Service Product Mix

Pricing of services
Service Promotion Mix
Place factor in services marketing
People in services
Service Process
Capacity planning
Capacity scheduling

 Formulating marketing mix for services is as

important as for products.

It is the set of tools that a firm uses to pursue

its marketing objectives in the target market

Service expectation levels of consumers are at

an all time high, hence formulation of service

marketing mix needs to be done on a
professional level, by experts

Offering quality services is not enough,Proper

promotion, sound pricing strategy, placement

decisions, hiring right staff and studying
consumers enhances service delivery process

This has resulted in broadening & modification of

the market mix i.e due to the inadequacy of the

4ps an extended mkt mix is devised

Expanded market mix for

services

An expanded marketing mix for services

Product
(service)

People
Place,
Place
&
cyberTime
space &
time

Customers
Customers
Customers

Promotion
Physical evidence

Process
Price
Price

People
All human actors who play a part in
service delivery and thus influence the
buyers perceptions: namely, the
firms personnel, the customer, and
other customers in the service
environment.
customer
service employees
other customers

Physical Evidence
The environment in which the service is
delivered and where the firm and
customer interact, and any tangible
components that facilitate performance
or communication of the service.

atmosphere
dcor, music etc.
equipment
facilities
uniforms

Process
The actual procedures, mechanisms,
and flow of activities by which the
service is deliveredthe service
delivery and operating systems.
service delivery systems
back stage
front stage
procedures
policies

Expanded Marketing
Mix for Services
PEOPLE

PHYSICAL
EVIDENCE

PROCESS

Employees

Facility design

Flow of activities

Customers

Equipment

Number of steps

Communicating
culture and values

Signage

Level of customer
involvement

Employee research

Employee dress
Other tangibles

Product mix
Product mix decides the magnitude of

success, intensity of profits and satisfaction

levels of the consumer

Factors influence the product mix based on

the type of service provided

Eg: Hotel service, quality of consumers

Transport services-emerging lifestyles,

levels of
urbanization
Personal care services- trends, tastes,
fashion

Service Product Mix

Service product is intangible and

perishable , inseparable &

heterogeneous in nature.
Conceptualization of the service product
Step 1-customer benefit concept

Step 2-service concept

Step 3-Service offer
Step 4-service delivery system

Consumers buy

not

Speed/comfort

An air ticket

Adventure/fun

Tour package

Bill paying convenience

Credit cards

Beauty

Beauty
treatments/cosmetics

Five Product Levels

Potential product
Augmented product
Expected product
Basic product
Core benefit

Levels of a service
Core product seat in a theatre, room in a
product
hotel, services in a bank
Expected product consumer perception

(speed in a bank, expertise/accuracy in

consultancy services, security in insurance)

Augmented product - additional attraction

provided to get an edge over competition,

this helps to keep marketing efforts pro
active

Potential product process of discovering

new ways to attract more customer, retain

existing and fight competition (24x7 call
centres, banks open on Sunday)

Designing of service offering

Three components are to be kept in mind when we

want to design the service offering.

Core service: The most basic component is the core

service and it addresses questions like What is the

customer really purchasing, What business are we
in? etc. It supplies the central problem solving
benefits that customers seek
Ex: Transport solves the need to move from one

location to another etc.

Core delivery process: The second component

concerns the core delivery process i.e - how the core

product is delivered to the customer, the customers
role in the process, how long the process is and style
of service offered.

Supplementary services: This is the third

component and it augment(increases) , facilitates
& enhances
The core service by making it easy to use and by

increasing the value and appeal.

