Services Marketing 9KmDR7TUyr

SERVICES MARKETING
Course
Course
Index
Index
Particulars
S.
No
.
Referenc
e No.
1.
Chapter 1
Introduction to Services
2.
Chapter 2
Consumer Behaviour in Service
32 50
3.
Chapter 3
Building Customer Relationship
51 71
4.
Chapter 4
Service Development & Design
72 92
5.
Chapter 5
Service Delivery
93 117
6.
Chapter 6
Managing Demand and Capacity
118 143
7.
Chapter 7
Integrated Service Marketing Communication
144 169
8.
Chapter 8
Pricing of Services
170 197
9.
Chapter 9
The Financial & Economic Effects of Services
198 222
10.
Chapter 10
Integrated Gaps Model of Service Quality
223 253
1 2
Slide
From
To
6 31
Course Introduction
Introduction
Course
The service sector is enormously large and varied. It includes banking,
transportation,
insurance,
communication,
education,
employment,
healthcare, Legal service, accounting, tourism, hospitality and information

services.
Some of the services are provided on a nonprofit basis, for example,
education and healthcare, while others are provided on a commercial basis
such as hotels, professional consultants, solicitors etc.
Defining a service is not an easy task and there is no single universally
accepted definition of the term. An earlier view of the concept of service
was that it was a mere benefit attached to a physical product. Now a major
1 3
Cont.
shift has taken place in the concept of service and the service industry at
In common parlance the term services means personal services like

repairing, health service, legal services, counseling etc. Marketing
experts view the problem in a different way. They feel that the contents
of services are much wider. Services are deeds, acts or performances.
The complexity of definition of services increases when one realizes that
there are no pure services or pure tangible products.
"Any act or performance that one party can offer to another that is
essentially intangible and does not result in ownership of anything. Its
production may or may not be tied to a physical product.
"Services can also be defined as action of organization that maintains
and improves the well being and functioning of people
1 4
Cont.
What these and other definitional approaches share in common is their

emphasis on the essentially intangible nature of a service. Thus a service
firm :
Offers an essentially intangible product(s)
Produces an output the units of which may be dissimilar in the same lot
(heterogeneity)
Cannot store the unused (unsold) service
May often need engagement of customers in the production and delivery
of the service
May leave the buying basket of customers as empty as it was before
1 5
buying
Introduction to
to Services
Services
Introduction
S.
No.
Reference
No.
1.
1 6
Particulars
Slide From
To
Learning Objectives
77
2.
Topic 1
Introduction
8 11
3.
Topic 2
Concepts of Service
12 21
4.
Topic 3
Characteristics of Services
22 22
5.
Topic 4
Three Waves of Services
23 27
6.
Topic 5
Services Marketing Mix
28 29
7.
Topic 6
Summary
30 31
Learning Objectives
After studying this chapter, you should be able to:
Discuss the concept of services
Learn about the importance and growth of services in an economy
Know about the characteristics that define a service
Learn about the three waves of services
Understand the product-service continuum
1 7
Introduction
Services marketing first emerged as an academic field during the 1970s.
Services have played a crucial part in the global economy as they are
becoming the way organizations meet with their markets.
Organizations have discovered that their survival depends on the products
they offer along with the additional offerings they make to their customers
which differentiate them from their competitors.
Innovative organizations are now succeeding in markets where established
organizations have failed.
Many firms are making spectacular progress by continually rethinking the way
they do business, looking for innovative ways to serve customers better and
taking advantage of new developments in technology.
1 8
Cont.
Introduction
Services account for a major share of the Gross Domestic Product (GDP) and
being responsible for most new jobs created in recent years.
In developing economies, the contribution made by services to both the GDP
and employment is growing rapidly.
The service sector of the economy can best be characterized by its diversity.
Service organizations range in size from huge international corporations in
such fields as airlines, banking, insurance, telecommunications, hotel chains
and freight transport to a vast array of locally owned and operated small
businesses.
Franchised service outlets in a wide array of fields combine the marketing
characteristics of a large chain offering a standardized product with the
benefits of local ownership and operation of a specific store or office.
1 9
Cont.
Introduction
Many services are concerned with the distribution, installation and upkeep of
physical objects.
Firms which create a time-sensitive physical output, such as printing and
photographic processing, describe themselves as being service businesses.
Governments and non-profit organizations are also in the business of
providing services, although the extent of such involvement may vary widely
from one country to another, reflecting both traditions and political values.
Service industries continue to face dramatic changes in their environment,
ranging from developments in computerization and telecommunications
(including the Internet) to the emergence of global markets for their output.
1 10
Cont.
Introduction
Innovative newcomers offering new standards of service are succeeding in
markets where established competitors have failed to please todays
demanding customers.
Customers now expect higher standards of service quality and greater
speed.
Investments in quality must be made with reference to the returns that
can be expected in terms of improved revenues and stronger customer
loyalty.
Forward looking firms seek to couple improvements in quality with
improvements in productivity.
Innovative applications of technology are often the best way to achieve
such dual gains.
1 11
Concepts of Service
As consumers, we use services every day.
Some of the examples of service consumption at the individual level are:
o Turning on a light
o watching TV
o talking on the telephone
o catching a bus
o visiting the dentist
o posting a letter
o getting a haircut
o refuelling a car
o writing a cheque
1 12
Cont.
Concepts of Service
The institution at which you are studying is itself a complex service
organization.
In case of educational services, the facilities at todays colleges and
universities usually comprise:
o libraries and cafeterias
o counseling services
o a bookshop and careers offices
o copy services
o telephones and Internet connections
If you are registered at a residential university, additional services are likely
to include halls of residence, health care, indoor and outdoor sports and
athletic facilities, a theatre and, perhaps, a post office.
1 13
Cont.
Concepts of Service
People
complain
about
late
deliveries,
rude
incompetent personnel, inconvenient service
or
hours,
poor performance, needlessly complicated procedures

and a host of other problems.
Following are the kinds of difficulties as observed by
many people are:
o Finding sales assistants to help them in shops
o Express frustration about mistakes on their credit
card bills or bank statements
o Shake their heads over the complexity of new selfservice equipment
o Mutter about poor value and sigh as they are forced
1 14
to wait for service or stand in queues almost
Cont.
Concepts of Service
Suppliers of services often seem to have a very different set of concerns.
Following are the complaints made by the suppliers :
o How difficult it is to make a profit
o How hard it is to find skilled and motivated employees
o How difficult to please customers have become
Firms believe that the surest route to financial success lies in cutting costs
and eliminating unnecessary frills.
There are service suppliers who know how to please their customers while
also running a productive, profitable operation, staffed by pleasant and
competent employees.
1 15
Cont.
Concepts of Service
1 16
Cont.
Definitions
According to Irons, pure services are intangible but they do usually

add value to, or make available, a tangible product. They do not
result in transfer of ownership and may leave only memories.
Zeithaml and Bitner claim that in the simplest terms services are
deeds, processes, and performances.
Their broader definition states that services include all economic
activities whose output is not a physical product, is generally
consumed at the time it is produced, and provides added value in
forms that are essentially intangible concerns of the purchaser.
Kotler defiles service as an activity that one party offers another
that is essential intangible and does not result in the ownership of
anything.
1 17
Cont.
Definitions
The conclusion derived from the definition is that

services deal with intangible components. The
purchase of services does not necessarily result in
physical transfer or ownership but still creates a bundle
of benefits during or after the service interaction or
experience.
1 18
Cont.
Importance And Growth of Services

Importance of Services
Innovators continually launch new ways to satisfy our existing needs and to
meet needs that we did not even know we had.
Many long-established firms are also failing or being merged out of
existence; but others are making spectacular progress by continually
rethinking the way they do business, looking for innovative ways to serve
customers better and taking advantage of new developments in technology.
Innovative newcomers offering new standards of service have succeeded in
markets where established competitors have failed to please todays
demanding customers.
Many barriers to competition are being swept away, allowing the entry of
eager newcomers, ranging from tiny start-up.
1 19
Cont.
Importance And Growth of Services

Growth of Services
Marketing of services becomes a challenging and yet extremely important
task due to . intangibility of services.
The attendant services provided are emerging as a key differentiator in the
mind of the consumers.
Marketers can leverage on the service offering to differentiate themselves
from the competition and attract consumers.
The need to listen to the needs of the customer and fulfill them through the
appropriate service offering and build a long lasting relationship which would
lead to repeat sales and positive word of mouth.
Services are usually generated and consumed at the same time, they
actually involve the customer in service delivery process by taking into
consideration his requirements and feedback.
1 20
Cont.
Scope of Service Industry
The percentage of people in a country who are employed in services

sector or tertiary sector jobs is a determinant of the economic
development of that nation.
The shift from primary and secondary activities to tertiary activities by
the citizens of a country indicates that it is on the path of progress.
The growth in the services sector can be attributed mostly to the
emergence of the Indian Information Technology (IIT) and IT enabled
Services (ITeS) sectors as well as e-commerce.
The services sector in India comprises a wide range of activities such as
transportation, logistics, financial, business process outsourcing services,
health care, trading, and consultancy, among many others.
1 21
Challenges In Services Marketing

Service firms face different challenges than companies that market physical
products.
Service firms are marketing something intangible that the customer cannot
experience until the firm has delivered it.
While some aspects of service marketing are similar to those of product
marketing, the service sector needs to place special emphasis on adding
value, differentiation and specialization.
Value
Service Development
Competition
Differentiation
1 22
1
2
3
4
Cont.
Characteristics of Services
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.
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.
Variability: Variability refers to the unwanted or random variable levels
of service quality customers receive when they support an organization.
Inseparability: Inseparability refers to the simultaneous production and
consumption of a service, thus it is often difficult to separate the service
provider from the service performance.
1 23
Cont.
Three Waves of Services

Manufacturing got a major boost with the confluence of three events:
The Industrial Revolution which itself was propelled by the scientific
temper, inventions and discoveries during the mid 1700s, it had its major
and initial impacts on England and the Old World (imperial Europe), and
later in the New World (United States).
The publication of Adam Smiths book, The Wealth of Nations that
propounded the view that creation of wealth by an individual would have a
trickle-down/percolating effect on the society/community. The excess wealth
would encourage investments, which in turn would have a job- and-wealthmultiplier effect on the society, greatly benefiting them from the wealth
sharing.
The American Revolution ending in 1776 with USAs independence,
which underscored fierce individualism. Americans felt free to invent and
1innovate
24
without being hampered by colonial and State controls.
Cont.
The Product-Service Continuum

Goods-services continuum is a tool that helps marketers to visualize the
differences and similarities between goods and services.
The goods and services continuum enables marketers to see the relative
goods/services composition of total products.
Product Service Continuum

1 25
Cont.
The Product-Service Continuum

A products position on the continuum, in turn, enables marketers to spot
opportunities. At the pure goods end of the continuum, goods that have no
related services are positioned.
At the pure services end are services that are not associated with physical
products. Products that are a combination of goods and services fall
between the two ends.
Example: Goods such as furnaces, which require accompanying services
such as delivery and installation, are situated toward the pure goods end.
Products that involve the sale of both goods and services, such as auto
repair, are near the center. And products that are primarily services but
rely on physical equipment, such as taxis, are located toward the pure
services end.
1 26
Highly Tangible Services

They have high degree of tangibility.
This is mainly because the services are rendered over certain tangible
goods, e.g., car rentals. It is a service based entirely on cars.
If a place had no cars, such a service would cease to exist.
1 27
Cont.
Highly Tangible Services

For the marketer, it is both a boon and a curse. As mentioned, car
rentals exist only because cars exist. It is easy for the service marketer
to be persuasive and tangibilise the offer. He only has to include the
car in his communication; the service concept could be easily
comprehended by the consumer.
If the car has a good brand image and is looking spick and span, the car
rental basks in the reflected glory. If the car rental mentions in its
advertisements about the type of cars in its pool, the consumers
perceive the quality of the company accordingly.
Alternatively, if the car breaks down during a rental service, the
consumer will have a poor impression and image of the car rental
company. He would not reason that it was the car that broke down and
failed and that the car rental company should really not be blamed.
1 28

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 Ps:
product, price, place, and promotion.
Careful management of these components is essential for the successful
marketing of goods and services in both long-term and short-term
marketing strategies of organizations.
The traditional marketing mix components have been found to be too
limited in their application of services.
The intangibility of service offerings is not taken into consideration
because the focus is on the tangibility of products.
1 29
Cont.

