Model Question Paper

Services Marketing (MD0111)

Section A
Answer all questions. ( 60 marks)
1. ‘Globally, the growth in the service sector was quite slow because of some
misconception held by people regarding services till a few decades back. But
Experience and statistics have shown that they were only myths and not reality’. In
this context, discuss the myths of services. ( 10 marks)
2. ‘Service organization should learn to efficiently manage customer expectations to
gain a competitive advantage.’ In this context, discuss the measures that help service
providers to manage customer expectations. ( 10 marks)
3. ‘The fundamental characteristics of services differ from those of packaged goods,
and the promotional strategies of services also differ due to these special
characteristics.’ In this regard, discuss the difference between services and packaged
goods in the context of promotion. ( 10 marks)
4. An efficient process leads to quality service delivery and customer satisfaction.
Explain the various factors or elements that affect the effectiveness and efficiency of
the process. ( 10 marks)
5. ‘Internal marketing involves attracting and retaining the best talent in the market and
motivating them to contribute to the organizational objective.’ In this context,
discuss the areas where internal marketing plays an important role. ( 10 marks)
6. ‘The mutual fund market can be segmented based on the investment objective of the
investor, as the investment objectives differ from customer to customer’. In this
regard discuss the market segmentations of funds based on these differences. ( 10 marks)

Section B
Answer all questions. ( 40 marks)
Caselet 1
Read the caselet carefully and answer the following questions:
7. Pampering the customer is worth the effort if it means retaining customer loyalty. This is
true more in the case of those customers who contribute a larger chunk of business and
revenue. In this light, analyze the services offered by Emirates via its Skywards-frequent
Flyer program. ( 10 marks)
8. Technology and innovation are synonymous with the growth of a company in serving its
customers. The goal of Emirates was always to achieve high customer satisfaction by
providing them high quality services. With respect to this, explain the steps, which an
organization should take to implement an effective customer-service program. ( 10 marks)
Emirates Airlines (EA) entered the airline industry in 1985 as an independent state
airline owned by the Dubai government. EA first started operating between Dubai and
Karachi with a Boeing 737 leased from Pakistan International Airlines (PIA) and an
Airbus A300. Just two decades later, EA has emerged as a world leader with a fleet of
more than 50 aircraft. By 2004, EA operated services to more than 70 destinations in 50
countries located in Asia, Europe, Africa, and America. It offered various value added
services to its customers and was awarded the “best airline of the year in the middle
east” in 2004.
Customer communication and measuring customer satisfaction was a continuous
program that has enabled the airline to make continuous innovations using technology
for the comfort and convenience of passengers. It also provided the requisite
infrastructure and training to staff members to ensure excellent customer care. To enable
Internet booking of air tickets, EA partnered with Datalex, to develop a web-booking
platform. Once the booking was through, the next step was check-in services and for
this, EA tied up with Materna and launched CUSS (Common Use Self Service)
machines in 2003-2004, which made things much more convenient for passengers. After
check-in, business class and first class passengers and Skywards members had access to
 the Luxury lounge that had massage chairs, plasma television screens, a business center,
a food court, deluxe bedrooms with attached televisions, and an extensive selection of
magazines.
As part of in-flight services on Emirates B777 and A330 aircraft, passengers were
provided with up to 18 TV channels and 22 audio channels. Further, first or business
class passengers could choose from 50 titles from the in-flight video library and watch
them on the in-seat personal video player. To enhance these services, it launched $8
million ICE (information, communication, and entertainment) technology with over 100
movies and 50 TV channels on demand, 350-plus audio channels and 40 in-flight games
- three times more than on any other airline on their airbus 340-500 flights. EA was the
first to offer BBC news updates on the flight as well as email and SMS services for $1
per request. It had the most widely used in-flight telephony system with US calls
charged at $5 per call. The quality of food on flights was very good and business / first
class passengers were offered a choice, from the menu card.
The cabin crew was multilingual and trained to be courteous and pleasant in catering to
the needs of passengers. This resulted in increased customer satisfaction.
To offer value-added services to loyal customers, EA, along with Sri Lankan Airlines,
launched the Skywards-frequent flyer program. With this membership, a passenger got
skyward miles credited to his account on every Emirates/Sri Lankan flight. The
membership could later get upgraded to Skywards Gold and Silver membership,
depending on the miles accumulated. The special privileges offered to Skyward
members were visa service, chauffeured transport to and from designated airports,
special meal considerations which gave a choice of twenty options, fast track at the
airport which meant avoiding long immigration queues, and stopover packages at select
destinations which offered negotiated rates on tours and travels. Skywards Silver and
Gold members enjoyed priority check-in and exclusive lounge access, and priority
baggage delivery, easing travel stress. As an additional service, EA tied up with
Fairmont Hotels and resorts and offered 500 Skywards miles for every qualifying stay at
all Fairmont hotels. Passengers had the facility of checking the website
www.skvwards.com for information on the miles they had accumulated. The site also
had convenient mileage calculators and maps, exclusive offers and events, reward miles,
etc. EA also provided a special escort service for unaccompanied children and old
people right from the point of embarking till their destination, with separate check-in
facilities for added convenience. To put the safety apprehensions of customers to rest,
EA had a Safety Audit program comprising 29 trained personnel to look into all aspects
of safety.
