Product vs service

Tangible vs. Intangible

The product is tangible. Eg when a individual buys a home, the buyer can nook and
cranny of the house that includes basement, foundation, individual room, etc.
a service is not something that one can feel or try out before paying for it. Say
an individual needs a professional inspector to identify any hidden issues before
deciding to purchase a home. The customer can read online reviews, ask for the
inspector’s credentials, as well as before and after pictures of his previous work,
but there’s no definite way of evaluating the quality of a service until it’s
rendered.
 Production vs. Interaction
A potential car buyer usually checks the car’s body lines, feels the
leather used on the seats, and takes the car for a test drive before
deciding whether to buy the car or not. Since it’s a product, the buyer is
aware of the specific production line the vehicle hails from, and there
are many more like it. In fact, there are other cars identical to the one
being bought.
But what about the service the car buyer receives from the car dealer?
The way a car salesperson interacts with one buyer is not the same way
he interacts with another buyer. If the car buyer is lucky, he may find a
salesperson who is well-informed, courteous, and is willing to
negotiate. If he’s not, the car salesperson might be one who lacks
information or behaves in a nonchalant way.
 
Perishable vs. Imperishable
The best way to illustrate perishable products is to consider a
restaurant owner. If such an individual does not understand the
concept of spoilage and waste reduction, he risks ruining his business
since most fresh foods spoil within a few days. Another example is
technology. Even some intangible products like software become
obsolete at some point. Imperishable products include items like
jewelry and automobile parts.
However, does the distinction between perishable and imperishable
exist in services? Services can be described as perishable but not
imperishable. A perishable service simply means that it’s short-lived.
Ideally, such a service is consumed as soon as it is produced. Unlike
products, the service cannot be stored for later use.
Perishable services are such as airline flights, auto repair, theater
entertainment, and manicures. If an individual purchases an air ticket
for a particular day, and then he suffers a cold and is not able to travel,
the ticket expires. The perishable attribute of some services makes it
hard to balance supply and demand.
 The Growing Demand for Products and Services
Based on history, it is evident that producers need to adapt or replace
products once they become outdated. Consider the way websites and
e-books have replaced paper books or how compact discs have
replaced cassettes and DVDs. In other instances, services have also
become a substitute for certain products. For instance, the streaming
services offered by entertainment firms like Netflix are now preferred
by many to DVD and cable or satellite television programs.

Simultaneous Production and Consumption

Service products are consumed at the same time they are being produced. The
tourist attraction is producing entertainment or pleasure at the same time it is being
consumed. In contrast, goods products are produced, stored, and then consumed. A
result of this characteristic is that the provider of the service is often present when
consumption takes place. Dentists, hotel staff, hair stylists, and ballet dancers are all
present when the product is used.

Little Standardization

Because service products are so closely related to the people providing the service,
ensuring the same level of satisfaction every time is very difficult. Dentists have their
bad days, not every baseball game is exciting, and the second vacation to Walt
Disney World Resort may not be as wonderful as the first.

