Service Marketing

As India moves increasingly toward a services economy, marketers need to know more about
marketing service products. On a simplistic note, one can say that services are activities or
benefits that one party can offer to another that are essentially intangible and do not result in the
ownership of anything. Thus we see how services are different from goods. During the past
decade services have increasingly assumed an important role in the Indian economy. Ever since
this trend was set in the nineties, services have gained dominance. The competition,
simultaneously, in service organisations, is becoming intense and severe. As a result these
organisations have to have a more professional approach to managing their businesses. Perhaps it
is in this context that the role of marketing is gaining importance in service organisations. In this
unit, you will be introduced to the concept of services.
Defining Services

One of the first to define services was the American Marketing Association, which, as early as in
1960, defined services as ìactivities, benefits, or satisfactions which are offered for sale, or
provided in connection with the sale of goods.î This definition took a very limited view on
services as it proposed that services are offered only in connection with the sale of goods.

The other definition which was proposed, in 1963, by Regan suggested that ìservices represent
either intangibles yielding satisfaction directly (transportation, housing), or intangibles yielding
satisfaction jointly when purchased either with commodities or other services (credit, delivery)î.
For the first time services were considered as pure intangibles capable of providing satisfaction
to the customer which could be marketed like tangible product

According to Gronross, ìa service is an activity or series of activities of more or less intangible

nature that normally, not necessarily, take place in interactions between the customer and service
employees and/or physical resources or goods and/or system of the service provider, which are
provided as solution to customer problems.

Customer has a role to play in the production process as the services are provided in. They take
place in the interaction between the customer and the service provider, which means that services
are produced and consumed simultaneously. As a result services are intangible. Services are by
and large activities or they are series of activities rather than things

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 Understanding Service Characteristics

As our knowledge of the characteristics of services grows, so does our ability to deal with them
from both an economic and marketing perspective. Services are intangible, inseparable, variable,
and perishable. Each characteristic poses problems and requires strategies to deal with those
problems.

In the following, we will go into the most relevant characteristics of services. Characteristics of
services apply universally to any service. The most important characteristics of services are:

 Lack of ownership
 Intangibility
 Inseparability
 Variability
 Perishability
 User participation

Lack of Ownership – Characteristics of Services

Lack of ownership may be one of the most obvious ones of the characteristics of service. It
refers to the fact that you cannot own and store a service like you can a product. This
characteristic is strongly linked to several other characteristics of services, such as
intangibility, perishability, inseparability.

Intangibility – Characteristics of Services

When thinking about the characteristics of services, intangibility may come to your mind
first. Service intangibility means that services cannot be seen, tasted, felt, heard or smelled
before they are bought. You cannot try them out. For instance, airline passengers have
nothing but a ticket and a promise that they will arrive at a certain time at a certain
destination. But there is nothing that can be touched.

Inseparability – Characteristics of Services

Characteristics of services include inseparability, which means that services are produced and
consumed at the same time. This also entails that services cannot be separated from their
providers. Contrary to services, physical goods are produced, then stored, later sold, and even
later consumed. Services are first sold, then produced and consumed at exactly the same
time. A product can, after production, be taken away from the producer. However, a service
is produced at or near the point of purchase. For instance, when visiting a restaurant, you
order your meal, the waiting and delivery of the meal, the service provided by the waiter/ress
etc. All these parts, including the providers, are part of the service and therefore inseparable.
In services marketing, a service provider is the product.

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Variability – Characteristics of Services

Variability does also belong to the important characteristics of services. It refers to the fact
that the quality of services can vary greatly, depending on who provides them and when,
where and how. Because of the labour-intensive nature of services, there is a great deal of
difference in the quality of service provided by various providers, or even by the same
providers at different times.

Perishability – Characteristics of Services

Perishability means that services cannot be stored for later sale or use. In other words,
services cannot be inventoried. This is one of the most significant characteristics of services,
since it may have a major impact on financial results. Doctors or dentists often charge
patients for missed appointments because the service value has foregone. The value existed
only at that particular point and disappeared when the patient did not come. When demand is
steady, the perishability of services is not a problem. However, in case of fluctuating
demand, service firms can have difficult problems. For this reason, transport companies own
much more equipment than they would if demand were even throughout the day: the demand
during rush-hours needs to be served at that specific time, it cannot be served later or earlier.
Consequently, service companies use various techniques for creating a better match between
demand and supply: Demand shifting.

User participation – Characteristics of Services

Finally, the characteristics of services include user participation. Indeed, users participate in
every service production. Even when the user is not required to be at a location where the
service is performed, users participate in every service production. A service cannot be
separated from its provider, but neither can it be separated from its user.

Role of service sector in the modern economy

Like primary and secondary sectors, service (tertiary) sector also plays an important role for
the economic development of a country. According to economists like Colin Clark, Simon
Kuznets etc., the development of a country depends on the performance of the service sector.

In a modern economy the share of primary sector towards national income is gradually
reducing, whereas; the shares of secondary and tertiary sectors are improving day by day. In
1950-51, the contribution of service sector in national income was 34%, which rose up to
65% . Service sector mainly includes transports and communications, banking and insurance,
education, health etc.

Service sector plays a vital role in the development of a modern economy. In fact this sector
is so vital that total performance of an economy depends on the performance of the tertiary
sector.

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(i) Share in Net National Product:

At present, the service sector contributes the maximum share in country’s net national
product at factor cost (national income). According to 2019-20, 65 % share of national
income comes from service sector and moreover, 22.9% of total working population are
employed in this sector.

(ii) Helps Industrialization:

The development of industries is dependent on the performance and improvement of

transport, communication, electricity, banking etc. in a country. Transport system helps to
carry raw materials, finished goods and labourers in their required destination.
Communication helps to widen the market industrial goods. Electricity and banking services
help to flourish the industries in remote areas.

(iii) Expands Agriculture:

Service sector helps to develop the agricultural production by providing better network
facilities. It helps to carry raw materials and finished goods from one place to another.

(iv) Removes Regional Imbalances:

This sector provides a well-organised transport and communication service. It also provides
sufficient banking services along with expansion of education and medical facilities in the
backward regions of the country. Thus it helps to wipe out the problem of regional
imbalances and disparities within the country.

(v) Growth of Market:

This sector provides different types of services to both agriculture and industrial sectors. Thu:
in other way, it helps to grow the proper markets for both agricultural and industrial goods
finished goods as well as raw materials or semi-finished goods.

(vi) High Quality of Life:

Better services in the areas of transport and communication, banking and insurance,
education and health etc must help a country to pave the path for economic development by
increasing the quality of life or standard of living within the country. It also helps to improve
the value of HDI (Human Development Index) of a country.

(vii) Increase Productivity:

This sector helps the working force by giving sufficient technical education and proper
medical facilities. Moreover, a well-organised network of transport and communication
system increases the mobility and informations among the workers. All these make the

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labourer more skillful and efficient and thus the productivity (producing capacity of a
labourer) will increase simultaneously.

(viii) Rise in International Trade:

A well-developed service sector, specially transport, communication banking etc., helps to

expand the international trade. Hence, it will also help to increase the foreign exchange
reserve within the country.

Factors Identified from the Demand and Supply Sides to Influence the Growth of Service
Sector

Factors contributing service sector can be broadly classified under three heads, viz. demand
side factors, supply side factors and other factors. The literature on growth in service sector
primarily argues that when an economy grows, both demand side and supply side factors
operate that lead to higher growth in the service sector as compared to the other sectors and
also lead to a larger share of the service sector in total employment.

(1) Demand Side Factors:

Under this, the following factors have an influencing effect on the growth of the service
sector:

(a) High income elasticity of demand for service sector oriented goods has a positive effect
in boosting the demand for services. For instance, automobile industry has both forward
and backward linkage for services. Outsourcing of spare parts required would generate
demand linked to backward linkage while the after sales service needs would generate
demand linked to the forward linkage. With a rise in income, the demand for such goods
would increase. With increased demand, the service sector related activities also would
get a boost.
(b) As economies grow and become more specialised, firms increasingly contract out several
functions, which they were earlier carrying out themselves. The process of contracting
out jobs to industries leading to first coming up and then their further expansion over
time is called ‘ancillarisation’. Likewise, jobs contracted out are referred to as
‘splintering’. Splintering, by increasing the demand for services inputs in production,
boosts the growth of services sector in two dimensions. One, by contributing to the
growth of services sector faster than that of other sectors in the economy and two, by
increasing the share of services sector in GDP even if the GDP itself is not growing.
(c) Increased trade is another factor, which can contribute to boosting the demand for service
sector activities. Trade promotes the setting up of multinational companies in a free
market economy. Changes in technology, which is a feature of the great trade promotion
and which in the recent past has enabled the delivery of services across countries at a
very has cost, has contributed to expansion of world trade significantly.

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(2) Supply Side Factors:

The supply side factors influencing the growth of service sector include the following:

(a) Higher inflow of FDI in services led to higher demand for services. This could be by way
the enhancing the scope for locally produced services deriving the benefit of scale
economies. This could, however, be also viewed as a demand side factor contributing to the
growth of services.

(b) Availability of improved technology results in reduction in costs of providing services

which, in turn, boosts the share of services in GDP.

(c) Availability of trained/skilled/English knowing labour force, which is vitally required to

take advantage of the emerging opportunities in the service sector.

(3) Other Factors:

Other Factors which can provide a boost for the growth of service sector include:

(i) New activities or products emerging out of technological developments (e.g. internet
services, cellular telephony, credit cards, etc.);

(ii) policy changes removing impediments to the growth of the sector (e.g. increasing the FDI
cap, lowering of import tariffs, etc.).

Role of service sector in Indian economy

Introduction

The tertiary sector of the economy (also known as the service sector or the service industry)
is one of the three economic sectors, the others being the secondary sector(approximately the
same as manufacturing) and the primary sector (agriculture, fishing, and extraction such as
mining).

The service sector consists of the "soft" parts of the economy, i.e. activities where people
offer their knowledge and time to improve productivity, performance, potential, and
sustainability. The basic characteristic of this sector is the production of services instead of
end products. Services (also known as "intangible goods") include attention, advice,
experience, and discussion. The production of information is generally also regarded as a
service, but some economists now attribute it to a fourth sector, the quaternary sector.

The tertiary sector of industry involves the provision of services to other businesses as well
as final consumers. Services may involve the transport, distribution and sale of goods from
producer to a consumer, as may happen in wholesaling and retailing, or may involve the
provision of a service, such as in pest control or entertainment. The goods may be

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transformed in the process of providing the service, as happens in the restaurant industry.
However, the focus is on people interacting with people and serving the customer rather than
transforming physical goods.

For the last 30 years there has been a substantial shift from the primary and secondary sectors
to the tertiary sector in industrialized countries. The tertiary sector is now the largest sector of
the economy in the Western world, and is also the fastest-growing sector.

Services or the "tertiary sector" of the economy covers a wide gamut of activities like
trading, banking & finance, infotainment, real estate, transportation, security, management &
technical consultancy among several others. The various sectors that combine together to
constitute service industry in India are:

Trade

• Hotels and Restaurants

• Railways

• Other Transport & Storage

• Communication (Post, Telecom)

• Banking

• Insurance

• Dwellings, Real Estate

• Business Services

• Public Administration; Defence

• Personal Services

• Community Services

• Other Services

The services sector is not only the dominant sector in India’s GDP, but has also attracted
significant foreign investment, has contributed significantly to export and has provided large-
scale employment. India’s services sector covers a wide variety of activities such as trade,
hotel and restaurants, transport, storage and communication, financing, insurance, real estate,
business services, community, social and personal services, and services associated with
construction.

Market Size

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The services sector is a key driver of India’s economic growth. The sector contributed
55.39% to India’s Gross Value Added at current price in FY20*. GVA at basic prices at
current prices in the second quarter of 2020-21 is estimated at Rs. 42.80 lakh crore (US$
580.80 billion), against Rs. 44.66 lakh crore (US$ 633.57 billion) in the second quarter of
2019-20, showing a contraction of 4.2%. According to RBI, in September 2020, service
exports stood at US$ 17.28 billion, while imports stood at US$ 10.13 billion.

Nikkei India Services Purchasing Managers' Index (PMI) stood at 53.7 in November 2020,
reflecting strong growth since March 2020, before the coronavirus pandemic accelerated;
however, it is still below the neutral mark, indicating eighth consecutive decline in business
activities in the private sector.

Exports of services

Services contribute significantly to India’s integration with world markets through trade and
FDI flows. India has been recording high growth in the export of services during the last few
years. As per RBI’s data, India’s services exports grew from US$ 17 billion in 2001-02 to
around US$ 102 billion in 2008-09.Growth has been particularly rapid in the miscellaneous
service category, which comprises of software services, business services, financial services
and communication services.

In 2005, while India’s share and ranking in world merchandise exports were 0.9% and 29th,
respectively, its share and ranking in world commercial services’ exports was 2.3% and 11th,
respectively. In 2008, India’s share and ranking in world commercial services’ exports
improved to 2.7% and 9th, respectively

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Services exports have grown much faster than merchandise exports and corresponded to 57%
of merchandise exports in 2008-09. The share of services in India’s total exports has
increased from 7% in 1999-2000 to 37% in 2008-09 suggesting its growing importance in
India’s overall export basket.

Employment in Services Sector

At present services account for about 26 per cent of total organized sector employment in the
country while contributing a little over 55 per cent to the national GDP. A sectoral
disaggregation of the employed workforce shows that the contribution to employment of
services (excluding construction) rose from 22.8 to 23.4 per cent, while the workforce
increased from 397.0 to 457.8 million between 1999-2000 and 2004-05 (details in Table 1c
below). Out of the increase in workforce by 60.8 million, the incremental share of services
was 16.8 million. However, despite the low overall elasticity of employment in the country
(at just 0.48) and not only in the services sector, the latest NSSO data shows that employment
elasticity is reasonably high (and increasing) in certain services categories, with financing,
insurance, real estate and business services registering an elasticity of employment of 0.94
followed by construction sector employment elasticity at 0.88.

Government Initiatives

The Government of India recognises the importance of promoting growth in services sector
and provides several incentives across a wide variety of sectors like health care, tourism,
education, engineering, communications, transportation, information technology, banking,
finance and management among others.

The Government of India has adopted few initiatives in the recent past, some of these are as
follows:

 On November 4, 2020, The Union Cabinet, chaired by the Prime Minister, Mr.
Narendra Modi, approved to sign a memorandum of understanding (MoU) between
the Ministry of Communication and Information Technology and the Department of
Digital, Culture, Media and Sports (DCMS) of United Kingdom Government to
cooperate in the field of telecommunications/information and communication
technologies (ICTs).
 In October 2020, the government selected Hughes Communications India to connect
5,000 village panchayats in border and naxal-affected states and island territories with
satellite broadband under BharatNet project by March 2021.
 In September 2020, the government announced that it may infuse Rs. 200 billion
(US$ 2.72 billion) in public sector banks through recapitalisation of bonds.
 In the next five years, the Ministry of Electronics and Information Technology is
working to increase the contribution of the digital economy to 20% of GDP. The
government is working to build cloud-based infrastructure for collaborative networks
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 that can be used for the creation of innovative solutions by AI entrepreneurs and
startups.
 On Independence Day 2020, Prime Minister Mr. Narendra Modi announced the
National Digital Health Mission (NDHM) to provide a unique health ID to every
Indian and revolutionise the healthcare industry by making it easily accessible to
everyone in the country. The policy draft is under ‘public consultation’ until
September 21, 2020.
 In September 2020, the Government of Tamil Nadu announced a new electronics &
hardware manufacturing policy aligned with the old policy to increase the state's
electronics output to US$ 100 billion by 2025. Under the policy, it aims to meet the
requirement for incremental human resource by upskilling and training >100,000
people by 2024.
 The Cabinet Committee on Economic Affairs has given its approval for continuation
of the process of recapitalization of Regional Rural Banks (RRBs) by providing
minimum regulatory capital to RRBs for another year beyond 2019-20.
 Government of India has launched the National Broadband Mission with an aim to
provide Broadband access to all villages by 2022.
 Under the Mid-Term Review of Foreign Trade Policy (2015-20), the Central
Government increased incentives provided under Services Exports from India
Scheme (SEIS) by 2%.

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 Classification of Services

There are numerous varieties of services. The numerous varieties of services can be classified
into certain categories or types on the basis of certain criteria.

Classification of services into certain categories or types serves certain purposes.

The purposes of classification of services into various categories are:

1. The classification helps to understand the nature of different services.

2. The classification is helpful to understand the attributes of a service product.

3. The classification is helpful to understand the relationship between service organisations and
their customers.

4. The classification is helpful to understand the nature of a service demand.

5. The classification is helpful in solving issues connected with planning and designing of
services.

The criteria used for the classification of services and the various classifications of services are:

1. Classification Based on the Ultimate Users of Services:

On the basis of the ultimate users of services, services can be classified into two categories.

They are:

(a) Services to final consumers – Services to final consumers are services which are provided to
ultimate consumers. Examples of such services are recreation and entertainment services,
tourism, hair-dressing and other personal care services, etc.

(b) Services to business firms – Services to business firms refer to services rendered by a service
organisation to business firms. Examples of these services are advertising, marketing research,
maintenance and repairs, installation of plants and equipments, computer programming,
consultancy, legal, accountancy, etc.

2. Classification Based on the Degree of Intangibility of Services:

On the basis of the degree of intangibility, services can be classified into two broad categories.

They are:

(a) Low intangible content services or highly tangible services – Low intangibility content
services are those services which have low intangibility content or which have high tangibility
content. Examples of these services are fast food services, vending machines, etc.

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(b) High intangibility content services or highly intangible services – High intangibility content
services refer to services which have high intangibility content or which are highly intangible.
Examples of these services are consultancy services, legal services, baby-sitting, etc.

3. Classification Based on Service Options:

On the basis of service options, services can be classified into two categories.

They are:

(a) Primarily people-based services – Primarily people-based services refer to services which are
primarily people-based or labour intensive. Examples of these services are restaurant, insurance,
medical services, etc.

(b) Primarily equipment – based services – Primarily equipment – based services refer to
services which are primarily equipment – based and which involve low contact with people.
Examples of these services are vending machines, automatic teller machine services in banks,
cinema, etc.

4. Classification Based on Specialisation:

On the basis of the expertise, skill and specialisation of the service providers, services can be
classified into two categories.

They are:

(a) Professional services – Professional services refer to services rendered by skilled specialised
professionals to business firms and ultimate consumers. Legal services, medical services,
consultancy services, accountancy and auditing services, etc. are examples of professional
services.

(b) Non-professional services – Non-professional services refer to services provided by non-

professional persons. Baby-sitting, domestic help, etc. are examples of non-professional services.

5. Classification Based on Profit-Orientation:

On the basis of profit-orientation (i.e., profit motive), services can be classified into two
categories.

They are:

(a) Profit-Oriented Services – Profit-oriented services refer to services rendered primarily with
profit motive. In other words, they are commercial services designed for profit. Examples of
profit-oriented services are banking service, insurance service, hotel, restaurant and catering
services, tour operation, airline service, etc.

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(b) Non-profit-oriented services – Non-profit-oriented services refer to services rendered without
any profit-orientation or profit motive. Examples of such services are educational services by
Government, hospital services by Government, services of cultural organisations, services of
welfare organisations, services of religious institutions, services of research foundations, etc.

6. Classification on the Basis of the Fact whether they are Primarily Directed at Public at Large
or Primarily Directed at Individuals:

On the basis of the fact, whether the services are primarily directed at public at large or primarily
directed at individuals, services can be classified into two categories.

They are:

(a) Public services – Public services refer to services which are primarily directed at (i.e.,
provided to) public at large. Examples of public services are public utility services, transport
services, insurance services, municipal services, etc.

(b) Private services – Private services refer to services which are primarily directed at
individuals. In other words, they are services designed for and used by consumers as individuals.
Examples of private services are personal care services, medical advice, etc.

7. Classification on the Basis of the Extent of Contact between the Service Provider and the
Consumer:

On the basis of the extent of contact between the service provider and the consumer, services can
be classified into two categories.

They are:

(a) High contact services – High contact services refer to services in which the consumers or
users have to spend more time with service providers to acquire or utilise the services. Examples
of high contact services are medical services, personal care services, etc.

(b) Low contact services – Low contact services refer to services in which the consumers or
users have to spend less time with the service providers to acquire or use the services. Examples
of low contact services are internet services, hospitability, theatre performance, etc.

8. Classification on the Basis of Number of Delivery Outlets:

On the basis of the number of delivery outlets, services can be classified into two categories.

They are:

(a) Single or specific outlet services – Single or specific, outlet services refer to services which
are provided to customers through a single outlet. In this case, the convenience of receiving the
service is less. Examples of these services are theatre services, museum services, etc.

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(b) Multiple outlet services – Multiple outlet services refer to services which are provided to
consumers through many outlets. In this case, the convenience of receiving the services is more.
Examples of these services are fast food service, bus service, etc.

9. Classification of Services as External and Internal:

Services can also be classified as:

(a) External services – External services refer to services provided by a service organisation to
external or outside agencies. Examples of these services are installation services, distribution
services, etc.

(b) Internal Services – Internal services refer to services provided by the service provider within
the organisation. Examples of these services are internal transport, office cleaning, etc.

10. Classification on the Basis of the Presence of Customers and Employees:

On the basis of the presence of customers and employees, services can be classified into three
categories.