Competitive advantage can be established through
the supplementary services when core product
reaches maturity.
Supplementary services provide the necessary
differentiation for success.
Each of the supplementary elements may require
their own delivery system and
Flowcharting offers an excellent way to under stand

& identify the many types of supplementary

services accompanying a core product

IDENTIFYING AND CLASSIFYING

SERVICES:

SUPPLEMENTARY

Supplementary services can be identified

as-

iin

for
ma
ti o
n

Hospitality

THE service flower

consultation

Safe keeping
Bil
li

Exception

r
e
d
r
O

ng
i
ta k

t
en
m
y
pa

ng

Delivery process of
supplementary services
reservations
Payment
options
Communication
facilities

parking

Check in
check out

Core

porter

Room service

meals
Theodoore Levitt

Service product decision

A service provider may start with a single

service, than provide a range of services

or develop a new offering or enter a new
market

These service product decision can be

made by using product/market matrix

called Ansoff matrix-

 Market penetration-no change in service or

marketstrategies to improve demand/market

share
a) Increase frequency-- introduce schemes
b) attract non-users
c) grabbing competitors share
Market developmentgeog, age-group, social

class

Diversificationnew service-new market

New service developmentnew service in

existing market

Managing services offering

Methods of New service development
Service improvements
Process line extension
Supplementary services/new service
Product line extension.
major innovation

Steps in new service

development
Idea generation

concept screening

testing the concept

design service & assess market potential

cost analysis

test marketing

final launch

* Need identification size of market

cost-benefit analysis introduction
of new product
* product life cycle

launch
growth
maturity
decline

Designing of new service

Re-engineering service processcost,

speed & productivity consideration

Use of flow charts, blue prints, review
alternative delivery methods, eliminate
supplementary services, rethink the
process
Using research to design new service-ask

customers what features & price will

create value

Factors to be noted while

developing service product
mix
Enrich peripheral services
Understand service quality expectations
Study behavioral profile of the consumers

(offering product is as important as

formulating it)

Take support of information technologies

Product for all (single product for all/offer

different specialisation in same product)

What is a Brand?

User

Culture

Attributes

Personality

Benefits

Values

Branding of services
Difficult to create a distinct brand image for

services due to lack of consistency in service

deliveryneed for the entire org to work
towards it.
Even so brand loyalty is high for services
Need for patronage in order to obtain

optimum satisfaction

Brand loyalty depends on

Past experience
Availability of substitutes
Cost of switching
Perceived risk involved in purchase of

services

Brand

Equity
Devoted
Devoted
toBrand
Brand
to

Valuesthe
theBrand
Brand
Values
(brandas
asfriend)
friend)
(brand
Satisfied &&Switching
SwitchingCost
Cost
Satisfied
SatisfiedCustomer
Customer
Satisfied
(noreason
reason to
tochange)
change)
(no
NoBrand
BrandLoyalty
Loyalty
No
(customerwill
will change)
change)
(customer

An Overview of
Branding Decisions
Branding
Decision

Brand
No brand

BrandSponsor
Decision

BrandName
Decision

BrandBrandStrategy Repositioning
Decision
Decision

Manufacturer
brand

brand
names
Blanket
family
name
Separate
family
names
Companyindividual
Individual
names

Line
extension
Brand
extension
Multibrands
New
brands
Cobrands

Distributor
(private)
brand
Licensed
brand

Repositioning
No
repositioning

Brand Strategies
Product Category
New

Existing

Line
Extension

Brand
Extension

New

Multibrands

New
Brands

Brand Name

Existing

Good Brand Names:

Distinctive

Suggest
Product
Qualities

Suggest
Product
Benefits

Lack Poor
Foreign
Language
Meanings
Easy to:
Pronounce
Recognize
Remember

Pricing of services
Research and expertise pertaining to the

pricing of services is found lacking

Pricing approaches developed for

products are applied to services too

The challenge is to determine a price at

which the service product is sold and also

gives profitable returns

The price must be acceptable to the target

customer & should accurately reflect on

the other elements of the marketing mix

Three differences between

pricing for goods &
services
Customer have limited

knowledge
regarding reference prices for
services

Price is an important signal of

quality
Monetary price is

not the only

relevant price to the customer

Pricing objectives
Survival
Maximization of current profit
Maximization of current revenue
prestige/ image
Patronage & user based objective