High Buyer Involvement

With many service products, the purchaser may provide a great deal of input into the
final form of the product. For example, if you wanted to go on a Caribbean cruise,
you would visit a number of Web sites describing the various cruise locations, review
the available options for cabin location and size, islands visited, food, entertainment,
prices, and whether they accommodate children. Although the task would be very
time consuming, you could, if you wanted, practically design every moment of
your vacation
Why it is important to have service?
Customer service is how your company interacts with its customers, both in daily
transactions and also as a problem-solving solution when issues arise. It has a direct and
meaningful impact on your company’s profitability as your customer service team serves as
the front-line response to your customer’s needs and is crucial for long-term customer
retention.
Here are eight reasons why customer service should be an important priority for every
company:
1. Helps you retain customers
If a customer has a good experience with a company, they’re more likely to return, and the
more loyal customers you have, the more your company can grow to its full potential. For
instance, if your customer service team has a seamless procedure that makes online returns
quick and simple, you’re more likely to retain customers and build a loyal customer base that
appreciates your no-hassle return policy.
2. Boosts employee retention
Employees want to work for companies that treat their customers fairly. When your
employees see that your company is focused on delivering exceptional customer service,
they will be more likely to become advocates for the business. They are also far more likely
to remain with the company and be fully engaged in their work.
3. Reinforces company values and brand
Your customer service team communicates with customers on a daily basis, which means
that they are directly responsible for representing your brand's mission and values. Great
customer service can result in positive reviews and word-of-mouth recommendations for
your business that can lead to new business. A positive public persona can strengthen the
way people see your company, products or services.
4. Generates referrals
Positive word-of-mouth referrals come directly from previous and existing customers that
have had a great experience with your company. They tell their friends, relatives, colleagues
and may even post to their social network about your friendly and helpful customer service.
Their contacts, in turn, feel encouraged to buy from you. Word-of-mouth advertising is often
a company's best and least expensive form of advertising.
5. Increases customer lifetime value
Customer lifetime value (CLV) represents the total amount of revenue your company can
expect to receive from a single customer over time. By increasing the CLV, you can
significantly increase your company's revenue without having to spend more on marketing.
An increasing CLV means that your customers are spending more money each time they
order or they are buying more often.
Customer service is a great way to increase CLV. If customers have a positive shopping
experience, they'll be more likely to buy from you again. It’s also easier to market new
products to existing customers. Return customers are more likely to trust the products and
services your customer service team is recommending because they’ve already had a great
experience.
6. Proactively addresses customer issues
Proactive customer service is when you reach out to customers before they know that
problems exist. By being proactive with your customer service approach, you can let
customers know that you're working to improve the user experience for them.
For example, if you have a group of customers who had a common problem and released a
new product or feature that resolved that issue, you could use your ticketing system to
identify those customers and then reach out to let them know about the new feature or
service. This approach can be effective because customers recognize you're trying to
resolve problems for them.
7. Strengthens company culture and streamlines processes
When everyone at your company shares the same end goal of customer service, you
promote a more streamlined workflow. For example, your engineers may be more willing to
help the sales team, or the production team may be more willing to listen to the customer
support representatives. Ultimately, by making serving others a priority, you can create a
culture of helpfulness within your organization.
8. Gives you a competitive advantage
Great customer service does more than just win over new customers and retain loyal ones. It
also sets you apart from the competition. By offering best-in-class customer service, you are
attaching values to your company’s brand, strengthening your reputation in the market place
and showing by example that you care about the people who purchase your product or
service

The Services Marketing Triangle

The Services Marketing Triangle is shown in the following diagram. It
shows the key marketing activities that happen between the key actors
within services businesses.

Each actor works together to develop, promote, and deliver a company’s

service. As you can see from the diagram we represent actors by the points
of the triangle. Our actors are:

 Company: refers to the leadership team of the company in question.

  Employees: refers to all employees, including subcontractors who
deliver the company’s service.
 Customers: refers to all customers and potential customers of the
company.
The lines between the points show the different types of marketing that
must occur:

 External Marketing: occurs between the company and its customers.

 Internal Marketing: occurs between the company and its employees.
 Interactive Marketing: occurs between the employees and the
customers.

External Marketing
Companies use external marketing to make promises to customers.
External marketing is any communication to customers (or potential
customers) that happens before service delivery starts.

Forms of external marketing include:

 Advertising

 Personal selling

 Public relations (PR)

 Direct marketing

We use external marketing to achieve many aims including:

 Creating awareness.

 Setting price expectations.

 Setting service level expectations.

 Informing customers if any prerequisites that must be in place before

they can use the service.
Internal Marketing
Within a services business, we view employees as internal customers. They
are a market which we must please first as a company. The leadership
team should be focused on satisfying its employees so that they want to
better serve customers.

Internal marketing involves motivating employees to work as a team to

make customers satisfied. This is obviously true for customer service
representatives. It can equally be applied to all employees. This results in
everyone, at all levels of the organization, being empowered to deliver great
customer service.

Key components of internal marketing include:

 Motivating employees

 Teaching customer satisfaction techniques

 Communicating company goals regularly

 Management of change

 Training staff on how to use the company’s services

 Good pay and working conditions

Interactive Marketing
Interactive marketing occurs when employees and customers interact. It is
here where the promises made during external marketing are either kept or
broken by employees or sub-contractors.

Each significant interaction between an employee and a customer is known

as a service encounter.
Interactive marketing is important because it establishes both short-term
and long-term satisfaction. That is, if the customer is satisfied with the
service they received in the short-term, they are more likely to be satisfied
over the longer term.
Services Marketing Triangle Example
To wrap things up let’s consider a simple example, that of a luxury hotel.

First, let’s consider external marketing. A luxury hotel may want to educate
customers through advertising and public relations. Here, they will want to
inform customers that their rooms have the finest quality fixtures, fittings,
and toiletries. They are likely to also want to convey that their staff are
knowledgeable and very willing to help with whatever request a customer
may have.

To deliver these promises the company focuses on internal marketing. It

establishes more concierge roles within the hotel than the industry
average. This helps ensure that staff feel they have the time they need to
help each customer to the best of their ability. Employees are also trained
on the local area, local activities, and excursions. The company also
teaches every employee how to handle and diffuse difficult guests and
situations.

