SERVICE MARKETING

KARISHMA SIROHI

IMS KUK

KARISHMA SIROHI

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UNIT 1

SERVICES

Services are everywhere we turn, whether it be travel to an exotic tourism destination, a visit to the doctor, a church service, a trip to the bank, a meeting with an insurance agent, a meal at our favorite restaurant, or a day at school. In general, goods can be defined as objects, devices, or things, whereas services can be defined as deeds, efforts, or performances. When the term“product” is mentioned, for our purposes, it refers to both goods and services and isused. Ultimately, the primary difference between goods and services is the property of intangibility.

Definition

1. American Marketing Association, Committee of Definitions 1960,“Activities, benefits and satisfactions, which are offered for sale or are provided in connection with the sale of goods” .

2. Kotler (1996), “service is an activity that on party offers another that is essential intangible and does not result in the ownership of anything. Its production may or may not be tied to physical product.”

3. Quinn, Baruch and Paquette, (1987),“Services include all economic activities whose output is not a physical product or construction, is generally consumed at the time it is produced, and provides added value in forms (such as convenience, amusement, timeliness, comfort or health) that are essentially intangible concerns of its first purchaser”

4. Zeithmal VA and Mary Jo Bitner, (1996), “services are deeds, processes and

performances.”

Features of Service:

Services have basically six to eight features that greatly affect the designer of marketing programs. They are:

1. Intangibility: Intangibility is the dominant characteristic of services and is defined as the lack of tangible assets which can be seen, touched or smelled prior to purchase. The intangible characteristic of services present service marketers with several problems. The lack of physical attributes of services makes it difficult to

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SERVICES§ Intangibility§ Inseparability§ Variability§ Ownership§ Perishability§ Difficult to visualize§ Distribution through non physical channels§ Customer participation§ No ownership§ Cannot be inventoried§ Customer is co-producer.

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display or communicate services readily and easily to customers. Customers often find it mentally difficult to grasp the service performance or experience without tangible evidence, which makes it difficult to diffuse.

2. Variability: services are highly variable. It is almost impossible to have the same service from the same seller the second time. No two customers can have exactly similar even through they experience it simultaneously.

3. Inseparability: It refers to the simultaneous production and consumption of a service, thus it is often difficult to separate the service provider from the service performance. Customers are normally present at and during the service performance and play an active role in the service production process. The quality of the service performance is dependent on the interaction between the service provider and the customer.

4. Perishability: Perishability is the inability of a service to be inventoried or stored. This characteristic is of major concern to service marketers because it inevitably leads to supply and demand problems. The capacity lost in services can never be regained and to equalize supply and demand is a difficult task. These distinct service problems present service marketers with the challenge of setting up good recovery strategies for service process failures.

5. Ownership: Customers receive only the right to a service process when they purchase it. Subsequently it is assumed that payment for services buys only the right of access to a service and not physical transfer of ownership to customers. Customers view the lack of ownership of a service as a perceived risk. Firstly they are presented with the uncertainty as to whether the right service has been obtained and secondly with the uncertainty about the consequences of the service purchase. Since services are produced and consumed simultaneously, the option of “returning” a service does not exist. The inability to own a service also has direct implications on the distribution of services.

6. Heterogeneous: because services are performances, frequently produced by humans, no two services will be precisely alike. The employees delivering the services frequently are the service in the customer’s eyes, and people may differ in their performance from day to day or even hour to hour. Heterogeneity also results because no two customers are precisely alike; each will have unique demands or experience the service in a unique way.

7. No Inventories for Services: Because a service is a deed or performance, ratherthan a tangible item that the customer keeps, it is "perishable" and canno t beinventoried. Of course, the necessary facilities, equipment, and labor can be held inreadiness to create the service, but these simply represent productive capacity, not theproduct itself.

8. I m p o r t a n c e o f th e T i m e Facto r Many services are delivered in real time.Customers have to be physically present to receive service from organizations such asairlines, hospitals, haircutters, and restaurants. There are limits as to ho w long customersare willing to be kept waiting and service must be delivered fast enough so thatcustomers do not waste time receiving service.

