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Here are the TYBMS Sem 5 subject - Service Sector management notes
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Ch-1 Introduction to Services Marketing Define Services A service is an act or performance offered by one party to another. They are economic activities that create value and provide benefits for customers at specific times and places as a result of bringing desired change. According to Sir William B "Service refers to social efforts which includes the Govt. to fight five giant evils – wants, disease, ignorance, squalor and illness in the society". Characteristics of services Service is an act or performance offered by one party to another. They are economic activities that create value and provide benefits for customers at specific times and places as a result of bringing about a desired change in or on behalf of the recipient of the service. The term service is not limited to personal services like medical services, beauty parlors, legal services, etc. According to the marketing experts and management thinkers the concept of services is a wider one. The term services are defined in a number of ways but not a single one is universally accepted. The distinct characteristics of services are mentioned below. 1. Intangibility: Services are intangible we cannot touch them are not physical objects. According to Carman and Uhl, a consumer feels that he has the right and opportunity to see, touch, hear, smell or taste the goods before they buy them. This is not applicable to services. The buyer does not have any opportunity to touch smell, and taste the services. While selling or promoting a service one has to concentrate on the satisfaction and benefit a consumer can derive having spent on these services. For e.g. An airline sells a flight ticket from A destination to B destination. Here it is the matter' of consumer's perception of services than smelling it or tasting it. 2. Perishability : Services too, are perishable like labor, Service has a high degree of perish ability. Here the element of time assumes a significant position. If we do not use it today, it labor if ever. If labor stops working, it is a complete waste. It cannot be stored. Utilized or unutilized services are an economic waste. An unoccupied building, an unemployed person, credit unutilized, etc. are economic waste. Services have a high level of perish ability. 3. Inseparability: Services are generally created or supplied simultaneously. They are inseparable. For an e.g., the entertainment industry, health experts and other professionals create and offer their service at the same given time. Services and their providers are associated closely and thus, not separable. Donald Cowell
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states 'Goods are produced, sold and then consumed whereas the services are sold and then produced and consumed'. Therefore inseparability is an important characteristic of services which proves challenging to service management industry. 4. Heterogeneity: This character of services makes it difficult to set a standard for any service. The quality of services cannot be standardized. The price paid for a service may either be too high or too low as is seen in the case of the entertainment industry and sports. The same type of services cannot be sold to all the consumers even if they pay the same price. Consumers rate these services in different ways. This is due to the difference in perception of individuals at the level of providers and users. Heterogeneity makes it difficult to establish standards for the output of service firm. 5. Ownership: In the sale of goods, after the completion of process, the goods are transferred in the name of the buyer and he becomes the owner of the goods. But in the case of services, we do not find this. The users have only an access to services. They cannot own the service. For e.g. a consumer can use personal care services or medical services or can use a hotel room or swimming pool, however the ownership remains with the providers. According to Philip Kotler, "A service is an activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. "From this it is clear that the ownership is not affected in the process of selling the services. 6. Simultaneity: Services cannot move through channels of distribution and cannot be delivered to the potential customers and user. Thus, either users are brought to the services or providers go to the user. It is right to say that services have limited geographical area. According to Carman, "Producers of services generally have a small size area of operations than do the producers of items. largely because the producer must to get the services or vice- versa." When the producers approach the buyer time is taken away from the production of services and the cost of those services is increased. On the other hand it cost time and money for the buyers to come to producers directly. Here the economics of time and travel provide incentives to locate more service centers closer, to prospective customer, resulting in emergence of smaller service centers for e.g. aeroplane cannot be brought to customer, etc. 7. Quality Measurement: A service sector requires another tool for measurement. We can measure it in terms of service level. It is very difficult to rate or quantify
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total purchase. E.g. we can quantify the food served in a hotel but the way waiter serves the customer or the behaviour of the staff cannot be ignored while rating the total process. Hence we can determine the level of satisfaction at which users are satisfied. Thus the firm sells good atmosphere convenience of customers, consistent quality of services, etc. 8. Nature of demand- Generally, the services are fluctuating in nature. During the peak tourist seasons there is an abnormal increase in the demand of services. Therefore, while identifying the salient features of services one cannot ignore the nature of demand. E.g. tourists go to hill stations during summer season wherein public transport utilities are used substantially. This indicates that flexibility is the important feature of service. Give a brief classification of services. The classification scheme developed by Christopher Lovelock represents an attempt to address one of the following aspects. 1. Nature of the Service Act: The service act can be considered in two-ways: – Who or what is the direct recipient of the service and – The tangible nature of service. This creates four classification possibilities shown below: Direct Recipient of the Service People Things Services directed at people's bodies Services directed at goods and Health care other physical possessions: Passenger transportation Freight transportation Beauty saloons Industrial equipment repair and Exercise clinics maintenance. Restaurants Laundry and dry cleaning Haircutting Landscaping/lawn care Veterinary care Services directed at people's mind Services directed at intangible Education assets: Broadcasting Banking Information services Legal Services Theatres Accounting Museums Securities Insurance Understanding the Nature of the Service Act
Nature of the Service Act
Tangible actions
Intangible actions
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2. Type of Relationship that the service organization has with its customers: In this the prime factors which need consideration – Whether or not the customer has some type, of formal relationship with the provider of service and – Whether the service itself is provided continuously or in discrete transactions. These considerations lend themselves to the matrix shown in the figure shown below: Type of Relationship between Service Organization and its customers Nature of Service Delivery Continuous delivery service Membership relationship of Insurance Telephone subscription College enrollment Banking Trade Associations Long-distance phone calls Theatre series subscription Commuter ticket or pass No formal relationship Radio station Police protection Lighthouse Public highway Car rental Mail service Toll highway Pay phone Movie theater Public transportation Restaurant
Discrete transaction
There are advantages for the service provider to have customers as 'members' whether done in a contractual sense or just by mutual agreement. By knowing personal details about the customer, it becomes easy to contact them through direct marketing and tailor special offers around those particular needs. 3. Scope for customization and judgment in service delivery: Services are created as they are consumed. There is far more scope for tailoring the service to meet the needs of the individual customer because the customer is often actually involved in the production process. As shown in the figure below customization can proceed along at least two dimensions: – The extent to which the characteristics of the service and delivery system tend themselves to customization. – How much judgment customer contact personnel are able to exercise in defining the nature of services received by individual customers. Extent to which Service Characteristics are Customized
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Professional services Surgery Taxi services Beautician Plumber Education (tutorials) Cournet restaurant Telephone service Hotel services Retail banking Family restaurant
Education (large. classes) Preventive health programs College food service
Public transportation Routine appliance repair Movie theater Spectator sports Fast-food restaurant
4. Nature of Demand and supply for the Service: Some service industries face steady demand for their services whereas others encounter significant fluctuations: The time perish ability of service capacity creates a challenge for the service manager. This is because services cannot be produced and stored as inventory for future sale. But the extent of demand and supply imbalances varies across service industries as shown in the figure below: Extent to which Supply is Constrained Wide Narrow Insurance Legal services Banking Laundry and dry cleaning Services similar to those above but with insufficient capacity for their base level of business
Electricity Peak demand can usually be Natural gas met without a major delay Telephone Hospital maternity unit Policy and fire emergencies Accounting and tax preparation
Peak demand exceeds capacity
regularly Passenger transportation Hotels and motels Restaurants Theaters What is the Nature of Demand for the Service Relative to Supply? The service managers may face serious problems while coping up with the demand fluctuations. However, with technological development several service companies are
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using computers to help in delivery scheduling to bring about a balance between demand and supply of services. 5. Method of Service Delivery: The method by which the service is delivered to customers could be yet another area where a change of marketing strategy could pay dividends. The factors to consider are shown in the figure below: Availability of Service Outlets Nature of Interaction between Customer Single site Organization and Service Customer goes to service organization Theater Barbershop Service organization comes to customer Lawn care service Pest control service Taxi Credit card company Customer and service organization Local TV station transact at arm's length (mail or electronic communication) Method of Service Delivery
Multiple site Bus service Fast-food chain Mail delivery Emergency repairs Broadcast network Telephone company
Services with multiple sites have significant management implications for ensuring consistency and quality in offering of services. Service§, delivery is of great important to the customers overall perception of quality services. Distinguish between Goofs and services GOODS (1) Tangible (2) Can be stored (3) Homogeneous (4) Transfer of ownership (5) Production & distribution are separated from consumption (6) Core value produced in factory (7) Customer do not participate in the production process (8) A Thing SERVICE (1) Intangible (2) Cannot be stored (3) Heterogeneous (4) No transfer of ownership (5) Production, distribution & consumption are simultaneous process. (6) Core value produced in buyer seller interaction. (7) Customer participate in the production process (8) An activity
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Explain growth of service sector? Services comprise a set of economic activities like transportation, trade, tourism, communications, banking and insurance, real estate, public administration, defence and so on. According to an Adrian - Payne four factors are responsible for growth in the service sector. They are: demographic, social, economic and political. 1. Demographic changes: The life expectancy has raised which in turn, is producing an expanding retired population. This sector has created a new demand for travel and leisure, as well as for healthcare, nursing and life insurance. The need for infrastructural support services has increased due to the development of new towns and regions. 2. Social changes: The number of women's in work force has increased, and this has led to traditional domestic functions being performed outside the home. The rise in number of double income household has created a greater demand for consumer services, including retailing, real estate and personal financial services. With the growing income, the standard of life has improved. Smaller families with double income spend ore on entertainment, travel and hospitality services. The aspiration levels have increased due to communication and travel. As a result, both children and adults are making new demands on learning establishments, so that they can develop the skills needed in order to compete. In the complex and fast changing environment. This has opened avenues for knowledge and information based services. 3. Economic changes: The demand for communication, travel and information services has increased due to globalisation. This has been filled by the rapid changes brought about by new information technology. Increased specialization within the economy has led to reliance on specialist service providers For e.g. advertising and marketing research have now become specialist functions providing support to all the sectors of the economy. 4. Political and legal chap : The size of the government has grown creating a huge infrastructure of service departments. With the growth in international trade, the demand on legal and other professional services have increased, cutting across national boundaries. Manufacturing firms handing over repair and maintenance, data processing, where rousing and logistics services to specialised sources, which they earlier used to perform in- house. The liberalization has also created a new avenue for growth. The slow growth of agriculture and industry and the presence of
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widespread unemployment have driven people to seek work in the informal services. This is particularly true in the urban areas, where petty pavement retail trade, transport, another is repair and service establishments have proliferated. Since the overall growth of the economy is now dependent on the service sector, the pace of productivity growth in services becomes critically important. Therefore, the government is taking an initiative in the sector. REASONS FOR THE GROWTH OF SERVICES IN INDIA: 1. Economic affluence: One, of the key factors for the growth of demand for services is the economic affluence. According to the NCAER study the size of the middle income consumer is raising fast and the percentage of the very poor household's declining. The rural households in the upper income category is growing at a much faster pace than the urban households in the corresponding categories. The Economic liberalisation Process has had a positive impact on the Indian households. Their income as well as their expenditure has been pushed, creating a demand for many goods and services. 2. Changing Role of Women: Traditionally the Indian woman was confined to household activities. But with the changing time there has been a change in the traditional way of thinking in the society. Women are now allowed to work. They are employed in defence services, police services, postal services, software services, health services, hospital services, entertainment industries, Business Process Outsourcing and so on. The percentage of working women has been growing rapidly. The changing role of women has created a market for a number of product and services. Earning women prefer to hire services in order to minimise the innumerable roles that they are required to perform. The demand by woman is forcing service organisations to be more innovative in their approach. 3. Cultural Changes: Change is the underlying philosophy of culture place of change in Indian culture is not uniform. However, during the last century the factors of change are prominent. The emergence of the nuclear family system in place of the traditional joint family system creates a demand for a host of services like education, health care, entertainment, telecommunication, transport, tourism and so on. There has' been a marked change in the thought Processes relating to investment, leisure time perception and so on which has created a huge demand for services. 4. I.T. Revolution: For the last 15 years India'6aste,en occupying a vital position in the area of Information Technology. IT became one of the key service businesses of the country. India has the largest software skilled population in the world. The
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domestic market as well as the international market has grown substantially. Realising the potential for this area many state governments have made IT as their most, prioritized segment states such as Karnntnka, Andhra Pradesh, Madhya Pradesh Maharashtra and Delhi have already achieved substantial progress in Information Technology the In Ile years to come 'Lille IT enabled se Aces will have a bright future. The growth. of' population, industrialisation and indiscriminate consumptions have affected the, natural resources, environment and the ecological balance. Due to this there is an imbalance of the ecology various service organisations have been promoted in order to take up social marketing. Thousands of crores of rupees are being spent on safeguarding the rare animals and birds, water pollution, conservation of oil & energy and research to develop new technologies that can promote effective use of natural resources and safeguard the environment. 5. Development of Markets: During the last few decades the wholesaler and the retailer population has grown in the country. Urban India has become a cluster of wholesaling and retailing business. In the Semi - urban areas, retailing has spread to the nooks and corners of the streets and in the rural areas retail business is significantly present. A new breed of organisations, offering marketing services has come up. The government also offers marketing services to the small-scale agricultural farmers, artisans and other traditional business sectors such 'as promotion of regulated markets, export promotion councils, development boards etc. 6. Market orientation: The changing competitive situation and demand supply positions has forced the manufacturing organisation to shift their philosophy from production orientation to market orientation. Market is a service function that has been added in the organisation. The pressures in the market has further forced the manufacturing organisations to have marketing research, accounting, auditing, financial management, human resource management and marketing research divisions - all of which are services functions. 7. Health-Care Consciousness: In India, the healthcare market has grown substantially. The increased life expectancy is the result of the consciousness of the people regarding the health issues. The growth of fitness clubs, diagnostic centres, medical counselling, health-related information sites are the reflections of the growing demands for health care services. The government as well as the social organisations have taken up the mass campaigns in order to create awareness among the illiterate persons and the rural population on health service. Hence, the growth of health related services.
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8. Economic liberalisation: The economic liberalisation of the 1991 has brought many changes in the Indian scenario. With the Disinvestment and the Privatisation policies the state owned monopolies in many service areas came to an end Multinationals were permitted to enter the Indian market. Liberal lending policies and lower interest rates motivated many people to become self-employed. Different sectors like Banking, Insurance, Power projects, Telecommunication, Hospitality sector, Health Services, Entertainment, Air transport, and Courier services witnessed intense competition, due to the entry of multinationals. The flow of time-tested service technology from various parts of the world changed the attitude of the Indian consumer towards sources. 9. Rampant migration: One of the important reasons for the growth of services in India is the rampant migration of rural to semi-urban and urban areas. Migration to urban areas for the want of jobs and livelihood has resulted in the expansion of cities and townships due to which businesses like real estates, rentals, transportation and infrastructure services are rapidly expanding. 10. Export potential: India is considered to be a Potential source for services. There are a number of services that India offers to various parts of the world like banking, insurance, transportation co data services, accounting services, construction labour, designing, entertainment, education, health services, software services and tourism. Tourism and software services are among the major foreign exchange earners of the country and that the growth rate is also very high as compared to the other sectors. 11. Service tax: The growth in the service sector attracted the attention of the government as a tax generating source. Over the years, the number of services brought under service tax has increased- Service tax is levied on hotels and restaurants, transport, storage and communications, financial services, real states, business services and social and personal services. Explain the growing importance of services or Service constitute about 54% of G.D / List four areas/trends which have led to this phenomenal growth. From the following points we can find out the growing importance of services: i. There has been an increase in demand for the services of professionally qualified technicians with the establishment of technical institutes. ii. Communication services like entertainment, education and the right to information by the public is more important. iii. Due to the increasing standards in education there is an increasing demand for educational services. Primary, secondary, higher secondary schools, junior degree colleges are the institutes which are in great demand. As the number of students
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iv. v. vi. vii.
viii.
ix. x.
xi. xii.
goes up the demand for private classes, tuitions, etc. also increases. Banking services have become necessary to meet financial requirements of the public and the national industrial sector. Personal care services are essential to develop potentiality of an individual for a perfect personality and positive image. Electricity services are required for the benefit of society, industry and so on. With the increasing amount of trade and business, done by road there has been a demand for transport services which benefits various automobile manufacturers. Large section of population prefers having their own vehicles, proving a good business proposition for automatic industry. The tourism industry has geared itself to make the tourists enjoy the holiday seasons in the places of their choice and take them away from monotonous existence of cities. Adequate hospital services are essential for the well being of the society. Hospitality services work on the strategies to satisfy the business class through their service in terms of comfort and satisfaction. The above activities have left the management scientists, professionals and socio-economic thinkers to analyze and understand that managing services need attention, stay in business. As the natural resources are depleting and need for conservation is increasing we see the coming of service providers like pollution control agencies, car pools, etc. The development in information, technology has given rise to services like pager service PCOs, world wide, Professional requirements need a change when technology develops and evolves; This necessitates proficiency in the management level by giving a boost to abilities.
MARKETING CHALLENGES OF SERVICES: Managing, growing, and profiting with both product and service businesses are challenging tasks. But the challenges are different from one to the other. Listed below are some of the most common and difficult challenges of growing and .managing consulting, professional, or technology service businesses that don't necessary apply to product businesses. 1. Clients can't see or touch services before they purchase them: This makes services difficult to conceptualize and evaluate from the client perspective, creating increased uncertainty and perception of risk. From the firm's perspective, service intangibility can make services difficult to promote, control quality, and set price. 2. Services are often produced and consumed simultaneously: This creates special challenges in service quality management that product companies do not even consider. Products are tested before they go out the door. If a product has quality problems while in production the company can fix them and customers are none
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the wiser. Service production happens with the customer present, creating a very different and challenging dynamic. Trust is necessary: Some level of trust in the service organization and its people must be established before clients will engage services. This is as important, sometimes more important, than the service offerings and their value proposition. Competition is often not who you think: Competition for product companies are other product companies. Competition for service companies are often the clients themselves: Sure, sometimes you find yourself in a competitive shootout (some firms more than others), but often the client is asking 'should we engage this service; at all' and 'if so, should we just do it in-house'. Brand extends beyond marketing: Brand in service businesses is about who you are as much as what you say about yourself. And internal brand management and communications can be equally as vital to marketing success as are external communication. Proactive lead generation is difficult: Many service companies have tried, and failed, at using lead generation tactics that work wonders for product companies. Implemented correctly, traditional product techniques, such as direct marketing and selling, can work for services, but the special dynamics of how clients buy services must be carefully woven into your strategy. Service deliverers often do the selling : Many product companies have dedicated sales forces. For services, the selling is often split between sales, marketing, professional, and management staff. Marketing and sales lose momentum: Most product companies have dedicated marketers and sellers. They market and sell continuously, regardless of the revenue levels they generate. In many services companies the marketers and sellers also must manage and deliver. This can often lead to the Services Revenue Rollercoaster-wide swings between revenue and work overflow, and revenue and work drought. Passion is necessary yet elusive: The more passion, spirit, hustle, and desire your staff brings to the organization every day, the more revenue and success you will have. The correlation between staff passion and financial success is direct and measurable
Services Marketing Environment Features of Business Environment 1. Business environment is the sum total of all factors external to the business firm and that greatly influences their functioning. 2. It covers factors and forces like customers, competitors, suppliers, government, and the social, cultural, political, technological and legal conditions. 3. The business environment is dynamic in nature that means, it keeps on changing. 4. The changes in business environment are unpredictable. It is very difficult to
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predict the exact nature of future happenings and the changes in economic and social environment. 5. Business Environment differs from place to place, region to region and country to country. Political conditions in India differ from those in Pakistan. Taste and values cherished by people in India and China vary considerably. Importance of Business Environment There is a close and continuous interaction between the business and its environment. This interaction helps in strengthening the business firm and using its resources more effectively. As stated above, the business environment is multifaceted, complex, and dynamic in nature and has a far-reaching impact on the survival and growth of the business. To be more specific, proper understanding of the social, political, legal and economic environment helps the business in the following ways: 1. Determining Opportunities and Threats: The interaction between the business and its environment would identify opportunities for and threats to the business. It helps the business enterprises for meeting the challenges successfully. 2. Giving Direction for Growth: The interaction with the environment leads to opening up new frontiers of growth for the business firms. It enables the business, to identify the areas for growth and expansion of their activities. 3. Continuous Learning: Environmental analysis makes the task of managers easier in dealing with business challenges. The managers are motivated to continuously update their knowledge, understanding and skills to meet-the predicted changes in realm of business. 4. Image Building: Environmental understanding helps the business organisations in improving their image by showing their sensitivity to the environment within which they are working. For example, in view of the shortage of power, many companies have set up Captive Power Plants (CPP) in their factories to meet their own requirement of power. 5. Meeting Competition: It help the firms to analyse the competitors' strategies and formulate their own strategies accordingly. 6. Identifying Firm's Strength and Weakness : Business and Weakness: Business environment helps to identify the individual strength weaknesses in view of the technological and global developments.
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Business environment is broadly divided into two types: i. Internal Environment and ii. External environment i. Internal Environment : It relates to those factors which are internal to the business and are controllable. The internal environment exercises a significant influence on the attitudes, behaviour and performance of people. Internal environment is influenced by the following factors: 1. Goals and objectives of the organisation: The goals and the objectives set up the parameters within which the organisation decisions can be taken. They greatly influence an ability of an organisation to deal with its external environment. Financial and nonfinancial targets are determined by the goals. 2. Corporate image: Every organisation enjoys an image among the employees. Some refer to their employers as progressive whereas others refer to them as Conservative. To make the business acceptable to the society, every business must try to improve its image. Objectives based on enlightened lines certainly help to improve corporate image. 3. Research and development facilities: Research and development is the strength of the business. it helps the business to go ahead of the competitors by introducing new products and improving the existing ones. 4. Efficient manpower: A successful business is known by its efficient manpower and not by the buildings and machines. Manpower makes or breaks a business. Due care should be taken to recruit result oriented employees. 5. Business policies: The knowledge of internal environment and how it affects the functioning of the organisation is important to understand the use of business policies. Broadly, policies cover four functional areas viz. production, marketing, finance and HRD. Business policies provide the broad guidelines within which an organisation has to work. Thus policies should be comprehensive. 6. Strong financial base: Business organisations must try to attain strong financial base. This helps the business to fight uncertainty in the market. It can depend on internal financing when an external borrowing becomes costly. 7. Cordial relations: Both the employers & employees should try to maintain cordial relations at the workplace. It is important to keep clear line of communication. Differences and conflicts can be settled across the table. Work environment should attract employees to their work. 8. Value based management : Traditional measures for performance measurement like a return on sales, a return investment or a return on net assets have become outdated. New measures like shareholders, views, employee morale and the work ethics which improve the employee satisfaction are considered more important.
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Value system is internal to business and differs from enterprise to enterprise. ii. External Environment: External environment relates to the factors which are external to the business organisation. It is divided into Micro Environment and Macro Environment. MICRO ENVIRONMENT: The micro environment consists of all the factors in the company's immediate environment that affects the performance of the Company. These include the sup-pliers, marketing intermediaries, competitors, customers and the publics. The microenvironmental factors are more - intimately linked with the company than the macro factors. The micro- forces need not necessarily affect all the forms in a particular industry in the same way. Some of the micro factors may be particular to a firm. When competing firms in an industry have the same micro elements, the relative success of the firm depends inter alia, on their relative effectiveness in dealing with these elements. The following factors affect the micro environment: Corporate Resources: Corporate resources include employees, funds, materials, machinery and management. These resources are controllable. They can be used as per the guidelines provided by the business policies. Customers: The business exists only because of its customers. Monitoring the customers' sensitivity is therefore a prerequisite for the success of a business- It is important to consider the customers' likes, dislikes, needs, preferences, buying motives and expectations. A company may have different categories of customers like individuals, households, industries and other commercial establishments and government and other institutions. Higher customer patronage brings increased profit to the business. Suppliers: Supplier is an important force in the micro environment of the firm. Supplier, are those people who supply inputs like raw materials and components to the firm. The importance of reliable source of supply to the smooth functioning of the business cannot be overlooked. Uncertainty regarding the supply or the other supply constraints often compel companies to maintain high inventories leading to increased cost. It is always advisable to, negotiate with several suppliers and not allow a single supplier to enjoy monopoly power. The selection of suppliers is within the control of the management. Competitors: The role of competitors is beyond the control of the management. It is necessary to study
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the competitors' policy on product, price, promotion, etc. When relevant information is collected about the competitors, it helps to strengthen business and also face the competition more effectively. The business can profit by exploiting the weaknesses of the competitors Marketing intermediaries The marketing intermediaries, include middlemen such as agents and merchants who help the company find - customer or close sales with them. Marketing intermediaries are a vital link between the company a the final consumers. A wrong choice of the link, may cost the company heavily. Goods requiring demonstrations find the services of middlemen unavoidable. Society: Business has to serve the society. Society consists of general public, media, government, financial institutions and organize group like trade unions, shareholders' associations etc. Society, directly influences the decisions of business. MACRO ENVIRONMENT 1. Economic Environment The survival and success of each and every business enterprise depend fully on its economic environment. The main factors that affect the economic environment are: (a) Economic Conditions: The economic conditions of a nation refer to a set of economic factors that have great influence on business organisations and their operations. These include gross domestic product, per capita income, markets for goods and services, availability of capital, foreign exchange reserve, growth of foreign trade, strength of capital market etc. All these help in improving the pace of economic growth. (b) Economic Policies: All business activities and operations are directly influenced by the economic policies framed by the government from time to time. Some of the important economic policies are: (i) Industrial policy (ii) Fiscal policy (iii) Monetary policy (iv) Foreign investment policy (v) Export –Import policy (Exim policy) The government keeps on changing these policies from time to time in view of the developments taking place in the economic scenario, political expediency and the changing requirement. Every business firm has to function strictly within the policy framework and respond to the changes therein.
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Important Economic Policies i. Industrial policy: The Industrial policy of the government covers all those principles, policies, rules, regulations and procedures, which direct and control the industrial enterprises of the country and shape the pattern of industrial development. ii. Fiscal policy: It includes government policy in respect of public expenditure, taxation and debt. iii. Monetary policy: It includes all those activities and interventions that aim at smooth supply of credit to the business and a boost to trade and industry. iv. Foreign investment policy: This policy aims at regulating the inflow of foreign investment in various sectors for speeding up industrial development and take advantage of the modern technology. v. Export–Import policy (Exim policy) : It aims at increasing exports and bridge the gap between expert and import. Through this policy, the government announces various duties/levies. The focus now-a-days lies on removing barriers and controls and lowering the custom duties. 2. Social and culture Environment It refers to people's attitude to work and wealth; role of family, marriage, religion and education; ethical issues and social responsiveness of business. The social environment of business includes social factors like customs, traditions, values, beliefs, poverty, literacy, life expectancy rate etc. The social structure and the values that a society cherishes have a considerable influence on the functioning of business firms. For example, during festive seasons there is an increase in the demand for new clothes, sweets, fruits, flower, etc. Due to increase in literacy rate the consumers are becoming more conscious of the quality of the products. Due to change in family composition, more nuclear families with single child concepts have come up. This increases the demand for the different types of household goods. It may be noted that the consumption patterns, the dressing and living styles of people belonging to different social structures and culture vary significantly. 3. Political Environment This includes the political system, the government policies and attitude towards the business community and the unionism. All these aspects have a bearing on the strategies adopted by the business firms. The stability of the government also influences business and related activities to a great extent. It sends a signal of strength, confidence to various interest groups and investors. Further, ideology of the political party also influences the business organisation and its operations. You may be aware that Coca-Cola, a cold drink widely used even now, had to wind up operations in India in late seventies. Again the trade union activities also influence the operation of business enterprises. Most of the labour unions in India are affiliated to various political parties. Strikes, lockouts and
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labour disputes etc. also adversely affect the business operations. However, with the competitive business environment, trade unions are now showing great maturity and started contributing positively to the success of the business organisation and its operations through workers participation in management. 4. Legal Environment This refers to set of laws, regulations, which influence the business organisations and their operations. Every business organisation has to obey, and work within, the framework of the law. The important legislations that concern the business enterprises include : a. Companies Act, 1956 b. Foreign Exchange Management Act, 1999 c. The Factories Act, 1948 d. Industrial Disputes Act, 1972 e. Payment of Gratuity Act, 1972 f. Industries (Development and Regulation) Act, 1951 g. Prevention of Food Adulteration Act, 1954 h. Essential Commodities Act, 2002 i. The Standards of Weights and Measures Act, 1956 j. Monopolies and Restrictive Trade Practices Act, 1969 k. Trade Marks Act, 1999 l. Bureau of indian Standards Act, 1986 m. Consumer Protection Act, 1986 n. Environment Protection Act o. Competition Act, 2002 The Goods-service Continuum The goods and services continuum enables marketers to see the relative goods/services composition of total products. A product's position on the continuum, in turn, enables marketers to spot opportunities. At the pure goods end of the continuum, goods that have no related services are positioned. At the pure services end are services that are not associated with physical products. Products that are a combination of goods and services fall between the two ends. For example, goods such as furnaces, which require accompanying services such as delivery and installation, are situated toward the pure goods end. Products that involve the sale of both goods and services, such as auto repair, are near the center. And products that are primarily services but rely on physical equipment, such as taxis, are located toward the pure services end. A few observations of the Continuum model can be made: – The offerings of a firm range from pure goods to pure services. – Those that are mostly goods are tangible and are very easy to evaluate by the
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consumer (like fabrics, jewellery, a house etc.). A consumer finds it very difficult to evaluate those offers which are mostly services because of their intangibility (like legal and counselling advice, medical diagnosis etc). – The range of offers has different qualities in themselves and the customer looks for or seeks these qualities: Those that are mostly goods show search qualities. Customers know exactly what they want and look for those features in the offer. Thus, an apartment hunter would look for a 2bedroom-hall-kitchen property in Bandra admeasuring 900 square feet in car.pet area. Or, a lady might look for specific designs in a 23-carat bangle from a Tanishq outlet. Mr. Joseph looks for worsted, blue woollen suit material for himself etc. Thus a marketer can put the search quality features on prominent display and make it easier for customers to get details or access. If the customers do not find these features in their search they may become anxious and may not buy or they may go for rival products where there is easier access to information. Those offers that are mostly services evince credence qualities There are no tangible features for the customer to search for. He then looks for credo qualities in the offer Reputation of the offer becomes the decisive factor. He has very few other alternatives to compare. Thus, Mrs. Manjrekar would choose only that lawyer to fight her divorce and custody battle who has a reputation for winning such court cases. A patient would. choose his doctor or surgeon on the basis of his reputation. We tend to give our computers or for -repair on the basis of the reputation of the repairman. A marketer of such offers has to be doubly careful in highlighting the credibility of the service provider. An actor is never called again for a stage play if his histrionic talent is in question; a doctor or surgeons whose ethical reputation is in question right never have patients. Thus, in the product-service continuum', services can be classified in three ways, under the range or degree of tangibility - highly tangible to highly intangible. They are: 1. Highly tangible services: They have high degree of tangibility. This is mainly because the services are rendered over certain goods, e.g., car rentals. It is a service based entirely on cars. If a place had no cars, such a service would cease to exist. For the marketer, it is both a boon and a curse. As mentioned, car rentals exist only because cars exist. It's easy for the service marketer to be persuasive and "tangibles" the offer. He only has to include the car in his communication; the service concept could be easily comprehended by the consumer. In addition, if the car has a good brand image and is looking spick and, the car rental basks in the reflected glory. If the car rental mentions in its advertisements about the type of cars in its pool, the consumers perceive the quality of the company accordingly. Alternatively, if the car breaks down during a rental service, the consumer will have a poor impression and image of the car rental company. He would not reason that it was the
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car that broke down and failed and that the car rental company should really not be blamed. Examples of car rental companies in India are Dial-a-Cab, in Delhi, and -Wheels-RentA-Car (WRAC) of the Bhoruka group, who also own Transport Corporation of India, the giant fleet trucking enterprise. Other car rental companies are Hertz-Rent-A-Car and Avis in the United States. 2. Service linked to tangible goods: Here the service is linked to goods, either independently, or as part of the marketer's offer. If it is the latter, the service becomes a part of the total product concept. This takes place when Videocon, the home appliance company, includes repair as part of its marketing mix. Even if it is not included, home appliance repair is a service that is forever linked to goods. If there were no home appliances in the world, such services would be nonexistent. A whole range of services exists in the housing sector - especially postconstruction like repair and maintenance. 3. Highly intangible services: In this classification under the continuum model, service is highly intangible. The services cannot be touched, felt or seen, e.g., counselling, consultancy, psychotherapy, physiotherapy, a guest lecture, etc. Buying Behaviour of the Service Consumer Why does the customer buy? The customer mostly buys goods, services, people, places,-events, organizations, ideas, information and experiences. All these generally fall under goods 8'services. But the offers that they buy can be: High Involvement offers Low involvement offers/Impulse offers High involvement service products have the following characteristics 1. Complexity of features: If the servicer product has complex features, it will induce anxiety in consumers. They will take more time understand service product usage feature familiarization as well as internalization. Thus, a SLR (single lens reflex) camera preferred by professional photographers will induce higher involvement from the consumers than box cameras with only point-andshoot features. 2. High price: High pries of Service products will make consumers slow and cautious in their decision making. This is the reason why they will debate on the pros and cons of consumption d service transaction costs of a vacation, more than
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3. High perceived risks: A consumer perceives risk in consumption in two forms: bodily harm and financial loss. When Shalini goes for cosmetic surgery, she will perceive higher risk in the offer than for a routine facial. 4. Large differences in features: If the consumers perceive that across a service category there are large differences in feature, then they would be highly involved. And if the situation is as in the home appliance industry where consumers really don't perceive much difference between products then their involvement becomes low. 5. Large number of users: If there are a large number of users for a service offer, like a family package tour, then there is going to be more participation and involvement from all family members. This is unlike when only one person is a consumer-like Pooja deciding to take a computer course during her school vacation. 6. Enduring product: If the service offer has a long life span or has a longer lasting effect -like a time share purchase or selection of a school for child - then it will make the decision-maker highly involved. 7. Reflects self-concept of the buyer: consumers are very much aware of their selfimage-and either wants to maintain or change it. They do so by purchasing products and services hoping that by doing so it will reinforce their personality and self-image or help them acquire a new one. This aspect is so close to the wellbeing of consumers that they become highly involved with the purchase. Low involvement service products have the following features: 1. 2. 3. 4. 5. 6. Low Price Less difference in features Simple features in the service product Does not reflect a consumer's personality The products are of mostly daily needs Low brand loyalty
What are the stapes of the buying decision process? Most of the successful companies research the buying decision process involved in their category. They ask the consumer when they first became acquainted with the product category and brands, what are their brand beliefs, how involved t1fey are with the
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product, how and how satisfied they are after purchase. In a typical buying process the consumer passes through five stages: 1. Problem Recognition: The buying process begins when the buyer recognizes problem or need. The need can be triggered by internal or external stimuli. In the case, a person's normal needs are hunger, thirst sex that rises to the threshold level becomes a drive. In the latter case, a need is aroused by external stimulus. A person passes bakery sees fresh toasted bread that stimulates his hunger. Marketers need to, identify the circumstances that trigger a particular need. Through marketing research the marketers can identify the most frequent stimuli that spark an interest in a product category. They can then develop appropriate trigger consumer interest. 2. Information Search: An aroused consumer will be inclined to search for more information. The consumer information sources fall into three groups: a. Personal Sources: Family, friends, neighbors, acquaintances, etc. b. Commercial Sources: Advertising, sales persons, dealers, packaging, displays, etc. c. Public Sources: Mass media, consumer ratings organizations, etc. As a result of gathering information the consumer increases his awareness of availability of the service and its attributes. In purchasing services, the customer tends to rely on the personal sources the personal experience in using these services. 3. Evaluation of Alternatives: The consumer evaluates the alternative services that satisfy his needs with the available information. He evaluates the distinct features of the service provider, quality and price. In case of services, the available alternatives are relatively smaller than the goods, because brand choice in services is limited. The quality of service can only be experienced but it is difficult to compare with other service firms purchase information of the service cannot be obtained. In evaluating alternative for the purchase decision, the customers ranking in order importance the factors that contributes towards the purchase decision. For example, choosing a restaurant the customer considers factors such as food quality, menu, price, atmosphere and convenience. However, the importance attached to these factors may differ according to the purpose of visit to the restaurant. 4. Purchase Decision: After carrying out a thorough evaluation of the various alternatives, the customer chooses that service provider who will be able to satisfy his needs. The purchase of service is an experience which leads to satisfaction of
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customer needs. Production and consumption of service is a simultaneous activity. The service encounter involves interaction of the service provider and the customer. The success of the service largely depends on the service encounter. Hence, apart from motivating the staff to deliver the service, the service provider must also be aware of the moods and the emotions of the customer and try to influence those moods and emotions In ,a positive way. There are many factors that can be used in order to influence moods. the Ambience, Design of –Physical Setting, Limiting Waiting Time, Scheduling of Customers and Motivating the Staff who interact with the Customers. At times the presence of other customers during service delivery may influence the service experience of the customer for an example a restaurant, resort, clubs, airlines etc. 5. Post-Purchase Behaviour: Only after experiencing the service, the customer will be able to judge the quality of service in relation to his expectations and actual service received. The consumer will experience some level of satisfaction or dissatisfaction. In some like the legal services, the customer will find it difficult to judge the service rendered -even after receiving the service. The evaluation of the service received received gets further complicated by the role played by the customer in the "'d livery process. Sometimes customers attribute some of the dissatisfaction with the services to their own disability to specify their needs or failure to perform their part of the service, rather than completely blame the service provider. Stage in Cycle Bachelor Newel Married Characteristics Independent Young Early stage of career and earnings Two incomes. Relative independence, Present and future oriented Youngest child under 6 years. One /One and a half incomes, Limited independence. Future oriented Youngest child tinder 6 years, One and a half to two incomes. Dependent, Future oriented Youngest child at home but Relevance of Retailing Clothing, Car. Travel, Café Entertainment Furnishing Apartment, Travel, Clothing. Durables. Appeal to togetherness Goods and services geared to child. Family oriented items- Practicality of items and appeal to economy Savings, Home, Education. Children oriented items. Family vacations, Appeal to comfort and luxuries Education. Expensive
Full Nest I
Full Nest 2
Full Nest 3
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www.BMS.co.in durables for children. Replacement and improvement of parents durables. Appeal to comfort and luxuries. Retirement home, Travel. Entertainment, Luxuries. Appeal to self gratification Travel, Recreation, Health related items. Little interest in luxury. Appeal to comfort Immersion in jobs and friends. Travel entertainment Clothing. Health Travel. Entertainment Health related items. Appeal to economy and social activity
Empty Nest 1
Empty Nest 2
No children at home. Independent. Good income. Thoughts of retirement Retirement- Limited income. Present oriented
Lonely Nest-I/ Sole Survivor 1
Only one spouse alive. Good income. Employed, Present oriented Only one spouse alive. Limited income Retired.