EA focused on offering the best services to its customers, right from booking tickets, to
the flight journey. These services earned it around 200 awards in the two decades of its
existence. Some of the awards in 2004 were Best Airline of the Year by Marco Polo
Awards, Italy, and Best Frequent Flyer Program by Business Traveler Middle-East
Awards. Apart from performing its core function as an airline, EA also succeeded in
establishing itself as a clean, efficient, world-class airline service.
END OF CASELET 1

Caselet 2
Read the caselet carefully and answer the following questions:
9. With respect to the caselet, discuss why the medical tourism is booming in India and also
discuss the drawbacks to Indians due to the influx of medical tourism in India. ( 10 marks)
10. Many countries are promoting tourism and it has become a major source of income to
countries like India, Singapore and Malaysia. Discuss the recent trends in Tourism. ( 10 marks)
The buzz in the Western news media is healthcare tourism and the role of India's medical
establishment in providing affordable healthcare. According to the National Coalition on
Health Care, there are 46.6 million uninsured Americans. The number of Americans
travelling overseas for healthcare is increasing each year. Healthcare costs in the United
States are skyrocketing. Insurance premiums and healthcare costs are growing at more
than three times the overall inflation, averaging at least a nine per cent increase in each
of the last five years. Even in socialistic medical systems such as in Europe and Canada,
the wait for critical surgery is supposedly long and painful. The private healthcare
system is so expensive that many have little option but to seek medical services from
low-cost countries such as India. MedicalToursim.com calculates the cost for critical
heart bypass in India is just 7.7 per cent of the cost in the U.S. The costs for other
surgeries including hip replacement are less than 20 per cent of that in the U.S. Even
after adding first class airfare and five star facilities, Westerners are better off seeking
medical services in India (there may be some long term risks, which we will ignore for
the time being).
Medical tourism has grown by leaps over the past two years and is expected to grow at a
faster pace in the coming years. A superior medical service (at economical rates) along
with an exotic vacation is what medical tourism is all about. Countries like India,
Malaysia and Singapore are always on the move to introduce new technologies to
upgrade their medical services and provide an ideal healing experience. Obviously
capitalists are ready to exploit such opportunities and the massive cost differentials. And
why not? Numerous state-of-the-art hospitals are popping up in major Indian cities to
service foreign clientele.
But, here is the conundrum. In its latest report, World Health Organization (WHO)
identifies India along with other poorest nations in Africa and South Asia as having the
greatest shortage of healthcare professionals. India has around 650,000 physicians with a
density of 0.60 physicians per 1000 people. In comparison, the U.S. has 2.56 per 1000
and most Western nations have at least four times higher density of doctors than India.
China has 1.05 physicians per 1000. More troubling is that India has a large numbers of
patients with tuberculosis, malaria, AIDS/HIV, leprosy, and other contagious diseases.
India lags far behind the Western world in average life expectancy and has much higher
infant mortality rates. So, we can safely assume the demand for healthcare professionals
in India far exceeds the supply.
India has low public healthcare spending. Based on WHO data, government spending as
a percentage of total healthcare costs of most Western nations including the U.S. is
higher than India's. In India, more than 75 per cent of the healthcare spending is in the
private sector (for the U.S. it is 44.6 per cent). The percentage of out-of-pocket spending
on private healthcare is a whopping 97 per cent. In the U.S, it is just 24.5 per cent and in
most European countries it is even lower.
Thus, the massive gap between the demand and the supply and significantly higher
private spending on healthcare raises numerous questions as medical tourism takes
firmer roots. Private cost of healthcare services may rise since healthcare tourism
amplifies the gap between the demand and the supply. The need for five-star hospital
services and advanced medical devices will increase investment levels, which will force
providers to seek higher revenue generating foreign clients. Since some of the major
hospital groups are publicly traded, there will be greater pressure for increasing
shareholder value. Since doctors' reputations attract patients, there will be a bidding war
for well-known doctors. All this can be expected to increase the cost of healthcare
services for the local population.
