MBA Sem – 4 Service and Relationship Marketing

Module 2
Chapter 3 – Service as A product

Introduction : A product as anything that can be offered to a market for

attention, acquisition, use or consumption that might satisfy a want or need. It
includes physical objects, services, places, organizations and ideas. But in many
service firms, the product also includes an unplanned component. For example,
it may be a broken chair in a restaurant or a delayed departure of a flight or
simply, a long wait on the customer support helpline.

Product levels : The challenge for the service managers is to minimize (if not
eliminate these unplanned components and make sure that the customers get
what they expected. To facilitate this, a multi-level view of the product‘ helps. It
may view the product as comprising of the core product, the facilitating product,
the supporting product and the augmented product.

1. Core Product : This is the basic product and the focus is on the purpose for
which the product is intended. For example, a warm coat will protect you from
the cold and the rain. The more important benefits the product provides, the
more that customers need the product. A key element is the uniqueness of the
core product. This will benefit the product positioning within a market and effect
the possible competition.
2. Generic Product : This represents all the qualities of the product. For a warm
coat this is about fit, material, rain repellent ability, high-quality fasteners, etc.
3. Expected Product : This is about all aspects the consumer expects to get when
they purchase a product. That coat should be really warm and protect from the
weather and the wind and be comfortable when riding a bicycle.
4. Augmented Product : The Augmented Product refers to all additional factors
which sets the product apart from that of the competition. And this particularly
involves brand identity and image. Is that warm coat in style, its colour trendy
and made by a well-known fashion brand? But also factors like service, warranty
and good value for money play a major role in this. The goal is to deliver
something that is beyond an expected product. It’s the translation of the desire
that is converted into reality.
MBA Sem – 4 Service and Relationship Marketing

5. Potential Product: This is about augmentations and transformations that the

product may undergo in the future. For example, a warm coat that is made of a
fabric that is as thin as paper and therefore light as a feather that allows rain to
automatically slide down.

A service product comprises of all elements of service performance, both

physical and intangible, that create value for customers. Service products consist
of:
1. Core Product  central component that supplies the principal, problem-
solving benefits customers seek
2. Supplementary Services  augments the core product, facilitating its use and
enhancing its value and appeal
3. Delivery Processes  used to deliver both the core product and each of the
supplementary services

All these elements combine with the core, facilitating and supporting products
to provide the augmented product For a mobile phone service provider, the
core product is telephony/communication service. The facilitating product
refers to its infrastructure, mobile handsets, retail outlets, re-charge options and
so on. The supporting product refers to the value-added services like zero-
balance call or one-touch services. The augmented product refers to its
customer support or helpline, retail reach, atmospherics and so on.

Flower of service : Although core products may differ widely, certain

supplementary elements like information, billing, and reservations or order
taking keep recurring. There are dozens of different supplementary services, but
almost all of them can be classified into one of the following eight clusters. We
have listed them as either facilitating supplementary services, which aid in the
use of the core product or are required for service delivery, or enhancing
supplementary services, which add extra value for customers.
These eight clusters are displayed as petals surrounding the center of a flower
which we call the Flower of Service. We've shown them clockwise in the
sequence in which they are often likely to be encountered by customers
(although this sequence may vary for instance, payment may have to be made
 MBA Sem – 4 Service and Relationship Marketing

before service is delivered rather than afterwards). In a well-run service

organization, the petals and core are fresh and attractive.

But a badly designed or poorly executed service is like a flower with missing,
wilted, or discolored petals. Even if the core is perfect, the overall flower is
unattractive. Think about your own experiences as a customer. When you were
dissatisfied with a particular purchase, was it the core that was at fault or was
there a problem with one or more of the supplementary service petals? Not
every core product is surrounded by supplementary elements from all eight
clusters. As we'll see, the nature of the product helps to determine which
supplementary services must be offered and which might be added to enhance
the value of the core service.
1. Information : To obtain full value from any service experience, customers need
relevant information New customers and prospects are especially information
hungry. Customer needs may include directions to the physical location where
the product is sold (or details of how to order it by telephone or Web site),
service hours, prices, and usage instructions.
Traditional ways of providing information to customers include using front-line
employees (who are not always as well informed as customers might like),
printed notices, brochures, and instruction books.
Other media include videotapes or software-driven tutorials, touch screen video
displays, and menu-driven recorded telephone messages. The most significant
recent innovation has been corporate use of Web sites. Companies use the
Internet for a wide range of useful applications including the provision of
information about train and airline schedules, hotel availability and
reservations, the location of specific retail outlets such as restaurants and
stores, and service descriptions and prices.
Many business logistics companies offer shippers the opportunity to track the
movements of their packages each of which has been assigned a unique
identification number.
Applications :
Membership in clubs or programs
Subscription services (e.g., utilities)
 MBA Sem – 4 Service and Relationship Marketing

2. Order Taking : Once customers are ready to buy, companies must have effective
supplementary service processes in place to handle applications, orders, and
reservations. The process of order taking should be polite, fast, and accurate so
that customers do not waste time and endure unnecessary mental or physical
effort. Banks, insurance companies, and utilities require prospective customers
to go through an application process designed to gather relevant information
and to screen out those who do not meet basic enrollment criteria (like a bad
credit record or serious health problems).
Universities also require prospective students to apply for admission.
Reservations (including appointments and check-in) represent a special type of
order taking that entitles customers to a defined unit of service at a specific time
and location for example, an airline seat, a restaurant table, a hotel room, time
with a qualified professional, or admission to a facility such as a theater or sports
arena. Ticket less systems, based upon telephone or online reservations,
provides enormous cost savings for airlines.
There is no travel agent commission since customers book directly, and the
administrative effort is drastically reduced. A paper ticket at an airline may be
handled 15 times while an electronic ticket requires just one step. But some
customers are not comfortable with the paperless process.
3. Billing : Billing is common to almost all services (unless the service is provided
free of charge). Inaccurate, illegible, or incomplete bills risk disappointing
customers who may, up to that point, have been quite satisfied with their
experience. Such failures add insult to injury if the customer is already
dissatisfied. Billing procedures range from verbal statements to a machine-
displayed price, and from handwritten invoices to elaborate monthly
statements of account activity and fees.
Due to recent technological advances, many forms of billing are computerized
to capitalize on the potential for productivity improvements. But computerized
billing can sometimes cause service failures, as when an innocent customer tries
futilely to contest an inaccurate bill and is met by an escalating sequence of ever-
larger bills (compounded interest and penalty charges) accompanied by
increasingly threatening, computer-generated letters.
 MBA Sem – 4 Service and Relationship Marketing

