2.Services Marketing(Mkt Mix)

8/8/2019 2.Services Marketing(Mkt Mix)

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Service Product MixPricing of services

Service Promotion MixPlace factor in services marketing

People in servicesService Process

Capacity planningCapacity scheduling


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Formulating marketing mix for services is as important asfor products.

It is the set of tools that a firm uses to pursue its marketingobjectives in the target market

Service expectation levels of consumers are at an all timehigh, hence formulation of service marketing mix needs to bedone on a professional level, by experts

Offering quality services is not enough,Proper promotion,sound pricing strategy, placement decisions, hiring right staffand studying consumers enhances service delivery process

This has resulted in broadening & modification of the

market mix i.e due to the inadequacy of the 4ps anextended mkt mix is devised


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services


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An expanded marketing mix for services

Customers PricePlace &

Time

Promotion

Product

(service)PeopleProcess

Physicalevidence

Customers Price

Customers

Place,

cyber-

space &

time


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People All human actors who play a part in

service delivery and thus influence thebuyers perceptions: namely, thefirms personnel, the customer, and

other customers in the serviceenvironment.

customer

service employees

other customers


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Physical Evidence The environment in which the service is

delivered and where the firm andcustomer interact, and any tangiblecomponents that facilitate performance

or communication of the service.

atmosphere

dcor, music etc.

equipmentfacilitiesuniforms


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ProcessThe actual procedures, mechanisms,

and flow of activities by which theservice is deliveredthe servicedelivery and operating systems.

service delivery systemsback stage

front stageprocedures

policies


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PEOPLE PHYSICALEVIDENCE

PROCESS

Employees Facility design Flow of activities

Customers Equipment Number of steps

Communicatingculture and values

Signage Level of customer involvement

Employee research Employee dress

Other tangibles

Expanded MarketingExpanded Marketing

Mix for ServicesMix for Services


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Product mix

Product mix decides the magnitude ofsuccess, intensityofprofits and satisfaction levels of the consumer

Factors influence the product mix based on the type ofservice provided

Eg: Hotel service, quality of consumers

Transport services-emerging lifestyles, levels ofurbanization

Personal care services- trends, tastes, fashion


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Consumers buy not

Speed/comfort An air ticket

Adventure/fun Tour package

Bill paying convenience Credit cards

Beauty Beauty treatments/cosmetics


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Service Product MixService product is intangible and

perishable , inseparable & heterogeneous innature.

Conceptualization of the service product

Step 1-costumer benefit concept

Step 2-service concept

Step 3-Service offer

Step 4-service delivery system


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Potential product

Augmented product

Expected productBasic product

Core benefit


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productCore product seat in a theatre, room in a

hotel, services in a bank

Expected product consumer perception(speed in a bank, expertise/accuracy inconsultancy services, security in insurance)

Augmented product - additional attractionprovided to get an edge over competition,this helps to keep marketing efforts proactive

Potential product process of discoveringnew ways to attract more customer, retainexisting and fight competition (24x7 callcentres, banks open on Sunday)

f i ff i


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Nature of service offering Three components are to be kept in mind when we

want to design the service offering.

Core service: The most basic component is the coreservice and it addresses questions like What is thecustomer really purchasing, What business are wein? etc. It supplies the central problem solving

benefits that customers seekEx: Transport solves the need to move from one

location to another etc.

Core delivery process: The second component

concerns the core delivery process i.e - how the coreproduct is delivered to the customer, the customersrole in the process, how long the process is and styleof service offered.


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Supplementary services: This is the thirdcomponent and it augment(increases) ,

facilitates & enhancesThe core service by making it easy to use and by

increasing the value and appeal.

Each of the supplementary elements may requiretheir own delivery system and

Prescribed service level.

Flowcharting offers an excellent way to understand & identify the many types of supplementaryservices accompanying a core product

IDENTIFYING AND CLASSIFYING SUPPLEMENTARY


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IDENTIFYING AND CLASSIFYING SUPPLEMENTARYSERVICES:

Supplementary services can be identified

as-


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THE service flower


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Service product decision

A service provider may start with a singleservice, than provide a range of services ordevelop a new offering or enter a new market

These service product decision can be made byusing product/market matrix called Ansoffmatrix-


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Market penetration-no change in service ormarketstrategies to improve demand

a) introduce schemes

b) attract non-users

c) grabbing competitors share

Market developmentgeog, age-group, socialclass

Diversificationnew service-new market


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Managing services offeringNew service development

Style changes

Service improvements

Process line extension

Supplementary services/new service

Product line extension.