Lonely Nest II / Sole Survivor 2
TYPES OF BUYING BEHAVIOUR: Assael distinguished four types of buying behaviour based on the degree of buyer involvement and the degree of differences among brands. 1. Complex Buying Behaviour: Complex buying behaviour involves a three-step process; first, the buyer develops beliefs about the product. Second, he or she develops attitudes about the product. Third, he or she makes a thoughtful choice. When the customer is involved in complex buying, they are aware of significantdifferences in brands. This is the case when the products are expensive, bought frequently risky and highly self expressive. In this case the customer does not know much about that category. For example, a person buying a personal computer may not know what attributes to look for. Many product features carry no meaning, unless the buyer has done some research. 2. Dissonance - Reducing Buyer Behaviour: Sometimes the consumer is highly involved in a purchase but sees little difference in brands. The purchase is expensive, infrequent, and risky; therefore the consumer is highly involved. In this case, the buyer will go around to learn what is available but will buy when he gets a good price. After the purchase, the consumer might experience dissonance that stems from noticing certain odd features or hearing favourable things about other brands. The consumer will be alert to information that supports his or her
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decision. In this case, the consumer first acted, then acquired new beliefs, then ended up with a set of attitudes. Marketing communications should supply beliefs and evaluations that help feel good about his or her brand choice. 3. Habitual Buying Behaviour: There are many Products which are bought under conditions of low involvement and the absence of significant brand differences. Take a simple example of salt. Consumers have little involvement in this product category. They go to the shop and reach for the brand. If they keep reaching for the same brand, it is out of habit, riot strong brand loyalty. It is-evident that consumers have low involvement with most low-cost, frequently Purchased Products. With these products, consumer behaviour does not pass through the 'normal sequence of belief, attitude and, behaviour. Consumers do not search extensively for information, evaluate characteristics and make decisions on which brand to buy. Instead they are passive recipients of information the television or print ads. The repetition of ads creates brand familiarity rather than brand conviction. After making the purchase, they may not even evaluate the choice because they are not highly involved with the product. For low involvement products, the buying, process begins with brand beliefs formed by passive learning & is followed by purchase behaviour which may be followed by evaluation. 4. Variety seeking Buying Behaviour : There has some buying situation that an characterized by low involvement but significant brand differences. In such cases the consumer often goes into a lot of brand switching. Take the example of chocolates. The consumers has some beliefs about chocolates chooses a brand of chocolates without much evaluation, & evaluates the -product during consumption. Next time, the consumer may reach for another brand out of a wish for a different taste. In this case the brand switching occurs for the sake of variety rather than dissatisfaction. SERVICE MARKETING TRIANGLE According to Philip Kotler, service marketing requires both external marketing and internal as well as interactive marketing. The three types of marketing in service industries are shown in the following figure. The right side of the triangle shows the external marketing (setting promises). It is the normal activity of the firm to develop price, promote and distribute the service offering to the customers. Any thing that is communicated to the customer before service delivery is seen as a part of external marketing. The left side of the triangle shows the internal marketing (enabling the promise). The internal marketing activities of the firm are to train and motivate its employees to work as a team in order to deliver the service. It emphasis on the critical role that enables
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the employees to keep the promises made to the customer. The bottom part of the triangle describes the employee's skill in handling customer contact. It is the real time marketing of "moments of truth" where the employees directly interact with the customer in order to fulfill the promise.
Types of Marketing in Service Firms All the three sides mentioned in the triangle are critical to successful services marketing. The service triangle also has a number of fundamental strategic implications: 1. The key factor is customer focus and, not functions. Customer satisfaction should be the function of the entire organisation. 2. The internal environment is reflected in the external culture. It is directly linked to how the staff serves the customer. 3. One who delivers the service must not only have the skill and knowledge but also the authority to serve the customer to his satisfaction. 4. The organizational values, in relation to the service culture need to be simple, clear and shared by all 5. During interaction the customers infer the quality. Therefore, it becomes necessary to develop good delivery associated activities. External Marketing: The external marketing efforts are the traditional functions of marketing of the
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customers and make promises to the customers as to what is to be delivered. Anything conveyed to the customer in any form before the delivery of service can be viewed as a part of external marketing function. The first step towards external marketing is to make the firm understand what makes a customers' want a particular type of service and what are their expectations of a certain type of service, since external marketing builds customers' expectations and beliefs about service delivery. The external marketing then gives promises that correspond with the personal needs of the target group. It becomes necessary to understand the needs of the customer for the service provider. This leads to market segmentation on a suitable basis i.e. demographic, psychographic and wage pattern. Once the market segment is identified, the next task is to find ways to compete in that segment. This can be achieved by using the right marketing mix after taking into consideration the external factors. The services planning, pricing, promotion and delivery of the service tend to differ in respect of a customer group. The promises which the service provider makes must highlight the reasons why the customer should choose his particular service from the several service providers. The promise made should also match with the customers' expectations of the service. The company conveys promises through promotion campaign, corporate image and word of mouth communication. It also conveys through the past experience which the customer has had with the firm. According to Zeithamal and Bitner, the customer's expectation of the services can be derived from the following sources: i) Past Experience. ii) Corporate image. iii) Word of mouth communication. iv) Explicit service promises which are personal and non-personal statements about the service made to the customer by service firms through contracts, personal selling, advertisement, etc. v) Implicit service promises which are related over other than explicit promise that leads to inference about what service should and will be like. vi) Care should be taken to maintain credibility while setting the promise because a very high expectation may lead to a highly dissatisfied customer.
Internal Marketing: According to Wood Ruff, treating with equal importance, the needs of the internal market (employees) and external market I customers) through proactive programmes. If the service system as well as the service staff do not support the frontline employees, it
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will not be possible to meet the promises made b the organization. Thus the employees are the internal customers who in their job depend on others in the organization for providing goods and services to external customers. Internal marketing suggests that the firm should employ market research, market segmentation and traditional marketing activities like advertising and publicity in order to attract employees. Role of Internal Marketing: i) The entire organisation is focused on customer approach as the customer service becomes a significant element. ii) Internal marketing helps the service firm to compete aggressively giving the organisation a competitive advantage. iii) It builds corporate image by creating awareness. iv) It highlights the role of communication in the organisation which is very important for employee motivation and excellence, v) An open management style exists where all the employees co-operate and there is commitment, to the highest level. Components of Internal Marketing: There are no specific or special components of the internal marketing programme. Any activity or function that has an impact on the service mindedness and customer conscious employees can be a part of internal marketing programme. However, the following components can be included as a part of internal marketing programme: i) Human Resource activities. ii) Continuous interaction with the management. iii) Training. iv) Internal mass communication and information support. What is "Moment of Truth"? "Moment of Truth" of buyer and seller interaction is the core of Gronroos model. The actual delivery of the promise takes place here. The employees of the firm directly interact with the customers. The concept of moment of truth means that this is the time and places the service provider has the opportunity to demonstrate to the customer the quality of its services. Interactive marketing takes place outside the marketing mix. It takes place at the very moment the buyer and seller interacts. These interactions are also caIIed1§qrvice encounters. It is the skill and motivational tools employed by service personnel in, handling the customer contacts. In this process of interaction the customer judges the quality 8f service delivered by the service provider. History:
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Richard Norman first invented the conceptual framework of "MOMENT OF TRUTH". Subsequently Scandinavian Airlines adopted it as a part, of their everyday language, particularly after Jan Carizon of SAS published book titled "Moment of Truth". Since then moment of truth has become a widely used concept, a household word within the service industry everywhere. The Concept: Most services are the result of, social acts, which take place in direct contact between the customer and service provider. Taking the metaphor from bull fighting, the customer's perceived quality is realised at the moment of truth, where the service provider and the customer confront one another in the arena. At the moment they are very much on their own. What happens then, cannot be directly influenced by the firm. In the period of three years Jan Carloz the president of SAS transformed the company from a major loser to the best Airline of the year. In this book he explains" Last year, each one of our 10 million customers came in contact with approximately 5 SAS employees, and this contact lasted for about 15 seconds each time. Thus SAS is created in the minds of the customer 50 million times in a year, 15 seconds at a time. These 50 millions 'moments of truth' are the moments when we prove to our customers that SAS is their best alternative." Gronroos states that the customer's perception of service quality can be judged on two aspects the technical and functional quality. The judgment on the basis of technical and functional qualities varies depending on the type of service encounter. The service can be classified into three categories: 1) Remote encounter: The tangible evidence of the services becomes a primary basis for judging quality as there is no human contact in service delivery. E.g. ATM vending machines. 2) Phone encounter: Here the service quality can be judged on the basis of how long they had to wait for the phone to be attended, the tone of voice and efficiency in handling the issues. 3) Face- to- face encounter: When there is direct contact with the employee and customer this type of encounter occurs. In this situation determining the quality is highly complex as it will be influenced by the behaviour of both the customer and employee. In order to assess the quality services tangible cues like physical setting, equipment, appearance of personnel and intangible cues like attitude and behaviour of personnel will be considered. Thus in the interactive marketing, service encounter or the moment of truth is where the value to the customer is created in the service delivery process. At this stage all the efforts of internal and external marketing will be reflected. On the basis of thousand stories, four common themes - recovery .(after failure), adaptability,
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spontaneity, & coping - have been identified as the sources of customer satisfaction/ dissatisfaction in memorable service encounter. 1. Recover: (Employees response to service delivery failure) the 1 st theme includes all themes in which there has been a failure of services & the employee is required to respond in some way to customer. The failure may be hotel room is not available, flight may delay or a critical error in internal documents. In these cases employees have to response which is remembered by the customer favorably. 2. Adaptabilty: (Employee response to customer needs & requests) The second theme underlying in satisfaction/dissatisfaction is how adaptable the service delivery system is when the customer has special needs & requests that place demands on the process. In such cases, customer judge, service encounters quality in the terms of flexibility of the employee & the system. Customers will be pleased if employees go out of their way to accommodate their special needs & requests. On the other hand the employee are unwilling to accommodate, customers are angered & frustrated. 3. Spontaneity: (Unpromptness & unsolicited employees actions) Even when there is no service failure & is special request or need, customer can still service encounters as being highly satisfied or highly dissatisfied Employee spontaneity in delivering memorable good or poor service is the third theme. Highly satisfying incidents represent pleasant surprises for the customer (special attention, being treated like royal etc.) whereas highly dissatisfying incidents represent negative & unacceptable employee behaviour (like rudeness, discrimination, ignoring the customer). 4. Coping: (Employees response to problem customer) There are some customers who will be uncooperative to the service provider & would not respect the rules & regulations or would not care for other customers' inconvenience. Such type of customers causes their own dissatisfaction & discomfort to other customers. Thus in the interactive marketing, service encounter or the moment of truth is where the value to the customer is created in the service delivery process. At this stage all the efforts of internal and external marketing will be reflected.
Ch- 2 Key Elements of Services Marketing Introduction: The marketing mix concept was popularized by an American professor Jerome McCarthy
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in terms of 4Ps -Product, Price, Promotion and Place. The major part of marketing after considering the environmental variables is assembling and managing the marketing variables. The most important task is to blend the 4 elements in different combination in order to have a greater marketing impact and also to be cost effective. Some modifications in the 4Ps are required when applied to services due to some special features of services. Elements of Service Marketing Mix: (7ps of Service Marketing-Mix) The service marketing mix consists of the following variables:
PRODUCT In the words of Philip Kotler, "a product is anything that can be offered to market for attention, acquisition use or consumption that satisfy a want or need. It includes physical objects (TV), service (banking), person (political person), place (holiday resort), organization (Red Cross) and idea (aid awareness). " Characteristics of Products (Tangible To Intangible)
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Conceptualization of the Service Concept: Conceptualization of the services product was described by Donald Cowell in four steps. They are: 1) Customer Benefit Concept: The customer is the starting point in manufacturing or developing goods or services. The Customer purchases the services because-it offers him certain benefits. In buying the customers are not buying the goods or services but instead they are buying certain benefits and values. It must be noted that when a customer's buys medicine he buys hope, when he goes on a tour he, buys pleasure not tour and so on. It becomes necessary for the service provider to spell the customers-benefits concept first. The customers look for the benefits rather than the product's features. 2) Service Concept: The service concept takes the customer-benefit concept and translates them in order determine the aim and intention of the organization. The service concept is based on the idea that the actual services offered could be divided into a number of levels that may relate to the' customer's need, his satisfaction and benefits. Hence, while planning the market offer, the service provider should make an analysis of various levels of product. These are: 3) Core service benefit level : This level consist of the basic service product i.e. the benefit the customer is really buying. The core products are essentially those
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products that define what kind of business they are in. For an example, the hotel industry or in the hospital business, the core products are indispensable to any business. The core service level provides the platform for the development of other peripheral levels. 4) The expected service level: This level reflects the standard required or expected by the customer to satisfy their needs and wants. It is the minimum set of expectations a customer has about a product or service which the marketer must strive to satisfy. If the service offer fails at this level it will mean immediate dissatisfaction. It is the minimum set of expectation that a customer has about the product or services which the marketer must strive to satisfy. If the service offer fails at this level if will means immediate dissatisfaction. 5) The augmented level: It includes the fundamental services and benefits that distinguish the company's offer from the competitor's offer. This product is basically a formal product with some ancillary benefits or extra features attached to it. These value additions are made in order to make the service more attractive to customers. The service provider should make continuous efforts to search for further features and benefits in order to add to their offer According to Helen Woodruff, "augmented services is the way in lavish the service provider fine tunes the marketing mix to differentiate their services and naked it stand out from the competitors," 6) Potential level: The potential product focuses on the future. When a product exceeds the augmented level it comes as a pleasant surprise to their customer and he is delighted leading to his loyalty towards the product. For an example, the customer will be delighted to receive a special discount on his next visit, if his bill exceeds a particular amount. Service Product (Levels of Products):
Inputs of Healthcare
Core Product
Expected Service
Augmented Product
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Quality Treatment
? ? ? ?
Clearf Facilities, Qualified Staff and Doctors, Quality Health Care reasonable rates ? Efficient tools for specialized Operations and Surgeries, ? Range of Rooms ? Third Party Services ? ? ? ? ? ?
Medical Software
Software
? Health Education & Training ? In-house Medical Facility, ? Hostel Facility ? Blood Donation Centre, ? Research & Laboratory, ? Special Wards for VIPs ? Visiting Consultant, ? Internationally Expert Advice, recognized doctors. Installation Package/Kit, ? Webcam connectivity, Prompt Result, ? Interconnectivity, Tested and recommended ? Acceptable widely, Error Free, ? Doorstep delivery, User Friendly, Validity ? Intimation on new Security Privacy. updates. ? Smart Cards ? Different Schemes
Medical Insurance
Covering Risk
? Choice Available, ? Reasonable Rates.
1) Services Offer and Service Package: Service offer is the element that makes up the total service package. It includes both tangible and intangible components of service. The service package includes all decisions involving the essential concept of the service and the range of service provided. Christian Gronroos describes services package as a bundle of different services tangible and intangible together which form the total product. 2) Service Delivery System: The service delivery system spells the service that is provided to the customer. It represents interaction between the service provider and the customer and between the customer and the service facility. The service delivery system is a carefully designed blueprint which describes how the services will be rendered to the customer.
Service Life Cycle :
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The different stages in the life cycle of a product and services are more or less similar and have common characteristics. They are as follows: 1. Introduction: At this stage the service is new as it is just launched its usage rate will be low. The production cost is high but the sales being smaller the revenue is low. Until the growth .stage the service provider mostly operate from one location. 2. Growth: There is a rapid increase in the sales at this stage. The sales increase at an increasing rate as the consumers see the benefits. In using the service. Promotion is focused in order to attract new users and retain repeat customers. The firm may even improve service quality and add some new features to attract the customers. 3. Maturity: The product/services enter the stage of maturity as the rate of growth slows down. Here the sales are still increasing but increasing at a decreasing rate. The sales touch their peak and then it saturates. At that level for a longer period of time. There is intense competition at this stage and the firm in order to keep its market share may modify and improve the service quality. 4. Decline: The usage rate of services diminishes with the technological advancement and changing consumer tastes. The service provider uses different strategies at this stage. Some firms withdraw form the current service and switch over to new ventures with better opportunities. Some retain the services in order to cater to the needs of a few loyal customers but still diversify to other services. Service Flower (Core and supplementary services)
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PRICING IN SERVICES Price is a significant element of the marketing mix because it is the only element that produces revenue whereas the other elements produce cost. Price reflects the value attached to the service by the service provide- and it must correspond with the customer's perception of value. Pricing is a dynamic tool for meeting competition. It is the art of translating into quantitative terms the value of the product or a unit of a service to customer. Service providers offer a range of service at different price levels to cater to the needs of different target segments that may have different levels of purchasing power. For an example, airline offers business class as well as economy class travel. They also vary the price of the product in order to address the problems arising out of demand and capacity constraints. For managing demand they offer different prices to customers buying the services at different point of time, with lower prices being charged in the slack periods. Objective of Pricing: i) Survival. ii) Growth. iii) Maximize profit. iv) Maximize Market share.
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Leadership in service quality. Stimulating patronage.
Factors Affecting Pricing Decisions: The factors affecting pricing decision may be classified as internal factors which are controllable and external factors that stem from external environment. Internal Factors: i) Organizational factors: It refers to the internal arrangement for decision making. ii) Marketing mix Elements: Which includes the service offering the promotion, .people; process and physical evidence are important in determining the value for money aspect in the service sector. iii) Positioning iv) Service cost: Pricing policy should cover at least the basic cost. External Factors: i) Competition: This is more relevant it) case of homogenous services like laundry, vending 1 machines etc. ii) Demand: The demand may vary for a number of reasons. iii) Regulatory factors: In many of the services the prices are either administered & controlled e.g. post & telegraph, banking, railways and education. Special Issues of Pricing in a Service Sector: A service marketer has to consider the following issues regarding pricing methods and policies to be adopted. (i) Intangibility (ii) Perishability (iii) Customer participation. (iv) Controllability (v) Variability
Methods of Pricing in Services:
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1) Cost based pricing: It is also called as cost-plus pricing. Under this method the company determines les the cost of service delivery as well as a pre-determined rate of profit in order to arrive at a price. It is necessary to-, analyze all costs accurately and differentiate between fixed and variable costs in order to use cost as the basis for pricing decisions. In the service industries it is complicated to identify and trace the cost to the particular offering. This method of pricing is widely used in catering services and by advertising agencies. 2) Demand based pricing : In this method of pricing the cost is not considered but the serve provider allows the demand to determine the price. Demand based pricing is generally us where the services are price sensitive. The consumer perception of the value of the service quality varies. Therefore successful demand based pricing is based on effective segmentation of market to achieve the maximum price from the segment. 3) Competition based pricing: Homogeneous services that are standards without specie service attributes are the best examples of competition based pricing. In this method of pricing the price is determined on the basis of competitor's price. Price under such situations may be used to gain short-term competitive advantage over rival Pricing Strategy: 1) New Service Pricing Strategy: While launching a new service there are two alternative pricing strategies. ? Skimming Strategy: In this the services are introduced at a high price. It is assume that the customers are more concerned about obtaining a quality service rather than cost of the service. As the demand for the services falls, the price level is reduced e.g. mobile phones, computers, etc. ? Penetration Pricing: In this, the new services are priced low. The prices are kept low t stimulate trial and thereby ensure customer loyalty. Low pricing is possible when the services are sensitive to price and it is possible to achieve economies of large scale operations by operating at large volumes. The penetration pricing begins with a low price but it increases in the growth stage. The increase is usually associated with additional services that are offered. 2) Differential Pricing/Market Segmentation Pricing: Different market segments may show different price elasticity of demand. The pricing strategy adopted to successfully cater t these groups is known as discriminatory pricing on the basis of market segmentation. It may be done on the following basis. ? Different time of consumption. ? Different point of consumption.
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3) Service-Mix Pricing: In this, the firms with multiple service offering that' are more often interrelated may adopt this strategy. It may resort to i) Captive service: ii) In captive service strategy the customer has no choice but to get attritional service offer from the service provider along with the core service. iii) Competing services: iv) In this the service firm competes with its own offering. v) Optional additional service: In this the service provider gives an option, to the customer to purchase the optional services along with the core services. 4) Price Bundling: It means pricing and selling the services as a group rather than an individual offering. In this the service firm will be able to sell all the products in the service line. E.g. Health clubs. 5) Relationship Pricing: In this type of pricing the lifetime value of the customer is taken into account. The main objective is to encourage customer loyalty by rewarding it. John Winkler has rightly stated that pricing can never be an automatic or impersonal process-, it cannot be reduced to a mathematical or accounting formula. It is an elusive art. T11 more you examine the market, the better you judge the value of what you want to offer. 6) Competitors Pricing: Services which are very price sensitive and where the core benefits sought are largely similar, competition-oriented pricing occurs frequently. Organizations that operate on competition-oriented pricing strategies will try to influence the consumer preference through elements of marketing mix such as service quality. 7) Marginal Pricing: It is based on the concept of marginal cost and is particularly relevant for service industry. The marginal cost is the cost of last unit of output and may be very low. For an example, in case of passenger airline with a capacity of 100 seats empty seats will not be preferred instead they can be filled with passengers paying reduced ticket prices -because any way the fuel cost, maintenance, staffing cost so on are made for 100 seats. Carry empty seats means carrying loss. COMMUNICATION MIX The word 'promotion is derived from the Latin word 'promovere', meaning 'an attempt to shift the attention of people from one end of the spectrum (disinterest) to the other (interest)'. Service marketers have used this marketing tool to great advantage in positioning their service, adding tangibility and value to their offer. Promotion is used
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only as a temporary tool and is communication oriented. Promotion consists of the following major areas of marketing: ? Advertising ? Public relations ? Sales promotion ? Personal selling ? Word of mouth ? Direct mail These areas are called the promotion mix or the communication mix. The service marketer can use a blend of all of these to achieve his communication and other goals. The choice of the communication or the promotion blend would depend on whether the advertiser wants to increase awareness, changes opinions, alter attitudes, use high degree of persuasion, etc. The advertiser or the service firm also has to take decisions on the choice of media, which would depend on the target audience and the reach of the medium (circulation and viewership/readership)' Comprehensive Communication Programme and Model Word 'communication' is derived from the Latin word communicoi, meaning 'to share'. Communication needs an objective that the service marketer must set and achieve. Following are the components of the communication programme: 1. Identify the target audience or receivers; 2. Determine the promotion objectives; 3. Develop the message 4. Select the communication mix or the promotion blend-, 5. Select the media vehicle; 6. Set up systems for feedback and feed forward' 1. Identify the target audience or receivers: Although this would have been done in the market segmentation process, a more detailed picture of the target audience would be required for specific promotions. For example, a high-priced hospital would have chosen the upper income group through segmentation. But now for promotion it would require to address people who are interested in the treatment of, say, cancer or heart, diseases or plain cosmetic surgery. Its message, Promotions and media choices would be decided accordingly, i.e., tailormade for this select audience. 2. Determine the promotion objectives: Every communication has an objective and the success of the communication programme depends on how the marketer has been able to clearly perceive his objectives and integrate the components. The service marketer has three promotional goals: to inform, to peruade and to remind. Some of the objectives for a service marketer are:
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Reinforce positioning, Develop brand image; Make customers aware of the offer, its attributes and benefits, Persuade customers to buy the offer, Continually remind customers about the service through remembrance exercises.
3. Develop the message: There are many models for describing the customer responses. One simplest and widely used is the AIDA model, developed by E.K. strong and is illustrated below:
According to this model, the service consumer moves through various stages in sequence. The customer is first aware of the service brand, which will generate interest & then desire in the offer. Once the desire is present, the customer is motivated or 'driven' to purchase the service product. The whole sequence grinds to a halt even if one of the tasks is unachieved. This implies that without even basic consumer awareness, the service marketer cannot hope for any sales. The message formulation will depend upon which of these AIDA sequence tasks is to be achieved. Message development is guided by the encoding process, which involves the consideration of issues: ? Message content - what to say', ? Message structure - how to say it logically, ? Message style - creating a strong presence; and
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? Message source - which should develop it. The service communication has four choices in encoding: words, symbols, pictures and images. 4. Select the communication mix or the promotion blend: The communication could have personal interaction (one-to-one) or impersonal messages (one-way). Personal communication consists of personal selling (insurance advisors making a presentation customers), word of mouth (publicity and public relations exercises for a restaurant or for a movie like Devdas), & interaction during service delivery (like inside a retail bank). I m personal communication consists of mass communications like advertising in newspapers, TV, outdoor advertising, point of sale, leaflets and brochures, and the service environment or the services cape itself. 5. Select the media Vehicle: The media vehicle is selected by effectiveness & efficiency with which it reaches the messages to the target audience. This message also guides the media vehicle: if the message is personal, then mass media cannot be used. What becomes effective are letters (on paper or through emails), personal interaction, etc. this is where media analysis would be required for its audience profile & viewers reading or media habits. 6. Set up system for feedback & feedforward: The communication should undertake two important exercises to make its present & future messages effective: Feedback is a kind of pre-test undertaken before the message has been broadcast to ensure the message will be received. Feedforward is a kind of post-test undertaken after the message has been broadcast to ensure the message was received. The issue of promotion blends like whether to use public relations more than advertising etc. have to be clarified by by the service marketer. The decision is guided by the following factors for their defferential impact ability on the communication mixes: ? Service is for profit or not-for-profit. ? Constrains of ethics exist in some services, like hospitals, healthcare and with doctors. ? Competitive intensity is high or low. ? The geographic spread is large or small. ? The custom within a specific service sector dictates promotional practice. ? Managers are sophisticated or not. Guidelines for services Communication W. R. George and L. Berry have identified six guidelines that can be used for promoting
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services. They are mostly applicable to all service sectors, with the exception to some few due to the variable nature of services. 1) Provide Clues to Tangibles the Service Offer: We can easily pick up tangible clues in case, of goods. Services have a major intangible component in them and so it is difficult for the customers to pick up tangible clues. Though services are intangible, they still have tangible components. The customers generally use these as a substitute to evaluate various service alternatives. The tangible clues reduce the risk and eliminate the uncertainties associated with a service not known to the customer 2) Maintain Communications Continuity: It is imperative to maintain continuity in communication for achieving differentiation and to portray a unifying and consistent theme over a period of time. Continuous advertising and publicity will enable the customer to get strongly attached to the theme. 3) Direct Advertising to Employees: The rapport that an air hostess can maintain with the passenger can greatly influence the quality perception of the passengers. There are certain services which are labor intensive and involve greater server customer interaction,' In such a type of service the service quality provided is largely dependent on the quality of the person who serves. The service firm has to market the firm to its own employees first who in turn gain confidence in the product they have to sell to the customers. 4) Use of Word of Mouth Publicity: In professional services like doctors, lawyers, teachers, hair dressers, schools, colleges, etc. word of mouth publicity that have already experienced the service holds weight age in attracting prospective customers. 5) Promising a Service which can be delivered: A realistic service promise should be made which enables the service firm to regularly meet the customers' expectations. This wills mimicries the service quality gap and keeps the customer's happy and satisfied. 6) Make the Service Easy to Understand: Due to the intangible nature of the services it is generally difficult to comprehend what exactly constitutes the offer of a service firm. The various tools used for promotion are i) Advertising ii) Sales Promotion iii)Personal Selling iv) Word of mouth v) Public relation vi) Publicity vii) Sponsorship viii) Direct Marketing
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DISTRIBUTION The importance of 'place' or location and distribution as part of a marketing mix is due to the fact that it facilitates accessibility to the service offer. It is the most mysterious of all elements of the marketing mixes. While all other marketing mix variables (service product, price and promotion) create or enhance demand, place or distribution is the only one that satisfies demand. The inseparability of services makes it imperative for both the service provider and the customer to meet to complete the service transactions and to create service benefits. In other words, service cannot be produced by one person in one place and be distributed by someone else in some other place. A service, by extension, cannot be produced in a place where the cost is lower and delivered to another place where the demand is higher. This is the fundamental difference .between goods and services that affect distribution strategies. All location strategies should be directed to make the encounter possible, place is especially important to the service marketer because the offer cannot be stored (intangibility and perishability) and the offer has to be produced and consumed at the same time in the service location, and outlets, The normal decisions of locations and channel are: ? How to deliver the service to the customer? ? Where and when should the delivery of service take place? ? What roles do intermediaries or middlemen have to play in the service delivery process? ? How can a marketer juggle the delivery of the tangible and intangible components of a service offer? For the service consumer, the first two of the above-mentioned decisions themselves become the most important perceived benefits. What is a distribution channel - especially in services? A distribution channel consists of a set of people or firms who are intrinsically involved in the transfer of goods or services from the producer to the end user. The end user could either be an individual consumer or an industrial consumer. A channel of distribution includes the producer of the goods and services, the consumer of the same and a series of middlemen like wholesalers, dealers, retailers, agents etc. The channel for any offer is extended to the last person or institution that buys it without making any changes in the form of the offer. If there is any change in the form of the offer, then there will be another channel of distribution. In, services distribution the offer has to be produced and consumed at the same time in the place of offer (outlet). Why should service firms use intermediaries? a) Specializations: In services, the offer is produced and consumed in one place, and it is mostly intangible, the question of distribution problems is not very acute-,
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the-service transaction itself and its quality is the main issue. In the production and distribution of services, the wide variety found in the Specializations in the case of goods is absent. Service firms have a different kind of dilemma: own its outlets or get the distribution done through franchisees'. Most major decision, are one-time decisions unlike in goods distribution. Only services like retailing that have higher tangibility content will face the same complexity in distribution as faced by goods manufacturer. b) Customer Utility: Customers require choices in their preferences and this was offered to them by retailers through varieties & assortments. This way, the customers could compare the merchandise and choose the best buy according to their judgment. The intangibility of services might have reduced the scope of consumers to compare the offer features, but nevertheless encouraged enquiries and clarifications from at the distribution outlet. c) Complexity: When any business - be it goods or services - is small, it is easier to manage it. This includes the complete marketing mix as well as the environment' But as any business grows, so does its complexity. To facilitate the exchanges of goods and services there arose an urgent requirement of complex systems for each type of goods and delivering them to the consumers. d) Distance: With the strategic decision of a firm to extend its geographical reach for its goods and services, there developed a gap between the producer and the enduser. This could only be filled by middlemen and intermediaries. SOTC/Kuoni, the innovative package tour company is a classic example in services. Mumbai based, it yearned for a wider customer base and took the help of intermediaries to achieve its goal. Thus Frequent Travels, a travel agency was initially roped in to be its representative in Madhya Pradesh. But SOTC went on to have its own outlet at indore, catering to its package tours. 1CICI Home Finance Company takes the help of Mumbai based, Unique Finance and Maximus Finance, amongst others to do its marketing. PEOPLE In service business, the service provider reflects the organization realities. It is through the interaction with the staff, that the customer from an opinion of the organization. A service firm may have the latest equipment and all the facilities but yet it may not be able to provide satisfactory customer service due to lack of interpersonal relationship between the service provider and the customer. In such cases the customer develops a negative attitude towards the organization. It is therefore, necessary that the service marketer should develop a high level of interpersonal skill and customer oriented attitude in the employee.