They are:

(a) Self-services – Self-services refer to services in which there will be the presence of only the
customers. Examples of self-services are self-service restaurants, ATM banking service, etc.

(b) Inter-personal services – Inter-personal services refer to services in which there will be the
presence of both customers and employees. Examples of these services are education, hotel
services, entertainment services, etc.

(c) Remote Services – Remote services refer to services in which there will be the presence of
only employees. Examples of such services are insurance services, etc.

Goods Vs Services

Goods and services are an essential part of an economy, and these two terms are used in most of
the important economic discussions.

There are many products that a consumer purchases in order to fulfill their certain requirements.
These products can be either in the form of goods or services.

Goods are tangible, as in these have a physical presence and they can be touched, while services
are intangible in nature.

The purpose of both goods and services is to provide utility and satisfaction to the consumer.

Goods Meaning

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The meaning of goods can be expressed in terms of economics, as any item that provides utility
and fulfills the needs of the consumer. Goods can be classified as durable and non-durable based
on their durability. Durable goods last for a long time while non-durable goods perish sooner
than durable goods.

Goods involve transfer of ownership from the seller once it is purchased by the consumer
(buyer). There is a certain time period that is required for the production of goods. Goods due to
their tangible nature have a proper structure, size and shape. They can be produced as per the
market demand.

Services Meaning

Services are the intangible and non physical part of the economy that cannot be touched. They
are perishable in nature as they need to be provided at a moment when requested by the
consumer.Service lacks a physical identity and cannot be owned, it can only be utilised. For e.g,
when having dinner at a restaurant you can avail the concierge services but you do not own the
restaurant.

In other words, there is no transfer of ownership in services and unlike goods, services cannot be
stored and utilised later. Also, services cannot be distinguished from the service provider.

The following points of difference between services and goods can be discussed.

Basis of Comparison Goods Services

Nature Tangible Intangible

Transfer of Possible Not Possible

Ownership

Separable Goods can be separated from the seller Services cannot be separated
from the service provider

Storage Goods can be stored Services cannot be stored

Perishable Not all goods are perishable Services are perishable

Production and Goods have a significant time gap Services are produced and
Consumption between production and consumption consumed together
Key Differences Between Goods and Services

The basic differences between goods and services are mentioned below:

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  Goods are the material items that the customers are ready to purchase for a price.
Services are the amenities, benefits or facilities provided by the other persons.
 Goods are tangible items i.e. they can be seen or touched whereas services are intangible
items.
 When the buyer purchases the goods by paying the consideration, the ownership of goods
moves from the seller to the buyer. Conversely, the ownership of services is non-
transferable.
 The evaluation of services is difficult because every service provider has a different
approach of carrying out services, so it is hard to judge whose services are better than the
other as compared to goods.
 Goods can be returned to or exchanged with the seller, but it is not possible to return or
exchange services, once they are provided.
 Goods can be distinguished from the seller. On the other hand, services and service
provider are inseparable.
 A particular product will remain same regarding physical characteristics and
specifications, but services can never remain same.
 Goods can be stored for future use, but services are time bound, i.e. if not availed in the
given time, then it cannot be stored.
 First of all the goods are produced, then they are traded and finally consumed, whereas
services are produced and consumed at the same time.

Generally, companies keep a stock of goods with itself to fulfill an urgent requirement of goods.
It also keeps track of the quantity of goods at the beginning and the end. In contrast to services
are delivered as per the request of the customer itself. In short, the production of services
depends on the customer’s demand. Both are subject to tax like Value Added Tax (VAT) is
levied on goods while service tax on services provided.

Sometimes products offered by the companies in such a way that it ‘s hard to segregate goods
and services like in the case of a restaurant, you pay for the food you eat as well as for the add-on
services of the waiters, chef, watchman and so on.

Service as a System

Some of the most important components of the service system are as follows: 1. The Service
Operations System 2. The Service Delivery System 3. The Service Marketing System.

When receiving a haircut, for example, customers come into contact with receptionist and
stylists, the physical dimensions of the salon itself, heating, seating etc., and other customers
within the salon. The model draws the distinction between visible elements and invisible
components of the system.

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The latter would include all the other organizational activities taking place ‘backstage’, for
instance, staff training and administration. According to the model, in order to receive the
benefits from the service experience the customer must be part of the system thus explicitly
acknowledging the inseparability characteristic of services.

The components of the service system are:

(1) The service operations system,

(2) The service delivery system, and

(3) The service marketing system.

The model illustrates how the three functional areas – marketing, operations and human
resources of the service business – are integrated together.

The distinction between front stage and backstage elements of the system is maintained, with
backstage activities taking place out of sight of the consumer.

1. The Service Operations System:

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The service operations system comprises backstage activities, such as staff training, stock
replenishment, etc., as well as the front stage aspects of the operation experienced directly by the
customer, such as how they are treated by employees as soon as they enter the parlour, or how
quickly they are moved around from the washbasins to the cutting chair (if they are receiving a
cut and blow for example).

Although there is generally no need for the customer to see most aspects of service operations
(therefore they are kept backstage), some service providers deliberately expose customers to
backstage activities in an attempt to influence positively their perceptions of the quality of the
service provided.

Restaurants frequently invite customers to visit kitchens where the food is being prepared either
before or after they have eaten. This is designed to reinforce an image of fresh food prepared in a
hygienic cooking environment which may influence their perception of the overall quality of
their experience.

2. The Service Delivery System:

The service delivery system encompasses not only the visible elements of the service operating
system, employees and the physical facilities, but also includes exposure to other customers. In
many- service businesses, positive on-site interaction can have a significant impact on
customers’ overall perception of their experience. In the hairdressing parlour, customers may
find themselves waiting for a period of time for their particular stylist in a communal reception
area.

Conversations frequently take place at this point between customers who have never met prior to
entering the delivery system. Although the discussions may consist largely of banter and
pleasantries not directly connected with the hairdressing service (e.g. conversations about the
weather, traffic in town, etc.), the exchanges can for many customers improve their overall
experience by making the time pass more quickly.

Occasionally, when conversations turn to the service itself, the provider can benefit positively
from the exchange. For instance, one customer who has visited the parlour several times may
comment on the skill and expertise of a certain stylist, and the generally professional attitude of
all employees. To new customers attending for the first time the comments might have a positive
influence on their opinion of the parlour.

3. The Service Marketing System:

The service marketing system incorporates elements of the service experience which may
contribute to the customer’s overall view of the organisation but are not specifically part of the
delivery system. Clearly, many of these are the elements which the organisation may not be able
to control, such as conversations customers may have about the parlour with friends or relatives

18
at home, or exposure to the service they may get from reading a hairdressing editorial in the local
paper.

Lovelock feels that by conceptualising the service experience as three overlapping systems,
services managers are forced to consider their business from a customer’s rather than a purely
operations perspective. It highlights the importance of managing all elements of the business that
are visible to customers.

Growth of service sector

The Services sector accounts over one half of India’s GDP. The examination of the Services
sector at a reasonably disaggregated level is necessary because the services sector (tertiary
sector) is very highlyheterogeneous in nature than the primary and the secondary sectors. Further
technological advance, the process of globalisation and increased reliance of outsourcing have
led to rapid changes in the economic structures of many economies including India. And these
changes have resulted in the relatively higher levels of growth of the services sector. This study
attempts to understand the growth and structure of the services sector in India through the
analysis of the sub‐sectors within the services sector at a level of disaggregation that has so far
not been adequately analysed in the literature. It identifies sub‐sectors within services that have
contributed mainly to GDP growth. It also identifies sub‐sectors that have contributed mainly to
employment growth. The quality of employment in the services sector is examined through the
analysis of the productivity levels in different services. The paper also compares the performance
of producer services with distributive services and social or personal services.

The size of the service sector is increasing in virtually all countries around the world. In
emerging economies, the service output is growing rapidly and often represents at least half of
the GDP. Thus, Service economy is growing. As a national economy develops, the relative share
of employment between agriculture, industry (including manufacturing and mining).The service
economy in developing countries like India is mostly concentrated in financial services, health,
and education.

Market Size of Service Industry

A quick comparison with the American and Chinese economy reveals the unique nature of
India’s GDP growth from the contribution of the Service sector and its linkages to employment
and income distribution (Figures in bracket indicate employment). Over time, a robust
manufacturing and productive agriculture sector leads to the Service industry in India becoming
the mainstay of GDP and employment. In our context, the Service sector has become extremely
important to grow not only our GDP, as well as make it the key vehicle for employment
generation. However, the question is - how to increase value add to GDP from Service
companies in India, while reducing employment dependency from agriculture, as well as
boosting the manufacturing industry.

19
Factors contributing to the growth of service sector

1. Government policies:

It is Govt. which makes mandatory for price levels, distribution strategies, defining procedure
attributes. Another important action taken by the Govt.‟s “Privatization” means the policy of
transformcompanies.

The transformation of such operations like telecoms, airlines has led to restructuring cost cutting
and more market focused.

Pros of privatization:

a. Increase the efficiency

b. Increase in profits

New change will require services firm to change their marketing strategy, operational
procedures, and HR policies.

2. Social changes

Now a day there is a drastic change, two members are working, which requires to hire
individuals to perform tasks that used to be performed by a house hold member.

20
  E.g. Child care
 Laundry
 Food preparation
 Combinations of changing life styles like
 Higher income
 Declining prices for many high technology products –made for people to by computers.
 Mobile phone etc.
 Increased imaginations into countries –U.S, Canada and Australia.

3. Business trends

Many professional associations have been forced by Govt. to remove long-standing bars on adv
and promotional activities.

Franchising has become wider spread in many service industries.

Licensing of independent entrepreneurs to produce and sell a branded service according to

tightly specified procedures.

4. Advances in it:

Changes come from the integration of computers and tele-communication

More powerful software enables firm to create databases that combine information about
customers with details of all their transaction, so that they can be used to predict new trends,
segment the market, new marketing opportunities.

The creation of wireless networks and transfer of electronic equipments such as cell phones to
lap tops and scanners, to allow sales and customer service personnel to keep in touch.

5. INTERNATIONALISATION AND GLOBALIZATION:

A strategy of international expansion may be driven by a sector for new markets or by the need
to respond to existing customers who are traveling abroad in greater numbers.

panies set up operations in other countries they often prefer to deal with just a few international
suppliers rather than numerous local firms.

The net effect is to increase competition and to encourage the transfer of innovation in both
products and processes from country to country.

Service sector in India

21
The service industry in India includes a wide swath of the market. Business that do not deal in
the extraction or manufacture of raw materials fall into the service category. The service sector
has seen massive changes in recent history, many being attributed to outsourcing, automation
and digital based business that have altered traditional business models.

The current growth of service sector in India is based mainly on labour market arbitrage. Moving
forward, India can no longer rely on ‘low cost’ for ‘low value added’ services. Therefore, we
need solutions that address these:

i) Boosting the manufacturing sector with both direct and indirect spin - off benefits for the
growth of the service sector in India (e.g. Make in India)

ii) Moving up the value chain, especially in the IT/ ITeS sector.

iii) Broad - basing the Indian Services offering platform into sectors beyond the traditional IT/
ITeS by identifying the global demand for such services, and meeting these demands based on
our natural competencies and comparative advantages.

Service Sector in India: Sectors and Growth potential

Let us now look at the list of service sectors in India that perform, as well as demonstrate strong
potential for future growth.

IT-BPM/ Fintech

The IT/ITeS & Fintech segments provide over $ 155 bn in gross value add and have the potential
to grow between 10 -15% p.a. Exports form its largest component. So far, our key advantage has
been low - cost labour arbitrage in a predominantly English - speaking country. Going forward,
the IT and ITeS segments require significant upskilling to move beyond a ‘low - cost low value
add service provider’ to a ‘high value add partner’.

Indian IT companies can also leverage their skill sets to provide fintech solutions to global
financial customers. Financial risk management services, insurance, natural disaster modelling
and underwriting are examples of high value add services performed within India for a global
audience.

Healthcare & Tourism

The current contribution of the healthcare industry is over $ 110 bn and is expected to touch $
280 bn by 2020. Availability of world - class medical facilities, skilled doctors, technicians and
pharmaceuticals are some of our advantages. With digital communication and interfaces,
diagnostic medicine can also be tapped into as a service for global customers.

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Similarly, for tourism, India is renowned for its places of natural beauty and historical
significance. Tourism presently contributes $ 47 bn to the country’s GD, compared with $ 115
bn for China. Thus, tourism has exponential possibilities to boost the Indian services sector in the
next decade.

To attract significant revenues, improved customer experience (medical or tourism) is the key
factor that will determine its future growth. In this context, government initiatives such as e -
Visas, better infrastructure facilities, safety, connectivity etc. are enablers in the right direction.

Space

India captured the world's attention last February when it broke the record for launching the most
number of satellites into space. Moreover, this was done at a fraction of the cost incurred by
other space powers.

Indian services in the space domain, with proven expertise in multiple launch technologies,
provide it with a significant advantage over its peers in the global space transportation industry.
Our launch capabilities have a near 100% track record. Many countries are actively looking to
piggyback on India’s launch facilities. This demonstrates great potential. The government is
actively proving its ability, but more can be done to build capacity in military and non - military
space applications. In this context, public - private participation is key to ensure the flow of
capital, as well as to strengthen competencies in this area.

Logistics & Transportation

India’s natural coastline and vast river network give it a competitive edge in providing
transportation and logistics services, both domestically and internationally. These can be
classified into ports and ports services, warehousing, trans - shipment services, e - logistics,
inland waterways for freight and passengers, expressways and dedicated freight corridors.
India’s logistics service sector itself is expected to grow from $ 115 bn to $ 360 bn by 2032.

India should closely look into the development of the service industry, given the potential and
need for sustained large scale investment. Investments typically have a long gestation period.
However, once the infrastructure is created, linkages to the rest of the economy provide
significant multiplier effects. For example, the Mumbai - Pune expressway and the development
of service industries in Pune.

Other services

Media & Entertainment (animation, gaming, dubbing), Education (online platforms such as
MOOC), and Sports (IPL, IFL, Sports Management), Legal/ Paralegal services, Risk
management and advisory functions, etc. are areas that can lead to an immense contribution of
service industry in the Indian economy.

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Undoubtedly, India has experienced a robust service led growth in the post-liberalization era, but
sustaining such growth is equally vital and to achieve sustainable growth, India has to
considerably improve its infrastructure and human capital. Where infrastructure development is
vital for the growth of services like transport, communication, tourism etc, supply of skilled
workforce is essential for the services like IT and ITeS, communication, BPO, accounting
services, legal services, financial services etc. India already created a niche in the word for its
services and now it must endeavor to use the service sector as a tool to achieve goals like poverty
eradication, employment generation, income and regional equality etc.

Employment opportunities in Service sector

The service industry is composed of businesses and individuals that market a wide variety of
services to consumers and commercial enterprises. People employed in service industry jobs
include workers in the travel industry and hospitality workers. Financial professionals,
communications firm employees and various others who generate money without selling actual
products all fall into this group as well. Both entry-level workers and highly skilled workers can
find jobs within the industry and the pay levels vary greatly between different roles.

People employed in service industry jobs in the transportation sector include train drivers, ticket
collectors, airline stewards and pilots. These individuals are tasked with ensuring that clients
travel safely one from location to another. Meanwhile, behind-the-scenes mechanics, engineers
and air traffic controllers are tasked with ensuring that transportation systems function efficiently
and safely. Transportation firms also employ large numbers of sales people and customer service
clerks and these individuals are responsible for selling tickets and catering to passenger's needs.

The hospitality sector includes establishments that provide consumers with food, beverages and
accommodation such as restaurants, bars and hotels. Servers and bartenders work in all of these
establishments and these front line employees often receive the majority of their wages in the
form of tips. While these individuals actually deliver food and drinks to clients, many hospitality
workers are employed in behind-the-scenes service industry jobs and these roles include chefs,
purchasing managers, cleaners and customer service clerks. Purchasing managers order supplies
for a particular facility while clerks accept reservations and attempt to resolve customer's
complaints; typically, hospitality venues are overseen by a manager who hires and fires staff
while also ensuring that the location creates a profit.

Bankers, insurance agents, mortgages brokers and real estate agents are also employed in service
industry jobs. These professionals attempt to provide financial solutions for client's issues and
advise individuals and business owners on making big purchases or investment decisions.
Likewise, attorneys and accountants are licensed professionals who provide people with legal or
tax advice. People engaged in other types of service roles include plumbers, electricians and
couriers, all of whom perform tasks rather than selling tangible products.

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 Service Marketing mix

The service marketing mix is also known as an extended marketing mix and is an integral part of
a service blueprint design. The service marketing mix consists of 7 P’s as compared to the 4 P’s
of a product marketing mix. Simply said, the service marketing mix assumes the service as a
product itself. However it adds 3 more P’s which are required for optimum service delivery. The
product marketing mix consists of the 4 P’s which are Product, Pricing, Promotions and
Placement. These are discussed in my article on product marketing mix – the 4 P’s. The extended
service marketing mix places 3 further P’s which include People, Process and Physical evidence.
All of these factors are necessary for optimum service delivery. Let us discuss the same in
further detail.

1) Product The product in service marketing mix is intangible in nature. Like physical products
such as a soap or a detergent, service products cannot be measured. Tourism industry or the
education industry can be an excellent example. At the same time service products are
heterogeneous, perishable and cannot be owned. The service product thus has to be designed
with care. Generally service blue printing is done to define the service product. For example – a
restaurant blue print will be prepared before establishing a restaurant business. This service blue
print defines exactly how the product (in this case the restaurant) is going to be.

2) Place Place in case of services determine where is the service product going to be located. The
best place to open up a petrol pump is on the highway or in the city. A place where there is
minimum traffic is a wrong location to start a petrol pump. Similarly a software company will be
better placed in a business hub with a lot of companies nearby rather than being placed in a town
or rural area. Read more about the role of business locations or Place element.

3) Promotion Promotions have become a critical factor in the service marketing mix. Services
are easy to be duplicated and hence it is generally the brand which sets a service apart from its
counterpart. You will find a lot of banks and telecom companies promoting themselves
rigorously. Why is that? It is because competition in this service sector is generally high and
promotions is necessary to survive. Thus banks, IT companies, and dotcoms place themselves
above the rest by advertising or promotions.

4) Pricing Pricing in case of services is rather more difficult than in case of products. If you were
a restaurant owner, you can price people only for the food you are serving. But then who will pay
for the nice ambiance you have built up for your customers? Who will pay for the band you have
for music? Thus these elements have to be taken into consideration while costing. Generally
service pricing involves taking into consideration labor, material cost and overhead costs. By
adding a profit mark up you get your final service pricing. You can also read about pricing
strategies.

5) People People is one of the elements of service marketing mix. People define a service. If you
have an IT company, your software engineers define you. If you have a restaurant, your chef and

25
service staff defines you. If you are into banking, employees in your branch and their behavior
towards customers defines you. In case of service marketing, people can make or break an
organization. Thus many companies nowadays are involved into specially getting their staff
trained in interpersonal skills and customer service with a focus towards customer satisfaction. In
fact many companies have to undergo accreditation to show that their staff is better than the rest.
Definitely a USP in case of services.

6) Process Service process is the way in which a service is delivered to the end customer. Let’s
take the example of two very good companies – McDonalds and Fedex. Both the companies
thrive on their quick service and the reason they can do that is their confidence on their
processes. On top of it, the demand of these services is such that they have to deliver optimally
without a loss in quality. Thus the process of a service company in delivering its product is of
utmost importance. It is also a critical component in the service blueprint, wherein before
establishing the service, the company defines exactly what should be the process of the service
product reaching the end customer.

7) Physical Evidence The last element in the service marketing mix is a very important element.
As said before, services are intangible in nature. However, to create a better customer experience
tangible elements are also delivered with the service. Take an example of a restaurant which has
only chairs and tables and good food, or a restaurant which has ambient lighting, nice music
along with good seating arrangement and this also serves good food. Which one will you prefer?
The one with the nice ambience. That’s physical evidence. Several times, physical evidence is
used as a differentiator in service marketing. Imagine a private hospital and a government
hospital. A private hospital will have plush offices and well dressed staff. Same cannot be said
for a government hospital. Thus physical evidence acts as a differentiator.

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 MARKET SEGMENTAION

Market segmentation is the process of aggregating customers with similar wants, needs,
preferences, or buying behaviour. Market targeting involves evaluating the attractiveness of the
segments and selecting ones the firm will serve. In other words, segmentation is the analysis
conducted about customers and targeting is the managerial decision about whom to serve. Both
of these are required for effective market positioning, which involves establishing he competitive
position for the service in the mind of the customer and creating or adapting the service mix to fit
the position.

Some of the major bases for market segmentation are as follows:

1. Geographic Segmentation

2. Demographic Segmentation

3. Psychographic Segmentation

4. Behavioristic Segmentation

5. Volume Segmentation

6. Product-space Segmentation

7. Benefit Segmentation.

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1. GEOGRAPHIC SEGMENTATION:

Geographic location is one of the simplest methods of segmenting the market. People living in

one region of the country have purchasing and consuming habit which differs from those living

in other regions. For example, life style products sell very well in metro cities, e.g., Mumbai,

Delhi, Kolkata and Chennai but do not sell in small towns. Banking needs of people in rural

areas differ from those of urban areas. Even within a city, a bank branch located in the northern

part of the city may attract more clients than a branch located in eastern part of the city.