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Marketing Mix

Product

Price

Place

Promotion

People

Physical Evidence

Process

Marketing Mix

Product

Price

Place

Promotion

People

Physical Evidence

Process

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9.

Marketing of Services:

Service marketing means the activities performed by the marketer to promote his services which is his final product/services. A different marketing approach is necessary for service marketing, because services differ from goods in many respects. Service marketing includes all the marketing activities performed by the marketers.

Marketing mix in services:

The traditional marketing mix is the most basic concept in marketing and is defined as elements which organizations control and use to satisfy or communicate with customers. The components of the traditional marketing mix are the four P’s: product, price, place, and promotion. The three new components address the uniqueness of three of the service characteristics. They focus, firstly, on the inseparability of service marketers from customers, secondly, on the inability to hold service in inventory which makes it critical for the service process to flow smoothly and lastly, on the fact that a highly intangible service offering must appear tangible.

1. Service offerings (Product): A product is anything that an organization offers to customers that might satisfy a need, whether it is tangible or intangible. An analysis of service offerings shows that it can be divided it into two distinct components namely, a core service offering that represents the intangible core benefits of services and a secondary service offering that represents the tangible and augmented elements of the service offerings. The core service offerings are developed with customers’ benefit in mind and place the emphasis on the customers’ perception of services. The secondary service offerings illustrate the additional benefits that the service offers to meet customers’ additional needs, and serve to differentiate the offerings from those of competitors’. These benefits can combine both the tangible and intangible elements of service offerings that facilitate the customer to comprehend the core service.

2. Price: The price of service offerings is often used by customers as an input into their expectations, purchase decisions, and evaluation of service quality. It is seen as a tangible cue in services with a high risk and experience properties, to form expectations of the service. Price is used as an indicator of quality by customers. Thus,

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the assumption is formed that the higher the price of service offerings, the more is expected of it by customers.

3. Product: The distribution decision refers to the availability and accessibility of service offerings to customers. Availability from the customers’ point of view signifies that services are on hand when they want them, while accessibility is the relative ease with which customers can conduct service processes with the service providers. For pure services, the distribution decision is of little relevance, though most services involve a tangible component. As a result, the distribution decision involves physical locations and decisions which intermediaries use to provide the services.

4. Promotions: The services promotion mix uses a combination of channels to convey messages to the target market. These messages are received from sources within the organization and externally. External sources include word of mouth communications or press editorials, while internal communications originate from the traditional marketing mix and from the frontline employees. The combination of communication channels depends on the characteristics of the target market, the size of the service, the nature of the service and the cost of the various channels (Palmer and Cole, 1995:260). The promotional mix of a service organization involves the transmission of messages to past, present and future customers. The ultimate aim is to make future customers aware of the service and influence them towards purchase.

5. People: People as an element in the service mix include all the human actors - the firm’s employees (internal customers), the buyers (external customers), and other customers - who play a part in service delivery and accordingly influence the buyers’ perception of choice in the service environment (Zeithaml and Bitner, 1996:26). Service employees interact with customers during service delivery processes and provide cues to external customers concerning the services. Hence, it can be said that service employees’ competence, attitude, and appearance influence customers’ perception of services. Customers often experience service employees as synonymous with the service and no matter how small or large a part they play in the actual delivery of the service, they are still the focal point of the service for customers.

6. Processes: Processes are the actual procedures, mechanisms, and flow of activities by which services are delivered (Zeithaml and Bitner, 1996, 21). Customers judge services on the operational flow or on the actual delivery thereof. The inseparability characteristic of services requires customers to follow a series of extensive or complicated actions to complete the process. Often the logic of these actions escapes the customers. Whether the service process is standardized or customized, it is used as evidence by customers to judge service quality. Standardized services will follow a production-line approach, while customized services command a greater degree of empowerment. Nonetheless, the moment of truth where customers experience the evidence, is not a once-off event but an ongoing process.The actual service delivery process can be performed in three locations namely,

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the customer’s environment, at a store or an office or electronically or via telecommunications.