Foundation for setting service

price

Approaches/structure of
pricing

1. Cost based pricing - difficult as very

small portion of tangible goods sold, intangible

service difficult to price, profit considerations
also included after total cost is computed.
The formula for cost based pricing is

Price = direct cost + overhead cost + profit

margin
Draw back :Defining the unit in which service is
purchased
Cost are difficult to identify
Calculation of peoples time

2. Competition based pricing Does not

mean charging the same price as the

competitors but only using it as a base
for determining ones own price .
Used usually were services are almost
standardized or in case of oligopoly markets
Drawbacks :Competitors may not be the best parameter,
service standards/delivery processes may
differ.
Small firms may charge comparatively low
prices

3. Demand based pricing - It is associated with the customer rather

than the cost or competition

Relationship between price & demand

Drawbacks: Considers only the monetary aspect of

cost of service, however non-monetary

cost & benefit must be factored

Customer is willing to pay higher price

when he is able to save time & effort

4. Value based pricing

How customer defines value
Customers are weighing the perceived
benefits against the perceived cost they
will incur
Recognize trade off customers are willing
to make
Quantify non-monetary & monetary value
to the customer
People perceive different set of values,
identify one or more bundle that
addresses a segment.

 Perception of value for a consumer the

price determines the value attached by the

service provider & it should correspond
with the customers perception of value

There are various factors that influence

price to be charged:Range of service offered

Demand & capacity constraints
Kind of organization
Market structure
Competitors price

Pricing strategies for

capturing & communicating
value
Satisfaction based pricing Service guarantees, benefit
driven or flat rate pricing

Relationship pricing encourages a customer to expand

his dealings with service provider

Efficiency pricing- understanding , managing & reducing

cost . Providing value for money. Reducing monetary

burden to the consumers by providing best service
and a cost effective one. Efficiency through innovation,
making it difficult for competitors to imitate

Satisfaction based pricing

Service guaranteesa powerful reassurance, gives them a recourse-usually a
price reduction or a refund. It symbolizes
co commitmentenhances confidence
Benefit driven based on how it is used &
how it creates value. Service that directly
benefits customer. Customers feels more
satisfied & less uncertain, if the price of
a service is related to the benefit it
delivers
Flat rate pricingwhere service prices are
un predictable & cost are badly
managed

Relationship pricing
Long term contract price & non-price

incentives are offered to strengthen the

existing relationship & build a new one.

Price bundling selling two or more

service selling together. Provides various

benefits to the service provider.

Managing the perception of value

value is subjective, not possible to

assess the true value of services
especially for credence qualities, hence
necessary to communicate

 Reducing the related monetary & non-

monetary cost price paid also includes

non-monetary cost which is of 4 types
Time cost
Physical cost
Psychological cost
Sensory cost
Price discrimination (different prices for
different consumers), penetration,
skimming, follow the competitor, are also
few of the strategies for pricing effectively
used

Service Promotion Mix

Guidelines for an optimum promotion mix
Develop word of mouth communication

network (Customers refer friends etc)

Dont over-promise
Tangibilize the intangible factors
Feature working relationships between
customer and service provider
Propagate minimum/zero variance in
service delivery
Focus on service quality dimension
Position & differentiate the service via
the delivery process
Make the service more easily understood

Developing promotion
strategy
Select target market
Develop firms positioning strategy
Develop promotion/communication budget and

mix

Define communication objectives (in line with

PLC)

Divide communication objectives and target

audience for users, non users, etc.

Elements of promotion
mix
Advertising TV, radio, newspapers,

magazines, outdoor, POP etc.

