SPBA01 POSTGRADUATE COURSE MBA - OPTIONAL SECOND YEAR FOURTH SEMESTER OPTIONAL SUBJECT - I SERVICES MARKETING INSTITUTE OF DISTANCE EDUCATION UNIVERSITY OF MADRAS MBA - OPTIONAL SUBJECTS SECOND YEAR - FOURTH SEMESTER OPTIONAL SUBJECT - I SERVICES MARKETING WELCOME Warm Greetings. It is with a great pleasure to welcome you as a student of Institute of Distance Education, University of Madras. It is a proud moment for the Institute of Distance education as you are entering into a cafeteria system of learning process as envisaged by the University Grants Commission. Yes, we have framed and introduced Choice Based Credit System(CBCS) in Semester pattern from the academic year 2018-19. You are free to choose courses, as per the Regulations, to attain the target of total number of credits set for each course and also each degree programme. What is a credit? To earn one credit in a semester you have to spend 30 hours of learning process. Each course has a weightage in terms of credits. Credits are assigned by taking into account of its level of subject content. For instance, if one particular course or paper has 4 credits then you have to spend 120 hours of self-learning in a semester. You are advised to plan the strategy to devote hours of self-study in the learning process. You will be assessed periodically by means of tests, assignments and quizzes either in class room or laboratory or field work. In the case of PG (UG), Continuous Internal Assessment for 20(25) percentage and End Semester University Examination for 80 (75) percentage of the maximum score for a course / paper. The theory paper in the end semester examination will bring out your various skills: namely basic knowledge about subject, memory recall, application, analysis, comprehension and descriptive writing. We will always have in mind while training you in conducting experiments, analyzing the performance during laboratory work, and observing the outcomes to bring out the truth from the experiment, and we measure these skills in the end semester examination. You will be guided by well experienced faculty. I invite you to join the CBCS in Semester System to gain rich knowledge leisurely at your will and wish. Choose the right courses at right times so as to erect your flag of success. We always encourage and enlighten to excel and empower. We are the cross bearers to make you a torch bearer to have a bright future. With best wishes from mind and heart, DIRECTOR (i) MBA - OPTIONAL SUBJECTS SECOND YEAR - FOURTH SEMESTER OPTIONAL SUBJECT - I SERVICES MARKETING COURSE WRITER Dr. Eugin Pathinathan Fernando Principal in Apollo Institute of Hospital, Management & Allied Sciences Chennai - 600 095 COORDINATION AND EDITING Dr. B. Devamaindhan Associate Professor in Management Studies Institute of Distance Education University of Madras Chennai - 600 005. © UNIVERSITY OF MADRAS, CHENNAI 600 005. (ii) MBA - OPTIONAL SUBJECTS SECOND YEAR FOURTH SEMESTER OPTIONAL SUBJECTS - I SERVICES MARKETING SYLLABUS UNIT I Marketing Services: Introduction - Growth of the service sector - The Concept of Service - Characteristics of Service – Classification of Service – Designing of the Service, Blueprinting, Using Technology, Developing Human Resources, Building Service Aspirations. UNIT II Marketing Mix In Service Marketing: The Seven Ps: Product Decision, Pricing, Strategies And Tactics, Promotion Of Service And Placing Of Distribution Methods For Services. Additional Dimension In Services Marketing – People, Physical Evidence And Process. UNIT III Effective Management Of Service Marketing: Marketing Demand And Supply through Capacity Planning and Segmentation – Internal Marketing of Services – External versus Internal Orientation of Service Strategy. UNIT IV Delivering Quality Service: Causes Of Service – Quality Gaps. The Customer Expectations Versus Perceived Service Gap. Factors And Techniques To Resolve This Gap Customer Relationship Management. (iii) Gaps in Services – Quality Standards, Factors and Solutions – The Service Performance Gap – Key Factors and Strategies for Closing the Gap. External Communication to the Customers – The Promise versus Delivery Gap – Developing Appropriate and Effective Communication about Service Quality. UNIT V Marketing Of Service With Special Reference: Financial Services – Health Service Hospitality Services including travel, hotels and tourism - Professional Service - Public Utility Services - Educational Services. Reference Books 1. Bateman, J.E. and Hoffman, D., Services Marketing, 4thEdition, Cengage Learning, 2011. 2. Gronoos, C., Service Management and Marketing: Customer Management in Service Competition, 3rdEdition, Wiley India, 2011. 3. Jauhari, V. and Dutta, K., Services: Marketing, Operations and Management, Oxford University press, 2009. 4. Lovelock, C., Wirtz, J. and Chatterjee, J., Services Marketing, 7thEdition, Pearson, 2011. 5. Srinivasan, R., Services Marketing: Indian Context, PHI Learning, 2012. 6. Zeithaml, V., Bitner, M.J., Gremler, D. and Pandit, A., Services Marketing, 5thEdition, Tata McGraw-Hill Education, 2010. (iv) MBA - OPTIONAL SUBJECTS SECOND YEAR FOURTH SEMESTER OPTIONAL SUBJECTS - I SERVICES MARKETING SCHEME OF LESSONS Sl.No. Title Page 1 Services Marketing, Concepts, Classification and Characteristics 1 2 Service Design and Blue Print 19 3 Service Product and Service Life Cycle 33 4 New Service Development 51 5 Service Pricing 59 6 Service Delivery 66 7 Service Communication 76 8 Expanded Marketing Mix 91 9 Service Market Segmentation and Targeting 100 10 Managing Demand and Capacity 110 11 Gaps Model 122 12 Customer Expectations, Perceptions and Service Encounters 139 13 Service Quality 159 14 Financial Services and Health Services Marketing 168 15 Education, Public Utility and Professional Services Marketing 184 (v) 1 LESSON – 1 Services Marketing, Concepts, Classifications and Characteristsics Learning Objectives After having read this lesson, you will be able to discuss Importance and Reasons for Service Marketing Difference Between Services and Customer Services Role of Service Marketing in Global and Indian Economy Identifying Fastest Growing Service Industries Characteristic, types and classification of Service Marketing Structure 1.1 1.1 Introduction 1.2 Definition of Services 1.3 Customer Services 1.4 Tangibility of Service Spectrum 1.5 Structure of the Service Sector 1.6 Growth and Concepts of Services Marketing 1.7 Characteristics and Types 1.8 Classification of Services 1.9 Summary 1.10 Keywords 1.11 Review Questions Introduction Every human being, as customers, use services every day from dawn to dusk. Turning on a light, listening to the radio, talking on the telephone, traveling by bus, use of water etc are all 2 examples of service consumption at the individual level. Industries and other business organizations are dependent on a wide array of services, usually purchasing on a much larger scale than individuals or households. Unfortunately, customers are not always happy with quality and value of the services they receive. People complain about late deliveries, incompetent personnel, inconvenient service hours, needlessly complicated procedures, long ques, and a host of other problems. Supplies of services, who often face stiff competition, sometimes appear to have a very different set of concerns. Many owners and managers complain about how difficult it is to make a profit, to find skilled and motivated employees, or to please customers. Fortunately, some suppliers know how to please their customers while also running a productive, profitable operation, staffed by pleasant and competent employees. 1.2 Definition of Services Valarie A. Zeithaml defines “Services are deeds, process and performances”. Services to “include all economic activities whose output is not a physical product or construction, is generally consumed at the time it is produced, and provides added value in forms (such as convenience, amusement, timelines, comfort or health) that are essentially intangible concerns of its first purchase”. “A service is an act or performance offered by one party to another. Although the process may be tied to a physical product, the performance is transitory, often intangible in nature, and does not normally result in ownership of any of the factors of production.”- Christopher Lovelock Christopher lovelock further states “A service is an economic activity that creates value and provides benefits for customers at specific times and places.” 1.3 Customer Services It is important to draw the distinction between services and customer services. Services encompass a wide range of industries. All the following companies are considered service companies: Bharat Sanchar Nigam Limited (BSNL – Telephone services), Tamil Nadu Generation and Distribution Corporation Limited (Electricity services), Marriott International (Hotels), Air India (Aviation services), State Bank of India (Banking services) etc. 3 All of the companies above mentioned are marketing and delivering services to customers. Customer service is the service provided in support of a company’s core products. All types of companies including manufacturers, IT companies and service companies provide customer services. Customer service can occur at site, over phone, Internet, Post. Normally, there is no charge for customer service. Quality of customer service is essential to building customer relationships. It should not, however, be confused with the services provided for sale by a company. For example, DHL courier market and deliver services, but also provides a high level of customer service. Its service include overnight package delivery and also logistical services including inventory management, distribution using state-of- the-art technology. 1.4 Tangibility of Service Spectrum The broad definition of services implies that intangibility is a key determinant of whether an offering is a service. While this is true, it is also true that very few products are purely intangible or totally tangible. Instead, services tend to be more intangible than manufactured products, and manufactured products tend to be more tangible than services. For example, the fast food industry, while classified as a service, also has many tangible components such as the food, the packaging, and so on. Fig. 1.1 Tangibility spectrum 4 As suggested earlier, intangibles are not produced only service sector of the economy. Manufacturers such as Boeing Airplane Company and Ford Motor Company also produce products on the right end of the spectrum, both for sale to external consumers and to support internal production processes. For example, Boeing has provided consulting services and demand forecasting services for its airline customers. And within Boeing large departments (such as data processing and legal services) provide internal services to the organization. 1.5 Structure of the Service Sector The services sector is remarkably diverse. It comprises a wide array of industries that sell to individual consumers and business customers, as well as to government agencies and nonprofit organizations. Services make up the bulk of today’s economy and also account for most of the growth in new jobs. Unless you are already predestined for a career in family manufacturing or agricultural businesses, the probability is high that you will spend your working life in service organizations. Perhaps you will even start your own service business. The size of the service sector is increasing in almost all economies around the world. As a national economy develops, the relative share of employment among agriculture, industry (including manufacturing and mining), and services changes dramatically. Even in emerging economies, service output is growing rapidly and often represents at least half of the GDP. The Service Experience Experts have found difference ways to describe services. Most of these ways have ended up concluding that a service experience is the best way to describe what happens to a customer. But, what constitutes the service experience? It is the sum of all encounters between a customer and a service provider, while buying/using a service, feelings about such encounters immediately after the event and sometimes, the recollections about the event after a period of time. For example, many things happen when a customer undertakes a train journey. The reservation process may precede the actual journey in many cases. But the journey itself is a multifaceted experience. Transport to the railway station, the appearance of the station, the ease of finding your seat, the co-passengers’ behavior and appearance, the availability of food, the on-time departure and arrival of the train, and many other features make up the total experience of a railway journey for the consumer. Some more experiences could be related to 5 carrying and storing luggage or finding a porter to help carry it. For these reasons, it is appropriate to think of a service as an experience comprising many tangibles, intangibles, process and encounters. Some other popular ways of working at services have been: 1. As Moments of truth: This phrase was popularized by the CEO of Scandinavian Airlines, Jan Carlzon. He said that all encounters or transactions where the customer interacted with the company were ‘moments of truth’ that moulded the customer’s opinion about the company. He said if these moments could be well-managed, the result would be a great service company, and a happy customer. 2. As the Service Model This states that there are two components – the visible and the invisible – on the service provider’s end, comprising both people and inanimate environment. The customer interacts with the visible part of this set up, and with other customers present there at the same time. The inanimate environment is similar to the tangible elements that mentioned earlier. Since a large part of services are intangible, there may be a tendency to draw conclusions about service quality based on a look at the tangibles. For example, a professor’s room or his appearance may be used by students as indicators of how well he is teaching. 3. As the Service theatre This aspect implies comparing the experience of service planning, design and delivery to that of a theatrical performance. Elements in the two activities or experiences are actors, team work of front stage and backstage people in the success of a performance and impression management including prior communication about the service, managing expectations of the customer, and creating an impact with a sincere and effective performance. 4. As the Playing Out of a Role as per a script There is a view that services can be treated as a script to be played out by the service provider and the customer. If these roles are played according to the script, it creates a satisfied customer and service provider. For example, in a class room settings, it is understood that a 6 teacher is in charge, and the rules are laid out by him. But if a student transgresses his role and misbehaves, the service experience goes bad for both student and teacher. 1.6 Growth and Concepts of Services Marketing Many forces have led to the growth of services marketing, and many industries, companies, and individuals have defined the scope of the concepts, frameworks, and strategies that define the field. It is important to note that the field of services marketing and management has evolved as a result of these combined forces and that the roots and scope of the field are global. In numerous countries, increased productivity and automation in agriculture and industry, combined with growing demand for both new and traditional services, have jointly resulted in continuing increase overtime in the percentage of the labour force that is employed in services. There is a hidden service sector within many large corporations that are classified by government statistician as being in manufacturing, agricultural, or natural resources industries. These socalled internal services covered a wide range of activities, including recruitment, legal and accounting services, payroll administration, office cleaning, landscape maintenance, supply change management, advertising, and many other kind of services. Organisations are increasingly choosing to outsource the internal services that can be performed more efficiently by a speacilised sub contractor. Internal services are also being spun out as separate service operations offered in the wider market place. When such tasks are outsourced, they become part of the competitive market place and are therefore more easily identifiable as contributing to the services component of the economy. Among the forces that shape service markets are government policies, social changes, business trends, advances in information technology and internationalization. The implications of the changes outlined earlier are several. On the positive side, there is likely to be growing demand for many services. The opening up of the service economy means that there will be greater competition. In turn, more competition will stimulate innovation, not least through the application of new and improved technologies. Customer needs and behaviour evolves in response to changing demographics and values, as well as new options. Both individually and in combination, these developments will require managers of service organizations to focus more sharply on marketing strategy. It has been said that the only person in the world who appreciates a change is a wet baby. However, the willingness and ability of managers in service 7 companies to respond to the dramatic changes affecting the service economy will determine whether their own organization survive and prosper are go down to defeat at the hands of more agile and adaptive competitors. Reasons for Growth 1. Shift to industrialization 2. Growth of information age 3. Ageing population 4. Increased leisure time 5. Prefers to be home 6. Higher per capita income 7. Changing social and cultural value 8. Longer life expectancies 9. Quality and health conscious Service and Economy Services marketing concepts strategies have developed in response to the tremendous growth of service industries, resulting in their increased importance to the world economy. Service sector represented 84 percent of total employment and 82 percent of gross domestic product of the United States, in 2010. Almost all of the absolute growth in numbers of jobs and the fastest growth rates in job formation are in service industries. Another indicator of the economic importance of services is that trade in services growing worldwide. World - class providers of services such as American Express, McDonald’s, and Marriott Hotels, together with many small services companies, are exporting information, knowledge, creativity and technology that the world badly needs. There is a growing market for services and increasing dominance of services in economies worldwide. The tremendous growth and economic contributions of the service sector have drawn increasing attention to the issues and problems of service sector industries worldwide. 8 Service Marketing and Indian Economy Services marketing in India have undergone dramatic changes in the last decade. From a controlled environment, the country has moved towards autonomy in several sectors. For example, an autonomous regulatory authority called Telecom Regulatory Authority of India (TRAI) has been formed to oversee the telecom industry. There is increasing private participation in many government controlled service industries, and the trend is likely to continue. In general, the service industry has outpaced manufacturing and agriculture to contribute over half the gross domestic product of the country. In this scenario, the customers of various services are also in a state of increased awareness and expectation. For example, there has been a price war resulting in a 100 per cent decline in the price of long distance phone calls in India. The cell phone companies, and the government controlled BSNL with landlines and cell phones are all in fierce competition with each other, on par with some competitive industries in the developed world. It is expected that the government will deregulate more service industries at its own pace and using its own methods. Many services could be partially or totally privatized in the years to come. There are explosive growth opportunities in many services areas such as entertainment, travel and tourism, banking, retailing, E commerce and so on. The Indian consumer, though not as savvy or demanding as his US counterpart, will learn from his exposure to the environment. For example, in the telecom sector, consumers are routinely migrating from one cell phone Service Company to another, based on pricing and service quality. For example Jio cell phone able to acquire more subscribers base within a short span of time. What this means for services providers is that consumers can no longer be taken for granted, and that special efforts may be needed to retain them. In the retail sector, for example, this could translate into more discount stores opening, to cater to the price-conscious customer, in anticipation of the opening of the sector to 100 per cent foreign ownership, which would bring in formidable international competition like Wal Mart and Marks and Spencer. Branding and Chain Stores - India Service companies in India are not known for a pan-Indian presence through chain stores, barring a few companies. The uniform service brand and a common brand promise therefore do not exist in many service industries. However, this may change over the next couple of 9 decades, with service companies learning of the synergies and added profit opportunities provided by growth in scale of operations through organic growth, acquisitions or franchising models, which are frequently more suitable for the service industries. Phenomenal growth opportunities exist for entrepreneurs ready to take on the challenges posed by the decoding of the diverse and multifaceted markets that the Indian states present. Some of the entrepreneurs may even venture abroad and create international brands out of their businesses, akin to what Infosys, Wipro and TCS have done. Ethics in Service Marketing With rapid growth in the industry, there have been various ethical issues and concerns being raised about the service industry, and some of these are discussed below: 1. Aggressive Promotion through telemarketing or personal selling 2. Invasion of Privacy 3. Misleading Claims backed by poor service performance Aggressive promotions in mass media may not be violating any ethical norms, because people can choose to ignore them. But in personal selling, there could be possible violations, if a salesperson does not know where to stop. Invasion of a customer or potential customer’s privacy is also a major issue. What are the rules governing cold calls, what time these calls are made, and how they are handled are all concerns which may parallel the junk mails on your computer. Again, you can ignore the mails, but you may be tempted to answer your cell phone. Therefore, knowing where to draw line in disturbing people is a part of good ethics training for service marketers. For example, in India, RBI made it compulsory for banks to have a list of “No Call” customer telephone numbers, who should not be disturbed with telemarketing calls. This was in response to numerous complaints about such nuisance calls from customers or other telephone owners. Permission Marketing is to denote the process of obtaining prior permission from potential or existing customers to mail or phone them. This may be a good practice to follow. Credit card companies have also been charged with dubious practices like not letting customers return their cards. There have also been complaints of non-transparent or misleading methods of charging interest and penalties, and debts being subsidized by good customers. 10 Deliberate misleading claims in any services are also unethical. For example, some tour operators claim a certain low price, but there are strings attached, which a customer comes to know much later. There may also be non-obvious issues such as discriminatory treatment of customers or fudging of data to get customers some benefit. For example, new customers of life insurance or medical insurance may hide pertinent information while filing an application. If the salesperson or agent handling the transaction is ethical, he may stand firm in not accepting such new customers. 1.7 Characteristics and Types Characteristics 1. Intangibility The most basic, and universally cited, difference between goods and services is intangibility. Because services are performances or actions rather than objects, they cannot be seen, felt, tasted, or touched in the same manner that we can sense tangible goods. For example, health care services are actions (such as surgery, diagnosis, examination and treatment) performed by providers and directed towards patients and their families. These services cannot actually be seen or touched by the patient, although the patient may be able to see and touch certain tangible components of the service (like the equipment or hospital room). In fact, many services such as health care are difficult for the consumer to grasp even mentally. Even after a diagnosis or surgery has been completed the patient may not fully comprehend the service performed. Goods Services Resulting implications Tangible Intangible Services cannot be inventoried. Services cannot be patented. Cannot be displayed or communicated. Pricing is difficult. Standardized Heterogeneous Service delivery and customer satisfaction depend on employees’ action. No sure knowledge that the service delivered matches what was planned and promoted. 11 Quality depends upon many uncontrollable factors. Production and Both are simultaneous Customers participate in and affect the consumption transactions. are different Employees affect the service outcome. Mass production is difficult. Nonperishable Perishable Services cannot be resold or returned. 2. Resulting Marketing Implications Intangibility presents several marketing challenges. Services cannot be inventoried, and therefore fluctuations in demand are often difficult to manage. For example, there is tremendous demand for resort accommodations in Phoenix in February, but little demand in July. Yet resort owners have the same number of rooms to sell year- round. Services cannot be easily patented, and new service concepts can therefore easily be copied by competitors. Services cannot be readily displayed or easily communicated to customers, so quality may be difficult for consumers to assess. Decisions about what to include in advertising and other promotional materials are challenging, as is pricing. The actual costs of a “unit of service” are hard to determine, and the price-quality relationship is complex. 3. Heterogeneity Because services are performances, frequently produced by humans, no two services will be precisely alike. The employees delivering the service frequently are the service in the customer’s eyes, and people may differ in their performance from day to day or even hour to hour. Heterogeneity also results because no two customers are precisely alike; each will have unique demands or experience the service in a unique way. Thus the heterogeneity connected with the services is largely the result of human interaction (between among employees and customers) and all of the vagaries that accompany it. For example, a tax accountant may provide a different service experience to two different customers on the same day depending on their individual needs and personalities and on whether the accountant is interviewing them when he or she is fresh in the morning or tired at the end of a long day of meetings. 12 4. Resulting Marketing Implications Because services are heterogeneous across time, organizations, and people, ensuring consistent service quality is challenging. Quality actually depends on many factors that cannot be fully controlled by the service supplier, such as the ability of the consumer to articulate his or her needs, the ability and willingness of personnel to satisfy those needs, the presence (or absence) of other customers, and the level of demand for the service. Because of these complicating factors, the service manager cannot always know for sure that the service is being delivered in a manner consistent with what was originally planned and promoted. Sometimes services may be provided for a third party, further increasing the potential heterogeneity of the offering. For example, a consulting organization may choose to subcontract certain elements of its total offering. From the customer’s perspective, these subcontractors still represent the consulting organization, even though their actions cannot be totally predicted or controlled by the contractor. 5. Inseparability Simultaneous Production and Consumption are take place in service marketing. In products marketing, the most of the goods are produced first, then sold and consumed, whereas in services marketing production and consumption take in same place and period. For example, restaurant services cannot be provided until they have been sold, and the dining experience is essentially produced and consumed at the same time. Frequently this also means that the customer is present while the service being produced and thus views and may even take part in the production process. This also means that frequently customers will interact with each other during the service production process and thus may affect each other’s experiences. For example, strangers seated next to each other in an airplane may well affect the nature of the service experiences for each other. Another outcome of simultaneous production and consumption is that service producers find themselves playing a role as part of the product itself and as an essential ingredient in the service experience for the consumer. 6. Resulting Marketing Implications Because services often are produced and consumed at the same time, mass production is difficult if not impossible. The quality of service and customer satisfaction will be highly dependent on what happens in “real time”, including actions of employees and the interactions between employees and customers. Similarly, it is not usually possible to gain significant economies of scale through centralization. Usually operations need to be relatively decentralized 13 so that the service can be delivered directly to the consumer in convenient locations. Also because of simultaneous production and consumption, the customer is involved in and observes the production process and thus may affect the outcome of the service transaction. 7. Perishability Perishability refers to the fact that services cannot be saved, stored, resold, or returned. A seat on an airplane or in a restaurant cannot be reclaimed and used or sold at a later time. This is contrast to goods that can be stored in inventory or resold another day, or even returned if the customer is unhappy. 8. Resulting Marketing Implications A primary issue that marketers face in relation to service perishability is the inability to inventory. Demand forecasting and creative planning for capacity utilization are therefore important and challenging decision areas. The fact that services cannot typically cannot be returned or resold also implies a need for strong recovery strategies when things do go wrong. Types of Services 1. Airline 2. Hotel 3. Tourism 4. Courier service 5. Beauty salon 6. Amusement park 7. Marketing research 8. Consultancy 9. Advertising 10. Education 11. Legal services 12. Hospitals 13. Retailing 14 14. IT services 15. R & D services 16. Financial and Banking 17. E Commerce 1.8 Classification of Services The prominent ways of classifying services include: 1. The degree of tangibility of the service 2. Whether the service is directed at the customer or his possessions. 3. The time and place of service delivery 4. Level of customization versus standardization 5. Formal and informal relationship with customers 6. Extent to which demand and supply fluctuate 7. Interaction with people or inanimate objects/environment 1. The degree of tangibility of the service As we have discussed earlier, some services are more tangible than others, for example, the food in a restaurant is a tangible thing, though the service part may not be. The effect of a restaurant visit may be linked with the tangible items and the satisfaction derived from them. But, in a consultant’s job, a lot of things remain intangible even after the consultancy is over. Similarly, in the car mechanic’s servicing of your car, a lot of what he has done remain unfathomable. Different services could be classified on their extent or degree of tangibility. 2. Whether the service is directed at the customer or his possessions This can be basis for classification, since some services are performed on the customer or with his participation as a part of the service delivery, as in the case of a haircut, hotel checkin, etc. On the other hand, some are provided to his possessions such as car, camera or TV repair. 15 3. The time and place of service delivery The can be either the service provider’s location or the customer’s home or office. The pest control must be on site, but software services can be provided via Internet from any location. Similarly, medical operations have to be performed at specific sites recommended by the doctor. 4. Level of Customization Vs Standardization Services can be customized like a theme birthday party at a hotel or restaurant, or standardized, like a standard meal at a south Indian restaurant. Some services tend to be more customized, like lawyers’ or doctors’ consultation, where these days, there are a few standardized services, like some NIIT’s computer courses, or a McDonald’s menu, ambience and service pattern. 5. Formal or Informal Relationship with Customers Generally, entries to Clubs require formal membership. The Disney world or a movie theatre only requires people to buy ticket for entry, with no record of the name of the customer, or any particulars. The telephone and electricity supplying companies require your name, address and other particulars. Nowadays, the practitioners or customer relationship management (CRM), mostly the service companies, try and collect the relevant information from every customer, and try to use it to direct specific campaigns at some subset of these, who could be a target market for a given objective. Some enterprising companies even sell these address lists as a ‘product’. 6. Extent to Which Demand and Supply Fluctuate For example, some services have steady demand, like a downtown restaurant. Some others have a highly fluctuating demand based on the time of the day, or season, etc. like electric power, the demand for which increases or decreases with the weather. In north Indian plains coolers and air conditioners are of great demand in the hot months, and room heaters in the winter months. In the south, generally, the weather is more reasonable, except for a couple of months of heat in April and May. The power demand also fluctuates accordingly. 7. Interaction with People or Inanimate Objects/Environment Some transactions could be on the phone, like ordering a new checkbook from a private sector bank, or a modernized public sector bank. Others need the presence of the customers on site, like taking a flight or eating out. Depending on the level and frequency of the customer 16 contact required, one can classify services into different categories. There may be mixed models, where some contact is needed, but after that the customer is on his own, like a fast food selfservice model. The usefulness of these classification or typologies of services depend on how we use them. If used strategically, for example in making choices of which service markets to enter, they may point out if the new area is a ‘core competence’ area for the firm or not. Service and Technology Technology is dramatically changing the nature of services, resulting in tremendous potential for new service offerings not imaginable even a decade a ago. Technology is profoundly changing hoe services are delivered, enabling both customers and employees to get and provider better, more efficient, customized services. Technology facilitates the global reach of services that historically were tied to their home locations. Major trend – technology, specifically information technology- is currently shaping the field and influencing the practice of service marketing. In fact, some would argue that the Internet, the king of current technologies, is “one big service” Vehicle. Potential for New Service offerings Automated voice mail, interactive voice response systems, E commerce, ATMs, and other common services were possible only because of new technologies. Just think how dramatically different your world would be without these basic technology services. More recently, we have seen the explosion of the Internet of Things (IOT), resulting in a host of new services. Internetbased companies like amazon.com, Flipkart, Snapdeal, Swiggy and eBay offer services previously unheard of. Many new technology services are on the horizon. For example, some project that the “connected car” will allow people to access all kinds of existing and new services while on the road. The mobile Internet is also likely to result in new service offerings. Small screens and clumsy controls mean that cell phone Internet access is less desirable than other points of access. However, accessing the web via cell phones is certainly a possibility today. New Ways to Deliver Service Technology is providing vehicles for delivering existing services in more accessible, convenient, productive ways. Technology facilitates basic customer services functions viz. bill 17 paying, questions, checking accounting records, and tracking orders, transactions (both retail and business-to-business), and learning or information seeking. Technology also facilitates transactions by offering a direct vehicle for making purchases. Finally, technology, specifically the Internet, provides an easy way for customers to learn and research. Access to information has never been easier. Technology enables both customers and employees to be more effective in getting and providing service. 1.9 Summary This lesson has set a stage for further learning about services marketing by presenting information about the changes in the world economy and business practice that have driven the focus on service: the fact that services dominate the modern economies of the world; the focus on services as a competitive business imperative; specific needs of the deregulated and professional service industries. A broad definition of services as deeds, process and performances was presented, and distinctions between service and customer service were drawn. Tangibility spectrum of service industry was discussed. Service industries are having very good market potential in global as well as in India. Last one decade is growing tremendously and also contributing major revenue to the government. More than 50 per cent of employment opportunities are created by service economy. Similarly, it has to face a lot of challenges to meet the quality consideration of the present customers. The nature of services marketing is different from product marketing. Unlike other marketing characteristics, services are different in nature like intangible, heterogeneous, simultaneous production and consumption. Services economy and market are expanding and new services are entering in service portfolio. Technology plays a vital role in delivering the existing services in different and easier mode and also it provides a way for new services development. 1.10 Keywords Inseparably Intangibility Heterogeneity Services 18 1.11 Review Questions 1. What is a service? Give examples of service. 2. What distinguishes service offerings from customer service? Provide specific examples. 3. How tangibility determines the service provision? 4. Explain the service structure. 5. Explain the growth potential of service marketing in global scenario and India. 6. What are the fastest growing service industries in India? 7. What are the general challenges faced in service marketing? 8. How can new services be designed and tested effectively when the service is an intangible process? 9. What are the characteristics of service marketing? 10. How services marketing different from Products marketing? 11. Detail the classification of services marketing 12. How technology have impact on service marketing? 19 LESSON - 2 Service Design and Blue Print Learning Objectives After reading this lesson, you must be able to discuss Meaning of Service Design Challenges on Services Process Meaning of Blueprint and its Components Designing Blueprints for Technology Delivered Service How to build a Service Blueprint Guidelines for Blueprinting Structure 2.1 2.1 Introduction 2.2 Service Design 2.3 Service Blueprint and its Components 2.4 Blueprint for Technology Delivered Self Service 2.5 Benefits of Service Blueprinting 2.6 Steps for Building a Service Blueprint 2.7 Summary 2.8 Keywords 2.9 Review Questions Introduction A stumbling block in developing services (and in improving existing services) is seeming inability to describe and depict the service at the concept development, product development, and market test stages. Because services are intangible, such as hospital stay, a golf lesson, or an NBA basketball game, they are difficult to describe and communicate. When services are delivered over a long period-a week’s resort vacation, a six month consulting engagement, 10 20 weeks on a Weight Watchers program- their complexity increases, and they become even more difficult to define and describe. One of the keys to matching service specifications to customer expectations is the ability to describe critical service processes characteristics objectively and to depict them so that employees, customers, and managers alike know what the service is, can see their role in its delivery, and understand all of the steps and flows involved in the service process. As a servicemarketing manager, everyone should learn to draw the blueprint for services being delivered through technology. The impacts of technology in service industry are tremendous. 2.2 Service Design Meaning Service design is one of the keys to matching specifications to customer expectations is the ability to describe critical service process characteristics objectively and to depict them so that employees, customers, and managers alike know what the service is, can see their role in delivery, and understand all of the steps and flows involved in the service process. Challenges of Service Design Because services cannot be touched or examined, or tried out, people frequently resort to words in their efforts to describe them. Lynn shostack, a pioneer in developing design concept for services, has pointed out four risks of attempting to describe services in word alone. The first risk is oversimplification. Shostack points out that “to say that ‘portfolio management’ means ‘buying and selling stocks’ is like describing a space shuttle as ‘something that flies’. Some people will picture a bird, some a helicopter, and some an angel”. Words are simply inadequate to describe a whole complex service system. The second risk is incompleteness. In describing services, people (employees, managers, customers) tend to omit details or elements of the service with which they are not familiar. A person might do a fairly credible job of describing how a discount stock brokerage service take orders from customers. But would that person be able to describe fully how the monthly statements are created, how the interactive computer system works, and how these two elements of service are integrated into the ordertaking process? 21 The third risk is subjectivity. Any one person describing a service in words will be biased by personal experience and degree of exposure to the service. There is a natural (and mistaken) tendency to assume that because all people have gone to a fastfood restaurant, they all understand what the service is. Person working in different functional areas of the same service organization (a marketing person, an operations person, a finance person) are likely to describe the service very differently as well, biased by their own functional blinders. A final risk of describing services using words alone is biased interpretation. No two people will define “responsive”, “quick”, “flexible”, in exactly the same way. For example, a supervisor or manager may suggest to a front-line service employee that the employee should try to be more flexible or responsive in providing service to the customer. Unless flexibility is further defined, the employee is likely to interpret the word differently from the manager. All of these risks become very apparent in the new service development process, when organizations may be attempting to design services never before experienced by customers. It is critical that all involved (managers, front-line employees, and behind-the-scenes support staff) be working with the same concepts of the new service, based on customer needs and expectations. For a service that already exists, any attempt to improve it will also suffer unless everyone has a shared vision of the service and associated issues. 