Service Product

Dr.P. Ganesan VIT Business School VIT University

 Service Offering benefits that customers derive from the purchase of services Offering
A prime good A tangible good with accompanying services A major service with accompanying a minor goods A prime service
e.g., repair services restore a damaged or malfunctioning machine or building to goodworking order Marketing Research consulting firm expert advice on market potential for e-learning software

The basic service product-the central problem solving benefit that customer seek
Core Expected Augmented Potential

The generic product together with minimal purchase condition which need to be met

The area which enables one product to be differentiated from another i.e., adding value to the core product

Consists of all potential added features and benefits that are / may be of utility of service buyers

POTENTIAL SERVICE (LOANER CAR)

AUGMENTED SERVICE (VEHICLE PICKUP/DROP)

EXPECTED SERVICE ( SHUTTLE SERVICE )

BASIC SERVICE

CORE SERVICE

Service Product / Offering

A core product bundled together with a variety of supplementary service elements
Product Level Core Product Customers view Customers generic need which must be met Library Services

Expected product

Customers minimal set of expectations

Augmented Product

Sellers offering over and above what customer expects or is accustomed

Potential Product

Everything that potentially can be done with the product that is of utility to the customer

Key steps in Service Planning

Service Offering - Planning

Market & Competitive Analysis

Corporate Objectives & Resources

Resource Allocation Analysis

Market Assets Statements

Customer portfolio Market Knowledge Marketing implementation skill Product line Positioning Strategies Reputation of brand(s)

Operating Assets Statements

Physical facilities Equipments Information technology HR Alliances and Partnerships Cost Structure

Service Marketing Concept

Benefit to Customer Core product Supplementary services Service levels and style Accessibility (where & when) User costs Price & other monetary costs Time and mental effort Physical effort Negative sensory experiences

Service Operations Concept

Nature of Processes People processing Possession processing Mental stimulus processing Information processing Geographic scope of operations Area(s) served Single site vs. multisite Facilities location Telecommunications Scheduling Hours/days/seasons of services Continues vs. intermittent If intermittent, what frequency Facility design and layout HR Leverage thro partnership & self-service Specific tasks assigned to front stage & backstage operations

Service Delivery Process

Marketing Assets Statement

Customer portfolio
Size of the market (number of the customers served), profile of the customers and cost & benefit or value to the customers

Knowledge of the market and competitors Product line a group of product product class sold to group of customers same channels given price range Positioning Strategies Market analysis, internal analysis and competitive analysis Reputation of Brand

 Operating Assets Statements exhibits

Can the organization afford to allocate the physical facilities, equipment, information technology, and human resources needed to market existing service products? Does an analysis of these operating assets suggest new opportunities to improve utliization in the market place? How can alliance and partnering be made, when firm is having lack of resources? Does an identified marketing opportunity promise sufficient profits to yield acceptable return on the assets used after deducting all relevant costs?

Facilitating and Enhancing supplementary Service Product

OrderTaking

Information Consultation Hospitality Safekeeping Exceptions

Payment Billing

Core

The Flower of Services

Identifying and classifying supplementary services

Facilitating supplementary services

Information Order taking Billing Payment

Enhancing supplementary services

Consultation Hospitality Safekeeping Exceptions

 FACILITATING SERVICES
Product Level
Information

Customers view
Customer need relevant information Customer Needs: site at which product is sold service hours prices usage information Customer needs documentation e.g., receipt from ATM withdrawals Applications Order Entry Reservation, if any

Customer ready to buy Ordertaking

Billing

Common, unless service is provided free accurate, legible or complete ~~~~ satisfied customers timely bill ~~~~ stimulate faster payment by the customer(s)
Ease and convenience of payment Availability of options of paying bill

Payment

 FACILITATING SERVICES
Product Level
Consultation

Customers view
Response to Customers questions on various information Dialogue on Customer Needs / requirements Customer needs: advice, personal counseling, management / technical consulting reflect pleasure at meeting new customers and greeting old ones when they return treat customers as guests assistance for the personal possessions

Hospitality

Safekeeping

Exceptions

customer may request such services that fall outside the routine of normal service delivery

Categories of Services
Major service innovations new core services / product that have not been previously defined
eBays online auction services