7. Physical evidence: The environment in which the service provider delivers the service and where the customers and the organization interact, as well as any tangible component that facilitates performance or communication of the service, is referred to as physical evidence (Zeithaml and Bitner, 1996, 26). Service organizations need to provide tangible evidence of the service to develop an image in the mind of current and prospective customers. Often physical evidence overlaps with the promotion and distribution mix of the service mix. All tangible representations of services, such as brochures, letterheads, business cards, report formats, signage, equipment, and physical facilities where service are rendered, represent the physical evidence of services.

Types of Services:

1. People processing: involves tangible actions to people's bodies. Examples ofpeople-processing services include passenger transportation, haircutting, anddental work. Customers need to be physically present throughout service delivery to receive its desired benefits.

2. Possession processing: includes tangible actions to goods and other physicalpossessions belonging to the customer. Examples of possession processinginclude airfreight, lawn mowing, and cleaning services. In these instances, theobject requiring processing must be present, but the customer need not be.

3. Mental stimulus processing refers to intangible actions directed at people'sminds. Services in this category include entertainment, spectator sports, theaterperformances, and education. In such instances, customers must be present mentally but can be located either in a specific service facility or in a remote locationconnected by broadcast signals or telecommunication linkages.

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People Processi ng

Possessi on Processi ng

Information Processi ng

Mental stimulus Processi ng

SERVICES

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4. Information processing describes intangible actions directed at a customer'sassets. Examples of information-processing services include insurance, banking,and consulting. In this category, little direct involvement with the customer maybe needed once the request for service has been initiated

Conceptual Framework for Service Marketing:

1. Understanding service products, consumers, and markets

§ New perspectives on marketing in the service economy.

§ Consumer behavior in a services context.

§ Positioning services in competitive markets.2. Applying the 7P’s of marketing to services

§ Developing the service products: core and supplementary elements.

§ Distribution services through physical and electronic channels.

§ Setting price and implementing revenue management

§ Promoting services and educating customer.3. Managing the customer interface

§ Designing and managing service processes.

§ Balancing demand and productive capacity.

§ Crafting the service environment.

§ Managing people for service advantage4. Implementing profitable service strategies

§ Managing relationships and building loyalty.

§ Complaint handling and service recovery.

§ Improving service quality and productivity.

§ Striving for service leadership.

Service Triangle:

Service marketers face marketing challenges which revolve around issues such as:

§ understanding customers’ needs and expectations of services,§ making services tangible to customers and§ keeping and dealing with promises made to the customers

The services marketing triangle helps service marketers to address these challenges. The three points of the service triangle represent the organization, the customers, and the employees. Between each of the three points of the triangle different marketing processes such as external marketing, interactive marketing and internal marketing must be successfully carried out for service processes to succeed and to build and maintain relationships with the internal and external customers.

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Management

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§ External Marketing: The link between an organization and its customers is the external marketing process. External marketing represents the promises which organizations make to their customers with reference to products or services they offer. Organizations make promises to customers concerning their offerings and how delivery of the offerings will be conducted.

§ Interactive Marketing: The interactive marketing process is about keeping the promises made by the organization to the customer along with delivering a quality service to the customer. Interactive marketing is the actual contact between the service employees and the customers and is called the "moment of truth" or service encounter. It is the decisive moment in the service process where organizations actually show what they can do and how they meet the set expectations. At these decisive moments, everything about the service process can succeed or fail. The success or failure can be temporary, complete, or final but the interaction can never be restaged or controlled.

§ Internal Marketing: Internal marketing hinges on the assumption that employee satisfaction and customer satisfaction are interlinked, thus internal marketing must precede external marketing. Organizations whose objective is to deliver constant high service quality have to enable all employees to practice customer orientation and marketing. Service organizations must recognize that achieving objectives and creating change can only be achieved through employees. Service providers need to recruit, train, and provide tools to employees to perform superior service. They should therefore be fully equipped to provide the best service to the external and internal customers. Employees who understand their functions within the organization are more likely

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CustomerEmployees

Internal Marketing

External Marketing

Interactive Marketing

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to create a harmonious work environment that will pave the way for less role ambiguity, less conflict, and more satisfied employees in the workplace.

