Service Sector Management Notes - 185357706

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Ch-1 Introduction to Services Marketing
Define Services
A service is an act or performance offered by one party to another. They are
economic activities that create value and provide benefits for customers at specific times
and places as a result of bringing desired change.
According to Sir William B "Service refers to social efforts which includes the
Govt. to fight five giant evils – wants, disease, ignorance, squalor and illness in the
society".
Characteristics of services
Service is an act or performance offered by one party to another. They are
economic activities that create value and provide benefits for customers at specific times
and places as a result of bringing about a desired change in or on behalf of the recipient
of the service. The term service is not limited to personal services like medical services,
beauty parlors, legal services, etc. According to the marketing experts and management
thinkers the concept of services is a wider one. The term services are defined in a number
of ways but not a single one is universally accepted. The distinct characteristics of
services are mentioned below.
1. Intangibility: Services are intangible we cannot touch them are not physical
objects. According to Carman and Uhl, a consumer feels that he has the right and
opportunity to see, touch, hear, smell or taste the goods before they buy them.
This is not applicable to services. The buyer does not have any opportunity to
touch smell, and taste the services. While selling or promoting a service one has
to concentrate on the satisfaction and benefit a consumer can derive having spent
on these services.
For e.g. An airline sells a flight ticket from A destination to B destination. Here it
is the matter' of consumer's perception of services than smelling it or tasting it.
2. Perishability : Services too, are perishable like labor, Service has a high degree
of perish ability. Here the element of time assumes a significant position. If we do
not use it today, it labor if ever. If labor stops working, it is a complete waste. It
cannot be stored. Utilized or unutilized services are an economic waste. An
unoccupied building, an unemployed person, credit unutilized, etc. are economic
waste. Services have a high level of perish ability.
3. Inseparability: Services are generally created or supplied simultaneously. They

are inseparable. For an e.g., the entertainment industry, health experts and other
professionals create and offer their service at the same given time. Services and
their providers are associated closely and thus, not separable. Donald Cowell
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states 'Goods are produced, sold and then consumed whereas the services are sold
and then produced and consumed'. Therefore inseparability is an important
characteristic of services which proves challenging to service management
industry.
4. Heterogeneity: This character of services makes it difficult to set a standard for

any service. The quality of services cannot be standardized. The price paid for a
service may either be too high or too low as is seen in the case of the
entertainment industry and sports. The same type of services cannot be sold to all
the consumers even if they pay the same price. Consumers rate these services in
different ways. This is due to the difference in perception of individuals at the
level of providers and users. Heterogeneity makes it difficult to establish
standards for the output of service firm.
5. Ownership: In the sale of goods, after the completion of process, the goods are
transferred in the name of the buyer and he becomes the owner of the goods. But
in the case of services, we do not find this. The users have only an access to
services. They cannot own the service.
For e.g. a consumer can use personal care services or medical services or can use
a hotel room or swimming pool, however the ownership remains with the
providers.
According to Philip Kotler, "A service is an activity or benefit that one party can
offer to another that is essentially intangible and does not result in the ownership
of anything. "From this it is clear that the ownership is not affected in the process
of selling the services.
6. Simultaneity: Services cannot move through channels of distribution and cannot

be delivered to the potential customers and user. Thus, either users are brought to
the services or providers go to the user. It is right to say that services have limited
geographical area. According to Carman, "Producers of services generally have a
small size area of operations than do the producers of items. largely because the
producer must to get the services or vice- versa."
When the producers approach the buyer time is taken away from the production
of services and the cost of those services is increased. On the other hand it cost
time and money for the buyers to come to producers directly. Here the economics
of time and travel provide incentives to locate more service centers closer, to
prospective customer, resulting in emergence of smaller service centers for e.g.
aeroplane cannot be brought to customer, etc.
7. Quality Measurement: A service sector requires another tool for measurement.

We can measure it in terms of service level. It is very difficult to rate or quantify
total purchase. E.g. we can quantify the food served in a hotel but the way waiter
serves the customer or the behaviour of the staff cannot be ignored while rating
the total process.
Hence we can determine the level of satisfaction at which users are satisfied. Thus
the firm sells good atmosphere convenience of customers, consistent quality of
services, etc.
8. Nature of demand- Generally, the services are fluctuating in nature. During the
peak tourist seasons there is an abnormal increase in the demand of services.
Therefore, while identifying the salient features of services one cannot ignore the
nature of demand. E.g. tourists go to hill stations during summer season wherein
public transport utilities are used substantially. This indicates that flexibility is the
important feature of service.
Give a brief classification of services.

The classification scheme developed by Christopher Lovelock represents an attempt to
address one of the following aspects.
1. Nature of the Service Act:
The service act can be considered in two-ways:
– Who or what is the direct recipient of the service and
– The tangible nature of service.
This creates four classification possibilities shown below:
Direct Recipient of the Service

People Things
Nature of Services directed at people's bodies Services directed at goods and
the Service Act Health care other physical possessions:
Passenger transportation Freight transportation
Beauty saloons Industrial equipment repair and
Tangible actions Exercise clinics maintenance.
Restaurants Laundry and dry cleaning
Haircutting Landscaping/lawn care
Veterinary care
Services directed at people's mind Services directed at intangible
Education assets:
Broadcasting Banking
Intangible actions Information services Legal Services
Theatres Accounting
Museums Securities
Insurance
Understanding the Nature of the Service Act
2. Type of Relationship that the service organization has with its customers:
In this the prime factors which need consideration
– Whether or not the customer has some type, of formal relationship with the
provider of service and
– Whether the service itself is provided continuously or in discrete transactions.
These considerations lend themselves to the matrix shown in the figure shown below:
Type of Relationship between Service Organization and its customers
Nature of Membership relationship No formal relationship

Service Delivery
Continuous delivery of Insurance Radio station
service Telephone subscription Police protection
College enrollment Lighthouse
Banking Public highway
Trade Associations
Long-distance phone calls Car rental
Theatre series subscription Mail service
Commuter ticket or pass Toll highway
Discrete transaction Pay phone
Movie theater
Public transportation
Restaurant
There are advantages for the service provider to have customers as 'members'
whether done in a contractual sense or just by mutual agreement. By knowing personal
details about the customer, it becomes easy to contact them through direct marketing and
tailor special offers around those particular needs.
3. Scope for customization and judgment in service delivery:

Services are created as they are consumed. There is far more scope for tailoring
the service to meet the needs of the individual customer because the customer is
often actually involved in the production process. As shown in the figure below
customization can proceed along at least two dimensions:
– The extent to which the characteristics of the service and delivery system tend
themselves to customization.
– How much judgment customer contact personnel are able to exercise in defining
the nature of services received by individual customers.
Extent to which Service Characteristics are Customized
Extent to Which Customer High Low Contact Personnel Exercise

judgment in Meeting
Individual Customer Needs
Professional services Education (large. classes)
Surgery Preventive health programs
Taxi services College food service
High Beautician
Plumber
Education (tutorials)
Cournet restaurant
Telephone service Public transportation
Hotel services Routine appliance repair
Low Retail banking Movie theater
Family restaurant Spectator sports
Fast-food restaurant
4. Nature of Demand and supply for the Service:

Some service industries face steady demand for their services whereas others
encounter significant fluctuations: The time perish ability of service capacity
creates a challenge for the service manager. This is because services cannot be
produced and stored as inventory for future sale. But the extent of demand and
supply imbalances varies across service industries as shown in the figure below:
Extent to which Supply is Wide Narrow

Constrained
Electricity Insurance
Peak demand can usually be Natural gas Legal services
met without a major delay Telephone Banking
Hospital maternity unit Laundry and dry cleaning
Policy and fire emergencies
Accounting and tax Services similar to those
preparation above but with insufficient
capacity for their base
level of business
Peak demand regularly Passenger transportation
exceeds capacity Hotels and motels
Restaurants
Theaters
What is the Nature of Demand for the Service Relative to Supply?
The service managers may face serious problems while coping up with the demand
fluctuations. However, with technological development several service companies are
using computers to help in delivery scheduling to bring about a balance between demand
and supply of services.
5. Method of Service Delivery:

The method by which the service is delivered to customers could be yet another
area where a change of marketing strategy could pay dividends. The factors to
consider are shown in the figure below:
Availability of Service Outlets

Nature of Interaction between Customer Single site Multiple site
Organization and Service
Customer goes to service organization Theater Bus service
Barbershop Fast-food chain
Service organization comes to customer Lawn care service Mail delivery
Pest control service Emergency repairs
Taxi
Credit card company Broadcast network
Customer and service organization
Local TV station Telephone company
transact at arm's length (mail or electronic
communication)
Method of Service Delivery
Services with multiple sites have significant management implications for ensuring
consistency and quality in offering of services. Service§, delivery is of great important to
the customers overall perception of quality services.
Distinguish between Goofs and services
GOODS SERVICE
(1) Tangible (1) Intangible
(2) Can be stored (2) Cannot be stored
(3) Homogeneous (3) Heterogeneous
(4) Transfer of ownership (4) No transfer of ownership
(5) Production & distribution are separated (5) Production, distribution & consumption
from consumption are simultaneous
process.
(6) Core value produced in factory (6) Core value produced in buyer
seller interaction.
(7) Customer do not participate in (7) Customer participate in the production
the production process process
(8) A Thing (8) An activity
(9) Movable (9) Immovable
Explain growth of service sector?

Services comprise a set of economic activities like transportation, trade, tourism,
communications, banking and insurance, real estate, public administration, defence and
so on. According to an Adrian - Payne four factors are responsible for growth in the
service sector. They are: demographic, social, economic and political.
1. Demographic changes: The life expectancy has raised which in turn, is producing
an expanding retired population. This sector has created a new demand for travel
and leisure, as well as for healthcare, nursing and life insurance. The need for
infrastructural support services has increased due to the development of new
towns and regions.
2. Social changes: The number of women's in work force has increased, and this has
led to traditional domestic functions being performed outside the home. The rise
in number of double income household has created a greater demand for
consumer services, including retailing, real estate and personal financial services.
With the growing income, the standard of life has improved. Smaller families
with double income spend ore on entertainment, travel and hospitality services.
The aspiration levels have increased due to communication and travel. As a result,
both children and adults are making new demands on learning establishments, so
that they can develop the skills needed in order to compete. In the complex and
fast changing environment. This has opened avenues for knowledge and
information based services.
3. Economic changes: The demand for communication, travel and information

services has increased due to globalisation. This has been filled by the rapid
changes brought about by new information technology. Increased specialization
within the economy has led to reliance on specialist service providers For e.g.
advertising and marketing research have now become specialist functions
providing support to all the sectors of the economy.
4. Political and legal chap : The size of the government has grown creating a huge
infrastructure of service departments. With the growth in international trade, the
demand on legal and other professional services have increased, cutting across
national boundaries.
Manufacturing firms handing over repair and maintenance, data processing,
where rousing and logistics services to specialised sources, which they earlier
used to perform in- house. The liberalization has also created a new avenue for
growth. The slow growth of agriculture and industry and the presence of
widespread unemployment have driven people to seek work in the informal

services. This is particularly true in the urban areas, where petty pavement retail
trade, transport, another is repair and service establishments have proliferated.
Since the overall growth of the economy is now dependent on the service
sector, the pace of productivity growth in services becomes critically important.
Therefore, the government is taking an initiative in the sector.
REASONS FOR THE GROWTH OF SERVICES IN INDIA:

1. Economic affluence: One, of the key factors for the growth of demand for
services is the economic affluence. According to the NCAER study the size of the
middle income consumer is raising fast and the percentage of the very poor
household's declining. The rural households in the upper income category is
growing at a much faster pace than the urban households in the corresponding
categories. The Economic liberalisation Process has had a positive impact on the
Indian households. Their income as well as their expenditure has been pushed,
creating a demand for many goods and services.
2. Changing Role of Women: Traditionally the Indian woman was confined to

household activities. But with the changing time there has been a change in the
traditional way of thinking in the society. Women are now allowed to work. They
are employed in defence services, police services, postal services, software
services, health services, hospital services, entertainment industries, Business
Process Outsourcing and so on.
The percentage of working women has been growing rapidly. The changing role
of women has created a market for a number of product and services. Earning
women prefer to hire services in order to minimise the innumerable roles that they
are required to perform. The demand by woman is forcing service organisations to
be more innovative in their approach.
3. Cultural Changes: Change is the underlying philosophy of culture place of change

in Indian culture is not uniform. However, during the last century the factors of
change are prominent. The emergence of the nuclear family system in place of the
traditional joint family system creates a demand for a host of services like
education, health care, entertainment, telecommunication, transport, tourism and
so on. There has' been a marked change in the thought Processes relating to
investment, leisure time perception and so on which has created a huge demand
for services.
4. I.T. Revolution: For the last 15 years India'6aste,en occupying a vital position in
the area of Information Technology. IT became one of the key service businesses
of the country. India has the largest software skilled population in the world. The
domestic market as well as the international market has grown substantially.

Realising the potential for this area many state governments have made IT as their
most, prioritized segment states such as Karnntnka, Andhra Pradesh, Madhya
Pradesh Maharashtra and Delhi have already achieved substantial progress in
Information Technology the In Ile years to come 'Lille IT enabled se Aces will
have a bright future. The growth. of' population, industrialisation and
indiscriminate consumptions have affected the, natural resources, environment
and the ecological balance. Due to this there is an imbalance of the ecology
various service organisations have been promoted in order to take up social
marketing. Thousands of crores of rupees are being spent on safeguarding the rare
animals and birds, water pollution, conservation of oil & energy and research to
develop new technologies that can promote effective use of natural resources and
safeguard the environment.
5. Development of Markets: During the last few decades the wholesaler and the
retailer population has grown in the country. Urban India has become a cluster of
wholesaling and retailing business. In the Semi - urban areas, retailing has spread
to the nooks and corners of the streets and in the rural areas retail business is
significantly present. A new breed of organisations, offering marketing services
has come up. The government also offers marketing services to the small-scale
agricultural farmers, artisans and other traditional business sectors such 'as
promotion of regulated markets, export promotion councils, development boards
etc.
6. Market orientation: The changing competitive situation and demand supply

positions has forced the manufacturing organisation to shift their philosophy from
production orientation to market orientation. Market is a service function that has
been added in the organisation. The pressures in the market has further forced the
manufacturing organisations to have marketing research, accounting, auditing,
financial management, human resource management and marketing research
divisions - all of which are services functions.
7. Health-Care Consciousness: In India, the healthcare market has grown

substantially. The increased life expectancy is the result of the consciousness of
the people regarding the health issues. The growth of fitness clubs, diagnostic
centres, medical counselling, health-related information sites are the reflections of
the growing demands for health care services. The government as well as the
social organisations have taken up the mass campaigns in order to create
awareness among the illiterate persons and the rural population on health service.
Hence, the growth of health related services.
8. Economic liberalisation: The economic liberalisation of the 1991 has brought

