CHAPTER 1

Introduction

1.1 Conceptual Framework

1.1.1 Marketing Strategy
1.1.2 The Service Concept
1.1.3 Service Marketing mix
1.2 Rationale of the Study
1.3 Objectives of the Study
1.4 Outline of Thesis
 Introduction

1.1 Conceptual Framework

Marketing as a discipline developed initially in connection with selling

physical products such as cars, cosmetics, equipments etc. Hospitals
typically lagged behind manufacturing firms in their use of marketing.

Healthcare is one of India’s largest sectors, in terms of revenue and

employment, and the sector is expanding rapidly. During the 1990s, Indian
healthcare grew at a compound annual rate of 16%. Today the total value
of the sector is more than $80 billion. This translates to $80 per capita, or
roughly 5% of GDP. By 2020, India’s healthcare sector is projected to
grow to nearly $280 billion. The private sector accounts for more than 80%
of total healthcare spending in India. Unless there is a decline in the
combined federal and state government deficit, which currently stands at
roughly 9%, the opportunity for significantly higher public health spending
will be limited.

There are several reasons why hospitals have neglected marketing. Many
hospitals formerly believed that it is unprofessional to use marketing. Other
hospitals had so much former demand that they felt no need for marketing
until recently. Today, as the competition intensifies, as cost rises, as
productivity stagnates, and as service quality deteriorates, more hospitals
are taking interest in marketing.

Now, hospitals are taking marketing all the more seriously than ever before
and are addressing all the areas of marketing viz. Product, Place, Price,
Promotion, Process, Physical evidence and People.

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1.1.1 Marketing Strategy:

Marketing is so basic that it cannot be considered a separate function. It is

the whole business seen from the point of view of its final result.
Marketing has been defined as a social and a managerial process by which
individuals and groups obtain what they need and want through creation of
offerings and exchange of the products of value with others. Thus,
marketing means human activities taking place in relation to markets or it
means working with markets to actualise potential exchange for the
purpose of satisfying needs and wants. The concept of marketing is thus
embedded in customer needs and wants which states that the key to
achieving organisational goals consists in determining the needs and wants
of target markets and delivering the derived satisfaction more effectively
and efficiently than competitors.

The marketing concept consists of three cornerstones. It starts with

customer needs and wants as the foundation of business purpose. Next, the
organisation must determine how it will satisfy these needs and wants and
finally the opportunity to meet organisational objectives will come through
the enterprise’s efforts to deliver customer value. Applying the marketing
concept is a continuing activity; strategies must be developed, implemented
and evaluated within these guidelines. One cannot identify customer needs
and wants at one point and expect them not to change as determining these
needs is not always an easy task. Management must be ready to adapt to
changing conditions which may generate new opportunities and problems.
Once identified, choosing and selecting an effective business strategy is
important on the basis of available resources and capabilities. As well
planned and executed business strategies do not always result in the level
of performance expected, management must continuously make changes
until satisfactory performance is reached. While adoption of marketing

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concept offers direction to the management in charting the course of the

enterprise into future, its implementation requires carefully selected
strategies and effective management of strategies over time.

The idea of strategy is very ancient as it has been around for almost
thousands of years as a way of thinking about survival and achieving
success through leadership in war or politics. Political and military leaders
have always had to make choices about the direction and policy about
resources at their disposal and how best to distribute those resources in the
pursuit of objectives. Though the term ‘strategy’ became popular in 1960s,
it has been understood and acted upon in all the world’s great civilisations.
Classical texts such as ‘Art of War’ written by Sun Tsu, China 2500 years
ago, the political strategy ‘The Prince’ (Machiavelli, 1513), or the work of
German military strategist, ‘Clausewitz’ in the nineteenth century are still
considered the basic texts of strategic thinking.

The concise English Dictionary defines strategy as generalship, the art;

management of an army or armies in a campaign, art of so moving or
disposing troops or ships as to impose upon the enemy the place and time
and condition for fighting preferred by oneself. This represents a view of
strategy as planning.