Customers usually expect bills to be clear and informative, and itemized in ways
that make it clear how the total was computed. Unexplained or confusing
charges do not create a favorable impression of the supplier. Nor does fuzzy
printing or illegible handwriting. Laser printers, with their ability to switch fonts
and typefaces, to box and to highlight, can produce statements that are not only
more legible but also organize information in more useful ways.
4. Payment : In most cases, a bill requires the customer to take action on payment.
Bank statements are an exception, since they detail charges that have already
been deducted from the customer's account. Increasingly, customers expect
ease and convenience of payment, including credit, wherever they make their
purchases.
A variety of options exists to facilitate customer bill paying (Table). Self-service
payment systems, for instance, require customers to insert coins, banknotes,
tokens, or cards in machines. But equipment breakdowns destroy the whole
purpose of such a system, so good maintenance and speedy trouble-shooting
are essential. Much payment still takes place through hand-to-hand transfers of
cash and checks, but credit and debit cards are growing in importance as more
and more establishments accept them.
Other alternatives include tokens, vouchers, coupons, or prepaid tickets. Firms
benefit from prompt payment, since it reduces the amount of accounts
receivable. To ensure that people actually pay what they owe, some services
employ control systems, such as ticket collection before entering a movie
theater or boarding a train. However, inspectors and security officers must be
trained to combine politeness with firmness in performing their jobs, so that
honest customers do not feel harassed
self-service
 Insert token
 Electronic funds transfer
 Enter credit card number online
Direct to payee or intermediary
 Cheque handling
 Credit/charge/debit card handling
 Coupon redemption
 Tokens, vouchers, etc.
 MBA Sem – 4 Service and Relationship Marketing

5. Consultation : Consultation is an enhancing supplementary service that involves

a dialog to identify customer requirements and develop a personalized solution.
provides examples of several supplementary services in the consultation
category. At its simplest, consultation consists of immediate advice from a
knowledgeable service person in response to the request:
"What do you suggest?" (For example, you might ask the person who cuts your
hair for advice on different hairstyles and products.) Effective consultation
requires an understanding of each customer's current situation before
suggesting a suitable course of action. Good customer records can be a great
help in this respect, particularly if relevant data can be retrieved easily from a
remote terminal.
The sales engineer researches the business customer's situation and then offers
objective advice about what particular package of equipment and systems will
yield the best results. Some consulting services are offered free of charge in the
hope of making a sale. In other instances the service is "unbundled" and
customers are expected to pay for it.
6. Hospitality : Hospitality-related services should ideally reflect pleasure at
meeting new customers and greeting old ones when they return. Companies like
Wal-Mart take this concept quite literally, designating a specific employee in
each store to welcome customers as they enter. Well-managed businesses try
to ensure that their employees treat customers as guests. Courtesy and
consideration for customers' needs apply to both face-to-face encounters and
telephone interactions.
Hospitality finds its full expression in face-to-face encounters. In some cases, it
starts with an offer of transport to and from the service site, as with courtesy
shuttle buses. If customers must wait outdoors before the service can be
delivered, then a thoughtful service provider will offer weather protection.
If the wait occurs indoors, then guests should have access to a waiting area with
seating and entertainment (TV, newspapers, or magazines) to pass the time.
Recruiting employees who are naturally warm, welcoming, and considerate for
customer-contact jobs also helps to create a hospitable atmosphere.
 Greeting
 Food and beverages
 MBA Sem – 4 Service and Relationship Marketing

 Toilets and washrooms

 Waiting facilities and amenities
 Lounges, waiting areas, seating
 Weather protection
 Magazines, entertainment, newspapers

The quality of a firm's hospitality services can increase or decrease satisfaction

with the core product. This is especially true for people-processing services
where customers cannot easily leave the service facility. Private hospitals often
seek to enhance their hospitality by providing the level of room service including
meals that might be expected in a good hotel.
Some air transportation companies (like Singapore Airlines) differentiate
themselves from their competitors with better meals and more attentive cabin
crew.
While in-flight hospitality is important, an airline journey also includes
passengers' pre- and post-flight experiences. Air travelers have come to expect
departure lounges, but British Airways (BA) came up with the novel idea of an
arrivals lounge for its terminals at London's Heathrow and Gatwick airports to
serve passengers arriving early in the morning after a long, overnight flight from
the Americas, Asia, Africa, and Australia.
The airline allows holders of first- and business-class tickets or a BA Executive
Club gold card (awarded to the airline's most frequent flyers) to use a special
lounge where they can take a shower, change, have breakfast, and make phone
calls or send faxes before continuing to their final destination. The arrivals
lounge provided such a significant competitive advantage for British Airways
that other airlines felt obliged to copy it.
7. Safekeeping : While visiting a service site, customers often want assistance with
their personal possessions. In fact, unless certain safekeeping services are
provided (like safe and convenient parking for their cars), some customers may
not come at all. The list of potential on-site safekeeping services is long. It
includes: provision of coatrooms; luggage transport, handling, and storage;
safekeeping of valuables; and even child and pet care Additional safekeeping
services are directed at physical products that customers buy or rent.
 MBA Sem – 4 Service and Relationship Marketing

They include packaging, pick-up and delivery, assembly, installation, leaning,

and inspection. Sometimes there's a charge for these services.
Caring for possessions customers bring with them
 Childcare
 Pet care
 Parking facilities for vehicles
 Valet parking
 Coatrooms
 Luggage handling
 Storage space
 Safe deposit boxes
 Security personnel

8. Exceptions : Exceptions involve supplementary services that fall outside the

routine of normal service delivery . Astute businesses anticipate exceptions and
develop contingency plans and guidelines in advance. That way, employees will
not appear helpless and surprised when customers ask for special assistance.
Well-defined procedures make it easier for employees to respond promptly and
effectively.
There are several different types of exceptions:
A flexible approach to exceptions is generally a good idea because it reflects
responsiveness to customer needs. On the other hand, too many exceptions
may compromise safety, negatively impact other customers, and overburden
employees. Managers need to keep an eye on the level of exception requests.
Large numbers of exceptions may indicate a need to reexamine standard service
procedures. For instance, if a restaurant constantly receives requests for special
vegetarian meals when there are none on the menu, then it may be time to
revise the menu to include at least one meatless dish.
Special requests in advance of service delivery
 Children's needs
 Dietary requirements
 Medical or disability needs
 MBA Sem – 4 Service and Relationship Marketing

 Religious observances
 Deviations from standard operating procedures

Handling special communications
 Complaints
 Compliments
 Suggestions

Problem solving
 Warranties and guarantees against product malfunction
 Resolving difficulties that arise from using the product
 Resolving difficulties caused by accidents, service failures, and problems with
staff or other customers
 Assisting customers who have suffered an accident or medical emergency
Restitution
 Refunds
 Compensation in kind for unsatisfactory goods and services
 Free repair of defective goods