Major process innovations using new processes to deliver existing core products in new ways with additional benefits
E-learning instead of traditional learning

Service product-line extensions additions to the current product lines

Banks with retail insurance products

Service process-line extensions new ways of delivering existing products

net banking / mobile banking

 Supplementary services innovations adding new facilitating or enhancing service elements to an existing core services Accepting credit card payment in retail grocery store Service improvements modest changes in the performance in the current service products improvement in the core products or supplementary products

Style changes simplest changes

Introducing new cheque design Outfitting service Employees in new uniform

Service Life Cycle Concept

Helps in determining the appropriate marketing action

New Service Development Process

Generation of Ideas Screening Testing the concept Business analysis & evaluation Practical Development Market Testing Launch

Achieving Success in NSD

Market synergy
Products fit with existing image Superior advantage than competing product Strong ASS from firm Understanding about purchase decision behaviour

Organizational factors
Strong inter-functional cooperation and coordination

Market research factors

Conduct market research study prior to the development of new service A good definition of the product concept before undertaking field surveys

Planning and Branding Service Products

Service Product
Single or Bundle of output and also the ability to differentiate one bundle of output from another

Product Lines and Brands

Service Firms offer a line of products rather than single product
LIC of India

Each brand promises a distinct mix of benefits, targeted at a different customer segment

Offering a Branded Experience

Branding --- corporate level and product levels

4th P: PLACE
Dr.P. Ganesan Professor VIT Business School

Introduction - Distribution
Physical Goods Service: inseparable nature range of choice is not
open to service

What is Distributed in a Service Context?

Information and Promotion flow Negotiation flow Product flow

 Key Factors for Service Location

Service inseparability Perishability The role of customer as co-producer of the service Importance of geographical location as part of the service Target Markets

Service inseparability

Service Inseparability
Performance of Service on a person-to-person Degree of direct access influence the channel decisions

Perishability
Cannot be stored Role of intermediaries often form part of the service production and delivery process

Consumer - co-producer of the service

Many services requires extensive interaction of the consumer
The audience must go to the theatre The customer must study the menu and place an order

Customer needs must be given priority when making decision about when and where the service will be available

Customer needs & wants

Same service ~ various customer segments different types of channels
Branch Banking Mobile Banking Online Banking

Importance of the Geographical Location as part of the Service

services are dependent on the geographical location
Tourist destinations Health Spas located at real sources of spa water

 Services ~ attracts customers travel

for the service

Services ~ providers need to travel to

their customers
Decorating Plumbing & maintenance services

Specialist medical treatment Education & Training

The Role of Intermediaries

#1 Delegating Specific Service Elements
Supplier: core product with information, consultation and Exceptional Intermediary: Other supplementary services are delegated

Information OrderConsultation
Taking Payment
Core

Hospitality
Safekeeping

Billing

Exceptions

The Flower of Services

The Role of Intermediaries

#2 Franchising
Even delivery of the core product outsourced to an intermediary Information OrderConsultation To expand delivery of an Taking effective service concept Hospitality embracing all 7Ps to Payme Core multiple sites, without nt investment Safekeeping Billing Exception s

The Flower of Services

The Role of Intermediaries

#3 The Challenge of National Distribution in Large Markets Distance and the existence of multiple time zones Multiculturalism and multi-language

Direct Distribution no outside agents or intermediaries

Factors influencing choice on Direct Distribution
Company Resources / Company Objectives Type of Services

Geographic spread of the market

Legal and Political restrictions of foreign operations Levels of technical expertise or skill required to deliver the service satisfactorily Customer Preferences

Company Resources / Company Objectives

Structure & size of the organization distribution strategy Objective Faster growth network of intermediaries ~ a preferred alternative

Type of Services
Equipment based services operated thro network agents
e.g., Car rental, Vending Machine

People based services Direct distribution

Geographic spread of the Market

Locally based services Direct distribution Wider Market setting up branches or development of a network of intermediaries

Legal and Political restrictions of foreign operations

Restrictions forced to have local channels ~ Direct Distribution is impossible

Levels of technical expertise or skill required to deliver the service satisfactorily

