UNIT – II (SM)

MARKETING MIX IN SERVICE MARKETING (7PS)

MEANING AND DEFINITION OF MARKETING MIX
Marketing a service requires two very distinct strategies. The marketing mix
is the blend of key interrelated marketing elements that companies and firms
consider in building an effective marketing plan. Conventionally, the marketing
mix is referred to as the four P’s of Marketing (product, place, price and
promotion). However, growth in the service sector has led to development of an
expanded 7 P’s of service marketing. Marketing mix for services is an extension
of the marketing mix for products and goods, as a few more elements are added.

DEFINITION
According to Stanton, “Marketing mix is the term used to describe the
combination of the four inputs which constitute the core of a company’s
marketing system – the product, the price structure, the promotional activities and
the distribution system”.

SEVEN PS/SERVICES MARKETING MIX ELEMENTS

Marketing mix can be studied in following two headings:
1. 4 Ps of marketing (Traditional marketing mix) and
2. Expand mix (Augmented mix for services).
4 PS OF MARKETING/TRADITIONAL MARKETING MIX
Marketing mix describes the specific combination of marketing elements
used to achieve an organization’s/individual’s objectives and satisfy the target
market.

Product Price Place Promotion

Target Market

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ADDITIONAL DIMENSIONS/AUGMENTED SERVICE MIX

In case of services, however, there are alternative approaches suggested by

various authors. They have suggested the need for an expansion of these four
classic ingredients. Over a time the special needs of services have led to the
extension of the mix to seven P’s. The additional 3 P’s listed below are known as
the expanded service mix or augmented service mix.

1.) People
2.) Process
3.) Physical Evidence

People Process Physical Evidence

Employees: Flow of Activities:Facility Design:
 Recruiting  Standardized  Aesthetics
 Training  Customized  Functionality
 Motivation  Ambient
 Rewards Number of Steps conditions
 Team Work  Simple  Equipment
 Complex  Signage
 Employee dress
Customers: Level of customer Other Tangibles:
o Education involvement o Reports
o Training o Business cards
o Communicating o Statements
o Culture and values o Guarantees
o Employee
Research

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 PRODUCT DECISION IN SERVICES

INTRODUCTION TO SERVICE PRODUCT

Physical goods and services can be looked at in terms of benefits offered, as
well as features and specific attributes associated with those benefits. The notion
of the service concept is based in the idea that actual service offerings (or physical
products, in fact) can be broken down into a number of levels relating to customer
need-satisfactions, benefits and features.

Traditionally, product is described as manufactured goods or services. Thus,

goods and services are two types of the product. Today customers do not buy
goods or services. They buy specific benefits and value from the total offering.
The total offering which is also referred to as ‘offer’ to the customer in exchange
process represents those benefits that a customer derives from goods and services.
LEVELS OF SERVICE PRODUCT

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 SERVICE LIFE CYCLE
The product life cycle is typically represented graphically in terms of sales
over time. Plotting the level of sales over a period will result in a life cycle curve
which may look like this.

Sales

Launch Growth Maturity Decline

PRICING IN SERVICES

INTRODUCTION
Price is what customers are willing to pay for services. How much a
customer has to pay depends on the value perceived in the service offer. The
payment can be in many forms – money, barter, or return services. The price is a
key element of the marketing mix; it must be acceptable to target customers and it
must reflect the other components of the mix accurately. The price of the service
is the value attached to it by the service provider and it must correspond with the
customer’s perception of value. In services price is what one pays for what he/she
gets.