UNIT 2

Service consumer behavior:

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awareness of need

information search# define need#explore solutions# identify alternative service supplier

evaluation of alternatives# review documentation# consult with other people# visit possi ble service supplier

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There are three important terms in marketing that are commonly used as interchangeable terms. They are buyer, consumer and customer. A consumer in one who consumes goods and services. The term consumer includes human beings, animals, birds, trees and all those who have a capacity to consume. Buyer are those who buy goods and services. All buyers are human beings. Buyer also represent those consumers who can’t buyer their own. The term customer finds meaning from the point of view of the seller. If a buyer rapidly buys products of one company, he will be called a customer of that company.

The three stage model of service consumption:

Purchase process: the stages a customer goes through in choosing, consuming, and evaluating a service. W h e n customers decide to buy a service to meet an unfilled need, they go through what is often a complex purchase process. This process has three separate stages: the pre-purchase stage, service encounter stage, post purchase stage.

1. Pre-purchase stage: The decision to buy and use a service is made in the pre-purchase stage. Individual needs and expectations are very important here because they influence what alternatives customers will consider. If the purchase is routine and relatively low risk, customers may move quickly to selecting and using a specific service provider. But when more is at stake or a service is about to be used for the first time, they may conduct an intensive information search.

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Pre-purchase stage

awareness of needinformation searchevaluation of alternativespurchase decision

Service encounter stage

request service from chosen supplier or initiate self service.

Post-purchase model

evaluation of service performance

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§ Need awareness: the decision to buy or use a service is triggering by a person’s or an organization’s underlying need or need arousal. The awareness of a need will drive an information search and evaluation of alternatives before a decision is reached. Needs may be triggered by:

Unconscious minds Physical conditions External sources

When a need is recognized, people are likely to be motivated to take action to resolve it.

§ Information search: once a need or a problem has been recognized, customers are motivated to search for solutions to satisfy the need. Several alternatives may come into minds through the information search, and these form the evoked set (also known as consideration set), the set of products or brands a customer may consider in the decision making process. The evoked set can be derived from past experiences or external sources such as advertising, retail display etc. once an evoked set is in place, the different alternatives need to be evaluated before a final choice can be made.

§ Evaluating awareness: when faced with several alternatives, customer need to compare and evaluate the different service offerings. Ease or difficulty of evaluating a product before purchase is a function of its attributes where consumer distinguish between three types:

Search attributes: are tangible characteristics customer can evaluate before purchase. Style, color, texture, taste and sound are examples of such features that allow prospective consumers to try out, taste, or test drive the product prior to purchase. These help customers understand and evaluate what they will get in exchange for their money and reduces the sense of uncertainty or risk associated with the purchase.

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Experience attributes: are those that cannot be evaluated before purchase. Customers must experience the service before they can assess attributes such as reliability, ease of use, and customer support.

Credence attributes: product features that customer find hard to evaluate even after consumption are known as credence attributes. Here, the customer is forced to believe or trust that certain tasks have been performed at the promised level of quality. These attributes are such as hygiene factor, safety factor etc.

the more difficulty a customer has in evaluating a service before purchase, the higher the perceived risk associated with that decision.Because many services are hard to evaluate, consumers perceive higher risk. As customers do not like to take risks and prefer safe choices, firms should employ risk reduction strategy such as offering free trails and guarantees.

Types of perceived risk

1. Functional risk (unsatisfactoryperformance outcomes)

2. Financial risk (monetary loss,unexpected costs)

3. Temporal risk (wasting time,consequences of delays)

4. Physical risk (personal injuryor damage to possessions)

5. Psychological risk (personalfears and emotions)

6. Social risk (how othersthink and react)

7. Sensory risk (unwanted impactson any of the five senses)

Examples of Customer Concerns

• Will this training course give me the skill 1 need to get a better job?