Publicity
Sales promotion gifts, contests, discounts,

commission, fairs

Personal selling
Word of mouth
Telemarketing

Alternate techniques
Samples
Price/ quality discount
Coupons
Promotional offers
Future discount
Gift coupons, scratch cards

Place in

services

Place in services
The decision regarding location are the most

crucial and accessibility and availability form

an significant base for location decisions.
Accessibility refers to convenience with which

the service can be purchased & availability

refers to the extent to which the service is
obtainable.
Mainly considered in terms of location, time &

cost (channels involved in distribution)

Factors influencing choice

of location

Nature of interaction required

Nature of service
Customers needs & wants
Dependency of other services
Use of technology

The three possible interaction between

service provider & customer: The customer goes to the service provider
The service provider goes to the customer
Interact at arms length

Decision about location

Nature of services

Low contact services: remote sites, less

expensive
High contact services: accessibility, visibility,
customer convenience eg hospitals , airports
location constraints: operational
requirements eg airports, resorts with
certain special facilities, economies of scale
locating in multi purpose facilities; near
work places, airports
Multi stores ATM, subway, fast-food

Direct distribution
The inseparable, intangible and the

perishable nature of services makes direct

distribution an indispensible option for
ensuring quality and care to the customer
Advantages of direct distribution
Greater control & monitoring
Closer and amicable relationship with the

customers
Ensure confidentiality & secrecy
Elimination of certain costs
Effective internal & external communication

Channels decisions

Channel decision may be influenced by foll factors

Ease and accessibility for the customers
The added value or service or benefit they provide
The cost to the company & the margins they seek
Their reputation and reliability
Their expertise, ability and compatibility
The vital role that they play

Widely used distribution channels in service includeAgent or broker

Franchised or contracted service deliveries
Electronics

Primary channels in service

distribution
Franchises
Services
created by
company

Electronics
Agents/brokers

Target
customer

Decisions about

time

Today for some highly responsive service

operations the standard has become 24/7,

never the less there are many firms who resist
the trend of 7 days operation.

Factors that encourage extended operating

hours:Economic pressure from consumers

Changes in legislation
To improve asset utilization
Automated self service facilities
Availability of workers to work for extended
hours
Pressure from competition

Strategies for effective service

delivery

1. Control strategythe pre requisites for

employing control strategy are uniqueness
of the service offer, strong consumer
demand, high loyalty in target mkt
Approaches to implement control strategies: Measurement
Review
2. Partnering strategies learn about end
users, improve delivery quality,
communicate honestly
Approaches to partnering
Integration of goals
Participation & co-operation

3 . Empowerment strategy- effective in the

following context: Service principal is new to the market
Lacks sufficient power to manage the channel
The service intermediary is more talented
Approaches to empowerment: Provide needed support
Train the intermediary to deliver quality service
Enable to develop customer driven service

processes
Change to co-operative management structure

People in services
Includes both, employees and consumers -

moment of truth is dependent on both

Most demanding job in the service business

are the so called front line jobs, they play a

key role in anticipating customers needs,
building customer relations, loyalty,
customization, recovery etc

Importance can be summed up as i) they are

the core part of the product ii) they

represent the firm iii) they are the brand

Success depends on firms commitment to HR

Classification of
employees
High contact services hospitals, education
Low contact services -- post office, couriers
Professional service employees
Consumer service employees

Challenges faced & sources of

conflicts

Emotional labor
boundary spanning
Personl/role conflict
Organization/client conflict
Inter client conflict

Strategies for customer oriented

service delivery
Hire right people
i) competing for the best people
ii)hiring for service competence & service

inclination
iii) being the preferred employer

Develop/train employees to deliver services

as per standards
i) Training for technical & interactive skills
ii) Empowering employees-3 power tools
iii) Promoting team work

Provide needed support system to employees

 Retaining the best employees

i)Rewards & appreciation & recognization
ii)Including employees in companies vision
Study target market/potential & current

customers

* Observe service delivery process, keeping

people in mind
Give due importance to consumers feedback
Employ CRM identify, attracting,

differentiating and retaining customers

Physical evidence in
services
* Includes everything tangible, its like packaging
and acts like a silent salesman.

It plays a major role in shaping service experience

& delivering customer satisfaction, shaping first

impression & managing differentiation.