Entrepreneurs and hospitals argue that a high-paying Western clientele can subsidize the
cost of providing services for the local population. This is a sound argument if we ignore
the severe shortage of medical professionals. Further, foreign clientele will expect more
than the required resources since the long-term risks involved are higher. Thus, hospitals
and doctors will spend disproportionately more resources for foreign (or wealthy)
patients. It is hard to conceive how resources can be allocated for poor patients under
severe deficit.
END OF CASELET 2

END OF QUESTION PAPER

 Suggested Answers
Services Marketing (MD0111)

Section A
1. Globally, the growth in the service sector was quite slow because of some misconceptions held
by people regarding services till a few decades back. But experience and statistics have shown
that they- were only myths and not reality. Some of the myths pertaining to services are discussed
below:
Myth 1: Service is a necessary evil for manufacturing firms
Manufacturing firms offer services like repair and maintenance, to customers who buy their
products and equipment. Though such services require organizations to incur some cost in the
short-term, they help them reap huge benefits in the long-term. Global companies like GE,
Motorola and Dell use service centers not only to offer support functions to customers but also to
generate leads and convert prospects into customers. The service centers are used by these
companies to differentiate themselves from competitors. Hence, the service function is not a
necessary evil, but serves as a source of competitive advantage for manufacturing firms.
Myth 2: The service sector is labor-intensive and less productive
Although the service industry is considered to be labor-intensive, this doesn't apply to all
services. While software, legal, consultancy and other knowledge-based services require the
employment of a large number of people, power, transportation and telecommunication services
require advanced technology and equipment, and thus investment of huge amounts of capital.
It was believed that the service sector depends on people to serve customers and as human
capability is limited, service firms cannot improve their productivity beyond a certain point.
Therefore, it was believed that service sector lags behind manufacturing sector in its productivity.
Myth 3: Service firms earn less revenue when compared to the other two sectors
It was earlier perceived that service firms earn less revenue when compared to manufacturing
firms. The basic reason behind this assumption was that the services at that point in time were
limited to only some areas like banking, house-keeping transport etc. But as technology
developed and the world progressed, services grew into a vast area with wide scope. Services like
information technology, consultancy, retailing, specialized health care etc. evolved and
developed, which have removed the myth. Today, it is in fact perceived that service firms earn
more than manufacturing firms because of the higher margins they enjoy.
Myth 4: Growth in the service economy is linked to the growth of the public sector services
In India, the service sector including banking, insurance, railways, power, telecom, etc., were all
under the government for a long time and there was no role for the private players in these areas.
As these areas formed a big chunk of the national economy, it was perceived that growth in the
service economy was linked to the growth of public sector services. The scenario has however
changed after the liberalization and globalization as the economy has opened the gates for private
players in different areas like banking, telecom, insurance, power and energy etc. Private telecom
players like Bharti and Reliance have made their mark in the telecom sector while public sector
insurance companies like L1C and others are facing stiff competition from the likes of ICICI-
Prudential, HDFC-Standard Life, Tata-AIG, ING-Vysya, etc.
Myth 5: Marketing a service is not different from marketing a product
Marketing a service is entirely different from marketing a product. There is a lot of difference
between marketing a 'car' and marketing an 'airlines service.' To sell a car, the manufacturing firm
has to emphasize on its features, mileage, durability and the service outlet network, all of which
are tangible. In contrast, an airlines provider has to emphasize the quality of in-flight service
offered by its staff, pre- and post-flight service offered (if any), the airline's history of on-time
departures and arrivals and so on, which are intangible till the service is experienced. The
intangible and heterogeneous nature of services makes it difficult for service marketers to
convince customers to buy their services. While product, price, place and promotion form the
four P's of product marketing, three more P's, i.e. people, process and physical evidence, also
need to be given equal attention by service marketers.
Myth 6: Growth in the service sector eliminates jobs from the manufacturing sector
Some people are of the opinion that growth in the service sector results in an absolute decline in
employment in manufacturing sector. This opinion may have been formed because in developed
 countries, the manufacturing sector is dominated by the services sector and the rate of growth of
the service sector is greater than the rate of growth of manufacturing sector. Many manufacturing
firms in developed countries have shifted some of their plants to developing countries because of
the availability of low cost labor. This has resulted in a decline in employment in the
manufacturing sector in these countries.
However, the myth is no longer held, as people have realized that it is natural that focus shifts
from manufacturing to services as the economy develops and where the jobs in manufacturing
sector decline, jobs in service sector increase, creating a balance. Economists also explain that it
is not the growth of the service sector that leads to a decline in employment in manufacturing
sector; they attribute the loss of jobs in manufacturing to advances in technology, and efforts to
improve productivity by restructuring and reengineering.