• Will 1 lose money if 1 make the investment recommended by my stockbroker?

• Will 1 have to wait in line before entering the exhibition?

• Will 1 get hurt if 1 go skiing at this resort?

• How can 1 be sure this aircraft won't crash?• Will the consultant make me feel stupid?

• What will my friends think of me if they learn 1 stayed at this cheap motel?

• Will 1 get a view of the parking lot from my room, rather than the beach?• Will the bed be uncomfortable?

W h e n customers feel uncomfortable with risks, they can use a variety of methods to reduce them during the prepurchase stage. Customer can do these things to reduce their perceived risk:

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Seeking information from respected personal sources (family, friends, peers) Relying on a firm with a good reputation Looking for guarantees and warranties Visiting service facilities or trying aspects of the service before purchasing Asking knowledgeable employees about competing services Examining tangible cues or other physical evidence Using the Web to compare service offering

When a company does a good job of managing potential customers’ risk perceptions, uncertainty is reduced, thereby increasing the chances that they will be the service provider chosen. Another important input to consumer choice are expectations:

Service expectations: expectations are formed during the search and decision making process, and they are heavily shaped by information search and evaluation of attributes. Expectations are internal standards that customers use to judge the quality of a service experience. Expectations embrace several elements, including desired, adequate, and predicted service, and a zone of tolerance that falls between the desired and adequate service levels.

Desired services: the type of service customers hope to receive is termed desired service. It’s a wished for level--- a combination of what customers believe can and should be delivered in the context of their personal needs.

Adequate services: the minimum level of service customers will accept without being dissatisfied.

Predicted services: this is the level of service customers actually anticipate receiving. Predicted service can also be affected by service provider promises, word of mouth and past experiences.

Zone of tolerance: the range within which customers are willing to accept variations in service delivery. Performing too low causes dissatisfaction, whereas exceeding the desired service level should surprise and delight customers.

§ Purchase decision: after consumers have evaluated possible alternatives, purchase decision is taken. Once the decision is made the consumer is ready to move to the service encounter stage.

2. Service encounter stage: After deciding to purchase a specific service, customers experience one or more contacts with their chosen service provider. The service encounter stage often begins with submitting an application, requesting a reservation, or placing an order. A service encounter is a period of time during which a customer interacts directly with a service provider. There are number of models to understands the consumer behavior at this stage:

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§ Service encounter are “moments of truth”: Richard Normann borrowed the “moment of truth” metaphor from bullfighting to show the importance of contact point with customers. This metaphor refers to customer touch points that can make or break customer relationships. Moment of truth is the point in service delivery where customers interact with service employees or self service equipment and the outcome may affect perceptions of service quality.

§ Service encounter range from high contact to low contact: services involve different levels of contact with the service operations. There are mainly three levels of customer contact:

high contact services: tend to be those in which customers visit the service facility in person. Customers are actively involved with the service organization and its personnel throughout service delivery (e.g., hairdressing or medical services). All peopleprocessing services (other than those delivered at home) are high contact.

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Medium contact services: entail less interaction with service providers. They involve situations in which customers visit the service provider's facilities (or are visited at home or at a third-party location by the firm's employees) but either do not remain throughout service delivery or else have only modest contact with service personnel. The purpose of such contacts is often limited to: (1) establishing a relationship and defining a service need (e.g., management consulting, insurance, or personal financial advising, where clients make an initial visit to the firm's office but then have relatively limited interactions with the provider during service production), (2) dropping off and picking up a physical possession that is being serviced, or (3) trying to resolve a problem.

Low contact services: involve very little, if any, physical contact between customers and service providers. Instead, contact takes place at arm's length through the medium of electronic or physical distribution channels—a fast-growing trend in today's convenience-oriented society.

§ Servuction model: this model is the combination of terms service and production. The Servuction system consists of a technical core invisible to the customer and the service delivery system visible to and experienced by the consumer.