One of the ways that the hotel handles interactive marketing is as follows.
They employ someone to manage their social media presence and
reputation.

Now suppose a guest tweeted that they are in their room preparing for an
impo

Service flower concept:

The Service Concept explained
One of the central models of the Service Automation Framework is the service
concept. In this post we explore the use of a Service Concept in further detail, and
why it is important to understand what the Service Concept of an organization is.

The service concept outlines how a service provider can realize the value and
desired outcomes of its services. The service concept can best be described as the
way in which an organization would like to have its services perceived by its
stakeholders.[i] It describes the non-tangible aspects of service delivery and is an
integral part of the value proposition of service providers. Whereas with tangible
objects the final product is mostly the sum of its parts, this is certainly not the case
with services.

Various studies have shown that users tend to see a service as a ‘whole experience.’
For example, a day at Disneyland’s Magic Kingdom is more likely to be defined by its
visitors as a magical experience rather than six rides and a burger in a clean park.[ii]
The service concept facilitates this holistic approach by providing a detailed
description of what is to be done for the user (what needs and wishes are to be
satisfied) and how this is to be achieved.[iii] As such, the service concept can be a
major driver for the Service Design phase of (new) services.

The service concept consists of the holistic combination (i.e. all element should be
considered equally) of four dimensions[iv]:

1. Service operation: the way in which the service is delivered;

2. User experience: the user’s direct experience of the service;
3. Service outcome: the benefits and results of the service for the user;
4. Value: the benefits the user perceives as inherent in the service, weighed
against the cost of the service.
The four dimensions of the service concept form a key to defining how the
stakeholders in an organization perceive the value of services, minimizing the gap
between user expectations and the service delivery operation:

The four dimensions of the Service Concept

The service concept plays an important role in
determining the Service Automation strategy for
organizations, and the subsequent design and development activities. It is
positioned as a high-level and overarching concept that gives input to the overall
strategy of the service provider.

Why is the Service Concept important?

One of the most distinctive characteristics of services is their process-oriented
nature. Each service can be seen as a chain of activities that help a service to
function effectively.[v] For example, a package delivery service consists of a number
of activities that need to be executed in a predetermined order. First, you need to
register your package with the shipping company. Next you print the package label
and attach this to the shipment item. Finally the courier will pick up the package and
subsequently ensure that it is delivered at the designated address. Each of the
activities mentioned is part of a larger (again holistic) process that constitutes the
whole service. Because each activity contributes to a singular outcome of a service
(in this example the shipment of the package from A to B) the service concept of any
organization needs to take into account that its potential to deliver value is only as
good as its weakest link. If any of the activities in the sequence fail, the user will
have a very poor user experience because the desired outcome of the service is not
achieved.

Almost every service provider delivers not one, but a variety of different services,
which can all be considered as separate processes of value creation. Service
organizations do, however, only have one service concept, which functions as an
overarching directive to all other services. It is the glue that binds the individual
services of an organization together, aiming them towards the common objectives
of the service concept. As such, the service concept aligns an organization’s service
offering towards a common direction by setting overall goals and objectives that
apply for the complete collection of services. This is especially so in larger
organizations, which offer a variety of different services, where establishing a
uniform service concept greatly helps in determining and setting priorities.

The Service Concept directs the design of multiple services

The primary goal of the Service Concept is to determine the desired service
outcomes and value of a service provider, which is subsequently incorporated into
the design of the organization’s various services. A firm that delivers accountancy
services, for example, might have a service concept that concentrates on national
delivery (service operation) of various accounting services (value) that comply with
all relevant rules and regulations (service outcomes) and that primarily focuses on
online delivery (user experience). Although this is an extremely abbreviated
example of a service concept, it can set the direction for all services of the
accountancy firm. Each of the organization’s accountancy services, which are all
individual processes, can be related and designed based on the service concept.
Ultimately, the service concept might form the foundation upon which organizations
can start managing their service portfolio, which is the collection of various services
a service provider offers.

Definition: Service design is the activity of planning and

organizing a business’s resources (people, props, and
processes) in order to (1) directly improve the employee’s
experience, and (2) indirectly, the customer’s experience. 
Imagine a restaurant where there are a range employees: hosts, servers,
busboys, and chefs. Service design focuses on how the restaurant
operates and delivers the food it promises—from sourcing and receiving
ingredients, to on-boarding new chefs, to server-chef communication
regarding a diner’s allergies. Each moving part plays a role in the food that
arrives on the diner’s plate, even though it is not directly part of their
experience. Service design can be mapped using a service blueprint.  