2. MANAGING CUSTOMER SERVICE EXPECTATIONS
Service organizations should learn to efficiently manage customer expectations to gain a
competitive advantage. The following measures can help service providers manage customer
expectations:
Managing Promises
The first step in managing customer expectations is to manage the promises made by service
providers. In order to successfully meet the service expectations of customers, service companies
should promise only what they are confident of delivering rather than making promises which are
difficult for them to fulfill. For example, consider the case of a courier company that claims it can
deliver consignments anywhere in the world in three working days but messes up on a certain
consignment by not only failing to deliver it within the stated time but also losing the contents of
the package in transit. This gives the customer sending the consignment, a very unpleasant
service experience because of the failure of the company to deliver what it promised. Some
service providers intentionally under-promise the service to exceed customer expectations at the
time of service deliver. However, this kind of practice will reduce the competitive attractiveness
of the service. On the other hand, over-promising will increase the customers' expectations
beyond the company's ability to meet them. Therefore, firms should make an honest
representation of their capacity to deliver the service through explicit means such as personal
selling and advertising, and implicit means such as price of the service and appearance of the
service facilities.
Reliability - "Getting it Right the First Time"
Customers give importance to reliability over the other four dimensions of service. Firms that fail
to deliver reliable products or services the first time, fail their customers directly. Studies show
that the service expectations of customers increase at the time of service recovery. When there is
a service failure the first time, a customer's zone of tolerance decreases. Hence, during service
recovery, customers' expectations of desired and adequate service increase for both the outcome
dimension of reliability and process dimensions of tangibility, assurance, responsiveness, and
empathy. Consider an example where the owner of an air-conditioner has called up the appliance
company for a repair work. The company promises to send its executive at a given time on a said
date, but fails to do so. This reduces the zone of tolerance of the AC owner. He expects the
company to keep its promise, without any deviations, the next time the executive is scheduled to
come.
Service organizations should therefore practice to deliver the promises made to the customer,
correctly the very first time. Further it should emphasize and design their service operations in a
way that they reflect the outcome dimension of reliability during the customer's first service
encounter.
Effective Communication
Companies should communicate effectively with customers to keep track of their expectations
and views about the services provided. Communication can be initiated in two ways, either from
the company or from the customer. A service organization can initiate proactive communication
to inform customers about the latest developments in the organization that will help it serve them
better. For example, consider a situation in which a hotel has introduced an online booking
facility enabling customers to reserve a room through the Internet. The hotel can use its customer
database to communicate the information regarding the new facility to all its customers,
irrespective of the number of times they have stayed at the hotel. This action would delight the
customers who stayed at the hotel only once or twice and increase the trust of their regular
visitors. Service organizations can also manage customer expectations by seeking their
suggestions or complaints about the service.
3. PROMOTIONAL STRATEGIES FOR SERVICES
The fundamental characterizes of services differ from those of packaged goods. As we have
studied in the earlier chapters, services are characterized by intangibility, variability, and
perishability. The differences between the promotional strategies of packaged goods and services
arise due to these special characteristics. Let us now discuss the differences between services and
packaged goods in the context of promotion:

Services cannot be inventoried: Services are perishable in nature and they cannot be stored for
future use when the demand would be high. Therefore, matching demand with capacity becomes
a challenge for service marketers. One way to match demand and capacity is to decrease the
usage during peak demand periods and increase it during off-periods. This can be done through
price discrimination. However, this strategy will be successful only if service providers are able
to communicate the price changes to the target audience on a regular basis. On the other hand,
promotion of packaged goods has little necessity to match supply and demand as the capacity can
be altered to suit the demand at the manufacturing stage itself. Further, temporary promotions by
marketers of goods encourage customers to purchase in bulk and store them, enabling marketers
to reduce their holding costs of inventories. Though it is impossible to store services for future
use, service marketers can attract customers to use their services more frequently by offering
memberships in the form of advance purchases or loyalty schemes. While advance purchases
offer convenience to customers, loyalty schemes offers price discounts. For example, many
airlines offer frequent flier schemes that allow a price discount on the subsequent travel, once a
customer collects a certain number of points.
Reduced role of intermediaries: Promotion planning for packaged goods requires distribution of
available resources among advertising, trade promotion and consumer promotion. Whereas,
services that are sold directly in the market do not require any trade promotion. That is, as the
role of intermediaries is limited or even non-existent, there is no need to promote them.
Intermediaries come into the picture only in a few service industries like travel and insurance.
These companies hire agents and brokers and reward them aptly to successfully compete with the
other players in the industry. Therefore companies have special promotional policies for
intermediaries as well, as discussed earlier.