Ohmae (1982) defined strategy as grasping the state of the market,

objectively assessing the strengths and weaknesses of business, changing
direction with flexibility when required and calculating the profit and loss
likely to result from each management action. No strategy is likely to be
perfect and none should be inflexible. It can be realistically developed in a
situation where there is clear objective and there are one or more
antagonists who seek to prevent the organisation from achieving it.
Strategy without direction and competition is only a policy which explains

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their rationale and difficulty of bringing the market forces to bear upon the
government departments. The process of establishing objectives and
strategies needed to achieve them is known as strategic process.

It is important to set carefully conceived and evaluated objectives, but the

motive force of the whole process comes from strategies. In an
organisation, the strategies are the sum of a number of sub-strategies whose
interplay is aimed at achieving competitive advantage. These sub­
strategies, in turn, breakdown into lower level strategies and the specific
tactics needed at the operational level to move those strategies forward.
Thus, an organisation has a hierarchy of strategies. Each of company’s
objectives will need one or more strategies to ensure its achievement.
Strategies may be developed through conscious planning or may evolve out
of changes in the circumstances affecting the company. Strategies should
be selected with care and be robust, since they consume resources they
must prove themselves to be effective within the expected time frame or
must be re-assessed. Strategy takes many forms and a range of different
approaches demonstrating its diversity. It is clear that there is no single
theory of strategy, or even one definition, there is a mainstream of writers
and approaches, and certainly many different ideas about what is important
in strategy.

It is very significant that both strategy and marketing operate at two levels
in any competitive organisation. Strategy is the process which shapes the
ability of an organisation to compete successfully over time and should
penetrate all parts of that organisation. Strategies are also specific means
by which company objectives are achieved. Marketing is the concept
related to needs and values of customers and should imbibe all plans and
actions in business. Both relate to customers, both seek to disarm
competitors and to do so must galvanise the whole organisation. Both also

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provide specific skills and processes to work with in achieving company

goals. Marketing strategies are the means of meeting marketing objectives.
In general terms, most marketing strategies may be subsumed in four Ps:
Product, Place, Promotion and Price (McCarthy, 1975). The interplay of
these four Ps is termed as Marketing Mix.

Marketing strategies relate directly to the marketplace and build a bridge

between the business and its actual and potential customers. The synergy
between corporate and marketing strategies should be powerful. The
synergy depends, however, on strict alignment of company and marketing
strategies. Marketing strategies should not be rigid, but should offer
sufficient flexibility since they have to respond to customer needs which
change frequently, whereas, company objectives should be stable. Thus,
the ends are fixed and the means are variable.

1.1.2 The Service Concept:

‘A service is an activity or benefit that one party can offer to another that
is essentially intangible and does not result in the ownership of anything.
Its production may or may not be tied to a physical product ’ (Kotler and
Armstrong, 1991)

We as consumers use services every day. Getting a haircut, getting clothes

cleaned from the dry cleaner, eating at restaurant, taking a bus are all
examples of service utilisation at the personal and individual level. The
colleges and institutions at which students study, are themselves complex
service organisations. These service organisations in addition to
educational services provide services such as library, cafeteria, counselling,
telephone services and many more. Businesses and other organisations are
also dependent on an extensive range of services albeit on a much larger
scale.

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Few common characteristics of service are:

• inseparable: It is inseparable from the point where it is consumed,

and from the provider of the service. For example, you cannot take a
live theatre performance home to consume it. (a DVD of the same
performance would be a product, not a service)
• Intangible: A service cannot have a real, physical presence as does
a product. For example, motor insurance may have a certificate, but
the financial service itself cannot be touched i.e. it is intangible.
• Perishable: The term perishable implies that once it has occurred it
cannot be repeated in exactly the same way. For example, once a 100
meters Olympic final has been run, there will be no other for 4 more
years, and even then it will be staged in a different place with many
different finalists.
• Variability: The human involvement of service provision means that
no two services will be completely identical. For example, returning
to the same garage time and time again for a service on your car
might see different levels of customer satisfaction, or speediness of
work.
• Right of Ownership: Right of ownership is not taken to the service,
since you merely experience it. For example, an engineer may
service you air conditioning, but you do not own the service, the
engineer or his equipment. You cannot sell it once it has been
consumed, and do not take ownership of it.