major innovation


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development

* Idea generation concept screening testing

the conceptdesign service & assess marketpotential cost analysis test marketing finallaunch

* Need identification size of market cost-

benefit analysis introduction of new product

* product life cycle launch, growth, maturity, &decline


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Designing of new serviceRe-engineering service processcost, speed &

productivity considerationUse of flow charts, blue prints, review alternative

delivery methods, eliminate supplementaryservices, rethink the process

Using research to design new service-askcustomers what features & price will createvalue

ac ors o e no e w e


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ac ors o e no e w edeveloping service product

mix Enrich peripheral services

Understand service quality expectations

Study behavioral profile of the consumers(offering product is as important as formulating it)

Take support of information technologies

Product for all (single product for all/offer differentspecialisation in same product)


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Attributes Benefits Values

Culture

User

Personality

B di f i


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Branding of services

Difficult to create a distinct brand image forservices due to lack of consistency in servicedeliveryneed for the entire org to worktowards it.

Even so brand loyalty is high for services

Need for patronage in order to obtainoptimum satisfaction


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No Brand Loyalty

(customer will change)No Brand Loyalty

(customer will change)

Satisfied Customer

(no reason to change)Satisfied Customer

(no reason to change)

Satisfied & Switching CostSatisfied & Switching Cost

Values the Brand(brand as friend)

Values the Brand(brand as friend)

Devoted

to BrandDevoted

to Brand


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BrandingDecision

Brand

No brand

Brand-SponsorDecision

Manu-facturerbrand

Distribu-tor

(private)brand

Licensedbrand

Brand-Name

Decision

brandnamesBlanketfamilynameSeparate

familynamesCompany-individualIndividualnames

Brand-Repositioning

Decision

Reposi-tioning

Noreposi-tioning

Brand-StrategyDecision

Lineextension

Brandextension

Multi-

brandsNewbrands

Cobrands


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Brand

Extension

New

Bra

nd

Nam

e

Product Category

Line

Extension

Existing

Existing

MultibrandsNew New

Brands


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SuggestProductBenefits

Distinctive

Lack PoorForeign

LanguageMeanings

SuggestProductQualities

Easy to:

PronounceRecognizeRemember

P i i f i


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Pricing of services Research and expertise pertaining to the

pricing of services is found lacking

Pricing approaches developed forproducts are applied to services too

The challenge is to determine a price atwhich the service product is sold and alsogives profitable returns

The price must be acceptable to the targetcustomer & should accurately reflect onthe other elements of the marketing mix


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Perception of value for a consumer theprice determines the value attached by theservice provider & it should correspondwith the customers perception of value

There are various factors that influenceprice to be charged:-

Range of service offered

Demand & capacity constraints Kind of organization

Market structure

Competitors price

Th diff b t


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Three differences betweenpricing for goods & services

Customer have limited knowledgeregarding reference prices for

services

Price is an important signal ofquality

Monetary price is not the onlyrelevant price to the customer


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Pricing objectives

Survival

Maximization of current profit

Maximization of current revenue

prestige/ image

Patronage & user based objective

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pricing1. Cost based pricing - difficult as very small

portion of tangible goods sold, intangible servicedifficult to price, profit considerations also includedafter total cost is computed. The formula forcost based pricing is

Price = direct cost + overhead cost profit marginDraw back :-

Defining the unit in which service is purchased

Cost are difficult to identify

Calculation of peoples time


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2. Competition based pricing Not mean

charging the same price as the competitorsbut only using it as a base for determiningones own price .Used usually were services are almoststandardized

Drawbacks :-Competitors may not be the best parameter,service standards/delivery processes may differ.

Small firms may charge comparatively lowprices, should we consider this firms


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3. Value based pricing

How customer defines valueCustomers are weighing the perceived

benefits against the perceived cost they willincur

Recognize trade off customers are willing tomake

Quantify non-monetary & monetary value tothe customer

People perceive different set of values,identify one or more bundle that addresses asegment.