Equally, the simultaneous production and consumption of service
offerings make the distribution component difficult to implement and
control.
While the promotion component of the traditional marketing mix
concerns itself with advertising, sales promotions and publicity, services
marketing involves service employees and customers in the real time
marketing of services during the interaction process.
The elements of the new services are product, place, price, promotion,
people, physical evidence, processes, productivity & quality.
1 30
Summary
Services have become an integral part of the world economy.
Over the past decade the roll of services marketing has become a dominant
feature in the service industry.
The continuous shift to an information society lad to an increase in service
demand from customers, meaning that organizations no longer regard
services as an option but rather as a necessity to gain a competitive
advantage.
A broad definition of services implies that it is originally intangible and
relatively quickly perishable activities whose buying takes place in a process
of interaction aimed at crating customer satisfaction, but during this
interactive consumption it does not always lad to material possession.
1 31
Cont.
Summary
Services have five unique characteristics that arc not founds in goods,
namely
intangibility,
inseparability,
variability,
perishability
and
ownership.
The intangibility characteristic of services seems to be the dominant one
in the definition of services.
These unique characteristics create numerous challenges for service
marketers to attract new customers and retain current customers.
1 32
CONSUMER BEHAVIOUR
BEHAVIOUR IN
IN SERVICE
SERVICE
CONSUMER
S.
No.
Reference
No.
1.
1 33
Particulars
Slide From
To
Learning Objectives
33 33
2.
Topic 1
Introduction
34 35
3.
Topic 2
Who is the Customer?
36 37
4.
Topic 3
Role of Consumer in Services
38 43
5.
Topic 4
Consumer xpectations of Service
44 45
6.
Topic 5
Consumer Perceptions of Service
46 48
7.
Topic 6
Undrstanding xpctation and

Prcption through Markting
Rsarch
49 49
8.
Topic 7
Summary
50 51
Learning Objectives
Know who is a customer and
the relevance customer behaviour in
services
Learn about customer expectations
Understand consumer perceptions
Understand marketing research as a tool to know about customers
1 34
Introduction
For the following purposes, we buy many things which are as follows:
o We exchange our money for goods and services
o We exchange our money for our own use
o We exchange our money for the use of our families
The key concept of marketing is customer centrality.
Understanding the processes involved in making those decisions is central
to establishing policy.
Consumer behavior includes the processes and motives that drive consumer
buying activities.
1 35
Cont.
Introduction
Following are the academic subjects that preceded marketing:
o Economics (the study of supply and demand)
o Sociology (the study of group behaviour)
o Psychology (the study of thought processes)
o Neurology (the study of brain function)
o Anthropology (the study of what makes us human)
Consumers make purchases in a systematic way within two aspects:
o with the time frame
o nature of the process dependent on the type of purchase
1 36
Who Is The Customer?
A customer is a person or
organization that a marketer
believes will benefit from the goods
and services offered by the
marketer's organization.
1 37
Cont.
Who Is The Customer?

The customer is the main goal of companies, since it is the customer
who pays for the products and services provided by any company
Customers may fall into one of three customer groups:
o Existing Customers: Consists of customers who have purchased or
otherwise used an organizations goods or services, typically within
a designated period of time.
o Former Customers: This group consists of those who have formerly
had relations with the marketing organization typically through a
previous purchase.
o Potential Customers: The third category of customers includes those
who have yet to purchase but possess what the marketer believes
are the requirement to eventually become existing customers.
1 38
Role of Consumer In Services

With the developing interest in services and services marketing it might be
expected that the consumer behaviour literature would include references
to the evaluation and consumption of intangibles.
There
would
appear
to
be
an
assumption,
consistent
with
the
interchangeability of terminology, that consumer behaviour related to

goods is the same as that related to products, i.e. the difference between
goods and services is insignificant.
In the case of products where the "good" element is dominant this may be
a valid assumption, but for products where the dominant characteristic is
the service intangibility this assumption denies the significant impact upon
consumption behaviour of the characteristics identified above.
1 39
Cont.
Decision Making Role

Service experience is the outcomes of interactions between organization
related system or process, service employees and customers.
Considerable research in marketing and management has examined
customer satisfaction with service experiences.
Predominantly, the research has focused on the roles of service
processes,
employees
and
tangibles
in
creating
quality
service
experiences for customers.

However, in many services customers themselves have vital roles to
play in creating service outcomes and ultimately enhancing or
detracting from their own satisfaction and the value received. This is
true whether the customer is an end consumer.
1 40
Cont.
Consumer Decision Making

The services marketing literature can be organized according to a multistage
approach
to
analyzing
consumer
behaviour
and
service
performance.
In particular, consumers go through three major stages when they

consume services:
o The pre-purchase stage
o The service encounter stage and
o The post-encounter stage.
This framework is helpful because it assists academics in forming a clear

research focus and direction, and businesses in identifying the stages
that need the most improvement and therefore need more resources
allocated to the.
1 41
Cont.

The very first step in the process is when consumers realize that they
have a need for something.
Marketers want to create an imbalance in consumers between their
present status and their preferred status. This imbalance will create a
need and make a consumers search out and buy a product or service.
1 42
Cont..
1 43
Cont.
Customer Satisfaction With Services
1 44
Consumer Expectations of Service

Customer expectations are beliefs about service delivery that serve as
standards or reference points against which performance is judged.
Because customers compare their perceptions of performance with
these reference points when evaluating service quality, thorough
knowledge about customer expectations is critical to services marketers.
Knowing what the customer expects is the first and possibly most critical
step in delivering good quality service
1 45
Cont.
Consumer Expectations of Service

These are few qualities which may influence the consumers expectation of
services are:
Consistency
Concern
Competence
Contact
Courtesy
Communications
Credibility
Confidentiality
Zone of Tolerance
Desired Services
Predicted and Adequate Services
1 46
Consumer Perceptions of Service

Perception is a way of regarding, understanding, or interpreting something;
a mental impression.
The perceptions consumers have of a business and its products or service
have a dramatic effect on buying behavior.
Thats why businesses spend so much money marketing themselves,
honing their customer service and doing whatever else they can to
favorably influence the perceptions of target consumers.
With careful planning and execution, a business can influence those
perceptions and foster profitable consumer behaviors.
1 47
Factors Influencing Perceptions
Factors
Influencing
Perceptions
Characteristics
of the Perceiver
1 48
Characteristics
of the Target
Characteristics
of the Situation
How Consumers Deal with Risk

Variety of methods to reduce risks by service suppliers, like:
Offering performance warranties
Money back guarantees
Preview of services through broachers, websites, and videos
Encouraging visits to service facilities
Instituting visible safety procedures
Training staff members
Providing 24/7 customer service
Delivering automated messages
Online information about order delivery
Productive systems
1 49
Understanding Expectation And Perception Through

Marketing Research
Delivering quality service consistently gives a competitive edge to service
organizations.
It requires an understanding of customer expectations and the types of
expectations.
Further, knowledge of factors influencing the desired service level, adequate
service level, and zone of tolerance will help service organizations
consistently meet and exceed service expectations of customers.
The tasks of Marketing Research are very clear: to assess the information
needs of the service firm and provide its management with relevant,
accurate, reliable, valid and current information.
1 50
Summary
The key concept of marketing is customer centrality: we cannot ignore
customer decision-making and behaviour.
Consumer behavior includes the processes and motives that drive
consumer buying activities.
Customers represent the best market for future sales, especially if they are
satisfied with the relationship they presently have with the marketer.
Customers themselves have vital roles to play in creating service outcomes
and ultimately enhancing or detracting from their own satisfaction and the
value received.
Customers can influence both the quality and quantity of production.
1 51
Cont.
Summary
Customers can play in services delivery is that of contributor to their own
satisfaction and the ultimate quality of the services they receive.
Consumers go through three major stages when they consume services:
the pre-purchase stage, the service encounter stage and the postencounter stage.
Customer expectations are beliefs about service delivery that serve as
standards or reference points against which performance is judged.
Delivering quality service consistently gives a competitive edge to service
organizations and therefore, must be researched
1 52
BUILDING CUSTOMR
CUSTOMR RLATIONSHIP
RLATIONSHIP
BUILDING
S.
No.
Reference
No.
1.
1 53
Particulars
Slide From
To
Learning Objectives
53 53
2.
Topic 1
Introduction
54 54
3.
Topic 2
Customer Relationship
55 59
4.
Topic 3
The Service-profit Chain Model
60 61
5.
Topic 4
Customer Loyalty
62 66
6.
Topic 5
Service Recovery
67 70
7.
Topic 6
Summary
71 72
Learning Objectives
Discuss the concept of customer relationship
Learn about relationship marketing
Explain the leaking bucket theory
Learn about customer loyalty
Understand service recovery
1 54
Introduction
Targeting, acquiring, and retaining the right customers is at the core of
many successful service firms.
The objectives are to build relationships and to develop loyal customers
who will do a growing volume of business with the firm in the future.
Loyalty in a business context describes a customers willingness to
continue buying from a firm over the long term and recommending the
firms products to friends and associates. Customer loyalty does not just
refer to customer behavior. It also includes preference, liking, and future
intentions.
1 55
Any business benefits from good customer relations, whether a large
corporation or a mom and pop shop.
Customer relations, or customer service, refers to the way a business
communicates and interacts with the public to gain and retain customers.
It is necessary for a business to cultivate good customer relations to attract
and keep a loyal base of customers.
Customer relations is key to understanding consumer motivation. Without
assessing customer relations, it's difficult for a company to know how visible
it is in terms of its client base.
It's also hard to figure out how to grow the company without understanding
the relationships it has with current customers.
1 56
Cont.
Maintaining a loyal base involves building relationships with customers
by acknowledging them.
It is difficult to attract customers, and a key aspect of customer relations
is retaining a loyal base of customers who keep coming back to the
company.
Companies use direct print, online marketing or relationship marketing
to keep in touch with their clients.
Customers want to feel involved with a business, as if they're part of the
firm.
1 57
Customer Retention Through Relationship Marketing

Successful businesses provide excellent service by handling customer
complaints promptly and effectively.
They diffuse any instance of customer complaint through quick resolution of
the problem and a free product or service discount offer.
Relationship marketing seeks to establish such long-term relationships with
customers rather than focusing on the single transaction.
Establishing a relationship in a business-to-business (B2B) context turns out
to be a great deal easier than establishing a relationship in a business-toconsumer (B2C) context.
Relationship marketing is rooted in the idea that it is cheaper to retain an
existing customer than to recruit a new one.
1 58
Cont.
Transactional marketing vs. Relationship

marketing
1 59
Cont.
Businesses and Relationship Marketing

1 60
The Service-Profit Chain Model

The
service-profit
chain
establishes
relationships
between
profitability,
customer loyalty, and employee satisfaction, loyalty, and productivity.

The links in the chain (which should be regarded as propositions) are as
follows: Profit and growth are stimulated primarily by customer loyalty.
Loyalty is a direct result of customer satisfaction. Satisfaction is largely
influenced by the value of services provided to customers.
Value is created by satisfied, loyal, and productive employees.
Employee satisfaction, in turn, results primarily from high-quality support
services and policies that enable employees to deliver results to customers.
The service-profit chain is also defined by a special kind of leadership.
COs of exemplary service companies emphasize the importance of each
employee and customer.
1 61
Cont.
The Service-Profit Chain Model
Links in the Service-Profit Change

1 62
Customer Loyalty
Richheld and Sasser analyzed the profit per customer in different service
businesses.
It was grouped by the number of years that a customer had been with the
firm.
The longer customers remained with a firm in each of these industries, the
more profitable they became.
1 63
How much profit a customer generates over

time
Cont.
Customer Loyalty
Customers are not automatically loyal to any one firm.
Rather, we need to give our customers a reason to combine their buying
with only us and then staying with us. We need to create value for them to
become and remain loyal.
Research has shown that relationships can create value for individual
consumers through such factors as inspiring greater confidence, offering
social benefits, and providing special treatment.
1 64
Cont.
The Wheel of Loyalty

It is made up of three sequential strategies.
First, the firm needs a solid foundation for creating customer loyalty that
includes targeting the right portfolio of customer segments, attracting the
right customers, tiering the service, and delivering high levels of
satisfaction.
Second, to truly build loyalty, a firm needs to develop close bonds with its
customers. It can either deepen the relationship through cross-selling and
bundling, or add value to the customer through loyalty rewards and higherlevel bonds.
Third, the firm needs to identify and reduce the factors that result in
churn, the loss of existing customers and the need to replace them with
new ones
1 65
Cont.
The Wheel of Loyalty
1 66
Cont.
Features of Successful Loyalty Scheme

Following are the features that make loyalty pay:
Focus on acquiring data, not just repeat visits
o The smarter operators used loyalty programmes not to buy repeat visits
but to garner information from their customers
Target customer acquisition more accurately
o A loyalty programme should attract new customers to the business
o The quality of new customers acquired can be raised by careful use of
the existing data from a loyalty programme
Move customers up the spend bands
Intelligent de-selection of the least profitable customers
o It can be more profitable to lose bad customers than to gain new ones
1 67
Cont.

Win back profitable customers that have defected
o The success rate in approaching lost customers can be three to four
times as high as it is when prospecting for new customers
Increase Customer Lifetime Value (CLV)
o CLV is increasingly being recognized as one of the most important
measures of the worth of a customer
Build real customer relationships based on relevance
o Building a relationship with customers can lead to improved behavioural
loyalty and thus to increased bottom-line profits.
Set fairer tiered pricing policies
o It If enough best customers are happy to buy a product at a particular
price there seems little point in reducing that price simply to attract
1 68
cherry-pickers
Cont.

