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Services Marketing & Customer Relationship Management Date of Examination: September 26, 2011

Marketing Specialization Duration of Examination: 3 Hrs

Maximum marks: 100 (Weightage – 60%)

INSTRUCTIONS TO CANDIDATES   This is a closed book examination

  Section A – Attempt any Three out of Four questions

  Section B (Caselet) is compulsory

  Marks for each question are shown in parenthesis

Section A - answer any Three of the following question 

1. Critically examine the relevance of “Value” as a basis for pricing goods and services. Illustrate your 

answer with appropriate examples.

2. An Organization is contemplating a review of its service delivery and seeks your advice on how to ensure

an effective service delivery involving intermediaries. Provide an example of a service to illustrate your 

answer.

3. A retailer is interested in knowing the various waiting line strategies that can be considered by the

organization. Critically examine them by highlighting the merits and limitations of these strategies.

4. Marketers are often confronted with privacy issues when dealing with CRM. Highlight the importance of 

this in implementing an effective CRM procedure in an organization.

(3 * 20 = 60 Marks)

Section B - Case Study

The Future prospects of the service sector in India were to a great extent buffered by political winds. The events of 

one particular year, especially, had far-reaching ramifications for the service sector; 1969. Two legendary service

 providers saw both danger and opportunity in the crisis of 1969.

1969: Prime Minister Lal Bahadur Shastri’s sudden death at Tashkent in 1965, Mrs. Indira Gandhi had been foisted 

as Prime Minister by a powerful coterie of old men in the Congress Party. They reasoned that while she has a

 personable and acceptable face with a pedigree that they did not, she could be controlled and manipulated and it

would be their agenda that would be implemented. Mrs. Gandhi thought otherwise and broke away from the old 

guard, forming her own party. Now, to strengthen herself, she required an image make-over that would endear her to

the people and scare the old guard away from any retaliation. She acquired a radical image for herself by two acts

and a slogan: bank nationalization, abolition of privy purses and ‘garibi hatao’ (meaning ‘remove poverty’).

 Bank nationalization: Nationalization was an instrument used by the Indian political leadership to either get an

override on the economy or further their political agenda. And the service sector was as much a target as

manufacturing, and suffered greatly:

  Life Insurance Corporation was nationalized in 1950.

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  State Bank of India was nationalized in 1955 (with the central Government retaining 98% control).

  Bengal-Nagpur Railway (BNR) was nationalized in the fifties.

  Air-India was wrested from the Tatas in the fifties.

  General insurance was nationalized in 1972, making General Insurance Corporation of India as the apex

insurance body with four subsidiaries under it.

   Nineteen banks were nationalized in 1969.

  Another six banks were nationalized in 1980, during the phase of Mrs. Gandhi’s phoenix-like resurrection and 

second coming.

Mrs. Gandhi nationalized nineteen banks and in effect told the country that she was returning stolen wealth back ot

its people. Now these banks would do ‘development’ work, which was not being done before. But to give them due

credit, banks after nationalization rapidly developed extensive rural networks, devised service products for farmers

and the unemployed youth, increased the number of relevant products and schemes... and grew. There was a radical

shift in the focus and intent of the banks; from class banking to mass banking. Ordinary people could now step into a

 bank without fear and apprehension and open an account. Banking habits did  spread around the country.

There was compulsory priority-sector lending: 40% of total advances had to go to priority sector. Banks falling

 below this minimum were penalized by, effectively higher CRR/SLR (it is still there) and promotion among public

sector banks were discouraged. The banks ended up doing the bidding of the political whips. Indian banks have yet

to recover from the trauma of these early years. The non-performing assets (NPAs) of most public-sector banks were

 ballooning; bad loans were routine; the morale of the officers were low as anticipated bad loans were sanctioned 

more for reasons of political expediency than commercial considerations and fiscal discipline was the casualty. But

what was hardest hit was customer service, competitiveness and innovativeness.