2.3 Service Blueprint and its Components The manufacturing and construction industries have a long tradition of engineering and design. Can you imagine a house being built without detailed specifications? Can you imagine a car, a computer, or even a simple product like a child’s toy or a shampoo being produced without a concrete and detailed plans, written specifications, and engineering drawings? Yet services lack concrete specifications. A service, even a complex one might be introduced without any formal, objective depiction of the process. A service blueprint is a picture or a map that accurately portrays the service system so that the different people involved in providing it can understand and deal with it objectively regardless of their roles or their individual points of view. Blue prints are particularly useful at the design and redesign stages of service development. A service blueprint visually displays the service by simultaneously depicting the process of service delivery, the points of customer contact, the roles of customers and employees, and the visible elements of the service. It provides a way to break a service down into its logical components and to depict the steps or 22 tasks in the process, the means by which the tasks are executed, and the evidence of service as the customer experiences it. Blueprinting has its origins in a variety of fields and techniques, including logistics, industrial engineering, decision theory, and computer system analysis-all of which deal with the definition and explanation of processes. A tool for simultaneously depicting the service process, the points of customer contact, and the evidence of service from the customer’s point of view. Blueprint Components The key components of service blueprints are shown in figure depicted below. They are customer actions, “onstage” contact employee actions, and “backstage” contact employee actions, and support processes. The conventions for drawing service blueprints are not rigidly defined, and thus the particular symbols used, the number of horizontal lines in the blueprint, and the particular labels for each part of the blueprint may vary somewhat depending on what you read and the complexity of the blueprint being described. This is not a problem as long as you keep in mind the purpose of the blueprint and view it as a useful tool, rather than as set of rigid rules for designing services. The customer actions area encompasses the steps, choices, activities, and interactions that the customer performs in the process of purchasing, consuming, and evaluating the services. In a legal services example, the customer actions might include a decision to contact an attorney, phone calls to the attorney, face-to-face meetings, receipt of documents, and receipt of a bill. 23 Paralleling the customer actions are two areas of contact employee actions. The steps and activities that the contact employee performs that are visible to the customer are the onstage employee actions. In the legal services setting, the actions of the attorney (the contact employee) that are visible to the client are, for example, the initial interview, intermediate meetings, and final delivery of legal documents. Those contact employee actions that occur behind the scenes to support the onstage activities are the backstage contact employee actions. In the example, anything the attorney does behind the scenes to prepare for the meetings or to prepare the final documents will appear in this section of the blueprint, together with phone call contacts the customer has with the attorney or other front-line staff in the firm. The support processes section of the blueprint covers the internal services, steps, and interaction that take place to support the contact employees in delivery the service. Again in the legal example, any service support activities such as legal research by staff, preparation of documents, and secretarial support to set up meetings will be shown in the support processes area of the blueprint. Figure 2.1 Service Blueprint Components 24 One of the most significant differences in service blueprints compared with other types of process flow diagrams is the inclusion of customers and their views of the service process. In fact, in designing effective service blueprints it is recommended that the diagramming start with the customer’s view of the process and work backward into the delivery system. The boxes shown within each action area depict steps performed or experienced by the actors at that level. The four key action areas are separated by three horizontal lines. First is the line of interaction, representing direct interactions between the customers and the organization. Anytime a vertical line crosses the horizontal line of interaction, a direct contact between the customer and the organization, or a service encounter, has occurred. The next horizontal line is the critically important line of visibility. This line separates all service activities that are visible top the customers from those that are not visible. In reading blueprints it is immediately obvious whether the consumer is provided with much visible evidence of the service simply by analyzing how much of the service occurs above the line of visibility versus the activities carried out below the line. This line also separates what the contact employees do on stage from what they do backstage. For example, in a medical examination situation, the doctor would perform the actual exam and answer the patient’s questions above the line of visibility, or onstage, whereas she might read the patients chart in advance and transcribe notes following the exam below the line of visibility, or backstage. The third line is the line of internal interaction, which separates contact employee activities from those of other service support activities and people. Vertical lines cutting across the line of internal interaction represent internal service encounters. At the very top of the blueprint you see the physical evidence of the service. Typically, above each point of contact the actual physical evidence of the service is listed. Again using the legal example, above the encounter depicting the face-to-face meeting with the attorney you would see listed such things as office décor, written documents, lawyer’s clothing, and so forth. Service blueprint examples For example, service blueprints for two different services: express mail and an overnight hotel stay. These blueprints are deliberately kept very simple, showing only the most basic steps in the service. Complex diagrams could be developed for each step and the internal process could be much more fully developed. In addition to the food action areas separated by the three horizontal lines, these blueprints also show the physical evidence of the service from the customer’s point of view at each step of the process. 25 In examining the express mail blueprint, it is clear that from the customer’s point of view there are only three steps in the service process: the phone call, the package pickup, and the package delivery. The process is relatively standardized; the people that perform the service are the phone order-taker and the delivery person; and the physical evidence is the document package, the transmittal forms, the truck, and the hand held computer. The complex process that occurs behind the line of visibility is of little interest or concern to the customer. However, for the three visible-to-the-customer steps to proceed effectively, invisible internal service are needed. For these steps are and the fact that they support the delivery of the service to the external customer are apparent from the blueprint. Any of the steps in the blueprint could be exploded into a detailed blueprint if needed for a particular process. For example, if it were learned that the “unload and sought” step was taking too long and causing unacceptable delays in delivery, that step could be blueprint in much greater detail to isolate the problems. In the case of overnight hotel stay, the customer obviously is more actively involved in the service than he or she is in the express mail service just described. The guest first checks in, than goes to the hotel room where variety of steps take place (receiving bags, sleeping, showering, eating breakfast, and so on), and finally checks out. Imagine how much more complex this process could be and how many more interactions might occur if the service map depicted a week-long vacation at the hotel, or even a three-day business conference. From the service map it is also clear (by reading across the line of interaction) with whom the guest interacts and thus who provides evidence of the service to the customer. Several interactions occur with the variety of hotel employees including the bell person, the front desk clerk, the food service ordertaker, and the food delivery person. Each of the steps in the customer action areas also associated with various forms of physical evidence, in the hotel parking area and hotel exterior and interior to the forms used at guest registration, the lobby, the room, and the food. The hotel facility itself is critical in communicating the image of the hotel company, in providing satisfaction for the guest through the manner in which the hotel room is designed and maintained, and in facilitating the actions and interactions of both guest and employees of the hotel. In the hotel case, the process is relatively complex (although again somewhat standardized), the people providing the service are a variety of front-line employees, and the physical evidence includes everything from the guest registration form to the design of the lobby and room to the uniforms worn by front-line Employees. 26 2.4 Blueprints for Technology - Delivered Self-Service To this point all of our discussion of service blueprints has related to service that are delivered in person, where there are employees interacting directly at some point in the process with customers. But what about technology-delivered services like self-service websites (cisco systems customer self-service site) and interactive kiosks (ATMs, movie ticket ordering)? Can service blueprinting be used effectively to design these types of services? Certainly it can, but the lines of demarcation may need to change, and some of the blueprint labels can be adapted to fit this context. If there are truly no employees involved in the service (except when there is a problem or the service doesn’t function as planned), the contact person areas of the blueprint are not needed. Instead, the area above the line of visibility can be used to illustrate the interface between the customer and the computer website or the physical interaction with the kiosk. This area can be relabeled onstage technology. The back stage contact person actions area would be irrelevant in this case. If the service involves a combination of human and technology interfaces, as with airline self-check-in, then the onstage area can be cut into two distinct spaces divided by an additional horizontal line. In the airline self-check-in example, the human contact with the airline employee who takes the bags and checks identification would be shown in one area and the technology interactions with the self-check-in computer kiosk in the second area, both above the line of visibility. Reading and using Service Blueprints A service blueprint can be read in a variety of ways, depending on your purpose. If the purpose is to understand the customer’s view of the process, the blueprint can be read from left to right, tracking the events in the customer action area. Questions that might be asked include these: how does the customer initiate the service? What choices does the customer make? Is the customer highly involved in creating the service, or are few actions required of the customer? What is the physical evidence of the service from the customer’s point of view? Is the evidence consistent with the organization’s strategy and positioning? If the purpose is to understand the contact employees’ roles, the blueprint can also be read horizontally but this time focusing on the activities directly above and below the line of 27 visibility. Questions that might be asked include these: how rational, efficient and effective is the process? Who interacts with our customer’s, when, and how often? Is one person responsible for the customer, or is the customer passed off from one contact employee to another? Recognition that the patient passed was passed from one employee to another with little or no individual attention resulted in a hospital in Florida reorganizing itself so that each patient was assigned to a “care pair” (usually a nurse and an assistant) that serves that patient’s needs from check-in to discharge. The result was a reduction in operating costs of greater than 9 percent, along with higher patient satisfaction. If the purpose is to understand the integration of the various elements of the service process, or to identify where particular employees fit into the bigger picture, the blueprint can be analyzed vertically. In doing this, it becomes clear what tasks and which employees are essential in the delivery of service to the customer. The linkages from internal actions deep within the organization to front-line effects on the customer can also be seen in the blueprint. Questions that might be asked include these: what actions are performed backstage to support critical customer interaction points? What are the associated support actions? How are handoffs from one employee to another taking place? If the purpose is service redesign, the blueprint can be looked at as a whole to assess the complexity of the process, how it might be changed and how changes from customer’s point of view would impact the contact employee and other internal processes, and vice versa. The evidence of service can also be analyzed to determine if it is consistent with the goals for the service. Blueprints can also be used to isolate the failure points or bottlenecks in the service process. When such points are discovered, the blueprint can be exploded to focus in much greater detail on that particular piece of the system. On the basis of a blueprinting application in the design and fine-tuning of a rapid train service between Stockholm and Gothenburg, the two largest cities in Sweden, a number of benefits were noted as presented in exhibit 8.2. Clearly, one of the greatest benefits of blueprinting is education. When people begin to develop a blueprint, it quickly becomes apparent what is actually known about the service. Sometimes the shared knowledge is very little. Biases and prejudices are made explicit, and agreements and compromises must be reached. The process itself promotes cross-functional integration and understanding. In the attempt to visualize the entire service system, people are forced to consider the service in new and more comprehensive ways. 28 2.5 1. Benefits of Service Blueprinting Provides an overview so employees can relate, “What I do” to the service viewed as an integrated whole, thus reinforcing a customer-oriented focus among employees. 2. Identifies fail points-that is, weak links of the chain of service activities, which can be the target of continuous quality improvement. 3. Line of interaction between external customers and employees illuminates the customer’s role and demonstrates where the customer experiences quality, thus contributing to informed service design. 4. Line of visibility promotes a conscious decision on what customers should see and which employee must be in contact with the customers, thus facilitating rational service design. 5. Line of internal interaction clarifies interfaces across departmental lines, with their inherent interdependencies, thus strengthening continuous quality improvement. 6. Stimulates strategic discussion by illuminating the elements and connections that constitute the service. Those who participate in strategic sessions tend to exaggerate the significance of their own special function and perspective unless a common ground for an integrated view of the service is provided. 7. Provides a basis for identifying assessing cost, revenue, and capital invested in each element of service. 8. Constitutes a rational basis for external and internal marketing. For example, the service map makes it easier for an advertising agency or an inhouse promotion team to overview a service and select essential messages for communication. 9. Facilitates top-down, bottom-up approach to quality improvement. It enables managers to identify, channel, and support quality improvement efforts of grass-roots employees working on both frontline and support teams. Employee work teams can create service maps and thus more clearly apply and communicate their experience and suggestions for improvements. Building a Blueprint Through the process of developing the blueprint, many intermediate goals can be achieved: clarification of the concept, development of a shared service vision, development of complexities and intricacies of the service that are not initially apparent, and delineation of roles and 29 responsibilities, to name a few. The development of a blueprint needs to involve a variety of functional representatives as well as information from customers. Drawing or building a blueprint is not a task that should be assigned to one person or one functional area. Figure 8.9 identifies the basic steps in building a blueprint. 2.6 Steps for Building a Service Blueprint Step 1 Identify the process to be blueprint Step 2 Identify the customer or customer segment Step 3 Map the process from the customer’s point of view Step 4 Map contact employee actions, onstage and backstage, and/or technology actions Step 5 Link contact activities to needed support functions Step 6 Add evidence of service at each customer action gap 30 Step 1: Identify the Service Process to be blueprinted Blueprints can be developed at a variety of levels, and there needs to be agreement on the starting point. For example, the express mail blueprint shown earlier is at the basic service concept level. Little detail is shown, and variations based on market segment or specific services are not shown. Specific blueprints could be developed for two-day express mail, large accounts, internet-facilitated services, and /or store-front drop-off centers. Each of these blueprints would share some features with the concept blueprint bur would also include unique features. Or if the “short packages” and “loading” elements of the process were found to be problem areas or bottlenecks that were slowing service to customers, a detailed blueprint of the sub processes at work in those two steps could be developed. Identifying the process to be mapped will be determined by the underlying purpose for building in the first place. Step 2: Identifying the Customer or Customer Segment Experiencing the Service: A common rationale for market segmentation is that each segment’s needs are different and therefore will require variations in the service or product features. Thus, blueprints are most useful when developed for a particular customer or customer segment, assuming that the service process varies across segments. At a very abstract or conceptual level it may be possible to combine customer segments on one blueprint. However, once almost any level of detail is reached, separate blueprints should be developed to avoid confusion and maximize their usefulness. Step 3: Map the Service Process from the Customer’s Point of View: This step involves charting the choices and actions that the customer performs or experiences in purchasing, consuming, and evaluating the service. Identifying the service from the customer’s point of view first will help to avoid focusing on processes and steps that have no customer impact. This step forces agreement on who the customer is (sometimes no small tasks) and may involve considerable research to determine exactly how the customer experiences the service. Step 4: Map Contact Employee Actions, both Onstage and Backstage, and/or Technology Actions: First the lines of interaction and visibility are drawn, and then the process from the customer contact person’s point of view is mapped, distinguishing visible or onstage activities from invisible backstage activities. For existing services this will involve questioning front-line operation 31 employees to learn what they do and which activities are performed in full view of the customer versus which activities are carried out behind the scenes. In the case of technology-delivered services or those that combine technology and human delivery, the required actions of the technology interface will be mapped above the line of visibility as well. If no employees are involved in the service at all, then the area can be relabeled “onstage technology actions”. If there are human and technology interactions, those activities can be separated by an additional horizontal line to separate “onstage contact employee actions” from “onstage technology actions”. Using the additional line will facilitate reading and interpretation of the service blueprint. Step 5: Link Contact Activities to Needed Support Functions The line of internal interaction can be drawn and linkages from contact activities to internal support functions can be identified. It is in this process that the direct and indirect impact of internal actions on customers becomes apparent. Internal service processes take on added importance when viewed in connection with their link to the customer. Alternatively, certain steps in the process may be viewed as unnecessary if there is no clear link to the customer’s experience or to an essential internal support service. Step 6: Add Evidence of Service at each Customer Action Step Finally the evidence of service can be added to the blueprint to illustrate what it is that the customer sees and receives as tangible evidence of the service at each step in the customer experience. The photographic blueprint including photos, slides, or video of the process can be very useful at this stage as well to aid in analyzing the impact of tangible evidence and its consistency with the overall strategy and service positioning. 2.7 Summary Accurate perception of customers’ expectation is necessary, but not sufficient, for delivering superior quality service. Another pre requisite is the presence of service delivery designs and performance standards that reflects those accurate perceptions. A recurring theme in service companies is the difficulty executives, managers, and other policy setters experience in translating their understanding of customer expectations into service design that employees can understand and execute. To develop the appropriate service design, many challenges to be faced by service 32 managers. Blueprint is a map, which will facilitate the customers and employees to understand their roles in physical evidence and service delivery. Service blueprinting is a useful technique in the service development process. A blueprint can make a complex and intangible service concrete through its visual depiction of all of the steps, actors, processes, and physical evidence of the service. The key feature of service blueprints is their focus on the customer- the customer’s experience is documented first and is kept fully in view as the other features of the blueprint are developed. 2.8 Keywords Evidence Point of Contact Process Service Blue Print 2.9 Review Questions 1. Explain service design and its importance in service delivery. 2. What are the challenges in service design? 3. What is blueprint? Explain blueprint components with examples. 4. How is service blueprint helpful for technology-based service? 5. What are the advantages of blueprinting? 6. How will you develop a service blueprint for a restaurant? 33 LESSON - 3 Service Life Cycle Learning Objectives After having read this lesson, you will be able to discuss, Meaning of Core Service and Augmented Service Plan for the New Service Design Factors enable to Facilitate the Supplementary Services Branding of Services Different Stages of Service Life Cycle Common Strategies for Each Stages Structure 3.1 Introduction 3.2 Core Services 3.3 Supplementary Services 3.4 Augmented Services 3.5 Facilitating and Enhancing Services 3.6 Planning and Branding Service Products 3.7 Service Lines and Brands 3.8 Service Life Cycle Stages 3.9 Characteristics and Strategies 3.10 Strategies Consideration in SLC Concept 3.11 Summary 3.12 Keywords 3.13 Review Questions 34 3.1 Introduction All service organizations face choices about the types of products to offer and the operational procedures to use in creating them. In a customer-focused organization, these choices are often driven by market factors, with firms seeking to respond to the expressed needs of specific market segments and to differentiate the characteristics of their offerings against those of competitors. A service product consists of a core product bundled with a variety of supplementary service elements. Just like a product life cycle, services too have a life cycle. If we make distinction between the service category and the technology changes, we can see that many broad service categories or remain constant over a long period of time. The technology changes have altered the product form in many cases, with basic need category remaining the same. For instance, new coffee bars like Barista, Qwiky’s and Café Coffee Day have changed the landscape of many cities, and many traditional teashops have virtually disappeared from some places. 3.2 Core Services The core service product gives the basic benefits of satisfying the customer’s basic need or solve the problem. In other words, the core product supplies the central problem-solving benefits that customers seek. Thus transport solves the need to move a person or a physical from one location to another; management consulting is expected to yield expert advice on the actions that a company should take; and repair services restore a damaged or malfunctioning machine or building to good working order. 3.3 Supplementary Services Supplementary services facilitate and enhance use of the core service. These elements augment the core product, both facilitating its use and enhancing its value and appeal. The extent and level of supplementary services often play a role in differentiating and positioning the core product. Adding supplementary elements or increasing the level of performance can add value to the core product and enable the service provider to charge a higher price. For example, In-flight services in air travel. 35 3.4 Augmented Services The combination of core service and supplementary services is often referred to as the augmented product. The augmented product with fine tune the marketing mix to differentiate and stand out from the competition. Several frameworks can be used to describe augmented products in a services context. The figure 3.1 given here will explain the above service products clearly. Figure 3.1 Service Products 3.5 Facilitating and Enhancing Services Of the potentially dozens of supplementary services, all most all of them can be classified into one of the following four clusters. We list them as either facilitating or enhancing supplementary services. 36 Facilitating Services 1. Information 2. Order taking 3. Billing 4. Payment 1. Information To obtain full value from any good or service, customers need relevant information. New customers and prospects are especially information hungry. Customers’ needs may include direction to the site where the product is sold, service hours, prices, and usage instructions. Further information, sometimes required by law, could include conditions of sale and use, warnings, reminders, and notification of changes. Finally, customers may want documentation of what has already taken place, confirmations of reservations, receipts and tickets, and monthly summaries of account activity. Companies should make sure that the information that they provide is both timely and accurate, as incorrect information may annoy or inconvenience customers. Traditional ways of providing information to customers include using front-line employees, printed notices, brochures, and instruction books. 2. Order Taking Once customers are ready to buy, a key supplementary element comes into play: accepting applications, orders, and reservations. The process of order taking should be polite, fast and accurate so that customers do not waste time and endure unnecessary mental or physical effort. Technology can be used to make order taking easier and faster for both customers and suppliers. The key lies in minimizing the time and effort required of both parties, while also ensuring completeness and accuracy. 3. Billing Billing is common to almost too all services, unless the service is provided free of cost. Inaccurate, ineligible or incomplete bills risk disappointing customers who may, up to that point, have been quite satisfied with their experience. Such failures add insult to injury if the customer is already dissatisfied. Billing should also be timely because it serves to stimulate faster payment. 37 Procedures range from verbal statements to a machine-displayed price and from handwritten invoices to elaborate monthly statements of account activity and fees. Perhaps the simplest approach is self-billing, when the customer tallies up the amount of an order and either encloses a cheque or signs a credit card payment authorization. In such instances, billing and payment are combined into a single act, although the seller may still need to check for accuracy. Customers usually expect bills to be clear, informative, and itemized in ways that make it clear how the total was computed. Busy customers hate to be kept waiting for a bill to be prepared in a hotel, restaurant, or rental car lot. 4. Payment In most cases, a bill requires the customer to take action on payment, and such action may be very slow in process. One exception is bank statements that detail charges that have already been deducted from the customer’s account. Increasingly customers expect ease and convenience of payment, including credit, when they make purchases in their own countries and while traveling abroad. A variety of options exist to facilitate customer bill paying. Self-service payment systems, for instance, requires customers to insert coins, banknotes, tokens, or cards in machines and payment wallets. But equipment breakdowns destroy the whole purpose of such a system, so good maintenance and rapid-response troubleshooting are essential. To ensure that people pay what is due, some service businesses have instituted control systems, such as ticket checks before entering a movie theatre or on board a train. Enhancing Services 1. Consultation 2. Hospitality 3. Safekeeping 4. Exceptions 1. Consultation Now we move to enhancing supplementary services, led by consultation. In contrast to information, which suggests a simple response to customers’ questions, consultation involves a dialogue to probe customer requirements and then to develop a tailored solution. At its simplest, 38 consultation consists of immediate advice from a knowledgeable service person in response to the request: what do you suggest? Effective consultation requires an understanding of each customer’s current situation before suggesting a suitable course of action. Good customer records can be great help in this respect, particularly if relevant data can be retrieved easily from a remote terminal. 2. Hospitality Hospitality-related services should, ideally, reflect pleasure at meeting new customers and greeting old ones when they return. Well-managed businesses try at least in small ways, to ensure that their employees treat customers as guests. Courtesy and considerations for customers’ needs apply to both face-to-face encounters and 6telephone interactions. Hospitality finds its full expression in face-to-face encounters. In some cases, it starts and ends with an offer of transport to and from the service site, as with courtesy shuttle buses. If customers must wait outdoors before the service can be delivered, a thoughtful service provider will offer a weather protection; if indoors, a waiting area with seating and entertainment to pass the time. Recruiting employees who are naturally warm, welcoming, and considerate for customer-contact jobs helps to create a hospitable atmosphere. The quality of the hospitality services offered by a firm can increase or decrease the satisfaction with the core product. This is especially true when customers cannot leave the people –processing service facility. Private hospitals often seek to enhance their appeals by providing the level of room service, including meals that might be expected in a good hotel. 3. Safekeeping While visiting a service site, customers often want assistance with their personal possessions. In fact, unless certain safe keeping services are provided, such as safe and convenient parking for their cars, some customers may not come at all. The list of potential onsite safe keeping services is long and includes provision of coatrooms; baggage transport, handling and storage; safekeeping of valuables; and even childcare and pet care. Responsible businesses also worry about the safety of their customers. These days, many businesses pay close attention to safety and security for customers who are visiting their service facilities. When it mails out its bank statements, City Bank includes a brochure containing information about using its ATM machines safely. The bank seeks to educate its customers about how to 39 protect both their ATM cards and themselves from theft and personal injury. And the bank makes it sure that its machines are in brightly lit, highly visible locations to reduce any risks to its customers or their possessions. 4. Exceptions Exceptions involve supplementary services that fall outside the routine of normal service delivery. Astute businesses anticipate exceptions and develop contingency plans and guidelines in advance. That way, employees will not appear helpless and surprised when customers ask for special assistance. Well-defined procedures make it easier for employees to respond promptly and effectively. There are several types of exceptions: 3.6 Special requests Problem solving Handling of complaints/suggestions/compliments Restitution Planning and Branding Service Products A product implies defined and a consistent “bundle of output” and also the ability to differentiate one bundle of output from another. In a manufacturing context, the product is easy to understand and visualize. Service firms can also differentiate their products in similar fashion to the various “models” offered by manufacturers. Quick service restaurants are sometimes described as “quasi-manufacturing” operations, as they produce a physical output combined with value added service. At each site, they display menu of their products, which are, of course, highly tangible. 3.7 Service Lines and Brands Most service organizations offer a line of product rather than a single product. Some of these products are distinctly different from one another-as, for example, when a company is engaged in several areas of business. Within a specific industry, a large firm may offer several differently positioned entries, each identified by a separate brand name. 40 Each brand promises a distinct mix of benefits, targeted at a different customer segment. The strategy of brand extension is aimed at encouraging customers to continue patronizing units within the brand family. 3.8 Services Life Cycle Stages Many services generally have a characteristic known as ‘perishable’ distinctiveness. This means that a product which is distinct when new, degenerates over the years into a common commodity. The process by which the distinctiveness gradually disappears as the product mergers with other competitive products has been rightly termed by Joel dean as “the cycle of competitive degeneration”. The cycle begins with the invention of a new service, and is often followed by a rapid expansion in its sales as the service gains market acceptance. Then competitors enter the field with imitation and rival services and the distinctiveness of the new service starts diminishing. This speed of degeneration differs from service to service. While some services fail immediately on birth or a little later, others may live long enough. The innovation of a new service and its segmentation into common services is termed as the life cycle of a service. There are five distinct stages in the life cycle of a service as shown below: 1. Introduction stage 2. Growth stage 3. Maturity stage 4. Decline stage 1. Introduction Stage This stage starts when the service is launched. The charters tics of this stage are: Service are very low Evade awareness Spend more on advertisement and sales promotion Innovators/ trend setters will be initial customers Careful planning for effective encounters 41 Prompt service delivery Market penetration pricing will be ideal if there is competition. Profits are negative are low Better quality/features of basic service. Based on these characteristics, a company may use an appropriate marketing strategy with the company objectives and resources. At this stage, since the service is new, all competitors will be focusing on building the distribution network and service awareness. The success in the market would around pricing and promotions. The options could be as follows: (a) High price-low promotion spending This strategy will yield high profit per unit and also keep the marketing costs down. It is likely to succeed when: Competition is limited. Market size is limited. Service awareness already exists. Customers are willing to pay a high price. (b) Low price - heavy promotion spending This will help in cornering a bigger market share and faster market penetration. The condition under which it is likely to succeed are: Large Market Price Sensitive Buyers Service Awareness Strong Competition Economy Of Scale In Production- Low Unit Manufacturing Costs 42 2. Growth Stage This stage is most rewarding if the introduced service has been considered to be satisfactory by the market. Characteristics of this stage are: Increase of sales revenue and profit Rationalize the promotional expenses Increase the market share Encourage repeat utilizing service Cost plus pricing will be the ideal Standardize higher service quality Increase in competition New market segment will be opened 43 As the sales and profit grow rapidly as compared to the introduction stage companies use varying strategies in the growth stage. Some typical strategies are: Lured by high sales and the correspondingly high profits. Competition enters the market. Therefore, improving and/ or adding features will expand the market for a company. Because of the high volume of business and increase in competition, prior should not be raised. On the other hand, strategic lowering of price should be resorted to attract more buyers. Increased emphasis on promotions will play very important role in educating the market as well as in meeting the challenges of the competition. Distribution channel would need to be strengthens and new channels opened to handle additional volumes and new market. In advertising, some emphasis would shift from product awareness to product conviction. General strategy would be to be prepared and face a tradeoff between high profits and high market share. As mentioned above, increased investment on product improvement, promotions and distribution may lower the current profit but the company can make it up in the next stage. The service begins to make rapid sales gains because of the cumulative effects of introductory promotion, distribution, and word-of-mouth influence. High and sharply rising profits may be witnessed. But to sustain growth, consumer satisfaction must be ensured at this stage. 3. Maturity Stage In this stage, though the sales growth slows down, the stage in itself continues for long period. Therefore, sales reach and remain on a plateau market by the level of replacement demand. There is little additional demand to be stimulated. It possess a strong challenges to marketing managers. 44 The characteristics of this stage are: Slow in sales and growth Increased capacities (inventories) Competition brings the prices down Profits down. Retain the customer Seek the new customer Customized high end customers New service, value added service to be expanded New market may be explored Meet more that customer expectation More branches may be opened Because of the intense competition and falling profits, not all companies can survive this stage. Thus a number of proactive steps are needed to stay profitable. Some of strategies are: (a) Market modification In order to increase the consumption, the companies look for: New users New market segments Increased usage among present customers (b) Service modification In order to increase consumption to attract more users, a company may attempt service characteristic improvements such as: Quality · eatures Styles 45 (c) Marketing mix: Value for money concepts Sales promotion methods 4. Decline Stage There are sayings like “nothing lasts forever” or “all good things must come to an end”. The sale of any service eventually dips. They may plunge to zero or continue at a very low level for some years. Sales begin to diminish absolutely as the customers begin to tire of the service and the service is gradually edged out by better services or substitutes, for example, dial telephones. This indicates the stage of decline. The characteristics of this stage are: Cat on the wall Declining sales Very low or no profits Reduced competition due to low volumes and margins Few customers (laggards) Strategies for decline stage Market research to be conducted Top management to be reviewed and consulted Service re launch More promotional expenses Service recovery to be planned A company may have a number of services introduced simultaneously but the extent of decline may not be the same for all services. Companies should therefore identify and pay more attention to aging services because the strategy for each service would depend upon its health. The health can be gauged by reviewing the sales, market shares and extend of profits. Based on these observations, a company can follow the further following strategies; 46 Maintain: Hoping that with passage of time, the competition will drop out and the product will continue to sell, a company may decide to continue with the service. Harvest: This strategy is aimed at reducing the costs (Production, maintenance, advertising, sales force, etc.) and hoping that the services offerings will be profitable for some time to come. Drop: This is the end of the line for a particular service. However, it may be sold to some other company if there is a corporate buyer. The service life cycle, its different stages and the various characteristics that they reflect in the varying stages and strategies are as follows: 3.9 Characteristics and Strategies Effects and Introduction Growth Maturity Decline responses Characteristics of the stage Consumers Innovators Early adapters Middle majority Laggards Competitors Few, hence Growing in Stable, intense Declining, less important numbers and competition followers Sales Low sales shakeout Sales will Stagnating Declining be growing sales sales High profits Declining rapidly Profits Negligible due to Peaks due high protection and to growing launch costs demand profits 47 Costs High cost per Cost starts Low cost due Low cost per consumer declining to higher volume consumer Marketing objectives Establishment Market Defend the Cost cutting, in the market; penetration; market shares, making the creating products increasing brands products awareness and trial market share Marketing strategies Product Distribution Basic service Augmenting Diversification of Divesting offering services brands and weak models service Building Intensive Retention of Unprofitable distribution distribution higher shelf ones are space phased out Low price selectively High cost Price to What consumers plus to recover penetrate the can bear and best the cost of markets competitors introduction Advertising are offers Building Mass Stress on Reduced just awareness communication brand to retail differences loyal especially: targeted innovators consumers and distribution channels Sales promotion High to increase trials Moderate High to build loyal consumers Low 48 3.10 Strategic consideration in SLC concept Competition At the introductory stage, competition is given no importance. At the growth stage, it is given a little importance while at the maturity stage, there are rivals in the market, slowly, and however, the number of competitors or rivals gets reduced with the declining stage. Overall Strategic Focus At the first stage, emphasis is laid on market establishment. At the growth stage, market penetration and persuasion of mass market are emphasized. Creation of brand loyalty and brand preferences is focused at the maturity stage, the strategy aims at overall preparation for renewal. Profit At the introductory stage, profits are negligible but at the growth stage, they reach the peak levels as a result of growing demand. At the maturity stage, they decline due to the increasing competition. At the last stage, the declining volume pushes costs up and eliminates profits. Distribution Strategies At the introductory stage, distribution is elective. However, at the growth and maturity stages, it is intensive. At the decline stage, it becomes selective and hence low-end strategies are used. Advertising Strategies At the introduction stage, advertising strategies aim at the needs of early adopters; at the growth stage, an attempt is made to make the mass market aware of brand benefits. At maturity stage, advertising is used as a vehicle for differentiating among otherwise similar brands. At the last stage, however it emphasizes, on low price of the service and minimum advertising expenditure. 49 Marketing Strategies in SLC Service life cycle concentrates only on the life cycle of a service beginning with its introduction into the market to the post-marketing phase. However, a series of processes are to be undertaken by the management even prior to the introduction of a service in the market. These processes include exploration, screening analysis; development testing etc. the concept of service life cycle may be used as a managerial tool. Marketing strategies, however, have to be changed with the changes in the phase of the life cycle of a service. An understanding of the cycle is helpful to the managers for a rational understanding of the future sales activities as also planning of marketing strategies. Hence, SLC is synonymous with the pattern of demand for a product over time. The length of time that a service spends at any varies from service to service. A service might not pass through every stage in life cycle. Some services for instance, might not get past the introductory stage, while others might not get past the growth or even the maturity stage. There might be still other services that might pass through the introduction to maturity stages but might take a longer period to reach the saturation stage and hence might take a longer period to reach the decline stage. Some service might even hustle through the entire cycle in an amazingly short period. In certain cases, there might even be a repositioning involves changing basically the image or the perceived of a service. 