40697861 2 Services Marketing Mkt Mix (1)

8/11/2019 40697861 2 Services Marketing Mkt Mix (1)

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Service Product MixPricing of services

Service Promotion MixPlace factor in services marketing

People in services Service Process

Capacity planningCapacity scheduling


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Formulating marketing mix for services is as

important as for products.

It is the set of tools that a firm uses to pursue itsmarketing objectives in the target market

Service expectation levels of consumers are at an alltime high, hence formulation of service marketing mixneeds to be done on a professional level, by experts

Offering quality services is not enough,Properpromotion, sound pricing strategy, placementdecisions, hiring right staff and studying consumersenhances service delivery process

This has resulted in broadening & modification ofthe market mix i.e due to the inadequacy of the 4ps

an extended mkt mix is devised


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Expanded market mix for services

service

Physicalevidence

process

promotion

peopleplace

product

price


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An expanded marketing mix for services

Customers PricePlace &Time

Promotion

Product(service)People Process

Physical evidence

Customers Price

Customers Place,cyber-space &time


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People

All human actors who play a part in servicedelivery and thus influence the buyersperceptions: namely, the firms personnel, thecustomer, and other customers in the serviceenvironment.

customerservice employeesother customers


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Physical Evidence The environment in which the service is

delivered and where the firm and customerinteract, and any tangible components thatfacilitate performance or communication ofthe service.

atmospheredcor, music etc.

equipment facilities uniforms


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Process The actual procedures, mechanisms, and

flow of activities by which the service isdelivered the service delivery and operatingsystems.

service delivery systems back stage front stage

procedures 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 Marketing Mix forServices


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Product mix

Product mix decides the magnitude of success , intensity of profits and satisfaction levels of the consumer

Factors influence the product mix based on the type ofservice provided

Eg: Hotel service, quality of consumersTransport services-emerging lifestyles, levels ofurbanizationPersonal 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 in nature.Conceptualization of the service productStep 1-costumer benefit concept

Step 2-service concept

Step 3-Service offer

Step 4-service delivery system


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Five Product Levels

Potential product

Augmented product

Expected productBasic product

Core benefit


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Levels of a service productCore product seat in a theatre, room in a hotel,

services in a bankExpected product consumer perception (speed ina bank, expertise/accuracy in consultancy services,security in insurance)

Augmented product - additional attractionprovided to get an edge over competition, thishelps to keep marketing efforts pro active

Potential product process of discovering new ways to attract more customer, retain existing andfight competition (24x7 call centres, banks open onSunday )


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Nature of service offering Three components are to be kept in mind when we want todesign the service offering.Core service: The most basic component is the core serviceand it addresses questions like What is the customer reallypurchasing, What business are we in? etc. It supplies thecentral problem solving benefits that customers seek

Ex: Transport solves the need to move from one location toanother etc.

Core delivery process : The second component concerns thecore delivery process i.e - how the core product is delivered to

the customer, the customers role in the process, how long theprocess is and style of service offered.


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

The core service by making it easy to use and by increasingthe value and appeal.Each of the supplementary elements may require their owndelivery system andPrescribed service level.

Flowcharting offers an excellent way to under stand &identify the many types of supplementary servicesaccompanying a core product


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IDENTIFYING AND CLASSIFYING SUPPLEMENTARY SERVICES:

Supplementary services can be identified as-

Facilitating Enhancing

InformationOrdertaking

Billing

payment

ConsultationHospitalitySafekeeping

exceptions


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THE service flower


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Service product decision

A service provider may start with a single service, thanprovide a range of services or develop a new offering orenter a new market

These service product decision can be made by usingproduct/market matrix called Ansoff matrix-


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Market penetration-no change in service or market strategies to improve demand a) introduce schemesb) attract non-usersc) grabbing competitors share

Market development geog, age-group, social class

Diversification new service-new market


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Managing services offeringNew service development

Style changesService improvementsProcess line extensionSupplementary services/new serviceProduct line extension.major innovation


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Steps in new service development* Idea generation concept screening testing the

concept design service & assess market potential costanalysis test marketing final launch

* Need identification size of market cost-benefitanalysis introduction of new product

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


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Designing of new serviceRe-engineering service process cost, speed &

productivity considerationUse of flow charts, blue prints, review alternative deliverymethods, eliminate supplementary services, rethink theprocess

Using research to design new service-ask customers whatfeatures & price will create value


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Factors to be noted while

developing service product mix Enrich peripheral services Understand service quality expectations

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

Take support of information technologies Product for all (single product for all/offer different

specialisation in same product)


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What is a Brand?