Examples of Pricing of Services

Terms Used For Pricing Services
What one Pays (Price) What one gets (service)
1.) Tuition Education
2.) Interest Use of money
3.) Rent Use of living house or piece of equipment for certain time
4.) Fare Tax ride, airline flight or bus journey
5.) Fee Services of doctor/lawyer
6.) Retainer ship Consultants’ service over a period of time
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7.) Toll Travel on some highway
8.) Salary Services of an executive/white collar work
9.) Wages Services of blue collar worker
10.) Commission Sales person’s services, agent services
11.) Dues Membership of a union/club
12.) Admission Theatre entry
13.) Tariff Utilities
14.) Premium Insurance

CHARACTERISTICS OF PRICING OF SERVICE

Markets have to consider these characteristics while pricing services and
marginal differences which need to be considered are
1. Negotiations
2. Discounts
3. Quality

PRICING OBJECTIVES

1.) Profit Maximization

i. To Achieve a targeted Return on Investment (ROI)

APPROACHES TO PRICING SERVICES

Pricing decisions in manufacturing industry are usually based on the

tangible items, i.e., cost of raw material, bought in components, machine rates,
labor costs etc. In service industry which is largely non-asset based, decisions
generally have to be made on intangibles. There are district differences between
the pricing procedures of different types of service industry, depending on the
type of activity in which they are engaged.

Various approaches to service pricing are shown in Figure below:

Approaches to Pricing Services

Cost-Based Pricing Computer-based Pricing

Demand Oriented Pricing

Value-Based Pricing

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 PRICING STRATEGIES & TACTICS IN SERVICES MARKETING
Various pricing strategies used by service marketers are shown in figure
below:

Pricing Strategies in Services

Marketing

Price Discounting
Odd Pricing
Penetration Pricing
Bundled Pricing
Prestige Pricing
Market Segmentation Pricing
Loss Leadership Pricing
Bid Pricing

Money – Back Guarantees

PROMOTION IN SERVICES

Introduction to Promotion in Services

Many times people equate ‘Marketing communication (promotion)’ with
marketing. Promotion for its ubiquity attracts more than its due attention from the
management. Markets employ various promotional tools like advertising, sales
promotion activities, public relations, and persuade them to respond favorably to
the same.

The rated importance of promotional tools varies between consumer and

industrial markets. Now with changing market conditions, use of promotional
tools as an active marketing strategy component is emerging very fast. To
function effectively in emerging competitive markets, the service markets are
pushing their services by aggressive use of promotional tools. This is particularly
true in the context of services like education, healthcare, airlines, banking and
insurance.
DEFINITION
According to Stanton, “Promotion includes, advertising, personal selling,
sales promotion and other selling tolls.”
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 CHARACTERISTICS OF PROMOTION FOR SERVICES
1.) Help to Inform about Services: Customers are informed about the services
of the company, either at the time of introducing of a new service into the
market or when any changes is made in the existing service.
2.) Help Remind about Services: Customers are reminded of the services of
the company.
3.) Persuades Customer for Purchase: Customers are requested or persuaded
to purchase the services of the company.
4.) Promotion Techniques: Promotion includes, advertising, personal selling
and other sales promotion techniques.
5.) Help Determining Customer’s Needs and Demands: Promotion activities
are performed by the manufacturer. It is responsibility of the producer to get
information about consumer so that necessary services may be served to
meet their demands.

SETTING PROMOTION OBJECTIVES

Setting Communications Objectives

Target Audience
Specifying Communication Objectives

Other Considerations (How

where and When)

PROMOTION MIX FOR SERVICES

Promotion is one element of marketing mix. Promotional activities include

advertising (by using different media), sales promotion (sales and trades
promotion), and personal selling activities. It also includes internet marketing,
sponsorship marketing, direct marketing, database marketing, and public
relations. And integration of all these promotional tools along with other
components of marketing mix to gain edge over competitor is called promotion
mix.

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 The elements of promotion mix/communication mix are shown in figure
below.

Marketing Communication Mix

Elements

Advertising
Personal selling
Sales Promotion
Publicity
Public Relationship
Direct Marketing
E-Commerce/Internet
Marketing Sponsorship

Exhibitions Packaging
Corporate
Communications/Identity Word-of-Mouth

Event Marketing Shows

Trade Shows
Shows Shows
PLACE IN SERVICES
Introduction to Place/Services Distribution

Distribution of services differs significantly from that or tangible goods. In

the case of tangible goods, production is separate from consumption. But in
services, production and consumption take place simultaneously. The service
provider and consumer will participate in service production at a specified
location. The importance of distribution can be traced in services marketing
with its presence in the name of ‘place’ in the services marketing mix. But
there are more than enough similarities to make distribution relevant and
important to service firms.

