Unit III

Marketing Mix & Services

Q1. What is the marketing mix of services?
Ans. 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.

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 heterogenous, 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.

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.

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.

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 ambience 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.
Here on we start towards the extended service marketing mix.

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 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.

Process – Service process is the way in which a service is delivered to the end
customer. Lets 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.
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.
This is the service marketing mix (7p) which is also known as the extended
marketing mix.

Of course the marketing mix for services still needs to address the remaining 4Ps
of pricing, product, place and promotion. Let‟s consider some examples of these
four elements from the perspective of a service.

Pricing for services

Pricing needs to take into account two factors in relation to services. The first
issue is what is the unit which we are pricing? Do we sell a hotel room based on
its area or upon how long you use it for? Would you cost dental surgery by the
amount of time you sat in the dentist‟s chair or by the actual procedure that
was undertaken? Secondly if a price is based upon a bundle of sub services then
how do you price it as a whole? An example of this would be an all-you-can-eat
menu priced at a single point e.g. €20, or would you charge for each item on the
menu individually and add-on a service charge?

Product for services

In this instance our product and service are pretty much the same. However as
we have discussed our service is intangible etc. One-way dealing with this is to
consider that: service = product + process. So we need to focus upon the
process. For example when you arrive at a hotel people process you to ensure
that you are registered and your baggage is taken to a room. This is an example
of people processing. Another type of processing is possession processing, and
an example would be where you take your dog to be groomed, or you organise a
service for your car i.e. your possessions are processed. Both of these are
examples of product in relation to service.

Place for services

Where you consume the service is a central part of the services marketing mix.
With the place element the marketer considers convenience, location, footfall,
number of outlets, and timing. Consider an event which takes place over a
weekend. If you have a food trailer which sells organic salads to the public you
need to make sure that you are actually booked at the event, that people will
walk past your trailer and be able to stop and queue, and that you are able to sell
to the people when they want to eat. Simply scale this up for businesses like
Pizza Express.

Promotion for services

Obviously services are more difficult to assess in terms of attributes in
comparison to tangible products. The marketer needs to be more innovative and
clear when it comes to the benefits to the target market of his or her service. The
marketer can try a number of techniques which include:
Emphasizing any tangible cues e.g. telecommunications companies will
use symbols such as Mercury to emphasize speed. Burger King will use
boxes and packaging which emphasize its marketing communications.
Exploiting celebrity to provide information about the service. There are
many examples of well-known public faces telling us on TV how they
purchase life assurance or organize their final will.
Branding is everything to service. Starbucks does sell coffee and cake but
much of its offering is its service. Starbucks‟ logo, its location, the
ambience of their stores and the whole service experience is all part of
the brand Starbucks. There are many other examples of this including
KFC and McDonalds. Can you think of anymore?

Physical Evidence
Physical evidence is the environment in which the service is delivered, and
where the firm and customer interact, and any tangible components that
facilitate performance or communication of the service.
Physical Evidence is the material part of a service. Strictly speaking there are no
physical attributes to a service, so a consumer tends to rely on material cues.
There are many examples of physical evidence, including some of the following
buildings, equipment, signs and logos, annual accounts and business reports,
brochures, your website, and even your business cards. Physical evidence lesson

Process
Process is the actual procedures, mechanisms, and flow of activities by which
the service is delivered – this service delivery and operating systems.
There are a number of perceptions of the concept of process within the business
and marketing literature. Some see processes as a means to achieve an outcome,
for example – to achieve a 30% market share, a company implements a
marketing planning process. However in reality it is more about the customer
interface between the business and consumer and how they deal with each other
in a series of steps in stages, i.e. throughout the process.
People
People are all human actors who play a part in service delivery and thus
influence the buyers‟ perceptions; namely, the firm‟s personnel, the customer,
and other customers in the service environment.
People are the most important element of any service or experience. Services
tend to be produced and consumed at the same moment, and aspects of the
customer experience are altered to meet the individual needs of the person
consuming it.
 Unit V

Service Marketing – Specific

Industries

Q 1What is the role of marketing mix in tourism

industry? Ans.