Intelligent response to competitive challenges
o A good loyalty programmes ability to tie purchases to individual
customers allows quick and accurate identification of customers who
defect when new competition opens nearby.
Improving product range and stock selection
o Knowing what best customers buy frequently helps choose which lines to
stock and which lines to expand on.
Better merchandising and store layout planning
Reduce promotional and advertising costs
Geographical targeting for new store locations
Loyal customers directly impact company profitability
Influencing customer satisfaction levels
1 69
Service Recovery
Mistakes are a critical part of every service.
Even the best service companies cant prevent the occasional late flight,
burned steak, or missed delivery.
The fact is, in services, often performed in the customers presence, errors
are inevitable. But dissatisfied customers are not.
While companies may not be able to prevent all problems, they can learn to
recover from them.
A good recovery can turn angry, frustrated customers into loyal ones. It can,
in fact, create more goodwill than if things had gone smoothly in the first
place.
1 70
Cont.
Complaint Handling
Why do customers complain
Obtain Restitution or Compensation: Consumers often complain to recover
some economic loss by seeking a refund, compensation, and/or have the
service performed again.
Vent their Anger: Some customers complain to rebuild self-esteem and/or to
vent their anger and frustration.
Help to Improve the Service: When customers are highly involved with a
service (e.g., at a college, an alumni association, or their main banking
connection), they give feedback to try to contribute toward service
improvements.
For Altruistic Reasons: Finally, some customers are motivated by altruistic
reasons. They want to spare other customers from experiencing the same
shortcomings, and they may feel bad if they fail to draw attention to a
1problem
71
that will raise difficulties for others if it remains uncorrected.
Cont.
Complaint Handling
Complaint Handling Procedure
At a minimum your complaint handling procedure should require the
following for your staff or organization:
An acknowledgement of receipt of the complaint
An accurate and accessible record of complaint information
Attachment to timeframes for resolution
Customers must be inform about any delays in resolving a complaint
Rewarding Attachment amongst Your Staff
Inform Customers Of Complaint Handling Procedures
1 72
Cont.
Complaint Handling
Achieving Service Leadership
In most of service organisations would claim that they intend to deliver
consistently excellent service.
But all-too-often, there is an uncomfortable gap between the intention
and the actual results and traditional, task-oriented approaches to
workforce management have proved to be incapable of addressing the
issue.
Achieving the service leadership is done through achieving the business
challenges, service excellence and with the target audience
1 73
Summary
Any business benefits from good customer relations, whether a large
corporation or a mom and pop shop.
Customer relations is key to understanding consumer motivation. Without
assessing customer relations, it's difficult for a company to know how visible
it is in terms of its client base.
Successful businesses provide excellent service by handling customer
complaints promptly and effectively.
The new economics of service requires innovative measurement techniques.
The service-profit chain establishes relationships between profitability,
customer loyalty, and employee satisfaction, loyalty, and productivity
1 74
Cont.
Summary
Customers are not automatically loyal to any one firm. Rather,
organizations need to give customers a reason to combine their buying
with them and remain loyal.
Through a loyalty programme, customer and transactional data can be
collected, and the intelligent use of that data will provide a much clearer
picture of the customer base.
1 75
SRVIC DVLOPMNT
DVLOPMNT &
& DSIGN
DSIGN
SRVIC
S.
No.
Reference
No.
1.
1 76
Particulars
Slide From
To
Learning Objectives
74 74
2.
Topic 1
Introduction
75 75
3.
Topic 2
The Service Development
76 83
4.
Topic 3
Service Design
84 86
5.
Topic 4
Customer- defined Service Standards
87 88
6.
Topic 5
Service Blueprinting
89 91
7.
Topic 6
Summary
92 93
Learning Objectives
Discuss the concept of service development
Learn about the service package and the augmented service offering
Understand the concept of service design
Know about the customer defined service standards
Learn about service blueprinting
1 77
Introduction
There are various management activities you find in Service management.
There is a new idea for a service to provide ongoing support to customers
who have purchased the new service.
very organization conducts service development.
The development of new services is an increasingly important subject in
today's rapidly growing service.
New service development that links marketing and operational capabilities
to conceive, design and implement a service are valued by a customers.
Multidisciplinary and integrated perspective is necessary to address this
fundamentally cross-functional activity
1 78

New service development has a similar development process to product
development, but there are significant differences in the activities and the
research techniques.
A review of service development by Cowell in 1988, highlighted the following
points:
o Services development appeared to be technology driven rather than
user driven
o The rate of new service creation is quicker, while user adoption of new
services are slower, relative to new products
o There are more service improvements rather than service innovations
o In most services, users are involved in the service production process
o Service staff are critical to service production and delivery
1 79
Cont.
Development Process for Products and Services is shown on the next slide
1 80
Cont.

Both service and manufacturing organizations try to satisfy identifiable user
needs.
The satisfaction of needs in each case requires stages of development.
The difference between services and goods lies in the distinctiveness or
separability of the steps and the degree of involvement between the user
and service staff in each step.
The partnership of the service staff and the user is a direct result of the
unique characteristics of services.
This leads to important issues of process management of the service staff
and users.
The two main causes of service failures have been found to be poor, or lack
of, market research and process.
1 81
Cont.
Service Product/Product-Service System (PSS)

The service product is a service that can be sold and that is performed
within customer service.
Characteristics of traditional product sales vs. innovative
alternatives
Traditional Product Sales
Innovative alternatives : Product, Service, Systems
Consumer buys a washing
Consumer rents a washing machine
Client buys a service from a
machine to clean clothes in
to clean clothes in house /hotels.
company( laundry to clean clothes

( Company determines best
house/hotel
equipments and methods

based on client needs
Client owns uses and stores
Company retains ownership of
Company owns and maintain and
washing machine. Consumer is
washing machine, and is responsible
stores the cleaning equipment
responsible for maintenance and
for maintenance. Client is
including washing machine.
quality of the cleaning
responsible for use and quality
Company is responsible for quality of
cleaning
the cleaning
Initial investment for consumer
Consumer costs are spread over
Consumer costs are spread over
could be considerable
time (they pay a low initial deposits
time( they pay per wash
and then pay per wash)

Consumer ultimately disposes of
Company is responsible for disposal
Company is responsible for disposals
washing machine and buys
and has incentives to prolong use of
and has incentives to prolong use of
replacement.
product, recycle materials.
product, reuse component and

recycle materials.
1 82
Cont.
The Service Package

The service as the product is described as a package or bundle of different
services, tangibles and intangibles, which together form the total product.
The package is divided into two main categories:
o Main service, which often is called the "core service" or "substantive
service";
o Auxiliary
services
or
"extras,"
which
often
are
referred
to
as
peripherals" or peripheral services

A model of the service as the product has to be customer oriented.
It has to recognize all the aspects of a product that customers perceive.
The image and communication impact on service quality perception has to
be recognized as well.
1 83
Cont.
The Augmented Service Offering

Based on a well-defined customer benefit concept, which states which
benefits or bundle of benefits customers seek or would appreciate,
managing the service offering requires three (or actually four) steps:
o Developing the service concept
o Developing a basic service package
o Developing an augmented service offering
o Managing perception (image and communication)
There are three basic elements of the process:
o Accessibility of the service;
o Interaction with the service organisation; and
o Consumer participation.
1 84
Cont.
The Augmented Service Offering
1 85
Cont.
Market Communication of The Service Offering

The way in which image and communication affects the perception of the
Augmented Service Offering is illustrated in below figure.
1 86
Service Design
Service design is the activity of planning and organizing people,
infrastructure, communication and material components of a service
in order to improve its quality and the interaction between service
provider and customers.
The purpose of service design methodologies is to design according
to the needs of customers or participants, so that the service is userfriendly, competitive and relevant to the customers.
1 87
Cont.
Total Product Concept

The Total Product Concept sometime called Levitts Rings is where Levitt
explains that a product has several different dimensions and referred to
these as
o the generic product
o the expected product
o the augmented product and
o the potential product
An appropriate representation of a products design, the Total Product Design
Concept (TPDC) is not limited to a product's functionality, but also includes its
aesthetics, and meaning. The three constituent elements of the TPDC:
o Functionality
o Aesthetics
1 o
88
Meaning
Cont.
Total Product Concept
1 89
Customer - Defined Service Standards

Standards are based on the most important customer expectations and
reflect the customers view of these expectations.
These are formed through Customer Expectations, Customer Process
Blueprint, Customer Experience and Observations.
These standards can be categorised under two heads:
o Hard standards and measures: Things that can be counted,
timed, or observed through audits (time, numbers of events)
o Soft standards and measures: Opinion-based measures that
cannot be observed and must be collected by talking to customers
(perceptions, beliefs)
1 90
Cont.
Process for Setting Customer-Defined Standards
1 91
Definition
Service blueprinting was initially introduced as a process control
technique for services that offered several advantages:
o it was more precise than verbal definitions
o it could help solve problems preemptively
o it was able to identify failure points in a service operation
Service blueprinting was further developed to distinguish between
onstage and backstage activities.
1 92
Cont.
Approaches
Service blueprinting shares similarities with other process modeling
approaches in that it:
o is a visual notation for depicting business processes via symbols that
represent actors and activities
o can be used to represent high-level overviews of conceptual processes
or details of particular support or sub-processes
o will accommodate links to parallel and sub-process documents and
diagrams via other more internally-focused process modeling tools and
languages
1 93
Cont.
Elements of Service Blueprint

A customer blueprint has three core elements:
Identification of all those functions those are essential to deliver a service
along with the appropriate personnel with requisite responsibility, authority
and accountability.
The relationships amongst different functions of service components are
explained by graphics and charts.
The relationship is based on time and sequence with each other.
Setting up of standards for each function with tolerance levels and variance
from standards and these tolerances for variance should not adversely
affect the service quality adversely
1 94
Cont.
Components Of Service Blueprint

There are five components of a typical service blueprint:
Customer Actions
Onstage/Visible Contact Employee Actions
Backstage/Invisible Contact Employee Actions
Support Processes
Physical Evidence
1 95
Components of Service
Blueprint
Summary
New service development has a similar development process to product
development, but there are significant differences in the activities and the
research techniques.
The service product is a service that can be sold and that is performed
within customer service.
New service development concerns all the activities involved in realizing
new service opportunities, including product or service design, business
model design, and marketing.
According to NSD studies, how services are designed and how services
are implemented require coordination and alignment. If the two parts are
disconnected, this might result in the generation of service concepts that
cannot be actualized in current service delivery system
1 96
Cont.
Summary
The current Service Design capabilities should be extended to or
reinforced by service operation knowledge.
Henzeet al. applied human-centered approach to help the networked
collaboration for developing Product Service System.
1 97
SRVIC DLIVRY
DLIVRY
SRVIC
S.
No.
Reference
No.
1.
1 98
Particulars
Slide From
To
Learning Objectives
95 95
2.
Topic 1
Introduction
96 97
3.
Topic 2
Service Delivery
98 106
4.
Topic 3
Employees Roles in Service Delivery
107 108
5.
Topic 4
Customers Role in Service Delivery
109 112
6.
Topic 5
Delivering Services through Intermediaries

and Electronic Channels
113 116
7.
Topic 6
Summary
117 118
Learning Objectives
Discuss the concept of service delivery
Learn about service delivery location decision making
Understand the role of employees and customers in service delivery
Learn about usage of intermediaries and electronic channels to deliver
services
1 99
Introduction
Place or location and distribution in marketing mix facilitates accessibility to
the service offer.
Marketing mix variables such as service product, price and promotion create
or enhance demand, place or distribution is the only one that satisfies
demand.
very organization conducts service development.
Service cannot be produced in a place where:
o There is one person in one place
o It is distributed by someone else in some other place
o It is produced in a place where the cost is lower
o It is delivered to another place where the demand is higher
1 100
Cont.
Introduction
New service development that links marketing and operational capabilities
to conceive, design and implement a service are valued by a customers.
Place is important to the service marketer due to the following reasons:
o The offer cannot be stored (intangibility and perishability)
o The offer has to be produced and consumed at the same time in the
service locations and outlets
The consumption of services involves the personal interaction of consumers
and service employees.
Qualitative in-depth interviews were used to conduct an experiential
investigation of how consumers want to participate in their service
experiences
and
how
participation expectations
1 101
satisfaction
develops
as
function
of
their
Service Delivery
Definition
A service delivery framework (SDF) is a set of principles, standards, policies
and constraints used to guide the design, development, deployment,
operation and retirement of services delivered by a service provider with a
view to offering a consistent service experience to a specific user community
in a specific business context.
A SDF is the context in which a service provider's capabilities are arranged
into services
1 102
Cont.
Service Location Decision

Facility Location Decision which is part of organizations strategy are as follows:
Service to be offered
o Example: Mc Donalds has entered into India and planning to open new
facilities from metro cities to tier 1 and tier 2 cities, city after city to grow
in the country.
Growth Strategy
o Example: Many hotels are expanding their facilities to include recreational
activities, spa, gymnasium to cater to rising demand of customers.
To manage increased demand
o Example: The airports at Delhi, Mumbai and Bangalore in India have
expanded their facilities to meet this increasing demand.
Expansion Strategy
o Example: The facility location decisions are considered where service
organization seek for new sites or regions with sufficient demandCont.
from
1 103
their existing low demand facilities
Service Location Decision
Location Decision: Part of Organizations

Strategy
1 104
The Approach Taken to Service Business Location

The location decision as an intuitively appealing two-step procedure which
are:
o general area for the service operation
o particular site
Influences can be described as being musts or wants for each step in
the decision.
The responsibility of the decision maker are:
o To look first to musts and to satisfying them,
o Then to move on to consider otherwise desirable features, termed
wants, for the location.
The service business is then assumed to evaluate formally only those
1locations
105
that satisfy both the musts and the wants criteria
Cont.
The Approach Taken to Service Business

Location
(A)The general area
choice
Area must
influences
Area wants
influences
Initial need
expressed
for new
location
Alternatives
considered and
evaluated
Area non
must
influences
Choice made
for the general
area location
Site must
influences
Choice made
for the general
area location
Area influences
that are not
want
(B)The particular site

choice
Site wants
influences
Site non
must
influences
Alternatives
considered and
evaluated
Choice made
for the
particular site
location
Site influences
that are not
want
Location Decision-Making of Service Firms

1 106
Cont.
Location Decision to Achieve Competitive Advantage

The first decision taken by service organization is on locating a facility.
Facility location decision is a strategic decision for service organizations.
Following points must be considered while deciding about potential facility
location.
o Create entry barriers
o Generate and manage demand
o Flexibility
o Competitive Positioning
o Focus
o Facility Location decision can be seen at macro level and micro level
1 107
Cont.
Facility Location Decision Levels
1 108
Cont.
Facility Location Decision Factors

1 109

Internal customers (employees) play a variety of roles that stretch beyond
the expected boundaries.
V C Judd has developed a 2x2 matrix that leads to four categories of roles
played by employees of a service firm which are:
o Contractors
o Modifiers
o Influencers
o Isolated
1 110
Cont.