People based services Direct distribution Sectors traditionally served operated thro network agents
e.g., travel agents, insurance brokers

Customer Preferences
Customer needs & wants

Advantages
Greater Control Customer service and satisfaction levels can be more easily monitored, as can service quality Management has direct control over all aspects of operations Internal and external communications can be handled more effectively Closer involvement with customers Direct contact with customers can allow databases to be established and used for target marketing Greater confidentiality can be maintained Commission costs and other fees are avoided

Issues involving Intermediaries

Channel conflict over objectives and performance
Conflict between: service provider and intermediaries; among intermediaries in a given area; different types of intermediaries used by a service provider Conflicts on: Goals, competing roles and rights, performance

Channel conflict over costs and rewards

Monetary agreements between service provider and service channel

Difficulty controlling Quality and Consistency across outlets

Inconsistency and lack of uniform quality when service provided through multiple outlets

Issues involving Intermediaries

Tension between Empowerment and Control
Service Providers desire to control every aspect of their intermediaries businesses Service Intermediarys independent ideas often subsumed by the practice and policies of the service provider

Channel Ambiguity
Doubt exist over the roles of the company and intermediary leading to confusion and conflict

Channel Selection / Intermediaries

Agents & Brokers

Agents
have specialist local knowledge ~ enhance performance of the service in a particular market is authorized to make agreements between customers and the principal
Selling Agents: contractual authority to sell a service principals output (travel, insurance etc) Purchasing Agents: long-term relationships with buyers, evaluating and making purchase for the customer/buyer (Purchasing art, antiques etc) Facilitating agents: help with marketing process by adding expertise or support (financial services)

Types

 Brokers
bringing buyers and sellers together while assisting in negotiation they are paid by the party who hired them

Benefits
Reduced selling and distribution costs Intermediarys possession of special skills and knowledge Wide representation Knowledge on local markets Customer choice

Challenges
Loss of control over pricing and other aspects of marketing Representation of multiple service participants

Franchise Operators
a business established or operated under an authorization to sell or distribute a company's goods or services in a particular area A brand name under which a series of products is released

Franchisers benefit
Low cost expansion Rapid growth Local Management expertise / personnel

Franchisees benefit
Reduced risk Business Support

Challenges - Franchise Operators

For Franchiser
Difficulty in maintaining and motivating franchisees Highly publicized disputes and conflicts Inconsistent quality Control of customer relationship by intermediary

For Franchisee
Encroachment Disappointing profits and revenues Lack of perceived control over operations High fees

Electronic Channels
Do not require human interaction Predesigned service and an electronic vehicle to deliver it requirement for electronic channel

3rd P: PROMOTION
Dr.P. Ganesan Professor VIT Business School

Role Marketing Communication Tasks

Informing Educating Persuading Reminding

Customers

Communicating with Existing Customers Internal Communications Ethical issues in communication

Why service organization need to communicate?

Internal External

Internal

To inform employees about changes in the organization to communicate plans and programmes To publicize incentive scheme To inform & educate new services

External

To inform current & new services offerings and benefits To educate customers To persuade to buy To remind customers To Publicise policy decisions

Challenges and Opportunities in Communicating Services

Problems of Intangibility and Strategies for dealing with them
Generality: items that comprise a class of objects, persons or event Nonsearchability: intangibles cannot be searched or inspected before they are purchased Abstractness: concepts do not have one-to-one correspondence with physical objects Impalpability: services are sufficiently complex, multidimensional, or novel that it is difficult for consumers to understand what the experience of using them will be like and what benefits will resuls

 Facilitate Customer Involvement in Production

Production and Consumption of services involves RISK
Financial or Psychological or Physical

 Help Customers to Evaluate Service Offering

Customer often find difficulty in distinguishing service of one firm from another

Promotion plays
in providing tangible clues highlights the quality of equipment and facilities emphasizes employee characteristics

 Stimulate Capacity

or

Dampen

Demand

to

Match

Marketing Communications
change the timing of customer use the services convert peak to non-peak by providing various information

Promote the Contribution of Service Personnel

Checklist for marketing commn. Planning Who is our target audience? What do we need to communicate and achieve? How should we communicate this? Where should we communicate this? When do the communications need to take place?