Role of service personnel: Service personnel play a key role in customer interaction and in the
service deliver process. A customer's perception of the image of the company and his satisfaction
with the service depend to a large extent on his/her interaction with the service personnel. In
contrast, there is relatively less responsibility for sales personnel in packaged goods industry as
the actual product also has a role to play in customer satisfaction. Service companies can
differentiate their services and gain a competitive advantage through their customer service.
Therefore, service providers like airlines and hotels advertise the quality of their service and the
commitment of their personnel. In fact, according to company sources, the Taj group's 'She's the
Taj' campaign was meant to emote what a woman (in this case the customer service personnel)
stood for in terms of warmth, caring and hospitality.
Service delivery location: Service delivery location also adds to the credibility of the service
provider and his service. For example, a spacious, well-lit and well- ventilated cyber cafe in a
complex would attract more customers than a narrow and dingy cafe in a by-lane. Customers rate
the service provider depending on the ambience of the place too. Further, the physical evidence at
the service provider's location tangibilizes the service and thus reduces the perceived risk of the
customer. Therefore most service providers advertise their service location. They even resort to
PR initiatives when any changes are made to their locations or new ones are added. For example,
when TCS (Tata Consultancy Services) opened its new office in Hyderabad in a magnificent
30,000 sq. ft. building, there were news items in newspapers and magazines, announcing it.
Customer as a co-producer: Unlike packaged goods where customer is not involved in the
production process, some service industries require customer's involvement in the production
process. For example, selecting investment options, ordering menu in the restaurant, etc. require
customer's participation. Therefore, service providers stress on the role of the customer in their
promotion campaigns. At Masala Art, promoted by the Taj hotel in Delhi, the chef cooks the food
in front of the customer, in the manner he desires. This maximizes the scope for the customer in
designing the service the way he wants.
4. FACTORS INFLUENCING PROCESS EFFICIENCY
An efficient process leads to quality service deliver}' and customer satisfaction, as has been
discussed in the beginning of the chapter. However, how does the service provider design an
 efficient process and execute it? There are various factors or elements that affect the effectiveness
and efficiency of a process. These factors are discussed below.
Planning
Planning is the first stage in developing a service process and determines its effectiveness.
Planning a service process should include various aspects like customer preferences,
technological requirements, location and appearance of the service location, quality of service
personnel, financial inputs etc. Each of these should be analyzed and compared with the
capability of the service provider before planning the process. For example, if an hotelier plans to
include a complimentary massage in the process of serving his customers, he first needs to know
how many customers would be actually interested in it. Then, he can plan the other factors
involved.

Service Personnel
Service personnel play a very important role in producing and delivering quality services. They
add value to the service process with their knowledge, efficiency and cordial behavior. Further,
service personnel are the people who can enhance the image of the organization in the minds of
the customers. Therefore, service companies should give freedom and training to their employees
to innovate and practice ways to satisfy their customers. For example, Ritz Carlton is well known
for its customer service, which it achieves through excellent training, employee empowerment,
and reward structures.
Technology
Technology has completely transformed the way services are delivered to customers.
Technological developments are especially evident in service industries like banking, hospitality,
healthcare, financial services, travel, etc. These improvements add to the customers' convenience
while using the service, and enhance the overall efficiency of the service processes. Internet
banking, online reservation facilities, online status enquiries, ATM machines, video
conferencing, etc. are a few examples of technological innovations in service industries. Further,
technology has also helped in achieving unimaginable standards and results in the field of
medical services. A service provider should continuously try to upgrade technology to match the
latest standards and provide better services to his customers.
Location and Decor
As we have discussed in the earlier chapter "Place in Services", the location of a service outlet
plays an important role in creating an image of the organization in the customers' minds and in
providing tangible evidence to them. In recent years, the interior decor of a service outlet has also
gained great importance. These changes can be seen in the posh and sleek interiors of many
national, private, and international banks, hotels, hospitals, etc. Due to distinct characteristics of
services (like tangibility, perishability, and variability), service providers have limited
opportunities to attract and retain customers and set their services apart from competitors'
services. However, marketers have found that a customer's opinion of a service can be changed
by altering the messages received by his sensory stimuli (sight, sound, touch, and smell).
Therefore, service providers should change the interiors of the service organization to attract and
please customers.
Customer's Role
Customers derive greater satisfaction from a service when they play a bigger role in creating and
producing the service. A customer's knowledge about the service also determines his expectations
of the service. For example, a customer who is a frequent flier would estimate the service of an
airline better, than a customer who has boarded a flight for the first time. If the actual service
delivered does not meet his expectations, then the customer is dissatisfied. Therefore, service
providers should clearly lay down the processes based on the level of customer participation in
the sendee creation and deliver}'. For example, a customer's involvement in choosing an
insurance policy, determining the premium and the frequency of payment (half-yearly or annual)
etc. depend on the level of his knowledge about the service. A customer who has no knowledge
of insurance business and is only interested in an insurance or investment option might leave all
the decisions to the service provider.
