Marketing of Services Nd Ims

8/6/2019 Marketing of Services Nd Ims...

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MARKETING OF SERVICES

India is projected to become third largest economy in the world by 2050. The servicesector remained the key driving force of Indian economy and average growth of thissector at 8.6 per cent was higher than the average growth of 7.5 per cent during the last

five years. Eventually service sector contributed above 50 per cent of GDP since 1997-98and touched 57.6 per cent in 2004-05. Further India ranked 18th largest exporter of globalservice and touched export revenue of US$ 51,326 million line 2004-05.

The Tangibility Spectrum

Products and services may be ranked according to their tangibility (page 7, Zeithaml book). Salt is shown as being highly tangible, while teaching is shown to be leasttangible. The point of this classification is that the concepts presented in the servicesmarketing literature are especially significant to the services that are least tangible, suchas teaching.

Basic Characteristics of Services

Services differ from products in four important ways: intangibility, heterogeneity,simultaneous production and consumption and perishability. All of these ways affectmarketing strategy.

Services are intangible and teaching is among the least tangible services.Intangibility leads to two problems. It is difficult to describe teaching and it is difficult toevaluate its quality. Regarding the first difficulty, it is very important to be careful in

describing teaching fully and accurately in order to avoid building up unrealisticexpectations in the minds of students. Regarding the second difficulty (evaluation),schools have to anticipate that students will use a variety of sources of information inevaluating the quality of the teaching, including people (administrators, faculty, staff andother students), physical evidence (classrooms, lounges, labs, libraries) and processes(instructional and administrative).

Services are heterogeneous . Even within one institution, teaching is produced bydifferent people, in different places, at different times, with different students. Therefore,the quality of the service delivered depends on the capabilities, demeanor and motivationof service providers (teachers), the adequacy of the physical surroundings and the interest

and behavior of the students. The challenge of maintaining the quality of teaching in aninstitution requires measures that affect positively the behavior of many people indifferent places, in the absence of close supervision. Indirect methods, such as marketingto the service providers (teachers) need to be used. See the Service Marketing Triangle(page 23) ( Exhibit 11.1 )

Services are produced and consumed simultaneously. All service providers,administrators, teachers and staff are producers and simultaneously marketers of the
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educational service. At the same time, the behavior of students may affect the quality of the education received by all students. These factors lead to two conclusions. To achieve

best results, all service providers should have a basic understanding of marketing and possess marketing skills. In addition, students must be selected and oriented and if need be trained, in ways that will enhance the learning experience of all students.

Services are perishable . Teaching cannot be stored. It cannot be returned or replaced. To achieve satisfactory financial results proper scheduling becomes animportant issue. On the other hand, in order to enable students to get a good education, itmay appear necessary, at times to schedule small classes. Conflicting goals may requirecreative problem-solving.

The Expanded Marketing Mix

For all services marketing, including teaching, three elements have to be added (26) to

the usual four part marketing mix consisting of product, price, promotion anddistribution. The following three elements also have to be considered in formulatingmarketing strategy because all of them play a role in student pre-purchase and post-

purchase evaluation:

1. People: administrators, teachers and students.2. Physical evidence: buildings, classrooms, computer labs, libraries, student

lounges.3. Process: teaching methods, technology, level of student involvement.


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On the Five Dimensions of Service Quality

1. Reliability is the ability to deliver important promised results, such as career advancement, consistently. Alumni testimonials and placement and career progress datawould have to be offered to support this type of positioning. In addition, some form of

guarantees might have to be offered. 2. Responsiveness is the willingness to help students. Substantial advisory and

tutoring services would have be offered to support such positioning.

3. Assurance positioning would have to be backed up by evidence of the knowledgeand thoughtfulness of administrators, faculty and staff and their ability to inspire trust andconfidence.

4. Empathy positioning would have to be supported by evidence that caring,individualized attention is given to students by administrators, faculty and staff.

5. Tangibles positioning would have to be supported by the appearance, usefulnessand comfort of physical facilities and the quality and availability of computers, on-lineservices and library, etc.