2. DEMOGRAPHIC SEGMENTATION: Demographic variables such as age, occupation,

education, sex and income are commonly used for segmenting markets.

(a) Age: Teenagers, adults, retired.

(b) Sex: Male and female.

(c) Occupation: Agriculture, industry, trade, students, service sector, house-holds, institutions.

(i) Industrial sector: Large, small, tiny.

(ii) Trade: Wholesale, retail, exporters.

(iii) Services: Professionals and non-professionals.

(iv) Institutions: Educational, religions, clubs.

(v) Agriculture and cottage industries.

(d) Income Level: Above Rs. 1 lakh per annum, Rs. 50,000 to Rs. 1 lakh, Rs. 25,000 to Rs.
50,000 per annum, i.e., higher, middle and lower.

(e) Family Life-cycle: Young single, young married no children, young married youngest child
under six, young married youngest child over six, older married with children, older married no
children under eighteen, older single, etc.

3. PSYCHO-GRAPHIC SEGMENTATION: Under this method consumers are classified into

market segments on the basis of their psychological make-up, i.e., personality, attitude and
lifestyle. According to attitude towards life, people may be classified as traditionalists, achievers,
etc. Rogers has identified five groups of consumer personalities according to the way they adopt
new products:

(а) Innovators: These are cosmopolitan people who are eager to try new ideas. They are highly
venturesome and willing to assume the risk of an occasional bad experience with a new product.
28
‘(b) Early Adopters: These are influential people with whom the average person checks out an
innovation.

(c) Early Majority: This group tends to deliberate before adopting a new product. Its members
are important in legitimizing an innovation but they are seldom leaders.

(d) Late Majority: This group is cautious and adopts new ideas after an innovation has received
public confidence.

(e) Laggards: These are past-oriented people. They are suspicious of change and innovations. By
the time they adopt a product, it may already have been replaced by a new one. Understanding of
psycho-graphic of consumers enables marketers to better select potential markets and match the
product image with the type of consumer using it. For example, women making heavy use of
bank credit cards are said to lead an active lifestyle and are concerned with their appearance.
They tend to be liberated and are willing to try new things. Psycho-graphic classification may,
however, be an oversimplification of consumer personalities and purchase behaviour. So many
factors influence consumers that an early adopter of one product might well be a laggard for
some other product and vice versa.

4. BEHAVIOURIST SEGMENTATION: In this method consumers are classified into market

segments not the basis of their knowledge, attitude and use of actual products or product
attributes. Any of the following variables might be used for this purpose:

(а) Purchase Occasion: Buyers may be differentiated on the basis of when they use a product or
service. For example, air travellers might fly for business or vacation. Therefore, one airline
might promote itself as a business flyer while another might target the tourists.

(b) Benefits Sought: The major benefit sought in a product is used as the basis of classify
consumers. High quality, low price, good taste, speed, sex appeal are examples of benefits. For
example, some air travellers prefer economy class (low price), while others seek executive class
(status and comfort).

(c) User Status: Potential buyers may be classified as regular users, occasional users and
nonusers. Marketers can develop new products or new uses of old products by targeting one or
another of these groups.

5. VOLUME SEGMENTATION: Consumers are classified light, medium and heavy users of a
product. In some cases, 80 per cent of the product may be sold to only 20 per cent of the group.
Marketers can decide product features and advertising strategies by finding common
characteristics among heavy users. For example, airlines having ‘Frequent Flyer’ are using user
rate as the basis of market segmentation. Generally, marketers are interested in the heavy user
group. But marketers should pay attention to all the user groups because they represent different

29
opportunities. The non-users may consist of two types of people— those who do not use the
product and those who might use it. Some may change over time from a non-user to a user.

Those who do not use due to ignorance may be provided extensive information. Repetitive
advertising may be used to overcome inertia or psychological resistance. In this way non-users
can gradually be converted into users.

6. PRODUCT-SPACE SEGMENTATION: Here the buyers are asked to compare the existing
brands according to their perceived similarity and in relation to their ideal brands. First, the
analyst infers the latent attributes that consumers are using to perceive the brand. Then buyers
are classified into groups each having a distinct ideal brand in mind. The distinctive
characteristics of each group are ascertained. 7. BENEFIT SEGMENTATION: Consumer
behavior depends more on the benefit sought in product/service than on demographic factors.
Each market segment is identified by the major benefits it is seeking. Most buyers seek as many
benefits as possible. However, the relative importance attached to individual benefits differs
from one group to another. For example, some consumers of toothpaste give greater importance
to freshness while other prefer taste or brightness of teeth. Research studies on benefit
segmentation reveal that it is easier to take advantage of existing segment, then to create new
segments. As no brand can appeal to all consumers, a marketer who wants to cover the market
fully must offer multiple brands.

Service positioning

Frequently heard statements like “value for money”, “our people are the key”, or “convenience”
are of little descriptive or differentiating value for developing competitive strategy. Without
knowing which product features are of the specific interest to customers, it’s hard for managers
to develop an appropriate competitive strategy for their firm and its products, and harder still to
evaluate a product’s subsequent performance in the marketplace.Once that target segment or
market is clear, the service marketer has to positionhimself appropriately for that segment.
Positioning, as is now well understood in marketing, is an integral part of strategy for a new
service provider. Even in the case of a mature business, a service marketer needs to reaffirm its
positioning in the minds of target customers. At times, a subtle shift in positioning may also be
necessary to keep up with the changing consumer preferences or to cope with the challenges
from competitors.

Importance of Positioning

 To Make Entire Organisation Market-oriented:

 Product positioning is a part of the broader marketing philosophy. It concerns with
identifying superior aspects of product and matching them with consumers more

30
 effectively than competitions. This philosophy makes the entire organisation market
oriented.
 To Cope with Market Changes: Once the product is positioned successfully doesn’t mean
the task of manager is over. He has to constantly watch the market. As per new
developments in the market place, new competitive advantages should be identified,
discovered or developed to suit the changing expectations of the market. It makes the
manager active, alert and dynamic.
 To Meet Expectation of Buyers: Generally, the advantages to be communicated are
decided on the basis of expectations of the target buyers. So, product positioning can help
realize consumers’ expectations.
 To Promote Consumer Goodwill and Loyalty: Systematic product positioning reinforces
the company’s name, its product and brand. It popularizes the brand. The company can
create goodwill and can win customer loyalty.
 To Design Promotional Strategy: More meaningful promotional programme can be
designed. Based on what advantages are to be communicated, appropriate means are
selected to promote the product. Product positioning signifies those advantages that are
significant to consumers. When such benefits are promoted through suitable means of
advertising, it definitely catches the interest and attention of consumers
 . To Attract Different Types of Consumers: Consumers differ in terms of their
expectations from the product. Some want durability; some want unique features; some
want novelty; some wants safety; some want low price; and so on. A company, by
promoting different types of competitive advantages, can attract different types of buyers.
 To Face Competition: This is the fundamental use of product positioning. Company can
respond strongly to the competitors. It can improve its competitive strength.
 To Introduce New Product Successfully:Product positioning can assist a company in
introducing a new product in the market. It can position new and superior advantages of
the product and can penetrate the market easily.
 To Communicate New and Varied Feature Added Later on: When a company changes
qualities and/or features of the existing products, such improvements can be positioned
against products offered by the competitors. Product positioning improves competitive
strength of a company. Normally, consumers consider product advantages before they
buy it. So, product positioning proves superiority of company’s offers over competitors.
It may also help consumers in choosing the right product.

Service positioning process

According to Jack Trout, positioning strategy must establish position for firm or product in
minds of customers. should be distinctive, providing one simple, consistent message, must set
firm/product apart from competitors and must focus its efforts

31
1. Determining the levels of positioning: Step one is to settle on which level needs positioning
attention and focus. For e.g. Vodafone has separate corporate plans and individual plans

2. Identification of attributes: After step one, specific attributes that customers seek comes into
play. For e.g., the purpose of using the .banking service may be different for business and
personal service seekers. Timing also influences choice of service. For e.g. choice of going to a
restaurant will be different for a corporate meeting or a weekend family brunch. The service
seeker also evaluates alternatives available to him/her and makes a choice basis his perception.
This choice need not necessarily reflect the most important attribute he seeks in a service. For
e.g. a customer using the services of a particular bank ranks ‘rate of interest as the most
important feature. But mostly all banks will have similar rates. so he makes his choice basis other
factors like, bank timings. atmosphere, friendly staff. net banking facility etc. the service seekers
perceptions of this process is the basis for developing positioning map.

3. Location of attributes on a positioning map: Positioning maps is a useful way to represent

consumer perceptions of alternative products in visual format. They are typically two attributes,
but nowadays, 3-D models can be used to portray positions on three attributes simultaneously.
They are also known as perceptual maps. Positioning maps can be developed for each segment in
the target market and these maps will show the positions of different players, as per the
perceptions of the consumers in these segments. Mapping future scenarios help identify potential
competitive responses and helps in visualization of strategy.

4. Evaluating position options: According to Ries and Trout, there are 3 positioning options: (a)
Strengthening current position against competitors: This means to better ones own services and
thus strengthening the current position against competitors (b) Identifying an unoccupied market
position: This means to identify and fill the unoccupied and unnoticed .gaps through better
service delivery. (c) Repositioning the competition: This means to frequently reposition in order
to attain a better position as compared to the competitor can be achieved through advertising and
innovation.

5. Implementing positioning: The positioning should be communicated to the target audience by

all employees, policies and advertising.

Types of positioning- There are a variety of ways in which positioning can be arrived at. Some
major ways of doing this are discussed below.

Positioning by features: It is based on a single feature or attribute of a service.If your product or

service has some unique features that have obvious value this may be the way to go. For
example, the largest roller coaster in town: an amusementpark. One new ride added every month,
for a similar theme park, live music alongwith a dinner, for the restaurant.

Positioning by comparison: In this service is positioned against a particular competitor. For

example, the highest occupancy rates in town fora hotel, the highest percentage of satisfied

32
customers for an airline, or the highest percentage of successful candidates, for a coaching class
or educational institution. Business schools frequently use rankings in independent surveys to
claim they are in the top 10 or 15 in the country. One business school, Indian Institute of
Planning and Management (IIPM), even positions itself against the Indian Institutes of
Management (IIMs), with the line “Dare to Think Beyond the IIMs”.

Positioning by benefit to consumer: It is based on some benefit the customer derives using a
particular service . As in “You have a dream of becoming an expertprogrammer, working for a
multinational, going abroad, etc., and we help you tofulfill it”, could be the slogans of a
computer training institute such as NIIT or SSI.Or, a caterer could position himself as “taking the
hassles out of cooking and cleaningfor a party”, or a resort could position itself as a “get away
from the year round hecticpace of life”. Airlines such as Indian Airlines offer the largest
connections to mostIndian towns and cities, and try to use it to position themselves.

Positioning as an expert: For example, we understand air travel, for an airline, or, theexpert on
budget tours for a tour operator.

Positioning through guarantees: Full satisfaction, or your money back, or returnswith no

questions asked, in case of retail stores.

Positioning as a leader: Number 1 in the furniture retailing business, or leadershipwith

responsiveness, in the banking industry.

Positioning through smart tag lines, which may implicitly convey some benefit, like the famous
line used by Met Life Insurance, USA, which says “Get Met. It Pays.” (In India, they are
currently using the tag line “Have you met life today?”). This may indicate that it settles claims
with less of fuss than competitors. It may also imply other value, though not explicitly specified.

Positioning through emotions such as fear, love, kinship, concern for the environment, etc. A
hotel chain in India calls its properties Ecotels, to indicate the environmental consciousness at
various levels. Sahara Airlines, a late entrant into the airline business, positioned itself as
“Emotionally Yours”.

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 Selecting Target Segments

Once an actionable segmentation approach is in place, marketing organizations typically follow

one of two major segmentation strategies: a concentration strategy or a multisegment strategy.

In the concentration strategy, a company chooses to focus its marketing efforts on only one
market segment. Only one marketing mix is developed: the combination of product offerings,
promotional communications, distribution, and pricing targeted to that single market segment.
The primary advantage of this strategy is that it enables the organization to analyze the needs and
wants of only one segment and then focus all its efforts on that segment. The primary
disadvantage of concentration is that if demand in the segment declines, the organization’s sales
and financial position will also decline.

In the multisegment strategy, a company focuses its marketing efforts on two or more distinct
market segments. The organization develops a distinct marketing mix for each segment. Then
they develop marketing programs tailored to each of these segments. This strategy is
advantageous because it may increase total sales with more marketing programs targeting more
customers. The disadvantage is the higher costs, which stem from the need for multiple
marketing programs that may include segment-specific product differentiation, promotions and
communication, distribution/delivery channels, and pricing.

How do you choose?

Selecting the target segments boils down the following questions, which connect to the “ideal
segment” conditions listed above:

 Whose needs can you best satisfy?

 Who will be the most profitable customers?
 Can you reach and serve each target segment effectively?
 Are the segments large and profitable enough to support your business?
 Do you have the resources available to effectively reach and serve each target segment?

As you answer these questions with regard to the different market segments you have defined,
you will confirm which segments are most likely to be good targets for your product(s). These
segments become your target market—the object of your targeting strategy, marketing mix, and
marketing activities.

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 Maintaining valued relationship with customers

The term ‗relationship marketing‘ was introduced during the 1980‘s and is a relatively new and
evolving concept. Relationship marketing (or relationship management) is a philosophy of doing
business, a strategic orientation, that focuses on keeping and improving current customers, rather
than on acquiring new customers. This philosophy assumes that consumers prefer to have an
ongoing relationship with one organization that to switch continually among providers in their
search for value. building on this assumption and the fact that it is usually much cheaper to keep
a current customer than to attract a new one, successful marketers are working on effective
strategies for retaining customers.

According to Leonard Berry: ―Relationship marketing is the attraction, maintaining and …. in

multi service organisatoin …… enhancing customer relationships. The marketing mindset is that
the attraction of new customer is merely the first step in marketing process‖. This view has three
complementary perspectives:

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The nature of the way the companies views their relationships with customers is changing.
emphasis is moving from a transaction focus to a relationship focus with the aim of long-term
customer retention. A broader view is emerging of the markets with which the company
interacts.

In the business world, a company can successfully build its brand name in many ways—
advertising, online marketing, social media, and a plethora of other building processes. With a
little hard work and a solid business plan, business owners can get their budding companies off
to the right start.

But perhaps the factor most important for the continued success of a company is its relationships
with customers. Through positive word-of-mouth, those customers may be the champions
needed to bring in new clients and provide an overall boon to the business.

Many business owners, however, are uncertain how to maintain good customer relationships.
The process is actually simple if the professional knows some proven techniques to employ.

Take these seven steps to effectively strengthen your customer relationships:

 Send greeting cards

Simple gestures can go a long way. For the holidays, send cards to your customers to
express how grateful you are for them and their business. That one simple act will make
your customers feel respected, valued, and, best of all, appreciated. Taking a few breaks
from selling your company to do an unselfish act will make your customers feel good.
 Keep lines of communication with customers open
Research shows that when customers receive multiple methods of communication, they
are more likely to remain loyal. And, in many instances, the most effective
communications incorporate soft sells rather than hard-hitting sales language.
Newsletters, emails, tweets, and Facebook status updates (social media in general) are
easy-to-use, appropriate ways for staying connected and incorporating soft sells. Product
quality reports and annual company reports can also keep customers apprised.
 Know the stages of customer loyalty
o Suspect
o Prospect
o First-time customer
o Repeat customer
o Client
o Advocate

When you know the stages of customer loyalty, it's easier to bring people from the
suspect stage all the way to the advocate stage. To achieve that transition, marketers need

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 to understand how to entice people to convert them into customers while nurturing the
relationship

 Provide customer support

 Ask for customers' opinions
 Don't overlook current customers in your marketing
 Adapt your business plan/model

Customer loyalty

Customer loyalty is a measure of a customer’s likeliness to do repeat business with a company or

brand. It is the result of customer satisfaction, positive customer experiences, and the overall
value of the goods or services a customer receives from a business. When a customer is loyal to a
specific brand, they are not easily influenced by availability or pricing. They are willing to pay
more as long as they get the same quality product or service they are familiar with and love.

Characteristics of a l customer loyalty

 they are not actively searching for different suppliers;

 they are more willing to refer a brand to their family and friends;
 they are not open to pitches from competing companies;
 they are open to other goods or services provided by a particular business;
 they are more understanding when issues occur and trust a business to fix them;
 they offer feedback on how a brand can improve its products or services;
 as long as there is a need, they will keep purchasing from a business.

Significance of customer loyalty

Regardless of the size of a company, customer loyalty is essential. First-time customers are
harder to convince because they do not have any experience with the services or goods offered
by a business. As such, the brand needs a comprehensive marketing funnel to get them to
purchase. However, customers who have already shopped from a particular store are more
accessible to sell to because they know what to expect.

That said, here some reasons why customer loyalty is essential:

 Repeat customers spend more than first-time customers. They have a way higher average
order value that increases with the duration they have been doing business with a brand.
 Loyal customers produce higher conversion rates. Existing customers have way higher
conversion rates than new ones. The average conversion rate of a loyal customer is 60%
to 70%, while that of a new one is 5% to 20%

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  It boosts profits. To enjoy better profits, brands need to foster customer loyalty. Business
profits go up by 25% to 95% when customer retention rates are increased by only 5%.
 Retaining an existing customer is cheaper than acquiring a new one. It is cheaper to keep
an existing customer than to bring a new one on board. Studies show that getting a first-
time customer is 5X more expensive than retaining a loyal one.
 Customer loyalty helps in effective planning. Customer loyalty enables businesses to
predict growth more effectively, thus helping in financial planning. Marketing teams can
identify committed customers who can be relied upon hence making it easier to make
anticipatory decisions based on their budget.
 Loyal customer shop regularly. Given their good experience with a brand, repeat
customers have higher chances of returning. Moreover, their likelihood of making future
purchases increases as they make more transactions.
 Repeat customers spend more during the holidays. While all customers tend to spend
more on busy holiday seasons, loyal customers tend to perform way better.

How to Build Customer Loyalty

 Reward loyal customers with a loyalty program

 Make customer care a priority for the brand
 Boost customer experience by introducing VIP tiers
 Segment your clients
 Send event-based emails
 Optimize the businesses’ referral program
 Encourage customers to give feedback and act on it

Service branding

Brand- A name, term, sign, symbol or design, or a combination of them, which is intended to
identify the goods and services of one seller or group of sellers and to differentiate them from
those of their competitors”. American Marketing Association “A name, logo, or symbol that
evokes in customers a perception of added value for which they will pay a premium price.” John
Torella

Branding -Branding is the art of aligning what you want people to think about your company
with what people actually do think about your company Branding is more than a name and
symbol. A brand is created and influenced by people, visuals, culture, style, perception, words,
messages, PR, opinions, news media and especially social media.

Elements of Brand

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The brand is represented by the various tangible elements that create and formulate a visual,
auditory, and olfactory brand identity resulting in the innate and inherent Brand Elements.

For instance, the brand logo, tagline, color palette, all the marketing, and promotional materials,
letterheads, signage, messaging and communication, and so on are all tangible representations of
the brand that make up its sensory identity in the market and in the minds of the customers

1) brand name

Brand name refers to the word, phrases or words used to identify the company, product, service
or concept and other core values of the brand.

On the facade, naming a brand may seem quite easy and simple. But coming up with an iconic
and innovative brand name is very difficult. Ponder about the brands such as Chevy, Coca-Cola,
Häagen-Dazs, and Target. Today, these words are monikers that are now an understood part of
our everyday normal language. And because consumers are willing to pay more for products
marked with these legendary brand names, those simple words are worth millions now.

2) logo

To simply explain, a logo is a visual trademark that identifies the brand with its design elements.

The Nike swoosh has become so well known that the word “Nike” no longer need to appear with
it for recognition as a brand name. The Morton Salt girl has been recognized since the year 1914
even though she has been restyled almost six times. When you see a computer with lit up apple
on the back of its screen, you know the brand without even a brand name written with it.

As mentioned earlier, a logo is the standard bearer for the entire brand experience and a Brand
Element that lives everywhere.

3) theme line

A catchphrase or a tagline, such as Bounty’s “The Quicker Picker Upper” or Verizon’s “Can you
hear me now?” are quite very famous.

Essentially, theme lines such as “Just do it.” for Nike or “Don’t leave home without it.” for
American Express help to quickly state the brand position memorably in the minds of the
customers. Great theme or taglines have a long run rather than being changed every year.

4) SHAPE

Physical shape is like the distinctive shape of the Coca-Cola bottle or the Volkswagen Beetle that
is both trademarked elements of those specific brands and can also be used as a brand identity
element.Dyson’s vacuum cleaners feature a unique ball on which they can maneuver quite easily.

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The one-of-a-kind chunky Ugg boot has become a classic fashion item in the market. And
Airstream’s silver bullet trailers stand out quite aptly from their competitors’ products in the
market because of their rounded edges.

5) graphics

Graphics are those Brand Elements that can also bring a brand to our attention in a fraction of a
second. The dynamic ribbon is a trademarked part of Coca-Cola’s brand and Coach’s unique
pattern of “C’s” emboldens the look of most of their products in the market. Louis Vuitton’s
stylized flower pattern makes their luggage uniquely identifiable amongst other products in the
market. The red and tan plaid lining makes Burberry coats stand out from plainer competition
and are the favorite amongst the fashion lovers.

While they aren’t logos, graphics are the visual elements that serve to quickly identify a brand
without any need for words.