The matrix is based on the frequency of customer contact that employees
have with customers and the involvement of the staff with conventional
marketing activities.
Analysis of the four groups and the consequent roles will reveal also the
importance of the people factor to the following:
o The efficiency and effectiveness of the service firm
o Customer responsiveness
o Image and positioning of the firm, especially where lacking any relevant
tangibility to service, they form the major part of differentiation of the
service firm.
o Opportunity to create additional value
1 111
Cont.
Employees Roles In Service Delivery
Roles of employees in service delivery
1 112
Customers Role In Service Delivery

Customer participation at some level is inevitable in service delivery.
Services are actions or performances, typically produced and consumed
simultaneously.
Customers and even others in the service environment interact to produce
the ultimate service outcome in some situations.
A customer can contribute to the gap through appropriate or inappropriate,
effective or ineffective, productive or unproductive behaviors.
Customers who are unprepared in terms of what they want to order can
soak up the customer service representatives time as they seek advice.
Shoppers who are not prepared with their credit cards can put the
representative on hold.
1 113
Cont.
Managing Customer Waiting

Long wait and hold times also mean:
o lost sales
o bigger service issues when they do come up
o customers who are ready to jump to another provider at a moment's
notice
Wait times not only affect customer frustration and abandonment but also
how much customers are willing to spend.
Longer
customer
wait
times
translate
into
diminished
customer
experiences.
1 114
Cont.
Managing Customer Waiting

Few ways how organizations can decrease customer wait times
Find the chokepoints

Focus on the front end
Create self-service opportunities
Focus on customer expectations
Optimize your staffing
1 115
Delivering
Services
Through
Intermediaries
And
Electronic Channels
Distribution's role in the marketing mix is to get the product to its target
market.
Some of the implications are:
o Arrange for its final sale
o Transfer title (ownership) to the goods from the producer to the
consumer
o Promote the product
o Store and stock the product (which further implies higher risks of
thefts, breakages, losses, etc.)
o Transportation
of
the
goods
to
its
shouldering the financial and other risks)

1 116
destination
(which
implies
Cont.
Delivering
Services
Through
Intermediaries
And
Electronic Channels
The intermediaries are classified on the basis of their taking title or
ownership of the offers being distributed
o Merchant Intermediaries: Those who take title to the goods and
services are called merchant intermediaries, like wholesalers and
retailers
o Agent Intermediaries: The intermediaries who do not take title to
the offer, because of the nature of the offer or their business, are
known as agent intermediaries. They earn a commission or a fee for
the services rendered and facilitates the transfer of ownership to the
consumer. These would be real estate brokers, agents of manufacturers
like arms (Bofors) and expensive computerised numerically controlled
(CNC) machines, travel agents, etc. Services invariably have agent
1 117
middlemen.
Role of Electronic Channels

The growth in Information Technology (IT) industry is perhaps the fastest of all
that within a span of a decadewhich are as follows:
A Multi-faceted Product
o Information Technology (IT) is still adjusting in the world of traditional
marketing which has a complete range of marketing possibilities where
we see product marketing through wholesale and retail.
Large Product Range
o A large product range having come up in an industry which is relatively
new, market methodologies are still being evolved and debated
amongst those who increasingly try to penetrate new areas
1 118
Cont.
Role of Electronic Channels

Software Dominance
o Some pioneering effort in the early 80s resulted in making machines
more users friendly.
o The role of hardware vendors, who still dominate the industry, in directing
the manner in which information technology was to be marketed.
Emerging Marketing Mix consists of the following:
o Application software
o Professional services (both on-site and offshore)
o Education and training
o Technology oriented applications
o Software packages
o Maintenance services which include hardware, software, and facilities
Cont.
1 119
Delivering Services In Cyberspace

Developments in telecommunications and computer technology
Technological Innovations
o Development of smart mobile telephones and PDAs as well as Wi-Fi
high-speed Internet technology that links users to Internet from almost
anywhere
o Store detailed information about customer which:
Act as electronic purse containing digital money
Increase accessibility of services
Social Media
o Social networking is a huge, ever-increasing part of the internet now.
o Customers expect to be able to find brands on social media sites.
o
1 120
Cont.
Posting content that is shared is a great way to reach new customers
Summary
A service delivery framework is the context in which a service provider's
capabilities are arranged into services.
A distribution channel consists of a set of people or firms who are
intrinsically involved in the transfer of goods or services from the
producer to the end user.
Service delivery fosters true business-IT partnerships to the benefit of
the company as a whole, eliminating the Us versus Them mind-set and
the unproductive activities it drives.
Facility location decision is a strategic decision for any service
organization.
The location decision as an intuitively appealing two-step procedure,
that first chooses a general area for the service operation, and only
then a particular site
1 121
Cont.
Summary
Any service organization first takes decision on locating a facility followed
by the decisions on design of the service and service delivery systems
By virtue of over dependence on people, internal customers (employees)
play a variety of roles.
Customer participation at some level is inevitable in service delivery.
Organizations employs the services of a series of middlemen or
intermediaries for service delivery
1 122
MANAGING DMAND
DMAND AND
AND CAPACITY
CAPACITY
MANAGING
S.
No.
Reference
No.
1.
Particulars
Slide From
To
Learning Objectives
120 120
2.
Topic 1
Introduction
121 124
3.
Topic 2
Managing Demand
125 130
4.
Topic 3
Managing Capacity
131 135
5.
Topic 4
Crafting the Service Environment
136 143
6.
Topic 5
Summary
144 144
1 123
Learning Objectives
Discuss the demand and capacity are managed in services
Learn about types of demand and customer interaction
Know more about managing capacity
Understand the relevance of crafting a service environment
1 124
Introduction
The perishable and intangible nature of services makes it impossible for
service companies to store them in order to use them during peak demand
periods.
Demand for services depends on many factors like the phase in which the
economy operates:
o whether the economy is in a recession or expansion
o demographic factors
o natural disasters
o the technological developments in the market
Organizations should understand the basics of how and why demand for a
service fluctuates in order to design strategies to manage demand.
1 125
Cont.
Introduction
Understanding demand is not sufficient to manage demand fluctuations which
involves the organization's capacity to fulfil the demand.
A clear understanding of demand patterns and capacity constraints will help an
organization design suitable strategies to match them both.
Demand and capacity can be matched either by shifting demand and stretching
or aligning capacity to meet demand.
Shifting demand involves:
o varying original offer to meet the current demand,
o communicating the periods of peak and low demand to the customers,
o altering timings of service delivery to spread the demand across the peak
and slack periods,
o adopting price differentiation strategy to meet the demand fluctuations
Cont.
1 126
Introduction
The first step is to deal with the waiting line or queue at the time of service
delivery.
Other strategies involve:
o serving those customers who require the services on an emergency
basis first
o reducing the time of transaction
o serving important customers first
o by serving customers who contribute the most to the organization's
profits
Organizations should consider the psychological feelings of the customers
while they are waiting and make the process more tolerable for them
Organizations should understand the customers tendency to wait for longer
1periods
127
Cont.
depending on the value of the service and their irritability while
Introduction
Overview Strategies for Managing Demand and

Capacity
1 128
Managing Demand
Balancing the supply and demand sides of a service industry is not easy, and
whether a manager does it well or not will, makes all the difference.
The task of managing markets and ensuring a good fit between supply and
demand is usually very much more complex for services than for goods.
Example
Umbrella manufacturers can work during the summer months making
umbrellas to store to meet the sudden surge in demand each monsoon.
Those umbrellas not sold in that monsoon can be sold later in the year at a
lower clearance price, or put back into stock for the following year.
1 129
Cont.
Types of Demand
ight different demand situations are:
Negative demand
No demand
Latent demand
Faltering demand
Irregular demand
Full demand
Overfull demand
Unwholesome demand
1 130
Customer Interaction
Excellent customer service leads to customer satisfaction which increases
the customer's desire to use the supplier's services in the future, thus
increasing company revenue.
The achievement of customer satisfaction in service operations depends to a
great extent on employee customer service behaviour (CSB).
It is concluded that:
o employees remain the key to success at the 'moments of truth';
o the manner in which the service is delivered is critical in consumers'
evaluations of service quality; and
o service employees run the service operation, market the service and
are equated by customers with the service
1 131
Cont.
Some of the personality traits that are related to external customer service
ratings taken together are commonly labeled service predisposition.
Example: Likeability, Adjustment, and Sociability.
Individuals may not be encouraged to behave in a service oriented manner
unless an organizational climate exists that is supportive of customer
service.
Involving the customer in the service delivery process in place of your own
employees can enhance the productivity.
One has to understand consumer behaviour and the causes of such
behaviour before educating and expecting the customer to participate in
the production process
1 132
Cont.
Some of the examples of Customer satisfaction are as follows:
A self-service restaurant. However, there could be situations where the
customer is willing to pay more rather than waitering himself
Hospitals are such examples where customers do not want to participate
in the production of services but want to leave everything on the
hospital staff.
1 133
Cont.
Reduce Mismatch Between Supply And Demand

Some basic strategies which alter demand so as to fit it within the available
capacity are as follows:
o Developing off-peak pricing schemes
o Non-peak promotion and demand creation
o Developing complementary services
o Creation of reservation system
Developing off-peak pricing schemes will help in shifting the demand from
peak periods to non-peak periods.
Developing complementary or facilitating services would not only attract
consumers away from bottleneck operations at peak times but might also
provide an alternative service while they are in queue for the capacity
restricted operations
1 134
Managing Capacity
Capacity is the ability to work off an existing demand makes for a more
dynamic measure.
Once capacity is expressed in these terms it becomes apparent that it is
related to an output quantity from the service delivery system.
Capacity has a time dimension and is influenced by all input elements to the
system.
So a variable mix of product and service packages will give rise to variations
in the input and demand placed on the service delivery system.
Capacity needs to be related to the level within the service company and
here there may be up to four levels which are useful for complex service
organisations, characterised by the network and branch structure.
1 135
Cont.
Goods
Supply problems in respect of goods occur in those services that are highly
tangible such as:
o retailing
o car rentals
o restaurants
o tourism
o Hotels & pubs
The service marketer forever loses that revenue.
To retain the customer, the retailer might offer rain checks (a promise to
stock the SKU especially for the customer whenever he comes next - which
is an expensive proposition anyway).
1 136
Cont.
Systems And Processes

Supply problems occur here when the systems and processes of service delivery
fail and the provider is not able to offer the service as he is entirely dependent on
them.
Example 1:
o With the 9/11 terrorist attack in New York, and the destruction of World
Trade Centre, many BPOs and banks based in USA could not continue
their service. It was great difficulty that American xpress restarted their
operations due to their Indian connection via their BPO.
Example 2:
o If there is any supply and quality problems in the ATMs from National Cash
Register (NCR), ICICI Bank may not be able to offer its unique services. Its
entire strategy of having a high ATM-to-manned branches ratio might
come to naught
Example 3:
o Amazon.com and Rediff may not be able to offer their services if there
Cont.are
1 137
People
Perishability occurs when the service marketer is not able to marshal
internal customers in the right place in the right time in requisite numbers.
The internal customers are employees, channel partners etc. who play the
role of providers.
Example
A retail store has peak-time crowds during evenings and slack times in the
afternoons. The dilemma for the retailer is how many employees to have: if
their number is as per the peak time crowds, then there might not be much
work for them during the slack times and the retailer ends up having higher
operating costs.
Esselworld, the theme park pioneer, takes in students as temporary
employees or trainees on internship during their summer holidays.
1 138
Cont.
Include the customer in your process

This is a novel way to beat perishability due to the supply problem of
personnel.
The customer is made to be a partner and a part of the service delivery.
Example
Executive buffet lunch is a classic example of a high quality service offer
delivered with minimal staff support. Whatever be the crowd, if the provision
and capacity for the lunch is there, it can be delivered through the executive
buffet process. The diner helps and serves himself; the provider ensures that
all the paraphernalia like cutlery, tissue paper, etc., is available.
Self-service shopping in modern-format superstores is another example. The
customers wheel out the trolleys and carts themselves and load their
shopping goods in them. When their shopping is complete, they go out to
the checkout counters for payment. Customers in a bank fill out the forms
1 themselves
139
while shopping for Dell computers on the net is pure self-service

Designing the service environment is an art that takes a lot of time and
effort, and can be expensive to implement.
Service environments are also called services capes.
This term is modelled after the term landscape, but refers to a service
environment.
The term services cape refers to the style and appearance of the
physical surroundings and also includes other elements of the service
environment that shape customers experience.
Once designed and built, service environments are not easily changed
1 140
Cont.

The purpose of service environments:
Helps firm to create distinctive image and unique positioning.
Service environment affects buyer behaviour in three
Services capes form a core part of the value proposition
Shape customers experience and their behaviour.
Support image, positioning and differentiation
Be part of the value proposition.
Facilitate the service encounter and enhance productivity
1 141
Cont.
Shape Customers Experience & Behaviour

The environment can affect a customers perception and service experience in
three important ways:
As a message-creating medium, using the elements in the environment to
communicate the special nature and quality of the service experience.
As an attention-creating medium, to make the service escape stand out
from those of its competitors, and to attract customers from target
segments.
As an effect-creating medium, using colours, textures, sounds, scents and
spatial design to create the desired service experience, and/or to increase
the desire for certain goods, services or experiences
1 142
Cont.
Support Image, Positioning and Differentiation

Often
customers
find
it
difficult
to
assess
the
quality
of
service
performances, therefore, they use the service environment as a proxy.