On the Three Elements of Service Evidence

People

An essential ingredient to any service provision is the use of appropriate staff and people.

Recruiting the right staff and training them appropriately in the delivery of their service isessential if the organisation wants to obtain a form of competitive advantage. Consumersmake judgments and deliver perceptions of the service based on the employees theyinteract with. Staff should have the appropriate interpersonal skills, aptititude, and serviceknowledge to provide the service that consumers are paying for. Many Britishorganisations aim to apply for the Investors In People accreditation, which tellsconsumers that staff are taken care off by the company and they are trained to certainstandards.

Process

Refers to the systems used to assist the organisation in delivering the service. Imagineyou walk into Burger King and you order a Whopper Meal and you get it deliveredwithin 2 minutes. What was the process that allowed you to obtain an efficient servicedelivery? Banks that send out Credit Cards automatically when their customers old onehas expired again require an efficient process to identify expiry dates and renewal. Anefficient service that replaces old credit cards will foster consumer loyalty and confidencein the company.


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Physical Evidence

Where is the service being delivered? Physical Evidence is the element of the service mixwhich allows the consumer again to make judgments on the organisation. If you walk into a restaurant your expectations are of a clean, friendly environment. On an aircraft if

you travel first class you expect enough room to be able to lay down!Physical evidence is an essential ingredient of the service mix, consumers will make perceptions based on their sight of the service provision which will have an impact on theorganisations perceptual plan of the service.

Characteristics of a Service

Consumer Buying Behaviour

What influences consumers to purchase products or services? The consumer buying

process is a complex matter as many internal and external factors have an impact on the buying decisions of the consumer.

When purchasing a product there several processes, which consumers go through. Thesewill be discussed below.

1. Problem/Need Recognition

How do you decide you want to buy a particular product or service? It could be that your DVD player stops working and you now have to look for a new one, all those DVD filmsyou purchased you can no longer play! So you have a problem or a new need. For highvalue items like a DVD player or a car or other low frequency purchased products this isthe process we would take. However, for impulse low frequency purchases e.g.confectionery the process is different.


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2. Information searchSo we have a problem, our DVD player no longer works and we need to buy a new one.Whats the solution? Yes go out and purchase a new one, but which brand? Shall we buy

the same brand as the one that blew up? Or stay clear of that? Consumer often go onsome form of information search to help them through their purchase decision. Sources of information could be family, friends, neighbours who may have the product you have inmind, alternatively you may ask the sales people, or dealers, or read specialist magazineslike What DVD? to help with their purchase decision. You may even actually examinethe product before you decide to purchase it.

3. Evaluation of different purchase

options.So what DVD player do we purchase? Shall it be Sony, Toshiba or Bush? Consumersallocate attribute factors to certain products, almost like a point scoring system whichthey work out in their mind over which brand to purchase. This means that consumersknow what features from the rivals will benefit them and they attach different degrees of importance to each attribute. For example sound maybe better on the Sony product and

picture on the Toshiba , but picture clarity is more important to you then sound.Consumers usually have some sort of brand preference with companies as they may havehad a good history with a particular brand or their friends may have had a reliable historywith one, but if the decision falls between the Sony DVD or Toshiba then which one shall

it be? It could be that the a review the consumer reads on the particular Toshiba productmay have tipped the balance and that they will purchase that brand.

4. Purchase decisionThrough the evaluation process discussed above consumers will reach their final

purchase decision and they reach the final process of going through the purchase actione.g. The process of going to the shop to buy the product, which for some consumers can

be as just as rewarding as actually purchasing the product. Purchase of the product caneither be through the store, the web, or over the phone.

Post Purchase Behaviour


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Ever have doubts about the product after you purchased it? This simply is post purchase behaviour and research shows that it is a common trait amongst purchasers of products.Manufacturers of products clearly want recent consumers to feel proud of their purchase,it is therefore just as important for manufacturers to advertise for the sake of their recent

purchaser so consumers feel comfortable that they own a product from a strong andreputable organisation. This limits post purchase behaviour. i.e. You feel reassured thatyou own the latest advertised product.