Target Audience
Three categories:
Prospects Traditional marketing communication
mix media ad., PR, direct mail and telemarketing POS promotions, displays

Users selling efforts by service contact personnel,

Employees

Specifying Communication Objectives

To create awareness To attract the attention of prospective customers To stimulate inquiries and increase sale of services To generate a specified increase in repeat patronage

Key Planning Considerations

should reflect a good understanding of the service product and how well prospective buyer can evaluate
understand target market segments and their exposure to various media decisions also related to
Content, structure, and style of message Presentation Most suited media

budget available for execution, time frames

Marketing Communication Mix Planning

1. Define the problem and set objectives. The marketing problem is defined and promotion objectives are set that are consistent with the companys goals and objectives. 2. Appraise the overall situation. The feasibility space of the problem is defined. Feasibility space consists of opportunities available and constraints on finding a solution to the problem. 3. Determine tasks and identify means. The various tasks necessary to achieve the promotion objectives are determined, and the promotional tools to achieve the tasks are identified. 4. Identify alternative tasks and promotional mixes. Different ways to combine the promotion tools are identified. 5. Estimate the expected result. Estimates are made of how well each alternative mix will achieve the promotion objectives. 6. Review the alternative. A decision must be made by management. 7. Feedback of results and post-audit. 8. Adapt program if required.

The Marketing Communication Mix

Personal Personal Communications Selling Customer service Training Telemarketing WoM Advertising Broadcast Print Internet Outdoor Direct mail

Sales Promotion Sampling Coupons Gifts Sign-up Rebates Prize Promotions

 Impersonal Publicity and Public Relations Press Releases/Kits Press Conferences Special Events Sponsorships Trade shows, exhibitions Media-Initiated Coverage

Instructional Materials Web sites Manuals Brouchers Video / Audiocassettes Software CD-ROM Voice Mail

Corporate Design Signage Interior Dcor Vehicles Equipment Stationary Uniforms

What do we need to communicate and achieve?

Promotional Message
Rational Appeal
Based on hierarchy effect model Non-Personal MC Mix Suitable

What do we need to communicate and achieve?

Promotional Message
Emotional Appeal Emotional appeals are based on three ideas
Consumers ignore most advertisements. Rational appeals go unnoticed unless the consumer is in the market for a particular product at the time it is advertised. Emotional advertising can capture a viewers attention and help develop an attachment between a consumer and a brand.

What do we need to communicate and achieve?

Promotional Message
Emotional Appeal
Fear: Fear appeals are used because they work. Fear
increases both the viewers interest in an advertisement and the persuasiveness of that ad. Humour: The success of humor as an advertising tactic is based on causing consumers to:
Watch Laugh Most importantly, remember

What do we need to communicate and achieve?

Promotional Message
Fear Appeal

Frontline Staff Service outlets Advertising Sales Promotion Direct Marketing

A U D

Personal Selling
PR

I
E

WoM

N C

Media Editorial

Media Choice and Selection

The available budget:

the amount of money available to finance a campaign TV & National Press ~ too expensive

Target Audience factors: Profile of the audience Level of Coverage: the message to as many customers and
potential customers OR whole of the target audience

Exposure & Frequency: Cost Effectiveness:

the possible number of times any individual is exposed to the communication message

no. of people the message reaches advertisers calculate the average CPT (cost per thousand)

Stages in Promotional Management

Task:
coordinating and implementing promotional programmes, integrated within organizational marketing programmes

Stages:
Developing the promotional Mix: combination / separately ~ to create a comprehensive promotional programme Assigning the Promotional Budget: difficulty in allocation ~ effectively. Detailed Costing Monitoring and Evaluation:
Marketing research awareness testing Direct response Point-of-sale monitoring

Pricing - Services
Dr.P. Ganesan

VIT Business School

VIT University

Dr.PGS/VITBS

SERMKTG/PRICE

Introduction
Variety term for Price in Service Business
Marketer Monetary Price Customer
Time Cost an opportunity cost to customers for the time they are involved in the service delivery process, as they could spend that time in other ways Physical costs (fatigue or discomfort ) incurred in obtaining services, if queuing is involved, and if delivery entails self-service Psychic costs mental effort, perceived risk, cognitive dissonance, feelings of inadequacy, or fear, are sometimes attached to buying and using a particular service Sensory costs relate to unpleasant sensations affecting any of the five senses