Few characteristics of healthcare (hospital) services are:

• Hospital services are People Intensive: In hospital people are

involved in performing services. It involves people based services of
professionals like doctors, nurses etc. who are in continuous touch

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with patients and their services are variable due to lack of

standardisation and customisation.
• Hospital services have high length of patient contact time: Patient
receives hospital services till his disease is cured. This may require
longer time periods. Thus contact time of hospital with patients is
high.
• Hospital services are tailored to the specific need of patients:
Different patients undergo different treatment plan. Thus hospital
services are tailored to deliver the specific needs of patient treatment
and thus cannot be standardised.
• Hospital services have process focus: The process by which patient
receives treatment is very important and may sometimes define
hospital service quality. Hence hospital service has process focus.
• Hospital services are highly intangible: From the tangibility
perspective, hospital services are highly intangible making it
difficult for patient to evaluate the service quality and suitability.
• Hospital services are pure services: On the service-product
continuum, hospital services are more dominant towards service.
Thus they are pure service.

1.1.3 Service Marketing Mix:

The marketing mix is probably the most famous marketing term. Its
elements are the basic, tactical components of marketing plan. Also known
as the four Ps, the marketing mix elements are Product, Promotion, Price
and Place. The concept is simple like any another common mix - a cake
mix. All cakes contain eggs, milk, flour and sugar. However, one can alter
the final cake by altering the amounts of mix elements contained in it. It is
the same with the marketing mix. The offer one makes to the customer can

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be altered by varying the mix elements. So for a high profile brand, one can
increase the focus on promotion and desensitise the weight given to price.

Marketing mix conveys the positioning of a service or a product. In case of

services all the four Ps are very flexible, i.e. many number of combination
of the 4Ps are possible to arrive at a marketing mix. But the segmentation
criteria has to be very well defined and the positioning has to be very
sharp, because a customer is impacted instantly and very perceptibly as
soon as he comes in contact with a service provider or enters a service
facility. Service marketers face tremendous challenges in getting the
marketing mix right to be able to convey their positioning plank because
the marketing mix is flexible but the positioning has to be very pointed.
The marketer carefully plans these factors in an attempt to convince the
customers to buy their services.

As service involves intangibility and customer’s participation in service

delivery, it has three additional three Ps—People, Process and Physical
Evidence. Thus the expanded service marketing mix has 7 marketing
elements:

i. Product: Products are the means by which firms seek to satisfy

consumer needs Service also satisfy consumer needs but it is
intangible. Thus the service offerings of the firm are termed as
‘service products’. Service product mix decisions facing a service
marketer involves service product design, reliability, service product
range, brand image.
ii. Price: Price mix decisions include strategic and tactical decisions
about, the average level of prices to be charged, discount structures,
terms of payment and the extent to which price discrimination
between different groups of customers is to take place.

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iii. Promotion: The promotion mix includes various methods of

communicating the benefits of a service to potential consumers. The
mix consists of advertising, sales promotion, personal selling and
public relations. The promotion of services often needs to place
particular emphasis on increasing the apparent tangibility of a
service. Also, in case of services marketing, production personnel
can themselves become an important element of promotion mix.
iv. Place: It refers to the ease of access which customer has to service.
Place decisions can involve physical location decisions, decisions
about which intermediaries to use in making a service accessible to a
consumer and non-locational decisions which are used to make
services available.
v. People: For most services, people are vital element of the marketing
mix. All the participants 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. Given the
strong influence they have on service quality and service delivery
employees, the customer and other customers are included within the
people element of the service marketing mix.
vi. Physical evidence: The intangible nature of a service means that
customers are unable to judge a service before it is consumed,
increasing the risk inherent in a purchase decision. An important
element of marketing planning is therefore to reduce this level of
risk by offering tangible evidence of the nature of the service. The
physical evidence of service includes all the tangible representations
of the service such as letterhead, business cards, report formats,
signage etc.
vii. Process: The actual procedures, mechanisms, and flow of activities
by which the service is delivered comprise the service delivery and