Managerial Implications of the Flower of Service ;

The eight categories of supplementary services that form the Flower of Service
provide many options for enhancing the core service product. Most
supplementary services do (or should) represent responses to customer needs.
As noted earlier, some are facilitating Services like information and reservations
that enable customers to use the core product more effectively.
Others are "extras" that enhance the core or even reduce its no financial costs
(for example, meals, magazines, and entertainment are hospitality elements
that help pass the time). Some elements—notably billing and payment are
imposed by the service provider. But even if not actively desired by the
customer, they still form part of the overall service experience.
Any badly handled element may negatively affect customers' perceptions of
service quality. The "information" and "consultation" petals emphasize the need
for education as well as promotion in communicating with service customers.
MBA Sem – 4 Service and Relationship Marketing

Not every core product will be surrounded by a large number of supplementary

services from all eight petals.
People-processing services tend to be the most demanding in terms of
supplementary elements like hospitality, since they involve close (and often
extended) interactions with customers. When customers do not visit the service
factory, the need for hospitality may be limited to simple courtesies in letters
and telecommunications.
Possession-processing services sometimes place heavy demands on safekeeping
elements, but there may be no need for this particular petal in information-
processing services where customers and suppliers deal entirely at arm's length.
However, financial services that are provided electronically are an exception to
this.
Companies in the business-to-business sector face many decisions concerning
what types of supplementary services to offer. The company which services
should be offered to customers as a standard package accompanying the core,
and which should be offered as options for an extra charge.
There are no simple rules governing decisions about core products and
supplementary services. But managers should continually review their firms'
product offerings to make sure they are in line with both market practice and
customer needs.
A strategy of adding benefits to increase customers’ perceptions of quality will
probably require more supplementary services (and also a higher level of
performance on all such elements) than a strategy of competing on low prices.
In general, a firm that competes on a low-cost, no-frills basis will require fewer
supplementary elements than one that is marketing an expensive, high-value-
added product. And firms that offer different grades of service like first class,
business class, and economy class in an airline differentiate them by adding
extra supplementary services to a common core for each upgrade in service.
Regardless of which supplementary services a firm decides to offer, the
elements in each petal should receive the care and attention needed to
consistently meet defined service standards. That way the resulting Flower of
Service will always have a fresh and appealing appearance rather than looking
wilted or disfigured by neglect.
MBA Sem – 4 Service and Relationship Marketing

Chapter 4 – Pricing Services

Introduction : Price is the only marketing mix element that produces revenue.
All others represent cost. A pricing mistake can lead to business failure, even
when all other elements of the business are sound. A price is an expression of
value. The value rests in the usefulness and quality of the product itself, in the
image that is conveyed through advertising and promotion, in the availability of
the product through wholesale and retail distribution systems, and in the service
that goes with it.

Importance of Pricing :
A price is the seller‘s estimate of what all of this is worth to potential buyers,
recognizing the other options buyers will have for filling the need the product
is intended to satisfy. To the extent that the product or service finds markets
and is profitable at given price levels, it provides a viable economic base for
building and maintaining a business.

In the competitive marketplace, pricing is a game. The struggle for market share
focuses critically on price. Pricing strategies of competing firms, therefore, are
highly interdependent.

The price one competitor sets is a function not only of what the market will pay
but also of what other firms charge. Prices set by individual firms respond to
those of competitors; they also are intended often to influence competitors‘
pricing behaviour. All of marketing comes to focus in the pricing decision.

A way to think about making a pricing decision is that price should be set
somewhere between what the product costs to make and sell and its value to
the customer. If price exceeds the perceived value of the product to potential
purchasers, it has no market. If the price is below what the product costs to
produce, the business cannot survive for very long. Where a price should be set
between cost and customer value is a strategic decision. This decision is more
difficult in the case of services than products. It is because of the key differences
between customer evaluation of pricing for services and goods.
MBA Sem – 4 Service and Relationship Marketing

Why Pricing of Service become more complex.

Service heterogeneity limits knowledge. The intangible nature of the services
gives the service firms great flexibility in the configurations of services they
offer. It leads to complex and complicated pricing structures. For example,
consider a health insurance plan.

Service providers are unwilling to estimate prices. The fundamental reason in

many cases is that they do not know themselves what the services will involve
until the process of service delivery. So a prior estimation is very difficult. For
example, consider medical diagnosis and treatment.

Individual customer needs vary. As a result, uniform pricing may not be feasible.
For example, consider the legal services.

Price information is overwhelming in services. In most cases, there are not list
prices because of the reasons mentioned above. As a result, price comparison
becomes difficult.

Prices are not visible and they may be hidden or implicit. For example, consider
the financial services. In few cases, many customers do not see the price at all
until after they receive certain services.

Another unique characteristic of services is the role of non-monetary costs (like

time costs, search costs and psychological costs) in the evaluation of whether to
buy a service. Most services require direct participation of the consumer and
thus consume real time. Time becomes a sacrifice made to receive service in
multiple ways.

When quality is hard to detect or when quality or price varies a great deal within
a class of services, consumers may believe that price is the best indicator of
quality. Unlike goods (products) that are dominated by search properties,
services are dominated by experience and credence properties. Therefore price
is not used to judge quality in goods as often as it is in services.
 MBA Sem – 4 Service and Relationship Marketing

Factor affecting Pricing: The price the company charges will be somewhere
between one that is too low to produce a profit and one that is too high to
produce any demand. Product costs set a floor for the price and consumer
perceptions of its value set the ceiling. The firm must consider competitors‘
prices and other external and internal factors to find the best price between
these two extremes.

Internal factors: External factors:

Marketing objectives Nature of the market and demand
Marketing mix strategy Competition
Costs Other environmental factors (e.g.
Pricing economy, resellers and the Govt.)
organization

Pricing Approach of Service

1.1 Cost-based approach : The simplest pricing method is cost-plus or markup
pricing - adding a standard markup to the cost of the product. Markups vary
greatly among different goods. Cost as a percentage of selling price is a
commonly used pricing technique is the restaurant industry.
For example, a soft drink may cost Rs.10 is sold for Rs.20 in a upscale
restaurant at a 100 percent markup on cost. Markups are generally higher on
seasonal items (to cover the risk of not selling) and on specialty items, slower
moving items, items with inelastic demand. It must be noted that any pricing
method that ignores current demand and competition is not likely to lead to the
best price. Hence markup pricing only works if that price actually brings in the
expected level of sales.
Advantages:
(1) It covers all the costs
(2) It is designed to provide the target rate of margin
(3) It is generally a rational and widely accepted method
(4) It is an easy to comprehend and simple method
Disadvantages:
(1) The cost calculations are based on a predetermined level of activity. If the
actual level of activity varies from this estimated level, the costs may vary,
rendering this method unrealistic.
MBA Sem – 4 Service and Relationship Marketing

(2) If the costs of the firm are higher than its competitors, this method would
render the firm passive in relation to price.
(3) Another drawback is that sometimes the opportunity to charge a high price
is foregone.
(4) It ignores the price elasticity of demand.
(5) The cost-based pricing would not be helpful for some of the objectives or
tasks like market penetration, fighting competition and so on.
(6) It imparts an in-built inflexibility to pricing decisions.