Components of ‘Service Design’

In user experience design multiple components must be designed: visuals,
features and commands, copywriting, information architecture, and more.
Not only should each component must be designed correctly, but they also
must be integrated to create a total user experience. Service design follows
the same basic idea. There are several components, each one should be
designed correctly, and all of them should be integrated.
The three main components of service design are:
People. This component includes anyone who creates or uses the service,
as well as individuals who may be indirectly affected by the service. 
Examples include: 
 Employees
 Customers
 Fellow customers encountered throughout the service
  Partners 
Props. This component refers to the physical or digital artifacts (including
products) that are needed to perform the service successfully. 
Examples include: 
 Physical space:  storefront, teller window, conference room
 Digital environment through which the service is delivered
o Webpages
o Blogs
o Social Media
 Objects and collateral
o Digital files
o Physical products
Processes. These are any workflows, procedures, or rituals performed by
either the employee or the user throughout a service. 
Examples include: 
 Withdrawing money from an ATM
 Getting an issue resolved over support
 Interviewing a new employee 
 Sharing a file
Returning to the restaurant example, people would be farmers growing the
produce, restaurant managers, chefs, hosts, and servers. Props would
include (amongst others): the kitchen, ingredients, POS software, and
uniforms. Processes would include: employees clocking in, servers
entering orders, cleaning dishes, and storing food.  
 

Frontstage vs. Backstage 

Service components are broken down into frontstage and backstage,
depending on whether the customers sees them or not. Think of a theater
performance. The audience sees everything in front of the curtain: the
actors, costumes, orchestra, and set. However, behind the curtain there is
a whole ecosystem: the director, stage hands, lighting coordinators, and set
designers. 

Though not ever seen by the audience, the backstage plays a critical part
in shaping the audience’s experience. In a restaurant, what happens in the
kitchen dictates what appears on your table. 
Frontstage components include: 
 Channels
 Products 
 Touchpoints 
 Interfaces
Backstage components includes:
 Policies 
 Technology 
 Infrastructures 
 Systems
 Service Design vs. Designing a Service 
Service design is not simply designing a service. Service design addresses
how an organization gets something done— think “experience of the
employee.” Designing a service addresses the touchpoints that create a
customer’s journey — think “experience of the user.”
As a parallel, every software application has a user interface, no matter
how rudimentary. However, writing code that creates an interface as a bi-
product would not be called a ‘user interface design process’. Similarly,
even if the user interface were created from a deliberate design process, it
would not be a product of ‘user experience design’ unless the experience of
the user is taken into account.
Why do we need to care about service design and the “experience of the
employee” as UX Designers? An organization’s backstage processes (how
we do things internally) have as much, if not more, impact on the overall
user experience as the visible points of interaction that users encounter. If
a server does not successfully communicate allergies to the chef, a diner
could consume food with severe consequences. If a restaurant is
overcrowded, but has a systematic process for clearing tables and
assigning seating, customers never have to wait or know its overcrowded in
the first place.
 

Benefits of Service Design

Most organizations’ resources (time, budget, logistics) are spent on
customer-facing outputs, while internal processes (including the experience
of the organization’s employees) are overlooked. This disconnect triggers a
common, widespread sentiment that one hand does not know what the
other is doing.
Service design bridges such organizational gaps by: 
 Surfacing conflicts. Business models and service-design models are
often in conflict because business models do not always align with
the service that the organization delivers. Service design triggers
thought and provides context around systems that need to be in
place in order to adequately provide a service throughout the entire
product’s life cycle (and in some cases, beyond).  
  Fostering hard conversations. Focused discussion on procedures
and policies exposes weak links and misalignment and enable
organizations to devise collaborative and cross functional solutions.  
 Reducing redundancies with a bird’s-eye view. Mapping out the
whole cycle of internal service processes gives companies a bird’s-
eye view of its service ecosystem, whether within one large offering,
or across multiple sub offerings. This process helps pinpoint where
duplicate efforts occur, likely causing employee frustration and
wasted resources. Eliminating redundancies conserves energy,
improves employees’ efficiency, and reduces costs. 
 Forming relationships. Service design helps align internal service
provisions like roles, backstage actors, processes, and workflows to
the equivalent frontstage personnel. To come back to our initial
example, with service design, information provided to one agent
should be available to all other agents who interact with the same
customer. 
Conclusion: When backstage problems exist, they have frontstage
consequences: poor service, customer frustration, and inconsistent
channels. Streamlining backstage processes improves the employees’
experience, which, in turn, allows them to create a better user experience. 
Unit -2
Pricing
Pricing is a process of fixing the value that a manufacturer will receive in the
exchange of services and goods. Pricing method is exercised to adjust the cost of
the producer’s offerings suitable to both the manufacturer and the customer. The
pricing depends on the company’s average prices, and the buyer’s perceived value of
an item, as compared to the perceived value of competitors product.
Objectives of Pricing:
 Survival- The objective of pricing for any company is to fix a price that is
reasonable for the consumers and also for the producer to survive in the
market. Every company is in danger of getting ruled out from the market
because of rigorous competition, change in customer’s preferences and taste.
Therefore, while determining the cost of a product all the variables and fixed
cost should be taken into consideration. Once the survival phase is over the
company can strive for extra profits.
 Expansion of current profits-Most of the company tries to enlarge their profit
margin by evaluating the demand and supply of services and goods in the
market. So the pricing is fixed according to the product’s demand and the
substitute for that product. If the demand is high, the price will also be high.
 Ruling the market- Firm’s impose low figure for the goods and services to get
hold of large market size. The technique helps to increase the sale by
increasing the demand and leading to low production cost.
 A market for an innovative idea- Here, the company charge a high price for
their product and services that are highly innovative and use cutting-edge
technology. The price is high because of high production cost. Mobile phone,
electronic gadgets are a few examples.