Attributes Benefits Values

Culture

User

Personality


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Branding of services

Difficult to create a distinct brand image for servicesdue to lack of consistency in service delivery needfor the entire org to work towards it.

Even so brand loyalty is high for services

Need for patronage in order to obtain optimumsatisfaction


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Brand Equity

No Brand Loyalty

(customer will change )

Satisfied Customer (no reason to change)

Satisfied & Switching Cost

Values the Brand(brand as friend)

Devotedto Brand


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An Overview of

Branding DecisionsBrandingDecision

Brand

No brand

Brand-SponsorDecisio n Manu-

facturerbrand

Distribu-tor(private)brand

Licensedbrand

Brand-Name

Decisionbrandnames

Blanketfamilyname

Separate

familynames Company-individual

Individualnames

Brand-Repositioning

Decision

Reposi-tioning

Noreposi-tioning

Brand-StrategyDecision Lineextension

Brandextension

Multi-brands

Newbrands

Cobrands


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Brand Strategies

BrandExtension

New

B r a

n d N a m e

Product Category

LineExtension

Existing

Existing

MultibrandsNew NewBrands


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Good Brand Names:

SuggestProductBenefits

Distinctive

Lack PoorForeign

LanguageMeanings

SuggestProductQualities

Easy to:PronounceRecognizeRemember


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Pricing of services Research and expertise pertaining to the pricing

of services is found lacking Pricing approaches developed for products are

applied to services too

The challenge is to determine a price at which theservice product is sold and also gives profitablereturns

The price must be acceptable to the targetcustomer & should accurately reflect on the otherelements of the marketing mix


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Perception of value for a consumer the price

determines the value attached by the serviceprovider & it should correspond with thecustomers perception of value

There are various factors that influence price tobe charged:-

Range of service offered

Demand & capacity constraints Kind of organization Market structure Competitors price

Th diff b i i f


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Three differences between pricing forgoods & services

Customer have limited knowledgeregarding reference prices for services

Price is an important signal of quality

Monetary price is not the only relevantprice to the customer


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Pricing objectives

Survival

Maximization of current profit

Maximization of current revenue

prestige/ image

Patronage & user based objective

h f i i


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Approaches / structure of pricing1. Cost based pricing - difficult as very small

portion of tangible goods sold, intangible servicedifficult to price, profit considerations alsoincluded after total cost is computed. Theformula for cost 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 benefitsagainst the perceived cost they will incurRecognize trade off customers are willing tomakeQuantify non-monetary & monetary value tothe customer

People perceive different set of values, identifyone or more bundle that addresses a segment.


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4. Demand based pricing --

It is associated with the customer ratherthan the cost or competitionRelationship between price & demandDrawbacks:-Considers only the monetary aspect ofcost of service, however non-monetarycost & benefit must be factored

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

Pricing strategies for capturing &


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Pricing strategies for capturing &communicating value

Satisfaction based pricing Service guarantees, benefit drivenor flat rate pricing

Relationship pricing encourages a customer to expand hisdealings with service provider

Efficiency pricing- understanding , managing & reducingcost . Pro viding value for money. Reducing monetaryburden to the consumers by providing best service and acost effective one. Efficiency through innovation, making itdifficult for competitors to imitate

Satisfaction based pricing


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Satisfaction based pricingService guarantees a powerful re-assurance,gives them a recourse-usually a price reductionor a refund. It symbolizes co commitment enhances confidence

Benefit driven based on how it is used & how itcreates value. Service that directly benefitscustomer. Customers feels more satisfied thanuncertain, than if the price of a service isunrelated to the benefit it delivers

Flat rate pricing where service prices are unpredictable & cost are badly managed

Relationship pricing


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Relationship pricing

Long term contract price & non-price incentivesare offered to strengthen the existingrelationship & build a new one.

Price bundling selling two or more serviceselling together. Provides various benefits to theservice provider.

