413 marketing of services

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MBA (Marketing)

Paper 4.13

MARKETING OF SERVICES

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MBA PAPER 4.13

MARKETING OF SERVICES

SYLLABUS

UNIT 1 Services: Definition, characteristics, classification Relationship Marketing Services Mission: Meaning Services mission statements Developing a services mission Services Market Segmentation:Meaning Process Bases and purpose of market segmentation.

UNIT 2 Services positioning and Differentiation: Evolution of positioning Positioning and services Levels ofpositioning Process of positioning Importance of positioning.

UNIT 3 Services Marketing Mix: Marketing mix elements- Service product Pricing the service Service location andchannels Promotion and communication of services People in services Processes Physicalevidence Developing a marketing mix strategy.

UNIT 4 Marketing Plans for Services: Marketing planning process Marketing strategy formulation Resourceallocation and monitoring Marketing planning and services.

UNIT 5 Service Encounter: Tourism and Travel marketing Hotel marketing consultancy marketing Courierservices.

UNIT 6 Marketing of Services: Bank marketing Insurance marketing Hospital marketing TelecommunicationServices Education marketing

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Contents

UNIT I

1. Services Marketing An Introduction

2. Classification of Services

3. Relationship Marketing

4. Services Mission

5. Services Market Segmentation

UNIT II

6. Positioning and Differentiation of Services

UNIT III

7. Services Marketing Mix

UNIT IV

8. Marketing Plans for Services

9. Customer-focused Services

UNIT V

10. Tourism and Travel Marketing

11. Hotel Marketing

12. Consultancy Marketing

13. Courier Services

UNIT VI

14. Bank Marketing

15. Insurance Marketing

16. Hospital Marketing

17. Telecommunication Marketing

18. Education Marketing

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Lesson 1

Services Marketing An Introduction

The service sector has increased dramatically in importance over the last decade, where it now accounts for nearlytwo-thirds of the economy by income and jobs. Deregulation of services, growing competition, fluctuations in demand,and the application of new technologies are presenting a considerable challenge to service organizations. Servicesmarketing concepts and strategies have developed in response to the tremendous growth of service industries. Dueto their increased importance, the world economies have drawn increasing attention to the issues and problems of

service sector industries.

Definition

The American Marketing Association defines services as activities, benefits or satisfactions which are offered for saleand are provided with the sale of goods. This definition is considered to be too broad as products also offer benefitsand satisfactions to customers. So there were attempts to differentiate physical products from services by definingcharacteristics which are prese4nt in services but are not found in case of physical products.

Kotler defines a service as any act or performance that one party can offer to another that is essentially intangibleand does not result in the ownership of anything. Its production may or may not be tied to a physical product. AbrainPayne defines it as an activity which has some intangibility associated with it, which involves some interaction withcustomers or with property with it, which involves some interaction with customers or with property in theirpossession, and does not result in a transfer of ownership. A change in condition may occur and production of the

service may or may not be closely associated with a physical product.

A more mundane definition in the Indian context is provided by section 2(r) of the Monopolies and Restrictive TradePractices Act, 1969. Under the said statute a service means service which is made available to potential users andincludes the provision of facilities in connection with banking, financing, insurance, chit fund, real estate, transport,processing, supply of electrical or other energy, board or lodging or both, entertainment, amusement or the purveyingof news or other information.

Stanton defines services and identifies factors which distinguish products from services which are accepted by mostof he commentators. According to Stanton, services are those separately identifiable, essentially activities thatprovide want-satisfaction, and that are not necessarily ties to the sale of a product or another service. To produce aservice may or may not require the use of tangible goods. However, when such use in required, there is no transfer ofthe title (Permanent ownership) to these tangible goods. Stanton emphasizes four characteristics which distinguish

services from product. They are, intangibility, inseparability, heterogeneity and perishability and fluctuating demand.Kotler also emphasizes intangibility, inseparability, variability and perishability.

A service is an activity which has some elements of intangibility associated with it, which involves some interactionwith customers or with property in their possession, and does not result in a transfer of ownership. A change incondition may occur and production of the service may or may not be closely associated with a physical product.

Put in the simple terms, services are deeds, processes and performances. The core offerings of hospitals, hotels,banks and utilities comprise primary deeds and actions performed for customers. Services are produced not only byservice business such as those just described but are also integral to the offerings of many manufactured goodsprocedures. For example, care manufacturers offer warranties and repair services for their cars; Computermanufacturers offers warranties, maintenance contracts and training. all of these services are examples of deeds,processes and performances.

Characteristics of services

Stanton points out that the special nature of services stems form several distinctive characteristics and he singles ourfour for particular comment. They are:

1. Intangibility,

2. Inseparability,

3. Heterogeneity (Kotler terms this as variability), and

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4. Perishability and fluctuating demand.

These four have been identified by Kotler also as the major characteristics greatly affecting the design of marketingprogrammes for services.

Intangibility

Services are essentially intangible. Because services are performances or actions rather than objects, they cannot beseen, felt, tested, or touched in the same manner that we can sense tangible goods. For example, health-care

services are actions (e.g. surgery, diagnosis, examination, treatment) performed by providers and directed towardpatients and their families. These services cannot actually be seen or touched by the patient, although the patientmay be able to see and touch certain tangible components of the service (e.g. equipment, hospital room). In fact,many services such as health care are difficult for the consumer to grasp even mentally. Even after a diagnosis orsurgery has been completed the patient may not fully comprehend the service performed.

Marketing implications

Intangibility presents several marketing challenges: Services cannot be inventoried, and therefore fluctuations indemand are often difficult to manage. For example, there is tremendous demand for resort accommodations in Simla /Ooty in May, but little demand in December. Yet resort owners have the same number of rooks to sell year-round.Services cannot be patented legally, and new service concepts can therefore easily be copied by competitors.Services cannot be readily displayed or easily communicated to customers, so quality may be difficult for consumersto assess. Decisions about what to include in advertising and other promotional materials are challenges, as is

pricing. The actual cost of a unit of service are had to determine and the price/ quality relationship is complex.

Inseparability

Services are created and consumed simultaneously and generally they cannot be separated from the provider of theservice. Thus the service provider customer interaction is a special feature of services marketing.

Unlike the tangible goods, services cannot be distributed using conventional channels. Inseparability makes directsales as the only possible channel of distribution and this delimits the markets for the sellers services. Thischaracteristic also limits that scale of operation of the service provider. For example, a doctor can give treatment tolimited number of patients only in a day.

This characteristic also emphasizes the importance of the quality of provider client interaction in services. Thisposes another management challenge to the service markets. While a consumers satisfaction depends on thefunctional aspects in the purchase of goods, in the case of services the above mentioned interaction plays animportant role in determining the quality of services and customer satisfaction. For example, an airline company mayprovide excellent flight service, but a discourteous onboard staff may keep off the customer permanently from thatcompany. There are exemptions also to the inseparability characteristic. A television coverage, travel agency or stockbroker may represent and help marketing the service provided by another service firm.


Because services often are produced and consumed at the same time, mass production is difficult if not impossible.The quality of service and customer satisfaction will be highly dependent on what happens in real time, includingactions of employees and the interactions between employees and customers.

Heterogeneity

This characteristic is referred to as variability by Kotler. We have already seen that services cannot be standardized.They are highly variable depending upon the provider and the time and place where they are provided. A serviceprovided on a particular occasion is somewhat different from the same service provided on other occasions. Also thestandard of quality perceived by different consumers may differ according to the order of preference given by them tothe various attribute of service quality. For example, the treatments given by hospital to different persons on differentoccasion cannot be of the same quality. Consumers of services are aware of this variability and by their interactionwith other consumers they also get influenced or influence others in the selection of service provider.


