MARKETING SERVICE UNIT 2

Types of New Services

 Major Innovations: are new services for markets as yet identified. Ex. Vatika
Towers, Gurgaon.
 Start up Businesses: consist of new services for a market that is already served
by existnig products that meet the same generic need. Ex. SAB TV, DTH.
 New Services for the currently served market: represent attempts to offer
existing customers of the organizations a service not previously available from the
company. Ex. VAS in telecom
 Service line extensions: represent augmentation of the existing service line. Ex.
Domino’s adding Mexican Wrap to its Menu
 Service improvements: represents change in features of a service already
offered. Ex. 12 hours banking by ICICI Bank
 Style changes: modest innovation but highly visible. Ex. Changing the interiors
of a restaurant
Types of service redesign
Service redesign has the potential of increasing customer benefits or reducing customer
costs.
 Self Service
 Direct Service
 Pre Service: focus is on front end processes. It affects the customer experience
 Bundled service
 Physical Service: changing customer experience through the tangibles
New service development process
1. Idea Generation
 brainstorming - thinking about it
 creating a new service based on some observed need
 thinking of a new service based on some accident or chance circumstance
2. Screening
 getting opinions from
 employees
 potential customers
 media
 government
 what are the weaknesses of existing service that are similar
 is there any competition for a new product
 What are the industry sales and market trends the service idea is based on
. Idea Evaluation / Concept Development
 estimate costs, revenue, profit,
 do market research
 target market segmentation
 describe the main group of people who will be the first customers
4. Development of Service / Business Analysis
 physically design and manufacture the service
  estimate likely selling price based upon competition and customer feedback
 estimate sales volume based upon size of market
 produce prototype or mock-up
 test the service (and its packaging) in typical usage situations
5. Commercialization
 "make enough to sell"

 launch "promotion campaign

The challenge that companies always have coming up with new services
 people like using the old services - especially that take some time to learn
 people don't like the expense of a new service
 people don't like it when parts or tech support is not available for an old service so
the resent companies always churning out new services
 people want to wait until the new service has been on the market for some time so
they can evaluate whether it is useful to switch or not
 one of the prime reasons companies feel compelled to come out with new
models is because of the competitive environment - their competition will
see what is selling, and make a new version with better features, so the
original manufacturer has to come up with a "new and improved" model
or customers will switch to the competition
Pricing of Services
Key differences between customer evaluation of pricing for services and
goods
1. Customers often have inaccurate or limited reference prices for services
2. Price is a key signal of quality in services
3. Monetary price is not the only price relevant to service customers.
Three key ways service prices are different for consumers
Customers Knowledge of Service Prices
A reference price is a price point in memory for a good or a service, and can consist of
the price last paid, the price most frequently paid, or the average of all prices customers
have paid for similar offerings.
Service heterogeneity limits knowledge
Service firms have great flexibility in the configurations of services they offer. Infinite
permutations and combinations are available, leading to complex pricing structures
Providers are unwilling to estimate prices
Many providers are unable or unwilling to estimate price in advance. Because providers
themselves do not know what services will be involved.
Individual customers need vary
Consider the services of a hairstylist or a car garage
Price information is overwhelming in services
 Customers are overwhelmed with the information they need to gather. Example of
a retail store
Prices are not visible
Customers know less than expected, they don’t understand what are they paying for.
 Which of the following would you select if you
What do you know about pricing of services?needed a filling in a tooth?
Cost?  Dentist A – Rs 100, 15 kms from home, 3
Dental checkup weeks appointment and 3 hrs in the waiting
 General medical check up room.
 Dental braces  Dentist B-Rs 150, 15 kms from home, 1
 Haircut week appointment, 30 mins in the waiting
 Bike or Car service room.
 Dentist C- Rs 200, 3 kms from office, one
week appointment and no time in the
waiting room.
 Dentist D- Rs. 300, 3 kms from office, one
week appointment, no time in the waiting
room and nitrix oxide used so no pain.

The role of Nonmonetary Costs

 Other sources of sacrifice perceived by consumers when buying and using a
service.
 Time costs
 Search costs
 Psychological costs
 Convenience costs