Factors influencing the behaviour of buyers .Consumer behaviour is affected by many uncontrollable factors. Just think, what

influences you before you buy a product or service? Your friends, your upbringing, your culture, the media, a role model or influences from certain groups?

Culture is one factor that influences behaviour. Simply culture is defined as our attitudes and beliefs. But how are these attitudes and beliefs developed? As an individualgrowing up, a child is influenced by their parents, brothers, sister and other familymember who may teach them what is wrong or right. They learn about their religion andculture, which helps them develop these opinions, attitudes and beliefs (AIO) . Thesefactors will influence their purchase behaviour however other factors like groups of friends, or people they look up to may influence their choices of purchasing a particular

product or service. Reference groups are particular groups of people some people may

look up towards to that have an impact on consumer behaviour. So they can be simply a band like the Spice Girls or your immediate family members. Opinion leaders are those people that you look up to because your respect their views and judgements and theseviews may influence consumer decisions. So it maybe a friend who works with the ITtrade who may influence your decision on what computer to buy. The economicalenvironment also has an impact on consumer behaviour; do consumers have a secure joband a regular income to spend on goods? Marketing and advertising obviously influenceconsumers in trying to evoke them to purchase a particular product or service.

Peoples social status will also impact their behaviour. What is their role within society?Are they Actors? Doctors? Office worker? and mothers and fathers also? Clearly being

parents affects your buying habits depending on the age of the children, the type of jobmay mean you need to purchase formal clothes, the income which is earned has animpact. The lifestyle of someone who earns 250000 would clearly be different fromsomeone who earns 25000. Also characters have an influence on buying decision.Whether the person is extrovert (out going and spends on entertainment) or introvert(keeps to themselves and purchases via online or mail order) again has an impact on thetypes of purchases made.


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Maslows Hierarchy of NeedsAbraham Maslow hierarchy of needs theory sets out to explain what motivated

individuals in life to achieve. He set out his answer in a form of a hierarchy. He suggestsindividuals aim to meet basic psychological needs of hunger and thirst. When this has been met they then move up to the next stage of the hierarchy, safety needs , where the priority lay with job security and the knowing that an income will be available to themregularly . Social needs come in the next level of the hierarchy, the need to belong or beloved is a natural human desire and people do strive for this belonging. Esteem need isthe need for status and recognition within society, status sometimes drives people, theneed to have a good job title and be recognised or the need to wear branded clothes as asymbol of status.Self-actualization the realization that an individual has reached their potential in life.The point of self-actualization is down to the individual, when do you know you have

reached your point of self-fulfilment?But how does this concept help an organization trying to market a product or service?Well as we have established earlier within this website, marketing is about meeting needsand providing benefits, Maslows concept suggests that needs change as we go along our

path of striving for self-actualization. Supermarket firms develop value brands to meetthe psychological needs of hunger and thirst. Harrods develops products and services for those who want have met their esteem needs. So Maslows concept is useful for marketers as it can help them understand and develop consumer needs and wants.

Types of buying behavior.There are four typical types of buying behaviors based on the type of products thatintends to be purchased . Complex buying behaviors is where the individual purchases ahigh value brand and seeks a lot of information before the purchase is made. Habitualbuying behaviors are where the individual buys a product out of habit e.g. a dailynewspaper, sugar or salt. Variety seeking buying behaviors is where the individual likesto shop around and experiment with different products. So an individual may shop aroundfor different breakfast cereals because he/she wants variety in the mornings! Dissonancereducing buying behaviors is when buyer are highly involved with the purchase of the

product, because the purchase is expensive or infrequent. There is little difference between existing brands an example would be buying a diamond ring, there is perceivedlittle difference between existing diamond brand manufacturers.

White Labelling


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Where a product or service is produced by one organisation but offered to the public byanother.White labelling is used in a wide variety of industries including food, technologyand financial products.

Advantages of white labelling.

Producer can access a wider market for their goods.

For the distributor they do not have the R&D cost of having to invest in a new product,whilst benefiting from the advantages of having their own product.