6) color

Owens-Corning is the only brand of fiberglass insulation that can be pink in color. UPS’s unique
brown trucks and uniforms have become its trademarks and are quite easily identified. Sephora
cashiers wear one black glove with which they handle products before giving them to customers
making it the brand’s crucial Brand Element. When used to its full potential, consumers instantly
recognize a brand by color quite specifically. It’s the reason Tiffany & Co. trademarked their
robin egg blue in the year of 1998.

7) sound

Sound or a unique set of notes or tones can also assist in forming a brand’s identity as the crucial
Brand Elements.

When a brand is mentioned, a jingle may come to the mind of the customers. For instance, any
sports fan would be able to recognize ESPN’s Sports Center introduction from the first two notes
of the jingle. A few other famous examples include “Um um good” for the Campbells brand or
the Intel Inside music tone.

8) movement

Another Brand Element is the movement or how the product shifts, expands or condenses in its
nature and functionality. Lamborghini, the automobile brand has trademarked the upward motion
of its car doors. Apple launched quite a revolution of screen interactions namely, the motion of
two fingers moving apart, which allows its users to enlarge images on their iPhones and iPods
very easily. The revolving motion within its suction chamber sets the brand Dyson’s bagless
vacuums apart from the other bagged vacuum brands.While movement can feel like one of the
more abstract brand elements, it shouldn’t be overlooked at all.

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9) smell

The smell of a brand also adds to the overall elements of the brand identity. For instance, scents,
such as the rose-jasmine-musk of Chanel No. 5 is trademarked or the fresh handmade aroma of
Lush Cosmetics.

10) taste

Last but not least, taste is another one of the crucial Brand Element that you can use to
differentiate yourself in the market from the competition. KFC has trademarked its special recipe
of 11 herbs and spices for fried chicken since its inception. McDonald’s is quite famous for their
French fries. Soda fanatics swear they can tell the difference between a Coke and a Pepsi quite
easily.

Service Branding- According to Berry (2000) the service branding model does not differ in kind
from that of products, only in degree. He argues that the main difference in building brand equity
for products compared to services is the great importance of service performance, meaning
human performance for services rather than machine performance for products.

Service branding strategies

Building Brand awareness

Think of virtually any consumer brand – what immediately pops into your mind? Most likely,
it’s their logo. For the top brands, logos cross cultural boundaries and international borders,
becoming readily recognizable around the globe.

Building Brand identity

Logos can tell potential customers a great deal about your business without having to say
anything. Coca-Cola’s Spencerian Script reflects the company’s long history and a core product
that has remained virtually unchanged for more than 100 years. People choose Coca-Cola
because it’s a dependable product. They know what they’re getting from it. Past attempts to mess
with the formula have become cautionary tales about brand mismanagement.

Sticking with an old-fashioned logo year after year helps sell the message that the product has
stood the test of time and that there’s no need to fix what isn’t broken.

FedEx is another good example of a logo that subtly tells customers quite a bit about the brand.
The logo famously hides an arrow within its second syllable suggesting speed, accuracy and
reliability in delivering packages to their destinations.

Brand messaging

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What can you offer customers? How do your services or brand experience compare with the
competition’s? What do customers get from your business that they can’t get anywhere else?

Your brand messaging should account for these questions and more. It defines what your
company is, permeating everything from marketing materials to tag lines to product descriptions.

There a lot of factors that are wrapped up in brand messaging, including

 Value proposition.
 Key differentiators.
 Brand principles.
 Organizational culture.
 Target audience.
 Product positioning.

Everything your company says should have meaning, and that meaning should always reflect
your brand messaging. Look at Subway. For decades, it ran a fairly popular – if unremarkable –
fast-food business. Today, it’s the largest fast-food chain in the country, representing 18.5% of
the total market. A big reason for Subway’s success has been its shift in messaging to appeal to
health-conscious consumers.

Brand positioning

Brand positioning could easily be considered a subset of brand messaging, but it’s important
enough to warrant its own discussion. In short, brand positioning is how you set yourself apart
from the competition. What do you bring to the table that’s wholly distinct from other players in
your market? If you don’t have a clear answer to that question, it’s going to be difficult to
convince potential customers to choose your business over another one.

Branding agencies can help with that, though. Through market research and organizational
analysis, they’re able to determine what customers want, what your business can realistically
provide and how those offerings compare with your competitors.

Creating an effective branding strategy is all about matching your capabilities with your
customers’ expectations and desires. Brand agencies are not looking to exaggerate or
overpromise. They simply want to drill down into what makes your business unique, and find an
effective way to showcase those strengths.

Brand voice

Brands are like people: Each one has its own particular way of expressing itself. Some are
friendly, some are irreverent, some are unflaggingly professional and some are aspirational.

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Establishing a brand voice and adhering to it across all touch points, marketing campaigns and
customer interactions is extremely important. Having a strong brand voice solidifies your
company’s identity, and any deviation could negatively impact the perception of your
organization.

Style guide

Once you’ve defined your brand voice, you need to codify it so every employee and stakeholder
knows how to follow your branding guidelines. That’s where a style guide comes into play. Style
guides can lay out your brand voice, messaging, design principles and more in precise detail.
They instruct your staff members and business partners on the exact language to use in different
scenarios, what color schemes to incorporate into design layouts and how to most effectively
communicate with your core audience.

Social media branding

Many companies struggle with social media branding. On one hand, you want to have the same
consistent branding across all channels. On the other hand, social media platforms like Twitter
often lend themselves to more irreverent and playful content. Businesses need to find a way to
stay true to their brand messaging, voice and values while still taking advantage of social
media’s inherent strengths. It’s a tricky balancing act, and a lot of organizations wind up falling
flat on their faces.

Service branding model

Brand Equity

Brand equity describes the level of sway a brand name has in the minds of consumers, and the
value of having a brand that is identifiable and well thought of. Organizations establish brand

43
equity by creating positive experiences that entice consumers to continue purchasing from them
over competitors who make similar products.

This is done by generating awareness through campaigns that speak to target-consumer values,
delivering on promises and qualifications when consumers use the product, and loyalty and
retention efforts. By offering consumers loyalty incentives such as points that can be exchanged
for discounts or a free product on their birthday, they are more likely to continue to purchase
from your brand rather than moving on to a competitor. Awareness and experience are the two
key tenets of brand equity.

Awareness: Can consumers easily identify your brand? Messaging and imagery surrounding
your brand should be cohesive so consumer can always identify it, even for a new product. What
kinds of values do consumers associate with the brand? Perhaps they think of sustainability,
quality, or family friendly qualities.

Experience: How have first hand experiences with your brand gone? This could mean that the
product performed the way it was supposed to, that encounters with brand representatives and
customer service teams have been accommodating and helpful, and that loyalty programs have
been worthwhile.

Importance of brand equity

A key benefit of establishing positive brand equity is the benefits it can have on ROI.
Organizations that leverage the power of branding often earn more money than competitors,
while spending less - whether on production, advertising, or elsewhere. For example, positive
brand equity enables brands to charge price premiums. When consumers believe in the values
put forth by a brand and the quality of their products, they will pay higher prices to purchase
from that brand. Additionally, should an organization want to add new product offerings,
marketing them under the same umbrella brand will help the new product take off faster, as trust
has already been established.

Brand equity can positively affect the bottom line in the following ways:

Increased Order Value per Customer

If your brand has a positive brand equity, people are more likely to spend more money to
purchase those products.This results in higher profit margins. It may cost companies the same
amount as competitors to make a product. However, consumers are willing to pay for the brand
name. For example, a pair of designer shoes rather than those of a less well known or generic
brand.

Reputation & Less Ad Spend

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If your products have a good reputation, people will seek you out as their go-to brand. This
results in less money being spent via advertising and leads to increased sales when you launch a
new product due to established trust.

Customer Lifetime Value: If your customers are loyal to your brand, they will purchase more
from you. Apple is regularly regarded as one of the organizations with the highest brand equity.
Apple users tend to own other Apple products, while Android users do not generally have a
loyalty to a specific PC technology provider.

Customer Loyalty: Customers are 7 times more likely to forgive brands they are loyal to for
mistakes. Additionally, consumers are 9 times more likely to try new products from brands they
are loyal to.

Stock Price: Strong brand equity can increase stock market process for organizations, out of the
expectation that it will continue to perform.

How to Build Brand Equity

Understand Your Why

Too many advertisers focus on the How (How my product will make your day easier) versus the
Why (Why does this organization do what it does). For companies like Apple, their Why is
immediately apparent. They defy the status quo and stretch what’s possible. Because their
advertising focuses on their brand (and not their computers), they were able to expand their
product lines into new areas such as phones and music, where other computer companies failed.

Test your Messaging

When creating messaging, it is still important to test your positioning with consumers. How do
they react? What do they respond best to? Are you addressing their pain points? Are you creating
the type of message they will stop and engage with? Developing messaging and creative
elements should be a data-driven process, informed by what your specific consumers are drawn
to. This is especially crucial in today’s fragmented market.

Drive Awareness

Once you have a compelling message, you must drive awareness for both your brand and your
company focus. This often means emphasizing brand values over product attributes, and
emotional connections over conversions. In a world focused on the next immediate transaction,
it can be hard to advocate for such long-term planning. Brand campaigns must run on longer
timelines for consumers to register messages and connect them back to branded products. This
increase on brand focus will yield to results down the line if done correctly.

Maintain Consistency

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Once your brand is established, be consistent. This includes using consistent typefaces and style
guides. Treat your brand like a writer would treat a character. Even if the advertising idea is
good, if it is outside of your brand’s “personality”, don’t pursue it.

Customer Experience

Due to the rise of social media and the individual consumer’s voice, brands are no longer just
defined by what advertisements say. Brands are what consumers discuss or perceive. Having a
focus on the customer and putting them in the center of your company will help elevate your
overall brand. Consider Amazon’s review system. The site encourages users to be active in
reviewing products and communicating with sellers to ensure they get exactly what they need -
rather than just making a sale. When choosing between immediate transactional value and the
needs of the customer, they choose the customer. Amazon understands that taking this long-term
approach to customer experience will have a better impact on the bottom line.

Social media is also a great way to get face time, so to speak, with your actual consumers. For
example, Nike has a dedicated Twitter page (NikeSupport) to respond to consumer needs 24
hours a day in seven languages. This provides insight into where your brand may be missing the
mark, which can then be used for optimizations.

How to Measure Brand Equity

Here are a few ways to measure goals from a branding perspective:

Financial

For those looking to assign a numeric value to a brand, consider the following

 Company Value: To measure the brand equity, you could think of the firm as an asset.
When subtracting the tangible assets from the overall value of the firm, you would be left
with the brand equity.
 Market Share: What is your company’s market share? Leaders in the market tend to have
a higher brand equity.
 Revenue potential: What does the revenue potential look like for your product? How does
this compare to your company’s current revenue?

Product Value

A good way to measure this would be to compare a generic product with the branded product. In
the case of soap, Unilever can measure if women were more likely to purchase Dove over the
store brand. Additionally, you could consider what users may be prefer - for example, Coca Cola
compared to Pepsi.

Brand Audit

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Conducting a brand audit can also help you get a better understanding of how your brand is
performing. To begin a brand audit, review comparison sites, social channels, and web analytics.
Pull this data together to see how consumers are talking about you and if this is inline with the
vision for your brand.

Brand Association - Keller’s Brand Equity Model

This model was developed by Dartmouth professor Kevin Lane Keller and emphasizes the need
to mold the feeling associated with a brand’s products. By creating positive associations with
your products, you can shape how customers think about your brand. The model is based on a
hierarchy of brand equity that begins with a brand establishing their identity and differentiation,
and is fully realized when the brand establishes resonance and connection with target consumers.
By understanding where your brand is in the pyramid, you can get a better idea of how much
brand equity you have, and what the next steps should be to further establishing your brand in the
consumer conscious. The steps consist of:

 Brand Awareness
 Communicating the Idea behind a Brand
 Understanding Customer Response
 Brand Resonance/ Connection

Understanding Consumer Perception

Although not as quantifiable, mapping consumer perception to your brand is also an

important aspect of understanding brand equity.

Recall and Recognition - Do people remember your brand without a prompt (unaided brand
awareness) or do they need an aide? (aided awareness). Understanding how familiar people
are with your brand can help you address any gaps in the market.

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 Emotions Associated with the Brand - Failing to address negative emotions with your brand
can be a costly mistake. Even if your brand holds a monopoly of the market, consumers who
are eager to switch will do so as soon as a competitor grows into maturation.

Service Consumption

The consumption of services has been considered as ‘process consumption’ (Grönroos 1994)
because production is part of service consumption and is not simply viewed as the outcome of a
production process, as is the case in the traditional marketing of physical goods.

THE THREE-STAGE MODEL OF SERVICE CONSUMPTION

According to the three-stage model of service consumption, consumers go through three major
stages when they consume services: the pre-purchase stage, the service encounter stage and the
post-encounter stage (Lovelock and Wirtz 2011, pp.36–37; Tsiotsou and Wirtz 2012). This
approach is helpful because it assists academics in developing a clear research focus and
direction, and managers in setting objectives and shaping consumer behaviour in a targeted
manner, and therefore facilitates efficient resources allocation (Blackwell, Miniard and Engel
2003; Hensley and Sulek 2007). Research has been conducted on all three stages to examine
their major determinants, influences (direct and indirect), processes and outcomes

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The Pre-purchase Stage

In the pre-purchase stage, a need arousal triggers consumers to start searching for information
and evaluate alternatives before they make a purchase decision. There are various sources that
could trigger needs: the unconscious mind (e.g., impulse buying), internal conditions (e.g.,
hunger) or external sources (e.g., marketing mix), to name a few. Consumers can engage in
impulse buying or ‘unplanned behaviour’. Impulse buying occurs less frequently in services than
in goods due to the higher perceived risk and variability associated with services.

Information search

Service consumers acquire information not only from multiple sources but from different types
of sources. Thus, they seek information from trusted and respected personal sources such as
family, friends and peers; they use the Internet to compare service offerings and search for
independent reviews and ratings; they rely on firms with a good reputation; they look for
guarantees and warranties; they visit service facilities or try aspects of the service before

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purchasing; they examine tangible cues and other physical evidence and ask knowledgeable
employees about competing services

Evaluation of alternative service offers

During the search process, consumers form their consideration set, learn about the service
attributes they should consider and form expectations of how firms in the consideration set
perform on those attributes.Multi-attribute models have been widely used to simulate consumer
decision making. According to these models, consumers use service attributes (e.g., quality, price
and convenience) that are important to them to evaluate and compare alternative offerings of
firms in their consideration set. Each attribute is weighted according to its importance.

After consumers have evaluated the possible alternatives, they are ready to make a decision and
move on to the service encounter stage. This next step may take place immediately, or may
involve an advance reservation or membership subscription

The Service Encounter Stage

The service encounter stage involves consumer interactions with the service firm. In this stage,
consumers co-create experiences and value, and co-produce a service while evaluating the
service experience

Service encounters are complex processes where consumer interactions and surrounding
environmental factors form consumers’ expectations satisfaction, loyalty, repurchase intentions
and word-of-mouth behaviour The service encounter is generally considered a service delivery
process, often involving a sequence of related events occurring at different points in time. When
consumers visit the service delivery facility, they enter a service ‘factory’ (e.g., a motel is a
lodging factory and a hospital is a health treatment factory) However, service providers focus on
‘processing’ people rather than the inanimate objects found in traditional goods factories.
Consumers are exposed to many physical clues about the firm during the service delivery
process. These include the exterior and interior of its buildings, equipment and furnishings, as
well as the appearance and behaviour of service personnel and other customers.

The Post-encounter Stage

The last stage of service consumption is the post-encounter stage and involves consumers’
behavioural and attitudinal responses to the service experience. However, consumers who are
satisfied and have high perceptions of service quality do not necessarily return to the same
service provider or buy their services again .As a result, there has recently been a shift in the
consumer research agenda toward other important post-purchase outcomes, such as perceived
service value, consumer delight, consumer reactions to service failures (e.g., complaining and
switching behaviour) and consumer responses to service recovery.

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 Customer needs and expectations

Customer expectation encompasses everything that a customer expects from a product, service or
organisation. Customer expectations are created in the minds of customers based upon their
individual experiences and what they have learned, combined with their pre-existing experience
and knowledge.

Customers will have both explicit and implicit expectations regarding the product or service
which they have purchased. They will have performance expectations which include a dynamic
element due to anticipated changes to the product or service over time. Importantly, they will
also have interpersonal and service-level expectations which relate directly to the customer
relationship and interaction with a business or organization.

Factors Influencing Customer Expectations

Customer expectations are influenced by a multitude of factors but there are a few key elements
which are recognised as important influences on customer expectations.

Previous Customer Experience

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One of the most significant factors influencing customer expectations is their prior experience
with your organisation. If they are highly satisfied existing customers then this sets a high level
of expectation which must be maintained. But if their previous experience has been suboptimal
then they may lack confidence in your business and their expectations may be quite low.

Customer Communications

Every piece of outbound communication from your business may have influenced your customer
expectations. Blog posts, tweets, web pages, emails, print advertising, radio and TV advertising
all contribute to the expectations that your customers will have. It is essential that your
communications are all honest, consistent, clear and unambiguous.

Reviews and Word of Mouth

The internet is a magnificent research tool so you can expect your customer’s to have carried out
research before making their purchase. They will have read reviews of your product or service
and they will have potentially read reviews of your business. They may also have read what
people are saying in forums and on social media. What they derive from these sources will
influence their expectations so you need to be aware of what’s being said.

Previous Experience with Other Companies

People’s experiences with other companies and organisations greatly influence their
expectations. Regardless of whether other companies are in the same niche as yours, these days
customers expect the same high levels of great customer service from all businesses and
organisations.

Levels of consumer expectations

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What is Needs?

Needs are basic or advanced urges or demands that lead us to take an appropriate action to fulfill
them. Or in terms of marketing if we consider, needs are the gaps which the companies try to
fulfill with their products and services.

Need, in terms of marketing can be divided into the following five types:

1. Stated Needs – As the name suggests, in this case, the consumer explicitly states what he
wants. For eg. “I need a phone”.

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2. Real needs – This is more specific. So when the consumer wants a phone to remain
connected to his friends, family and colleagues, the actual need be a phone with high battery
backup and not high camera resolution.

3. Unstated needs – The consumer also expects warranty and other sorts of after sales service
when buying a phone which he might not say explicitly.

4. Delight needs – The consumer would like the phone manufacturer or the dealer to give him
some free gift or a promotional item (phone case, tempered glass, free SIM etc.), but he doesn’t
clearly express that he wants something with the phone.

5. Secret Needs – These are the needs which the consumer feels reluctant to admit; for
example the consumer wants the phone for his status symbol but he feels uncomfortable to admit
that status is important to him.

In the above example, responding to only stated need ie., “I need a phone” doesn’t help in
arriving at a right product proposition. As a marketer, it is important to dig deeper and uncover
not only the real, but also his other needs: unstated need, delight need and secret needs.

For example a customer wants to buy a car. When consumer says he wants something, like an
expensive car, that is his stated need. When the consumer wants a car for rational, genuine need,
like he wants a car whose operating costs are low over a time, and not just a low initial price, this
is his real need. In buying this car, the consumer also expects a good service from the dealer.
This is the unstated need. When the consumer doesn’t explicitly express that he would want
something but would like to have it anyway, say for example he would like the car dealer to
include an onboard GPS navigation system too; this becomes a delight for him. Lastly, there is a
desire seldom shown, this may be a secondary benefit of obtaining the product, yet equally
important or might as well be the main reason, but not expressed so readily. For example, here
the consumer wants a car for the status symbol so that he can show his friends that he is a savvy
consumer. This is when he has a secret need to appear to fit in.

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 Strategic response to the intangibility of service performance

When marketing your business offerings, it’s critical to understand the problems your consumers
are facing and specify how you’re the right company to help solve them. However, things begin
to get more challenging when you’re dealing with intangible products and services like life
insurance policies and car repair. The difference between tangible and intangible products is that
customers cannot hold these items in their hands and see for themselves what they will be getting
in return for their hard-earned money. As a result, your marketing and sales tactics have to show
customers the real value of your offerings.

Understand Your Target Audience’s Needs

Knowing your customer is vital regardless of whether you sell a tangible or intangible product.
However, when you’re selling something that is difficult for customers to understand or
conceptualize, knowing their needs is increasingly important. Personalization is the key to selling
intangible products and services. This involves tailoring your marketing messaging and sales
pitch to the customer’s needs.

Market segmentation is critical so you can group different types of customers based on specific
demographic, geographic, psychographic and behavioral criteria. While your business may cater
to different kinds of customers, not all of them will have the same challenges and desires.
Segmenting them helps you understand more fully what they need, and what type of messaging
they will respond to.

Once you’ve segmented your audience, build an audience persona. This is a reference document
that details traits of your ideal customer, the challenges they are experiencing and what kind of
results they are looking for. Teach your sales and marketing teams to use the audience persona
whenever they are developing messaging for customers so they can personalize their content. For
example, if your target audience is stressed about their car breaking down and confused about the
process to fix it, this language can go in your sales pitch to help them self-identify as your
customer.

Discuss the Results They Will Achieve

It can be difficult for customers to understand what they are getting when they buy an intangible
product or service. For example, when they buy life insurance, the only thing they may see is a
contract on a piece of paper. In return for thousands of dollars, there is no concrete item they can
hold. To counter this, businesses should focus on the results the customers get with the intangible
items.

