UNIT II

Expanded marketing mix of services

Strategies to market manufactured goods usually address the four elements of
the marketing mix product, price, place and promotion. But the distinctive
characteristics of services, including the lack of inventories and customer
involvement in production, require attention to additional strategic elements. The 8
Ps model highlights eight strategic decision variables for managers of service
organizations, including: product elements (all components of the service
performance that create value for customers; place, cyberspace and time
(when, where and how to deliver services to customers); process (the method
and sequence in which an operating system works); productivity (how
efficiently service inputs are transformed into value-added outputs) and quality
(the degree to which customer needs, satisfactions and wants are met); people
(customers and employees involved in the delivery of service).
Classification of services based on skills required
Professional services: These services require the service provider to be formally
trained to deliver the service. The service rendered by a doctor. A pilot, an IT
consultant or a corporate trainer are examples of professional services.
Non-professional services: These services do not require the service provider to
undergo any training to deliver the service. For example, baby-sitting and
housekeeping are examples of non-professional services and can be delivered without
the need for formal training.
Classification of services based on business orientation of service provider
Services can be categorized based on the service providers purpose of doing business:
Not-for-profit organizations: These are the services in which the main objective of
the service provider is to serve society and not to make profits. For example,
government schools and social service organizations are not in the business to make a
profit.
Commercial organizations: These are services in which the main objective of the
service provider is to earn revenues and make profits. Airlines, insurance firms and
restaurants charge customers for the services they offer and attempt to continuously
improve their services and profitability.
Classification of service organizations in India
Large international corporations airlines, banking, telecom, hotel chains, freight
transportation
Locally owned small business restaurants, laundries, taxi services, internet services,
courier etc.
B-2- B services
Franchised service outlets-food, education
Additional three of Services Marketing Mix
People
All human actors who play a part in service delivery and thus influence the buyers
perceptions.
Namely the firms personnel, the customer, and the other customers in the service
environment.
How people are dressed.

Personal appearance.
Their attitude and behaviour
Importance varies from service to service
FM Broadcast
Person not visible
Dress not that critical
How he speaks is critical
Doctor performing surgery
How famous is he/she
Courtesy
Communication
How he encourages patient
Performance starts after patient is seated
Role of people vary from service to service.

Physical evidence
The environment in which the service is delivered and where the firm and customer interact.
Any tangible components that facilitate performance or communication of the service.
Tangible representation of the service such as brochures, letterheads, business cards,
signage, equipment.
PVR Anupam
Reservation counter
Well dressed employees
Computerised tickets
Security at entrance
Clean and tidy
Comfortable seats
We judge quality on above parameters
ABN Amro Bank-ATM
Location of ATM
Restricted entry
Air Conditioned
Attractive ATM layout
New currency notes
Attractive, well laid out brochures
Image of excellent service
Process
The actual procedure, mechanism, and flow of activities by which the service is delivered
the service delivery and operating systems.
Various types of service
Simple
Complicated
How the service is delivered?
PROCESS-ABN AMRO Bank
Cash withdrawl
Earlier visit to the bank
Present cheque
Debit your account
Go to cashier
Get cash
Problems
Customers have to visit bank

 Traffic / parking problems

Rush in branch
Waiting
Customers not satisfied.
How to improve the process?
AT PRESENT
Banking at home
Withdrawl request on phone
Bank employee delivers cash at home
No hassles of parking etc.
Process made easier
Customers more satisfied
We need to continuously improve processes to improve customer satisfaction.
Different classification schemes for services with suitable examples
Classification level
categories
Nature of organization
1) purpose: individual, business, both
2) Structure: profit, non-profit
3) Type: public, private
Nature of service
1) degree of tradeability: Embodied service, pure service
2) Service directed toward: Individuals, things
3) Degree of merchantability: High, medium, low
Customer relationship