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4. Demand based pricing --

It is associated with the customer ratherthan the cost or competition

Relationship between price & demandDrawbacks:-Considers only the monetary aspect of

cost of service, however non-monetarycost & benefit must be factored

Customer is willing to pay higher pricewhen he is able to save time & effort

capturing & communicating


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capturing & communicatingvalue

Satisfaction based pricing Service guarantees,benefit driven or flat rate pricing

Relationship pricing encourages a customer toexpand his dealings with service provider

Efficiency pricing- understanding , managing &reducing cost . Providing value for money. Reducing

monetary burden to the consumers by providingbest service and a cost effective one. Efficiencythrough innovation, making it difficult forcompetitors to imitate

Satisfaction based pricing


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Satisfaction based pricingService guaranteesa powerful re-assurance,gives them a recourse-usually a price

reduction or a refund. It symbolizes cocommitmentenhances confidence

Benefit driven based on how it is used & how

it creates value. Service that directly benefitscustomer. Customers feels more satisfiedthan uncertain, than if the price of aservice is unrelated to the benefit it delivers

Flat rate pricingwhere service prices areun predictable & cost are badly managed

Relationship pricing


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Relationship pricing

Long term contract price & non-priceincentives are offered to strengthen the

existing relationship & build a new one.

Price bundling selling two or more service

selling together. Provides various benefits tothe service provider.

Managing the perception of value value is

subjective, not possible to assess the truevalue of services especially for credencequalities, hence necessary to communicate


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Reducing the related monetary & non-

monetary cost price paid also includesnon-monetary cost which is of 4 types

Time cost

Physical cost

Psychological cost

Sensory cost

Price discrimination (different prices for

different consumers), penetration, skimming,follow the competitor, are also few of thestrategies for pricing effectively used

Place in services


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Place in servicesMainly considered in terms of location, time &

cost (channels involved in distribution)

The decision regarding location are the mostcrucial and accessibility and availability form an

significant base for location decisions.

Accessibility refers to convenience with whichthe service can be purchased & availability

refers to the extent to which the service isobtainable

location


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location

Nature of service

Nature of interaction required

Customers needs & wants

Dependency of other services

Use of technology

The three possible interaction between serviceprovider & customer:-

The customer goes to the service provider

The service provider goes to the customer

Interact at arms length

Decision about location


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Decision about location Factors influencing Location (Nature of

services, competition etc)

Low contact services: remote sites, lessexpensive

High contact services: accessibility, visibility,

customer convenience

location constraints: operational requirementseg airports, resorts with certain special facilities,

economies of scale

locating in multi purpose facilities; near workplaces

Decisions about time


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Decisions about timeToday for some highly responsive service

operations the standard has become 24/7, neverthe less there are many firms who resist the trendof 7 days operation.

Factors that encourage extended operating hours:-

Economic pressure from consumers

Changes in legislation

To improve asset utilization

Automated self service facilitiesAvailability of workers to work for extended hours

Pressure from competition

Direct distribution


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Direct distributionThe inseparable, intangible and the

perishable nature of services makes directdistribution and indispensible option forensuring quality and care to the customer

Advantages of direct distribution

Greater control & monitoring

Closer and amicable relationship with the

customersEnsure confidentiality & secrecy

Elimination of certain costs

Channels decisions


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Channels decisionsChannel decision may be influenced by the

following factors

Ease and accessibility for the customers

The added value or service or benefit theyprovide

The cost to the company & the margins theyseek

Their reputation and reliability

Their expertise, ability and compatibility

The vital role that they play


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Primary channels in service distribution

Services

created by

company

Franchises

Electronics

Agents/brokers

Target

customer

Widely used distribution channels in service include-

Agent or broker

Franchised or contracted service deliveriesElectronics

d li


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delivery1. Control strategythepre requisites for

employing control strategy are uniqueness of theservice offer, strong consumer demand, highloyalty in target mkt

Approaches to implement control strategies:-

Measurement Review

2. Partnering strategies learn about end users,

improve delivery quality, communicate honestly Approaches to partnering

Integration of goals

Participation & co-operation


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3 . Empowerment strategy- effective in thefollowing context:-

Service principal is new to the market Lacks sufficient power to manage the channel

The service intermediary is more talented

Approaches to empowerment:- Provide needed support

Train the intermediary to deliver quality service

Enable to develop customer driven service

processes Change to co-operative management structure

People in services


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People in services Includes both, employees and consumers - moment of

truth is dependent on both

Most demanding job in the service business are the socalled front line jobs, they play a key role inanticipating customers needs, building customerrelations, loyalty, customization, recovery etc

Importance can be summed up as i) they are the corepart of the product ii) they represent the firm iii)they are the brand

Success depends on firms commitment to HR

employees


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employeesHigh contact services