An intangible product example is a career counseling service that helps people figure out their
ideal job. In the marketing and sales materials, the business should focus on what happens when
the candidate finds their ideal job. The result is meaningful work, being satisfied in your career,

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having a stable paycheck and loving your job. Those are results that the target customer can
understand because it is what they have been looking for. Focusing on results helps to make the
intangible items more real.

Demonstrate How the Service Works

Business.com notes that one of the reasons customers fear buying intangible products and
services is because they don’t understand how they work. When buying something they cannot
see, hear, taste, smell or touch, customers aren’t sure what goes into that offering and how it
provides them with the results they are after. As a result, businesses need to focus on
communicating a clear and easy-to-understand process.

Don’t tell customers about each detailed step you take in your cleaning service or what goes on
behind the scenes at your event planning company. Instead, distill the process down into three to
five simple steps that helps customers understand what to expect. For example, the cleaning
business’ process can include tidying the surfaces, washing the floors and doing a deep clean of
the bathroom and kitchen. This way, the customer can see exactly what will be done in order to
get them the squeaky-clean house they want to come home to.

Communicate the process in your marketing and sales materials to help customers more clearly
understand what the intangible service or product is and how it works. In some businesses, the
process may be customizable based on what the consumer is getting. You can say the process is
tailored to their needs, but provide a few examples so they know what their options are.

Focus on the Emotional Benefits

When trying to bring life to a service or intangible product, put emphasis on the emotional
benefits. Forbes notes that consumers often have a lot of challenges, worries and fears they are
dealing with on a day-to-day basis. If your business can help alleviate even one of those negative
emotions, then customers will be more interested in what you have to say. Use your audience
persona to determine what emotions your customers are going through.

For example, your customer may be anxious, worried, confused, overwhelmed, frustrated or
devastated about something specific. If your intangible product or service offering can fix that
problem, use emotional language to help your customers identify with you. What you’re selling
is comfort and peace of mind so that your customers don’t have to worry about that specific
thing.

Intangible services examples include tax preparation and personal finance consulting. Money
makes people feel stressed and worried, so focus on taking those negative emotions away in your
marketing and sales pitch. Use terms like "peace of mind," "relaxed," "calm," "at ease,"

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"fulfilled" and "satisfied" to show the emotional benefits customers will receive when they work
with you.

Share Case Studies and Testimonials

using success stories is an effective way to show customers why they need the intangible product
or service. Use case studies and testimonials to help create social proof. Customers want to know
that your intangible offering works before they spend their money. By proving this point with
results other customers have achieved, you help to alleviate any fears and distrust.

Your case studies should cover a range of customers who faced different types of problems, so
that you can appeal to all segments of your market. For testimonials, ask key accounts who are
pleased with your business to talk about specific things like results, process, benefits and
timeline. This helps prospects to imagine themselves as your customers seeing the same positive
outcomes.

Build Trust and Relationships With Your Customers

An effective way to bring life to a service or intangible product is by helping customers

humanize your business. Instead of just a corporate entity, they can build relationships with staff
and management and learn more about what you do. This relationship helps create a sense of
trust in the business. With new prospects, businesses can spend time to fully understand their
needs, walk them through the process, show them case studies or testimonials and answer any
questions.

In order to retain existing customers and get repeat sales. Keeping in touch on a regular basis.
This can be through social media, email marketing, direct mail marketing or phone follow-ups
depending on your business. For example, a massage therapist may call her existing patients
every six weeks to see if they want to book their next appointment. The interaction doesn’t need
to be intrusive. Businesses can simply remind customers of the results they received last time and
ask whether they want to see those results again. When customers trust the business and have a
long-standing relationship with the staff, they are more inclined to buy an intangible product or
service.

Customer perception of service

Perception is same universe is viewed differently by different persons. It is the process through
which the information from outside environment is selected, received, organized and interpreted
to make it meaningful to us. It is the process by which individuals organized and interpret their
sensory impressions in order to give meaning to their environment.

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According to Joseph Reitz, “ Perception includes all those processes by which an individuals
receives information about his environment- seeing, hearing, feeling, tasting and smelling.”

Factors influencing service perceptions

 Service Encounter -A customer estimates the quality of service throughout his/her

interaction with a service provider.
 Service evidence-Because services are intangible, customers are searching for evidence
of service in every interaction they have with an organization. The 3 major categories of
evidence as experienced by the customer are:- people, process and physical environment.
These categories together represent the service and provide the evidence that tangiblizes
the offerings.
 Price-Perception of consumer is affected by the price of service. If a service company
prices a product low, then consumer may perceive it of low quality. Whereas, if the price
is high, consumer expect high quality service.
 People-Service personnel play an important role in defining the quality of service
encounter in the mind of the customers. E.g.- Fast food restaurants such as McDonald’s
make their service tangible, by hiring people who are friendly and have a pleasing
appearance, to serve customers
 Process of service delivery- It involves various steps in the process of delivering a service
and the flow of operational activities. The service process is also evaluated on the basis of
the number of flexible or standard policies and the technological or human modes
involved in delivering the service
 Physical Enviroment -it creates an impact on customer perception. The physical
environment consist of the ambience offered by a service provider and the design of the
interiors or exteriors of the service facility.
 Organizational Image- it creates an impact on customer perception. The physical
environment consist of the ambience offered by a service provider and the design of the
interiors or exteriors of the service facility

Strategies influencing service perceptions

 Measure and Manage Customer Satisfaction and Service Quality

 Aim for Customer Quality and Satisfaction in every Service Encounter
 Plan for effective Recovery
 Facilitate Adaptability and Flexibility
 Encourage Spontaneity
 Help employees Cope with problem Customers
 Manage the dimensions of Quality at the Encounter Level
 Reflect Evidence of Service
 Communicate and create a Realistic Image

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  Enhance Customer Perceptions of Quality and value through Pricing

Consumer purchase decision making process

Consumer behavior includes the processes and motives that drive consumer buying activities.
Consumers typically make purchases in a systematic way, with the time frame and nature of the
process dependent on the type of purchase. The standard consumer buying process with a service
has some specific differences from a product-based purchase situation.

Need Discovery

The first step in the consumer decision-making process is need discovery. This stage is where a
consumer realizes he has a functional or emotional need or want. In engaging in a service
scenario, consumers recognize several common needs. One is expertise. A consumer might hire a
plumber or electrician for their service expertise, for instance. Time savings, more valuable ways
to spend time and simply not liking to perform a certain activity are among needs or motives for
a service purchase.

Information Search

The second phase of the buying process is information search. During this stage, the buyer looks
for information and evaluates providers on certain criteria. Services are intangible, so buyers
often need to consult company websites and talk with sales reps to evaluate options.
Additionally, services are often highly involved purchases for buyers because of the costs and
importance. To get someone to hire your roofing company, you must provide significant
information about the value of your materials and service relative to competitors. Proof Devices

Buyers typically want to see proof of benefits before making a product or service purchase. With
products, you can show buyers how the product works and demonstrate the benefits. With
intangible services, you can't. You can, however, provide customer testimonials emphasizing the
quality, reliability and value of your service. It is also important to connect with customers'
emotions by communicating the value of your expertise or the time that you save them.

Evaluation of alternatives

In information search stage consumer chooses different services in his mind based on his mood
and evoked set but in the process of purchase this will not work as his choice of purchase is
confined to his ability to purchase. In order to overcome this situation he tries to evaluate his
each choice of service and select a best alternative which satisfies his need and want satisfying of
service.

Purchase and Consumption

The customer has now decided based on the knowledge gathered what to purchase and where to
purchase what they desire. At this stage a customer has either assessed all the facts and come to a
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logical conclusion, made a decision based on emotional connections/experiences or succumbed
to advertising/marketing campaigns, or most likely a combination of all of these has occurred. In
our customer journey we purchased some rather nice Asics runners as we had a wonderful
experience with them previously, they were well priced on the market and the marketing around
Asics trainers has always linked them to being the best option for “real athletic trainers”. The
positioning of the product also lent itself to where they were purchased, a sport shop rather than a
shoe shop.

Post-Purchase Evaluation

Following a purchase, customers compare what they experience with what they expected. This
point makes follow-up and follow-through on commitments important to customer satisfaction,
repeat business and referrals. What makes a service experience distinct is that the people that
provide it are especially key to the customer's perception of the experience. Getting customer
feedback on the quality of service provided by all employees involved in the sale and delivery of
the service is helpful in making any necessary improvements.

Types of New Services

Competitive intensity and customer expectations are increasing in nearly all service industries.
Thus success lies not only in providing existing services well, but also in creating new
approaches to service. Because the outcome and process aspects of a service often combine to
create the experience and benefits obtained by customers, both aspects must be addressed in new
service development.

The word "new" is popular in marketing because it's a good way to attract people's attention.
However, there are different degrees of "newness" in new service development. In fact, we can
identify seven categories of new services, ranging from major innovations to simple style
changes.

 Major service innovations are new core products for markets that have not been
previously defined. They usually include both new service characteristics and radical new
processes. Examples include FedEx's introduction of overnight, nationwide, express
package delivery in 1971, the advent of global news service from CNN, and eBay's
launch of online auction services.
 Major process innovations consist of using new processes to deliver existing core
products in new ways with additional benefits. For example, the University of Phoenix
competes with other universities by delivering undergraduate and graduate degree
programs in a nontraditional way. It has no permanent campus; instead its courses are
offered online or at night in rented facilities.
Its students get most of the core benefits of a college degree in half the time and at a
much lower price than other universities.the existence of the Internet has led to the
creation of many start-up businesses employing new retailing models that exclude the use

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 of traditional stores, saving customer’s time and travel costs. Often, these models add
new, information-based benefits such as greater customization, the opportunity to visit
chat rooms with fellow customers, and suggestions for additional products that
complement what has already been purchased.
 Product line extensions are additions to current product lines by existing firms. The first
company in a market to offer such a product may be seen as an innovator, but the others
are merely followers who are often acting defensively. These new services may be
targeted at existing customers to serve a broader array of needs, designed to attract new
customers with different needs, or both. Starbucks, known for its coffee shops, has
extended its offerings to include light lunches (Figure).
Major computer manufacturers like Compaq, Hewlett-Packard, and IBM are going
beyond their traditional business definitions to offer integrated "e-solutions" based on
consulting and customized service. Telephone companies have introduced numerous
value-added services such as caller ID, call waiting, and call forwarding. Cable television
providers are starting to offer broadband Internet access. Many banks sell insurance
products in the hope of increasing the number of profitable relationships with existing
customers. American Express, too, offers a full range of insurance products, including
auto, home, and umbrella policies. And at least one insurance company State Farm
Insurance as gone into the banking business, relying on its well-established brand name
to help draw customers.
 Process line extensions are less innovative than process innovations. But they do often
represent distinctive new ways of delivering existing products, either with the intent of
offering more convenience and a different experience for existing customers or of
attracting new customers who find the traditional approach unappealing. Most
commonly, they involve adding a lower-contact distribution channel to an existing high-
contact channel, as when a financial service firm develops telephone-based or Internet-
based services or a bricks -and -mortar retailer adds catalog sales or a Web site.
 Supplementary service innovations involve adding new facilitating or enhancing
service elements to an existing core service, or significantly improving an existing
supplementary service. Low-tech innovations for an existing service can be as simple as
adding parking at a retail site or agreeing to accept credit cards for payment. Multiple
improvements may have the effect of creating what customers perceive as an altogether
new experience, even though it is built around the same core.
Theme restaurants like the Rainforest Cafe are examples of enhancing the core with new
experiences. The cafes are designed to keep customers entertained with aquariums, live
parrots, waterfalls, fiberglass monkeys, talking trees that spout environmentally related
information, and regularly timed thunderstorms, complete with lightning.
 Service improvements are the most common type of innovation. They involve modest
changes in the performance of current products, including improvements to either the core
product or to existing supplementary services. For instance, a movie theater might

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 renovate its interior, adding ergonomically designed seats with built-in cup holders to
increase both comfort and convenience for customers during the show or an airline might
add power sockets for laptops in its business-class cabins.
 Style changes represent the simplest type of innovation, typically involving no changes in
either processes or performance. However they are often highly visible, create excitement,
and may serve to motivate employees. Examples include repainting retail branches and
vehicles in new color schemes, outfitting service employees in new uniforms, introducing
a new bank check design, or making minor changes in service scripts for employees.

New Service development

https://theintactone.com/2019/03/21/mos-u2-topic-5-new-service-development-process/

For more detailed process, click on this link

New Service Characteristics:

Since services are intangible, it has to have 4 basic characteristics:

1.It must be objective, not subjective

2.It must be precise, not vague.

3.It must be fact driven, not opinion driven.

4.It must be methodological, not philosophical.

New Service Development Process/ Stages

1. Front End Planning:

a. Business Strategy Development:

The first Step is to review the vision and mission of the company.

b. New Service Strategy Development:

The product portfolio strategy and a defined organizational structure for new product /
service development are critical for the foundation of success. (Possibility in terms of
markets, types of services, time horizon, profit criteria).

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 The framework allows an organization to identify possible directions for growth.
 
Offerings are some of the most common approaches.
      
There should be formal mechanism for ensuring an ongoing stream of new service
possibilities.
          
The mechanism may include a formal new service development department with
responsibility for generating new ideas, suggestion boxes for employees, customers, new
service development teams to 
identify new services.
c. Idea Generation:
 
Formal brainstorming, solicitation of ideas from employees and customers, lead-users
researchers and learning about competitors.
  d.Service Concept development and evaluation:
         After clear definition of the concept, it is important to produce a description of the
service that represents its specific features and then to determine initial customer and
employee responses to the concept.
 e. Business Analysis:
          Assuming the service concept is favourably evaluated by customers and employees
at the concept development stage, the next step is to determine its feasibility and potential
profit implications.This stage will involve preliminary assumptions about the costs of
hiring and training personnel delivery system enhancements, facility changes. The
organization will pass the results of the business analysis through its profitability and
feasibility screen to determine whether the new service idea meets the minimum
requirements.
2. IMPLEMENTATION:

f. . Service development and testing:

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It involves construction of product prototype and testing for consumer acceptance.During
this phase, the concept is refined to the point where a detailed service blueprint
representing the implementation plan for the service can be produced.
  g.    Market testing:
 
The new service may be offered to employees of the organization and their families for a
time to assess their responses to variations in marketing mix.
At this stage, pilot study has to be done for the service, to be sure that the operational
details are functioning smoothly.
 
h.   Commercialization:
 
At this stage, the service goes live and introduced to the market place.
 
The first is to build and maintain acceptance of the new service among large numbers of
service delivery personnel who will be responsibility day-to-day for service quality.
 
To monitor all aspects of the service during introduction and through the complete
service cycle.
 
i. Post introduction evaluation:
 
At this stage, the information gathered during commercialization of the service can be
viewed and changes made to the delivery process, staffing or marketing –mix variables on
the basis of actual offering to the market response.

Service blue printing

 
A service blueprint is a picture or map that accurately portrays the service system so that
the different people can understand.      It is useful at the design and redesign stages of
service development. It visually displays the service by simultaneously depicting the

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 process of service delivery, the points of customer contact, the roles of customers and
employees.
Blueprinting components:
  Line of interaction:
 It represents direct interactions between the customer and the organization.
 
Ex: Initial interview, intermediate meetings.
 
Line of visibility:
 
This line separates all service activities that are visible to the customer from those that are
not visible.
  Line of internal interaction:
 It separates contact employee activities from those of other service support activities and
people. Ex: Blueprint for express mail delivery services.
BUILDING A BLUEPRINT:
  STEP -1:
 Blueprints can be developed at a variety of levels and there needs to be agreement on the
starting point. Identifying the process to be mapped will be determined by the underlying
purpose of building the blueprint.
 STEP-2:
 A common rationale for market segmentation is that each segments needs are different
and therefore will require variations in the service features once any level of detail is
reached, separates blueprints should be developed to avoid confusion and maximize their
usefulness.
 STEP-3:
  in purchasing, consuming and evaluating the service.
  STEP-4:
 In case of technology-delivered services, the required actions of the technology interface
will be mapped above the line of visibility.If no employees are involved in the service at
all, then the area can be relabeled “onstage technology actions”actions,thoseactivities.If bo
“onstage contact employee actions”

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   STEP-5:
Here the line of internal interaction can then be drawn and linkages from contact activities
to internal support function can be identified.
   STEP-6:
 Finally, the evidence of service can be added to the blueprint to illustrate what it is that
the customer sees and receives as tangible evidence of the service at each step in the
customer experience.
Benefits Of Service Blueprinting: 
1.It provides an overview of the service
 
2.It provides a basis for identifying and assessing cost, revenue and capital invested in
each element of the service.
 
3.It facilitates top-down, bottom-up approach to quality improvement.

Service quality
Service quality is the assessment of quality is done during the service delivery processes. It is an
attitude formed by a long-term overall evaluation of a firm‟s performance.
Quality: “The quality of service is the degree of conformance of all the relevant features and
characteristics of service to all the aspects of customer needs limited by the price and delivery
he/she will accept.”
Quality may be judged from the following:
1) Design reflected through the relevant feature and characteristics of service.
2) Satisfaction of customer needs
3) Production and delivery of service
Principles of service quality:
 S.Q is more difficult for the consumer to evaluate than the quality of goods.
 It is based on consumer perception.
 Service quality perception result from a comparison of what the customer expected prior
to the service and the perceived level of service received.
Dimensions of Service Quality
1. Tangibles: The physical appearance of the facilities, staff, buildings, etc., e.g. Does the
equipment appear modern? How clean is the waitress’s apron?

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2. Reliability: The ability to reproduce the same level of service again and again e.g.. Is
feedback regarding student progress always given? Are messages always passed on?
3. Responsiveness: The speed with which queries etc. and dealt with e.g.. Are letters replied
to by return of post, or does it take a month? Is feedback on assignments given within a
week in time for students to assimilate the information, or does the feedback come too
late, after the examination has been taken?
4. Communication: The clarity and understandability of the information given to the client,
e.g. Does the doctor take the time to explain in terms the patient can understand, what is
going to happen next? Does the solicitor explain clearly what the legal jargon means?
5. Credibility: The trustworthiness of the service provider, e.g. Does the newspaper reporter
report all the facts or only those which support his/her argument? Does the financial
adviser present all the options or only those which earn him/her the most commission?
6. Security: The physical safety of the customer or privacy of client information, e.g. Are
the medical records of patients kept confidential? Are the stands in the football ground
strong enough to support the weight of all the supporters?
7. Competence: The actual technical expertise of the service provider, e.g. Is the doctor
really qualified to perform heart surgery? Does the financial adviser have sufficient
knowledge of all the relevant tax regulations?
8. Courtesy: The attitude of the service provider and manner adopted by the server, e.g.. Is
the receptionist friendly, helpful and polite? Does the doctor treat the patient as an
inferior being?
9. Understanding: How well the provider of the service understands the client’s needs
e.g. .Does the bank recognize that most clients cannot get to the bank in working hours?
Are there mirrors positioned in the hotel bathrooms which allow guests to see the back of
their hair?
10. Access: How easy is it to reach the service provider, geographically or by phone, e.g Are
there car parking facilities close to the solicitor’s office? Does it always take five
attempts to get the solicitor on the phone?
Perspectives of service quality: 
 Transcendent View –Quality judged E.g. Medical service experience
 Product based View –Quality depends on each service E.g. Saloon Ingredients
 User based View –Quality lies in the eyes of the user E.g. Education
 Manufacturing View –Quality based productivity E.g. BPO service
 Value based View –Service quality is judged in terms of value and prices

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 Measurement of Service equality
1.SOFT MEASURE:
They can‟t be easily observed
SERVQUAL can be used to measure
 On going surveys
 Employee surveys
 Mystery shopping
 Focus group discussion
2.HARD MEASURE:
They refer to operational procedures and include data as service response time, failures rates and
delivery costs
E.g. how many minutes a customers had to wait in line to get the service?

Gap analysis of service quality

Managers have to match perceived services with expected service or customer expectations with
customer perceptions in order to successfully achieve customer satisfaction. GAP analysis helps
the managers to analysis the gaps between customer expectations of services and customer
perception of service. This model was developed by Parasuram, Berry, and Zeithaml in 1985.

Gap 1: is the distance between what customers expect and what managers think they expect -
Clearly survey research is a key way to narrow this gap. Reasons:
1. Inadequate market research
2. Lack of upward communication in the organization
3. Insufficient focus on customer relationships
4. Not knowing what customer expects
5. Inadequate service recovery
This gap can be narrowed through adequate research programmes to find customer needs and
the sources of their expectations and to improve the communication system
Gap 2: is between management perception and the actual specification of the customer
experience - Managers need to make sure the organization is defining the level of service they
believe is needed. Reasons:
1. Poor service design
2. Absence of customer driven standards

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3. Lack of management commitment to satisfy the customer
4. Lack of intangible evidence
This gap can be closed by standardizing service delivery process wherever possible and also
setting proper organizational goals and to realize that customer is of prime important.
Gap 3 : is from the experience specification to the delivery of the experience - Managers need to
audit the customer experience that their organization currently delivers in order to make sure it
lives up to the spec.
Reasons:
 Human resource problem
 Failure to match market demand and market supply
 Customers are unaware of their roles and responsibilities
 Service intermediaries problems
This gap can be closed through employee questionnaire, that address their perceived ability to
deliver to established standards
Gap 4: is the gap between the delivery of the customer experience and what is communicated to
customers - All too often organizations exaggerate what will be provided to customers, or
discuss the best case rather than the likely case, raising customer expectations and harming
customer perceptions.
Reasons:
1. Lack of integrated service marketing communications
2. Ineffective management of customer expectations by managers
3. Over promising by the organization
4. Inadequate horizontal communication within the organization.
This can be reduced by efficient and effective communication system and also by not inflating
promises to customers leading to higher expectations.
Gap 5 : is the gap between a customer's perception of the experience and the customer's
expectation of the service - Customers' expectations have been shaped by word of mouth, their
personal needs and their own past experiences. Routine transactional surveys after delivering the
customer experience are important for an organization to measure customer perceptions of
service. Reason for the gap 5 is the association of the gap 1 to 4 and can be bridged by closing all
the above four gaps.

