02.services marketing(mkt mix)
DESCRIPTION
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Service Product MixPricing of servicesService Promotion Mix‘Place’ factor in services marketing‘People’ in servicesService ‘Process’Capacity planningCapacity scheduling
• Formulating marketing mix for services is as important as for products.
• It is the set of tools that a firm uses to pursue its marketing objectives in the target market
• Service expectation levels of consumers are at an all time high, hence formulation of service marketing mix needs to be done on a professional level, by experts
• Offering quality services is not enough,Proper promotion, sound pricing strategy, placement decisions, hiring right staff and studying consumers enhances service delivery process
• This has resulted in broadening & modification of the market mix i.e due to the inadequacy of the 4p’s an extended mkt mix is devised
Expanded market mix for services
An expanded marketing mix for services
Customers PricePlace & Time
Promotion
Product (service)People Process
Physical evidence
Customers PriceCustomers
Place, cyber-space & time
People◦All human actors who play a part in
service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment.
customerservice employeesother customers
Physical Evidence◦ The environment in which the service is
delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service.
•atmospheredécor, music etc.
•equipment•facilities•uniforms
Process◦The actual procedures, mechanisms,
and flow of activities by which the service is delivered—the service delivery and operating systems.
service delivery systems•back stage•front stage
procedurespolicies
PEOPLE PHYSICALEVIDENCE
PROCESS
Employees Facility design Flow of activities
Customers Equipment Number of steps
Communicatingculture and values
Signage Level of customerinvolvement
Employee research Employee dress
Other tangibles
Expanded Marketing Expanded Marketing Mix for ServicesMix for Services
Product mix
• Product mix decides the magnitude of success, intensity of profits and satisfaction levels of the consumer
• Factors influence the product mix based on the type of service provided
• Eg: Hotel service, quality of consumersTransport services-emerging lifestyles, levels of urbanizationPersonal care services- trends, tastes, fashion
Service Product Mix Service product is intangible and
perishable , inseparable & heterogeneous in nature.
Conceptualization of the service product Step 1-customer benefit concept
Step 2-service concept
Step 3-Service offer
Step 4-service delivery system
Consumers buy… not…
Speed/comfort An air ticket
Adventure/fun Tour package
Bill paying convenience Credit cards
BeautyBeauty
treatments/cosmetics
Five Product Levels
Potential product
Augmented product
Expected product
Basic product
Core benefit
Levels of a service product Core product – seat in a theatre, room in a
hotel, services in a bank
Expected product – consumer perception (speed in a bank, expertise/accuracy in consultancy services, security in insurance)
Augmented product - additional attraction provided to get an edge over competition, this helps to keep marketing efforts pro active
Potential product – process of discovering new ways to attract more customer, retain existing and fight competition (24x7 call centres, banks open on Sunday)
Designing of service offering Three components are to be kept in mind when we
want to design the service offering. Core service: The most basic component is the core
service and it addresses questions like “What is the customer really purchasing”, “What business are we in?” etc. It supplies the central problem solving benefits that customers seek Ex: Transport solves the need to move from
one location to another etc.
Core delivery process: The second component concerns the core delivery process i.e - how the core product is delivered to the customer, the customer’s role in the process, how long the process is and style of service offered.
Supplementary services: This is the third component and it augment(increases) , facilitates & enhances The core service by making it easy to use and by
increasing the value and appeal. Competitive advantage can be established through
the supplementary services when core product reaches maturity.
Supplementary services provide the necessary differentiation for success.
Each of the supplementary elements may require their own delivery system and
Flowcharting offers an excellent way to under stand & identify the many types of supplementary services accompanying a core product
IDENTIFYING AND CLASSIFYING SUPPLEMENTARY SERVICES: Supplementary services can be identified
as-
THE service flower
iinformation
Order tak
ingBilling
paym
ent
Exc
epti
on
consultation Safe keeping
Hos
pita
lity
Delivery process of supplementary services
Core Communication facilities
Payment options
(porter
Check in check out
parking
reservations
mealsRoom service
Theodoore Levitt
Service product decision
A service provider may start with a single service, than provide a range of services or develop a new offering or enter a new market
These service product decision can be made by using product/market matrix called Ansoff matrix-
Market penetration-no change in service or market—strategies to improve demand/market share
a) Increase frequency-- introduce schemes b) attract non-users c) grabbing competitors share
Market development—geog, age-group, social class
Diversification—new service-new market
New service development—new service in existing market
Managing services offering
Methods of New service development Service improvements Process line extension Supplementary services/new service Product line extension. major innovation
Steps in new service development
Idea generation
concept screening
testing the concept
design service & assess market potential
cost analysis
test marketing
final launch
* Need identification – size of market – cost-benefit analysis – introduction of new product
* product life cycle– launch growth maturity decline
Designing of new service Re-engineering service process—cost,
speed & productivity consideration Use of flow charts, blue prints, review
alternative delivery methods, eliminate supplementary services, rethink the process
Using research to design new service-ask customers what features & price will create value
Factors to be noted while developing service product mix• Enrich peripheral services
• Understand service quality expectations
• Study behavioral profile of the consumers (offering product is as important as formulating it)
• Take support of information technologies
• Product for all (single product for all/offer different specialisation in same product)
What is a Brand?