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Because services are heterogeneous across time, organizations, and people, ensuring consistent service quality ischallenging. Quality actually depends on many factors that cannot be fully controlled by the service supplier, such asthe ability of the consumer to articulate his or her needs, the ability and willingness of personnel to satisfy thoseneeds, the presence (or absence) of other customers, and the level of demand fo he service.

Perish ability and Fluctuating Demand

Perish ability refers to the fact that services cannot be saved, stored, resold or returned. A seat on an airplane or in arestaurant, an hour of a lawyers time, or telephone line capacity not used cannot be reclaimed and used or resold at

a later time. This is in contrast to goods that can be stored in inventory or resold another day, or even returned if theconsumer is unhappy.


A primary issue that marketers face in relation to service perish ability is the inability to inventory. Demand forecastingand creative planning for capacity utilization are therefore important and challenging decision areas. The fact thatservices cannot typically be returned or resold also implies a need for strong recovery strategies when things do gowrong. For example, while a bad haircut cannot be returned, the hairdresser can and should have strategies forrecovering the customers good will if and when such a problem occurs.

Services Marketing Management

There are a number of areas of marketing management which do have special significance for services marketing. It

is worth commenting on some of those aspects, as they are important to developing an awareness of problem andkey issues in services marketing.

Productivity and quality

In striving to gain and maintain competitive advantage, both productivity and quality are of key importance. However,the nature of services implies that it is difficult to avoid a trade-off situation, when improvements in service productivitycan lead to sacrifices in the level of quality. This is most sensitive in services marketing where people are the servicedelivers. If a bank cashier or travel agent needs to process customers more quickly to improve productivity, how canorganisatoins ensure that there is not resulting drop in quality?

Service quality is measured on two levels:

Technical quality the overall efficiency with which a bank handles its customer accounts in terms of promptstatements, rates of interest offered and so on.

Functional quality the way the service is actually delivered; this includes personal courtesy, the serviceenvironment in terms of comfort and dcor, the customers own role.

The importance which is attached to functional and technical quality depends on the type of service, and the benefitsought by the consumer.

Service Marketing Triangle

A useful way to conceptualize the questions the decisions that need to the made is presented in the servicesmarketing triangle shown in Figure 1. The trainable suggests that there are three types of marketing that must besuccessfully carried out for a service organization to succeed, and that all of them revolve around making and keeping

promises to customers.

On the right side of the triangle are the external marketing efforts that the firm engages in to set up its customersexpectations and make promises to customers regarding what is to be delivered. Anything that communicates to thecustomer before service delivery can be viewed as part of this external marketing function. In service firms there are

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Company

(Management)

Internal Marketing

enabling the promise

External Marketing

setting the promise

Employees CustomersInteractive Marketing

delivering the promise


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many factors that communicate toe customers beyond traditional elements of advertising, special promotions, sales,and public relations, for example, the firms personnel and the physical facilities themselves.

On the bottom of the triangle is what has been termed interactive marketing, or what some refer to as real-timemarketing. Here the actual service delivery takes place-the firms employees interact directly with customers. It is atthis point that the promise is delivered ( or nor delivered). Having a positive link between what is promised through theexternal marketing in the world is useless if promise cannot be kept.

The left side of the triangle suggests the critical role played by internal marketing, which enables employees to keep

the promises that have been made to customers. Internal marketing refers to the activities the firm must carry out totrain, motivate, and reward its employees. unless service employees are able and willing to deliver on the promisesmade, the firm will not be successful in keeping its promises and the services marketing triangle will collapse. Internalmarketing hinges on the assumption that employee satisfaction and customer satisfaction are inextricably linked.

What the triangle implies is that all three sides are critical to successful services marketing and management, thatwithout one of the sides in place the triangle, or the total marketing effort, cannot be supported. Each side representssignificant challenges for most service business, and as we proceed through the text we will find approaches andstrategies for dealing with all three.

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Lesson 2

Classification of Services

The underlying objective in any service classification scheme is to get a deeper understanding of the service product.Despite the diversity in the range of service products it is possible to classify and explore them on the basis of certainfactors.

There have been more than sixteen studies regarding the classification schemes. Naturally, some are worthwhile in

developing marketing strategies, while others suffer shortcomings. Christopher Lovelock identifies certain issues asimportant in the classification of services. He points out that

Service industries continue to be dominated by operations orientation, with the service managers insistingthat their tasks and challenges in their industry is unique and have nothing in common with those from otherservice industries;

A managerial mind set evident in many service sectors argues that the marketing of a service industry hasnothing in common with the marketing of another service industry. For example, the marketing of an airlinesservice has nothing in common with marketing of a banking service or a financial service;

Classification schemes should offer strategic marketing insights so as to have managerial value. Any othersimple classification would be insufficient.

Payne identifies a wide range of factors which are used in various classification schemes. They are

Type of service,

Type of seller,

Type of purchaser,

Demand characteristics,

Rented versus owned services,

Degree of intangibility,

Buying motives,

Equipment based versus people based,

Amount of customer contact,

Service delivery requirements,

Degree of customization and

Degree of labour intensity

A simple form of classification is to list out the service industries, like transportation, banking, health care, education

etc. obviously, such listing are not helpful to identify the features relevant to the marketing of services. Recentresearchers have sought to classify the services in a more meaningful manner that give insight into the strategicdimensions of services marketing.

Various classification schemes, clubbing various groups of services that share marketing commonalities, are reliedupon by good marketers to gain strategic marketing insights. The underlying aim for such classification scheme is togain a deeper understanding of the service product. Service products are also very diverse. They include services likeentertainment, health services, education, legal services, management consultancy, accounting, travel etc. inspite ofsuch diversities, the services can be classified and on the basis of some criteria they can be explored to provide adeeper insight into the nature of service.

Kotler and Station

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According to Kotler, service may be equipment based. The service may meet a personal need or a business need,according to the difference in their objectives and the ownership. The objectives may either be for profit on nonprofitand the ownership may be private or public.

Stanton also lists a classification of services as follows:

1. Housing,

2. Household operations like utilities, house repairs, repairs or equipments in the house etc.,

3. Recreation,

4. Personal care like laundry, beauty care etc.,

5. Medical and other health care,

6. Private education,

7. Business and other professional services,

8. Insurance and financial,

9. Transportation and

10. Communication

Lovelocks Classification Schemes

Obviously the classification schemes proposed by Kotler and Stanton appear to be simple. To understand the natureof service businesses and the extent of common characteristics shared by different services businesses, Lovelocksclassification systems provides a helpful framework. The marketing insights obtainable from Lovelocks classificationschemes, mentioned below, are worth discussing.

Nature of the service act

In this scheme, the nature of the service act, i.e. intangibility etc. and the recipients of the services are considered. Ithas wide dimensions and considers how the customer presence, physically or mentally, is required during the

services delivery and the benefits gained by the customer. It also considers how the customers changes on receipt ofthe service. It leads to the consideration of location and scheduling convenience for the presence of the customer toutilize the service. It also provides marketing insights as to the restructuring of the service activity to standardize it in away providing convenience to the customer in terms of service delivery and to the service provider.