5. THE ROLE OF INTERNAL MARKETING
it is understood that internal marketing involves attracting and retaining the best talent in the
market and motivating them to contribute to the organizational objectives, internal marketing
offers many advantages. Some of these advantages like high productivity and increased return on
 investment fall within the internal sphere of the organization. Others like better customer
relationships and enhanced organizational image fall in the outer sphere of the organization.
Internal marketing plays an important role in the following areas:
Customer attraction and retention: Internal marketing motivates employees to provide the best
service to every customer and earns their commitment to strive for excellence in rendering
services. Customers who enjoy superior quality service patronize the organization and bring in
more business through repeated and increased purchases. They also help bring in new customers
for the company when they provide positive word-of-mouth publicity. Therefore, internal
marketing helps in attracting new customers and retaining the existing ones.
Employee retention and motivation: Internal marketing seeks to design jobs that provide
satisfaction and enrichment to employees, create the right work environment and offer a reward
system that motivates them to perform better. This helps the organization enjoy high employee
productivity and also their commitment and loyalty towards the organization. It also helps in
attracting the best resources in the talent market as the turnover rate would be low and the
employees carry a positive image of the organization.
Corporate image: Internal marketing ensures that all the employees understand the mission,
vision and objectives of the organization and their role in achieving the organizational objectives.
When employees feel valued and respected by the organization, they work with enhanced
commitment. Committed employees render superior service to exceed customer expectations and
these delighted customers develop a positive attitude towards the organization. The satisfied
employees together with customers create a good corporate image of the organization in the
society.
Change management: Internal marketing emphasizes on listening to employees, addressing their
concerns, and empowering them to play an important role in the organization. It believes in
involving the employees while introducing any changes in the existing system by seeking and
valuing their opinions and suggestions. Employee suggestions that are feasible and valuable are
implemented and the employees rewarded suitably. This system generates enthusiasm amongst
employees and encourages them to participate in implementing organizational change programs.
Organization's performance and continuity: Internal marketing emphasizes continuous
training and development of employees to meet the future requirements of the organization and
also help them achieve their individual aspirations. This ensures that organizations have a
continuous and uninterrupted supply of talented and motivated people. Even when some
employees leave the organization due to various reasons like retirement, resignation, etc., the
organization will have suitable people at the next level to take over. This helps in preventing
situations where employees face ambiguity and uncertainty due to lack of able managers, which
would eventually affect the organization's performance.
6. Since customer needs are different, the market can be segmented into the following funds based
on these differences.
Growth funds: Growth funds provide capital appreciation over the medium to long term. These
funds invest in equities, which generally offer high returns over a period of time. Therefore, they
are ideal for investors looking for high returns on capital over the long term.
Income funds: Income funds provide regular income to investors. Such funds generally invest in
fixed income securities such as bonds, corporate debentures and Government securities. They are
ideal for investors who desire the minimum risk and a regular income on their investment.
Balanced funds: Balanced funds, as the name suggests, strike a balance between growth and
regular income. These funds invest in a combination of equities and fixed income securities, in a
pre-determined proportion. They arc ideal for investors who want both capital appreciation and a
steady income.
Money market funds: Money market funds invest in instruments like treasury bills, certificates
of deposit, commercial paper and inter-bank call money. These are safer short-term investment
options. They are ideal for investors looking for preserving capital along with income returns.
The returns fluctuate with change in interest rates, which might happen in the short-term.
Tax saving schemes: These funds are for those investors looking for tax-saving benefits. Equity
lined savings schemes (ELSS) ensure tax saving to eligible investors under Sec. 88 of the Income
Tax Act.
Other schemes: There are some special funds designed, which invest in only specific industries
like IT or pharma. A slight variation is the sectoral fund, which invests in a specific industry or a
group of industries. For example, Reliance launched a power sector mutual fund in early 2004.
 To take advantage of the growth opportunities in the power sector. There are also index based
schemes, which try' to replicate the performance of a sensex like the BSE or the NSE, However,
the performance of such funds strictly fluctuates with changes in the sensex, increasing the risk,
and of course, the returns too.
Marketers design their strategies after identifying the market segment they would like to target.
Based on their strategy, they determine the marketing mix elements and adapt them to suit the
market needs. They might have to change their pricing strategy, promotion strategy or the place
strategy to reap the maximum returns from the market.
Section B
7. In the service industry, the more the service is used, the higher the chances of customer retention
provided the quality of service is good.