 Abolition of Privy Purses: One of Sardar Patel’s unsung works after Independence was getting the princely states to

agree to merge and align their kingdoms with free India. With the kingdoms numbering over 500, it was a herculean

task. A few who disagreed (Junagadh, Hyderabad) were forcefully annexed. But the stop to these princely states was

a privy purse of a lakh of rupees per month – a ‘princely’ sum in those halcyon days.

 In 1969, Mrs. Gandhi abolished the privy purses at one stroke of the pen, refusing to support the lavish lifestyles of 

a group who, in the eyes of the nation, had hardly done anything other than further their own interests. No one shed 

any tears for them, even though it was a blatant abandonment of a settlement at government level.

‘Garibi hatao’: Mrs. Gandhi used rhetoric effectively unlike anyone before and set a socialistic agenda. High taxes,

 poor growth, foreign exchange crises and bad monsoons... the time was ripe for targeting industries in general and 

luxuries in particular. The license regime presented high entry barriers.

But how did these affect services in India? In more ways than anyone can imagine.

In 1969, J.R.D. Tata brought with him from London a dynamic hotelier to take care of his one-hotel enterprise.

What Ajit Kerkar saw in Hotel Taj Mahal (which has now completed 100 years) left him aghast. The regal-looking

hotel was going to seed with unionism, bad service and low morale. He soon straightened the hotel up and looked 

for growth and expansion. He could see the implications of 1969 in a positive light.

Mr. P N Haksar was the legendary chief of Imperial Tobacco Company, who also saw 1969 in the same light as

Kerkar. Haskar realized that the socialism and radicalism of Mrs. Gandhi was irrevocable and clearly visualized the

coming taxation axe on cigarettes. He rechristened the company “ITC Ltd.”, and decided to transform it from an

‘only cigarettes company’ to an ‘also cigarettes company’ – attempt to spread its eggs around. Also prompted by the

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Monopolies and Restrictive Trade Practices Act, ITC went on a diversification and vertical integration spree:

developing leaf tobaccos, paper, packaging edible oils, button cells, social institutions like Sangeet Research

Academy, etc., and hotels.

Both the stalwarts perceived the plight of the former maharajas as a golden opportunity for themselves and acted 

identically. First off the mark was Kerkar, who could successfully convince the royals to lease some of their palaces

for his hotels. Many cash-starved royals got a pipeline to a continuous cash flow while some of them, Gaj Singh

from the royal family of Jodhpur for example, became hoteliers themselves. Now there was a race between the two

to grab as many palaces as possible for their hotels. It became the quintessential win-win situation for both the

hoteliers and the royals... and Heritage Tourism came into its own.

ITC for its part also perceived the frenetic growth of the consuming class and went into leisure and support services

in a big way. It went into hotels with three properties and a name: Welcomhotel Maurya (Delhi), Welcomhotel

Mughal (Agra) and Welcomhotel Chola (Chennai). In the late seventies, the Welcomhotel group joined hands with

Sheraton Hotels (of ITT, USA) to leverage the advantage of international connections, reservations and bookings.

On the cards were finance (ITC Classic Finance which rode the NBFC boom of the late eighties), travel

(International Travel House, into travel agency and cargo), golf courses, retailing (Wills Lifestyle), motels, palaces

and “Indovilles”. Indovilles was an innovative concept of having an Indian village done up as a tourist attraction

where foreigners could get a grass – roots look at a village and soak in the village atmosphere. It did not catch on,

although smaller players seem to have succeeded in recreating the quintessential Indian village for the leisure

tourists, of which “Chokhi Dhaani” in the suburbs of Jaipur is a classic example.

Questions

1. Critically examine the external environment factors that effect the organization in the context of the case. What

would be your advice to the organization on how such factors can be anticipated analyzed and controlled in order to

mitigate its effect on the organization.

2. In the context of the case examine how a CEO can adapt to the various external environment factors that impact

an organization. Your answer should highlight the importance of recognizing the role of external factors influencing

 business decisions.

(2 * 20 = 40 Marks)