4.1.2 Value-based approach

This approach uses the buyers‘ perceptions of value, not the seller‘s cost, as the
key to pricing. The non-price variables in the marketing mix are used to build
perceived value in the buyers‘ minds and set price to match the perceived value.

Any firm using perceived-value pricing must learn the value in the buyers‘ minds
for different competitive offers. Using a technique called trade off analysis (to
identify those service features that add more value than they cost), the
customer‘s willingness to pay for a service can be determined.

If the seller charges more than the buyers‘ perceived value, its sales will suffer.
Many firms overprice their products, resulting in poor sales. Other firms under
price. Under riced products sell well, but they produce less revenue than they
would if the firm raised its price to the perceived-value level. When consumers
discuss value, they may use the term in different ways. What constitutes value
may be highly personal and hence vary from one customer to another.

Following are the pricing approaches that are suited to these value definitions:
1. Value is low price – When monetary price is the most important determinant
of value to a customer, the firm focuses mainly on price. The appropriate pricing
approaches are:
a. Discounting – To communicate to price-sensitive buyers that they are
receiving value, service firms offer discounts or price cuts.
b. Odd pricing – To make buyers perceive that they are getting a lower price,
the services are priced just below the exact/round amount (i.e. Rs.99 instead of
Rs.100)
MBA Sem – 4 Service and Relationship Marketing

c. Synchro-pricing – It is the use of price to manage demand for a service by

using customer sensitivity to prices. (For example, Internet service providers
charge for the connection time during day when the demand is peak and offer
it free during the night when the demand is less).
d. Penetration pricing – New services are introduced at low prices to stimulate
trial and widespread use. For example, a mobile phone service provider may
offer a new feature such as ‗Voice sms‘ at a low ‗introductory‘ price for quick
penetration.
2. Value is whatever I want in a product or service – When the customer is
concerned principally with the ‗get‘ components of a service, monetary price is
not of primary concern. The service is valued by the desirable intrinsic attributes
it possesses and priced accordingly. The appropriate pricing approaches are:
a. Prestige pricing – It is used by service firms who offer high quality or status
services. Customers of these firms actually value the high price because it
represents prestige or a quality image. For example, consider a Golf club
membership.
b. Skimming pricing – This is a strategy in which new services are introduced at
high prices with large promotional expenditures. Many customers are more
concerned about obtaining the service than about the cost of the service.

3. Value is the quality I get for the price I pay – When the customer primarily
considers quality and monetary price, the task of the marketer is to understand
what ‗quality‘ means to the customer and then to match quality level with price
level. The appropriate pricing approaches are:
a. Value pricing – In the current usage, it involves assembling a bundle of
services that are desirable to a wide group of customers and then pricing them
lower than they would cost alone. For example, many fast food restaurants offer
a value meal consisting of many items in the menu. It represents giving more for
less.
b. Market segmentation pricing – A service marketer charges different prices to
groups of customers for what are perceived to be different quality levels of
service, even though there may not be corresponding differences in the costs of
providing the services to each of these groups. For example, there may a
differential pricing for members and non-members in a health club.
MBA Sem – 4 Service and Relationship Marketing

4. Value is what I get for what I give – When the customer considers all that
he/she gets for a given price, including the accompanying products, the
consumption context and the consumption result, the service marketer may
consider the following approaches to arrive at the final price:
a. Price framing – Because many customers do not possess accurate reference
prices for services, service marketers are more likely than product marketers to
organize the price information for customers so they know how to view it.
Marketers provide a price anchor. If the customers accept the anchor, they view
the price and service package favorably.
b. Price bundling – Some services are consumed more effectively in conjunction
with other services. When customers find value in a package of services that are
inter-related, price bundling (that is, pricing and selling services as a group rather
than individually) is an appropriate strategy.
c. Complementary pricing – Services that are highly interrelated can be
leveraged by using complementary pricing tactics such as captive pricing, two-
part pricing and loss leadership. In captive pricing, the firm offers a base service
or product and then provides the supplies or peripheral services needed to
continue using the service. In two-part pricing, the service price is broken into a
fixed fee plus variable usage fees. In loss leadership, a familiar service is priced
low to attract customers and then other services available at higher prices are
revealed.
d. Results-based pricing – In service industries (such as legal consulting) in which
outcome is very important but uncertainty is high, the most relevant aspect of
value is the ‗result‘ or the ‗outcome‘ of the service. Pay-forperformance models
are gaining popularity in pricing the services of an ad agency. Money-back
guarantees are another example for this pricing tactic.

4.1.3 Competition-based approach

Competition-based pricing approach may take the form of going-rate pricing or
sealed-bid pricing. In going-rate pricing, the firm bases its price largely on
competitors‘ prices, with less attention paid to its own cost or to demand. In
oligopolistic industries (where there are a few large service providers), firms
normally charge the same price.
MBA Sem – 4 Service and Relationship Marketing

It is a popular pricing method When demand elasticity is hard to measure, firms

feel the going price represents the collective wisdom of the industry concerning
the price that will yield a fair return.

Competition-based pricing is also used when firms bid for jobs. Using sealed-bid
pricing, a firm bases its price on how it thinks competitors will price rather than
on its own costs or on the demand. The firm wants to win a contract and winning
the contract requires pricing lower than other firms. Yet, the firm cannot set its
price below a certain level. It cannot price below cost without hurting its
position. In contrast, the higher the firm sets its price above its costs, the less its
chance of getting the contract.Many firms follow the dominant competitors,
particularly the price leader, in setting the price.