Tourism and the Marketing Mix

The marketing mix is a business tool used in marketing and by marketing

professionals. The marketing mix is often crucial when determining a product or
brand‟s offering and is often synonymous with the four P’s: price,
product, promotion and place. In service marketing – like tourism,
however, the four P‟s have been expanded to the seven P’s to address the
different nature of services. The additonal three P‟s in tourism are people,
process and physical evidence.
By taking a fresh look at these various aspects of your company you will be sure that
all of your work supports your main goal – selling your services to your
customer. It will also help you answer more fundamental questions such as;
“who are your customers?”, “how do you reach your customers?” and “what are
the needs of your customers?”, to name a few.
The 4 traditional P’s and the implications in the tourism business

Product
When thinking about a tourism product, it’s important to differentiate
between what the customers actually buy (the promise of a
product) and the product – mainly a service – that they receive
after the purchase (the actual product). The
purchasing decision made by the tourist is based on the promise of the product –
a promise established by what she or he sees in your promotional material. This
is because the tourism product – unlike a car or a computer –
consists of a combination of tangible and intangible items and
the potential customers “buy” the product before “acquiring” the product (we‟ll
dive deeper into this in our next blog post).
For example, the product “Amazon Lodge” – shown below – is the combination
of tangible goods (e.g. the rooms, the swimming pool, the birds) and intangible
experiences (e.g. the service, the activities). Obviously, the product is thousands
of miles away and you are not buying the property, therefore the actual
product you buy is the promise displayed on the brochure
(while the brochure is a promotional channel).

Promotion
Promotion is the activity of telling your market about your
product. In the example of the Amazon Lodge, you are using a brochure to tell
your customers about a tourism product in the Amazon.
Nowadays, promotion is replaced by communications, which represents
a
broader focus. Communications can include advertising, public relations,
personal selling, viral advertising, and any form of communication between the
organization and the consumer.

Placement
Placement is synonymous with distribution. It refers to providing the product
at a place, which is convenient for consumers to access. In tourism, the
product is not distributed to the client, but the clients travel to
the product. Thus, unlike physical products, tourism distribution is more
related to where you distribute the informaton about the service (trade shows,
resellers, webpages, etc.). In the example of the brochure of the Amazon Lodge,
the placement may be your
office, a trade show in London or to potential customer´s houses (by direct
mailing).

Price
Price is what the business charges for its‟ tourism product as defined by the
interacting forces of supply and demand.
At a practical level, tourism enterprises can determine their prices by analyzing:
1. The cost of running the business;
2. The willingness to pay by the demand;
3. The prices of the competition;
4. The commission to be provided to resellers.
In tourism, two prices are often used: rack rates, which are the prices
published in promotional materials – without discounts, and net prices (or net
rates), which is the rack rate less the commission offered to resellers (tour
operators or other intermediaries).
It may also be advantageous to differentiate rates for seniors, children, off-
season, etc.

The 3 additional P’s of

tourism People
Any person coming into contact with customers can have an impact on overall
satisfaction. In tourism, people are particularly important because, in the
customer‟s eyes, they are generally inseparable from total service.
In tourism, the human component is very important, so the
attitude, skills and appearance of all people involved in the
traveler’s experience needs to be first class. Some ways in which
people add value to an experience, as part of the marketing mix, are training and
service.

Process
If tourism business offers services, the processes of the business can offer specific
advantages. Processes should do more than just make life easier
for the business – they must help customers get what they want.
For instance, for booking a flight on the internet the process begins with the
customer visiting an airline‟s website. The customer enters details of the flights
and books them. The customer‟s ticket/booking references arrive by email (or,
less and less, by post). The customer catches his flight on time and he arrives
refreshed at his destination. The coming together of all the mentioned stages
constitutes a marketing process.
 Physical evidence
Makes the customers perceive how the services would be like. Unlike a physical
product, a service cannot be experienced before it is delivered,
which makes it intangible. This, therefore, means that potential
customers could perceive greater risk when deciding whether or not to use a
service. To reduce the feeling of risk, thus improving the chance for success, it is
vital for potential customers to see what a product would be
like. This is done by providing physical evidence – displayed in photographs
(of your facilities, etc.) or testimonials (what tourists write about their own
previous experience).

Q 2 What is the role of marketing mix in financial industry?