Low contact services

Professional service employees

Consumer service employees

Challenges faced & sources ofconflictsEmotional labor

boundary spanningPerson/role conflict

Organization/client conflict

Inter client conflict

service delivery


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service delivery

Hire right people

i) competing for the best people

ii)hiring for service competence & serviceinclination

iii) being the preferred employer

Develop/train employees to deliver services as perstandards

i) Training for technical & interactive skills

ii) Empowering employees-3 power tools

iii) Promoting team work

Provide needed support system to employees


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Retaining the best employees

i)Rewards & appreciation & recognization

ii)Including employees in companies vision

Study target market/potential & current customers

* Observe service delivery process, keeping people inmind

Give due importance to consumers feedback

Employ CRM identify, attracting, differentiating andretaining customers

services


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services* Includes everything tangible

It plays a major role in shaping service experience& delivering customer satisfaction

It applies to all types & sizes of service org, though

use of physical evidence is extensive in serviceslike hospitals, hotels and minimal in insuranceservice, postal services, laundry services etc

Due to the intangibility physical evidence is used asan vital quality proxy & firms take great pain tosignal quality & portray a desired image


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Service environment is also called as servicescape

Many servicescape may be purely functional , as theyare not the only one that shape customers perception

Impact of service environment on buying behavior:-

A) as an attention creating medium

B) as a message creating medium

C) as an effect creating medium

Designing a service env is considered an art & takes

considerable time & efforts. It requires considerationabout ambient conditions, space, functionality etc

evidence


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evidencePeripheral evidence:- those items that confirm

the service or are complementary to the service

Essential evidence:-includes physical elementsintegral to the service though may not be always

passed on.

Elements of physical evidence:-

Physical environment

Communication

Price

Personnel

Corporate image & identity

Elements of physical env


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Elements of physical env

Atmospheric

SightSoundSmell

Touch

ServicescapeExterior design

SignageParking

LandscapeSurrounding env

InteriorsEquipments

FacilitiesLayout , etc

dimensions


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dimensions


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Designing of servicescape will depend upon whetherit is a elaborate or lean servicescape , elaborateservice scape communicates heavily through

physical evidence

Communication:-

Tangibilizing the service

Tangibilizing the message

Price:-it is a visible indicator of service quality & level

Too low price

Too high price

Personnel

Corporate image & identity

id


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evidenceShaping first impression

Managing trust

Managing service quality

Managing differentiation

Re-positioning

Improving productivity

Service process


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Service process

Service design should essentially satisfy thecustomers as well as be operationally efficient. It involves series of activities, theirsequence, procedures that have to beefficiently performed for delivery of service.

Service process involves three concepts:-

A series of procedure

Creation & delivery of the serviceCustomer involvement & participation

Factors to be considered while designing service process


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Factors to be considered while designing service process

Nature of service -divergence, complexity

Service location

Customer participation

Level of contact

The service itself:

a) Process based

b) Technology, machinery, equipment based

Basic concepts for designing a process

* Process should be broken into logical steps

* process should be flexible* should include the concept of deviation

process


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processLine & flow operation

Job shop process

Decisions in service process planningBasic technological decision

Specific equipment decisionLocation & layout decision

Peoples decision

Operation structure

Process flow decisionblue print, flow charts,

& benchmarks

blue print as a key tool in


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p yservice design

It is the visual depiction of the process of service delivery,the roles of the employees & customers & the visibleelements of the service.

It takes an holistic view about the delivery process

mechanism keeping in mind the customer

A blue print should address the following aspects:-

Service staff should understand what is required of them

Customer should have knowledge of his role

The time frame involved for each activity should be stated

print


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print

Support processes

Line of interaction

Line of visibility

Contact employees action

Line of internal interaction


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Flow charting for services


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Flow charting for servicesInvolves presentation of the process visually

& in sequence

Useful in defining the points in the processwhere the consumer uses core service &

where he uses the supplementary service

Next step would be to put all these customerinteractions linearly into a sequence in which

they occur

Benchmarking


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BenchmarkingThis technique helps companies to become as good or

better than the best in most imp aspects of the org

Objective:-

Gives companies a standard to measure performance

It allows companies to identify best ways to get

competitive advantageAllows companies to overcome problems or pursue

targets to confirm competitive advantage

Benchmarking is not a single job but is a continuousprocess requiring commitment from all

Approaches of benchmarking


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pp gIt may be related to:-

Customer serviceDistribution channels

Improving human resources

Quality managementManufacturing systems, cost etc

Product development

Inventory control and loads of other issuesconcerned with effectively managing ofbusiness activities

Steps in benchmarking


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Steps in benchmarkingIdentify the items to be benchmarked

Create a bench mark team

Trace out the bench mark pattern

Identify the data collection process

Termination of the benchmarking study

Implement the findings


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Service Promotion MixGuidelines for an optimum promotion mix Develop word of mouth communication

network (Customers refer friends etc) Dont over-promise Tangibilize the intangible factors Feature working relationships between

customer and service provider Propagate minimum/zero variance in service

delivery Focus on service quality dimension Position & differentiate the service via the

delivery process Make the service more easily understood

Developing promotion


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Developing promotion

strategy Select target market

Develop firms positioning strategy

Develop promotion/communication budget and mix

Define communication objectives (in line with PLC)

Divide communication objectives and target audience for users, non users, etc.

mi


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mix

Advertising TV, radio, newspapers,magazines, outdoor, POP etc.