The main advantages of this method are:

(1) It is a very simple method
(2) It follows the main market trend
(3) It has relevance to the competitive standing of the firm
(4) Holding to the going price will prevent harmful price wars

The major disadvantages and limitations of following competitors are:

(1) If the competitors‘ price decisions are unrealistic, the follower will also be
going wrong on the price
(2) The cost factors of the follower may not be similar to that of the competitors‘
(3) The pricing objective of the firm could be different from that of the
competitors‘
(4) Sometimes the competitor may initiate price change for wrong reasons

4.2 Initiating price changes

After developing their price structures and strategies, service firms may face
occasions when they want to cut or raise prices. The following situations may
arise:
• Initiating price cuts – Reasons for a firm to cut price are excess capacity,
unable to increase business through promotional efforts, service efficiency
improvement, follow-the-leader pricing and to dominate the market
MBA Sem – 4 Service and Relationship Marketing

• Initiating price increases – Reasons for a company to increase price are cost
inflation or excess demand
• Buyer reactions to price changes –Buyers will associate price with quality
when evaluating services they have not experienced directly. They use it as a
simple heuristic to judge.
• Competitor reactions to price changes – Competitors are most likely to react
when the number of firms involved is small, when the service is similar and when
buyers are well informed.
• Responding to price changes – While reacting to competitor‘s price changes,
the issues to consider are: Why did the competitor change the price? Is it going
to be temporary or permanent? Are other competitors going to respond and
what are their likely responses? Of course, the firm must consider its own
position and the possible customer reactions to price changes.
MBA Sem – 4 Service and Relationship Marketing

Chapter 5 - Delivering the Service

Introduction : Firms must carefully choose how and where their goods reach
consumers by managing their distribution channels.. It overcomes the major
time, place and possession gaps that separate goods and services from those
who would use them. The choice of distribution channels should support the
firm‘s overall marketing strategy.

Definition : A distribution channel can be defined as an organization system of

marketing institutions and their inter-relationships that promote the physical
and title flow of goods and services from producers to consumers.

Example: the distribution channel of Air Deccan, India‘s leading low-cost airliner.
Apart from directly selling a ticket (e-ticket) from the airline‘s website,
www.airdeccan.net, it also sells through an arrangement with Reliance Web
World (a chain of Internet cafés) and Indian Oil retail outlets(petrol bunks).
There is a limited, if not, full scale distribution, through the travel agents also.
As a result, Air Deccan uses multiple channels.

Function of channels :
1. Information: gathering and distributing marketing research and intelligence
information about the marketing environment
2. Promotion: developing and spreading persuasive communications about
an offer
3. Contact: finding and communicating with prospective buyers
4. Matching: shaping and fitting the offer to the buyer‘s needs, including such
activities such as manufacturing, assembling and packaging
5. Negotiation: agreeing on price and other terms of the offer so that ownership
or possession can be transferred
6. Physical distribution: transporting and storing goods
7. Financing: acquiring and using funds to cover the costs of channel work
8. Risk taking: assuming financial risks such as the inability to sell inventory at
full margin.

Service Intermediaries
 MBA Sem – 4 Service and Relationship Marketing

In a typical service marketing context, two service marketers are involved

in delivering service through intermediaries: the service principal (originator)
and the service deliverer (intermediary).
For example, in the fast food industry, Pizza Hut is the service principal
and the outlet in Pondicherry run by a franchisee is the service deliverer. Service
intermediaries perform important functions for the service principal. They often
coproduce the service, fulfilling service principal‘s promises to customers.
Because services cannot be owned, there are no titles or rights to most
services that can be passed along a delivery channel. Because services are
intangible and perishable, inventories cannot exist, making warehousing a
dispensable function. Many of the primary functions of channel members have
no meaning in services.
The options for service distribution are limited to franchisees, agents,
brokers and electronic channels.

1. Franchisees are service outlets licensed by a principal to deliver a unique service

concept it has created or popularized (Example: fast-food chains like
McDonald‘s)
A franchise is a type of license that a party (franchisee) acquires to allow them
to have access to a business's (the franchiser) proprietary knowledge, processes,
and trademarks in order to allow the party to sell a product or provide
a service under the business's name

For Franchiser
Advantages Disadvantages
Leveraged business format for greater Difficulty in maintaining and
expansion and revenues motivating franchisees

Consistency in outlets Highly publicized disputes and

Conflict
Knowledge of local markets Inconsistent quality

Shared financial risk and more Control of customer relationship by

working capital intermediary
For Franchisee
 MBA Sem – 4 Service and Relationship Marketing

Advantages Disadvantages
An established business format Disappointing profits and revenues
National or regional brand marketing Lack of perceived control over
operations
Minimized risk of starting a business High fees

2. Agents and brokers are representatives who distribute and sell the services of
one or more service suppliers (Example: Insurance agents)

Through agents and brokers:-

Advantages Disadvantages
Reduced selling and distribution costs Loss of control over pricing
Intermediary‘s possession of special Representation of multiple service
skills and knowledge principals
Wide representation
Knowledge of local markets
Customer choice

3. Electronic channels include all forms of service provision through television,

telephone, interactive media and the Internet. (Example: a hotel website
facilitating online reservation)

Advantages Disadvantages
Consistent delivery for standardized Price competition
services
Low cost Lack of control of the electronic
environment
Customer convenience Inability to customize with highly
standardized services
Wide distribution Lack of consistency due to customer
involvement
Customer choice and ability to Competition from widening
customize geographies
Channel levels
MBA Sem – 4 Service and Relationship Marketing

Marketing channels can be described by the number of channel levels. Each

layer that performs some work in bringing the product and its
ownership/consumption closer to the final buyer is a channel level. Because the
producers and the final consumer both perform some work, they are part of
every channel. The number of intermediary levels (channel members) is used to
indicate the length of a channel.
As a result, one can have a short or long marketing channel depending on the
number of intermediary levels that exist between the producer and the
consumer.
Factor affecting distributing channel
Short channel Long channel
Market factors  Business users (B2B)  Consumers (B2C)
 Geographically  Geographically
concentrated diverse
 Extensive technical  Little technical
knowledge and regular knowledge and
servicing required regular servicing not
required
Product factors  Large orders  Small orders
 Perishable  Durable
 Complex  Standardized
 Expensive  Inexpensive
Producer factors  Manufacturer has  Manufacturer lacks
adequate resources to  adequate resources
perform channel functions to perform channel
 Broad product line functions
 Channel control important  Limited product line

Competitive  Manufacturer feels  Manufacturer feels

factors satisfied with marketing dissatisfied with
intermediaries‘ marketing
performance in promoting intermediaries‘ .
products
MBA Sem – 4 Service and Relationship Marketing

Self service technologies

Customer self-service is a type of electronic support that allows end users to use
technology to access information and perform routine tasks without requiring
the assistance of a live customer service representative.