Ans. Marketing of Financial Services (Banking, Insurance, Mutual
Fund & Portfolio Management Services)
7 ps of bank marketing –

1. Product Mix
The banks primarily deal in services and therefore, the formulation of product
mix is required to be in the face of changing business environment conditions.
Of course the public sector commercial banks have launched a number of
policies and programs for the development of backward regions and welfare of
the weaker sections of the society but at the same time it is also right to mention
that their development-oriented welfare programs are not optimal to the
national socio-economic requirements. A proportional contraction in the
number of customers is found affecting the business of public sector commercial
banks. The changing psychology, the increasing expectation, the rising income,
the changing lifestyles, the increasing domination of foreign banks and the
changing needs and requirements of the customers at large make it essential
that they innovate their service mix and make them of worked class. The
development of new generic product, especially when the business environment
is regulated is found a difficult task. However, it is pertinent that banks
formulate a package in tune with the changing business conditions. Against this
background, we find it significant that the banking organizations minify,
magnify, combine and modify their service mix.

In the formulation of service mix, the banks can follow two guidelines, first is
related to the processing of product to market needs and the second is
concerned
 with the processing of market needs to product. In the first process, the needs to
the target market are anticipated and visualized and therefore, we expect the
prices likely to be productive. In the second process, the banks react to the
expressed needs and therefore we consider it reactive. It is essential that every
product is measured up to the accepted technical standards. This is because no
consumer would buy a product, which contains technical faults. Technical
perfection in service is meant prompt delivery, quick disposal, and presentation
of right data, right filing, proper documentation or so. If computers start
disobeying, the command and the customers get wrong facts, the use of
technology would be a minus point, and you don‟t have any excuse for your
faults.
Marketing aims not only offering but also at creating\innovating the services\
schemes found new to the competitors vis-a vis- to the customers. The enhanced
customer patronage would be a reward to the bank. The additional attractions,
the product attractiveness would be a plus point of your mix, which would help
you in many ways. This makes it essential that the banking organizations are
sincere to the innovations process and try to enrich their peripheral services
much earlier than the competitors. We also find the product portfolio of the
banks. While formulating the services mix, it is also pertinent that the bank
professionals make possible affair synchronization of core and peripheral
services. To be more specific, the peripheral services need an intensive care
since the core services are found by and large the same. Innovating the
peripheral services thus appears to be an important functional responsibility of
marketing professionals. We can‟t deny the fact that if the foreign banks have
been getting a positive response; the credibility goes to their innovative
peripheral services. Thus, the formulation of product mix is found to be a
difficult task that requires world-class professionalism.

2. Promotional Mix:
Promotion mix includes advertising, publicity, sales promotion, word – of –
mouth promotion, personal selling and telemarketing. Each of these services
needs to be applied in different degree. These components can be useful in the
banking business in the following ways:

Advertising
Advertising is paid form of communication. Banking organizations use this
component of the promotion mix with motto of informing, sensing and
persuading the customers. While advertising it is essential to be aware of key
decision making areas so that instrumentally helps banks at micro and macro
levels.

2. Finalizing the budget:

This is related to the formulation of the budget for advertisement. The bank
professionals, senior executives and even the policy planners are found to be
involved in the process. The business of a bank determines the scale of the
advertisement budget. In addition, the intensity of competition also plays a
decisive role since in the majority of cases; we find a increase in the budget due
to a change in the competitor‟s strategy.

Suitable vehicle:
There are a number of devices to advertise, such as broad cast media, telecast
media and print media. In the face of the budgetary provisions, it is necessary to
select a suitable vehicle. For promoting the banking business, the print media is
found to be economic as well as effective.

Making possible creative:

The advertising professionals bear the responsibility of making the appeals,
slogans and messages more creative. Here, creative means making the
advertisement programs distinct to the competitive organizations, which are
active in influencing the impulse of the customers and successful in informing
and sensing the customers. This requires an in-depth knowledge of the receiving
capacity of the target market for which the advertisements are designed.

Testing the effectiveness:

It bears an analogous significance that our advertisements are effective in
influencing the impulse of customers by energizing persuasion. For making the
process effective, it is essential to test the effectiveness before launching of the
commercial advertisements.

Managers: Instrumentality of branch

At micro level, a branch manager bears the responsibility of advertising locally
so that the messages reach the target audience.