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Types of Service Personnel: In any type of service the customer comes direct in contact with the service provider and therefore is classified further: 1) Customer Contact Employee: These contact employees are very important because they represent the organization and can directly influence the customer satisfaction. The degree of the personnel customer contacts varies so we have: i) High contact personnel: They are required when the physical presence and interaction of the customer with the employees is for a longer time like hospitals, educational institutions, restaurants etc. ii) Low contact personnel: They are required when the physical presence and interaction with the customer is for a lesser time, example, retailing, post office etc. iii) Skilled and professional: E.g. Doctors, lawyers, chartered accountants, engineers etc. iv) Non professionals: E.g. Courier delivery boys, waiters, helpers etc. 2) Non-contact employees: Those employees who contribute to the service delivery but do not come in contact with the customers are called non-contact employees. They are actually support personnel. They possess high technical skill and are highly competent in their work.
The technical support personnel operate at the back stage and are not visible to the customer Developing Customer Conscious Employee.
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The Gallup model as shown in the figure above describes the path between the individual contribution of every employee and ultimate result of increase in the company value Service Quality and Employee Behaviour The 5 dimension of service quality are directly influenced by the service employee. (RATER) 1) Reliability: Delivering the service as promised is often totally within the control of frontline employees. Even in case of automated service such as ATMs, vending machine, support personnel are critical to make sure all system are working
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2) 3) 4)
5)
properly. Assurance: Service quality dependent on employee ability to communication their creditability and to inspire trust and confidence. Tangible: Employee appearance and dress are important aspect of tangible dimension of quality along with other factor like service -decor etc Empathy: Organisation can deliver caring and individual attention to customer only through employee. Empathy implies that employee will pay attention, listen, adapt and be flexible in delivering what individual customer needs. Responsiveness: Frontline employees often directly influence customer perception of responsiveness through their willing to help and their promptness in serving customer.
PHYSICAL EVIDENCE Generally a service transaction involves the interaction of the service provider with the customer in a service environment. Services like hotel services and hospitals are delivered in physical environment created by the service firm. Physical evidence is termed as the social environment along with the tangible cues. Zeithaml & Bitner defines physical evidence as lithe environment in which the service is delivered and where the firm and customer interact; and any tangible commodities that facilitate performance communication of the service". Physical Evidence includes all the efforts taken by the service provider to tangibilise their services, they include: 1) Physical Facilities: On the basis of physical evidence like building, furniture, equipment, stationery etc the potential customers forms an impression about the service organization. Physical evidence include essential evidence and peripheral evidence. Essential evidence are the technical facilities without which the service delivery is not possible e.g. air-craft in the airline services. Essential evidence is integral to the service offerings. In every services. the quality and Standard of the essential evidence will be of major influence in the customer' purchase decision. Peripheral evidence can actually change hands during the service transaction, they - stationery, brochures etc. Though services can be performed without these items, still they – used to enhance the corporate image. Examples of physical evidences that could be included for a fast food restaurant: Physical Evidences Inferences i) Food -Taste, smell, presentation etc. ii) Seating -Comfort, layout, availability. iii) Overall appearance -Cleanliness, decor, lighting, attractiveness. iv) Facilities -Payphones, toilets, children amusement. v) Service delivery -Efficient, prompt vi) Atmosphere -Friendly, Cold, i1ndiffU-rE'F1t.
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vii) Accessibility -Location of entrances, car parking.
2) Physical Environment: Another factor influencing consumer expectations of service quality and satisfaction is the physical setting or the service environment within which the service takes place. The important elements of physical settings are: i) Ambience-. The ambience of the physical setting includes temperature, lighting, noise, music, scent and color. All these factors affect the way the people think, feel and respond to a particular, service setting. The most comfortable source of light is the natural light. In the absence of natural light artificial light is needed. Different types of lights create different types of atmosphere. For an example, low levels of lighting are associated with romantic setting, well lit passages create a feeling of safety and so on. Often color and lighting are used in conjunction. Colors create different feelings-, some colors have a soothing feeling while some have disturbing feelings. Green and blue are cool colors whereas red, orange and yellow are warm colors. Temperature and humidity also affect the comfort of the customer and employees. It affects the efficiency directly. ii) Space: People need space around them to feel comfortable. Ease of access, good visibility, proximity of linked services will help to make the customer feel comfortable. The service provider should not expect the customer to share their space with others as it will lead to increase in stress levels or make them feel uncomfortable. This will create a negative impact on their perception of the service received. iii) Decor & Artifacts-, Decor: Signs, symbols and artifacts are the important components of decor. Signs represent the first encounter the customer ahs with the service firm. It influences the first impression. Sign can be used as labels for directional purpose e a. parking, entrance and exit, to communicate rules of Behaviour e.g. no smoking. Symbols are used to judge the expertise of the service provider. Certificates hanged on the wall are symbols of achievement and may provide reassurance to the customer. In the same way photographs on walls and personal objects displayed in the service environment can all communicate symbolic meaning and create a good impression Artifacts: The style of the decor can generally create an impression of cheap, serious, cheerful and expensive-, Artifacts like original oil painting may indicate success,
3) Social Settings: The appearance of the service personnel is the major aspect of the social setting that influences the consumer's attitude about the service personnel. The concept of appearance shows whether the employees appear to be friendly
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and approachable, caring, professional and confident. As a marketing mix element, physical evidence can be used as facilitator, socialize, differentia tore shaping first impression and build corporate image and identity. SERVICE PROCESS The service process refers to how a service is provided or delivered to a customer. Delivery system is a creative process. it begins with a service concept and strategy to provide a service. In order to achieve these objectives, various alternatives must be analyzed and identified before a decision is made. Designing a service process involves issues such as location facility, design and layout for effective design and layout for effective customer and work flow, procedure and job definitions for service providers, extent of customer involvement, measures to ensure service quality, equipment selection and adequate service capacity. According to C. Lovelock there are 7 operational issues, which have to be considered while designing the service quality process. i) In order to achieve economies of scale and perform consistently the— operation people would prefer to process in a batch while the marketing would prefer to cater to individuals so that the customer feels as being treated specially. ii) The decisions on designs and facility layout should satisfy the objectives of both iii) Operational people are interested to improve the productivity as the cost of production per unit will reduce. iv) Operation people want a standardized service since it keeps the cost lower and is easy for implementation. On the other hand the marketing people prefer customization to match customers' needs. v) Manage the queues in such a way that it is possible to use the available space. vi) Operational employees feel that the job design should minimize error and standardize tasks, making efficient use of approach. vii) The operational personnel lie to manage capacity in such a way that wasteful under-utilization will not take place. Planning The following strategic decisions and design elements must be considered in the Service planning process. 1. Basic Technological Decision. 2. Conversion/Materials Decision. 3. Specific Equipment Decision. 4. Process Flow Decision: i) Blue prints. ii) Flow charts. iii) Front and back Office.
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iv)
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MARKET SEGMENTATION Market segmentation is a process of dividing a heterogeneous market into homogenous subunits; concept that was first developed by a Wendell R. Smith in a paper in 1956.1t is defined as dividing a market into distinct groups of buyers with different needs, .characteristics, or behaviour who might require separate services. A market was analyzed for its nature and composition, and was clubbed under groups of similar needs and other characteristics. Customers inside a grouping had similar preferences & traits, two different groups had different preferences and traits. Each of these grouping was called a segment, & the process was known as market segmentation. Requirements for Effective Segmentation ? Measurable and obtainable: Size, purchasing power, and characteristics of segments ? Accessible: The segments should be effectively reached and served. For example, questions like this keep cropping up. Will it be possible for us to communicate and serve the people of the North-East if and when we open our branch there?" ? Substantial and viable: The segment chosen should be large and profitable. It should be cost-effective for the service marketer to address the segment. ? Intensity in competition: More the intensity of competition, less attractive is the segment. ? Actionable: If the segments are attractive &have the potential for profit making, then effective marketing programmes can be designed. NIIT found that the Chinese market had huge potential and designed innovative marketing programmes to serve that market. ? Differentiable: The segments should be distinct from each other, behaving and responding differently. Or else, the process becomes like Undifferentiated Marketing. Bases for Segmenting the Service Consumer The service marketer can segment the market according to consumer characteristics & consumer responses. Consumer characteristics indicate who buys: ? Geo-demographic (e.g., political - state, districts, blocks-, region - urban or rural-, geographic North, South. East, 'West) ? Demographic (e.g' age, gender, marital status, education, family size, family life cycle, etc.)
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Socio-economic (e.g., income, social class, occupation) Culture (e.g., lifestyles, religion, language, ethnic origin & culture)
MARKET POSITIONING The segment chosen in market segmentation is to be targeted for customer acquisition and retention. For this to be successful, customers have to be persuaded that the service offer is unique in features, value and benefits. The offer, thus, has to be positioned in their minds to enable them to recognize-the offer as distinct from the crowd and to be persuaded that the offer is the best offer for them. Positioning is a battle for the consumer's mindshare. "The empires of the future are the empires of the mind", said \Winston Churchill. Four Principles of Positioning: ? A service firm must position itself in the target segment's mind. ? The position should be singular, with one simple' consistent message' ? The position must set the service firm and the service product apart. ? A service firm cannot be all things to all people-, should focus on certain segments' Process of Market Positioning Stage 1: Identity Key Product Characteristics The service marketer should make efforts to find out which of the offer's features and characteristics do consumers desire, and value most, when they make a decision to buy. Some kind of weighting should be put on these features. The features could be both tangible (colour, size, design) and intangible (guarantees, reputation, experience, quality, etc').
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Stage 2: Draw a Perceptual Map With the weights of different features, a perceptual map is drawn. This is an extremely useful tool to visually depict what the consumers think of available brands -with their features. A perceptual map consists of a grid on two axes, with product attributes on each of them. Thus, brands are spread over the grid, giving indication what the marker perceives of the brands vis-a-vis others. Clusters of brands in one area or brand standing alone in another area will give the service marketer an indication of the intensity of competition as well as the distinctiveness or lack of it of the brands. The marketer also gets glimpses of gaps in the market, for exploitation. Stage 3: Decide on a Competitive Strategy After the perceptual map has been drawn, the decision to be taken is either of the two: ? To compete head-on, or ? Get away from the competition Different players take different positions in the grid. Some are competing head-on while others prefer to be alone. A new entrant decides on the segment to compete in and if there
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is a cluster' as with Shopper's Stop, Cross roads/P i ram yd, Globus and West Side, then they have to compete head-on. The other choice could be the lower quadrants where there is an absence of competition. Stage 4: Design Product Attributes and Associated Imagery To help the targeted customer identify the services and their benefits, the marketer designs service product features and associated images are designed. They will include brand name, slogan, advertising themes, price levels, and distribution outlets. Thus with marketing mixes, the service marketer is able to position his offer in the minds of the consumer. Stage 5: Sustain a Competitive Advantage A service marketer gets a decisive competitive advantage if he is able to set his offer apart from those of the rest of the competition - in the eyes of the target customer. Success will breed imitators, and the service marketer will then have to spend time and resources to ward them off' But this competitive advantage has to be sustained, and can only be done by keeping in touch with the customer and knowing his needs.
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STRATEGIES FOR MANAGING CAPACITY & DEMAND The demand may be too high or too low. When demand is too high the capacity can be altered by: i) Stretching time, labour, facilities and equipments. ii) Cross train the employees. iii) Request over-time from employees. iv) Rent or share facilities. v) Hire part-time employees. vi) Subcontract or outsource service. When the demand is too low, the capacity can be altered by: i) Performing maintenance, renovations. ii) Schedule vacations. iii) Schedule employee training. iv) Lay-off employees. a. Customers' Involvement: By converting certain operations to self-service like buffets at restaurant and fast food joints the firm can divert its own personnel to other functions. Self-service firm lose a certain measure of control over service quality when the customers are asked to perform key functions. b. Using Part-time Employees-, Part-time help can supplement regular employees when the peaks of activity are persistent and ' predictable. A ready part-time labour pool is available from college students and others who are interested In .supplementing their primary source of income. Another source is off duty personnel placed on stand-by. Hospitals and Airlines often pay their personnel to be on stand-by. They are there to be ready for work if needed. c. Cross Training Employees: Some services consist of various operations. At times when one operation is busy the other operation may be idle. Cross training employees to do the tasks in various operations creates flexible capacity to meet demand. For an example, we see at supermarkets when the queues develop at the cash registers, the managers call on stockers to operate registers until the queues reduce. In the same way during slack periods some of the cashiers are busy stocking shelves. d. Modify or Move Facilities and Equipments: Sometimes it may be possible to modify the existing capacity to meet the demand fluctuations. For an example, the new Boeing 777 aircraft is so flexible that it can be reconfigured within hours to accommodate extra numbers of seats allocated to one, two or three classes. Thus
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the plane can be quickly modified to match the demand arising from different market segments. e. Sharing Capacity: A large investment in equipment and facilities exist in a service delivery system. At the time of underutilization, it may be possible to find other use for the capacity. An airline is a good example. At the small airports, airlines share the same baggage handling equipments, ground personnel etc. It is a common practice for some airlines to lease their aircraft to other airlines during the off season. f. Stretch Existing Capacity: In order to match the demand th,~ riqtinn r-~7m~7irjtv of resources can be expanded. Under such circumstances no new resources are added but people, facilities and equipments are asked to work harder so that demand can be met. g. Schedule 'Down Time' during low demand: If during the peak period, people, equipment and facilities are being used at maximum capacity then it is necessary to schedule repairs, maintenance and renovations during off periods. For employees vacations and trainings can also be arranged during this period. Strategies for managing demand to match capacity: 1. Partitioning the Demand: The demand for services is often grouped into random arrivals and planned arrivals. For an e.g. at a doctor's clinic the walk-in patients arriving are more than those with appointments. Appointment can be controlled. But walk-in demand is uncontrollable. We often find that the inflow of patients is higher on weekdays than weekend. Therefore, in order to level demand a partition can be created as, keep appointments in the latter part of the week i.e. weekends and only walk-in patients on weekdays. 2. Vary the service offering: Depending on the seasons of the year, day of the week, or time of the day, we can change the nature of the service offering. For an example, accounting firms focus on tax preparations and general activities late in the year and until April when the taxes are due. During the other times of the year they can focus on auditing and other general consulting activities. Care should be taken in implementing strategies to change the service offerings as change may easily imply and require alterations in other marketing variables such as promotion pricing and staffing in order to match the new offerings. Until and unless these new additional marketing mix variables are altered effectively to support the offering the strategy may not work. 3. Developing Complementary Services: Complementary services are basically offered in order to occupy waiting customers. The Indian Restaurants have
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4.
5.
6.
7.
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discovered the benefits of complementary services by adding a bar to the Restaurant. The customers can enjoy food and drinks separately as well as together. Promoting off-peak Demand: During off-seasons holiday resorts use their premises as retreat location for business or professional groups. In the same way in order to encourage long distance dialing the Telephone companies offer lower rates at night. Pricing Incentives: In order to smoothen the demand on the service process, prices can be raised during peak times and lower, at non-peak times. Movies have matinee special and hotels offers lowest rates during weekends. Communicate with the Customers: Another way for shifting demand is to communicate with the customers and let them know the peak demand period so that they can choose to use the services at alternative times and avoids crowding. Modify Timing and location of service delivery: Extending working hours and working on weekends can meet the customer's demand. Another strategy may also work by moving the service to a new location in order to meet the demands of the customers. Advertising and Sales promotion: Advertising and sales promotion can be used to emphasize different service benefits during different period i.e. peak and slow period. Advertising messages can also be used to remind customers about the peak demand times and promotional offers during the off-season.
Strategies when demand and capacity cannot be matched: 1. Reservations and Appointments: Examples: Airlines, Railways, Health Care, and Hospitals, Doctors, etc 2. Waiting Lines 3. Triage -Means Sorting: Example: Emergency rooms are given on the basis of critical and not in order of arrival. 4. Delaying Service Delivery: Next day or next week or until capacity becomes available. Demand Patterns Demand Pattern by Market Segments: Disaggregation of demand by market segmentation is possible if an organisation has detailed records on customer transactions or the analysis may reveal that the demand from one segment is predictable whereas the demand is relatively random from another segment, For an example, for a bank the current account holders may come daily at predictable time whereas savings account holders may visit the bank at random intervals. Random Demand Fluctuations:
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Random variations in demand are there in every kind of services. For an example, health related events like heart attacks and birth or death all increase the demand for hospital services but the level of demand generally cannot be determined in advance. in the same way natural disasters Such, as floods, fires, droughts, earthquakes, etc. can dramatically increase the need for services such, as health care, insurance, telecommunication etc. Predictable Cycles: Variations in demand can be caused by many factors. Some are predictable -while some are not. Tourism services have peak periods at certain holidays and at weekend days. Generally one or more causes can be identified when there exist a predictable pattern. Charting Demand Pattern: Those organisations which have computerized customer information systems can do the charting demand over relevant periods. If seasonality is a suspected problem then graphing should be done for data from the past year. Some of the basic types of demand curves are as follows:
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Managing Constraints on Capacity: Demand cannot be controlled perfectly. Efficient management of resources needs that the firm should consider the changing capacity by increasing it to meet higher demand and contract it when the demand is low. Depending on the type of service, service firms are faced with various constraints. 1. Time: In case of some services, the primary constraint on service production is time. For an example, 'a consultant, a lawyer or a hairdresser all sell their time. The profits are lost if their time is not used productively. In the same way time cannot be created if there is excess demand. Time is a major constraint from the point of view of individual service provider. Time capacity can be increased by operating for longer hours. This cannot be an option if the time does not match the customer's needs. Its capacity can also be increased by shortening the length of the time in serving the customer. Time can be saved by using the slack demand time for repairs and maintenance, since the functions of repairs and maintenance has to be performed sometimes or the other: However, if they are kept away from peak demand periods, the overall productivity will be improved. E.g. legal, consulting, accounting, medical. 2. Labour: In the case of labour intensive unit the number of service providers is large. Here, labour or staffing levels can be the primary capacity constraint. A law firm, consulting firm or a repair maintenance contractor all fare the same problem. At certain times the demand for their organisations' services cannot be met as the staff is already operating at peak capacity. In some cases it is easier to hire and fire. But it can be costly if the employees require extensive training in order to provide service. This can be avoided by imply increasing the working hours of the regular staff at the time of high demand and paying overtime. The capacity of the workforce can be made more flexible through extensive cross training This enables the employees to perform several different jobs It is also possible to increase the productivity and hence work capacity. E.g. Law firms, accounting firms, consulting firms, health clinics. 3. Equipment: Equipment may be critical constraints for service firms. In case of, transportation, the trucks or the planes required to service demand may have capacity limitations. Especially during festivals, summer and winter vacations the delivery service providers are faced with this problem. Telecommunication companies face equipment constraints when everyone wants to use the telephone lines at the time of peak hours. The use of productivity enhancement tools can increase the capacity of fixed work force. They can be kept free from doing repetitive task. Example, Banks have built ATMs, manufacturers of sophisticated computers and electronic products have build self diagnostic components, into their products in order to avoid sending costly engineers into the field to carry out routine analysis. In many
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kinds of firms computers automate ordering and billing activities and keep track of customer's purchase history. This has transformed operations performed by the clerical staff. E.g. Delivery services, telecommunication, utilities, health club. 4. Facilities: Most of the service firms are faced with the problem of limited facilities. Education institutions like schools and colleges are constrained by the number of rooms and the number of seats in each class, restaurant capacity is restricted to the number of tables and seats available, Airlines are limited by the number of seats in the aircraft and so on. Physical facilities are very difficult to adjust. Adding a building or a room or an aircraft tends to increase the capacity but then it will add to the cost. However, a service firm with a multiple outlet may be able to accommodate excess demand at one unit by sending the extras to another unit. Temporary renting is another solution. E.g. Hotels, restaurants, hospitals, airlines, schools and theatres. BRANDING OF SERVICES A brand can be defined as 'a name, term, symbol or design or a combination of them which is intended to identify the goods and services of one seller and to differentiate them from those of competitors. In case of services, branding is still in its infancy. The importance of branding is expected to rise due to the following reasons: i) Services itself does not offer unique tangible benefits, brand development tangibilises the service. ii) It is cheaper to retain customers than to attract new ones. iii) The new service development assumes greater importance. Brand Awareness Brand awareness is the ability of the consumer to recognize and recall that a service brand is an intrinsic part of the offer category. Service brands fall into the five categories according, to how much (or less) the consumer is aware of them. Some brands are not known at all by the customers, while brand awareness exists for some. At a higher plane, there are offers that have brand acceptability and those that enjoy a high degree of brand preference.
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Ch-3 Service Quality What are the SERVICE GAPS? Gap 1: The Knowledge Gap: Difference between consumer expectations and the management perceptions of consumer expectations. This gap can be narrowed through adequate research programmes. Gap 2: The Standard Gap: Difference between management perceptions of consumer expectations and service quality specifications. This gap can be closed by standardizing service delivery process wherever possible and also setting right organizational goals. Gap 3: The Delivery Gap: Difference between service quality specifications and the service actually delivered. This gap can be eliminated by providing the employees with adequate support system and better human resource policies and programmes and improving teamwork. Gap 4: The Internal Communication Gap: Difference between service delivery and what is communicated about the service to the consumers. This gap can be eliminated through efficient and effective communication system and also by not giving false promises to customers that leads to higher expectations. Gap 5: The Perception Gap: Difference between the perceived service and expected service. This gap depends on the size and directions of the first four gaps associated with the delivery of service quality. 3y bridging gaps 1 —4, automatically gap 5 can be closed. The gap analysis is useful in setting priorities for actions in order to improve the company's image in the eyes of the customers. What are the causes of Gaps in Service Quality? The assessment of quality takes place in the customer's mind simultaneously as services are created and delivered. The custor-ner's level of satisfaction is largely influenced by the difference between customer's expectation and perception of service performance. Whom the delivered service is perceived to be better than expected, the outcome is that the customer is satisfied and vice-versa. The Gap between expected service and delivered services has its origin at different points: Gap 1: Customers Expectation: It is simply not known what the customers expect. The intangible nature of service makes it difficult to define customer expectations quantitatively. Even the customer sometimes is not articulate enough to explain as to what are his/her specific expectations. It is also observed that some service quality dimensions are difficult to quality. As a result, marketers have to depend upon their own judgment, which sometimes is at a
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Gap 2: Management Perception of Customers Expectation: The customer expectation needs to be translated into appropriate performance standards. Many a time a service firm has a good idea as to what customers expect but fail to develop them into appropriate service specifications. There are many reasons responsible for if. Inadequate commitment to quality lack of inclination to specify quality standards and measure quality. Perception of unfeasibility, perception that services cannot be
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standardized etc. Gap 3: Service Delivery: This refl6cts variation of the actual performance from the standard performance i.e. failure to conform to established standards. It occurs when the employees are unable to or unwilling to perform at desired level. Role ambiguity, role conflict, poor employee-job fit, lack of training, absence of proper motivation system etc may be the reasons for it. Gap 4: External Marketing Communication: A service companies external communication efforts i.e. advertising, publicity, personal selling and public relations may over-promise and that logically results into this gap to occur, The marketers find it very hard to resist the temptation of making big promises. Otherwise they know that if they don't make tall promises their appeal to the customers won't be that exciting and the entire promotion exercise may be reduced to any. Gap 5: Actual Service Performance (As perceived by the customers): This Gap occurs when the customer's perception of delivered service is at variance with the expected service. The customer's experience of the service is conflict upon many factors and some times the service may need customer's expectations and yet perceived otherwise. The key to providing good service quality is meeting and exceeding customer's expectations. This gap is the end result earlier four gaps. How to measure service Quality? Or What are the Dimensions / Determinants of Quality? It refers to the process quality as judged by the consumers during a service delivery and the quality of output judged after a service is performed. Berry, Parasuram and Zeithaml conducted an extensive research in service quality and identified 10 criteria used by consumers in evaluating service quality as shown in the figure below: Ten Dimensions of Service Quality Dimension and Definition Tangibles: Appearance of Physical facilities, equipment, personnel and communication materials. Reliability: Ability to perform The promised service dependably and accurately. Examples of Specific Questions Realised by Customers ? Are the bank's facilities attractive? ? Is my stockbroker dressed appropriately? ? Is my credit card statement easy to understand? ? So the tools used by the repair person look modern? ? When a loan officer says they will call me back in 15 ? minutes, does she do so? ? Does the stockbroker follow my exact instructions to buy or sell?
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Achiever’s Academy ? ? ? ? ? ? Competence: Possession of The required skills and Knowledge to perform the service. ? ? ? ? Courtesy: Politeness, respect, consideration and friendliness of contact personnel. ? ? ? ? Credibility: Trustworthiness, believability, honesty of the service provider. ? ? ? ? ? ? ? ? ? Access: Approachability and ease of contact, ?
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Responsiveness: Willingness to help customers and provide prompt service.
Security: Freedom from danger, risk or doubt.
Is my credit card statement free of errors? Is my washing machine repaired right the first time? When there is a problem with my bank statement, does the bank resolve the problem quickly? Is my stockbroker willing to answer my questions? uestions? Are changes for returned merchandise credited to my account promptly? Is the repair firm willing to give me a specific time when the repair person will show up? Is the bank teller able to process my transactions without fumbling around? Does my brokerage firm have the research capabilities to accurately track market developments? When I call my credit card company, is the person enabled to answer my questions? Does the repair person appear to know what he is doing? Does the bank teller have a pleasant demeanor? Does my broker refrain from acting busy or being rude when I ask questions? Are the telephone operators in the credit card company consistently polite when answering my calls? Does the repair person take off his muddy shoes before stepping on my carpet? Does the bank have a good reputation? Does my broker refrain from pressuring me to buy? Are the interest rates/fees charged by my credit card company consistent with the services provided? Does the repair firm guarantee its services? Is it safe for me to use the bank's automatic teller machines? Does my brokerage firm know where my stock certificate is? Is my credit card safe from unauthorized use? Can I be confident that the repair job was done properly? How easy it is for me to talk to senior bank officials when I have a problem?
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Achiever’s Academy ? ? ? ? ? ? ? Understanding the Customer: Making the effort to know customers and their needs. ? ? ?
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Communication: Keeping customers informed in a language they can understand and listening to them.
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Is it easy to get through to my broker over the telephone? Does the credit card company have a 24-hour, toll-free telephone number? Is the repair service facility conveniently located? Can the loan officer explain clearly the various changes related to the mortgage loan? Does my broker avoid using technical jargon? When I call my credit card company, are they willing to listen to me? Does the repair firm call when they are unable to keep a scheduled repair appointment? Does someone in my bank recognize me as a regular customer? Does my broker try to determine what my specific financial objectives are? Is the credit limit set by my credit card company consistent with what I can afford (i.e. neither too high nor too low)? is the repair firm willing to be flexible enough to accommodate me schedule?
It was found that there was a high degree of correlation between most of these variables. They are consolidated into five broad dimensions. 1. Tangibles: Tangibles are those factors which the consumer can feel, hear and touch. Tangible are used while assessing the physical qualities and before the service is experienced. For an example, you would not like to be served by an unclean waiter with dirty uniform and perhaps you would never visit such a restaurant again. 2. Responsiveness: It refers to the willingness to help customers and provide prompt service. Responsiveness is an important dimension for those customers who require some extra service over and above that is usually provided. 3. Empathy: It means the power of understanding the customer's feelings and needs that enables the server to take care of the customer and provide personal attention. It is described as human touch. 4. Assurance: It means that the knowledge which the provider possesses enables him to perform the services competently. It also includes courtesy aspects such as politeness and respect for customers.'
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5. Reliability: It is the capacity to deliver the promised service accurately on time. The milkman who delivers milk on a regular basis in time is reliable. Productivity and quality Productivity relates to how inputs are transformed into outputs that are valued by customers. Improving productivity keeps costs under control Quality refers to the degree to which a service satisfies customers by meeting their needs, wants and expectations. Service quality helps in product differentiation and building customer loyalty. Invest in quality profitably i.e. by considering incremental cost and incremental revenue. What do you mean by service recovery? Service recovery is a term used for systematic efforts by a firm in order to correct the problem following a service failure, and to retain a customer's goodwill. Service recovery efforts play a crucial role in achieving or restoring customer satisfaction. In every organisation, things may occur that have a negative impact on its relationship with customers. The true test of a firms, commitment to satisfaction and service quality isn't in advertising promises or the decor and ambience of its office but in the way it responds when things go wrong.jor the customer. Effective service recovery requires thoughtful procedures for resolving problems and handling disgruntled customers. It is critical for firms to have effective recovery stralegies, because even a single service problem can destroy a customers' confiderTce, in tvfirm under the following conditions: i) The failure is totally outrageous. ii) The problem fits a pattern of failure rather than .being'ah isolated incident. iii) The recovery efforts are weak, serving to: compound the original problem rather than correct it. Some complaints are made while service, deliqery (s still taking place, while others are made after the fact. In both instances, how the complaint is handled may determine whether the customer remains with the firm or seeks new; suppliers in the future. The advantage of getting real time complaints is that there nay still be a chance to correct the situation before service delivery is complete. The downside of real time compliant (from an employee perspective), is that they can be de-motivating. Dealing with them in real time can also interfere with service delivery. The real difficulty for employees is that they often lack the authority and the tools to resolve customer problems, especially, when comes to arranging alternatives at companies' expense or authorizing compensbtionon the spot. When complaints are made after the fact, the options for recovery are more limited. In this case, the firm can apologize, repeat the service to achieve the desired solution or offer some other forms of compensations.
