and student to be more purposeful, and fueled by their time
spent online learning.
2. Growing Sophistication of Video Based Learning
Over the years, the benefits of video-based learning have become clearer. The
use of video in learning has easily transformed the teaching experience not only for
the students, but also for educators, from flipped classrooms, to traditional or
blended education platforms.
3. Utilizing Learning Analytics
In 2017, we are surrounded by different forms of data, from GPS location
tracking and wearable technology, to the access of a wealth of information via
devices like tablets and smart phones on a whim. Many institutions have become
aware of the growing importance of data collection and analysis. Nonetheless, the
big question in 2017 will be:
4. Blended Learning
The importance of the role played by the teachers cannot be overstated. One of
the key elements in the learning process, regardless of age, is the dynamic
relationship that is shared between the student, their peers, and the learner and
the instructor. The teacher is responsible for fostering these relationships. But,
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considering the amount of time and effort instructors put into lesson planning,
marking and evaluation students’ performance, and finding academic books, the
time available to assess their learning style’s effectiveness is miniscule at best.
5. Gamification of Education
It has become evident that the non-traditional learner is the majority in 2017.
Students are finding it increasingly more difficult to connect to an outdated method
of learning, and the education system is facing more pressure to personalize
learning for individuals. Gamification is one of the key solutions we have seen in
2017. Gamification is the use of video games for educational purposes. While 2016
saw some interesting use of gamification in the education sector – for instance with
Minecraft Education Edition – such forays were quite minimal and more
experiments.
6. Private In-Home Tutors
Tutoring is a big industry, and can be practiced based on an on-site location,
or at home. The home based model typically employs a broker who acts as an
intermediary between them and the students who want to learn any number of
subjects. On the other hand, the on-site location based model typically involves
having a dedicated centre where kids can go and take classes and learn a variety of
subjects. Aside from the basic subjects like Maths and English, these institutions
will offer standardised test preparation.
7. Personalized Learning
The ideal learning experience is one that has been perfectly customized to
meet the specific needs of each student. When an instructor fits personalized
learning on both the style of teaching and the level of knowledge, the learners
generally become better at retaining what they have learned, become more engaged,
and are more receptive to learning.
8. Focus on Job Placement and Careers
Over the recent years, there have been growing choruses over the value of
education to the job market, especially with higher education institutions. In 2017,
universities are now renewing their efforts to demonstrate value to their students,
in both employment and earning benefits. A growing number of these institutions
are investing in community projects and research institutions, to spur new
business development and commercialise the student discoveries.
9. Alternate Credentialing
Learning institutions are now seeking alternative methods to assess learning, and
are recognizing, using the traditional form of teaching as the basis, but also recognizing
that learning must provide credentials. In the reality of the modern world where debt is
looming and job hunts have become unrewarding, the students of today are increasingly
searching for affordable ways to achieve the education they need for the jobs they want.
In 2016, we saw a rise in the level of alternate credentialing programs, wherein students
were provided with new ways to become qualified.
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2.3.2. Recent Trends in Public Utility
2.3.3. Recent Trends in Telecommunication Industry
Traffic expansion is on the rise: Big challenge for telcos is to build the
additional infrastructure for new technologies.
Growth in the IoT market: New services being deployed on top of old
technologies will help the Internet of Things market to grow suggestively.
Bidding adieu to 2G: In the era of 4G, 2G has become outdated. As a result,
the demand for network services that are up to date with the latest requirements is
rising.
2.3.4. Water Supply and Sanitation: Key Challenges and Emerging Policy Priorities
Universal access to both water and sanitation still remains an issue in urban
India. As illustrated, the mere presence of infrastructure is no indicator of service
levels. While 40 percent do not have access to public piped water supply, the
remaining households may not get a sufficient quantity of water, or regular water
supply. In absence of public service, households depend on multiple sources of
water—procuring water from private players or some form of provisioning. In
addition, nearly one-third of urban households do not have any water source within
their premises, and nearly a third depend on shared facilities. Water quality is
likely to be a concern. At the city level, the biggest concern remains the high
distribution losses, and high non-revenue water.
Nearly 10 million urban households do not have access to any form of latrine,
and defecate in the open, while another 2 million have access to unimproved
sanitation. Any equally pertinent concern is the abysmal record on wastewater
conveyance and treatment side. Only one-third of the waste is carried through
sewered networks, and only 15 per cent of wastewater is treated. There are minimal
facilities for safe sullage/septage removal, transportation and treatment.
The focus has predominantly been on creation of new infrastructure, without
adequate attention paid to putting in place a sustainable O & M region to ensure
sustainability of infrastructure.
The urban poor are disproportionately affected by the lack of access to water
and sanitation. Urban poor households are more likely to need to fetch water from
outside their houses, and more likely to depend on shared facilities. On the
sanitation side, they are more likely not to have access to adequate sanitation
facilities. As highlighted above, there are unique challenges to ensure provisioning
of services to the poor, including tenure security, affordability and space
constraints.
The environmental concerns posed by the urban water supply and sanitation
are two-fold. There is inadequate attention being paid to the protection of water
sources, and there are hardly any efforts to move towards conjoint management of
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water. The more severe concern is pollution of both surface and groundwater
caused by a lack of treatment of wastewater.
Thus, cities need to address the following on a priority basis:
1. Universal access to water and sanitation, especially ensuring access to the poor
2. 100per cent treatment of waste
3. Protection of water sources
4. Rationalising use of water
 Increased efficiency of city-level infrastructure, specifically reduction of non -
revenue water
 Demand management
5. Ensuring adequate O &M regime
2.3.5. Recent Trends in Electric Power Sector:
Coal power in decline: For many power companies and politicians, the
single most noticeable trend in the utility industry is the steady retirement of coal-
fired power plants.
Natural gas is growing fast: In the near-term, coal’s loss appears to be
natural gas’ gain. As market conditions and regulations push older coal generators
into retirement, utilities looking to add reliable capacity quickly are increasingly
looking to gas plants.
Renewable reaching grid parity: For years, the primary argument against
renewable energy was that it isn’t cost effective. Today, that line of reasoning is
becoming increasingly obsolete. In many regions, wind and solar — especially at
utility scale — are reaching grid parity and often pricing out more traditional
generation resources.
Utilities face growing load defection: EEI’s “Disruptive Challenges”
white paper introduced the electric industry to the threat of the “utility death
spiral." Nearly three years later, utilities across the nation are still struggling with
how to deal with load defection as some customers bypass their local utility for
their electricity needs.
Utilities getting in on the solar game: In response to increasing load
defection and consumer demand for clean energy, a number of utilities are moving
into the solar industry, both in the utility-scale and rooftop markets.
Debates over rate design reforms and value of DERs are heating up:
In addition to getting into the solar industry themselves, a number of utilities are
responding to the rise of distributed generation by altering their rate designs to
properly value distributed resources
Utilities becoming more customer-centric: The rapid growth in both grid
and home energy technologies has forced utilities to rethink the customer
relationship. Whereas power companies used to think of their consumers simply as
ratepayers, or even just “load,” new home energy technologies and shifting
customer expectations have pushed them to focus on individual consumers.
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Utility business models are changing: If each of these trends has
something in common, it’s that they all are changing the way electric utilities have
traditionally done business.
For most of the 20th century, the role of the utility was quite clear: Build out the
grid and power system as a regulated monopoly entity to achieve economies of scale,
and then maintain it so the lights don’t go out. Utilities appealed to regulators when
they needed new infrastructure, and then built it while earning a modest return.
Recent Trends in Banking Services: Electronic Payment Services, Real Time
Gross Settlement, Electronic Funds Transfer, Electronic Clearing Service,
Automatic Teller Machine, Electronic Data Interchange. Shared Payment Network
System, Tele Banking, Phone Banking, Credit Cards and D-Mat Accounts
Recent Trends in Education: Digital Content Continues to Boost Adaptive
Learning, Growing Sophistication of Video Based Learning, Utilizing Learning
Analytics, Blended Learning, Gamification of Education, Private In-Home Tutors,
Personalized Learning, Focus on Job Placement and Careers and Alternate
Credentialing.
Recent Trends in Public Utility: Recent Trends in Telecommunication
Industry, Water Supply and Sanitation: Key Challenges and Emerging Policy
Priorities and Recent Trends in Electric Power Sector.
1. Critically examine new trends in banking services
2. Describe various trends in educational services
3. Enumerate the recent trends in Public Utility Services.
18.6 SUMMARY
1. This unit deals with the recent trends in banking services like, Self Service
Technologies (RTGS, EFT, ECS, ATM, Electronic Data Interchange. Shared
Payment Network System, Tele Banking, Phone Banking, Credit Cards and D-
Mat Accounts)
2. Recent Trends in Education: It includes the digitalization, Customization and
skill specific education to be employable in future.
3. Recent Trends in Public Utility
4. Recent Trends in Telecommunication Industry, Water Supply and Sanitation:
Key Challenges and Emerging Policy Priorities and Recent Trends in Electric
Power Sector.
1. In _________ system, payment transaction is not subjected to any waiting
period, with transactions being settled as soon as they are processed.
2. ___________ is a service is a retail payment system that can be used to make
bulk payments/ receipts of a similar nature especially where each individual
payment is of a repetitive nature and of relatively smaller amount.
a) RTGS b) EFT c) ECS d) Mobile Banking
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3. ___________ of the following is an educational trend that has been perfectly
customized to meet the specific needs of each student.
a) Blended Learning b)Private In-Home Tutors
4. Personalized Learning d) Alternate Credentialing
1. https://www.utilitydive.com/news/10-trends-shaping-the-power-sector-in-
2018/515235/
2. https://www.teachthought.com/pedagogy/modern-trends-education-50-
different-approaches-learning/
3. https://www.capgemini.com/resources/top-ten-trends-in-banking-2017/
18.9 ASSIGNMENT
1. Critically examine various public utility trends with special reference to India.
1. Modern banking, Shelagh Heffernan, John Wiley & Sons, 2005
2. Current Issues and Trends in Education, Jerry Aldridge, Renitta L. Goldman,
Pearson/Allyn and Bacon, 2007
1. Enumerate how technology fuel changes in banking services.
18.12 KEY WORDS
1. Trends in Banking Services, Trends in Educational Sector and Recent trends
in public utility services.
H
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LESSON -19
TOURISM MARKETING – TOURISM PRICING - TOURISM PROMOTION
– TOURISM AND GOVERNMENT ADMINISTRATIVE SYSTEMS
19.1 INTRODUCTION
People travel from one place to another for many reasons ranging from leisure
to business trip. Tourism marketing has emerged to give professional experience in
this area. The tourist market is comprised of all the companies that offer their
products and services agents of travel, hotels, restoration companies, inhabitants of
the destination, the plaintiffs and the entire infrastructure that can be used by
tourists. The peculiar characters of tourism is , Perishable, Not expendable,
Inseparable, Rigid, Heterogeneous and complementary, Subjective and Intangible.
Tourism promotion needs different approach than product promotion due to its
unique characteristics. And The Ministry of Tourism and National Tourist
Organization are the government administrative systems aid in tourism
development.
19.2 OBJECTIVES
 After studying this lesson, you will be able to understand: What is Tourism
Marketing? How tourism is being priced and promoted by tourism marketer.
Further, government role in the development of tourism.
19.3 CONTENTS
19.3.1 Tourism
19.3.2 Tourism Marketing
19.3.3 Types of Tourism
19.3.4 Tourism Pricing
19.3.5 Tourism Promotion
19.3.6 Tourism and Government Administrative Systems
3.3.1. Tourism
"Tourism comprises the activities of persons traveling to and staying in places
outside their usual environment for not more than one consecutive year for leisure,
business and other purposes.
19.3.2 Tourism Marketing
According to krippendort “Tourism marketing is to be understood as the
systematic and coordinated execution of business policy by tourist undertakings
whether private or state owned at local, regional , national or international level to
achieve the optimal satisfaction of the needs of identifiable consumer groups, and
in doing so to achieve an appropriate return.”
Concept of tourist market
The tourist market is comprised of all the companies that offer their products
and services agents of travel, hotels, restoration companies, inhabitants of the
destination, the plaintiffs and the entire infrastructure that can be used by tourists.
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To understand how the tourism market is structured, it must first define the
characteristics of the products it offers. The tourism product has very special
characteristics and which are not shared with other sectors of business products.
These characteristics that define the tourism product are as follows:
 Perishable: They cannot be stored in stock, an unused service constitutes an
irrecoverable loss to the company. For example a hotel room not sold today.
 Not expendable: is conditional on the presence of the customer, so the
displacement is important.
 Inseparable: The production and consumption are made many times in the
same place and at the same time, are simultaneous. This perhaps is one of the
pillars of tourism since to enjoy that service or product is required an offset.
 Rigid: The tourist product lacks elasticity in the direction of that slowly
adapts to variations of the demands. This is caused by the huge cost of tourist
investments and considerable time of its construction, bid cannot follow
variations in demand with the same rapidity with which occur.
 Heterogeneous and complementary: in global product there is
complementarity between the various by-products, isolated by-products are
heterogeneous and do not form a whole, has its own entity.
 Subjective: The satisfaction or dissatisfaction of the customer depends among
other things of his emotional state, how the product is offered and the
expectations that have been created
 Intangible: You cannot possess it or touching, only you can enjoy.
19.3.3 Types of Tourism
Traveling is one effective way to see the world, experience new cultures and
meet new people at the same time. For many tourists, however, traveling
accomplishes many other purposes that don’t even have anything to do with the joy
of visiting a new place. This is why there are many different types of tourism that
explain why tourists choose a particular destination and the things that they expect
to do when they are there.
Perhaps the most common type of tourism is what most people associate with
traveling: Recreation tourism. This is when people go to a place that is very
different from their regular day-to-day life to relax and have fun. Beaches, theme
parks and camp grounds are often the most common places frequented by
recreational tourists.
If the objective of one’s visit to a particular place is to get to know its history
and culture then this type of tourism is known as cultural tourism. Tourists may
visit different landmarks of a particular country or they may simply opt to focus on
just one area. They may also attend festivals and ceremonies in order to gain a
better understanding of the people, their beliefs and their practices.
For tourists who want to see wildlife or bask in the joy of just being in the
midst of nature, nature tourism is the answer. Ecotourism and nature treks are all
part of this kind of tourism. Bird watching, for example, is one activity that nature
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tourists are fond of doing. What marks this kind of tourism is that it is
environmentally responsible, has low impact and advantageous to the local
community.
Many people today are stressed out in the corporate rat race and in need of
rejuvenation. Thus, they go on trips that refresh their souls and spirits. This is
called pleasure tourism and usually includes yoga workshops and detox vacations,
among others. Others, however, de-stress by engaging in a particular sport.
Called sports tourism, travelers here target places which are known for a
particular sporting facility. Skiing, for example, is a type of sports tourism. Also
included in this category are those who go to a destination to experience a sports
spectacle such as the Olympics, FIFA World Cup and others.
Religious tourism is another type of tourism where people go to a religious
location or locations to follow the footsteps of their founder or to attend a religious
ceremony. Catholics, for example, go on pilgrimages in the Holy Land to experience
the paths where Jesus walked.
Medical or health tourism is a relatively new type of tourist activity where the
main focus of the travel is improving one’s health, physical appearance or fitness.
For instance, certain countries promote the expertise of their doctors and surgeons
in the field of cosmetic surgery and invite foreigners to have their liposuction,
facelift, nose lift and other forms of cosmetic procedures to be done there. Medical
tourism also incorporates aspects of recreation tourism where the patient goes to a
relaxing getaway to recover from the procedure.
Adventure tourism is another type of tourism that is catered for those who
want to do more than just visit regular tourist sites. These kinds of trips involve
challenging activities like rock climbing, mountain climbing and wild water rafting.
It should be noted that there are no strict delineations when tourists go on
their trips. These kinds of tourism often overlap so it’s not unusual for travelers to
experience more than one type of tourism in one vacation.
19.3.4 Tourism Pricing
A product must be priced accurately and competitively. This requires a clear
understanding of the individual costs of all product components and their impact
on the total price.
The setting of prices for tourism and hospitality products among SMEs is often
‘hit or miss’. Many smaller operators continue in business for years not realising
that they are slowly going backwards. Important points to consider when setting
your prices are:
Total costs involved in getting the product or service to the market,
 Your required profit margin,
 Price sensitivity of target markets,
 Commission levels and other distribution costs,
 Allowance for any taxes that are applicable,
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 Competitor analysis and competitive advantage,
 Market and image perception of the product, the business and the region,
 The perceived value of the product,
 The quality of the product.
 Factors influencing pricing are:
Seasonality: particularly fluctuations between high and low season,
Operating costs: overheads, promotion and labour costs can vary depending
on business peaks and troughs/
Competition: this influences the maximum price for which a product can be
sold
Demand: generated by existing and potential customers
To determine prices, many operators simply rely on comparisons with
competitors, or use a 'cost-plus' pricing system, without ever determining the
break-even point. This is a simple calculation to determine how much product they
need to sell to stay in business, before even considering making a profit. Read how
you can do a simple break-even analysis.
Discounting: Pricing, and especially how to effectively use dynamic, seasonal
and value-added pricing, including discounting, can be a valuable part of your
marketing strategy. There are a number of ways to influence customers to buy
more, e.g.….
 Package or bundle your product
 Discount pricing
 Quantity discounts
 Seasonal discounts
Segmented pricing (i.e. price reductions to one part of your market, e.g.
students, seniors etc)
Discounting on price alone can be a short term action to boost sales, and it
works best for low value, high turnover products, but it is usually a doomed
strategy on a longer term basis. There will always be a competitor who can
undercut your price and it’s easy to find yourself in a downward spiral of
competitive price cutting.
Value vs. Price
There are some market segments that will always be price sensitive. However,
in recent times there has been a steadily growing consumer appreciation of ‘value’
rather than price alone, regardless of whether you are selling a tent site, a
backpacker bed or a 14 night Baltic cruise. The more sustainable approach is to
price your offer on the basis of ‘value’ and to use your marketing communications
to clearly communicate that value. Pricing based on value-added and bundling is
much harder for competitors to compete on.
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Develop a perceptual map
1. Take out a piece of paper and draw a horizontal and vertical axis on it.
2. On the left hand end of the horizontal axis, write ‘Necessity’, and at the right
hand end write ‘Discretionary’
3. At the top of the vertical axis write ‘Unique, and at the other end write
‘commodity’
Map your products
4. Write down every single product and service that you offer your clients
somewhere on this 2X2 matrix. If possible, do this with a team. Think outside
the box, especially about the services that you offer.
Analyse results
5. You should find that you have some unique and discretionary products in the
top right hand quadrant. These are the products and services you should
focus on developing strong value stories for, with premium prices.
6. The products and services in the bottom left hand corner represent necessary
commodities. These are what you should compete on price on.
19.3.5 Tourism Promotion
Tourism promotion means stimulating sales through the dissemination of
information. It means trying to encourage actual and potential customers to travel.
Objectives of Tourism Promotion
The objectives of tourism promotion are to foster understanding between
people, to create employment opportunities and bring about socio-economic
benefits to the community, particularly in the interior and remote areas and to
strive towards balanced and sustainable development and preserve, enrich and
promote India’s cultural heritage. One of the major objectives is the preservation
and protection of natural resources and environment to achieve sustainable
development.
Promotion and Communication
Good promotion is good communication. Essentially, developing the
promotional mix is an exercise in communication. The communication system is
made up of a sender, receiver and a message.
The sender (travel organization) transmits certain information that will change
people’s attitudes and creates in them a desire to use the product or services
The receiver is the potential tourist.
The message can be verbal (radio) visual (press, advertising, television, film
shows, exhibition, periodicals etc.) For communication to take place, there should
be a common understanding between the sender of the message and the receiver of
the message.
The end goal of promotion is behaviour modification. Its task to initiate a
purchase where none has been made before; initiate a change in purchase
behaviour by having the tourist buy a different destination package or to reinforce
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existing behaviour or to reinforce existing behaviour by having the tourist continue
to buy the brand being promoted.
Three types of promotion