Nature of demand
Service package
Delivery method

1) type of relationship: formal, informal

2) Degree of participation: customer must be present,
customer must start & finish service, and customer has to
finish service
1) level of demand: demand exceeds capacity
2) degree of fluctuation: wide, narrow, variable,
no fluctuation
1) no. of service & goods:2) units of service
3) degree of equipment base 4)degree of customization
1) availability of service
2) nature of delivery
3) type of consumption
4) allocation of capacity

Physical evidence
It is the environment in which the service is delivered & where the firm & the customer
interact, & any tangible commodities that facilitate performance or communication of the
service.
Role of physical evidence or servicescape in promoting service:
package
facilitator
socializer
differentiator
Guidelines for physical evidence strategy:
recognize the strategic impact of physical evidence
map the physical evidence of service
clarify roles of the servicescape
assess & identify physical evidence opportunities

 be prepared to update & modernize the evidence

work cross-functionality
Bases for Segmentation
The population in a certain region can be divided into groups on the basis of three factors as
discussed below:
Behavioural basis
We can estimate the population that fall into various behavioural segments like usage occasions,
benefits, user status, usage rate, readiness stage and attitude towards the service. These bases
have been detailed in Table below.
Behavioural Bases for Segmentation
1.Need
strong
moderate
light
none
2.Occasions
regular
special
3.Benefits
quality
service
economy
speed
first-time regular
4.User status
nonuser
ex-user
potential user
user
user
5.Usage rate
light
medium
heavy
shift loyalty
split between hard core
6.Loyalty status switcher from one brand
2 or 3 brands
loyal
to another
7.Readiness
intending
unaware
aware
informed interested desirous
stage
to buy
8.Attitude
toward the
enthusiastic
positive
indifferent negative hostile
service
Demographic basis
Using a census, we can estimate the population of the region that our business will serve in
various categories including age, gender and family size. The subdivisions for each of the basis
are given in Table below.
Demographic Bases for Segmentation
Age
Family size
Gender
Under 6 years
young single;
male
6-11 years
young married no children;
female
12-19 years young married youngest child under 6;
20-34 years young married youngest child 6 or over;
35-49 years
older married with children;
50-60 years
older married no children under 18;
60 + years
older single;
other
Psychographic basis
We can estimate the population belonging to various socio-economic classes, their lifestyle and
personality. Tables below list the socio-economic classes in terms of education and occupation in
urban and rural regions of India. Classes A1 and R1 have the highest purchase potential and E2
and R4B have the lowest purchase potential in urban and rural India respectively.
Socio-economic Classification of People in Urban India
Bases:
Illiterate School School SSC/HSC SSC/HSC Graduate/ Graduate/Post
Occupation/
upto 4
5-9
NonPost
Graduate
Education
years years
Graduate Graduate
(Professional)

(General)
Unskilled
Workers
Skilled Workers
Petty Traders
Shop Owners
Businessmen/
Industrialists
with:
* no employees
* 1-10
employees
* >10 employees
Self-employed/
Professionals
Clerical/
Salesmen
Supervisory
Level
Officers/ Junior
Executives
Officers/
Middle/Senior
Executives

E2

E2

E1

E2
E2
D

E1
D
D

D
D
C

C
C
B2

C
C
B1

B2
B2
A2

B2
B2
A2

B2

B1

A2

A2

A1

B2

B2

B1

A2

A1

A1

B1

B1

A2

A2

A1

A1

A1

B2

B1

A2

A1

B1

B1

B2

B1

A2

B2

B1

A2

A2

B1

B1

B1

B1

A2

A1

A1

Socio-Economic Classification of People in Rural India

1.Bases: Education / Type of House Pucca Semi-puccaKuccha
2.Illiterate
R4A R4A
R4B
3.Below SSC
R3A R3B
R4B
4.SSC/HSC
R2 R3A
R3B
5.Some College Education, Not
R1 R2
R3B
Graduate
6.Graduate/Postgraduate (General) R1 R2
R3A
7.Graduate/Postgraduate
R1 R2
R3A
(Professional)
Psychographic Bases for Segmentation
cultureSportsoutdoor1.Lifestyle
oriented
oriented
oriented
2.Personality
compulsive gregarious authoritarian ambitious
which
which
which
which
which which which
3.Media habits
newspapers magazines television
radio
online events billboards

PROCESS OF CHOOSING THE TARGET MARKET

Choosing the target market is related to, but not synonymous with market segmentation.
Segmentation is the means or the tool; choosing the target market is the purpose.
Segmentation can also be viewed as the prelude to target market selection.