Service quality management Service quality narrow down the goals of service quality
management as

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1. To maintain a consistency in service delivery so that all elements are under control and
achieve the same desired results the first time and every time
2. To meet the customers rising expectation through the introduction of the new services and
enhancement of the existing ones.
The service quality management process involves
1. Setting the right standard
2. Organizing and implementing quality service
3. Monitoring service quality
Monitoring service quality:
It is very important to monitor the implemented standards of service to achieve goals of the firm.
To monitor service quality firms use certain tools and techniques some of them are
Statistical tools: punctuality, waiting time, delivery status etc are vety much difficulty to
monitor. In this case firms can measure the quality by using simple statistical tools and display
the results in the form of a chart. Ex: scheduling models for telephone response centers can
predict staffing levels needed to maintain, say a three-second response.
Quality function deployment: it is a disciplined approach to transform customer requirements,
the voice of the customer into product/service development requirement. It brings together what
customers want and how their requirements can be delivered.
Internal performance analysis: It is undertaken by the all organizations to measure the success
of their planning and also quality of service. Sales figures, internal reporting data, job appraisal
and levels are key indicators to quality performance.
Customer satisfaction analysis: This is the most important analysis and is collected in the form
of feedback and follow up survey. Focused group discussions and other market research
techniques can be utilized to ask customer directly about their satisfaction of the service quality.

Service mapping
A service map is a graphical display of a service that illustrates the various components upon
which successful delivery of that service relies. These components generally include hardware,
software, and configurable settings or roles.
Why a Service Map?
If we want to control the quality of the experience to the user and customer, we must understand
and control all of the components that make up the service.They present a service-centered view
of the environment, organizing technical capability in business-oriented terms.They more readily

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facilitate understanding of complex systems and component dependencies than text-based
documents for both technical staff and customers.
What Does a Service Map Tell Us?
 Hardware streams that make up a service
 Application streams that make up a service
 Types of settings that are needed for the service to function
 Supporting services that are needed to ensure the service stays available
 Different customers that use the service
Types of service mapping
1.Storyboards
Storyboarding was a technique first developed by Walt Disney for his animated films. It’s a
visual way of telling a story where you draw what is happening in every scene to describe a
sequence of events and tell the story.
Hand drawings or simple pictures are an effective way to illustrate a story or user journey in this
way. In his book Unfolding the Napkin, Dan Roan explains why hand drawings are so powerful:

2. User/Customer Experience Map

An experience map is focussed on understanding and capturing emotive feedback–what people
are doing, as well as what they are thinking and feeling.
A good experience map will capture both the high and the low points of an experience people
have across different stages of an end to end service. This will usually include how people
anticipate doing something (what happens beforehand), and how they reflect on the experience
(what happens afterwards).
Experience mapping is a great way of capturing and creatively mapping research insights as well
as developing an understanding of opportunities for creating a better and more consistent
experience for service users or customers.
3. User/Customer Journey Map
A journey map is less focussed on mapping an emotive experience and more about
understanding the component parts and interactions across an end to end service, or for part of a

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service. It will either show an ‘as if’ understanding of a user journey–how something works at
the moment. Or, it will show a future view and design–how we intend something to work in the
future.
The most successful journey maps are used as living artefacts rather than project deliverables.
When used effectively as a focal point for conversations to happen in teams, they enable
decisions to be made with a better understanding of user needs within the context of an end to
end service.
4. User Story Map
A user story map or ‘story mapping’ in an approach more commonly used in agile software and
product delivery. In his book User Story Mapping, Jeff Patton explains that:
“Stories in agile development get their name from how they should be used, not what you write
down”.
Story mapping is a great way of building a shared understanding of what you’re building and
why. This approach is more focussed on the product or software components of a project. This
way teams can prioritise what to build, but it’s not a full view of an end to end service with
internal and supporting processes.
5. Service Blueprint
A service blueprint is more towards a design or technical plan for a service, or part of a service.
This is usually an operational tool that visualises components in enough detail to analyse,
implement, and maintain them. This detail can be used to analyse the business model underlying
a service proposition, as well as revealing dependencies and helping to monitor performance
across different touchpoints.
Teams might use a blueprint to link to other technical documents, or user stories and product
level specification being developed, especially as part of technical delivery.
Blueprints often represent organisational design. They map the people and processes used to
deliver different parts of services, as well as showing who owns what parts of a journey in an
organisation, or across organisations.
These are some of the most common types of maps in user centred design. You could also
include things like ‘Service Architecture’ (which would sit below service blueprint in terms of
technical detail) and ‘System Mapping’ (which would sit somewhere in the middle). These
artefacts/outputs are less likely to start from a user or customer perspective so they’re best
considered separately.

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Principles of service mapping
These are questions to work through when getting started:
 What is the purpose of your map and who is it for?
 or What conversations will this map support and with who?
 Is it a research or design tool, or both?
Often maps start out as a way of bringing together observations and an understanding of
user research. Think about whether you need to create an ‘as is’ map or whether you’re
designing a future view of a service. For clarity, it usually makes sense to split ‘as is’ and
future service maps into separate outputs or artefacts.
 Is it intended to be tactical or inspirational?
Think about whether the purpose of your map is to support short-term improvements and
‘quick-wins’, or to inspire and support longer-term changes to a service.
 Will a design, engineering, or operational team(s) use it to build out and deliver parts or
all of a service?
If a maps intended purpose is for work with operational or engineering teams it might
focus more on technical detail like a service blueprint, rather than capturing a more
emotive experience.
Or, is its purpose to share new concepts and ideas throughout the organisation?
If a maps intended purpose is to communicate a future vision for a service inside an
organisation, or with senior leaders, then more of a storytelling and visual approach could
have the greatest impact.

Service Failure and Service Recovery

A service failure, simply defined, is service performance that fails to meet a customer's
expectations. Typically, when a service failure occurs, a customer will expect to be compensated
for the inconvenience in the form of any combination of refunds, credits, discounts, or apologies.
Even with the best service organizations, failures can just happen — they may be due to the
service not available when promised, it may be delivered late or too slowly (some times too
fast??), the outcome may be incorrect or poorly executed, or employees may be rude or uncaring.
All these types of service failures bring about negative experiences. If left unfixed they can result
in customers leaving, telling others about the negative experiences or even challenging through
consumer courts. Research has shown that resolving the problems effectively has a strong impact
on the customer satisfaction, loyalty, and bottom-line performance. Customers who experience

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service failures, but are ultimately satisfied based on recovery efforts by the firm, will be more
loyal.

Types of Service failures

 Core service failure
 Outcome Failure
 Process Failure
 Failure due to physical evidence
 Encounter failue
Reasons for service failure
The major reasons for service failures include strategy of the management, leadership quality of
managers, and natural instincts of employees.
Strategy of the management: Management should be able to plan and strategize company
policies and operations so that every aspect of the business is well-organized to reduce the
chances of service failure.
Leadership quality of managers: Managers should be able to apply their leadership skills in
motivating, supervising, and correcting the operations and actions in the organization to ensure
higher customer satisfaction and minimum service failure.
Natural instincts of employees: A large part of service relies on the employees as they are the
one to provide service and interact with the customers. The behavior of leadership and
management towards employees is often incongruent with the customer service initiative. Thus,
employees must be well-skilled and trained to work efficiently and effectively.

Service Recovery Strategies

Service recovery is a company's resolution of a problem from a dissatisfied customer, converting
them into a loyal customer. It is the action a service provider takes in response to service failure.

When a service failure occurs, service recovery strategies will be needed to be implemented by
service organizations. This long-term strategy will be embedded as part of organization’s overall
service strategy. Service recovery is about the combination of a variety of strategies to solve the
specific context of the problem. The proposed eight strategies by Zeithaml et al. are:

The first strategy is to make the service fail-safe by doing it right the first time. It avoids
negativities of failures and it is the most important dimension of service quality. In order to

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achieve that, there must be a top management commitment and a positive firm culture of ‘zero
defection’ and appreciate ‘relationship value of customers’ to uphold the standards of service
without blindly adopting the Total Quality Management from the product perspective.
The second strategy is to encourage and track complaints. According to research, almost 50% of
customers encountered problems by do not complain. This segment will have a higher chance of
switching to competitor as organization has no control over it. Encouraging complaint is healthy
and it will allow organization to learn. Tracking complaints will ensure no complaints are left
out. Technology can be used to aid in handling of complaints.
The third strategy is to act quickly. Complaining customers want quick responses and do not
want to be ping-pong around different employees, which will seem to be shirking
responsibilities. Even when full resolution is likely to take longer, fast acknowledgement is
required to appease them. There is positive correlation between fast service recovery with
satisfaction and loyalty.
The fourth strategy is to provide adequate explanations. This allows customers to understand
why the failure occurred. According to attribution theory, customer will understand and
appreciate what is going on and they will be more forgiving. The content and the style of the
delivery must be suitable to the affected customers subjectively.
The fifth strategy is to treat customers fairly. They want justice in their complaint-handling
process, which involves procedure (speed, convenience, follow-up etc), interaction (behavior of
service representatives) and outcome. Therefore it is important that the process be handled
properly to return them the justice they seek. Recent research indicates that justice considerations
have a large impact on how customers evaluate firm’s recovery effort. Therefore, if they do not
perceive themselves being just, they will rate the recovery badly even when it is perfectly done.
(Tax and Brown 2000).
The sixth strategy is to cultivate relationship with customers. Long term relationship will allow
customers to be more forgiving and open to the recovery process. Cultivation of strong
relationship can provide an important buffer to service firms when failures occur. The biggest
challenge would be to restore their confidence and trust again.
The seventh strategy is to learn from recovery experience. Organizations can learn through using
tools to help evaluate experiences. They can use blueprinting, control charts, fishbone diagram
(cause and effect diagram) to use those acquired knowledge in their recovery effort. The last
strategy is to learn from lost customers through market research and get into the root cause
analysis of why they left.

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Steps of service recovery
Step 1: Apologize and Ask for Forgiveness: After a service failure, listen to the customers and
don’t interrupt. Apologize for the failure in a genuine and sincere tone. Also, provide them with
the full information regarding the cause of the service failure.
Step 2: Go Over the Complaint with Your Customer: Always go through the complaint as you
might be missing something. This also helps us to actually understand who’s at fault because
sometimes the customers may also be wrong or may give false complaint. We can also locate the
expectations of the customers after the failure has occurred.
Step 3: Fix the Problem and Then Follow Up: In the third step of service recovery, try to fix the
problem with the best alternative and follow-up with the customer. In the case of Southwest
Airlines, a man had paid $8 for the Wi-Fi services in the flight but didn’t get the service. Later,
the amount was refunded by the airline, and this helped to develop a loyal customer for
Southwest Airlines.
Step 4: Document the Problem in Detail: The last step of service recovery is recording the
complaints and problems and training the staff members for similar problems that may occur in
the future. The only way to prevent serious problems from recurring is to document the problem
for careful analysis later.
Service Pricing
Pricing of services
Pricing Strategy It is a strategic tool that organizations use to differentiate their products from
competitors and thereby gain the competitive edge to capture the market.
How to price services
Because there is not a set-in-stone method for pricing services, you have some flexibility. Use
the following six steps to learn how to price a service:

 Calculate your costs

 Look at the market
 Know your customers
 Consider time invested
 Come up with a fair profit margin
 Charge an hourly or per-project rate

Process of service Pricing-Steps

 Understanding customer value

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  Determine demand based on competition and offring
 Revenues and LTV
 Establish a Pricing Structure and Level
 Set Final Price
Approaches to pricing service
For every product, the company has to choose a price. But determining the price can take many
ways. Most importantly, it should follow a predetermined strategy. 3 major pricing strategies can
be identified:
 Cost based pricing
 Competition based pricing
 Demand based pricing
Cost based pricing: While in customer value-based pricing, customers’ perceptions of value are
key to setting prices, in cost-based pricing the seller’s costs are the primary consideration. Costs
set the floor for the price that the company can charge. Therefore, cost-based pricing involves
setting prices based on the costs for producing, distributing and selling the product. In order to
make some profit, a fair rate of return is added to account for efforts and risks.
Some companies, such as Ryanair or Walmart, pursue a low-cost strategy and aim to offer the
lowest prices. This goes along with accepting smaller margins but greater sales. Other
companies, such as Apple or BMW, do not compete based on low prices. By offering superior
customer value, they can claim higher prices and margins — they pursue a customer value-based
pricing strategy. We can see that choosing between the 3 major pricing strategies is closely
related to the overall marketing strategy — actually it is an integral part of it.
Competition based pricing: competition-based pricing involves setting prices based on
competitor’s strategies, costs, prices and market offerings. In highly competitive markets,
consumers will base their judgments of a product’s value on the prices that competitors charge
for similar products. For instance in the gasoline industry, competition-based pricing is applied.
Demand based pricing: Demand Based Pricing is a pricing method based on the customer’s
demand and the perceived value of the product. In this method the customer’s responsiveness to
purchase the product at different prices is compared and then an acceptable price is set.
One of the most appropriate ways that companies price their service is basing the price on the
perceived value of the service to customers. When consumers discuss value, they use the term in
many different ways and talk about myriad attributes or ferent ways and talk about myriad
attributes or components. What constitutes value, even in a single service category, appears to be
highly personal and idiosyncratic, customers define value in four ways:

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  Value is low price
 Value is whatever I want in a product or a service
 Value is the quality I get for the price I pay
 Value is what I get for what I give
Strategies of service pricing
Discounting: Service providers offer discount to communicate to price-sensitive buyers that are
receiving value.
Odd Pricing: It is the pricing service just below the exact dollar amount to make buyers perceive
that they are getting a lower price.
Synchro-pricing: Ir is the use of price to manage demand for a service by capitalizing on
customer sensitivity price.
Penetration pricing: It is a strategy in which new services are introduced at low price to stimulate
trial and widespread use
Prestige Pricing: It is a special form of demand-based pricing by service marketers who offer
high-quality or status services. Marketing strategy where prices are set higher than normal
because lower prices will hurt instead of helping sales, such as for high-end perfumes, jewelry,
clothing, cars, etc. Also called image pricing.
Skimming Pricing: Price skimming is a pricing strategy in which a marketer sets a relatively
high initial price for a product or service at first, then lowers the price over time. It is a temporal
version of price discrimination/yield management.
Value pricing: Value-based pricing means setting a price customers are willing to pay based on
the perceived value to them of your product or service — not on the cost of providing it. Pricing
strategist Mark Striving of Pragmatic Pricing explains. Value-based pricing (or value pricing) is
the most highly recommended pricing technique by consultants and academics. The basic idea is
to set a price that’s based on what your customers are willing to pay.
Market segmentation pricing: A service marketer charges different prices to groups of
customers for what are perceived to be different quality levels of service, even though there may
not be corresponding differences in the costs of providing the service to each of these groups.
This form of pricing is based on the premise that segments show different price elasticizes of
demand and desire different quality levels.
Price framing: Because many customers do not posses accurate reference price for services,
services marketers are more likely than good marketers to organize price infiltration for customer
so they know how to view it. Customer naturally look for price anchor as well as familiar
services against which to judge focal services.

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Price building: Price building is one method of determining the value of your company as you
prepare to sell your business. Price building is a valuation method that simply looks at the hard
facts: assets, leases, real estate, and goodwill (i.e., the value of the business’s good name and
reputation and demonstrated ability to consistently turn a profit). It is the amount over and above
the market value of the tangible assets on the balance sheet that a buyer should be expected to
pay for the business.
Complementary pricing: Method in which one of the complementary products (shaving razor,
for example) is priced to achieve maximum sales volume, (without cost or profit considerations)
to stimulate the demand for the other product (razor blades). The objective is to generate a level
of profit that adequately covers losses sustained by the first product.
Results-based pricing: In service industries in which outcome is very important but uncertainty
is high, the most relevant aspect of value is the result of the service.
Premium pricing: Charge higher prices because you have something that makes you unique. For
example, do you offer a warranty or service guarantee that your competitors do not? Do you use
exclusive tools or technology that make your business easier to work with and deliver results that
stand out?

Economy pricing: Set low prices because overheads are low. Your costs may be low for several
reasons. Perhaps you use software to organize and manage your business instead of hiring an
assistant. Or maybe you have a special arrangement with one of your suppliers which allows you
to get inexpensive supplies.
Cost-plus pricing: Calculate the cost to deliver your services and add a margin for a profit. For
example, if you know your time and materials cost $200, and you want to make a 20% profit
margin, simply charge $240. This is a straightforward pricing strategy, but it can cost you money
because you may end up setting a lower price than what customers are actually willing to pay.
Psychological pricing: Prices based on the psychological impact they have. For example, it’s
believed that odd prices like $19.97 are more attractive than round numbers like $20.00.
Competitive pricing: Charge according to what the competition charges. While competitors can
give you a good idea of where to start, remember that your business is unique. Just because
someone is charging a specific price doesn’t mean you should match or undercut them.
Bundled pricing: Also known as packaged pricing, this strategy involves bundling various
services together and charging one price. Bundled services are usually cheaper than if customers
were to purchase each service individually. If done correctly, this technique is a great way to
upsell more services and boost your profits

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 Service attributes that influence pricing decisions
Price is the only element of marketing mix that helps in generating income.Therefore, a marketer
should adopt a well-planned approach for pricing decisions.The marketer should know the
factors that influence the pricing decisions before setting the price of a product.
 Organizational Objectives:
Affect the pricing decisions to a great extent. The marketers should set the prices as per
the organizational goals. For instance, an organization has set a goal to produce quality
products, thus, the prices will be set according to the quality of products. Similarly, if the
organization has a goal to increase sales by 18% every year, then the reasonable prices
have to be set to increase the demand of the product.
 Costs:
Influence the price setting decisions of an organization. The organization may sell
products at prices less than that of the competitors even if it is incurring high costs. By
following this strategy, the organization can increase sales volumes in the short run but
cannot survive in the long run.Thus, the marketers analyze the costs before setting the
prices to minimize losses. Costs include cost of raw materials, selling and distribution
overheads, cost of advertisement and sales promotion and office and administration
overheads.
 Legal and Regulatory Issues:
Persuade marketers to change price decisions. The legal and regulatory laws set prices on
various products, such as insurance and dairy items. These laws may lead to the fixing,
freezing, or controlling of prices at minimum or maximum levels.
 Product Characteristics:
Include the nature of the product, substitutes of the product, stage of life-cycle of the
product, and product diversification.
 Competition:
Affects prices significantly. The organization matches the prices with the competitors and
adjusts the prices more or less than the competitors. The organization also assesses that
how the competitors respond to changes in the prices.
 Pricing Objectives:
Help an organization in determining price decisions. For instance, an organization has a
pricing objective to increase the market share through low pricing. Therefore, it needs to
set the prices less than the competitor prices to gain the market share. Giving rebates and

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 discounts on products is also a price objective that influences the customer’s decisions to
buy a product.
 Price Elasticity of Demand:
Refers to change in demand of a product due to change in price.
There are three situations that arise under it:
o Products that have inelastic demand will be highly priced
o Products that have more than elastic demand will be priced low
o Products that have elastic demand will be reasonably priced.
 Competitor’s pricing Policies:
Influence the pricing policies of the organizations. The price of a product should be
determined in such a way that it should easily face price competition
 Distribution Channels:
Implies a pathway through which the final products of manufacturers reach the end users.
If the distribution channel is large, price of the product will be high and if the distribution
channel is short, the price of the product will be low. Thus, these are the major factors
that influence the pricing decisions.
 Service heterogeneity
 Service persishability
 Service intangibility
 Service inseprability

Service pricing objectives

Pricing can be defined as the process of determining an appropriate price for the product, or it is
an act of setting price for the product. Pricing involves a number of decisions related to setting
price of product. Pricing policies are aimed at achieving various objectives. Company has several
objectives to be achieved by the sound pricing policies and strategies. Pricing decisions are based
on the objectives to be achieved. Objectives are related to sales volume, profitability, market
shares, or competition.
Profits-related Objectives:
Profit has remained a dominant objective of business activities. Company’s pricing policies and
strategies are aimed at following profits-related objectives:
 Maximum Current Profit
 Target Return on Investment
Sales oriented objectives

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  Sales growth
 Target market share
 Increase in market share
Competition-related Objectives
 To Face Competition
 To Keep Competitors Away
 To Achieve Quality Leadership by Pricing
 To Remove Competitors from the Market
Customer-related Objectives
 To Win Confidence of Customers
 To Satisfy Customers
Other objectives
 Market Penetration
 Promoting a New Product
 Maintaining Image and Reputation in the Market
 To Skim the Cream from the Market
 Price Stability
 Survival and Growth

Foundations for formulating pricing objectives

Pricing objectives or goals give direction to the whole pricing process. Determining what your
objectives are is the first step in pricing. When deciding on pricing objectives you must consider:
 The overall financial, marketing, and strategic objectives of the company
 The objectives of your product or brand;
 Price elasticity and price points
 Brand image
 The competition
 Substitution services
 The resources you have available
 Service heterogeneity
 The type of customer
 The costs associated with the service

Price discrimination in services

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Price discrimination is a selling strategy that charges customers different prices for the same
product or service based on what the seller thinks they can get the customer to agree to. In pure
price discrimination, the seller charges each customer the maximum price he or she will pay. In
more common forms of price discrimination, the seller places customers in groups based on
certain attributes and charges each group a different price.
Price discrimination is practiced based on the seller's belief that customers in certain groups can
be asked to pay more or less based on certain demographics or on how they value the product or
service in question.
Price discrimination is most valuable when the profit that is earned as a result of separating the
markets is greater than the profit that is earned as a result of keeping the markets combined.
Whether price discrimination works and for how long the various groups are willing to pay
different prices for the same product depends on the relative elasticities of demand in the sub-
markets. Consumers in a relatively inelastic submarket pay a higher price, while those in a
relatively elastic sub-market pay a lower price.
How Price Discrimination Works
With price discrimination, the company looking to make the sales identifies different market
segments, such as domestic and industrial users, with different price elasticities. Markets must be
kept separate by time, physical distance, and nature of use.