1. Informative promotion is more important during the early stages of the
product life cycle when owners of new resorts and other attractions will seek
promotional outlets to inform the public of the facilities and amenities that
would make their vacation experience worthwhile.
2. Persuasive promotion is used when an attraction is in its early stages of
growth, so its owners put very much promotional effort in devising persuasive
messages and sending them through several channels.
3. Reminder is important upon reaching a mature stage. Owners will then
remind people of their positive experiences. These reminder messages serve to
jog the memory and keep the product in the public
Promotion and Traveller’s Buying Process
The relationship between the goals of promotion and the buying process of the
traveler is explained in figure 5. To achieve the goal of behaviour modification the
three types of promotion described above are used. Informative is important to the
tourist at the attention and comprehension stages of the buying process. Persuasive
promotion tries to change attitudes, develop intentions to buy and then initiate the
purchase. Reminder promotion is used after the purchase has been made.
Goals of promotion and the Traveller’s Buying Process
BUYING PROCESS PROMOTION GOALS END GOAL
Adoption
Remind
Purchase
Intention Persuade
Behaviour
Attitude Modification
Comprehension
Inform
Attention
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Promotion and Visitor’s Buying Process
 Informative promotions are most effective at the earlier buying process
stages(attention and comprehension).
 Persuasive promotions work better at intermediate buying process stages
(attitude,
 intention, and purchase).
 Reminder promotions are most effective after the first visit or use.
PROMOTION PLANNING
Promotion planning determines the objectives or goals the organization should
strive to accomplish and the plan of action to attain these goals.
Promotion Mix
Promotion mix are the tools that convey the message to the customers. The
major types of the promotion mix are:
Advertising-any form of paid for, non-personal presentation and promotion of
ideas, products or services by a specific sponsor using some forms of mass media.
Personal selling- an oral presentation to one or more prospective customers
on a face-to-face basis;
Sales promotion-activities, other than advertising and Personal selling, that
stimulate a purchase.
Public relations- the presentation of ideas, goods or services about an
organization using mass media, unlike advertising it is not paid for. It is designed
to create favourable image of the product, service or business unit.
 Merchandising
 Public relations and publicity
 Internet marketing (sometimes called digital marketing)
Procedures in Implementing a Promotional Program:
1. Select the target market
2. Develop promotional objectives
3. Establish the promotional budget
4. Determine the message idea
5. Select the message format
6. Select promotional mix elements
7. Select promotional media
8. Measure and evaluate promotional effectiveness
19.3.6 Tourism and Government Administrative Systems
National Tourist Organization
The national tourist organization may be a full-fledged ministry, directorate
general, a department, corporation or board. Its arrangement and constitution
depends on factors like political structure of the country, the level of economic
development, potential value of tourism to the economy and the level of tourism
development.
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Functions of NTO
Research: A basic function of NTO is the research of tourism potential in the
country (natural and man-made both).
Information and promotion within the country: - To provide important and
accurate up to date information to the tourists visiting country or at various place.
Regularization and standards of lodging and restaurants: - To ensure the
maintenance of appropriate standards of quality and services of hotels and
restaurants.
Control of activities of private travel agencies: To ensure the appropriate
standards of quality and services of the travel agents in terms of efficiency, comfort,
economy and protection is maintained.
Publicity over-seas: It includes advertisements for publicity of all kinds (print
media, electronic media) public relation, distribution of print material.
International relations: To develop international understanding while
bringing diverse people face to face, develop social cultural values/understandings
among all the people of the world making friends to set a good image of the country
at international level.
The Ministry of Tourism
The Ministry of tourism headed by the „Union Minister for Tourism‟ is the
nodal agency for the formation of national policies and programs related to tourism.
It also coordinates all the activities of the central government agencies, state
government undertakings and the private sector for the development and promotion
of tourism. The administrative head of the ministry is the secretary (tourism) who
also acts as the Directorate General (DG) tourism. Directorate General of tourism
has 20 offices within India and 13 offices overseas. The work of the ministry is
divided into different divisions which are headed by either a Director or Deputy
Secretary level officer. These include
 Administration,
 Public sector undertakings (PSU) planning & coordination division,
 Publicity,
 International cooperation and IT & Events divisions,
 Market research division,
 Overseas marketing division,
 Hotels and restaurants division,
 Travel & trade division,
 Integrated finance,
 E-governance division,
 Official language division,
 Human resource development and domestic tourism division and parliament
vigilance, administration & public grievances divisions.
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Aims & Objectives of Establishment of Ministry of Tourism