Managing the perception of value v alue issubjective, not possible to assess the true valueof services especially for credence qualities,hence necessary to communicate


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Reducing the related monetary & non-

monetary cost price paid also includes non-monetary cost which is of 4 types Time costPhysical costPsychological costSensory costPrice discrimination (different prices for differentconsumers), penetration, skimming, follow thecompetitor, are also few of the strategies forpricing effectively used

Pl i i


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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 ansignificant base for location decisions.

Accessibility refers to convenience with whichthe service can be purchased & availability refersto the extent to which the service is obtainable

Factors influencing choice of location


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Factors influencing choice of location

Nature of serviceNature of interaction requiredCustomers needs & wantsDependency of other servicesUse of technology

The three possible interaction between serviceprovider & customer:-The customer goes to the service providerThe 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, less expensive

High contact services: accessibility, visibility,customer convenience

location constraints: operational requirements egairports, resorts with certain special facilities,

economies of scale

locating in multi purpose facilities; near workplaces

D i i b t ti


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Decisions about timeToday for some highly responsive service operations

the standard has become 24/7, never the less there aremany firms who resist the trend of 7 days operation.

Factors that encourage extended operating hours:-

Economic pressure from consumersChanges in legislationTo improve asset utilization

Automated self service facilities Availability of workers to work for extended hoursPressure from competition

Di t di t ib ti


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Direct distributionThe inseparable, intangible and the perishable

nature of services makes direct distribution andindispensible option for ensuring quality and careto the customer

Advantages of direct distributionGreater control & monitoringCloser and amicable relationship with thecustomersEnsure confidentiality & secrecyElimination of certain costs

Channels decisions


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Channels decisionsChannel decision may be influenced by thefollowing factors

Ease and accessibility for the customers

The added value or service or benefit they provide

The cost to the company & the margins they seek

Their reputation and reliability

Their expertise, ability and compatibility

The vital role that they play


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Primary channels in service distribution

Servicescreated bycompany

Franchises

Electronics

Agents/brokers

Targetcustomer

Widely used distribution channels in service include-Agent or broker

Franchised or contracted service deliveriesElectronics


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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 theso called 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 thecore part of the product ii) they represent the firmiii) they are the brand

Success depends on firms commitment to HR

Classification of employees


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Classification of employeesHigh contact services

Low contact servicesProfessional service employeesConsumer service employees

Challenges faced & sources of conflictsEmotional labor boundary spanningPerson/role conflictOrganization/client conflictInter client conflict

Strategies for customer oriented service delivery


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Strategies for customer oriented service delivery Hire right people

i) competing for the best people ii)hiring for service competence & service inclination iii) being the preferred employer

Develop/train employees to deliver services as 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

Physical evidence in services


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Physical evidence in 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, thoughuse of physical evidence is extensive in services likehospitals, hotels and minimal in insurance service,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 mediumB) as a message creating mediumC) as an effect creating medium

Designing a service env is considered an art & takesconsiderable time & efforts. It requires considerationabout ambient conditions, space, functionality etc

Types of physical evidence


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Types of physical evidencePeripheral evidence:- those items that confirm the

service or are complementary to the service

Essential evidence:-includes physical elements integralto the service though may not be always passed on.

Elements of physical evidence:-Physical environment

CommunicationPricePersonnelCorporate image & identity

Elements of physical env


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Elements of physical env

Atmospheric

SightSoundSmellTouch

ServicescapeExterior design

SignageParking

LandscapeSurrounding env

InteriorsEquipments

FacilitiesLayout , etc

Environmental dimensions


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Environmental dimensions

Ambientconditions

Temperature Noise Music Scent, etc

space/function

Layout Equipment Furnishing etc

Signs/symbols

Signage Style of dcor Personal

artifacts


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Designing of servicescape will depend upon whether itis a elaborate or lean servicescape , elaborate servicescape communicates heavily through physical evidence

Communication:-Tangibilizing the service

Tangibilizing the message

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

Too low priceToo high pricePersonnelCorporate image & identity

Si ifi f h i l id


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Significance of physical evidence Shaping 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 the customersas well as be operationally efficient . It involves seriesof activities, their sequence, procedures that have to beefficiently performed for delivery of service.