3.11 Summary Designing a service product is a complex task that requires an understanding of how the core and supplementary services should be combined, sequenced, and scheduled to create an offering that meets the needs of target market segments. Many firms create an array of offerings with various performance attributes and brand each package with a distinctive name. In particular, creating a distinctive branded service experience for customers require consistency across all product elements and at all stages of the service delivery process. Many services catering to the basic needs do not die out over a long period. For example, the needs for services like electric power, petroleum retailing, hospitals, and education and so on continue for hundreds of years. There have been some services where technology has drastically altered the pattern of the service, or led to its premature decline. For instance, the rapid rise of mobile phone services has almost killed the paging services, which earlier had a significant growth potential. 50 The individual service companies and service brands can still benefit from an analysis of their past and predictions about future growth potential in the traditional format of a life cycle curve. However, many basic service categories are here to stay for a longer period of time. 3.12 Keywords Growth Decline Introduction Maturity Services Life Cycle 3.13 Review Questions 1. What is a core service? Identify the real core service for all services industry. 2. Explain the role of supplementary services. Can they be allied to goods as well as to services? 3. What are the differences between enhancing and facilitating supplementary services? 4. How is branding used in services marketing? 5. What is services life cycle? 6. Draw service life cycle foe Cell phone service and Pager service in India. 7. Explain the different stages of service life cycle. 8. What are the characteristics of SLC in each stage? 9. Explain the strategies to be adopted in each stage. 51 LESSON – 4 New Service Development Learning Objectives After reading this lesson, you will be able to discuss Types of new services Characteristics of new service development Differentiate stages of new service development Service redesign Structure 4.1 4.1 Introduction 4.2 Characteristics of New Service Development 4.3 Types of New Services 4.4 Stages of New Service Development 4.5 Services Redesign 4.6 Summary 4.7 Keywords 4.8 Review Questions Introduction A new service design process may be imprecise in defining the nature of service concept because the people involved in believe either that intangible process cannot be defined precisely or that everyone knows what we mean. Because services are produced and consumed simultaneously and often involve interaction between employees and consumers, it is critical that the new service development process involve both employees and customers. Employees frequently are the service, or at least they perform or deliver the service, and thus their involvement in choosing which new services to develop and how these services should be designed and implemented can be very beneficial. 52 Research suggests that services that are designed and introduced via the steps in the structured planning framework have a greater likelihood of ultimate success than those not developed within a framework. 4.2 Characteristics of New Service Development The fact that services are intangibles makes it even more imperative for a new service development system to have four basic characteristics. 1. It must be objective, not subjective. 2. It must be precise, not vague. 3. It must be fact driven, not opinion driven. 4. It must be methodological, not philosophical. Contact employees are physiologically and physically close to the customers and can be very helpful in identifying customer needs for which new services can be offered. Involving employees in the design and development process also increases the likelihood of new service success because employees can identify the organizational issues that need to be addressed to support the delivery of the service to the customers. Because customers often actively participate in service delivery, they too should be involved in the new service development process. Beyond just providing input on their own needs, customers can help design the service concept and the delivery process, particularly in cases where the customer personally carries out part of the service process. Marriott Corporation is well known for involving guests in the design of its hotel rooms to ensure that the features and placement of furnishings in the rooms will work for the guests and not just for the staff or the architects who design the rooms. 4.3 Types of New Services As we build the new service development process, remember that not all services are “new” to the same degree. The types of new service options can run the gaunt from major innovations to minor style changes: Major innovations are new services for marketers as yet undefined. Past examples include the first broadcast television services and federal express’s introduction in the nationwide, 53 overnight small package delivery. Many innovations now and in the future will evolve from information, computer, and Internet based technologies. Start-up business consists of new services for a market that is already served by existing products that meet the same generic needs. Service examples include the creation of health maintenance organizations to provide an alternative form of health care delivery, online banking for financial transactions, and door-to-door airport shuttle services that compete with traditional taxi and limousine services. New services for the currently served market represent attempts to offer existing customers of the organization a service not previously available from the company. Examples include banners and noble offering coffee service. Service line extensions represent augmentations of the existing service line, such as restaurant adding new menu items, an airline offering new routes, and a university adding new courses or degrees. Service improvements represent perhaps the most common type pf service innovation. Changes in features of services that are already offered might involve faster execution of an existing service process, extend hours of service such as value added amenities in a hotel room. Style changes represent the most modest service innovations, although they are often highly visible and can have significant effects on customer perceptions, emotions, and attitudes. Changing the color scheme of a restaurant, revising the logo for an organization, website redesign, or painting aircraft a different color all represent style changes. 4.4 Stages of New Service Development The actual steps to be followed in new service development are discussed here under. This step can be applied to any type of new services or service redesign efforts just described. 1. Idea generation 2. Screening 3. Concept development and evaluation 4. Business analysis 54 5. Service development and testing 6. Test marketing 7. Commercialization 8. Post introduction evaluation 1. Idea generation This idea generation at this phase can be passed through the new service strategy. Many methods and avenues are available for searching out new service ideas. Formal brainstorming, solicitation of ideas from employees and customers, lead user research, and learning about competitors’ offerings are some of the most common approaches. Observing customers and how they use the firm’s products and services can also generate creative ideas for new innovations. Sometimes referred to as emphatic design, observation is particularly effective in situations where customers may not able to recognize. In service businesses, contact personnel, who actually deliver the services and interact directly with customers, can be particularly good sources of ideas for complementary service to those already in the market place and ways to improve current offerings. In listening to the customers, many manufacturers around the world have discovered ideas for new services rather than product enhancements. 2. Screening The main purpose of all the succeeding stages is to reduce the number of ideas. The company will not likely to have the resources or inclination to develop all of the new service ideas, even if they are all good. The first idea-pruning stage is screening. In the screening stage, the company must seek to avoid two types of errors A DROP error occurs when the company dismisses an otherwise good idea because of a lack of vision of its potentialities. A GO error occurs when the company lets a poor idea proceed to development and commercialization. 3. Concept development and evaluation Once an ideas surface that is regarded as a good fit with both the basic business and the new service strategies, it is ready for initial development. In this case of a tangible product, this 55 world means formulating the basic product definition and then presenting consumers with descriptions and drawings to get their resources. The inherent characteristic of services, particularly intangibility and simultaneous production and consumption, place complex demands on this phase of the process. Drawing pictures and describing an intangible service in concrete terms are difficult. It is therefore the agreement be reached at this stage exactly what the concept is. By involving multiple parties in sharpening the concept definition, it often becomes apparent that individual views of the concept are not the same. Through the initial concept development phase it became clear that not everyone in the organization have the same idea about how this description would translate into an actual service and that there were a variety of ways the concept could be developed. After clear definition of the concept, it is important to produce a description of the service that represents its specific measures and characteristics and then to determine initial customer and employee responses to the concept. The service design document describes the problem addressed by the service, discus the reasons for offering the new service, itemize the service process and its benefits, and provide a rationale for purchasing the service. 4. Business analysis Assuming customers and employees favorably evaluate the service concept at the concept development stage, the next step is to determine its feasibility and potential profit implications. Demand analysis, revenue projections, cost analyses, and operational feasibility is assessed at this stage. Because the development of service concepts is closely tied to the operational system of the organization, this stage will involve preliminary assumptions about the costs of hiring and training personnel, delivery system enhancements, facility changes, and any other projected operation costs. The organization will pass the results of the business analysis through its profitability and feasibility screen to determine whether the new service idea meets the minimum requirement. 5. Service development and testing In the development of new tangible products, this stage involves construction of product prototypes and testing for consumer acceptance. Again, because services are intangible and largely produced and consumed simultaneously, this step is difficult. To address the challenge, this stage of service development should involve all who have a stake in the new service: 56 customers and contact employees as well as functional representatives from marketing, operations and human resources. During this phase the concept is refined to the point where a detailed service blueprint representing the implementation for the service can be produced. The blue print is likely to evolve over a series of iterations on the basis of input from all of the parties listed. A final step is for each area involved in rendering the service to translate the final blueprint into specific implementation plans for its part of the service delivery process. Because service development, design, and delivery are so intricately intertwined, all parties involved in any aspects of the new service we must work together at this stage to delineate the details of new service. If not, seemingly minor operational details can cause an otherwise good new service ideal to fail. 6. Test Marketing It is at the stage of the development process that a tangible product might be test marketed in a limited number of trading areas to determine marketplace acceptance of the product as well as other marketing mix variables such as promotion, pricing, and distribution system. Again, the standard approach for a new manufactured product is typically possible for a new service due to his inherent characteristics. Because new service offerings are often intertwined with the delivery system for existing services, it is difficult to test new services in isolation. There are alternative ways of the testing the response to marketing mix variables, however. The new service might be offered to employees of the organization and their families for a time to assess their responses to variations in the market mix. Or the organization might decide to test variations in pricing and promotion in less realistic contexts by presenting customers with hypothetical mixes and get their response in terms to try the service under varying circumstances. It is also extremely important at this stage in the development process to pilot run the service to be sure that the operation details arte functioning smoothly. Frequently this purpose is overlooked and the actual market introduction may be the first test whether the service system functions as planned. 7. Commercialization At this stage in the process, the service goes live and is introduced to the market place. This stage has two primary objectives. The first is to build and maintain acceptance of the service among large numbers of service delivery personnel who will responsible day to day for service quality. This task is made easier if acceptance has been built in by involving key groups 57 in the design and development process all along. However, it will still be a challenge to maintain enthusiasm and communicate the new service through the system. The second objective is to monitor all aspects of the service during introduction and through the complete service cycle. If the customer needs six months to experience the entire service, then careful monitoring must be maintained through at least six months. Every detail of the service should be assessed- phone calls, face to face transactions, billing, complaints, and delivery problems. 8. Post introduction evaluation At this point, the information gathered during commercialization of the service can be reviewed and changes made to delivery process, staffing, or marketing mix variables on the basis of actual market response to the offering. No service will remain the same. Therefore formalizing the review process to make those changes that enhance service quality from the customer’s point of view is critical. 4.5 Service Redesign Instead of declining services in favor of new service innovations, many firms have discovered that redesigning existing services is another viable approach to service development growth. Based on their extensive research, Len berry have suggested five types of service redesign as potential ways of increasing customer benefits or reducing customer costs. Self service- one approach to redesign is to move the customer into a production mode rather than a passive, receiving mode. Redesigning the service process in this way increases benefits for the customer in terms of personal control, accessibility, and timing. Prime examples of self-service occur when companies offer their services via the Internet. Direct service- direct service means bringing the service to the customer rather that asking the customer to come to the provider. This might mean delivering the service to the customer in his home or workplace. Restaurant food and dry cleaning delivery to the office, pet grooming in the home are examples of firms bringing services directly to their customers rather than customer traveling to the service provider. Pre service- this type is redesign involves streamlining or improving the activation of the service, focusing on the front-end process. Preadmission processing at a hospital and prepayment tolls on highway are examples. 58 Bundled service- grouping or bundling, multiple services together is another way to redesign current offerings. The benefit of the customers is in receiving greater value, combined with convenience, than they might have received purchasing each service independently. Physical service- physical redesign involves changing the customer’s experience through the tangibles associated with the service or the physical surroundings of the service. Midway express airlines have changed the entire airline flight experience primarily through redesigning the interior of its aeroplanes. 4.6 Summary More and more organizations are recognizing the advantages, indeed the necessity, of developing new services. If anything, their current offerings are facing shortening life span and must be replaced the newer service or improvements to made. New service development, however, is not a primrose path. The risks of innovation are as great as the rewards. This lesson viewed the new service development process as consisting of eight stages. Each stage explain the approach to be followed for creating new service and last step discussed about the post evaluation even after commercialization so as to fine tune the new service offering to the customers. 4.7 Keywords Business Analysis Concept Development Communication Idea Generation Screening Test Marketing 4.8 Review Questions 1. Suggest some new idea generation sources to develop new service. 2. What are the characteristics of new service development? 3. Explain the different stages of new service development 4. What are the important areas to be taken care of in screening stage? 5. What are difference between concept testing and market testing? 59 LESSON - 5 Service Pricing Learning Objectives After having read this lesson, you will be able to discuss, Key ways to differentiate the prices if service to different customers How quality determines the price Marketing principles to adopted pricing techniques Approaches for pricing Structure 5.1 5.1 Introduction 5.2 Pricing of Services 5.3 Price as an Indicator of Service Quality 5.4 Marketing Principles about Pricing 5.5 Pricing Strategies 5.6 Summary 5.7 Keywords 5.8 Review Questions Introduction Service companies must understand how price works, but first they must understand how customers perceive prices and price changes. What role does service play in customer decisions about services? How important is price to potential buyers compared with other factors and service features? 5.2 Pricing of Services Pricing is the mechanism by which sales are transformed into revenues. Pricing is typically more complex in services than in manufacturing. Because there is no ownership of services, it is usually more difficult to identify the financial costs of creating a process or performance for a 60 customer. According to one of the leading experts on service pricing, most service companies use a “naïve and unsophisticated approach to pricing without regard to underlying shifts in demand, the rate that supply can be expanded, prices of available substitutes etc” Service prices are different for consumers Customer Knowledge of service Prices: To what extent do customers use price as a criterion in selecting services? How much do customers know about services? Service heterogeneity limits knowledge. Providers are unwilling/ unable to estimate prices. Individual customer needs vary. Price information is overwhelming in services. Prices are not visible. Role of Non-monetary costs In recent years economists have recognized that monetary price is not the only sacrifice consumers make to obtain products and services. Demand, therefore is not just a function of monetary price but is influenced by other costs as well. Non-monetary costs represent other sources of sacrifice perceived by consumers when buying and using a service. Time costs, search costs, and psychological costs often enter into the evaluation of whether to buy or rebuy a service, and may be at times be more important concerns that monetary price. Customer will trade money for other costs. 5.3 Time costs Search costs Convenience costs Psychological costs Price as an Indicator of Service Quality One of the intriguing aspects of pricing is that buyers are likely to use price as an indicator of both service costs and service quality—price is at once an attraction variable and a repellent. 61 Customer’s use of price as an indicator of quality depends on several factors, one of which is the other information available to them. When service cues to quality are readily accessible, when brand names provide evidence of a company’s reputation, or when level of advertising communicates the company’s belief in the brand, customers may use to prefer those cues instead of price. In other situations, however, such as when quality is hard to detect or when quality or price varies a great deal within a class of services, consumers may believe that price is the best indicator of quality. Many of these conditions typify situations that face consumers when purchasing services. Another factor that increases the dependence on price, as quality indicator is the risk associated with the service purchase. In high-risk situations many of which involve credence services such as medical treatment or management consulting, the customer will look to price as a surrogate for quality. Because customers depend on price as a cue to quality and because price sets expectations of quality, service prices must be determined carefully. In addition to being chosen to cover costs or match competitors, prices must be chosen to convey the appropriate quality signal. Pricing too low can lead to inaccurate inferences about the quality of service. Pricing too high can set expectations that may be difficult to match in service delivery. Because goods are dominated by search properties, price is not used to judge quality as often as it is in services, where experience and credence properties dominate. Any services market must be aware of the signals that price conveys about its offerings. 5.4 Marketing Principles about Pricing Many of the aspects of pricing of service are the same as pricing of goods. 1. The firm must consider many factors in setting its pricing policy: selecting the pricing objective, determining demand, estimating costs, analyzing competitors prices and offers, selecting a pricing method, and selecting the final price. 2. Company do not always seek to minimize profits through pricing, other objectives they may have include survival, maximizing current revenue, maximizing sales growth, maximizing market skimming, and product quality leadership. 3. Markets need to understand how responsive demand would be to a change in price. To evaluate this important criterion of price sensitivity, markets can calculate the price elasticity of demand, which is expressed as 62 Elasticity= 4. Percentage change in quantity purchased Percentage change in Price Various types of costs must be considered in setting prices, including direct and indirect costs, fixed and variable costs, indirect traceable costs, and allocated costs. If a product or service is to be profitable for a company, price must cover all costs and include a markup as well. 5. Competitor’s prices will affect the desirability of a company’s offerings and must be considered in establishing prices. 6. A variety of pricing methods exist including markup, target return, perceived-value, going rate, sealed-bid, and psychological. 7. After setting a price structure, companies adapt prices using geographic pricing, price discounts and allowances, promotional pricing, discriminatory pricing, and product mix pricing. 5.5 Pricing Strategies 1. Cost-based Pricing Cost Plus Pricing In cost based pricing, a company determines expansion from raw materials and labor, adds amounts or percentages for overhead and profit, and thereby arrives at the price. This method is widely used by industries such as utilities, contracting, wholesaling, and advertising. The basic formula for cost based pricing is Price = direct cost + overhead costs + profit margin Direct costs involve materials and labor that are associated with the service, overhead costs are a share of fixed costs, and the profit margin is a percentage of full costs (direct + overhead). Professional Fee for Service It is the pricing strategy used by professionals; it represents the costs of the time involved in providing the service. Consultants, Psychologists and lawyers are charging on an hourly basis. 63 Specific Issues (Problems) Defining the units in which a service is purchased is a vague entity. Costs are difficult to trace/calculate for services where multiple services are offered. The actual service costs may under represent the value of the service to the customer. E.g. tailor services. 2. Competition-based Pricing This approach focuses on the prices charged by other firms in the same industry or market. Competition-based pricing does not always imply changing the identical rate others charge but rather using others prices as an anchor for the firms price. This approach is used predominantly in two situations: (1) when services are standard across providers, such as in the dry cleaning industry, and (2) in oligopolies where there are a few large service providers, such as in the airline or rental car industry. Difficulties involved in provision of services sometimes make Competition-based pricing less simple than it is in goods industries. Two important pricing strategies in competition based as follows 1. Price Signaling – competitors to avoid giving a low- cost seller advantage will match any price offered by one company. E.g. Airline industry. 2. Going –rate pricing – Price fixed on the basis of prevailing in the market. E.g. Car rental. Specific issues Small companies charge fix low price and less margin, which find difficult to continue in the business. Heterogeneity of services cannot follow this pricing. 3. Demand-based Pricing The two approaches to pricing just described are based on the company and its competitors rather than on customers. Neither approach takes into considerations that customers may lack reference prices, may be sensitive to non monetary prices, and may judge quality on the basis of price. All of these factors can and should be accounted for in a company’s pricing decisions. The third major approach to pricing, demand based pricing, involves setting prices consistent with customer perceptions of value. Prices are based on what customers will pay for the services provided. Prices are fixed on the basis of demand of customers to the services offered by a service provider. 64 Four customer definitions of value: Service pricing strategies for four customer definitions of value: Prices are fixed on the basis of demand of customers to the services offered by a service provider. 1. Discounting 2. Market penetration pricing 3. Odd pricing – e.g. Rs.2.75 instead Rs.3.00 4. Synchro- Pricing (Peak load pricing) – More demand more price. 5. Skimming the cream – new services and no competition 6. Prestige pricing – Special price for high quality or status services. 7. Value pricing – value for money concept. Giving more for less. 8. Price Bundling - Bundle of services for lesser price otherwise the individual service will cost more. 9. Sealed bid Pricing – e.g. Air Sahara 65 5.6 Summary This lesson began with three key differences between customer evaluations of pricing for services. This chapter also explained about customer perceptions of value, quality and suggested appropriate pricing strategies that match each customer definition. The common pricing strategies are (1) cost based, (2) competition based, and (3) demand based. 5.7 Keywords Cost based pricing Competition based pricing Demand based pricing 5.8 Review Questions 1. Which approach to pricing (strategies) is the most fair to customers? Why? 2. Is it possible to use all three approaches simultaneously when pricing services? If your answer yes, describe a service that priced this way. 3. Explain the marketing principles about pricing. 4. How is price an indicator of service quality? 66 LESSON – 6 Service Delivery Learning Objectives After reading this lesson, you will be able to discuss Concept of service delivery in service marketing Service marketing triangle Boundary spanning Strategies for closing gap –3 Structure 6.1 Introduction 6.2 Service Marketing Triangle 6.3 Employee Satisfaction, Customer Satisfaction and Profits 6.4 Boundary Spanning 6.5 Strategies for Closing Gap-3 6.6 Customer Roles in Service Delivery 6.7 Strategies for Enhancing Customer Participation 6.8 Delivery Service through Intermediaries 6.9 Strategies for Effective Service Delivery through Intermediaries 6.10 Summary 6.11 Keywords 6.12 Review Questions 6.1 Introduction “In a service organization, if you’re not the customer, you’d better be serving someone who is. People-front-line employees and those supporting them from behind the scenes- are 67 critical to the success of any service organization. The importance of people in the marketing of services is captured in the people element of the services marketing mix, as 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. In this chapter we focus on service employees because They are the service. They are the organization in the customer’s eyes. They are the brand. They are the marketers. In many cases, the contact employee is the service- there is nothing else. For example, in most personal and professional services (like haircutting, physical trainers, child care, cleaning/ maintenance, Health services, counseling, and legal services) the contact employee provides the entire service single handedly. The offering is the employee. Thus, investing in the employee to improve the service parallels making a direct investment in the improvement of a manufactured product. Even if the contact employee does not perform the service entirely, he or she may still personify the firm in the customer’s eyes. Because contact employees represent the organization and can directly influence customer satisfaction, they perform the role of marketers. They physically embody the product and are walking billboards from a professional standpoint. 6.2 Services Marketing Triangle External Marketing: Companies make promises in addition to normal Advt., sales promotion, pricing etc and also through employees, décor facilities, design etc. Interactive Marketing: Sometimes promises are delivered through technology also. 68 Internal Marketing: Providers should be trained well, rewarded for good service. All three sides are equally essential to complete the marketing triangle to be success. 6.3 Employee Satisfaction, Customer Satisfaction and Profits There is concrete evidence that satisfied employees make for satisfied customers (and satisfied customers can, in turn, reinforce employees’ sense of satisfaction in their jobs). Some have even gone so far as to suggest that unless service employees are happy in their jobs, customer satisfaction will be difficult to achieve. 6.4 Boundary - Spanning The front-line service employees are referred to as boundary spanners because they operate organization’s boundary. Boundary spanners provide a link between the external customer and environment and the internal operations of the organization. They serve a critical function in understanding, filtering, and interpreting information and resources to and from the organization and its external constituencies. 69 In industries such as fast food, hotels, telecommunication, and retail, the boundary spanners are the least skilled, lowest-paid employees in the organization. They are order takers, frontdesk employees, telephone operators, store clerks, truck drivers, and delivery people. In other industries, boundary spanners are well- paid, highly educated professionals-for example, doctors, lawyers, accountants, consultants, architects, and teachers. 6.5 Strategies for Closing Gap - 3 Hire The Right People One of the best ways to close gap 3 is to start with right service delivery people from the beginning. This implies that considerable attention should be focused on hiring and recruiting service personnel. Such attention is contrary to traditional practices in many service industries, where service personnel are the lowest on the corporate ladder and work for minimum wage. But even in these industries, managers are beginning to focus on more effective recruitment practices. Compete for the best people Hire for service competencies and service inclination Be the preferred employer Develop People To Deliver Service Quality To grow and maintain a workforce that is customer oriented and focused on delivering quality, an organization must develop its employees to deliver service quality. That is, once it has hired the right employees, the organization must train and work with these individuals to ensure service performance. Train for technical and interactive skills Empower employees Promote team work Provide Needed Support Systems To be efficient and effective in their jobs, service workers require internal support system that are aligned with their need to be customer focused. This point cannot be overemphasized. In fact, without customer-focused internal support and customer-oriented systems, it is nearly impossible for employees to deliver quality service no matter how they want to. 70 The following sections suggest strategies for customer-oriented internal support. Measure internal service quality A cautionary note Provide supportive technology and equipment Develop service-oriented internal processes Retain The Best People An organization that hires the right people, trains and develops them to delivery service quality, and provides the needed support must also work to retain the best ones. Employee turnover, especially when the best service employees are the ones leaving, can be very detrimental to customer satisfaction, employee morale, and overall service quality. And, just as they do with customers, some firms spend a lot of time attracting employees but then tend to take them for granted (or even worse), causing these good employees to search for job alternatives. Although all of the strategies will support the retention of the best employees, here we will focus on some strategies that are particularly aimed at this goal. 6.6 Include employees in the company’s vision Treat employees as customers Measure and reward strong service performers Customers' Roles in Service Delivery Customer participation at some level is inevitable in service delivery. Services are actions or performances, typically produced and consumed simultaneously. In many situations employees, customers, and even others in the service environment interact to produce the ultimate service outcome. Because they participate, customers are indispensable to the production process of service organizations, and they can control or contribute to their own satisfaction. Customer Receiving the Service Because the customer receiving the service participates in the delivery process, he or she can contribute to gap 3 through appropriate or inappropriate, Effective or ineffective, productive or unproductive behaviors. Even in a relatively simple service such as retail mail order, customers’ actions and preparation can have an effect on service delivery. 71 The level of customer participation-low, medium, high-varies across services. Other Customers In many service contexts, customers receive the service simultaneously with other customers or must wait their turn while other customers are being served. In both cases, “other customers” are present in the service environment and can affect the nature of the service outcome or process. Other customers can either enhance or detract from customer satisfaction and perceptions of quality. Some of the ways other customers can negatively affect the service experience are by exhibiting disruptive behaviors, causing delays, overusing, excessively crowding, and manifesting incompatible needs. Customers' Roles Customer as Productive Resources Service customers have been referred to as “partial employees” of the organization-human resources who contribute to the organization’s productive capacity. Customer inputs can affect the organization’s productivity through both the quality of what they contribute and the resulting quality and quantity of output generated. For example, research suggests that an IT consulting context, clients who clearly articulate the solution they desire, provide needed information in a timely manner, communicate openly, gain the commitment of key internal stakeholders, and raise issues during the process before it is too late will get better service. In turn the consulting firm will spend less time redoing the service or waiting for information, allowing it to be more productive overall. The contributions of the client thus enhance the overall productivity of the firm in both quality and quantity of service. Customers as Contributors to Service Quality and Satisfaction Another role customers can play in service delivery is that of contributor to their own satisfaction and the ultimate quality of the services they receive. Customers may care little that they have increased the productivity of the organization through their participation, but they likely care a great deal about whether their needs are fulfilled. Effective customer participation can increase the likelihood that needs are met and that the benefits the customer seeks are actually attained. Think about services such as health care, education, personal fitness, and weight loss, where the service outcome is highly dependent on customer participation. In these 72 cases, unless the customers perform their roles effectively, the desired service outcomes are not possible. Customer as competitors A final role played by service customers is that of potential competitor. If self-service customers can be viewed as sources of the firm, or as “partial employees”, self-service customers could in some cases partially perform the service or perform the entire service for themselves and not need the provider at all. Customers thus in a sense are competitors of the companies that supply the service. Whether to produce a service for themselves (internal exchange) – for example, childcare, home maintenance, and car repair – or have someone else provide the service for them (external exchange) is a common dilemma for consumers. A proposed model of internal/external exchange suggests that such decisions depend on the following: Expertise capacity Resource capacity Time capacity Economic rewards Psychic rewards Trust Control 6.7 Strategies for Enhancing Customer Participation Define Customers’ Jobs Helping oneself Helping others Promoting the company Individual differences: Not Everyone Wants to Participate 73 Recruit, Educate And Reward Customers 6.8 Recruit the right customers Educate and train customers to perform effectively Reward customers for their contributions Avoid negative outcomes of inappropriate customer participation Delivery Service through Intermediaries Direct or Company-Owned Channels Many services are distributed directly from provider to customer. Some of these are local services-doctors, dry cleaners, and hairstylists-whose area of distribution is limited. Others are national chains with multiple outlets but are considered direct channels because the provider owns all the outlets. Key Intermediaries for Service Delivery Franchisees are service outlets licensed by a principal to deliver a unique service concept it has created or popularized. Agents and brokers are representatives who distribute and sell the services of one or more suppliers. Examples include insurance (Life Insurance Corporation of India), financial services (ICICI bank mutual funds), and travel services (Thomas Cook). Electronic channels include all forms of service provision through television, telephone, interactive multimedia, and computers. Many financial and information services are currently distributed through electronic media: banking, bill paying, and education. 6.9 Strategies for Effective Service Delivery through intermediaries Control Strategies In this category, the service principal believes that intermediaries will perform best when it creates standards both for revenue and service performance, measure results, and compensates or rewards on the basis of performance level. 74 Measurement Review Empowerment Strategies Empowerment strategies, where the service principal allows greater flexibility to intermediaries based on the belief that their talents are best revealed in participation rather than acquiescence are useful when the service principal is new or lacks sufficient power to govern the channel using control strategies. In empowerment strategies the principal provides information, research, or processes to help intermediaries perform well in service. Help the intermediary develop customer-oriented service processes Provide needed support systems Develop intermediaries to deliver service quality Change to a cooperative management structure Partnering Strategies The group of strategies with the highest potential for effectiveness involves partnering with intermediaries to learn together about end customers, set applications, improve delivery, and communicate honestly. This approach capitalizes on the skills and strengths of both principal and intermediary and engenders a sense of trust that improves the relationship. Alignment of goals Consultation and cooperation 6.10 Summary This chapter discussed the benefits and challenges of delivering service through intermediaries. In general, because services can’t be produced, warehoused, and then retailed as goods can, many channels available to goods producers are not feasible for service firms. Four forms of distribution were described in the chapter: franchises, agents/brokers, and direct and electronic channels. The benefits and challenges of each type of intermediary were discussed, and examples of firms successful in delivering services through each type were detailed. Discussions centered on strategies that could be used by service principals to improve management of intermediaries. 75 6.11 Keywords Control Strategies Empowerment Strategies Partnering Strategies 6.12 Review Questions 1. In what specific ways does the distribution of services differ from the distribution of goods? 2. Which of the reasons for channel conflict described at the beginning of this chapter is the most problematic? Why? 3. Which of the three categories of strategies for effective service delivery through intermediaries do you believe is most successful? Why? Why are the other two categories less successful? 76 LESSON - 7 Service Communication Learning Objectives After reading this lesson, you will be able to understand, The components and Guidelines of service communication. Use of advertising in service communication. Role public relations in service communication. Different communication mix to be used service communication. Importance of sales promotion in service communication. Role of personal selling in communication. Usefulness of direct marketing. Structure 7.1 Introduction 7.2 Components of Communication 7.3 Guidelines for Service Communication 7.4 Advertising and its Goals 7.5 Public Relations 7.6 Sales Promotion 7.7 Personal Selling 7.8 Direct Marketing 7.9 Summary 7.10 Keywords 7.11 Review Questions 77 7.1 Introduction The word communication derives from the Latin word communication, meaning ‘to share’. Communication needs an objective that the service marketing must set and achieve. Marketing communication is not what it used to be. Today’s customers of both goods and services receive communications from a far richer variety of sources. Marketing communication is essential for closing providers’ gap 4. 7.2 Components of Communication Following are the components of communication programme 1. Identify the target audience or receivers; 2. Determine the promotional objective; 3. Develop the message; 4. Select the communication mix or promotional blend; 5. Select the media vehicle; 6. Set up the system for feedback and feed forward. 1. Identify The Target Audience Or Receivers Although this word has been done in the market segmentation process, more a detail picture of the target audience would be required for special promotion. For example. A high price hospital would have the upper income group though segmentation. But now for promotion it would require to address people who are interested in the treatment of, say, cancer or heart diseases or claim cosmetic surgery. Its message, promotion and media choices would be decided accordingly, i.e. tailor-made for the select audience. 2. Determine The Promotional Objective Every communication has an objective and success of the communication programme depends on how the marketer has been able to clearly perceive his objective and integrate the components. The service marketer has three promotional goals: to inform, to persuade and to remind. Some of the objectives for a service marketer are: Reinforce positioning; Develop brand image; 78 Make customer aware of the offer; its attributes are benefits Persuade customers to buy the offer; Continually remind customers about the service through remembrance exercise. 3. Develop The Message There are main models for describing the consumer response. One of the simplest and widely used AIDA model. Te message formulated will depend upon which of these AIDA sequence task is to be achieved. Thus, if a health clinic wants make its target segment aware of the store than message will be information – oriented. If a hotel chain wants to increase its booking duration a slack season like the monsoon it might advertise for special discounted offers hoping of a rush for occupancies. Messages development is guided by the encoding process, which involves the consideration of four issues. Message content –what to say Message structure-how to say it logically Message style –creating a strong presence and Message source-who should develop it Service communication has four choices in encoding words symbols pictures and images. 4. Select The Communication Mix Or The Promotion Blend: The communication could have either personal interaction (one-to-one) or impersonal messages (one-way). Personal communication consists of personal selling (insurance advisors making a presentation to customers), Word of mouth and interaction during the service delivery. Impersonal communication consists of mass communication like advertising in newspaper, TV, Outdoors advertising, point of sales, leaflets and brochures, and the service environment or the service scape itself. 