Publicity

Sales promotion gifts, contests, discounts,commission, fairs

Personal selling

Word of mouth

Telemarketing

ServicesServices


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capacity


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capacityFluctuating demand and perishable nature of services

poses a major challenge for service organizations

This problem becomes especially prominent for anycapacity constraint service & can be effectivelysolved by two ways:-

Adjusting capacity to meet the change in the demandthrough proper operations & H.R management

And by managing the level of demand throughdevising effective marketing strategies

Managing capacity


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g g p yThe problem is familiar it is either feast or

famine!

At any given point a fixed capacity service mayface one of the four conditions:-

Excess demand denied service, business lost

Demand exceeds optimum capacity:- quality maysuffer

Demand and supply are well balanced:- idealsituation

Excess capacity- low productivity , low utilization.

shrinking)


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shrinking)Some capacity is elastic in absorbing extra demand

eg transportation services, hotels & restaurants by

switching to higher capacity or by extending the time

Chasing demand strategy:-

Schedule down time during period of low demand

Use part time employees

Rent or share extra facilities & equipments

Cross train employees

Managing demand


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Managing demandFirst it is important to understand the patterns of demand

as there may be seemingly random causes.

Several factors affect demand & thus service providershould approach the situation in the foll manner:-

1) Examine whether the demand follows the predictable

cycle or not-- & than try to identify that underlining factor2) Examine whether demand level changes randomly

3) Examine whether it can be associated to a particularsegment & than divide demand by market segment

demand


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Using marketing mix elements to shapedemand

Product variation

Modifying the timing and location of delivery

Pricing strategies

i i d d h h i i


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Invent rising demand through queuing & reservation

Queuing system

a) Easy operational logic

b) Establish a reservation process

c) Differentiate waiting customers on the basis of:-

Importance

Urgency of job

payment of premium priceDuration of service transaction


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Service blueprint/ service

mapping

Benchmarking

CLASS PARTICIPATION ACTIVITY

Capacity planning


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Capacity planningThrows light on the quality and quantity of service needed

in future

Market conditions, likes, tastes, expectations of consumersare studied

Their potential is rated

Lapses in current process are identified and correctivemeasures taken

Firm tries to match the service offerings to the marketdemand

Problems - Task of predicting behaviour of users is difficult

Unavailability of sufficient lead time in many cases

Capacity planning


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Capacity planning

important for Staying in business Fighting competition

Enhancing profits

Enhancing growth curve of the service firm

Preparing the firm for anticipated/sudden changesin demand, quality of services, new trends,changing tastes etc (Decreasing response time)


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Capacity scheduling Based on capacity planning

It helps schedules capacity according to the plan man, machines, money, materials

A detailed scheduling of need and usage of abovefactors is essential on a time map

Helps optimum utilisation of time and otherresources

Reduces wastages


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CaseA passenger with a confirmed ticket on early morning flight fromAhmedabad to Mumbai could reach Ahmedabad only by 3.30 pm becausethe train by which he was traveling to Ahmedabad got marooned due tofloods at night. He reached Ahmedabad traveling by special buses arrangedby the railways.

When he went to the airlines reservation office in town, the assistantwanted to know whether he had any certificate from the railways confirmingall this. He did not. He was then told as per rules, he had to be treated a NoShow and he would get no refund on the earlier ticket. He could buy a freshticket for either of the evening flights, both of which were late and fullybooked. He could take his chances at the airport. He agreed.

The assistant then endorsed the morning ticket for either of the eveningflight (without any extra charges) and told him to go to the airportimmediately and enter his name among the wait-listed passengers. Whenhe reached the airport in about 30 minutes, he found that his name wasalready among the wait-listed passengers. Apparently the assistant in theoffice had called up and entered his name in the list

2.Services Marketing(Mkt Mix)

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Transcript of 2.Services Marketing(Mkt Mix)