Service process involves three concepts:- A series of procedureCreation & delivery of the serviceCustomer involvement & participation

F b id d hil d i i i


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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 basedb) Technology, machinery, equipment based

Basic concepts for designing a process* Process should be broken into logical steps* process should be flexible* should include the concept of deviation

Two types of service process


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Two types of service processLine & flow operation

Job shop process

Decisions in service process planning

Basic technological decisionSpecific equipment decisionLocation & layout decisionPeoples decision Operation structureProcess flow decision blue print, flow charts,& benchmarks


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blue print as a key tool in service design

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

It takes an holistic view about the delivery processmechanism keeping in mind the customer

A blue print should address the following aspects:-

Service staff should understand what is required of themCustomer should have knowledge of his roleThe time frame involved for each activity should be stated

Components of service blue print


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Components of service blue print

Support processes

Line of interaction

Line of visibility

Contact employees action

Line of internal interaction

Steps in developing a service blue print


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Steps in developing a service blue printUnderstanding the service to be blue printed

Identifying all the key activities involved in the servicedelivery & specify the linkage between them distinguish between the on stage from the back stageactivities

Service blue print should clarify interaction betweencustomer & the employees & see the customers pointof viewIdentifying of support activitiesGiving physical evidence to each customer action stepCreate a script for the employees as well as thecustomers which can help in identifying potentialproblems or failures

Flow charting for services


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Flow charting for servicesInvolves presentation of the process visually & insequence

Useful in defining the points in the process where theconsumer uses core service & where he uses the

supplementary service

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

Benchmarking


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BenchmarkingThis technique helps companies to become as good orbetter than the best in most imp aspects of the org

Objective:-Gives companies a standard to measure performanceIt allows companies to identify best ways to getcompetitive advantage Allows companies to overcome problems or pursuetargets 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 channelsImproving human resourcesQuality managementManufacturing systems, cost etcProduct developmentInventory control and loads of other issuesconcerned with effectively managing of businessactivities

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


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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.

El f i i


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Elements of promotion mix

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

Publicity

Sales promotion gifts, contests, discounts,commission, fairs

Personal selling

Word of mouth

Telemarketing

An overview of 7 Ps for Services


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Managing demand & capacity


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Managing demand & capacityFluctuating demand and perishable nature of servicesposes 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 thedemand through 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 may face oneof the four conditions:-

Excess demand denied service, business lostDemand exceeds optimum capacity:- quality maysuffer

Demand and supply are well balanced:- ideal situationExcess capacity- low productivity , low utilization.

Tailoring of capacity level(stretching or shrinking)


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Tailoring of capacity level(stretching or shrinking)Some capacity is elastic in absorbing extra demand egtransportation services, hotels & restaurants byswitching 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 predictablecycle or not-- & than try to identify that underliningfactor

2) Examine whether demand level changes randomly3) Examine whether it can be associated to a particular

segment & than divide demand by market segment

Approaches to managing demand


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pp g gUsing marketing mix elements to shape demand

Product variation

Modifying the timing and location of delivery

Pricing strategies


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Invent rising demand through queuing & reservationQueuing system

a) Easy operational logic

b) Establish a reservation process

c) Differentiate waiting customers on the basis of:-ImportanceUrgency of jobpayment 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 consumers arestudied

Their potential is rated

Lapses in current process are identified and corrective measurestaken

Firm tries to match the service offerings to the market demand

Problems - Task of predicting behaviour of users is difficultUnavailability of sufficient lead time in many cases


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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 changes indemand, quality of services, new trends, changingtastes 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 above

factors is essential on a time map

Helps optimum utilisation of time and other resources

Reduces wastages


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Case A passenger with a confirmed ticket on early morning flight from Ahmedabad toMumbai could reach Ahmedabad only by 3.30 pm because the train by which he wastraveling to Ahmedabad got marooned due to floods at night. He reached Ahmedabad traveling by special buses arranged by the railways.

When he went to the airlines reservation office in town, the assistant wanted toknow whether he had any certificate from the railways confirming all this. He didnot. He was then told as per rules, he had to be treated a No Show and he wouldget no refund on the earlier ticket. He could buy a fresh ticket for either of theevening flights, both of which were late and fully booked. He could take his chancesat the airport. He agreed.

The assistant then endorsed the morning ticket for either of the evening f light(without any extra charges) and told him to go to the airport immediately and enterhis name among the wait-listed passengers. When he reached the airport in about30 minutes, he found that his name was already among the wait-listed passengers. Apparently the assistant in the office had called up and entered his name in the list

Documents

40697861 2 Services Marketing Mkt Mix (1)