CHAPTER 2SERVICES MARKETINGDEFNITION:The promotion of economic activities offered by a business to its clients. Service marketing might include the process of selling telecommunications, health treatment, financial, hospitality, car rental, air travel, and professional services.

IMPORTANCE OF SERVICE SECTOR1. Generation of employment: service sector includes

wide array of services like education, insurance, banking, hospitality and so on. Demand for these services is growing at lightning speed. This in turn created employment opportunities for millions of people in the country.

2. Optimum utilisation of resources: Service sector is labour intensive and exploitation of natural resources, focusing on service sector, saves substantial amount of natural resources of the country for the future generation.

3. Revenue Generation: service sector in India has attracted many entrepreneurs to start new ventures like travel, tourism, and hospitality which helps in establishment and growth of new ventures brings substantial amount of revenue to the government.

4. Capital formation: Growth of service sector has led to the substantial increase in the earning capacity of the people in the country and saving has lead to

considerable amount of capital formation in the country.

5. Increased Standard of Living: Availability of quality goods and services enhance the standard of living of people of the economy.

6. Use of Technology: Technology used by the service industry like bank, insurance, hospitality etc is least harmful to the environment.

Service marketing mixThe service marketing mix is a combination of

the different elements of services marketing that companies use to communicate their organizational and brand message to customers. The mix consists of the seven P's i.e. Product, Pricing, Place, Promotion, People, Process and Physical Evidence.1) Product – The product in service marketing mix is intangible in nature. Like physical products such as 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.

Place is the element of the marketing mix that ensures that the product is distributed and made conveniently available for the consumer - at the right location at the right time.

Since service delivery is concurrent with its production and cannot be stored or transported, the location of the service product assumes importance. Service providers have to give special thought as to where the service is provided.

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.

Other points: Arrangement where one party (the franchiser)

grants another party (the franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications.

The franchisee usually pays a one-time franchise fee plus a percentage of sales revenue as royalty, and gains

Immediate name recognition, Tried and tested products, Standard building design and décor,Detailed techniques in running and promoting the business, Training of employees, andOngoing help in promoting and upgrading of the products.

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.

Objectives of promotion:

a. Build awareness and interest in the service product and the service organization.

b. Differentiate the service offer and the service organization from competitors.

c. Communicate and portray the benefits of the services available.

d. Build and maintain the overall image and reputation of the service organization.

e. Persuade customers to buy or use the service.f. Ultimately the purpose of any promotional effort is

to sell the service product through informing, persuading and reminding.

Other points:

1. Advertising – defined as any paid form of non-personal presentation and promotion of services by an identified individual or organization.

2. Personal selling – defined as the personal presentation of services in a conversation with one or more prospective purchasers for the purpose of making sales.

3. Publicity -defined as the non-personal stimulation of demand for a service by obtaining commercially significant news about it in any medium or obtaining favourable presentation of it in any medium that is not paid for by the service sponsor.

4. Sales promotion – marketing activities other than advertising, personal selling or publicity that stimulate customer purchasing and use and enhance dealer effectiveness (e.g. competitions, coupons).

5. Public relations: The profession or practice of creating and maintaining goodwill of an organization's various publics (customers, employees, investors, suppliers, etc.), usually through publicity and other nonpaid forms of communication. These efforts may also include support of arts, charitable causes, education, sporting events, and other civic engagements.

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 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.

In determining the prices of services, the one characteristic which has great impact is their perishability and the fact that fluctuations in demand cannot be met through inventory.

Discount Pricing: It refers to the practice of offering a commission or discount to intermediates such as advertising agencies, stock brokers, property dealers for rendering a service.

Guaranteed Pricing: It refers to pricing strategy in which payment is to be made only after the results are achieved.

High Price Maintenance Pricing: This strategy is used when the high price is associated with the quality of the service.

Competitive parity pricing: Prices are set on the basis of following those set by the market leader.

Value based pricing: Prices are based on the service’s perceived value to a given customer segment.