For example, Microsoft Office Schools edition is available for a lower price to educational
institutions than to other users. The markets cannot overlap so that consumers who purchase at a
lower price in the elastic sub-market could resell at a higher price in the inelastic sub-market.
The company must also have monopoly power to make price discrimination more effective.
ypes of Price Discrimination
There are three types of price discrimination: first-degree or perfect price discrimination, second-
degree, and third-degree. These degrees of price discrimination are also known as personalized
pricing (1st-degree pricing), product versioning or menu pricing (2nd-degree pricing), and group
pricing (3rd-degree pricing).

First-degree Price Discrimination

First-degree discrimination, or perfect price discrimination, occurs when a business charges the
maximum possible price for each unit consumed. Because prices vary among units, the firm
captures all available consumer surplus for itself, or the economic surplus. Many industries

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involving client services practice first-degree price discrimination, where a company charges a
different price for every good or service sold.

Second-degree Price Discrimination

Second-degree price discrimination occurs when a company charges a different price for
different quantities consumed, such as quantity discounts on bulk purchases.

Third-degree Price Discrimination

Third-degree price discrimination occurs when a company charges a different price to different
consumer groups. For example, a theater may divide moviegoers into seniors, adults, and
children, each paying a different price when seeing the same movie. This discrimination is the
most common.

Many industries, such as the airline industry, the arts and entertainment industry, and the
pharmaceutical industry, use price discrimination strategies. Examples of price discrimination
include issuing coupons, applying specific discounts (e.g., age discounts), and creating loyalty
programs. One example of price discrimination can be seen in the airline industry. Consumers
buying airline tickets several months in advance typically pay less than consumers purchasing at
the last minute. When demand for a particular flight is high, airlines raise ticket prices in
response.

By contrast, when tickets for a flight are not selling well, the airline reduces the cost of available
tickets to try to generate sales. Because many passengers prefer flying home late on Sunday,
those flights tend to be more expensive than flights leaving early Sunday morning. Airline
passengers typically pay more for additional legroom too.
Primary Requirements for a Successful Price Discrimination
Imperfect competition
The firm must be a price maker (i.e., operate in a market with imperfect competition). There
must be a degree of monopoly power to be able to employ price discrimination. If the company
is operating in a market with perfect competition, this pricing strategy would not be possible, as
there would not be sufficient ability to influence prices.
Prevention of resale

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The firm must be able to prevent resale. In other words, consumers who already purchased a
good or service at a lower price must not be able to re-sell it to other consumers who would’ve
otherwise paid a higher price for the same good or service.
Elasticity of demand
Consumer groups must demonstrate varying elasticities of demand (i.e., low-income individuals
being more elastic to airplane tickets compared to business travelers). If consumers all show the
same elasticity of demand, this pricing strategy will not work.

Pricing and Demand

When managing a services, decisions about pricing are simultaneously some of the most
important choices a businessperson has to make and some of the most difficult. If the company
prices a product too high, the business might lose market share to the competition. If it prices
products too low, the business will cut into its margin and fail to cover its costs. The relationship
between price and consumer demand is critical to this decision-making process.
The Demand Curve
In economic theory, price relates to demand in a function called the demand curve. The demand
curve function assumes that the quantity consumers demand varies with price along a downward
slope -- as prices increase, the consumer demand quantity falls. When prices decline, the
consumer demand quantity increases. This model is also subject to non-price shifts in demand,
such as the introduction of substitutes or changes in consumer tastes. Market equilibrium occurs
at the point where demand intersects with the supply curve, and is the point in which the quantity
demanded by consumers is equal to the quantity the suppliers produce. When a market reaches
equilibrium, shifts in either supply or demand will alter prices either higher or lower depending
on the nature of the change.
Substitutes and Complements
The level of prices of one product sometimes relate to the demand for other products. In these
cases, the two products may be substitutes, where an increase in the price of one product will
drive up demand for the other product, or complements, where a similar price increase will
decrease demand for the other product. An example of substitutes might be strawberry jelly and
raspberry jelly, which frequently serve similar purposes for consumers. If the price of strawberry
jelly increases and the price of raspberry jelly does not increase, many consumers may switch to
raspberry jelly, resulting in a net increase in raspberry jelly demand. Peanut butter and
strawberry jelly, on the other hand, might function as complements. If the price of strawberry

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jelly increases, consumers who use it to make peanut butter and jelly sandwiches may no longer
do so, resulting in a decrease in demand for peanut butter.

Elasticity
Elasticity is the strength of the relationship between price levels and consumer demand. A
product is highly elastic if consumer demand varies considerably with price. For these products,
an increase in price is likely to cause a substantial downward change in the quantity of demand.
The prices of inelastic products, by contrast, do not vary considerably with price. For inelastic
products, either increases or decreases in price are unlikely to change the quantity of consumer
demand.
Responding to Non-Price Shifts in Demand
Sometimes, non-price factors such as consumer taste, income or expectations affect a change in
the relationship between price and demand. In these cases, businesses responding to non-price
factors stimulate sales of a product by lowering prices to increase demand. In this way, a non-
price shift in demand will result in a change in price, even if price did not originally cause the
shift. In other cases, non-price shifts may affect an increase in demand, which businesses may
answer by increasing prices as consumer demand increases.
Yield Management
Service organizations often use the percentage of capacity sold as a measure of operational
efficiency. By themselves, however, these percentage figures tell us little about the relative
profitability of the customer base. High utilization rates may be obtained at the expense of heavy
discounting, or even outright give-always.
Yield management pricing strategies are based on maximizing the revenue yield that can be
derived from available capacity at any given time. Effective yield management models can
significantly improve a company's profitability. Airlines, hotels, and car rental firms, in
particular, have become adept at varying their prices in response to the price sensitivity of
different market segments at different times of the day, week, or season.
Fencing Mechanisms
Firms need to be able to separate or "fence off" different value segments so that customers for
whom the service offers high value are unable to purchase it cheaply. Rate fences can be either
physical or nonphysical and involve setting qualifications that must be met in order to receive a
certain level of discount from the full price.

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Physical fences include observable characteristics of the customer (like child versus adult) and
service characteristics such as class of travel, type of hotel room, or inclusion of certain
amenities with a higher price (free breakfast at a hotel, free golf cart at a golf course).
Nonphysical fences include penalties for canceling or changing an inexpensive reservation,
requirements for advance purchase, group membership or affiliation, and time of use (e.g., happy
hours in bars before 8:00 P.M., travelers must stay over a Saturday night to obtain a cheap airline
booking).

Demand can often be segmented according to customers' sensitivity to price or service features.
For example, few theaters, concert halls, and stadiums have a single, fixed admission price for
performances. Instead, prices vary according to
 seat locations
 performance times
 projected staging costs, and
 the anticipated appeal of the performance

Putting service price into practice

Although the main decision in pricing is usually seen as how much to charge, there are other
important decisions to be made. Table summarizes the questions that service marketers need to
ask themselves as they design and implement a pricing strategy.
Putting service price into practice involves in taking crucial decisions in the areas of
Some Pricing Issues
How much should be charged for this service?
 What costs is the organization attempting to recover? Is the organization trying to achieve
a specific profit margin or return on investment by selling this service?
 How sensitive are customers to different prices?
 What prices are charged by competitors?
 What discount(s) should be offered from basic prices?
 Are psychological pricing points (e.g., $4.95 versus $5.00) customarily used?
What should be the basis of pricing?
 Execution of a specific task
 Admission to a service facility
 Units of time (hour, week, month, year)
 Percentage commission on the value of the transaction

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  Physical resources consumed
 Geographic distance covered
 Weight or size of object serviced
 Should each service element be billed independently?
 Should a single price be charged for a bundled package?
Who should collect payment?
 The organization that provides the service
 A specialist intermediary (travel or ticket agent, bank, retailer, etc.)
 How should the intermediary be compensated for this work—flat fee or percentage
commission?
Where should payment be made?
 The location at which the service is delivered
 A convenient retail outlet or financial intermediary (e.g., bank)
 The purchaser's home (by mail or phone)
When should payment be made?
 Before or after delivery of the service
 At which times of day
 On which days of the week
How should payment be made?
 Cash (exact change or not?)
 Token (where can these be purchased?)
 Stored value card
 Check (how to verify?)
 Electronic funds transfer
 Charge card (credit or debit)
 Credit account with service provider
 Vouchers
 Third-party payment (e.g., insurance company or government agency)?
How should prices be communicated to the target market?
 Through what communication medium? (advertising, signage, electronic display, sales
people, customer service personnel)
 What message content (how much emphasis should be placed on price?)


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 The role of marketing communications
The purpose of marketing communications
a. Inform and educate prospective customers about an organization and the relevant features of
the goods and services that it offers.
b. Persuade target customers that a specific service product offers the best solution to their needs,
relative to the offerings of competing firms.
c. Remind customers and prospects of product availability and motivate them to act.
d. Maintain contact with existing customers, providing updates and further education on how to
obtain the best results from the firm’s products in the lightof each customer’s documented usage
behaviour.
The key differences between products and services should be taken intoaccount in considering
service communication as follows:
1. Simultaneous production and consumption:The layout, shop facial, and the appearance and
manner of the staff are critical communication variables.
2. Intangibility.Service providers should attempt to reduce the risk to the consumer of buying an
intangible product by providing tangible clues about the service offering. These clues come from
all aspects of corporate communication.
3. Heterogeneity:This, too, leads to greater perceived risk. Again communications can help to
reduce this factor. It may be appropriate to communicate a service guarantee or promise or to
demonstrate how well-trained your staff are.
4. Perishability: Many promotional tools, e.g. advertising, sales promotion, and direct marketing,
have a role to play in shaping demand. This is one of the most challenging aspects of service
management and arises from the fact that services cannot be inventoried.

Flowing from this there are five key aspects of communication for the service marketer:
a. The role of personal selling
b. The targeting of employees in external communications
c. The management of expectations.
d. The provision of tangible clues
e. Word-of-mouth communications

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 Marketing communication process
Marketing communication involves sharing of meaning, information and concepts by the source
and the receiver about the products and services and also about the firm selling through the
devices of promotion via, advertising, publicity, salesmanship and sales promotion.
In marketing the source is the marketer who desires to promote the product. Marketer delivers a
message to a receiver, who is the target market segment. Message is received and integrated by
consumers and if their predisposition becomes favorable, they decide to purchase. Feedback is
the reverse flow of communication to the marketer.

Marketing communication may be distorted particularly when a message passes through a

number of channels. Noise can arise due to faulty transmission, faulty reception. Competitive
communication constitutes the most serious noise.
Communication is a process of exchanging verbal and non-verbal messages. It is a continuous
process. Pre-requisite of communication is a message. This message must be conveyed through
some medium to the recipient.
It is essential that this message must be understood by the recipient in same terms as intended by
the sender. He must respond within a time frame. Thus, communication is a two way process and
is incomplete without a feedback from the recipient to the sender.

The main components of communication process are as follows:

(i) Context:
Communication is affected by the context in which it takes place. This context may be physical,
social, chronological or cultural. Every communication proceeds with context. The sender
chooses the message to communicate within a context.
(ii) Sender/Encoder:
Sender/Encoder are a person who sends the message. A sender makes use of symbols to convey
the message and produce the required response. Sender may be an individual or a group or an
organization. The views, background, approach, skills, competencies and knowledge of the
sender have a great impact on the message.
The verbal and non-verbal symbols chosen are essential in ascertaining interpretation of the
message by the recipient in the same terms as intended by the sender.
(iii) Message:

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Message is a key idea that the sender wants to communicate. It is a sign that elicits the response
of recipient. Communication process begins with deciding about the message to be conveyed. It
must be ensured that the main objective of the message is clear.
(iv) Medium:
Medium is a means used to exchange/transmit the message. The sender must choose an
appropriate medium for transmitting the message else the message might not be conveyed to the
desired recipients.
The choice of appropriate medium of communication is essential for making the message
effective and correctly interpreted by the recipient.
(v) Recipient/Decoder:
Recipient/Decoder are a person for whom the message is intended/aimed/targeted. The degree to
which the decoder understands the message is dependent upon various factors such as knowledge
of recipient, their responsiveness to the message, and the reliance of encoder on decoder.
(vi) Feedback:
Feedback is the main component of communication process as it permits the sender to analyze
the efficacy of the message. It helps the sender in confirming the correct interpretation of
message by the decoder. Feedback may be verbal or non-verbal. It may take written form also in
form of memos, reports, etc.

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Golden Rules of Marketing Communications:
Despite the many benefits of Integrated Marketing Communications (or IMC); there are also
many barriers. Here’s how you can ensure you become integrated and stay integrated – 10
Golden Rules of Integration.
(1) Get Senior Management Support for the initiative by ensuring they understand the benefits of
IMC.
(2) Integrate at Different Levels of management – Put ‘integration’ on the agenda for various
types of management meetings whether annual reviews or creative sessions. Horizontally ensure
that all managers, not just marketing managers understand the importance of a consistent
message whether on delivery trucks or product quality.

Also ensure that Advertising, PR, Sales Promotions staff are integrating their messages. To do
this you must have carefully planned internal communications, that is, good internal marketing.

(3) Ensure the Design Manual or even a Brand Book is used to maintain common visual
standards for the use of logos, typefaces, colors and so on.

(4) Focus on a clear marketing communications strategy – Have crystal clear communications
objectives; clear positioning statements. Link core values into every communication. Ensure all
communications add value to (instead of dilute) the brand or organization. Exploit areas of
sustainable competitive advantage.

(5) Start with a Zero Budget – Start from scratch. Build a new communications plan. Specify
what you need to do in order to achieve your objectives. In reality, the budget you get is often
less than you ideally need, so you may have to priorities communications activities accordingly.

(6) Think Customers First – Wrap communications around the customer’s buying process.
Identify the stages they go through before, during and after a purchase. Select communication
tools which are right for each stage. Develop a sequence of communications activities which
help the customer to move easily through each stage.

(7) Build Relationships and Brand Values – All communications should help to develop stronger
and stronger relationships with customers. Ask how each communication tool helps to do this.
Remember: customer retention is as important as customer acquisition.

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(8) Develop a Good Marketing Information System which defines who needs what information
when. A customer database for example, can help the telesales, direct marketing and sales force.
IMC can help to define, collect and share vital information.

(9) Share Artwork and Other Media – Consider how, say, advertising imagery can be used in
mail shots, exhibition stands, Christmas cards, news releases and web sites.

(10) Be prepared to change it all – Learn from experience. Constantly search for the optimum
communications mix. Test Improve each year. ‘Kaizen’.

Objectives of service communication

Marketing communication is how you stay in touch with and convey important information
about your company to your customers. Communication vehicles can include newsletters,
websites, e-mail correspondence and other written materials. The content and design of these
pieces of communication must meet the objectives of educating, encouraging action or building
brand awareness.
Sales Marketing Communication
Communicating with your customers keeps them apprised of new happenings in your business
and fulfills the objective of promoting your products and services. This can include new product
launches, sales, expansion or introduction of new offerings. The objective of this form of
marketing communication is to encourage customers to act or to keep them involved with your
business. One example of sales marketing communication is an e-mail blast that informs
consumers about an upcoming, limited-time sale and provides a link to the company's online
product catalog where they can immediately take advantage of the savings opportunity.

Providing Information and Education

Many effective forms of marketing communication provide customers or potential customers
with information about your product, service, business or industry. For example, an accountant
that publishes and distributes a newsletter on tax tips is establishing himself as a expert in the
industry by way of educating the public about basic accounting practices. The objective of this
form of marketing communication is to establish the knowledge of the business and its expertise,
while encouraging people to use more in-depth services.
Retention of Existing Customers

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An objective of effective marketing communication is to retain your existing customers and
increase their investment in your business. establishing customer reward programs that are
presented through marketing mediums like direct mail help achieve this. Letting your customers
know you appreciate their business and presenting them with opportunities to save money, while
at the same time upselling them to new, more or better products, results in increased income for
your small business.

Referrals from Existing Customers

Bringing in new business by way of existing customers is an objective of marketing
communication practices. Communicating with existing customers via social media, email and
your website and encouraging them to refer you to others creates an independent sales team that
works on your behalf. Rewarding customers for their referrals further solidifies your relationship
with them at the same time.

Building Brand Awareness

Every communication message you share should reinforce your brand image in the mind of
consumers. This can be accomplished through consistent messaging and a commonly-used color
scheme, logo and graphic design on all marketing materials. Consumers will associate your
message and image with your product, creating a strong brand identity.

Service communication mix

The promotion element of marketing mix is concerned with activities that are undertaken to
communicate with customers and distribution channels to enhance the sales of the firm. The
promotional communication aims at informing and persuading the customer to buy the product
and informing him about the merits of the products.
Promotion mix: It refers to all the decisions related to promotion of sales of products and
services. The important decisions of promotion mix are selecting advertising media, selecting
promotional techniques, using publicity measures and public relations etc. There are various
tools and elements available for promotion. These are adopted by firms to carry on its
promotional activities. The marketer generally chooses a combination of these promotional tools

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The Advertising Element
Advertising is often the most prominent element of the communication mix. In fact, marketing
and advertising are often misconstrued as the same thing. Advertising includes all messages a
business pays to deliver through a medium to reach a targeted audience. Since it involves the
majority of paid messages, companies often allocate significant amounts of the marketing budget
to the advertising function. While it can be costly, the advertiser has ultimate control over the
message delivered, since it pays the television or radio station, print publication or website for
placement.

Personal Selling and Direct Marketing

Personal selling is sometimes integrated with the direct marketing element. However, many
companies make such extensive use of a sales force that it is important to consider this
component distinctly. Distribution channel suppliers use salespeople to promote products for
resale to trade buyers. Retail salespeople promote the value of goods and services to consumers
in retail businesses.
Selling is more emphasized by companies that sell higher-end products and services that require
more assertive efforts to persuade customers to buy.

Discounts and Promotions

Sales promotions or discounts are similar to advertising in that they are often promoted through
paid communication. However, sales promotions actually involve offering a discounted price to a

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buyer. This may include coupons, percent-off deals and rebates. Along with ads to promote deals
and coupon mailers, companies use exterior signs and in-store signage to call customer attention
to the discounts.

Goals of this communication tool include increasing revenue and cash flow, attracting new
customers and clearing out extra inventory.

Public Relations and Messaging

Public relations is sometimes somewhat similar to advertising in that much of it involves
messages communicated through mass media. The major difference is you don't pay for the time
or space for the message. A television or newspaper feature story mentioning a business, for
instance, isn't paid for and can provide brand exposure.

The downside of PR is that you don't always control the messages. You can try to influence them
through press releases and invites for media coverage, but the media could put a negative spin on
the story.
Direct Marketing to Targeted Customers
Direct marketing includes some aspects of both sales promotions and personal selling. It is
interactive communication with customers where the company's message seeks or implores a
response from targeted customers. E-mail and direct mail are common formats. These messages
are sent to customers with special offers or calls to action, often promoting limited-time deals or
new product launches.

Mail-order clubs, online or print surveys and infomercials are other examples of direct marketing
communication.

Event Sponsorship and Having a Presence

Event sponsorship is the element sometimes left out of the five-element communication mix.
Many models include it within advertising. Event sponsorship occurs with a company pays to
have a presence at a sports, entertainment, nonprofit or community events. The sponsorship may
include a mix of benefits including booth representation during the event to hand out samples,
gifts and literature, name mention during the event and ad spots connected to the event.