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What are the guidelines for effective problem resolution? Or How to Handle Complaints? 1. Admit mistakes, but don't be defensive: Acting defensively may suggest that the organisation has something to hide or is reluctant to fully explore the situation. 2. Act fast-, If the complaint is made during the service delivery, then Time is of the essence to achieve a full recovery. When complaints are made after the fact, many companies have established policies of responding within 24 hours or sooner. Even when full resolution is likely to be longer, fast acknowledgement remains very important. 3. Don't argue with customers: The goal should be to gather fact, to reach a mutually acceptable solution, not to win a debate or prove that the customer is an idiot. Arguing gets in the way of listening and seldom diffuses anger. 4. Show that you understand the problem from each customer's point of view: Seeing situations through the customer eyes is the only way to understand what they think has gone wrong and why they are upset. Service personnel should avoid jumping to conclusions with their own interpretation. 5. Give customers the benefit of the doubt: All the customers may not be truthful, and also not all complaints are justified. But customers should be treated as though they have a valid complaint until clear evidence to the contrary emerges. If a lot of money is at stake, like insurance claims or lawsuits, a full investigation is warranted. If the amount involved is small, it may not be worth to refund or compensate. But it's a good idea to check records to see if there is a past history of dubious complaints by the same customer. 6. Acknowledge the customer's feelings: Acknowledge the feelings of the customers tactfully for example," I can understand why you are upset. This action helps to build rapport, which is the first step in building a bruised relationship. 7. Clarify the steps needed to solve the problems: When instant solutions are not possible, telling customers how the organisation plans to proceed, shows that corrective action is being taken. It also sets expectations about the time involved. 8. Keep customers informed of the progress: Nobody likes being left in the dark. Uncertainty breeds, anxiety and stress. People tend to be more accepting of disruptions, if they know what is going on, and receive progress reports. 9. Consider compensation: When customers do not receive the service outcomes that debate for or have suffered serious inconveniences or loss of time and money, because the service, failed, either a monetary payment or an offer of equivalent service in kind, is appropriate. This type of recovery strategy may also reduce the risk of legal action by an angry customer. Service guarantees often lax out in advance, what such compensation will be and the firm should ensure that all guarantees are met. 10. Preserving to regain customers goodwill When customers have been disappointed,
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one of the biggest challenges is to restore their confidence and preserve the relationship for the future. Perseverance may be required to defuse customers' anger and to convince them that actions are being taken to avoid a recurrence of the problem. Truly exceptional recovery efforts can be extremely effective in building loyalty and referrals. Taking care of customers require that the firm also take care of its own employees. Managers need to recognise that handling complaints about service failures and attempting service recovery can be stressful for the employees, especially when they get treated abusively for problems over which they have no control. Compounding the stress are policies that implies in flexible, bureaucratic procedures, rather than empowered customer --contact personnel to handle recovery situations as they see fit. Service firm needs to develop internal service recovery strategies, designed to help employees recover from negative feelings that they may become the target of employee anger and dissatisfaction. Similarly, management must ensure that the firm employs a sufficient number of welltrained and motivated employees. so that good service is provided in the first place, plus prompt and effective recovery is done when things go wrong. Companies with a good reputation for customer care cannot afford to become complacent.
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Ch- 4 Services Management Service Mapping or Flowcharting Flowcharting can be applied to any type of services when a management needs to gain, a better understanding of how the service is created and delivered. It is also known as service mapping when portraying an existing situation and service blueprinting , when planning a new or revised process and prescribing how it ought to function. Service Blue Print A service blue print is a flowchart of the service process. It is a picture of a service system. It conveys the service concept by showing the service at an overview level. It shows how each job or department functions in relation to the service as a whole. Benchmarkinq: Advantages and Methodology Benchmarking is a process used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice, usually within their own sector. This then allows organizations to develop plans on how to adopt such best practice, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to challenge their practices. Benchmarking in simplistic terms is the process where you compare your process with that of a betterprocess and try to improve the standard of the process you follow to improve quality of the system, product, and services etc. A process similar to benchmarking is also used in technical product testing and in land surveying. See the article benchmark for these applications. Advantages of benchmarking: Benchmarking is a powerful management tool because it overcomes" paradigm." Paradigm Blindness can be summed up as the mode of thinking, "The way we do it is the best because this is the way we've always done it." Benchmarking opens organizations to new methods, ideas and tools to improve their effectiveness. It helps crack through resistance to change by demonstrating other: methods of solving problems than the one currently employed, and demonstrating that they work, because they are being used by others. Collaborative benchmarking Benchmarking, originally invented as a formal process by Rank Xerox, is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a
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voluntary collaborative benchmarking process since 1997 through their industry association. Procedure There is no single benchmarking process that has been universally adopted. The wide appeal and acceptance of benchmarking has led to various benchmarking methodologies emerging. The most prominent methodology is the 12 stage methodology by Robert Camp (who wrote the first book on benchmarking in 1989. The following is an example of a typical shorter version of the methodology: Identify your problem areas - Because benchmarking can be applied to any business process or function a range of research techniques may be required. They include: informal conversations with customers, employees, or suppliers, exploratory research techniques such as focus groups, or in-depth marketing research, quantitative research, surveys, questionnaires, re engineering analysis, process mapping, quality control variance reports, or financial ratio analysis. Before embarking on comparison with other organizations it essential that you know your own organization's function, process; base lining performance provides a point against which improvement effort can be measured. Identify other industries that have similar processes – For instance if one were interested in improving hand offs in addiction treatment s/he would try to identify other fields that also have hand off challenges. These could include air traffic control, cell phone switching between towers, transfer of patients from surgery to recovery rooms. Identify organizations that are leaders in these areas – Look for the very best in any industry and in any country. Consult customers, suppliers, financial analysts, trade associations, and magazines to determine which companies are worthy of study. Survey companies for measures and practices – Companies target specific business processes using detailed surveys of measures and practices used to identify business process alternatives and leading companies. Surveys are typically masked to protect confidential data by neutral associations and consultants. Visit the "best practice" companies to identify leading edge practices - Companies typically agree to mutually exchange information beneficial to all parties in a benchmarking group and share the results within the group. Implement new and improved business practices – Take the leading edge practices and develop implementation plans which include identification of specific opportunities, funding the project and selling the ideas to the organization for the purpose of gaining demonstrated value from the process. Blueprinting The service encounter is difficult to describe with accuracy and therefore there is a lot of
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subjectivity in its analysis. This inconsistency (variability) prevents quality measurement. This has given rise to many methodologies in service encounter analysis and measurements which seek to 'map' the service process. With such a 'map' and 'scripts', it is possible to be systematic in the encounter analysis This process is called 'blueprinting'. Blueprinting has given rise to other methodologies like 'servuction'. To facilitate maximum satisfaction to the customers, more inputs were added to the service delivery. Service evolved from very simple steps to complex processes, & there arose a need for the marketer to get a bird's eye view of the whole process. Blueprinting is flowcharting of service operation. Blueprinting would prevent the manager from learning by costly trial and error. It (blueprinting) also enables marketing managers to understand the parts of the operating system that are visible to the consumer and hence parts of the servuction system. In the servuction sysrem, it is very difficult to identify components of an individual firm. Worse firms underestimate the sensitivity of points of contact. Service firms are now starting to realize the importance of the first call and its potential for generating revenues. They are setting up '24 x 7 x 365 call centres to be manned by efficient and alert call handlers. The providers are adequately enabled by training, and computer facilities for all enquiry data access and customer and product details the service providers are trained to pick up the phone on the first ring. Service flowcharts allow managers to better understand servuction Processes. Designing the process becomes the key to product design. In the design stage, it is ensured that the visible part of operations is supported by invisible processes. Flowcharts seek to identify the following: ? The time it takes to move from one process to another; ? The costs involved with each process step; ? The amount of inventory build-up at each process step; ? The bottlenecks in the system. A customer blueprint has three core elements: ? Identification of all those functions that are essential to deliver a service along with the appropriate personnel with requisite responsibility, authority and accountability. ? The relationships amongst different functions of service components are explained by graphics and charts. The relationshio, is based on time and sequence with each other. For a hotel, the sequence of housekeeping in relation to reception and registration has to be elaborated with a specific time interval. ? Setting up of standards for each function with tolerance levels and variance from standards' These tolerances for variance should not adversely affect the service quality adversely.
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Steps in Designing a Blueprint 1. Identify the process to be blueprinted: This implies again that it would be impossible to blueprint the complete processes of the service provider in one format. The individual processes are to be identified for blueprinting. The summation of such processes would give the whole picture to the manager. Each process would by itself be an issue, and particular problem identification and appropriate solution formulation would be easier. 2. Map process from the custorner's point of view: Through this method, the customer's comfort zones can be identified. Processes can be modified if it is found that customers are not very comfortable with certain sequences. Consumers possess purchasing scripts that guide their thinking and behaviour during service encounters. The blueprint development process identifies steps where the system can go awry. Process involves specifying the timeframe of service execution. 3. Draw line of interaction: The line of visibility and the line of interaction have to be drawn clearly. The areas of interaction affect service experience the most. 4. Draw the line of visibility: These are processes in zones that are visible to the customers and in which the customer is most likely to participate. There are also the invisible zones which consist of processes and interactions that are necessary for servicing the customer but are hidden from his view. In a bank, this would include checking the credit-worthiness of clients, processing of documents, dispatch section operations, etc. 5. Map process from customer contact person's view, distinguishing visible activities from those that are invisible. 6. Draw line of internal interaction. 7. Link customer and contact person activities to needed support functions. Target Marketing Target Marketing recognizes that different groups of customers have different needs and might also desire different core benefits from the same service. It sought the different needs and preferences of the consumers and instead of trying to satisfy them with the same type of services, the firm designed complete marketing programmes for each of these sub-groups. Benefits of Target Marketing ? The market size is large and the service firm may not have sufficient resources to address it, neither would it perhaps want to do so. ? Customers are scattered all over the geographical spread, making it practically impossible to reach every potential buyer. Targeting was far more cost-effective. ? Competitors are enrrenched, making entry and survival difficult' Therefore, smaller firms can seek niche or specialized markets.
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Customer requirements from the service vary widely'. Targeting a segment or two - to the exclusion of the rest - increases the chances of meeting most of customers' demands. It generated customer loyalty.
Franchising : Franchising is the most common type of distributor in the services and accounts for most of the retail sales. According to the International Franchise Association of America, "A franchise operation is a contractual relationship between the franchiser and the franchisee in which the franchiser offers or is obligated to maintain a continuing interest in the business of the franchisee in such areas as know-hold and training, where in the franchisee operates under a common trade name format and/or procedure Owned and controlled by the franchiser and in which the franchisee has or will make a substantial capital investment in his business from his own r esources.” Location of Franchisee. The franchisee should be located at convenient and accessible places. The following factors influence the choice of franchise location: i) Area of potential demand ii) Competition in the area. iii) Requirement of space iv) Presence of another franchisee of the same firm. v) Other physical needs of the firm.
Benefits of Franchisee: To the Franchiser: i) Franchisees are self-motivator. ii) They share business risk. iii) They have a thorough although knowledge of the local market. iv) They maintain consistency in quality. v) Franchiser gets wider distribution network. To the Franchisee: i) Obtain ready-made business. ii) Reduction of risk. iii) Benefit of training and counseling and advice on local promotion of business. Franchising in India with Examples: As the service economy grows in the country, opportunities for franchising are going to be plentiful. The franchisers in the product market like Titan, Raymond, Bata or Reebok are well known. More names will be added to this list as franchising is catching on in
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service industries like in education I. T. kids, NIIT, Aptech; Healthcare - Arvindlal; Entertainment - AMF, Bumswick; Specialty food services -Subway, Cafe Coffee day and Personal grooming -Personal Point, VLCC. I. T. kids: Business concept: education through computers. Numbers planned: 300 in one year Company investment: Rs. 37 crores (in next one year) Franchisee investment: Rs. 12 -15 lakhs Chennai based computer firm with the novel concept of educating children aged between 4 to 14 years through computers. The curriculum is divided into several modules and gives a good chance of retaining the customers for many years. To include trials I.T. kids plans short duration programmes during summer vacations. As it is a niche market I.T. kids rely on franchising. They have rolled out swiftly and grab the first mover advantage. Cafe Coffee day - Business concept'. coffee cafes Numbers planned: 100 by 2001 Company investment: Rs. 5 crores Franchisee investment: about Rs. 40 lakhs The Rs. 200 crore Bangalore based Amalgamated Bean Coffee, India's largest coffee chain has set up a chain of cafes that mirror the successful day offers a variety of coffee blends and also a limited menu of snacks like sandwiches and pastries.
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CASE STUDY NOV: 2001 The three morning flights scheduled to leave Mumbai for Delhi at 6.30, 8.e0 and 8.45 a.m. were delayed due to fog in Delhi. The first two were rescheduled for 9.15 a.m. in the hope that by then the weather would improve. At 8.30 a.m. the passengers were asked to proceed for security check and await departure call. An announcement at 8.50 a.m. requested passengers on the second flight who were waiting in the lounge on the ground level to board the aircraft. Those who were booked for the first, waiting on the first floor lounge heard this announcement. Anticipating a similar announcement for them, they moved gradually to the gate. The movement of the staff through the aerobridge and to the telephones gave the impression that something was wrong. But the gate did not open. At about 9.15 one of the staff was asked the reasons for the delay. He replied rudely that they would be boarding within five minutes. At 9.30 a.m. another traffic assistant also said within five minutes. The passengers were getting restive. When the same answer was given by another assistant, the passengers got infuriated. They also felt that the staff was not doing their duty and that the delay was avoidable. Within another five minutes they were asked to board the aircraft. When all were seated, the pilot announced that the weather in Delhi was still bad, and that the next report was expected after 30 minutes and the breakfast would be served on board. From the air hostess, the passengers came to know the passengers of the second flight were also boarding only then This incident could have been communicated periodically. The announcement about boarding the flight was misleading. The traffic assistants perhaps themselves did not know the real situation when they had said five minutes. This situation further aggravated by further delay due to late arrival of a politician who was also travelling to Delhi. The parting greetings were given to the passengers "Hope you enjoyed the Flight" just before landing at Delhi. As if this was not enough, the passengers had to wait for one more hour for luggage clearance. Questions: i) Which were the critical interactions and which were not? ii) Did all the airline staff and the passengers exhibit technical and interactive skills? Elaborate. iii) What were the reasons for the delay at both the airports? iv) What steps could have been taken to rectify the situation as a service recovery strategy? v) What kind of an image did the parting remarks convey to the passenger? If you were the passenger, how would you perceive the quality of services rendered by the airline? NOV: 2002 On checking into a 5 Star Hotel in Bangalore recently, Anand was impressed by the
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courtesy extended to the visitor in the front office — polite, friendly and efficient. The checking in card was filled and ready, just waiting to be signed. He walked upto the room and his bag arrived at the time. A few minutes later, the bearer came in with a welcome drink — which was "on the house". It was certainly an excellent start. Later when he settled down, he discovered that there was no table lamp in the room and this made it difficult to read. The press button for the shower did not work, so one had to bend down and keep it pressed right through a shower. The wash basin became easily clogged and was virtually unusable. A complaint was made to the housekeeping department and they said they would certainly attend to it. Normally it happened for a whole day. The next day, a complaint was given to the Reception desk. They said they would surely look into it. In the evening it was discovered that only the basin had been attended to, but the floor was littered with some screws and nails lying in a pool of dirty water. Another complaint was lodged the following morning at the Reception desk, but again it remained unattended to by the evening. But the unkindest cut of all was inflicted the following morning when the girl at the Reception desk (who was new recruit, perhaps wrongly selected and obviously inadequately trained) crowed in her most pleasantly sarcastic manner: "Good morning, Mr. Anand, any further complaints today? I am all ears!" At that moment, the hotel lost a customer. The back room services rendered by the Hotel were poor and she compounded the problem with poor front office service. She had forgotten or perhaps never been taught that in the marketing of a service, the focus is not just on delivering goods, but on satisfying the reasonable expectations of paying customer. Questions: i) What were the moments of truth (indicate various interactions). ii) Highlight the critical and non-critical incidents. iii) Which were the supplementary/peripheral services missing in the hotel? Justify their importance. iv) What steps could have been taken to resolve the problem effectively? NOV: 2003 The passengers were through with their final security check and were boarding the aircraft The LOTUS Airlines personnel were awaiting the arrival of a V.I.P. to clear the take off. Finally the V.I.P arrived half an hour late and went directly for the security check. During the check the security personnel came across weapon with live cartilages. He was requested not to carry the weapon with live cartilages. He was requested not to carry the weapon on flight. However the V.I.P. refused to part with the weapon for personal security. When he was asked for the license, he said he was not carrying it. The security personnel refused to give permission to the V.I.P. to board the aircraft .This led to heated argument and in rage 'Lille V.I.P. threw one of the security staff across the floor.
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This further delayed the flight. The passengers were very restless since they were in the aircraft last 1½ hours. To top it up they were not allowed to leave the aircraft for security purpose. Questions: i) In this case, where do the service gaps exist and how would you close the gaps? ii) Elaborate the importance of "People" in airline services? iii) As service provider how would you manage this kind of service encounter? What is a service encounter? iv) What would you do when prevention fails and damage is done? NOV: 2004 Krishnan was delighted to get a phone call one evening from the finance company, saying that the new car that had been launched only a month back was ready for delivery. The appointment was fixed for next morning at 10. Krishnan and his family reached the show room promptly at 10, hoping to collect the vehicle before the inauspicious "rahu kalam" began at 12. When he entered the showroom, nobody, not even the receptionist asked him who he was and what he wanted. After standing around for sometimes, he asked a gentleman who was walking past, whether he would be attended to. He was told to wait. An empty chair was pointed out him. The rest of the family had to stand. After a few minutes, a young lady came with a file, and all small smiles, asked whether he had brought the balance money? "What balance "asked Krishnan? I was, told that all payments had been made and I can take the car this morning". The lady went to check. AS Krishnan was waiting, another well-dressed person, all smiles again, came and asked whether he would like to select accessories from the list, which were two full pages. "Let me get the car first", shouted Krishnan. The original Lady returned all smiles again, confirming that no payments were due and handed him the papers. One was an insurance receipt. Krishnan wanted to know what insurance cover had been taken. "This is the insurance cover," the lady said, "Yes what kind of cover", Krishnan wanted to know. She went back to check again and confirmed that it was a comprehensive cover. Krishnan was then required to go to the workshop, where, after more delay and paper work, he got the car at 12.30 pm. Questions: i) Identify the Service Gaps in this case and how would you rectify the same? ii) Explain the "core" and "supplementary" products in the context of above case. iii) How do you find the "people" factor in the above case? What skills, according to you, are lacking in them? iv) As a show room manager what service recovery measures would you take? NOV: 2005 The computerized reservation system in Mumbai was closed on 10" January, 1988. The software was being upgraded for better service. On the day, manual systems were put into
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operation, but only to attend to needs of passengers leaving by trains up to 12 noon on the 11`h A person, who was booked on the train leaving at 7 a.m. on the 12", could not avail of the manual facilities for cancellation. !f he had done so, he would have lost Rs. 30 as cancellation charges. He could only cancel his ticket on the 11th, and as per rules, he would loose 25%. But when he went to cancel it on that day, the cancellation charges would go upto 50% of the cost of the ticket. He pleaded with the local officers to certify on the ticket that he [lad come to cancel it, and that he could make a separate claim for refund later but this could not be done, as per rules. Only the ticket collector on the train was authorised to endorse on the ticket the fact of non-utilization. Nobody could help, beyond stating the rules, "The procedure and their helplessness. Questions: i) Discuss this case with the help of, the cause & effect analysis. ii) What is "flower of service"? Bring out the deformed petals in this case. iii) List out the critical and non critical incidents. NOV: 2006 Kool Travels Pvt. Ltd., a Holiday Company has been arranging regular holiday tours to Rajasthan. Kool Travels had regular arrangements with Maharaja Hotels for accommodation of their tourists in Jaipur. In December, 2005 Mr. Tejas and his family booked a Rajasthan Tour Package with Kool Travels and checked into Maharaja Hotel in the room allocated to him and his family. However Mr.Tejas did not like the room and decided to register his complaint about the room. In the meantime his wife, Pooja, switched on the television and was greeted by a screen with Maharaja Hotel Customer Survey. Using the remote control, Mr. Tejas punched in his evaluation. To his surprise within two minutes of the receiving the electronic communication, the Hotel Manager called him to say that because the Hotel was entirely booked this being a busy season, the room could not be exchanged, however the Guest could expect a Hospitality Gift from the Hote! for his inconvenience. The next day a garden facing room was available and the Hotel Manager offered the same to Mr. Tejas if he wished to shift. Mr. Tejas declined and told the Manager that he and his family were quite comfortable in the present room. Questions: i) Give your opinion about expected level of expected level of service in the case. ii) Analyse the service recovery in the case. iii) What would be the effect of this incident on the Kool Travels? iv) Why do you feel Mr. Tejas declined to change his room? NOV: 2007 Dear Customer Service Manager, Through the XYZ Travel Agency, my wife and I booked round trip first class seats on the following Dorby Airlines flights on the dates indicated:
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1st July DBA 3072 Mumbai to Heathrow 1st July DBA 86 Heathrow to Munich 21st July DBA 87 Munich the Heathrow 21st July DBA 3073 Heathrow to Mumbai. In addition, we had booked domestic flights between Udaipur-Mumbai and back for the respective dates on another airline. The out bound flights 3072 and 86 seemed pleasant enough at the beginning. However, mid flight on 86, we discovered that we had been poisoned on flight 3072, apparently by the chicken sandwich that was served in first class that day. My wife was so ill dying to get to the restroom to throw up, she passed out cold, hitting her head and we discovered over the next few days, apparently damaging her back. In addition to the nausea and diarrhea, she had a large knot on her head and headaches far several days. Her lower back has been in constant pain ever since. I, too, was very ill for several days. A nice start for a vacation: But it gets worse. During the long layover between flights at Heathrow, there was a tremendous rainstorm, and our baggage apparently was left out in it, a situation that we discovered when we arrived at our first nights lodging and discovered of our clothing was dripping wet. In addition, four art prints that we were bringing as gifts for our friends were ruined. The return flights were better only in that we did not get poisoned; instead we did not get fed! We had to ask for drinks-, the meals ran out and we were given no choice but an overdone piece of stale meat, with tomato-sauce on it. Given our previous experience with the food, we decided not to eat. Flights 87 was delayed in boarding by two hours, due to the "slowness in cleaning the aircrafts and late arrival of the crew" we were told. Also, thanks to heavy rainstorm that hit Heathrow again, our flight take off was further delayed-, all of which could have been avoided, if the plane had taken off before the rainstorm had started, as scheduled, had the crew and the cleaning done their jobs on time. Due to the excess delay at Heathrow, flight 87 was very late and we could not make our connection from Mumbai to Udaipur. As it turned out we would have barely been able to make it if the flight has been on time because Dorby Airlines had changed not only the flight numbers but also the flight times on the Heathrow - Mumbai leg of our journeyAND WE WERE NEVER NOTIFIED OF THIS CHANGE UNTIL WE ARRIVED AT THE AIRPORT. As first class passengers we have been treated as cattle! In Disgust, J. D'Souza Questions: i) What are services? What are critical incidences in this case? ii) What according to you are the causes for poor service deliver in this case? iii) Discuss the core and supplementary service in this case. iv) What is service recovery? How would you design a complaint handing process?
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NOV: 2008 The success of the package holiday firm Club Med in becoming a household name in the holiday business is no accident. Everyone at Club Med, from the C.E.O. to the kitchen porter, is committed to the ideal of customer satisfaction through every element of the package. Every member of the staff is aware that guests are coming to experience a combination of the resort location, the excellent facilities and the all-important element of personal interaction. Guests come for a total experience not just to have a few days away from home and work. Club Meds success can be attributed to the creative inclusive packages it has developed – all combining the basic mix of location, facilities and personal interaction. A typical Club Med inclusive packago is comprised of three meals a day, beer or wine with lunch arid dinner a swimming pool and gymnasium, sailing, kayaking, snorkeling, tennis, water exercise, rock climbing, archery, aerobics, volleyball, basket ball, table tennis, billiards, picnics, evening entertainment and dancing a night club and conference facilities. Club Med offers different holiday plans – a budget plan, a moderate plan, and a deluxe plan –from which customers can choose in accordance with their expectations and expenditure. Within these categories they offer various packages primarily for couples, packages primarily for singles and packages primarily for families. The family package incorporates sub packages selected by parents for their children according to age – kids club. Petit club, Mini club and Baby/nursery club. With these various packages, Club Med offers not merely a holiday, but a hassle free vacation package. In the 1970s and 1980s Club Med was in vogue as "the" holiday destination for many single people in Europe. As these customers grow older, got married, and began having children, their needs changed. In response, Club Med extended its services and packagesthereby successfully maintaining the loyalty of its original customers many years. Using various specialized packages, Club Med has maintained its basic customer's base while simultaneously extending its market demand to other customer groups. Questions: i) Explain the product / services offered by Club Med. ii) Explain the market segmentation of Club Med. iii) Explain the importance of team work in service sector.
iv)
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SERVICE SECTOR MANAGEMENT
NO. 1.
INDEX CHAPTER Introduction of Services Marketing 1
PAGE NO.
2.
Key Elements of Services Marketing
31
3.
Service Quality
61
4.
Services Management
70
5.
