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The Product
A product is a product if it is purchased and
consumed; if it is not purchased and
consumed then it remains a raw material
or material in process.

e.g. a movie or a play is not a complete

entertainment product if people don’t see
The Service Product
 The service product is an offering of commercial, having
intangible and tangible features going on to satisfy
various needs, wants and desires of the customers.

e.g. the credit cards have got various intangible features

( convenience, flexibility, contests, etc) the tangible
features of credit card could be complimentary diaries,
calendars, and other free gifts etc.

In marketing of services, unlike that of goods, no

exchange take place as the product is intangible.
Creating a Product Range
 By creating a service product line (new
product development)
 By increasing the number of service offer
items within each product line (length)
 By increasing the number of product lines
Width of the Service Business
(Different Business Lines)

Retail Banking Capital Markets Insurance Para Banking

 Personal  Mutual Funds  Life  Cards

Length of the Product Lines

Banking  Public Issue Insurance-  Travellers

 Agricultural Management Sukhjeevan, Cheques.
Banking Sanjeevani
 Demat
 Commercial & Services
 International

The Service Product Range of State Bank of India

The Product Life Cycle
 Incubation
 Introduction
 Growth
 Maturity
 Decline
 postmortem
New Product Development Process
Internal Ideation External
Sources Sources

Idea Screening Drop Errors

Go errors
Concept Development &

Marketing Financial
Assessment Business Analysis Assessment

Functional Product Development & Market

Testing Testing Testing

Test Marketing

Full Commercialisation
2. The Pricing
 One of the most critical elements of the
marketing mix for services for profit firms.

 Generates revenue.

 Flexible – can be changed.

 Price is what customer are willing to
pay for services.

 How much a customer has to pay

depends on the value he perceives in
the service offer.

 Price becomes very communicative

and gives a convincing indication of
Concept of Value & Price

Product Value

Service Value Total

Personnel Value Value

Image Value Buyer’s

Perception Of
Monetary Cost

Time Cost Total

Energy Cost Cost

Psychic Cost

Buyer’s perception of Value

Within the service sector, the term ‘price’
often passes under a number of names.
Some examples:
• Tuition Education
• Interest Use of money
• Rent Use of living quarters
• Fare Taxi ride
• Toll Travel over a bridge
• Salary Services of an employee
• Wage Services of a blue-collar worker
• Comm. Advisor’s services
Framework for Pricing Decisions in
Government Policy

Costs Demand

Corporate PRICE Competitor

Objective Reactions

Barriers in industry
- technology
- exit barrier

Pricing Decision Framework

Factors Influencing Pricing Decisions
1. Cost as a Basis for Pricing.
The service marketer adds up all his costs, and his profit
margin and the result is price.
(a) Full Cost or Mark-up Pricing.
based on total cost plus desired profit.
(b) Marginal Cost Pricing.
firms choose not to include their fixed costs.

2. Competitor-based Pricing.
based on what the competitor is offering.
(a) Going rate pricing.
(b) Sealed-bid pricing.
(c) Pricing below the competition.
(d) Pricing above the competition.
3. Demand-based Pricing.
based on what the customers are prepared to pay.
different customers have different upper ceilings on the price that
they are willing to pay for a service.
service marketer have a fine knowledge of customer demand and
the consumer's ability to pay.

(a) Groups of user discrimination: service is priced for different

groups of users depending on their ability as well as willingness to pay for
a service.
e.g. Indian Railways offer lower tariffs to price-sensitive senior

(b) Point of use discrimination: different prices are charged for

different points of services.
e.g. the Indian telecommunication department has different tariff
structures for rural areas and for metros.

(c) Time-of-use discrimination: the telephone and mobile

services companies usually have lower tariffs during off-peak periods like
9 p.m. onwards upto 9 a.m.
3. Service Promotion
 An attempt to shift the attention of people
from one end (disinterest) to the other
 Service marketers have used this
marketing tool to great advantage in
positioning their service , adding
tangibility, and value to their offer.
 Promotion is communication oriented.
Communication program and
1. Identify the target audience:
This would have been done in segmentation process, a more
detailed picture of the target audience would be required for specific

2. Determine the promotion objectives:

Three promotional goals (i) To Inform, (ii) To Persuade, (iii) To
- Develop brand image.
- Make customer aware of the offer, its benefits.
- Persuade customer to buy the offer.
- Continually remind customers about the service.
3. Develop the message:

“To Know”

INTEREST Affective
“To Feel”

Conative or
ACTION psychomotor
“Action or Drive”

“AIDA” Model of Hierarchy of Consumer Response

The message formulation will depend upon which of this AIDA sequence
is achieved.
Thus if a hotel chain wants to increase its bookings during a slack
season like the monsoon, it might advertise for special discounted

Message content is guided by encoding process which involves-

1. Message content - What to say;

2. Message structure - how to say it logically;
3. Message style - creating a strong presence;
4. Message source - who should develop.