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 Srvice delivery system
The four key elements for successful service delivery system are service culture, service quality,
employee engagement and customer experience. The four key elements in such a system are:

1. Service Culture is built on elements of leadership principles, norms, work habits and
vision, mission and values. Culture is the set of overriding principles according to which
management controls, maintains and develops the social process that manifests itself as
delivery of service and gives value to customers. Once a superior service delivery system
and a realistic service concept have been established, there is no other component so
fundamental to the long-term success of a service organization as its culture.
2. Employee Engagement includes employee attitude activities, purpose driven leadership
and HR processes. Even the best designed processes and systems will only be effective if
carried out by people with higher engagement. Engagement is the moderator between the
design and the execution of the service excellence model.
3. Service Quality includes strategies, processes and performance management systems.
The strategy and process design is fundamental to the design of the overall service
management model. Helping the client fulfil their mission and supporting them in the
pursuit of their organizational purpose, must be the foundation of any service provider
partnership.
4. Customer Experience includes elements of customer intelligence, account management
and continuous improvements. Perception is king and constantly evaluating how how
both customer and end-user perceive service delivery is important for continuous
collaboration. Successful service delivery works on the basis that the customer is a part of
the creation and delivery of the service and then designs processes built on that
philosophy – this is called co-creation.

Planning the service delivery

Phase-1 Phase II Phase III
Planning the Monitoring the Monitoring the
Service Delivery Service Experience Service Experience

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 System
When Before the customer During the customer’s After the customer’s
arrives, and while the experience experience
customer is waiting
for the service
experience
What Experience expected Experience realized Experience
remembered
Who Target customers Actual customers Past, current, and
potential future
customers
How Setting service Applying service Customer assessment:
standards; standards and job Comment cards; toll-
blueprinting; performance free 800 numbers;
Universal Service standards; managerial surveys (mail and
Map; fishbone observation Web, phone, critical
analysis; PERT/CPM; (MBWA); employee incidents);
simulations; observation meeting SERVQUAL;
forecasting demand; terms of service customer focus
designing waits guarantees; personal groups; mystery
(queues); training; interviews and shoppers Other data
quality teams; encounters with review: Service
pokayokes; cross- customers failure reports; service
functional guarantee utilization;
organizational desig interviews; customer
complaints by
category and type;
employee feedback;
sales and revenue
reports; market share/
capacity utilization
Further review:
Organizational
design; service

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 standards; training
methods Refer
findings back to
system planners

Phases of service delivery

The following are the stages of service delivery
 Design the delivery system
 Develop service standards
 Plan for and manage customer waits
 Monitor compliance with
 service standards
 Measure overall service quality
 Correct service failures/errors
 Evaluate service failures
 Adjust/improve the system

Physical evidence
Services as we know are largely intangible when marketing. However customers tend to rely on
physical cues to help them evaluate the product before they buy it. Therefore marketers develop
what we call physical evidence to replace these physical cues in a service. The role of the
marketer is to design and implement such tangible evidence. Physical evidence is the material
part of a service.

Physical Environment- The physical environment is the space by which you are surrounded
when you consume the service. So for a meal this is the restaurant and for a journey it is the
aircraft that you travel inside. The physical environment is made up from its ambient conditions;
spatial layout and functionality; and signs, symbols, and artefacts (Zeithaml 2000).

Ambience- The ambient conditions include temperature, colour, smell and sound, music and
noise. The ambience is a package of these elements which consciously or subconsciously help
you to experience the service. Ambience can be diverse. The ambience of a health spa is relaxing
and calm, and the music and smells underpin this experience. The ambience of a nightclub will

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be loud noise and bright lights which enhance this customer experience, obviously in a different
way. The marketer needs to match the ambience to the service that is being delivered.

Spatial Layout- The spatial layout and functionality are the way in which furniture is set up or
machinery spaced out. Think about the spatial layout of your local cinema, or a church or temple
that you have visited and how this affects your experience of the service. Functionality is more
about how well suited the environment is to actually accomplish your needs. For example is the
seat in the cinema comfortable, or can you reach your life jacket when on an aircraft?

Corporate branding (signs, symbols and artefacts) Finally corporate image and identity are
supported by signs, symbols and artefacts of the business itself. Examples of this would be the
signage in Starbucks which reassures the consumer through branding. When you visit an airport
there are signs which guide you around the facility smoothly, as well as statues and logos
displayed throughout the complex. This is all important to the physical evidence as a
fundamental element of the services marketing mix. There are many examples of physical
evidence, including some of the following:
The building itself (such as prestigious offices or scenic headquarters). This includes the design
of the building itself, signage around the building, and parking at the building, how the building
is landscaped and the environment that surrounds the building. This is part of what is known as
the servicescape.
• The interior of any service environment is important. This includes the interior design of the
facility, how well it is equipped, internal signage, how well the internal environment is laid out,
and aspects such as temperature and air conditioning. This is also part of the servicescape.
• Packaging.
• Internet/web pages.
• Paperwork (such as invoices, tickets and dispatch notes).
• Brochures.
• Furnishings.
• Signage (such as those on aircraft and vehicles).
• Uniforms and employee dress.
• Business cards.
• Mailboxes.
• Many others . . .

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A sporting event is packed full of physical evidence. Your tickets have your team’s logos printed
on them, and players are wearing uniforms (i.e. the team colors/colours and clothing). The
stadium itself could be impressive and have an electrifying atmosphere. You travelled there and
parked quickly nearby, and your seats are comfortable and close to restrooms and store. All you
need now is for your team to win! Some organizations depend heavily upon physical evidence as
a means of marketing communications, for example tourism attractions and resorts (e.g. Disney
World), parcel and mail services (e.g. UPS Courier Services), and large banks and insurance
companies (e.g. Lloyds of London). This is important to their corporate image. Of course there
are other examples with a slightly more tangible offering such as Rolls-Royce motor cars and
P&O cruises.

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Role of service evidence: A distinction is made in services marketing between two kinds of
physical evidence: (a) Peripheral evidence; (b) Essential evidence.
(a) Peripheral Evidence: Peripheral evidence is actually possessed as part of the purchase of
a service. It has however little or no independent value. Thus a bank cheque book is of no
value unless backed by the funds transfer and storage service it represents. An admission
ticket for a cinema equally has no independent value. It merely confirms the service. It is
not a surrogate for it. Peripheral evidence ‘adds to’ the value of essential evidence only as
far as the customer values these symbols of service. The hotel rooms of many large
international hotel groups contain much peripheral evidence like directories, town guides,
pens, notepads, welcome gifts, drink packs, soaps and so on. These representations of
service must be designed and developed with customer needs in mind. They often
provide an important set of complementary items to the essential core service sought by
customers
(b) Essential Evidence: Essential evidence, unlike peripheral evidence, cannot be possessed
by the customer. Nevertheless essential evidence may be so important in its influence on
service purchase it may be considered as an element in its own right. The overall
appearance and layout of a hotel; the ‘feel’ of a bank branch; the type of vehicle rented
by a car rental company; the type of aircraft used by a carrier are all examples of physical
evidence.

Servic scape
Servicescape is defined as the physical environment where a service can take place. It helps to
analyze and identify the impact of a good environment on the service-based industry.
Servicescape deals in the settings where a service is consumed or delivered and the place where
both the company and customer interactions with each other. It has a powerful impact on the
assessment, perception, and response of the customer.
Meaning of servicescape
Servicescape is a model that puts its onus on explaining the behavior of customers and clients
within the service environment. It is a popular concept from Booms and Bitner that categorically
states that ambiance has a direct impact on the customers. When a consumer visits a place for a
particular service or product, it is the surroundings that encourage or discourages him from
following a set course of action.

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It is the first aspect of service perceived by the client or customer and the impression that forms
pave the way for further services.

The founders of Servicescape have explained the concept as a necessity if you are interested in
improving your relationship with customers to felicitate better sales figures and larger revenues.

Aspects of servicescape
It is the role of a service provider to create an environment that will appeal to its customer and
ease any discomfort. The important aspects of servicescape are-

1. Spatial layout and functionality

Spatial layout is about the way you arrange the furnishings, equipment and machinery, their
shape and size and of course, the spatial relationship which exists amongst them. Functionality is
about the ability of those items to accomplish customer satisfaction.

The aspect of spatial layout and functionality is much needed in self-service settings where the
customers themselves handle the services.

You will generally not find employees or workers helping you to deal with them. Some
important examples are the ATM, self-service restaurants, internet shopping, etc.

2. Signs, symbols, and artifacts

The sign is one of the most explicit signals that can communicate directly with a customer in a
physical environment. These are prominently displayed on both exterior and interior of a place
and generally act as communicators.

The signs can be used as labels like the name of a department and company, for a directional
purpose like entrance and as rules for specific behavior like no smoking. Symbols and artifacts
are also effective in giving the implicit cue to the reader.

Some important examples are artwork, floor coverings, photographs on the wall, and display of
prominent artifacts that have symbolic meaning and manage to connect and communicate with
its reader.
3. Ambient conditions

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The background conditions of an environment like color, noise, music, sound, lighting, etc. are
included in ambient conditions. These are important factors as they affect one or other of our five
senses and can change the mindset and perception of a person.

In some cases, we hear a soothing background score to relieve stress. The effect of the strong
scent, for instance of coffee or cookies, act as great tempting force and can easily draw people in.
Remember, the ambient condition has proved itself as an influential aspect of servicescape.

Elements of servicescape
The various elements influencing servicescape are
Facility Exterior
 Landscape
 Exterior design
 Surrounding environment
 Parking
 Signage
Facility Interior
 Music
 Layout
 Equipment
 Air quality temperature
 Interior design
Others
 Virtual servicescape
 Brochures
 Employee dress
 Billing Statements
 Web pages
 Uniforms
 Reports
 Stationary
 Business cards

Roles of servicescape

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1. Facilitator
Servicescape acts as a facilitator to help people in their surroundings.A well-designed place
creates a pleasurable ambiance that relates to peace and harmony, whereas an inefficient design
can cause frustration and pessimistic attitude in the minds of both employees and customers.
2. Socialiser
The servicescape design acts as a perfect socializer between both customers and employees.It
also helps to depict the expected behavior and roles like an employee can understand his position
in a team through his cubicle placement, the quality of office furnishings and office
assignments.The design also suggests to customers where they are not allowed and where they
are encouraged and welcomed through servicescape.
3. Package
The servicescape helps to convey the internal image through its outward appearance.Product
packages are one of its primary examples where you can easily know about the wrapped product
by viewing and reading the matter. It acts as a visual metaphor for building a specific image.

4. Differentiator
Servicescape acts as a differentiator by separating designs of a company from its competitor. It
helps to reposition a company and attract new segments.

Types of servicescape environment

The two types of service environment identified on servicescape are –
1. Lean servicescape
Designing this type of environment is straightforward and includes fewer interactions, elements,
and spaces between employees and customers. Some important examples are fast-food outlets,
vending machine, and kiosks.

2. Elaborate servicescape
Designing this type of servicescape requires teams that are skilled in their work and are fully
aware of the corporate vision and desired outcome. The elaborate servicescape includes multiple
spaces, elements, and interactions between employees and customers. Some important examples
include restaurants, gym, swimming pool, bars, ocean liners, and international hotels.

Approach of servicescape
The approach adopted by servicescape includes-

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1. Direct observation
Trained observers are hired to observe and make a detailed note of the behavior and reactions of
both the employees and customers. Depth interviews and direct observation has helped to
explore the reactions and interactions of participants.
The findings have proved useful in comparing and redesigning the servicescape for better results.
2. Environment surveys
An environment survey asks both the employees and customers to put across their preferences
and needs by answering predetermined queries in a particular format. It measures perceptions of
three different factors like social condition, design, and ambiance.

The most important advantage of this survey is the interpretation and administration of the
derived result to create better servicescape.
3. Photographic blueprint
The visual and photographic blueprint can help to know the point of view of a customer. It acts
as a tool to assess the service process.
4. Experiments
Experimental methods help to assess particular reactions of both customer and employee
regarding environmental changes. The real perceptions and reactions can be assessed and
implemented through it very easily.

Distribution channels in service delivery

Using a combination of distribution channels for your service business can help you manage
demand for your services. You can choose different channels to reach various market segments
and develop different pricing strategies that correspond to the income of market segment
members. Such a strategy allows you to access new markets while bridging temporary reductions
in demand through a low-cost channel
Direct Sales
The direct sales channel allows you to contact your customers without any intermediaries
through visits, mail order or online and have complete control over presentation of your offers
and pricing. As you interact with your customers, you receive direct feedback on what you are
proposing and you can adjust your marketing accordingly. The disadvantage, if you don't use
other distribution channels, is that demand will fluctuate and your employees will sometimes be

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overloaded and at other times have little work. Ideally, you plan for your service capacity to
exceed expected direct sales and use other channels to fill in the gaps.
Agent
If you don't want to worry about marketing your services, you can use agents. These sales
professionals either act as individual contractors or work for an agency. The agents provide you
with customers for your services and take a commission. Depending on your agreement with the
agents, they may offer your services exclusively or have a number of service providers that they
offer to customers. You still have good customer contacts when you carry out the work, but you
have no information about the customers that didn't order your services
Partner/Franchise
When you partner with a related, non-competing business, you offer your services within the
framework of the partner's operations. For example, you could offer computer repair services
through a local computer store or installation services for the home through a hardware chain.
The benefit of such a channel is that you reach a lot of customers via your partner, but not having
an independent business with your own customers is a disadvantage.
Opaque Distribution
You may want to serve a low-cost market but keep your higher-margin customers, or you may
want to bridge a temporary drop in demand by selling your services at a discount. You can
achieve such two-tier pricing by using an opaque distribution channel. The channel is opaque
because the customers don't know you are offering the services at a lower price. The opaque
reseller is reselling in his own name but offering your services. The travel and hotel industry is
an example of widespread use of opaque resellers to dispose of surplus airline seats, cruise
capacity or hotel rooms by selling through third-party discount agencies. You can cover your
costs with the opaque channel and make profits on the services you sell at a higher price in your
own name.

Role of intermediaries in service delivery

Nowadays, many services are delivered by intermediaries. Two service marketers are involved in
indirect distribution; the service principal and the service deliverer. The service principal is the
originator and the service deliverer is the intermediary. The service principal is the entity which
creates the service concept. The service deliverer is the entity which deals with the customers
during the execution of the service. Thus, in the indirect channel, both the service supplier and
the intermediaries play an important role.
Role of service intermediaries in service distribution

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Service intermediaries discharge many important functions for the service principal.
1. Service intermediaries co-produce the service and make the service available to customers at a
place and time of their choice, thus fulfilling the promises made by the service firms to
customers.
2. The Franchisee uses the process developed by the service principal and renders satisfying
service to customers.
3. Service intermediaries also make service locally available.
4. Intermediaries act as multiple service principals. Intermediaries such as travel agents and
insurance agents provide retailing function to customers.
5. In many financial or professional services, intermediaries build a relationship based on trust
which is essential in a complex service offering.
6. Services are intangibles and perishables and inventories do not exist. Therefore, service
distribution focuses on identifying ways to bring the customer and principal together. Service
intermediaries such as franchisees agents, brokers, etc., act as a connecting link between the
service firm and customers.
7. Service intermediaries deliver services according to the specifications of the principals.
8. Service intermediaries are in direct contact with the customers. So, they are in a position to
determine the way customers perceive the quality of the service.
9. Service intermediaries advise the customers on the choice of the service which satisfies their
needs.
10. Intermediaries provide after sales support to the customers. For example, an insurance agent
guides the policy holder in making a claim and goes through the procedural formalities in
connection with that claim.
11. An intermediary, as a co-producer of a service shares the risks of providing services by
contributing their own capital to acquire the equipment needed for the delivery of service.
12. A service provider sells only his own services. But consumers prefer to buy service from an
intermediary who offers a wide variety of services including these offered by competing service
principals. The advantage of intermediaries is that they offer different services at one location.
13. Intermediaries relieve the service principal from the botheration of making huge investment
on his own. As intermediaries operate at different places, a service principal can invest his funds
in core services.

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 Service Marketing triangle
The service marketing triangle or the Service triangle as it is commonly called, underlines the
relationships between the various providers of services, and the customers who consume these
services.
As we know, relationships are most important in the services sector. The service triangle outlines
all the relationships that exist between the company, the employees and the customers.
Furthermore, it also outlines the importance of systems in a services industry and how these
systems help achieve customer satisfaction.

There are 3 types of marketing which happen within the service marketing triangle
Internal marketing – Marketing from the company to the employees
External marketing – Marketing from the company to the customers
Interactive marketing – Marketing between the customers and the employees

Internal marketing in the service triangle

Holistic marketing is most used when internal marketing is in effect. An advertising firm always
tries to keep its own employees motivated. They are given a hell lot of parties and outings just so
that they are in a jovial mood. And they need to be in a jovial mood because the rest of the times
they are using their creative brains very hard to give the ultimate service to their customers.
Furthermore, these same advertising companies empower their employees to take the right
decisions in front of customers. This empowerment goes a long way in building motivation and
confidence.
And that’s what internal marketing based on the service triangle is all about. Building confidence
and motivation in your employees, so that they build excellent relationships with the end
customers and the company gets the money.
According to the legendary writers Philip Kotler and Gary Armstrong, “Internal marketing is
orienting a motivating customer contact employees and supporting service people to work as a
team to provide customer satisfaction.”

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 Burkitt and Zealley said, “The challenge for internal marketing is not only to get the right
messages across, but to embed them in such a way that they both change and reinforce employee
behavior.”
How can we do internal marketing?
1. Aligning the organizational objective with the employee attitude is the most important step in
the internal marketing process. We always should keep our employees informed about our goal.
We should clearly convey the message to the employees that “this is the purpose for which we
are in the market”. Then we should take necessary steps so that the employees can harmonize
their attitude or behavior.
2. Introducing the core values of the organization is another step. Each and every employee must
comprehend the core value of the organization.
3. Coordinating the tasks of every employee is another important step in the entire process.
Introduction of the total quality management (TQM) is a great way to achieve this coordination.
If the employees don’t know what to do; when to do; how to do; for whom to do, then it is very
difficult to achieve the organizational objectives. And this lack of coordination parallels to the
lack of internal marketing. So coordination must be established.
4. Creating congenial atmosphere is also equally important. We should create such a corporate
culture in which every employee can share their views with others, even with the higher
authority.
5. Authorizing and empowering the employees facilitate internal marketing. When the
employees feel that they are authorized and empowered to take a decision, they can show their
intrinsic creativity which ultimately help satisfy the customers. This authorization and
empowerment also entail the accountability of the employees.
6. Rewarding the best employee performance is another way to do internal marketing. This also
initiates a positive competition among the employees.
7. Nurturing the fair-play policy can ensure active involvement of the employees in the
organizational activities which ultimately makes sure the implementation of internal marketing

Key components of internal marketing include:

 Motivating employees
 Teaching customer satisfaction techniques
 Communicating company goals regularly
 Management of change
 Training staff on how to use the company’s services

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  Good pay and working conditions

External Marketing
Through these efforts a company makes promises to its customers regarding what they can
expect and how it will be delivered. Traditional marketing activities such as advertising, sales,
special promotions, and pricing facilities this type of marketing, but for services, other factors
also communicate the promises to customers. The service employees, the design and decor of the
facility, and the service process itself also communicate and help to set customer expectation.
Service guarantees and two-way communication are additional ways of communicating service
promises. Unless consistent and realistic promises are set via all of these external communication
vehicles, a customer relationship will be off to a shaky beginning. Further, if there is tendency to
over promise, the relationship may also be off to weak beginning.
Companies use external marketing to make promises to customers. External marketing is any
communication to customers (or potential customers) that happens before service delivery starts.
Forms of external marketing include:
 Advertising
 Personal selling
 Public relations (PR)
 Direct marketing
We use external marketing to achieve many aims including:
 Creating awareness.
 Setting price expectations.
 Setting service level expectations.
 Informing customers if any prerequisites that must be in place before they can use the
service.

Interactive Marketing
Interactive marketing occurs in the moment of truth when the customer interacts with the
organization and the service is produced and consumed. Interestingly, promises are kept or
broken and the reliability of service is tested every time the customer interacts with the
organization.
Interactive marketing relies on customers expressing their preferences so that marketers can
produce more relevant marketing messages. Unlike the outbound marketing of the past,
interactive marketing creates a two way dialogue between a business and its customers.

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Advertising becomes a dynamic process that follows customers rather than leading them. Any
time a customer is invited to provide feedback, express their personal preferences, or offer up
demographic information, they are providing information that marketers can use to guide their
advertising efforts.
Marketing in an interactive way has many advantages over traditional marketing. First and
foremost is the cost. Online advertising costs significantly less than television, print, or radio ads
and often produces greater rates of return. Companies should always be interested in producing
the same results at a reduced cost.
Online activities also leave behind tremendous amounts of information about customers. Their
demographic details and their personal preferences are both revealed through their behavior
online, allowing companies to track and store this data to use in future marketing efforts. The
more relevant that marketing is to a customer’s immediate wants and needs, the more likely it is
to produce a sale.
Forms of Interactive Marketing
 Search Engine Marketing – This involves everything from optimizing a site so that it
shows up higher in search results, to placing targeted ads on the sides of results pages.
 Email Marketing – Delivering ads, deals, and notifications through email is an effective
and economical way to communicate with customers.
 Sponsorships – Partnerships with companies that have a more established online presence
can be a great way to connect with new customers.
 Blogging – Fun, short form blog posts keep customers informed about new products,
special deals, and the culture behind a brand
 Widgets – Simple downloadable tools that are branded are a great way to create
additional value for that brand.
 Social Networking – Sites like Facebook and Twitter have millions of users and are
critical spaces for connecting with customers
 Targeting – Certain ads can be targeted at certain customers. When customers are
exposed to advertising that is relevant to their needs, they purchase more.
 Offline Activation – Companies must actively advertise their URL and Twitter handle in
offline environments so that customers can easily find them online.

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