Relationship with customer

This classification matrix contrasts the nature of service delivery and ascertains whether there is a formal relationshipbetween the customer and service marketer. As knowledge of customers identities and addresses is grained to meetout specific offers to specific customers by targeted direct marketing, market segmentation seems to become easierand the customers loyalty is expected to be stronger. Further, this scheme provides insights into trade off betweenpricing and usage rates. In the absence of personal relationship, services may be provided by continuous delivery orby discrete transactions. In discrete transaction where the customer pays for each specific service being provided, thecustomers are often anonymous and there will be a lack of information about them and so the market opportunity is

restricted. Where no formal relationship exists the important issues for marketers would be established some form ofmore enduring relationship.

Customization and judgement in service delivery

In this classification, the degree of customization of service characteristics is contrasted with the degree of judgementrequired by customer contact staff. A decision regarding the extent to which the service offer should be customized isvery important to the service marketers. They have to balance the cost of custom made service with a standardservice and so the service marketers often seek to limit the number of options while deciding the extent ofcustomization. In professional service firms, customer contact staff may exercise a high degree of judgement or mayexercise-relatively little judgement establishing a series of routines and procedures.

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Nature of demand and supply for services

This classification contrasts the nature of demand fluctuation over time and the extent to which the supply isconstrained. Since services cannot be product for strong, the business may be lost to another service provider if thedemand exceeds the supply of any particular service. This classification is useful to contrast different supply demandsituations which affects all service marketers. It emphasizes in establishing demand patterns overtime, and tounderstand their existence. Then development of strategies are considered to help change patterns of demand so asto make them more favourable to the service provider.

Method of service delivery

The fifth classification focuses attention on examination of the availability of service outlets, ranging from single tomultiple site, and the nature of the interaction between the customer and the service provider. Distribution issuesrealtiong to the method of delivery are focused upon. Customer convenience is the important consideration deliveryare focused upon. Customer convenience is the import consideration here.

These classification systems of Lovelock provide frame work for service marketers to consider both the nature of theirbusiness and to what extent they share common characteristics with other seemingly unrelated service business.

Other classifications

Equipment based and labour based: Classification of services, according to Thomas, can be on the type of equipmentor people rendering the service. In equipment based services, the equipments or the machines being utilized for

service position are important while people play a secondary role. Some of the examples are automatic vendingmachines, automatic car washes and movies. In such services, the equipments may be operated automatically or byunskilled or skilled labour. In labour based services, the human element is primary in the production and delivery ofservices. The equipments or machines, if any, are secondary. This type of services include counselling, legal advisoryservice, catering and hair dressing service. There are services in which both he equipments and labour have equalimportance as in the case of hospital.

Convenience Shopping Specialty Services According to Nickles services can also be classified as beingconvenience shopping and specialty services. Evidently, the buyer behaviour will be different requiring specialmarketing strategies. Convenience services are those which the customer usually purchases frequently, immediatelyand with the minimum of efforts. Dry cleaning services, and shoe repairing services are examples of convenienceservices. Convenience of availability with minimum efforts determines the buying decisions. The user is not preparedto go to any efforts to secure a supply and will accept a substitute often compromising on price and quality. So the

marketer must secure a widest possible availability if he is to maximize sales.

In contrast to the convenience services, shopping services are purchased after comparing quality and price. Asinformation regarding the service product is important for customer comparisons, a marketing strategy has to beevolved providing enough information to the customer. Word of month is also an important factor in the selection ofshopping services. Shopping service include banks, insurance companies, physicians and beauticians.

In the case of specialty service the customer puts in special purchasing efforts. The customers will be ready to traveldistances and pay a premium for the services. Specialty services include medical specialists and legal advisors. Asthe customer is willing to take special purchasing efforts the marketing strategy will be focused on service product andbuilding customer satisfaction. According to Hill the services may be classified as follows:

Affecting person (eg. Health) or affecting goods (eg. Cargo maintenance),

According to the permanent or temporary efforts,

According to the reversibility or irreversibility of those effects,

Physical effects or mental effects and

Individual or collective services.

Lesson 3

Relationship Marketing

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The term relationship marketing was introduced during the 1980s and is a relatively new and evolving concept.Relationship marketing (or relationship management) is a philosophy of doing business, a strategic orientation, thatfocuses on keeping and improving current customers, rather than on acquiring new customers. This philosophyassumes that consumers prefer to have an ongoing relationship with one organization that to switch continuallyamong providers in their search for value. building on this assumption and the fact that it is usually much cheaper tokeep a current customer than to attract a new one, successful marketers are working on effective strategies forretaining customers.

According to Leonard Berry: Relationship marketing is the attraction, maintaining and . in multi service organisatoin

enhancing customer relationships. The marketing mindset is that the attraction of new customer is merely thefirst step in marketing process. This view has three complementary perspectives:

The nature of the way the companies views their relationships with customers is changing. emphasis ismoving from a transaction focus to a relationship focus with the aim of long-term customer retention.

A broader view is emerging of the markets with which the company interacts. In addition to customer marketsthe organization also becomes concerned with the development and enhancement of more enduringrelationships with other external markets including suppliers, recruitment, referral and influence, as well asinternal markets.

A recognition that quality, customer service and marketing activities need to be brought together. Arelationship marketing orientation focuses on bringing the three elements into closer alignment and ensuring

their combined synergistic potential is released.

Customer Markets

Customers must, of course, remain the prime focus area for marketing activity. But the focus need to be less ontransactional marketing and more on the building of long-term client relationship. These two approaches can becontrasted as follows:

Whilst a relationship focus has been fully adopted by some service businesses, it is noticeably absent in others.Unfortunately, many companies take the transactional route. The investment made in winning a new customer, oncesuccessful, is immediately transferred to the next prospect. Little effort goes into keeping that customer.

Transaction Marketing Relationship Marketing

1. Focus on the single sale 1. Focus on customer retention2. Orientation on product features 2. Orientation on product benefits

3. Short timescale 3. Long timescale

4. Little emphasis on customer service 4. High customer service emphasis

5. Limited customer commitment 5. High customer commitment

6. Moderate customer contact 6. High customer contact

7. Quality is primarily a concern of production

7. Quality is the concern of all

Firms are now starting to recognize that existing customers are easier to sell to and are frequently more profitable.However, whilst manages intellectually concur with this view, much greater emphasis and resources are oftendevoted to attracting new customers, and existing customers are taken for granted. It is only when some breakdownin service quality occurs, and the customer levels or is on the point of defection, that the existing customer becomesimportant.

=== Advocate ===

=== Supporter === Emphasis ondeveloping and

enhancingrelationships

(customer keeping)=== Client ===

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Emphasis on newcustomers (customer

catching)

=== Customer ===

=== Prospect ===

Fig. 3.1 The relationship marketing ladder of customer loyalty

This is not to say that new customers or clients are not important indeed they are vital to the future most services

businesses. Rather, a balance is needed between the effort directed toward existing and new customers. Thefollowing figure shows the relationship marketing ladder of customer loyalty which emphasizes this point. It isapparent that may organizations put their main emphasis on the lower rungs of identifying prospects and attemptingto turn them into customers rather than on the higher relationship- and ultimately more rewarding rungs of turningcustomers into regular clients and subsequently into strong supporters and eventually active advocates for thecompany and its products. But moving customers up the loyalty ladder is not simple. Organizations need to knowexplicitly and in depth exactly what each customer is buying and every customer is different and how it cancontinue to offer additional satisfactions that will differentiate its offering. Essentially, the only way to change someonefrom customer to advocate is to replace customer satisfaction with customer delight by offering service quality thatexceeds expectations.

Goals of relationship marketing

The goal of customer enhancement suggests that loyal customers can be even better customers if they buy more

products and services form the company over time. Loyal customers non only provide a solid base for theorganization, they may represent growth potential.