 To promote India as a competent and credible MICE destination.
 To encourage growth of professionalism and evolve an industry code of ethics.
 To promote India as a desirable travel destination to international travellers.
 To give emphasis on the success of the brand incredible India.
 To provide good and services in a cost effective manner.
The functions of the Ministry are;
1. Planning and Policy-making; Overall tourism policy formulation,
implementation, monitoring and review in collaboration with stakeholders.
2. Overall co-ordination; Liaise and coordinate with international, regional and
local institutions on tourism issues.
3. Resource mobilization: Internal external resource mobilization in
consultation with the Treasury for the development of tourism;
4. Facilitation: Establishment of an enabling legal and regulatory framework,
promotion of local and foreign investments, safety and security of tourists,
and conservation of biodiversity.
5. Product development and diversification: Development of viable tourism
products and promotion of community participation in tourism.
6. Capacity development: Coordinating capacity development and setting of
standards in the hospitality industry.
7. Research and development: Undertake and coordinate research in the
sector.
In this respect, the Department is responsible for overall guidance and policy
coordination for all State Corporations under its jurisdiction.
1. Tourism comprises the activities of persons traveling to and staying in places
outside their usual environment for not more than one consecutive year for
leisure, business and other purposes.
2. Tourism marketing is to be understood as the systematic and coordinated
execution of business policy by tourist undertakings whether private or state
owned at local, regional , national or international level to achieve the optimal
satisfaction of the needs of identifiable consumer groups, and in doing so to
achieve an appropriate return.”
3. Concept of tourist market: Not perishable, Not expendable, Inseparable,
Rigid, Heterogeneous and complementary, Subjective and Intangible:
4. Types of Tourism: Recreation tourism, cultural tourism, nature tourism,
pleasure tourism, sports tourism, Religious tourism, Medical or health
tourism and Adventure tourism
5. Tourism promotion means stimulating sales through the dissemination of
information. It means trying to encourage actual and potential customers to travel.
6. Tourism and Government Administrative Systems: National Tourist
Organization and the Ministry of Tourism.
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1. What is tourism marketing? Bring out its characteristics.
2. What is tourism pricing? Explain various methods of fixing tourism pricing.
3. Critically examine various promotional methods in tourism industry.
4. Explain the role of government administrative system in tourism development.
19.6 SUMMARY
Tourism comprises the activities of persons traveling to and staying in places
outside their usual environment. The unique characteristics of tourism services are:
Not perishable, Inseparable, Rigid, Heterogeneous and complementary, Subjective
and Intangible: Tourism is classified into different types, they are; Recreation
tourism, cultural tourism, nature tourism, pleasure tourism, sports tourism,
Religious tourism, Medical or health tourism and Adventure tourism. National
Tourist Organization and the Ministry of Tourism are the important two government
administrative system to promote tourism.
1. __________is according to the perceived or estimated value of a product or
service
2. The process of selling of a product through publicity is called
a) Marketing b) Segmentation c) Advertisement d) Promotion
3. Which is the most important economic benefit of tourism
a) Increase in employment b) Increase in production
c) Foreign exchange d) None of these
1. http://ijarm.com/pdfcopy/sept2014/ijarm5.pdf
2. https://www.careerigniter.com/questions/what-are-the-different-types-of-
tourism/
19.9 ASSIGNMENT
1. Frame both pricing and promotion for cultural and nature tourism with
special reference to tamilnadu.
1. Introduction to Tourism, N.Jayapalan, Atlantic Publishers &Dist, 2001.
2. Tourism Marketing, Dasgupta Devashish, Pearson Education India, 2011.
1. List out various recreation, cultural, natural, pleasure, sports, religious and
medical tourism in Tamilnadu.
19.12 KEY WORDS
1. Tourism, Tourism marketing, Concept of tourist market, Types of Tourism,
Tourism promotion and Tourism and Government Administrative Systems
H
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LESSON – 20
TRAVEL MANAGEMENT – NEED FOR TRAVEL MANAGEMENT -
PROCEDURE OF TRAVEL MANAGEMENT AND ITS METHODS -
NEW TRENDS IN TRAVEL MANAGEMENT
20.1 INTRODUCTION
Travel management is a set of activities which facilitates travel need of
corporate in a professional manner. The scope of travel management is wider than
that of Travel Agency. Travel management companies provide expertise with
professionalism. With the experience, they have alternate plan to manage uncertain
events. And they can give you best and competitive price too. And this lesson gives
recent trends in travel management.
20.2 OBJECTIVES
 After studying this lesson, you will be able to understand: What is Travel
Management? What are the needs for travel Management? Procedures of travel
management and it methods and what are the new trends in travel
management.
20.3 CONTENTS
20.3.1 Travel management Meaning
20.3.2 Travel Management Company
20.3.3 Need for travel management
20.3.4 Recent Trends in Travel Management
20.3.1 Travel management Meaning
Travel management encompasses a wide variety of business travel services for
companies. In contrast to a standard TRAVEL AGENCY that only handles hotel and
flight or ground travel reservations, travel management companies offer
comprehensive management services to companies covering everything from
scheduling to shaping corporate travel policy.
Corporate integration
Travel management companies often partner with a company’s finance or
administrative department to provide in-house services covering all aspects of the
company’s business travel including the development of corporate policy and its
implementation. Services can also include expense auditing, identifying tax issues,
route planning and logistics. In addition, they can advise executives on updates
and changes affecting the travel industry.
Strategic Partnership
Through strategic partnerships with preferred vendors and the use of state of
the art software and technology, travel managers manage vendor negotiations for
the purpose of identifying discounts and acquiring the best rates on travel,
including hotel packages, meals, taxis and car services for business travelers.
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Global Connections
Travel management companies often have branch offices in other countries or
partner with other international companies to provide important information for
international business travelers. This information can include passport
requirements, cultural customs, language translation, currency exchange,
international laws, and traveler safety warnings.
All Inclusive Services
As a functioning department within a corporation, a travel management
company maintains travel profiles and coordinates information on conferences,
itineraries, travel authorizations, and allowable business expenses and can deliver
data directly to employees using Web-based portals and integrating with popular
software like Microsoft Outlook and Excel. The company can also manage business
expense processes and forms upon the employees’ return.
Financial Planning and Management
In addition to providing travel services, a corporate travel management
company provides comprehensive data and ongoing reporting on business travel
expenses to assist companies with reviewing and budgeting corporate travel costs.
They also advise executives on best practices and help to develop future initiatives
and travel policies.
Personal Contact
The biggest difference between using a travel agency and using travel services
is the personal contact. Travel agencies hire individuals to work with people to
schedule trips. When hiring a travel agency, an individual will be able to work with
one travel agent. This can be done in person, on the phone or by email. In
comparison, travel services work online and an individual can use services just by
entering information into a website to plan a trip.
Trip Planning
A second difference is in the planning of a trip. Travel agents are trained to
assist individuals in planning a trip from start to finish and to think of all possible
issues that may arise with the trip. These individuals typically attend a secondary
institution to specialize in these skills. In contrast, travel services are set up to
specifically assist individuals in scheduling flights or hotels after a trip location has
been picked. Again, travel services can be automated or through a website and
there may have been no additional training.
Fees
Another difference is in how travel agencies are paid versus fees paid for travel
services. Travel agents can be paid in a variety of ways, including set salaries,
commissions and fees. Travel agents also receive free trips as bonuses or in order to
evaluate potential places to recommend to customers. Travel services usually
charge a set fee for booking hotels, flights or rental cars. These fees are standard
and are not based on the price of the purchases.
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Convenience
A final difference between travel agencies and travel services is the
convenience factor. Travel services are convenient in that most are automated or
Web-based. They are always available and ready to book trips. Individuals can book
a trip at midnight without worrying about trying to reach an individual. In contrast,
travel agencies have set hours and may not be available late at night or at the last
minute to schedule a flight or trip.
20.3.2 Travel Management Company
A Travel Management Company (TMC) is a travel agent that fully manages the
business travel requirements delegated by an individual, company or organization
to fundamentally save clients both time and money.
A TMC is also commonly known as a business travel agency or corporate travel
provider.
As opposed to the traditional travel agent, who will usually deal with
occasional leisure travel needs, a travel management company provides on-going
services with the aim of providing cost savings, keeping control of a travel policy
and allowing the client to spend less time on time-consuming travel arrangements.
Services under Travel Management
 Traveller Tracking
 Account management & consultancy services
 Global consolidated MI
 Global expense management tools
 Online booking tools and systems
 Groups, events, incentives and meetings management
 International and domestic air booking services and programme management
including low cost carriers
 International and domestic accommodation booking and programme
management including budget hotels
 Passport/Visa and consulate services
 Special events tickets and transportation
 Global risk and corporate responsibility systems and management support
 Car Rental, international, domestic and worldwide
 Medical and travel insurance
 FOREIGN CURRENCY EXCHANGE and traveller cheques/cards
 Travel documentation delivery and management
 Private jet charter
 Dedicated personal travel executives
 Bespoke leisure and holiday services
 Chauffeured limousines bookings and services
 Airport services including meet & greet and ground transportation services
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Benefits of Travel Management Company
Managing a team of dedicated employees and their travel arrangements is a
taxing gig that requires all the help you can get. While corporate TRAVEL
AGENCIES are the usual go-to when it comes to booking airlines, hotels, and
transportation, they introduce many points of friction. In this increasingly
connected day and age, these points of friction just don’t need to be there.
Consider the role of the internet: over the past 20 years, it has disrupted every
industry from leisure travel to lodging to taxi services. Corporate travel
management is no exception, with companies like ours working to provide travel
managers like you with a more streamlined and intuitive platform to overhaul the
entire process of traditional business travel booking.
Systemizing your company’s corporate travel management offers a wealth of
benefits to any travel manager looking to make their job easier while at the same
time adding value. Below are fives benefits gained from a digitized travel solution:
1. Streamlined processes
Emails, emails, and more emails: it’s usually the case that multiple rounds of
communication are necessary to initiate, clarify, and finalize a travel request. While
the results may be the same, time and control are lost in the process. This equates
to a lack of efficiency and a loss of potential savings since information about
transportation options is limited.
Simplifying booking processes returns that control to those who demand it:
you. Using them allows you to check and compare more flights and
accommodations faster, usually guaranteeing a much better price without the
hassle of multiple emails. Employees can book their own trips as well by using tools
like Travel Perk, which not only increases autonomy but also overall satisfaction.
2. Reduced travel expenses
Making sure your teams stays under budget while ensuring an efficient,
comfortable trip for them is a thin line to walk. Under and overspending means
money left on the table, money that can be used and/or saved more efficiently.
Static budgets don’t do very much to help travel managers in this regard as making
sure they stay accurate is difficult due to constantly fluctuating prices.
Unlike traditional corporate TRAVEL AGENCIES, most digital corporate travel
solutions are constantly connected. Some employ dynamic budgets as opposed to
static budgets, too, meaning they take into account real-time pricing information
along with your company’s travel policies. Together, you rest assured that budgets
are always being met, no matter what.
3. A more cost-conscious culture
According to Expedia, a majority of small business travellers (91%) spend more on
meals, hotel rooms and room service than when they travel on personal money. This
happens because employer and employee interests aren’t aligned and is made worse
from a fundamental lack of awareness of how these costs impact the bottom line.
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For both travel managers and the employees they manage, some digital travel
solutions offer more visibility about budgeting requirements and the company
policies that form their basis. This helps keep the focus of any communication
between you and those you manage on how to make their business travel more
efficient and comfortable.
4. Generates valuable corporate travel data
Putting everything into the hands of a corporate travel agent only serves to
take it out of yours, depriving you of valuable data that can serve to improve your
processes over time. Without it, you’re left groping in the dark, hoping the corporate
travel company you’re dealing with truly has your bottom line in mind. (Plot twist:
they probably don’t.)
Using digital travel solutions means generating troves of data full of valuable
metrics like flight costs, hidden fees, travel frequency, hotel stay frequency, and
many more. All of this valuable data can be used to better allocate funds and
negotiate better deals with those most used flights and hotels — making you and
those above you so much happier over the long-term.
20.3.3 Need for travel management
One need travel management to be efficient. Below are the points substantiate
propose the need for travel management.
You lack the human resources and Expertise: The task of travel
management often falls on someone with a completely different title, who likely
hasn’t been trained in corporate travel. This wastes company time and money when
that person should be doing their “real” job, but is stuck trying to buy tickets and
wrangle itineraries.
You lack patience. Do you struggle to know which deals are the best deals?
Do you have other things to do than spend the afternoon comparing sites, flight
routes, and prices? With a travel Management Company, let someone else find the
best deals.
You have little or no travel management industry knowledge. Do you know
the most effective practices for corporate travel policies? How about negotiating
airline or hotel contracts? You may be missing out on standard practices or budget
saving tips.
Your analytics and reporting are non-existent. Just like other areas of your
business, analyzing and managing the expenses and trends of your corporate travel
program is important for running your business overall.
You don’t have an emergency plan for travelers. Should your employees
face an emergency when traveling, do you have a plan? Do they know what to do
next? Travel management companies can provide additional duty of care support
when you need it the most.
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POLICIES AND PROCEDURES
Are a set of rules regulation within the framework of the corporate travel
program.
Some travel policy highlights are:
 Reservation
 Airfares
 Routing
 Layovers
 Corporate credit cards
Implementing travel policies and procedures
Implementing the travel policies and procedure involves the day to day
application of companies travel policies and procedures.
Travel authorization- authorization for an employee’s company travel is
normally done by the immediate supervisor, who is inform upon approval of travel
by the department head, via a travel order stating the destination, rationale and
objective for the trip.
Approval power- approval power differ from authorization travel in that the
former relates the financial aspect as the trip, while the former limits itself to the
propose and duration of travel.
Rank entitlement- some corporate ranks, like managers, directors and ranks
above are authorized a class of service standards above the normal or average.
Implementing a transition plan- upon commissioning, the travel
management company must consider the manner to thoroughness and credibility
of the transition plan implementation.
Management corporate travel operations
Another critical aspect of corporate travel management is the managing and
monitoring corporate travel operations.
Managing travel operation- managing travel operation start with itinerary
planning and ends with the post trip report.
Quality assurance initiatives- simply stated, quality assurance is the delivery
of service booked in accordance with reset standards.
Electronic management of travel and entertainment expenses- this simply
describes as follows: employees make reservations and order tickets online.
Reporting and analyzing performance
Parallel to all the previous stage of corporate travel management, this stage
involves generating all the necessary reports that unable analysis of performance
vis-à-vis the corporate travel objectives goals.
This stage consist of:
 Generating and analyzing reports.
 Reporting violations.
 Monitoring compliance
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20.3.4 Recent Trends in Travel Management
1. Big Data
The current obsession with data gathering and analytics is huge, with IBM
reporting that 90% of the world’s data has been created over just the last two years
– a staggering 2.5 quintillion bytes of data per day!
When it comes to business travel, data helps companies to build a clear
picture of their travellers, bookers and suppliers, and subsequent analytics can
help to manage spend, spot patterns and trends, and improve the business traveller
experience. Data also gives businesses the means to measure the services provided
by their suppliers, including travel management companies, to ensure successful
partnerships.
At Good Travel Management analytics are used by account managers to make
recommendations for changes that will positively impact a company’s bottom line,
the traveller experience and employee productivity, and companies can access this
data 24/7 in real time, for ultimate transparency.
2. Smarter Travel Tech
Technology is always moving forward, with a massive shift towards online and
mobile processes. Many travellers are now utilising their smart technology to
simplify travel – using a mobile phone for ticketless travel, for example. This digital
approach has also expanded into other aspects of travel such as room ‘keys’ that
are downloadable to a mobile app.
It’s essential that travel management companies keep up with relevant
technology trends. The Good Travel Trip Check app, for example, allows travellers
to view and share itineraries (including real-time details), check-in for flights, and
access destination information and travel tips. Travel bookers can also benefit from
online tools that allow them to make bookings at any time, from anywhere – with
options instantly checked for compliance with the company travel policy.
3. Virtual Reality and Augmented Reality
The trend for virtual and augmented reality really has the potential to shake
up the travel industry as a whole, offering business travellers, bookers, companies
and travel management companies the chance to ‘try before they buy’ before
committing to a supplier or travel option. There’s also the potential to use this
technology to recent business travel journeys in advance.
Some augmented reality apps are already moving into the travel market by
overlaying data about destinations and attractions onto landmarks and streets,
with the next logical step being augmented live travel and transport information.
This is a technology trend that is only just getting warmed up – with a potential
combined market expected to be worth up to $150 billion by 2020 – and travel
management companies need to start considering how it could benefit their users.
4. Embracing Disruptors and Innovators
Fresh thinking innovators such as Uber and Airbnb have completely shaken up
the travel industry by giving travellers exciting – often lower cost – accommodation and
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ground travel options. And it’s a similar story in the skies with the rise of the low-cost
airline, which is now expanding into long haul routes with the likes of low-cost airline
Norwegian launching ten new transatlantic routes from the UK and Ireland, and new
low-cost long-haul carrier Level due to launch from Barcelona this summer.
Travel industry disruptors often have a knock-on positive impact, forcing their
competitors to essentially ‘up their game’. For example, the recent London launch of
the MYTAXI app is adding value for black cab users as they are now able to use
smart tools to note their favourite drivers and share their real-time journey
information with others.
5. Pleasure
There’s a big buzz around leisure which is essentially the combination of
business and leisure travel to boost traveller well-being and productivity. It leads on
from the increased importance being placed on work/life balance and staff welfare
and has the potential to be a growing consideration for companies and the business
travel industry. We’re already seeing a consumer and corporate market crossover
with the trend for integrating leisure travel services such as an Airbnb
and Booking.com into business travel, and travel management companies should
be looking at ways to add value for the traveller, with the end goal of increased
traveller comfort and enjoyment.
Hotels are quickly cottoning on to the ‘added pleasure’ trend among business
travellers, swapping out more traditional delayed gratification loyalty perks for
instant perks that appeal to a younger workforce. Hilton, for example, runs a
scheme allowing members to spend loyalty points on Amazon purchases. Travel
management companies will need to negotiate similarly appealing ‘leisure-style’
perks i.e. free coffees, Wi-Fi, gym access and instant upgrades to compete with
hotels that are keen to appeal to businesses directly.
6. Focus on Safety and Security
With the threat level from international terrorism currently set at severe, the
world has never been more fearful of a terror attack. Airports, public transport
systems and busy city centres are seen as prime targets, which puts the business
traveller in a potentially dangerous position.
Companies have a duty of care towards their employees, and safety and
security are now a huge concern. Thorough risk assessments are essential, and
those using travel management companies will expect safety tools and processes in
place as standard. At Good Travel Management, GT Assist includes all the
essentials a business with travelling employees needs to fulfil its duty of care
responsibilities, including 24 emergency assistance, real-time traveller tracking,
travel disruption and risk alerts and crisis management.
In many companies, safety concerns will directly influence business travel plans
and policies, with increased questioning of the necessity of every trip. Communications
technology such as Skype and developing areas of technology such as virtual reality
will be considered as viable alternatives to non-essential travel.
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7. Personalisation
Companies are quickly realising that it’s not a case of ‘one size fits all’ when it
comes to managing their staff. Flexible working hours, unlimited leave, remote
working and job sharing are all initiatives that are on the rise, with businesses
benefiting from increased productivity, staff retention and a happier workforce.
We also see increased personalisation in our online experiences, with targeted
ads on social media and other online channels. The rise of the chat boot also means
that companies can connect with customers on their preferred platforms – airlines
such as KLM and Lufthansa are using Face book Messenger to talk to passengers,
for example.
Clever companies will use the insights gleaned from gathered data, together
with improvements in technology, to support a more personalised approach to
business travel. This has the potential to improve communication between travel
manager and traveller, increase awareness of and compliance with company travel
policies, and improve the traveller experience.
8. A Global Marketplace
Advancing communications technology and improved transportation links
make it easier than ever to do business abroad, and the predictions for a post-
Brexit Britain are that reduced UK-EU trade will encourage more international
partnerships and global business expansions. This all points towards a potential
boom in business travel – especially to further flung destinations and emerging
markets such as South America and the Middle East – as companies seek to learn
more about these unfamiliar markets, the cultural nuances, and the business rules
and regulations.
9. Financial Caution
The modern business world is undeniably a cautious place. Since 2000 there
has been a string of financial crises across the globe, including both the US and the
UK going through periods of recession. Brexit is currently causing economic and
political uncertainty, and controlling costs is crucial for businesses if they’re to
survive the crashes and crises that are now part of our global economy.
This tightening of the purse strings approach has naturally led to companies
questioning their business travel spend and seeking ways to either reduce costs or
add value. Companies are implementing travel approval policies, creating a need for