Characters and themes:

At apex level it is also important that while advertising the senior executives
watch the process minutely and select events, characters having a regional
orientation. The popular characters and sensational moments are likely to be
impact generating. The theme for appeals and messages also needs due
attention. Of course, they have a legitimate right of advertising but it is not
meant that like the goods manufacturing organizations, the service generating
organizations also start making invasion on culture. It is necessary to regulate a
bias to gender, profession, region or so.
Public relations:
In the banking services the effectiveness of public Relations is found in high
magnitude. It is in this context that difference is found in designing of the mix
for promoting the banking services.

Telemarketing:
The telemarketing is a process of promoting the business with the help of
sophisticated communication network. Telemarketing is found instrumental in
advertising the banking services and the banking organizations can use this tool
of the promotion mix both for advertising and selling. This minimizes the
dependence of banking organizations on sales people and just a counter or
center as listed in the call numbers may service multi- dimensional services.
Telemarketing is likely to play an incremental role in marketing the banking
services. The leading foreign banks and even some of the private sector
commercial banks have been found promoting telemarketing and they have
been getting positive results for their efforts.

Word-Of- Mouth:

Much communication about the banking services actually takes place by word-
of- mouth information, which is also known as word- of- mouth promotion. The
oral publicity plays an important role in eliminating the negative comments and
improving the services. This also helps the banker to know the feedback, which
may simplify the task of improving the quality of services. This component of
promotion mix is not to influence budget adversely or generate additional
financial burden. By improving the quality of services and by offering small gifts
to the word- of- mouth promoters, bankers can get more business command in
their area.

The above facts make it clear that such kind of promotion is influenced by a
number of factors. The most dominating factor is the quality of services offered.
The bank professionals, the frontline staff and the senior executives should
realize that degeneration in quality would make this tool effective.

3. Price Mix:

In the formulation of marketing mix, the pricing decisions occupy a place of

outstanding significance. The pricing decisions include the decisions related to
interest and fee or commission charged by banks. Pricing decisions are found
instrumental in motivating or influencing the target market. The RBI regulates
the rate of interest and the Indian Banks‟ Association controls other charges. In
our country, the price mix is more important because the banking organizations
are also supposed to sub serve the interests of the weaker sections and the
backward regions. Also in making the pricing decisions, the Government Of
India instrumentalists or commands everything as a shadow policy maker. This
also complicates the price mix for banking sector.
Pricing policy of a bank is considered important for raising the number of
customers vis-à-vis the accretion of deposits. Also the quality of service provided
has direct relationship with the fees charged. Thus while deciding the price mix
customer services rank the top position. Banks also have to take the value
satisfaction variable in to consideration. The value and satisfaction cannot be
quantified in terms of money since it differs from person to person. Keeping in
view the level of satisfaction of a particular segment, the banks have to frame the
pricing strategies.

The banking organizations are required to frame two- fold strategies. First, the
strategy is concerned with interest and fee charged and the second strategy is
related to the interest paid. Since both the strategies throw a vice- versa impact, it
is important that banks attempt to establish a correlation between two. It is
essential that both the buyers as well as the sellers have feeling of winning.

4. The People
Sophisticated technologies no doubt, inject life and strength to our efficiency but
the instrumentality of sophisticated technologies start turning sour id the
human resources are not managed in a right fashion. We can‟t deny the fact that
if foreign banks are performing fantastically; it is not only due to the
sophisticated information technologies they use but the result of a fair
synchronization of new information technologies and a team of personally
committed employees. The moment they witness lack of productive human
resources even the new generation of information technologies would hardly
produce the desired results. In addition to the professional excellence, the
employees working in the foreign banks are generally value- based. Thus we
accept the fact that generation of efficiency is substantially influenced by the
quality of human resources. The quality for banking sector is an aggregation of
all the properties, which are found essential for generating the efficiency and
projecting a fair image. Even efficiency essentially is supported by ethical
dimension, humanity and humanism. The development of human resources
makes the ways for the formation of human capital. Human resources can be
developed through education, training and by psychological tests. Even
incentives can inject efficiency and can motivate people for productive and
qualitative work.
5. The Process
• Flow of activities: all the major activities of banks follow RBI guidelines.
There has to be adherence to certain rules and principles in the
banking operations. The activities have been segregated into various
departments accordingly.