Examples of white labelling within the food industry

Many supermarkets offer own brand label products. There are two ways of doing this.

1. Either the supermarket will select a producer who also produces goods under their own

name or they will select a producer who manufacturers goods solely in other organisationnames for example Northern Foods within the UK produces many branded and own brand label product.

2. They will use another company to manufacturer the product. In the UK Weetabix produce cereals for the supermarkets and allow the supermarkets to label it as their own brand.

Examples of white labelling within the financial industry

Financial products are offered by many organisations some of these organisations will

use white labelling because they do not have the infrastructure required to offer financial products. For example small banks will ask large banks to handle their credit cardoperations as this is cheaper then dealing with it themselves. You may also get newfinancial organisations such as supermarkets who want to offer financial products usingwhite labelling, because they do not have the financial licence required to offer thefinancial services.

Components of customer services

Good customer service stretches from before the customer purchases the product to after the purchase transaction has been completed. The components of customer consist of the

following.Pre Transactional Strategies

This is all about the strategies a firm uses to get the consumer into the store. This couldinvolve using various promotional strategies such as offers to tempt customers. Manystores now offer cafes, have leaflets that will give detailed product information.


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Transactional Strategies

Once in the store, how can the store support the potential customer? Sales persons should be able to answer questions confidently about a product and demonstrate the product if asked. The buying process should also be straight forward and simple, so the customer

does not walk away.

Post Transactional Strategies

After the purchase transaction if there is a problem with the product, how is the complaintdealt with? Is the problem dealt with quickly for the customer? What is after sales servicelike? Should you contact the customer to ask them if they wish to extend their warrantyor purchase any complimentary products.

Customer Services

Customers Services is all about looking after potential and current customers and makingsure that their needs are met. This can happen before the customer transacts with thecompany, during the transactional process and after the transaction has been completed.

The above is known as the components of customer services and is talked about further here.

Good customer services is an essential part of a companys strategy particularly if thecompany wishes to retain customers for the long-term. Customers are more likely tospend more with your firm if they are looked after well. Good customers services cantake place in many forms. These include:

Having a visible customer services desk . Customers should be able to find customer services very easily within a retail store and this desk should always be staffed. Thissends out a good impression to customers visiting the store.

Skilled staff . Staff should have the area of expertise within the section they are workingwithin. Certainly they should know more than the average customer. This buildsconfidence and trust with the potential customer.

Store policies: What are the policies on product returns? Customers will feel moreconfident with a retail store knowing they can return the product if it develops a fault. UK

firm Argos have a 14 day money back guarantee on most products that are purchased. Soif consumers change their mind about the product within that period, they can return it.This policy goes beyond UK law, showing their dedication to customer service.

Phone line: If there is a phone line, customer calls should be answered within areasonable time. Is the customer service line picked up as quickly as the firms sales line?
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If your customers have any queries or complaints they should be dealt with very quickly.Any praise given to the firm should also be acknowledged and thanked, remember thecustomer has taken time out of their busy schedule to thank you and praise you.

Customer Services must be treated seriously. Failure to do so may result in the firm

losing out to competitors and developing a bad reputation within the market.

Benefits of relationship marketingRetaining customers for the long-term offers many benefits. The aim is for the companyto obtain life time custom. Some of the benefits of relationship marketing include:

1. Loyal customers will recommend your business to others, thus expanding your

business for you.2. Loyal customers are willing to try some of your new products, because they trustyou.

3. Customers will be willing to pay more for your services/products if there areadjustments in pricing because they are loyal to you and trust your services/products.

4. Loyal customers will tell you about problems with your products/servicesenabling to improve your products/services.

5. The ultimate benefit will be an increase sales, market share and dominance.

International MarketingSo you decided you want to sell your product overseas. The world is becoming a smaller

place because of technology (the internet) and social mobility, that is, people aretravelling more and are seeing familiar brands around the world, and, you can identifysimilar segment in overseas markets, so, lets go global!


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So why go Global?Competition within your national market is becoming too intense so you decide to pushsales in overseas markets.