many changes in the Indian scenario. With the Disinvestment and the
Privatisation policies the state owned monopolies in many service areas came to
an end Multinationals were permitted to enter the Indian market. Liberal lending
policies and lower interest rates motivated many people to become self-employed.
Different sectors like Banking, Insurance, Power projects, Telecommunication,
Hospitality sector, Health Services, Entertainment, Air transport, and Courier
services witnessed intense competition, due to the entry of multinationals. The
flow of time-tested service technology from various parts of the world changed
the attitude of the Indian consumer towards sources.
9. Rampant migration: One of the important reasons for the growth of services in
India is the rampant migration of rural to semi-urban and urban areas. Migration
to urban areas for the want of jobs and livelihood has resulted in the expansion of
cities and townships due to which businesses like real estates, rentals,
transportation and infrastructure services are rapidly expanding.
10. Export potential: India is considered to be a Potential source for services. There
are a number of services that India offers to various parts of the world like
banking, insurance, transportation co data services, accounting services,
construction labour, designing, entertainment, education, health services, software
services and tourism. Tourism and software services are among the major foreign
exchange earners of the country and that the growth rate is also very high as
compared to the other sectors.
11. Service tax: The growth in the service sector attracted the attention of the
government as a tax generating source. Over the years, the number of services
brought under service tax has increased- Service tax is levied on hotels and
restaurants, transport, storage and communications, financial services, real states,
business services and social and personal services.
Explain the growing importance of services or Service constitute about 54% of G.D /
List four areas/trends which have led to this phenomenal growth.
From the following points we can find out the growing importance of services:
i. There has been an increase in demand for the services of professionally qualified
technicians with the establishment of technical institutes.
ii. Communication services like entertainment, education and the right to
information by the public is more important.
iii. Due to the increasing standards in education there is an increasing demand for
educational services. Primary, secondary, higher secondary schools, junior degree
colleges are the institutes which are in great demand. As the number of students
goes up the demand for private classes, tuitions, etc. also increases.
iv. Banking services have become necessary to meet financial requirements of the
public and the national industrial sector.
v. Personal care services are essential to develop potentiality of an individual for a
perfect personality and positive image.
vi. Electricity services are required for the benefit of society, industry and so on.
vii. With the increasing amount of trade and business, done by road there has been a
demand for transport services which benefits various automobile manufacturers.
Large section of population prefers having their own vehicles, proving a good
business proposition for automatic industry.
viii. The tourism industry has geared itself to make the tourists enjoy the holiday
seasons in the places of their choice and take them away from monotonous
existence of cities.
ix. Adequate hospital services are essential for the well being of the society.
x. Hospitality services work on the strategies to satisfy the business class through
their service in terms of comfort and satisfaction. The above activities have left
the management scientists, professionals and socio-economic thinkers to analyze
and understand that managing services need attention, stay in business.
xi. As the natural resources are depleting and need for conservation is increasing we
see the coming of service providers like pollution control agencies, car pools, etc.
xii. The development in information, technology has given rise to services like pager
service PCOs, world wide, Professional requirements need a change when
technology develops and evolves; This necessitates proficiency in the
management level by giving a boost to abilities.
MARKETING CHALLENGES OF SERVICES:

Managing, growing, and profiting with both product and service businesses are
challenging tasks. But the challenges are different from one to the other. Listed below are
some of the most common and difficult challenges of growing and .managing consulting,
professional, or technology service businesses that don't necessary apply to product
businesses.
1. Clients can't see or touch services before they purchase them: This makes services
difficult to conceptualize and evaluate from the client perspective, creating
increased uncertainty and perception of risk. From the firm's perspective, service
intangibility can make services difficult to promote, control quality, and set price.
2. Services are often produced and consumed simultaneously: This creates special
challenges in service quality management that product companies do not even
consider. Products are tested before they go out the door. If a product has quality
problems while in production the company can fix them and customers are none
the wiser. Service production happens with the customer present, creating a very
different and challenging dynamic.
3. Trust is necessary: Some level of trust in the service organization and its people
must be established before clients will engage services. This is as important,
sometimes more important, than the service offerings and their value proposition.
4. Competition is often not who you think: Competition for product companies are
other product companies. Competition for service companies are often the clients
themselves: Sure, sometimes you find yourself in a competitive shootout (some
firms more than others), but often the client is asking 'should we engage this
service; at all' and 'if so, should we just do it in-house'.
5. Brand extends beyond marketing: Brand in service businesses is about who you
are as much as what you say about yourself. And internal brand management and
communications can be equally as vital to marketing success as are external
communication.
6. Proactive lead generation is difficult: Many service companies have tried, and
failed, at using lead generation tactics that work wonders for product companies.
Implemented correctly, traditional product techniques, such as direct marketing
and selling, can work for services, but the special dynamics of how clients buy
services must be carefully woven into your strategy.
7. Service deliverers often do the selling : Many product companies have dedicated
sales forces. For services, the selling is often split between sales, marketing,
professional, and management staff.
8. Marketing and sales lose momentum: Most product companies have dedicated
marketers and sellers. They market and sell continuously, regardless of the
revenue levels they generate. In many services companies the marketers and
sellers also must manage and deliver. This can often lead to the Services Revenue
Rollercoaster-wide swings between revenue and work overflow, and revenue and
work drought.
9. Passion is necessary yet elusive: The more passion, spirit, hustle, and desire your
staff brings to the organization every day, the more revenue and success you will
have. The correlation between staff passion and financial success is direct and
measurable
Services Marketing Environment

Features of Business Environment
1. Business environment is the sum total of all factors external to the business firm
and that greatly influences their functioning.
2. It covers factors and forces like customers, competitors, suppliers, government,
and the social, cultural, political, technological and legal conditions.
3. The business environment is dynamic in nature that means, it keeps on changing.
4. The changes in business environment are unpredictable. It is very difficult to
predict the exact nature of future happenings and the changes in economic and
social environment.
5. Business Environment differs from place to place, region to region and country to
country. Political conditions in India differ from those in Pakistan. Taste and
values cherished by people in India and China vary considerably.
Importance of Business Environment
There is a close and continuous interaction between the business and its environment.
This interaction helps in strengthening the business firm and using its resources more
effectively. As stated above, the business environment is multifaceted, complex, and
dynamic in nature and has a far-reaching impact on the survival and growth of the
business. To be more specific, proper understanding of the social, political, legal and
economic environment helps the business in the following ways:
1. Determining Opportunities and Threats: The interaction between the business and
its environment would identify opportunities for and threats to the business. It
helps the business enterprises for meeting the challenges successfully.
2. Giving Direction for Growth: The interaction with the environment leads to
opening up new frontiers of growth for the business firms. It enables the business,
to identify the areas for growth and expansion of their activities.
3. Continuous Learning: Environmental analysis makes the task of managers easier

in dealing with business challenges. The managers are motivated to continuously
update their knowledge, understanding and skills to meet-the predicted changes in
realm of business.
4. Image Building: Environmental understanding helps the business organisations in

improving their image by showing their sensitivity to the environment within
which they are working. For example, in view of the shortage of power, many
companies have set up Captive Power Plants (CPP) in their factories to meet their
own requirement of power.
5. Meeting Competition: It help the firms to analyse the competitors' strategies and
formulate their own strategies accordingly.
6. Identifying Firm's Strength and Weakness : Business and Weakness: Business

environment helps to identify the individual strength weaknesses in view of the
technological and global developments.
Business environment is broadly divided into two types:

i. Internal Environment and
ii. External environment
i. Internal Environment :
It relates to those factors which are internal to the business and are controllable. The
internal environment exercises a significant influence on the attitudes, behaviour and
performance of people. Internal environment is influenced by the following factors:
1. Goals and objectives of the organisation: The goals and the objectives set up the
parameters within which the organisation decisions can be taken. They greatly
influence an ability of an organisation to deal with its external environment.
Financial and nonfinancial targets are determined by the goals.
2. Corporate image: Every organisation enjoys an image among the employees.

Some refer to their employers as progressive whereas others refer to them as
Conservative. To make the business acceptable to the society, every business
must try to improve its image. Objectives based on enlightened lines certainly
help to improve corporate image.
3. Research and development facilities: Research and development is the strength of
the business. it helps the business to go ahead of the competitors by introducing
new products and improving the existing ones.
4. Efficient manpower: A successful business is known by its efficient manpower
and not by the buildings and machines. Manpower makes or breaks a business.
Due care should be taken to recruit result oriented employees.
5. Business policies: The knowledge of internal environment and how it affects the
functioning of the organisation is important to understand the use of business
policies. Broadly, policies cover four functional areas viz. production, marketing,
finance and HRD. Business policies provide the broad guidelines within which an
organisation has to work. Thus policies should be comprehensive.
6. Strong financial base: Business organisations must try to attain strong financial
base. This helps the business to fight uncertainty in the market. It can depend on
internal financing when an external borrowing becomes costly.
7. Cordial relations: Both the employers & employees should try to maintain cordial
relations at the workplace. It is important to keep clear line of communication.
Differences and conflicts can be settled across the table. Work environment
should attract employees to their work.
8. Value based management : Traditional measures for performance measurement
like a return on sales, a return investment or a return on net assets have become
outdated. New measures like shareholders, views, employee morale and the work
ethics which improve the employee satisfaction are considered more important.
Value system is internal to business and differs from enterprise to enterprise.
ii. External Environment:

External environment relates to the factors which are external to the business
organisation. It is divided into Micro Environment and Macro Environment.
MICRO ENVIRONMENT:
The micro environment consists of all the factors in the company's immediate
environment that affects the performance of the Company. These include the sup-pliers,
marketing intermediaries, competitors, customers and the publics. The micro-
environmental factors are more - intimately linked with the company than the macro
factors. The micro- forces need not necessarily affect all the forms in a particular industry
in the same way. Some of the micro factors may be particular to a firm. When competing
firms in an industry have the same micro elements, the relative success of the firm
depends inter alia, on their relative effectiveness in dealing with these elements. The
following factors affect the micro environment:
Corporate Resources:
Corporate resources include employees, funds, materials, machinery and management.
These resources are controllable. They can be used as per the guidelines provided by the
business policies.
Customers:
The business exists only because of its customers. Monitoring the customers' sensitivity
is therefore a prerequisite for the success of a business- It is important to consider the
customers' likes, dislikes, needs, preferences, buying motives and expectations. A
company may have different categories of customers like individuals, households,
industries and other commercial establishments and government and other institutions.
Higher customer patronage brings increased profit to the business.
Suppliers:
Supplier is an important force in the micro environment of the firm. Supplier, are those
people who supply inputs like raw materials and components to the firm. The importance
of reliable source of supply to the smooth functioning of the business cannot be
overlooked. Uncertainty regarding the supply or the other supply constraints often
compel companies to maintain high inventories leading to increased cost. It is always
advisable to, negotiate with several suppliers and not allow a single supplier to enjoy
monopoly power. The selection of suppliers is within the control of the management.
Competitors:
The role of competitors is beyond the control of the management. It is necessary to study
the competitors' policy on product, price, promotion, etc. When relevant information is
collected about the competitors, it helps to strengthen business and also face the
competition more effectively. The business can profit by exploiting the weaknesses of the
competitors
Marketing intermediaries
The marketing intermediaries, include middlemen such as agents and merchants who help
the company find - customer or close sales with them. Marketing intermediaries are a
vital link between the company a the final consumers. A wrong choice of the link, may
cost the company heavily. Goods requiring demonstrations find the services of
middlemen unavoidable.
Society:
Business has to serve the society. Society consists of general public, media, government,
financial institutions and organize group like trade unions, shareholders' associations etc.
Society, directly influences the decisions of business.
MACRO ENVIRONMENT
1. Economic Environment
The survival and success of each and every business enterprise depend fully on its
economic environment. The main factors that affect the economic environment are:
(a) Economic Conditions: The economic conditions of a nation refer to a set of economic
factors that have great influence on business organisations and their operations. These
include gross domestic product, per capita income, markets for goods and services,
availability of capital, foreign exchange reserve, growth of foreign trade, strength of
capital market etc. All these help in improving the pace of economic growth.
(b) Economic Policies: All business activities and operations are directly influenced by
the economic policies framed by the government from time to time. Some of the
important economic policies are:
(i) Industrial policy
(ii) Fiscal policy
(iii) Monetary policy
(iv) Foreign investment policy
(v) Export –Import policy (Exim policy)
The government keeps on changing these policies from time to time in view of the
developments taking place in the economic scenario, political expediency and the
changing requirement. Every business firm has to function strictly within the policy
framework and respond to the changes therein.
Important Economic Policies

i. Industrial policy: The Industrial policy of the government covers all those
principles, policies, rules, regulations and procedures, which direct and control the
industrial enterprises of the country and shape the pattern of industrial
development.
ii. Fiscal policy: It includes government policy in respect of public expenditure,
taxation and debt.
iii. Monetary policy: It includes all those activities and interventions that aim at
smooth supply of credit to the business and a boost to trade and industry.
iv. Foreign investment policy: This policy aims at regulating the inflow of foreign
investment in various sectors for speeding up industrial development and take
advantage of the modern technology.
v. Export–Import policy (Exim policy) : It aims at increasing exports and bridge the
gap between expert and import. Through this policy, the government announces
various duties/levies. The focus now-a-days lies on removing barriers and
controls and lowering the custom duties.
2. Social and culture Environment

It refers to people's attitude to work and wealth; role of family, marriage, religion
and education; ethical issues and social responsiveness of business. The social
environment of business includes social factors like customs, traditions, values, beliefs,
poverty, literacy, life expectancy rate etc. The social structure and the values that a
society cherishes have a considerable influence on the functioning of business firms. For
example, during festive seasons there is an increase in the demand for new clothes,
sweets, fruits, flower, etc. Due to increase in literacy rate the consumers are becoming
more conscious of the quality of the products. Due to change in family composition, more
nuclear families with single child concepts have come up. This increases the demand for
the different types of household goods. It may be noted that the consumption patterns, the
dressing and living styles of people belonging to different social structures and culture
vary significantly.
3. Political Environment
This includes the political system, the government policies and attitude towards the
business community and the unionism. All these aspects have a bearing on the strategies
adopted by the business firms. The stability of the government also influences business
and related activities to a great extent. It sends a signal of strength, confidence to various
interest groups and investors. Further, ideology of the political party also influences the
business organisation and its operations. You may be aware that Coca-Cola, a cold drink
widely used even now, had to wind up operations in India in late seventies. Again the
trade union activities also influence the operation of business enterprises. Most of the
labour unions in India are affiliated to various political parties. Strikes, lockouts and
labour disputes etc. also adversely affect the business operations. However, with the
competitive business environment, trade unions are now showing great maturity and
started contributing positively to the success of the business organisation and its
operations through workers participation in management.
4. Legal Environment
This refers to set of laws, regulations, which influence the business organisations and
their operations. Every business organisation has to obey, and work within, the
framework of the law. The important legislations that concern the business enterprises
include :
a. Companies Act, 1956
b. Foreign Exchange Management Act, 1999
c. The Factories Act, 1948
d. Industrial Disputes Act, 1972
e. Payment of Gratuity Act, 1972
f. Industries (Development and Regulation) Act, 1951
g. Prevention of Food Adulteration Act, 1954
h. Essential Commodities Act, 2002
i. The Standards of Weights and Measures Act, 1956
j. Monopolies and Restrictive Trade Practices Act, 1969
k. Trade Marks Act, 1999
l. Bureau of indian Standards Act, 1986
m. Consumer Protection Act, 1986
n. Environment Protection Act
o. Competition Act, 2002
The Goods-service Continuum

The goods and services continuum enables marketers to see the relative goods/services
composition of total products. A product's position on the continuum, in turn, enables
marketers to spot opportunities. At the pure goods end of the continuum, goods that have
no related services are positioned. At the pure services end are services that are not
associated with physical products. Products that are a combination of goods and services
fall between the two ends. For example, goods such as furnaces, which require
accompanying services such as delivery and installation, are situated toward the pure
goods end. Products that involve the sale of both goods and services, such as auto repair,
are near the center. And products that are primarily services but rely on physical
equipment, such as taxis, are located toward the pure services end.
A few observations of the Continuum model can be made:
– The offerings of a firm range from pure goods to pure services.