The basic objective of distribution of services is to make services available

at the right time and at the right place and accessible to consumers with ease

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 and convenience. When tangibles play a significant role in service production
and delivery, the requirement of direct contact may be reduced or sometimes
may be avoided.

NATURE OF SERVICES DISTRIBUTION

1. Inseparability of Production and Consumption
2. Difficulty in balancing the Demand and Supply of Services
3. Lack of Standardization in Services
4. Recovery Services

PEOPLE IN SERVICE

INTRODUCTION
The evolution of HRM (Human Resources Management) as an area has
received due attention from researchers, academics and corporate entities. Much
of this has happened in the context of production jobs and companies which had
to learn how to handle human beings involved in laborious, repetitive work as in
shop-floors. Ever since services took-off on a growth path, the marketing
concepts primary developed for goods have struggled to keep pace. These were
presumably enough to cater to the manufacturing era, but unable to give due
emphasis, to the recent service industry paradigms. Thus, three more Ps has been
added to the original four, ‘people’ being one among them. This is quite justified
too, as most services are dependent on people to deliver them successfully.
IMPORTANCE OF SERVICE EMPLOYEES
1.) They are the service
2.) They are the Organization in the customers’ Eyes
3.) They are the Brand
4.) They are Marketers

CLASSIFICATION OF SERVICE EMPLOYEES

1. Interaction
i. Low Contact Service
ii. High Contact Service

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 2. Types of Service Employees
i. Consumer service employees
ii. Professional Service Employees
3. Frequency and Length
i. Contact Personnel
ii. Moderate contact personnel
iii. Back-Office Staff
iv. Support Staff
v. Management

PHYSICAL EVIDENCE IN SERVICES

MEANING OF PHYSICAL EVIDENCE

The physical evidence is defined as the environment in which the service is
delivered and where the firm and the customers interact; and any tangible
commodities that facilitate performance or communicate the service. It plays a
role in enhancing customer’s perception of the service quality.

Physical evidence is everything that physically exhibits to the customer. It

includes the physical environment of the service outlet, the exterior, the interior,
all tangibles like machinery, furniture, vehicles, stationery, signboards,
communication materials, certificates, receipts, service personnel, and so on.

IMPORTANCE/SIGNIFICANCE OF PHYSICAL EVIDENCE

1.) Increased productivity
2.) Creating good impressions
3.) Increased credibility
4.) Differentiation from competitors
5.) Service quality management
6.) Repositioning of service
PHYSICAL EVIDENCE STRATEGY

Physical evidence management is crucial for success in a service business.

It has a powerful impact on employee and customer behavior. Some of the
guidelines for effective management are as follows.
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 1. Recognize the strategic impact of physical evidence
2. Map the physical evidence of service
3. Clarity roles of the servicescape
4. Assess and identify physical evidence opportunities
5. Be prepared to update and modernize the evidence
6. Work cross-functionally

PROCESS IN SERVICES

MEANING OF PROCESS
The process is one of the element of augmented marketing mix and vital
point of the value chain. This has received less attention though it is an important
part of the marketing task.

Process is the way of undertaking transaction, supplying information and

providing services on a way, which is acceptable to the consumer and effective to
the organization.
CHARACTERISTICS OF SERVICE PROCESS
There are certain specific characteristics of service process design and
implementation, which should be considered. These included.

1. Customer participation in the process

2. Location of service delivery
3. Service itself
4. High-Contact of Low-Services
5. Degree of Standardization
6. Complexity of the Service

Importance of Service Process

1. Indispensable for service success
2. Critical for delivering response

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