5. Select The Media Vehicle: The media vehicle is selected by the effectiveness and efficiency with which it reaches 79 the message to the target audience. The message also guides the media vehicle: if the message is personal, then mass media cannot be used. What becomes effective are letters, personal interaction, etc. This is where media analysis is required for its audience profile and viewer reading or media habits. 6. Set Up System For Feedback And Feed Forward: The communicator should under take two important exercises to make his present and future message effective. Feed forward is a kind of pre-test before message has been broadcast to ensure that the message will be received. Feedback is a kind of posttest under taken after the message has been broadcast to ensure that the message is received. This issue of promotion blends whether to use public relation more than advertising etc., have to be clarified by the service marketer. The decision is guided by the following factors for their differential impact ability on communication mix: The service is for profit or not for profit. Constrains of ethics exists in some services, like hospitals, health care and with doctors. 7.3 Competitive intensity is high or low. The geographic spread is large or small. The custom within a specific service sector dictates promotional practices. Managers are sophisticated or not. Guidelines for Service Communication There are six guidelines for service advertising which apply to a wide rang of service. 1. Provide Tangible Clues To overcome the intangibility of service, which is more performance and expenses than goods, tangible elements with in the product surrounded can be used to provide tangible clues. 80 2. Make The Service Comprehensive Again due to the intangibility, Service resembles concept products and it becomes difficult for the customer to understand the offers and its benefits. Thus ICICI bank used the umbrella symbol as a part of its “safety bonds” offer, to communication the offer effectively. 3. Communication Continuity The service marketer uses logos, signal, symbols, packaging, and advertising to present a unifying and consistent theme over time. This greatly help is the continuity of the message and in differentiation. 4. Promising What Is Possible Due to the intangibility of service the customer has difficulty believing in the promise. What can reinforce his faith is consistent service delivery as promised by the service marketer. Speed post the Indian postal service courier division, could not keep up promise of reliable delivery and suffered greatly in its positioning. Public sector Telecom services suffers greatly due to its in consistent and unreliable service. This is especially in comparison to private cellular service operator. Service firms should deliver what they promise. 5. Capitalizing On Words Of Mouth The intangibility and variability of service makes it vulnerable to word of mouth communication and their impact. Recommendations are an example of how word of mouth communication influences buying decisions. People seek personal recommendation for lawyer’s advise, doctor’s opinion and hair stylists etc., 6. Direct Communication To Employees The importance of internal marketing highlights how a highly motivated provider can make a difference to service quality. The enthusiastic internal customers especially if they are in a high contact service industry, will infectiously transfer it to their customers. 7.4 Advertising and its Goals The word advertising is derived from the Latin word “adverter” meaning to change the mood of the people indeed advertising does resemble a mood elevator. It is one of the most 81 important communication techniques of mass or impersonal communication. But it has very specific goals too. Advertising goals are necessary not only to justify the advertising expenditure but also to vindicate the art and bases of advertising. Achievement of the goals world confirms the effectiveness of advertising as a communication tool. Advertising means “Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor”- American Marketing Association. Goals of Advertising Awareness Goals: Advertising seeks to make consumers aware of the service offer its benefits and the experience. The awareness could also be quantified and tangibly achieved by measuring it before and after the campaign. The advertiser seeks to increase the customer knowledge about the service offer and the messages are directed at the cognitive (having the ability to recognize) part of his brain. Advertising is used for positioning of the service offer in the minds of the consumers by effectively differentiating it from competition. Behavioral Goals: Consumers have attitudes of favorable and unfavorable disposition toward brands and services advertising seek to change the attitude of the consumers towards a favorable disposition. For example a Korean food retailer or restaurateur my come across negative feeling amongst people who have come to know that one of the delicacies of the Koreans is cat and dog meat. The Korean restaurateur might approach an advertising agency to try and change the attitude of the people towards him. The advertiser seeks to change the attitude of the customer and the message are directed at the affective (have the ability to feel) part of this brain. Sales Goals The advertiser might only need sales generation and can ask an advertising agency to devise a communication campaign to help generate sales. Problem which achieving this goal and claiming credit for this achievement is two fold. 82 The lagged affect that advertising as on sales. People did not go to buy the service synchronized which the advertising campaign; nor to they stop buying a service which the end of a campaign. Other marketing mix like new product distribution, pricing and packing might contribute to sales. Advertiser seeks to make the consumer by the service offer and the message is direct at the cognitive or psychomotor (drive for action) part of this brain. Advertising is solely dependent on media to carry its message, some popularly – used media are cinema, TV, News Paper, magazines, out door, web advertising, Social Media, Brochures, Pamphlets, Direct mail, telephone and poster. 7.5 Public Relations Public Relation is building good relations with the company’s various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories and events. “The planned and sustained effort to establish and maintain goodwill between an organization and its ‘publics’” – British Institute of Public Relation. The ‘Publics’ constitute all those people and organization that have a stake in a company. They includes share holders, employees, Governments, opinion leaders of society, the media, customers, financial institution, suppliers, etc. Like most other communication programmes, public relation should also adhere to objective specifications, goal settings, deciding on the mix of Public relation activities and implementing them in an integrated way while evaluating results. Task of Public Relation Maintain or enhance the image. Supporting other communication activities like advertising, Personal selling, Direct mail, etc., · Influencing publics, Reinforcing positions, 83 Spearheading certain events like annual General Body Meeting, Press Conference, etc., Bringing out annual reports, Magazines and house journals. Troubleshooting. Tools of an Effective Public Relation Design Publication in form of press releases, house journals, postures, articles, annual report, Brochures, etc., Holding events like AGM, Press conferences, Seminars, conferences and congresses, etc., Investor relation programmes. Planting of stories to enhance media coverage. Conduct of trade shows, exhibitions. Sponsoring of social events, Charities, and communication projects. 7.6 Sales Promotion Sales promotion means “A direct inducement that offers an extra value or incentive for the product to the sales force, distributors, or the ultimate consumer with the primary objective of creating an immediate sale”. Sales promotions are incentives tools used to temporarily boost sales. They are targets at three types of audience: 1. Customer Oriented 2. Intermediaries Oriented 3. Internal Customer Oriented 1. Customers Oriented When the service marketer is keen on improving on the flat sales graph, he can make the consumer interested in his offer by various schemes that have short tenure. These are called consumer promotion and the ‘pull’ factor consist of: 84 Price Off: The same offer, for example, of a health club or fitness center service is now available at low price. Extra Grammage: There is more amount of offer by weight and volume at old price. This is possible in those service having higher tangibility as in restraints, souvenir shops, general and food retailing, etc., Freebies: These are free items bundled with the offer sales. They can be intra brand or inter brand. Pure service freebies also exist: Kotak Bank Offering free insurance with their home loans. Coupons: These can be exchanged for service or goods either free or at discount. Coupon is also used to measure the effectiveness of advertising campaigns for sales goals. Samples: These are used to boost trials, especially in the introductory stages. These again might seems to be impossible in service But it is for internet service provider to offer a month free trial, for housing companies to have sample flats/apartments ready, etc., Cash refund: This is used for loyalty programmes. Prizes: This is in the form of lucky draws from purchase made. Retailers routinely use this promotion. Demonstration: This is introducing the customer to a new service, make him knowledgeable about certain features and functions. Contests: These are directed at the participative nature of customer and are used to increase the involvement of the customers. 2. Intermediaries Oriented Middlemen like retailers, dealers and stockists are the beneficiaries of ‘push’ factors, which are in the form if; Margins; Credit; Discount; Free goods; 85 Shelf space display incentives; Advertising and other promotional allowance; Co-operative advertising; Distribution of awards. 3. Internal Customer Oriented Mostly sales forces of service firm are the beneficiaries of the ‘push’ factor, which consists of: Bonuses Contests Award and prizes Concentration on boosting, albeit temporarily, Sales, does makes this promotion at variance with making goal and other communication mixes. It is therefore very necessary for the marketer to be systematic in his sales promotion programme. The following is the guideline to develop a promotion programme. 1. Decide on the sales promotion objective and the co-ordination vis-à-vis other communication mixes. 2. Balance the sales promotion amongst customer, internal customers and intermediaries. 3. Decide on the sales promotion tools to be used. 4. Determine the amount of incentives. 5. Estimate conditions of involvement. 6. Decide on tenure of the promotion. 7. Select the distribution method of promotion 8. Make a promotional timetable. 9. Decide on promotion budget. 10. Pre-test the Promotion for its effectiveness. 11. Launch the sales programme. 12. Evaluate the promotion programme. 86 7.7 Personal Selling The high contact nature of service and the resultant interactions between service provider and customers makes personal selling very effective and important as communication tool. It is an effective tool of persuasion in those areas where customer has difficulty in comprehending the service product and its benefits. Personal contact are used to create customers and then built a long-term relationship and for customer retention. It is possible to personalize the communication according to the customer. This may not be possible in mass communication. After a sales call has been closed, personal selling can be used to sell other services. Some of the service sector that have been greatly benefited by personal selling are insurance, finance products from banks like credit cards, tour packages, medical service, etc., Personal selling can be made effectively in following seven ways: 1. Orchestration of The Service Purchase Encounter This service encounter is managed to create the maximum positive impression on the minds of the customer. This can be done on the following ways: Identify the needs and the expectation of the customer: The insurance advisor should make a customer needs analysis and then present his insurance product. Too often, the advisor / agent insist on hard selling certain policies for which he might get a higher commission and for which the policy holder might realize too late that he has not much use. It is no surprise that insurance agent are perceived very low in the social ladder. Usage of appropriate technical and presentation skills: The customer should be left with comparison of the offer and a lost in impression of offer benefits. Management of impression: Visual, oral, touch-and-feel factors are activities that can be used effectively to leave lasting impression. Housing companies have small models of the past, present and future projects strewn across their office. Servicescape management is used effectively to create good impression. Soft music was introduced by moribund public sector banks in an attempt to imitate the atmospheres of the foreign banks. Including the customer to participate positively: many service firms have inducted the customer in to the processor. Executive buffer lunch providers and shopping center with self-service are enduring examples. 87 2. Facilitations of Quality Assessment by the Customer Customer measures quality by their expectations and their perception of service delivery. The service provider should accordingly change his standard of measurement of service quality. 3. Making the Service Tangible This can be done in the followings ways: Evaluative criteria: The service marker (say for example, a business school) can help buyers determine what they are looking for (academic excellence, good faculty, placement efforts, extra – curricular activities, industry interface, projects and training etc.,) Comparative analysis: The buyer can be assisted on comparing the offer with others service direct, indirect to substitutes. The Internet has been most helpful for the buyers. The latter are now in a position to compare features, benefits, add-ons etc. very quickly. Differential advantages: Buyers can be made aware of the unique value effort of the service offer. 4. Emphasis on The Image of The Organization Most often than not, the customer equates the image of the sales personal with that of the firm. The service marketer should find out the images of the genetic service, from and sales representative held by the buyer and communicate the relevant image to him. 5. Use Of References for External Sources The service marketer should use satisfied customers as sources of referral and a positive word-of –mouth publicity campaign. This will increase the neutrality of the message. 6. Recognition of The Importance of Customer – Contact Personal If different service providers are meeting a customer in each of his encounters, the service firms lose an opportunity to know him very well. This superficial knowledge will make the providers insensitive to the customer’s in – depth needs, wants and expectation. There should be minimal contact personal interacting with a customer. The moments of truth concept has to be ingrained in all service personnel. 88 7. Recognition of Customer Involvement during the Service Process The customer’s feedback and other reactions are actually the starting point for the new product development of a service firm. Blue print are made airtight by eliciting response from the customer. Successful personal selling requires a highly trained and motivated staff that can bring in revenues for the service firm. Word of Mouth: The Service industry is very vulnerable to referral and word of mouth promotion and communication due to its intangibility factor. A satisfied customer will refer the service of a doctor to other while a dissatisfied dinner will be negative about a restaurant and irate customers might restore to de-marketing of the particular offer, often unprompted. There is a lot of research that bears out the effectiveness of personal recommendation through word of mouth. Service therefore benefit from the multiplier effect of recommendations – although negative experiences tend to be more damaging. There is a definite pattern to the role that word of mouth and referrals play. 7.8 Direct Marketing This is beginning increasingly adopted by service firms for their communication mix. The advantages over mass marketing are many: Personalization Unlike communication for mass marketing, here personalization of the message, method or technique of communication is possible. This would make the communication objective effective. The personalization can be language used, levels of vocabulary and articulation, depth of conceptual understanding and extent of persuasion and media. Cost Effective It becomes prohibitively expensive for small and medium service marketer to use mass media for communication. Even if used, it may not suit his purpose in reaching his target audience, especially if they are a niche segment. Direct marketing enable the service marketer to be cost effective that is, reaching his desire target audience with his limited resources. 89 Instant Feedback A major disadvantage of mass marketing is its inability to channel the customers for effective utilization. Sincere feedback can be used by the service marketer in new product development as well as in the fine tuning of service blueprint. This is possible in direct marketing where in the service and selling encounter, the customer are observed by the alert and sensitive direct marketer. Direct Mail or Database Marketing Here a database of customers – present and potential – is the major asset of the service marketing, increasing his market penetration. The marketer can either gather the database himself or acquire it from others. American express can and does take the database of the subscriber of India today to mail-market its credit cards. An issue of either rears its head here popularizing the new jargon, ‘permission marketing’. 7.9 Mail order or catalogue Direct selling Direct response Telemarketing Internet marketing. Summary Advertising and Public relations play a vital role in communicating the quality of services to the target audience. Unless the objective of advertising is spelt out clearly, there will not be any proper creation and design of communication message. Public relation will help to boost the corporate image in the market. This chapter discussed about role of sales promotion, personal selling and direct marketing in service communication. Sales promotion will be targeted towards customers, intermediaries and internal employees. Personal selling is very much essential for managing customer expectations. Direct marketing also discussed because it has got its own advantages in service marketing. 90 7.10 Keywords Advertising Direct Marketing Personal Selling Public Relations Sales Promotion 7.11 Review Questions 1. Define advertising and its importance in services communication. 2. What are the major decisions in Advertising to be carried out for services communication? 3. Explain the guidelines for using communication in service marketing 4. What is public Relation? And explain its importance in service communication. 5. What are the tools to be used in public relation? 6. What is sales promotion? How customer is oriented sales promotion helpful in service communication? 7. Explain the importance of personal selling in service communication. 8. Is direct marketing necessary for service communication? 91 LESSON – 8 Expanded Marketing Mix Learning Objective After having read this lesson, you will be able to discuss. The role of product in the marketing mix. The importance of price. The effectiveness of communication in marketing. Additional marketing mix in the service industry. Structure 8.1 8.1 Introduction 8.2 Product 8.3 Price 8.4 Promotion 8.5 Place 8.6 People 8.7 Physical Evidence 8.8 Process 8.9 Summary 8.10 Keywords 8.11 Review Questions Introduction One of the most basic concepts in marketing is the marketing mix, defined as the elements an organization controls that can be used to satisfy or communicate with customers. The traditional marketing mix is composed of the four P’s viz. product, price, place and promotion. This element appears as core decision variables in any marketing text or plan. However, the strategies for the four P’s require some modifications when applied to services. For example, 92 traditionally promotion is thought of as involving decisions related to sales, advertising, sales promotions, and publicity. In services these factors are also important, but because services are produced and consumed simultaneously, service delivery people are involved in real time promotion of service even if their jobs are typically defined in terms of the operation function they perform. 8.2 Product A service product refers to activities that a marketer offers to perform. This results in satisfaction of needs of a predetermined target customer. The most important issue in the service product understands what benefits and satisfaction the customer seeking from service. Service is the offering of a firm in the form of activities that satisfy needs. The success of service marketer depends on the level of service. A product has four levels. 1. The general product- This is the substantive thing. It is the basic benefit level. 2. The expected level- This is the customer’s minimum set of expectations from a service. 3. The Augmented product- This involves offerings in addition to what the customer expects. 4. The potential product- this is doing everything potentially feasible to hold and attract the customer. Most organizations start with the generic level. At this level, the customer is not satisfied enough to be hard core loyalist, any competitor who opts to operate a higher product level will be able to break into the service company’s market share. When a service product exceeds the expected benefits, it comes as a pleasant surprise to the customer leading to his loyalty. Those service marketers are winners who add that little extra of service to the service they sell. Services like hospitals, restaurants, airlines, retailing a fast-food etc. have the product packager in the form of the combination of intangibles and tangibles. However pure service like consultation and teaching, generally do not carry any physical output. Marketing of services primarily involves in balancing the mix of tangible and intangible components in a service package. 93 8.3 Price Service has intangible nature. Due to this nature a marketer faces greater difficulty in fixing his price in service marketing. In this case of services, different terms are used for different services. Many service providers offer a range of services at various price levels to meet the needs of different target segments that have different levels of spending power. There are many factors, which influence the price ultimately charged. These factors are 1. Structure of the market 2. Type of the organization 3. Price charged by the competitors 4. The life cycle stage of the service 5. Organizational objective 6. Regulations pf government or trade associations In determining the prices of services, the characteristics of service also play a significant role. The first characteristic, intangibility, creates a problem in price determination. The higher the intangibility, the more difficult it is to calculate the cost because services do not have a tangible component. The customer views price as a surrogate for service quality. Due to this reason, low priced services are often taken to inferior quality, and high priced services are often taken to be of superior quality. Another characteristic of services, which has a great impact on pricing, is Perishability. The fluctuations in demand can’t be met through inventory build up. Hotels and airlines offering lower rates in off-season are examples of how pricing strategies can be used to offset the perishable characteristic of services. Other characteristics also influence the pricing strategy. In determining the price of services, a marketer must consider the characteristics of services. There are various pricing strategies in service marketing, they are 1. Skimming price 2. Penetrating pricing 3. Mixed pricing 4. Cost plus pricing 94 5. Marginal cost pricing 6. Promotional pricing 7. Differential or flexible pricing 8. Market oriented pricing 8.4 Promotion Promotion is used to communicate information about services to the target audience thereby facilitating the exchange process. Promotion plays an important role in informing, educating, persuading and reminding the customer. The role of promotion in services becomes more important where there is a high degree of intangibility as there is no physical product or packing to attract the potential customer’s attention. Effective communication is needed to inform customers about their role in the service delivery process. In services, customers rely more on subjective impression rather than concrete evidence. This is so because of three reasons 1. The inherent intangible nature of services 2. Quality of service based on the performance rather than actual service. 3. Difficulty in evaluating the quality and value of services before consuming and paying for it. Therefore, we can say that excellent services of no use at all if potential customers know nothing about them. A marketing manager of services must design a promotion strategy which helps the customer to overcome the above mentioned three limitations. There are four elements of promotional mix. 8.5 1. Advertising 2. Personal selling 3. Sales promotion 4. Publicity / Public relations Place Traditionally it was assumed that distribution channels can not be used for marketing services because services are intangible and can not be stored and imported. But now distribution 95 plays an important role in service marketing, as services are inseparable and perishable. The inseparable nature of service means that services must be accessible to the customers and potential customers. Accessibility must be a component of service means it is essential for the service to be available to consumers in the right place at the right time. A distribution element of service marketing mix, is chiefly with two main issues; accessibility and availability. Accessibility refers to the ease and convenience with which a service can be purchased or used. Availability refers to the extent to which a service obtainable. A key decision with regard to distribution is location. There are several key factors to be considered in decisions about service location Service intangibility Perishability The role of the consumer as co producer of the service Customer’s needs and wants Importance of geographical location as part of the service Target market Many service organizations choose a direct distribution method which does not use agents and intermediaries. The practical issues influencing the decisions to undertake direct distribution include the following factors Type of service Customer preference Company objectives Legal and political restrictions on foreign operations Geographic spread of the market Level of technical expertise or skill required to deliver the service satisfactorily. The role and functions of channel intermediaries in the marketing of services differ from those in the marketing of physical goods. Inseparable and perishable, these two characteristics of service make the service channel very short and direct. Short service channel means that the service marketer uses one or two intermediaries who act like an agent or broker. The main role of an agent or a broker is to bring the producer or service and the consumer together. 96 Expanded Marketing Mix Because of service are usually produced and consumed simultaneously, customers are often present in the firm’s factory, interact directly with the firm’s personnel, and are actually parts of the service production process. These facts have led services marketers to conclude that they can use additional variables to communicate with and satisfy their customers. In additional to the traditional four P’s, the service marketing mix includes people, physical evidence and process. 8.6 People All human factors that play a part in service delivery and thus influence the buyer’s perception: namely, the firm’s personnel, the customer, and other customers in the service environment. All of the human actors participating in the delivery if service provide cues to the customer regarding the nature of service itself. How these people are dressed, their appearance and their attitudes and behaviors all influence the customer perceptions of the service. The service provider or contact person can be very important. In fact, in some services, such as consulting, counseling, teaching, and other professional relationship based services, the provider is the service. In other cases the contact person may play what appears to be a relatively small part in service delivery for instance, a telephone installer, an airline baggage handler or an equipment dispatcher. In many service situations, customers themselves can also influence service delivery, thus affecting service quality and their own satisfaction. For example, a client of a consulting company can influence the quality of service received by providing needed and the timely information and by implementing recommendations provided by the consultant. Customers not influence their own service outcomes, but they can influence other customers as well. 8.7 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 is called physical evidence. 97 The physical evidence of service includes all of the tangible representations of the service such as brochures, letterhead, business cards, report formats, signage and equipment. In some cases it includes the physical facility where the service is offered- the “services cape”- for example, the retail bank branch facility. In other cases, such as telecommunication services, the physical facility may be irrelevant. In this case other tangibles such as billing statements and appearance of the repair truck may be important indicators of quality. Especially when consumers have little on which to judge the actual quality of service they will rely on these cues, just as they rely on the cues provided by the people and the service process. Physical evidence cues provide excellent opportunities for the firm to send consistent and strong messages regarding the organization’s purpose, the indented market segments and the nature of the service. 8.8 Process The actual procedures, mechanisms and flow of activities by the service is delivered-the service delivery and operating systems. The actual delivery steps the customer experiences, or the operational flow of the service, also give customers evidence on which to judge the service. Some services are very complex, requiring the customer to follow a complicated and extensive series of actions to complete the process. Highly bureaucratized services frequently follow this pattern, and the logic of the steps involved often escapes the customer. Another distinguishing characteristic of the process that can provide evidence to the customer is whether the service follows a production line/ standardized approach or whether the process is an empowered one. None of the characteristics of the service is inherently better or worse than another. Rather, the point is that the characteristics are another form of evidence used by customers to judge service. For example, two successful airline companies, southwest and Singapore airlines, follow extremely different process models. Southwest is a no frills, no exceptions, low priced airline that offers frequently, relatively short domestic flights. 8.9 Summary The traditional marketing mix viz. Product, Price, Place and promotion are discussed. The three new marketing mix elements namely, People, process and Physical evidence are included in the marketing mix as separate elements because they are within the control of the 98 firm and any of them may influence the customer’s initial decision to purchase a service, as well as the customer’s level of satisfaction and repurchase decisions. 8.10 Keywords People Physical Evidence Place Process Price Product Promotion 8.11 Review Questions 1. What are the traditional marketing mixes are as applied in Product marketing? 2. What is the expanded marketing mixes in service marketing? 3. How will physical evidence be helpful in proving service quality? 99 LESSON - 9 Service Market Segmentation and Targeting Learning Objectives After reading this lesson, you will be able to discuss Meaning of service market segmentation Basic requirements for segmentation Bases by which the segmentation will be made. Process of service market segmentation Service positioning Structure 9.1 9.1 Introduction 9.2 Service Market Segmentation and Targeting 9.3 Requirements for effective Segmentation 9.4 Criteria for Evaluating Market Segments and Target 9.5 Bases for Segmentation 9.6 Steps in Market Segmentation 9.7 Service Positioning 9.8 Positioning Maps 9.9 Service Positioning Strategies 9.10 Summary 9.11 Keywords 9.12 Review Questions Introduction A second basic foundation of relationship marketing is market segmentation learning and defining whom the organization wants to have relationship with. A service marketer may be tempted to target all available segments, all at once. If we were to aggregate all the behavior, 100 expectation, and perception information for all the consumers in a particular market, we would probably be overwhelmed with the variations across customers. At one extreme, service firm historically those with a relatively small number of customers each of whom is vitally important— treat customers as individuals and develop individual marketing plans for each customer. For example, a law firm, an advertising agency, or even a large manufacturer like the Boeing Airplane Company will develop service offerings customized specifically and individually for their large corporate clients At the other extreme, some service firms offer one service to all potential customers as if their expectations, needs, and preference were homogeneous. Providers of gas or electricity, for example, often view needs of customers as varying only in terms of quality purchased; for their reason their marketing approach is standardized. Between these two extremes are options that most service marketing chooses—offering different service to different groups of customers. To do effectively, companies need market segmentation and targeting. 9.2 Service Market Segmentation and Targeting Service Market Segmentation Service market segmentation is the process of dividing the service market into smaller subsets of customers who are having homogeneous needs and wants. Market Target Market target is the process of selecting the specific market subsets and directing all marketing programmes towards the target audience. 9.3 Requirements for Effective Segmentation Measurability: The degree to which the size and purchasing power of the degree can be measured. Accessibility: The degree to which the segments can be reached and served. Substantiality: The degree to which the segments are large or profitable enough. Action Ability: The degree to which effective programs can be designed for attracting and servicing of the segments. 101 9.4 Criteria for Evaluating Market Segments and Target Segment Size And Growth: Includes information on current dollar sales, projected growth rates, and expected profit margins. Segment Structural Attractiveness: Includes current and potential competitors, substitute products and service, relative power of buyers, and relative power of suppliers. Company Objectives And Resources: Involves whether the segment fits the company’s objectives. 9.5 Bases for Segmentation 1. Demographic Segmentation: Dividing the market to form groups based on variables such as: Age Sex Family size Income Occupation and Religion. 2. Geographic Segmentation: Dividing the market to form different geographic units such as: Nations Regions States 3. Psychographics Segmentation: Dividing buyers to form groups based on: Social class Lifestyle 102 Personality characteristics. 4. Behavioral Segmentation: Dividing buyers to form groups based on: Knowledge Attitude Uses Responses Process for Market Segmentation and Targeting in Services Many aspects of segmentation and targeting for services are the same for manufactured goods. There are differences, however. The most powerful difference involves the need for compatibility in segments. Because other customers are often present when a service is delivered, service providers must recognize the needs to choose compatible segments or to ensure that incompatibility segmentation are not receiving service providers have a far greater to customize between service offerings in real time than manufacturing firms have. Illustrates the steps involved in segmenting and targeting services, and a brief discussion of each step follows. 9.6 Steps in Market Segmentation Identify bases for Segmentation the Market Market segments are formed by grouping customers who share common characteristics that are in some way meaningful to the design, delivery, promotion, or pricing of the service. Common segmentation bases for consumer market are shown in exhibit including demographic segmentation, geographic segmentation, psychographic segmentation, and behavioral segmentation segments may be identified on urban YMCA may provide service for demographic segments determined by age; preschool and gymnastics for those under basketball for boys and girls ages 5 to 16; and weight training and fitness classes for adults. Within these demographic segments there may be finely defined services based on lifestyle or usage, for example, fitness classes offered at 5A.M and 5:30P.M for adults who work from 8A.M to 5P.M. 103 Identify bases for market segmentation Develop profile of segments Develop measures of segment attractiveness Analyse the company resources Select the target segment Ensure that segments are compatible 104 Develop Profiles of Resulting Segments Once the segments have been identified it is critical to develop profiles of them. In customers markets these profiles usually involve demographic characterizations or psychographics usage segments. Of most importance in this stage clearly understanding how and whether the segments differ from each other in terms of their profiles. If they are not different from each other, the benefits to be derived from segmentation, that is, form more precisely from each other, the benefits to be derived from segmentation, that is, from precisely identifying sets of customers, will not be realized. Develop Measures of Segment Atractiveness The fact that segments of customers exist does not justify choice of them as target. Segments must be evaluated in terms of their attractiveness, some aspects of which are shown in exhibit. The size and purchasing power of the segments must be measurable so that the company can determine if the segments are worth the investment in marketing and relationship costs associated with the group. Later in this chapter, the idea of customer’s profitability segmentation is presented as an approach for defining and selecting target segments. The chosen segments also must be measurable that advertising or marketing vehicles must exit to allow the company to reach customers in the segments. Select the Target Segments Based in part on the evaluation criteria just discussed, the services marketer will select the target segment or segments for the service. The firm must decide if the segment is large enough and trending toward growth. Market size will be estimated and demand forecasts completed to determine whether the segment provides strong potential. Competitive analysis, including an evaluation of current and potential competitors, substitute products and services and relative power of buyer’s suppliers, will also help in the final selection of target segments. Finally, the firm must decide whether serving the segment is consistent with company objectives and resources. Ensure that the Target Segments are compatible This step, of all steps in segmentation strategy, is arguably more critical for service companies than for goods companies. Because services are often performed in the presence of the customer, the service marketer must be certain that the customers are compatible with each other. If during the non peak season a hotel chooses to serve two segments that are 105 incompatible with each other—for example, families who are attracted by the discounted prices and college students on their spring break – it may find that the two groups do not directly interact with each other, but if not, they may find that the two groups do not directly interact with each other, but if not, they may negatively influence each other’s important to think through how they will use the service and whether segments will be compatible. Later in the book we will examine specific strategies for balancing demand for service while serving the right segments and strategies for managing the customer mix. Individualized Service : Segments of One When carried to their logical conclusions both, segmentation and customization lead to “segments of one” or “mass customization” – products and services designed to fit each individual’s and needs. The inherent characteristics of services designed lend themselves to customization and support the possibility of segmentation to segmenting to the individual level. That is, because services are delivered to people by people, they are difficult to standardize and their outcomes and processes may be inconsistent from provider to provider, from customer to customer, and even from one time period to the next. This inherent heterogeneity is at once a curse and a blessing. On the one hand it means that service delivery is difficult to control and predict, and the resulting inconsistencies may cause customers to question a firm’s reliability. On the other hand it presents opportunities to customers and tailors the service in ways typically not possible for manufacturers of goods. Because the service itself is frequently delivered in “real time” by “real people” there is an opportunity for one-to-one customization of the offering. Heterogeneity pursued in a purposeful manner can be turned into an effective customization strategy. While segments of one may be practically unrealistic in some cases, the underlying idea of crafting a customized service to fit each individual’s needs fits very well with today’s consumer .who demand to be treated as individuals and who want their own particular needs satisfied. For service providers who have a limited number of large customers, the segment of one marketing strategy may be obvious. For example, a food management company that provides cafeteria and other types of food service for large manufacturing facilities will customize its services for each large account on the basics of the specific needs of the organization or an advertising agency that specializes in providing communication services for fortune 500 companies will develop individualized plans for each client. In such situations, a relationship manager or an account manager will likely be assigned to a particular customer or client to develop marketing plan tailored to that client’s needs. 106 9.7 Service Positioning Competitive service positioning strategy is based on establishing and maintaining a distinctive place in the market for an organization and/or its individual product offerings. Positioning needs to keep competitors out, not draw them in. Positioning strategy is becoming more sophisticated as growing numbers of firms engage in co-branding. The essence of positioning based upon the following principles: 9.8 1. A company must establish a position in the minds of its targeted customers. 2. The position should be singular, providing one simple and consistent message. 3. The position must set a company apart from its competitors. 4. A company cannot be all things to all people; it must focus its efforts. Positioning maps Developing a positioning “map” (Perpetual mapping) is a useful way of representing consumers’ perceptions of alternative products graphically. A map is usually confined to two attributes although three-dimensional models can be used to portray three of these attributes. 107 Information about a product (or company’ position relative to any one attribute) can be inferred from market data derived from ratings by representative consumers, or both, If consumer perceptions of service characteristics differ sharply from ‘reality’ as defined by management, marketing efforts may be needed to change these perceptions. 9.9 Service Positioning Strategies The research and analysis that underlie development of an effective positioning strategy are designed to highlight both opportunities and threats to the firm in the competitive marketplace, including the presence of generic competition, and competition from substituting products. Market Analysis Market analysis addresses such factors as the overall level and trend of demand and the geographic location of this demand. Is demand increasing or decreasing for the benefits offered by this type of service? Are there regional or international variations in the level of demand? Alternative ways of segmenting the market should be considered and an appraisal made of the size and potential of various market segments. Research may be needed to gain a better understanding of not only consumer needs and preferences within each of the different segments but also how each segment perceives the competition. Internal Analysis Internal corporate analysis focuses on identifying the organization’s resources (financial, human labour, and know-how and physical assets), any limitations or constraints, its goal (profitability, growth, professional preferences and, so on), and how its values shape the way it does business. Using insights from this analysis, management should be able to select a limited number of target market segments that can be served with either new or existing services. Competitive Analysis Competitive analysis can provide a marketing strategist with a sense of competitor’s strengths and weaknesses, which, in turn, may suggest opportunities for differentiation. Relating these insights back to the internal corporate analysis should suggest what might be viable opportunities for the organization to achieve differentiation and competitive advantage and thereby enable managers to decide which benefits should be emphasized to which target segments. This analysis should consider both direct and indirect competition. 