smart approval tools, and business travel managers will need to negotiate
competitive corporate rates and discounts for their clients.
Businesses are also likely to be looking at online alternatives to face to face
meetings, aggregating meetings or events to cut costs, or considering more cost
effective and cheaper destinations to host their events and meetings.
10. Focus on Ground Transport
The ground transport elements of business travel have long been overlooked as
an untraceable ancillary spend, but with increased importance being placed on
175
controlling costs, companies are likely to value whole journey cost transparency,
including rail travel, taxis and hire car expenses.
This may lead to price comparisons and some preference changes in business
travel policies. For example, train travel can be a cheaper option than air,
particularly if avoiding the ‘anytime travel’ ticketing options. And as business
travellers are usually able to make calls, use Wi-Fi and work from a table seat, time
spent travelling by train can be utilized as productive work time. Add to this less
‘dead time’ waiting in airports, a typically less stressful travel experience,
substantial investment in electrified routes, digital railways and high-speed rail
development, and a much-reduced carbon footprint, and travelling by train could
quickly become a viable alternative to air travel.
In an ever-changing world, the business travel industry needs to adapt to the
effects of global trends constantly. At Good Travel Management we strive to lead
from the front as a forward-thinking travel management company, using the latest
technology, tools and insights to make your business travel easier.
Travel management: ravel management encompasses a wide variety of
business travel services for companies. In contrast to a standard TRAVEL AGENCY
that only handles hotel and flight or ground travel reservations, travel management
companies offer comprehensive management services to companies covering
everything from scheduling to shaping corporate travel policy.
Travel Management Company
A Travel Management Company (TMC) is a travel agent that fully manages the
business travel requirements delegated by an individual, company or organization
to fundamentally save clients both time and money.
 Need for travel management::Travel management provides expertise service
backed with good analytical knowledge and patience.
 Policies and procedures: Are a set of rules regulation within the framework of
the corporate travel program. Some travel policy highlights are; Reservation,
Airfares, Routing, Layovers and Corporate credit cards.
 Recent Trends in Travel Management: Big Data, Smarter Travel Tech,
Virtual Reality and Augmented Reality, Embracing Disruptors and Innovators,
Bleisure, Focus on Safety and Security, Personalization , A Global
Marketplace, Financial Caution and Focus on Ground Transport.
1. What is travel management? Enumerate the various services rendered by
Travel Management Company
2. Examine the recent trends in travel management industry.
20.6 SUMMARY
 Travel management encompasses a wide variety of business travel services
for companies.
176
 A Travel Management Company (TMC) is a travel agent that fully manages
the business travel requirements.
 Services under Travel Management: Traveller Tracking, Online booking tools
and systems, Groups, events, incentives and meetings management,
International and domestic air booking services, Passport/Visa and consulate
services, Special events tickets and transportation, Car Rental, international,
domestic and worldwide, Medical and travel insurance, Foreign Currency
Exchange and traveller cheques/cards, Bespoke leisure and holiday services and
Airport services including meet & greet and ground transportation services.
 Need for travel management: You lack the human resources and Expertise,
You lack patience, You have little or no travel management industry
knowledge, Your analytics and reporting are non-existent and You don’t have
an emergency plan for travelers.
 Recent Trends in Travel Management: Big Data, Smarter Travel Tech,
Virtual Reality and Augmented Reality, Embracing Disruptors and Innovators,
Bleisure, Focus on Safety and Security, Personalization , A Global
Marketplace, Financial Caution and Focus on Ground Transport
1. ___________ is a travel agent that fully manages the business travel
requirements delegated by an individual, company or organization to
fundamentally save clients both time and money.
2. Which of the following is the reason for choosing travel Management
Company?
a) Expert Service b) Time Saving c) Cost Saving d) All of the above
1. http://blog.good-travel.co.uk/10-global-trends-that-affect-the-business-
travel-industry
2. https://www.cbtravel.com/2016/06/what-does-a-travel-management-
company-do/
20.9 ASSIGNMENT
1. Consider you own a Travel Management Company. Now list out the various
services you would provide in order to satisfy your clients.
1. Corporate Travel Management, James M. Poynter, Prentice Hall, 2011
2. The Business of Travel Agency and Tour Operations Management, A.K Bhatia,
Sterling Publishers Pvt. Ltd, 2012
1. Choose a real time travel management company, enumerate its various
functions. And also do a SWOT analysis for that company.
20.12 KEY WORDS
1. Travel management, Need for travel management, Policies and procedures:
and Recent Trends in Travel Management:
H
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LESSON - 21
HOSPITAL SERVICES
21.1 INTRODUCTION
Hospitals play an important role in the health care system. They are
health care institutions that have an organized medical and other professional staff,
and inpatient facilities, and deliver medical, nursing and related services to the general
public. A hospital is a health care institution providing patient treatment with
specialized medical and nursing staff and medical equipment. The important and
initial element within the health systems building blocks is water, sanitation and
hygiene services. Water, sanitation and hygiene in health care facilities are
fundamental for the provision of quality, people-centered care. Such services also
reduce health care-related infections, increase trust and uptake of services, increase
efficiency and decrease cost of service delivery and improve staff morale. All major
initiatives to improve global health depend on basic wash services in health care
facilities.
21.2 OBJECTIVES
After reading this lesson, you will be able to know about,
 Hospital services
 The various services offered in hospitals
 Different classifications of hospitals
 The types of hospitals
 Supportive services
 Consumerism
21.3 CONTENTS
21.3.1 Hospital services
21.3.2 Services offered in hospitals
21.3.3 Classification of hospitals
21.3.4 Types of hospitals
21.3.5 Supportive services
21.3.6 The Clinical and Non-clinical supportive services
21.3.7 Consumerism and hospital services
21.3.1 Hospital Services
Hospital services is a term that refers to medical and surgical services and the
supporting laboratories, equipment and personnel that make up the medical and
surgical mission of a hospital or hospital system. Hospital services make up the
core of a hospital's offerings. They are often shaped by the needs or wishes of its
major users to make the hospital a one-stop or core institution of its local
community or medical network. Hospitals are institutions comprising basic services
and personnel usually departments of medicine and surgery that administer
clinical and other services for specific diseases and conditions, as well as
emergency services. Hospital services cover a range of medical offerings from basic
health care necessities or training and research for major medical school centers to
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services designed by an industry owned network of such institutions as health
maintenance organizations.
21.3.2 Services Offered in Hospitals
Hospitals offer a variety of services that mainly cover inpatient procedures that
require overnight stays or outpatient operations that require anaesthesia or use of
expensive diagnostic and surgical equipment. Different types of hospital services are:
 Emergency Care
 Maternity
 Nursing
 Surgery
 Pharmacy
 Specialty services
Emergency Care
Most hospitals provide emergency care for traumas and other serious
conditions. Emergency room staffs are prepared to provide triage and stabilize
patients until they can be moved to a room or treated and released.
Maternity
Many hospitals provide maternity care. Rooms are available that are all-
inclusive where mothers can give birth, nurse their babies and spend a day or two
recovering from the delivery. Other hospitals utilize operating rooms for deliveries
and nurseries for the newborns. Newborn intensive care facilities are available at
most hospitals for babies born prematurely or with other serious medical
conditions. Maternity hospitals also prepare for emergency deliveries and those
with complications that require special care.
Nursing
Hospitals are the largest employers of nurses, who staff all sections in
hospitals. Nurses carry out the orders provided by doctors and see to the daily
needs of patients who are staying in rooms at the hospital. Nurses assist physicians
in surgery and staff various services in hospitals 24 hours a day.
Surgery
Hospitals stock and staff surgical suites that can be used for outpatient
services or in-depth procedures, such as transplants, heart surgery and repairing
broken bones. While many hospitals employ surgeons full-time on staff, others
make their surgical services available to affiliated doctors. Surgical services include
anaesthesiology services, nursing care, pre- and post-operative rooms, and lab and
x-ray technicians.
Pharmacy
Hospitals provide pharmacy services that supply patients with medications as
prescribed. In addition to providing inpatients with medicine, many hospital
pharmacies can fill prescriptions for patients as they leave.
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Specialty services
Various hospitals provide specialty services such as cardiology wards, cancer
centers, paediatric services and rehabilitation units. Nurses and technicians who
work in specialty units receive additional training to serve that population. Patients
may receive ongoing treatment as outpatients through a hospital-run clinic as well
as surgical and rehabilitation services in the same facility. Specialty units at
hospitals typically provide social services in addition to medical treatments in the
form of specialized referrals or in-house counsellors.
21.3.3 Classification of Hospitals
Hospitals have been classified into many ways. The most commonly accepted
criteria for the classification of the modern hospitals are; (a) ownership control
basis. (b) length of stay of patients and (c) clinical basis,
Based on Ownership/Control
On the basis of ownership or control, hospitals can be divided into four
categories, namely, public hospitals, voluntary hospitals, private nursing homes
and corporate hospitals.
Public Hospitals
Public hospitals are those run by the Central Government, state governments
or local bodies on non-commercial lines. These hospitals may be general hospitals
or specialized hospitals or both. General hospitals are those which provide
treatment for common diseases, whereas specialized hospitals provide treatment for
specific diseases like infectious diseases, cancer, eye diseases, psychiatric ailments,
etc. General hospitals can diagnose patients suffering from infectious diseases, but
refer them to infectious diseases hospitals for hospitalization, as general hospitals
are not licensed to treat infectious disease patients.
Voluntary Hospitals
Voluntary hospitals are those which are established and incorporated under
the Societies Registration Act, 1860 or Public Trust Act, 1882 or any other
appropriate Act of the Central or state government. They are run with public or
private funds on a non-commercial basis. No part of the profit of the voluntary
hospital goes to the benefit of any member, trustee or to any other individual.
Similarly, no member, trustee or any other individual is entitled to a share in the
distribution of any of the corporate assets on dissolution of the registered society. A
board of trustees, usually comprising prominent members of the community and
retired high officials of the government, manages such hospitals. The board
appoints an administrator and a medical director to run such voluntary hospitals.
These hospitals spend more on patient care than what they receive from the
patients. There is, of late, a trend among voluntary hospitals to charge reasonably
high fees from rich patients and very little from poor patients. Whatever they earn
from the rich patients of the private wards, spend on the patients of general wards.
However, the main sources of their revenue are public and private donations, and
grants-in-aid from the Central Government, the state government, and from
philanthropic organizations, both national and international .Thus, voluntary
hospitals run on a 'no profit, no loss' basis.
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Private Nursing Homes
Private nursing homes are generally owned by an individual doctor or a group
of doctors. They admit patients suffering from infirmity, advanced age, illness,
injury, chronic disability, etc., or those who are convalescing, but they do not admit
patients suffering from communicable diseases, alcoholism, drug-addiction or
mental illness.
There is, however, no uniform definition for nursing homes. The phrase may
refer to out-of-home care facilities that offer a range of services similar to many
found in a hospital. These nursing homes are run on a commercial basis. Naturally,
the ordinary citizen cannot usually afford to get medical treatment there. However,
these nursing homes are becoming more and more popular due to the shortage of
government and voluntary hospitals. Secondly, wealth patients do not want to get
treatment at public hospitals due to long queues of patients and the shortage of
medical as well as nursing staff leading to lack of medical and nursing care.
Corporate Hospitals
The latest concept is of corporate hospitals which are public limited companies
formed under the Companies Act. They are normally run on commercial lines. They
can be either general or specialized or both.
Based on Length of Stay of Patients
A patient stays for a short-term in a hospital for treatment of diseases such as
pneumonitis, appendicitis, gastroenteritis, etc. A patient may stay for a long-term in
a hospital for treatment of diseases such as tuberculosis, cancer, schizophrenia,
etc. Therefore, a hospital may fall either under the category of long-term or short-
term according to the diseases and treatment provided.
Based on Clinical Basis
A clinical classification of hospital is another basis for classification of
hospitals. Some hospitals are licensed as general hospitals while others as
specialized hospital. In a general hospital, patients are treated for all kinds of
diseases such as pneumonitis, typhoid, fever etc., at in a specialized hospital,
patients are treated only for those diseases for which that hospital has been set up ,
such as heart diseases, tuberculosis, cancer, maternity, ophthalmic diseases, etc.
21.3.4 Types of Hospitals
In India, healthcare is delivered at private and government clinics, community
health centers (CHCs), Ayurveda, Yoga and Naturopathy, Unani, Siddha and
Homoeopathy clinics, and hospitals. According to the classification set forth in the
Ministry of Health’s National Health Accounts, which measures the flow of
expenditures in the health sector, the Indian hospital system comprises general
hospitals and specialized hospitals in the public and private sectors, as well as
mental hospitals in the public sector. Public general hospitals include medical
college hospitals, district hospitals, sub-district hospitals and CHCs. Private general
hospitals include all private hospitals and nursing homes. Specialized hospitals
provide care for specific illnesses, e.g., tuberculosis, cancer, and lung disease, or in
specific practice areas, e.g., neurology, nephrology, and cardiology. Now we see
some of the common types of hospitals in India.
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General hospital
All establishments permanently staffed by at least two or more medical
officers, which can offer in-patient accommodation and provide active medical and
nursing care for more than one category of medical discipline (e.g. general
medicine, general surgery, obstetrics)
Rural hospital
Hospitals located in rural areas permanently staffed by at least one or more
physicians, which offer in-patient accommodation and provide medical and nursing
care for more than one category of medical discipline (e.g. general medicine, general
surgery and obstetrics.)
Specialized hospital
Hospitals providing medical and nursing care primarily for only one discipline
or specific diseases (e.g. tuberculosis, ENT, eyes, leprosy, orthopaedic, paediatrics,
gynaecological, cardiac, mental, cancer, infectious disease, and venereal diseases)
The specialized departments, administratively attached to a general hospital and
sometimes located in an annexe or separate ward, may be excluded and their beds
should not be considered in this category of specialized hospitals.
Teaching hospital
Hospital to which a college is attached is attached for medical/dental
education.
Tertiary hospital
States and Central Government set up tertiary hospitals in their capitals
where referred patients are treated such as AIIMS, New Delhi.
21.3.5 Supportive Services
Hospital supportive services refer to numerous services provided by hospitals
to the patients and their families. Within a hospital, different departments are
responsible for providing the levels of service that make a hospital run – from
environmental services, equipment distribution and linens to biomed/clinical
engineering, facilities and many others. All these support services are necessary to
keep the hospital going, so that hospital staff can provide care and patients can
receive treatment. These support services also have an opportunity to drive
operational improvement. Often, departmental directors in support services must
deal with the pressure to “do more with less”. They may need to cut their operating
expenses by 10% or reduce headcount. These departments need the ability to
increase the efficiency and utilization of staff to meet the workload.
Housekeeping Services play a vital role to create safe and hygienic
environment in the hospital to provide best possible health care services to the
patients. Housekeeping services in a hospital has a major role in controlling the
infection rate as well as minimizing the Nosocomial and Hospital acquired infection
to the patients. Housekeeping services are provided as per the protocols and SOPs
approved by the Hospital Infection Control Committee. Routine housekeeping is
done under the supervision of Housekeeping Manager and Housekeeping
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Supervisors round the clock. The supportive services may be divided in to Clinical
and Non-Clinical Supportive services. They are explained below,
21.3.6 The Clinical & Non-Clinical Supportive Services
The division of clinical support services comprises of the following services:
 Pharmacy and medicines management.
 Therapies (occupational therapy & physiotherapy)
 Dietetics.
 Transportation
 Radio-Diagnosis Services
Pharmacy and Medicines Management
Pharmacy and Medicines management can be defined as a system of processes
and behaviours that determines how medicines are used by the patients. Effective
medicines management places the patient as the primary focus, thus delivering
better targeted care and better informed individuals.
The list below gives you some examples of the issues the Medicines
Management Team are involved in:
 Supporting healthcare professionals and patients to make best use of
medicines
 Giving health professionals and patients unbiased information on new and
existing drugs
 Helping to avoid harm caused by medicines such as side effects through
medication review.
 Developing local guidelines for managing medical conditions
 Giving advice on how to store and dispose of medicines safely.
 Improved patient care and satisfaction
 Help to maximize the use of resources available
Pharmacy provides a trust wide comprehensive array of pharmacy services
with the overall aim of ensuring safe, effective and economical use of medicines
throughout the trust and supporting education, training and research.
Occupational Therapy and Physiotherapy Services
Physiotherapists aim to help people develop their physical abilities and functional
skills. They do this by assisting people to improve their posture and movement through
intervention and support. Occupational therapists help people to become more
independent and improve their ability to perform the daily operations of life such as
studying, working and playing. They do this by enabling people to engage in
meaningful occupations for health, wellbeing, achievement and life success.
Dietetics
Dieticians are involved in providing effective, evidence-based nutritional
assessment, dietary advice and support to patients, their careers and all staff
involved in patient care. The main aim of this service is the prevention or correction
of nutrition-related symptoms and/or disease. The team provides expertise in a
wide range of specialties.
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Transportation
This service provides an emergency and non-emergency patient transport
service to patients eligible under department of Health criteria. The ambulance
service is the emergency response wing of the Hospital services. The ambulance
service has two main functions: an accident and emergency paramedical function,
and the Patient Transport Service function which transfers immobile patients to
and from their hospital appointments.
Radio-Diagnosis Services
The practice of modern medicine and surgery has increased the use of such
specialized services as Radiology. The radiology services may be organized as three
separate departments, namely, diagnostic radiology, therapeutic radiology and
nuclear medicine. The main function of this department is to assist the physician in
the diagnosis and treatment of a patient's disease through the use of radiography,
fluoroscopy a radioisotopes and high voltage acceleration. The primary function is
to provide reliable radiological services to the patients. Secondary function is to
engage in essential research for medical advancement and Participate in
educational program for hospital resident and in service program for the medical
staff. The different types of Equipment used are Developer, Ultrasound-Colour
Doppler, Echocardiogram, MRI machine, CT scan machine, X-ray machine, Fixer
etc.
21.3.7 Consumerism and Hospital Services
Consumerism is a social and economic order and ideology that encourages the
acquisition of goods and services in ever-increasing amounts. Healthcare
consumerism is defined as, “transforming an employer’s health benefit plan into
one that puts economic purchasing power and decision-making in the hands of
participants. It’s about supplying the information and decision support tools they
need, along with financial incentives, rewards, and other benefits that encourage
personal involvement in altering health and healthcare purchasing behaviours.”
Consumerism has driven transformation and innovation in industries.
Healthcare despite significant improvement in the healthcare product, which has
seen limited transformation in the way it is approached and delivered. However,
major challenges put the affordability and sustainability at risk. Collaboration and
patient-centricity will make information more easily available and understandable,
change the patients’ behaviour and give patients wider choice. The passive patient
will be transformed to an informed consumer who is able to select wellness
maintenance and treatment from a collaborative global healthcare community that
provides personalized, evidence-based care. Consumerism has been making inroads
into the healthcare industry for at least a decade, with patients increasingly acting
like consumers who have a choice in their healthcare options, trying to make the
best decisions for quality and cost just as they do with any other commodity.
Nowadays many of those patients are able to access much more detailed
information about important factors such as a physician's experience with a
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particular procedure or a hospital's complication and readmission rates. Patients
are finding, however, that there are limits to how much they can play the savvy
consumer. Despite growing access to quality metrics and hospital rankings, there
still are holes in that data that can make it difficult to discern meaningful
differences among providers; and even if patients have adequate information, they
may be unable to choose freely because of health plan restrictions and other
limitations.
However, the trend toward consumerism has advanced far beyond where it
was just a few years ago, and the healthcare industry is responding with outreach
and initiatives intended to help patients in their quest for value. At the same time,
consumers and healthcare leaders are both realizing that making healthcare
choices is not the same as finding the best deal on a television set—and it never will
be. Other concerns and motivations are in play when it comes to healthcare,
starting with the fact that the patient often is making the decision in a time of
stress and urgent need. Also, choosing one physician or hospital usually is not
enough; the patient has to make choices based in part on which physicians,
specialists, and hospitals work together and how they will work with the patient's
insurance coverage. And unlike most consumer choices, the human connection
between the patient and the provider can hold great sway over a patient's decision.
Many researches shows that consumers seeking information about physicians
and hospitals, indicates significant overlap between what consumers say is most
valuable when selecting a physician and what physicians want to know when
referring a patient to a specialist. Both consumers and physicians say experience-
related information is most important, especially for complex conditions and unique
cases. When choosing a hospital, quality measures such as complications and
mortality rates are most important in complex cases. Consumers take note of the
"patient satisfaction" ratings of a physician or hospital more in basic, everyday
situations such as selecting a primary care provider than they do in more complex
scenarios such as finding the best surgeon for the procedure they need.
1. Hospital services is a term that refers to medical and surgical services and the
supporting laboratories, equipment and personnel that make up the medical
and surgical mission of a hospital or hospital system.
2. Hospitals offer a variety of services that mainly cover inpatient procedures
that require overnight stays or outpatient operations that require anaesthesia
or use of expensive diagnostic and surgical equipment.
3. In India, healthcare is delivered at private and government clinics, community
health centers (CHCs), Ayurveda, Yoga and Naturopathy, Unani, Siddha and
Homoeopathy clinics, and hospitals.
4. Effective medicines management places the patient as the primary focus, thus