Experience & firms put in a lot of effort into making sure that the
environment signals quality and communicate the desired image and
positioning.
Example
The Generator Youth Hostel in London and the Fairmont Empress in Victoria,
British Columbia, these two hotels have very different target segments. One
is for younger guests who love fun and have low budgets. The other targets
the more mature and wealthy customers that include business travellers.
Each service escape clearly shows its hotels positioning.
1 143
Cont.
Be part of the value proposition

The third purpose of the service escape is to help to shape the desired feelings
and reactions in customers and employees.
Example
The extreme examples of service escape come from Las Vegas. Faced with
competition from numerous casinos in other locations, Las Vegas has been
trying to reposition itself away from being purely an adult destination to
including elements that will be enjoyed by families and convention
attendees. The gambling is still there, of course
Many of the huge hotels recently built (or rebuilt)have been transformed
such that they look very impressive. The entertainment centres have
erupting volcanoes, mock sea battles, and striking reproductions of Paris,
ancient Rome, the Pyramids, and Venice and its canals.
1 144
Cont.
Facilitate the Service Encounter and Enhance Productivity

The services cape is often designed to make the service encounter easier
for customers and to increase productivity.
Example
Some childcare centres feature outlines of specific toys on the floors and
walls to show where these items should be placed after use.
People are Part of the Service Environment Too
The appearance and behaviour of both service personnel and customers
can strengthen the impression created by a service environment, or
weaken it.
Employees at Disney theme parks are called cast members. Whether the
staffs is acting as Cinderella, one of the seven dwarfs, or as park cleaner or
the person managing Buzz Light-years Tomorrow land booth, these cast
members must dress up and look the part. Once dressed up, they Cont.
must
1 145
perform for the guests
Managing People For Service Advantage

Hire the Right People
Be the Preferred Employer
Identify the Best Candidates
Train Service Employees Actively
Empower the Front Line
Build High-Performance Service-Delivery Teams
Motivate and Energize People
1 146
Summary
The perishable and intangible nature of services makes it impossible for
service companies to store them in order to use them during peak demand
periods
On the other hand, demand for services depends on many factors like the
phase in which the economy operates
Organizations should understand the basics of how and why demand for a
service fluctuates in order to design strategies to manage demand.
Understanding demand is not sufficient to manage demand fluctuations. It
also involves the organization's capacity to fulfil the demand
Kotler suggests a strategy to discourage the customers on a temporary or
permanent basis to achieve synchronisation between the demand and
supply
Sasser suggested some basic strategies to alter demand so as to fit it
1 147
within the available capacity
INTGRATD SRVIC
SRVIC MARKTING
MARKTING COMMUNICATION
COMMUNICATION
INTGRATD
S.
No.
Reference
No.
1.
Particulars
Slide From
To
Learning Objectives
146 146
2.
Topic 1
Introduction
147 148
3.
Topic 2
Comprehensive Communication
Programme& Model
149 151
4.
Topic 3
Advertising
152 158
5.
Topic 4
Public Relations
159 162
6.
Topic 5
Personal Selling
163 163
7.
Topic 6
Word of Mouth
164 164
8.
Topic 7
Direct Marketing
165 166
9.
Topic 8
Digital Marketing/Social Media
167 169
10.
Topic 9
Summary
170 170
1 148
Learning Objectives
Discuss the concept of integrated service marketing communication
Learn about the guidelines for service communication
Know about advertising and specific goals
Learn about public relations in services
Understand various concepts like personal selling, word-of-mouth, digital
marketing etc.
1 149
Introduction
The concept of having an integrated marketing communications services
plan is all about effectively coordinating your efforts to produce a sale in a
targeted market
Without some form of an integrated marketing communications plan, and
coordinated efforts toward a common sales goal, hardly anything of value
would exchange hands due to a lack of awareness, conflicting agendas and
distribution channel confusion.
Brand communication is an initiative taken by organizations to make their
products and services popular among the end-users. The process involves
identifying individuals who are best suited to the purchase of products or
services (also called target consumers) and promoting the brand among
them through any one of the following means:
Advertising
Sales Promotion
1 150
Cont.
Introduction
o Direct Marketing
o Personal Selling
o Social media, and so on
The various components of Integrated Marketing Communication:
o The Foundation
o The Corporate Culture
o Brand Focus
o Communication Tools
o Promotional Tools
o Integration Tools.
1 151
Introduction
Integrated marketing communication enables all aspects of marketing and
promotion mix to work together in harmony to promote a particular product
or service effectively among end-users.
It integrates all aspects of marketing mix to promote products and services
among the end-users at the right time and right place.
One needs to promote their products or services
awareness among the end-users.
1 152
well for maximum
Comprehensive Communication Programme& Model

Integrated Marketing Communications is a simple concept. It ensures that
all forms of communications and messages are carefully linked together.
The word communication is derived from the Latin word communicoi,
meaning 'to share'. Communication needs an objective that the service
marketer must set and achieve.
Following are the components of the communication programme:
o Identify the target audience or receivers;
o Determine the promotion objectives;
o Develop the message;
o Select the communication mix or the promotion blend;
o Select the media vehicle;
o Set up systems for feedback and feed forward
1 153
Guidelines For Service Communication

There are six important guidelines for services advertising which apply to a
wide range of services, these are:
o To Provide Tangible Clue: To overcome the intangibility of services,
which is more performance and experience than goods, tangible
elements within the product surround (total product concept) can be
used to provide tangible clues.
o Make the Service Comprehensible: Again due to their intangibility,
services resemble concept products and it becomes difficult for the
customer to understand the offer and its benefits. Thus, tangible
attributes of the service can be made use of to help in understanding
the offer. Thus, ICICI Bank (briefly) used the umbrella symbol as part of
its "Safety Bonds" offer, to communicate the offer effectively.
o Communications Continuity: The service marketer uses logos,
signage, symbolisms, packaging and advertising to present a unifying
1 154
Cont.
and consistent theme over time. This greatly helps in the continuity of
Guidelines For Service Communication

o Promising what is Possible: Due to the intangibility of services, the
customer has difficulty believing in the promise. What can reinforce his
faith is consistent service delivery as promised by the service marketer.
o Capitalising on Word of Mouth: The intangibility and variability of
services make it vulnerable to word of mouth communications and
their impacts. Example: Recommendations are an example of how
word of mouth communications influence buying decisions. People seek
personal recommendations for plays, lawyers, doctors, hair stylists, etc.
o Direct Communications to Employees: The importance of internal
marketing highlights how a highly motivated provider can make a
difference to service quality. The enthusiasm of internal customers,
especially if they are in a high contact service industry, will infectiously
transfer itself to their customers.
1 155
Advertising
Advertising is a powerful communication force, highly visible, and one of the
most important tools of marketing communications that helps to sell products,
services, ideas, and images, etc.
Many believe that advertising reflects the needs of the times. Whether one
likes it or not, advertisements are everywhere.
Advertising is an indicator of growth of civilization and a pointer of attempts
at the betterment and perfection. It is part of our social, cultural, and business
environment. Not only does advertising mirror this environment but it also
affects and gets affected by our style of life.
It is not at all surprising that advertising is one of the most closely scrutinised
of all business institutions. In today's environment, not only are advertisers
closely examined by the target audience for who the advertisements are
meant, but by the society in general
1 156
Cont.
Advertising
Service advertisers often are confronted with the problem of how best to
communicate the intangible qualities of a service to their target audiences.
The informational content of service and product advertisements and
analyses the relationship between the amount and type of information in an
advertisement and the type of product or service being advertised is different.
The influence that service characteristics have on advertising strategy is still
not well understood. One theory is that services need to be more tangible in
order to assist in the consumer decision-making process and advertising can
assist with this by providing factual information.
This is achieved by performing a content analysis. It is indicated that product
advertisements contain more information than services, which indicates a
discrepancy between advertising theory and practice. Also, there are
variances in the amount and type of information included in product and
service advertisements.
1 157
Cont.
Advertising
1 158
Goals Of Advertising
Advertising has some specific goals too. These goals are necessary not only to
justify the advertising expenditure, but also to vindicate the art and science
bases of advertising. The effectiveness of advertising as a communication tool
is measured by the achievement of the goals.
Three Goals of Advertising:
1. Informative
2. Persuasive (can also be informative)
3. Constructive (can also be informative and/or persuasive)
1 159
Selection of Media
Advertising is the lure that draws new customers to your business or
product. Small businesses utilize several options to advertise a product or
service. These range from traditional media to newer and out-of-the-box
methods to get the word out. For marketing managers, decisions in media
planning and consequently the media selection are becoming increasingly
complex and challenging as more media options are available.
o Online Advertising : Posting ads on websites that receive heavy
traffic is one way to get the word out about your business.
o Newspaper Ads: A traditional form of advertising, daily and weekly
newspaper ads allow you to target specific geographic neighborhoods.
o Radio Advertising: A catchy jingle and quick tag line can enhance a
radio ad's effectiveness. Matching the station you choose with your
target demographic is key.
1 160
Cont.
Selection of Media
o Television Advertising: Television ads on local stations might require
time and effort to produce, but can be especially effective if you sell a
product or service with a high price point.
o Public Speaking: If the product you sell relates to your own expertise,
public speaking can be a great advertisement.
o Door Hangers and Flyers: Canvassing the neighborhood, placing
flyers in mailboxes or hanging ads on doorknobs, is a good way to target
a specific area and to make sure your potential customers have seen
your information.
o Event Sponsorship: Advertising your product or service through event
sponsorship can take many forms.
o Word-of-Mouth Advertising: A non-traditional form of advertising,
word-of-mouth advertising involves hiring people to talk about your
product or service in a public place in a way that other people overhear
them.
1 161
Cont.
Selection of Media
1 162
Public Relations (PR)

Public relations is the management function that establishes and maintains
mutually beneficial relationships between an organization and the publics
on whom its success or failure depends.
PR is simple, cost-effective and powerful i.e., one call can earn media
coverage, one can reach thousands, even millions and the right story with
the right message can have a huge impact, respectively.
PR services are sought after by many organisations, companies and
prominent individuals. PR objective is to use information to strengthen the
bond between the organisation and the customernot necessarily to
increase sales in the short tent but to engender loyalty. selling more by
building commitment over the long term
1 163
Public Relations Vs. Advertising

'Advertising is visibility, public relations is credibility'.
Advertising is wholly dependent on the media to reach its target audience;
PR does use the media but can also communicate without the latter.
Advertising is a paid form of communication through the media; PR has no
media cost - but incurs substantial PR costs like salaries of PR personnel,
costs of hosting dinners or press conferences, etc.
Advertising has total control on the content and exposure of its message; PR
does not.
Advertising seeks to change opinions by changing awareness; PR seeks to
change attitudes by changing opinions.
1 164
Cont.
Public Relations Vs. Advertising

Advertising seeks to change or enhance brand or company identity; PR's
main job is to change or enhance brand or company image
In advertising, the audience is able to identify the advertiser through the
message, making him perceive the message to be a lot of self-praise and
thus doubt its credibility.
In PR, the audience cannot trace back the identity of the communicator from
the message; there is thus an element of neutrality in PR
Public Relations vs. Advertising
1 165
Tools of an Effective PR Design

Most organisations and individuals who decide to use PR services hire a PR
firm or specialist only for specific tasks.
Example: Presentations of a new product/service, communication with the
public and media during political campaigns or fund-raising events,
management of unpleasant situations and controversies, etc.. But many
also work with PR firms on a regular basis, while a growing number of
companies and organisations have their own PR department.
Public Relations tools:
o Pitch letters or calls to media: Propose coverage
o Photos, B-roll videotape, other visuals: Materials given to media to
help tell your story
o Brochures, newsletters, other collateral
1 166
o Web site content: Blogs, discussion boards, etc.
Personal Selling
Personal selling is a strategy that salespeople use to convince customers
to purchase a product.
The salesperson uses a personalized approach, tailored to meet the
individual needs of the customer, to demonstrate the ways that the
product will benefit him.
The customer is given the opportunity to ask questions, and the
salesperson addresses any concerns he has about the product.
Personal selling can be made effective in the following seven ways:
o
Orchestration of the service purchase encounter
Facilitation of quality assessment by the customer
Making the service tangible
Emphasis on the image of the organization
Use of references from external sources
Recognition of importance of customer-contact personnel
Recognition of customer involvement during the service design
1 167
process
Word Of Mouth
Word-of-mouth recommendation is considered the best form of advertising,
because it is persuasive, credible and free.The service industry is very
vulnerable to referral and word-of-mouth promotion and communication due
to its intangibility factor.
For Example: A satisfied customer will refer the services of a doctor to
others while an inadequate diner will be negative about a restaurant and
irate customers might resort to de-marketing of the particular offer, often
unprompted
"People know that somebody will only recommend something if they are
prepared to put their reputation on the line," says Steve Barton, president of
the Word of Mouth Marketing Association.
The accepted way to make this happen is to provide such a good service
that customers spontaneously talk about you to friends.
1 168
Direct Marketing
Direct marketing is about making direct contact with existing and potential
customers to promote your products or services.
Unlike media advertising, it enables you to target particular people with a
personalized message.
Direct marketing can be cost effective and extremely powerful at generating
sales, so it is ideal for small businesses.
Direct marketing uses a variety of different methods. Direct mail, mailshots
and leafleting are widespread, and other forms of direct and integrated
communication are growing in popularity.
Telephone marketing, mobile marketing, email and texting offer more
opportunities to reach your target market.
Direct marketing allows you to generate a response from targeted customers.
As a result, small businesses can focus their limited marketing resources
Cont.
1 169
Direct Marketing
A direct marketing campaign with a clear call to action can help you boost
your sales to existing customers, increase customer loyalty, recapture old
customers and generate new business.
Direct marketing can be evaluated and measured precisely.
Example:
Individuals will prefer different ways of contact, so make sure you take
account of their preferences.
Whereas it can be difficult to measure the effects of advertising or
sponsorship, in contrast, direct marketing is totally accountable.
With any direct marketing campaign, you can calculate a break-even point the number of sales you need to make to cover the cost of the marketing. In
addition, you can work out the cost per response and the actual return on
1investment.
170

In simplistic terms, digital marketing is the promotion of products or brands
via one or more forms of electronic media. Digital marketing differs from
traditional marketing in that it involves the use of channels and methods
that
enable
an
organization
to
analyze
marketing
campaigns
and
understand what is working and what is not.