108 Anticipating Competitive Response Before embarking on a specific plan of action, however, management should consider the possibility that one or more competitors might pursue the same market position. Perhaps another service organization has independently conducted the same positioning analysis and arrived at similar conclusions or an existing competitor may feel threatened by the new strategy and take steps to reposition its own service so as to compete more effectively. Alternatively, a new entrant to the market may decide to play “follow the leader” yet be able to offer customers a higher service level on one or more attributes and/or a lower price. The best way to anticipate possible competitive responses is to identify all current or potential competitors and to put oneself in their own managements’ shoes by conducting an internal corporate analysis for each of these firms. Coupling the insights from the analysis with data from existing market and competitive analysis (with one’s own firm cast in the role of competitor) should provide a good sense of how competitors might be likely to act. If chances seem high that a stronger competitor will move to occupy the same niche with a superior service concept, it would be wiser to reconsider the situation. Some firms develop sophisticated simulation models to analyze the impact of alternative competitive moves. How would a price cut affect demand, market share, and profits? Based on past experience, how might customers in different segments respond to increases or decreases in the level of quality on specific service attributes? How long would it take before customers responded to a new advertising campaign designed to change perceptions? Evolutionary Positioning Positions are rarely static. They need to evolve over time in response to changing market structures, technology, competitive activity, and the evolution of the firms itself. Many types of business lend themselves to evolutionary repositioning by adding or deleting services and target segments. Some companies have shrunk their offerings and divested certain lines of business in order to be more focused. Other companies have expanded their offerings in the expectation of increasing sales to existing customers and attracting new ones. Thus, service stations have added small convenience stores offering extended hours of service, whereas supermarkets and other retailers have added banking services. New developments in technology provide many opportunities for introducing not only new services but also new delivery systems for existing products. 109 When a company has a trusted and successful brand, it may be possible to extend a position based on perceive quality in one type of service to a variety of related services under the same umbrella brand. 9.10 Summary This lesson discussed many aspects of segmentation and targeting for services. It explained about the meaning of service segmentation and basic requirements of segmentation. Grouping of customers who share common characteristics that are in some way meaningful to the design, delivery, promotion, or pricing of the service forms market segments. Service positioning strategy is based on establishing and maintaining a distinctive place in the market for an organization and/or its individual product offerings. 9.11 Keywords Positioning Segmentation Targeting 9.12 Review Questions 1. What is market segmentation? Explain the basic requirements for segmenting market. 2. In what basis you will segment tourism industry? 3. Explain the service positioning with illustration? 4. What are the service positioning strategies? 110 LESSON - 10 Managing Demand and Capacity Learning Objectives After reading this lesson, you will be able to discuss The constraints on its capacity and underlying the demand patterns. Effective strategies for managing supply and demand fluctuations. Demand patterns and the market segments that comprise demand at different points in time. How capacity to match fluctuations in demand. Structure 10.1 Introduction 10.2 Underlying Issue: Lack of Inventory Capacity 10.3 Understanding Capacity Constraints 10.4 Understanding Demand Patterns 10.5 Strategies for Matching Capacity and Demand 10.6 Summary 10.7 Keywords 10.8 Review Questions 10.1 Introduction We focus on the challenges of matching supply and demand in capacity constrained services. Gap 3 can occur when organizations fail to smooth the peaks and valleys of demand, overuse their capacities, and attract an inappropriate customer mix in their efforts to build demand, or rely too much on price in smoothing demand. The effective use of capacity is frequently a key success factor of organizations. 111 10.2 Underlying Issue : Lack of Inventory Capability The fundamental issue underlying supply and demand management in services is the lack of inventory capability. Unlike manufacturing firms, services firms cannot build up inventories during periods of slow demand to use later when demand increases. This lack 0of inventory capability is due to the perishability of services and their simultaneous production and consumption. An airline seat that is not sold on a given flight cannot be resold the following day; the productive capacity of seat has perished. The lack of inventory capability combined with fluctuating demand leads to variety of potential outcomes. In many services, capacity is fixed; thus capacity can be designed by a flat horizontal line over a certain time period. Demand for service frequently fluctuates. The areas are labeled to represent four basic scenarios that can result from different combinations of capacity and demand; 1. Excess Demand: The level of demand exceeds maximum capacity. In this situation customers will be turned away, resulting in lost business opportunities. For the customers who do receive the service, its quality may not match what was promised because of crowding or overtaxing of staff and facilities. 2. Demand Exceeds Optimum Capacity: No one is being turned away, but the quality of service may still suffer because of overuse, crowding, or staff being pushed beyond their abilities to deliver consistent quality. 3. Demand And Supply Are Balanced At The Level Of Optimum Capacity: Staff and facilities are occupied at an ideal level. No one is overcrowded, facilities can be maintained, and customers are receiving quality service without undesirable delays. 4. Excess Capacity: Demand is below optimum capacity. Productive resources in the form of labor, equipment, and facilities are underutilized, resulting in lose productivity and lower profits. Customers may receive excellent quality on an individual level because they have the full use of facilities, no waiting, and complete attention from staff. If, however, service quality depends on the presence 112 of other customers, customers may be disappointed or may worry that they have chosen an inferior service provider. Not all firms will be challenged equally in terms of managing supply and demand. The seriousness of problem will depend on the extent of demand fluctuations over time, and the extent to which supply is constrained. Some types of organizations will experience wide fluctuations on demand (telecommunications, hospitals, transportations), whereas other will narrower fluctuations (insurance, banking). For some, peak demand fluctuates (electricity, telephone), but others for peak demand may frequently exceed capacity (hospital emergency rooms, restaurants). To identify effective strategies for managing supply and demand fluctuations, an organization needs a clear understanding of the constraints on its capacity and underlying the demand patterns. 10.3 Understanding Capacity Constraints There are some creative ways to expand and contract the capacity in the short and long term, but a given point in time we can assure service capacity is fixed. Depending on the type of service, critical fixed capacity factors can be time, labor, equipment, facilities, or in a combination of these. Time, Labor, Equipment, Facilities For some service businesses, the primary constraint on service production is time. For example, a lawyer, a consultant, a hairdresser, and a physiological counselor all primarily sell their time. If their time is not used productively, profits arte lost. If there is excess demand, time cannot be created to satisfy it. From the point of view of the individual service provider, time is the constraint. From the point of view of a firm that employs a large number of service providers, labor or staffing levels can be the primary capacity constraints. A law firm, a university department, a consulting firm, a tax accounting firm, and a repair and maintenance may all face the reality that at certain times demand for their organizations services cannot to be met because the staff is already operating at peak capacity. However it does not always make sense to hire additional service providers if low demand is a reality at other times. 113 In other cases, equipment may be the critical constraint. For trucking or airfreight delivery services, the trucks or airplanes needed to service demand may be the capacity limitation. Health club deal with the limitation, particularly at certain times of day (before work, during lunch hours, after work) and in certain months of the year. Telecommunications companies face equipment constraints when everyone wants to communicate during prime hours on holidays. For network service providers, bandwidth, servers and switches represent their perishable capacity. Finally many firms face restrictions brought about by their limited facilities. Hotels have only a certain number of rooms to sell, airlines are limited by the number of seats in the aircraft, education institutions are constrained by the number of rooms and the number of seats in each classroom, and restaurant capacity is restricted to the number of tables and seats are available. Understanding the primary capacity constraint, or the combination of factors that restrict capacity, is a first step in designing strategies to deal supply and demand issue. Optimal Versus Maximum use of Capacity To fully understand the capacity issues, it is important to know the difference between optimal and maximum use of capacity. Using capacity at a optimum level means that resources are fully employed but not overused and the customers are receiving quality service in timely manner. Maximum capacity, on the other hand, represents the absolute limit of service availability. In the case of football game, optimum and maximum capacity are the same. The entertainment value of the game is enhanced for customers when every single seat is filled, and obviously the profitability for the team is greatest under the circumstances. On the other hand, in a university classroom it is usually not desirable for student or faculty to have every seat filled. In some cases the maximum use of capacity may result in excessive waiting by customers, as in a popular restaurant. From the perspective of customer satisfaction, optimum use of the restaurants capacity will again be less than maximum use. In the case of equipment or facilities constraints, the maximum capacity at any given time is obvious. There are only a certain number of weight machines in the health club, a certain number of seats in the airplane, and a limited amount of space in a cargo carrier. In the case of bottling plant, when maximum capacity on the assembly line is exceeded, bottles began to break and the systems shutdown. Thus it is relatively easy to observe the effects of exceeding maximum capacity. 114 When the limitation is people’s time or labor, maximum capacity is harder to specify because people are in a sense of more flexible than facilities and equipment. When an individual service provider’s maximum capacity has been exceeded, the result is likely to be decreased quality, customer dissatisfaction, and employee burnout and turnover, but these outcomes may not be immediately observable even to the employee herself. It is often easy for a consulting firm to take on one more assignment, taxing its employees beyond their maximum capacity. Professional services and consulting firms face this dilemma all the time- whether to stretch their human capacity beyond what might be optimal for employees and for the customers. 10.4 Understanding Demand Patterns To manage fluctuating demand in a service business, it is necessary to have a clear understanding of demand patterns, why they are vary, and the market segments that comprise demand at different points in time. Charting Demand Patterns First, the organization needs to chart the level of demand over relevant time periods. Organizations that have good computerized customer information system can do this very accurately. Others may need to chart demand patterns more informally. Daily, weekly, and monthly demand levels should be followed, and if seasonality is a suspected problem, graphing should be done for data from at least the past year. In some services, such as restaurants or health care, hourly fluctuations within a day may also be relevant. Sometimes demand patterns are intuitively obvious. Predictable Cycles In looking at the graphic representation of demand levels, is there a predictable cycle daily, weekly, monthly, and yearly. In some cases, predictable patterns may occur at all periods. For example, in the restaurant industry, especially in seasonal tourist settings, demand can vary by month, by week, by day, and by hour. If there is a predictable cycle that demand cycles are based on seasonal weather patterns and that weekly variations are based on the workweek. Tax accounts can predict demand based on when taxes are due, quarterly and annually. Service catering to children and families respond to variations in school hours and vacations. When predictable patterns exist, generally one or more causes can be identified. 115 Random demand Fluctuations Sometimes the patterns of demand appear to be random- there is no apparent predictable cycle. For example, day-to-day changes in weather may affect use of recreational, shopping or entertainment facilities. Although the whether can not be predicted far in advance, it may be possible to anticipate the demand a day or two ahead. Health related events also couldn’t be predictable. Accidents, heart attacks, and births all increase demand in hospital services, but the level of demand cannot generally be determined in advance. Natural disasters such as floods, fires and hurricanes can dramatically increase the need for such services as insurance, telecommunications, and health care. Acts of war and terrorism such as that experienced in the united states on September 11, 2001, generate instantaneous need for services that can’t be predictable. Demand patterns by Market Segment If an organization has detailed records on customer transactions, it may be able to disaggregate demand by market segment, revealing patterns with patterns. Or the analysis may reveal that the demand from segment is predictable while demand from other segment is relatively random. For example, for a bank, the visits from its commercial accounts may occur daily at a predictable time, whereas personal account holders may visit the bank at seemingly random intervals. Health clinics often notice that walk – in or “care needed today” patients tend to concentrate their arrivals on Monday, with few numbers needing immediate attention on other days of the week. Knowing that is the pattern exists, some clinics schedule more future appointments for later days of the week, leaving more of Monday available for same day appointments and walk-ins. 10.5 Strategies for Matching Capacity and Demand When an organization has a clear grasp of its capacity constraints and an understanding of demand patterns, it is in a good position to develop strategies for matching supply and demand. There are two general approaches for accomplishing this match. The first is to smooth the demand the fluctuations themselves by shifting demand to match existing supply. The second general strategy is to adjust capacity to match fluctuations in demand. 116 Shifting demand to Match Capacity With this strategy and organization seeks to shift customers away from periods in which demand exceeds capacity, perhaps by convincing them to loose the service during periods of slow demand. This may be possible for some customers but not for others. For example, many business travelers are not able to shift their needs for airline, car rental, and hotel services; pleasure travelers, on the other hand, can often shift the timing of their trips. Those who can’t shift and can’t be accommodated will represent lost business for the firm. During periods of slow demand, the organization seeks to attract more and deferent customers to utilize its productive capacity. A variety of approaches, detailed in the following sections, can be used to shift or increase demand to match capacity. Vary the Service offering One approach is to change the nature of the service offering, depending on the season of the year, day of the week, or time of day. Airlines change the configuration of their plane seating to match the demand from different market segments. In some planes there may be no first class section at all. On routes with a large demand for first class seating, a significant proportion of seats may be placed in first class. the service offering and associated benefits are change to smooth customer demand for organizations resources. Care should be exercised in implementing strategies to change the service offering, because such changes may easily imply and require alterations in other marketing mix variablessuch as promotion, pricing and staffing-to match the new offering. Unless these additional mix variables are altered effectively to support the offering, the strategy may not work. Even when do well, the down side of such changes can be confusion in the organization’s image from the customers’ perspective, or a loss of strategic focus for the organization and its employees. Communicate with the Customer Another approach for shifting demand is to communicate with customers, letting them know the times of peak demand so they can choose to use the service at alternative times and avoid crowding or delays. For example signs in banks and post offices that let customers know their busiest hours and busiest days of the week can serve as warning, allowing customers to shift their demand to another time is possible. Forewarning customers about busy times and possible waits can have added benefits. Many customer service phone lines provide a similar 117 warning by informing waiting customers of approximately how long it will be until they are served. Those who don’t want to wait may choose to call back later when the lines are less busy. In addition to signage communicating peak demand times to customers, advertising and other forms of promotion can emphasize different service benefits during peak and slow periods. Advertising and sales messages can also remind customers about peak demand times. Modify Timing and Location of Service Delivery Some firms adjust their hours and days of service delivery to more directly reflect customer demand. Historically, Banks in India were open only during banking hours from 10 A.M. to 2 P.M. every week day. Obviously these hours did not match times when most people preferred to do their personal banking. Now many banks open early, stay open until 6 P.M. many days and are open on Saturdays, better reflecting customer demand patterns. Theatres also accommodate customer schedules by offering matinees on weekends and holidays when people are free during the day for entertainment. Differentiate on Price A common response during slow demand is to discount the price of the service. This strategy relies on basic economics of supply and demand. To be effective, however, a price differentiation strategy depends on solid understanding of customer price sensitivity and demand curves. For example, business travelers are far less price sensitive than are families traveling for pleasure. For example, lowering prices during the slow summer months by Taj Hotel is not likely to increase bookings from business travelers dramatically. However, the lower summer prices attract considerable numbers of families and local guests who want an opportunity to experience a luxury hotel but are not able to afford the rooms during peak season. For any hotel, airline, restaurant, or other service establishment all of the capacity could be filled with customers if the price were low enough. But the goal is always to ensure the highest level of capacity utilization without sacrificing profits. We explore this complex relationship among price, market segments, capacity utilization, and profitability later in the chapter in the section on yield management. Heavy use of price differentiation to smooth demand can be a risky strategy. Over-reliance on price can result in price wars in an industry where eventually all competitors suffer. Price wars are well known in the airline industry, where total industry profits suffered as a result of 118 airlines simultaneously trying to attract customers through price discounting. Another risk of relying on price is that customers grow accustomed to the lower price and expect to get the same deal the next time they use the service. If communications with customers are unclear, customers may not understand the reasons for the discounts and will expect to pay the same during peak demand periods. Overuse or exclusive use of price as a strategy for smoothing demand is also risky due to the potential impact on the organization’s image and the possibility of attracting undesired market segments. Flexing Capacity to meet Demand A second strategic approach to matching supply and demand focuses on adjusting or flexing capacity. The fundamental idea here is to adjust, stretch, and align capacity to match customer demand. During peak periods demand the organization seeks to stretch or expand its capacity as much as possible. During period of slow demand it tries to shrink capacity so as not to waste resources. Stretch Existing Capacity The existing capacity of service resources can often be expanded temporarily to match the demand. In such cases no new resources are added; rather people, facilities, and equipment are asked to work harder and longer to meet the demand. 1. Stretch Time: It may be possible to extend the service temporarily to accommodate demand. A health clinic might stay open longer during flu season, retailers are open longer hours during the Christmas shopping season, and accountants have extended appointment hours. 2. Stretch labor: In many service organizations, employees are asked to work longer and harder during periods of peak demand. For examples, consulting organizations face extensive peaks and valleys with respect to demand for their services. During peak demand, associates are asked to take on additional projects and work longer hours. And front line service personnel in banks, tourist attractions, restaurants and telecommunications companies are asked to serve more customers per hour during busy times than during hours or days when demand is low. 119 3. Stretch Facilities: Theaters, restaurants, meeting facilities and classrooms can sometimes be expanded temporarily by the addition of tables, chairs or other equipment needed by customers. Or, as in the case of commuter train, a car can hold a number of people seated comfortably or can expand by accommodating standing passengers. 4. Stretch Equipment: Computers, telephone lines and maintenance equipment can often be stretched beyond what would be considered the maximum capacity for short periods to accommodate peak demand. In using these types of stretch strategies, the organization needs to recognize the wear and tear on resources and the potential for inferior quality of service that may go with the use. These strategies should thus be used for relatively short periods in order to allow for later maintenance of the facilities and equipment and refreshment of the people who are asked to exceed their usual capacity. As noted earlier, sometimes it is difficult to know in advance, particularly in the case human resources, when capacity has been stretched too far. Align Capacity with Demand Fluctuations This basic strategy is sometimes known as a chase demand strategy. By adjusting service resources creatively, organizations can in effect chase the demand curves to match capacity with customer demand patterns. Time, labor, facilities and equipment are again the focus, this time with an eye toward adjusting the basic mix and use pf these resources. Use part time employees In this case of organization’s labor resource is being aligned with demand. Retailers hire part time employees during the holiday rush, tax accounts engage temporary help during tax season, and tourist resorts bring in extra workers during peak season. Restaurants often ask employees to work split shifts during peak mealtime hours. Outsourcing Firms that find they have a temporary peak demand for a service that they cannot perform themselves may choose to outsource the entire service. For example, in recent years, many firms have found they don’t have the capacity to fulfill their own needs for technology support, 120 web design and software related services. Rather than try to hire and training additional employees, these companies look to firms that specialize in outsourcing these types of functions as a temporary solution. Rent or share facilities or equipment For some organizations it is best to rent additional equipment or facilities during periods of peak demand. For example, express mail delivery services rent or lease trucks during the peak holiday delivery season. It would not make sense to buy trucks that would sit idle during the rest of the year. Sometimes organizations with the complementary demand patterns can share facilities. Schedule downtime during periods of low demand If people, equipment and facilities are being used at maximum capacity during the peak periods, then it is imperative to schedule repair, maintenance and renovations during off peak periods. This ensues that the resources are in top condition when they are most needed. With regard to employees, this means that vacations and training are also scheduled during slow demand periods. Cross train employees If employees are cross-trained, they can shift among tasks, filling in where they are most needed. This increases the efficiency of the whole system and avoids underutilizing employees in some areas while others are being over taxed. Many airlines cross train their employees to move from ticketing to working the gate counters to assisting with baggage if needed. In some fast food restaurants, employees specialize in one task during busy hours, and the team of specialists may number 10 people. During slow hours the team may shrink to three, with each person performing a variety of functions. Modify or move facilities and equipment Sometimes it is possible to adjust, move, or creativity modifies existing capacity to meet demand fluctuations. Hotels accomplish this by reconfiguring rooms- two rooms with a locked door between can be rented two to different parties in high demand times or turned into a suite during slow demand. The airline industry offers dramatic examples of this type strategy. Using an approach known as demand driven dispatch, airlines have begun to experiment with methods that assign airplanes to first schedule on the basis of fluctuating marketing needs. The method 121 depends on accurate knowledge of demand and the ability to quickly move airplanes with different seating capacities to flight assignments that match their capacity. The Boeing 777 aircraft is so flexible that it can be reconfigured within hours to vary the number of seats allocated to one, two, or three classes. The plane can thus be quickly modified to match demand from different market segments, essentially molding capacity to fit the demand. 10.6 Summary Because service organizations lack the ability to inventory their products, the effective use of capacity can be critical to success. Idle capacity in the form of unused time, labor, facilities, or equipment represents a direct drain on bottom-line profitability. This chapter has provided an understanding of the underlying issues of managing demand and supply in capacity constrained services. All strategies for aligning capacity and demand were discussed. 10.7 Keywords Cross Training Demand Outsourcing Rent Supply 10.8 Review Questions 1. Why do service organizations lack the capability to inventory the services? Compare a car repair and maintenance service with an automobile manufacturer/dealer in terms of inventory capability. 2. Discuss the four common types of constraints (time, labor, equipment, facilities) facing service businesses and give an example of each (real or hypothetical). 3. Choose a local restaurant or some type of service with fluctuating demand. What is the likely underlying pattern of demand? What causes the pattern? Is it predictable or random? 122 LESSON - 11 Gaps Model Learning objectives After having read this lesson, you will be able to discuss The reasons for creating customer gap The reasons for provider gaps Factors determining for customer gap Strategies for closing the customer gap The reasons for not having the right services quality designs and standards. Causes for not delivering to service standards. Consequences of not matching promises to performance. Way for closing all the gaps. Structure 11.1 Introduction 11.2 Providers Gap 11.3 Closing of Customer Gap 11.4 Provider Gap 11.5 Key Factors Leading to Customer Gap 11.6 Prescription for Closing Gap - 1 11.7 Provider Gap 2 11.8 Prescription for Closing Gap - 2 11.9 Provider Gap 3 11.10 Prescription for Closing Gap - 3 11.11 Provider Gap 4 11.12 Strategies for Closing Gap - 4 11.13 Summary 123 11.14 Keywords 11.15 Review Questions 11.1 Introduction The central focus of the gaps model is the customer gap, the difference between the customer expectations and perceptions. Expectations are the reference points customers have coming in to a service experience; perceptions reflect the service as actually received. The idea is that firms will want to close this gap – between what is expected and what is received – to satisfy their customers and build long-term relationships with them. To close this all- important customer gap, the model suggests that four other gaps- the provider gaps – need to be closed. 11.2 Providers Gap The provider gaps are the underlying causes behind the customer gaps: Gap 1 – Not knowing what customers expect. Gap 2 – Not selecting the right service designs and standards. Gap 3 – Not delivering to standard service. Gap 4 – Not matching performance to promises. A primary cause in many firms for not meeting customers’ expectations is that the firm lacks accurate understanding of exactly what those expectations are. A gap exists (gap 1) between company perceptions of customer expectations and what customers actually expect. In the first major section of this text we explore why this gap occurs and develop strategies for closing it. Even if a firm does clearly understand its customer’s expectations, there still may be problems if that understanding is not translated into customer-driven service designs and standards (gap2). The second major section of this text focuses on reasons for gap 2 and strategies for designing services and developing standards to meet customer expectations. Once service designs and standards are in place, it would seem the firm is well on its way to delivering high quality services. This is true, but still not enough. There must be systems, processes, and people in place to ensure that service delivery actually matches (or is even better than) the designs and standards in place (gap 3). The third major section of the text focuses on how and why gap 3 can occur and specific process, people, and infrastructure strategies for closing this gap. 124 Finally, with everything in place to effectively meet or to exceed customer expectations, the firm must ensure that what is promised to customers matches what is delivered (gap 4). In the last major section of the text we focus on strategies for communicating effectively with customers and for ensuring that promise, once made, can and will be kept. 11.3 Closing of Customer Gap In a broad sense, the gaps model says that a service marketer must first close the customer gap, shown in the accompanying figure, between customer perceptions and expectations. To do so, the provider must close the four provider gaps, or discrepancies within the organizations that inhibit delivery of quality service. These are explained as we go through the book. The gaps model focuses on strategies and processes that firma can employ to drive service excellence. It is used to frame the entire text and as an organizing structure for the rest of the chapters. Each section divider focuses on specific aspects of the gaps model that are covered in the chapters that follow it. The full model is drawn together and summarized in the concluding chapter of the text. The following figure shows a pair of boxes that correspond to two concepts - customer expectations and customer perceptions- that play a major role in services marketing. Customer perceptions are subjective assessments of actual service experiences. Customer expectations are the standards or the reference points for performance against which service experiences are compared and are often formulated in terms of what customer believes should or will happen. For exampled, when you visit an expensive restaurant, you expect a certain level of service, one that is considerably different from the level you would expect in a fast-food restaurant. The Customer Gap 125 The sources of customer expectations consist of marketer-controlled factors (such as pricing, advertising, and sales promises) as well as factors that the marketer has limited ability to affect (innate personal needs, word-of-mouth communications, and competitive offerings). In a perfect world, expectations and perceptions would be identical: customers would perceive that they receive what they thought they would and should. In practice these concepts are often, even usually, separated by some distance. Broadly, it is the goal services marketing to bridge this distance, and we devote virtually the entire text to describing strategies and practices designed to close this customer gap. Considerable evidence exists that consumer evaluation processes differ for goods and services and that these differences affect the way service providers market their organizations. Unfortunately, much of what is known and written about consumer evaluation processes pertains specifically to goods. The assumption appears to be that services, if not identical to goods, are at least similar enough in the consumer’s mind that they are chosen and evaluated in the same manner. In part 1, we show that the unique characteristics of services discussed in chapter 1intangibilty, heterogeneity, inseparability of production and consumption, and perishability necessitate different consumer evaluation processes from those used to assess goods. Service delivery Because customer satisfaction and customer focus are so critical to competitiveness of firms, any company interested in delivering quality service must begin with a clear understanding of its customers. Knowing what customers want and how they receive is the best way to design effective services. 126 11.4 Provider Gap 1 Provider gap 1 is the difference between customer expectations of service and company understanding of those expectations. Many reasons exist for managers not being aware of what customers expect: they mat not interact directly with customers, be unwilling to ask about expectations, or be unprepared to address them. When people with the authority and responsibility for setting priorities do not fully understand customers’ service expectations, they trigger a chain of bad decisions and sub optimal resource allocations that result in perceptions of poor service quality. 11.5 Key Factors Leading to the Customer Gap In this text, we broadened the responsibility for the first provider gap from managers alone to any employee in the organization with the authority to change or influence service policies and procedures. In today’s changing organizations, the authority to make adjustments in service delivery is delegated to empower teams and front-line people. Figure 18.3 shows the 127 key factors responsible for provider gap 1. An inadequate marketing research orientation is one of the critical factors. When management or empowered employees do not acquire accurate information about customers’ expectations, provided gap 1 is large. Formal and informal methods to capture information about customer expectations must be developed through market research. Techniques involving a variety of traditional research approaches must be used to stay close to the customer, among them customer visits, survey research, complaints systems, and customer panels. More innovative techniques- such as quality function deployment, structured brainstorming, and service quality gap analysis- are often needed. Another key factor that is related to provider gap1 is lack of upward communication. Front-line employees often know a great deal about customers; if management is not in contact with front-line employees and does not understand what they know, the gap widens. Also related to provider gap 1 is a lack of company strategies in retain customers and strengthen relationships with them, an approach called relationship marketing. When 128 organizations have strong relationships with existing customers, provide gap 1 is less likely to occur. Relationship marketing is distinct from transactional marketing, the term used to describe the more conventional emphasis on acquiring new customers rather than on retaining them. When companies focus too much on attracting new customers, they may fail to understand the changing needs and expectations of their current customers. One of the major marketing factors that is leveraged in relationship marketing, particularly in manufacturing companies, in service. Technology affords companies the ability to acquire and irrigate vast quantities of data on customers that can be used to build relationships. Frequent flyer travel programmes conducted by airlines, car rental companies, and hotels are among the most familiar programmes of this type. The final key factor associated with provider gap 1 is lack of service recovery. Even the best companies, with the best of intentions and clear understanding of their customers’ expectations, sometimes fail. It is critical for an organization to understand the importance of service recovery- why people complaint, what they expect when they complaint, and how to develop effective service recovery strategies for dealing with inevitable service failures. This might involve a well-define complaint- handling procedure and improving employees to react on the spot, in the real time, to fix the failure; other times it involves a service guarantee or ways to compensate the customer for the unfulfilled promise. 11.6 Prescription for Closing Gap - 1 Understand customer expectations through research, complaint analysis, customer panels, etc.: Increase direct interactions between managers and customers to improve understanding. Improve upward communication from contact personnel to management. Turn information and insights into action. 11.7 Provider Gap 2 A recurring theme in service companies is the difficulty experienced in translating customers’ expectations into service quality specifications. These problems are reflected in provider gap 2, the difference between company understanding of customer expectations and development of customer – driven service designs and standards. Figure 18.4 shows the key factor leading to 129 this gap. Customer-driven standards are different from the conventional performance standards that most service companies establish in that way are based on pivotal customer requirements that are visible to a measured by customers. They are operations standards set to correspond to customer expectations and priorities rather than to companies concerns such as productivity or efficiency. Provider gap 2 exists in service organizations for a variety of reasons. Those responsible for setting standards, typically management, sometimes believe that customer expectations are unreasonable or unrealistic. They may also believe that the degree of variability inherent in service defies standardization and therefore that setting standards will not achieve the desired goal. However, the quantity of service delivered by customer contact personnel is critically influenced by the standards against which they are evaluated and compensated. Standards signal to contact personnel what management priorities are and which types of performance really count. When service standards are absent or when the standards in place do not reflect customers’ expectations, 130 quality of service as perceived by customers is likely to suffer. In contrast, when there are standards reflecting what customers expect, the quality of service they receive is likely to be enhanced. Therefore, closing provider gap 2 – by setting customer-defined performance standards- has a powerful positive effect on closing the customer gap. Because services are intangible, they are difficult to describe and communicate. This is particularly true when new services are being developed. It is critical that all people are involved (managers, front-line employees, and behind-the-scene support staff) be working with the same concepts of new service, based on customer needs and expectations. For a service that already exists, any attempt to improve it will also suffer unless everyone has the same vision of the service and associated issues. One of the most important ways to avoid gap 2 is to design services clearly without oversimplification, incompleteness, subjectivity, or bias. To do this tools are needed to ensure that new and existing services are developed and improved in as careful a manner as possible. Another factor involved in provider gap 2 is physical evidence – the tangibles surrounding the service, including everything from business cards to reports, signage, Internet presence, equipment, and facilities used to deliver the service. The services cape, the physical setting where the service is delivered, must be appropriate. Think of a restaurant, a hotel, a theme park, a health club, a hospital, or a school. The services cape- the physical facility – is critical in these industries in terms of communicating about the service and making the entire experience pleasurable. Service organizations must explore the importance of physical evidence, the variety of roles it plays, and strategies for effectively designing physical evidence and the services cape to meet customer expectations. 11.8 Prescription for Closing Gap - 2 Ensure that top management displays ongoing commitment to quality as defined by customers. Set, communicate, and reinforce customer-oriented service standards for all work units. Train managers in the skills needed to lead employees to deliver service quality. Become receptive to new ways of doing business that overcome barriers to delivering service quality. 131 Standardize repetitive work tasks to ensure consistency and reliability by substituting hard technology for human contact and improving work methods (soft technology). Establish clear service quality goals that are challenging, realistic, and explicitly designed to meet customer expectations. Clarify which job tasks have the biggest impact on quality and should receive the highest priority. Ensure that employees understand and accept goals and priorities. Measure performance and provide regular feedback. Reward managers and employees for attaining quality goals. 