delivering better targeted care and better informed individuals.
5. The radiology services may be organized as three separate departments,
namely, diagnostic radiology, therapeutic radiology and nuclear medicine.
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1. Explain hospital services.
2. List out the services offered in hospitals.
3. Discuss the various classifications of hospitals.
4. State the different types of hospitals in India.
5. What are supportive services? Explain clinical and non clinical supportive
services.
6. Write short notes on consumerism.
21.6 SUMMARY
From the above it is clearly understood that Health care is one of the most
complex activities in which human beings engage. Hospitals are basically service
organizations. The professional area of an organization is influenced by its user’s
satisfaction. Healthcare services make up a significant portion of national expenses,
and thus it is essential that the nature and quality of services be explored. Patient
satisfaction is one of the primary outcome variables when considering healthcare
services. Patient satisfaction has become an important performance indicator for
the delivery of quality medical care services.
1. ________ hospitals are those run by the Central Government, state
governments or local bodies on non-commercial lines.
a) Public
b) Voluntary
c) Private
d) Corporate
2. ________ can be defined as a system of processes and behaviours that
determines how medicines are used by the patients.
a) Therapies
b) Diabetics
c) Pharmacy and Medicines management
d) Radio-diagnosis services
1. Mark Godson (2009), “Relationship Marketing”, Oxford University Press, New
Delhi.
2. Rama Mohana Rao K (2009), “Services Marketing”, Dorling Kindersley Pvt.
Ltd., New Delhi.
3. Srinivasan R (2010), “Services Marketing- The Indian Context”, PHI Learning
Private Limited, New Delhi.
4. Shajahan S (2014), “Services Marketing”, Himalaya Publishing House,
Mumbai.
5. Natarajan L (2010), “Services Marketing”, Margham Publications, Chennai.
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210.9 ASSIGNMENTS
1. What are Hospital Supportive Services? Explain how housekeeping services
play a vital role to create safe and hygienic environment in the hospital to
provide best possible health care services to the patients.
2. Discuss in detail the variety of services that are rendered by hospitals mainly
to cover inpatient procedures or outpatient operations.
1. healthleadersmedia.com/hr/how-real-healthcare-consumerism#
2. asianhhm.com/healthcare-management/consumerism-healthcare
3. princeton.edu/sites/default/files/content/docs/India%20Workshop%20Repor
t_2017.05.10%20FINAL.pdf
4. shodhganga.inflibnet.ac.in/bitstream/10603/8384/8/07_chapter%201.pdf
5. en.wikipedia.org/wiki/Healthcare_in_India
1. ‘Hospital services make up the core of hospital offerings.’ Discuss this
statement.
2. ‘Consumerism has driven transformation and innovation in industries.’ Do
you think so? Justify your answer.
21.12 KEY WORDS
1. Voluntary hospital
2. Public hospital
3. Private nursing home
4. Corporate hospital
5. Specialized hospital
6. Teaching hospital
7. Tertiary hospital
8. Supportive services
9. Consumerism
H
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LESSON - 22
MARKETING OF HEALTH SERVICES
22.1 INTRODUCTION
India is the major player in the world in healthcare industry. Low costs
combined with excellent facilities have stimulated the development of health care
service. Hospitals serve the masses by launching mass awareness programmes to
prevent ailment, which will pave way for a healthy life of the people. The marketing
principles for medicare services focus on distributing the services to users in a
decent way. World Health Organization (WHO) has enlarged the functional areas for
modern hospitals. A hospital is considered a social institution for delivery of health
care and offering considerable advantages to both the patient and the society. It is
considered to be the place for the diagnosis and treatment of human ills and
restoration of health and well being of those temporarily deprived of. As a social
institution, a hospital is responsible for protecting the social interests.
22.2 OBJECTIVES
After reading this lesson, your will be able to understand,
 The marketing mix for hospitals, health services and health care
 The Indian health care industry
22.3 CONTENTS
22.3.1 Marketing mix for hospitals
22.3.2 Marketing mix for health services and health care
22.3.3 Indian Health care Industry
22.3.1 Marketing mix for Hospitals
The marketing mix for hospital comprises product mix, price mix and place mix.
1. Product
A product is a set of attributes assembled in an identifiable form. The product
is the control component of any marketing mix. The product mix deals with a
variety of issues relating to development, presentation, and management of the
product which is to be offered to the market place. It covers issues such as service
package, core services and peripheral. The services offered by the hospitals are as
follows:
(i) Emergency services (ii) Ambulance services (iii) Diagnostic services (iv)
Pharmacy services; and (v) Consultancy services.
The emergency services offered by the hospitals are very important and
advanced as medical and Para medical personnel attending on the patients are fully
equipped to treat and save the lives of scores of people. There are super specialty
hospitals in I which treat several patients from I, Middle East, and Africa. In recent
months, the hospitals have received patients from Europe. International patients
account for around 8 per cent of total patients treated. Wockhardt Hospitals Ltd.
(WHL), Mumbai has become the first super specialty hospital in South India. It has
joined in line with 71 hospitals worldwide that have passed stringent quality
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standards. Hi-tech ambulances linked by state-of-the-art telecommunications are
fully equipped to assist in case of emergencies at the patient’s doorstep.
Modern hospitals are multi-specialty and multi-disciplinary that can handle
any kind of ailment. They offer a wide range of facilities – cardiology, neurology,
orthopaedics, ophthalmology and plastic surgery, oncology, etc. Most
hospitals have pharmacies which are open 24 hours. They cater to the needs not
only of the in-patients and out patients but other hospitals that require emergency
drugs. Modern hospitals have a 24 hour casualty department which attend to the
accident or emergency cases.
2. Price
Price is the significant element of the marketing mix. As a social institution, a
hospital must charge price acceptable to a target customer. The price element
should coordinate with other elements of the marketing mix. Hospitals charge price
on the basis of the treatment prescribed by the respective consultants and the
facilities offered to the patient. The fee structure is discriminatory since hospitals
treat the weaker sections of the society to provide them with an opportunity to avail
the quality medical services. In the U.S.A around 72 per cent of the people are
covered by medical insurance right from basic check up to major surgeries, which
is not the case with I.
3. Promotion
Promotion is an important dimension of marketing which simplifies the task of
motivating the prospects and transforming them into actual users. Promotion
includes advertising, sales promotion, personal selling and publicity. In the
medicare services, the ‘word of mouth’ communication plays a major role. Hospitals
introduce different health services such as master health programmes, diabetes
health checkups and annual health check-up to the corporate world. Moreover,
hospitals create mass awareness programmes through camps conducted in rural
areas. Hospitals advertise their services in health magazines.
4. Place
Place refers to the contact point between the service provider and the
customer. Identification of a suitable location is a must for distribution of medicare
services. The places for locating hospitals must be accessible to customers.
Accessibility is defined as the ease and convenience with which service can be
purchased, used or received. The location must ensure easy availability of the
service to the customers. The services must be capable of being purchased, used
and received. Certain factors influence the place decision – They are (i) market size
and structure by geographical regions, (ii) number and types of competitors, (iii)
potentially attractive consumer segments; and (iv) local infrastructure, etc.
5. People
People play an important role in the provision of services. Offering of treatment
requires efficient medical, Para medical and frontline staff. Customers are the
judges to evaluate the performance of medical personnel. Personnel offering their
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services to the vulnerable sections and thrust areas should be suitable rewarded.
Quality service can be provided by:
i) Keeping dedicated and service-oriented personnel.
ii) Providing training to the employees to acquire up-to-date knowledge in health care.
iii) Appointing professionally competent medical consultants.
iv) Use of latest technology.
The hospital authorities must ensure best medical attention to customers.
Because satisfied users act as an agent or hidden sale force.
6. Process
Process is a sequence of activities where inputs are converted into output.
Hospitals give importance to the process involved in the provision of services. The
process meant for the hospitals is divided into four stages as illustrated in the figure.
Joining Phase
The intensive
consumption phase
Detachment
phase
Feedback
Fig 22.1 Process in a hospital
The joining phase relates to arrival of the patient, and registration. The patient
makes an initial deposit. Then a file is opened in the patient’s name to record his
medical history.
The intensive consumption phase includes diagnosis where the consultant
diagnoses the ailment by conducting various tests. Then the illness is treated with
care. After the treatment is over, the patient is given instruction as to his diet,
medication, etc.
7. Physical evidence
Physical evidence is the environment where the service is delivered. It consists
of both tangible and intangible evidences. The tangibles in the service environment
are always important to customers. They evaluate the medicare with the tangibles
available with them. Modern hospitals are equipped with good ambience where
cordial relationship prevails. When a patient looks at the physical evidences, he can
form an opinion about the hospitals. Hospitals should have good ventilation, good
lightening, clean and well equipped rooms. Both physical and peripheral evidences
are given utmost importance
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22.3.2 Marketing of Health Services and Healthcare Products
The marketing of healthcare products and super specialty hospitals paves
avenues for initiating qualitative and quantitative improvement on the basis of
time-honoured managerial decisions. It is supposed to be the most effective device
for promoting the hospital services. The term hospital marketing connotes
application of marketing principles in a formal social institution with the motion of
enriching the potentiality of hospital organisations for making available to society
the best possible services. In plain words, the hospital marketing is a managerial
approach to design and plan everything in a hospital with the motto of serving
users’ interests.
The application of marketing principles in the hospitals may deliver goods to
the society and also ensure their financial viability. The product or the services in a
hospital differ from one hospital to another. However, there are three categories,
e.g., line services, staff services and auxiliary services. The line services include
emergency services, out-patient services, in-patient services, intensive care unit
and operation theatres. The supportive services are central sterile supply, diet,
laundry, laboratory, radiology and nursing. The auxiliary services are registration
and indoor case records, stores, transport, mortuary, dietary, engineering and
security. The users of the medical services demand quality services or treatment.
The technological innovations like laser technology based operations (operate the
human body even without making any scratches or insertions in the skin),
telemedicine and soon have added latest services in the field of medical science.
The consumer spending on health in India is predictably quite low. This is
partially because of free medical services provided by the government but also due
to lack awareness and level of importance given to health care. During the recent
past a lot of private nursing homes, diagnostic centres and specialty hospitals have
come up in urban areas, mainly for middle and high-income group people. The last
decade has also witnessed the emergence of ‘Corporate Hospitals’ in India. Apollo
Hospitals, (Rs. 10.24 crore public limited ventures opened at Madras on September
18, 1983) has the distinction of being the first corporate hospital in the country.
Now a lot many public limited companies have been set up in this area, which
include GIL Hospitals Ltd., Malar Hospitals Ltd., Advance Medical Care Ltd., NMC
Ltd., etc. Medical care is now emerging as a big industry in the private sector.
Currently, the Apollo Group has set up a huge (approximate Rs. 100 crore) multi-
specialty hospital in New Delhi, migrated to many South East Asian countries,
holding a network of 1000 super specialist doctors and 50,000 beds and emerged
as the second largest hospital chain in Asia.
1) Characteristics
Health services are highly intangible and which cannot be tested or examined
before consumption. Consumers the patients may not have the requisite knowledge
to verify and evaluate the quality of the services provided by a doctor. Due to
limited educational background and low awareness of health care issues, a majority
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of the consumers (patients) are not knowledgeable to evaluate service quality. The
following are the main characteristics.
(a) Degree of Variability
Health services are subject to great degree of variability. The services offered
by the hospital are highly judgmental and individualized. There are variations in
service performance offered by providers, employees depending on skills, moods,
etc. the various diagnostic procedures are also not standardized. The variations in
service provided depend on the affordability of the patient and reputation of the
hospital/expertise.
(b) Inseparability
Generally, health services are characterized by inseparability, which means
that the consumer has to play an active role in receiving service of good quality. In
health care services, the consumer plays a subordinate role. Health care service is
in many ways, different from other services and products. Here a person in need of
a health care service does not know where to search for relevant information.
Previously he consults his family members, relations and friends and of course
recent patients of that hospital as referrals. Now internet has altered the search
option for treatment.
(c) Health Service Quality
Word-of-mouth plays an important role in setting the platform for ascertaining
service quality. Therefore, satisfied past patients of a hospital can bring more
number of patients to that hospital than a number of advertisements. In this
context, healthcare organisations competing in such high pitch market have to take
all possible measures to provide quality service consistently. The principal
dimensions, which customers use to judge firm’s quality of service are as follows:
 Tangibles: The physical facilities, equipment, personnel and communication
facilities.
 Reliability: The ability to perform the promised service dependably and
accurately.
 Responsiveness: The willingness to help patients and to provide prompt
service.
 Assurance: The knowledge and courtesy of employees and their ability to
convey trust and confidence and
 Empathy: The provision of caring, individualized attention to patients.
2) Health Care Marketing Strategy
The Health Care Industry in India is becoming more competitive. This has
necessitated each hospital to identify and develop advanced function or service,
which can provide a competitive edge. As a result, many health care providers are
now recognizing the importance of brand building. The major reasons necessitating
a shift towards marketing approach in India are:
 Intense competition and very high customer expectations
 Enhanced consumer knowledge, quality of service and medical awareness.
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 Emergence of hospital chains, managed hospitals and super specialty
hospitals.
 Enhanced purchasing power and health consciousness and
 Focus more on the service of specialists and expertise.
Health care is a noble profession, which cannot be left to “profiteers” and
quacks, and, therefore, health care must be “sold” professionally by professionals.
Healthy people represent a healthy nation too. So it is necessary for the policy
makers to look up on this sector to do their level best. However dwindling of
resources compels them to open the sector for private players to take up more
initiatives in this regard. So hospital chains should be to provide the world class
medical services to every patient at their affordable price that too in a unique
manner.
(a) Positioning the service
Effective segmentation and positioning are the key to the success in health
care marketing. Although many hospitals emphasize sophisticated specialty care, it
is seen that maternity patients are most profitable. Some other health care
providers target their services to older individuals. This segment consists of
individuals aged above fifty years.
In India this segment is growing faster and it offers an opportunity to the
health care providers as this group is responsible for more patient days than other
segments. Some health care chains are focusing on the institutions. As many
public and private sector companies are becoming more professional and are
providing better perquisites and amenities to their employees; many of them have
respondent positively to the proposals put forth by the hospital chains in providing
health coverage and other medical facilities.
One factor that is likely to have a significant impact on the health care scene is
the growth of hospital chains such as Apollo Hospitals, Birla Health Centres, etc.
Artificial heart transplants and other complex operations although are few in
number generate a small portion of the total revenue, they are the line featuring
services used in advertisements. Furthermore, they help in generating word-of-
mouth which health care providers are actually interested. Many of these
companies are spending a lot in corporate advertising for image building. In the
coming years branches of big hospital chains, which will proliferate in cities and
towns, would compete with the local professional clinic.
(b) Healthy customer care practices
In order to understand the patients better, the Apollo Group of Hospitals have a
number of in-built systems, which keep a finger on the pulse of user opinion.
Following example illustrates this point further. In a hospital, where they had
adopted the following system:
1. Every patient is given a feedback form, which measures his levels of
satisfaction in patient areas. All patient complaints are sorted out as soon as
possible and the management regularly reviews the action taken in various
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areas. Senior officials including the Chairman, visit patients everyday as an
example of Management by Walking Around (MBWA). There are complaints /
suggestion boxes placed all over the hospital in order to encourage patients
and their relatives to make their opinions known.
2. The Guest Relations Officer is primarily in-charge of complaints and
suggestions. This office receives and handles regular suggestions regarding
improvement of services. Attempts are made to solve the problem on the spot
and regular reviews carried out.
3. A detailed study is carried out periodically with patients about to be
discharged. About 150 patients are studied every six months. The idea of
such periodical surveys is based on the fact that patients needs keep
changing. Since the hospital tries to solve problems immediately, the nature
of problems also keep changing. This is kept in view while constantly trying
to improve and enhance the quality of care.
4. The Facilitation Desk, which is manned right through the day, provides an
additional channel for patients who seek information, directions and
redressal. The 24-hour reception is of course ready to help the patients.
5. There is an Advisory Committee of opinion leaders from the community, who
meet once in two months and keep the management informed about what the
community feels about the hospital. Very interesting and insights have been
received while carrying out this programme. An opinion was received that
some of the hospital employees do not respect the privacy of the patients. So,
a special programme was organised to ensure that all the employees knock at
the door before entering.
(c) Health care Promotional mix
In the hospital marketing, the promotion strategies also need a careful
approach. It is surprising that users lack information regarding the nature and
types of services made available in a particular hospital, though they bear the
efficacy to avail the facilities. The advertising and publicity would raise the demand
for many special services. While promoting medical services, the advertising and
publicity strategies are expected to communicate all the related information, e.g.,
the fees charged the available boarding and lodging facilities for the attendants, the
transportation and communication facilities, etc.
This also helps hospitals in rationalizing the services vis-a-vis minimizes
inconveniences to the patients and attendants. The health consciousness or
nutritional awareness is also required to be included in the promotion plan of
hospitals. The channel for the distribution of services also occupies a significant
place. The behaviour of doctors, nurses and public relation officers or receptionists
are found more sensitive, particularly with the viewpoint of raising the standard of
services. Like other services, the medical services also need improved research and
training facilities, specially to the staff directly concerned with the patients and
attendants. The application of marketing principles would pave avenues for
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rationalizing the services, standardizing the offering and optimizing the fee
structure. This would open doors for channelizing the services through IT enabled
techniques and practices.
The growing rate of industrialization invites multi-pronged health hazards like
diabetes and high blood pressure. Lack of nutritional awareness and of inadequate
health education further aggravate the magnitude of problems. This requires
concerted efforts, a new approach, a new strategy, a new policy and a new concept
for managing the not-for-profit making organisations, specially the hospitals. The
promotion on healthcare marketing has to be extremely limited because of the
professional ethics of doctors. The promotional goals of hospital marketing
comprised of:
1. Informing and educating the public about the various services available
particularly in preventive health (for diabetes, heart disease).
2. Organising personal and formal meetings to discuss the services.
3. Persuading new consumers for trying modern medical services.
4. Educating the consumer regarding various services available to them and its
economical and efficient usage.
One of the successful promotional programmes of Apollo Hospitals has been
the cardiac screening programme where the emphasis is preventive medicine and
the services were offered at 50% of the usual cost. This has been one of the popular
and high profile campaigns ever undertaken by a hospital chain in India.
The government hospitals generally adopt cost-free pricing strategies whereas
the trust and private hospitals adopt subsidized or cost-based pricing strategies. In
few cases, some of the private hospitals also adopt cost plus subsidy based pricing
strategy. In the hospital services, the application of social advertising is found
important for a multiplication in the number users of the services. Unlike other
services, the hospital services have to assign due weightage to this element as a
number of diseases are on account of unsatisfactory living-condition and food-
habits. In the promotional strategies for hospitals, it is indispensable that slogans
carrying creativity, sensitivity and acceptability travel through innovative vehicles
effectively (e.g., family planning. Smoking, AIDS, communicable diseases, early
marriages and their harmful effects) to reach the target audience.
This is an area of social marketing which advocates, channelizing of messages
for preventing the diseases, creating awareness and improving the food and living
habits of general masses. To be more specific when we consider hospital as a social
institution, it can’t be freed from the responsibility of strengthening social
advertising. The modern literature on management of hospitals emphasizes the
need for effective public relations coupled with the need for systematic marketing of
the services, the hospital can offer to its various users. The opinion surveys would
be helpful in the very context.
The Public Relation Department in a hospital is supposed to be responsible for
raising the effectiveness of advertising and publicity. A major difference between the
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marketing of other service organisations and hospital establishments is related to
the expansion of market. It is sad to comment that Indian hospitals have not been
successful in promoting social advertising. The task of hospitals would be simplified
to a considerable extent, if they utilize public relation department for that purpose.
The innovative advertisement slogans carrying messages to check birth rate,
smoking, drinking of liquors, child marriage, AIDS etc. would prevent multi-faceted
diseases. This special role of hospitals would serve social interests vis-à-vis would
minimize the pressure on hospitals. The strengthening of advertising and publicity
measures appear significant also with the motto of creating nutritional awareness.
All these facts make it clear that in the hospital services, the public relation
department is expected to play a vital role in raising the creativity and acceptability
of hospital services.
(d) Healthcare service providers
Some of the hospitals given an overriding priority to the medical education,
training and research whereas some others concentrate their prime attention on
medical treatment. In the hospital services, a suitable basis for segmenting the
market is income. To some extent regional considerations may also be adopted as a
base for segmenting the market. This would help hospital organisations in charging
more from high and middle income groups, charging equal to cost from the low
income group and making available free services to the needy people. The
dependence on the exchequer would be minimized but the doors would not be
closed for initiating qualitative or quantitative improvements.
Health care services
Medical Services Medical Training Medical Education Medical Research
Line services Supportive services Auxiliary services like