Your products within your national markets are reaching the end of the life cycle so youwish to push it into national markets.

Sales and profit are generally declining in national markets.

You wish to become a global player.

One of Ansoffs strategies (Market development) does looks at exploiting products inoverseas markets as an option to plug falling sales.

International Marketing Environment

Entering global markets.

There are a number of steps that need to be taken before you decide to enter internationalmarkets.

Analyze the international marketing environment. A PEST/STEP analysis needs to beconducted on the market you enter, to assess whether it is worthwhile or not. Lets brieflylook at some factors that may influence an international decision.

Political factors

Consider:

The political stability of the nation. Is it a democracy, communist, or dictatorialregime?

Monetary regulations. Will the seller be paid in a currency that they value or will payments only be accepted in the host nation currency?

Economical Factors

Consider: Consumer wealth and expenditure within the country. National interests and inflation rate. Are quotas imposed on your product. Are there import tariffs imposed. Does the government offer subsidies to national players that make it difficult for

you to compete?


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Social Factors

Conside r

Language. Will language be a barrier to communication for you? Does your host

nation speak your national language? What is the meaning of your brand name inyour host countrys language? Customs: what customs do you have to be aware of within the country? This is

important. You need to make sure you do not offend while communicating your message.

Social factors: What are the role of women and family within society? Religion: How does religion affect behaviour? Values: what are the values and attitudes of individuals within the market?

Technological

Consider :

The technological infrastructure of the market. Do all homes have access to energy (electricity) Is there an Internet infrastructure. Does this infrastructure support broadband or

dial up? Will your systems easily integrate with your host countrys?

Market entry methods

After assessing the environment in your selected country, how do you decide which arethe best countries to enter? Paliwood (1993) suggests that before you enter an overseasmarket there are six factors that need to be considered:

Speed How quickly do you wish to enter your selected market?Costs- What is the cost of entering that market?Flexibility How easy is it to enter/leave your chosen market?Risk Factor What is the political risk of entering the market? What are the competitiverisk? How competitive is the market?Payback period When do you wish to obtain a return from entering the market? Arethere pressures to break even and return a profit within a certain period?

Long- term objectives- What does the organisation wish to achieve in the long term byoperating in the foreign market? Will they establish a presence in that market and thenmove onto others?

Trading overseas


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There are a number ways an organisation can start to sell their products in internationalmarkets.

1. Direct export.

The organisation produces their product in their home market and then sells them tocustomers overseas.

2. Indirect export

The organisations sells their product to a third party who then sells it on within theforeign market.

3.Licensing

Another less risky market entry method is licensing. Here the Licensor will grant an

organisation in the foreign market a license to produce the product, use the brand nameetc in return that they will receive a royalty payment.

4.Franchising

Franchising is another form of licensing. Here the organisation puts together a package of the successful ingredients that made them a success in their home market and thenfranchise this package to oversea investors. The Franchise holder may help out by

providing training and marketing the services or product. McDonalds is a popular example of a Franchising option for expanding in international markets.

5.Contracting

Another of form on market entry in an overseas market which involves the exchange of ideas is contracting. The manufacturer of the product will contract out the production of the product to another organisation to produce the product on their behalf. Clearlycontracting out saves the organisation exporting to the foreign market.

6.Manufacturing abroad

The ultimate decision to sell abroad is the decision to establish a manufacturing plant inthe host country. The government of the host country may give the organisation some

form of tax advantage because they wish to attract inward investment to help createemployment for their economy.

7.Joint Venture

To share the risk of market entry into a foreign market, two organisations may cometogether to form a company to operate in the host country. The two companies may share


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knowledge and expertise to assist them in the development of company, of course profitswill have to be shared out also.

The International Marketing MixWhen launching a product into foreign markets do you standardise or adapt your marketing mix to the foreign market? A company can adopt to use a standardisedmarketing mix around the world or an adapted marketing mix in each country.