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operating systems. The actual delivery steps the customer

experiences, or the operational flow of the service, will also provide
customers with evidence on which to judge the service.

1.2 Rationale of the Study

Review of literature revealed that researchers have been carrying out

studies for various dimensions of hospital marketing strategies and factors
influencing marketing strategies. A lot of work has been undertaken in
west regarding hospital marketing strategies and very little research is
available in the Indian context. We have not come across any study with
reference to marketing strategy adopted by private hospitals of Indore
during literature review. This study is aimed to fill this gap.

In the light of relevant literature, personal interactions and the preliminary

work done by the researcher, it is proposed that a study on the comparative
study of marketing practices of private hospitals of Indore should be
undertaken. It is also felt that there is a need to find out the differences in
the marketing strategies adopted by local private hospitals of Indore and
the marketing strategies adopted by corporate hospitals which operate on
national level.

1.3 Objectives of the Study

As stated before embracing marketing as a discipline is very new for

hospitals worldwide. Naturally we were curious to find out the acceptance
of marketing practices by hospitals in India and in Indore city particularly.

We aimed to study:
1. Whether private hospitals of Indore city have adopted
marketing practices?

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2. If yes, what is the current state of the affairs in terms of what

i

marketing strategies they employ?

3. What are the most preferred and least preferred marketing mix
elements which they employ?
4. What is the difference between the marketing strategy of local
private hospital and the marketing strategy of corporate
hospital which operate on the national basis?

With these questions in mind, we performed literature review and observed

that several studies have measured the effectiveness of hospital marketing
activities by documenting, for example, the percent response rate from
direct mail campaigns and the success rates associated with physician
referral programs.

However limited numbers of comparative studies have been conducted in

the past with regard to various marketing practices adopted by private
hospitals in India. We found case studies about the marketing strategy
adopted by a particular corporate hospital. We also found comparative
studies of marketing strategies of two or more Indian corporate hospitals.
However, we have not come across any single study being done on
marketing practices adopted by private hospitals of Indore city or any
comparative study being conducted on the marketing strategies adopted by
local Indore based private hospital and corporate hospitals which operates
in entire country. Therefore, in this study, we have attempted to learn the
various marketing strategies adopted by private hospitals of Indore. We
conducted the research with the following objectives:
1. To study the current marketing strategies adopted by various private
hospitals of Indore.
2. To compare the marketing strategies of private hospitals with
corporate hospitals of Indore.

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3. To study the elements of marketing mix which are most and least
emphasised by private hospitals of Indore.

We chose to perform study on private hospitals because private hospitals

face intense competition; hence they are expected to follow marketing
practices to remain competitive and profitable. Again, to mitigate the
impact of rise in cost, productivity stagnation and deterioration in service
quality, private hospitals are more likely to be more marketing oriented.
Only private hospitals can be expected to follow different marketing
strategies as all government hospitals follow uniform strategies as defined
by the government.
The study is expected to contribute to the mass of knowledge significantly
as the findings can be used by managers and strategy formulators for better
understanding of the trials and tribulations faced by them.

1.4 Outline of Thesis

This thesis is organised in 7 chapters.

Chapter 1 Introduction

Chapter 2 Literature Review

Chapter 3 Research Methodology

Chapter 4 Results

Chapter 5 Discussions

Chapter 6 Summary, Conclusions and Suggestions

Chapter 7 Implications of the Study

References

Appendix

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