Costs
Time Costs-Services require participation of the customers.
Search costs-efforts in identifying and selecting a service
Convenience costs-?
Psychological Costs-Fear of not understanding, fear of rejection, fear of uncertainity
Approaches to pricing services
 Cost Based Pricing-Price determination from expenses on raw materials and labor
plus profit.
 Problems: a) Costs are difficult to trace.
b) Labor is difficult to price than materials
c) Cost may not equal value
Examples of cost based pricing strategies used in services
 Cost plus pricing-In products, its simple but in services its complicated because
tracking and identification of costs are difficult.
 Fee for service- Strategy used by professionals, it represents the cost of the time
involved in providing the service.
Competition based pricing
 Predominantly used in two situations:
(a) where services are standard across providers
(b) In oligopolies where there are a few large service providers.
Problems in competition bases pricing
 Small firms may charge too little to be viable
  Heterogeneity of services limits comparability
 Prices may not reflect customer value
Examples of competition based pricing in service industries
Price signaling occurs in markets with a high concentration of sellers. In this type of
market, any price offered by one company will be matched by competitors to avoid
giving a low cost seller a distinct advantage. Example- airline industry, telecom operators
Going rate pricing-charging the most prevalent price in the market. Example- taxi
services
Demand based pricing
 Involves setting prices consistent with customer perceptions of value: prices are
based on what customers will pay for the services provided.
Problems: a) Monetary price be adjusted to reflect the value of nonmonetary costs.
b) Information on service costs is less available to customers, hence price may not be a
central factor.
Four customer definitions of value
 Value is low price
 Value is everything I want in service
 Value is the quality I get for the price I pay
 Value is all that I get for all that I give
Value is low price
Equating value with low price
 For dry cleaning “Value means the lowest price”
 For a fast food restaurant “When I can use coupons, I feel that the service is a
value”
Value is whatever I want in a product or service
Value consumers receive from a service or product as the most important component of
value
 For medical services “ Value is high quality”
 For a music show “ Value is the best performance
Value is the quality I get for the price I pay
Value as a trade-off between the money they give up and the quality they receive
 For a hotel for vacation “ Value is the price first and quality second”
 For a hotel for business travel “Value is the lowest price for a quality brand”
Value is what I get for what I give
All the benefits they receive as well as all sacrifice components (money, time, effort)
when describing value
 For a hairstylist “ Value is what I pay in cost and time for the look I get”
 For executive education “ Value is getting a good educational experience in the
shortest time possible
Perceived Value
It is the consumer’s overall assessment of the utility of a service based on perceptions of
what is received and what is given
Physical Evidence
Customers asses the firm and its services on the basis of physical evidence
Elements
 Facility Exterior-exterior design, signage, parking, landscape, surrounding
environment.
 Facility Interior- Interior design, equipment, signage, layout, air quality /
temperature
 Other tangibles-Business cards, Stationery, Billing statements, reports, employee
dress, uniforms, brochures, web pages, virtual service scape
Types of Service Scape
Servicescape Use-
 Self service
 remote service,
 interpersonal service
Implications
 Who should be consulted in making servicescape and other evidence decisions?
 What organizational goals might be targeted through serviescape design?
 How complex is the set of decisions regarding the servicescape?
Roles of service scape
 Package
 Facilitator
 Socializer
 Differentiator
What role do employees play in service delivery?
Employees are the Service and the Brand
Employees are
 The service
 Organization in the eyes of the customers
 The Brand
 The marketers
The Right Employees
Hire the right employees
 Compete for the Best People
 Hire for Service Competencies and Service Inclination
 Be the preferred employer
 Training – Technical and Interactive Skills
 Empower Employees and give them a sense of ownership
Conflicts faced by front line employees
 Person / role conflict
 Organization / Client Conflict
 Interclient conflict
The Services Marketing Triangle
 COMPANY MANEGEMENT

Internal External
Marketing Marketing
enabling setting
promises promises

Interactive Marketing Customers

keeping promises
Customers stop doing business with you because:
1% Die
3% move away
5% seek alternatives or develop other business relationships.
9% begin doing business with the competitors
14% QUIT for pricing reasons
68% are upset with the treatment they have received.
REASONS FOR POOR SERVICE:
 Uncaring employees
 Poor employee training
 Negative attitude of employees toward customers
 Differences in perception between what businesses think customers want and
what customers actually want
REASONS FOR POOR SERVICE
 Differences in perception between the product or service businesses think they
provide and what customers think they receive.
 Differences in perception between the way businesses think customers want to be
treated and the way customers really want to be treated, or are actually treated
Importance of Customers in Service Delivery
Level of customer participation across different services
Low: Consumer presence required during service delivery
 Products are standardized
  Service is provided regardless of any individual service
 Payment may be the only required customer input
End consumer examples
Airline travel, fast food restaurant
Business to business customer examples
Uniform cleaning service
Pest Control
Moderate: consumer inputs required for service creation
 Clients inputs customize a standard service
 Provision of service requires customer purchase
 Customer inputs are necessary
End consumer examples
Haircut, full service restaurant
B to B customer examples
Freight transportation, agency created advertising campaign
High: customer cocreates the service product
 Active client participation guides the customized service
 Active participation and inputs of customer necessary
End consumer examples
Marriage counseling, weight reduction programme
B to B customer examples
Management consulting, management seminar, installation of computer network
Customer’s roles
 Customers as productive resources
 Customers as contributors to service quality and satisfaction
 Customers as competitors
Self service technologies
 Are produced entirely by the customer without any direct involvement or
interaction with the firm’s employees
ATM, Electronic BP sugar machines, distance education, online auctions, internet
banking, online insurance, courier tracking, automated investment transaction.
Key intermediaries for service delivery
 Franchising
 Agents and brokers
 Electronic Channels
Strategies for effective service delivery through intermediaries
 Control strategies
Measurement & review
 Empowerment strategies
Support & develop systems
 Partnering Strategies
Goal alignment, consultation & cooperation
Key reasons for service communication problems
 Inadequate management of customer expectations
 Inadequate management of service promises
 Inadequate customer education
 Inadequate internal marketing communications
Exceeding customer expectations
Understand types of expectations

 Desired
 Adequate
Exceeding adequate customer expectations is unlikely to produce “delight” in customers
Know which customer expectations to exceed