International Product StrategiesStandardisation Vs AdaptionSo what should an organisation do? Adapt or sell a standardised product? Basic

marketing concepts tell us that we will sell more of a product if we aim to meet the needsof our target market. In international markets ,we have to take into considerationconsumers cultural background, buying habits, levels of personal disposable income etcin order to deliver a tailored marketing mix program to suit their needs.

The arguments however for standardisation suggest that if you go through the process of adapting the product to local markets it does little but add to the overall cost of producingthe product and weakens the brand on the global scale. In todays global world, whereconsumers travel more, watch satellite television, communicate and shop internationallyover the internet, the world now is becoming a lot smaller. Because of this there is noneed to adapt products to local markets. Brands such as Coca-Cola, MTV, Nike, Levis

are all successful global brands where they have a standardised approach to their marketing mix, all these products are targeted at similar groups globally.

In many circumstances a company will have to adapt their product and marketing mixstrategy to meet local needs and wants that cannot be changed. Mcdonald is a global

player however, their burgers are adapted to local needs. In India where a cow is a sacredanimal their burgers are served with chicken or fish. In Mexico burgers come with chillisauce. Coca-cola is some parts of the world taste sweeter then in others. Yes we canargue that standardisation is better for the organisation because it reduces cost, however many organisations will have to think global, but act local if they are to successfullyestablish them selves in foreign markets.

International Promotion StrategyAs with international product decisions an organisation can either adapt or standardisetheir promotional strategy and message. Advertising messages in countries may well haveto be adapted because of language barriers or the current message used in the nationalmarket may be offensive to overseas residents.


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The use of certain colours may also need to be thought about. In India red is the colour worn by the bride in weddings, white is the colour for mourning in Japan. The level of media development has to also be taken into account. Is commercial television wellestablished in your host country? What is the level of television penetration? How muchcontrol does the government have over advertising on TV and radio? Is print media more

popular then TV? Many organisation go for a strategy of adapting advertising messagesto local markets to best meet consumer demand.

International Pricing StrategiesPricing on an international scale is difficult. As well as taking into account traditional

price considerations (see marketing mix pricing) i.e.:

Fixed and variable costs,

Competition,

Company objectives ,

Proposed positioning strategies,

Target group and willingness to pay,

the organisation needs to consider the costs of transport, any tariffs or import duties thatmay be levied on their product(s) when they are sold on the international scale. Also whatcurrency do you expect to be paid in? Will it be home or international currency?

Exchange rate fluctuation will also impact profitability and influence pricing decisions.

Other factors to consider include local incomes, what are income and PDI levels. What isthe general economic situation of the country and how will this influence pricing?

The internet is now making pricing more transparent for consumers. Goods can be purchased online from any overseas organisations at local currency prices, a primeexamples is dvds which are purchased from sites like www.dvdsoon.com which deliver internationally.

International Distribution Strategies

A standard distribution channel in the UK may go from a Manufacturer, wholesaler,retailer to consumer or direct from a manufacturer to a retailer. In an overseas marketthere may well be more intermediaries involved. For example in Japan there areapproximately five different types of wholesaler a product goes through before the

product reaches the final consumer. In your international market , is it dominated by
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major retailers or is the retail sector made up of small independent retailers? Is internetdistribution common for your product .

iPAD to S-pad to Black Pad: TabletMarketingFrom iMacs to iPods to iTouch to iPhones and now the iPad. Apple is no doubt aninnovative company changing the various sectors they operate in. The business issue withthe tablet market is, will they become a substitute for netbook computers? For advertisersand developers it is another medium to consider when developing their marketingstrategy. Which tablet device should they gear their website towards? For whom shouldthey write apps for? Writing business apps maybe a feasible option for business tabletusers, as currently, business segments seem to be the main users. Apple currently is themarket leader, but it only takes one manufacturer offering the right combination of price

and quality to impact Apple iPad sales. But who will that be?As the iPad takes off, competitors rush to bring in alternative tablet machines, to capturethis growing market. The S Pad by Samsung has a 7 inch screen running GooglesAndroid operating system, whilst the iPad has a 10 inch screen. Blackberry have alsoannounced their Black Pad, aimed at the business segment.

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Marketing of Services Nd Ims