4. Select the communication mix: personal or impersonal.

5. Select the media vehicle: through which message reaches
to the target audience.
6. Set up systems for feedback and feedforward:
Feedforward: pre-test undertaken before the message has been
broadcast to ensure that the message will be received.
Feedback: post-test undertaken after the message has been broadcast
to ensure that the message was received.
Promotion Mix
 Advertising
 Sales promotion
 Personal selling
 Word of mouth
 Direct marketing
 Public Relations
 It is one of the most important communication
techniques of mass or impersonal communication
Goals of Advertising
1. Awareness goals:- to make consumers aware of the service offer,
its benefits and the experience.
messages are directed at the cognitive (having the ability to recognise)
part of his brain.
2. Behavioural goals:- to change the attitude of the customers
towards a favourable disposition.
messages are directed at the affective (having the ability to feel) part of
his brain.
3. Sales goals:- to make the consumer buy the service offer.
message is directed at the conative or psychomotor (drive for
action) part of his brain.
Sales promotion
 Sales promotion are incentives tools used to
temporarily boost sales. They are targeted at
three types of audiences:
1. Customers: make the consumer interested in his offer by various
schemes that have a short tenure.
• Price-offs: the same offer is now available at a lower price.
• Extra grammage; more amount of offer by weight and volume at the old
price, e.g. services having higher tangibility as in restaurant.
• Freebies: free items bundled with the offer sale, e.g. intra brand-
McDonald's offering another burger free with the purchase of one. Inter
brand- pizza hut offering Mattel toys free with their offer.
• Samples: used to boost trials, especially in the introductory stages, e.g.
internet service providers to offer a month of free trial.
• Prizes: in the form of lucky draws from purchases made.
2. Intermediaries:- retailers, dealers, and stockists are
the beneficiaries of push factor, which are in the form
free goods;
shelf-space display incentives.

3. Employees:- sales force of the service firm are the

beneficiaries of the push factor, which consists of:
Awards & prizes.
Personal Selling
 The high contact nature of services and
the interactions between service providers
and customers make personal selling very
effective and important as a
communication tool.
 Personal contacts are used to create
customers and then to build long term
relationships and for customer retention.
 Create positive impression:
1) Identify the needs and expectations of customer;
2) Usage of appropriate presentation skills;
3) Management of impressions;
4) Inducing the customer to participate positively;
 Facilitation of Quality assessment by the customer:
customers measure quality by their expectations and their perception
of service delivery.
 Emphasis on the image of the organisation: the customer
equates the image of the sales personnel with that of the firm.
 Use of references from external sources: of satisfied
 Recognition of importance of customer-contact personnel:
for building up a good relationship with the customer.
 Recognition of customer involvement during the service
design process: for getting feedback and other reactions.
Word of Mouth
 A satisfied customer will refer the services of a doctor to others
while a dissatisfied dinner will be negative about a restaurant

Expectations or Customer has expectations which guides his

decision to buy
Decision to Purchase

Customer interacts with the service providers

Interactions and becomes knowledgeable of the technical
and functional aspects of offer

Customer makes judgments from such

Experiences experiences and encounters. He either returns
as a buyer or does not return

Word of Mouth or Others usage of the service will depend on

the positive and or negative word of mouth
Referrals communication

Expectations or Decision to Purchase

Direct Marketing
 Personalisation
 Cost-effective:
 Instant feedback:
Some of the popular direct marketing tools are:
 Direct Mail or Database Marketing
 Direct selling
 Telemarketing
 Internet marketing.
Public Relations
 The planned and sustained effort to
establish and maintain goodwill between
an organization and its publics.

 Publics constitute all those people who

have stake in the company they include
shareholders, employees, the media,
customers etc.
Tasks of PR
 Maintaining or enhancing image
 Supporting other communication activities
like advertising, personal selling, direct
marketing etc.
 Spearheading certain events like Annual
General Body Meeting, press conferences
 Bringing out annual reports, magazines
and house journals.
Tools of an effective PR Design
 Publications in the form of press releases,
house journals, posters, articles annual
reports, brochures etc.
 Holding events like Annual General Body
Meetings, press conferences etc.
 Investors relations programmes
 Conduct of trade shows, exhibitions
 Sponsoring of social events, charities and
community projects.
Guidelines for Services
1. Provide tangible clues: tangible elements
within the product surround can be used to
provide tangible clues.
2. Make the service comprehensive: tangible
attributes of the service can be made use
of to help in understanding the offer. Thus,
ICICI Bank used the umbrella symbol as
part of its “Safety Bonds” offer, to
communicate the offer effectively.
3. Communications continuity: the service
marketer uses logos, signage, symbolisms,
packaging, and advertising to present a
unifying and consistent theme over time.
4. Promising what is possible: customer has
difficulty believing in the promise. Speed
post, the Indian postal service courier
division, could not keep its promise of
reliable delivery, MTNL calls itself the
“lifeline of Mumbai”, but suffers greatly due
to its inconsistent and unreliable service.
Service firm should deliver what they
5. Capitalising on word of mouth:
Recommendations are an example of how
word of mouth communications influence
buying decisions. People seeks personal
recommendations for plays, lawyers,
doctors, hair stylists etc
6. Direct communication to employees: highly
motivated provider can make a difference
to service quality. The enthusiasm of
employees will transfer itself to their
Q1. Role of services in economy
Q2. Draw a product range of any company
within service industry.
Q2. How will you define the services in
Global perspective? Point out the recent
trends found in international service