Benefits of customer retention

Both parties in the customer/ firm relationship can benefit form customers retention. That is, it is only in the bestinterest of the organisation to build and maintain a loyal customer base, but customers themselves also benefit formlong-term associations.

Benefits for customers

Assuming they have a choice, customers will remain loyal to a firm when they receive greater value relative to whatthey expect from competing firms. Remember that perceived value is the customers overall assessment of the utilityof a product based on perceptions of what is received and what is given. Value represents a trade-off for theconsumer between the give and the get components. Consumers are more likely to stay in a relationship when thegets (quality, satisfaction, specific benefits) exceed the gives (monetary and non-monetary costs). When firms canconsistently deliver value from the customers point of view, clearly the customer benefits and has an incentive to stayin the relationship.

In addition to the specific inherent benefits of receiving service value, customers also benefit from long-termrelationships because such association contribute to a sense of well-being and quality of life. Building a long-termrelationship with a service provider can reduce consumer stress as initial problems, if any, are solved; special needsare accommodated and the consumer learns what to expect. This is particularly true for complex services (e.g. legal,medical, education), for services where there is high ego involvement (e.g. hair styling, health club, weight-lossprogram), and for services that require large investments (e.g. banking, insurance). After a time the consumer beginsto trust the provider and to count on a consistent level of quality service.

Human nature is such that most of the people would prefer not to change service providers, particularly when theyhave a considerable investment in the relationship. If the service provider knows he consumers, knows theirpreferences, and has tailored services to suit their needs over time, then changing providers would mean educating anew provider on all of these factors.

Most consumers (whether individuals or business) have may competing demands for their time and money and arecontinually searching for ways to balance and simplify decision-making to improve the quality of their lives. When theycan maintain a relationship with a service provider, they free up time for other concerns and priorities.

In some long-term customer/ firm relationships a service provider may actually become part of the consumers socialsupport system. For example, hairdressers often serve as personal confidents. Less common examples includeproprietors of local retail stores who become central figures in neighborhood networks; the restaurant manager who

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knows his customers personally; the private school principal who knows an entire family and its special needs. Thesetypes of personal relationships can develop for business-to-business customers as well as for end-consumers ofservices. The social support benefits resulting from these relationships are important to the consumers quality of life(personal and/ or work life) above and beyond the technical benefits of the service provided.

Benefits of the organizations

Increasing purchases: As consumers get to know a firm and are satisfied with the quality of its services relative to thatof its competitors, they will tend to give more of their business to the firm. And as customers mature (in terms of age,

life cycle, growth of business), they frequently require more of a particular service.

Lower costs: There are many start-up costs associated with attracting new customers. They include advertising andother promotion costs, operating costs of setting up accounts and systems, and the time costs of getting to know thecustomer. Sometimes these initial costs and outweigh the revenue expected from the new customer in the short term.

A prime example occurs in the insurance industry.

Free advertising through word of mouth: When a product is complex and difficult to evaluate, and there is risk involvedin the decision to buy it as is the case with many services consumers most often look to others for advice onwhich providers to consider. Satisfied, loyal customers are likely to provide a firm with strong word-of-mouthendorsements. This form of advertising can be more effective than any paid advertising the firm might use, and hasthe added benefit of reducing the costs of attracting new customers.

Employee retention: an indirect benefit of customer retention is employee retention. It is easier for a firm to retain

employees when it has a stable base of satisfied customers. People like to work for companies whose customers arehappy and loyal. Their jobs are more satisfying and they are able to spend more of their time fostering relationshipsthan scrambling for new customers. In turn, customers are more satisfied and become even better customer.Because employees say with a firm longer, service quality improves and costs of turnover are reduced, adding furtherto profit.

Lifetime value of a customer: If companies knew how much it really costs to lose a customer, they would be able toemake accurate evaluations of investments designed to retain customers. One way of documenting the monetary valueof loyal customers is to estimate the increased value of profits that accrue for each additional customer who remainloyal to the company rather than defecting to the competition.

A somewhat less complex approach to understanding the life-time value of a customer is simply to multiply out thecustomers average money value purchases over the average lifetime of the customer in a particular industry. The

numbers can soon become very large. These relatively simply calculations can be used to assess at leastpreliminarily the lifetime value of customers in a variety of industries.

A more complex calculation would attempt to estimate the money value of all the benefits associated with a loyalcustomer, not just the long-term revenue stream. The value of word-of-mouth advertising, employee retention, anddeclining account maintenance costs would also enter into the calculation.

Given the many benefits of ling-term customer relationships, it would seem that a company would not want to refuseor terminate a relationship with any customer. But all relationships may not be beneficial, and that every customer isnot right all of the time.

A company cannot target its services to all customers, some segments will be more appropriate than others. It wouldnot be beneficial to either the company or the customer for a company to establish a relationship with a customerwhose needs the company cannot meet.

Similarly, it would not be wise to forge relationships simultaneously with incompatible market segments. In manyservice business (e.g. hotels, tour package operators, entertainment, education), customers experience the servicetogether and can influence each others perceptions about value received. Thus, to maximize service to coresegments an organization may choose to turn away marginally profitable segments that would be incompatible.

In the absence of ethical or legal mandates, organizations will prefer not to have long-term relationships withunprofitable customers. Some segments will not be profitable for the company even if their needs can be met byservices offered. This may be the case when there are not enough customers in the segment to make it profitable todevelop a marketing approach, when the segment cannot afford to pay the cost of the service, or when the projectedrevenue flows form the segment that would not cover the costs incurred to originate and maintain the business.

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At the individual customer level, it may not profitable for a firm to engage in a relationship with a particular customerwho has ban credit or who is a poor risk for some other reason. Retailers, banks, mortgage companies, and credit-card companies routinely refuse to do business with individuals whose credit histories are unreliable. While the short-term sale may beneficial, the long-term risk of nonpayment makes the relationship unwise from the companys pointof view.

Customers behaviour such as verbal / physical abuse of employees, refusal to follow policies or laws were found toresult in dissatisfaction for the customer.

Although often these difficult customers will be accommodated and employees can be trained to recognize and dealwith them appropriately, at time the best choice may be not to maintain the relationship at all especially at thebusiness-to-business level where long-term costs to the firm can be substantial.

It should be noted that the best customers are not just the ones that generate the most profit. Especially in business-to-business settings, those customers that inspire the best ideas and innovations are also good relationshipcustomers even if they do not necessarily generate the highest profits.

Thus, while in general firms will seek to maintain strong relationships with customers because of the benefitsdiscussed, all customer segments and all individual customers are not necessarily good long-term relationshipcustomers.

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Lesson 4

Service Mission

Meaning

A mission is an enduring statement of purpose that provides a clear vision of the organizations current and futurebusiness activities, in product, service and market terms, its values and beliefs, and its points of differentiation fromcompetitors. A mission helps determine the relationships in each of the key markets with which the organisation

interacts, and provides a sense of direction and purpose which leads to better independent decision-making at alllevels of he organisation.

Such a mission statement should explicitly reflect the underlying beliefs, values and aspirations, and strategies of theorganisation.

During the last decade many services organisatoins have started to develop mission statements. Over this periodthere has been increasing recognition of the potential value of mission statements and some companies have spentenormous amounts of time and effort in developing them.

The development of an effective mission statement is especially important in services because of the need for focusand differentiation in service sector businesses. Given the intangibility of services and the significance of people inservice operations, organizations need to develop a clear statement of purpose or mission to ensure that theappropriate attention is directed at the key elements of their strategy.

Issues to be considered while developing a good mission statement for a services business:

This mission statement should be defined clearly.