11.9 Provider Gap 3 Provider gap 3 is the discrepancy between development of customer-driven service standards and actual service performance by company employees. Even when guidelines exist for performing services well and treating customers correctly, high-quality service performance is not a certainty. Standards must be backed by appropriate resources (people, systems, and technology) and also must be enforced to be effective – that is, employees must be measured and compensated on the basis of performance along those standards. Thus, even when standards accurately reflect customers’ expectations, if the company fails to provide support for them – if it does not facilitate, encourage, and require their achievement – standards do no good. When the level of service delivery performance falls short of standards, it falls short of what customers expect as well. Narrowing gap 3 – by ensuring that all the resources needed to achieve the standards are in place – reduces the customer gap. Research and company experiences have identified many of the critical inhibitors to closing gap 3 (see figure 18.5). These include employees who do not clearly understand the roles they are to play in the company, employees who see conflict between customers and company management, the wrong employees, inadequate technology, inappropriate compensation and recognition, and lack of empowerment and teamwork. These factors all relate to the company’s human resource function, involving internal practices such as recruitment, training, feedback, job design, motivation, and organizational structure. To deliver better service performance, these issues must be addressed across functions (such as with both marketing and human 132 resources) if they are to be effective. One of the difficulties associated with gap 3 involves the challenge in delivering. service through intermediaries as retailers, franchisees, agents, and brokers. Because quality in service occurs in the human interaction between customers and service providers, control over the service encounter by the company is crucial, yet it rarely is fully possible. Most service (and many manufacturing) companies face an even more formidable task: attaining service 133 excellence and consistency in presence of intermediaries who represent them, interact with their customers, yet are not under their direct control. Among the intermediaries that play a central role in service delivery are retailers, franchisees, and dealers. Franchisers of services depend on their franchisees to execute service delivery as they have specified it. And it is in the execution by the franchisee that the customer evaluates the service quality of the company. With franchises and other types of intermediaries, someone other than the producer is critically important to the fulfillment of quality service. The service delivery process is complicated by outside parties who are likely to embrace goals and values that do not directly align with those of the service organization. For this reason, a firm must develop ways to either control or motivate these intermediaries to meet company goals. As we have just discussed, part of the variability in provider gap 3 comes from employees and intermediaries who are involved with service delivery. The other important variable is the customer. Even if contact employees and intermediaries are 100 percent consistent in their service delivery, the uncontrollable variable of the customer can introduce heterogeneity in service delivery. If customers do not perform their roles appropriately – if, for example, they fail to provide all the information necessary to the provider or neglect to read and follow instructions – service quality is jeopardized. Another issue in gap 3 is the need in service firms to synchronize demand and capacity. Because services are perishable and cannot be inventoried, service companies frequently face situations of over- or under demand. Lacking inventories to handle over demand, companies lose sales when capacity is inadequate to handle customer needs. On the other hand, capacity is frequently underutilized in slow periods. Most companies rely on operations strategies such as cross training or varying the size of the employee pool to synchronize supply and demand. The use of marketing strategies in many companies is limited. Marketing strategies for managing demand – such as price changes, advertising, promotion, and alternative service offerings – can supplement approaches for managing supply. 11.10 Prescription for Closing Gap - 3 Clarify employee roles. Ensure that all employees understand how their jobs contribute to customer satisfaction. 134 Match employees to jobs by selecting for the abilities and skills needed to perform each job well. Provide employees with the technical training needed to perform their assigned tasks effectively. Develop innovative recruitment and retention methods to attract the best people and build loyalty. Enhance performance by selecting the most appropriate and reliable technology and equipment. Teach employees about customer expectations, perceptions, and problems. Train employees in interpersonal skills, especially for dealing with customers under stressful conditions. Eliminate role conflict among employees by involving them in the process of setting standards. Train employees in priority setting and time management. Measure employee performance and tie compensation and recognition to delivery of quality service. Develop reward systems that are meaningful, timely, simple, accurate, and fair. Empower managers and employees in the field by pushing decision-making power down the organization; allow them greater discretion in the methods they use to reach goals. Ensure that employees working at internal support jobs provide good service to customer-contact personnel. Build teamwork so that employees work well together, and use team rewards as incentives. Treat customers as partial employees; clarify their roles in service delivery; and train and motivate them to perform well in their roles as coproducers. 135 11.11 Provider Gap 4 Provide gap 4 illustrates the difference between service delivery and the service provider’s external communications. Promises made by a service company through its media advertising, sales force, and other communications may potentially raise customer expectations that serve as the standard against which customers assess service quality. The discrepancy between actual and promised service therefore has an adverse effect on the customer gap. Broken promises can occur for many reasons: over-promising in advertising or personal selling, inadequate coordination between operations and marketing, and differences in policies and procedures across service outlets. Figure 18.6 shows the key factors that lead to provider gap 4. 136 In addition to unduly elevating expectations through exaggerated claims, there are other, less obvious ways in which external communications influence customers’ service quality assessments. Service companies frequently fail to capitalize on opportunities to educate customers to use services appropriately. They also frequently fail to manage customer expectations of what they will receive in service transactions and relationships. One of the major difficulties associated with provider gap 4 is that to customers involve issues that cross-disciplinary boundaries. Because service advertising promises what people do, and because what people do cannot be controlled in the way that machines that produce physical goods can be controlled, this type of communication involves functions other than the marketing department. This is what we called interactive marketing – the marketing between contact people and customers – and it must be coordinated with the conventional types of external marketing used in product and service firms. When employees who promote the service do not fully understand the reality of service delivery, they are likely to make exaggerated promises or fail to communicate to customer’s aspects of the service intended to serve them well. The result is poor service quality perceptions. Effectively coordinating actual service delivery with external communications, therefore, narrows provider gap 4 and favorably affects the customer gap as well. Another issue related to gap 4 is associated with the pricing of services. In packaged goods (and even in durable goods), many customers possess enough price knowledge before purchase to be able to judge whether a price is fair or in line with competition. With services, customers often have no internal reference point for prices before purchase and consumption. Pricing strategies such as discounting, “everyday prices,” and couponing obviously need to be different with services in cases where the customer has no sense of the price to start with. Techniques for developing price for services are more complicated than those for pricing of tangible goods. In summary external communications – whether from marketing communications or pricing – can create a larger customer gap by raising expectations about service delivery. In addition to improving service delivery, companies must also manage all communications to customers so that inflated promises do not lead to higher expectations. 137 11.12 Strategies for Closing Gap - 4 Seek inputs from operations personnel when new advertising programs are being created Develop advertising that features real employees performing their jobs. Allow service providers to preview advertisements before customers are exposed to them. Get sales staff to involve operations staff in face-to-face meetings with customers. Develop internal educational, motivational, and advertising campaigns to strengthen links among marketing operations, and human resource departments. Ensure that consistent standards of service are delivered across multiple locations. Ensure that advertising content accurately reflects those service characteristics that are most important to customers in their encounters with the organization. Manage customers’ expectations by letting them know what is and is not possibleand the reasons why. Identify and explain uncontrollable reasons for shortcomings in service performance. Offer customers different levels of service at different prices, explaining the distinctions. 11.13 Summary This lesson discussed the customer gap, the difference between the customer expectations and perceptions. This lesson also analyzed the factors leading to customer gaps i.e. Provider gaps. Provider gap-1 was discussed in detail with its reasons for the same. At the end of the lesson, the strategies for closing the provider gap were discussed. This lesson also discussed about provider gap 2 that explain about not having the right service quality designs and standards. This is mainly because of poor service design, absence of customer defined standards and inappropriate physical evidence and services scape. This lesson also explained the provider gap 3, which spells, about not delivering to service standards. This is due to deficiencies in human resources polices of a service provider, failure to match supply and demand, customers not fulfilling their roles and problems with service intermediaries. The gap 4 was discussed that speaks about when promises do not match performance. The strategies for closing the gaps 2, 3 and 4 were also discussed. 138 11.14 Keywords Customer Gap Gap 1 Gap 2 Gap 3 Gap 4 Provider Gap 11.15 Review Questions 1. What is customer gap? Explain the reasons for customer gap. 2. What are the factors create the provider gap –1? 3. Analyse the remedies for closing provider gap- 1. 4. If you were the manager of a five star hotel and wanted apply the gaps model to improve service, which gap would you start with? Why? 5. Can provider gap 4 be closed prior to closing any of the other three provider gaps? How? 6. Which of the provider gaps do you believe is hardest to close? Why? 7. What are strategies you will adopt to close the gaps 3 and 4? 139 LESSON - 12 Customer Expections, Perceptions and Service Encounters Learning Objectives After having read this lesson, you will be able to discuss Types of service expectations Understand the limit between desired and adequate service expectations Factors influencing customer expectations The ways to exceed customer service expectations The meaning of customer perceptions and satisfaction Strategies for influencing customer perceptions Moments of truth and Sources of pleasure and displeasure in service encounters Structure 12.1 Introduction 12.2 Types of Service Cxpectations 12.3 Zone of Tolerance 12.4 Factors that Influence Customer Expectations 12.5 Issues involving Customer Service Expectations 12.6 Customer perceptions 12.7 Strategies for Influencing Customer Perceptions 12.8 Service Encounters or “Moments of Truth” 12.9 Sources of Pleasure and Displeasure in Service Encounters 12.10 Summary 12.11 Keywords 12.12 Review Questions 140 12.1 Introduction Customer expectations are beliefs about service delivery that function as standards or reference points against which performance is judged. Because customer compare their perceptions of performance with these reference points when evaluating service quality, thorough knowledge about customer expectations is critical to service marketers. Knowing what the customer expects is the first and possibly most of critical step in delivering quality service. Being wrong about what customers want can mean losing a customer’s business when other company’s hits the target exactly. Being wrong can also mean expending money, time, and other resources on things that don’t count to the customer. 12.2 Types of Service Expectations To say the expectations are references points against which delivery is compared is only a beginning. The level expectations can vary widely depending on the reference point the customer holds. Although most everyone has an intuitive sense of what expectations are; service marketers need a far more thorough and clear definition of expectations in order to comprehend, measure and manage them. The idea of customer expectations is so critical to evaluation of service; we start this chapter by talking about the levels of expectations. Expected Service : Levels of Expectations Here we focus on two types. The highest can be termed desired service; the level of service the customer hopes to receive- the “wished for” level of performance. Desired service is a blend of what the customer believes can be” and “should be”. For example you will engage the services of your college’s placement office when you are ready to graduate. What your expectations of the service? In all likelihood you want the office to find you a job – the right job in the right place for the right salary- because that is what hope and wish for. And not all the companies you may be interested in have a relationship with your placement office. In this situation and in general, customers hope to achieve their service desires but recognize that this is not always possible. We call the threshold level of acceptable service adequate service – the level of service the customer will accept. In the economic slowdown 141 following the world trade center disaster, many college graduates trained for high skilled jobs accepted entry-level positions at fast food restaurants or internships for no pay. Their hopes and desires are still high, but they recognized that they could not attain those desires in the market that existed at the time. Their standard of adequate service was much lower that their desired service. Some graduates accept any job for which they could earn a salary, and others agreed to nonpaying, short term positions as interns to gain experience. Adequate service represents the “minimum tolerable expectations,” the bottom level of performance acceptable to the customer. 12.3 Zone of Tolerance Services are heterogeneous in that performance may vary across providers, across employees from the same provider, and even with the same service employee. The extent to which customers recognize and are willing to accept this variation is called the zone of tolerance. If service below the adequate service- the minimum level considered acceptable- customers will be frustrated and their satisfaction with the company will be undermined. If service performance is higher than the zone of tolerance at the top end – where performance exceeds desired service- customers will be very pleased and probably quite surprised as well. You might consider the zone of tolerance as the range or window in which customers do not particularly notice service performance. When it fails outside, the service gets the customer attention in either a positive or negative way. Customer service expectations are characterized by a range of levels, bounded by desired and adequate service, rather than a single level. This tolerance zone, representing the difference between desired service and the level of service considered adequate, can expand and contract with a customer. An airline customer’s zone tolerance will narrow when she is running late and concerned about making her plane. A minute seems much longer, and her adequate service level increases. On the other hand, a customer who arrives at the airport early may have a larger tolerance zone, making the wait in line far less noticeable that when he or she is pressed for time. This example shows that the marketer must understand not just the size and boundary levels for the zone of tolerance but also when and how the tolerance zone fluctuates with a given customer. 142 Different customers possess different zones of tolerance Another aspect of variability in the range of reasonable services is that different customers possess different tolerance zones. Some customers have narrow tolerance, requiring a tighter range of service from providers, whereas other customers allow a greater range of service. An individual customer’s zone of tolerance increases or decreases depending on the number of factors, including company controlled factors such as price. When prices increase, customer tends to be less tolerant of poor service. I Zone of tolerance vary for service dimensions Customer’s tolerance zones also vary for different service attributes or dimensions. The more important factor, the narrower the zone of tolerance is likely to be. In general, customers are likely to be less tolerant about unreliable service than other service deficiencies, which mean that they have higher expectations for this factor. In addition to higher expectations for the most important service dimensions an attributes, customers are likely to be less willing to relax these expectations than those for less important factors, making the zone of tolerance for the most important service dimension smaller and the desired and adequate service levels higher. The fluctuation in the individual customer’s zone of tolerance is more a fluctuation of changes in the adequate service level, which moves readily up and down due to situational circumstances, than in the desired service level, which tends to move upward incrementally 143 due to accumulated experiences. Desired service is relatively idiosyncratic and stable compared with adequate service, which moves up and down and in response to competition and other factors. Fluctuation in the zone of tolerance can be likened to an accordion’s movement, but with most of the gyration coming from one side (the adequate service level) rather than the other (the desired service level). In summary, we can express the boundaries of customer expectations of service with two different levels; desired service and adequate service. 12.4 Factors that Influence Customer Expectations Expectations play such a critical role in customer evaluation of services, marketers need and want to understand the factors that shape them. Marketers would also like to have control over these factors as well, but many of the forces that influence customer expectations are uncontrollable. Sources of Desired Service Expectations The two largest influences on the desired service level are 1. Personal needs 2. Derived Service expectations 3. Philosophies about service 1. Personal needs Those states or conditions essential to the physical or psychological well being of the customer, are pivotal factors that shape what we desire in service. Personal needs can fall into many categories, including physical, social, psychological, and functional. A fan who regularly goes to baseball games right from work, and is therefore thirsty and hungry, hopes and desires that the food and drink vendors will pass by his section regularly, whereas a fan who regularly has dinner elsewhere has a low or zero level of desired service from the vendors. A customer with high social and dependency needs may have relatively high expectations for a hotel’s ancillary services, hoping, for example, that the hotel has a bar with live music and dancing. 2. Derived Service Expectations Some customers are more demanding than others, having greater sensitivity to, and higher expectations of, service. Enduring service intensifiers are individual, stable factors that 144 lead the customer to a heightened sensitivity to service. One of the most important of these factors can be called derived service expectations, which occur when customer expectations are driven by another person or group of people. A parent choosing a vacation for the family, a spouse selecting a home cleaning service, an employee choosing an office for the firm – all these customers’ individual expectations are intensified because they represent and must answer to other parties who will receive the service. In the context of business to business service, customer’s expectations are driven by the expectations of their own customers. The head of an information technology department in an insurance company, who is the business customer a large computer vendor, has expectations based on those of the insurance customers she serves; when the computer equipment is down, her customers complain. Her need to keep the system up and running is not just her own expectation but is derived from the pressure of customers. 3. Philosophies about services Another enduring service intensifier is personal service philosophy- the customer’s underlying generic attitude about the meaning of service and the proper conduct of service providers. For example, believe that waitress should not keep customers waiting longer than 15 minutes take their orders. Knowing the way a kitchen operates, you may be less tolerant of lukewarm food or errors in the order than others who have not held the role of waitperson. In general, customers who are themselves in service business or worked for them in the past seem to have especially strong service philosophies. Sources of Adequate Service Expectations A different set of determinants affects adequate service, the level of service the customer finds acceptable. In general, these influences are short term and tend to fluctuate more than the factors that influence the desired service. The five factors that influence adequate service: 1. Transitory service intensifiers 2. Perceived service alternatives 3. Customer self-perceived role 4. Service performance out of Control (Situational Factors) 5. Predicted service 145 1. Transitory Service Intensifiers It consists of temporary, usually short term, individual factors that make a customer more aware of the need for service. Personal emergency situations in which service is urgently needed (such as accident and the need for automobile insurance or a break down in office equipment during a busy period) raise the level of adequate service expectations, particularly the level of responsiveness required and considered acceptable. Problems with the initial stage can also lead to heightened expectations. Performing a service right at the first time is very important because customers value service reliability above all other dimensions. If the service fails in the recovery phase, fixing it right the second time is even more critical than it was the first time. 2. Perceived Service Alternatives Perceived service alternatives are other providers from whom the customer can obtain service. If customers have multiple choices from, or if they can provide the service for themselves, their levels of adequate service are higher than those of customers who believe it is not possible to get better service elsewhere. An airline customer who lives in a small town with a tiny airport, for example, has a reduced set of options in airline travel. This customer will be more tolerant of the service performance of the carriers in town because of few alternatives exist. She will accept the scheduling and lower levels of service more than the customer in big city who has myriad flights and airlines to choose from. 3. Customer’s Self-Perceived Service Role The third factor affecting the level of adequate service is the customer’s self perceived service role. We define this as customer perceptions of the degree to which customers exert an influence on the level of service they receive. One role of the customer is specifying the level of service is expected. A customer who is very explicit with a waiter about how rare he wants his steak cooked in a restaurant will probably be more satisfied if the meat comes to the table overcooked than a customer who does not articulate the degree of doneness expected. The customer’s active participation in the service also affects this factor. A customer who does not show up for many of her allergy shots will probably be more lenient on the allergist when she experience symptoms than one who conscientiously shows up every shot. 146 4. Service Performance Out Of Control (Situational Factors) Levels of adequate service are also influenced by situational factors, defined as service performance conditions that customer view as beyond the control of service provider. For example, where personal emergencies such as serious automobile accidents would likely intensify customer service expectations of insurance companies, catastrophes that affect a large number of people at one time may lower service expectations because customers recognize that insurers are inundated with demand for their services. During the world trade disaster, telephone and internet services were poor because so many people trying to get in touch with friend and relatives. However, customers were forgiving because they understand the source of problem. Customer who recognize that situational factors are not the fault of the service company may accept the lower levels of adequate service given the context. 5. Predicted Service The final factor that influences the adequate service is predicted service, the level of service customers are believe they are likely to get. This type of service expectations can be viewed as predictions made by customers about what is likely to happen during an impending transaction or exchange. Predicted service performances imply some objective calculation of the probability of performance or estimate of anticipated service performance level. If customers predict good service, their levels of adequate service are likely to be higher than if they predict poor service. For example, full time residents in a college town usually predict faster restaurant services during the summer month when students are not in campus. This will probably lead them to have higher standards for adequate service in restaurants during the summer than during school months. Predicted service is typically an estimate or calculation of the service a customer will receive in an individual transaction rather than in the overall relationship with a service provider. Whereas desired and adequate service expectations are global assessments comprising many individual service transactions, predicted service is always an estimate of what will happen in the next service encounter or transaction that the customer experiences. This is one of the reasons predicted service is viewed in this model as an influencer of adequate service. 147 Sources of both desired and Predicted Service Expectations When consumers are interested in purchasing services, they are likely to seek or take in information from several different sources. For example, they may call a store, ask a friend, or deliberately track newspaper advertisements to find the needed service at the lowest price. They may also receive information by watching television or hearing an unsolicited comment from a colleague about a service about that was performed well. This section discuss one internal and three external factors that influence both desired and predicted service expectations. 1. Explicit service promises 2. Implicit service promises 3. Word of mouth communications 4. Past experience 1. Explicit Service Promises Explicit service promises are personal and non-personal statements about the service made by the organization to customer. The statements are personal when they are communicated by sales people or service or repair personnel; they are non-personal when they come from advertising, brochures, and other written publications. Explicit service promises are one of the few influences on expectations that are completely in the control of the service provider. Explicit service promises influence the levels of both desired service and predicted service. They shape what customer desire in general as well as what they predict will happen in the next service encounter from a particular service provider or in a certain service encounter. 2. Implicit Service Promises Implicit service promises are service related cues other than explicit promises that lead to inferences about what the service should and will be like. These quality cues are dominated by price and the tangibles associated with the service. In general, the higher the price and the more impressive the tangibles, the more a customer will expect from the service. Consider a customer who shops for insurance, finding two firms charging radically different prices. She may infer that the firm with the higher price should provide higher quality of service and better coverage. 148 3. Word of Mouth Communication The importance of world of mouth communication in shaping expectations of service is well documented. These personal and sometimes non-personal statements made by parties other than the organization convey to customers what the service will be like and influence both predicted and desire service. Word of mouth tends to be very important in services that are difficult to evaluate before purchase and direct experience of them. Experts are also words of mouth sources that can affect the levels of desired and predicted service. 4. Past Experience Past experience, the customers previous exposure to service that is relevant to the focal service, is another force in shaping the predictions and desires. The service is relevant for prediction can be previous exposure to the focal firm’s service. For example, you probably compare each stay in a particular hotel with all previous stays in that hotel. But past experience with the focal hotel is likely to be a very limited view of your past experience. You may also compare each stay with your experiences in other hotels and hotel chains. 12.5 Issue involving Customer Service Expectations The following issues represent current topics of particular interest to service marketers about customer expectations. In this section we discuss fie of the most frequently asked questions about customer expectations. 1. What does a service marketer do if customer expectations are unrealistic? 2. Should a company try to delight the customer? 3. How does a company exceed customer service expectations? 4. Do customer service expectations continually escalated? 5. How does a company stay ahead of competition in meeting customer expectations? 1. What does a Service Marketer do if Customer Expectations are unrealistic ? One inhibitor to learning about customer expectations is management and employee’s fear of asking. This apprehension often stems from the belief that customer expectations will be extravagant and unrealistic, and that by asking about them a company set itself up for loftier expectations levels. Customer expects service companies to do what they are supposed to do. They expect fundamentals, not fanciness; performance not empty promises. Customer wants 149 the service to be delivered as promised. They want planes to take off on time, hotel rooms to be clean, and food to be hot and service providers to show up when scheduled. Unfortunately, many service customers are disappointed and let down by company’s inability to meet these basic service expectations. At a minimum, a company should acknowledge to customers that it has received and heard their input and that will expend effort trying to address their issues. The company may not be able to - and indeed does not always have to – deliver to express expectations. An alternative and appropriate response would to let customers know the reasons desired service is not being provided at the present time and describe the efforts planned to address them. Another approach could be a campaign to educate customers about ways to use and improve the service they currently receive. While under promising makes service expectations more realistic, thereby narrowing the gap between expectations and perceptions, it also may reduce the competitive appeal of the offer. Also some research has indicated that under promising may have the inadvertent effect of lowering customer perceptions of service, particularly in situations where customers have little experience with service. In these situations the customer expectations may be self-fulfilling. Should company try to delight the customer? A way that mangers can conceive of delight is to consider product and service features in terms of concentric rings. The innermost bull’s – eye refers to attributes that are central to the basic function of the product or service, called musts. Around the musts is a ring called satisfiers: features that have the potential to further satisfaction beyond the basic function of the product. At the next and final outer level is delights, or product features that are unexpected and surprisingly enjoyable. These are the things that consumers would not expect to find and are therefore highly surprised and sometimes excited when they receive them. Delighting the customer is a good idea, but this level of service provision comes with extra effort and cost to the firm. Therefore the benefits of providing delight must be weighed. Among the considerations are the staying power and competitive implications of delight. Staying power involves the question of how long a company can expect an experience of delight to maintain the customer’s attention. If it is fighting means the customer forgets immediately. The competitive implications of delight relates to its impact on expectations of other firms in the same industry. If a competitor in the same industry is unable to copy the delight strategy, it will be disadvantage by the consumer’s increased expectations. 150 How does a Company Exceed Customer Service Expectations? Many companies today talk about exceeding customer expectations – delighting and surprising them by giving more than they expect. First, it is essential to recognize that exceeding customer expectations of the basics is virtually impossible. Honoring promises – having the reserved room available, meeting deadlines, and showing up for meetings, delivering the cost service – is what the company supposed to do. Companies are supposed to be accurate and dependable and provide the service they promised to provide. How, then, does a company delight its customer and exceed the expectations? In virtually any service, developing a customer relationship is one approach for exceeding service expectations. The United States Automobile Association (USSA), a provider of insurance to military personnel and their dependents, illustrates how a large company that never interacts personally with its customer can surprise and delight them with its personalization of service and knowledge of the customer. Using the state of art imaging system, all USA employees can access any customer’s entire information file in seconds, giving them full knowledge of the customer’s history and requirements and the status of the customer’s recent interactions with the company. Expecting a lower level of personalization from an insurance company and from most any service interaction on the telephone, USA’s customers are surprised and impressed with the care and concern employees demonstrate. Do customer service expectations continually escalate? Customer expectations are dynamic. In the credit card industry, as in many competitive service industries, battling companies seek to best each other and thereby raise the level of service above that of competing companies. Service expectations- in this case adequate service expectations – rise quickly as service delivery or promises rise quickly. In a highly competitive and rapid changing industry, expectations can thus raise quickly. For this reason companies need to monitor adequate service expectations continually- the more turbulent the industry, the more frequent the monitoring needed. Desired service expectations, on the other hand, are far more stable. Because they are driven by more enduring factors, such as personal needs and enduring service intensifiers, they tend to be high to begin with and remain high. 151 How does a Service Company stay ahead of Competition in Meeting customer Expectations? All else being equal, a company’s goal is to meet customer’s expectations better than its competitors. Given the fact that adequate service expectations change rapidly in a turbulent environment, how can a company ensure that it stays ahead of competition? The adequate service levels reflect the minimum performance level expected by customers after they consider a variety of personal factors, including the availability of service options from other providers. Companies whose service performance falls short of this level are clearly at a competitive disadvantage escalating as the gap widens. These companies may will be reluctant customers ready to take their business elsewhere the moment they perceive an alternative. If they are to use service quality for competitive advantage, companies must perform above the adequate services level. This level, however, may signal only a temporary advantage. Customers’ adequate service levels, which are less stable than desired service levels, will rise rapidly when competitors promise and deliver a higher level of service. If a company’s level of service is barely above the adequate service level to begin with, a competitor can quickly erode that advantage. Companies currently performing in the region of competitive advantage must stay alert to the need for service increases to meet or beat competition. 12.6 Customer Perceptions Customers perceive services in terms of the quality of the service and how satisfied they are overall with their experiences. Customer satisfaction is the consumer’s fulfillment response. It is a judgment that a product or service feature, or the service itself, provides a pleasurable level of consumption related fulfillment. Determinants of Customer Satisfaction 1. Service Features Customer satisfaction with a service is influenced significantly by the customer’s evaluation of service features. For a service such as a resort hotel. Important features might include the pool area, golf facilities, restaurants etc. 152 2. Consumer Emotions Customers’ emotions like good mood or bad mood in a situation affect the customer perceptions and satisfactions. 3. Attributes for Service Success or Falilure Attributions- the perceived causes of events- influence perception of satisfaction as well. For example, a patient will analyse the causes for non-cure because of his failure in taking medicines in time or not proper diagnosis by doctor before make any perceptions of satisfaction. 4. Perceptions of Equity or Fairness Customers ask themselves: Have I been treated fairly compared with other customers? Did I pay a fair price for the service? Notions of fairness are central to customers’ perceptions of satisfaction with services. 5. Other Customers, Family Members and Co-Workers In addition to services features and one’s own individual feelings and beliefs, consumer satisfaction is often influenced by other people. For example, satisfaction with a family vacation tour influenced by the reactions and opinions of other family members. 12.7 Strategies for Influencing Customer Perceptions Measure and manage customer satisfaction and service Quality It should be obvious that a key strategy for customer-focused firms is to measure and monitor customer satisfaction and service quality. Such measurements are needed to track trends, to diagnose problems, and to link to other customer focused strategies. In examples provided throughout the text, you will see how companies have linked their measurement of customer satisfaction to strategies related to employee training, reward system, internal process metrics, organizational structure, and leadership goals. Aim for customer Quality and Satisfaction in Every service Encounter Because every service encounter is potentially critical to customer retention, many firms or ‘Zero defects’, or 100 percent satisfaction in every encounter. To achieve this requires first, clear communication of all of the points of contact between the organization and its customers. 153 Plan for Effective Recovery Service failures and subsequent recovery efforts create strong memories for customers and for employees who empathize with their customers. When service customers have been disappointed on the first try, “doing it very right the second time” is essential to maintaining customer loyalty. This implies to determine the root causes of failure so that a redesign can ensure higher reliability. Facilitate Adaptability and Flexibility Customer perceptions of organizational adaptability and flexibility also create feelings of satisfaction or dissatisfaction in service encounters. The existence of this encounter theme suggests a need to know when and how the system can be fixed, and when and how to explain to customers why a particular request cannot be granted. Knowledge of the service concept, the service delivery system and its operation, and the system enables employees to inform customers about what happened, what can be done, and why their needs or requests can or cannot be accommodated. Such knowledge and willingness to explain can leave a lasting positive impression on customers even when their specific requests cannot be met. Encourage Spontaneity Memorable encounters occur for customers even when there is no system failure and no special request. Although employee behaviors within this third theme would appear to be somewhat random and relatively uncontrollable, there are things that organizations can do to encourage positive spontaneous behaviors and discourage negative behaviors. Recruitment and selection procedures can be used to hire employees with strong service orientation, whose natural tendency is to be service-minded. The foundations or building blocks for satisfaction and service quality-namely, service encounters or the “moment of truth”. It is where promises are kept or broken and where the proverbial rubber meets the road-sometimes called “real-time marketing”. It is from these service encounters that customers build their perceptions. 12.8 Service Encounters From the customer’s point of view, the most vivid impression of service occurs in the service encounter or “moment of truth”, when the customer interacts with the service firm. For 154 example, among the service encounters a hotel customer experiences are checking into the hotel, being taken to a room by a bell person, eating a restaurant meal, requesting a wake-up call, and checking out. You could think of the linking of these moments of truth as a service encounter cascade. It is in these encounter contribute to the customer’s overall satisfaction and willingness to do business with the organization again. From the organization’s point of view, each encounter thus presents an opportunity to prove its potential as a quality service provider and to increase customer loyalty. Some services have few service encounters, and others have many. The Disney Corporation estimates that each of its amusement park customers experience about 74 service encounters and that a negative experience in any one of them can lead to a negative overall evaluation. Mistakes or problems that occur in the early levels of the service cascade are particularly critical because a failure at one point results in greater risk for dissatisfaction at each ensuring level. Marriott Hotels learned this through their extensive customer research to determine what service elements contribute most to customer loyalty. They found that four of the top five factors came into plays in the first 10 minutes of the guest’s stay. Importance of Encounters Although early events in the encounter cascade are likely to be especially important, any encounter can potentially be critical in determining customer satisfaction and loyalty. If a customer is interacting with a firm for the first time, that initial encounter will create a first impression of the organization. In these first encounter situations, the customer frequently has no other basis for judging the organization, and the initial phone contact or face-to-face experience with a representative of the firm can take on excessive importance in the customer’s perceptions of quality. A customer calling for repair service on a household appliance may well hang up and call a different company if he is treated rudely by a customer service representative, put on hold for a lengthy period, or told that weeks is the soonest someone can be sent out to make the repair. Even if the technical quality of the firm’s repair service is superior, the firm may not get the chance to demonstrate it if the initial telephone encounter drives the customer away. Even when the customer has had multiple interactions with a firm, each individual encounter is important in creating a composite image of the firm in the customer’s memory. Many positive experiences add up to composite image of high quality, whereas many negative interactions will have the opposite effect. On the other hand, a combination of positive and negative interactions will leave the customer feeling unsure of the appeals of competitors. For example, 155 a large corporate customer of an institutional food provider that provides food service in all of its company dining rooms and cafeterias could have a series of positive encounters with the account manager or salesperson who handles the account. These experiences could be followed by positive encounters with the operations staff that actually set up the food service facilities. However, even with these positive encounters, later negative experiences with the staff who serve the food or the accounting department that administers the account and billing producers can result in the corporate customer wondering about the quality of the organization and unsure of what to expect in the future. Each encounter with different people and departments representing the food service provider adds to or detracts from the potential for a continuing relationship. Logic suggests that not all encounters are equally important in building relationships. For every organization, certain encounters are probably key to customer satisfaction. For Marriott hotels, as noted, it is the early encounters that are most important. In a hospital context, a study of patients revealed that encounters with nursing staff were more important in predicting satisfaction than were encounters with meal service or patient discharge personnel. Types of encounters A service encounter occurs every time a customer interacts with the service organization. There are tree general types of service encounters: remote encounters, phone encounters, and face-to-face encounters. A customer may experience any of these types of encounters, or a combination of all three, in his or her relations with a service firm. First, encounters can occur without any direct human contact such as when a customer interacts with a bank through the ATM system, with ticketron through an automated ticketing machine, with a retailer through its internet website, or with a mail-order service through automated dial-in ordering. Remote encounter also occur when the firm sends its billing statements or communicates other types of information to customers by mail. Although there is no direct human contact in these remote encounters, each represents an opportunity for the firm to reinforce or establish quality perceptions in the customers the tangible evidence of the service and the quality of the technical processes and systems become the primary bases for judging quality. In more organizations the most frequent type of encounter between an end customer and the firm occurs over telephone. Almost all firms rely on phone encounters in the firm of customer service, general inquiry, or order-taking functions. The judgment of quality in phone encounters 156 is different from remote encounters because there is greater potential variability in the interaction. Tone of voice, employee knowledge, and effectiveness/efficiency in handling customer issues become important criteria for judging quality in these encounters. A third type of encounter is the one occurs between an employee and a customer in direct contact. At Disney theme parks, face-to-face encounters occur between customers and ticket-takers, maintenance personnel, actors in Disney characters, ride personnel, food and beverage services, and others. For a company such as IBM, in a business-to-business setting direct encounters occur between the business customer and salespeople, delivery personnel, maintenance representatives, and professional consultants. Determining and understanding service quality issues in face-to-face contexts is the most complex of all. Both verbal and nonverbal behaviors are important determinants of quality, as tangible cues such as employee dress and other symbols of service. In face-to-face encounters the customer also plays a role in increasing quality service for herself through her own behaviors during the interaction. 