Attributes Benefits Values
Culture
User
Personality
Branding of services
Difficult to create a distinct brand image for services due to lack of consistency in service delivery—need for the entire org to work towards it.
Even so brand loyalty is high for services
Need for patronage in order to obtain optimum satisfaction
Brand loyalty depends on
Past experience
Availability of substitutes
Cost of switching
Perceived risk involved in purchase of services
Brand Equity
No Brand Loyalty(customer will change)
No Brand Loyalty(customer will change)
Satisfied Customer(no reason to change)Satisfied Customer
(no reason to change)
Satisfied & Switching CostSatisfied & Switching Cost
Values the Brand(brand as friend)
Values the Brand(brand as friend)
Devoted to Brand
Devoted to Brand
An Overview ofBranding Decisions
BrandingDecision
•Brand
•No brand
Brand-SponsorDecision
•Manu-facturerbrand
•Distribu-tor(private)brand
•Licensedbrand
Brand-Name
Decision
brandnames•Blanketfamilyname•Separatefamilynames•Company-individual•Individualnames
Brand-Repositioning
Decision
•Reposi-tioning
•Noreposi-tioning
Brand-StrategyDecision
•Lineextension
•Brandextension
•Multi-brands
•Newbrands
•Cobrands
Brand Strategies
BrandExtension
New
Bra
nd
Nam
e
Product Category
LineExtension
Existing
Existing
MultibrandsNew NewBrands
BrandExtension
New
LineExtension
Existing
Existing
MultibrandsNew NewBrands
Good Brand Names:
SuggestProductBenefits
Distinctive
Lack PoorForeign
LanguageMeanings
SuggestProductQualities
Easy to:PronounceRecognizeRemember
Pricing of services
• Research and expertise pertaining to the pricing of services is found lacking
• Pricing approaches developed for products are applied to services too
• The challenge is to determine a price at which the service product is sold and also gives profitable returns
• The price must be acceptable to the target customer & should accurately reflect on the other elements of the marketing mix
Three differences between pricing for goods & services Customer have limited knowledge
regarding reference prices for services
Price is an important signal of quality
Monetary price is not the only relevant price to the customer
Pricing objectives
Survival
Maximization of current profit
Maximization of current revenue
prestige/ image
Patronage & user based objective
Foundation for setting service price
Approaches/structure of pricing1. Cost based pricing - difficult as very
small portion of tangible goods sold, intangible service difficult to price, profit considerations also included after total cost is computed. The formula for cost based pricing is
Price = direct cost + overhead cost + profit margin
Draw back :- Defining the unit in which service is
purchased
Cost are difficult to identify
Calculation of peoples time
2. Competition based pricing – Does not mean charging the same price as the competitors but only using it as a base for determining ones own price .
Used usually were services are almost standardized or in case of oligopoly markets
Drawbacks :- Competitors may not be the best parameter,
service standards/delivery processes may differ.
Small firms may charge comparatively low
prices
3. Demand based pricing --
It is associated with the customer rather than the cost or competition
Relationship between price & demand
Drawbacks:-
Considers only the monetary aspect of cost of service, however non-monetary cost & benefit must be factored
Customer is willing to pay higher price when he is able to save time & effort
4. Value based pricing— How customer defines value Customers are weighing the perceived
benefits against the perceived cost they will incur
Recognize trade off customers are willing to make
Quantify non-monetary & monetary value to the customer
People perceive different set of values, identify one or more bundle that addresses a segment.