Why pricing strategy is important?

 Attract New Customer, When the prices fall it attracts new
customers in the market. Because it creates demands in the
society.
 Direct Effect on Profit, When the prices fall, it directly effects
on the profits. Profit could be increase or vice-versa.
 Branding, Companies make prices strategies at the time of
when they need to sell their old stocks and wants to introduce
new products. it helps in branding of the company.
 Business Growth, Pricing strategy helps to grow the business.
it provides sales to business which creates cash flow that help
to extend the business.
 Pricing is one of the toughest challenges encountered by the firms as
the prices should not only be relevant as per the current market
scenario, but should also meet the expenses of the firm and help it gain
profit. It must also take into account competitor’s pricing. Hence, it is
important to choose the right pricing strategy.
Types and Examples of Different Pricing Strategies
Pricing methods are the methods that firms use to calculate the price of their
products.
1. Cost based pricing
After calculating the total production costs, a target profit margin is levied on it.
Example – If the production cost of a pen is $100 and the target profit margin is
10%, then the price of pen would be 100 + 10% of 100 = $110.
Some of the other cost-based methods are cost plus, markup, break even, target &
marginal cost strategy.
2. Demand based pricing 
This strategy is used when their price is determined by customer demand.
Example- price of hotels & hospitality increases during the festive season owing to
high demand.
Some of the demand-based strategies are price skimming & price penetration.
3. Competition based pricing 
The prices in this type of method are decided by what the competition is offering.
The different types of pricing strategies include discount, premium & going rate
methods.

4. Target Pricing
Total investments are determined and a target rate of return is applied to it to attain
the desired return on investment.
Example – If the investments in the production of cups are $100 and the target rate
of return is 5%, then the price of the cups will be 100 + 5% of 100 = $105.
5. Value based pricing
The price is calculated based on the value being provided to the customers.
Example – If a personal coaching for 10 days in a particular subject is equivalent to
attending a coaching class consisting of 20 students for 20 days, then the person
would be willing to even pay the fee that he pays for the coaching classes for his
personal tuitions. This is assuming that the coaching class charges higher fee than
the personal coaching.
6. Psychological pricing
This is based on the psychological impact that the price would produce on the
customers.
Example – These days we see a lot of products are priced at an amount less than
some round figure (say $199 instead of $200). This is so because the customers
respond positively to such prices.
Some other pricing strategies which be used as per the requirement, factors, market
conditions, margins etc. are bundled, prestige & affordable pricing.
7. Good-better-best pricing
It is everywhere you look. Also known as ‘tiered pricing,’ the good-better-best pricing
strategy generally offers customers three options for a product at gradually
increasing prices: the ‘good’ option, the ‘better’ option, and the ‘best’ option.
Example
Any time you go to a restaurant or a movie theatre and they offer you small, medium,
and large options, that’s good-better-best pricing. When you book a flight and
choose between coach, premium economy, and business class: there’s good-better-
best again. Every time you fill your car up with gas, ‘good,’ ‘better,’ and ‘best’ are
represented by regular, plus, and premium options. With the prevalence of this
pricing strategy, it stands to reason that this is an effective practice, so let’s take a
closer look at how it work