– Those that are mostly goods are tangible and are very easy to evaluate by the
consumer (like fabrics, jewellery, a house etc.). A consumer finds it very difficult
to evaluate those offers which are mostly services because of their intangibility
(like legal and counselling advice, medical diagnosis etc).
– The range of offers has different qualities in themselves and the customer looks
for or seeks these qualities:
Those that are mostly goods show search qualities. Customers know exactly what
they want and look for those features in the offer. Thus, an apartment hunter would look
for a 2bedroom-hall-kitchen property in Bandra admeasuring 900 square feet in car.pet
area. Or, a lady might look for specific designs in a 23-carat bangle from a Tanishq
outlet. Mr. Joseph looks for worsted, blue woollen suit material for himself etc.
Thus a marketer can put the search quality features on prominent display and
make it easier for customers to get details or access. If the customers do not find these
features in their search they may become anxious and may not buy or they may go for
rival products where there is easier access to information.
Those offers that are mostly services evince credence qualities There are no
tangible features for the customer to search for. He then looks for credo qualities in the
offer Reputation of the offer becomes the decisive factor. He has very few other
alternatives to compare. Thus, Mrs. Manjrekar would choose only that lawyer to fight her
divorce and custody battle who has a reputation for winning such court cases. A patient
would. choose his doctor or surgeon on the basis of his reputation.
We tend to give our computers or for -repair on the basis of the reputation of the
repairman. A marketer of such offers has to be doubly careful in highlighting the
credibility of the service provider. An actor is never called again for a stage play if his
histrionic talent is in question; a doctor or surgeons whose ethical reputation is in
question right never have patients. Thus, in the product-service continuum', services can
be classified in three ways, under the range or degree of tangibility - highly tangible to
highly intangible. They are:
1. Highly tangible services:

They have high degree of tangibility. This is mainly because the services are rendered
over certain goods, e.g., car rentals. It is a service based entirely on cars. If a place had no
cars, such a service would cease to exist. For the marketer, it is both a boon and a curse.
As mentioned, car rentals exist only because cars exist. It's easy for the service marketer
to be persuasive and "tangibles" the offer. He only has to include the car in his
communication; the service concept could be easily comprehended by the consumer. In
addition, if the car has a good brand image and is looking spick and, the car rental basks
in the reflected glory. If the car rental mentions in its advertisements about the type of
cars in its pool, the consumers perceive the quality of the company accordingly.
Alternatively, if the car breaks down during a rental service, the consumer will have a
poor impression and image of the car rental company. He would not reason that it was the
car that broke down and failed and that the car rental company should really not be
blamed.
Examples of car rental companies in India are Dial-a-Cab, in Delhi, and -Wheels-Rent-
A-Car (WRAC) of the Bhoruka group, who also own Transport Corporation of India, the
giant fleet trucking enterprise. Other car rental companies are Hertz-Rent-A-Car and Avis
in the United States.
2. Service linked to tangible goods: Here the service is linked to goods, either
independently, or as part of the marketer's offer. If it is the latter, the service
becomes a part of the total product concept. This takes place when Videocon, the
home appliance company, includes repair as part of its marketing mix. Even if it
is not included, home appliance repair is a service that is forever linked to goods.
If there were no home appliances in the world, such services would be non-
existent. A whole range of services exists in the housing sector - especially post-
construction like repair and maintenance.
3. Highly intangible services: In this classification under the continuum model,

service is highly intangible. The services cannot be touched, felt or seen, e.g.,
counselling, consultancy, psychotherapy, physiotherapy, a guest lecture, etc.
Buying Behaviour of the Service Consumer
Why does the customer buy?

The customer mostly buys goods, services, people, places,-events, organizations, ideas,
information and experiences. All these generally fall under goods 8'services. But the
offers that they buy can be:
High Involvement offers
Low involvement offers/Impulse offers
High involvement service products have the following characteristics
1. Complexity of features: If the servicer product has complex features, it will

induce anxiety in consumers. They will take more time understand service
product usage feature familiarization as well as internalization. Thus, a SLR
(single lens reflex) camera preferred by professional photographers will induce
higher involvement from the consumers than box cameras with only point-and-
shoot features.
2. High price: High pries of Service products will make consumers slow and
cautious in their decision making. This is the reason why they will debate on the
pros and cons of consumption d service transaction costs of a vacation, more than
they would for a haircut.
3. High perceived risks: A consumer perceives risk in consumption in two forms:

bodily harm and financial loss. When Shalini goes for cosmetic surgery, she will
perceive higher risk in the offer than for a routine facial.
4. Large differences in features: If the consumers perceive that across a service

category there are large differences in feature, then they would be highly
involved. And if the situation is as in the home appliance industry where
consumers really don't perceive much difference between products then their
involvement becomes low.
5. Large number of users: If there are a large number of users for a service offer,
like a family package tour, then there is going to be more participation and
involvement from all family members. This is unlike when only one person is a
consumer-like Pooja deciding to take a computer course during her school
vacation.
6. Enduring product: If the service offer has a long life span or has a longer lasting
effect -like a time share purchase or selection of a school for child - then it will
make the decision-maker highly involved.
7. Reflects self-concept of the buyer: consumers are very much aware of their self-
image-and either wants to maintain or change it. They do so by purchasing
products and services hoping that by doing so it will reinforce their personality
and self-image or help them acquire a new one. This aspect is so close to the well-
being of consumers that they become highly involved with the purchase.
Low involvement service products have the following features:
1. Low Price
2. Less difference in features
3. Simple features in the service product
4. Does not reflect a consumer's personality
5. The products are of mostly daily needs
6. Low brand loyalty
What are the stapes of the buying decision process?

Most of the successful companies research the buying decision process involved in their
category. They ask the consumer when they first became acquainted with the product
category and brands, what are their brand beliefs, how involved t1fey are with the
product, how and how satisfied they are after purchase.

In a typical buying process the consumer passes through five stages:
1. Problem Recognition: The buying process begins when the buyer recognizes
problem or need. The need can be triggered by internal or external stimuli. In the
case, a person's normal needs are hunger, thirst sex that rises to the threshold level
becomes a drive.
In the latter case, a need is aroused by external stimulus. A person passes
bakery sees fresh toasted bread that stimulates his hunger.
Marketers need to, identify the circumstances that trigger a particular
need. Through marketing research the marketers can identify the most frequent
stimuli that spark an interest in a product category. They can then develop
appropriate trigger consumer interest.
2. Information Search: An aroused consumer will be inclined to search for more

information. The consumer information sources fall into three groups:
a. Personal Sources: Family, friends, neighbors, acquaintances, etc.
b. Commercial Sources: Advertising, sales persons, dealers, packaging, displays,
etc.
c. Public Sources: Mass media, consumer ratings organizations, etc.
As a result of gathering information the consumer increases his awareness
of availability of the service and its attributes.
In purchasing services, the customer tends to rely on the personal sources
the personal experience in using these services.
3. Evaluation of Alternatives: The consumer evaluates the alternative services that

satisfy his needs with the available information. He evaluates the distinct features
of the service provider, quality and price. In case of services, the available
alternatives are relatively smaller than the goods, because brand choice in services
is limited. The quality of service can only be experienced but it is difficult to
compare with other service firms purchase information of the service cannot be
obtained.
In evaluating alternative for the purchase decision, the customers ranking
in order importance the factors that contributes towards the purchase decision. For
example, choosing a restaurant the customer considers factors such as food
quality, menu, price, atmosphere and convenience. However, the importance
attached to these factors may differ according to the purpose of visit to the
restaurant.
4. Purchase Decision: After carrying out a thorough evaluation of the various

alternatives, the customer chooses that service provider who will be able to satisfy
his needs. The purchase of service is an experience which leads to satisfaction of
customer needs. Production and consumption of service is a simultaneous activity.

The service encounter involves interaction of the service provider and the
customer. The success of the service largely depends on the service encounter.
Hence, apart from motivating the staff to deliver the service, the service provider
must also be aware of the moods and the emotions of the customer and try to
influence those moods and emotions In ,a positive way. There are many factors
that can be used in order to influence moods. the Ambience, Design of –Physical
Setting, Limiting Waiting Time, Scheduling of Customers and Motivating the
Staff who interact with the Customers.
At times the presence of other customers during service delivery may
influence the service experience of the customer for an example a restaurant,
resort, clubs, airlines etc.
5. Post-Purchase Behaviour: Only after experiencing the service, the customer will
be able to judge the quality of service in relation to his expectations and actual
service received. The consumer will experience some level of satisfaction or
dissatisfaction. In some like the legal services, the customer will find it difficult to
judge the service rendered -even after receiving the service.
The evaluation of the service received received gets further complicated
by the role played by the customer in the "'d livery process. Sometimes customers
attribute some of the dissatisfaction with the services to their own disability to
specify their needs or failure to perform their part of the service, rather than
completely blame the service provider.
Stage in Cycle Characteristics Relevance of Retailing

Bachelor Independent Young Early Clothing, Car. Travel, Café
stage of career and earnings Entertainment
Newel Married Two incomes. Relative Furnishing Apartment,
independence, Present and Travel, Clothing. Durables.
future oriented Appeal to togetherness
Full Nest I Youngest child under 6 Goods and services geared
years. One /One and a half to child. Family oriented
incomes, Limited items- Practicality of items
independence. Future and appeal to economy
oriented
Full Nest 2 Youngest child tinder 6 Savings, Home, Education.
years, One and a half to two Children oriented items.
incomes. Dependent, Future Family vacations, Appeal to
oriented comfort and luxuries
Full Nest 3 Youngest child at home but Education. Expensive
independent- High-income durables for children.

level. Independent Replacement and
Thoughts of Retirement improvement of parents
durables. Appeal to comfort
and luxuries.
Empty Nest 1 No children at home. Retirement home, Travel.
Independent. Good income. Entertainment, Luxuries.
Thoughts of retirement Appeal to self gratification
Empty Nest 2 Retirement- Limited Travel, Recreation, Health
income. Present oriented related items. Little interest
in luxury. Appeal to
comfort
Only one spouse alive. Immersion in jobs and
Good income. Employed, friends. Travel
Lonely Nest-I/ Sole Present oriented entertainment Clothing.
Survivor 1 Health
Only one spouse alive. Travel. Entertainment
Limited income Retired. Health related items.
Lonely Nest II / Sole Appeal to economy and
Survivor 2 social activity
TYPES OF BUYING BEHAVIOUR:

Assael distinguished four types of buying behaviour based on the degree of buyer
involvement and the degree of differences among brands.
1. Complex Buying Behaviour: Complex buying behaviour involves a three-step
process; first, the buyer develops beliefs about the product. Second, he or she
develops attitudes about the product. Third, he or she makes a thoughtful choice.
When the customer is involved in complex buying, they are aware of significant-
differences in brands. This is the case when the products are expensive, bought
frequently risky and highly self expressive. In this case the customer does not
know much about that category. For example, a person buying a personal
computer may not know what attributes to look for. Many product features carry
no meaning, unless the buyer has done some research.
2. Dissonance - Reducing Buyer Behaviour: Sometimes the consumer is highly

involved in a purchase but sees little difference in brands. The purchase is
expensive, infrequent, and risky; therefore the consumer is highly involved. In
this case, the buyer will go around to learn what is available but will buy when he
gets a good price. After the purchase, the consumer might experience dissonance
that stems from noticing certain odd features or hearing favourable things about
other brands. The consumer will be alert to information that supports his or her
decision. In this case, the consumer first acted, then acquired new beliefs, then
ended up with a set of attitudes. Marketing communications should supply beliefs
and evaluations that help feel good about his or her brand choice.
3. Habitual Buying Behaviour: There are many Products which are bought under
conditions of low involvement and the absence of significant brand differences.
Take a simple example of salt. Consumers have little involvement in this product
category. They go to the shop and reach for the brand. If they keep reaching for
the same brand, it is out of habit, riot strong brand loyalty. It is-evident that
consumers have low involvement with most low-cost, frequently Purchased
Products. With these products, consumer behaviour does not pass through the
'normal sequence of belief, attitude and, behaviour. Consumers do not search
extensively for information, evaluate characteristics and make decisions on which
brand to buy. Instead they are passive recipients of information the television or
print ads. The repetition of ads creates brand familiarity rather than brand
conviction. After making the purchase, they may not even evaluate the choice
because they are not highly involved with the product. For low involvement
products, the buying, process begins with brand beliefs formed by passive
learning & is followed by purchase behaviour which may be followed by
evaluation.
4. Variety seeking Buying Behaviour : There has some buying situation that an
characterized by low involvement but significant brand differences. In such cases
the consumer often goes into a lot of brand switching. Take the example of
chocolates. The consumers has some beliefs about chocolates chooses a brand of
chocolates without much evaluation, & evaluates the -product during
consumption. Next time, the consumer may reach for another brand out of a wish
for a different taste. In this case the brand switching occurs for the sake of variety
rather than dissatisfaction.
SERVICE MARKETING TRIANGLE

According to Philip Kotler, service marketing requires both external marketing
and internal as well as interactive marketing. The three types of marketing in service
industries are shown in the following figure. The right side of the triangle shows the
external marketing (setting promises). It is the normal activity of the firm to develop
price, promote and distribute the service offering to the customers. Any thing that is
communicated to the customer before service delivery is seen as a part of external
marketing.
The left side of the triangle shows the internal marketing (enabling the promise).
The internal marketing activities of the firm are to train and motivate its employees to
work as a team in order to deliver the service. It emphasis on the critical role that enables
the employees to keep the promises made to the customer.
The bottom part of the triangle describes the employee's skill in handling
customer contact. It is the real time marketing of "moments of truth" where the
employees directly interact with the customer in order to fulfill the promise.
Types of Marketing in Service Firms