• Perception of value for a consumer –the price determines the value attached by the service provider & it should correspond with the customers perception of value
• There are various factors that influence price to be charged:-
• Range of service offered• Demand & capacity constraints• Kind of organization• Market structure• Competitors price
Pricing strategies for capturing & communicating valueSatisfaction based pricing – Service guarantees,
benefit driven or flat rate pricing
Relationship pricing – encourages a customer to expand his dealings with service provider
Efficiency pricing- understanding , managing & reducing cost . Providing value for money. Reducing monetary burden to the consumers by providing best service and a cost effective one. Efficiency through innovation, making it difficult for competitors to imitate
Satisfaction based pricing Service guarantees—a powerful re-
assurance, gives them a recourse-usually a price reduction or a refund. It symbolizes co commitment—enhances confidence
Benefit driven— based on how it is used & how it creates value. Service that directly benefits customer. Customers feels more satisfied & less uncertain, if the price of a service is related to the benefit it delivers
Flat rate pricing—where service prices are un predictable & cost are badly managed
Relationship pricing Long term contract– price & non-price
incentives are offered to strengthen the existing relationship & build a new one.
Price bundling– selling two or more service selling together. Provides various benefits to the service provider.
Managing the perception of value— value is subjective, not possible to assess the true value of services especially for credence qualities, hence necessary to communicate
Reducing the related monetary & non- monetary cost– price paid also includes non-monetary cost which is of 4 types –
Time cost Physical cost Psychological cost Sensory cost Price discrimination (different prices for
different consumers), penetration, skimming, follow the competitor, are also few of the strategies for pricing effectively used
Service Promotion MixGuidelines for an optimum promotion mix
• Develop word of mouth communication network (Customers refer friends etc)
• Don’t over-promise• Tangibilize the intangible factors• Feature working relationships between
customer and service provider• Propagate minimum/zero variance in
service delivery• Focus on service quality dimension• Position & differentiate the service via
the delivery process• Make the service more easily
understood
Developing promotion strategy• Select target market
• Develop firm’s positioning strategy
• Develop promotion/communication budget and mix
• Define communication objectives (in line with PLC)
• Divide communication objectives and target audience – for users, non users, etc.
Elements of promotion mix• Advertising – TV, radio, newspapers,
magazines, outdoor, POP etc.
• Publicity
• Sales promotion – gifts, contests, discounts, commission, fairs
• Personal selling
• Word of mouth
• Telemarketing
Alternate techniques Samples Price/ quality discount Coupons Promotional offers Future discount Gift coupons, scratch cards
Place in services
Place in services
The decision regarding location are the most crucial and accessibility and availability form an significant base for location decisions.
Accessibility refers to convenience with which the service can be purchased & availability refers to the extent to which the service is obtainable.
Mainly considered in terms of location, time & cost (channels involved in distribution)
Factors influencing choice of location Nature of interaction required Nature of service Customers needs & wants Dependency of other services Use of technology
The three possible interaction between service provider & customer:-
The customer goes to the service provider The service provider goes to the customer Interact at arms length
Decision about location• Nature of services
Low contact services: remote sites, less expensive
High contact services: accessibility, visibility, customer convenience eg hospitals , airports
location constraints: operational requirements eg airports, resorts with certain special facilities, economies of scale
locating in multi purpose facilities; near work places, airports
Multi stores– ATM, subway, fast-food
Direct distribution The inseparable, intangible and the
perishable nature of services makes direct distribution an indispensible option for ensuring quality and care to the customer
Advantages of direct distribution Greater control & monitoring Closer and amicable relationship with the
customers Ensure confidentiality & secrecy Elimination of certain costs Effective internal & external communication
Channels decisions Channel decision may be influenced by foll factors Ease and accessibility for the customers
The added value or service or benefit they provide
The cost to the company & the margins they seek
Their reputation and reliability
Their expertise, ability and compatibility
The vital role that they play
Primary channels in service distribution
Services created by company
Franchises
Electronics
Agents/brokers
Target customer
Widely used distribution channels in service include- Agent or brokerFranchised or contracted service deliveriesElectronics
Decisions about time Today for some highly responsive service
operations the standard has become 24/7, never the less there are many firms who resist the trend of 7 days operation.