The audience for a mission should be carefully considered.

It is necessary to understand in what business we are in.

A mission statement should be unique.

A mission statement should be market oriented.

Organizations mission statement should be defined clearly

In developing a mission statement the key is to achieve a balance between not being so narrow as to restrict growthopportunities and not being so broad as to lose focus. For example, some banks which diversified away from theircore business into stock broking and investment banking, with disastrous results, are not reconsidering their strategy.Similarly, a number of retailers that have diversified away from their core businesses, have been unprofitable in thesenew areas, and are now leaving them and consolidating back into their core retailing business. Hence theorganisation must be cautious while defining mission statement.

The audience for a mission should be carefully considered

Before formulating a mission statement the target audiences for the mission and thrie relative importance shouldbecomes dared. The sophistication of the mission needs to be reviewed taking into account the audience to whom itis addressed. The following figure outlines some of he key potential audience for admission and some of their

expectations, based on a consideration of stakeholders. A mission statements aims to capture the values and beliefsof the organization and provide guidelines for the way it should interact with its identified markets customers,internal employees, influence markets (including shareholders), suppliers, referral markets, as well as the recruitmentmarkets for employees.

It should be clear that a mission which attempts to address every one of these groups equally could becomeextremely long a and consist of general motherhood statements. In considering the various markets outlines abovethe company needs to consider how the company intends to serve each of them and to extent it wants to incorporaterecognition of them within the mission.

The decision on target audiences for the mission should be based on the context of the particular service firm and itscurrent position within the industry sector. Most senior managers in service firms consider that the key messages in

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the mission statement should be concerned primarily with providing a strategic direction for the organisatoin andmotivating and focusing its internal staff.

Fig.4.1

Influencers

1. Shareholders 2. Government and regulators

Returns

Growth

Compliance

Good corporate

Good corporate citizen

Credit rating

Compliance

Reliability

No surprises

It is necessary to understand in what business we are in

Consideration of the mission for a service organisation involves asking two interrelated questions: What business arewe in and what business should we be in? The mission should provide the target audience determined above,including employees and other relevant stakeholders, with a understanding of the strategic direction and scope of theorganization.The mission is a key vehicle for developing and reviewing the strategic market and service options. Inconsidering the basic purpose of the business it is essential that these strategic growth options are considered,otherwise the mission may simply be a series of elegant words used to reinforce the existing status quo. To do thiswhat should be done is to consider the service and market areas in which the organisatoin may wish to develop. Thefollowing figure outlines the product/ market options which the organisatoin needs to consider. These include the

following.

Market penetration

Market development

Product or service development

Diversification

Product / Services

16

CustomersGood service qualityTrustworthinessFair prices

SuppliersClear requirementsPartnershipLarge ordersReliable settlement

Internal staffRecognitionRewardsSecurityOpportunity for advancement

Employees (Potential)Job supply

Imager of first choice employerCourteous treatment

Referral SourcesReliabilityPerformanceRecognition

Reciprocation

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Present New

Market Penetration Product or Service Development

Market Development Diversification

Each section of the matrix in the above figure represents a core marketing strategy based on combinations of focuson existing markets, new markets, existing services and products or new services and products.

For the services firm four possible growth options are available. A first option involves expanding its markets position(market penetration) it can attempt to penetrate the existing market for its services by attracting customers away fromcompetitors, by increasing usage rates amongst existing competitors or by improving customer retention. A secondoption (service development) involves introducing new services to the existing market place. Many of the banks arefollowing this strategy by introducing a continuous array of new products including investment and insurance services.

A third option (market development) is to develop new markets for the existing services. This could involveidentification and attack of new market segments or may involve regional or global geographic expansion. The fourthoption (diversification) involves offering new services or products to new markets.

Developing a mission involves consideration of what services and markets the company wants to be in, not just those

in which it is involved at present. A mission can help identify a policy defining future business growth and probability,based on these four growth options.

A mission statement should be unique

A mission statement needs to be unique to the organisatoin under consideration: a key method of obtainingcompetitive advantage is to be different in a preferred way to a selected customer base. The mission statementshould articulate the point of differentiation and at the same time act as a framework for helping evaluate current andfuture activities. A mission statement should differentiate the company from other companies operating in the samesector and help to establish an organizations individuality and uniqueness.

It is essential to have a mission statement which is market oriented

It is particularly important to avoid mission statements that are product oriented, i.e. the mission should be defined in

a way that reflects customers needs rather than product features and attributes. Organizations such as airlines, hotelsand banks need to consider customer needs carefully and use this knowledge to make an input into the design of theservices that are offered.

A mission statement should articulate the right balance in terms of the desired long-term direction of the organisatoin,determine to whom the mission is addressed, indicate the services to be offered and markets to be served, be uniqueand focus more or customers needs rather than on the characteristics of the products and services offered.

Service Mission Statements

David ahs identified nine components of mission statements. These include the following:

1. Customerswho are they?

2. Products or services what are the firms major products or services?

3. Location where does the firm compete?

4. Technology what is the firms basic technology?

5. Concern for survival what are the firms economic objectives?

6. Philosophy what are the basic beliefs, values, aspirations and philosophical priorities of the firm?

7. Self concept what are the firms major strengths and competitive advantages?

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MarketNew

Present


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8. Concern for public image what are the firms public responsibilities and what image in desired?

9. Concern for employees what is the firms attitude towards its employees?

Example of service organizations mission statements

A good mission should to the following:

Define the purpose of the organisation.

Identify relevant services and markets

Assist in reviewing current and future strategic options.

Create a balance between narrowness and breadth

Differentiate the organisation from others in its sector

Be specific enough to have an impact on the behaviour of the organisation.

Be realistic, attainable and flexible.

Focus more on customer needs and their satisfaction than on the characteristics of the service themselves.

Reflect the core competencies of the organisation.

Permit close integration with corporate objectives, so that success in achieving the mission can be measured.

Be clearly understood and widely communicated through the organisation.

The nine components of the mission outlined earlier together with the list above, can act as a check-list whendeveloping a mission.

Once a satisfactory mission has been developed, it should be communicated within and where appropriate outsidethe organisation.

Andrew Campbell and his colleagues have identified the following four elements as important in a mission:

Purpose why the company exists

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DHL

Worldwide express*

Worldwide mission statement

DHL will become the acknowledged global leader in the express delivery of

documents and packages. Leadership will be achieved by establishing the

industry standards of excellence for quality of service and by maintaining the

lowest cost position relative to our service commitment in all markets of the

world.

The evolution of our business into new services, markets, or products will be

completely driven by our single-mined commitment to anticipating and meeting

the changing needs of our customers.


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Strategy the competitive position and distinctive competence.

Values what the company believes in.

Standards and behaviour the policies and behaviour patterns that underpin the distinctive competence andthe value system.

Degree of Sophistication

It is important that the degree of sophistication in the working used in a mission is appropriate to the organisationconcerned. The use of technical academic terms appropriate for a strategy consulting firms mission would be totallyinappropriate to a small company operating in road transportation.

Levels of Mission Statement

Just as companies have different levels of objectives, ranging from strategic objectives to tactical objectives andaction plans, a service organisation should consider to what extent it should develop mission or purpose statementsat lower levels. For example, a bank with diverse financial services operations could have a mission statement for thebank as a whole as well as individual missions for each business unit. Thus it might develop missions for retainbanking, international banking, investment banking and its insurance and stock broking activities. Many multi-business services organizations are in a similar position of needing to develop missions for their constituent parts. Itmay also be appropriate to have missions at individual functional levels.