Relationship Pricing: Prices are based on considerations of future potential profit streams over the lifetime of customers.

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 service staff defines you. If you are into banking, employees in your branch and their behavior towards customers define 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 staffs are better than the rest.

Service Personnel: Service Personnel play an important role in an organisation which provides services. The behaviour and attitude of the personnel providing services will have an influence, on the customer’s perception of the service.

Customers: customers are a source of influencing other customers by word-of-mouth. Ex: Lawyers, doctors etc..

6) 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.

Kinds of Delivery Process:

1. Line operations: In the line operations, the consumer moves through logically arranged operations which are arranged in a sequence. It is also called ‘assembly line’.

2. Job-Shop operations: The Job-shop process is appropriate for customised delivery of services. When the consumers require a combination of services using different sequences, the job shop type of operation is more useful.

3. Intermittent Operations: Intermittent processes are useful when the type of service is rarely repeated.

For example firms offering consultancy for projects and advertising.

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.

Types of Evidence:

Physical Evidence (also called real evidence) - Actual tangible evidence that can be touched and picked up that is relevant to the case.

Demonstrative Evidence - Evidence that requires a demonstration, such as a chart or a video.

Testimonial Evidence (also called personal evidence) - Evidence brought forth by witnesses, such as testimony.

Documentary Evidence - This evidence is documents like wills, letters, and other documentation. Although also physical in type, it is sectioned in its own category.

MANAGING DEMNAD AND SUPPLY IN SERVICE INDUSTRY

Finding Creative Solution

Competition is prevalent in every walk of life. In order to manage and maintain customers, the companies should create innovative solutions such solutions should be Attractive, Affordable and convenience to the customers.Pricing

One method managers use to shift demand from peak periods to nonpeak ones is to employ a differential pricing scheme, which might also increase primary demand for the nonpeak periods. Examples: they include matinee prices for movies, happy hours at bars, family nights at the ball park on week nights.Developing nonpeak demand

Companies make all efforts to increase volume during periods of low demand, especially in those facilities with a high-fixed, low-variable cost structure.Managers often use slack time productively as a time to train new employees, do maintenance on the equipment, clean the premises, prepare for the next peak, and give the workers some relief from the frantic pace of the peak periods.Developing complementary services

During peak period, formation of a queue is a necessary evil in any service system. Therefore it is necessary to provide complementary service to the customers to engage them before they take actual service. For example, restaurant owners have discovered that on busy nights most patrons complain less when sitting

in a lounge with cocktail then when standing in line as they wait for tables in the dining area. Also, the profitability of restaurants with bars can more than double.

Creating reservation systems

Service executives can effectively manage demand by employing a reservation system. The reservation system helps them in knowing in advance the exact demand for the day.Using part-time employees

The peaks of the business vary by type of business when there is a peak demand for the business it can effectively be managed by part-time employees.Maximising Efficiency

During peak periods, employees may not involve and stretch themselves to work little more than during leisure times. Therefore the manager should train his employees to cope with such saturations.Increasing consumer participation

Service organisations should encourage more participation from consumers. Exhaustive involvement of consumers in the service process reduces demand for additional workforce.Sharing capacity

The delivery of a service often requires the service business to invest in expensive equipment and labor skills that are necessary to perform the service but that are not used at full capacity. In such cases, the service

manager might consider sharing capacity with another business to use required, expensive, but underused resources jointly.Precaution While Investing

While investing money on facility creation, care should be taken to forecast future expansion possibilities and create extra facility for future.Cross-training of employees

It is necessary to train people on the overall functioning of the process and not just the part of it. When the time requires, the employees can be used more effectively.

Service Delivery ProcessA Service delivery process is a special process describing a complete and integrated approach for performing a specific project type. It provides a complete end-to-end lifecycle (for it's scope) and can be used as a reference for running projects with similar characteristics.

Customer participation at some level is inevitable in service delivery. Services are actions or performances, typically produced and consumed simultaneously. In many situations employees, customers and even others in the service environment interact to produce the ultimate service outcome.