12.9 Sources of Pleasure and Displeasure in Service Encounters Recovery — Employee response to service delivery system failures: The first theme includes all incidents in which there has been a failure of the service delivery system and an employee is required to respond in some way to customer complaints and disappointments. The failure may be, for example, a hotel room that isn’t available, an airplane flight that is delayed six hours, an incorrect item sent from a mail order company, or a critical error on an internal document. The content or form of the employee’s response is what causes the customer to remember the event either favorably or unfavorably. Adaptability— Employee response to customer needs and requests: A second theme underlying satisfaction / dissatisfaction in service encounters is how adaptable the service delivery system is when the customer has special needs or requests that place demands on the process. In these cases, customers judge service encounter quality in terms of flexibility of the employees and the system. Spontaneity— Unprompted and unsolicited employee actions: Even when there is no system failure and no special request or need, customers can still remember service encounters as being very satisfying or very dissatisfying. Employee spontaneity in delivering memorably good or poor service is the third theme. Satisfying incidents in this group represent very pleasant 157 surprises for the customer whereas dissatisfying incidents in this group represent negative and unacceptable employee behaviors (rudeness, stealing, discrimination, and ignoring the customer). Coping— Employee response to problem customers The incidents categorized in this group came to light when employees were asked to describe service encounter incidents in which customers were either very satisfied or dissatisfied. In addition to describing incidents of the types outlined under the first three themes, employees described many incidents in which customers were the cause of their own dissatisfaction. Such customers were basically uncooperative—that is, unwilling to cooperate with the service provider, other customers, industry regulations, and/or laws. In these cases nothing the employee could do would result in the customer feeling pleased about the encounter. The term “coping” is used to describe these incidents because this is the behavior generally required of employees to describe these incidents because this is the behavior required of employees to handle problem customer encounters. 12.10 Summary In this lesson we provided a framework for thinking about customer expectations. This chapter discussed the meaning and types of expected service, factors that influence customer expectations of service, a model of service expectations, and current issue involving customer service expectations. To develop a true customer franchise – immutable customer loyalty – companies must consistently exceed not only the adequate service level but also reach the desired service level. Exceptional service can intensify customers’ loyalty to a point where they are impervious to competitive options. This lesson also described customer perceptions of service by introducing two critical concepts: customer satisfaction and service quality. These critical customer perceptions were discussed in terms of the determinants that influence each of them. The second major purpose of the chapter was to explain the notion of service encounters, or “moments of truth” as the foundations for both satisfaction and quality. Finally, this lesson described strategies firms use to enhance customer perceptions of service quality and increase customer satisfaction. 158 12.11 Keywords Customer Expectation Customer Perceptions Service Encounter 12.12 1. Review Questions What is the difference between desired service and required service? Why would a service marketer need to understand both types of service expectations? 2. Consider a recent service purchase that you have made. Which of the factors influencing expectations were the most important in your decision? Why? 3. W hy are desire service expectations more stable than adequate service expectations? 4. Do you believe any of your service expectations are unrealistic? Which ones? Should a service marketer try to address unrealistic customer expectations? 5. What is customer satisfaction, and why it is so important? 6. List and define the five dimensions of service quality? 7. Describe a remote encounter, a phone encounter, and a face-to-face encounter that you had recently. 8. Assume you are a manager of a Amusement park, Discuss general strategies you might use to maximize customers’ positive perceptions of your Park, How would you know if you were successful? 159 LESSON – 13 Service Quality Learning Objectives After having read this lesson, you will be able to discuss The meaning of quality in service economy Dimensions of service quality The impact of service quality Servquel survey Structure 13.1 Introduction 13.2 Outcome, Interaction and Physical Environment Quality 13.3 Service Quality Dimensions 13.4 Impact of Service Quality 13.5 Approaches to Service Quality 13.6 Planning, Creating and Delivering Services 13.7 Service Delivery and Evaluation 13.8 Servquel Surveys 13.9 Summary 13.10 Keywords 13.11 Review Questions 13.1 Introduction Service quality assessment focuses specifically on dimensions of service. Service quality is a focused evaluation that reflects the customer’s perception of elements of service such as interaction quality, physical environment quality, and out come quality. These elements are in turn evaluated based on specific service quality dimensions: reliability, assurance, responsiveness, empathy and tangibles. 160 Service quality, a critical element of customer perceptions. In the case of pure services, service quality will be the dominant element in customers’ perceptions. In cases where customer service or services are offered in combination with a physical product, service quality may also be very critical in determining customer satisfaction. 13.2 Outcome, Interaction and Physical Environment Quality A restaurant customer will judge the service on his perceptions of the meal (technical outcome quality) and on how the meal was served and how the employees interacted with him (interaction quality). The décor and surroundings (physical environment quality) of the restaurant will also impact the customer’s perceptions of overall service quality. Assessment of all the above three aspects of quality of services are not possible in all the services. Sometimes assessment of technical quality will be difficult and ambiguous for example lawyers, doctors, engineers, professors etc. 13.3 Service Quality Dimensions Customers judge the quality based upon the various factors. The following are different dimensions a customer looks in to quality. 1. Reliability - The ability to reproduce the same level of service again and again 2. Responsiveness - Willingness to help and provide prompt service. 3. Assurance - Employees’ knowledge and courtesy and their ability to inspire trust and confidence. 4. Empathy - Caring, individual attention to customers. 5. Tangibles - Appearance of physical facilities, equipment, personnel and written materials. It is widely acknowledged that efforts to define and measure the quality of tangible products as instinct from services have proved more successful. The characteristics of services have made the determination of what constitutes quality that much more difficult and thereby its measurement less then complete. To increase our understanding and to enable practical step to be taken two things need to be present. · Specification of the determinants of service quality. 161 Measurable quality standards set. Achievement in these two areas will vary depending on whether the focus is: A low contact or a high contact service e.g. a fast food outlet versus an education course. Process or output. Whatever the service it is useful to bear in mind the following questions when it comes to quality What is the service supposed to do What does the service actually do Quality then refers to the extent to which a service is what it claims to be and does that it claims to do. It must not be confused with grade. For examples the quality of a library cannot be judged in an abstract way by, say counting the number of Shakespeare volumes possessed and subtracting the number of other novels. Instead the prime aspect of quality is whether the library provides people with what they want – it is a good library if it does and a bad library if it does not. 13.4 Impact of Service Quality Quality needs to be understood and managed throughout a service organization. Four areas in particular may serve as an arena with in which the question of quality can be addressed 1. Service Encounter - the customer interacts with animate (the service employees) and inanimate objects (the physical evidence). 2. How knowledgeable and courteous is the service employee? How effective is the sign in terms of visibility information provided positioning? How can the customer contribute to the quality of the encounter? What contribution do script theory and role theory make? Service design: the customer goes through a process to obtain a service. How well designed is the process? Is there a blueprint /flow chart of the process? 162 3. To what extent is there flexibility in the system? Does the process enquire customization of standardization? Service Productivity—there is a relationship between the quality of goods or services produced and the quality of resources used to produce them. What are the possible relationship between changes in quality and changes in quantity? i.e., if quality increase (number of patients seen by a general practitioner) what effect could that on the quality of service? What role should the customer play in the productivity equation? 4. Service organization and culture—the culture of an organization and the way it is organized can affect the quality of service. How do the various organization cultures (power, role, achievement and support) act as a key to understand the kind of service produced? What characteristics/features of an organization enable it to respond positively to customer needs and deliver a quality service? Another way to customer quality and its impact throughout an organization is to put the customer at the centre of the process and highlight the number of encounters, or moments of truth he or she may have with the organization. Consider the case of a student in an educational institution. Expectation of both the educational institution and potential student can be determined at the beginning. We can then expectation with the perception of students and staff during and at the end course. This kind of exercise can be undertaken with any service organization. The benefit of doing so is that it disciplines the service provider to think of how all aspects of the organization contribution to service quality. The customer can be asked how important each part of the service is and how well the organization performs the aspects. 13.5 Approaches to Service Quality The word “quality” has different meanings can be used in different ways. Garvin (1984) identified 5 categories or approaches to the concept of the quality. 163 The transcendent approach The manufacturing – based approach The user – based approach The product – based approach The value - based approach The transcendent approach follows the pocket oxford dictionary’s definition.’ Degree of excellence, relative nature.’ quality in the sense is innate excellence. It reflects the best there is so, For e.g.: a five star hotel would be classified as a quality hotel, opposed to the one star, family run hotel. The manufacturing based approach relates to conformance with design or specification. a quality service or product would be one which was free of errors, where on error would be designed as non- compliance with specification. The performance of the child playing a simple piece of music with no wrong notes and the correct timing could, with these approach, we classify as a quality performance. The user- based approach adopts the attitude that, if a service or product meets the requirements of the user, then it the quality service or product. Another phrase commonly used with this approaches fitness foe purpose. A cheap watch, which keeps the time accurately and meets the time requirements of the bearer, would be classified as a quality watch. On the other hand, if one of the requirements of the watch was to help create the right image for a successful, will of, power wielding young executive, then a gold titan would be more appropriate, and the cheap but accurate watch could not be considered a quality watch. The product – based approach is a quantitatively based approach and considers measurable characteristics. In most cases, more equates with the better and is thus deemed to be of higher quality than one which took 8 seconds on the other hand less would sometimes be classified as of higher quality for e.g. a dentist who took only 5 minutes, as compared with 10 minutes, to complete a filing would be considered as providing a higher-quality service! The value – based on customs and traditions beliefs and emotions, perceived to be of high value. 164 13.6 Planning, Creating and Delivering Services 165 13.7 Service Delivery and Evaluation 166 13.8 Servqual Surveys One of the first measures to be developed to measure service quality was the SERQUAL survey. This survey was developed by Valarie A. Zeithaml The SERQUAL scale involves a survey containing 21 services attributes, grouped into the five service quality dimensions viz. reliability, responsiveness, assurance, empathy and tangibles. Data gathered through a Servqual survey can be used for the following purposes: To determine the average gap score (between customers’ perceptions and expectations) for each service attribute. To assess a company’s service quality along each of the five dimensions. To track customers’ expectations and perceptions. To compare a company’s service quality with other competitors. To identify and examine customer segments. To assess internal service quality. 13.9 Summary This lesson discussed service quality, a critical element of customer perceptions. Service quality will be the dominant element in customers’ perceptions. In cases where customer service or services are offered in combination with a physical product, service quality may also be very critical in determining customer satisfaction. Service quality dimensions, impact of service quality were analysed. Approaches to service quality and servqual survey were also described in this lesson. 13.10 Keywords Assurance Empathy Service Quality Servqual Reliability 167 Responsiveness Tangibles 13.11 Review Questions 1. What are the dimensions of service quality? 2. Explain the impact of service quality. 3. What are the ways of approaching services quality? 4. Describe servqual survey. 168 LESSON – 14 Financial Services and Health Services Marketing Learning Objectives After having read this lesson, you will be able to discuss The special characteristics of financial marketing How the competitive environment have impact on financial marketing The need for financial services marketing mix. Hospitality elements in Health services Characteristics of Health services Role of health services in India Functions of Health services Information providers Structure 14.1 Introduction 14.2 Characteristics of Financial Marketing 14.3 Financial Marketing and Competitive Environment 14.4 Financial Services Marketing Mix 14.5 Service Marketing in Health Services 14.6 Characteristics of Health Services 14.7 Leading Health Services in India 14.8 Functions 14.9 Competitive Environment 14.10 Summary 14.11 Keywords 14.12 Review Questions 169 14.1 Introduction The financial services industry in India has experienced massive change since the early 1980s. Prior to this time, banks served different customer needs, often catering to different sets of customers. Regulatory frame works and traditional business practices meant that there was virtually no competition between types of institution. Banks provided current accounts, loans and business finance. The removal of many barriers to competition has been brought about through deregulatory legislation. This has led to intense competition as the boundaries between Banks and other institutions have faded. Additionally the size of the market continues to grow, as does the range of services available, due to the increased sophistication of consumers and their willingness to buy or invest in complex financial ‘products. As well as traditional life insurance and other types of insurance and savings policies, higher-risk products such as Personal Equity Plans, shares, Mutual Funds and Unit Trusts are in demand from a far greater number of consumers than ever before. This chapter reviews some of the special characteristics of financial services marketing and developments, which have taken place. The legislative changes referred to are also considered together in the light of the competitive environment. 14.2 Characteristics of Financial Services Marketing Services tend to share four important characteristics, which distinguish them from physical products and impact on marketing programmers, namely: 1. Intangibility 2. Inseparability 3. Heterogeneity/variability 4. Perishability Financial services share these characteristics to a degree but also exhibit certain differences. Some of these similarities and differences are included in the following discussion: 170 1. Intangibility Financial services are generally intangible, but the service providers go to considerable lengths to ‘tangibilise’ the service for customers. A building society passbook, regular bank statements, ‘gold’ credit cards and insurance policies are all examples of the way in which financial services are presented to consumers. They can enhance the image of the service and the provider and even bestow status or implied benefits upon the user as with a ‘gold’ card. Physical reminders of the service product, brand name and value serve to reassure the consumer and help the organization’s positioning. 2. Inseparability The type degree of inseparability depends on the service and the actual supplier. Whilst the service will frequently be inseparable from the service provider, such as the quality of service received by a customer visiting their bank to pay some bills, the situation is frequently less clear. Many everyday transactions are carried out now via automated teller machines (ATMs) which are now so familiar. Because access to these systems has broadened to allow use of any particular machine by customers of other institutions, the customer will often not be dealing directly with their own provider. 3. Heterogeneity/ Variability In this case, the complexity of the service transaction process will determine the extent of variability and this can differ to a large extent between institutions and even within one institution. The greater the degree of automation within any transaction process, the greater the degree of standardization. Thus, simple transactions may be carried out via ATMs and completely standardized or via a branch counter where they might be fairly standardized but subject to some variation in quality. Total standardisation is not necessarily desirable from the consumer’s point of view. A friendly greeting or being addressed by name can enhance service delivery and while an ATM cannot arrange an emergency overdraft facility when funds are low, branch staff can look at the standing of individual customers and make arrangements where appropriate, satisfying the customer and profiting from charges applied to the account. Some customers may want transactions to be handled as speedily and efficiently as possible while others may prefer a 171 caring approach and a friendly chat. Customer care is the key for organisations whether engaging with customers in a simple ‘free’ transaction such as paying a bill or a long-term commitment such as a mortgage or pension. Tailoring the approach to the needs of the individual customer as far as possible may be the best policy. 4. Perishability Again, the degree of perishability depends on the type of service. If a cheque needs to be cleared by a certain date and the system causes a delay then the benefits to the consumer are lost so the service could be said to be perishable. By and large, however, money and financial services are enduring in nature. If a bank’s reserves are not fully utilized profitably through lending or investment they will still retain their worth and may be utilized at a later date. A bank branch which does not have any customers at all on a particular day may actually gain rather than lose profit, as staff may be able to use the peace and quiet to catch up on other work. Production and consumption is frequently not simultaneous with financial services. Whilst a customer ordering a meal in a restaurant does so on the understanding that their needs will be satisfied the same evening, a customer signing for a savings plan may expect benefits in five or ten years, or even longer. There may be no immediate benefit-on the contrary having to make regular payments may easily be seen as a disadvantage or a cause of worry. Even financial services which offer a benefit such as a loan or mortgage which enables the customer to purchase something which they otherwise could not afford are not usually produced and consumed simultaneously, although very fast or ‘instant’ decisions on loan facilities within certain limits are increasingly offered as a benefit by finance companies. A key in financial services marketing is to create awareness of long-term benefits and helping customers to recognize the need for financial services such as pensions which they may not see themselves needing for many years, or needs which they not see themselves needing for many years, or needs which they not want even to consider at all such as life insurance. Financial service providers also need to reduce cognitive dissonance in customers who might back out of a commitment due to second thoughts. Other characteristics There are other characteristics which apply to many types of financial services and which must be taken into considerations by marketers. These vary between type of service and type of provider but the following examples illustrate key ideas: 172 High involvement purchase/complex products Many financial services are high involvement purchases. This will mean that the customer will shop around the best advice or the best offer and will generally take a long time to plan the purchase, for example with a mortgage or a pension. Information will be sought about competing brands and products, usually from a variety of sources including advertising, the press, informal advice from colleagues or family, perhaps, and formal advice from the bank manager or a financial consultant. The process can be likened to buying a car or any other major purchase, except that the customer often perceives greater risk as financial services are frequently highly complex and it is difficult for the layperson to assess their value/potential. Someone buying a car is usually happy to rely on the supplier’s guarantee that any faults will be put right but a customer looking for a good investment has no such guarantee-often a warning instead that investment products may go down as well as up in value. High levels of brand loyalty Customers tend to say with financial service providers and use them to satisfy their needs at different stages of their life. Banks recognize this well and are keen to provide student overdrafts in the hope of retaining a professional salaried account holder for many years. Many people choose the same bank or building society as their parents open an account for them. Children and teenagers are a key target market for and building societies because of the possibilities of future business. Insurance companies’ emphasis in their advertising that they offer services to meet a whole lifetime of needs from a first-time mortgage, life insurance and household insurance for family protection, savings and pensions for old age and even funeral costs cover. Customer retention is the aim for financial service providers. Customers will, and increasingly do, change providers if they are very dissatisfied, however, or if they perceive better value elsewhere, thus increasing the competitive pressure between institutions. Financial services also tend to be joint purchases, very often, with decisions made by more than one person. The nature of many products mean that repeat purchase is very low or infrequent so the service provider needs to maintain contact with the customer over time whenever possible through annual statements, sales follow-ups and so on. 173 Service providers need to keep abreast of significant changes in their customers’ circumstances as far as possible so that they can offer new services as required and safeguard both their own and the customer’s interests in case of financial difficulty. Many areas identified above are not unique to financial services but must be taken into consideration when planning effective marketing programmes. Other similar characteristics include the following: The importance of advertising in creating strong brand image and positioning. District market segments and the use of target marketing, especially in growing markets (for example career women, the over 55’s). Increasing price sensitivity and heavy price competition (for example car and home insurance, bank and credit card charges.) Growth in the importance of customer care in service differentiation. 14.3 Financial Marketing and Competitive Environment Environmental analysis and monitoring is of critical importance in any industry especially in the dynamic financial services industry with its proliferation of products and services and changing industry structure. External environmental analysis usually involves assessing influences on the organisation’s business activity under the following main headings: 1. Political/ Legal 2. Economic 3. Socio-cultural 4. Technological Some key influences in each of these categories and the competitive environment will be reviewed here: 1. Political/ Legal Some major political and legal developments have been reviewed in the preceding section, which have highlighted the radical changes, which have been brought about by these influences. Other influences which can have an impact on financial services and consumer confidence include the following: 174 Government attitude towards home ownership. State provisions of pensions. Government encouragement of savings and investment (via tax benefits, for example). Regulatory control and protection (to prevent the collapse of financial institutions and protect investors’ money). 2. Economic Economic factors are key variables, which will impact on activity in the financial services sector. The level of consumer activity is governed almost entirely by income levels and personal wealth. As income levels grow, more discretionary income is available to spend on financial services. Consumer confidence in the economy and in job security also has a major impact; if lean times are foreseen ahead, savings will take priority over loans and other forms of expenditure. Consumers may also seek easy access savings and be unwilling to tie up their money for longer periods with potentially more attractive investments. The main economic factors which should be monitored with regard to financial services marketing are as follows: Personal and household disposable income Discretionary income levels Employment levels The rate of inflation Income tax levels and taxation structures Savings and investment levels and trends · Stock market performance Consumer spending Consumer credit 3. Socio – Cultural Many demographic factors have an important bearing on financial services markets. Certain factors have been particularly noticeable in recent years such as the growth of inherited wealth 175 through property ownership and changing attitudes towards consumer credit and debit. Key influences include: Changing employment patterns Numbers of working women The aging population Number of first-time house buyers Changes in the number of households Marriage/divorce/birth rates Consumption trends 4. Technological Technology has had a major impact in many industries including financial services and banking in particular. ATM services, On line Banking (Internet based) are not only provide cash but allow for bill payments, deposits and instant payments which are widely used by customers. From the customer’s view point, technology has played a major role in the development not of the financial product itself but of the process whereby the service is delivered. Automated queuing systems have made visits to the bank easier and more convenient. Telephone banking and insurance services such as First Direct and Direct Line are examples of telecommunications technology being used to innovate in place of a traditional branch based service process. Technology has also played a major role within organizations, bringing about far greater efficiency through computerized records and transaction systems and also in business development, through the setting up of detailed customer databases for effective segmentation and targeting. Competitive environment The financial services industry has undergone major changes, as discussed earlier. During the 1980s the industry expanded considerably and the number of financial products available proliferated. The trend since the early 1990s, however, is towards more streamlined business structures through rationalization to produce greater efficiency and higher profitability in a market suffering from the setback of the recession. 176 14.4 Financial Services Marketing Mix The key objectives for financial services providers are Attracting customers in the first place Retaining customers through high levels of client satisfaction and by providing a portfolio of financial services to meet their changing needs over time. Some key issues discussed earlier in this chapter, which must be taken into consideration in designing the most effective financial services marketing mix like product, price, place, promotion, people, process and physical evidences. 14.5 Service Marketing in Health Services Health related services should, ideally, reflect pleasure at meeting new customers and greeting old ones when they return. Well managed business try, at least in small ways, to ensure that their employees treat their customer as guests. Courtesy and consideration for customers’ needs apply to both face-face encounters and telephone interactions. Hospitality finds its full expression in face-face encounters. In some cases it starts and ends with an offer of transport to and from the service site, as with courtesy shuttle buses. If customer must wait outdoors before the service can be delivered, then a thought full service provider will offer weather protection; if indoors, then a waiting area with seating and even entertainment (television, newspapers or magazines) to pass the time should be made available. Recruiting employees who are naturally warm, welcoming and considerate for customer-contact jobs helps to create a hospitable atmosphere. The quality of hospitality services offered by a firm can increase or decrease satisfaction with the core product. This is especially true for people processing services where customers cannot easily leave the service facility. Private hospital often seek to enhance their appeals by providing the level of room service including meals that might be included in a good hotel. Examples of hospitality elements Greeting Toilets and washrooms Transport 177 Waiting facility and amenities Lounges, waiting areas, seating Weather protection Magazines, entertainment, newspapers Foods and beverages Bathroom kits Security. 14.6 Characteristics of Health Services 1. Professionals registered with the medical council dominate hospitals. Therefore certain peculiarities of their organization and of their professional colleges need to be kept in mind. The conflict between the organizational objectives and there objectives of the professional bodies cannot be ruled out. This is further complicated by the fact that the reward received for achieving their professional objectives may be greater than those received for obtaining organizational ones. This professional work of management activates of the hospital on a part time basic. Most of the time the work they do is similar that done by their subordinates. They often prefer to work independently. In hospitals, the professional qualities of the doctor and paramedical staff are of the primary importance, other consideration being secondary Promotions are on the criteria established by the organization and tend to be time based not much emphasis is paid to effectiveness and efficiency of the working of the hospital. The professional medical education lays stress on professional discipline and does not usually includes management education. Although the leadership job in a nonprofit organization may require more management skills than professional skills, tradition often requires that the manager of such a unit be a professional. Professional often tends to give inadequate weight to financial implication of their decisions. 178 2. Less subject to market forces The most hospitals established by the government are less subject to market forces for they have a captive population to serve. Profit oriented organization operate in the market environment and have to survive in the fact of competition. Their performance has to be equal, if not better, to performance of their competitor and there prices have to be sufficiently higher then there cost, to generate profit in constant of their non-profit organization do not follow the dictates of market demand, but what they consider best in absence of market mechanism for allocating resource manager of different units compete with one another for available resource. In such unit, there is greater difficulty in relating cost to benefits and measuring performance. 3. It produces intangible services rather than tangible goods Services cannot be stored; these are perishable. It is not easy to measure quantity of service produced the quantity of service cannot be inspected in advance like that of goods. The literature and control techniques tend to emphasis the production environment rather than service organization. Examples given for explanation techniques like, standard cost, variance analysis, statically quality control, inventory control escudo not generally pertain to service organization as they are less efficient even though the statistical comparisons are not possible in the absence of data on productivity. 14.7 Leading Health Services in India India is considered the leading country promoting medical tourism-and now it is moving into a new area of “medical outsourcing,” where subcontractors provide services to the overburdened medical care systems in western countries. India’s National Health Policy declares that treatment of foreign patients is legally an “export” and deemed “eligible for all fiscal incentives extended to export earnings.” Medical tourism is a growing sector in India. The reports estimate that medical tourism to India is growing by 30 per cent a year. In October 2015, India’s medical tourism sector was estimated to be worth US$3 billion. It is projected to grow to $7–8 billion by 2020. According to the Confederation of Indian Industries (CII), the primary reason that attracts medical value travel to India is costeffectiveness, and treatment from accredited facilities at par with developed countries at much lower cost. The Medical Tourism Market Report: 2015 found that India was “one of the lowest 179 cost and highest quality of all medical tourism destinations, it offers wide variety of procedures at about one-tenth the cost of similar procedures in the United States.” Traditionally, the United States and the United Kingdom have been the largest source countries for medical tourism to India. However, according to a CII-Grant Thornton report released in October 2015, Bangladeshis and Afghans accounted for 34% of foreign patients, the maximum share, primarily due to their close proximity with India and poor healthcare infrastructure. Russia and the Commonwealth of Independent States (CIS) accounted for 30% share of foreign medical tourist arrivals. Other major sources of patients include Africa and the Middle East, particularly the Persian Gulf countries. In 2015, India became the top destination for Russians seeking medical treatment. Chennai, Kolkata, Mumbai, Hyderabad, Bangalore and the National Capital Region received the highest number of foreign patients primarily from South Eastern countries. India’s top-rated education system is not only churning out computer programmers and engineers, but an estimated 20,000 to 30,000 doctors and nurses each year. The largest of the estimated half-dozen medical corporations in India serving medical tourists is Apollo Hospital Enterprises. It is Apollo that is aggressively moving into medical outsourcing. Apollo already provides overnight computer services for U.S. insurance companies and hospitals as well as working with big pharmaceutical corporations with drug trials. Apollo’s business began to grow in the 1990s, with the deregulation of the Indian economy, which drastically cut the bureaucratic barriers to expansion and made it easier to import the most modern medical equipment. The first patients were Indian expatriates who returned home for treatment; major investment houses followed with money and then patients from Europe, the Middle East and Canada began to arrive. Apollo now has 52 hospitals all over India and some foreign countries. The company is in partnership in hospitals in Kuwait, Oman and Nigeria. Western patients usually get a package deal that includes flights, transfers, hotels, treatment and often a post-operative vacation. 14.8 Functions The functions of hospitals appear to be obvious, but in reality this are quite complex-they keep changing with time. Sometimes they are also in conflict with each other some of the main function of hospitals is given below. 180 1. It is patients care function: It is important to remember besides treatment attitudes and behavior pattern of health professionals are known to have a important influence on patients care as they are directly related to quality of care. The different system affecting the patients and their effects are discussed below. a. Environmental system Schulz and Johnson quote a number of studies to say that the physical environment of the hospital also affects patient’s response to treatment –a large number of sanatoriums are located in hill stations. b. Social system the effect of attitude of staff towards patients due to the change in their stature is obvious. c. Culture relationships the lower income group person have a problem in communicating with higher social economic status physicians which is obvious the barrier exists not only because of different languages spoken by them also because of classes difference some of the doctor make a conscious effort to overcome this. d. Season have a direct influence of diseases and illness especially in context of our country where the variations too wide. 2. Providing a workshop for physicians: it has to be understood that the physician is not so much a part of hospital as the hospital is the part of physician practice. 3. Working as a community work health center: hospitals have increasingly taken up a proactive role to improve the population they serve, rather then sticking to the reactive role of crisis care. 4. Serving the instruction itself by the achieving perpetuation, growth and prestige for instructions, it is staff and community. Customer particulars are facilitated by technology in many industries. For example in education, technology allows students to interact with each other and their professors via email and discussion boards. In real estate technology allows buyers to preview homes and develop lists of places they would like to visit without having to reply totally on a real estate agent to find all available properties. And in high technology industries, business customers often interact with each other on the web, helping each other solve problems, answering each other’s questions, and so forth. All of these are examples of how technology-particularly the Interest-has facilitated customer participation and, as in the case just described increased 181 customer satisfaction. Nowhere is this more apparent than in health care. There is probably no greater, higherparticipation service context than health care where the customer must participate and where the provider and customer clearly co-create the service. Patient participation is required at multiple levels. To achieve optimal health outcomes, patients must Provide accurate information about symptoms and health background. Answer detailed questions Help to decide on a course of treatment Carry out the prescribe regimen leading to recovery Technology is clearly influencing how customers perform these roles and shifting in some senses the power of information into the hands of consumers. Two studies by the Pew Internet and American Life Project, funded by the Pew Charitable Trusts, illuminate the trends in online health care as well as some of the challenging issues. This research showed that as of September 2001, 61 percent of U.S Internet users or over 65 million people, hand gone online in search of health information. Of these “ health seekers,” a majority go online for health care information at least once per month and about half say the advice found there helped improve the way they take care of themselves. They seek information about specific diseases, mental health nutrition and fitness drugs and drug interaction, and specific doctors and hospitals. Over 40 percent were seeking information for themselves and their own medical conditions and over 50 percent sought information on behalf of a friend or family member. People like getting health information this way because of the convenience the wealth of information that is available and the fact that research can be done anonymously. Thousands of Internet sites provide some type of health-related information. Some belong to health care providers like Mayo Clinic (www.mayo.edu) or pharmacy benefits providers like Advance PCS (www. Advanceoaradigm.com). Others are operated totally on-line-like WebMD (www.webmd.com) or Drugstore. Com (www.drugstore.com)-without affiliation to a specific health care provider. Yet others are information sites for specific health conditions such as AIDS, depression diabetes, breast cancer, and the like. Although some of the purely online health information sites did not survive the dot-com downturn many are still thriving and very popular with customers. 182 All of their readily available medical information has the potential to change the role of the health care consumer to one of active participant in diagnosing illnesses treatment options and determining overall well-being. Armed with information, patients gain confidence in asking questions and seeking appropriate diagnoses in some cases they can e-mail questions to their doctors or others providers or find support in chat groups, bulletin boards and e-mail lists on the Internet. Despite this growth and popularity there are a number of concerns that patients and doctors share regarding health information online. The two primary concerns are privacy of patient data and reliability of health information provided online. The Pew study of internet health care usage found that 63 percent of those who sought health information on the internet felt that putting their own private medical records and information on the web would be a bad idea; 89 percent were concerned that their information could be sold to a third party; 85 percent were concerned their insurance company might raise their rates or deny coverage based on sites they visited and 52 percent were concerned about employers finding out which sited they visited. Many (86 percent) were also concerned about the reliability of the information they found on the web. Although health laws being implemented are intended to protect patient information privacy, it appears that many websites may fall between the cracks in terms of being required to follow the new laws unless they are owned or operated by a health care provider a health plan or a health care clearinghouse. Thus consumers will continue to be wary of putting their personal health information on the web. As for information reliability many sites are now making very apparent the sources of their information. For example, Intel health (www.Intelihealth.com) is now closely linked with Harvard’s medical school. National and international associations are also developing standards and “seal of approval” programs to address privacy security and quality of information on the health. 