Digital marketers monitor things like what is being viewed, how often and
for how long, sales conversions, what content works and doesnt work, etc.
While the Internet is, perhaps, the channel most closely associated with
digital marketing, others include wireless text messaging, mobile instant
messaging, mobile apps, podcasts, electronic billboards, digital television
and radio channels, etc.
Digital media is so pervasive that consumers have access to information
any time and any place they want it
1 171
Cont.
1 172
Cont.

Three keys to digital marketing success:
o Manage complex customer relationships across a variety of channels
both digital and traditional.
o Respond to and initiate dynamic customer interactions.
o Extract value from big data to make better decisions faster
1 173
Summary
The concept of having an integrated marketing communications services
plan is all about effectively coordinating your efforts to produce a sale in a
targeted market
Brand communication is an initiative taken by organizations to make their
products and services popular among the end-users.
Communication needs an objective that the service marketer must set and
achieve.
The communication could have either personal interaction (one-to-one) or
impersonal messages (one-way)
The media vehicle is selected by the effectiveness and efficiency with which
it reaches the message to the target audience.
Integrating the communication plans ensures that you communicate
consistent messages to all groups
1 174
PRICING OF
OF SRVICS
SRVICS
PRICING
S.
No.
Reference
No.
1.
Particulars
Slide From
To
Learning Objectives
172 172
2.
Topic 1
Introduction
173 175
3.
Topic 2
Meaning of Price
176 181
4.
Topic 3
Framework for Pricing Decision in Services
182 186
5.
Topic 4
Types of Pricing
187 189
6.
Topic 5
Pricing Strategy
190 197
7.
Topic 6
Summary
198 198
1 175
Learning Objectives
Discuss the uses and objectives of pricing
Learn about society oriented objectives of price
Understand the framework for pricing decisions in services
Know what are the types of pricing
Learn about pricing strategy
1 176
Introduction
Despite this significance of pricing as an element of the companys marketing
strategy, there seems to be a lack of interest among marketing academics on
this issue, which has brought Nagle and Holden to suggest that pricing is the
most neglected element of the marketing mix.
One of the most popular, and yet acknowledged as the most ineffective way
to price a product, be it a good or a service, is the use of cost-plus pricing.
However, such an approach poses problems, especially in high fixed cost
services.
When marginal costs are zero, the cost computed in the cost based
approach is an amount contributing towards fixed costs and the price is a
percentage above that amount, given the volume to be sold. Such a pricing
approach may lead to uncertain outcomes when firms begin to compete on
price.
Furthermore, firms who adopt this approach show a lack of understanding of
1 177
how pricing theory functions.
Cont.
Introduction
The simplest criticism is that costs per unit cannot be determined without
knowing the volume to be produced and the volume to produce is
dependent on demand that is in turn determined by the price. By setting a
cost-plus price, the cost is at best an approximation.
It is not far fetched if the firm is to forecast the demand characteristics,
based on historical data, and price its product based on the cost of
producing that forecasted volume.
A whole stream of research on demand forecasting and yield/revenue
management in high fixed cost services such as airlines and hotels have
emerged following this point.
The disciplines of accounting, decision sciences and economics take a very
different view of costs in services.
Whilst the economists contend that sunk costs are committed and should
1not
178 feature
in pricing decisions, accountants and decision scientists Cont.

insist
Introduction
The point is, both are right.
To borrow terminology from economics, ex ante, pricing decisions should
not take into account sunk costs.
However, ex-post, prices obtained may be used to calculate the returns to
investment. The confusion arises when expost analyses influences ex-ante
pricing decisions.
1 179
Meaning of Price
General Meaning of Price: Price is the amount of money charged for a
product or service. In other words it is the value, in money terms, that a
consumer exchanges for the benefits or satisfaction of having, or using, a
product or service.
Price in terms of Marketing: In the marketing context, price is said to be
one of the constituents of the 'marketing mix', which also includes quality,
design, advertising, marketing and distribution as well as price.
Price and other elements of Marketing Mix: One critical difference
between price and other ingredients of the marketing mix is that price
produces revenue while the other elements produce costs, so that the
setting of an appropriate price is critical for a company's success.
Price as product differential: A product offering can compete on either a
price or a non price basis. Price competition emphasizes price as the
product differential. Prices fluctuate frequently, and price competition
1 among
180
Cont.
sellers is aggressive. Non price competition emphasizes product
Meaning of Price
Example: The German company Bosch produces washing machines and
dishwashers which are more expensive than its rivals under the slogan the
'the repair man doesn't have enough to do' - a classic product leadership
comment.
Marketing Strategy and Price: A second internal factor affecting price
determination is the marketing mix strategy. In other words, this relates to
what price is being set, in comparison to the company's pricing strategy
Example: Undercutting the market or over pricing. This usually depends on
the contextual operation of the workplace like size ability.
Importance of Target Market:
Buyers' perceptions of price vary. Some
consumer segments are sensitive to price, but others may not be. Thus,
before determining price, a marketer needs to be aware of its importance to
the target market. Knowledge of the prices charged for competing brands is
essential to allow the firm to adjust its prices relative to competitors'.
1 181
Cont.
Meaning of Price
Political Impact and Price: Government regulations and legislation also
influence pricing decisions. Several laws aim to enhance competition in the
marketplace by outlawing price fixing and deceptive pricing. Legislation
also restricts price differentials that can injure competition. Moreover, the
government can invoke price controls to curb inflation.
1 182
Uses & Objectives Of Price

Determines what to produce and for whom: In the price system,
prices are used to determine what goods and services are produced and
who gets them. There are at least two major advantages to this.
o First, it allows consumers to decide which things they want to buy.
They choose to buy or not to buy a given product at a given price.
This gives them the greatest control over their economic lives.
o Second, it allocates resources efficiently.
Indicator of product demand: Prices send strong signals about what is
wanted and what is not. Suppliers respond to these prices automatically.
This is much more efficient than a system in which a government tries to
determine what is and is not needed and adjusts production accordingly
1 183
Cont.
Uses & Objectives Of Price

Diamantopoulos 3 Pricing objectives: Diamantopoulos suggests that
pricing objectives can fall under three main headings relating to their
content (i.e. nature), the desired level of attainment and the associated time
horizon. As far as their content is concerned, both quantitative and
qualitative objectives can enter the objective functions of firms.
o The quantitative objectives can be measured easily and include those
objectives that are related to the firms profits, sales, market share and
cost coverage.
o On the other hand, the qualitative ones are associated with less
quantifiable goals such as the relationship with customers, competitors,
distributors, the long-term survival of the firm and the achievement of
social goals.
1 184
Framework For Pricing Decision In Services

Uniqueness of Services: Academic service literature informs us that
services are unique in that they are perishable, intangible, inseparable
between production and consumption, and heterogeneous in delivery, all at
once.
High Cost and Temporary: Furthermore, other distinctively service traits
(although not necessarily unique) include high fixed to variable costs ratio and
largely temporal in nature.
Definable nature is must : What is ambiguous about the literature is how
such specificities affect pricing. Mere descriptions of service characteristics
are therefore not useful, unless translated into some meaningful insights that
assist firms in the pricing decision.
Customer and his willingness: The value of a service is only unlocked at
the point when it is performed and consumed by the customer; the same
value held by the customer that can be converted into revenue to the
firm
Cont.
1 185
through the price the customer is willing to pay.
Framework For Pricing Decision In Services

In the case of the movie, the customer values the performance of the service by
the firm (through the provision of the movie, comfortable seating, quiet
surroundings etc.), which is simultaneously consumed by him or her.
Customers Consumption: Without the customers consumption, which can
only arise if the firm produces the service, the value of the service cannot be
converted into revenue, despite the production of its equipment.
Advanced Pricing: It ought to be clearer now that the issue of pricing in
service is therefore the issue of advanced pricing, even though the time in
advance may be mere minutes e.g. the purchase of a movie ticket just before
the movie.
1 186
Cont.
Factors Influencing Pricing Decisions

Marketings four Ps -- product, price, promotion and placement -- are the
basic components of any marketing mix.
There are many factors that will have an influence on how you set the price
for your product or service, with some of them internal and some external,
and most of them will fluctuate over time.
o Competition: A competitive pricing strategy, where prices for a product
or service are set based primarily on the prices of the competition, is
best suited for a price-sensitive and highly competitive market. Whether
you use this type of strategy or not, you should always take your
competitions pricing into account when setting your own pricing, unless
you hold a monopoly
o Market Demand: The laws of supply and demand should always come
into play when setting your pricing. If a product is in high demand,
particularly if demand exceeds supply, then the market can bear a higher
1 187
Cont.
price. Conversely, if demand dwindles, consumers will not be willing to

Brand Strategy: Setting your prices without a thorough grasp of your brand
objectives can destroy any brand-building efforts. Your price is a part of your
brand image. Think about Walmart, which has built its entire brand around
low pricing, or Tiffany & Co., whose consumers expect high-end pricing
Cost of Goods Sold: If you want to make a profit on the sale of your
products, you must charge a higher price than what it cost you to actually
produce and transport them. The cost of goods sold almost always plays an
integral role in any pricing strategy
Cost-plus pricing: This standard method of pricing in business seeks to first
determine the cost of making a product or, in this case, providing a service,
and then add an additional amount to represent the desired profit. To
determine cost, you need to figure out direct costs, indirect costs, and fixed
costs.
1 188
Cont.

Competitors' pricing: You need to be aware of what competitors are
charging for similar services in the marketplace, Oster Young says. This
information could come from competitor websites, phone calls, talking to
friends and associates who have used a competitor's services, published data,
etc.
Perceived value to the customer: This is where a lot of the subjectivity
comes in when setting a price for a service. When you have a product, you
may decide to use keystone pricing, which generally takes the wholesale cost
and doubles it to come up with a price to charge and account for your profit.
With a service, you can't necessarily do that. To your customer, the important
factor in determining how much they are willing to pay for a service may not
be how much time you spent providing the service, but ultimately what the
perceived value of that service and your expertise is to them, Oster Young
says. That is where pricing becomes more of an art form.
1 189
Types of Pricing
The pricing of your services and products is one of the most crucial
components to running any business.
When thought about on its basic level, price is nothing more than a barrier
to service.
Those who have mastered the art of pricing know how high or low to set
that barrier.
While it is usually thought of as a tool of the for-profit world, non-profits do
actually sell things
1 190
Cont.
Types of Pricing
Full cost or mark-up pricing: Mark-up is the difference between the costs
of producing and selling a product (fixed costs plus variable costs) and the
market selling price of the product. It is the difference between what you
spend to produce the product and what the customer spends to purchase it
Marginal cost pricing: A special kind of cost-based pricing occurs when
service firms choose not to include their fixed costs
Competition-based pricing: Competitive pricing means setting prices
relative to competitors
Demand-based pricing: This is based on what the customers are prepared
to pay
1 191
Cont.
Types of Pricing
1 192
Pricing Strategy
Pricing is one of the four elements of the marketing mix, along with product,
place and promotion.
Pricing strategy is important for companies who wish to achieve success by
finding the price point where they can maximize sales and profits.
Companies may use a variety of pricing strategies, depending on their own
unique marketing goals and objectives
o Premium Pricing: Premium pricing strategy establishes a price higher
than the competitors
o Penetration Pricing: A penetration pricing strategy is designed to
capture market share by entering the market with a low price relative to
the competition to attract buyers.
o Price Skimming: Businesses that have a significant competitive
advantage can enter the market with a price skimming strategy designed
1 193
Cont.
to gain maximum revenue advantage before other competitors begin
Pricing Strategy
o Psychological Pricing: Psychological pricing strategy is commonly
used by marketers in the prices they establish for their products.
Pricing is difficult and must reflect supply and demand relationship. Pricing a
product too high or too low could mean a loss of sales for the organisation.
Pricing should take into account the following factors:
o Company objectives
o Competition
o Proposed positioning strategies
o Fixed and variable costs
o Target group and willingness to pay
o An organisation can adopt a number of pricing strategies; the pricing
strategy will usually be based on corporate objectives
1 194
Pricing Strategy
New Service Pricing Strategy: Aims for high sales through a lower price
and often used for products and services that would not attract an initial elite
market. It discourages competitors because of the low profit margin. A large
target market and a high volume of sales are needed to meet profit goals.
Saturation pricing strategy: Market saturation happens when most of the
prospective customers in a current market already use a product or service. It
can be considered evidence of a successful sales campaign and indicates that
the demand in the current market is satisfied or nearly satisfied.
Service portfolio pricing: In a portfolio pricing arrangement, your firm would
charge a fixed fee for a series of matters
Tactical pricing: Tactical price optimization can be carried out with output
from simple regression models that ignores the simultaneous competitive
reaction for pricing changes, because in the short term the impact of these
changes may be very subtle
1 195
Cont.
Pricing Strategy
Pricing strategy for public sector services
o Efficient public sector prices depend on numerous conditions including
the public good or externality characteristics of the services, the
structure of markets, the deadweight costs of paying for fixed costs,
transaction costs, and information problems.
o Given the importance of pricing to efficient resource allocation,
economists have analysed in detail the prices that governments should
set for their services to maximise social welfare in a variety of market
conditions observe: 'The great bulk of older established research on
pricing principles is incompatible with the actual practice of public sector
pricing
Most public pricing literature starts from the premises that government is the
sole supplier of a service and that prices should be designed to maximise the
welfare of consumers and producers that are party to the transaction.
1 196
Cont.
Pricing Strategy
It is also generally assumed ab initio that:
o There are no spillovers.
o Services are separable (excludable) and nonrival.
o There are no significant transaction costs
o Revenues cover fixed costs or that taxation to pay for deficits has
negligible deadweight cost.
o All other prices, including input prices, equal marginal costs.
o Equity should be achieved by income transfers rather than by altering
price relationships.
o Under these conditions, maximising efficiency requires that services
should be priced at the intersection of the demand curve and the short
run marginal cost (SRMC) curve. This is generally described in short as
1 197
SRMC pricing
Cont.
Pricing Strategy
1 198
Summary
Price is the value, in money terms, that a consumer exchanges for the
benefits or satisfaction of having, or using, a product or service.
Between price and other ingredients of the marketing mix the basic
difference is that price produces revenue while the other elements produce
costs, so that the setting of an appropriate price is critical for a company's
success.
In the price system, prices are used to determine what goods and services
are produced and who gets them
There are many factors which have a bearing on how managers finally decide
on their pricing strategy.
Prices send strong signals about what is wanted and what is not. Suppliers
respond to these prices automatically.
The pricing of your services and products is one of the most crucial
1 components
199
to running any business
TH FINANCIAL&
FINANCIAL& ECONOMIC
ECONOMIC EFFECTS
EFFECTS OF
OF
TH
SERVICES
SERVICES
S.
No.
Reference
No.
1.
1 200
Particulars
Slide From
To
Learning Objectives
200 200
2.
Topic 1
Introduction
201 201
3.
Topic 2
Direct Relationship between Services &

