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
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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.
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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
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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
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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
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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.
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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.
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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;
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
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
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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.
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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
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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.
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
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,
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
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:
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 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;
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
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.
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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.
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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.
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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.
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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.
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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?
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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,
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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.
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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
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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
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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.
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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.
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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
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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?
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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,
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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.
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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
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
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.
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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
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
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
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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.
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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.
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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.
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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.
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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?
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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
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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.
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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.
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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.
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 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.
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
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
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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.
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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,
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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
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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?
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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
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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.
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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
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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.
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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
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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
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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
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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.
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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
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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
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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.
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
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.
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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.
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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?
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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
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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
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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.
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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
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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
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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
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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.
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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
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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,
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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
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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
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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.
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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.
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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?
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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
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
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:
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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.
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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.
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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
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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.
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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.
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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.
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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
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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.
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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.
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
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.
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
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
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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
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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.
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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.
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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.
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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
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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.
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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
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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
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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.
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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.
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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
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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
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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.
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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 ?
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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)