CSS offers end users with 24-hour-a-day support and immediate access to
information without having to wait for a customer representative. Ultimately,
the success of a customer self-service initiative depends upon the quality and
quantity of information available and the ease with which it can be accessed.

Once the technology is set up, a self-service interaction can cost much less than
a similar transaction with a live customer service representative. Customer self-
service technologies include:

Web self service - the customer can access information and perform routine
tasks over the Internet by searching a knowledge base or reviewing an FAQ.
Interactive voice response - the customer can interact with an automated
telephony system to perform specific tasks, such as reporting a power outage.
Apps - the customer can interact with a software program on a mobile device to
carry out specific tasks, such as check an account balance or transfer funds from
one bank account to another.
Kiosks - the customer can perform specific tasks such as checking in at an airport
by interacting with a small physical structure that houses a computer and display
screen.
Self-checkout - the customer can scan, bag, and pay for purchases without
human assistance.
 MBA Sem – 4 Service and Relationship Marketing

Chapter 6 - Promoting Services

Introduction : Promotion is the function of informing, persuading and
influencing the consumer‘s purchase decision. Consumers receive marketing
communications – messages that deal with buyer-seller relationships – from a
variety of media including television, magazines and the Internet. Marketers can
broadcast an ad on television network to mass markets or design a customized
direct-mail appeal targeted to a small market segment.

Promotion Mix : firm‘s total marketing communications program, called its

promotion mix, consists of a specific blend of advertising, sales promotion,
public relations and personal selling to achieve advertising and marketing
objectives.

1. Advertising – Any paid form of non-personal presentation and promotion of

ideas, goods or services by an identified sponsor
2. Sales promotion – Short-term incentives to encourage the purchase or sales of
a product or service
3. Public relations – Building good relations with the firm‘s various publics by
obtaining favourable publicity, developing a good corporate image, and
handling or heading off unfavourable rumours, stories and events.
4. Personal selling – Oral presentation in a conversation with one or more
prospective buyers for the purpose of making sales.
5. Direct marketing – The use of direct communication to a consumer designed to
generate a response in the form of an order (direct order); a request for further
information (lead generation); or a visit to a place of business to purchase
specific goods/services (traffic generation).

Services marketing communication

Service firms must add to the traditional communications or promotion mix, a
concern about the ways that customers receive information about services
through interactive marketing or marketing between employees and customers.
Refer to the services marketing triangle It demonstrates that the customer of
services is the target of two types of marketing communication
MBA Sem – 4 Service and Relationship Marketing

First, external marketing communication extends from the firm to the

customer and includes such traditional communication channels as advertising,
sales promotion and public relations.
Second, interactive marketing communication involves the messages that
employees give to customers through such channels as personal selling,
customer service interactions, service encounter interactions and services
capes.

Integrated services marketing communication To match service delivery with

service promises, the following strategies are recommended: manage service
promises, manage customer expectations, improve customer education and
manage internal marketing communications.

Manage service promises

In manufacturing physical goods, the departments that make promises
and those that deliver them can operate independently. In services, however,
the sales and marketing departments make promises about what other
employees in the organizations will fulfill. Because what employees do cannot
be standardized like physical goods produced mechanically, greater
coordination and management of promises are required.
Successful services advertising and personal selling becomes the
responsibility of both marketing and operations. Intangibility makes services
advertising different from product advertising and difficult for marketers.
 MBA Sem – 4 Service and Relationship Marketing

Service marketers have developed the following guidelines for service

advertising effectiveness:
Use narratives to demonstrate the service experience
Present vivid information
Use interactive imagery
Focus on the tangibles
Feature service employees in communication
Promise what is possible
Encourage word-of-mouth (WOM) communication
Feature service customers
Use transformational advertising

Manage customer expectations

Many service firms find themselves in the position of having to tell customers
that services previously provided will be discontinued or available only at a
higher price. Here are four strategies for a service firm to gracefully give the
customer news about what to expect.

1. One way to reset expectations is to give the customer options for any aspects of
service that are meaningful, such as time and cost. With the choice, clients can
select that aspect of the trade-off (time or money) that s most meaningful to
them. Making the choice solidifies the client‘s expectations of service.
 MBA Sem – 4 Service and Relationship Marketing

2. Product companies are accustomed to offering different versions of their

products with prices commensurate with the value customers perceive. This
type of formal bundling and pricing can be accomplished in services, with the
extra benefit of managing expectations.
3. A service provider can educate the customer the criteria by which to evaluate
the service. The provider who does this in a credible manner will have an
advantage in shaping the evaluation process.
4. Service providers must learn to present their offerings in terms of value and not
on price alone. Such a value-centred negotiation can lead to more realistic
expectation in the customer.

Improve customer education : The nature of services demand that customers

perform their roles properly for many services to be effective. If the customer
forgets to perform this role, or performs it improperly, disappointment may
result. For this reason, communication to customers can take the form of
customer education. The following customer education approaches can help
match promises with delivery:
 Prepare customers for the service process
 Confirm performance to standards and expectations
 Clarify expectations after the sale
 Teach customers to avoid peak demand periods and seek slow demand
Periods
 MBA Sem – 4 Service and Relationship Marketing

Most service marketers have access to numerous forms of communication,

referred to collectively as the marketing communications mix. Different
communication elements have distinctive capabilities relative to the types of
messages that they can convey and the market segments most likely to be
exposed to them. As shown in Figure, the mix includes personal contact,
advertising, publicity and public relations, sales promotion, instructional
materials, and corporate design.

A. Personal Communications :As shown in Figure, personal communications

include personal selling, telemarketing, customer training, customer service,
and word of mouth.

Personal Selling Interpersonal encounters in which efforts are made to educate

customers and promote preference for a particular brand or product are
referred to as personal selling. For infrequently purchased services like property,
insurance, and funeral services, the firm's representative may act as a consultant
to help buyers make their selections. Because face-to-face selling is usually
expensive, it's most often used in business-to-business markets. A lower-cost
alternative is telemarketing, involving use of the telephone to reach prospective
customers. It's used by about 75 percent of all industrial companies.

Customer Service Employees in customer service positions are often

responsible for delivery of a variety of supplementary services, including
providing information, taking reservations, receiving payments, and problem
solving. New customers, in particular, often rely on customer service personnel
for assistance in learning how to use a service effectively and how to resolve
problems. When several different products are available from the same
supplier, firms encourage their customer service staff to cross-sell additional
services. However, this approach is likely to fail if strategies are not properly
planned and executed.

In the banking industry, for example, a highly competitive marketplace and new
technologies have forced banks to add more services in an attempt to increase
their profitability. In many banks, tellers who traditionally provided customer
service are now expected to promote new services to their customers as well.
 MBA Sem – 4 Service and Relationship Marketing

Despite training, many employees feel uncomfortable in this role and don't
perform effectively as salespeople.