Profit
202 206
4.
Topic 3
Measuring the Effects of Quality

Services
207 210
5.
Topic 4
The Balanced Scorecard
211 213
6.
Topic 5
Economic Effects of Services (Global &

Indian Market)
214 221
7.
Topic 6
Summary
222 223
Learning Objectives
Discuss the financial effects of services
Learn about the relationship between services and profit
Know about the assumption of 80/20 rule
Understand the concept of balanced scorecard
1 201
Introduction
The current list of Fortune 500 companies contains more service

companies and fewer manufacturers than in previous decades.
The service economy in developing countries is mostly concentrated in

financial
services,
hospitality,
retail,
health,
human
services,
information technology and education.

In the management literature this is referred to as the servitization of
products.
Virtually every product today has a service component to it.
These statements are the recent economic developments in service
economy.
1 202
Direct Relationship Between Services & Profit

The Service Profit Chain is a theory and business model evolved by a
group of researchers from Harvard University in the nineties (among
others James L. Heskett and Leonard Schlesinger).
They have proved that there is a direct financial link between superior
service experiences, customer loyalty, and financial performance (profit
and growth).
At a high level, The Service Profit Chain shows a casual relation between
the different important aspects and works like this unfolding all eight
steps of the chain.
1 203
Cont.
Profit and Growth: Most companies strive towards

profit and growth. That is the main success criteria.
Customer Loyalty: Companies with profit and growth
are
characterized
by
large
number
of
loyal
customers.
Customer Satisfaction: Loyal customers result from
satisfied customers.
Value: Satisfaction depends on the companys ability
to create value for the customer.
Employee
Productivity:
Satisfied
and
loyal
employees are far more productive.

Employee
Loyalty:
Value
is
created
by
loyal
employees.
Employee Satisfaction: Employee loyalty is driven
by employee satisfaction.
Internal Quality: To engage employees and ensure
employee satisfaction the company has to build up the
1 204
best possible internal quality.
Service-Profit Chain
ROQ (Return on Quality)

The return on quality approach, which is based on the assumptions that:
o Quality is an investment
o Quality efforts must be financially accountable,
o It is possible to spend too much on quality
o Not all quality expenditures are equally valid. The authors then
provide a managerial framework that can be used to guide quality
improvement efforts.
This framework has several attractive features, including ensured
managerial relevance and financial accountability.
1 205
Cont.
The ROQ Improvement Process

Given figure shows how this process can be visualized as consisting of five
distinct stages:
Preliminary information gathering
Identification of possible opportunities
Limited testing of improvements
Financial projections based on hard data
Full rollout of quality improvement efforts
The ROQ Quality Improvement Process

1 206
Measuring the Effects of Quality Services

The below figure shows a conceptual model that delineates the variables
involved in the relationship between service quality and profits.
The term offensive effects depict the impact of service on obtaining new
customers.
On offensive effects involves the relationship between service quality and
antecedents of profitability such as market share, firm reputation, and the
ability to command a price premium.
1 207
Service-Profit Chain
Cont.
Offensive Marketing
Except for the results of the Profit Impact of Marketing Strategies (PIMS) data
found in the 1980s, there is virtually no empirical research support for the
offensive impact of service quality.
Instinct and the evidence from the PIMS studies suggest that service quality
improves reputation, market share, sales, and the ability to charge premium
prices, yet confirmation in the form of research is sparse.
Offensive marketing always focuses to:
o Quality attracts new customers
o W-O-M
o Personal referrals
o Willingness to recommend
o Enthusiastic testimonial
1 208
Cont.
Defensive Marketing
Anecdotes about the superior financial value of existing customers over
new customers are ubiquitous.
Two of the most frequently espoused are that it costs 5 times as much
to obtain a new customer as to keep an existing one and that selling
costs for existing customers are much lower (on average 20% lower)
than selling to new ones.
When it comes to keeping the customers a firm already has, an
approach called defensive marketing.
1 209
Cont.
Assumption of 80/20 Rule

Few rules are more widely quoted in marketing today than the 80/20 Rule,
which states that 80% of your sales come from just 20% of your customer
base.
In this age of relationship marketing, this rule has become an often-heard
battle cry to focus our efforts on maintaining the loyalty of customers
belonging to the golden 20% that drive most of our business, while
spending less effort on the trivial other 80%.
The 80/20 rule has been a very popular credo of business professionals in
this era of customer-oriented business strategy. It states that for most
companies, 80% of their profitable revenue comes from just 20% of their
clients. This highlights a very important element of customer-centric
business: not only is it important to find the right customers, but it is even
more imperative that an organization retain the continued business of these
loyal clients.
1 210

Traditional financial reporting systems provide an indication of how a firm
has performed in the past, but offer little information about how it might
perform in the future.
Example: A firm might reduce its level of customer service in order to

boost current earnings, but then future earnings might be negatively
impacted due to reduced customer satisfaction.
The balanced scorecard translates the organization's strategy into four

perspectives, with a balance between the following:
o Between Internal And External Measures
o Between Objective Measures And Subjective Measures
o Between Performance results and the drivers of future results
1 211
Cont.

The Balanced Scorecard goes beyond standard financial measures to include
the following additional perspectives: the customer perspective, the internal
process perspective, and the learning and growth perspective.
1 212
Four Realms of Balance Scorecard

The following four realms are not simple a collection of independent
perspectives.
Financial perspective - includes measures such as operating income,
return on capital employed, and economic value added.
Customer perspective - includes measures such as customer satisfaction,
customer retention, and market share in target segments.
Business process perspective - includes measures such as cost,
throughput, and quality. These are for business processes such as
procurement, production, and order fulfillment.
Learning & growth perspective - includes measures such as employee
satisfaction, employee retention, skill sets, etc.
1 213
Economic Effects of Services (Global & Indian Market)

Service Marketing: Indian Context
Also known as the tertiary sector, the development of a country's services
sector is an indicator of its economic development.
India's services sector is a vital component of its economy, as it presently
accounts for around 60 per cent of its gross domestic product (GDP). It has
matured considerably during the last few years and has been globally
recognized for its high growth and development.
The growth in the services sector in India is expected to be around 5.6 per cent
in FY 15 owing, particularly, to the growth in the IT sector.
The services sector in India comprises a wide range of activities, including
trading, transportation, communication, financial, real estate & business
services, community, social and personal services.
1 214
Cont.
Market Size
The services sector in India attracts the highest foreign domestic investment
(FDI) equity inflows, accounting for about 17.96 per cent of the total equity
inflows. In the period April 2000 - June 2014, the services sector in India
attracted FDI inflows amounting to about US$ 40,197.21 million, according to
data released by Department of Industrial Policy and Promotion (DIPP).
According to International Data Corporation (IDC), the total mobile services
market revenue in India will reach US$ 29.8 billion by 2014 and is expected
to touch US$ 37 billion in 2017 with a compound annual growth rate (CAGR)
of 5.2 percent.
Manufacturing and services sectors in India expanded at a faster pace than
China during June while emerging market output registered the strongest
upturn in business activity since March quarter of 2013, as per an HSBC
survey.
1 215
Service Marketing: Global Context

Global marketing is marketing on a worldwide scale reconciling or taking
commercial advantage of global operational differences, similarities and
opportunities in order to meet global objectives"
Global marketing is not a revolutionary shift, it is an evolutionary process.
While the following does not apply to all companies, it does apply to most
companies that begin as domestic-only companies. International marketing
has intensified and is evident for approximately nearly all aspects of
consumers daily life.
Local regions or national boundaries no longer restricted to the competitive
forces. To be successful in today's globalize economy, it is must for the
companies to simultaneously be responsive to local as well as global
market conditions and varying aspects related to the international
marketing process.
1 216
Cont.
Economic Effects
Customer service firm developed two statistical models that monitor
service by documenting value/ROI of a service system by measuring its
performance and by determining how to improve service in a costeffective manner.
The customer service models also project results of a service system
before it is implemented and provides a way to prove that customer
service will achieve bottom-line results.
The models apply to buying patterns, profit margins and dozens of other
factors.
1 217
Cont.
The market impact of a customer service model

The market impact of customer service refers to the market/financial
worth of a customer and how to quantify the economic impact of a
businesss various levels of customer service.
The Market Impact of Service Model is salvation for executives charged
with overseeing a service system.
It enables them to document that service is a profit center generating
substantial additional sales.
It also identifies improvements in service that are needed to increase
market share or to boost revenue by a predetermined amount.
1 218
Cont.
The model produces weights indicating effect of the component

parts of service on the overall effectiveness of service. Then these
weights are incorporated into simple formulas that can be used in
planning. In summary, the market impact of a customer service
model reveals:
Increased sales and ROI from better service
Amount of reduction in service costs through prevention of dissatisfaction
Positive market impact by the satisfaction that good service causes
among a larger proportion of customers
Using the model comes up with specific information for a company such
as incremental cost versus incremental benefit.
1 219
Cont.
Sensitivity to Profits Model

Not all customer service efforts are created equal you will find some
tactics produce more significant results than others for your business do.
To help determine where to spend your budget, you may find the
sensitivity to profits model useful.
The primary use of the sensitivity to profits model is to postulate the
impact of various customer service expenditures on customer satisfaction
before expenditures are made.
The model equips executives to make educated decisions about priorities.
1 220
Cont.
Monitoring your Service System

In addition to the more complex statistical modeling, monitoring your
service system also makes it possible to determine degree of customer
satisfaction needed to retain the customers brand loyalty or company
loyalty. This is vital data.
Research has documented the importance of satisfaction in establishing
brand loyalty which determines a companys ability to retain or to
increase market share.
To maintain a level of service that retains customers, you need a
mechanism for monitoring service performance.
Do it by periodically re-evaluating all service support systems to make
certain that they really do support the service strategy.
1 221
Cont.
Summary
The Service Profit Chain is a theory and business model evolved by a
group of researchers from Harvard University. It shows a casual relation
between the different important aspects and works like this unfolding all
eight steps of the chain.
The financial benefits of quality, which had been assumed as a matter of
faith in the religion of quality, are now being seriously questioned by
cost-cutting executives
An approach to making quality expenditures financially accountable is the
return on quality (ROQ) approach.
1 222
Cont.
Summary
Quality expenditures generally have not been treated as an investment by
most companies, because there has been no solid basis for assessing
financial impact.
Processing a good reputation is indisputably one of the most critical factors
in customer choice, so service firms are tremendously interested in the role
of service.
As per the 80/20 Rule, 80% of sales come from just 20% of customer base.
Robert Kaplan and David Norton developed the Balanced Scorecard, a
performance measurement system that considers not only financial
measures, but also customer, business process, and learning measures to
provide an indication of how a firm has performed in the past.
1 223
INTGRATD GAPS
GAPS MODL
MODL OF
OF SRVIC
SRVIC QUALITY
QUALITY
INTGRATD
S.
No.
Reference
No.
1.
1 224
Particulars
Slide From
To
Learning Objectives
225 225
2.
Topic 1
Introduction
226 226
3.
Topic 2
Service Quality
227 229
4.
Topic 3
The Integrated Gap Model of Service