Factors that encourage extended operating hours:-
Economic pressure from consumers Changes in legislation To improve asset utilization Automated self service facilities Availability of workers to work for extended
hours Pressure from competition
Strategies for effective service delivery1. Control strategy—the pre requisites for
employing control strategy are –uniqueness of the service offer, strong consumer demand, high loyalty in target mkt
Approaches to implement control strategies:-• Measurement• Review
2. Partnering strategies— learn about end users, improve delivery quality, communicate honestly
• Approaches to partnering• Integration of goals• Participation & co-operation
3 . Empowerment strategy- effective in the following context:-
• Service principal is new to the market• Lacks sufficient power to manage the channel• The service intermediary is more talented
• Approaches to empowerment:-• Provide needed support• Train the intermediary to deliver quality
service• Enable to develop customer driven service
processes• Change to co-operative management structure
‘People’ in services• Includes both, employees and consumers -
moment of truth is dependent on both
• Most demanding job in the service business are the so called front line jobs, they play a key role in anticipating customers needs, building customer relations, loyalty, customization, recovery etc
• Importance can be summed up as i) they are the core part of the product ii) they represent the firm iii) they are the brand
• Success depends on firms commitment to HR
Classification of employees High contact services – hospitals, education Low contact services -- post office, couriers Professional service employees Consumer service employees
Challenges faced & sources of conflicts
Emotional labor boundary spanning Personl/role conflict Organization/client conflict Inter client conflict
Strategies for customer oriented service delivery • Hire right people• i) competing for the best people• ii)hiring for service competence & service
inclination• iii) being the preferred employer
• Develop/train employees to deliver services as per standards
• i) Training for technical & interactive skills• ii) Empowering employees-3 power tools • iii) Promoting team work
• Provide needed support system to employees
• Retaining the best employees• i)Rewards & appreciation & recognization• ii)Including employees in companies vision
• Study target market/potential & current customers
* Observe service delivery process, keeping ‘people’ in mind
• Give due importance to consumers feedback
• Employ CRM – identify, attracting, differentiating and retaining customers
‘Physical evidence in services * Includes everything tangible, its like packaging and acts like a silent salesman.
• It plays a major role in shaping service experience & delivering customer satisfaction, shaping first impression & managing differentiation.
• It applies to all types & sizes of service org, though use of physical evidence is extensive in services like hospitals, hotels and minimal in insurance service, postal services, laundry services etc
• Due to the intangibility physical evidence is used as an vital quality proxy & firms take great pain to signal quality & portray a desired image
Service environment is also called as servicescape
Many servicescape may be purely functional , as they are not the only one that shape customers perception
Impact of service environment on buying behavior:-
A) as an attention creating medium B) as a message creating medium C) as an effect creating medium
Designing a service env is considered an art & takes considerable time & efforts. It requires consideration about ambient conditions, space, functionality etc
Types of physical evidence Peripheral evidence:- those items that
confirm the service or are complementary to the service
Essential evidence:-includes physical elements integral to the service though may not be always passed on.
Elements of physical evidence:- Physical environment– elaborate and
lean Communication Price Personnel Corporate image & identity
Elements of physical env
Atmospheric
Sight- size, layout ,lighting color
Sound- music , volume , pitch
Smell- fresh, appetizing, scented
Touch- temp, comfort
ServicescapeExterior design
SignageParking
LandscapeSurrounding env
InteriorsEquipmentsFacilities
Layout , etc
Environmental dimensions
Designing of service scape will depend upon :-
The degree of interaction between the customer and the employee, which can be as follows:-
Self service– customer performs most of the service
Interpersonal service– where both are present Remote service– where there is little or no
involvement On the degree of complexity— Low complex are referred to as lean service
scape and more complex as elaborate service scape, elaborate service scape communicates heavily through physical evidence
Communication:- Tangibilizing the service Tangibilizing the message Price:-it is a visible indicator of service
quality & level Too low price Too high price
Personnel- customer contact employees are important in providing physical evidence
Corporate image & identity
Significance of physical evidence Shaping first impression
Managing trust
Managing service quality
Managing differentiation
Re-positioning
Improving productivity
Service process
Service design should essentially satisfy the customers as well as be operationally efficient . It involves series of activities, their sequence, tech, methodology & procedures that have to be efficiently performed for delivery of service.
Service process involves three concepts:- A series of procedure Creation & delivery of the service Customer involvement & participation
Factors to be considered while designing service process
• Nature of service -divergence, complexity• Service location• Customer participation• Level of contact• The service itself:a) Process basedb) Technology, machinery, equipment based
Basic concepts for designing a process * Process should be broken into logical
steps * process should be flexible * should include the concept of deviation
Two types of service process Line & flow operation Job shop process
Decisions in service process planning Basic technological decision Specific equipment decision Location & layout decision People’s decision Operation structure Process flow decision—blue print, flow
charts, & benchmarks
blue print as a key tool in service design
It is the visual depiction of the process of service delivery, the roles of the employees & customers & the visible elements of the service. A picture that portraits the whole service offering.