• Standardization: banks have got standardized procedures got typical

transactions. In fact not only all the branches of a single-bank, but all the
banks have some standardization in them. This is because of the rules
they are subject to. Besides this, each of the banks has its standard forms,
documentations etc. Standardization saves a lot of time behind individual
transaction.
• Customization: There are specialty counters at each branch to deal with
customers of a particular scheme. Besides this the customers can select
their deposit period among the available alternatives.
• Number of stores: numbers of steps are usually specified and a specific
pattern is followed to minimize time taken.
• Simplicity: in banks various functions are segregated. Separate counters
exist with clear indication. Thus a customer wanting to deposit money
goes to „deposits‟ counter and does not mingle elsewhere. This makes
procedures not only simple but consume less time. Besides instruction
boards in national boards in national and regional language help the
customers further.
• Customer involvement: ATM does not involve any bank employees.
Besides, during usual bank transactions, there is definite customer
involvement at some or the other place because of the money matters and
signature requires.

6. The Physical Evidence

The physical evidences include signage, reports, punch lines, other tangibles,
employee‟s dress code etc. The company‟s financial reports are issued to the
customers to emphasis or credibility. Even some of the banks follow a dress code
for their internal customers. This helps the customers to feel the ease and comfort
Signage: each and every bank has its logo by which a person can identify the
company. Thus such signages are significant for creating visualization and
corporate identity.

Tangibles: banks give pens, writing pads to the internal customers. Even the
passbooks, chequebooks, etc reduce the inherent intangibility of services.
Punch lines: punch lines or the corporate statement depict the philosophy and
attitude of the bank. Banks have influential punch lines to attract the customers.
Banking marketing consists of identifying the most profitable markets now and
in future, assessing the present and future needs of customers, setting business
development goals, making plans-all in the context of changing environment.

Advertisements
The bank is a financial institution which accepts deposits and lends that money
to its customers. As banks deal with their customers 'finances, banking is a high-
involvement service. Therefore banks need to win the trust of their customers.
Based on the customer profiles, banks segment their market into retail banking,
corporate banking, personal banking etc.

Depending on customer needs for finance, the market can also be segmented into
trade finance, consumer finance, etc. For the banker to derive maximum returns
and enhance his market position the marketing mix has to be effectively
managed. The products offered by a bank may be in the core or augmented form.
The core products offered by a bank include a savings bank account or a housing
loan.

The augmented product includes services like internet banking, ATMs, 24-hour
customer service etc. These augmented services help the banker differentiate his
service offering from those of his competitors. In the pricing of banking services,
determining the interest rates plays an important role, as these rates in turn
determine the revenues and profits of the bank.

The multiple sources of revenue for today's banks include annual charges for
core services and augmented services, penalties, commissions for cross selling
and charges for payment of utility bills, apart from the differential interest rate.
The basic pricing strategy in banks is based on risk-return pay-offs. However, the
competitor and customer reaction have to be taken into consideration while
initiating a price change.

The place element of the marketing mix refers to making the services available
and accessible to customers. Improvements in the availability and accessibility of
services have changed the process of banking. Technological innovations have
given rise to modern channels like the Internet, which have helped banks
increase business volumes and attract new customers.

ATMs and credit and debit cards offer convenience to customers and have also
improved the efficiency of banking operations. These changes have helped
banks tackle the challenges of services marketing. The promotion or
communication
mix in banking refers to varied strategies like personal selling, advertising,
discounts, and publicity etc. used by present day banks to promote their service
offerings.

7. People
People also play an important role, even though their role has been eclipsed by
technology in the recent past. Process determines the efficiency of banking
operations and thus the service quality in a bank. Physical evidence includes the
infrastructure and buildings not only in branch offices, but also the ATMs or
other places of interaction. Even the quality of cheque books and mailers to
customers forms physical evidence.

The banking industry has changed drastically over the past decade. The banking
reforms and the opening of the economy to foreign and private banks have
improved the working of the public sector banks. This has resulted in improved
service to the customers of the banking industry. Increased competition and
technology have enhanced the quality of service offered to the customers and
also improved the returns for bankers.
◻