Emergency Central sterile supply clinical trials and drug
Out-patient Laboratory effectiveness
In-patient Radiology Outpatient case
Intensive care Nursing observation
Operation Catering Inpatient case records
Laundry Drug stores and
availability
Transport service
Mortuary
Dietary counseling
service
Bio-medical engineering
Security
Fig. 22.2 Category of Services
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While selecting a suitable site for the location of a hospital, the management
should be careful of adequate transportation, communication, water supply and
electrification facilities. In addition, it is also important that the selected site is free
from the problem of industrial pollution and the plantation, gardening and drainage
plans have received due attention. Disposal of waste from the hospitals is a serious
civil and law and order problem in many parts of the country. The financial
involvement on the beautification of premises and surroundings is nominal but its
impact on the hospital output is of high magnitude. Neat and clean, noise and dust
free surroundings help speedy recovery of patients. As we experience in the past, a
good number of hospitals are managed and maintained by the government, the
charitable trusts and private entrepreneurs.
It is important to be aware of changing needs, changes in what the people feel
and even changes in fashions. With the AIDS scare, came the increasing insistence
on disposable needles. With women’s fashions veering towards pencil thinness,
came the popularity of fitness clinics. It is also right to mention that amidst multi-
dimensional constraints, some of the Indian hospitals have been offering world-
class services. Unfortunately due to poor information management system, the
rural potential users fail in utilizing the services. The strengthening of advertising
and publicity measures would ensure them the required information in the field of
medical sciences.
To conclude, with burgeoning population and a change in people’s attitude
towards health, appearance and life, the health care market is ready to take off in
the coming years. This offers new opportunities to medical professionals,
pharmaceutical manufacturers, exercise equipments and accessories
manufacturers, medical equipment manufacturers and of course, to Marketing
Research Advertising Agencies as well.
(e) Changing Health care Regulations
In the mid eighties the health care sector was recognized as an industry and it
paved the way for the players to get long term funding. Further the reduction of the
tariff duties on the medical equipments and technology has helped the industry in
building its state-of-are high quality services.
Since the National Health Policy, with its main objective of ‘Health of all’ by the
year 2000, was approved in 1983, is the first step in this direction. Now the focus is
not on medical care and but on comprehensive healthcare for the people at large.
The Union Ministry of Health and Family Welfare (the Ministry) is instrumental and
responsible for implementation of various programs of national importance like
AIDS awareness, prevention and control of major diseases like Polio, Malaria,
Chickenpox etc., which form the main plank of the developmental efforts. Apart
from these the Ministry also assists States in preventing and controlling the
outbreaks of epidemics through technical assistance.
India has an abundant stock of intellectual capital in healthcare sector and
state-of-the-art technologies in the various therapeutic services (cardiology,
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neurology, etc.) are available. There is a need for qualified specialists nurses and
paramedics and qualified hospitals administrators. Many hospitals have been
responding to this constraint by operating at below-norm nurse to patient ratios,
stretching nursing, staff working hours and even recruiting partly skilled personnel.
22.3.3 Indian Health Care Industry
Health care industry in India is gaining popularity due to rise in (i) literacy
rate, (ii) better standard of living; and (iii) increased awareness of health
consciousness among people. Indians spend five to six times more on health
care as compared to their spending say about 10 or 15 years earlier.
The Indian healthcare market is one of the fastest growing markets in the
world. By 2008, the market is expected to be worth in excess of $40 billion as
compared to over $20 billion now. The same is expected to touch $70 billion by
2012, according to study done by the U.K. Trade and Investment.
India is undoubtedly a land of opportunities. Good health care facilities are in
great demand. So, the Indian Government is encouraging the industry suitably in
this regard.
In India, private hospitals account for more than 75% of the country’s total
health care infrastructure. Quality is now the key issue with patients.
Factors leading to the growth of Health services in India
The following are the key indicators which drive the industry towards high growth:
1. The Government of India is giving high priority to this sector by an increased
budgetary outlay. It has considerably reduced custom duties on medical
equipment imports. It has allowed higher depreciation rates on equipment to
fiscal incentives for new hospitals.
2. Supreme court’s ruling makes it mandatory for all the hospitals to establish
advanced infrastructure for emergency medical devices. Moreover, there
should be an effective clinical waste management system.
3. Government has proposals to upgrade most of the sub health centres with
better infrastructure.
4. Huge investments are being made both by private and government healthcare
players on world class equipment and devices.
5. Growing number of doctors annually lead to increased demand for medical
equipment.
6. Cut in custom duties will invite multinationals to invest in manufacturing
medical equipment in India.
7. With the privatization of insurance sector, more and more Indians are being
covered under medical insurance. This naturally requires proper and quality
health care infrastructure.
In the detachment phase, the patient is discharged from the hospital on the
advice of the consultant after settling the account.
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Finally, feedback is obtained from the patients. The patient evaluates the
worthiness of the service rendered to him. Patient’s suggestions are considered
important for the future improvement of the services.
1. A product is a set of attributes assembled in an identifiable form. The product
is the control component of any marketing mix.
2. The application of marketing principles in the hospitals may deliver goods to
the society and also ensure their financial viability.
3. The government hospitals generally adopt cost-free pricing strategies whereas
the trust and private hospitals adopt subsidized or cost-based pricing
strategies.
4. Health care industry in India is gaining popularity due to rise in (i) literacy
rate, (ii) better standard of living; and (iii) increased awareness of health
consciousness among people.
1. What are the different marketing mix for hospitals?
2. What are the four stages of process?
3. Write short notes on marketing of health services and health care products.
4. What are the major characteristics of health services?
5. What are the principal dimensions, which customers use to judge firm’s
quality of service?
6. Explain health care promotional mix and its goals.
7. Write a detailed note on Indian health care industry.
22.6 SUMMARY
Indian market offers huge opportunity for the service providers to make an
impact on the quality of Indian healthcare service. Opportunities exist for those
who can supply hospitals with a high quality integrated range of products,
supported by an extensive service network. The low end of the market
(consumables and disposable equipment) is dominated by a fragmented group of
local manufacturers. While new private hospitals with to procure high quality
equipment, price sensitivity is pervasive in India and purchasing decisions hinge on
persuasive cost benefit arguments. The more ambitious have developed their own
production facilities taking advantage of low manufacturing costs and using India
as a platform to supply the Asian market. New economic policy offers immense
scope for imports now. Manufacturers of innovative new products are adopting long
term approaches to the Indian Market.
1. ______ is a sequence of activities where inputs are converted into output.
a) Product
b) Process
c) Promotion
d) None of the above
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2. The __________ in a hospital is supposed to be responsible for raising the
effectiveness of advertising and publicity.
e) Public Relation Department
f) Hospital management
g) Promotional mix
h) None of the above
1. Mark Godson (2009), “Relationship Marketing”, Oxford University Press, New Delhi.
Ltd., New Delhi.
3. Srinivasan R (2010), “ Services Marketing- The Indian Context”, PHI Learning
4. Shajahan S (2014), “ Services Marketing”, Himalaya Publishing House, Mumbai.
22.9 ASSIGNMENTS
1. ‘The marketing mix for hospital comprises product mix, price mix and place
mix.’ Explain them in detail.
2. “The Health Care Industry in India is becoming more competitive”. Do you
agree with this statement? Justify your answer.
1. healthleadersmedia.com/hr/how-real-healthcare-consumerism#
2. asianhhm.com/healthcare-management/consumerism-healthcare
3. princeton.edu/sites/default/files/content/docs/India%20Workshop%20Repor
t_2017.05.10%20FINAL.pdf
4. shodhganga.inflibnet.ac.in/bitstream/10603/8384/8/07_chapter%201.pdf
5. en.wikipedia.org/wiki/Healthcare_in_India
1. “The marketing of healthcare products and super specialty hospitals paves
avenues for initiating qualitative and quantitative improvement on the basis of
time-honoured managerial decisions.” Discuss.
2. In India, private hospitals account for more than 75% of the country’s total
health care infrastructure. Why is this so? Why there is no proper
infrastructure in Public or Voluntary hospitals? Suggest suitable measures to
improve the medical facilities in Public and Voluntary hospitals.
22.12 KEY WORDS
1. Marketing mix
2. Product mix
3. Intensive Consumption phase
4. Variability
5. Inseparability
H
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LESSON - 23
HOTEL INDUSTRY
23.1 INTRODUCTION
Hotel industry is the industry that is responsible for providing primarily food
services and accommodations in places such as hotels, resorts, conference centers
and theme or amusement parks. A hotel is an establishment that provides
paid lodging on a short-term basis. Hotel operations vary in size, function, and cost.
Most hotels and major hospitality companies that operate hotels have set widely
accepted industry standards to classify hotel types. The hotel industry is the
servicing business conducing another significant branch in the economic
development of the country. The hotel industry associates many types of industry,
such as the tourist industry, the transportation industry, and the food servicing
industry. It is apparent that every country emphasizes on the significance of this
kind of industry, with a belief that this is a source for employment, disseminating
the income of the country, conducing the country’s progression. The Indian hotel
industry has been instrumental in contributing to the nation’s economic growth.
This trend is expected to continue especially with the introduction of e-visa for
foreign tourists and with the domestic economy improving, there are clear signs of
increased domestic travel. The growth rate in room demand (about 6%) has been
consistently outpacing the supply (about 3%) growth in India for the past few years.
23.2 OBJECTIVES
After reading this lesson, you will be able to understand,
 Hotel industry
 Top Indian hotels
 Various types of hotels
 Accommodation management and manager
 Types of licenses to start a hotel
 Problems of hotel industry
23.3 CONTENTS
23.3.1 Hotel - Definition
23.3.2 Hotel industry vs. Tourism industry
23.3.3 Top hotel brands in India
23.3.4 Types of hotels
23.3.5 Supporting services
23.3.6 Accommodation Management
23.3.7 Accommodation Manager
23.3.8 Licenses
23.3.9 Problems of hotel industry
23.3.1 Hotel – Definition
Hotel is an establishment that provides lodging and usually meals,
entertainment, and various personal services for the public. It is a commercial
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establishment offering lodging to travelers and sometimes to permanent residents
and often having restaurants, meeting rooms, stores etc., that are available to
general public. Hotel is such a place where the accommodation system to stay night
with the facilities food and beverage is available.
A hotel is an establishment that provides lodging paid on a short-term basis.
The provision of basic accommodation, in times past, consisting only of a room with
a bed, a cupboard, a small table and a washstand has largely been replaced by
rooms with modern facilities, including en-suite bathrooms and air conditioning or
climate control. Additional common features found in hotel rooms are a telephone,
an alarm clock, a television, a safe, a mini-bar with snack foods and drinks, and
facilities for making tea and coffee. Luxury features include bathrobes and slippers,
a pillow menu, twin-sink vanities, and Jacuzzi bathtubs. Larger hotels may provide
additional guest facilities such as a swimming pool, fitness center, business center,
childcare, conference facilities and social function services. Hotel rooms are usually
numbered to allow guests to identify their room. Some hotels offer meals as part of
a room and board arrangement. In the United Kingdom, a hotel is required by law
to serve food and drinks to all guests within certain stated hours. In Japan, capsule
hotels provide a minimized amount of room space and shared facilities.
23.3.2 Hotel Industry Vs Tourism Industry
The hotel industry in India thrives largely due to the growth in tourism and
travel. Due to the increase in tourism with rising foreign and domestic tourists,
hotel sector is bound to grow. There is an emergence of budget hotels in India to
cater to much of the population who seek affordable stay. International companies
are also increasingly looking at setting up such hotels. Imbalance in increase in
tourists both domestic and foreign not been supported with equal number of rooms
is a latent source of opportunity for growth. Tourism has now become a significant
industry in India. It is a sun rise industry, an employment generator, a significant
source of foreign exchange for the country. Tourism in India is the third largest
foreign exchange earner of the country.
The booming tourism industry has had a cascading effect on the hospitality
sector with an increase in the occupancy ratios and average room rates. As per
world travel and tourism Council (WTTC), India is one of the favourite tourist
destinations from the year 2009 and will continue to be one of the favourite till
2018. Further, the Travel and Tourism Competitiveness Report by World Economic
Forum, has ranked India at the sixth place in tourism and hospitality. It is expected
that the hotels industry is expected to fall short of meeting the long term demands
of an economy growing at about 7% p.a. Regarding the supply from foreign nations,
around 40 international brands are said to enter the country in the next five years.
In the long term, the demand-supply gap in India is very real and that there is
need for more hotels. The shortage is especially true within the budget hotels and
the mid-market hotels segment. There is an urgent need for budget and mid-market
hotels in the country as travelers look for safe and affordable accommodation.
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Various domestic and international brands have made significant inroads into this
space and more are expected to follow as the potential for this segment of hotels
becomes more obvious. As per a report by ICRA, the revenue growth for the Indian
hotel industry is expected to improve to 6-7% in FY18, despite growth prospects
being scaled down from the earlier 8-10%, constrained by the regulatory hurdles
the industry is currently facing. The growth is expected to come from the rise in
online bookings. Hotel bookings is one of the least penetrated segments in the
travel categories in India.
23.3.3 Top Hotel Brands in India
(i) ITC Hotels - The Luxury Collection
The association of ITC Hotels & The Luxury Collection presents a unique set of
hotels in a bouquet of enriching experiences that celebrate the spirit & distinctive
character of each destination. Eleven exceptional hotels bring you the architectural
grandeur of ancient dynasties and the cultural ethos of different regions of the
Indian peninsula. ITC Hotels - The Luxury Collection are super deluxe and
premium hotels located at strategic business and leisure locations.
(ii) Welcome Hotel - Sheraton
Synonymous with customer centricity and efficiency, an exquisite ITC Hotels
have been aligned under the renowned Sheraton brand, offering warm, comforting
services to the global traveler. Designed to cater to the discerning business and
leisure traveler offering five-star hospitality, Welcome Hotels are a haven for
personalized services that make every visit memorable.
(iii) Fortune Hotels
Located across India including smaller towns and cities, Fortune Hotels is one
of the leading first-class, full service business hotel chains in India catering to the
mid-market to upscale segment in business and leisure destinations.
(iv) Welcome Heritage Hotels
Welcome Heritage brings together a chain of palaces, forts, havelis and resorts
that offer a unique experience.
(v) Taj Hotels Resorts and Palaces
Indian Hotels Company Limited (IHCL), branded as Taj Group, is a chain of
hotels and resorts headquartered at Oxford House in Mumbai. The inventory of the
Taj Group of Hotels now stands at 131 hotels with 15,751 rooms. Twelve hotels of
the Taj group are members of the Leading Hotels of the World.
(vi) Oberoi Hotels & Resorts
Oberoi is now part of the international chain of hotels which has properties not
only in India but also in Australia, Indonesia, Egypt, Sri Lanka, Singapore,
Zanzibar and Nepal. Today The Oberoi Group operates 30 hotels, a Nile Cruiser and
a Motor Vessel in the backwaters of Kerala. The Group has presence in six
countries under the luxury 'Oberoi' and five-star 'Trident' brand. The Group is also
engaged in flight catering, airport restaurants, travel and tour services, car rentals,
project management and corporate air charters.
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23.3.4 Types of Hotels
Hotel operations vary in size, function, and cost. Most hotels and major
hospitality companies that operate hotels have set widely accepted industry
standards to classify hotel types. General categories include the following:
Based on location
As per location, Hotel can be classified into four types; City Centre, Resort
Hotels, Floating Hotels and Boatels.
1. Resort hotels: Resort is considered best if it is wish to spend quality time with
you. To put another words, they make to relax.
2. Floating hotels: This kind of hotels situated on river, sea or big lakes.
3. City Centre: This kind of Hotels situated in the heart of the city. And it is easy
to catch the office, shopping malls, hospitals, and banks etc. from city centre.
4. Boatels: A house boat hotels stand for boatels, which is widely known for
offering luxurious accommodation to travelers during visit.
Based on length of stay
And they are following Transient, Residential and Semi residential depending
on the stay of a guest.
1. Transient Hotel: It’s also known as Five Star Hotel and their charges usually
very high. They are located adjacent to the Airport. Occupants come here to
stay for a day or even less.
2. Residential Hotels: Here, the length of stay can be extended to one month and
up to a year. They come to room, bedroom and kitchen too. And charges can
be paid on a monthly or quarterly basis.
3. Semi Residential Hotels: These hotels provide great service with the
amalgamation of both transient and residential hotels.
Based on theme
There are four kinds of hotel; Heritage hotels, Ecotels, Boutique hotels and Spas.
1. Heritage Hotel: It is known to give you a royal treatment since each room of
hotel oozes with a glorious past. And the occupant is entertained by serving
delicious and tradition food.
2. Ecotels: These are new kind of hotel and being appreciated by the occupants.
They are known eco-friendly items in the room.
3. Boutique Hotels: This type of hotel serves you exceptional accommodation
including incredible furniture and interior decoration.
4. Spas: Here, you can enjoy an excellent therapeutic bath and massage.
Apart from the above mentioned, Hotel can be categorized on the basis of
Target Market. And as per Target Market, Hotel can be classified as Commercial
Hotel, Convention Hotel, Resort Hotel, Suits Hotel and Casino Hotel. According to
IH&RA, to harmonize hotel classification based on a single grading (which is
uniform across national boundaries) would be an undesirable and impossible task.
As a rough guide:
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 1-Star hotel provides a limited range of amenities and services, but adheres to
a high standard of facility-wide cleanliness.
 2-Star hotel provides good accommodation and better equipped bedrooms,
each with a telephone and attached private bathroom.
 3-Star hotel has more spacious rooms and adds high-class decorations and
furnishings and colour TV. It also offers one or more bars or lounges.
 4-Star hotel is much more comfortable and larger, and provides excellent
cuisine (table d'hote and a la carte), room service, and other amenities.
 5-Star hotel offers most luxurious premises, widest range of guest services, as
well as swimming pool and sport and exercise facilities.
23.3.5 Supporting Services
Hotel services, their number and the amount of people engaged in them
depends on the size of the hotel as well as on its status. Typically, the basic hotel
services include reception guests, room service, food service, including restaurants
in the hotel, and security. Sometimes in the small hotels the duties of security, a
cook and a cleaner are performed by the owner himself. Other services offered to
guests of the hotel, can be considered as bonuses. These are the laundry service,
massage room, fitness gyms, conference rooms, lock boxes for valuable assets and
many other things. These services can be included in the price of the room or paid
separately.
Many hotels nowadays offer recreation for a particular group of tourists.
Popular family hotels, hotels for the newlyweds and hotels for people with
disabilities – each of them has its unique set of services. For example in the family
hotel clients are offered services of child care and game rooms. In the hotel for the
newlyweds there is a special service for weddings. In the hotel for disabled persons
there is medical support service. Among the services that are indirectly related to
the customers, that means that they are not involved in direct care of guests, are
marketing service and bookkeeping of the hotel. Reservation, once considered one
of the main hotel services, today has become an anachronism. Nowadays, in order
to book a hotel clients use services of the major tour operators. Online booking
through the numerous tourist online services is getting increasingly popular.
Often the responsibilities of some hotel services are assigned to the other
companies. In the United States and Western Europe the network of special hotel
firms, which offer their services to the hotels, is widely developed. Typically, if the
hotel uses the services of such companies, the price of the rooms will be slightly
lower than in a hotel that provides a full range of hotel services on its own.
Third party managerial and support services will be provided based on
individual hotel needs and choice.
 Hotel Operations.
 Culinary and Beverage Support.
 Sales and Marketing.
 Accounting Services.
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 Technical Services.
 General Training.
 ICT.
 Human Resource.
23.3.6 Accommodation Management
Accommodation is one of the basic necessities of international and domestic
travelers. A government which is focused on developing tourism in the state
normally considers reducing tax and increasing incentives for hotels or businesses
that provide accommodation in travel destinations. This can promote the
construction of new hotels or resorts in the locality driving the growth in tourism
sector. To ensure good traveler experience it is important for hotels to have well-set
quality standards for operations and safety, hygiene and health policies. An
accommodation manager is trained to take care of the quality standards, manage
budget and staff and plan business in hotels, resorts or any other tourism business
he/she is working with. Students learn the vital quality guidelines, human resource
management skills and other managerial aspects of the job profile during their
graduation or post-graduation courses.
Accommodation Management plays a major role in a traveler’s overall
experience of visiting a place. It is one of the big components of traveler’s
expenditure. Therefore the role of accommodation manager is crucial in hotel
business/tourism industry. Accommodation manager mainly deals with human
resources, budget and inventory. It is his/her responsibility to get the staff trained
and ensure that quality standards for hygiene, health and safety are met in the
hotel environment. Maintenance of the infrastructure too falls under the purview of
the manager. Since the professional deals with staff and with customers, it is
important for him/her to have positive attitude, higher energy, good communication
skills and relationship management skills, knowledge of handling finances and
budget and integrity. The manager’s services directly impacts the hotel as a brand.
When performed well, accommodation management can bring back customers to a
hotel or resort for the second, third and multiple numbers of times. Customer
satisfaction and wonderful memories are intangible takeaways for customers that
can greatly impact the business’s growth.
23.3.7 Accommodation Manager
Accommodation manager is responsible for the efficient running of the
establishment so that it meets the needs of tenants, guests or residents. This
includes ensuring standards of cleanliness and maintenance are upheld, budgets
are controlled and any problems are quickly rectified.
Types of Accommodation Manager
Accommodation managers work in a variety of settings, including:
 care homes
 conference centres
 halls of residence
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 health worker housing
 hotels
 housing associations
 NHS hospitals
 Youth hostels.
Accommodation manager job titles vary depending on the sector; for example,
in hotels accommodation managers may be known as housekeepers or
housekeeping managers, in halls of residence they may be known as domestic
bursars or hall managers, and in hospitals as domestic services or facilities
managers.
Responsibilities
Accommodation managers across all sectors have similar managerial
responsibilities that generally cover people and the building. Common tasks include
budget control, business planning and administration. They also,
 ensure the smooth running of accommodation facilities, including the safety
and well-being of guests, tenants and residents
 develop and build positive relationships with residents, tenants and guests
 control a budget and finances, manage stock levels and order supplies
 communicate with reception services to coordinate and plan the allocation of
accommodation
 liaise with other departments within the organisation, e.g. catering for
conferences, and relevant external agencies
 arrange repairs and maintenance of the facilities
 inspect the accommodation to ensure that hygiene and health and safety
regulations are met, carrying out risk assessments as necessary
 supervise the work of cleaning staff and ensure standards are maintained
 make sure adequate security for the building is provided
 get involved in the building and refurbishment of residential accommodation.
23.3.8 Licenses
A number of licenses and registrations are required for starting and operating a
hotel business in India. Many of the licenses and registrations must be obtained prior
to starting the hotel and renewed while the hotel is operational. Further, most
licenses require the hotel to meet certain rules or criteria’s for maintaining validity.
Therefore, it is important for Entrepreneurs in the hotel industry to be aware of these
licenses and registrations to operate a hotel business smoothly. A lot of the license
requirements depend on the type of hotel, star rating, amenities and the location of
the hotel. Further, the rules and regulations to obtain license for hotel industry
differs according to the states. Some of the licenses needed are discussed below.
FSSAI Food Business License
A FSSAI food business license under the Food Safety and Standard Act
is required for operating a restaurant in India. The FSSAI food business license is
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usually provided for one year and is renewal at the end of each year. FSSAI license
for restaurants are managed by the local FSSAI office. FSSAI license for restaurants
does not fall under the purview of the Central Government.
Building Permit
The National Building Code of India was prepared by the Bureau of Indian
Standards to unify the building regulations throughout the country. The National
Building Code is adopted by all Government Departments, Municipal Bodies and
other Construction Agencies. As per the National Building Code, no person shall
carry out any development, erect, re-erect or make alterations or demolish any
building or cause the same to be done without first obtaining a separate permit for
each such development/building from the Authority. Therefore, all hotels must
have a proper building permit as per the relevant Town Planning Act
or Development Act or Municipal Act or any other applicable statutes for layout,
building plans, water supply, sewerage, drainage, electrification, etc,.
Fire Safety Permit
A fire safety certificate or permit is required for the Fire Department is a must
for operating a hotel business. Fire safety certificate is usually provided if the
building has incorporated proper fire prevention and fire safety measures as