Choosing the target market usually follows multi-level segmentation using different
bases.
Choosing the target market involves several other tasks in addition to segmentation.
looking at each segment as a distinct marketing opportunity
evaluating the worth of each segment (sales/profit potential)
Evaluating whether the segment is:
o Distinguishable
o Measurable
o Sizable
o Accessible
o Growing
o Profitable
Compatible with the firms resources
Examining whether it is better to choose the whole market, or the only a few segment,
and deciding which ones should be chosen.
looking for segments, which are relatively less satisfied by the current offers in the
market from competing brands
Checking out if the firm has the differential advantage // distinctive capability for serving
the selected segments
Evaluating the firms resources and checking whether it is possible to put in the
marketing programmes required for capturing the spotted segments with those resources.
Finally selecting those segments that are hat are most appropriate.
FACTORS TO BE CONSIDERED FOR TARGET MARKET SELECTION
Target marketing tailors a marketing mix for one or more segments identified by market
segmentation. Target marketing contrasts with mass marketing, which offers a single
product to the entire market. Two important factors to consider when selecting a target
market segment are the attractiveness of the segment and the fit between the segment and
the firm's objectives, resources, and capabilities.
Attractiveness of a Market Segment
The following are some examples of aspects that should be considered when evaluating
the attractiveness of a market segment:
Size of the segment (number of customers and/or number of units).
Growth rate of the segment.
Competition in ion in the segment.
Brand loyalty of existing customers in the segment.
Attainable market share given promotional budget and competitors' expenditures.
Required market share to break even.
Sales potential for the firm in the segment.
Expected profit margins in the segment.
Market research and analysis is instrumental in obtaining this information. For example,
buyer intentions, sales force estimates, test marketing, and statistical demand analysis are
useful for determining sales potential. The impact of applicable micro-environmental and
macro-environmental variables on the market segment should be considered.
Note that larger segments are not necessarily the most profitable to target since they
likely will have more competition. It may be more profitable to serve one or more smaller
segments that have little competition. On the other hand, if the firm can develop a
competitive advantage, for example, via patent protection, it may find it profitable to
pursue a larger market segment.