Technical core- is back stage and invisible to the customers, but what happens back stage can affect the quality of front stage activities. Therefore, back stage activities have to be coordinated with front stage activities.

Service delivery system- is front stage and visible to the customer. It encompasses all the interactions that together create the service experience, which in a high contact service includes customer interaction with the service environment, its service employees, and with other customer. Each type of interaction can create or destroy value. Firms have to orchestrate all these interactions to create a satisfying service experience.

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Segmentation

DemographicalPsychographic

BehaviouralTechnologicalGeographical

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§ Theater as metaphor for service delivery: theater can be used as metaphor for service delivery, and firms can view their service as staging a performance with props and actors, and manage them accordingly. The props are the service facilities and equipment. The actors are the service employees and customers. Each actors needs to understand their roles and scripts well. Firms can make use of the role and script theories to better design, train, communicate, and manage both employees and customer scripts and roles.

3. Post-purchase stage: in this stage, customer evaluates the service performance they have experienced and compare it with their prior expectations.

§ Customer satisfaction with service expectations: satisfaction is an attitude like judgment following a consumption experience. Customer have a certain predicted service level in mind prior to consumption. This predicted level typically is the outcome of the search and choice process, when customers decided to buy a particular service. During the service encounter, customer experience the service performance and compare it to their predicted service levels. The resulting judgment is labeled positive disconfirmation if the service is better than expected, negative disconfirmation if it is worse than expected, and simple confirmation if it is expected.

§ Service expectations: customer develop expectations about how the service they chosen will perform. The zone of tolerance can be narrow and they are related to the attributes.

§ Customer delight: occurs when positive disconfirmation is coupled with pleasure and surprise.

Very satisfied customers are more likely to make repeat purchases, remain loyal to that supplier, and spread positive word of mouth. Dissatisfied customers, however, may complain or switch service providers.

STP:

Segmentation:

Market segmentation is the dividing of heterogeneous markets into segments. It should be ensured while segmentation that each segment is homogenous in all significant characteristics.

Bases for segmentation:

The basis for segmentation can be broadly categorized into – a. consumer characteristics, b. consumer responses. These are:

1. Geographical Segmentation: it is simplest way of segmenting the market. Under this approach, the market will be divided into various geographical units. Companies generally use the marked divisions such as

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Nations, States, Regions Cities Towns

To get benefit of already existing databases resources at a very low price. Geographical segmentation reflects in the identification of cultural groups, climatic difference, resource combination, demand supply gaps, religion and race. It provides opportunity to the service stalls to explore distinctive opportunities for product development as well as product differentiation.

2. Demographic segmentation: under this approach, the market will be divided into segments based on various demographic variables such as age, family size, gender, family life cycle, income, occupation, education, religion, race, nationally and social class.

3. Psychological segmentation: under this approach, consumers are divided into groups based on lifestyles, personality and values.

4. Behavioral segmentation: for this approach, consumers are divided into groups based on their knowledge, attitudes and use or response to a service. The variables used under this approach are occasions, benefits, user status, usage rate, loyalty status, buyer readiness stage and attitude towards the service.

5. Technologic segmentation: the market for technology related services has been on a tremendous rise during the last one and a half decade. Marketers are trying to identify the customer groups that have the willingness as well as the ability to use the latest technology. Identification of segments was based on the interaction of three variables. These are attitude towards technology, application of technology and the financial position of the consumers.

Criteria for market segmentation:

Service firms generally adopt the following criteria for assessing the suitability of segmentation:

§ Substantiality: the size of the segment is an important dimension. An identified segment should be large enough to design a distinctive marketing programme for itself. Substantiality is not only measured in size but also in terms of profitability. The benefits that are expected from segmentation should be more than the estimated expenditure from the special marketing efforts required.

§ Measurability: the segment identified must be amendable to measurement. Characteristics such as size, purchasing power, response rates and so on need to be measured so as to design appropriate marketing strategy.

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§ Accessibility: accessibility has specific significance in services. Production and consumption of the service take place simultaneously in producer and consumer interaction. Therefore, the segments identified should be within the reach of the service organizations.