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Difficulties in Pricing for services

No ownership of services--hard for firms to calculate financial costs of creating an intangible performance Variability of inputs and outputs--how can firms define a unit of service and establish basis for pricing? Many services hard for customers to evaluate--what are they getting in return for their money? Importance of time factor--same service may have more value to customers when delivered faster Delivery through physical or electronic channels--may create differences in perceived value

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Foundations of Services Pricing Strategy

Pricing Strategy

Competition
Costs
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Value to customer
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Foundations of Services Pricing Strategy

Costs set a floor to the price that may be charged for
a specific service product

Value to Customer set a ceiling i.e.,

benefits costs

Competition within the ceiling to floor range

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Foundations of pricing strategy - Objectives

Profit Maximization Sales Maximization Market share Maximization Market share increase ROI Coverage of the existing capacity Price differentiation Distributors needs satisfaction Price stability in the market
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Sales stability in the market Discouragement of new competitors entering into the market Maintenance of the existing customer Determination of fair prices for customer Long term of survival

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Pricing Objectives C Lovelock

Revenue Oriented
Seek Profit Cover Costs

Patronage oriented
Build Demand Build a User Base

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Pricing Methods
Cost based Methods
Cost plus method:
services average cost a profit margin is added on the

Target return pricing: BEA:

the price is determined at the point that yields the firms target rate of return on investment

the price is determined at the point where total revenues are equal to total costs a deviation from the breakeven analysis, where only the direct costs of a product or service are taken into consideration

Contribution analysis: Marginal Pricing:

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the price is set below total and variable costs so as to cover only marginal costs
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 Activity-based cost Pricing

Used in complex product lines with shared infrastructure available within the service firm Identifies the various activities Determine the cost of each activity and Link resource expenses to the each activity

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Value-based pricing
Customer weighing the perceived benefits against the perceived cost NET VALUE = the sum of all the perceived value (gross value) minus the sum of all the perceived costs of service Recognizing the various tradeoffs service companies sometimes create several levels of service Four Pricing Strategies:
Pricing strategy to reduce uncertainty Relationship Pricing Low-cost leadership Managing the Perception of Value
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Dr.PGS/VITBS

 Pricing Strategies to Reduce Uncertainty

Benefit-driven pricing involves pricing that aspect of the service that directly benefits customers Flat-rate pricing quoting a fixed price in advance of service delivery

Relationship pricing
Relate to developing and maintaining long-term customer relationship
Discounting Price

Low-cost Leadership
Appeal to customers who are on a tight financial budget

Managing the Perception of Value

Pricing for quality and value the customer receive
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Competition-based methods Pricing similar to competitors or according to the markets average prices Pricing above competitors Pricing below competitors Pricing according to the dominant price in the market the leaders price that is adopted by the rest of the companies in the market
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Pricing Issues

How much to charge? What basis for pricing? Who should collect payment? Where should payment be made? When should payment be made? How should payment be made? How to communicate prices?
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Pricing Issues
How much to charge?
Relevant costs to be recovered Profit Margin ROI ~ set base of pricing Market sensitivity to various prices Competitor(s) price Price that customer to pay offer / discounts. etc.

What should be the basis for pricing?

Is it related to a specific task? Should it be based on admission to a service performance? Should it time based? Should it be related to monetary value associated with service delivery? Consumption of physical resource Distance based charge Weight or size or object serviced Billed independently or charged for a bundled package
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 Who should collect payment?

The service firm that provides the service Intermediary How should the intermediary be compensated for the work

Where should payment be made?

The location at which the service is delivered A convenient retail outlet or financial intermediary The purchasers home

When should payment be made?

Before or after delivery of the service At which times of day On which days of the week

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 How should payment be made?

Cash (exact change or not?) Token (Where can these be purchased?) Stored value card Cheque Electronic Fund transfer Charge card (Credit or Debit) Credit account with service provider Vouchers Third party payment

How should it be communicated to the target market

Through what communication medium? What message content?

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