8. Price skimming 
If you set your prices as high as the market will possibly tolerate and then
lower them over time, you'll be using the price skimming strategy. The goal
is to skim the top off the market and the lower prices to reach everyone
else. With the right product it can work, but you should be very cautious
using it.
Example: Apple
9. Penetration pricing
In highly competitive markets, it can be hard for new companies to get a foothold.
One way some companies attempt to push new products is by offering prices that
are much lower than the competition. This is penetration pricing. While it may get
you customers and decent sales volume, you'll need a lot of them and you'll need
them to be very loyal to stick around when the price increases in the future.
Example:  online news website offering one month free for a subscription-
based service or a bank offering a free checking account for six months
10. Economy pricing 
This strategy is popular in the commodity goods sector. The goal is to price a
product cheaper than the competition and make the money back with increased
volume. While it's a good method to get people to buy your generic soda, it's not a
great fit for SaaS and subscription businesses.
Example: Store-brand products and generic medications
11. Dynamic pricing 
In some industries, you can get away with constantly changing your prices to
match the current demand for the item. This doesn't work well for subscription and
SaaS business, because customers expect consistent monthly or yearly expenses.
Example:  Uber, trains, and airlines are very a great user of dynamic pricing in the
transportation industry
Price Adjustment Strategies
The price adjustment strategies relate to all the strategies implemented by an
organization that takes into account the differences between customers and
rapidly changing. The price adjustment strategies are geographical pricing,
psychological prices, segmented prices, promotional prices, international
prices, supply and pricing of allowances. The explanation of these strategies
is as follows.
Discount and allowance pricing
Several companies offer discounts and bonuses at their basic price to reward
customers for their specific responses. Discounts can take many forms, such
as cash discount which give the buyer a discount if paid before the due date of
payment. Similarly, there is a quantity discount on the purchase of products in
large quantities. For example, the price of a shirt is $ 5, but if the buyer
purchases two shirts, then the price is $ 4 per shirt. Other functional forms off
discount (which is given to channel members by the seller to perform certain
functions) and the discount season (in which discount is given to buyers to
purchase goods off-season).
Segmented Pricing
Companies use segmented pricing to charge different prices to buyers on the
basis of differences in customers, products, and places. Some of the major
forms of price fixing are targeted customer segment, the shape of the product
price, location, etc. Low price pricing segment of customers, firms charge
different prices to different customers.
For example, students pay less for tickets of the soccer match compared with
other citizens. For prices to a product, customers pay differently depending on
the different versions. Here we take the example of mobile phones that are
priced differently depending on features, but these features only cost a few
dollars more to do. Also, in case of liquidity pricing, firms charge different
prices to customers based on their preferences for certain places. For
example, in cricket matches, ticket prices are different depending on the
location, although the cost of providing in each place is the same.
Psychological prices
Many people judge the quality of the commodity price for taking a higher price
as a sign of good quality. Sometimes customers do not have information on
actual prices of products as judging the quality of the product by its price. This
type of behaviour requires sellers to increase prices of their products despite
the fact that real prices are low. Customers also lead to prices in their minds,
these prices are known as reference prices. In order to obtain higher profits,
sellers have to influence the reference price of the customers.
Example:
In supermarkets it is very common for products in the pastries, snacks, and appetizers section
to have a round price, as they are products that tend to be bought on impulse.
Promotional prices
Many organizations try to promote their products by cutting down the prices of
their products below list price or costs. This promotional pricing helps
merchants to mum customers in a short period of time. However promotional
pricing can be dangerous for the organization because it can ruin the
reputation of the organization. Just as the practices are easily copied by
competitors and help organizations build their brand the long term.
Example
1. Buy One, Get One Free (BOGOF) The "buy one, get one free" deal — or
some sort of variant involving a reduced-priced good or service available
with the purchase ...
2. Loyalty Programs. A loyalty program is a promotional pricing strategy
where a company incentivizes brand loyalty by offering deals and
discounts in exchange for consistent, repeated purchases.
3. Seasonal Sales. A seasonal sale is essentially an extended flash sale —
typically tailored to move merchandise relevant to a specific time of year.
Geographic Pricing
The companies also charge different prices are the customers who live in
different parts of the country or the world. If customers are living in remote
areas, companies have to charge higher prices to cover the cost of delivery,
but this will result in the loss of customers to competitors. Therefore it
becomes difficult for the company the possibility to apply uniform prices
across the country price or charge according to the geographical conditions in
which the customers live.
Example
where all customers within designated regions are charged the same,
localized price. With zone pricing, more distant customers generally pay
higher prices for a company's products or services.
International pricing
Many organizations operate in different countries because they have to decide
whether to charge uniform prices or sell products according to the situations of
the countries in which organizations operate. There are several factors that
affect the pricing decision of companies such as consumer perception,
economic conditions, law and order, the marketing objectives of the company,
etc. These factors help organizations be able to charge similar prices or
different throughout the world.
For example, in many cases the organizations to charge higher prices for
people living in remote countries because of differences in income per capita.
Competition pricing
Competition-based pricing is the pricing of goods and services that is based on what
the competitors are charging. 
Example adding more years of warranty or providing special customer care, can also
be a sufficient reason for the price difference on similar products
PROMOTION
Promotion is a type of communication between the buyer and the seller.
The seller tries to persuade the buyer to purchase their goods or services
through promotions. It helps in making the people aware of a product,
service or a company. It also helps to improve the public image of a
company.
Importance of promotion
1) Increasing brand awareness –
Promotions help in creating brand awareness. With the help of various
media like the television, billboards, radio or local newspaper news,
you can spread across information about your brand and company,
which helps people to find out more about you and look into your
products and make purchases.
2) Segment Identification –
If your promotional and marketing strategy is loosely structured, it
might not be successful in targeting the “right” audiences. Having a
full-proof and well-thought-out promotional strategy and marketing
plan can help you identify different segments of consumers in the
market and offer suitable solutions for your clients.
3) Increasing customer traffic –
Promotion also helps in increasing customer traffic. The more you
promote your brand, the more will the customers know about you and
your company and the more will they be interested in your products.
Promotion can be done even by giving out free samples which work
wonders for customers! They try your product and ultimately, come to
you and make purchases.
4) If you want to build brand awareness and increase word-of-mouth publicity,
a big, spectacular eye-catching event or a charitable donation might be the best
tool.