Developing a Service Mission

The first point in developing a mission statement is to consider if the organisatoin is ready to proceed with the task. Anumber of different approaches can be used for the development of a mission.

A workshop approach

This typically takes place in the context of a strategy or marketing planning workshop with senior executives from theorganisation. A period is spent explaining the purpose and role of a mission statement and the different types ofmission that can exist at different levels. This is followed by syndicate exercises, where groups of about five peoplespend a sufficiently long period to produce a first draft mission. The missions fro a number of different syndicates arethen presented and the strengths and weaknesses of each are discussed in detail, leading to the eventualdevelopment of a mission statement.

T top team approach

Another approach is one which consists of boards of directors, with a group of upto eight people. The session startswith the senior management, or board, being asked the purpose of their business. Each member is asked to write hisor her view of he mission on a card. Significant variations are often found. After an appropriate period the missions onthe cards are collected and shuffled, and during a coffee break they are written up on large sheets of paper andpinned to the walls. The mission statements do not identify their authors. The terms is then invited to write a secondversion of the mission on a card and again these are collected and written on large sheets of paper which replace theones on the wall. At this point a more detailed discussion follows. After two or three attempts a good draft missionmay start to evolve, although in some cases more fundamental analysis may be needed.

This time devoted to the development of a satisfactory mission can be considerable. The development of a missionstatement can be assisted by an external consultant.

Once completed, mission statements change only less frequently. The emergence of a new opportunity, a decline inthe companys existing markets or a new technology offering a breakthrough in service delivery can create the needfor change. A mission should be sufficiently robust to last for some time but should be reviewed on an annual externalenvironment.

Lesson 5

Services Markets Segmentation

Market segmentation is the process of aggregating customers with similar wants, needs, preferences, or buyingbehaviour. Market targeting involves evaluating the attractiveness of the segments and selecting ones the firm will

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serve. In other words, segmentation is the analysis conducted about customers and targeting is the managerialdecision about whom to serve. Both of these are required for effective market positioning, which involves establishinghe competitive position for the service in the mind of the customer and creating or adapting the service mix to fit theposition.

Market segmentation is especially important for services in the current competitive marketplace. Service industriesare suffering from increasing competition both in the number of competitors and in the proliferation of serviceofferings. Market segmentation helps prevent the waste of valuable resources by directing effort into those areas thatwill help achieve success.

Service products are frequently not clearly differentiated. Market segmentation offers the opportunity of gainingcompetitive advantage, in a highly contested market, through differentiation. The market segmentation approachinvolves identification of the benefits which different homogeneous groups seek, allowing relevant features andrequirements to be determined and used as a source of service differentiation.

Different customers have different needs. A hotel which aims to satisfy the prestige executive market needs toconsider the specific requirements of this segment. These might include full secretarial and office facilities, conferenceamentities, twenty-four hour catering, a fitness facility and late check-out options. Successful marketing identifiesspecific needs and preferences for services, and then develops strategies to satisfy these preferences.

A single service or product cannot meet the needs of all customers, but it can meet the needs of a specific group ofcustomers. A service business should be positioned to serve particular segments of the attractive parts of the marketso that it can serve them effectively and produce the greatest profit.

The segmentation process, shown in the following figure is concerned to divide a heterogeneous follows four broadsteps:

The definition of the market to be addressed.

The identification of alternative bases for segmentation.

An examination of these bases and the choice of the best base or bases for segmentation.

The identification of individual market segments, an assessment of their attractiveness and the selection ofspecific target segments.

Once the market segment has been selected, the process of target marketing involves developing a positioning forthe target segments selected and then developing a marketing mix for each target market.

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Definition of Relevant Market

The definition of the relevant market to be addressed involves specifying the customer group to which the company isseeking to market its services. This can be a broad group such as retail customers for a supermarket in a givengeographic region, or a much more specific group which can be further segmented.

Successful market segmentation means satisfying the needs of existing and potential customers in a clearly definedmarket. This involves understanding customer attitudes, and customer preferences, as well as the benefits which aresought. Definition of the target market and its requirements is the first essential step in the segmentation process.

Bases of Segmentations

Market segments are formed by grouping customers who share common characteristics that are in some waymeaningful to the design, delivery, promotion, or pricing of the service. Common segmentation bases for customermarkets are demographic segmentation, geographic segmentation, psychographic segmentation and behaviouralsegmentation. Segments may be identified on the basis of one of these characteristics or a combination.

21

Definition of Markets

Identify alternatives bases for

segmentation

Select best base/s for segmentation

Identify and select market segments

Develop positioning for target segments

Develop marketing mix for each target

markets

Fig. 5.1 Services market

segmentation

Marketing

mix

development

Positioning

Process of

market

segmentation

Segmentation

Approaches

Consumer

characteristics

Consumer

responses

Demographic and

SocioeconomicsPhysiographic Geography

Benefits UsagePromotional

responseLoyalty Service

Fig 5.2


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Demographics and socio-economic segmentation

Demographic segmentation includes a number of factors including sex, age, family size etc. Socio-economic variablesmay also be considered here, including income education, social class and ethnic origins. Many retail stores targetdifferent customer group.

An interesting example of market segmentation is seen in the banking patterns of consumers based on the lifecycle ofthe household. Whilst other factors such as socio economic level are also important, the age and family compositionof the lifecycle concept are particularly valuable predictors of a households propensity to either save or borrow.

An analysis of the stages within the customer lifecycle determines what kinds of banking relationships are needed tomeet the demands of the household. These need change significantly from a bachelor who wants easy credit facilitiesand convenient transactions, young married requiring higher levels of credit facilities, through to older families at the

peak of their earning and spending potential, and then older people without children at home who have a higherpropensity to save. A financial institution can therefore direct various service offering to individuals based on theirstage within the lifecycle model.

Psychographic segmentation

This form of segmentation cannot be explained in clearly defined quantitative measures it is concerned with peoplesbehaviour and ways of living. Psychographic segmentation is concerned with analyzing lifestyle characteristics,attitudes and personality. Often these elements are examined in conjunction with demographic variables. Servicecompanies are increasingly starting to look at psychographic segmentation.

Geographic segmentation

Geographic segmentation divides customers according to where they live or work and correlates this with other

variables. This is appropriate where customer needs vary it different areas, or where local and regional trends favourparticular types of service offerings.

A geographic analysis is a relatively simple means of segmenting a market, it is frequently one of the firstsegmentation variables to be considered by a service firm Geographic segmentation dimensions are typically groupedinto market scope factor and geographic market measures.

1. Market scope factors include a consideration of where the markets to be served are located: this maybe local,national, regional or global. To be a major player in some service business requires a regional or globalpresence: airlines wishing to be significant players are recognizing this. Many airlines are seeking increasedscale of operations through mergers and strategic alliances.

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2. Geographic market measures include examination of population density, climate-related factors, andstandardized market areas. Geographic measures are especially important in the selection of specializedmass communications media. Most mass circulation media profile geographic coverage of standardizedmarket areas in detail as well as providing media circulation by type of reader and other variables.Geographic market measures are used to determine relative sales potential in different geographic areas.

Benefit segmentation

The segmentation variables listed above focus on the personal attributes of the customer. Segmentation can also be

carried out on the basis of the customers response.

Benefit segmentation assumes that the benefits that people are seeking from a given product or services are thebasic reasons why they buy the product. This differs from psychographic segmentation which focuses on who will buya product. Identifying a segment seeking a common benefit permits the service provider to develop a relevantoffering. For example, various benefits are sought within the retail banking market. One segment seeks large, wellknown banks which offer a full range of service for varying needs. Another segments looks for advantageous loanswith borrowing easily available at low interest. A third segment may seek high savings interest with quick service anda personal banking relationship. A fourth segment might seek a one-stop bank with a wide variety of services,convenient hours and quick service. A bank can direct its service to satisfying one or more of these segments andgain a reputation for offering a distinct package.