All the three sides mentioned in the triangle are critical to successful services
marketing. The service triangle also has a number of fundamental strategic implications:
1. The key factor is customer focus and, not functions. Customer satisfaction should
be the function of the entire organisation.
2. The internal environment is reflected in the external culture. It is directly linked to
how the staff serves the customer.
3. One who delivers the service must not only have the skill and knowledge but also
the authority to serve the customer to his satisfaction.
4. The organizational values, in relation to the service culture need to be simple,
clear and shared by all
5. During interaction the customers infer the quality. Therefore, it becomes
necessary to develop good delivery associated activities.
External Marketing:
The external marketing efforts are the traditional functions of marketing of the
customers and make promises to the customers as to what is to be delivered. Anything

conveyed to the customer in any form before the delivery of service can be viewed as a
part of external marketing function.
The first step towards external marketing is to make the firm understand what
makes a customers' want a particular type of service and what are their expectations of a
certain type of service, since external marketing builds customers' expectations and
beliefs about service delivery. The external marketing then gives promises that
correspond with the personal needs of the target group.
It becomes necessary to understand the needs of the customer for the service
provider. This leads to market segmentation on a suitable basis i.e. demographic,
psychographic and wage pattern. Once the market segment is identified, the next task is
to find ways to compete in that segment.
This can be achieved by using the right marketing mix after taking into
consideration the external factors. The services planning, pricing, promotion and delivery
of the service tend to differ in respect of a customer group. The promises which the
service provider makes must highlight the reasons why the customer should choose his
particular service from the several service providers. The promise made should also
match with the customers' expectations of the service.
The company conveys promises through promotion campaign, corporate image
and word of mouth communication. It also conveys through the past experience which
the customer has had with the firm.
According to Zeithamal and Bitner, the customer's expectation of the services can
be derived from the following sources:
i) Past Experience.
ii) Corporate image.
iii) Word of mouth communication.
iv) Explicit service promises which are personal and non-personal statements
about the service made to the customer by service firms through contracts,
personal selling, advertisement, etc.
v) Implicit service promises which are related over other than explicit promise
that leads to inference about what service should and will be like.
vi) Care should be taken to maintain credibility while setting the promise because
a very high expectation may lead to a highly dissatisfied customer.
Internal Marketing:
According to Wood Ruff, treating with equal importance, the needs of the internal
market (employees) and external market I customers) through proactive programmes. If
the service system as well as the service staff do not support the frontline employees, it
will not be possible to meet the promises made b the organization. Thus the employees
are the internal customers who in their job depend on others in the organization for
providing goods and services to external customers. Internal marketing suggests that the
firm should employ market research, market segmentation and traditional marketing
activities like advertising and publicity in order to attract employees.
Role of Internal Marketing:

i) The entire organisation is focused on customer approach as the customer
service becomes a significant element.
ii) Internal marketing helps the service firm to compete aggressively giving the
organisation a competitive advantage.
iii) It builds corporate image by creating awareness.
iv) It highlights the role of communication in the organisation which is very
important for employee motivation and excellence,
v) An open management style exists where all the employees co-operate and
there is commitment, to the highest level.
Components of Internal Marketing:

There are no specific or special components of the internal marketing programme.
Any activity or function that has an impact on the service mindedness and customer
conscious employees can be a part of internal marketing programme.
However, the following components can be included as a part of internal
marketing programme:
i) Human Resource activities.
ii) Continuous interaction with the management.
iii) Training.
iv) Internal mass communication and information support.
What is "Moment of Truth"?

"Moment of Truth" of buyer and seller interaction is the core of Gronroos model.
The actual delivery of the promise takes place here. The employees of the firm directly
interact with the customers. The concept of moment of truth means that this is the time
and places the service provider has the opportunity to demonstrate to the customer the
quality of its services.
Interactive marketing takes place outside the marketing mix. It takes place at the
very moment the buyer and seller interacts. These interactions are also caIIed1§qrvice
encounters. It is the skill and motivational tools employed by service personnel in,
handling the customer contacts. In this process of interaction the customer judges the
quality 8f service delivered by the service provider.
History:
Richard Norman first invented the conceptual framework of "MOMENT OF

TRUTH". Subsequently Scandinavian Airlines adopted it as a part, of their everyday
language, particularly after Jan Carizon of SAS published book titled "Moment of Truth".
Since then moment of truth has become a widely used concept, a household word within
the service industry everywhere.
The Concept:
Most services are the result of, social acts, which take place in direct contact
between the customer and service provider. Taking the metaphor from bull fighting, the
customer's perceived quality is realised at the moment of truth, where the service
provider and the customer confront one another in the arena. At the moment they are very
much on their own. What happens then, cannot be directly influenced by the firm.
In the period of three years Jan Carloz the president of SAS transformed the
company from a major loser to the best Airline of the year. In this book he explains" Last
year, each one of our 10 million customers came in contact with approximately 5 SAS
employees, and this contact lasted for about 15 seconds each time. Thus SAS is created in
the minds of the customer 50 million times in a year, 15 seconds at a time. These 50
millions 'moments of truth' are the moments when we prove to our customers that SAS is
their best alternative."
Gronroos states that the customer's perception of service quality can be judged on
two aspects the technical and functional quality.
The judgment on the basis of technical and functional qualities varies depending
on the type of service encounter. The service can be classified into three categories:
1) Remote encounter: The tangible evidence of the services becomes a primary basis
for judging quality as there is no human contact in service delivery. E.g. ATM
vending machines.
2) Phone encounter: Here the service quality can be judged on the basis of how long
they had to wait for the phone to be attended, the tone of voice and efficiency in
handling the issues.
3) Face- to- face encounter: When there is direct contact with the employee and
customer this type of encounter occurs. In this situation determining the quality is
highly complex as it will be influenced by the behaviour of both the customer and
employee.
In order to assess the quality services tangible cues like physical setting, equipment,
appearance of personnel and intangible cues like attitude and behaviour of personnel will
be considered.
Thus in the interactive marketing, service encounter or the moment of truth is where the
value to the customer is created in the service delivery process. At this stage all the
efforts of internal and external marketing will be reflected.
On the basis of thousand stories, four common themes - recovery .(after failure),
adaptability,
spontaneity, & coping - have been identified as the sources of customer satisfaction/
dissatisfaction in memorable service encounter.
1. Recover: (Employees response to service delivery failure) the 1 st theme includes

all themes in which there has been a failure of services & the employee is
required to respond in some way to customer. The failure may be hotel room is -
not available, flight may delay or a critical error in internal documents. In these
cases employees have to response which is remembered by the customer
favorably.
2. Adaptabilty: (Employee response to customer needs & requests) The second
theme underlying in satisfaction/dissatisfaction is how adaptable the service
delivery system is when the customer has special needs & requests that place
demands on the process. In such cases, customer judge, service encounters quality
in the terms of flexibility of the employee & the system. Customers will be
pleased if employees go out of their way to accommodate their special needs &
requests. On the other hand the employee are unwilling to accommodate,
customers are angered & frustrated.
3. Spontaneity: (Unpromptness & unsolicited employees actions) Even when there is
no service failure & is special request or need, customer can still service
encounters as being highly satisfied or highly dissatisfied Employee spontaneity
in delivering memorable good or poor service is the third theme. Highly satisfying
incidents represent pleasant surprises for the customer (special attention, being
treated like royal etc.) whereas highly dissatisfying incidents represent negative &
unacceptable employee behaviour (like rudeness, discrimination, ignoring the
customer).
4. Coping: (Employees response to problem customer) There are some customers
who will be uncooperative to the service provider & would not respect the rules &
regulations or would not care for other customers' inconvenience. Such type of
customers causes their own dissatisfaction & discomfort to other customers.
Thus in the interactive marketing, service encounter or the moment of truth is where the
value to the customer is created in the service delivery process. At this stage all the
efforts of internal and external marketing will be reflected.
Ch- 2 Key Elements of Services Marketing
Introduction:
The marketing mix concept was popularized by an American professor Jerome McCarthy
in terms of 4Ps -Product, Price, Promotion and Place. The major part of marketing after
considering the environmental variables is assembling and managing the marketing
variables. The most important task is to blend the 4 elements in different combination in
order to have a greater marketing impact and also to be cost effective. Some
modifications in the 4Ps are required when applied to services due to some special
features of services.
Elements of Service Marketing Mix: (7ps of Service Marketing-Mix)

The service marketing mix consists of the following variables:
PRODUCT
In the words of Philip Kotler, "a product is anything that can be offered to market for
attention, acquisition use or consumption that satisfy a want or need. It includes physical
objects (TV), service (banking), person (political person), place (holiday resort),
organization (Red Cross) and idea (aid awareness). "
Characteristics of Products (Tangible To Intangible)
Conceptualization of the Service Concept:

Conceptualization of the services product was described by Donald Cowell in four steps.
They are:
1) Customer Benefit Concept: The customer is the starting point in manufacturing or

developing goods or services. The Customer purchases the services because-it
offers him certain benefits. In buying the customers are not buying the goods or
services but instead they are buying certain benefits and values. It must be noted
that when a customer's buys medicine he buys hope, when he goes on a tour he,
buys pleasure not tour and so on. It becomes necessary for the service provider to
spell the customers-benefits concept first. The customers look for the benefits
rather than the product's features.
2) Service Concept: The service concept takes the customer-benefit concept and
translates them in order determine the aim and intention of the organization. The
service concept is based on the idea that the actual services offered could be
divided into a number of levels that may relate to the' customer's need, his
satisfaction and benefits. Hence, while planning the market offer, the service
provider should make an analysis of various levels of product. These are:
3) Core service benefit level : This level consist of the basic service product i.e. the
benefit the customer is really buying. The core products are essentially those
products that define what kind of business they are in. For an example, the hotel
industry or in the hospital business, the core products are indispensable to any
business. The core service level provides the platform for the development of
other peripheral levels.
4) The expected service level: This level reflects the standard required or expected
by the customer to satisfy their needs and wants. It is the minimum set of
expectations a customer has about a product or service which the marketer must
strive to satisfy. If the service offer fails at this level it will mean immediate
dissatisfaction. It is the minimum set of expectation that a customer has about the
product or services which the marketer must strive to satisfy. If the service offer
fails at this level if will means immediate dissatisfaction.
5) The augmented level: It includes the fundamental services and benefits that
distinguish the company's offer from the competitor's offer. This product is
basically a formal product with some ancillary benefits or extra features attached
to it. These value additions are made in order to make the service more attractive
to customers. The service provider should make continuous efforts to search for
further features and benefits in order to add to their offer According to Helen
Woodruff, "augmented services is the way in lavish the service provider fine
tunes the marketing mix to differentiate their services and naked it stand out from
the competitors,"
6) Potential level: The potential product focuses on the future. When a product
exceeds the augmented level it comes as a pleasant surprise to their customer and
he is delighted leading to his loyalty towards the product. For an example, the
customer will be delighted to receive a special discount on his next visit, if his bill
exceeds a particular amount.
Service Product (Levels of Products):
Inputs of Core Expected Service Augmented Product

Healthcare Product
Industry
Hospitals Quality  Clearf Facilities,  Health Education &
Treatment  Qualified Staff and Training
 Doctors,  In-house Medical
 Quality Health Care Facility,
reasonable rates  Hostel Facility
 Efficient tools for specialized  Blood Donation Centre,
Operations and Surgeries,  Research & Laboratory,
 Range of Rooms  Special Wards for VIPs
 Third Party Services  Visiting Consultant,
 Internationally
 Expert Advice, recognized doctors.
Medical Software
 Installation Package/Kit,  Webcam connectivity,
Software
 Prompt Result,  Interconnectivity,
 Tested and recommended  Acceptable widely,
 Error Free,  Doorstep delivery,
 User Friendly, Validity  Intimation on new
Security Privacy. updates.
Medical Covering  Choice Available,  Smart Cards

Insurance Risk  Reasonable Rates.  Different Schemes
1) Services Offer and Service Package: Service offer is the element that makes up
the total service package. It includes both tangible and intangible components of
service. The service package includes all decisions involving the essential concept
of the service and the range of service provided. Christian Gronroos describes
services package as a bundle of different services tangible and intangible together
which form the total product.
2) Service Delivery System: The service delivery system spells the service that is
provided to the customer. It represents interaction between the service provider
and the customer and between the customer and the service facility. The service
delivery system is a carefully designed blueprint which describes how the services
will be rendered to the customer.
Service Life Cycle :
The different stages in the life cycle of a product and services are more or less similar and
have common characteristics. They are as follows:
1. Introduction: At this stage the service is new as it is just launched its usage rate
will be low. The production cost is high but the sales being smaller the revenue is
low. Until the growth .stage the service provider mostly operate from one
location.
2. Growth: There is a rapid increase in the sales at this stage. The sales increase at an
increasing rate as the consumers see the benefits. In using the service. Promotion
is focused in order to attract new users and retain repeat customers. The firm may
even improve service quality and add some new features to attract the customers.
3. Maturity: The product/services enter the stage of maturity as the rate of growth
slows down. Here the sales are still increasing but increasing at a decreasing rate.
The sales touch their peak and then it saturates. At that level for a longer period of
time. There is intense competition at this stage and the firm in order to keep its
market share may modify and improve the service quality.
4. Decline: The usage rate of services diminishes with the technological
advancement and changing consumer tastes. The service provider uses different
strategies at this stage. Some firms withdraw form the current service and switch
over to new ventures with better opportunities. Some retain the services in order
to cater to the needs of a few loyal customers but still diversify to other services.
Service Flower (Core and supplementary services)
PRICING IN SERVICES
Price is a significant element of the marketing mix because it is the only element
that produces revenue whereas the other elements produce cost. Price reflects the value
attached to the service by the service provide- and it must correspond with the customer's
perception of value. Pricing is a dynamic tool for meeting competition. It is the art of
translating into quantitative terms the value of the product or a unit of a service to
customer. Service providers offer a range of service at different price levels to cater to the
needs of different target segments that may have different levels of purchasing power.
For an example, airline offers business class as well as economy class travel. They also
vary the price of the product in order to address the problems arising out of demand and
capacity constraints.
For managing demand they offer different prices to customers buying the services
at different point of time, with lower prices being charged in the slack periods.
Objective of Pricing:
i) Survival.
ii) Growth.
iii) Maximize profit.
iv) Maximize Market share.
v) Leadership in service quality.

vi) Stimulating patronage.
Factors Affecting Pricing Decisions:

The factors affecting pricing decision may be classified as internal factors which are
controllable and external factors that stem from external environment.
Internal Factors:
i) Organizational factors: It refers to the internal arrangement for decision making.
ii) Marketing mix Elements: Which includes the service offering the promotion,
.people; process and physical evidence are important in determining the value for
money aspect in the service sector.
iii) Positioning
iv) Service cost: Pricing policy should cover at least the basic cost.
External Factors:
i) Competition: This is more relevant it) case of homogenous services like laundry,
vending 1 machines etc.
ii) Demand: The demand may vary for a number of reasons.
iii) Regulatory factors: In many of the services the prices are either administered &
controlled e.g. post & telegraph, banking, railways and education.
Special Issues of Pricing in a Service Sector:

A service marketer has to consider the following issues regarding pricing methods and
policies to be adopted.
(i) Intangibility (ii) Perishability (iii) Customer participation.
(iv) Controllability (v) Variability
Methods of Pricing in Services:
1) Cost based pricing: It is also called as cost-plus pricing. Under this method the
company determines les the cost of service delivery as well as a pre-determined
rate of profit in order to arrive at a price. It is necessary to-, analyze all costs
accurately and differentiate between fixed and variable costs in order to use cost
as the basis for pricing decisions. In the service industries it is complicated to
identify and trace the cost to the particular offering. This method of pricing is
widely used in catering services and by advertising agencies.
2) Demand based pricing : In this method of pricing the cost is not considered but
the serve provider allows the demand to determine the price. Demand based
pricing is generally us where the services are price sensitive. The consumer
perception of the value of the service quality varies. Therefore successful demand
based pricing is based on effective segmentation of market to achieve the
maximum price from the segment.
3) Competition based pricing: Homogeneous services that are standards without
specie service attributes are the best examples of competition based pricing. In
this method of pricing the price is determined on the basis of competitor's price.
Price under such situations may be used to gain short-term competitive advantage
over rival
Pricing Strategy:
1) New Service Pricing Strategy: While launching a new service there are two
alternative pricing strategies.
 Skimming Strategy: In this the services are introduced at a high price. It is assume
that the customers are more concerned about obtaining a quality service rather
than cost of the service. As the demand for the services falls, the price level is
reduced e.g. mobile phones, computers, etc.
 Penetration Pricing:
In this, the new services are priced low. The prices are kept low t stimulate trial and
thereby ensure customer loyalty. Low pricing is possible when the services are sensitive
to price and it is possible to achieve economies of large scale operations by operating at
large volumes. The penetration pricing begins with a low price but it increases in the
growth stage. The increase is usually associated with additional services that are offered.
2) Differential Pricing/Market Segmentation Pricing: Different market segments

may show different price elasticity of demand. The pricing strategy adopted to
successfully cater t these groups is known as discriminatory pricing on the basis
of market segmentation. It may be done on the following basis.
 Different time of consumption.
 Different point of consumption.
 Group of buyers.
3) Service-Mix Pricing: In this, the firms with multiple service offering that' are
more often interrelated may adopt this strategy. It may resort to
i) Captive service:
ii) In captive service strategy the customer has no choice but to get attritional service
offer from the service provider along with the core service.
iii) Competing services:
iv) In this the service firm competes with its own offering.
v) Optional additional service:
In this the service provider gives an option, to the customer to purchase the optional
services along with the core services.
4) Price Bundling: It means pricing and selling the services as a group rather than an
individual offering. In this the service firm will be able to sell all the products in the
service line. E.g. Health clubs.
5) Relationship Pricing: In this type of pricing the lifetime value of the customer is
taken into account. The main objective is to encourage customer loyalty by rewarding it.
John Winkler has rightly stated that pricing can never be an automatic or impersonal
process-, it cannot be reduced to a mathematical or accounting formula. It is an elusive
art. T11 more you examine the market, the better you judge the value of what you want
to offer.
6) Competitors Pricing: Services which are very price sensitive and where the core
benefits sought are largely similar, competition-oriented pricing occurs frequently.
Organizations that operate on competition-oriented pricing strategies will try to influence
the consumer preference through elements of marketing mix such as service quality.
7) Marginal Pricing: It is based on the concept of marginal cost and is particularly

relevant for service industry. The marginal cost is the cost of last unit of output and may
be very low. For an example, in case of passenger airline with a capacity of 100 seats
empty seats will not be preferred instead they can be filled with passengers paying
reduced ticket prices -because any way the fuel cost, maintenance, staffing cost so on are
made for 100 seats. Carry empty seats means carrying loss.
COMMUNICATION MIX
The word 'promotion is derived from the Latin word 'promovere', meaning 'an attempt to
shift the attention of people from one end of the spectrum (disinterest) to the other
(interest)'. Service marketers have used this marketing tool to great advantage in
positioning their service, adding tangibility and value to their offer. Promotion is used
only as a temporary tool and is communication oriented. Promotion consists of the

following major areas of marketing:
 Advertising
 Public relations
 Sales promotion
 Personal selling
 Word of mouth
 Direct mail
These areas are called the promotion mix or the communication mix. The service
marketer can use a blend of all of these to achieve his communication and other goals.
The choice of the communication or the promotion blend would depend on whether the
advertiser wants to increase awareness, changes opinions, alter attitudes, use high degree
of persuasion, etc. The advertiser or the service firm also has to take decisions on the
choice of media, which would depend on the target audience and the reach of the medium
(circulation and viewership/readership)'
Comprehensive Communication Programme and Model

Word 'communication' is derived from the Latin word communicoi, meaning 'to share'.
Communication needs an objective that the service marketer must set and achieve.
Following are the components of the communication programme:
1. Identify the target audience or receivers;
2. Determine the promotion objectives;
3. Develop the message
4. Select the communication mix or the promotion blend-,
5. Select the media vehicle;
6. Set up systems for feedback and feed forward'
1. Identify the target audience or receivers: Although this would have been done
in the market segmentation process, a more detailed picture of the target audience
would be required for specific promotions. For example, a high-priced hospital
would have chosen the upper income group through segmentation. But now for
promotion it would require to address people who are interested in the treatment
of, say, cancer or heart, diseases or plain cosmetic surgery. Its message,
Promotions and media choices would be decided accordingly, i.e., tailormade for
this select audience.
2. Determine the promotion objectives: Every communication has an objective

and the success of the communication programme depends on how the marketer
has been able to clearly perceive his objectives and integrate the components. The
service marketer has three promotional goals: to inform, to peruade and to remind.
Some of the objectives for a service marketer are:
o Reinforce positioning,
o Develop brand image;
o Make customers aware of the offer, its attributes and benefits,
o Persuade customers to buy the offer,
o Continually remind customers about the service through remembrance
exercises.
3. Develop the message: There are many models for describing the customer
responses. One simplest and widely used is the AIDA model, developed by E.K.
strong and is illustrated below:
According to this model, the service consumer moves through various stages in sequence.
The customer is first aware of the service brand, which will generate interest & then
desire in the offer. Once the desire is present, the customer is motivated or 'driven' to
purchase the service product. The whole sequence grinds to a halt even if one of the tasks
is unachieved. This implies that without even basic consumer awareness, the service
marketer cannot hope for any sales.
The message formulation will depend upon which of these AIDA sequence tasks is to be
achieved. Message development is guided by the encoding process, which involves the
consideration of issues:
 Message content - what to say',
 Message structure - how to say it logically,
 Message style - creating a strong presence; and
 Message source - which should develop it.

The service communication has four choices in encoding: words, symbols, pictures and
images.
4. Select the communication mix or the promotion blend: The communication
could have personal interaction (one-to-one) or impersonal messages (one-way).
Personal communication consists of personal selling (insurance advisors making a
presentation customers), word of mouth (publicity and public relations exercises
for a restaurant or for a movie like Devdas), & interaction during service delivery
(like inside a retail bank). I m personal communication consists of mass
communications like advertising in newspapers, TV, outdoor advertising, point of
sale, leaflets and brochures, and the service environment or the services cape
itself.
5. Select the media Vehicle: The media vehicle is selected by effectiveness &
efficiency with which it reaches the messages to the target audience. This
message also guides the media vehicle: if the message is personal, then mass
media cannot be used. What becomes effective are letters (on paper or through e-
mails), personal interaction, etc. this is where media analysis would be required
for its audience profile & viewers reading or media habits.
6. Set up system for feedback & feedforward: The communication should

undertake two important exercises to make its present & future messages
effective:
Feedback is a kind of pre-test undertaken before the message has been broadcast to
ensure the message will be received.
Feedforward is a kind of post-test undertaken after the message has been broadcast to
ensure the message was received.
The issue of promotion blends like whether to use public relations more than advertising
etc. have to be clarified by by the service marketer. The decision is guided by the
following factors for their defferential impact ability on the communication mixes:
 Service is for profit or not-for-profit.
 Constrains of ethics exist in some services, like hospitals, healthcare and with
doctors.
 Competitive intensity is high or low.
 The geographic spread is large or small.
 The custom within a specific service sector dictates promotional practice.
 Managers are sophisticated or not.
Guidelines for services Communication

W. R. George and L. Berry have identified six guidelines that can be used for promoting
services. They are mostly applicable to all service sectors, with the exception to some few
due to the variable nature of services.
1) Provide Clues to Tangibles the Service Offer: We can easily pick up tangible
clues in case, of goods. Services have a major intangible component in them and
so it is difficult for the customers to pick up tangible clues. Though services are
intangible, they still have tangible components. The customers generally use these
as a substitute to evaluate various service alternatives. The tangible clues reduce
the risk and eliminate the uncertainties associated with a service not known to the
customer
2) Maintain Communications Continuity: It is imperative to maintain continuity in

communication for achieving differentiation and to portray a unifying and
consistent theme over a period of time. Continuous advertising and publicity will
enable the customer to get strongly attached to the theme.
3) Direct Advertising to Employees: The rapport that an air hostess can maintain
with the passenger can greatly influence the quality perception of the passengers.
There are certain services which are labor intensive and involve greater server -
customer interaction,' In such a type of service the service quality provided is
largely dependent on the quality of the person who serves. The service firm has to
market the firm to its own employees first who in turn gain confidence in the
product they have to sell to the customers.
4) Use of Word of Mouth Publicity: In professional services like doctors, lawyers,

teachers, hair dressers, schools, colleges, etc. word of mouth publicity that have
already experienced the service holds weight age in attracting prospective
customers.
5) Promising a Service which can be delivered: A realistic service promise should be

made which enables the service firm to regularly meet the customers'
expectations. This wills mimicries the service quality gap and keeps the
customer's happy and satisfied.
6) Make the Service Easy to Understand: Due to the intangible nature of the services
it is generally difficult to comprehend what exactly constitutes the offer of a
service firm. The various tools used for promotion are -
i) Advertising ii) Sales Promotion iii)Personal Selling
iv) Word of mouth v) Public relation vi) Publicity
vii) Sponsorship viii) Direct Marketing
DISTRIBUTION
The importance of 'place' or location and distribution as part of a marketing mix is
due to the fact that it facilitates accessibility to the service offer. It is the most mysterious
of all elements of the marketing mixes. While all other marketing mix variables (service
product, price and promotion) create or enhance demand, place or distribution is the only
one that satisfies demand.
The inseparability of services makes it imperative for both the service provider
and the customer to meet to complete the service transactions and to create service
benefits. In other words, service cannot be produced by one person in one place and be
distributed by someone else in some other place. A service, by extension, cannot be
produced in a place where the cost is lower and delivered to another place where the
demand is higher. This is the fundamental difference .between goods and services that
affect distribution strategies. All location strategies should be directed to make the
encounter possible, place is especially important to the service marketer because the offer
cannot be stored (intangibility and perishability) and the offer has to be produced and
consumed at the same time in the service location, and outlets, The normal decisions of
locations and channel are:
 How to deliver the service to the customer?
 Where and when should the delivery of service take place?
 What roles do intermediaries or middlemen have to play in the service delivery
process?
 How can a marketer juggle the delivery of the tangible and intangible components
of a service offer?
For the service consumer, the first two of the above-mentioned decisions themselves
become the most important perceived benefits.
What is a distribution channel - especially in services?

A distribution channel consists of a set of people or firms who are intrinsically
involved in the transfer of goods or services from the producer to the end user. The end
user could either be an individual consumer or an industrial consumer. A channel of
distribution includes the producer of the goods and services, the consumer of the same
and a series of middlemen like wholesalers, dealers, retailers, agents etc. The channel for
any offer is extended to the last person or institution that buys it without making any
changes in the form of the offer. If there is any change in the form of the offer, then there
will be another channel of distribution. In, services distribution the offer has to be
produced and consumed at the same time in the place of offer (outlet).
Why should service firms use intermediaries?

a) Specializations: In services, the offer is produced and consumed in one place, and
it is mostly intangible, the question of distribution problems is not very acute-,
the-service transaction itself and its quality is the main issue. In the production
and distribution of services, the wide variety found in the Specializations in the
case of goods is absent. Service firms have a different kind of dilemma: own its
outlets or get the distribution done through franchisees'. Most major decision, are
one-time decisions unlike in goods distribution. Only services like retailing that
have higher tangibility content will face the same complexity in distribution as
faced by goods manufacturer.
b) Customer Utility: Customers require choices in their preferences and this was
offered to them by retailers through varieties & assortments. This way, the
customers could compare the merchandise and choose the best buy according to
their judgment. The intangibility of services might have reduced the scope of
consumers to compare the offer features, but nevertheless encouraged enquiries
and clarifications from at the distribution outlet.
c) Complexity: When any business - be it goods or services - is small, it is easier to

manage it. This includes the complete marketing mix as well as the environment'
But as any business grows, so does its complexity. To facilitate the exchanges of
goods and services there arose an urgent requirement of complex systems for each
type of goods and delivering them to the consumers.
d) Distance: With the strategic decision of a firm to extend its geographical reach for
its goods and services, there developed a gap between the producer and the end-
user. This could only be filled by middlemen and intermediaries. SOTC/Kuoni,
the innovative package tour company is a classic example in services. Mumbai
based, it yearned for a wider customer base and took the help of intermediaries to
achieve its goal. Thus Frequent Travels, a travel agency was initially roped in to
be its representative in Madhya Pradesh. But SOTC went on to have its own
outlet at indore, catering to its package tours. 1CICI Home Finance Company
takes the help of Mumbai based, Unique Finance and Maximus Finance, amongst
others to do its marketing.
PEOPLE
In service business, the service provider reflects the organization realities. It is
through the interaction with the staff, that the customer from an opinion of the
organization. A service firm may have the latest equipment and all the facilities but yet it
may not be able to provide satisfactory customer service due to lack of interpersonal
relationship between the service provider and the customer. In such cases the customer
develops a negative attitude towards the organization. It is therefore, necessary that the
service marketer should develop a high level of interpersonal skill and customer oriented
attitude in the employee.
Types of Service Personnel:

In any type of service the customer comes direct in contact with the service
provider and therefore is classified further:
1) Customer Contact Employee: These contact employees are very important

because they represent the organization and can directly influence the customer
satisfaction. The degree of the personnel customer contacts varies so we have:
i) High contact personnel: They are required when the physical presence and
interaction of the customer with the employees is for a longer time like
hospitals, educational institutions, restaurants etc.
ii) Low contact personnel: They are required when the physical presence and
interaction with the customer is for a lesser time, example, retailing, post
office etc.
iii) Skilled and professional: E.g. Doctors, lawyers, chartered accountants,
engineers etc.
iv) Non professionals: E.g. Courier delivery boys, waiters, helpers etc.
2) Non-contact employees: Those employees who contribute to the service delivery

but do not come in contact with the customers are called non-contact employees.
They are actually support personnel. They possess high technical skill and are
highly competent in their work.
The technical support personnel operate at the back stage and are not visible to the
customer Developing Customer Conscious Employee.
Service Profit chain model
The Gallup model as shown in the figure above describes the path between the individual
contribution of every employee and ultimate result of increase in the company value
Service Quality and Employee Behaviour

The 5 dimension of service quality are directly influenced by the service employee.
(RATER)
1) Reliability: Delivering the service as promised is often totally within the control
of frontline employees. Even in case of automated service such as ATMs, vending
machine, support personnel are critical to make sure all system are working
properly.
2) Assurance: Service quality dependent on employee ability to communication their
creditability and to inspire trust and confidence.
3) Tangible: Employee appearance and dress are important aspect of tangible
dimension of quality along with other factor like service -decor etc
4) Empathy: Organisation can deliver caring and individual attention to customer
only through employee. Empathy implies that employee will pay attention, listen,
adapt and be flexible in delivering what individual customer needs.
5) Responsiveness: Frontline employees often directly influence customer
perception of responsiveness through their willing to help and their promptness in
serving customer.
PHYSICAL EVIDENCE
Generally a service transaction involves the interaction of the service provider with the
customer in a service environment. Services like hotel services and hospitals are
delivered in physical environment created by the service firm. Physical evidence is
termed as the social environment along with the tangible cues. Zeithaml & Bitner defines
physical evidence as lithe environment in which the service is delivered and where the
firm and customer interact; and any tangible commodities that facilitate performance
communication of the service".
Physical Evidence includes all the efforts taken by the service provider to tangibilise their
services, they include:
1) Physical Facilities: On the basis of physical evidence like building, furniture,
equipment, stationery etc the potential customers forms an impression about the
service organization. Physical evidence include essential evidence and peripheral
evidence. Essential evidence are the technical facilities without which the service
delivery is not possible e.g. air-craft in the airline services. Essential evidence is
integral to the service offerings. In every services. the quality and Standard of the
essential evidence will be of major influence in the customer' purchase decision.
Peripheral evidence can actually change hands during the service transaction, they
- stationery, brochures etc. Though services can be performed without these items,
still they – used to enhance the corporate image. Examples of physical evidences
that could be included for a fast food restaurant:
Physical Evidences Inferences
i) Food -Taste, smell, presentation etc.
ii) Seating -Comfort, layout, availability.
iii) Overall appearance -Cleanliness, decor, lighting, attractiveness.
iv) Facilities -Payphones, toilets, children amusement.
v) Service delivery -Efficient, prompt
vi) Atmosphere -Friendly, Cold, i1ndiffU-rE'F1t.
vii) Accessibility -Location of entrances, car parking.