• In case of Emirates, the launch of the Skywards program had a dual objective – increased
usage of airline services and retaining passengers by giving mileage points.
• Apart from this basic objective, the program provided a host of benefits to Skywards
members during their journey. At the outset, there was a separate check-in for Skywards
Gold and Silver members so that they could avoid the general waiting time.
• They had access to lounges that offered unmatched luxury. They were also offered a choice
of menus on board their flight.
• As part of additional services, the airline officials in Dubai arranged visas.
• To reduce the uncertainty factor in a new country negotiated deals on various tours and
airports.
• These additional services helped to make the customers feel at home and increased the
probability of his repeated usage of Emirates Airlines.
• EA was successful in gaining the loyalty of its customers by giving additional rewards.
• Under a tie-up with Fairmont Hotels in November 2004, guests at Fairmont Hotels and
Resorts earned 500 Skywards Miles for every qualifying stay at the hotel. Such reward
programs were successful in attracting customers using various value-added services and
pampering the high-value customers.
• As part of in-flight services on Emirates B777 and A330 aircraft, passengers were provided
with up to 18 TV channels and 22 audio channels. Further, first or business class passengers
could choose from 50 titles from the in-flight video library and watch them on the in-seat
personal video player.
• To enhance these services, it launched $8 million ICE (information, communication, and
entertainment) technology with over 100 movies and 50 TV channels on demand, 350-plus
audio channels and 40 in-flight games - three times more than on any other airline on their
airbus 340-500 flights. EA was the first to offer BBC news updates on the flight as well as
email and SMS services for $1 per request. It had the most widely used in-flight telephony
system with US calls charged at $5 per call. The quality of food on flights was very good
and business / first class passengers were offered a choice, from the menu card.
• The cabin crew was multilingual and trained to be courteous and pleasant in catering to the
needs of passengers. This resulted in increased customer satisfaction.
• The special privileges offered to Skyward members were visa service, chauffeured
transport to and from designated airports, special meal considerations which gave a choice
of twenty options, fast track at the airport which meant avoiding long immigration queues,
and stopover packages at select destinations which offered negotiated rates on tours and
travels.
• Skywards Silver and Gold members enjoyed priority check-in and exclusive lounge access,
and priority baggage delivery, easing travel stress. As an additional service, EA tied up with
Fairmont Hotels and resorts and offered 500 Skywards miles for every qualifying stay at all
Fairmont hotels.
• EA also provided a special escort service for unaccompanied children and old people right
from the point of embarking till their destination, with separate check-in facilities for added
convenience.
8. The goal of any service organizations is to achieve high customer satisfaction because this is
what holds the key to customer retention and loyalty. Service organizations can achieve high
 customer satisfaction only when their service personnel deliver customer service effectively. An
organization needs to take the following steps to implement effective customer-service program:
• Place the right person in the right job: The management of a service organization should
conduct comprehensive recruitment tests and select the best candidate for each job.
Different jobs require different skills like technical skills, interpersonal skills,
communication skills, etc. Some jobs require a combination of some of these skills.
Organizational personnel who interact with the customers directly should be able to
withstand the work pressure and control their emotions. So, the management should use
some personality tests for assessing the candidates and selecting the right people.
Administer training programs: The management should try to identify the training needs
of employees and conduct training programs periodically to help them hone their skills and
excel in customer service.
• Serve information needs of customers: Customers also need to be kept informed of any
changes made in the service delivery system. An informed customer will know better how
to use the service quickly and effectively. This will help avoid delays at the service site and
reduce inconvenience to customers. For example, Electronic Voting Machines were used for
elections (2004) in India. Citizens were educated through television and live demonstrations
in various constituencies in advance, so' that they could cast their votes without any
problems on the day of voting.
• Resolve problems quickly and talk pleasantly: Employees should be attentive while
interacting with customers. When a customer reports a problem, the front office personnel
should immediately take the necessary action. In case of minor problems, they should
initiate corrective action immediately and in case of major problems; they should take up the
case with the manager concerned. They should also be tactful in pacifying irate customers.
Peaceful customers can be more easily dealt with than aggressive and unpleasant one.
Therefore, employees will be subjected to less stress and can respond to more customers if
they help their customers calm down. However, employees should also remember that sweet
talk alone cannot please a customer for long, and that his problem needs to be solved at the
earliest.
• Standardize service delivery mechanisms: A service delivery process can be split up into
a set of steps that are carried out in a particular sequence to deliver the desired service. Each
step should be evaluated to identify the possibility for standardization. All such steps should
be standardized and the employees should be trained to carry out the steps quickly in a
systematic way and deliver satisfactory service to customers.