Quality
230 233
5.
Topic 4
Service Quality & Service Marketing
234 243
6.
Topic 5
The Cycle of Capability
244 253
7.
Topic 6
Summary
254 254
Learning Objectives
Discuss the concept of quality in services
Learn about the integrated gap model of service quality
Understand the relevance of service quality in services marketing
Learn about SRVQUAL
Know about TQM
1 225
Introduction
The Service Quality Model, also known as the GAP Model, was developed in
1985. It highlights the main requirements for delivering a high level of
service quality by identifying five gaps' that can lead to unsuccessful
delivery of service.
Service firms like other organizations are realizing the significance of
customer- centred philosophies and are turning to quality management
approaches to help managing their businesses
Managers
in
the
service
sector
are
under
increasing
pressure
to
demonstrate that their services are customer-focused and that continuous

performance improvement is being delivered
While there have been efforts to study service quality, there has been no
general agreement on the measurement of the concept. The majority of the
work to date has attempted to use the SRVQUAL methodology in an effort
1 226
to measure service quality
Service Quality
Service quality is a major factor contributing to customer satisfaction.
Service quality is defined as the delivery of excellent or superior service
relative to customers' expectations.
Service quality is a concept that has aroused considerable interest and
debate in the research literature because of the difficulties in both defining it
and measuring it with no overall consensus emerging on either.
Service quality is also defined as the extent to which a service meets
customers needs or expectations.
Service quality can thus be defined as the difference between customer
expectations of service and perceived service. If expectations are greater
than performance, then perceived quality is less than satisfactory and hence
customer dissatisfaction occurs.
1 227
Cont.
Service Quality
The basic principles that underlie the concept of service quality indicate
certain factors.
It is morel difficult for customers to evaluate the quality of services than the
quality of goods.
Service quality is based on customers' perception of the outcome of the
service and their evaluation of the process by which the service was
performed.
Service quality perceptions result from a comparison of what the customer
expected before the service and the perceived level of service received
Customers' expectations play an essential role in the judgement of service
quality. therefore. a service that fats to meet the expectations of one
customer might satisfy another customer whose expectation level of the
service was not as high.
1 228
Cont.
As a result. it is important that service providers develop meaningful ways by
Service Quality
Components of service quality
o Technical quality or what is delivered to customers refers to the relative
quantifiable aspect of services.
o Fractional quality or how a service is performed is not objectively
measurable, but provides a clear indication of customers thoughts and
feedback concerning the service performance
o Corporate image is based on both the technical quality and tie functional
quality of services. It focuses on the actual service performance. the
surroundings in which the service was provided and the image conveyed
by service providers
Dimensions of quality
o Research
has
indicated
that
customers
consider
reliability,
responsiveness, assurance, empathy and tangibles as the five quality

1 229dimensions
that apply specifically to service organizations
The Integrated Gap Model Of Service Quality

Customers generally have a tendency to compare the service they
'experience' with the service they 'expect' to receive; thus, when the
experience does not match the expectation, a gap arises
Example of GAP Model of Service Quality

1 230
Cont.

The model majority professes two types of gaps:
The Customer Gap: The customer gap is a gap between customer
expectations and customer perceptions. This, in other words, is the service
quality shortfall as seen by the customers
Example: A customer is satisfied with a certain restaurant; but his last
experience there (it could be because of a new waiter) could leave him
embittered, washing away years of happy experiences at one go.
Lesson: We are only as good as our last Moment of Truth, and what it
signified to the customer
The Provider Gap: There are four provider gaps and these in sum total are
the cause of the Customer Gap. They are the shortfalls within the service
firm. To close the customer gap, the provider gap (or, as also known,
Company Gap) has to be bridged
1 231
Cont.

There are seven major gaps in the service quality concept:
Gap1: Customers expectations versus management perceptions: as a result
of the lack of a marketing research orientation, inadequate upward
communication and too many layers of management.
Gap2: Management perceptions versus service specifications: as a result of
inadequate commitment to service quality, a perception of unfeasibility,
inadequate task standardisation and an absence of goal setting.
Gap3: Service specifications versus service delivery: as a result of role
ambiguity and conflict, poor employee-job fit and poor technology-job fit,
inappropriate supervisory control systems, lack of perceived control and lack
of teamwork.
Gap4: Service delivery versus external communication: as a result of
inadequate horizontal communications and propensity to over-promise.
1 232
Cont.

Gap5: The discrepancy between customer expectations and their perceptions
of the service delivered: as a result of the influences exerted from the
customer side and the shortfalls (gaps) on the part of the service provider.
Gap6: The discrepancy between customer expectations and employees
perceptions: as a result of the differences in the understanding of customer
expectations by front-line service providers.
Gap7: The discrepancy between employees perceptions and management
perceptions: as a result of the differences in the understanding of customer
expectations between managers and service providers
1 233

Service marketers face marketing challenges which revolve around issues
such as:
o understanding customers' needs and expectations of services,
o making services tangible to customers and
o keeping and dealing with promises made to the customers.
o The services marketing triangle shown in Figure given in next slide
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
1 234
Cont.
The Service Marketing Triangle

1 235
Cont.

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 truthor 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
1 236
Cont.

Internal marketing
o The marketing process that enables service marketers to deliver
promises to customers is called internal marketing.
o Through internal marketing. the organization reveals that it consists of
individuals and departments who are considered to be each other's
customers.
o Employees do not only provide a service to the external customers but
also to each other within the organization.
o Promises are easy to make. but unless organizations have internal
systems in place to ensure the delivery thereof. service processes
cannot succeed.
o The success of internal service systems is dependent on the
relationship between the organization and the employees
1 237
Cont.

Reasons for the importance of quality in services:
Lower Costs: Higher quality of services imply fewer mistakes for any repeat
tasks, service recovery exercises or refunds to disgruntled customers
Immune or less Vulnerable to Price War: Service firms known for their high
quality services have an additional differentiating attribute and can avoid the
service commodity trap
Higher Customer Loyalty: Service quality ensures customer satisfaction that
drives customer loyalty and enhanced profits
Higher Market Share: Loyal customers contribute to positive word-of-mouth
publicity, which broadens customer base with minimal costs
Loyal Internal Customers: The linear relationship between happy employees
and customer loyalty, and a firm's profitability
Higher ROI: The service-profit chain had established high quality services
1contribute
238
to higher profitability
Defining Quality In Services

Quality is described as a subjective term for which each person or sector
has its own definition.
In technical usage, quality can have two meanings:
o the characteristics of a product or service that bear on its ability to
satisfy stated or implied needs;
o a product or service free of deficiencies
Perceived service quality can be defined as, according to the model, the
difference
between
consumer's
expectation
and
perceptions
which
eventually depends on the size and the direction of the four gaps
concerning the delivery of service quality on the company side. The
magnitude and the direction of each gap will affect the service quality.
1 239
Cont.
Defining Quality In Services

Quality can be viewed from multiple perspectives:
o Product-based
o User-based
o Manufacturing-based
o Value-based
o Transcendental
1 240
Cont.
Dimension of Service Quality

Gronroos identified two service quality dimensions the technical aspect that
is what service is provided and functional aspect and how the service is
provided.
The customers perceive what he/she receives as the outcome of the process
in which the resources are used that is the technical quality. But he also and
more often importantly, perceives how the process itself functions that is the
functions quality
The SRVQUAL Instrument
The SRVQUAL instrument developed by Parasuraman et al has proved
popular, being used in many studies of service quality
The SRVQUAL Instrument measures the five dimensions of Service Quality.
These five dimensions are: tangibility, reliability, responsiveness, assurance
and empathy
1 241
Cont.
Dimension Of Service Quality

According to Garvin, there are eight dimensions of quality, which are:
Perceived Quality: Consumers develop a perception due to companycontrolled stimuli like advertising, publicity and brand promotion, and social
effects like word-of-mouth.
Features: These are in addition to the core product, which do not come as
standard 'features' but as add-ons.
Performance: Every product is supposed to deliver benefits and the
measure of its quality is performance of the offer.Example: a dish scrubber,
which can clean plates completely and quickly, would be a performance
measure.
Conformance: Delivery quality meeting design standards.
Durability: This is a measure of the length of time that a product can
deliver benefits, without deterioration.
1 242
Cont.
Dimension Of Service Quality

Reliability: This is a measure of the degree of probability of the product
delivering what had been promised.
Serviceability: If the product can be repaired with ease and speed then it
is a measure of quality. It could include the behavioural dimension of service
personnel, their politeness.
Aesthetics: This is a measure of the product's looks, design, touch and feel
1 243
The Cycle of Capability

Measuring and maintaining service quality goes on to reduce variability
and increase consistency of service delivery and the total capability of the
firm.
This has a great and positive impact on employee satisfaction, which
greatly lowers attrition levels.
The
higher
loyalty
factor
reduces
training
costs
while
increasing
productivity and the quality of output.
1 244
Cycle of Capability
Cont.
SERVQUAL
The measurement of service quality in the service sector should take into
account customer expectations of service as well as perceptions of service.
However, as Robinson concludes: "It is apparent that there is little consensus
of opinion and much disagreement about how to measure service quality".
One service quality measurement model that has been extensively applied
is the SRVQUAL model developed by Parasuraman et al. SRVQUAL as the
most often used approach for measuring service quality has been to
compare customers' expectations before a service encounter and their
perceptions of the actual service delivered.
The SRVQUAL instrument has been the predominant method used to
measure consumers perceptions of service quality
1 245
Cont.
SERVQUAL
It has five generic dimensions or factors and are stated as follows:
Tangibles: Physical facilities, equipment and appearance of personnel
Reliability: Ability to perform the promised service dependably and
accurately
Responsiveness: Willingness to help customers and provide prompt
service.
Assurance (including competence, courtesy, credibility and security):
Knowledge and courtesy of employees and their ability to inspire trust
and confidence
Empathy
customer)
1 246
(including
access,
communication,
understanding
the
Total Quality Management (TQM)

TQM is the way of managing for the future, and is far wider in its application
than just assuring product or service quality it is a way of managing
people and business processes to ensure complete customer satisfaction at
every stage, internally and externally.
TQM, combined with effective leadership, results in an organisation doing
the right things right, first time
The core of TQM is the customer-supplier interfaces, both externally and
internally, and at each interface lie a number of processes. This core must
be surrounded by commitment to quality, communication of the quality
message, and recognition of the need to change the culture of the
organisation to create total quality.
1 247
Cont.
1 248
Cont.
1 249
Cont.
1 250
Cont.
Primary Elements Of TQM

Total quality management can be summarized as a management system
for a customer-focused organization that involves all employees in
continual
improvement.
It
uses
strategy,
data,
and
effective
communications to integrate the quality discipline into the culture and

activities of the organization
o Customer-focused: The customer ultimately determines the level of
quality
o Total employee involvement: All employees participate in working
toward common goals
o Process- centred: A fundamental part of TQM is a focus on process
thinking
o Integrated system: Although an organization may consist of many
different functional specialties often organized into vertically
1 251
structured
departments,
it
is
the
horizontal
Cont.
processes
Primary Elements Of TQM
1 252
Total Quality Management
1 253
Summary
Service quality is a major factor contributing to customer satisfaction,
however, excellent service quality is a prerequisite to satisfy customers
completely and create customer loyalty.
Service quality can majorly be defined as the difference between customer
expectations of service and perceived service.
Service quality, customer satisfaction. and service value are important
components of the success of a service organization.
Customers generally have a tendency to compare the service they
'experience' with the service they 'expect' to receive; thus, when the
experience does not match the expectation, a gap arises.
The gap model is one of the best received and most heuristically valuable
contributions to the services literature.
A number of researchers have applied the SRVQUAL model to measure
1 service
254
quality in the services industry
1 255

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SERVICES MARKETING

Consumer Behaviour in Service

Building Customer Relationship

Service Development & Design

Managing Demand and Capacity

Integrated Service Marketing Communication

The Financial & Economic Effects of Services

Integrated Gaps Model of Service Quality

healthcare, Legal service, accounting, tourism, hospitality and information

In common parlance the term services means personal services like

What these and other definitional approaches share in common is their

Three Waves of Services

Services Marketing Mix

incompetent personnel, inconvenient service

poor performance, needlessly complicated procedures

to wait for service or stand in queues almost

According to Irons, pure services are intangible but they do usually

The conclusion derived from the definition is that

Importance And Growth of Services

Importance And Growth of Services

Scope of Service Industry

The percentage of people in a country who are employed in services

Challenges In Services Marketing

Three Waves of Services

without being hampered by colonial and State controls.

The Product-Service Continuum

Product Service Continuum

The Product-Service Continuum

Highly Tangible Services

Highly Tangible Services

Services Marketing Mix

Services Marketing Mix

Who is the Customer?

Role of Consumer in Services

Consumer xpectations of Service

Consumer Perceptions of Service

Undrstanding xpctation and

the relevance customer behaviour in

Who Is The Customer?

Who Is The Customer?

Role of Consumer In Services

interchangeability of terminology, that consumer behaviour related to

Decision Making Role

experiences for customers.

Consumer Decision Making

In particular, consumers go through three major stages when they

This framework is helpful because it assists academics in forming a clear

Consumer Decision Making

Consumer Decision Making

Customer Satisfaction With Services

Consumer Expectations of Service

Consumer Expectations of Service

Consumer Perceptions of Service

Factors Influencing Perceptions

How Consumers Deal with Risk

Understanding Expectation And Perception Through

The Service-profit Chain Model

Customer Retention Through Relationship Marketing

Customer Retention Through Relationship Marketing

Transactional marketing vs. Relationship

Customer Retention Through Relationship Marketing

Businesses and Relationship Marketing

The Service-Profit Chain Model