2) Physical Environment: Another factor influencing consumer expectations of
service quality and satisfaction is the physical setting or the service environment
within which the service takes place. The important elements of physical settings
are:
i) Ambience-. The ambience of the physical setting includes temperature,
lighting, noise, music, scent and color. All these factors affect the way the
people think, feel and respond to a particular, service setting. The most
comfortable source of light is the natural light. In the absence of natural light
artificial light is needed. Different types of lights create different types of
atmosphere. For an example, low levels of lighting are associated with
romantic setting, well lit passages create a feeling of safety and so on. Often
color and lighting are used in conjunction. Colors create different feelings-,
some colors have a soothing feeling while some have disturbing feelings.
Green and blue are cool colors whereas red, orange and yellow are warm
colors. Temperature and humidity also affect the comfort of the customer and
employees. It affects the efficiency directly.
ii) Space: People need space around them to feel comfortable. Ease of access,
good visibility, proximity of linked services will help to make the customer
feel comfortable. The service provider should not expect the customer to share
their space with others as it will lead to increase in stress levels or make them
feel uncomfortable. This will create a negative impact on their perception of
the service received.
iii) Decor & Artifacts-, Decor: Signs, symbols and artifacts are the important
components of decor. Signs represent the first encounter the customer ahs
with the service firm. It influences the first impression. Sign can be used as
labels for directional purpose e a. parking, entrance and exit, to communicate
rules of Behaviour e.g. no smoking. Symbols are used to judge the expertise
of the service provider. Certificates hanged on the wall are symbols of
achievement and may provide reassurance to the customer. In the same way
photographs on walls and personal objects displayed in the service
environment can all communicate symbolic meaning and create a good
impression
Artifacts: The style of the decor can generally create an impression of cheap,
serious, cheerful and expensive-, Artifacts like original oil painting may
indicate success,
3) Social Settings: The appearance of the service personnel is the major aspect of the
social setting that influences the consumer's attitude about the service personnel.
The concept of appearance shows whether the employees appear to be friendly
and approachable, caring, professional and confident.

As a marketing mix element, physical evidence can be used as facilitator,
socialize, differentia tore shaping first impression and build corporate image and
identity.
SERVICE PROCESS
The service process refers to how a service is provided or delivered to a customer.
Delivery system is a creative process. it begins with a service concept and strategy to
provide a service. In order to achieve these objectives, various alternatives must be
analyzed and identified before a decision is made. Designing a service process involves
issues such as location facility, design and layout for effective design and layout for
effective customer and work flow, procedure and job definitions for service providers,
extent of customer involvement, measures to ensure service quality, equipment selection
and adequate service capacity.
According to C. Lovelock there are 7 operational issues, which have to be considered
while designing the service quality process.
i) In order to achieve economies of scale and perform consistently the— operation
people would prefer to process in a batch while the marketing would prefer to
cater to individuals so that the customer feels as being treated specially.
ii) The decisions on designs and facility layout should satisfy the objectives of both
iii) Operational people are interested to improve the productivity as the cost of
production per unit will reduce.
iv) Operation people want a standardized service since it keeps the cost lower and is
easy for implementation. On the other hand the marketing people prefer
customization to match customers' needs.
v) Manage the queues in such a way that it is possible to use the available space.
vi) Operational employees feel that the job design should minimize error and
standardize tasks, making efficient use of approach.
vii) The operational personnel lie to manage capacity in such a way that wasteful
under-utilization will not take place.
Planning
The following strategic decisions and design elements must be considered in the Service
planning process.
1. Basic Technological Decision.
2. Conversion/Materials Decision.
3. Specific Equipment Decision.
4. Process Flow Decision:
i) Blue prints.
ii) Flow charts.
iii) Front and back Office.
iv) Layouts.
v) Benchmarks.
5) People Decision.
MARKET SEGMENTATION
Market segmentation is a process of dividing a heterogeneous market into homogenous
subunits; concept that was first developed by a Wendell R. Smith in a paper in 1956.1t is
defined as dividing a market into distinct groups of buyers with different needs,
.characteristics, or behaviour who might require separate services. A market was
analyzed for its nature and composition, and was clubbed under groups of similar needs
and other characteristics. Customers inside a grouping had similar preferences & traits,
two different groups had different preferences and traits. Each of these grouping was
called a segment, & the process was known as market segmentation.
Requirements for Effective Segmentation

 Measurable and obtainable: Size, purchasing power, and characteristics of
segments
 Accessible: The segments should be effectively reached and served. For example,
questions like this keep cropping up. Will it be possible for us to communicate
and serve the people of the North-East if and when we open our branch there?"
 Substantial and viable: The segment chosen should be large and profitable. It
should be cost-effective for the service marketer to address the segment.
 Intensity in competition: More the intensity of competition, less attractive is the
segment.
 Actionable: If the segments are attractive &have the potential for profit making,
then effective marketing programmes can be designed. NIIT found that the
Chinese market had huge potential and designed innovative marketing
programmes to serve that market.
 Differentiable: The segments should be distinct from each other, behaving and
responding differently. Or else, the process becomes like Undifferentiated
Marketing.
Bases for Segmenting the Service Consumer

The service marketer can segment the market according to consumer characteristics &
consumer responses.
Consumer characteristics indicate who buys:
 Geo-demographic (e.g., political - state, districts, blocks-, region - urban or rural-,
geographic North, South. East, 'West)
 Demographic (e.g' age, gender, marital status, education, family size, family life
cycle, etc.)
 Socio-economic (e.g., income, social class, occupation)

 Culture (e.g., lifestyles, religion, language, ethnic origin & culture)
MARKET POSITIONING
The segment chosen in market segmentation is to be targeted for customer acquisition
and retention. For this to be successful, customers have to be persuaded that the service
offer is unique in features, value and benefits. The offer, thus, has to be positioned in
their minds to enable them to recognize-the offer as distinct from the crowd and to be
persuaded that the offer is the best offer for them. Positioning is a battle for the
consumer's mindshare. "The empires of the future are the empires of the mind", said
\Winston Churchill.
Four Principles of Positioning:

 A service firm must position itself in the target segment's mind.
 The position should be singular, with one simple' consistent message'
 The position must set the service firm and the service product apart.
 A service firm cannot be all things to all people-, should focus on certain
segments'
Process of Market Positioning
Stage 1: Identity Key Product Characteristics

The service marketer should make efforts to find out which of the offer's features and
characteristics do consumers desire, and value most, when they make a decision to buy.
Some kind of weighting should be put on these features. The features could be both
tangible (colour, size, design) and intangible (guarantees, reputation, experience, quality,
etc').
Stage 2: Draw a Perceptual Map

With the weights of different features, a perceptual map is drawn. This is an extremely
useful tool to visually depict what the consumers think of available brands -with their
features. A perceptual map consists of a grid on two axes, with product attributes on each
of them. Thus, brands are spread over the grid, giving indication what the marker
perceives of the brands vis-a-vis others. Clusters of brands in one area or brand standing
alone in another area will give the service marketer an indication of the intensity of
competition as well as the distinctiveness or lack of it of the brands. The marketer also
gets glimpses of gaps in the market, for exploitation.
Stage 3: Decide on a Competitive Strategy

After the perceptual map has been drawn, the decision to be taken is either of the two:
 To compete head-on, or
 Get away from the competition
Different players take different positions in the grid. Some are competing head-on while
others prefer to be alone. A new entrant decides on the segment to compete in and if there
is a cluster' as with Shopper's Stop, Cross roads/P i ram yd, Globus and West Side, then
they have to compete head-on. The other choice could be the lower quadrants where there
is an absence of competition.
Stage 4: Design Product Attributes and Associated Imagery

To help the targeted customer identify the services and their benefits, the marketer
designs service product features and associated images are designed. They will include
brand name, slogan, advertising themes, price levels, and distribution outlets. Thus with
marketing mixes, the service marketer is able to position his offer in the minds of the
consumer.
Stage 5: Sustain a Competitive Advantage

A service marketer gets a decisive competitive advantage if he is able to set his offer
apart from those of the rest of the competition - in the eyes of the target customer.
Success will breed imitators, and the service marketer will then have to spend time and
resources to ward them off' But this competitive advantage has to be sustained, and can
only be done by keeping in touch with the customer and knowing his needs.
STRATEGIES FOR MANAGING CAPACITY & DEMAND

The demand may be too high or too low. When demand is too high the capacity can be
altered by:
i) Stretching time, labour, facilities and equipments.
ii) Cross train the employees.
iii) Request over-time from employees.
iv) Rent or share facilities.
v) Hire part-time employees.
vi) Subcontract or outsource service.
When the demand is too low, the capacity can be altered by:
i) Performing maintenance, renovations.
ii) Schedule vacations.
iii) Schedule employee training.
iv) Lay-off employees.
a. Customers' Involvement: By converting certain operations to self-service like

buffets at restaurant and fast food joints the firm can divert its own personnel to
other functions. Self-service firm lose a certain measure of control over service
quality when the customers are asked to perform key functions.
b. Using Part-time Employees-, Part-time help can supplement regular employees

when the peaks of activity are persistent and ' predictable. A ready part-time
labour pool is available from college students and others who are interested In
.supplementing their primary source of income. Another source is off duty
personnel placed on stand-by. Hospitals and Airlines often pay their personnel to
be on stand-by. They are there to be ready for work if needed.
c. Cross Training Employees: Some services consist of various operations. At times

when one operation is busy the other operation may be idle. Cross training
employees to do the tasks in various operations creates flexible capacity to meet
demand. For an example, we see at supermarkets when the queues develop at the
cash registers, the managers call on stockers to operate registers until the queues
reduce. In the same way during slack periods some of the cashiers are busy
stocking shelves.
d. Modify or Move Facilities and Equipments: Sometimes it may be possible to

modify the existing capacity to meet the demand fluctuations. For an example, the
new Boeing 777 aircraft is so flexible that it can be reconfigured within hours to
accommodate extra numbers of seats allocated to one, two or three classes. Thus
the plane can be quickly modified to match the demand arising from different
market segments.
e. Sharing Capacity: A large investment in equipment and facilities exist in a service

delivery system. At the time of underutilization, it may be possible to find other
use for the capacity. An airline is a good example. At the small airports, airlines
share the same baggage handling equipments, ground personnel etc. It is a
common practice for some airlines to lease their aircraft to other airlines during
the off season.
f. Stretch Existing Capacity: In order to match the demand th,~ riqtinn r-~7m~7irjtv
of resources can be expanded. Under such circumstances no new resources are
added but people, facilities and equipments are asked to work harder so that
demand can be met.
g. Schedule 'Down Time' during low demand: If during the peak period, people,
equipment and facilities are being used at maximum capacity then it is necessary
to schedule repairs, maintenance and renovations during off periods. For
employees vacations and trainings can also be arranged during this period.
Strategies for managing demand to match capacity:

1. Partitioning the Demand: The demand for services is often grouped into random
arrivals and planned arrivals. For an e.g. at a doctor's clinic the walk-in patients
arriving are more than those with appointments. Appointment can be controlled.
But walk-in demand is uncontrollable.
We often find that the inflow of patients is higher on weekdays than weekend.
Therefore, in order to level demand a partition can be created as, keep
appointments in the latter part of the week i.e. weekends and only walk-in patients
on weekdays.
2. Vary the service offering: Depending on the seasons of the year, day of the week,
or time of the day, we can change the nature of the service offering. For an
example, accounting firms focus on tax preparations and general activities late in
the year and until April when the taxes are due. During the other times of the year
they can focus on auditing and other general consulting activities.
Care should be taken in implementing strategies to change the service offerings as
change may easily imply and require alterations in other marketing variables such
as promotion pricing and staffing in order to match the new offerings. Until and
unless these new additional marketing mix variables are altered effectively to
support the offering the strategy may not work.
3. Developing Complementary Services: Complementary services are basically
offered in order to occupy waiting customers. The Indian Restaurants have
discovered the benefits of complementary services by adding a bar to the

Restaurant. The customers can enjoy food and drinks separately as well as
together.
4. Promoting off-peak Demand: During off-seasons holiday resorts use their
premises as retreat location for business or professional groups. In the same way
in order to encourage long distance dialing the Telephone companies offer lower
rates at night.
5. Pricing Incentives: In order to smoothen the demand on the service process, prices
can be raised during peak times and lower, at non-peak times. Movies have
matinee special and hotels offers lowest rates during weekends.
6. Communicate with the Customers: Another way for shifting demand is to
communicate with the customers and let them know the peak demand period so
that they can choose to use the services at alternative times and avoids crowding.
7. Modify Timing and location of service delivery: Extending working hours and
working on weekends can meet the customer's demand. Another strategy may
also work by moving the service to a new location in order to meet the demands
of the customers.
8. Advertising and Sales promotion: Advertising and sales promotion can be used to
emphasize different service benefits during different period i.e. peak and slow
period. Advertising messages can also be used to remind customers about the
peak demand times and promotional offers during the off-season.
Strategies when demand and capacity cannot be matched:

1. Reservations and Appointments: Examples: Airlines, Railways, Health Care, and
Hospitals, Doctors, etc
2. Waiting Lines
3. Triage -Means Sorting: Example: Emergency rooms are given on the basis of
critical and not in order of arrival.
4. Delaying Service Delivery: Next day or next week or until capacity becomes
available.
Demand Patterns
Demand Pattern by Market Segments:
Disaggregation of demand by market segmentation is possible if an organisation has
detailed records on customer transactions or the analysis may reveal that the demand
from one segment is predictable whereas the demand is relatively random from another
segment, For an example, for a bank the current account holders may come daily at
predictable time whereas savings account holders may visit the bank at random intervals.
Random Demand Fluctuations:
Random variations in demand are there in every kind of services. For an example, health
related events like heart attacks and birth or death all increase the demand for hospital
services but the level of demand generally cannot be determined in advance. in the same
way natural disasters Such, as floods, fires, droughts, earthquakes, etc. can dramatically
increase the need for services such, as health care, insurance, telecommunication etc.
Predictable Cycles:
Variations in demand can be caused by many factors. Some are predictable -while some
are not. Tourism services have peak periods at certain holidays and at weekend days.
Generally one or more causes can be identified when there exist a predictable pattern.
Charting Demand Pattern:

Those organisations which have computerized customer information systems can do the
charting demand over relevant periods. If seasonality is a suspected problem then
graphing should be done for data from the past year.
Some of the basic types of demand curves are as follows:
Managing Constraints on Capacity:

Demand cannot be controlled perfectly. Efficient management of resources needs that the
firm should consider the changing capacity by increasing it to meet higher demand and
contract it when the demand is low. Depending on the type of service, service firms are
faced with various constraints.
1. Time: In case of some services, the primary constraint on service production is
time. For an example, 'a consultant, a lawyer or a hairdresser all sell their time.
The profits are lost if their time is not used productively. In the same way time
cannot be created if there is excess demand.
Time is a major constraint from the point of view of individual service
provider. Time capacity can be increased by operating for longer hours. This
cannot be an option if the time does not match the customer's needs. Its capacity
can also be increased by shortening the length of the time in serving the customer.
Time can be saved by using the slack demand time for repairs and
maintenance, since the functions of repairs and maintenance has to be performed
sometimes or the other: However, if they are kept away from peak demand
periods, the overall productivity will be improved. E.g. legal, consulting,
accounting, medical.
2. Labour: In the case of labour intensive unit the number of service providers is
large. Here, labour or staffing levels can be the primary capacity constraint. A law
firm, consulting firm or a repair maintenance contractor all fare the same problem.
At certain times the demand for their organisations' services cannot be met as the
staff is already operating at peak capacity. In some cases it is easier to hire and
fire. But it can be costly if the employees require extensive training in order to
provide service. This can be avoided by imply increasing the working hours of the
regular staff at the time of high demand and paying overtime.
The capacity of the workforce can be made more flexible through
extensive cross training This enables the employees to perform several different
jobs It is also possible to increase the productivity and hence work capacity. E.g.
Law firms, accounting firms, consulting firms, health clinics.
3. Equipment: Equipment may be critical constraints for service firms. In case of,
transportation, the trucks or the planes required to service demand may have
capacity limitations. Especially during festivals, summer and winter vacations the
delivery service providers are faced with this problem. Telecommunication
companies face equipment constraints when everyone wants to use the telephone
lines at the time of peak hours.
The use of productivity enhancement tools can increase the capacity of
fixed work force. They can be kept free from doing repetitive task. Example,
Banks have built ATMs, manufacturers of sophisticated computers and electronic
products have build self diagnostic components, into their products in order to
avoid sending costly engineers into the field to carry out routine analysis. In many
kinds of firms computers automate ordering and billing activities and keep track
of customer's purchase history. This has transformed operations performed by the
clerical staff. E.g. Delivery services, telecommunication, utilities, health club.
4. Facilities: Most of the service firms are faced with the problem of limited
facilities. Education institutions like schools and colleges are constrained by the
number of rooms and the number of seats in each class, restaurant capacity is
restricted to the number of tables and seats available, Airlines are limited by the
number of seats in the aircraft and so on.
Physical facilities are very difficult to adjust. Adding a building or a room
or an aircraft tends to increase the capacity but then it will add to the cost.
However, a service firm with a multiple outlet may be able to accommodate
excess demand at one unit by sending the extras to another unit. Temporary
renting is another solution. E.g. Hotels, restaurants, hospitals, airlines, schools and
theatres.
BRANDING OF SERVICES
A brand can be defined as 'a name, term, symbol or design or a combination of them
which is intended to identify the goods and services of one seller and to differentiate
them from those of competitors. In case of services, branding is still in its infancy. The
importance of branding is expected to rise due to the following reasons:
i) Services itself does not offer unique tangible benefits, brand development
tangibilises the service.
ii) It is cheaper to retain customers than to attract new ones.
iii) The new service development assumes greater importance.
Brand Awareness
Brand awareness is the ability of the consumer to recognize and recall that a service
brand is an intrinsic part of the offer category. Service brands fall into the five categories
according, to how much (or less) the consumer is aware of them. Some brands are not
known at all by the customers, while brand awareness exists for some. At a higher plane,
there are offers that have brand acceptability and those that enjoy a high degree of brand
preference.
Ch-3 Service Quality
What are the SERVICE GAPS?

Gap 1: The Knowledge Gap: Difference between consumer expectations and the
management perceptions of consumer expectations. This gap can be narrowed through
adequate research programmes.
Gap 2: The Standard Gap: Difference between management perceptions of consumer
expectations and service quality specifications. This gap can be closed by standardizing
service delivery process wherever possible and also setting right organizational goals.
Gap 3: The Delivery Gap: Difference between service quality specifications and the
service actually delivered. This gap can be eliminated by providing the employees with
adequate support system and better human resource policies and programmes and
improving teamwork.
Gap 4: The Internal Communication Gap: Difference between service delivery and what
is communicated about the service to the consumers. This gap can be eliminated through
efficient and effective communication system and also by not giving false promises to
customers that leads to higher expectations.
Gap 5: The Perception Gap: Difference between the perceived service and expected
service. This gap depends on the size and directions of the first four gaps associated with
the delivery of service quality.
3y bridging gaps 1 —4, automatically gap 5 can be closed. The gap analysis is useful in
setting priorities for actions in order to improve the company's image in the eyes of the
customers.
What are the causes of Gaps in Service Quality?

The assessment of quality takes place in the customer's mind simultaneously as services
are created and delivered. The custor-ner's level of satisfaction is largely influenced by
the difference between customer's expectation and perception of service performance.
Whom the delivered service is perceived to be better than expected, the outcome is that
the customer is satisfied and vice-versa.
The Gap between expected service and delivered services has its origin at different
points:
Gap 1: Customers Expectation:

It is simply not known what the customers expect. The intangible nature of service makes
it difficult to define customer expectations quantitatively.
Even the customer sometimes is not articulate enough to explain as to what are his/her
specific expectations.
It is also observed that some service quality dimensions are difficult to quality.
As a result, marketers have to depend upon their own judgment, which sometimes is at a
variance with the customer expectations
Gap 2: Management Perception of Customers Expectation:

The customer expectation needs to be translated into appropriate performance standards.
Many a time a service firm has a good idea as to what customers expect but fail to
develop them into appropriate service specifications. There are many reasons responsible
for if. Inadequate commitment to quality lack of inclination to specify quality standards
and measure quality. Perception of unfeasibility, perception that services cannot be
standardized etc.
Gap 3: Service Delivery:
This refl6cts variation of the actual performance from the standard performance i.e.
failure to conform to established standards. It occurs when the employees are unable to or
unwilling to perform at desired level. Role ambiguity, role conflict, poor employee-job
fit, lack of training, absence of proper motivation system etc may be the reasons for it.
Gap 4: External Marketing Communication:
A service companies external communication efforts i.e. advertising, publicity, personal
selling and public relations may over-promise and that logically results into this gap to
occur, The marketers find it very hard to resist the temptation of making big promises.
Otherwise they know that if they don't make tall promises their appeal to the customers
won't be that exciting and the entire promotion exercise may be reduced to any.
Gap 5: Actual Service Performance (As perceived by the customers):
This Gap occurs when the customer's perception of delivered service is at variance with
the expected service. The customer's experience of the service is conflict upon many
factors and some times the service may need customer's expectations and yet perceived
otherwise. The key to providing good service quality is meeting and exceeding
customer's expectations.
This gap is the end result earlier four gaps.
How to measure service Quality?

Or
What are the Dimensions / Determinants of Quality?
It refers to the process quality as judged by the consumers during a service delivery and
the quality of output judged after a service is performed.
Berry, Parasuram and Zeithaml conducted an extensive research in service quality and
identified 10 criteria used by consumers in evaluating service quality as shown in the
figure below:
Ten Dimensions of Service Quality
Dimension and Definition Examples of Specific Questions Realised by Customers

Tangibles: Appearance of  Are the bank's facilities attractive?
Physical facilities, equipment,  Is my stockbroker dressed appropriately?
personnel and communication  Is my credit card statement easy to understand?
materials.  So the tools used by the repair person look modern?
Reliability: Ability to perform  When a loan officer says they will call me back in 15
The promised service  minutes, does she do so?
dependably and accurately.  Does the stockbroker follow my exact instructions to
buy or sell?
 Is my credit card statement free of errors?

 Is my washing machine repaired right the first time?
Responsiveness: Willingness  When there is a problem with my bank statement, does
to help customers and provide the bank resolve the problem quickly?
prompt service.  Is my stockbroker willing to answer my questions?
uestions?
 Are changes for returned merchandise credited to my
account promptly?
 Is the repair firm willing to give me a specific time
when the repair person will show up?
Competence: Possession of  Is the bank teller able to process my transactions
The required skills and without fumbling around?
Knowledge to perform the  Does my brokerage firm have the research capabilities
service. to accurately track market developments?
 When I call my credit card company, is the person
enabled to answer my questions?
 Does the repair person appear to know what he is
doing?
Courtesy: Politeness, respect,  Does the bank teller have a pleasant demeanor?
consideration and friendliness  Does my broker refrain from acting busy or being rude
of contact personnel. when I ask questions?
 Are the telephone operators in the credit card company
consistently polite when answering my calls?
 Does the repair person take off his muddy shoes before
stepping on my carpet?
Credibility: Trustworthiness,  Does the bank have a good reputation?
believability, honesty of the  Does my broker refrain from pressuring me to buy?
service provider.  Are the interest rates/fees charged by my credit card
 company consistent with the services provided?
 Does the repair firm guarantee its services?
Security: Freedom from  Is it safe for me to use the bank's automatic teller
danger, risk or doubt. machines?
 Does my brokerage firm know where my stock
certificate is?
 Is my credit card safe from unauthorized use?
 Can I be confident that the repair job was done
properly?
Access: Approachability and  How easy it is for me to talk to senior bank officials
ease of contact, when I have a problem?
 Is it easy to get through to my broker over the

telephone?
 Does the credit card company have a 24-hour, toll-free
telephone number?
 Is the repair service facility conveniently located?
Communication: Keeping  Can the loan officer explain clearly the various changes
customers informed in a related to the mortgage loan?
language they can understand  Does my broker avoid using technical jargon?
and listening to them.  When I call my credit card company, are they
willing to listen to me?
 Does the repair firm call when they are unable to keep a
scheduled repair appointment?
Understanding the Customer:  Does someone in my bank recognize me as a regular
Making the effort to know customer?
customers and their needs.  Does my broker try to determine what my specific
financial objectives are?
 Is the credit limit set by my credit card company
consistent with what I can afford (i.e. neither too high
nor too low)?
 is the repair firm willing to be flexible
enough to accommodate me schedule?
It was found that there was a high degree of correlation between most of these variables.
They
are consolidated into five broad dimensions.
1. Tangibles: Tangibles are those factors which the consumer can feel, hear and
touch. Tangible are used while assessing the physical qualities and before the
service is experienced. For an example, you would not like to be served by an
unclean waiter with dirty uniform and perhaps you would never visit such a
restaurant again.
2. Responsiveness: It refers to the willingness to help customers and provide prompt
service. Responsiveness is an important dimension for those customers who
require some extra service over and above that is usually provided.
3. Empathy: It means the power of understanding the customer's feelings and needs
that enables the server to take care of the customer and provide personal attention.
It is described as human touch.
4. Assurance: It means that the knowledge which the provider possesses enables him
to perform the services competently. It also includes courtesy aspects such as
politeness and respect for customers.'
5. Reliability: It is the capacity to deliver the promised service accurately on time.

The milkman who delivers milk on a regular basis in time is reliable.
Productivity and quality

Productivity relates to how inputs are transformed into outputs that are valued by
customers. Improving productivity keeps costs under control Quality refers to the degree
to which a service satisfies customers by meeting their needs, wants and expectations.
Service quality helps in product differentiation and building customer loyalty. Invest in
quality profitably i.e. by considering incremental cost and incremental revenue.
What do you mean by service recovery?

Service recovery is a term used for systematic efforts by a firm in order to correct the
problem following a service failure, and to retain a customer's goodwill. Service recovery
efforts play a crucial role in achieving or restoring customer satisfaction. In every
organisation, things may occur that have a negative impact on its relationship with
customers. The true test of a firms, commitment to satisfaction and service quality isn't in
advertising promises or the decor and ambience of its office but in the way it responds
when things go wrong.jor the customer.
Effective service recovery requires thoughtful procedures for resolving problems
and handling disgruntled customers. It is critical for firms to have effective recovery
stralegies, because even a single service problem can destroy a customers' confiderTce, in
tvfirm under the following conditions:
i) The failure is totally outrageous.
ii) The problem fits a pattern of failure rather than .being'ah isolated incident.
iii) The recovery efforts are weak, serving to: compound the original problem rather
than correct it.
Some complaints are made while service, deliqery (s still taking place, while
others are made after the fact. In both instances, how the complaint is handled may
determine whether the customer remains with the firm or seeks new; suppliers in the
future. The advantage of getting real time complaints is that there nay still be a chance to
correct the situation before service delivery is complete.
The downside of real time compliant (from an employee perspective), is that they
can be de-motivating. Dealing with them in real time can also interfere with service
delivery. The real difficulty for employees is that they often lack the authority and the
tools to resolve customer problems, especially, when comes to arranging alternatives at
companies' expense or authorizing compensbtionon the spot. When complaints are made
after the fact, the options for recovery are more limited. In this case, the firm can
apologize, repeat the service to achieve the desired solution or offer some other forms of
compensations.
What are the guidelines for effective problem resolution?