§ Differentiability: the difference between segments should be substantial and measurable. For a specific service package, the response from one segment should be different to that of other segments.

Targeting:

A segment is selected to be targeting and apply the positioning strategy in the segment.

Target market consists of a set of buyers who share common needs or characteristics that the company decides to serve.

Evaluating Market Segments

• Segment size and growth• Segment structural attractiveness• Company objectives and resources

Target Marketing Strategies

1. Undifferentiated marketing targets the whole market with one offer– Mass marketing– Focuses on common needs rather than what’s different

2. Differentiated marketing targets several different market segments and designs separate offers for each• Goal is to achieve higher sales and stronger position• More expensive than undifferentiated marketing

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3. Concentrated marketing targets a small share of a large market• Limited company resources• Knowledge of the market• More effective and efficient

4. Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations• Local marketing• Individual marketing

5. Local marketing involves tailoring brands and promotion to the needs and wants of local customer groups• Cities• Neighborhoods• Stores

6. Individual marketing involves tailoring products and marketing programs to the needsand preferences of individual customers Also known as:

– One‐ to‐ one marketing– Mass customization

– Markets‐ of‐ one marketing

Positioning: positioning means projection the image of the product or service in such a way that consumers perceive its value distinctively from that of competitive offers. In other words, positioning intends to influence the perceptual process of consumers against a product or service.

Positioning into the following four principles:

A company must establish a position in the minds of its targeted customers. The position should be singular, providing one simple and consistent message. The position must set a company apart from its competitors. A company cannot be all things to all people—it must focus its efforts.

Uses of Positioning in Marketing Management

Understand relationships between products and markets compare to competition on specific attributes evaluate product’s ability to meet consumer needs/expectations predict demand at specific prices/performance levels

Identify market opportunities introduce new products redesign existing products eliminate non-performing products

Make marketing mix decisions, respond to competition

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distribution/service delivery pricing communication

Possible Dimensions for Developing Positioning Strategies

Product attributes Price/quality relationships Reference to competitors (usually shortcomings) Usage occasions User characteristics Product class

How positioning map helps:

Positioning maps display relative performance of competing firms on key attributes Research provides inputs to development of positioning maps Challenge is to ensure that

attributes employed in maps are important to target segments performance of individual firms on each attribute accurately reflects perceptions

of customers in target segments Predictions can be made of how positions may change in the light of new developments

in the future Simple graphic representations are often easier for managers to grasp than tables of data

or paragraphs of prose Charts and maps can facilitate a “visual awakening” to threats and opportunities and

suggest alternative strategic directions

Developing an effective positioning strategy:

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core servicefacilitating servicessupporting services

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Approaches in service sector:

1. Fully focused: a fully focused organization provides a limited range of services to a narrow and specific market segment.

2. Market focused: a market focused company concentrates on a narrow market segment, but has a wide range of services.

3. Service focused: service focused firms offer a narrow range of services to a fairly broad market. However, as new segment are added, firms need to develop knowledge and skills in serving each segment.

4. Unfocused: finally, many service provides fall into the unfocused category, because they try to serve broad markets and provide a wide range of services.

New service design and development:

Service product package: a service product is a package of service elements executed in proper order in keeping with the needs and wants of the consumer, with an intention to maximize consumer satisfaction. The concept of a basic service package helps to understand the service product comprehensively. Basic service package includes:

1. core product: the core product is the central component that supplies the principal, problem solving benefits customer seek. It is the reason for being in the market.

2. Facilitating services: are those services without which core service cannot be performed.

3. Supporting services: are those which helps the customer in making differential image of the organization.

Flower of services:

Flower of services shows the supplementary services:

Supplementary service:

Facilitating services Supporting services

Christopher Lovelock developed the flower of service, which indicates the core service surrounded by a cluster of supplementary services.

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1. Information: Customers often require information about how to obtain and use a product or service. They may also need reminders and documentation.