5)If you have a product that isn't selling, packaging it together with a
successful product in a "two for the price of one" campaign has advantages.

6) To encourage customers to try a new product, rebates or "complete refund if

you're not satisfied" campaigns may prove effective.

7) If your goal is to gather more information about your customers, a

promotion that incorporates a website visit can be useful. To claim the rebate,
customers log in and provide their email address, for instance. Then, you can
contact them later by email with more offers.
8)Boost brand awareness.

9)Convince people to try a new product at least once.

10) Provide information: If your product is new, promotion can make people
aware of its benefits and why it's better than the competition.

11) Increase customer use: Frequent-flyer programs are an example of this

kind of promotion. A traveller who uses Delta or American Airlines over and
over can qualify for free flights down the road. Using a credit card tied to the
airline gives customers more miles
12) If traffic increases the profitability of the company also increases.
13) In long term success, promotion plays a vital. Eg Dairy milk promotion,
take sweet before doing any good things; is still reflects in minds of the people
before whenever they do a kind of good things, this is the long-term success of
the company.
14) Create customer relationships- For the agency, it issues the
opportunity to play a significantly more important role in the
development of the communications program and to become a
more effective partner in the relationship. By participating in the
totality of the communications requirements, rather than having
responsibility for one or more components, the agency can embrace
a more strategic stance. This, in turn, provides significant power
and provides important advantages over competitors.

15) Build your reputation.