It applies to all types & sizes of service org, though

use of physical evidence is extensive in services

like hospitals, hotels and minimal in insurance
service, postal services, laundry services etc

Due to the intangibility physical evidence is used as

an vital quality proxy & firms take great pain to

signal quality & portray a desired image

 Service environment is also called as

servicescape

Many servicescape may be purely functional ,

as they are not the only one that shape

customers perception

Impact of service environment on buying

behavior: A) as an attention creating medium

B) as a message creating medium
C) as an effect creating medium

Designing a service env is considered an art &

takes considerable time & efforts. It requires

consideration about ambient conditions,
space, functionality etc

Types of physical evidence

Peripheral evidence:- those items that

confirm the service or are complementary to

the service

Essential evidence:-includes physical

elements integral to the service though may

not be always passed on.

Elements of physical evidence:Physical environment elaborate and lean

Communication
Price
Personnel
Corporate image & identity

Elements of physical env

Atmospheric
Sight-

size, layout ,lighting

color

Sound-

music , volume ,
pitch

Smell-

fresh, appetizing,
scented

Touch-

temp, comfort

Servicescape
Exterior design
Signage
Parking
Landscape
Surrounding env
Interiors
Equipments
Facilities
Layout , etc

Environmental dimensions

 Designing of service scape will depend

upon :The degree of interaction between the

customer and the employee, which can be as
follows:Self service customer performs most of the service
Interpersonal service where both are present
Remote service where there is little or no
involvement

On the degree of complexity

Low complex are referred to as lean service scape

and more complex as elaborate service scape,

elaborate service scape communicates heavily
through physical evidence

 Communication: Tangibilizing the service

Tangibilizing the message
Price:-it is a visible indicator of service

quality & level

Too low price
Too high price
Personnel- customer contact employees

are important in providing physical

evidence
Corporate image & identity

Significance of physical
evidence

Shaping first impression

Managing trust
Managing service quality
Managing differentiation
Re-positioning
Improving productivity

Service process
Service design should essentially satisfy

the customers as well as be operationally

efficient . It involves series of activities,
their sequence, tech, methodology &
procedures that have to be efficiently
performed for delivery of service.
Service process involves three concepts: A series of procedure
Creation & delivery of the service
Customer involvement & participation

Factors to be considered while designing

service process
Nature of service -divergence, complexity
Service location
Customer participation
Level of contact
The service itself:
a) Process based
b) Technology, machinery, equipment based
Basic concepts for designing a process
* Process should be broken into logical steps
* process should be flexible
* should include the concept of deviation

Two types of service

process
Line & flow operation
Job shop process

Decisions in service process planning

Basic technological decision
Specific equipment decision
Location & layout decision
Peoples decision
Operation structure
Process flow decisionblue print, flow
charts,
& benchmarks

It is the visual depiction of the process of service delivery,

the roles of the employees & customers & the visible
elements of the service. A picture that portraits the
whole service offering.

blue print as a key tool in

service design
It takes an holistic view about the delivery process

mechanism keeping in mind the customer

A blue print should address the following aspects:Service staff should understand what is required of them
Customer should have knowledge of his role
The time frame involved for each activity should be
stated

Components of service blue

print
Customer Action

Contact employees action

Support processes
Line of interaction
Line of visibility
Line of internal interaction

Components of blue print

Customer Action above the line of

interaction
Contact Employees actions a) between the line of interaction and line

of visibility.
b) between line of visibility and line of
internal interaction
Support processes behind the line of

internal interaction

Steps in developing a service blue

print
Understanding the service to be blue printed
Identifying all the key activities involved in

the service delivery & specify the linkage

between them
distinguish between the on stage from the
back stage activities
Service blue print should clarify interaction
between customer & the employees & see the
customers point of view
Identifying of support activities & fail(critical)
points
Giving physical evidence to each customer
action step
Create a script for the employees as well as
the customers which can help in identifying
potential problems or failures