14.9 Competitive Environment Competitive Environment provides corporations with the programs and tools needed to make them more competitive and effective. Health services dedicated to bringing innovative solutions to environmental issues. The government is taking a lot initiative to help the organizations to achieve environmental, health and safety excellence while improving the competitive position in today’s demanding business environment. 183 14.10 Summary Financial Services reviewed some of the special characteristics of financial services marketing and developments, which have taken place. The legislative changes referred to are also considered together in the light of the competitive environment. The impact of competitive environment of financial services was discussed. Financial marketing mix in light of the characteristics was also discussed. Health services in India is progressing at a faster speed. India is considered the leading country promoting medical tourism-and now it is moving into a new area of “medical outsourcing,” where subcontractors provide services to the overburdened medical care systems in western countries. General characteristics of health services were analysed. Functions of health services were also discussed this lesson. 14.11 Keywords Financial Services Health Services 14.12 Discussion Questions 1. Explain the role of financial services in India. 2. Describe the characteristics of financial services marketing. 3. How will you analyse the competitive environment with respect to financial marketing? 4. Briefly mention about financial marketing mix. 5. Explain the role of health services in India. 6. What are characteristics of Health Services? 7. Explain the functions of health services. 184 LESSON - 15 Education, Public Utility and Professional Services Marketing Learning Objectives After reading this lesson, you will be able to discuss The definition of education services Classification of education services Implications of characteristics in educational service marketing Role of marketing mix in educational services. The workings of various government utilities like Electricity, Post offices etc The importance of professional services The need for marketing the professional services Various strategies of marketing the professional services. Structure 15.1 Introduction 15.2 Definition 15.3 Education and Service Classification 15.4 Service Characteristics and Implications 15.5 Marketing Mix and Education Services 15.6 Public Utility Services 15.7 Professional Service Marketing 15.8 Marketing and the Professional 15.9 Market Segmentation 15.10 Professional Services Marketing Mix 15.11 Summary 15.12 Keywords 15.13 Review Questions 185 15.1 Introduction Marketing of education services gives an in depth exposure to the concept of education as a service. Formal education begins at the school age and depending upon the choice, vocation, and circumstance of the pursuant, matures into intermediate and higher levels of learning, ramifying into professional and specialized fields. Apparently, benefits sought from higher and professional or vocational courses are more tangible or measurable in terms of entry qualifications to a chosen profession, certification to enable practicing a profession or relative ease of access to a suitable form of livelihood. The focus here is whether post-school or higher education the objective is to develop a basic understanding of the concepts involved in the marketing of education. The need to ‘market’ their services has not really been felt by the education sector, as educational institutions, be it colleges or universities or institutions catering to specific fields, especially in developing countries like ours, have always faced more demand than they could cope with. For specialised fields like management and computer education, where attractive market potentials have increasingly caused more and more institutions to be set up, competitive situation is slowly changing. Even the institutions facing heavy demand have been confronted with the question of being able to choose the desired kind of target customers and are, therefore, face to face with issues like product differentiation, product extension, diversification and service integration. 15.2 Definition According to AMA “services are those separately identifiable, essentially intangible activities, which provide want satisfaction and are not necessarily tied to the sale of product or another service. Providing a service may or may not require the use of tangible goods. However, when such use is required, there is no ownership transfer of these tangible goods in a service buying transaction “. as a service, then, can be said to be fulfilling the need for learning, acquiring knowledge – providing an intangible benefit (increment in knowledge, aptitude, professional expertise, skills) produced with the help of a set of tangible (infrastructure) and intangible (faculty expertise and learning) means, where the buyer of the service does not get any ownership. 186 15.3 Education and Service Classification 1. Education is a service that is geared primarily to the consumer market: Therefore it can be classified as a consumer service rather than an intermediate or industrial service, though packages of industrial training are also designed for organizational customers. On the basis of the way in which services have been bought, education, depending upon the type and level, can be classified both as a shopping service and as a specialty service. For a majority of customers, education may fulfill the instrumental function, but there is always a category of customers for whom education and the pursuit of knowledge are expressive motives. 2. There is a category of customers for whom education and the pursuit of knowledge are expressive motives: It categories services as equipment based and people based, depending upon which resource is primarily used in the production of the service. By its very nature, education is essentially a people based service though some service delivery systems may make heavy use of technology and equipment. Services have also been classified on the level of personal contact or high contact services. Education, in its conventional form, is a high contact service. Accordingly, education can b e classified as a pure service with dominant intangibility content. 15.4 Service Characteristics and Implications 1. Intangibility Education, like most ‘pure’ services, is an intangible dominant service – impossible to touch, see or feel. Evaluation of this service can be obtained by judging service content (curricula, course material, student workload, constituent faculty) and the service delivery system. The consumer, based on these evaluation, has a of number alternatives choices before him and may make selection on the basis of his own evaluation referrals, opinions sought from others and of course a brand or corporate image of the organization providing education. At the end of the service experience, the consumer gets something tangible to show for his efforts i.e. Certificate or a grade card denoting his level of proficiency in the given course\ programme. Education cannot be seen or touched and is often difficult to evaluate. It is, therefore, imperative to build in “service differentiation” in the basic product to enable competitive positioning. 187 Precise standardization is difficult. For educational packages of same levels and bearing similar certification (example, BA, BSc, and B.Com degree programmes, postgraduate art, and commerce and management diploma) across universities and colleges, it is often difficult to bring about standardization of course design as resources/need /objectives of different institutions may differ. Institutions like universities, though, try to manage equivalence in standards through ‘boards of studies’, which are generally inter-university bodies. Technical education is sought to be standardized through bodies like the All India Council for Technical Education. Education as a service cannot be patented. This feature implies that course designed or developed at one institution. It also implies that as far as the service product features are concerned, all advantages of a given competitor have an essentially perishable character. Only those discernible strengths, which have their basis in the people resource, cannot be easily replicated. Hence, the added importance of faculty selection and motivation for educational institutions. As these implications of intangibility become apparent to the service product designers and providers in the field of education, the following pointers to marketing planning emerge: Focus on account of intangibility should increasingly be on benefits delivered by the service system and the uniqueness of the package that is being offered. The benefit accruing to the student may emanate from the service product- its depth, width, level or variety or from the extremely high goodwill enjoyed by the institution. · Education, like most other pure services, should be tangiblised so that the beneficiary has some physical evidence to show foe his achievements. Certifications for various level of attainment, citations and separate certificates for any special achievements or activities should be duly prepared and delivered in time to be meaningful. Branding through effective use of institute/university acronym, to aid instant identification and recognition should be practiced. Concerted efforts at building up the organization’s reputation through performance as well as through skilful use of communication tools would need to be carried out to associate this ‘brand name’ with a desired ‘brand image’. 2. Perishability Services are perishable and cannot be stored. To an extent education displays this characteristic, which results in certain features. 188 Production and consumption are simultaneous activities. This is true of most conventional teaching institutions where face-to-face teaching necessitates simultaneous production and consumption. Open and distance learning systems which make substantial use of technology, however, have made it possible for production and consumption of the service to be carried out at different times –the use of audio –video inputs and preparation of course material to be sent to the student across the consume population are designed to meet the challenges posed by the perishability character of services. No inventions can be built up. This is true of most services, as well an education, as a delivered cannot be stored, if there are no students enrolling for the course or to attend the lecture. This factor opens up the challenges of managing the service in the face of fluctuating demand. 3. Inseparability Services are also characterized by the factor of inseparability in the sense that it s usually impossible to separate a service from the person of the provider. In the context of the education, this translates into the need for the presence of the performer (the instructor) when the service is to be performed and consumed. This necessarily limits the scale of operations – the number of instructors available would define the number of simultaneous performance possible. It also means that the distribution mode is more often than not direct in the sense that no intermediaries are involved; the transfer of knowledge is directly from the provider to the learner. Ownership, or the lack of it, also characterizes services. In the context of education, the customer only buys access to education or derives the learning benefit from the services provided. There is no transfer of the ownership of tangibles and intangibles, which have gone into creation of the service product. Payment of fees (price for the service) is just the consideration for access to knowledge and for the use of facilities for a given tenure. 15.5 Marketing Mix and Education Services 1. The service product - The Education package The starting point always has to be the consumer. It is imperative at the very outset of deciding the service product, to outline the distinction between what an educational institution offers in terms of its service and what benefits does it larger population derive from it. . Central 189 to the idea of a service product are the consumer benefit concept, the service concept, the service offer and the service delivery system. While the consumer benefit concept defines what benefits do consumers derive from a particular educational package offered, the service concept is concerned with the definition of the general benefit the service organization offers on the basis of the design of the education offer, marketing orientation suggests that the offer should be fashioned as a response to the identification of the consumer benefits sought. Developing the education product, according to the conceptualization developed by entails: 1. Developing the service concept 2. Developing a basic service package 3. Developing an augmented service offering and 4. Managing image and communication. The service concept defines the intentions of the organization in respect of offering a certain benefit to the consumers. The ‘basic service package’ describes the bundle of services that are needed to fulfill the needs of the target market. Extending this to the education sector, the basic service package determines the entire package offer, which is designed to fulfill the learning needs of a target population. To decision making purposes, it is essential to recognize this basic package as consisting of three elements. These are: 1. The core services. 2. The facilitating services (and goods) and 3. The supporting services. 2. Pricing of the Education Service Pricing decisions for the service offer are of major importance and should ideally be related to achievement of marketing and organizational goals. Pricing of the educational offer, however, typically represented as ‘tuition fees’, is subject to certain constraints and characteristics. Most educational institutions, in fact, all public institutions, the universities, institutes of technology, medical and engineering colleges, come under the category of services where prices are subject to public regulation. In all such cases, the price element is uncontrolled by the marketer, instead it becomes a subject matter of public policy where political, environmental and social considerations. Prices my be based on the ability to pay (fees structure relating to 190 parents income in case of universities) or some socially desirable goals. (Total fee exemption for women candidates in states likes Rajasthan and Gujarat). Autonomous institutions also subject themselves to formal self – regulation of price. For Example: Institutions like CA, AICWA and ICS are subject to institutional regulations relating to fee structures, which they decide for themselves. On the other hand, private institutions, typically in specialized fields like medicine, engineering computers and management tend to price their services on what the market would bear. As most of these institutions operate in the subject fields where demand far exceeds supply, prices charged depending upon economic conditions, consumer feelings about prices, buyer needs urgency, competition in the market place, level of demand and the extent to which consumers begrudge the purchase of certain service. 3. Promotion and the Education Services Offer The objective of promotion in education service would be akin to its role in other marketing endeavors. Accordingly the basic objectives that promotion as a marketing tool is expected to play for marketing of education would include: 1. Building awareness of the education offer package and the organization providing it. 2. Creating and sustaining differentiation of the organization and its offer from its competitors. 3. Communicate and portray the benefits are sought to be provided. 4. Build and maintain overall image and reputation of the service organization. 5. Persuade customers to use or buy the service 6. Generating detailed information about core, facilitating and augmented service offer. 7. Advising existing and potential customers of any special offers or modifications or new service offer packages. 8. Eliminating perceived misconceptions. Educational institutions have not been able to use promotional tools effectively. Some these are Most educational institutions are product oriented rather than market or student oriented. 191 Professional and ethical consideration prevents the use of certain forms of promotion. Established educational institutions may regard the use of mass advertising and sales promotion as being in bad taste. The nature of competition in case of educational institutions like universities, technology and management institutes in such that they are enable to cope with their present demand and workload. Therefore they may not feel the need to promote for demand generation purposes. The nature of consumer attitudes regarding education and their perception of mass media information sources may Sometimes preclude the use of intensive promotion. Due to some of the above considerations, as also because of prevailing industry tradition, promotion of educational service has tended to rely most heavily on the component of publicity rather than any other element. 4. Place Decision and the Education Service In most cases, educational services represent the single location and direct distribution process with no intermediary between the producers and the consumers of the service. The user of the service going to the services provider usually accomplishes the learning process. However because of buyer need urgency and the nature of the utility derived, accessibility and convenience for educational service location is not as critical a factor as in case of, say, banking service. Depending upon the competitive situation, the factors that have marketing implications in terms of location are: a. What does the market demand? Will the purchase of service be postponed or negated if the institution is not conveniently located? How critical are accessibility and convenience in service choice decision? b. Are competitions finding alternative ways to reach out to the Markets (distance learning in education)? Can some competitive advantage be gained by developing alternative/different norms of service location and delivery? c. How do flexibility, being technology or people based, affect educational services offer in terms of flexibility in location and relocation? 192 d. Is there an obligation on the part of the institution to be located in a convenient site (i.e., public health education centers, family planning training centers, vocational training centers, etc)? e. How critical are complementary services to the location decision (transport, residential and canteen facilities and so on)? Answers to issues like the above underline the critical importance of the location decision and may result in more systematic approaches than in past. 15.6 Public Utility Services Electricity Energy is the basic element of human activity and an indispensable input leading to socio-economic transformation. The present energy scenario has diverted the attention of the scientist, the planners and the public alike realizing that the process of overall development could be geared up only by adequate energy supply. When India became independent in 1947, the power generation capacity in the country was merely 1300 MW. It increased to 1700MW when the planned concept of development started in 1951.now after more than fifty years, the total installed capacity has come to about 55000MW, an increase of 32 times. It is estimated that total energy requirement at the turn of this century will be around 1, 10,000MW. The management experts and to be more specific, market experts feel that non-optimal distribution is the main reason for mounting dissatisfaction amongst the users odd service. It is not meant that energy generation is adequate. Indeed it is meant that rational distribution policy has been neglected and so whatever we generate is found concentrated or centralized in a few areas, regions or segments. This is due to mismanagement and here the application of marketing principles would be effective to make possible rational distribution, which would minimize the intensity of mounting dissatisfaction among the users of service, individuals, institutional, agricultural and industrial. The slow progress on hydro-projects has created operational problems, necessitating additional capacity for meeting peak demand on the one hand and the backing down of thermal units on the other. This requires adoption of short and long-term strategies, covering various facets like optimal utilization of the existing facilities, reduction in transmission and distribution losses, taking u projects with short gestation period, fuel choices, and location of thermal stations, energy conservation and strategic measure for load management. 193 Electricity and Marketing Electricity marketing involves application of marketing principles by the electricity organizations. The electricity marketing also involves managerial approach to market the electricity services. The electricity marketing consists of a systematic approach to distribute the electricity services to the different categories of users. It also ensures an optimal use of the different sources of energy. There are two issues involved in the marketing practices 1. Optimal generation of electricity on the basis of changing needs and requirements of the different sectors. 2. A rational distribution of electricity for different segments. Ultimately, the electricity marketing strikes a balance between the demand and supply. The electricity marketing, involves the following managerial principles. 1. The managerial approach in electricity marketing will regulate the working of the organizations engaged in the distribution process. 2. It strikes a balance between the demand and supply position. 3. It provides customer satisfaction with regards to the quality of services, which keep the users satisfied. 4. As a social process it regulates the sources of generation and protects the interest of neglected segments. Need for Electricity Marketing Electricity marketing paves ways for maximizing the transmission and distribution capacity, makes an assault on multi-faceted losses, provides suitable guidelines for making decisions regarding the location of a particular generating or distributing unit at suitable places, activates the process of energy conservation, guides the users while making fuel choices and minimizes the gestation period to control the losses on account of growing inflationary pressure. Consider the following aspects: 1. Quantitative improvements in the generation capacity 2. Minimizing the transmission and distribution losses 3. Minimizing the gestation period. 194 The marketing practices insist on locating the units at suitable places where inputs and infrastructure facilities are to be conveniently made available. if we underestimate this aspect, it is natural that the cost of project, transmission or distribution would go up. Marketing practices advocate innovating and strengthening the advertisements and publicity measures so that the users in general attempt to conserve electricity. Particularly in the domestic sector, this aspect requires an overriding priority as due to illiteracy, lack of awareness, carelessness etc… Domestic users are mostly found misusing this vital input. The Formulation of Marketing Mix It is found significant with the viewpoint of maximizing transmission and distribution capacity, rationalizing the distribution system, making the price structure rational and creating public awareness. It is natural that when users get the services in adequate quantity and at a reasonable price, the satisfaction index moves upward. It is in this face that formulation of different submixes becomes significant. 1. The Distribution Mix It is not only sufficient that the generating units maximize their transmission capacity. Optimal distribution appears to have a far-reaching impact on the users of services. In the Indian context, these aspects needs attention as the users appear dissatisfied even in the regions or areas where the generation graph is moving upward. In this context, it is significant that a national policy is formulated so that electricity generated through any source reach different categories of users in time. The organizations bear the responsibility of studying the intensity of requirements of users. It is right o say that the manufacturing sector of the economy, primary or secondary, gets a priority but at the same time it is also indispensable that the services, an emerging sector in the global map, also gets electricity in tune with its requirements. 2. The Pricing Strategy The pricing decisions are mainly governed and distribution costs. If the total cost is found moving upward, it is very difficult to minimize the tariff. It is right to point out that due to a number of factors, the generating and distributing organizations have failed in minimizing the operational costs. Some of the important reasons are mounting losses in generation and distribution. The application of marketing principles assign due weightage to minimizing the 195 losses by accelerating overall productivity. If the losses are minimized or controlled, operational economy is maintained which makes possible a reduction in the tariff. In this context, it is significant that rural areas, backward regions, the agricultural sector, entrepreneurs promoting village and tiny industries, the upcoming or budding entrepreneurs and their industries etc…are made available would be compensated or adjusted with the surpluses received from the profit generating organizations. 3. The Promotion Mix Generally, an uninterrupted power supply is necessary to meet the increasing requirements .the electricity organization is necessary to meet the increasing requirements. The electricity organization has to check the misuse of electricity. The promotional efforts must be focused on the rational use of electricity. 4. Advertising It is a paid form of persuasive communication. The electricity organizations must play a balances role in the distribution of power. As there is only very few private organizations, there is no intensity of competition. The advertising messages and themes therefore must focus on the conservation and a rational use of electricity. The domestic and the institutional sectors have been found misusing electricity, creating an imbalance in the demand and supply position. We can always see adequate supply in some areas whereas in some other areas we find frequent breakdown. The users have to realize gravity of the situation and regulate their requirements .in addition; the advertising professionals are required to throw light on the way of rationalizing the preferences and the implications of a non-optimal use or misuse. Print media, broadcast media and the telecast media can be used. On the other hand, in the rural areas, there are ample chances for generating electricity from animal dung, agricultural wastes and solar. The private organizations have to promote the use of non-conventional sources. Due to the subsidized prices, majority of the public sector organization are found generating loss, and therefore, it is difficult for them to spend for promotion. 5. Publicity The publicity measures need to influence the media people for regulating the misuse of electricity. The electricity organization must focus on intensifying the publicity measures to educate the users in a right direction. 196 6. Sales Promotion Sales promotion measures include offering of temporary incentives to the users and the sales people. The private sector organizations must provide innovative incentives to the users of the services so that they continue to buy their services which keeps on moving business promotions. Here they also need to offer incentives to their own personnel for increasing transmission and optimizing the operational expenses. 7. Word-of-Mouth This promotion is made by the satisfied users in favor of the services of an organization. The private sector organization establishes an edge over the public sector organizations. The users would make a strong recommendation to private services as when they interact with their friends and relatives. 8. The Product Mix The main purpose of place mix is to ensure that the promised quality of service reach to the ultimate users without any distortion. The gap between the services offered and service promised can be bridged with the cooperation of almost all the employees who are involved in the process. The electricity organization has to design a viable product mix that will meet the needs of the different categories of users. The lace mix helps them substantially in the process of offering the services. There are two issues involved in the place mix. 1. The services must be processed in a right way and 2. The service generating and distributing organization are location at right places where they get all the supporting infrastructure facilities. Post Office The Department of Posts comes under the Ministry of Communications and Information Technology. For providing postal services, the whole country has been divided into twenty-two postal circles. Each Circle is co-terminus with a State except for Gujarat Circle, Kerala Circle, Maharashtra Circle, North East Circle, Punjab Circle, and Tamilnadu Circle. Chief Postmaster General heads each of these Circles. Each Circle is further divided 197 into Regions comprising field units, called Divisions (Postal / RMS Divisions). Each Region is headed by a Postmaster General .In the Circles and Regions there are other functional units like Circle Stamp Depots, Postal Stores Depots and Mail Motor Service etc. Besides these twenty-two Circles, there is another Circle, called Base Circle, to cater to the postal communication needs of the Armed Forces. An Additional Director General, Army Postal Service in the rank of a Major General, heads the Base Circle. The officer cadre of the Army Postal Service comprises officers on deputation from the Civil Posts. Seventy five percent of the other ranks of the Army Postal Service are also drawn from the Department of Posts and the Army recruits the remaining personnel. Bharat Sanvchar Nigam Limited Bharat Sanchar Nigam Ltd. formed in October, 2000, is World’s 7th largest Telecommunications Company providing comprehensive range of telecom services in India: Wire line, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. Within a span of five years it has become one of the largest public sector unit in India. BSNL has installed Quality Telecom Network in the country and now focusing on improving it, expanding the network, introducing new telecom services with ICT applications in villages and wining customer’s confidence. BSNL is the only service provider, making focused efforts and planned initiatives to bridge the Rural-Urban Digital Divide ICT sector. In fact there is no telecom operator in the country to beat its reach with its wide network giving services in every nook & corner of country and operates across India except Delhi & Mumbai. Whether it is inaccessible areas of Siachen glacier and Northeastern region of the country. BSNL serves its customers with its wide bouquet of telecom services. BSNL offers vide ranging & most transparent tariff schemes designed to suite every customer. BSNL is a major provider of GSM cellular mobile services under the brand name Cellone. BSNL provides a complete telecom services solution to enterprise customers including MPLS, P2P and Internet leased lines. It provides fixed line services and landline using CDMA technology and its own extensive optical fiber network. BSNL provides Internet access services through dial-up connections as prepaid, NetOne as Postpaid and DataOne as BSNL Broadband. 198 BSNL offers value-added services such as Free Phone Service (FPH), India Telephone Card (Prepaid card), Account Card Calling (ACC), Virtual Private Network (VPN), Tele-voting, Premium Rate Service (PRM) and Universal Access Number (UAN). BSNL also offers the IPTV which enables customers to watch television through the Internet and Voice and Video Over Internet Protocol (VVoIP). In 2007, BSNL announced plans to provide 5 million broadband connections and secured 80% of the INR 25 billion rural telephony project of the Government of India.On 20 March 2009, BSNL launched blackberry services across India. BSNL paid Rs. 101.87 billion for 3G spectrum in 2010. As of 2011, BSNL offered coverage in over 800 cities across India. Bharat Sanchar Nigam Limited, a Public Sector Enterprise, also provides fiber plans for the home, which are generally known as BSNL FTTH broadband service. This is the fastest broadband service provided by BSNL, offering speeds up to 100Mbit/s to home-based Internet users. According to a Telecom Regulatory Authority of India Report dated 19 February 2016, at the end of 2015, BSNL’s 14.54% share of the broadband market placed it 4th in market share. As a wireless provider, it ranked 6th with an 8.16% share of that market. BSNL launched linguistic email service using the DATAMAIL app in eight Indian languages. On 8 June 2017 BSNL signed a memorandum of understanding (MoU) with the Universal Service Obligation Fund (USOF) to have 25,000 Wi-Fi hotspots in rural exchanges within the next six months. In September 2018, The Department of Telecommunication (DoT) approved BSNL’s proposal to launch nation-wide 4G LTE services via the allocation of the 2100Mhz band. This meant the state run company would soon launch pan-India 4G services except for Mumbai and Delhi circles. BSNL launched 4G services first from Kerala circle in 9-02-2018 at Udumbanchola, Idukki district.Now BSNL has around 800 live state of art 4G BTS’s in corporation with Nokia in Kerala circle. BSNL started Commercial 4G services at Idukki, Kottayam,Malapuram, Thrissur, Ernakulam districts of Kerala by shutting down of 3G services. Administrative Units BSNL cellular service, Cell One, has more than 17.8 million cellular customers, garnering 24 percent of all mobile users as its subscribers. That means that almost every fourth mobile 199 user in the country has a BSNL connection. In basic services, BSNL is miles ahead of its rivals, with 35.1 million Basic Phone subscribers i.e. 85 per cent share of the subscriber base and 92 percent share in revenue terms. BSNL has more than 2.5 million WLL subscribers and 2.5 million Internet Customers who access Internet through various modes viz. Dial-up, Leased Line, DIAS, and Account Less Internet (CLI). BSNL has been adjudged as the NUMBER ONE ISP in the country. BSNL has set up a world-class multi-gigabit, multi-protocol convergent IP infrastructure that provides convergent services like voice, data and video through the same Backbone and Broadband Access Network. At present there are 0.6 million DataOne broadband customers. The company has vast experience in Planning, Installation, network integration and Maintenance of Switching & Transmission Networks and also has a world class ISO 9000 certified Telecom Training Institute. All India Radio Radio is the most exciting, involving and powerful promotional medium. Radio’s ability to tease, to create dynamic promotional concepts, to build anticipation and generate excitement, to magnetize the audience. the exhilaration radio delivers for both audience and advertisers is unparalleled. Countrywide reach of All India Radio with its network of 111 Primary Channel Stations, 40 Vividh Bharati Centers, 75 Local Radio Stations and 12 FM Rainbow plus 4 FM Gold Stations - operating at four metro cities as an additional channel, makes it practically the ruler of the audio world. The advertisers are convinced of the fact that their products can reach the massive rural population only through the medium of All India Radio. Advertisers have showed marked interest in bookings for Regional News with reason being that it is considered to be more personalized and relates to their own State. With this new-found platform they have succeeded in developing new market for their products. The other attractive feature of Regional News is that Spot booked in Regional News covers all the Primary Channels and Local Radio Stations of that particular State. The News Service Division (NSD) of all India radio disseminates new and comments to listeners in India and abroad. From 27 news bulletins in 1939-40, AIR today puts out 362 200 bulletins daily. It is a composite blend of information and entertainment with one third of its contents devoted to news and current affairs. 15.7 Professional Services Marketing Professional services such as accountancy, consultancy, medicine and the law make up a substantial proportion of the service economy. These services represent the extreme end of the scale with regard to service tangibility, being highly intangible, high-contact, people-based services with a high degree of expertise. Example of professional service usage can be found in all market sectors; solicitors may look after the needs of both consumers and business clients, architects and project managers. All professional service organizations seek to attract and serve clients in order to generate revenues and profits. Marketing can play a key role in marking business more effective through identifying customer or client needs and wants and matching the organization. Understanding and utilizing marketing concepts and strategies can make organizations more able to cope within the rapidly changing social; and market environment especially during reversionary periods. 15.8 Marketing and the Professional Services Professional services encompass a broad range of activities but can all generally be defined by certain common characteristics: Professional service providers are highly trained and knowledgeable in a complex specialist area of expertise. They will hold qualification and accreditations within their field of expertise; entry into the field is not possible without the appropriate credentials. Typically, membership of a professional society or governing body is also required. Professional services are sold to individual clients-either business or private –on a confidential basis. The service is tailored to meet client’s needs. 201 15.9 Market Segmentation The segmentation process would simplify the task of understanding the users. The modern marketing principles require marketing policies and techniques for each market segment, which an organization plans to achieve it. Each segment represents somewhat a different opportunity for the organization. The segmentation process makes possible grouping and sub grouping of customers, which simplifies the Identification process. The marketing strategies designed on the basis of segment are generally, found to be customer-oriented. 15.10 Professional Services Marketing Mix The importance of selecting and balancing the right marketing mix elements has been stressed in relation to professional services marketing. 1. The Service Package (Product) The service offering needs to be looking at carefully to ensure it meets customer needs as closely as possible. The range of services offered may require extending or updating in response to new developments within the market. Some large accountancy firms now receive only a small proportion of their income from audit and accounting work as the revenue from their other specialist services has grown as these have developed. 202 2. Pricing Policy It is well recognized that price represents other factors than simply costs and is often used by prospective clients as a guide to quality. Many professional fees are changed at hourly rates although other alternatives include fixed fees for fairly standards jobs (for example, health screening checks offered at set fees) and tendering or quotation schemes for contracts. The competitive situation should also be considered in relation to pricing with regard to possible provider substitution. 3. Promotional Programmes Promotional objectives need to be clearly defined before a strategic promotional programme can be designed. Many professional service providers may have more than one promotional objective and will use a variety of messages and media to communicate with target audiences. Advertising can increase awareness of the organization and its services. Newsletters or house magazines can be a useful tool for communicating with existing customers and other publics. Sponsorship, PR and publicity can be used to attract attention and inform target audiences about changes and innovations within the organization. 4. Distribution Location may be less important for highly complex or specialist services where the service provider may actually visit the client to perform the service in any case, thu8s making accessibility and availability more important than physical location. Professional service organizations seldom have channels as such, usually dealing directly with clients and being more likely to open branch offices and subsidiary operations when moving into new market areas. People aspects of successful service delivery Professional service delivery quality depends on the person delivering the service. Internal marketing and staff development programmes can help to optimize staff performance through allowing individuals to fulfill their potential and to understand more fully their role in the organization and their contribution to success. Process Design There are many aspects of the process design, which can play an important role in creating and delivering a quality service, even in highly customized specialist services. Administration 203 quality, customer care, appointments systems methods of communication, office opening hours and operating efficiency in terms of delegation or team working are all examples of aspects of the service delivery process which may be improved or revised. Physical Evidence Credence plays an important role in customer assessments of professional service quality. Customers will base their judgment on the physical evidence available to them. Professional qualifications and affiliations will be listed on company literature and stationery and certificates displayed. The firm’s premises and working environment should reflect the professionalism And expertise of the service provider and also the price charged. Staff may wear uniforms or other work wear such as white coats, as is very common in the medical professions, or they may adhere to certain dress codes in business. 15.11 Summary Education as a service, to be fulfilling the need for learning, acquiring knowledge – providing an intangible benefit (increment in knowledge, aptitude, professional expertise, skills) produced with the help of a set of tangible (infrastructure) and intangible (faculty expertise and learning) means, where the buyer of the service does not get any ownership. Specific characteristics of education marketing were discussed. Marketing mix of services industry in relation to education were explained elaborately. Public utility services marketing described the important public utility services like Electricity and post office in India, in addition to BSNL and All India Radio. The need for electricity marketing and various marketing mix were also discussed. There is a need for marketing approaches in various public utility services so as to meet the customers demand. Since it was dominated by government and enjoyed monopoly market in yester years, now the necessity of marketing felt due to competition in the market. Professional services such as accountancy, consultancy, medicine and the law which make up a substantial proportion of the service economy. All professional service organizations seek to attract and serve clients in order to generate revenues and profits. Marketing can play a key role in marking business more effective through identifying customer or client needs and 204 wants and matching the organization. Market segmentation and marketing mix of the professional also discussed in this chapter. 15.12 Keywords Educational Services Public Utility Services Profesional Services 15.13 Review Questions 1. Define educational services. 2. What are the service classifications in education industry? 3. Explain the characteristics of education services. 4. Describe marketing mix of education marketing. 5. Why is marketing approach should required for electricity? 6. Describe the functions of Post office. 7. Explain the functions of BSNL and All India Radio. 8. Why should adopt marketing approaches for the professional services? 9. Explain the market segmentation of the professional services. 205 Model Question Paper MBA Degree Examination Second Year – Fourth Semester Optional Paper - I SERVICES MARKETING Time : 3 Hours Maximum : 80 Marks SECTION - A Answer any TEN out of TWELVE Questions (10 x 2 = 20 Marks) 1. What are Services ? 2. What is Blue Printing ? 3. What is Service Process ? 4. What is Servqual ? 5. What are provider Gaps ? 6. What are Service Encounters ? 7. What are Core Services ? 8. What are Supplementary Services? 9. What is Service redesign ? 10. What is advertising ? 11. What is publicity ? 12. What is physical evidence ? 206 SECTION - B Answer any FIVE out of Seven Questions 13. Differentiate goods and services. 14. What are the characteristics of Services ? 15. Discuss the strategies used to close provider gap 1. 16. What do you mean by Customer expectations ? 17. Explain the stages of Services Life cycle. 18. Discuss the pricing of services. 19. Outline the bases for segmentation of Services. ( 5 x 6 = 30 Marks) SECTION - C Answer any THREE out of FIVE questions 20. Explain the Services Marketing Mix. 21. Discuss the types of Services. 22. Discuss the service quality dimensions. 23. Explain the Marketing of Financial Services. 24. Discuss the strategies for matching capacity and demand. (3 x 10 = 30 Marks)