16) Improve word-of-mouth opportunities.
17) Stay ahead of the competition on market share.
Objectives of Promotion
i. To create product and brand awareness – Several sales promotion
techniques are highly effective in exposing customers to products
and brands for the first time and can serve as key promotional
components in the early stages of new product and brand
introduction. This awareness is the basis for all other future
promotional activities. Promotional activities motivate the
customers to try new products and brand and the dealers also to
push the new products and brands.
ii. To create interest – Sales promotions are very effective in
creating interest in a product. In fact, creating interest is often
considered the most important use of sales promotion. In the retail
industry an appealing sales promotion can significantly create
customer interest.
iii. To provide information – Promotional activities provide
substantial information about the product to the customers. This
goes a long way in converting interest into actual sales.
iv. To stimulate demand – Effective promotional activities can
stimulate demand for the product by convincing the customers to
buy the products.
v. To reinforce the Brand – Promotion can be used to reinforce or
strengthen the brand in the minds of the customers. This will
ensure repeat sales of the product in the long run.
vi. To attract new customers – Sales promotion measures also play
an important role in attracting new customers for an organization.
Usually, new customers are those persons that are loyal to other
brands. Samples, gifts, prizes, etc. are used to encourage consumers
to try a new brand or shift their patronage to new dealers.
vii. To induce existing customers to buy more – Promotion activities
can increase the purchases made by the existing customers by
making them consume more quantity or consume on more
occasions.
viii. To help the firm to remain competitive – Companies undertake
sales promotion activities in order to remain competitive in the
market. Therefore, in the modern competitive world no firm can
escape sales promotion activities.
ix. To increase sales in off-seasons – Sales of the products naturally
reduce during the off-season. Therefore promotional activities can
be implemented during the off-season to maintain or even increase
the sales. Techniques such as off-season discounts, off-season offers
can achieve this.
x. To add to the stock of the dealers – Dealers like wholesalers and
retailers usually deal with a variety of goods. Their selling activity
becomes easier when the manufacturer supplements their efforts by
sales promotion measures. When a product or service is well
supported by sales promotion, dealers are automatically induced to
have more of such items.
xi. To Keep Existing Customers – A sales promotion can be geared
toward keeping existing customers, especially if a new competitor is
likely to enter the market.
xii. To clear inventory – Promotional techniques can be effectively
used to clear unsold inventory by giving effective offers.
Stages of promotion
New Service launch
1. Get partners involved. Channel and marketing partners who have a
financial stake in the success of the launch are natural allies. The more
people that are talking about the release, the better chances it will get
pickup.
2. Make it easy for people to learn more about your product with free trials,
downloads, product videos, and demos. Examples: Host a Facebook Live
session demoing the product and highlighting its features, Run a live or recorded
Q&A on the product itself.
service available to important influencers as a first step. Influencers
can be friendly customers, prospects, or even bloggers who have an
sizable online presence. Encourage these people to use your product or
service and then write review articles or posts. These folks are also great
resources to talk to analysts about your offering pre-launch.

components of the promotion mix

 Advertising
 Public Relations
 Personal Selling
 Sales Promotion
 Direct Marketing
Advertising
Advertising is a paid promotion method where a sponsor calls for
public attention through paid announcements.  This promotional mix
component uses paid media channels like TV, radio,
newspaper, billboards, or even digital advertising channels like social
media platforms and search engines.

Advertisements have the following characteristics:

 Paid form of promotion.

 Focuses on one way communication from brand to the
customer.
  Can be personal or non-personal, depending on the
channel used.
 Have a mass reach.
Public Relations
Public relations involves communicating to the target audience and
getting their attention using earned media channels like news, word of
mouth, government announcements, etc.

Simply, public relations is a strategised process of releasing

organisation-related information to the public using trustable
channels like news to maintain a favourable reputation of the brand.

Public relations involves:

 Trustable sources,
 Brand mission oriented communication messages, and
 Two-way communication, as the brand releases the
message and waits for the public response to strategically
release another set of messages.
Sales Promotion
 Sales promotion is the offering’s promotion using attractive
short-term incentives to stimulate demand and increase sales.
Eg: This sales promotion example found on a professional
education website illustrates how sales often revolve around
special times or events — in this case, the start of the new year.

The short-term incentives are often used to –

 Promote new products in the market

 Promote unsold inventory
 Attract more customers
 Lift sale temporarily
These incentives include but are not limited to –
  Seasonal discounts,
 FIinancial schemes,
 Target-based benefits for retailers, wholesalers, resellers,
and affiliates
 Free samples,
 Exchange schemes
 Shipping schemes
 Bulk purchase discounts,
 Trade deals, etc.
Personal Selling

Personal selling is a personalised promotion that involves person-to-

person interaction between a brand representative and a prospective
customer.

It involves personalised conversations and promotion presentations

by the salesperson developed after understanding the needs and
wants of the target customer they promote to.

Unlike advertising, personal selling develops a personal connection

between the brand representative and the customer and involves
more costs per person reached.

Personal selling is:

 Two-way personal communication between the brand

representative and the target customer,
 Dependent on the influencing and persuasion skills of the
salesperson,
 Highly flexible way of promotion, and
 Focused on educating the customer more about the
product and give them personalised reasons to buy.
Direct Marketing
Direct marketing is a promotion strategy where the target customers
are contacted directly by the brand instead of having an indirect
medium like a retailer or wholesaler.

It’s a great promotional tool that helps the brand communicate

directly with the prospective customers through channels like –

 Door-to-door promotion,
 Promotional telephone calls,
 SMS, Emails, IM promotional messages,
 Targeted advertisements, etc.
But direct marketing is different from personal selling. Even though it
involves direct contact between the brand and the customer, it not
often involves highly personalised sales pitches. Eg: An example of
this can be seen in the popular promotional tactic of deploying email
messages to people who have interacted with a service.

Tie ups

Unit 3

Demand management

‘All the activities and decisions management carries out in order to

plan and implement how they will attempt to influence the level of
demand for any service offered at any point in time’.