Case Study
76
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P's Of Service Sector Management Sr. No. 1 Sector Roadway (Public Utility Services) Product Tar road, Medians, Pavement Place Cities, Towns, village, Forests, Toll gates Price Material , Wages, Salary, Survey Travel Class, Distance traveled, Luggage Promotion Publicity, Word-of-Mouth Promotion, Public Relation Advertising, Publicity, Word-of – mouth promotion , Public Relation Advertising, Publicity, Word-of – mouth promotion , Public Relation Advertising, Publicity, Word-of – mouth promotion , Public Relation Physical Evidence Signs, Milestone, Road Roller People Committees, Govt.dept. traffic police, Engineer, Labour Driver, Guards, Railway Police, Maintenance staff, Station Master Government service, Postman, Delivery boy, Booking staff, Logistic staff etc Trauma care personnel, driver, fire fighter Process Digging, Laying, Repair, Rolling, Purchasing, Contracting, Routing, Ticketing, Repair, Truck Laying , Transporting etc Enquiries, Booking, Transportation, Documentation, Etc
2
Railway (Public Utility Services)
Coaches, Tracks, Signals, Bridges, Tickets Letter, Cards, Stamps, Saving, Scheme, Post boxes, Mail Bags Fire Engine, Helmets, Clothing
Station
Tracks, Signals, Station Stalls, Trains Letter, Packets, Parcels, Mail Van, Document, Receipt, Post Box, Stamp seal, Pin codes etc Fire engine, first aid kits, hoses, water, fire proof clothing, cranes fire station
3
Postal and Courier ( Public Utility Services)
Post Office, Post Box, Collection centers, Door receipt
Distance , Weight, Nationality, Speed Size
4
Fire Control ( Public Utility Service)
Wherever fire erupts e.g. Houses, Offices, Forests
Free service for public which is indirectly collected from tax
Training, fire fighting, Medical aid, Counseling, Safety education
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5
Civil Aviation (Public Utility Service)
Airplanes, Tickets, Magazines, Skyshoping
Airport
Distance Traveled, Travel class, Schemes
Advertising, Publicity, Word-of – mouth promotion , Public Relation, Broadcasting Advertising, Publicity, Word-of – mouth promotion , Public Relation
6
Electricity ( Public Utility Services)
Meter, transformer, switch boards, Distribution tower and lines, energy, fuses
Homes, Offices, Factories, Commercial Establishments, Manufacturing, Agriculture, Medical Centers Telecom center Home, Workplace, Private operator
Industrial consumption, Domestic consumption, Subsidies
7
Service Telecommuni cation (Public Utility Service) Service: Health Care
Telephone, Telegraph, Fax, Internet , Intranet
Distance , Time of the day, Duration Service charges
Length of stay, Level of illness, type of room, specialist, Tests required
8
Diagnostic and Surgical equipment, First aid kits, Medicines
Clinic, Hospital, Camps
Advertising, Publicity, Word-of mouth promotion , Public Relation Advertising, Publicity, Word-of – mouth promotion , Public Relation
Airplanes, Airport, Tarmacs, Radars, Control Tower, Aerobridges, Passengers, Cargo, Conveyors Transmission tower, grids, transformer, meters, fuses, lines, generating station, meter reading cards, Bills Directories, Bills, Telecom equipment Yellow colors display board
Hospital, Intensive care, Wards, Medical shop ambulance, Mortuary, Emergency
Pilots, Cabin Crew, Caterer, Administrative staff, Techniques, Engineer, Security, Helper
Ticketing, Boarding, Transporting, Hospitality, Booking, Announcement Etc
Electricity boards, technician, administrative staff
Operators, Service Personnel
Generation, Supply, Metering, Billing, Collection, Repairs, Emergency calls, Installation Machine Operation, Billing, Collection
Doctors, Nurses, Para medicines, Pharmacists, Specialists
Testing, Surgery, First Aid, Physical examination, Catering, Laundry
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9
Service: Tourism
10
Service: Hotel (Hospitality Service)
Cottage, Pubs, Restaurant, Shops, Accommodatio n : 5 – 1 star Reception, Rooms, Areas, Entertainment, Shopping, Personal care, Parks, Swimming pools Luxury, Express, Pointin-point, Ordinary Service, Light & heavy vehicles Policies- whole life, ordinary, limited, payment, convertible, Marriage, Accident etc
Hill station, Beaches, Palaces, Places of workship, Heritage sites Near airport, Bus Stand, Railway station, Ports, Tourism spots, Shopping areas, Place of workship Tourist places, Business Establishment, Personal Visits, Airport, Station
11
Service Travel (Hospitality Services)
12
Service: Insurance ( Financial Service)
Branches, offices, home
Distance, Accommodati on, Food, Drinks, Guides, Entry fees Occupancy periods, star category, room capacity, Air conditions, Location, Room service, taxes Distance traveled, hours traveled, flat rates, drivers tips, luggage, fuel consumed, Premium, rate of death, rate of interest, expenses incurred
Advertising, Publicity, Word-of mouth promotion , Public Relation Advertising, Publicity, word-of – mouth promotion , Public Relation, Telemarketing Broadcasting Advertising, Publicity, Wordof – mouth promotion , Public Relation Telemarketing , Broadcasting Advertising, Publicity, Wordof – mouth promotion , Public Relation Telemarketing Broadcasting
Monument, Leisure centers, Healing Location, Historic places, Monument Tariff cards, Menu cards, Interior decoration, Furnishing, House Keeping, Display board, lighting, Valets Vehicle, booking office, tariffs, brochures, mobile displays Brochure, leaflet, environment, people, currency, client, interior, decoration
Tour operator, Government, Travel agent, Tourist guide,
Training, Guiding, Explaining, Preserving, Documentation House keeping, Food Preparation check- in & out, Foreign exchange, Room service, Meeting arrangement
House keeping staff, Bill boy, Receptionist staff, Chefs, Waiter, Administrative staff
Drivers, Maintenance staff, booking staff, PRO. Liaison officers
Booking, vehicles purchase, marketing, billing, collection, documentation
Brokers, agents, company staff Application, verification, sanction, receipt
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13
Service: Advertising Agency (Professional Service) Service: Banking ( Financial Service)
Media campaign, layouts, accounts, video, audio tapes Deposits, letter of credit, foreign currency, consultancy, merchant, banking
Camera, filters, lights, reflectors, clap boards, films, cable, liquids, make-up kits, animators Healthcare, pollution, abatement equipment, bucket of earthworms to improve soil quality of garden
Agency offices, client offices, other meeting venues
Media involved, target audience, time, no. of persons, physical work
Advertising, Publicity, Wordof -- mouth promotion , Public Relation Advertising, Publicity, Wordof – mouth promotion , Public Relation
Photographs, brochures, printouts, logo, trademarks, brand names Staff, cheque book, currency receipt, application form, counters, ATM's, credit cards, Vans, generator, lights, studios, theaters, tickets, hoarding, crowds, copyrights, Raw material, energy efficiency, waste pollution, packaging, lifespan, reusability , recyclables
Editors, copywriter, creative thinkers, artists, media personnel Staff, agent , auditors, board of directors, trade union, Reserve Bank of India
Layout, copywriting , typography, photo setting Canvassing, application, verification, sanctioning, delivering, documentation,
14
Branches, branch and offsite ATM's, online banking
Interest, commission, dividend, shares, bonds, non– performing,
15
Service Entertainment ( Film Marketing)
Studios, movie theaters, films cities, dubbing theaters, labs, recording theaters, Natural environment
Salary, wages, signing amount, location, rental, shooting period, costumes, special effects
16
Service Green Marketing
Environment friendly raw materials, cleaner process and technology, compiling with new green law
Advertising, Publicity, Wordof -- mouth promotion , Public Relation Telemarketing , Broadcasting Advertising, publicity, word – of – mouth promotion, public relation, broadcasting
Art director, artistic, audiographers, designer, choreographers, suppliers, technicians
Environmentalist
Editing, Directing, choreographer, stunts, music, production, acting financing, casting scripting, dubbing, mixing,
Activities, scientists, conservation list educationalist
Preserving, educating, documentation, canvassing, researching
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Here are the TYBMS Sem 5 subject - Service Sector management notes
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Ch-1 Introduction to Services Marketing Define Services A service is an act or performance offered by one party to another. They are economic activities that create value and provide benefits for customers at specific times and places as a result of bringing desired change. According to Sir William B "Service refers to social efforts which includes the Govt. to fight five giant evils – wants, disease, ignorance, squalor and illness in the society". Characteristics of services Service is an act or performance offered by one party to another. They are economic activities that create value and provide benefits for customers at specific times and places as a result of bringing about a desired change in or on behalf of the recipient of the service. The term service is not limited to personal services like medical services, beauty parlors, legal services, etc. According to the marketing experts and management thinkers the concept of services is a wider one. The term services are defined in a number of ways but not a single one is universally accepted. The distinct characteristics of services are mentioned below. 1. Intangibility: Services are intangible we cannot touch them are not physical objects. According to Carman and Uhl, a consumer feels that he has the right and opportunity to see, touch, hear, smell or taste the goods before they buy them. This is not applicable to services. The buyer does not have any opportunity to touch smell, and taste the services. While selling or promoting a service one has to concentrate on the satisfaction and benefit a consumer can derive having spent on these services. For e.g. An airline sells a flight ticket from A destination to B destination. Here it is the matter' of consumer's perception of services than smelling it or tasting it. 2. Perishability : Services too, are perishable like labor, Service has a high degree of perish ability. Here the element of time assumes a significant position. If we do not use it today, it labor if ever. If labor stops working, it is a complete waste. It cannot be stored. Utilized or unutilized services are an economic waste. An unoccupied building, an unemployed person, credit unutilized, etc. are economic waste. Services have a high level of perish ability. 3. Inseparability: Services are generally created or supplied simultaneously. They are inseparable. For an e.g., the entertainment industry, health experts and other professionals create and offer their service at the same given time. Services and their providers are associated closely and thus, not separable. Donald Cowell
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states 'Goods are produced, sold and then consumed whereas the services are sold and then produced and consumed'. Therefore inseparability is an important characteristic of services which proves challenging to service management industry. 4. Heterogeneity: This character of services makes it difficult to set a standard for any service. The quality of services cannot be standardized. The price paid for a service may either be too high or too low as is seen in the case of the entertainment industry and sports. The same type of services cannot be sold to all the consumers even if they pay the same price. Consumers rate these services in different ways. This is due to the difference in perception of individuals at the level of providers and users. Heterogeneity makes it difficult to establish standards for the output of service firm. 5. Ownership: In the sale of goods, after the completion of process, the goods are transferred in the name of the buyer and he becomes the owner of the goods. But in the case of services, we do not find this. The users have only an access to services. They cannot own the service. For e.g. a consumer can use personal care services or medical services or can use a hotel room or swimming pool, however the ownership remains with the providers. According to Philip Kotler, "A service is an activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. "From this it is clear that the ownership is not affected in the process of selling the services. 6. Simultaneity: Services cannot move through channels of distribution and cannot be delivered to the potential customers and user. Thus, either users are brought to the services or providers go to the user. It is right to say that services have limited geographical area. According to Carman, "Producers of services generally have a small size area of operations than do the producers of items. largely because the producer must to get the services or vice- versa." When the producers approach the buyer time is taken away from the production of services and the cost of those services is increased. On the other hand it cost time and money for the buyers to come to producers directly. Here the economics of time and travel provide incentives to locate more service centers closer, to prospective customer, resulting in emergence of smaller service centers for e.g. aeroplane cannot be brought to customer, etc. 7. Quality Measurement: A service sector requires another tool for measurement. We can measure it in terms of service level. It is very difficult to rate or quantify
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total purchase. E.g. we can quantify the food served in a hotel but the way waiter serves the customer or the behaviour of the staff cannot be ignored while rating the total process. Hence we can determine the level of satisfaction at which users are satisfied. Thus the firm sells good atmosphere convenience of customers, consistent quality of services, etc. 8. Nature of demand- Generally, the services are fluctuating in nature. During the peak tourist seasons there is an abnormal increase in the demand of services. Therefore, while identifying the salient features of services one cannot ignore the nature of demand. E.g. tourists go to hill stations during summer season wherein public transport utilities are used substantially. This indicates that flexibility is the important feature of service. Give a brief classification of services. The classification scheme developed by Christopher Lovelock represents an attempt to address one of the following aspects. 1. Nature of the Service Act: The service act can be considered in two-ways: – Who or what is the direct recipient of the service and – The tangible nature of service. This creates four classification possibilities shown below: Direct Recipient of the Service People Things Services directed at people's bodies Services directed at goods and Health care other physical possessions: Passenger transportation Freight transportation Beauty saloons Industrial equipment repair and Exercise clinics maintenance. Restaurants Laundry and dry cleaning Haircutting Landscaping/lawn care Veterinary care Services directed at people's mind Services directed at intangible Education assets: Broadcasting Banking Information services Legal Services Theatres Accounting Museums Securities Insurance Understanding the Nature of the Service Act
Nature of the Service Act
Tangible actions
Intangible actions
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2. Type of Relationship that the service organization has with its customers: In this the prime factors which need consideration – Whether or not the customer has some type, of formal relationship with the provider of service and – Whether the service itself is provided continuously or in discrete transactions. These considerations lend themselves to the matrix shown in the figure shown below: Type of Relationship between Service Organization and its customers Nature of Service Delivery Continuous delivery service Membership relationship of Insurance Telephone subscription College enrollment Banking Trade Associations Long-distance phone calls Theatre series subscription Commuter ticket or pass No formal relationship Radio station Police protection Lighthouse Public highway Car rental Mail service Toll highway Pay phone Movie theater Public transportation Restaurant
Discrete transaction
There are advantages for the service provider to have customers as 'members' whether done in a contractual sense or just by mutual agreement. By knowing personal details about the customer, it becomes easy to contact them through direct marketing and tailor special offers around those particular needs. 3. Scope for customization and judgment in service delivery: Services are created as they are consumed. There is far more scope for tailoring the service to meet the needs of the individual customer because the customer is often actually involved in the production process. As shown in the figure below customization can proceed along at least two dimensions: – The extent to which the characteristics of the service and delivery system tend themselves to customization. – How much judgment customer contact personnel are able to exercise in defining the nature of services received by individual customers. Extent to which Service Characteristics are Customized
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5 High
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High
Low
Professional services Surgery Taxi services Beautician Plumber Education (tutorials) Cournet restaurant Telephone service Hotel services Retail banking Family restaurant
Education (large. classes) Preventive health programs College food service
Public transportation Routine appliance repair Movie theater Spectator sports Fast-food restaurant
4. Nature of Demand and supply for the Service: Some service industries face steady demand for their services whereas others encounter significant fluctuations: The time perish ability of service capacity creates a challenge for the service manager. This is because services cannot be produced and stored as inventory for future sale. But the extent of demand and supply imbalances varies across service industries as shown in the figure below: Extent to which Supply is Constrained Wide Narrow Insurance Legal services Banking Laundry and dry cleaning Services similar to those above but with insufficient capacity for their base level of business
Electricity Peak demand can usually be Natural gas met without a major delay Telephone Hospital maternity unit Policy and fire emergencies Accounting and tax preparation
Peak demand exceeds capacity
regularly Passenger transportation Hotels and motels Restaurants Theaters What is the Nature of Demand for the Service Relative to Supply? The service managers may face serious problems while coping up with the demand fluctuations. However, with technological development several service companies are
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using computers to help in delivery scheduling to bring about a balance between demand and supply of services. 5. Method of Service Delivery: The method by which the service is delivered to customers could be yet another area where a change of marketing strategy could pay dividends. The factors to consider are shown in the figure below: Availability of Service Outlets Nature of Interaction between Customer Single site Organization and Service Customer goes to service organization Theater Barbershop Service organization comes to customer Lawn care service Pest control service Taxi Credit card company Customer and service organization Local TV station transact at arm's length (mail or electronic communication) Method of Service Delivery
Multiple site Bus service Fast-food chain Mail delivery Emergency repairs Broadcast network Telephone company
Services with multiple sites have significant management implications for ensuring consistency and quality in offering of services. Service§, delivery is of great important to the customers overall perception of quality services. Distinguish between Goofs and services GOODS (1) Tangible (2) Can be stored (3) Homogeneous (4) Transfer of ownership (5) Production & distribution are separated from consumption (6) Core value produced in factory (7) Customer do not participate in the production process (8) A Thing SERVICE (1) Intangible (2) Cannot be stored (3) Heterogeneous (4) No transfer of ownership (5) Production, distribution & consumption are simultaneous process. (6) Core value produced in buyer seller interaction. (7) Customer participate in the production process (8) An activity
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Explain growth of service sector? Services comprise a set of economic activities like transportation, trade, tourism, communications, banking and insurance, real estate, public administration, defence and so on. According to an Adrian - Payne four factors are responsible for growth in the service sector. They are: demographic, social, economic and political. 1. Demographic changes: The life expectancy has raised which in turn, is producing an expanding retired population. This sector has created a new demand for travel and leisure, as well as for healthcare, nursing and life insurance. The need for infrastructural support services has increased due to the development of new towns and regions. 2. Social changes: The number of women's in work force has increased, and this has led to traditional domestic functions being performed outside the home. The rise in number of double income household has created a greater demand for consumer services, including retailing, real estate and personal financial services. With the growing income, the standard of life has improved. Smaller families with double income spend ore on entertainment, travel and hospitality services. The aspiration levels have increased due to communication and travel. As a result, both children and adults are making new demands on learning establishments, so that they can develop the skills needed in order to compete. In the complex and fast changing environment. This has opened avenues for knowledge and information based services. 3. Economic changes: The demand for communication, travel and information services has increased due to globalisation. This has been filled by the rapid changes brought about by new information technology. Increased specialization within the economy has led to reliance on specialist service providers For e.g. advertising and marketing research have now become specialist functions providing support to all the sectors of the economy. 4. Political and legal chap : The size of the government has grown creating a huge infrastructure of service departments. With the growth in international trade, the demand on legal and other professional services have increased, cutting across national boundaries. Manufacturing firms handing over repair and maintenance, data processing, where rousing and logistics services to specialised sources, which they earlier used to perform in- house. The liberalization has also created a new avenue for growth. The slow growth of agriculture and industry and the presence of
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widespread unemployment have driven people to seek work in the informal services. This is particularly true in the urban areas, where petty pavement retail trade, transport, another is repair and service establishments have proliferated. Since the overall growth of the economy is now dependent on the service sector, the pace of productivity growth in services becomes critically important. Therefore, the government is taking an initiative in the sector. REASONS FOR THE GROWTH OF SERVICES IN INDIA: 1. Economic affluence: One, of the key factors for the growth of demand for services is the economic affluence. According to the NCAER study the size of the middle income consumer is raising fast and the percentage of the very poor household's declining. The rural households in the upper income category is growing at a much faster pace than the urban households in the corresponding categories. The Economic liberalisation Process has had a positive impact on the Indian households. Their income as well as their expenditure has been pushed, creating a demand for many goods and services. 2. Changing Role of Women: Traditionally the Indian woman was confined to household activities. But with the changing time there has been a change in the traditional way of thinking in the society. Women are now allowed to work. They are employed in defence services, police services, postal services, software services, health services, hospital services, entertainment industries, Business Process Outsourcing and so on. The percentage of working women has been growing rapidly. The changing role of women has created a market for a number of product and services. Earning women prefer to hire services in order to minimise the innumerable roles that they are required to perform. The demand by woman is forcing service organisations to be more innovative in their approach. 3. Cultural Changes: Change is the underlying philosophy of culture place of change in Indian culture is not uniform. However, during the last century the factors of change are prominent. The emergence of the nuclear family system in place of the traditional joint family system creates a demand for a host of services like education, health care, entertainment, telecommunication, transport, tourism and so on. There has' been a marked change in the thought Processes relating to investment, leisure time perception and so on which has created a huge demand for services. 4. I.T. Revolution: For the last 15 years India'6aste,en occupying a vital position in the area of Information Technology. IT became one of the key service businesses of the country. India has the largest software skilled population in the world. The
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domestic market as well as the international market has grown substantially. Realising the potential for this area many state governments have made IT as their most, prioritized segment states such as Karnntnka, Andhra Pradesh, Madhya Pradesh Maharashtra and Delhi have already achieved substantial progress in Information Technology the In Ile years to come 'Lille IT enabled se Aces will have a bright future. The growth. of' population, industrialisation and indiscriminate consumptions have affected the, natural resources, environment and the ecological balance. Due to this there is an imbalance of the ecology various service organisations have been promoted in order to take up social marketing. Thousands of crores of rupees are being spent on safeguarding the rare animals and birds, water pollution, conservation of oil & energy and research to develop new technologies that can promote effective use of natural resources and safeguard the environment. 5. Development of Markets: During the last few decades the wholesaler and the retailer population has grown in the country. Urban India has become a cluster of wholesaling and retailing business. In the Semi - urban areas, retailing has spread to the nooks and corners of the streets and in the rural areas retail business is significantly present. A new breed of organisations, offering marketing services has come up. The government also offers marketing services to the small-scale agricultural farmers, artisans and other traditional business sectors such 'as promotion of regulated markets, export promotion councils, development boards etc. 6. Market orientation: The changing competitive situation and demand supply positions has forced the manufacturing organisation to shift their philosophy from production orientation to market orientation. Market is a service function that has been added in the organisation. The pressures in the market has further forced the manufacturing organisations to have marketing research, accounting, auditing, financial management, human resource management and marketing research divisions - all of which are services functions. 7. Health-Care Consciousness: In India, the healthcare market has grown substantially. The increased life expectancy is the result of the consciousness of the people regarding the health issues. The growth of fitness clubs, diagnostic centres, medical counselling, health-related information sites are the reflections of the growing demands for health care services. The government as well as the social organisations have taken up the mass campaigns in order to create awareness among the illiterate persons and the rural population on health service. Hence, the growth of health related services.
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8. Economic liberalisation: The economic liberalisation of the 1991 has brought many changes in the Indian scenario. With the Disinvestment and the Privatisation policies the state owned monopolies in many service areas came to an end Multinationals were permitted to enter the Indian market. Liberal lending policies and lower interest rates motivated many people to become self-employed. Different sectors like Banking, Insurance, Power projects, Telecommunication, Hospitality sector, Health Services, Entertainment, Air transport, and Courier services witnessed intense competition, due to the entry of multinationals. The flow of time-tested service technology from various parts of the world changed the attitude of the Indian consumer towards sources. 9. Rampant migration: One of the important reasons for the growth of services in India is the rampant migration of rural to semi-urban and urban areas. Migration to urban areas for the want of jobs and livelihood has resulted in the expansion of cities and townships due to which businesses like real estates, rentals, transportation and infrastructure services are rapidly expanding. 10. Export potential: India is considered to be a Potential source for services. There are a number of services that India offers to various parts of the world like banking, insurance, transportation co data services, accounting services, construction labour, designing, entertainment, education, health services, software services and tourism. Tourism and software services are among the major foreign exchange earners of the country and that the growth rate is also very high as compared to the other sectors. 11. Service tax: The growth in the service sector attracted the attention of the government as a tax generating source. Over the years, the number of services brought under service tax has increased- Service tax is levied on hotels and restaurants, transport, storage and communications, financial services, real states, business services and social and personal services. Explain the growing importance of services or Service constitute about 54% of G.D / List four areas/trends which have led to this phenomenal growth. From the following points we can find out the growing importance of services: i. There has been an increase in demand for the services of professionally qualified technicians with the establishment of technical institutes. ii. Communication services like entertainment, education and the right to information by the public is more important. iii. Due to the increasing standards in education there is an increasing demand for educational services. Primary, secondary, higher secondary schools, junior degree colleges are the institutes which are in great demand. As the number of students
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iv. v. vi. vii.
viii.
ix. x.
xi. xii.
goes up the demand for private classes, tuitions, etc. also increases. Banking services have become necessary to meet financial requirements of the public and the national industrial sector. Personal care services are essential to develop potentiality of an individual for a perfect personality and positive image. Electricity services are required for the benefit of society, industry and so on. With the increasing amount of trade and business, done by road there has been a demand for transport services which benefits various automobile manufacturers. Large section of population prefers having their own vehicles, proving a good business proposition for automatic industry. The tourism industry has geared itself to make the tourists enjoy the holiday seasons in the places of their choice and take them away from monotonous existence of cities. Adequate hospital services are essential for the well being of the society. Hospitality services work on the strategies to satisfy the business class through their service in terms of comfort and satisfaction. The above activities have left the management scientists, professionals and socio-economic thinkers to analyze and understand that managing services need attention, stay in business. As the natural resources are depleting and need for conservation is increasing we see the coming of service providers like pollution control agencies, car pools, etc. The development in information, technology has given rise to services like pager service PCOs, world wide, Professional requirements need a change when technology develops and evolves; This necessitates proficiency in the management level by giving a boost to abilities.
MARKETING CHALLENGES OF SERVICES: Managing, growing, and profiting with both product and service businesses are challenging tasks. But the challenges are different from one to the other. Listed below are some of the most common and difficult challenges of growing and .managing consulting, professional, or technology service businesses that don't necessary apply to product businesses. 1. Clients can't see or touch services before they purchase them: This makes services difficult to conceptualize and evaluate from the client perspective, creating increased uncertainty and perception of risk. From the firm's perspective, service intangibility can make services difficult to promote, control quality, and set price. 2. Services are often produced and consumed simultaneously: This creates special challenges in service quality management that product companies do not even consider. Products are tested before they go out the door. If a product has quality problems while in production the company can fix them and customers are none
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3.
4.
5.
6.
7.
8.
9.
the wiser. Service production happens with the customer present, creating a very different and challenging dynamic. Trust is necessary: Some level of trust in the service organization and its people must be established before clients will engage services. This is as important, sometimes more important, than the service offerings and their value proposition. Competition is often not who you think: Competition for product companies are other product companies. Competition for service companies are often the clients themselves: Sure, sometimes you find yourself in a competitive shootout (some firms more than others), but often the client is asking 'should we engage this service; at all' and 'if so, should we just do it in-house'. Brand extends beyond marketing: Brand in service businesses is about who you are as much as what you say about yourself. And internal brand management and communications can be equally as vital to marketing success as are external communication. Proactive lead generation is difficult: Many service companies have tried, and failed, at using lead generation tactics that work wonders for product companies. Implemented correctly, traditional product techniques, such as direct marketing and selling, can work for services, but the special dynamics of how clients buy services must be carefully woven into your strategy. Service deliverers often do the selling : Many product companies have dedicated sales forces. For services, the selling is often split between sales, marketing, professional, and management staff. Marketing and sales lose momentum: Most product companies have dedicated marketers and sellers. They market and sell continuously, regardless of the revenue levels they generate. In many services companies the marketers and sellers also must manage and deliver. This can often lead to the Services Revenue Rollercoaster-wide swings between revenue and work overflow, and revenue and work drought. Passion is necessary yet elusive: The more passion, spirit, hustle, and desire your staff brings to the organization every day, the more revenue and success you will have. The correlation between staff passion and financial success is direct and measurable
Services Marketing Environment Features of Business Environment 1. Business environment is the sum total of all factors external to the business firm and that greatly influences their functioning. 2. It covers factors and forces like customers, competitors, suppliers, government, and the social, cultural, political, technological and legal conditions. 3. The business environment is dynamic in nature that means, it keeps on changing. 4. The changes in business environment are unpredictable. It is very difficult to
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predict the exact nature of future happenings and the changes in economic and social environment. 5. Business Environment differs from place to place, region to region and country to country. Political conditions in India differ from those in Pakistan. Taste and values cherished by people in India and China vary considerably. Importance of Business Environment There is a close and continuous interaction between the business and its environment. This interaction helps in strengthening the business firm and using its resources more effectively. As stated above, the business environment is multifaceted, complex, and dynamic in nature and has a far-reaching impact on the survival and growth of the business. To be more specific, proper understanding of the social, political, legal and economic environment helps the business in the following ways: 1. Determining Opportunities and Threats: The interaction between the business and its environment would identify opportunities for and threats to the business. It helps the business enterprises for meeting the challenges successfully. 2. Giving Direction for Growth: The interaction with the environment leads to opening up new frontiers of growth for the business firms. It enables the business, to identify the areas for growth and expansion of their activities. 3. Continuous Learning: Environmental analysis makes the task of managers easier in dealing with business challenges. The managers are motivated to continuously update their knowledge, understanding and skills to meet-the predicted changes in realm of business. 4. Image Building: Environmental understanding helps the business organisations in improving their image by showing their sensitivity to the environment within which they are working. For example, in view of the shortage of power, many companies have set up Captive Power Plants (CPP) in their factories to meet their own requirement of power. 5. Meeting Competition: It help the firms to analyse the competitors' strategies and formulate their own strategies accordingly. 6. Identifying Firm's Strength and Weakness : Business and Weakness: Business environment helps to identify the individual strength weaknesses in view of the technological and global developments.
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Business environment is broadly divided into two types: i. Internal Environment and ii. External environment i. Internal Environment : It relates to those factors which are internal to the business and are controllable. The internal environment exercises a significant influence on the attitudes, behaviour and performance of people. Internal environment is influenced by the following factors: 1. Goals and objectives of the organisation: The goals and the objectives set up the parameters within which the organisation decisions can be taken. They greatly influence an ability of an organisation to deal with its external environment. Financial and nonfinancial targets are determined by the goals. 2. Corporate image: Every organisation enjoys an image among the employees. Some refer to their employers as progressive whereas others refer to them as Conservative. To make the business acceptable to the society, every business must try to improve its image. Objectives based on enlightened lines certainly help to improve corporate image. 3. Research and development facilities: Research and development is the strength of the business. it helps the business to go ahead of the competitors by introducing new products and improving the existing ones. 4. Efficient manpower: A successful business is known by its efficient manpower and not by the buildings and machines. Manpower makes or breaks a business. Due care should be taken to recruit result oriented employees. 5. Business policies: The knowledge of internal environment and how it affects the functioning of the organisation is important to understand the use of business policies. Broadly, policies cover four functional areas viz. production, marketing, finance and HRD. Business policies provide the broad guidelines within which an organisation has to work. Thus policies should be comprehensive. 6. Strong financial base: Business organisations must try to attain strong financial base. This helps the business to fight uncertainty in the market. It can depend on internal financing when an external borrowing becomes costly. 7. Cordial relations: Both the employers & employees should try to maintain cordial relations at the workplace. It is important to keep clear line of communication. Differences and conflicts can be settled across the table. Work environment should attract employees to their work. 8. Value based management : Traditional measures for performance measurement like a return on sales, a return investment or a return on net assets have become outdated. New measures like shareholders, views, employee morale and the work ethics which improve the employee satisfaction are considered more important.
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Value system is internal to business and differs from enterprise to enterprise. ii. External Environment: External environment relates to the factors which are external to the business organisation. It is divided into Micro Environment and Macro Environment. MICRO ENVIRONMENT: The micro environment consists of all the factors in the company's immediate environment that affects the performance of the Company. These include the sup-pliers, marketing intermediaries, competitors, customers and the publics. The microenvironmental factors are more - intimately linked with the company than the macro factors. The micro- forces need not necessarily affect all the forms in a particular industry in the same way. Some of the micro factors may be particular to a firm. When competing firms in an industry have the same micro elements, the relative success of the firm depends inter alia, on their relative effectiveness in dealing with these elements. The following factors affect the micro environment: Corporate Resources: Corporate resources include employees, funds, materials, machinery and management. These resources are controllable. They can be used as per the guidelines provided by the business policies. Customers: The business exists only because of its customers. Monitoring the customers' sensitivity is therefore a prerequisite for the success of a business- It is important to consider the customers' likes, dislikes, needs, preferences, buying motives and expectations. A company may have different categories of customers like individuals, households, industries and other commercial establishments and government and other institutions. Higher customer patronage brings increased profit to the business. Suppliers: Supplier is an important force in the micro environment of the firm. Supplier, are those people who supply inputs like raw materials and components to the firm. The importance of reliable source of supply to the smooth functioning of the business cannot be overlooked. Uncertainty regarding the supply or the other supply constraints often compel companies to maintain high inventories leading to increased cost. It is always advisable to, negotiate with several suppliers and not allow a single supplier to enjoy monopoly power. The selection of suppliers is within the control of the management. Competitors: The role of competitors is beyond the control of the management. It is necessary to study
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the competitors' policy on product, price, promotion, etc. When relevant information is collected about the competitors, it helps to strengthen business and also face the competition more effectively. The business can profit by exploiting the weaknesses of the competitors Marketing intermediaries The marketing intermediaries, include middlemen such as agents and merchants who help the company find - customer or close sales with them. Marketing intermediaries are a vital link between the company a the final consumers. A wrong choice of the link, may cost the company heavily. Goods requiring demonstrations find the services of middlemen unavoidable. Society: Business has to serve the society. Society consists of general public, media, government, financial institutions and organize group like trade unions, shareholders' associations etc. Society, directly influences the decisions of business. MACRO ENVIRONMENT 1. Economic Environment The survival and success of each and every business enterprise depend fully on its economic environment. The main factors that affect the economic environment are: (a) Economic Conditions: The economic conditions of a nation refer to a set of economic factors that have great influence on business organisations and their operations. These include gross domestic product, per capita income, markets for goods and services, availability of capital, foreign exchange reserve, growth of foreign trade, strength of capital market etc. All these help in improving the pace of economic growth. (b) Economic Policies: All business activities and operations are directly influenced by the economic policies framed by the government from time to time. Some of the important economic policies are: (i) Industrial policy (ii) Fiscal policy (iii) Monetary policy (iv) Foreign investment policy (v) Export –Import policy (Exim policy) The government keeps on changing these policies from time to time in view of the developments taking place in the economic scenario, political expediency and the changing requirement. Every business firm has to function strictly within the policy framework and respond to the changes therein.
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Important Economic Policies i. Industrial policy: The Industrial policy of the government covers all those principles, policies, rules, regulations and procedures, which direct and control the industrial enterprises of the country and shape the pattern of industrial development. ii. Fiscal policy: It includes government policy in respect of public expenditure, taxation and debt. iii. Monetary policy: It includes all those activities and interventions that aim at smooth supply of credit to the business and a boost to trade and industry. iv. Foreign investment policy: This policy aims at regulating the inflow of foreign investment in various sectors for speeding up industrial development and take advantage of the modern technology. v. Export–Import policy (Exim policy) : It aims at increasing exports and bridge the gap between expert and import. Through this policy, the government announces various duties/levies. The focus now-a-days lies on removing barriers and controls and lowering the custom duties. 2. Social and culture Environment It refers to people's attitude to work and wealth; role of family, marriage, religion and education; ethical issues and social responsiveness of business. The social environment of business includes social factors like customs, traditions, values, beliefs, poverty, literacy, life expectancy rate etc. The social structure and the values that a society cherishes have a considerable influence on the functioning of business firms. For example, during festive seasons there is an increase in the demand for new clothes, sweets, fruits, flower, etc. Due to increase in literacy rate the consumers are becoming more conscious of the quality of the products. Due to change in family composition, more nuclear families with single child concepts have come up. This increases the demand for the different types of household goods. It may be noted that the consumption patterns, the dressing and living styles of people belonging to different social structures and culture vary significantly. 3. Political Environment This includes the political system, the government policies and attitude towards the business community and the unionism. All these aspects have a bearing on the strategies adopted by the business firms. The stability of the government also influences business and related activities to a great extent. It sends a signal of strength, confidence to various interest groups and investors. Further, ideology of the political party also influences the business organisation and its operations. You may be aware that Coca-Cola, a cold drink widely used even now, had to wind up operations in India in late seventies. Again the trade union activities also influence the operation of business enterprises. Most of the labour unions in India are affiliated to various political parties. Strikes, lockouts and
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labour disputes etc. also adversely affect the business operations. However, with the competitive business environment, trade unions are now showing great maturity and started contributing positively to the success of the business organisation and its operations through workers participation in management. 4. Legal Environment This refers to set of laws, regulations, which influence the business organisations and their operations. Every business organisation has to obey, and work within, the framework of the law. The important legislations that concern the business enterprises include : a. Companies Act, 1956 b. Foreign Exchange Management Act, 1999 c. The Factories Act, 1948 d. Industrial Disputes Act, 1972 e. Payment of Gratuity Act, 1972 f. Industries (Development and Regulation) Act, 1951 g. Prevention of Food Adulteration Act, 1954 h. Essential Commodities Act, 2002 i. The Standards of Weights and Measures Act, 1956 j. Monopolies and Restrictive Trade Practices Act, 1969 k. Trade Marks Act, 1999 l. Bureau of indian Standards Act, 1986 m. Consumer Protection Act, 1986 n. Environment Protection Act o. Competition Act, 2002 The Goods-service Continuum The goods and services continuum enables marketers to see the relative goods/services composition of total products. A product's position on the continuum, in turn, enables marketers to spot opportunities. At the pure goods end of the continuum, goods that have no related services are positioned. At the pure services end are services that are not associated with physical products. Products that are a combination of goods and services fall between the two ends. For example, goods such as furnaces, which require accompanying services such as delivery and installation, are situated toward the pure goods end. Products that involve the sale of both goods and services, such as auto repair, are near the center. And products that are primarily services but rely on physical equipment, such as taxis, are located toward the pure services end. A few observations of the Continuum model can be made: – The offerings of a firm range from pure goods to pure services. – Those that are mostly goods are tangible and are very easy to evaluate by the
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consumer (like fabrics, jewellery, a house etc.). A consumer finds it very difficult to evaluate those offers which are mostly services because of their intangibility (like legal and counselling advice, medical diagnosis etc). – The range of offers has different qualities in themselves and the customer looks for or seeks these qualities: Those that are mostly goods show search qualities. Customers know exactly what they want and look for those features in the offer. Thus, an apartment hunter would look for a 2bedroom-hall-kitchen property in Bandra admeasuring 900 square feet in car.pet area. Or, a lady might look for specific designs in a 23-carat bangle from a Tanishq outlet. Mr. Joseph looks for worsted, blue woollen suit material for himself etc. Thus a marketer can put the search quality features on prominent display and make it easier for customers to get details or access. If the customers do not find these features in their search they may become anxious and may not buy or they may go for rival products where there is easier access to information. Those offers that are mostly services evince credence qualities There are no tangible features for the customer to search for. He then looks for credo qualities in the offer Reputation of the offer becomes the decisive factor. He has very few other alternatives to compare. Thus, Mrs. Manjrekar would choose only that lawyer to fight her divorce and custody battle who has a reputation for winning such court cases. A patient would. choose his doctor or surgeon on the basis of his reputation. We tend to give our computers or for -repair on the basis of the reputation of the repairman. A marketer of such offers has to be doubly careful in highlighting the credibility of the service provider. An actor is never called again for a stage play if his histrionic talent is in question; a doctor or surgeons whose ethical reputation is in question right never have patients. Thus, in the product-service continuum', services can be classified in three ways, under the range or degree of tangibility - highly tangible to highly intangible. They are: 1. Highly tangible services: They have high degree of tangibility. This is mainly because the services are rendered over certain goods, e.g., car rentals. It is a service based entirely on cars. If a place had no cars, such a service would cease to exist. For the marketer, it is both a boon and a curse. As mentioned, car rentals exist only because cars exist. It's easy for the service marketer to be persuasive and "tangibles" the offer. He only has to include the car in his communication; the service concept could be easily comprehended by the consumer. In addition, if the car has a good brand image and is looking spick and, the car rental basks in the reflected glory. If the car rental mentions in its advertisements about the type of cars in its pool, the consumers perceive the quality of the company accordingly. Alternatively, if the car breaks down during a rental service, the consumer will have a poor impression and image of the car rental company. He would not reason that it was the
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car that broke down and failed and that the car rental company should really not be blamed. Examples of car rental companies in India are Dial-a-Cab, in Delhi, and -Wheels-RentA-Car (WRAC) of the Bhoruka group, who also own Transport Corporation of India, the giant fleet trucking enterprise. Other car rental companies are Hertz-Rent-A-Car and Avis in the United States. 2. Service linked to tangible goods: Here the service is linked to goods, either independently, or as part of the marketer's offer. If it is the latter, the service becomes a part of the total product concept. This takes place when Videocon, the home appliance company, includes repair as part of its marketing mix. Even if it is not included, home appliance repair is a service that is forever linked to goods. If there were no home appliances in the world, such services would be nonexistent. A whole range of services exists in the housing sector - especially postconstruction like repair and maintenance. 3. Highly intangible services: In this classification under the continuum model, service is highly intangible. The services cannot be touched, felt or seen, e.g., counselling, consultancy, psychotherapy, physiotherapy, a guest lecture, etc. Buying Behaviour of the Service Consumer Why does the customer buy? The customer mostly buys goods, services, people, places,-events, organizations, ideas, information and experiences. All these generally fall under goods 8'services. But the offers that they buy can be: High Involvement offers Low involvement offers/Impulse offers High involvement service products have the following characteristics 1. Complexity of features: If the servicer product has complex features, it will induce anxiety in consumers. They will take more time understand service product usage feature familiarization as well as internalization. Thus, a SLR (single lens reflex) camera preferred by professional photographers will induce higher involvement from the consumers than box cameras with only point-andshoot features. 2. High price: High pries of Service products will make consumers slow and cautious in their decision making. This is the reason why they will debate on the pros and cons of consumption d service transaction costs of a vacation, more than
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3. High perceived risks: A consumer perceives risk in consumption in two forms: bodily harm and financial loss. When Shalini goes for cosmetic surgery, she will perceive higher risk in the offer than for a routine facial. 4. Large differences in features: If the consumers perceive that across a service category there are large differences in feature, then they would be highly involved. And if the situation is as in the home appliance industry where consumers really don't perceive much difference between products then their involvement becomes low. 5. Large number of users: If there are a large number of users for a service offer, like a family package tour, then there is going to be more participation and involvement from all family members. This is unlike when only one person is a consumer-like Pooja deciding to take a computer course during her school vacation. 6. Enduring product: If the service offer has a long life span or has a longer lasting effect -like a time share purchase or selection of a school for child - then it will make the decision-maker highly involved. 7. Reflects self-concept of the buyer: consumers are very much aware of their selfimage-and either wants to maintain or change it. They do so by purchasing products and services hoping that by doing so it will reinforce their personality and self-image or help them acquire a new one. This aspect is so close to the wellbeing of consumers that they become highly involved with the purchase. Low involvement service products have the following features: 1. 2. 3. 4. 5. 6. Low Price Less difference in features Simple features in the service product Does not reflect a consumer's personality The products are of mostly daily needs Low brand loyalty
What are the stapes of the buying decision process? Most of the successful companies research the buying decision process involved in their category. They ask the consumer when they first became acquainted with the product category and brands, what are their brand beliefs, how involved t1fey are with the
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product, how and how satisfied they are after purchase. In a typical buying process the consumer passes through five stages: 1. Problem Recognition: The buying process begins when the buyer recognizes problem or need. The need can be triggered by internal or external stimuli. In the case, a person's normal needs are hunger, thirst sex that rises to the threshold level becomes a drive. In the latter case, a need is aroused by external stimulus. A person passes bakery sees fresh toasted bread that stimulates his hunger. Marketers need to, identify the circumstances that trigger a particular need. Through marketing research the marketers can identify the most frequent stimuli that spark an interest in a product category. They can then develop appropriate trigger consumer interest. 2. Information Search: An aroused consumer will be inclined to search for more information. The consumer information sources fall into three groups: a. Personal Sources: Family, friends, neighbors, acquaintances, etc. b. Commercial Sources: Advertising, sales persons, dealers, packaging, displays, etc. c. Public Sources: Mass media, consumer ratings organizations, etc. As a result of gathering information the consumer increases his awareness of availability of the service and its attributes. In purchasing services, the customer tends to rely on the personal sources the personal experience in using these services. 3. Evaluation of Alternatives: The consumer evaluates the alternative services that satisfy his needs with the available information. He evaluates the distinct features of the service provider, quality and price. In case of services, the available alternatives are relatively smaller than the goods, because brand choice in services is limited. The quality of service can only be experienced but it is difficult to compare with other service firms purchase information of the service cannot be obtained. In evaluating alternative for the purchase decision, the customers ranking in order importance the factors that contributes towards the purchase decision. For example, choosing a restaurant the customer considers factors such as food quality, menu, price, atmosphere and convenience. However, the importance attached to these factors may differ according to the purpose of visit to the restaurant. 4. Purchase Decision: After carrying out a thorough evaluation of the various alternatives, the customer chooses that service provider who will be able to satisfy his needs. The purchase of service is an experience which leads to satisfaction of
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customer needs. Production and consumption of service is a simultaneous activity. The service encounter involves interaction of the service provider and the customer. The success of the service largely depends on the service encounter. Hence, apart from motivating the staff to deliver the service, the service provider must also be aware of the moods and the emotions of the customer and try to influence those moods and emotions In ,a positive way. There are many factors that can be used in order to influence moods. the Ambience, Design of –Physical Setting, Limiting Waiting Time, Scheduling of Customers and Motivating the Staff who interact with the Customers. At times the presence of other customers during service delivery may influence the service experience of the customer for an example a restaurant, resort, clubs, airlines etc. 5. Post-Purchase Behaviour: Only after experiencing the service, the customer will be able to judge the quality of service in relation to his expectations and actual service received. The consumer will experience some level of satisfaction or dissatisfaction. In some like the legal services, the customer will find it difficult to judge the service rendered -even after receiving the service. The evaluation of the service received received gets further complicated by the role played by the customer in the "'d livery process. Sometimes customers attribute some of the dissatisfaction with the services to their own disability to specify their needs or failure to perform their part of the service, rather than completely blame the service provider. Stage in Cycle Bachelor Newel Married Characteristics Independent Young Early stage of career and earnings Two incomes. Relative independence, Present and future oriented Youngest child under 6 years. One /One and a half incomes, Limited independence. Future oriented Youngest child tinder 6 years, One and a half to two incomes. Dependent, Future oriented Youngest child at home but Relevance of Retailing Clothing, Car. Travel, Café Entertainment Furnishing Apartment, Travel, Clothing. Durables. Appeal to togetherness Goods and services geared to child. Family oriented items- Practicality of items and appeal to economy Savings, Home, Education. Children oriented items. Family vacations, Appeal to comfort and luxuries Education. Expensive
Full Nest I
Full Nest 2
Full Nest 3
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24 independent- High-income level. Independent Thoughts of Retirement
www.BMS.co.in durables for children. Replacement and improvement of parents durables. Appeal to comfort and luxuries. Retirement home, Travel. Entertainment, Luxuries. Appeal to self gratification Travel, Recreation, Health related items. Little interest in luxury. Appeal to comfort Immersion in jobs and friends. Travel entertainment Clothing. Health Travel. Entertainment Health related items. Appeal to economy and social activity
Empty Nest 1
Empty Nest 2
No children at home. Independent. Good income. Thoughts of retirement Retirement- Limited income. Present oriented
Lonely Nest-I/ Sole Survivor 1
Only one spouse alive. Good income. Employed, Present oriented Only one spouse alive. Limited income Retired.