2. Order taking: Many goods and services must be ordered or reserved in advance. Customers need to know what is available and may want to secure commitment to delivery

3. Billing: “How much do I owe you?” Customers deserve clear, accurate and intelligible bills and statements

4. Payment: Customers may pay faster and more cheerfully if you make transactions simple and convenient for them

5. Consultation: Value can be added to goods and services by offering advice and consultation tailored to each customer’s needs and situation

6. Hospitality: Customers who invest time and effort in visiting a business and using its services deserve to be treated as welcome guests (after all, marketing invited them there!)

7. Safekeeping: Customers prefer not to worry about looking after the personal possessions that they bring with them to a service site. They may also want delivery and after-sales services for goods that they purchase or rent

8. Exceptions: Customers appreciate some flexibility in a business when they make special requests. They expect it when not everything goes according to plan

Development of a new service:

What is new service product: a service can be termed as new service when it is totally innovative, and is created and offered by the company to the world for the first time. According to Booz, Allen and Hamiltan, there can be six category of new service:

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idea generation

screening ideas

concept development and testing

marketing strategy development

business analysis

service development

market testing

commercialisation

new to the world products

new product lines

addition to the existing product line

improvements and revisions of existing product

repositioning

cost reduction

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NEW SERVICE DESIGN AND DEVELOPMENT:

The service offering:

A service product is a package of a series of service elements executed in proper order in keeping with the needs and wants of the consumer, with an intention to maximize consumer satisfaction. There are three elements in basic service package:

Core service: is the reason for being in the market. Thus, a hospital is for health care, a hotel is for lodging and an airline is for transportation.

Facilitating service: are those services without which core service cannot be performed. Thus, a hotel requires building consisting of rooms, toilet and so on to provide lodging services.

Supporting service: do not facilitate the consumption or use of a core service, but increase the value of the service offering. Thus, a hotel can operate a restaurant inside, transport services for local visits and so on as auxiliary services which enhance value of the total offering.

Flower of services

Christopher lovelock developed the flower of service, which indicates the core service surrounded by a cluster of supplementary

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services. The flower consisting of eight petals, four of them are facilitating services and the other four are enhancing supplementary services.

1. Information: To obtain full value from any service experience, customers need relevant information. New customers and prospects are especially information hungry. Companies should make sure the information they provide is both timely and accurate; if it's not, customers may be annoyed or inconvenienced. Following are the examples of information elements:

2. Order taking: Once customers are ready to buy, companies must have effective supplementary service processes in place to handle applications, orders, and reservations. The process of order taking should be polite, fast, and accurate so that customers do not waste time and endure unnecessary mental or physical effort. Banks, insurance companies, and utilities require prospective customers to go through an application process designed to gather relevant information and to screen out those who do not meet basic enrollment criteria (like a bad credit record or serious health problems).Applications• Membership in clubs or programs• Subscription services (e.g., utilities)• Prerequisite-based services (e.g., financial credit, college enrollment)Order Entry• On-site order fulfillment• Mail/telephone order placement• E-mail/Web site order placementReservations and Check-in• Seats• Tables• Rooms• Vehicles or equipment rental• Professional appointments• Admission to restricted facilities (e.g., museums, aquariums)

3. Billing: Billing is common to almost all services (unless the service is provided free of charge). Inaccurate, illegible, or incomplete bills risk disappointing customers who may, up to that point, have been quite satisfied with their experience. Such failures add insult to injury if the customer is already dissatisfied. Billing procedures range from verbal statements to a machine-displayed price, and from handwritten invoices to elaborate monthly statements of account activity and fees. Companies may provide

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Flower of Service: a visualframework for understanding

the supplementary serviceelements that surround and

add value to the product core.

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periodic statements of accounts to customers or allow customers to complete bills by themselves for greater transparency in the process.

4. Payment: after the billing is done, customers have to take action on payment. Activities such as cash handling, cheque handling, credit system and coupon system are part of the payment system. The payment system should facilitate customers to get easy and convenient payment of their dues.

5. Consultation: Consultation is an enhancing supplementary service that involves a dialog to identify customer requirements and develop a personalized solution.

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