ROLE OF CUSTOMER IN SERVICE DELIVERY PROCESS

Customers as a productive process Customers as quality contributors Customers as competitors

Customers as a productive processCustomer inputs can affect the

organization’s productivity through both quality and quantity of output. e.g. research suggest that in an it consulting context:

a. They should tell the company what exactly are their requirements

b. Provide necessary information on time.c. Communicate openlyd. Give the feedback before it is too late to rectify

the damage.

Customers as quality contributionsServices such as health care, education, personal fitness, and weight loss, where the service outcome is highly dependent on the customer’s participation. In such services unless the customers perform their roles effectively, the desired service outcomes cannot be achieved. Effective customer participation can increase the likelihood of service delivery that their needs are met and that benefits the customer seeks are attained. 

Customers as Competitions: the rapid growth of the internet and supporting technologies has given consumers increases strength in the consumer. As consumers have grown in power, their expectations have grown manifold. Their ever increasing expectations are the real competition and challenge for the companies. Therefore, the companies are investing serious time and resources into understanding customer

expectations, & improving their value to the customers.

QUALITY ISSUES IN SERVICES A business with high service quality will meet or exceed customer expectations whilst remaining economically competitive. Evidence from empirical studies suggests that improved service quality increases profitability and long term economic competitiveness.Delivering superior quality is important for the following reasons.I. Superior service quality increases profitabilityII. Companies can charge premium pricesIII. Customer preferenceIV. Customer retentionV. Market expansionVI. Fewer customer complaintsVII. Lower employee turnover and dissatisfaction

DIMENSIONS OF SERVICE QUALITYThe five dimensions are:

TANGIBLES-Appearance of physical facilities, equipment, personnel, and communication materials

RELIABILITY-Ability to perform the promised service dependably and accurately

RESPONSIVENESS-Willingness to help customers and provide prompt service

ASSURANCE-Knowledge and courtesy of employees and their ability to convey trust and confidence

EMPATHY-Caring, individualized attention the firm provides its customers

MANAGING MOMENTS OF TRUTHA moment of truth is basically an instance wherein a customer and a company/service provider come into contact in such a way that the customers either forms and opinion or changes his existing opinion about the company/service provider.The moment of truth or service encounter is of paramount importance. It can make or break a company. There are five stems in managing moments of truth

1. Indentify and prioritise each customer interaction.2. Identify alternative ways that could improve firm

response in each of these customer contact opportunities.

3. Choose the response that will likely provide delightful experience for the customer.

4. Create a service standard to ensure basic customer satisfaction.

5. Measure customer satisfaction on each Moment of truth.

MARKETING MANAGEMENT PROCESSThe marketing management process involves the following activities.

1. Organising marketing planning2. Analysing marketing opportunities3. Selection of target market 4. Developing marketing mix5. Managing marketing efforts1. Organising marketing planning:

a. What type of business are we planning to do?

b. Who are all the customers?c. How to identify customers for our service?d. What benefits our customers are seeking?e. Which are the companies providing the proposed

service?f. How can our service be different from our

competitors?g. How can we achieve competitive advantage?h. How to design cost effective operations?i. How are we testing our product in the

marketing?j. What efforts are required to design and deliver

the product?2. Analysis marketing opportunities:

a. Market sizeb. Market trendc. Market growth rated. Market profitabilitye. Industry cost structuref. Distribution channelsg. Key success factors

3. Selection of target market:a. Understand the lifestyle of the consumersb. Age groupc. Income of the consumersd. Spending capacity of the consumerse. Education & Profession of the peoplef. Genderg. Mentality & thought process of the consumersh. Social statusi. Kind of environment individuals are exposed to

4. Developing marketing mix:

a. Productb. Placec. Promotiond. Pricee. Processf. Peopleg. Physical evidence

5. Managing marketing efforts:Marketing organisation should constantly monitor their marketing efforts to know how effectively they are working in the market. Constant feedback should be taken from customers to know whether their wants are met completely.