Suitability of Market Segments to the Firm

Market segments also should be evaluated according to how they fit the firm's objectives,
resources, and capabilities. Some aspects of fit include:
Whether the firm can offer superior value to the customers in the segment
The impact of serving the segment on the firm's image
Access to distribution channel required to serve the segment
The firm's resources vs. capital investment required to serve the segment
The better the firm's fit to a market segment and the more attractive the market segment,
the greater the profit potential to the firm.
Targeting strategies for a service marketer
Single segment strategies- target single segment, develop single
marketing mix & gain specialization.
e.g. software firm catering to logistic solutions only
Selective specialization targeting more than one segments
e.g. financial firm target retired persons & working women.
Product specialization single product or service to various segments e.g. conference
halls in hotels used for corporate meetings, birthday parties, get together, kitty parties etc
Market specialization- target segment remains same , company tries to
cater to different needs by offering products / services
e.g your institution various courses
Full mkt. coverage.various products & services for the entire market
E.g. hindi movie released with sub tittles abroad.
Environmental trends faced by service marketers
Focus on customer service and satisfaction: Companies of the past focused too much on their
internal being. Their capital expenditures were geared towards expansion of network, technical
superiority and market domination by size or scale. These companies failed to recognize that
unless customer needs are taken into account, these initiatives will not bring success or profit.
Focus on the service value: customers want value for their money and they expect company
offerings must be of prime quality at the least possible price. This is opposite to the principle of
business operations. Companies will need more money to execute first class service because it
requires investment on well experienced employees which eventually require higher salaries,
higher-end facilities, additional employee trainings which all boils down to an increase in
operational expenditures. Managers of service companies are tasked to design a service model
that are valuable to their customers but priced reasonably. In the past companies believed that as
long as they are big in terms of size, scale and resources, their perceived value is high. This is no
longer true today. The best judge of your companys value is your customers.
Focus on Information Technology: One of the best contributions of technology is information.
Technological advances lead to the availability of information in all sectors of the organization.
Examples of information are consumers purchasing behaviour, consumption pattern, and so on.
Information made the decision making process of top executives easy and later resulted to further
innovation and improvement on the companys strategic direction. Companies who failed to use
the information also failed to understand their customers.
Focus on Globalization: Globalization has swept companies from all over the world by storm.
Local markets are already saturated by local players and the best way to expand their sales is to
tap emerging international markets. However, internationalization approach is not as simple as
transporting your service to another country. If your companys service model is effective in your
local market, it is not a guarantee that it will be effective in other countries. Culture, social
behaviour and customs of the foreign countries must always be taken into account. Many
companies which jumped in the international brand wagon failed to adjust their service approach
when setting up a foreign franchise. In the fast food industry for example, Mc Donalds beef
burger may not be a hit in countries like India because cows are sacred in India. Some American

fast food chains that established franchise in the Middle-East or some parts of Asia changed the
ingredients of their food products and modify the service orientation of their staff in order to
adapt to the taste and customs of the locals.
These are just some of the emerging trends that managers of service companies must consider.
Companies that did not recognize these signs and failed to adapt to these trends have suffered
and send millions or billions of their resources into the trash bin.

Service Positioning
Positioning by Attribute service provider positions on attributes / feature e.g.Allahabad bank positions as oldest bank in India
However Positioning service strategy based on feature does not work too well.
Competitor positioning strategy positioned against competition .e.g. IIPM
positioned against IIMs- dare to think beyond IIMs.
Use / application positioning.positioned as best for a certain application SBI
positioned best for education loans.
Positioning by benefit to consumer: offer add on benefits as customer psyche is to
analyze the benefits e.g ICICI bank, Citi Bank ATMs & internet banking, bill
payments etc.
Positioning as an Expert
Positioning through guarantee
Category positioning category leader & becomes synonymous with the service e.g.
Essel world for entertainment.
Quality & price positioning-service is positioned as possessing a certain standard, at a
particular price. Eg: Taj Hotels high quality service at high price.
Positioning as a leader
Positioning through smart tag lines
User positioning positioned for specific target users India as destination for
tourists
Positioning through emotions

Environmental trends and emerging service markets

Environmental Trend
Consumer Affluence

Working Women

Greater life expectancy

Complexity of Life
New Youth
Corporate Crowd

Service Market
Dine out habits, travel, entertainment, clubs, repairs and
servicing, health care, carpet and dry cleaning, domestic
services, banking and investments, retailing, insurance
Domestic services, travel, nurseries, fast food restaurants,
financial services, marriage counseling, retailing, personal
care
Hospitals, nursing homes, entertainment, travel, resorts,
leisure services, banking and investments
Travel, legal aid, tax counseling, professional services,
airlines, courier services, insurance and banking
Entertainment, leasing, fast food, travel, picnic resorts,
educational institutions, tutorial aids, counseling, retailing
Hotels, advertising, legal services, recruitment services,
management consultants, health care, airlines, travel
booking, courier services, insurance, banking ,marketing

Product Innovation
Growing Product
Complexities

research
Repair and servicing services, training and education,
sharing services
Expert advice, specialists