Benefit segmentation is applicable to almost all services as it focuses on the clearlying reasons for purchasing them.For example, within the education market consumers can be analyzed based on the primary benefits they seek fromthe education experience. An example of benefit segments used for categorizing prospective MBAs can be identifiedfrom a survey of candidates.

Usage segmentation

Usage segmentation focuses on the type and extent of usage patterns. Consumers are typically divided into heavyusers, medium users, occasional users or non-users of the service being considered. Many services marketers areconcerned with focusing on the heavy user segment, who may consumer many times more of the service than theoccasional user. This is the basis of many fast food restaurants who cater for high volume usage by providing speedy,low-cost food.Banks and building societies are concerned with heavy, medium, light and non-users of their services.They wish to understand the nature, behaviour and identity of heavy users and attract them to their bank.

Promotional response segmentation

Promotional response segmentation considers how customers respond to a particular form of promotional activity.This may include response to advertising, sales promotions, in-store displays and exhibitions. Users of mail ordercatalogues tend to be good users of credit cards and will have a higher response rate to other direct mail offerings.This information can be used by service companies to ensure that this segment receives frequent communication bydirect mail, thus building a relationship with the customer as well as obtaining a high response rate to promotions.

With loyalty segmentation customers are categorized according to the extent of the loyalty they exhibit to theparticular product or service being offered. Customers can be characterized according to their degree of loyalty in thechannels of distribution on outlets.

Some customers are very loyal to the services organisation they are currently with, even if they are not happy with theservice they are receiving. Customers are sometimes divided into four categories according to consumer loyaltypatterns, hard-core loyals (consumers who buy their brand all the time); soft-core loyals (who are loyal to two or

three brands); shifting loyals (who shift from favouring one brand to another); and switchers (who show littlesustainable loyalty to one brand). The underlying reasons for these different behaviour patterns need further analysis.

Segmentation by service

One area which has received relatively little attention is the consideration of how customers respond to varyingservice offerings. This may be considered a subset of benefit segmentation, but it is of sufficient importance to beaddressed separately. The various elements of customer service that can be offered, and possible differentiation interms of service levels within these elements, represent a considerable opportunity to design service packageappropriate to different market segments.

Segmenting markets by service involves addressing the following issues:

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Can groupings of customers be identified with similar service requirements?

Can we differentiate our service offering?

Do all our products require the same level of service?

The types of segmentation outlined above are illustrative of the main forms of segmentation used by servicescompanies. they are, however, by no means exhaustive. To a large extent the identification of segmentation basesinvolves and element of creativity. Those marketing services should constantly be considering alternative ways of

segmenting the market and seeking ways in which they can create differential advantage over their competitors. Thisstage of the segmentation process should result in the selection of the best base(s) for segmentation.

The segmentation process should result in one of four basic decisions being reached:

1. The service firm may be decide to target one segment of the market.

2. The service firm may decide to target several segments and so will develop different marketing mix plans foreach segment.

3. Management may decide not to segment the market bout to offer the service to he mass market. This may beappropriate if the market is very small and single portion would not be profitable. It also may be the case thatthe service company dominates the market so that targeting a few segments would not increase volume orprofit.

4. Analysis may show that there is no viable market niche for the service offering.

The relevance of market segmentation if now being increasingly recognized in the services sector. A number ofstudies have pointed to the importance of market segmentation. One study ranked problems in recognizing, defining,understanding and segmenting markets as the most important problem facing the senior executives surveyed.

Another survey ranked segmentation as the third most important marketing tool out of eighteen surveyed. However,despite the recognition of the importance of market segmentation, and the developments that have been made inmarket segmentation methodology, some service firms are still basing their marketing strategies and tactics on eitherabroad approach to the market, or a relatively unsophisticated approach to segmentation. May service firms need tobe more disciplined in their focus on their marketplace.

Segmentation is at the heart of marketing strategy and is concerned with the development of a market position that

minimizes competitions strengths and maximizes the strength of the service providers. Segmentation and theassociated steps of positioning provide the opportunity to tailor the service offered to better meet the needs of specificsegments.

Lesson 6

Positioning and Differentiation of Services

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Services firms are not identifying their key market segments and then determining how they wish consumers toperceive both their company and its products and services. Positioning is of particular significant in the services sectoras it places an intangible service within a more tangible frame of reference. Thus the concept of positioning stemsfrom a consideration of how an organisation wishes its target customer to view its products and services inrelationship to those of its competitors and their actual, or perceived, needs.

Positioning can be defined as follows:

Positioning is concerned with the identification, development and communication of a differentiated advantage which

makes the organizations products and services perceived as superior and distinctive to those of its competitors in themind of its target customers.

Positioning offers the opportunity to differentiate any service. Each service firm and its goods and services has aposition or image in the consumers mind and this influences purchase decisions. Positions can be implicit andunplanned and evolve over a period of time or can be planned as part of the marketing strategy and thencommunicated to the target market. The purpose of planned positioning is to create a differentiation in the customersmind which distinguished the companys services from other competitive services. It is important to establish aposition of value for the product or service in the minds of the target market, i.e. it must be distinguishable by anattribute, or attributes, which are important to the customer. These attributes should be factors which are critical in thecustomers purchase decision.

There is therefore no such thing as a commodity or standard service. Every service offered has the potential to beperceived as different by a customer. Buyers have different needs and are therefore attracted to different offers. It istherefore important to select distinguishing characteristics which satisfy the following criteria:

Importance the difference is highly valued to a sufficiently large market

Distinctiveness the difference is distinctly superior to other offering which are available.

Communicability it is possible to communicate the difference in a simple and strong way.

Superiority the difference is not easily copied by competitors.

Affordability the target customers will be able and willing to pay for the difference. Any additional cost of thedistinguishing characteristic(s) will be perceived as sufficiently valuable to compensate for any additional cost.

Profitability- the company will achieve additional profits as a result of introducing the difference

Each product or service has a set of attributes which can be compared to competitive offerings. Some of theseattributes will be real, others will be perceived as real. A company wishing to position itself should determine howmany attributes and differences to promote to target customers. Some marketers advocate promoting one benefit andestablishing recognition as being the leader for that particular attribute. Others suggests that promoting more than onebenefit will help in carving out a special niche which is less easily contested by competitors. The selection of thedifferentiating attribute(s) is most successful if it confirms fact which is already in the mind of the target market.Denying or fighting customers perceptions of different offerings in the market is unlikely to be successful. Asuccessful positioning strategy takes into account customers existing perceptions of market offerings. It determinesneeds which customers value and which are not being met by competitors services. It identifies which unsatisfiedneeds could be satisfied. The positioning strategy seeks to integrate all elements of the service, to ensure that theperceived position of the service is strongly reinforced.

Services have a number of distinguishing characteristics which have special implications for the positioning andselection of which attributes to emphasize. Three of the key characteristics of services, make positioning strategies ofparticular importance in marketing a service. These are the intangibility, the degree of variability or heterogeneity inquality of a given service, and inseparability the fact that the performance of a service will often occur in presence ofa customer.

Positioning can permit an intangible service bendfit to be represented tangibly. It can help the customer see anintangible benefit cleanliness; and this view can be reinforced by plastic covered glasses in rooms and a papercover over the lid of a lavatory stating sanitized for your protection. This helps the customer to associate cleanlinesswith the service offering, reinforcing the position that the hotel wishes to portray. Service companies often promotetheir reputations in an attempt to ad tangibility.