Customer Training Some companies, especially those selling complex business-

to business services, offer formal training courses to familiarize their customers
with the service product and teach them how to use it to their best advantage.

Word of Mouth Recommendations from other customers can have a powerful

influence on people's decisions to use a service, but word of mouth is a difficult
form of communication for firms to control. Some advertisers try to encourage
positive comments from customers who have already used a service since
positive word of mouth can act as a powerful and highly credible selling agent.
In an effort to extend the reach of word of mouth, advertising and brochures
sometimes feature comments from satisfied customers.

B. Advertising : As the most dominant form of communication in consumer

marketing, advertising is often the first point of contact between service
marketers and their customers, serving to build awareness, inform, persuade,
and remind. It plays a vital role in providing factual information about services
and educating customers about product features and capabilities. To
demonstrate this point, Grove, Pickett, and Laband carried out a study
comparing newspaper and television advertising for goods and services.
Based on a review of 11,543 television advertisements over a 10-month period
and of 30,940 newspaper display advertisements that appeared over a 12-
month period, they found that ads for services were significantly more likely
than those for goods to contain factual information on price;
guarantees/warranties; documentation of performance; and availability (where,
when, and how to acquire products).
One of the challenges facing advertisers is how to get their messages noticed.
Television and radio broadcasts are cluttered with commercials, while
newspapers and magazines sometimes seem to contain more ads than news and
features. How cans a firm hope to stand out from the crowd? Longer, louder
commercials and bigger format ads are not necessarily the answer.
MBA Sem – 4 Service and Relationship Marketing

Some advertisers stand out by using a sharply different format. For its ads in
Business Week, where most advertising includes color photography and
occupies one or two full pages, Williams Communications employs black-and
white cartoons occupying approximately half a page .
A broad array of paid advertising media is available, including broadcast (TV and
radio), print (magazines and newspapers), movie theaters, and many types of
outdoor media (posters, billboards, electronic message boards, and the
exteriors of buses or bicycles). Some media are more focused than others,
targeting specific geographic areas or audiences with a particular interest.
Advertising messages delivered through mass media are often reinforced by
direct marketing tools like mailings, telemarketing, faxes, or email. Direct
marketing, which offers the potential to send personalized messages to highly
targeted micro-segments, is most likely to be successful when marketers
possess a detailed database of information about customers and prospects
 MBA Sem – 4 Service and Relationship Marketing

C. Sales Promotion : A few years ago, SAS International Hotels devised an

interesting sales promotion targeted at older customers. If a hotel had vacant
rooms, guests over 65 years of age could get a discount equivalent to their years
(e.g., a 75-year-old could save 75 percent of the normal room price). All went
well until a Swedish guest checked into one of the SAS chain's hotels in Vienna,
announced his age as 102, and asked to be paid 2 percent of the room rate in
return for staying the night.
This request was granted, whereupon the spry centenarian challenged the
general manager to a game of tennis and got that, too. (The results of the game,
however, were not disclosed!) Events like these are the stuff of dreams for PR
people. In this case, a clever promotion led to a humorous, widely reported story
that placed the hotel chain in a favorable light.
A useful way of looking at sales promotions is as a communication attached to
an incentive. Sales promotions are usually specific to a time period, price, or
customer group sometimes all three, as in the SAS example. Typically, the
objective is to accelerate the purchasing decision or motivate customers to use
a specific service sooner, in greater volume with each purchase, or more
frequently.
Sales promotions for service firms may take such forms as samples, coupons and
other discounts, gifts, and competitions with prizes. Used in these forms, sales
promotions add value, provide a competitive edge, boost sales during periods
when demand would otherwise be weak, speed the introduction and
acceptance of new services, and generally get customers to act faster than they
would in the absence of any promotional incentive. The Cleanrite coupon shown
in Figure is a simple example of a sales promotion designed to encourage past
customers to become repeat customers.
Some promotional campaigns are very creative in their appeals to customers.
For example, some international airlines provide passengers in first and business
classes with free gifts including toiletries, pens, stationery, and playing cards.
Gifts are sometimes offered simply to amuse customers and create a friendly
environment. The Conrad Hotel in Hong Kong places a small teddy bear on each
guest's bed and a yellow rubber duck in the bathroom; it reports that many
guests take these items home with them.
 MBA Sem – 4 Service and Relationship Marketing

D. Publicity and Public Relations : Public relations (PR) involves efforts to stimulate
positive interest in an organization and its products by sending out news
releases, holding press conferences, staging special events, and sponsoring
newsworthy activities put on by third parties. A basic element in public relations
strategy is the preparation and distribution of press releases (including photos
and/or videos) that feature stories about the company, its products, and its
employees.
PR executives also arrange press conferences and distribute press kits when they
feel a story is especially newsworthy. A key task performed by corporate PR
specialists is to teach senior managers how to present themselves well at news
conferences or in radio and television interviews.
Other widely used PR techniques include recognition and reward programs,
obtaining testimonials from public figures, community involvement and
support, fundraising, and obtaining favorable publicity for the organization
through special events and pro bono work. These tools can help a service
organization build its reputation and credibility; form strong relationships with
its employees, customers, and the community; and secure an image conducive
to business success.
MBA Sem – 4 Service and Relationship Marketing

Firms can also win wide exposure through sponsorship of sporting events and
other high-profile activities where banners, decals, and other visual displays
provide continuing repetition of the corporate name and symbol. For example,
the U.S. Postal Service (USPS) was a major sponsor of the U.S. cycling team in
the 2000 Tour de France.
This provided many PR and advertising opportunities for the Postal Service
including stamps, print articles, television news clips, and photos of the team
members with "U.S. Postal Service" prominently displayed on their jerseys. USPS
gained worldwide attention when team member Lance Armstrong won the Tour
de France after a near-fatal battle with cancer.
Unusual activities can present an opportunity to promote a company's
expertise. FedEx gained significant favorable publicity in December 2000 when
it safely transported two giant pandas from Chengdu, China, to the National Zoo
in Washington, D.C. The pandas flew in specially designed containers aboard an
MD 11 aircraft renamed "FedEx PandaOne." In addition to press releases, the
company also featured information about the unusual shipment on a special
page in its Web site (Figure).
In the business-to-business marketplace, trade shows are a popular form of
publicity. They are not usually open to the public, and there is no entry fee. In
many industries, trade shows are a great opportunity for business customers to
find out about the latest products in their fields. Service vendors provide
physical evidence in the form of exhibits, samples and demonstrations, and
brochures to educate and impress these potential customers. For example,
cosmetic surgeons from around the world attended
Trade shows to learn about advances in technology and equipment that will
allow them to perform highly effective no surgical treatments with mysterious
names like "botox," "vein sclerotherapy," and "collagen replacement therapy."
Trade shows can be very profitable promotional tools. Fifty percent of the sales
leads generated at these shows can be closed with just one sales call a much
higher percentage than for leads generated in any other way. And a sales
representative who usually reaches four to five prospective clients per day can
average five qualified leads per hour at a show.
 MBA Sem – 4 Service and Relationship Marketing