required under the relevant fire safety rules and regulations.
Police License for Hotel
Hotels are public places that are monitored closely by the Police Department.
Therefore, all hotels must maintain proper log of all Guests who have stayed at the
hotel, follow relevant regulations and maintain a valid permit from the Police
Department. Police license for hotels usually falls under the power of licensing of
Places of Public Entertainment held by Commissioner or Additional Commissioner of
Police.
Health Trade License or Trade License
A health trade license is usually required from the local Health Department for
restaurants and hotels. Health trade licenses are usually issued by the Municipal
Corporation. The health trade license is required for businesses that have a direct
impact on public health. Compliance with the relevant hygiene and safety norms,
which are important for public health is a prerequisite for issuance of a health
trade license.
Business Registration
It is recommended that a hotel be setup under an artificial legal entity like
company or LLP. By operating a company under an artificial legal entity, the
liability of the promoters with respect to the business can be limited and the
business as a going concern would be easily transferable to another person.
ESI Registration
ESI is an autonomous corporation under Ministry of Labour and Employment,
Government of India. Employee’s State Insurance (ESI) registration is mandatory in
India for Businesses that employ 10 or more employees. To maintain compliance
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with the ESI Regulations, the employer must contribute 4.75% of the wages for all
employees earning Rs.15,000 or less toward ESI employer dues. The employee is
required to contribute 1.75% of his/her wages as ESI dues.
Provident Fund Registration
An Employee Provident Fund (PF) Registration is required for any
establishment that employs more than 20 persons in India. The PF
Board administers a contributory provident fund, pension scheme and an
insurance scheme for the workforce engaged in the organized sector in India.
Bar License
If the hotel operates a bar or serves alcohol in the restaurants, a Bar
license will be required from the relevant authorities. Bar license is usually
provided by departments operating under the State Government. Hence, the
requirement for bar license varies from state to state.
23.3.9 Problems of Hotel Industry
Hotel industry in India is developing rapidly and yet there is limited data
relating to these developments. Some of the problems and its elucidation are
discussed below.
High competition
Hotel industry is an ever blooming business. Travel and tourism keeps on
growing every year. Travelers always look for the perfect accommodation. Due to
very high demand in accommodation, the competition is also high in this business.
In the crowded travel spots, you can see hotels at each and every locality. High
competition is a major challenge in this sector. To reap the high profits, new or
existing competitors could significantly reduce rates or provide greater
conveniences, services or amenities, or significantly expand, improve or introduce
new facilities in the markets.
Improper marketing effort
As the technology is improving day by day, there are lots of options available
for the hotels in capturing their market space online. But according to a recent
survey in the year 2016, almost 70% of the hotels across the world still follow the
old marketing practices. Due to poor marketing efforts, sales and brand recognition
gets affected to high extent. The current trend denotes that hotels are slowly
moving towards OTA marketing and hotel management software to ease the
workload and increase ROI.
Energy management difficulties
Investing in renewable & eco-friendly resources can help in improving the
hotel's overall profit margin. Tourists prefer to accommodate themselves at an
environmental-friendly hotel room rather than an ordinary hotel room. With rising
electricity prices and increasing pressure to cut carbon emissions, saving energy is
the no.1 on an hotelier’s priority list. There are two solutions for effective energy
management. One is voltage optimization, which works to reduce the incoming
power to premises for reducing the energy consumption and protect electrical
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equipment. The other is energy management systems, which switch on and off
appliances depending on the occupancy of a room.
Poor customer satisfaction
With the lack of food resources and staffs, most of the hotels provide low-
quality foods to their customers. Once you get a bad recognition in the area /
locality / city, it is very difficult to regain the good position. From an hotelier's point
of view, customer satisfaction is nothing but providing the good quality foods,
amenities, customer support, etc..
Lack of productive chefs and managers
Finding the right cooks, labours and managers may be a difficult task,
especially if it is small or medium hotel. Usually, five star hotels (luxurious
accommodation providers) recruit professional cooks at high cost. Hence it is a
hectic job for the low-budget hotels to find the right persons.
High service rates
Whether to provide a high-quality or low-quality service, make sure it is
affordable to the end users. High service rates can divert the visitors to the
competitors. Provide lodging rooms at reasonable rates. Service rate should match
with the facilities of the hotel. Avoid taking commissions, high tax charges, etc.
Cleanliness issues
Cleanliness is the major issue in hotel industry. Make sure the lodging rooms
have clean, odour-free, eco-friendly and spacious conditions. This would help to
drive more visitors to the hotel. As hospitality businesses usually operate around
the clock and slow periods in which staff can conduct some minor cleaning are
never guaranteed; many companies choose to hire a professional cleaning service.
This is the best way to ensure that all the requirements are met and it doesn’t
mean you have to take valuable time out of the day to enforce the fact that
everything is completed.
No proper transportation facility
Hotels should be ready to provide transportation facility 24x7 from all the major
pick-up points of a city or town. Even a small cab / van from the major spots (airports,
tourist destinations, etc) can make a huge improvement in the hotel business
management. Transport facility is a must for hotels situated in the remote locations.
Security challenges
This is one of the major problems in hotel industry. Different types of security
challenges are,
 General theft and other crime
 Public violence
 Terrorism
 Armed robbery
 Credit card fraud
 Cyber crime issues
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 Identity theft
 Sexual abuse on women
 Racial discrimination
 Risk of food poisoning
Lack of refreshing events and entertainment
Most of the tourists who stay in a hotel room expect refreshing events &
entertainment programs for getting relaxation from the stressful conditions.
Conduct events & entertainment shows on a regular basis to attract more audience
to the business.
1. It is an commercial establishment offering lodging to travelers and sometimes
to permanent residents and often having restaurants, meeting rooms, stores
etc., that are available to general public
2. As per location, Hotel can be classified into four types; City Centre, Resort
Hotels, Floating Hotels and Boatels.
3. A lot of the license requirements depend on the type of hotel, star rating,
amenities and the location of the hotel.
4. Cleanliness is the major issue in hotel industry. Make sure the lodging rooms
have clean, odour-free, eco-friendly and spacious conditions. This would help
to drive more visitors to the hotel.
1. Define hotel.
2. Write short notes on hotel industry vs. tourism industry.
3. List out the top hotel brands in India.
4. What are the different types of hotels?
5. What are supporting services? Write short notes.
6. Explain Accommodation management.
7. Who is an Accommodation manager? List out the variety of settings in which
accommodation manager works.
8. What are the responsibilities of accommodation manager?
9. Explain the licenses needed to start a hotel.
10. What are the problems in hotel industry?
23.6 SUMMARY
India’s Hotel and tourism industry has huge growth potential. The tourism
industry is also looking forward to the expansion of E-visa scheme which is
expected to double the tourist inflow to India, which automatically improves the
hotel industry. India's hotel and tourism industry has the potential to expand by
2.5 per cent on the back of higher budgetary allocation and low cost healthcare
facility. Tourism industry in India is growing at a rapid pace contributing about 6-
7% of our national GDP and the numbers are expected to improve in the years to
come. The tourism and hospitality sector is among the top 10 sectors in India to
attract the highest Foreign Direct Investment (FDI). During the period April 2000-
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June 2017, the hotel and tourism sector attracted around US$ 10.48 billion of FDI,
according to the data released by Department of Industrial Policy and Promotion
(DIPP). The Indian government has realized the country’s potential in the tourism
industry and has taken several steps to make India a global tourism hub.
1. ______ is known to give you a royal treatment since each room of hotel oozes
with a glorious past. And the occupant is entertained by serving delicious and
tradition food.
a) Heritage hotel
b) Ecotels
c) Boutique hotel
d) Spas
2. _____ is an autonomous corporation under Ministry of Labour and
Employment, Government of India.
e) Provident fund
f) ESI
g) Trade license
h) None of the above
1. Mark Godson (2009), “Relationship Marketing”, Oxford University Press, New
Delhi.
Ltd., New Delhi.
3. Srinivasan R (2010), “ Services Marketing- The Indian Context”, PHI Learning
4. Shajahan S (2014), “ Services Marketing”, Himalaya Publishing House,
Mumbai.
23.9 ASSIGNMENTS
1. ‘The hotel industry in India thrives largely due to the growth in tourism and
travel.’ Is this statement true? If so, justify it.
2. ‘Accommodation manager is responsible for the efficient running of the
establishment so that it meets the needs of tenants, guests or residents.’ How?
Discuss the responsibilities of an accommodation manager and the variety of
settings in which he works.
1. businessdictionary.com/definition/hotel.html
2. equitymaster.com/research-it/sector-info/hotels/Hotels-Sector-Analysis-
Report.asp
3. sasmitasrinibas.blogspot.in/2015/09/introduction-growth-of-hotel-
industry.html
4. howmanytypesof.com/hotel/
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5. city-of-hotels.com/165/hotel-services-business.html
6. accorhotels.com/gb/support/reservations/you-want-to-book/faq/what-
services-are-offered-by-the-hotel.shtml
7. www.worldhotels.com/hoteliers/supporting-services
8. shodhganga.inflibnet.ac.in
9. inurture.co.in/accommodation-management-an-important-role-in-hospitality-
business
10. prospects.ac.uk/job-profiles/accommodation-manager
11. indiafilings.com/learn/licenses-and-registration-required-for-hotel-business/
12. 4dhotelbookingsoftware.com/blog/post/top-10-hotel-problems-challenges
13. ibef.org/industry/tourism-hospitality-india.aspx
14. online.csp.edu/blog/business/the-importance-of-marketing-in-the-
hospitality-industry
1. Discuss the licenses and registrations that are required for starting and
operating a hotel business in India.
2. ‘Hotel industry is an ever blooming business, but high competition is a major
challenge in this sector.’ Discuss this statement.
23.12 KEY WORDS
1. Hotel industry
2. Tourism industry
3. Top hotel brands in India
4. Supporting services
5. Accommodation management
6. Accommodation manager
7. License
8. Heritage
9. Boutique
10. Transient hotel
11. Residential hotel
H
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LESSON – 24
HOTEL MARKETING
24.1 INTRODUCTION
In a competitive industry, all hotel and resort needs an effective online
marketing strategy to promote their property, drive traffic to their website and
generate guest bookings. With the arrival of internet Search, traditional marketing
outlets such as TV advertising, Radio and Newspapers have become less and less
effective. In any business, a solid marketing strategy is critical to building a brand,
attracting new customers and maintaining loyalty. The hospitality industry is
having no difference. Because customer loyalty is key, marketing managers and
executives devote a lot of time and resources to building brand awareness and
creating ongoing, interconnected campaigns. These marketing efforts usually
include both print and digital collateral that target former guests while also
attracting new clientele. However, this particular industry has a unique set of
challenges that must be overcome. Understanding the importance of marketing in
the hotel industry can help to get ahead and stand out in the competitive job
market.
24.2 OBJECTIVES
After reading this lesson, you will be able to understand,
 Hotel marketing and its importance
 Role of marketing in hotel industry
 Recent trends developed in hotel marketing
24.3 CONTENTS
24.3.1 Hotel Marketing
24.3.2 Importance of Hotel Marketing
24.3.3 Role of marketing in hotel industry
24.3.4 Marketing Strategy for Hotel Industry
24.3.5 Recent trends in Hotel Marketing
24.3.1 Hotel Marketing
In this competitive and customer oriented market, every hotel and resort needs
to make an effective online marketing strategy to promote their business.
Nowadays, enquiry and bookings are made by online through internet. It is believed
that a professional, easy to use and attractive website should be the centerpiece of
every hotel and resort's distribution strategy. With the arrival of internet and search
engines, traditional marketing outlets such as TV advertising, Radio and
Newspapers have become minimum and less effective. In a tech-savvy time in which
most people expect to find the information they need within just a few clicks of their
mouse, a strong internet presence for the business isn't just a necessity, it's crucial
for survival. The e-Tourism Hotel Marketing strategy is about to making sure that
guests can find fast next time they are planning a trip online.
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Hotel and its allied sales are different from consumer goods sales because
marketers must sell tangible as well as intangible products. In many cases this
means that they are marketing services rather than goods, and success hinges on
creating the right feeling in the consumer. For example, a resort will want to
cultivate a relaxing, fun atmosphere that is recognizable to customers and inspires
those same feelings in the consumer. Because the Hotel industry is mostly made up
of tourism and other experiential services, a consistent brand identity is also very
important. Marketers want to ensure that brand recognition exists so that
customers will use their services again and again. Repeat customers bring in a
sizeable portion of revenue, so marketing strategy must be split between
maintaining relationships with past customers while seeking out new ones.
The evolution of marketing in the hotel industry is similar to every other
industry. The main reason for the marketing in the hotel business is because of the
growth in the number of guests who are in need of accommodation and the
increase in competitions by the accommodation service providers. Moreover, the
hotel industry is becoming a more and more mature market whereby the
competition is increasing globally and winning customers becomes a problem.
24.3.2 Importance of Hotel Marketing
Organization or business firms in the Hotel industry use various methods to
develop and maintain an effective marketing plan. The following are some of the
general strategies that marketers use for brand success.
Research
Customers choose hotels and other allied services for a variety of reasons.
From location to facilities and perks, companies have to be sure that they’re
providing what buyers are looking for. The role of marketers is to identify what
factors make customers choose a particular hospitality service, and this requires
extensive research. By speaking to current and former guests, monitoring customer
reviews on websites, reviewing industry data and more, marketing professionals
learn what makes a hospitality service stand out, as well as how it can be
improved.
Awareness
If potential customers don’t know about a service, they can’t purchase it.
That’s where brand awareness comes in. Marketers make sure information on
hotels, resorts and restaurants is easy to find and up-to-date. They can do this by
buying ad space on relevant travel sites, creating an engaging website and
collaborating with other, noncompeting hospitality services in the same market.
Promotion
Another smart strategy for attracting customers is to run promotions during
certain times of the year, usually when business is slower. Introducing incentives
and offering incentives are just some of the ways that marketing professionals
achieve this.
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Relationships
To ensure high levels of repeat business, good customer relationships are vital.
Not only do repeat customers usually promote a service through word-of-mouth
and social media, but they also create a stable revenue base. One way to build
relationships is through customer loyalty programs, which reward customers who
regularly use a particular Hotel or hospitality service.
24.3.3 Role of Marketing in Hotel Industry
Marketing plays a vital role in the success of any business organization. Since
all aspects of the business depend on successful marketing, it is difficult to
highlight all the roles which marketing plays in a company. However, for the
purpose of this thesis, some of the major impact of marketing will be highlighted in
the following paragraphs. Marketing helps in building a company’s brand name and
placing the company’s product or service in the heart of prospective customers.
In the hotel industry, the success of any hotel often depends on good
reputation. As the reputation of a hotel grows bigger within society, more customers
will lodge in the hotel, thereby making the hotel’s room occupancy rate increase
and generate more income to the hotel. Additionally, it is fair to say that marketing
really helps in the aspect of branding as it creates and supports effective
communication within and outside the hotel unit.
Effective marketing campaign gives a company an edge over its competitors. A
business may offer the best product in the market, but without a good marketing
campaign, it will not generate the desired returns on investment because it is
marketing that makes the product or service known to prospective customers.
A good marketing campaign helps a company to efficiently manage its
resources. When an effective and efficient marketing strategy is adopted in a
company, resources wastage is reduced if not eliminated. The hotel industry is an
industry with perishable products, in other words, if a room is not occupied during
a particular period, the income that is supposed to be realized on that particular
room is lost forever and it cannot be regained. Efficient marketing helps in ensuring
that the hotel has a high occupancy rate at all time. Marketing helps to ensure that
a company’s income increases. As more people get to know about a company’s
products or services, the company’s share of the market increases as well as its
sales revenue.
24.3.4 Marketing Strategy for Hotel Industry
The hotel industry is a competitive marketplace for which traditional
advertising streams, such as television, newspapers and billboards have become
increasingly insufficient. Additionally, when to run an independent small hotel or
restaurant, it is not necessary to have access to the enormous marketing budgets
on which the international and national chains rely. A creative, more personal
marketing plan may serve the best.
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Digital marketing
Digital Marketing is termed as advertising delivered through digital channels
such as search engines, websites, social media, email, and mobile apps.
The marketing of products or services using digital channels to reach consumers.
The key objective is to promote brands through various forms
of digital media. Digital marketing extends beyond internet marketing to include
channels that do not require the use of the internet. Digital marketing methods
such as search engine optimization (SEO), search engine marketing (SEM), content
marketing, influencer marketing, content automation, campaign marketing, data-
driven marketing, e-commerce marketing, social media marketing, social media
optimization, e-mail direct marketing, display advertising, e–books, and optical
disks and games are becoming more common in our advancing technology. In fact,
digital marketing now extends to non-Internet channels that provide digital media,
such as mobile phones (SMS and MMS), callback, and on-hold mobile ring tones.
Email and Content marketing
Email marketing is the act of sending a commercial message, typically to a
group of people, using email. In its broadest sense, every email sent to a potential
or current customer could be considered email marketing. It usually involves using
email to send advertisements, request business, or solicit sales or donations, and is
meant to build loyalty, trust, or brand awareness. Marketing emails can be sent to
a purchased lead list or a current customer database. The term usually refers to
sending email messages with the purpose of enhancing a merchant's relationship
with current or previous customers, encouraging customer loyalty and repeat
business, acquiring new customers or convincing current customers to purchase
something immediately, and sharing third-party ads.
The two big advantages of email marketing are price and ease. Emailing is an
inexpensive way to advertise the company and its products and/or services
compared to many other types of marketing. It's also extremely easy to set up and
track an email marketing campaign, making it a very accessible type of marketing
for small businesses especially to the Hotel industry.
Viral marketing
Viral marketing is a method of marketing whereby consumers are encouraged
to share information about a company's goods or services via the Internet. Viral
marketing is a marketing technique that uses pre-existing social networking
services and other technologies to produce increases in brand awareness or to
achieve other marketing objectives through self-replicating viral processes,
analogous to the spread of viruses or computer viruses.
There are three basic criteria for viral marketing; the messenger, the message
and the environment. All three must be effectively executed in order for a viral
message to be successful.
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Some techniques for effective marketing include targeting the appropriate audience
and channels, creating videos, offering a valuable service or product for free, creating an
emotional appeal, social outreach and enabling easy sharing and downloading.
Word-of-mouth
Oral or written recommendation by a satisfied customer to the prospective
customers of a good or service. Considered to be the most effective form of
promotion, it is also called word of mouth advertising which is incorrect because,
by definition, advertising is a paid and non-personal communication. Word of
mouth marketing can be very effective in the communication of the advertising
campaign as it can offer a solution to "penetrating consumers guards" to get them
talking about a particular product. Many marketers find this type of marketing
strategy advantageous to the entire advertising campaign of a certain product. One
positive aspect of this marketing strategy is that sources of this word-of-mouth
advertising are mostly personal.
24.3.5 Recent Trends in Hotel Marketing
As the hotel industry continues to grow and independent properties gain even
more attraction, it’s key to look into the marketing trends that will define the year.
Marketing is a powerful tool that has the ability to make or break a business, or
even an entire destination. Social media will continue to remain an important part
of business to consumer marketing strategies. Social media evolves at a rapid pace,
and the strategies that work in years past may not be optimal anymore. For
example, Face book regularly updates their algorithm.
Reputation management is here to stay for all business types. Reputation
management is part proactive and part reactive. To be proactive, properties should
directly ask happy customers to leave reviews, therefore positively padding your
online presence. Regardless of whether a review is positive or negative, someone
from your property should respond to the review. In both the case of a positive or a
negative review, a response shows that the business cares and listens to feedback.
For negative reviews, always try to find a resolution, ideally off the public forum.
For creating an action plan for reputation management that includes both
asking for positive reviews and responding to any and all reviews on the most
important sites.
Specifically regarding to the hotel and travel industry, one of the best ways to
market the business to a wider audience is through distribution partners. Online
travel agencies (OTAs) big and small offer properties of all types and sizes the ability
to reach new and expansive audiences. Large OTAs like Expedia, Hotels.com, or
Booking.com cater to millions of travelers every single day even if it is compared
side-by-side to nearly every single one of the competitors. And then there are
smaller, more niche distribution channels which help the business to reach people
of certain demographics or travel types.
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1. The main reason for the marketing in the hotel business is because of the
growth in the number of guests who are in need of accommodation and the
increase in competitions by the accommodation service providers.
2. The role of marketers is to identify what factors make customers choose a
particular hospitality service, and this requires extensive research.
3. One way to build relationships is through customer loyalty programs, which
reward customers who regularly use a particular Hotel or hospitality service.
4. Effective marketing campaign gives a company an edge over its competitors.
5. The hotel industry is a competitive marketplace for which traditional
advertising streams, such as television, newspapers and billboards have
become increasingly insufficient.
1. What is Hotel Marketing?
2. State the importance of hotel marketing.
3. Bring out the role of marketing in hotel industry.
4. Explain the marketing strategy for hotel industry?
5. Write short notes on Digital Marketing.
6. What is Viral Marketing?
7. Explain ‘word-of-mouth’.
8. What are the recent trends in Hotel Marketing?
24.6 SUMMARY
The hotel industry is so competitive that it requires the hotel to formulate a
dynamic mechanism which can adapt to the changes in the market environment,
the competitiveness of the market as well as the economic climate. The ultimate
goal of having a marketing strategy is usually to identify opportunity to serve the
market in a way that is profitable and effective enough to the extent that it becomes
difficult if not impossible for another company to take up the venture without
running into losses. Some authors believe that at the initial stage of starting a hotel
business, the hotel will not make a profit, even in the second year the hotel will
only break even and the hotel may start to make a little profit from the third year.
On the other hand, other marketers in the hotel industry think that the hotel can
start to make a profit immediately from the first year of entering into the industry if
the right marketing strategies were used.
1. _____ is a smart strategy for attracting customers, during certain times of the
year, usually when business is slower.
a) Research; b) Awareness; c) Promotion
d) Relationships
2. _______ marketing is a method of marketing whereby consumers are encouraged
to share information about a company's goods or services via the Internet.
a) Digital ; b) Content; c) Viral; d) None of the above
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1. Mark Godson (2009), “Relationship Marketing”, Oxford University Press, New Delhi.
2. Rama Mohana Rao K (2009), “Services Marketing”, Dorling Kindersley Pvt. Ltd., New Delhi.
3. Srinivasan R (2010), “ Services Marketing- The Indian Context”, PHI Learning Private
Limited, New Delhi.
4. Shajahan S (2014), “ Services Marketing”, Himalaya Publishing House,
5. Mumbai.
24.9 ASSIGNMENTS
1. Organization or business firms in the Hotel industry use various methods to develop
and maintain an effective marketing plan. Explain some of the general strategies that
marketers use for brand success.
2. ‘Marketing is a powerful tool that has the ability to make or break a business, or even an
entire destination.’ Do you agree with this statement? Justify your answer.
24.10 SUGGESED READINGS
1. etourism.com.au/hotel-marketing
2. theseus.fi/bitstream/handle/10024/103657/Talabi_Juwon.pdf?sequence=1&isAllowed=y
3. smallbusiness.chron.com/effective-marketing-plan-hotel-restaurant-industry-
43767.html
4. en.wikipedia.org/wiki/Digital_marketing
5. en.wikipedia.org/wiki/Email_marketing
6. thebalance.com/email-marketing-2948346
7. en.wikipedia.org/wiki/Viral_marketing
8. searchsalesforce.techtarget.com/definition/viral-marketing
9. businessdictionary.com/definition/word-of-mouth-marketing.html
10. en.wikipedia.org/wiki/Word-of-mouth_marketing
11. cloudbeds.com/articles/hospitality-marketing-trends-2018/
1. ‘Marketing plays a vital role in the success of any business organization’. Describe
the role of marketing in tel industry in detail.
2. ‘When to run an independent small hotel or restaurant, it is not necessary to have
access to the enormous marketing budgets on which the international and
national chains rely. A creative, more personal marketing plan may serve the
best.’ Discuss this statement.
24.12 KEY WORDS
1. Hotel Marketing 4. Viral marketing 7. Word-of-mouth
2. Billboards 5. Email marketing 8. Social media
3. Digital marketing 6. Content marketing 9. Reputation management
H
348EN210
ANNAMALAI UNIVERSITY PRESS 2018 - 2019