Lonely Nest II / Sole Survivor 2
TYPES OF BUYING BEHAVIOUR: Assael distinguished four types of buying behaviour based on the degree of buyer involvement and the degree of differences among brands. 1. Complex Buying Behaviour: Complex buying behaviour involves a three-step process; first, the buyer develops beliefs about the product. Second, he or she develops attitudes about the product. Third, he or she makes a thoughtful choice. When the customer is involved in complex buying, they are aware of significantdifferences in brands. This is the case when the products are expensive, bought frequently risky and highly self expressive. In this case the customer does not know much about that category. For example, a person buying a personal computer may not know what attributes to look for. Many product features carry no meaning, unless the buyer has done some research. 2. Dissonance - Reducing Buyer Behaviour: Sometimes the consumer is highly involved in a purchase but sees little difference in brands. The purchase is expensive, infrequent, and risky; therefore the consumer is highly involved. In this case, the buyer will go around to learn what is available but will buy when he gets a good price. After the purchase, the consumer might experience dissonance that stems from noticing certain odd features or hearing favourable things about other brands. The consumer will be alert to information that supports his or her
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decision. In this case, the consumer first acted, then acquired new beliefs, then ended up with a set of attitudes. Marketing communications should supply beliefs and evaluations that help feel good about his or her brand choice. 3. Habitual Buying Behaviour: There are many Products which are bought under conditions of low involvement and the absence of significant brand differences. Take a simple example of salt. Consumers have little involvement in this product category. They go to the shop and reach for the brand. If they keep reaching for the same brand, it is out of habit, riot strong brand loyalty. It is-evident that consumers have low involvement with most low-cost, frequently Purchased Products. With these products, consumer behaviour does not pass through the 'normal sequence of belief, attitude and, behaviour. Consumers do not search extensively for information, evaluate characteristics and make decisions on which brand to buy. Instead they are passive recipients of information the television or print ads. The repetition of ads creates brand familiarity rather than brand conviction. After making the purchase, they may not even evaluate the choice because they are not highly involved with the product. For low involvement products, the buying, process begins with brand beliefs formed by passive learning & is followed by purchase behaviour which may be followed by evaluation. 4. Variety seeking Buying Behaviour : There has some buying situation that an characterized by low involvement but significant brand differences. In such cases the consumer often goes into a lot of brand switching. Take the example of chocolates. The consumers has some beliefs about chocolates chooses a brand of chocolates without much evaluation, & evaluates the -product during consumption. Next time, the consumer may reach for another brand out of a wish for a different taste. In this case the brand switching occurs for the sake of variety rather than dissatisfaction. SERVICE MARKETING TRIANGLE According to Philip Kotler, service marketing requires both external marketing and internal as well as interactive marketing. The three types of marketing in service industries are shown in the following figure. The right side of the triangle shows the external marketing (setting promises). It is the normal activity of the firm to develop price, promote and distribute the service offering to the customers. Any thing that is communicated to the customer before service delivery is seen as a part of external marketing. The left side of the triangle shows the internal marketing (enabling the promise). The internal marketing activities of the firm are to train and motivate its employees to work as a team in order to deliver the service. It emphasis on the critical role that enables
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the employees to keep the promises made to the customer. The bottom part of the triangle describes the employee's skill in handling customer contact. It is the real time marketing of "moments of truth" where the employees directly interact with the customer in order to fulfill the promise.
Types of Marketing in Service Firms All the three sides mentioned in the triangle are critical to successful services marketing. The service triangle also has a number of fundamental strategic implications: 1. The key factor is customer focus and, not functions. Customer satisfaction should be the function of the entire organisation. 2. The internal environment is reflected in the external culture. It is directly linked to how the staff serves the customer. 3. One who delivers the service must not only have the skill and knowledge but also the authority to serve the customer to his satisfaction. 4. The organizational values, in relation to the service culture need to be simple, clear and shared by all 5. During interaction the customers infer the quality. Therefore, it becomes necessary to develop good delivery associated activities. External Marketing: The external marketing efforts are the traditional functions of marketing of the
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customers and make promises to the customers as to what is to be delivered. Anything conveyed to the customer in any form before the delivery of service can be viewed as a part of external marketing function. The first step towards external marketing is to make the firm understand what makes a customers' want a particular type of service and what are their expectations of a certain type of service, since external marketing builds customers' expectations and beliefs about service delivery. The external marketing then gives promises that correspond with the personal needs of the target group. It becomes necessary to understand the needs of the customer for the service provider. This leads to market segmentation on a suitable basis i.e. demographic, psychographic and wage pattern. Once the market segment is identified, the next task is to find ways to compete in that segment. This can be achieved by using the right marketing mix after taking into consideration the external factors. The services planning, pricing, promotion and delivery of the service tend to differ in respect of a customer group. The promises which the service provider makes must highlight the reasons why the customer should choose his particular service from the several service providers. The promise made should also match with the customers' expectations of the service. The company conveys promises through promotion campaign, corporate image and word of mouth communication. It also conveys through the past experience which the customer has had with the firm. According to Zeithamal and Bitner, the customer's expectation of the services can be derived from the following sources: i) Past Experience. ii) Corporate image. iii) Word of mouth communication. iv) Explicit service promises which are personal and non-personal statements about the service made to the customer by service firms through contracts, personal selling, advertisement, etc. v) Implicit service promises which are related over other than explicit promise that leads to inference about what service should and will be like. vi) Care should be taken to maintain credibility while setting the promise because a very high expectation may lead to a highly dissatisfied customer.
Internal Marketing: According to Wood Ruff, treating with equal importance, the needs of the internal market (employees) and external market I customers) through proactive programmes. If the service system as well as the service staff do not support the frontline employees, it
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will not be possible to meet the promises made b the organization. Thus the employees are the internal customers who in their job depend on others in the organization for providing goods and services to external customers. Internal marketing suggests that the firm should employ market research, market segmentation and traditional marketing activities like advertising and publicity in order to attract employees. Role of Internal Marketing: i) The entire organisation is focused on customer approach as the customer service becomes a significant element. ii) Internal marketing helps the service firm to compete aggressively giving the organisation a competitive advantage. iii) It builds corporate image by creating awareness. iv) It highlights the role of communication in the organisation which is very important for employee motivation and excellence, v) An open management style exists where all the employees co-operate and there is commitment, to the highest level. Components of Internal Marketing: There are no specific or special components of the internal marketing programme. Any activity or function that has an impact on the service mindedness and customer conscious employees can be a part of internal marketing programme. However, the following components can be included as a part of internal marketing programme: i) Human Resource activities. ii) Continuous interaction with the management. iii) Training. iv) Internal mass communication and information support. What is "Moment of Truth"? "Moment of Truth" of buyer and seller interaction is the core of Gronroos model. The actual delivery of the promise takes place here. The employees of the firm directly interact with the customers. The concept of moment of truth means that this is the time and places the service provider has the opportunity to demonstrate to the customer the quality of its services. Interactive marketing takes place outside the marketing mix. It takes place at the very moment the buyer and seller interacts. These interactions are also caIIed1§qrvice encounters. It is the skill and motivational tools employed by service personnel in, handling the customer contacts. In this process of interaction the customer judges the quality 8f service delivered by the service provider. History:
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Richard Norman first invented the conceptual framework of "MOMENT OF TRUTH". Subsequently Scandinavian Airlines adopted it as a part, of their everyday language, particularly after Jan Carizon of SAS published book titled "Moment of Truth". Since then moment of truth has become a widely used concept, a household word within the service industry everywhere. The Concept: Most services are the result of, social acts, which take place in direct contact between the customer and service provider. Taking the metaphor from bull fighting, the customer's perceived quality is realised at the moment of truth, where the service provider and the customer confront one another in the arena. At the moment they are very much on their own. What happens then, cannot be directly influenced by the firm. In the period of three years Jan Carloz the president of SAS transformed the company from a major loser to the best Airline of the year. In this book he explains" Last year, each one of our 10 million customers came in contact with approximately 5 SAS employees, and this contact lasted for about 15 seconds each time. Thus SAS is created in the minds of the customer 50 million times in a year, 15 seconds at a time. These 50 millions 'moments of truth' are the moments when we prove to our customers that SAS is their best alternative." Gronroos states that the customer's perception of service quality can be judged on two aspects the technical and functional quality. The judgment on the basis of technical and functional qualities varies depending on the type of service encounter. The service can be classified into three categories: 1) Remote encounter: The tangible evidence of the services becomes a primary basis for judging quality as there is no human contact in service delivery. E.g. ATM vending machines. 2) Phone encounter: Here the service quality can be judged on the basis of how long they had to wait for the phone to be attended, the tone of voice and efficiency in handling the issues. 3) Face- to- face encounter: When there is direct contact with the employee and customer this type of encounter occurs. In this situation determining the quality is highly complex as it will be influenced by the behaviour of both the customer and employee. In order to assess the quality services tangible cues like physical setting, equipment, appearance of personnel and intangible cues like attitude and behaviour of personnel will be considered. Thus in the interactive marketing, service encounter or the moment of truth is where the value to the customer is created in the service delivery process. At this stage all the efforts of internal and external marketing will be reflected. On the basis of thousand stories, four common themes - recovery .(after failure), adaptability,
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spontaneity, & coping - have been identified as the sources of customer satisfaction/ dissatisfaction in memorable service encounter. 1. Recover: (Employees response to service delivery failure) the 1 st theme includes all themes in which there has been a failure of services & the employee is required to respond in some way to customer. The failure may be hotel room is not available, flight may delay or a critical error in internal documents. In these cases employees have to response which is remembered by the customer favorably. 2. Adaptabilty: (Employee response to customer needs & requests) The second theme underlying in satisfaction/dissatisfaction is how adaptable the service delivery system is when the customer has special needs & requests that place demands on the process. In such cases, customer judge, service encounters quality in the terms of flexibility of the employee & the system. Customers will be pleased if employees go out of their way to accommodate their special needs & requests. On the other hand the employee are unwilling to accommodate, customers are angered & frustrated. 3. Spontaneity: (Unpromptness & unsolicited employees actions) Even when there is no service failure & is special request or need, customer can still service encounters as being highly satisfied or highly dissatisfied Employee spontaneity in delivering memorable good or poor service is the third theme. Highly satisfying incidents represent pleasant surprises for the customer (special attention, being treated like royal etc.) whereas highly dissatisfying incidents represent negative & unacceptable employee behaviour (like rudeness, discrimination, ignoring the customer). 4. Coping: (Employees response to problem customer) There are some customers who will be uncooperative to the service provider & would not respect the rules & regulations or would not care for other customers' inconvenience. Such type of customers causes their own dissatisfaction & discomfort to other customers. Thus in the interactive marketing, service encounter or the moment of truth is where the value to the customer is created in the service delivery process. At this stage all the efforts of internal and external marketing will be reflected.
Ch- 2 Key Elements of Services Marketing Introduction: The marketing mix concept was popularized by an American professor Jerome McCarthy
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in terms of 4Ps -Product, Price, Promotion and Place. The major part of marketing after considering the environmental variables is assembling and managing the marketing variables. The most important task is to blend the 4 elements in different combination in order to have a greater marketing impact and also to be cost effective. Some modifications in the 4Ps are required when applied to services due to some special features of services. Elements of Service Marketing Mix: (7ps of Service Marketing-Mix) The service marketing mix consists of the following variables:
PRODUCT In the words of Philip Kotler, "a product is anything that can be offered to market for attention, acquisition use or consumption that satisfy a want or need. It includes physical objects (TV), service (banking), person (political person), place (holiday resort), organization (Red Cross) and idea (aid awareness). " Characteristics of Products (Tangible To Intangible)
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Conceptualization of the Service Concept: Conceptualization of the services product was described by Donald Cowell in four steps. They are: 1) Customer Benefit Concept: The customer is the starting point in manufacturing or developing goods or services. The Customer purchases the services because-it offers him certain benefits. In buying the customers are not buying the goods or services but instead they are buying certain benefits and values. It must be noted that when a customer's buys medicine he buys hope, when he goes on a tour he, buys pleasure not tour and so on. It becomes necessary for the service provider to spell the customers-benefits concept first. The customers look for the benefits rather than the product's features. 2) Service Concept: The service concept takes the customer-benefit concept and translates them in order determine the aim and intention of the organization. The service concept is based on the idea that the actual services offered could be divided into a number of levels that may relate to the' customer's need, his satisfaction and benefits. Hence, while planning the market offer, the service provider should make an analysis of various levels of product. These are: 3) Core service benefit level : This level consist of the basic service product i.e. the benefit the customer is really buying. The core products are essentially those
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products that define what kind of business they are in. For an example, the hotel industry or in the hospital business, the core products are indispensable to any business. The core service level provides the platform for the development of other peripheral levels. 4) The expected service level: This level reflects the standard required or expected by the customer to satisfy their needs and wants. It is the minimum set of expectations a customer has about a product or service which the marketer must strive to satisfy. If the service offer fails at this level it will mean immediate dissatisfaction. It is the minimum set of expectation that a customer has about the product or services which the marketer must strive to satisfy. If the service offer fails at this level if will means immediate dissatisfaction. 5) The augmented level: It includes the fundamental services and benefits that distinguish the company's offer from the competitor's offer. This product is basically a formal product with some ancillary benefits or extra features attached to it. These value additions are made in order to make the service more attractive to customers. The service provider should make continuous efforts to search for further features and benefits in order to add to their offer According to Helen Woodruff, "augmented services is the way in lavish the service provider fine tunes the marketing mix to differentiate their services and naked it stand out from the competitors," 6) Potential level: The potential product focuses on the future. When a product exceeds the augmented level it comes as a pleasant surprise to their customer and he is delighted leading to his loyalty towards the product. For an example, the customer will be delighted to receive a special discount on his next visit, if his bill exceeds a particular amount. Service Product (Levels of Products):
Inputs of Healthcare
Core Product
Expected Service
Augmented Product
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Quality Treatment
? ? ? ?
Clearf Facilities, Qualified Staff and Doctors, Quality Health Care reasonable rates ? Efficient tools for specialized Operations and Surgeries, ? Range of Rooms ? Third Party Services ? ? ? ? ? ?
Medical Software
Software
? Health Education & Training ? In-house Medical Facility, ? Hostel Facility ? Blood Donation Centre, ? Research & Laboratory, ? Special Wards for VIPs ? Visiting Consultant, ? Internationally Expert Advice, recognized doctors. Installation Package/Kit, ? Webcam connectivity, Prompt Result, ? Interconnectivity, Tested and recommended ? Acceptable widely, Error Free, ? Doorstep delivery, User Friendly, Validity ? Intimation on new Security Privacy. updates. ? Smart Cards ? Different Schemes
Medical Insurance
Covering Risk
? Choice Available, ? Reasonable Rates.
1) Services Offer and Service Package: Service offer is the element that makes up the total service package. It includes both tangible and intangible components of service. The service package includes all decisions involving the essential concept of the service and the range of service provided. Christian Gronroos describes services package as a bundle of different services tangible and intangible together which form the total product. 2) Service Delivery System: The service delivery system spells the service that is provided to the customer. It represents interaction between the service provider and the customer and between the customer and the service facility. The service delivery system is a carefully designed blueprint which describes how the services will be rendered to the customer.
Service Life Cycle :
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The different stages in the life cycle of a product and services are more or less similar and have common characteristics. They are as follows: 1. Introduction: At this stage the service is new as it is just launched its usage rate will be low. The production cost is high but the sales being smaller the revenue is low. Until the growth .stage the service provider mostly operate from one location. 2. Growth: There is a rapid increase in the sales at this stage. The sales increase at an increasing rate as the consumers see the benefits. In using the service. Promotion is focused in order to attract new users and retain repeat customers. The firm may even improve service quality and add some new features to attract the customers. 3. Maturity: The product/services enter the stage of maturity as the rate of growth slows down. Here the sales are still increasing but increasing at a decreasing rate. The sales touch their peak and then it saturates. At that level for a longer period of time. There is intense competition at this stage and the firm in order to keep its market share may modify and improve the service quality. 4. Decline: The usage rate of services diminishes with the technological advancement and changing consumer tastes. The service provider uses different strategies at this stage. Some firms withdraw form the current service and switch over to new ventures with better opportunities. Some retain the services in order to cater to the needs of a few loyal customers but still diversify to other services. Service Flower (Core and supplementary services)
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PRICING IN SERVICES Price is a significant element of the marketing mix because it is the only element that produces revenue whereas the other elements produce cost. Price reflects the value attached to the service by the service provide- and it must correspond with the customer's perception of value. Pricing is a dynamic tool for meeting competition. It is the art of translating into quantitative terms the value of the product or a unit of a service to customer. Service providers offer a range of service at different price levels to cater to the needs of different target segments that may have different levels of purchasing power. For an example, airline offers business class as well as economy class travel. They also vary the price of the product in order to address the problems arising out of demand and capacity constraints. For managing demand they offer different prices to customers buying the services at different point of time, with lower prices being charged in the slack periods. Objective of Pricing: i) Survival. ii) Growth. iii) Maximize profit. iv) Maximize Market share.
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v) vi)
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Leadership in service quality. Stimulating patronage.
Factors Affecting Pricing Decisions: The factors affecting pricing decision may be classified as internal factors which are controllable and external factors that stem from external environment. Internal Factors: i) Organizational factors: It refers to the internal arrangement for decision making. ii) Marketing mix Elements: Which includes the service offering the promotion, .people; process and physical evidence are important in determining the value for money aspect in the service sector. iii) Positioning iv) Service cost: Pricing policy should cover at least the basic cost. External Factors: i) Competition: This is more relevant it) case of homogenous services like laundry, vending 1 machines etc. ii) Demand: The demand may vary for a number of reasons. iii) Regulatory factors: In many of the services the prices are either administered & controlled e.g. post & telegraph, banking, railways and education. Special Issues of Pricing in a Service Sector: A service marketer has to consider the following issues regarding pricing methods and policies to be adopted. (i) Intangibility (ii) Perishability (iii) Customer participation. (iv) Controllability (v) Variability
Methods of Pricing in Services:
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1) Cost based pricing: It is also called as cost-plus pricing. Under this method the company determines les the cost of service delivery as well as a pre-determined rate of profit in order to arrive at a price. It is necessary to-, analyze all costs accurately and differentiate between fixed and variable costs in order to use cost as the basis for pricing decisions. In the service industries it is complicated to identify and trace the cost to the particular offering. This method of pricing is widely used in catering services and by advertising agencies. 2) Demand based pricing : In this method of pricing the cost is not considered but the serve provider allows the demand to determine the price. Demand based pricing is generally us where the services are price sensitive. The consumer perception of the value of the service quality varies. Therefore successful demand based pricing is based on effective segmentation of market to achieve the maximum price from the segment. 3) Competition based pricing: Homogeneous services that are standards without specie service attributes are the best examples of competition based pricing. In this method of pricing the price is determined on the basis of competitor's price. Price under such situations may be used to gain short-term competitive advantage over rival Pricing Strategy: 1) New Service Pricing Strategy: While launching a new service there are two alternative pricing strategies. ? Skimming Strategy: In this the services are introduced at a high price. It is assume that the customers are more concerned about obtaining a quality service rather than cost of the service. As the demand for the services falls, the price level is reduced e.g. mobile phones, computers, etc. ? Penetration Pricing: In this, the new services are priced low. The prices are kept low t stimulate trial and thereby ensure customer loyalty. Low pricing is possible when the services are sensitive to price and it is possible to achieve economies of large scale operations by operating at large volumes. The penetration pricing begins with a low price but it increases in the growth stage. The increase is usually associated with additional services that are offered. 2) Differential Pricing/Market Segmentation Pricing: Different market segments may show different price elasticity of demand. The pricing strategy adopted to successfully cater t these groups is known as discriminatory pricing on the basis of market segmentation. It may be done on the following basis. ? Different time of consumption. ? Different point of consumption.
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3) Service-Mix Pricing: In this, the firms with multiple service offering that' are more often interrelated may adopt this strategy. It may resort to i) Captive service: ii) In captive service strategy the customer has no choice but to get attritional service offer from the service provider along with the core service. iii) Competing services: iv) In this the service firm competes with its own offering. v) Optional additional service: In this the service provider gives an option, to the customer to purchase the optional services along with the core services. 4) Price Bundling: It means pricing and selling the services as a group rather than an individual offering. In this the service firm will be able to sell all the products in the service line. E.g. Health clubs. 5) Relationship Pricing: In this type of pricing the lifetime value of the customer is taken into account. The main objective is to encourage customer loyalty by rewarding it. John Winkler has rightly stated that pricing can never be an automatic or impersonal process-, it cannot be reduced to a mathematical or accounting formula. It is an elusive art. T11 more you examine the market, the better you judge the value of what you want to offer. 6) Competitors Pricing: Services which are very price sensitive and where the core benefits sought are largely similar, competition-oriented pricing occurs frequently. Organizations that operate on competition-oriented pricing strategies will try to influence the consumer preference through elements of marketing mix such as service quality. 7) Marginal Pricing: It is based on the concept of marginal cost and is particularly relevant for service industry. The marginal cost is the cost of last unit of output and may be very low. For an example, in case of passenger airline with a capacity of 100 seats empty seats will not be preferred instead they can be filled with passengers paying reduced ticket prices -because any way the fuel cost, maintenance, staffing cost so on are made for 100 seats. Carry empty seats means carrying loss. COMMUNICATION MIX The word 'promotion is derived from the Latin word 'promovere', meaning 'an attempt to shift the attention of people from one end of the spectrum (disinterest) to the other (interest)'. Service marketers have used this marketing tool to great advantage in positioning their service, adding tangibility and value to their offer. Promotion is used
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only as a temporary tool and is communication oriented. Promotion consists of the following major areas of marketing: ? Advertising ? Public relations ? Sales promotion ? Personal selling ? Word of mouth ? Direct mail These areas are called the promotion mix or the communication mix. The service marketer can use a blend of all of these to achieve his communication and other goals. The choice of the communication or the promotion blend would depend on whether the advertiser wants to increase awareness, changes opinions, alter attitudes, use high degree of persuasion, etc. The advertiser or the service firm also has to take decisions on the choice of media, which would depend on the target audience and the reach of the medium (circulation and viewership/readership)' Comprehensive Communication Programme and Model Word 'communication' is derived from the Latin word communicoi, meaning 'to share'. Communication needs an objective that the service marketer must set and achieve. Following are the components of the communication programme: 1. Identify the target audience or receivers; 2. Determine the promotion objectives; 3. Develop the message 4. Select the communication mix or the promotion blend-, 5. Select the media vehicle; 6. Set up systems for feedback and feed forward' 1. Identify the target audience or receivers: Although this would have been done in the market segmentation process, a more detailed picture of the target audience would be required for specific promotions. For example, a high-priced hospital would have chosen the upper income group through segmentation. But now for promotion it would require to address people who are interested in the treatment of, say, cancer or heart, diseases or plain cosmetic surgery. Its message, Promotions and media choices would be decided accordingly, i.e., tailormade for this select audience. 2. Determine the promotion objectives: Every communication has an objective and the success of the communication programme depends on how the marketer has been able to clearly perceive his objectives and integrate the components. The service marketer has three promotional goals: to inform, to peruade and to remind. Some of the objectives for a service marketer are:
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Reinforce positioning, Develop brand image; Make customers aware of the offer, its attributes and benefits, Persuade customers to buy the offer, Continually remind customers about the service through remembrance exercises.
3. Develop the message: There are many models for describing the customer responses. One simplest and widely used is the AIDA model, developed by E.K. strong and is illustrated below:
According to this model, the service consumer moves through various stages in sequence. The customer is first aware of the service brand, which will generate interest & then desire in the offer. Once the desire is present, the customer is motivated or 'driven' to purchase the service product. The whole sequence grinds to a halt even if one of the tasks is unachieved. This implies that without even basic consumer awareness, the service marketer cannot hope for any sales. The message formulation will depend upon which of these AIDA sequence tasks is to be achieved. Message development is guided by the encoding process, which involves the consideration of issues: ? Message content - what to say', ? Message structure - how to say it logically, ? Message style - creating a strong presence; and
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? Message source - which should develop it. The service communication has four choices in encoding: words, symbols, pictures and images. 4. Select the communication mix or the promotion blend: The communication could have personal interaction (one-to-one) or impersonal messages (one-way). Personal communication consists of personal selling (insurance advisors making a presentation customers), word of mouth (publicity and public relations exercises for a restaurant or for a movie like Devdas), & interaction during service delivery (like inside a retail bank). I m personal communication consists of mass communications like advertising in newspapers, TV, outdoor advertising, point of sale, leaflets and brochures, and the service environment or the services cape itself. 5. Select the media Vehicle: The media vehicle is selected by effectiveness & efficiency with which it reaches the messages to the target audience. This message also guides the media vehicle: if the message is personal, then mass media cannot be used. What becomes effective are letters (on paper or through emails), personal interaction, etc. this is where media analysis would be required for its audience profile & viewers reading or media habits. 6. Set up system for feedback & feedforward: The communication should undertake two important exercises to make its present & future messages effective: Feedback is a kind of pre-test undertaken before the message has been broadcast to ensure the message will be received. Feedforward is a kind of post-test undertaken after the message has been broadcast to ensure the message was received. The issue of promotion blends like whether to use public relations more than advertising etc. have to be clarified by by the service marketer. The decision is guided by the following factors for their defferential impact ability on the communication mixes: ? Service is for profit or not-for-profit. ? Constrains of ethics exist in some services, like hospitals, healthcare and with doctors. ? Competitive intensity is high or low. ? The geographic spread is large or small. ? The custom within a specific service sector dictates promotional practice. ? Managers are sophisticated or not. Guidelines for services Communication W. R. George and L. Berry have identified six guidelines that can be used for promoting
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services. They are mostly applicable to all service sectors, with the exception to some few due to the variable nature of services. 1) Provide Clues to Tangibles the Service Offer: We can easily pick up tangible clues in case, of goods. Services have a major intangible component in them and so it is difficult for the customers to pick up tangible clues. Though services are intangible, they still have tangible components. The customers generally use these as a substitute to evaluate various service alternatives. The tangible clues reduce the risk and eliminate the uncertainties associated with a service not known to the customer 2) Maintain Communications Continuity: It is imperative to maintain continuity in communication for achieving differentiation and to portray a unifying and consistent theme over a period of time. Continuous advertising and publicity will enable the customer to get strongly attached to the theme. 3) Direct Advertising to Employees: The rapport that an air hostess can maintain with the passenger can greatly influence the quality perception of the passengers. There are certain services which are labor intensive and involve greater server customer interaction,' In such a type of service the service quality provided is largely dependent on the quality of the person who serves. The service firm has to market the firm to its own employees first who in turn gain confidence in the product they have to sell to the customers. 4) Use of Word of Mouth Publicity: In professional services like doctors, lawyers, teachers, hair dressers, schools, colleges, etc. word of mouth publicity that have already experienced the service holds weight age in attracting prospective customers. 5) Promising a Service which can be delivered: A realistic service promise should be made which enables the service firm to regularly meet the customers' expectations. This wills mimicries the service quality gap and keeps the customer's happy and satisfied. 6) Make the Service Easy to Understand: Due to the intangible nature of the services it is generally difficult to comprehend what exactly constitutes the offer of a service firm. The various tools used for promotion are i) Advertising ii) Sales Promotion iii)Personal Selling iv) Word of mouth v) Public relation vi) Publicity vii) Sponsorship viii) Direct Marketing
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DISTRIBUTION The importance of 'place' or location and distribution as part of a marketing mix is due to the fact that it facilitates accessibility to the service offer. It is the most mysterious of all elements of the marketing mixes. While all other marketing mix variables (service product, price and promotion) create or enhance demand, place or distribution is the only one that satisfies demand. The inseparability of services makes it imperative for both the service provider and the customer to meet to complete the service transactions and to create service benefits. In other words, service cannot be produced by one person in one place and be distributed by someone else in some other place. A service, by extension, cannot be produced in a place where the cost is lower and delivered to another place where the demand is higher. This is the fundamental difference .between goods and services that affect distribution strategies. All location strategies should be directed to make the encounter possible, place is especially important to the service marketer because the offer cannot be stored (intangibility and perishability) and the offer has to be produced and consumed at the same time in the service location, and outlets, The normal decisions of locations and channel are: ? How to deliver the service to the customer? ? Where and when should the delivery of service take place? ? What roles do intermediaries or middlemen have to play in the service delivery process? ? How can a marketer juggle the delivery of the tangible and intangible components of a service offer? For the service consumer, the first two of the above-mentioned decisions themselves become the most important perceived benefits. What is a distribution channel - especially in services? A distribution channel consists of a set of people or firms who are intrinsically involved in the transfer of goods or services from the producer to the end user. The end user could either be an individual consumer or an industrial consumer. A channel of distribution includes the producer of the goods and services, the consumer of the same and a series of middlemen like wholesalers, dealers, retailers, agents etc. The channel for any offer is extended to the last person or institution that buys it without making any changes in the form of the offer. If there is any change in the form of the offer, then there will be another channel of distribution. In, services distribution the offer has to be produced and consumed at the same time in the place of offer (outlet). Why should service firms use intermediaries? a) Specializations: In services, the offer is produced and consumed in one place, and it is mostly intangible, the question of distribution problems is not very acute-,
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the-service transaction itself and its quality is the main issue. In the production and distribution of services, the wide variety found in the Specializations in the case of goods is absent. Service firms have a different kind of dilemma: own its outlets or get the distribution done through franchisees'. Most major decision, are one-time decisions unlike in goods distribution. Only services like retailing that have higher tangibility content will face the same complexity in distribution as faced by goods manufacturer. b) Customer Utility: Customers require choices in their preferences and this was offered to them by retailers through varieties & assortments. This way, the customers could compare the merchandise and choose the best buy according to their judgment. The intangibility of services might have reduced the scope of consumers to compare the offer features, but nevertheless encouraged enquiries and clarifications from at the distribution outlet. c) Complexity: When any business - be it goods or services - is small, it is easier to manage it. This includes the complete marketing mix as well as the environment' But as any business grows, so does its complexity. To facilitate the exchanges of goods and services there arose an urgent requirement of complex systems for each type of goods and delivering them to the consumers. d) Distance: With the strategic decision of a firm to extend its geographical reach for its goods and services, there developed a gap between the producer and the enduser. This could only be filled by middlemen and intermediaries. SOTC/Kuoni, the innovative package tour company is a classic example in services. Mumbai based, it yearned for a wider customer base and took the help of intermediaries to achieve its goal. Thus Frequent Travels, a travel agency was initially roped in to be its representative in Madhya Pradesh. But SOTC went on to have its own outlet at indore, catering to its package tours. 1CICI Home Finance Company takes the help of Mumbai based, Unique Finance and Maximus Finance, amongst others to do its marketing. PEOPLE In service business, the service provider reflects the organization realities. It is through the interaction with the staff, that the customer from an opinion of the organization. A service firm may have the latest equipment and all the facilities but yet it may not be able to provide satisfactory customer service due to lack of interpersonal relationship between the service provider and the customer. In such cases the customer develops a negative attitude towards the organization. It is therefore, necessary that the service marketer should develop a high level of interpersonal skill and customer oriented attitude in the employee.