Flow charting for services

Involves presentation of the process

visually & in sequence

Useful in defining the points in the

process where the consumer uses core

service & where he uses the
supplementary service
Next step would be to put all these

customer interactions linearly into a

sequence in which they occur

An overview of 7 Ps
Services

for

Managing demand & capacity

Fluctuating demand and perishable nature

of services poses a major challenge for

service organizations
This problem becomes especially prominent
for any capacity constraint service &
can be effectively solved by two ways: Adjusting capacity to meet the change in

the demand through proper operations &

H.R management

And by managing the level of demand

through devising effective marketing

strategies

Managing capacity
Tailoring of capacity level(stretching or shrinking)
Some capacity is elastic in absorbing extra demand
eg transportation services, hotels & restaurants by
switching to higher capacity or by extending the
time
Chasing demand strategy: Schedule down time during period of low demand
Use part time employees
Rent or share extra facilities & equipments
Cross train employees

Managing Demand
The problem is familiar it is either feast or

famine!
At any given point a service provider may face

one of the four conditions: Excess demand denied service, business lost
Demand exceeds optimum capacity:- quality may

suffer
Demand and supply are well balanced:- ideal
situation
Excess capacity- low productivity , low utilization.

Managing demand
First it is important to understand the patterns of

demand as there may be seemingly random

causes.

Several factors affect demand & thus service

provider should approach the situation in the

foll manner:1) Examine whether the demand follows the
predictable cycle or not-- & than try to identify
that underlining factor
2) Examine whether demand level changes
randomly
3) Examine whether it can be associated to a
particular segment & than divide demand by
market segment

Five common approaches to manage

Take no action
demand
Reduce demand
Increase demand
Inventorying demand by Queuing & reservation

strategies to manage demand

Using marketing mix elements to shape demand
Product variation
Modifying the timing and location of delivery
Pricing strategies
Communication efforts

 Inventorying demand through queuing &

reservation

Strategies to deal with Queuing system

a) Employ operational logic- configure queues

b) Establish a reservation process
c) Differentiate waiting customers on the basis of:-

Importance
Urgency of job
payment of premium price
Duration of service transaction

Capacity planning
Throws light on the quality and quantity of service needed in

future
Market conditions, likes, tastes, expectations of consumers

are studied
Their potential is rated
Lapses in current process are identified and corrective

measures taken
Firm tries to match the service offerings to the market

demand
Problems - Task of predicting behaviour of users is difficult
Unavailability of sufficient lead time in many cases

Capacity planning
important for
Staying in business
Fighting competition
Enhancing profits
Enhancing growth curve of the service firm
Preparing the firm for anticipated/sudden

changes in demand, quality of services, new

trends, changing tastes etc (Decreasing
response time)

Capacity scheduling
Based on capacity planning
It helps schedules capacity according to the

plan man, machines, money, materials

A detailed scheduling of need and usage of

above factors is essential on a time map

Helps optimum utilisation of time and other

resources

Reduces wastages

Case
A passenger with a confirmed ticket on early morning flight from
Ahmedabad to Mumbai could reach Ahmedabad only by 3.30 pm because
the train by which he was traveling to Ahmedabad got marooned due to
floods at night. He reached Ahmedabad traveling by special buses
arranged by the railways.
When he went to the airlines reservation office in town, the assistant
wanted to know whether he had any certificate from the railways
confirming all this. He did not. He was then told as per rules, he had to be
treated a No Show and he would get no refund on the earlier ticket. He
could buy a fresh ticket for either of the evening flights, both of which
were late and fully booked. He could take his chances at the airport. He
agreed.
The assistant then endorsed the morning ticket for either of the evening
flight (without any extra charges) and told him to go to the airport
immediately and enter his name among the wait-listed passengers. When
he reached the airport in about 30 minutes, he found that his name was
already among the wait-listed passengers. Apparently the assistant in the
office had called up and entered his name in the list