Annamalai University: M.B.A Marketing Management

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348EN210

M.B.A Marketing Management

PRODUCT AND SERVICES MARKETING

Prof. Dr. E. Selvarajan

Dr. C. Samudhra Rajakumar Dr. C. Madhavi

PRODUCT MANAGEMENT FUNDAMENTALS

 Industrial services include maintenance & repairs (AMC –Annual maintenance

Integrated Diversification Sun feast Sun feast

Where a co diversifies & manufactures products which it previously purchased

1. Dannon Yogurt offers several 3. Where a co diversifies &

New to the World

3.3.2 New Product Development Strategy

131/2% 34% 34% 16%

Early adopters Early majority Late majority Laggards

Customer Reaction Response Impact

Try Like Neutral

No Try Like Loss

3.3.6 Product Deletion

Stage of the product life cycle

Introduction Growth Maturity Decline

4.3.1 Introductory Stage

Stage in life cycle Product

Stage in Life Cycle Pricing Promotion Distribution

4.3.7 Identification of stages in a PLC

If more points fall on or above the

shift from growth stage to maturity

4.4 REVISION POINTS

Intel – Product Positioning

DEMAND PERFORMANCE BENEFITS

Intel Pentium Processor by early 1990’s

6.3.5 Product Differentiation Techniques

2. Increasing occasions for use

Perceived Quality/ • Perceived Quality

Awareness • Levels of awareness

Rise Fad Decline Classic

Rise Peck Decline Long Period Rise Peck Decline

Source : Donald Cowell, “The Marketing of Services”, Heinemann, London.

 Customers - Free offers, samples, demonstrations, coupons, cash refunds,

relative to customer expectations. - Zeithaml and Bitner

Establishing customer Bench marketing

Ultimately, consumers judge the quality of services on their perceptions of the

Education Services Medical Services

Gap No. Dimension of Gap

BANKING – CUSTOMER SERVICE – MARKETING STRATEGIES FOR

Three types of promotion

BUYING PROCESS PROMOTION GOALS END GOAL

Aims & Objectives of Establishment of Ministry of Tourism

19.5 INTEXT QUESTIONS

Health care services

Medical Services Medical Training Medical Education Medical Research

Line services Supportive services Auxiliary services like

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