It takes an holistic view about the delivery process mechanism keeping in mind the customer
A blue print should address the following aspects:- Service staff should understand what is required of them Customer should have knowledge of his role The time frame involved for each activity should be
stated
Components of service blue print
Customer Action
Support processes
Line of interaction
Line of visibility
Contact employees action
Line of internal interaction
Components of blue print Customer Action – above the line of
interaction
Contact Employees actions- a) between the line of interaction and line
of visibility. b) between line of visibility and line of
internal interaction
Support processes – behind the line of internal interaction
Steps in developing a service blue Steps in developing a service blue printprint Understanding the service to be blue printed
Identifying all the key activities involved in the service delivery & specify the linkage between them
distinguish between the on stage from the back stage activities
Service blue print should clarify interaction between customer & the employees & see the customers point of view
Identifying of support activities & fail(critical) points
Giving physical evidence to each customer action step
Create a script for the employees as well as the customers which can help in identifying potential problems or failures
Flow charting for services Involves presentation of the process
visually & in sequence
Useful in defining the points in the process where the consumer uses core service & where he uses the supplementary service
Next step would be to put all these customer interactions linearly into a sequence in which they occur
An overview of 7 P’s for An overview of 7 P’s for ServicesServices
Managing demand & capacity Fluctuating demand and perishable nature
of services poses a major challenge for service organizations
This problem becomes especially prominent for any capacity constraint service & can be effectively solved by two ways:-
Adjusting capacity to meet the change in the demand through proper operations & H.R management
And by managing the level of demand through devising effective marketing strategies
Managing capacity
Tailoring of capacity level(stretching or shrinking)
Some capacity is elastic in absorbing extra demand eg transportation services, hotels & restaurants by switching to higher capacity or by extending the time
Chasing demand strategy:- Schedule down time during period of low demand
Use part time employees
Rent or share extra facilities & equipments
Cross train employees
Managing Demand The problem is familiar “it is either feast or
famine!”
At any given point a service provider may face one of the four conditions:-
Excess demand– denied service, business lost Demand exceeds optimum capacity:- quality
may suffer Demand and supply are well balanced:- ideal
situation Excess capacity- low productivity , low
utilization.
Managing demand First it is important to understand the patterns
of demand as there may be seemingly random causes.
Several factors affect demand & thus service provider should approach the situation in the foll manner:-
1) Examine whether the demand follows the predictable cycle or not-- & than try to identify that underlining factor
2) Examine whether demand level changes randomly
3) Examine whether it can be associated to a particular segment & than divide demand by market segment
Five common approaches to manage demand Take no action
Reduce demand Increase demand Inventorying demand by Queuing & reservation
strategies to manage demand
Using marketing mix elements to shape demand
Product variation
Modifying the timing and location of delivery
Pricing strategies
Communication efforts
Inventorying demand through queuing & reservation
Strategies to deal with Queuing system
a) Employ operational logic- configure queues
b) Establish a reservation process
c) Differentiate waiting customers on the basis of:-
Importance Urgency of job payment of premium price Duration of service transaction
Capacity planning Throws light on the quality and quantity of service needed in
future
Market conditions, likes, tastes, expectations of consumers are studied
Their potential is rated
Lapses in current process are identified and corrective measures taken
Firm tries to match the service offerings to the market demand
Problems - Task of predicting behaviour of users is difficult
Unavailability of sufficient lead time in many cases
Capacity planning important for
• Staying in business
• Fighting competition
• Enhancing profits
• Enhancing growth curve of the service firm
• Preparing the firm for anticipated/sudden changes in demand, quality of services, new trends, changing tastes etc (Decreasing response time)
Capacity scheduling
• Based on capacity planning
• It helps schedules capacity according to the plan – man, machines, money, materials
• A detailed scheduling of need and usage of above factors is essential on a time map
• Helps optimum utilisation of time and other resources
• Reduces wastages
Case
A passenger with a confirmed ticket on early morning flight from Ahmedabad to Mumbai could reach Ahmedabad only by 3.30 pm because the train by which he was traveling to Ahmedabad got marooned due to floods at night. He reached Ahmedabad traveling by special buses arranged by the railways.
When he went to the airlines reservation office in town, the assistant wanted to know whether he had any certificate from the railways confirming all this. He did not. He was then told as per rules, he had to be treated a ‘No Show’ and he would get no refund on the earlier ticket. He could buy a fresh ticket for either of the evening flights, both of which were late and fully booked. He could take his chances at the airport. He agreed.
The assistant then endorsed the morning ticket for either of the evening flight (without any extra charges) and told him to go to the airport immediately and enter his name among the wait-listed passengers. When he reached the airport in about 30 minutes, he found that his name was already among the wait-listed passengers. Apparently the assistant in the office had called up and entered his name in the list