E. Instructional Materials : Promotion and education often go hand in hand.

There's little point in promoting a new service (or service feature) if people are
unsure of the benefits or don't know how to proceed. Service personnel are
often called upon to play teaching roles, but they are not always available to
help in the locations where customers need them. To remedy this problem,
some firms offer free telephone calls to expert personnel or provide printed
materials, video or audio instructions, or informative Web sites. Newspaper
advertising by the CVS pharmacy chain encourages customers to use their
telephones to access recorded information about prescription medications for
a variety of different diseases.
Nowadays, many instructional media are technology based. Supermarkets and
department stores sometimes feature a touch-screen store directory. Airlines
show films to illustrate aircraft safety procedures and make customers aware of
government regulations.
Some banks install computerized displays that customers can use to learn about
new financial products. Through access to Web sites, customers can access
needed information from their homes or offices. corporate design: the
 MBA Sem – 4 Service and Relationship Marketing

consistent application of distinctive colors, symbols, and lettering to give a firm

an easily recognizable identity.
F. Corporate Design and Physical Evidence : Many service firms employ a unified
and distinctive visual appearance for all tangible elements to facilitate
recognition and reinforce a desired image. Corporate design strategies are
usually created by external consulting firms and include such features as
stationery and promotional literature, retail signage, uniforms, and color
schemes for painting vehicles, equipment, and building interiors.
The objective is to provide a unifying and recognizable theme linking all of the
firm's operations in a branded service experience through the strategic use of
physical evidence. The American Automobile Association has made good use of
corporate design in solidifying its brand identity. The bright red AAA logo is
recognized worldwide as a reliable source of travel information and assistance.
Corporate design is particularly important for companies operating in
competitive markets where it's necessary to stand out from the crowd and to be
instantly recognizable in different locations. For example, gasoline retailing
provides striking contrasts in corporate designs, from BP's bright green and
yellow service stations to Texaco's red, black, and white, and Sunoco's blue,
maroon, and yellow.
Companies in the highly competitive express delivery industry tend to use their
names as a central element in their corporate designs. When Federal Express
changed its trading name to the snappier and more multilingual "FedEx," it also
changed its logo to feature the new name in a distinctive typeface. Consistent
applications of this design were developed for use in settings ranging from
business cards to boxes and from employee caps to aircraft exteriors.
Some companies use a trademarked symbol, rather than a name, as their
primary logo. Shell makes a pun of its English name by displaying a yellow scallop
shell on a red background, which has the advantage of making its vehicles and
service stations instantly recognizable even in parts of the world that do not use
the Roman alphabet.
McDonald's "Golden Arches" is said to be the most widely recognized corporate
symbol in the world. (However, international companies operating in many
countries need to select their designs carefully to avoid conveying a culturally
 MBA Sem – 4 Service and Relationship Marketing

inappropriate message through unfortunate choices of names, colors, or

images.)
Merrill Lynch, the global financial services company, used its famous slogan,
"We're Bullish on America" as the basis for its corporate symbol a bull. A recent
advertising campaign by the company developed some intriguing variations of
this highly recognizable symbol (an example is shown in Figure).

G. Services cape Dimensions The term services cape describes the design of any
physical location where customers come to place orders and obtain service
delivery. It consists of four dimensions: the physical facility; the location;
ambient conditions (like temperature or lighting); and personnel. Each of these
elements is a critical form of physical evidence, since the appearance of a firm's
service facilities and personnel affects customers' perceptions of service quality.

Corporate design consulates are sometimes asked to advise on services cape

design, to coordinate the visual elements of both interiors and exteriors such as
MBA Sem – 4 Service and Relationship Marketing

signage, decor, carpeting, furnishings, and uniforms so that they may

complement and reinforce the other design elements.
We can think of the services cape concept in terms of the design of the stage on
which the service drama is enacted. A good set and costumes can't save a bad
play but they can greatly enhance the audience's enjoyment of a good one.
Conversely, a bad stage set can create a poor initial impression. Physical
evidence and services cape design.
Ethical Issues in Communication
Few aspects of marketing lend themselves so easily to misuse (and even abuse)
as advertising, selling, and sales promotion. The fact that customers often find
it hard to evaluate services makes them more dependent on marketing
communication for information and advice. Communication messages often
include promises about the benefits that customers will receive and the quality
of service delivery.
When promises are made and then broken, customers are disappointed because
their expectations have not been met. Their disappointment and even anger will
be even greater if they have wasted money, time, and effort and have no
benefits to show in return or have actually suffered a negative impact.
Employees, too, may feel disappointed and frustrated as they listen to
customers' complaints about unfulfilled expectations.
Some unrealistic service promises result from poor internal communications
between operations and marketing personnel concerning the level of service
performance that customers can reasonably expect. In other instances,
unethical advertisers and salespeople deliberately make exaggerated promises
about the benefits that customers can hope to receive. Finally, there are
deceptive promotions that lead people to think that they have a much higher
chance of winning prizes or awards than is really the case.
Fortunately, there are many consumer watchdogs on the lookout for these
deceptive marketing practices. They include consumer protection agencies,
trade associations within specific industries, and journalists who investigate
customer complaints and seek to expose fraud and misrepresentation.
A different type of ethical issue concerns unwanted intrusion into people's
personal Lives including, perhaps, your own. You can, of course, simply turn the
MBA Sem – 4 Service and Relationship Marketing

page if you don't want to look at an advertisement in a newspaper or magazine.

Perhaps you ignore television advertising by pressing the mute button on your
remote and by talking to friends or family members while the commercials are
on.
However, the increase in telemarketing and direct mail is frustrating for those
who receive unwanted sales communications. How do you feel if your evening
meal at home is interrupted by a telephone call from a stranger trying to interest
you in buying services in which you have no interest? Even if you are interested,
you may feel, as many do, that your privacy has been violated and see the call
as an unwanted intrusion. Trade associations like the Direct Marketing
Association offer ways for consumers to remove their names from
telemarketing and direct-mail lists in an attempt to address the growing hostility
toward these types of direct-marketing techniques.