• Fix reasonable prices: A service provider has to price his services reasonably. He should
compare the quality and level of the services he offers with those of competitors in the
industry and then determine the price of his service. The service provider should constantly
monitor the external environment, the existing demand and supply for his services and make
changes in the price accordingly.
• Outsource some activities: Service providers should identify the activities that are not an
integral part of the core service. If they find that these activities can be performed by
external organizations at a low cost without affecting the quality of customer service, then
such non-core activities should be outsourced.
• Attempt to prevent problems: Service providers should observe the service delivery
mechanism and identify the problem areas. They should then take the steps necessary to
eliminate the factors leading to problems and enhance the customer-service.
• Evaluate employee performance: The performance of service personnel should be
appraised periodically and the feedback should be discussed with the concerned employee.
The achievements of an employee should be rewarded. At the same time, if there are any
areas for improvement, his superior should communicate them to the employee and help
him upgrade his performance.
9. Medical tourism boom in India:
A superior medical service (at economical rates) along with an exotic vacation is what medical
tourism is all about. Countries like India, Malaysia and Singapore are always on the move to
introduce new technologies to upgrade their medical services and provide an ideal healing
experience.
• According to the National Coalition on Health Care, there are 46.6 million uninsured
Americans. The number of Americans travelling overseas for healthcare is increasing each
 year. Healthcare costs in the United States are skyrocketing.
• Insurance premiums and healthcare costs are growing at more than three times the overall
inflation, averaging at least a nine per cent increase in each of the last five years. Even in
socialistic medical systems such as in Europe and Canada, the wait for critical surgery is
supposedly long and painful.
• The private healthcare system is so expensive that many have little option but to seek
medical services from low-cost countries such as India. MedicalToursim.com calculates the
cost for critical heart bypass in India is just 7.7 per cent of the cost in the U.S.
• The costs for other surgeries including hip replacement are less than 20 per cent of that in
the U.S. Even after adding first class airfare and five star facilities, Westerners are better off
seeking medical services in India.
Drawbacks to Indians due to the influx of medical tourism in India:
In its latest report, World Health Organization (WHO) identifies India along with other poorest
nations in Africa and South Asia as having the greatest shortage of healthcare professionals.
• India has around 650,000 physicians with a density of 0.60 physicians per 1000 people. In
comparison, the U.S. has 2.56 per 1000 and most Western nations have at least four times
higher density of doctors than India. China has 1.05 physicians per 1000.
• More troubling is that India has a large numbers of patients with tuberculosis, malaria,
AIDS/HIV, leprosy, and other contagious diseases. India lags far behind the Western world
in average life expectancy and has much higher infant mortality rates. So, we can safely
assume the demand for healthcare professionals in India far exceeds the supply.
• India has low public healthcare spending. Based on WHO data, government spending as a
percentage of total healthcare costs of most Western nations — including the U.S. — is
higher than India's. In India, more than 75 per cent of the healthcare spending is in the
private sector (for the U.S. it is 44.6 per cent).
• The percentage of out-of-pocket spending on private healthcare is a whopping 97 per cent.
In the U.S, it is just 24.5 per cent and in most European countries it is even lower.
• Thus, the massive gap between the demand and the supply and significantly higher private
spending on healthcare raises numerous questions as medical tourism takes firmer roots.
Private cost of healthcare services may rise since healthcare tourism amplifies the gap
between the demand and the supply.
• The need for five-star hospital services and advanced medical devices will increase
investment levels, which will force providers to seek higher revenue generating foreign
clients. Since some of the major hospital groups are publicly traded, there will be greater
pressure for increasing shareholder value. Since doctors' reputations attract patients, there
will be a bidding war for well-known doctors. All this can be expected to increase the cost
of healthcare services for the local population.
10. Many countries are promoting tourism and it has become a source of major income for countries
like India, Singapore and Malaysia. Tourism is, of course, a big industry in most developed
countries like the US, the UK, France and Switzerland. However, political and social instability
can affect the tourism industry badly.
• Sophisticated technology has improved communication with the customers, tour operators
in other countries, etc. For example, a foreign tourist might communicate with an Indian
tour operator with ease and at negligible cost, through the Internet. In addition, technology
is also used to provide facilities that could never have been imagined a few years ago.
• India has promoted itself as a favorite tourist destination branding itself as 'Incredible
India.' This promotion has added to India's popularity among international tourists.
• There has been increase in travel due to international business travelers. At the same time,
domestic travelers who travel mostly for business purposes do take short vacations with
friends or family and visit nearby resorts. This trend is picking up.
• The increase in the number of young people who are earning has also led to an increase in
domestic travel.
• There is a high demand for wellness resorts, hill retreats, wildlife resorts, etc.
• Timesharing is another evolving concept