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Types of Service Personnel: In any type of service the customer comes direct in contact with the service provider and therefore is classified further: 1) Customer Contact Employee: These contact employees are very important because they represent the organization and can directly influence the customer satisfaction. The degree of the personnel customer contacts varies so we have: i) High contact personnel: They are required when the physical presence and interaction of the customer with the employees is for a longer time like hospitals, educational institutions, restaurants etc. ii) Low contact personnel: They are required when the physical presence and interaction with the customer is for a lesser time, example, retailing, post office etc. iii) Skilled and professional: E.g. Doctors, lawyers, chartered accountants, engineers etc. iv) Non professionals: E.g. Courier delivery boys, waiters, helpers etc. 2) Non-contact employees: Those employees who contribute to the service delivery but do not come in contact with the customers are called non-contact employees. They are actually support personnel. They possess high technical skill and are highly competent in their work.
The technical support personnel operate at the back stage and are not visible to the customer Developing Customer Conscious Employee.
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The Gallup model as shown in the figure above describes the path between the individual contribution of every employee and ultimate result of increase in the company value Service Quality and Employee Behaviour The 5 dimension of service quality are directly influenced by the service employee. (RATER) 1) Reliability: Delivering the service as promised is often totally within the control of frontline employees. Even in case of automated service such as ATMs, vending machine, support personnel are critical to make sure all system are working
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2) 3) 4)
5)
properly. Assurance: Service quality dependent on employee ability to communication their creditability and to inspire trust and confidence. Tangible: Employee appearance and dress are important aspect of tangible dimension of quality along with other factor like service -decor etc Empathy: Organisation can deliver caring and individual attention to customer only through employee. Empathy implies that employee will pay attention, listen, adapt and be flexible in delivering what individual customer needs. Responsiveness: Frontline employees often directly influence customer perception of responsiveness through their willing to help and their promptness in serving customer.
PHYSICAL EVIDENCE Generally a service transaction involves the interaction of the service provider with the customer in a service environment. Services like hotel services and hospitals are delivered in physical environment created by the service firm. Physical evidence is termed as the social environment along with the tangible cues. Zeithaml & Bitner defines physical evidence as lithe environment in which the service is delivered and where the firm and customer interact; and any tangible commodities that facilitate performance communication of the service". Physical Evidence includes all the efforts taken by the service provider to tangibilise their services, they include: 1) Physical Facilities: On the basis of physical evidence like building, furniture, equipment, stationery etc the potential customers forms an impression about the service organization. Physical evidence include essential evidence and peripheral evidence. Essential evidence are the technical facilities without which the service delivery is not possible e.g. air-craft in the airline services. Essential evidence is integral to the service offerings. In every services. the quality and Standard of the essential evidence will be of major influence in the customer' purchase decision. Peripheral evidence can actually change hands during the service transaction, they - stationery, brochures etc. Though services can be performed without these items, still they – used to enhance the corporate image. Examples of physical evidences that could be included for a fast food restaurant: Physical Evidences Inferences i) Food -Taste, smell, presentation etc. ii) Seating -Comfort, layout, availability. iii) Overall appearance -Cleanliness, decor, lighting, attractiveness. iv) Facilities -Payphones, toilets, children amusement. v) Service delivery -Efficient, prompt vi) Atmosphere -Friendly, Cold, i1ndiffU-rE'F1t.
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vii) Accessibility -Location of entrances, car parking.
2) Physical Environment: Another factor influencing consumer expectations of service quality and satisfaction is the physical setting or the service environment within which the service takes place. The important elements of physical settings are: i) Ambience-. The ambience of the physical setting includes temperature, lighting, noise, music, scent and color. All these factors affect the way the people think, feel and respond to a particular, service setting. The most comfortable source of light is the natural light. In the absence of natural light artificial light is needed. Different types of lights create different types of atmosphere. For an example, low levels of lighting are associated with romantic setting, well lit passages create a feeling of safety and so on. Often color and lighting are used in conjunction. Colors create different feelings-, some colors have a soothing feeling while some have disturbing feelings. Green and blue are cool colors whereas red, orange and yellow are warm colors. Temperature and humidity also affect the comfort of the customer and employees. It affects the efficiency directly. ii) Space: People need space around them to feel comfortable. Ease of access, good visibility, proximity of linked services will help to make the customer feel comfortable. The service provider should not expect the customer to share their space with others as it will lead to increase in stress levels or make them feel uncomfortable. This will create a negative impact on their perception of the service received. iii) Decor & Artifacts-, Decor: Signs, symbols and artifacts are the important components of decor. Signs represent the first encounter the customer ahs with the service firm. It influences the first impression. Sign can be used as labels for directional purpose e a. parking, entrance and exit, to communicate rules of Behaviour e.g. no smoking. Symbols are used to judge the expertise of the service provider. Certificates hanged on the wall are symbols of achievement and may provide reassurance to the customer. In the same way photographs on walls and personal objects displayed in the service environment can all communicate symbolic meaning and create a good impression Artifacts: The style of the decor can generally create an impression of cheap, serious, cheerful and expensive-, Artifacts like original oil painting may indicate success,
3) Social Settings: The appearance of the service personnel is the major aspect of the social setting that influences the consumer's attitude about the service personnel. The concept of appearance shows whether the employees appear to be friendly
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and approachable, caring, professional and confident. As a marketing mix element, physical evidence can be used as facilitator, socialize, differentia tore shaping first impression and build corporate image and identity. SERVICE PROCESS The service process refers to how a service is provided or delivered to a customer. Delivery system is a creative process. it begins with a service concept and strategy to provide a service. In order to achieve these objectives, various alternatives must be analyzed and identified before a decision is made. Designing a service process involves issues such as location facility, design and layout for effective design and layout for effective customer and work flow, procedure and job definitions for service providers, extent of customer involvement, measures to ensure service quality, equipment selection and adequate service capacity. According to C. Lovelock there are 7 operational issues, which have to be considered while designing the service quality process. i) In order to achieve economies of scale and perform consistently the— operation people would prefer to process in a batch while the marketing would prefer to cater to individuals so that the customer feels as being treated specially. ii) The decisions on designs and facility layout should satisfy the objectives of both iii) Operational people are interested to improve the productivity as the cost of production per unit will reduce. iv) Operation people want a standardized service since it keeps the cost lower and is easy for implementation. On the other hand the marketing people prefer customization to match customers' needs. v) Manage the queues in such a way that it is possible to use the available space. vi) Operational employees feel that the job design should minimize error and standardize tasks, making efficient use of approach. vii) The operational personnel lie to manage capacity in such a way that wasteful under-utilization will not take place. Planning The following strategic decisions and design elements must be considered in the Service planning process. 1. Basic Technological Decision. 2. Conversion/Materials Decision. 3. Specific Equipment Decision. 4. Process Flow Decision: i) Blue prints. ii) Flow charts. iii) Front and back Office.
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MARKET SEGMENTATION Market segmentation is a process of dividing a heterogeneous market into homogenous subunits; concept that was first developed by a Wendell R. Smith in a paper in 1956.1t is defined as dividing a market into distinct groups of buyers with different needs, .characteristics, or behaviour who might require separate services. A market was analyzed for its nature and composition, and was clubbed under groups of similar needs and other characteristics. Customers inside a grouping had similar preferences & traits, two different groups had different preferences and traits. Each of these grouping was called a segment, & the process was known as market segmentation. Requirements for Effective Segmentation ? Measurable and obtainable: Size, purchasing power, and characteristics of segments ? Accessible: The segments should be effectively reached and served. For example, questions like this keep cropping up. Will it be possible for us to communicate and serve the people of the North-East if and when we open our branch there?" ? Substantial and viable: The segment chosen should be large and profitable. It should be cost-effective for the service marketer to address the segment. ? Intensity in competition: More the intensity of competition, less attractive is the segment. ? Actionable: If the segments are attractive &have the potential for profit making, then effective marketing programmes can be designed. NIIT found that the Chinese market had huge potential and designed innovative marketing programmes to serve that market. ? Differentiable: The segments should be distinct from each other, behaving and responding differently. Or else, the process becomes like Undifferentiated Marketing. Bases for Segmenting the Service Consumer The service marketer can segment the market according to consumer characteristics & consumer responses. Consumer characteristics indicate who buys: ? Geo-demographic (e.g., political - state, districts, blocks-, region - urban or rural-, geographic North, South. East, 'West) ? Demographic (e.g' age, gender, marital status, education, family size, family life cycle, etc.)
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Socio-economic (e.g., income, social class, occupation) Culture (e.g., lifestyles, religion, language, ethnic origin & culture)
MARKET POSITIONING The segment chosen in market segmentation is to be targeted for customer acquisition and retention. For this to be successful, customers have to be persuaded that the service offer is unique in features, value and benefits. The offer, thus, has to be positioned in their minds to enable them to recognize-the offer as distinct from the crowd and to be persuaded that the offer is the best offer for them. Positioning is a battle for the consumer's mindshare. "The empires of the future are the empires of the mind", said \Winston Churchill. Four Principles of Positioning: ? A service firm must position itself in the target segment's mind. ? The position should be singular, with one simple' consistent message' ? The position must set the service firm and the service product apart. ? A service firm cannot be all things to all people-, should focus on certain segments' Process of Market Positioning Stage 1: Identity Key Product Characteristics The service marketer should make efforts to find out which of the offer's features and characteristics do consumers desire, and value most, when they make a decision to buy. Some kind of weighting should be put on these features. The features could be both tangible (colour, size, design) and intangible (guarantees, reputation, experience, quality, etc').
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Stage 2: Draw a Perceptual Map With the weights of different features, a perceptual map is drawn. This is an extremely useful tool to visually depict what the consumers think of available brands -with their features. A perceptual map consists of a grid on two axes, with product attributes on each of them. Thus, brands are spread over the grid, giving indication what the marker perceives of the brands vis-a-vis others. Clusters of brands in one area or brand standing alone in another area will give the service marketer an indication of the intensity of competition as well as the distinctiveness or lack of it of the brands. The marketer also gets glimpses of gaps in the market, for exploitation. Stage 3: Decide on a Competitive Strategy After the perceptual map has been drawn, the decision to be taken is either of the two: ? To compete head-on, or ? Get away from the competition Different players take different positions in the grid. Some are competing head-on while others prefer to be alone. A new entrant decides on the segment to compete in and if there
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is a cluster' as with Shopper's Stop, Cross roads/P i ram yd, Globus and West Side, then they have to compete head-on. The other choice could be the lower quadrants where there is an absence of competition. Stage 4: Design Product Attributes and Associated Imagery To help the targeted customer identify the services and their benefits, the marketer designs service product features and associated images are designed. They will include brand name, slogan, advertising themes, price levels, and distribution outlets. Thus with marketing mixes, the service marketer is able to position his offer in the minds of the consumer. Stage 5: Sustain a Competitive Advantage A service marketer gets a decisive competitive advantage if he is able to set his offer apart from those of the rest of the competition - in the eyes of the target customer. Success will breed imitators, and the service marketer will then have to spend time and resources to ward them off' But this competitive advantage has to be sustained, and can only be done by keeping in touch with the customer and knowing his needs.
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STRATEGIES FOR MANAGING CAPACITY & DEMAND The demand may be too high or too low. When demand is too high the capacity can be altered by: i) Stretching time, labour, facilities and equipments. ii) Cross train the employees. iii) Request over-time from employees. iv) Rent or share facilities. v) Hire part-time employees. vi) Subcontract or outsource service. When the demand is too low, the capacity can be altered by: i) Performing maintenance, renovations. ii) Schedule vacations. iii) Schedule employee training. iv) Lay-off employees. a. Customers' Involvement: By converting certain operations to self-service like buffets at restaurant and fast food joints the firm can divert its own personnel to other functions. Self-service firm lose a certain measure of control over service quality when the customers are asked to perform key functions. b. Using Part-time Employees-, Part-time help can supplement regular employees when the peaks of activity are persistent and ' predictable. A ready part-time labour pool is available from college students and others who are interested In .supplementing their primary source of income. Another source is off duty personnel placed on stand-by. Hospitals and Airlines often pay their personnel to be on stand-by. They are there to be ready for work if needed. c. Cross Training Employees: Some services consist of various operations. At times when one operation is busy the other operation may be idle. Cross training employees to do the tasks in various operations creates flexible capacity to meet demand. For an example, we see at supermarkets when the queues develop at the cash registers, the managers call on stockers to operate registers until the queues reduce. In the same way during slack periods some of the cashiers are busy stocking shelves. d. Modify or Move Facilities and Equipments: Sometimes it may be possible to modify the existing capacity to meet the demand fluctuations. For an example, the new Boeing 777 aircraft is so flexible that it can be reconfigured within hours to accommodate extra numbers of seats allocated to one, two or three classes. Thus
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the plane can be quickly modified to match the demand arising from different market segments. e. Sharing Capacity: A large investment in equipment and facilities exist in a service delivery system. At the time of underutilization, it may be possible to find other use for the capacity. An airline is a good example. At the small airports, airlines share the same baggage handling equipments, ground personnel etc. It is a common practice for some airlines to lease their aircraft to other airlines during the off season. f. Stretch Existing Capacity: In order to match the demand th,~ riqtinn r-~7m~7irjtv of resources can be expanded. Under such circumstances no new resources are added but people, facilities and equipments are asked to work harder so that demand can be met. g. Schedule 'Down Time' during low demand: If during the peak period, people, equipment and facilities are being used at maximum capacity then it is necessary to schedule repairs, maintenance and renovations during off periods. For employees vacations and trainings can also be arranged during this period. Strategies for managing demand to match capacity: 1. Partitioning the Demand: The demand for services is often grouped into random arrivals and planned arrivals. For an e.g. at a doctor's clinic the walk-in patients arriving are more than those with appointments. Appointment can be controlled. But walk-in demand is uncontrollable. We often find that the inflow of patients is higher on weekdays than weekend. Therefore, in order to level demand a partition can be created as, keep appointments in the latter part of the week i.e. weekends and only walk-in patients on weekdays. 2. Vary the service offering: Depending on the seasons of the year, day of the week, or time of the day, we can change the nature of the service offering. For an example, accounting firms focus on tax preparations and general activities late in the year and until April when the taxes are due. During the other times of the year they can focus on auditing and other general consulting activities. Care should be taken in implementing strategies to change the service offerings as change may easily imply and require alterations in other marketing variables such as promotion pricing and staffing in order to match the new offerings. Until and unless these new additional marketing mix variables are altered effectively to support the offering the strategy may not work. 3. Developing Complementary Services: Complementary services are basically offered in order to occupy waiting customers. The Indian Restaurants have
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4.
5.
6.
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discovered the benefits of complementary services by adding a bar to the Restaurant. The customers can enjoy food and drinks separately as well as together. Promoting off-peak Demand: During off-seasons holiday resorts use their premises as retreat location for business or professional groups. In the same way in order to encourage long distance dialing the Telephone companies offer lower rates at night. Pricing Incentives: In order to smoothen the demand on the service process, prices can be raised during peak times and lower, at non-peak times. Movies have matinee special and hotels offers lowest rates during weekends. Communicate with the Customers: Another way for shifting demand is to communicate with the customers and let them know the peak demand period so that they can choose to use the services at alternative times and avoids crowding. Modify Timing and location of service delivery: Extending working hours and working on weekends can meet the customer's demand. Another strategy may also work by moving the service to a new location in order to meet the demands of the customers. Advertising and Sales promotion: Advertising and sales promotion can be used to emphasize different service benefits during different period i.e. peak and slow period. Advertising messages can also be used to remind customers about the peak demand times and promotional offers during the off-season.
Strategies when demand and capacity cannot be matched: 1. Reservations and Appointments: Examples: Airlines, Railways, Health Care, and Hospitals, Doctors, etc 2. Waiting Lines 3. Triage -Means Sorting: Example: Emergency rooms are given on the basis of critical and not in order of arrival. 4. Delaying Service Delivery: Next day or next week or until capacity becomes available. Demand Patterns Demand Pattern by Market Segments: Disaggregation of demand by market segmentation is possible if an organisation has detailed records on customer transactions or the analysis may reveal that the demand from one segment is predictable whereas the demand is relatively random from another segment, For an example, for a bank the current account holders may come daily at predictable time whereas savings account holders may visit the bank at random intervals. Random Demand Fluctuations:
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Random variations in demand are there in every kind of services. For an example, health related events like heart attacks and birth or death all increase the demand for hospital services but the level of demand generally cannot be determined in advance. in the same way natural disasters Such, as floods, fires, droughts, earthquakes, etc. can dramatically increase the need for services such, as health care, insurance, telecommunication etc. Predictable Cycles: Variations in demand can be caused by many factors. Some are predictable -while some are not. Tourism services have peak periods at certain holidays and at weekend days. Generally one or more causes can be identified when there exist a predictable pattern. Charting Demand Pattern: Those organisations which have computerized customer information systems can do the charting demand over relevant periods. If seasonality is a suspected problem then graphing should be done for data from the past year. Some of the basic types of demand curves are as follows:
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Managing Constraints on Capacity: Demand cannot be controlled perfectly. Efficient management of resources needs that the firm should consider the changing capacity by increasing it to meet higher demand and contract it when the demand is low. Depending on the type of service, service firms are faced with various constraints. 1. Time: In case of some services, the primary constraint on service production is time. For an example, 'a consultant, a lawyer or a hairdresser all sell their time. The profits are lost if their time is not used productively. In the same way time cannot be created if there is excess demand. Time is a major constraint from the point of view of individual service provider. Time capacity can be increased by operating for longer hours. This cannot be an option if the time does not match the customer's needs. Its capacity can also be increased by shortening the length of the time in serving the customer. Time can be saved by using the slack demand time for repairs and maintenance, since the functions of repairs and maintenance has to be performed sometimes or the other: However, if they are kept away from peak demand periods, the overall productivity will be improved. E.g. legal, consulting, accounting, medical. 2. Labour: In the case of labour intensive unit the number of service providers is large. Here, labour or staffing levels can be the primary capacity constraint. A law firm, consulting firm or a repair maintenance contractor all fare the same problem. At certain times the demand for their organisations' services cannot be met as the staff is already operating at peak capacity. In some cases it is easier to hire and fire. But it can be costly if the employees require extensive training in order to provide service. This can be avoided by imply increasing the working hours of the regular staff at the time of high demand and paying overtime. The capacity of the workforce can be made more flexible through extensive cross training This enables the employees to perform several different jobs It is also possible to increase the productivity and hence work capacity. E.g. Law firms, accounting firms, consulting firms, health clinics. 3. Equipment: Equipment may be critical constraints for service firms. In case of, transportation, the trucks or the planes required to service demand may have capacity limitations. Especially during festivals, summer and winter vacations the delivery service providers are faced with this problem. Telecommunication companies face equipment constraints when everyone wants to use the telephone lines at the time of peak hours. The use of productivity enhancement tools can increase the capacity of fixed work force. They can be kept free from doing repetitive task. Example, Banks have built ATMs, manufacturers of sophisticated computers and electronic products have build self diagnostic components, into their products in order to avoid sending costly engineers into the field to carry out routine analysis. In many
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kinds of firms computers automate ordering and billing activities and keep track of customer's purchase history. This has transformed operations performed by the clerical staff. E.g. Delivery services, telecommunication, utilities, health club. 4. Facilities: Most of the service firms are faced with the problem of limited facilities. Education institutions like schools and colleges are constrained by the number of rooms and the number of seats in each class, restaurant capacity is restricted to the number of tables and seats available, Airlines are limited by the number of seats in the aircraft and so on. Physical facilities are very difficult to adjust. Adding a building or a room or an aircraft tends to increase the capacity but then it will add to the cost. However, a service firm with a multiple outlet may be able to accommodate excess demand at one unit by sending the extras to another unit. Temporary renting is another solution. E.g. Hotels, restaurants, hospitals, airlines, schools and theatres. BRANDING OF SERVICES A brand can be defined as 'a name, term, symbol or design or a combination of them which is intended to identify the goods and services of one seller and to differentiate them from those of competitors. In case of services, branding is still in its infancy. The importance of branding is expected to rise due to the following reasons: i) Services itself does not offer unique tangible benefits, brand development tangibilises the service. ii) It is cheaper to retain customers than to attract new ones. iii) The new service development assumes greater importance. Brand Awareness Brand awareness is the ability of the consumer to recognize and recall that a service brand is an intrinsic part of the offer category. Service brands fall into the five categories according, to how much (or less) the consumer is aware of them. Some brands are not known at all by the customers, while brand awareness exists for some. At a higher plane, there are offers that have brand acceptability and those that enjoy a high degree of brand preference.
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Ch-3 Service Quality What are the SERVICE GAPS? Gap 1: The Knowledge Gap: Difference between consumer expectations and the management perceptions of consumer expectations. This gap can be narrowed through adequate research programmes. Gap 2: The Standard Gap: Difference between management perceptions of consumer expectations and service quality specifications. This gap can be closed by standardizing service delivery process wherever possible and also setting right organizational goals. Gap 3: The Delivery Gap: Difference between service quality specifications and the service actually delivered. This gap can be eliminated by providing the employees with adequate support system and better human resource policies and programmes and improving teamwork. Gap 4: The Internal Communication Gap: Difference between service delivery and what is communicated about the service to the consumers. This gap can be eliminated through efficient and effective communication system and also by not giving false promises to customers that leads to higher expectations. Gap 5: The Perception Gap: Difference between the perceived service and expected service. This gap depends on the size and directions of the first four gaps associated with the delivery of service quality. 3y bridging gaps 1 —4, automatically gap 5 can be closed. The gap analysis is useful in setting priorities for actions in order to improve the company's image in the eyes of the customers. What are the causes of Gaps in Service Quality? The assessment of quality takes place in the customer's mind simultaneously as services are created and delivered. The custor-ner's level of satisfaction is largely influenced by the difference between customer's expectation and perception of service performance. Whom the delivered service is perceived to be better than expected, the outcome is that the customer is satisfied and vice-versa. The Gap between expected service and delivered services has its origin at different points: Gap 1: Customers Expectation: It is simply not known what the customers expect. The intangible nature of service makes it difficult to define customer expectations quantitatively. Even the customer sometimes is not articulate enough to explain as to what are his/her specific expectations. It is also observed that some service quality dimensions are difficult to quality. As a result, marketers have to depend upon their own judgment, which sometimes is at a
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Gap 2: Management Perception of Customers Expectation: The customer expectation needs to be translated into appropriate performance standards. Many a time a service firm has a good idea as to what customers expect but fail to develop them into appropriate service specifications. There are many reasons responsible for if. Inadequate commitment to quality lack of inclination to specify quality standards and measure quality. Perception of unfeasibility, perception that services cannot be
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standardized etc. Gap 3: Service Delivery: This refl6cts variation of the actual performance from the standard performance i.e. failure to conform to established standards. It occurs when the employees are unable to or unwilling to perform at desired level. Role ambiguity, role conflict, poor employee-job fit, lack of training, absence of proper motivation system etc may be the reasons for it. Gap 4: External Marketing Communication: A service companies external communication efforts i.e. advertising, publicity, personal selling and public relations may over-promise and that logically results into this gap to occur, The marketers find it very hard to resist the temptation of making big promises. Otherwise they know that if they don't make tall promises their appeal to the customers won't be that exciting and the entire promotion exercise may be reduced to any. Gap 5: Actual Service Performance (As perceived by the customers): This Gap occurs when the customer's perception of delivered service is at variance with the expected service. The customer's experience of the service is conflict upon many factors and some times the service may need customer's expectations and yet perceived otherwise. The key to providing good service quality is meeting and exceeding customer's expectations. This gap is the end result earlier four gaps. How to measure service Quality? Or What are the Dimensions / Determinants of Quality? It refers to the process quality as judged by the consumers during a service delivery and the quality of output judged after a service is performed. Berry, Parasuram and Zeithaml conducted an extensive research in service quality and identified 10 criteria used by consumers in evaluating service quality as shown in the figure below: Ten Dimensions of Service Quality Dimension and Definition Tangibles: Appearance of Physical facilities, equipment, personnel and communication materials. Reliability: Ability to perform The promised service dependably and accurately. Examples of Specific Questions Realised by Customers ? Are the bank's facilities attractive? ? Is my stockbroker dressed appropriately? ? Is my credit card statement easy to understand? ? So the tools used by the repair person look modern? ? When a loan officer says they will call me back in 15 ? minutes, does she do so? ? Does the stockbroker follow my exact instructions to buy or sell?
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Achiever’s Academy ? ? ? ? ? ? Competence: Possession of The required skills and Knowledge to perform the service. ? ? ? ? Courtesy: Politeness, respect, consideration and friendliness of contact personnel. ? ? ? ? Credibility: Trustworthiness, believability, honesty of the service provider. ? ? ? ? ? ? ? ? ? Access: Approachability and ease of contact, ?
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Responsiveness: Willingness to help customers and provide prompt service.
Security: Freedom from danger, risk or doubt.
Is my credit card statement free of errors? Is my washing machine repaired right the first time? When there is a problem with my bank statement, does the bank resolve the problem quickly? Is my stockbroker willing to answer my questions? uestions? Are changes for returned merchandise credited to my account promptly? Is the repair firm willing to give me a specific time when the repair person will show up? Is the bank teller able to process my transactions without fumbling around? Does my brokerage firm have the research capabilities to accurately track market developments? When I call my credit card company, is the person enabled to answer my questions? Does the repair person appear to know what he is doing? Does the bank teller have a pleasant demeanor? Does my broker refrain from acting busy or being rude when I ask questions? Are the telephone operators in the credit card company consistently polite when answering my calls? Does the repair person take off his muddy shoes before stepping on my carpet? Does the bank have a good reputation? Does my broker refrain from pressuring me to buy? Are the interest rates/fees charged by my credit card company consistent with the services provided? Does the repair firm guarantee its services? Is it safe for me to use the bank's automatic teller machines? Does my brokerage firm know where my stock certificate is? Is my credit card safe from unauthorized use? Can I be confident that the repair job was done properly? How easy it is for me to talk to senior bank officials when I have a problem?
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Achiever’s Academy ? ? ? ? ? ? ? Understanding the Customer: Making the effort to know customers and their needs. ? ? ?
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Communication: Keeping customers informed in a language they can understand and listening to them.
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Is it easy to get through to my broker over the telephone? Does the credit card company have a 24-hour, toll-free telephone number? Is the repair service facility conveniently located? Can the loan officer explain clearly the various changes related to the mortgage loan? Does my broker avoid using technical jargon? When I call my credit card company, are they willing to listen to me? Does the repair firm call when they are unable to keep a scheduled repair appointment? Does someone in my bank recognize me as a regular customer? Does my broker try to determine what my specific financial objectives are? Is the credit limit set by my credit card company consistent with what I can afford (i.e. neither too high nor too low)? is the repair firm willing to be flexible enough to accommodate me schedule?
It was found that there was a high degree of correlation between most of these variables. They are consolidated into five broad dimensions. 1. Tangibles: Tangibles are those factors which the consumer can feel, hear and touch. Tangible are used while assessing the physical qualities and before the service is experienced. For an example, you would not like to be served by an unclean waiter with dirty uniform and perhaps you would never visit such a restaurant again. 2. Responsiveness: It refers to the willingness to help customers and provide prompt service. Responsiveness is an important dimension for those customers who require some extra service over and above that is usually provided. 3. Empathy: It means the power of understanding the customer's feelings and needs that enables the server to take care of the customer and provide personal attention. It is described as human touch. 4. Assurance: It means that the knowledge which the provider possesses enables him to perform the services competently. It also includes courtesy aspects such as politeness and respect for customers.'
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5. Reliability: It is the capacity to deliver the promised service accurately on time. The milkman who delivers milk on a regular basis in time is reliable. Productivity and quality Productivity relates to how inputs are transformed into outputs that are valued by customers. Improving productivity keeps costs under control Quality refers to the degree to which a service satisfies customers by meeting their needs, wants and expectations. Service quality helps in product differentiation and building customer loyalty. Invest in quality profitably i.e. by considering incremental cost and incremental revenue. What do you mean by service recovery? Service recovery is a term used for systematic efforts by a firm in order to correct the problem following a service failure, and to retain a customer's goodwill. Service recovery efforts play a crucial role in achieving or restoring customer satisfaction. In every organisation, things may occur that have a negative impact on its relationship with customers. The true test of a firms, commitment to satisfaction and service quality isn't in advertising promises or the decor and ambience of its office but in the way it responds when things go wrong.jor the customer. Effective service recovery requires thoughtful procedures for resolving problems and handling disgruntled customers. It is critical for firms to have effective recovery stralegies, because even a single service problem can destroy a customers' confiderTce, in tvfirm under the following conditions: i) The failure is totally outrageous. ii) The problem fits a pattern of failure rather than .being'ah isolated incident. iii) The recovery efforts are weak, serving to: compound the original problem rather than correct it. Some complaints are made while service, deliqery (s still taking place, while others are made after the fact. In both instances, how the complaint is handled may determine whether the customer remains with the firm or seeks new; suppliers in the future. The advantage of getting real time complaints is that there nay still be a chance to correct the situation before service delivery is complete. The downside of real time compliant (from an employee perspective), is that they can be de-motivating. Dealing with them in real time can also interfere with service delivery. The real difficulty for employees is that they often lack the authority and the tools to resolve customer problems, especially, when comes to arranging alternatives at companies' expense or authorizing compensbtionon the spot. When complaints are made after the fact, the options for recovery are more limited. In this case, the firm can apologize, repeat the service to achieve the desired solution or offer some other forms of compensations.