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Services are also highly variable and rely to a great extent on input from company employees for their production. Forexample, in a restaurant the waiter is the main point of contact with the customer and his service performance will bea major factor in the say the establishment will be judged. His performance will vary at different times, and there willalso be variance between his service and that of another waiter or waitress in the restaurant, as a result, the quality ofthe delivered service can vary widely.

Further, the quality of small elements of a total service offering may affect the received quality of the service as awhole. For instance, a poor check-out procedure from a hotel, may greatly affect the perceived quality of the overallexperience of staying on it. The customers perception of the quality of the service is therefore greatly affected by the

quality of the overall experience of staying in it. The customers perception of the quality of he service is thereforegreatly affected by the quality of the staff who are responsible for delivery. An advantage can be gained by providingbetter trained and more highly responsive people. A positioning strategy may therefore include the distinctivecharacteristic of employing better people.

Services tend to be inseparable and are characterized by the fact that they are performed in the presence of thecustomer.

The distinctive features of the services outlined above provides the basis for competitive positioning strategy.

Positioning can be considered at several levels:

Industry positioning the positioning of the service industry as a whole.

Organizational positioning the positioning of the organization as a whole.

Product sector positing the positioning of a range or family of related products and services being offered by theorganisation.

Individual product or service positioning the positioning of specific products.

Process of Positioning

Product positioning involves a number of steps including the following:

Determining levels of positioning

Identification of key attributes of importance to selected segments

Location of attributes on a positioning map

Evaluating positioning options

Implementing positioning.

Determining levels of positioning

The first step in positioning is to determine which level(s) service level, product sector level, corporate level are toreceive explicit positioning attention. Some examples will illustrate the choices that are made by some serviceorganizations. The level or levels of positioning to be undertaken are usually fairly clear out, although someorganisation, have placed different emphasis on these levels at different points in time.

Identification of attributes Once the level of positioning has been determined it is necessary to identify the specificattributes that are important to the chosen market segments. In particular, the way in which purchasing decisions aremade should be considered. Individuals use different criteria fro making a purchase decision of a service.

Location of attributes on positioning map

The positioning process involves the identification of the most important attribute and location of various companiesservices, for these attributes, on a positioning map. Where a range of attributes are identified, statistical proceduresexist for combining these attributes into aggregate dimensions. Such dimensions are referred to by various namessuch as principal components, multi-dimensional scales, factors etc. depending upon how the data were elicited andwhich statistical procedures were used. Usually two dimensions are used on positioning maps and these oftenaccount for a large proportion of the explanation of the customers preferences.

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Products or services are typically plotted on a two dimensional positioning man such as show in the following figure.The positioning map can be used to identify the position of competitors services in relation to the selected attributes.The analysis can be further developed by drawing separate positioning maps for each market segment. Customers ineach market segment may perceive the service and its benefits differently and different map will show these differentpositions.

Positioning maps can be based on either objective attributes or subjective attributes Maps can also use a combinationof objective and subjective attributes.

Evaluation positioning options

Strengthening current position against competitors to avoid head-on attack.

Identifying an unoccupied market position that was not filled by a competitor

Repositioning the competition.

Once a company had identified where it is positioned at present, it then needs to determine how to enhance orsustain its position relative to its competitors.

Criteria for good positioning

The positioning should be meaningful.

The positioning must be believable.

The positioning must be unique.

Implementing positioning and the marketing mix

How a company and service is positioned needs to be communicated throughout all of its implicit and explicitinteractions with customers. This suggests that all elements of the company, its staff, policies and image, need toreflect a similar image which together conveys the desires position to the market place. This means that a companymust establish a strategic positioning direction, which is followed through in all of its tactical marketing and salesactivities.

27

Attribute - 1

Services - AServices - D

Services - EServices - B

Services - C

Services - F

Attribute-2

Fig. 6.1 Illustrative positioning man


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A successful positioning strategy should make the service clearly distinguishable by features which are desirable andimportant to the target customer segment. This means that the positioning strategy should be examined from time totime to ensure that it does not become outdated and that it is still relevant to the target market segment.

The marketing mix is the key to implementing a positioning strategy. The design of the marketing mix to implementthe positioning must be based on the key salient attributes relevant to the target segment. These attributes should beidentified in the context of analysis of competitors, whose positions should be assessed to discover their vulnerability.

All the elements of the marketing mix can be utilized to influence the customers perception and hence the positioningof the product or organisatoin concerned. The marketing mix can be used to develop a coherent totality that creates

the positioning in the customers mind.

Importance of Positioning

Positioning involves both launching new brands into the marketplace (new brand positioning), and repositioning oldbrands. It is concerned with the differentiation of products and services and ensuring that they do not degenerate intoa commodity. To maximize its potential a company should position itself in its core market segments, where it isobjectively or subjectively differentiated in a positive way over competing offerings.

Positioning is particularly import for services in the market. As a result of competitive pressure the consumer isbecoming increasingly confused by the huge offering of services within each market sector. These offering arecommunicated by a vast number of advertising messages promoting different features of the services. The key to asuccessful positioning strategy is to promote the feature which the company is best and which exactly matches theneeds of the customer.

Because of intangibility and other features associated with services, consumers find that differentiation of servicescan be more difficult and complex. Successful positioning makes it easier for the customer to see a companysservices as being different from others and exactly what is wanted.

Positioning is a strategic marketing tool which allows managers to determine what their position is now, what theywish it to be and what actions are needed to attain it. The permits market opportunities to be identified, by consideringpositions which are not met by competitors products. It therefore helps influence both product development and theredesign of existing products. It also allows consideration of competitors possible moves and responses so thatappropriate action can be taken. The concept is often considered at the product level although it is also relevant at theproduct sector and organizational level. Positioning involves giving the target market segment the reason for buyingyour services and thus underpins the whole marketing strategy. It also offers guidelines for development of amarketing mix with each element of he it being consistent with the positioning.

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Lesson 7

Services Marketing Mix

The marketing mix concept is a well established tool used as a structure by marketers. It consists of the variouselements of a marketing programme which need to be considered in order to successfully implement the marketingstrategy and positioning in the companys markets. The discipline of considering the integration of the elements of themarketing mix, as well as the individual various elements, helps ensure that there is consistency within the marketingstrategy as a whole.

Essentially the marketing mix represents the factors which need to be considered when determining a service firmsmarketing strategy. For example, in marketing a law firm the following elements should be considered: What particularlegal services it offers to the target market segment(s) it has selected; the pricing strategy that is appropriate to thoseservices; how it will promote itself and communicate with its market; the processes it will adopt; the appropriateservice levels it will offer to its clients; the processes it will adopt; the appropriate service levels it will offer to itsclients; the delivery system of the legal services; and the type and expertise of the people who will be involved inproviding them.

The elements of the marketing mix for services include Product, Price, Place, Promotion, People, Processes andPhysical evidence. The underlying concept in developing each of these elements is to use them to support eachother, to reinforce the positioning of the product and to deliver appropriate service quality to achieve competitiveadvantage.

Service Product

The term product is frequently used in a broad sense to describe either a manufactured good or service. Thus goodsand services are two types of product. A service product denotes and activity or activities that a service provider offersto perform, which results in satisfaction of a need to want of predetermined customers. The services are offered to avariety of customers at several levels as individual service products. In fact customers are not buying goods orservices they are really buying specific benefits and value from the total of

413 marketing of services

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