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What are the guidelines for effective problem resolution? Or How to Handle Complaints? 1. Admit mistakes, but don't be defensive: Acting defensively may suggest that the organisation has something to hide or is reluctant to fully explore the situation. 2. Act fast-, If the complaint is made during the service delivery, then Time is of the essence to achieve a full recovery. When complaints are made after the fact, many companies have established policies of responding within 24 hours or sooner. Even when full resolution is likely to be longer, fast acknowledgement remains very important. 3. Don't argue with customers: The goal should be to gather fact, to reach a mutually acceptable solution, not to win a debate or prove that the customer is an idiot. Arguing gets in the way of listening and seldom diffuses anger. 4. Show that you understand the problem from each customer's point of view: Seeing situations through the customer eyes is the only way to understand what they think has gone wrong and why they are upset. Service personnel should avoid jumping to conclusions with their own interpretation. 5. Give customers the benefit of the doubt: All the customers may not be truthful, and also not all complaints are justified. But customers should be treated as though they have a valid complaint until clear evidence to the contrary emerges. If a lot of money is at stake, like insurance claims or lawsuits, a full investigation is warranted. If the amount involved is small, it may not be worth to refund or compensate. But it's a good idea to check records to see if there is a past history of dubious complaints by the same customer. 6. Acknowledge the customer's feelings: Acknowledge the feelings of the customers tactfully for example," I can understand why you are upset. This action helps to build rapport, which is the first step in building a bruised relationship. 7. Clarify the steps needed to solve the problems: When instant solutions are not possible, telling customers how the organisation plans to proceed, shows that corrective action is being taken. It also sets expectations about the time involved. 8. Keep customers informed of the progress: Nobody likes being left in the dark. Uncertainty breeds, anxiety and stress. People tend to be more accepting of disruptions, if they know what is going on, and receive progress reports. 9. Consider compensation: When customers do not receive the service outcomes that debate for or have suffered serious inconveniences or loss of time and money, because the service, failed, either a monetary payment or an offer of equivalent service in kind, is appropriate. This type of recovery strategy may also reduce the risk of legal action by an angry customer. Service guarantees often lax out in advance, what such compensation will be and the firm should ensure that all guarantees are met. 10. Preserving to regain customers goodwill When customers have been disappointed,
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one of the biggest challenges is to restore their confidence and preserve the relationship for the future. Perseverance may be required to defuse customers' anger and to convince them that actions are being taken to avoid a recurrence of the problem. Truly exceptional recovery efforts can be extremely effective in building loyalty and referrals. Taking care of customers require that the firm also take care of its own employees. Managers need to recognise that handling complaints about service failures and attempting service recovery can be stressful for the employees, especially when they get treated abusively for problems over which they have no control. Compounding the stress are policies that implies in flexible, bureaucratic procedures, rather than empowered customer --contact personnel to handle recovery situations as they see fit. Service firm needs to develop internal service recovery strategies, designed to help employees recover from negative feelings that they may become the target of employee anger and dissatisfaction. Similarly, management must ensure that the firm employs a sufficient number of welltrained and motivated employees. so that good service is provided in the first place, plus prompt and effective recovery is done when things go wrong. Companies with a good reputation for customer care cannot afford to become complacent.
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Ch- 4 Services Management Service Mapping or Flowcharting Flowcharting can be applied to any type of services when a management needs to gain, a better understanding of how the service is created and delivered. It is also known as service mapping when portraying an existing situation and service blueprinting , when planning a new or revised process and prescribing how it ought to function. Service Blue Print A service blue print is a flowchart of the service process. It is a picture of a service system. It conveys the service concept by showing the service at an overview level. It shows how each job or department functions in relation to the service as a whole. Benchmarkinq: Advantages and Methodology Benchmarking is a process used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice, usually within their own sector. This then allows organizations to develop plans on how to adopt such best practice, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to challenge their practices. Benchmarking in simplistic terms is the process where you compare your process with that of a betterprocess and try to improve the standard of the process you follow to improve quality of the system, product, and services etc. A process similar to benchmarking is also used in technical product testing and in land surveying. See the article benchmark for these applications. Advantages of benchmarking: Benchmarking is a powerful management tool because it overcomes" paradigm." Paradigm Blindness can be summed up as the mode of thinking, "The way we do it is the best because this is the way we've always done it." Benchmarking opens organizations to new methods, ideas and tools to improve their effectiveness. It helps crack through resistance to change by demonstrating other: methods of solving problems than the one currently employed, and demonstrating that they work, because they are being used by others. Collaborative benchmarking Benchmarking, originally invented as a formal process by Rank Xerox, is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a
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voluntary collaborative benchmarking process since 1997 through their industry association. Procedure There is no single benchmarking process that has been universally adopted. The wide appeal and acceptance of benchmarking has led to various benchmarking methodologies emerging. The most prominent methodology is the 12 stage methodology by Robert Camp (who wrote the first book on benchmarking in 1989. The following is an example of a typical shorter version of the methodology: Identify your problem areas - Because benchmarking can be applied to any business process or function a range of research techniques may be required. They include: informal conversations with customers, employees, or suppliers, exploratory research techniques such as focus groups, or in-depth marketing research, quantitative research, surveys, questionnaires, re engineering analysis, process mapping, quality control variance reports, or financial ratio analysis. Before embarking on comparison with other organizations it essential that you know your own organization's function, process; base lining performance provides a point against which improvement effort can be measured. Identify other industries that have similar processes – For instance if one were interested in improving hand offs in addiction treatment s/he would try to identify other fields that also have hand off challenges. These could include air traffic control, cell phone switching between towers, transfer of patients from surgery to recovery rooms. Identify organizations that are leaders in these areas – Look for the very best in any industry and in any country. Consult customers, suppliers, financial analysts, trade associations, and magazines to determine which companies are worthy of study. Survey companies for measures and practices – Companies target specific business processes using detailed surveys of measures and practices used to identify business process alternatives and leading companies. Surveys are typically masked to protect confidential data by neutral associations and consultants. Visit the "best practice" companies to identify leading edge practices - Companies typically agree to mutually exchange information beneficial to all parties in a benchmarking group and share the results within the group. Implement new and improved business practices – Take the leading edge practices and develop implementation plans which include identification of specific opportunities, funding the project and selling the ideas to the organization for the purpose of gaining demonstrated value from the process. Blueprinting The service encounter is difficult to describe with accuracy and therefore there is a lot of
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subjectivity in its analysis. This inconsistency (variability) prevents quality measurement. This has given rise to many methodologies in service encounter analysis and measurements which seek to 'map' the service process. With such a 'map' and 'scripts', it is possible to be systematic in the encounter analysis This process is called 'blueprinting'. Blueprinting has given rise to other methodologies like 'servuction'. To facilitate maximum satisfaction to the customers, more inputs were added to the service delivery. Service evolved from very simple steps to complex processes, & there arose a need for the marketer to get a bird's eye view of the whole process. Blueprinting is flowcharting of service operation. Blueprinting would prevent the manager from learning by costly trial and error. It (blueprinting) also enables marketing managers to understand the parts of the operating system that are visible to the consumer and hence parts of the servuction system. In the servuction sysrem, it is very difficult to identify components of an individual firm. Worse firms underestimate the sensitivity of points of contact. Service firms are now starting to realize the importance of the first call and its potential for generating revenues. They are setting up '24 x 7 x 365 call centres to be manned by efficient and alert call handlers. The providers are adequately enabled by training, and computer facilities for all enquiry data access and customer and product details the service providers are trained to pick up the phone on the first ring. Service flowcharts allow managers to better understand servuction Processes. Designing the process becomes the key to product design. In the design stage, it is ensured that the visible part of operations is supported by invisible processes. Flowcharts seek to identify the following: ? The time it takes to move from one process to another; ? The costs involved with each process step; ? The amount of inventory build-up at each process step; ? The bottlenecks in the system. A customer blueprint has three core elements: ? Identification of all those functions that are essential to deliver a service along with the appropriate personnel with requisite responsibility, authority and accountability. ? The relationships amongst different functions of service components are explained by graphics and charts. The relationshio, is based on time and sequence with each other. For a hotel, the sequence of housekeeping in relation to reception and registration has to be elaborated with a specific time interval. ? Setting up of standards for each function with tolerance levels and variance from standards' These tolerances for variance should not adversely affect the service quality adversely.
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Steps in Designing a Blueprint 1. Identify the process to be blueprinted: This implies again that it would be impossible to blueprint the complete processes of the service provider in one format. The individual processes are to be identified for blueprinting. The summation of such processes would give the whole picture to the manager. Each process would by itself be an issue, and particular problem identification and appropriate solution formulation would be easier. 2. Map process from the custorner's point of view: Through this method, the customer's comfort zones can be identified. Processes can be modified if it is found that customers are not very comfortable with certain sequences. Consumers possess purchasing scripts that guide their thinking and behaviour during service encounters. The blueprint development process identifies steps where the system can go awry. Process involves specifying the timeframe of service execution. 3. Draw line of interaction: The line of visibility and the line of interaction have to be drawn clearly. The areas of interaction affect service experience the most. 4. Draw the line of visibility: These are processes in zones that are visible to the customers and in which the customer is most likely to participate. There are also the invisible zones which consist of processes and interactions that are necessary for servicing the customer but are hidden from his view. In a bank, this would include checking the credit-worthiness of clients, processing of documents, dispatch section operations, etc. 5. Map process from customer contact person's view, distinguishing visible activities from those that are invisible. 6. Draw line of internal interaction. 7. Link customer and contact person activities to needed support functions. Target Marketing Target Marketing recognizes that different groups of customers have different needs and might also desire different core benefits from the same service. It sought the different needs and preferences of the consumers and instead of trying to satisfy them with the same type of services, the firm designed complete marketing programmes for each of these sub-groups. Benefits of Target Marketing ? The market size is large and the service firm may not have sufficient resources to address it, neither would it perhaps want to do so. ? Customers are scattered all over the geographical spread, making it practically impossible to reach every potential buyer. Targeting was far more cost-effective. ? Competitors are enrrenched, making entry and survival difficult' Therefore, smaller firms can seek niche or specialized markets.
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Customer requirements from the service vary widely'. Targeting a segment or two - to the exclusion of the rest - increases the chances of meeting most of customers' demands. It generated customer loyalty.
Franchising : Franchising is the most common type of distributor in the services and accounts for most of the retail sales. According to the International Franchise Association of America, "A franchise operation is a contractual relationship between the franchiser and the franchisee in which the franchiser offers or is obligated to maintain a continuing interest in the business of the franchisee in such areas as know-hold and training, where in the franchisee operates under a common trade name format and/or procedure Owned and controlled by the franchiser and in which the franchisee has or will make a substantial capital investment in his business from his own r esources.” Location of Franchisee. The franchisee should be located at convenient and accessible places. The following factors influence the choice of franchise location: i) Area of potential demand ii) Competition in the area. iii) Requirement of space iv) Presence of another franchisee of the same firm. v) Other physical needs of the firm.
Benefits of Franchisee: To the Franchiser: i) Franchisees are self-motivator. ii) They share business risk. iii) They have a thorough although knowledge of the local market. iv) They maintain consistency in quality. v) Franchiser gets wider distribution network. To the Franchisee: i) Obtain ready-made business. ii) Reduction of risk. iii) Benefit of training and counseling and advice on local promotion of business. Franchising in India with Examples: As the service economy grows in the country, opportunities for franchising are going to be plentiful. The franchisers in the product market like Titan, Raymond, Bata or Reebok are well known. More names will be added to this list as franchising is catching on in
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service industries like in education I. T. kids, NIIT, Aptech; Healthcare - Arvindlal; Entertainment - AMF, Bumswick; Specialty food services -Subway, Cafe Coffee day and Personal grooming -Personal Point, VLCC. I. T. kids: Business concept: education through computers. Numbers planned: 300 in one year Company investment: Rs. 37 crores (in next one year) Franchisee investment: Rs. 12 -15 lakhs Chennai based computer firm with the novel concept of educating children aged between 4 to 14 years through computers. The curriculum is divided into several modules and gives a good chance of retaining the customers for many years. To include trials I.T. kids plans short duration programmes during summer vacations. As it is a niche market I.T. kids rely on franchising. They have rolled out swiftly and grab the first mover advantage. Cafe Coffee day - Business concept'. coffee cafes Numbers planned: 100 by 2001 Company investment: Rs. 5 crores Franchisee investment: about Rs. 40 lakhs The Rs. 200 crore Bangalore based Amalgamated Bean Coffee, India's largest coffee chain has set up a chain of cafes that mirror the successful day offers a variety of coffee blends and also a limited menu of snacks like sandwiches and pastries.
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CASE STUDY NOV: 2001 The three morning flights scheduled to leave Mumbai for Delhi at 6.30, 8.e0 and 8.45 a.m. were delayed due to fog in Delhi. The first two were rescheduled for 9.15 a.m. in the hope that by then the weather would improve. At 8.30 a.m. the passengers were asked to proceed for security check and await departure call. An announcement at 8.50 a.m. requested passengers on the second flight who were waiting in the lounge on the ground level to board the aircraft. Those who were booked for the first, waiting on the first floor lounge heard this announcement. Anticipating a similar announcement for them, they moved gradually to the gate. The movement of the staff through the aerobridge and to the telephones gave the impression that something was wrong. But the gate did not open. At about 9.15 one of the staff was asked the reasons for the delay. He replied rudely that they would be boarding within five minutes. At 9.30 a.m. another traffic assistant also said within five minutes. The passengers were getting restive. When the same answer was given by another assistant, the passengers got infuriated. They also felt that the staff was not doing their duty and that the delay was avoidable. Within another five minutes they were asked to board the aircraft. When all were seated, the pilot announced that the weather in Delhi was still bad, and that the next report was expected after 30 minutes and the breakfast would be served on board. From the air hostess, the passengers came to know the passengers of the second flight were also boarding only then This incident could have been communicated periodically. The announcement about boarding the flight was misleading. The traffic assistants perhaps themselves did not know the real situation when they had said five minutes. This situation further aggravated by further delay due to late arrival of a politician who was also travelling to Delhi. The parting greetings were given to the passengers "Hope you enjoyed the Flight" just before landing at Delhi. As if this was not enough, the passengers had to wait for one more hour for luggage clearance. Questions: i) Which were the critical interactions and which were not? ii) Did all the airline staff and the passengers exhibit technical and interactive skills? Elaborate. iii) What were the reasons for the delay at both the airports? iv) What steps could have been taken to rectify the situation as a service recovery strategy? v) What kind of an image did the parting remarks convey to the passenger? If you were the passenger, how would you perceive the quality of services rendered by the airline? NOV: 2002 On checking into a 5 Star Hotel in Bangalore recently, Anand was impressed by the
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courtesy extended to the visitor in the front office — polite, friendly and efficient. The checking in card was filled and ready, just waiting to be signed. He walked upto the room and his bag arrived at the time. A few minutes later, the bearer came in with a welcome drink — which was "on the house". It was certainly an excellent start. Later when he settled down, he discovered that there was no table lamp in the room and this made it difficult to read. The press button for the shower did not work, so one had to bend down and keep it pressed right through a shower. The wash basin became easily clogged and was virtually unusable. A complaint was made to the housekeeping department and they said they would certainly attend to it. Normally it happened for a whole day. The next day, a complaint was given to the Reception desk. They said they would surely look into it. In the evening it was discovered that only the basin had been attended to, but the floor was littered with some screws and nails lying in a pool of dirty water. Another complaint was lodged the following morning at the Reception desk, but again it remained unattended to by the evening. But the unkindest cut of all was inflicted the following morning when the girl at the Reception desk (who was new recruit, perhaps wrongly selected and obviously inadequately trained) crowed in her most pleasantly sarcastic manner: "Good morning, Mr. Anand, any further complaints today? I am all ears!" At that moment, the hotel lost a customer. The back room services rendered by the Hotel were poor and she compounded the problem with poor front office service. She had forgotten or perhaps never been taught that in the marketing of a service, the focus is not just on delivering goods, but on satisfying the reasonable expectations of paying customer. Questions: i) What were the moments of truth (indicate various interactions). ii) Highlight the critical and non-critical incidents. iii) Which were the supplementary/peripheral services missing in the hotel? Justify their importance. iv) What steps could have been taken to resolve the problem effectively? NOV: 2003 The passengers were through with their final security check and were boarding the aircraft The LOTUS Airlines personnel were awaiting the arrival of a V.I.P. to clear the take off. Finally the V.I.P arrived half an hour late and went directly for the security check. During the check the security personnel came across weapon with live cartilages. He was requested not to carry the weapon with live cartilages. He was requested not to carry the weapon on flight. However the V.I.P. refused to part with the weapon for personal security. When he was asked for the license, he said he was not carrying it. The security personnel refused to give permission to the V.I.P. to board the aircraft .This led to heated argument and in rage 'Lille V.I.P. threw one of the security staff across the floor.
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This further delayed the flight. The passengers were very restless since they were in the aircraft last 1½ hours. To top it up they were not allowed to leave the aircraft for security purpose. Questions: i) In this case, where do the service gaps exist and how would you close the gaps? ii) Elaborate the importance of "People" in airline services? iii) As service provider how would you manage this kind of service encounter? What is a service encounter? iv) What would you do when prevention fails and damage is done? NOV: 2004 Krishnan was delighted to get a phone call one evening from the finance company, saying that the new car that had been launched only a month back was ready for delivery. The appointment was fixed for next morning at 10. Krishnan and his family reached the show room promptly at 10, hoping to collect the vehicle before the inauspicious "rahu kalam" began at 12. When he entered the showroom, nobody, not even the receptionist asked him who he was and what he wanted. After standing around for sometimes, he asked a gentleman who was walking past, whether he would be attended to. He was told to wait. An empty chair was pointed out him. The rest of the family had to stand. After a few minutes, a young lady came with a file, and all small smiles, asked whether he had brought the balance money? "What balance "asked Krishnan? I was, told that all payments had been made and I can take the car this morning". The lady went to check. AS Krishnan was waiting, another well-dressed person, all smiles again, came and asked whether he would like to select accessories from the list, which were two full pages. "Let me get the car first", shouted Krishnan. The original Lady returned all smiles again, confirming that no payments were due and handed him the papers. One was an insurance receipt. Krishnan wanted to know what insurance cover had been taken. "This is the insurance cover," the lady said, "Yes what kind of cover", Krishnan wanted to know. She went back to check again and confirmed that it was a comprehensive cover. Krishnan was then required to go to the workshop, where, after more delay and paper work, he got the car at 12.30 pm. Questions: i) Identify the Service Gaps in this case and how would you rectify the same? ii) Explain the "core" and "supplementary" products in the context of above case. iii) How do you find the "people" factor in the above case? What skills, according to you, are lacking in them? iv) As a show room manager what service recovery measures would you take? NOV: 2005 The computerized reservation system in Mumbai was closed on 10" January, 1988. The software was being upgraded for better service. On the day, manual systems were put into
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operation, but only to attend to needs of passengers leaving by trains up to 12 noon on the 11`h A person, who was booked on the train leaving at 7 a.m. on the 12", could not avail of the manual facilities for cancellation. !f he had done so, he would have lost Rs. 30 as cancellation charges. He could only cancel his ticket on the 11th, and as per rules, he would loose 25%. But when he went to cancel it on that day, the cancellation charges would go upto 50% of the cost of the ticket. He pleaded with the local officers to certify on the ticket that he [lad come to cancel it, and that he could make a separate claim for refund later but this could not be done, as per rules. Only the ticket collector on the train was authorised to endorse on the ticket the fact of non-utilization. Nobody could help, beyond stating the rules, "The procedure and their helplessness. Questions: i) Discuss this case with the help of, the cause & effect analysis. ii) What is "flower of service"? Bring out the deformed petals in this case. iii) List out the critical and non critical incidents. NOV: 2006 Kool Travels Pvt. Ltd., a Holiday Company has been arranging regular holiday tours to Rajasthan. Kool Travels had regular arrangements with Maharaja Hotels for accommodation of their tourists in Jaipur. In December, 2005 Mr. Tejas and his family booked a Rajasthan Tour Package with Kool Travels and checked into Maharaja Hotel in the room allocated to him and his family. However Mr.Tejas did not like the room and decided to register his complaint about the room. In the meantime his wife, Pooja, switched on the television and was greeted by a screen with Maharaja Hotel Customer Survey. Using the remote control, Mr. Tejas punched in his evaluation. To his surprise within two minutes of the receiving the electronic communication, the Hotel Manager called him to say that because the Hotel was entirely booked this being a busy season, the room could not be exchanged, however the Guest could expect a Hospitality Gift from the Hote! for his inconvenience. The next day a garden facing room was available and the Hotel Manager offered the same to Mr. Tejas if he wished to shift. Mr. Tejas declined and told the Manager that he and his family were quite comfortable in the present room. Questions: i) Give your opinion about expected level of expected level of service in the case. ii) Analyse the service recovery in the case. iii) What would be the effect of this incident on the Kool Travels? iv) Why do you feel Mr. Tejas declined to change his room? NOV: 2007 Dear Customer Service Manager, Through the XYZ Travel Agency, my wife and I booked round trip first class seats on the following Dorby Airlines flights on the dates indicated:
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1st July DBA 3072 Mumbai to Heathrow 1st July DBA 86 Heathrow to Munich 21st July DBA 87 Munich the Heathrow 21st July DBA 3073 Heathrow to Mumbai. In addition, we had booked domestic flights between Udaipur-Mumbai and back for the respective dates on another airline. The out bound flights 3072 and 86 seemed pleasant enough at the beginning. However, mid flight on 86, we discovered that we had been poisoned on flight 3072, apparently by the chicken sandwich that was served in first class that day. My wife was so ill dying to get to the restroom to throw up, she passed out cold, hitting her head and we discovered over the next few days, apparently damaging her back. In addition to the nausea and diarrhea, she had a large knot on her head and headaches far several days. Her lower back has been in constant pain ever since. I, too, was very ill for several days. A nice start for a vacation: But it gets worse. During the long layover between flights at Heathrow, there was a tremendous rainstorm, and our baggage apparently was left out in it, a situation that we discovered when we arrived at our first nights lodging and discovered of our clothing was dripping wet. In addition, four art prints that we were bringing as gifts for our friends were ruined. The return flights were better only in that we did not get poisoned; instead we did not get fed! We had to ask for drinks-, the meals ran out and we were given no choice but an overdone piece of stale meat, with tomato-sauce on it. Given our previous experience with the food, we decided not to eat. Flights 87 was delayed in boarding by two hours, due to the "slowness in cleaning the aircrafts and late arrival of the crew" we were told. Also, thanks to heavy rainstorm that hit Heathrow again, our flight take off was further delayed-, all of which could have been avoided, if the plane had taken off before the rainstorm had started, as scheduled, had the crew and the cleaning done their jobs on time. Due to the excess delay at Heathrow, flight 87 was very late and we could not make our connection from Mumbai to Udaipur. As it turned out we would have barely been able to make it if the flight has been on time because Dorby Airlines had changed not only the flight numbers but also the flight times on the Heathrow - Mumbai leg of our journeyAND WE WERE NEVER NOTIFIED OF THIS CHANGE UNTIL WE ARRIVED AT THE AIRPORT. As first class passengers we have been treated as cattle! In Disgust, J. D'Souza Questions: i) What are services? What are critical incidences in this case? ii) What according to you are the causes for poor service deliver in this case? iii) Discuss the core and supplementary service in this case. iv) What is service recovery? How would you design a complaint handing process?
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NOV: 2008 The success of the package holiday firm Club Med in becoming a household name in the holiday business is no accident. Everyone at Club Med, from the C.E.O. to the kitchen porter, is committed to the ideal of customer satisfaction through every element of the package. Every member of the staff is aware that guests are coming to experience a combination of the resort location, the excellent facilities and the all-important element of personal interaction. Guests come for a total experience not just to have a few days away from home and work. Club Meds success can be attributed to the creative inclusive packages it has developed – all combining the basic mix of location, facilities and personal interaction. A typical Club Med inclusive packago is comprised of three meals a day, beer or wine with lunch arid dinner a swimming pool and gymnasium, sailing, kayaking, snorkeling, tennis, water exercise, rock climbing, archery, aerobics, volleyball, basket ball, table tennis, billiards, picnics, evening entertainment and dancing a night club and conference facilities. Club Med offers different holiday plans – a budget plan, a moderate plan, and a deluxe plan –from which customers can choose in accordance with their expectations and expenditure. Within these categories they offer various packages primarily for couples, packages primarily for singles and packages primarily for families. The family package incorporates sub packages selected by parents for their children according to age – kids club. Petit club, Mini club and Baby/nursery club. With these various packages, Club Med offers not merely a holiday, but a hassle free vacation package. In the 1970s and 1980s Club Med was in vogue as "the" holiday destination for many single people in Europe. As these customers grow older, got married, and began having children, their needs changed. In response, Club Med extended its services and packagesthereby successfully maintaining the loyalty of its original customers many years. Using various specialized packages, Club Med has maintained its basic customer's base while simultaneously extending its market demand to other customer groups. Questions: i) Explain the product / services offered by Club Med. ii) Explain the market segmentation of Club Med. iii) Explain the importance of team work in service sector.
iv)
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SERVICE SECTOR MANAGEMENT
NO. 1.
INDEX CHAPTER Introduction of Services Marketing 1
PAGE NO.
2.
Key Elements of Services Marketing
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3.
Service Quality
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4.
Services Management
70
5.
Case Study
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P's Of Service Sector Management Sr. No. 1 Sector Roadway (Public Utility Services) Product Tar road, Medians, Pavement Place Cities, Towns, village, Forests, Toll gates Price Material , Wages, Salary, Survey Travel Class, Distance traveled, Luggage Promotion Publicity, Word-of-Mouth Promotion, Public Relation Advertising, Publicity, Word-of – mouth promotion , Public Relation Advertising, Publicity, Word-of – mouth promotion , Public Relation Advertising, Publicity, Word-of – mouth promotion , Public Relation Physical Evidence Signs, Milestone, Road Roller People Committees, Govt.dept. traffic police, Engineer, Labour Driver, Guards, Railway Police, Maintenance staff, Station Master Government service, Postman, Delivery boy, Booking staff, Logistic staff etc Trauma care personnel, driver, fire fighter Process Digging, Laying, Repair, Rolling, Purchasing, Contracting, Routing, Ticketing, Repair, Truck Laying , Transporting etc Enquiries, Booking, Transportation, Documentation, Etc
2
Railway (Public Utility Services)
Coaches, Tracks, Signals, Bridges, Tickets Letter, Cards, Stamps, Saving, Scheme, Post boxes, Mail Bags Fire Engine, Helmets, Clothing
Station
Tracks, Signals, Station Stalls, Trains Letter, Packets, Parcels, Mail Van, Document, Receipt, Post Box, Stamp seal, Pin codes etc Fire engine, first aid kits, hoses, water, fire proof clothing, cranes fire station
3
Postal and Courier ( Public Utility Services)
Post Office, Post Box, Collection centers, Door receipt
Distance , Weight, Nationality, Speed Size
4
Fire Control ( Public Utility Service)
Wherever fire erupts e.g. Houses, Offices, Forests
Free service for public which is indirectly collected from tax
Training, fire fighting, Medical aid, Counseling, Safety education
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5
Civil Aviation (Public Utility Service)
Airplanes, Tickets, Magazines, Skyshoping
Airport
Distance Traveled, Travel class, Schemes
Advertising, Publicity, Word-of – mouth promotion , Public Relation, Broadcasting Advertising, Publicity, Word-of – mouth promotion , Public Relation
6
Electricity ( Public Utility Services)
Meter, transformer, switch boards, Distribution tower and lines, energy, fuses
Homes, Offices, Factories, Commercial Establishments, Manufacturing, Agriculture, Medical Centers Telecom center Home, Workplace, Private operator
Industrial consumption, Domestic consumption, Subsidies
7
Service Telecommuni cation (Public Utility Service) Service: Health Care
Telephone, Telegraph, Fax, Internet , Intranet
Distance , Time of the day, Duration Service charges
Length of stay, Level of illness, type of room, specialist, Tests required
8
Diagnostic and Surgical equipment, First aid kits, Medicines
Clinic, Hospital, Camps
Advertising, Publicity, Word-of mouth promotion , Public Relation Advertising, Publicity, Word-of – mouth promotion , Public Relation
Airplanes, Airport, Tarmacs, Radars, Control Tower, Aerobridges, Passengers, Cargo, Conveyors Transmission tower, grids, transformer, meters, fuses, lines, generating station, meter reading cards, Bills Directories, Bills, Telecom equipment Yellow colors display board
Hospital, Intensive care, Wards, Medical shop ambulance, Mortuary, Emergency
Pilots, Cabin Crew, Caterer, Administrative staff, Techniques, Engineer, Security, Helper
Ticketing, Boarding, Transporting, Hospitality, Booking, Announcement Etc
Electricity boards, technician, administrative staff
Operators, Service Personnel
Generation, Supply, Metering, Billing, Collection, Repairs, Emergency calls, Installation Machine Operation, Billing, Collection
Doctors, Nurses, Para medicines, Pharmacists, Specialists
Testing, Surgery, First Aid, Physical examination, Catering, Laundry
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9
Service: Tourism
10
Service: Hotel (Hospitality Service)
Cottage, Pubs, Restaurant, Shops, Accommodatio n : 5 – 1 star Reception, Rooms, Areas, Entertainment, Shopping, Personal care, Parks, Swimming pools Luxury, Express, Pointin-point, Ordinary Service, Light & heavy vehicles Policies- whole life, ordinary, limited, payment, convertible, Marriage, Accident etc
Hill station, Beaches, Palaces, Places of workship, Heritage sites Near airport, Bus Stand, Railway station, Ports, Tourism spots, Shopping areas, Place of workship Tourist places, Business Establishment, Personal Visits, Airport, Station
11
Service Travel (Hospitality Services)
12
Service: Insurance ( Financial Service)
Branches, offices, home
Distance, Accommodati on, Food, Drinks, Guides, Entry fees Occupancy periods, star category, room capacity, Air conditions, Location, Room service, taxes Distance traveled, hours traveled, flat rates, drivers tips, luggage, fuel consumed, Premium, rate of death, rate of interest, expenses incurred
Advertising, Publicity, Word-of mouth promotion , Public Relation Advertising, Publicity, word-of – mouth promotion , Public Relation, Telemarketing Broadcasting Advertising, Publicity, Wordof – mouth promotion , Public Relation Telemarketing , Broadcasting Advertising, Publicity, Wordof – mouth promotion , Public Relation Telemarketing Broadcasting
Monument, Leisure centers, Healing Location, Historic places, Monument Tariff cards, Menu cards, Interior decoration, Furnishing, House Keeping, Display board, lighting, Valets Vehicle, booking office, tariffs, brochures, mobile displays Brochure, leaflet, environment, people, currency, client, interior, decoration
Tour operator, Government, Travel agent, Tourist guide,
Training, Guiding, Explaining, Preserving, Documentation House keeping, Food Preparation check- in & out, Foreign exchange, Room service, Meeting arrangement
House keeping staff, Bill boy, Receptionist staff, Chefs, Waiter, Administrative staff
Drivers, Maintenance staff, booking staff, PRO. Liaison officers
Booking, vehicles purchase, marketing, billing, collection, documentation
Brokers, agents, company staff Application, verification, sanction, receipt
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13
Service: Advertising Agency (Professional Service) Service: Banking ( Financial Service)
Media campaign, layouts, accounts, video, audio tapes Deposits, letter of credit, foreign currency, consultancy, merchant, banking
Camera, filters, lights, reflectors, clap boards, films, cable, liquids, make-up kits, animators Healthcare, pollution, abatement equipment, bucket of earthworms to improve soil quality of garden
Agency offices, client offices, other meeting venues
Media involved, target audience, time, no. of persons, physical work
Advertising, Publicity, Wordof -- mouth promotion , Public Relation Advertising, Publicity, Wordof – mouth promotion , Public Relation
Photographs, brochures, printouts, logo, trademarks, brand names Staff, cheque book, currency receipt, application form, counters, ATM's, credit cards, Vans, generator, lights, studios, theaters, tickets, hoarding, crowds, copyrights, Raw material, energy efficiency, waste pollution, packaging, lifespan, reusability , recyclables
Editors, copywriter, creative thinkers, artists, media personnel Staff, agent , auditors, board of directors, trade union, Reserve Bank of India
Layout, copywriting , typography, photo setting Canvassing, application, verification, sanctioning, delivering, documentation,
14
Branches, branch and offsite ATM's, online banking
Interest, commission, dividend, shares, bonds, non– performing,
15
Service Entertainment ( Film Marketing)
Studios, movie theaters, films cities, dubbing theaters, labs, recording theaters, Natural environment
Salary, wages, signing amount, location, rental, shooting period, costumes, special effects
16
Service Green Marketing
Environment friendly raw materials, cleaner process and technology, compiling with new green law
Advertising, Publicity, Wordof -- mouth promotion , Public Relation Telemarketing , Broadcasting Advertising, publicity, word – of – mouth promotion, public relation, broadcasting
Art director, artistic, audiographers, designer, choreographers, suppliers, technicians
Environmentalist
Editing, Directing, choreographer, stunts, music, production, acting financing, casting scripting, dubbing, mixing,
Activities, scientists, conservation list educationalist
Preserving, educating, documentation, canvassing, researching
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