Or
How to Handle Complaints?
1. Admit mistakes, but don't be defensive: Acting defensively may suggest that the
organisation has something to hide or is reluctant to fully explore the situation.
2. Act fast-, If the complaint is made during the service delivery, then Time is of the
essence to achieve a full recovery. When complaints are made after the fact, many
companies have established policies of responding within 24 hours or sooner.
Even when full resolution is likely to be longer, fast acknowledgement remains
very important.
3. Don't argue with customers: The goal should be to gather fact, to reach a mutually
acceptable solution, not to win a debate or prove that the customer is an idiot.
Arguing gets in the way of listening and seldom diffuses anger.
4. Show that you understand the problem from each customer's point of view:
Seeing situations through the customer eyes is the only way to understand what
they think has gone wrong and why they are upset. Service personnel should
avoid jumping to conclusions with their own interpretation.
5. Give customers the benefit of the doubt: All the customers may not be truthful,
and also not all complaints are justified. But customers should be treated as
though they have a valid complaint until clear evidence to the contrary emerges. If
a lot of money is at stake, like insurance claims or lawsuits, a full investigation is
warranted. If the amount involved is small, it may not be worth to refund or
compensate. But it's a good idea to check records to see if there is a past history of
dubious complaints by the same customer.
6. Acknowledge the customer's feelings: Acknowledge the feelings of the customers
tactfully for example," I can understand why you are upset. This action helps to
build rapport, which is the first step in building a bruised relationship.
7. Clarify the steps needed to solve the problems: When instant solutions are not
possible, telling customers how the organisation plans to proceed, shows that
corrective action is being taken. It also sets expectations about the time involved.
8. Keep customers informed of the progress: Nobody likes being left in the dark.
Uncertainty breeds, anxiety and stress. People tend to be more accepting of
disruptions, if they know what is going on, and receive progress reports.
9. Consider compensation: When customers do not receive the service outcomes that
debate for or have suffered serious inconveniences or loss of time and money,
because the service, failed, either a monetary payment or an offer of equivalent
service in kind, is appropriate. This type of recovery strategy may also reduce the
risk of legal action by an angry customer. Service guarantees often lax out in
advance, what such compensation will be and the firm should ensure that all
guarantees are met.
10. Preserving to regain customers goodwill When customers have been disappointed,
one of the biggest challenges is to restore their confidence and preserve the
relationship for the future. Perseverance may be required to defuse customers'
anger and to convince them that actions are being taken to avoid a recurrence of
the problem. Truly exceptional recovery efforts can be extremely effective in
building loyalty and referrals.
Taking care of customers require that the firm also take care of its own employees.
Managers need to recognise that handling complaints about service failures and
attempting service recovery can be stressful for the employees, especially when they get
treated abusively for problems over which they have no control. Compounding the stress
are policies that implies in flexible, bureaucratic procedures, rather than empowered
customer --contact personnel to handle recovery situations as they see fit. Service firm
needs to develop internal service recovery strategies, designed to help employees recover
from negative feelings that they may become the target of employee anger and
dissatisfaction.
Similarly, management must ensure that the firm employs a sufficient number of well-
trained and motivated employees. so that good service is provided in the first place, plus
prompt and effective recovery is done when things go wrong. Companies with a good
reputation for customer care cannot afford to become complacent.
Ch- 4 Services Management
Service Mapping or Flowcharting

Flowcharting can be applied to any type of services when a management needs to gain, a
better understanding of how the service is created and delivered. It is also known as
service mapping when portraying an existing situation and service blueprinting , when
planning a new or revised process and prescribing how it ought to function.
Service Blue Print

A service blue print is a flowchart of the service process. It is a picture of a service
system. It conveys the service concept by showing the service at an overview level. It
shows how each job or department functions in relation to the service as a whole.
Benchmarkinq: Advantages and Methodology

Benchmarking is a process used in management and particularly strategic management,
in which organizations evaluate various aspects of their processes in relation to best
practice, usually within their own sector. This then allows organizations to develop plans
on how to adopt such best practice, usually with the aim of increasing some aspect of
performance. Benchmarking may be a one-off event, but is often treated as a continuous
process in which organizations continually seek to challenge their practices.
Benchmarking in simplistic terms is the process where you compare your process with
that of a betterprocess and try to improve the standard of the process you follow to
improve quality of the system, product, and services etc. A process similar to
benchmarking is also used in technical product testing and in land surveying. See the
article benchmark for these applications.
Advantages of benchmarking:
Benchmarking is a powerful management tool because it overcomes" paradigm."
Paradigm Blindness can be summed up as the mode of thinking, "The way we do it is the
best because this is the way we've always done it." Benchmarking opens organizations to
new methods, ideas and tools to improve their effectiveness. It helps crack through
resistance to change by demonstrating other: methods of solving problems than the one
currently employed, and demonstrating that they work, because they are being used by
others.
Collaborative benchmarking
Benchmarking, originally invented as a formal process by Rank Xerox, is usually carried
out by individual companies. Sometimes it may be carried out collaboratively by groups
of companies (e.g. subsidiaries of a multinational in different countries). One example is
that of the Dutch municipally-owned water supply companies, which have carried out a
voluntary collaborative benchmarking process since 1997 through their industry

association.
Procedure
There is no single benchmarking process that has been universally adopted. The wide
appeal and acceptance of benchmarking has led to various benchmarking methodologies
emerging. The most prominent methodology is the 12 stage methodology by Robert
Camp (who wrote the first book on benchmarking in 1989.
The following is an example of a typical shorter version of the methodology:

Identify your problem areas - Because benchmarking can be applied to any business
process or function a range of research techniques may be required. They include:
informal conversations with customers, employees, or suppliers, exploratory research
techniques such as focus groups, or in-depth marketing research, quantitative research,
surveys, questionnaires, re engineering analysis, process mapping, quality control
variance reports, or financial ratio analysis. Before embarking on comparison with other
organizations it essential that you know your own organization's function, process; base
lining performance provides a point against which improvement effort can be measured.
Identify other industries that have similar processes – For instance if one were interested
in improving hand offs in addiction treatment s/he would try to identify other fields that
also have hand off challenges. These could include air traffic control, cell phone
switching between towers, transfer of patients from surgery to recovery rooms.
Identify organizations that are leaders in these areas – Look for the very best in any
industry and in any country. Consult customers, suppliers, financial analysts, trade
associations, and magazines to determine which companies are worthy of study.
Survey companies for measures and practices – Companies target specific business
processes using detailed surveys of measures and practices used to identify business
process alternatives and leading companies. Surveys are typically masked to protect
confidential data by neutral associations and consultants.
Visit the "best practice" companies to identify leading edge practices - Companies
typically agree to mutually exchange information beneficial to all parties in a
benchmarking group and share the results within the group.
Implement new and improved business practices – Take the leading edge practices and
develop implementation plans which include identification of specific opportunities,
funding the project and selling the ideas to the organization for the purpose of gaining
demonstrated value from the process.
Blueprinting
The service encounter is difficult to describe with accuracy and therefore there is a lot of
subjectivity in its analysis. This inconsistency (variability) prevents quality measurement.

This has given rise to many methodologies in service encounter analysis and
measurements which seek to 'map' the service process. With such a 'map' and 'scripts', it
is possible to be systematic in the encounter analysis This process is called 'blueprinting'.
Blueprinting has given rise to other methodologies like 'servuction'.
To facilitate maximum satisfaction to the customers, more inputs were added to the
service delivery. Service evolved from very simple steps to complex processes, & there
arose a need for the marketer to get a bird's eye view of the whole process. Blueprinting
is flowcharting of service operation.
Blueprinting would prevent the manager from learning by costly trial and error. It
(blueprinting) also enables marketing managers to understand the parts of the operating
system that are visible to the consumer and hence parts of the servuction system. In the
servuction sysrem, it is very difficult to identify components of an individual firm. Worse
firms underestimate the sensitivity of points of contact. Service firms are now starting to
realize the importance of the first call and its potential for generating revenues. They are
setting up '24 x 7 x 365 call centres to be manned by efficient and alert call handlers. The
providers are adequately enabled by training, and computer facilities for all enquiry data
access and customer and product details the service providers are trained to pick up the
phone on the first ring.
Service flowcharts allow managers to better understand servuction Processes. Designing

the process becomes the key to product design. In the design stage, it is ensured that the
visible part of operations is supported by invisible processes. Flowcharts seek to identify
the following:
 The time it takes to move from one process to another;
 The costs involved with each process step;
 The amount of inventory build-up at each process step;
 The bottlenecks in the system.
A customer blueprint has three core elements:
 Identification of all those functions that are essential to deliver a service along
with the appropriate personnel with requisite responsibility, authority and
accountability.
 The relationships amongst different functions of service components are
explained by graphics and charts. The relationshio, is based on time and sequence
with each other. For a hotel, the sequence of housekeeping in relation to reception
and registration has to be elaborated with a specific time interval.
 Setting up of standards for each function with tolerance levels and variance from
standards' These tolerances for variance should not adversely affect the service
quality adversely.
Steps in Designing a Blueprint

1. Identify the process to be blueprinted: This implies again that it would be
impossible to blueprint the complete processes of the service provider in one
format. The individual processes are to be identified for blueprinting. The
summation of such processes would give the whole picture to the manager. Each
process would by itself be an issue, and particular problem identification and
appropriate solution formulation would be easier.
2. Map process from the custorner's point of view: Through this method, the
customer's comfort zones can be identified. Processes can be modified if it is
found that customers are not very comfortable with certain sequences. Consumers
possess purchasing scripts that guide their thinking and behaviour during service
encounters. The blueprint development process identifies steps where the system
can go awry. Process involves specifying the timeframe of service execution.
3. Draw line of interaction: The line of visibility and the line of interaction have to
be drawn clearly. The areas of interaction affect service experience the most.
4. Draw the line of visibility: These are processes in zones that are visible to the
customers and in which the customer is most likely to participate. There are also
the invisible zones which consist of processes and interactions that are necessary
for servicing the customer but are hidden from his view. In a bank, this would
include checking the credit-worthiness of clients, processing of documents,
dispatch section operations, etc.
5. Map process from customer contact person's view, distinguishing visible activities
from those that are invisible.
6. Draw line of internal interaction.
7. Link customer and contact person activities to needed support functions.
Target Marketing
Target Marketing recognizes that different groups of customers have different needs and
might also desire different core benefits from the same service. It sought the different
needs and preferences of the consumers and instead of trying to satisfy them with the
same type of services, the firm designed complete marketing programmes for each of
these sub-groups.
Benefits of Target Marketing

 The market size is large and the service firm may not have sufficient resources to
address it, neither would it perhaps want to do so.
 Customers are scattered all over the geographical spread, making it practically
impossible to reach every potential buyer. Targeting was far more cost-effective.
 Competitors are enrrenched, making entry and survival difficult' Therefore,
smaller firms can seek niche or specialized markets.
 Customer requirements from the service vary widely'. Targeting a segment or two
- to the exclusion of the rest - increases the chances of meeting most of customers'
demands.
 It generated customer loyalty.
Franchising :
Franchising is the most common type of distributor in the services and accounts for most
of the retail sales. According to the International Franchise Association of America, "A
franchise operation is a contractual relationship between the franchiser and the franchisee
in which the franchiser offers or is obligated to maintain a continuing interest in the
business of the franchisee in such areas as know-hold and training, where in the
franchisee operates under a common trade name format and/or procedure Owned and
controlled by the franchiser and in which the franchisee has or will make a substantial
capital investment in his business from his own resources.”
Location of Franchisee.
The franchisee should be located at convenient and accessible places. The following
factors influence the choice of franchise location:
i) Area of potential demand
ii) Competition in the area.
iii) Requirement of space
iv) Presence of another franchisee of the same firm.
v) Other physical needs of the firm.
Benefits of Franchisee:
To the Franchiser:
i) Franchisees are self-motivator.
ii) They share business risk.
iii) They have a thorough although knowledge of the local market.
iv) They maintain consistency in quality.
v) Franchiser gets wider distribution network.
To the Franchisee:
i) Obtain ready-made business.
ii) Reduction of risk.
iii) Benefit of training and counseling and advice on local promotion of business.
Franchising in India with Examples:

As the service economy grows in the country, opportunities for franchising are going to
be plentiful. The franchisers in the product market like Titan, Raymond, Bata or Reebok
are well known. More names will be added to this list as franchising is catching on in
service industries like in education I. T. kids, NIIT, Aptech; Healthcare - Arvindlal;

Entertainment - AMF, Bumswick; Specialty food services -Subway, Cafe Coffee day and
Personal grooming -Personal Point, VLCC.
I. T. kids: Business concept: education through computers.

Numbers planned: 300 in one year
Company investment: Rs. 37 crores (in next one year)
Franchisee investment: Rs. 12 -15 lakhs
Chennai based computer firm with the novel concept of educating children aged between
4 to 14 years through computers. The curriculum is divided into several modules and
gives a good chance of retaining the customers for many years. To include trials I.T. kids
plans short duration programmes during summer vacations. As it is a niche market I.T.
kids rely on franchising. They have rolled out swiftly and grab the first mover advantage.
Cafe Coffee day - Business concept'. coffee cafes

Numbers planned: 100 by 2001
Company investment: Rs. 5 crores
Franchisee investment: about Rs. 40 lakhs
The Rs. 200 crore Bangalore based Amalgamated Bean Coffee, India's largest coffee
chain has set up a chain of cafes that mirror the successful day offers a variety of coffee
blends and also a limited menu of snacks like sandwiches and pastries.
CASE STUDY
NOV: 2001
The three morning flights scheduled to leave Mumbai for Delhi at 6.30, 8.e0 and 8.45
a.m. were delayed due to fog in Delhi. The first two were rescheduled for 9.15 a.m. in the
hope that by then the weather would improve. At 8.30 a.m. the passengers were asked to
proceed for security check and await departure call. An announcement at 8.50 a.m.
requested passengers on the second flight who were waiting in the lounge on the ground
level to board the aircraft. Those who were booked for the first, waiting on the first floor
lounge heard this announcement. Anticipating a similar announcement for them, they
moved gradually to the gate. The movement of the staff through the aerobridge and to the
telephones gave the impression that something was wrong. But the gate did not open. At
about 9.15 one of the staff was asked the reasons for the delay. He replied rudely that
they would be boarding within five minutes. At 9.30 a.m. another traffic assistant also
said within five minutes. The passengers were getting restive. When the same answer was
given by another assistant, the passengers got infuriated. They also felt that the staff was
not doing their duty and that the delay was avoidable. Within another five minutes they
were asked to board the aircraft. When all were seated, the pilot announced that the
weather in Delhi was still bad, and that the next report was expected after 30 minutes and
the breakfast would be served on board. From the air hostess, the passengers came to
know the passengers of the second flight were also boarding only then This incident
could have been communicated periodically. The announcement about boarding the flight
was misleading. The traffic assistants perhaps themselves did not know the real situation
when they had said five minutes. This situation further aggravated by further delay due to
late arrival of a politician who was also travelling to Delhi. The parting greetings were
given to the passengers "Hope you enjoyed the Flight" just before landing at Delhi. As if
this was not enough, the passengers had to wait for one more hour for luggage clearance.
Questions:
i) Which were the critical interactions and which were not?
ii) Did all the airline staff and the passengers exhibit technical and interactive skills?
Elaborate.
iii) What were the reasons for the delay at both the airports?
iv) What steps could have been taken to rectify the situation as a service recovery
strategy?
v) What kind of an image did the parting remarks convey to the passenger? If you
were the passenger, how would you perceive the quality of services rendered by
the airline?
NOV: 2002
On checking into a 5 Star Hotel in Bangalore recently, Anand was impressed by the
courtesy extended to the visitor in the front office — polite, friendly and efficient. The
checking in card was filled and ready, just waiting to be signed. He walked upto the room
and his bag arrived at the time. A few minutes later, the bearer came in with a welcome
drink — which was "on the house". It was certainly an excellent start.
Later when he settled down, he discovered that there was no table lamp in the room and
this made it difficult to read. The press button for the shower did not work, so one had to
bend down and keep it pressed right through a shower. The wash basin became easily
clogged and was virtually unusable. A complaint was made to the housekeeping
department and they said they would certainly attend to it. Normally it happened for a
whole day.
The next day, a complaint was given to the Reception desk. They said they would surely
look into it. In the evening it was discovered that only the basin had been attended to, but
the floor was littered with some screws and nails lying in a pool of dirty water. Another
complaint was lodged the following morning at the Reception desk, but again it remained
unattended to by the evening. But the unkindest cut of all was inflicted the following
morning when the girl at the Reception desk (who was new recruit, perhaps wrongly
selected and obviously inadequately trained) crowed in her most pleasantly sarcastic
manner: "Good morning, Mr. Anand, any further complaints today? I am all ears!"
At that moment, the hotel lost a customer. The back room services rendered by the Hotel
were poor and she compounded the problem with poor front office service. She had
forgotten or perhaps never been taught that in the marketing of a service, the focus is not
just on delivering goods, but on satisfying the reasonable expectations of paying
customer.
Questions:
i) What were the moments of truth (indicate various interactions).
ii) Highlight the critical and non-critical incidents.
iii) Which were the supplementary/peripheral services missing in the hotel? Justify
their importance.
iv) What steps could have been taken to resolve the problem effectively?
NOV: 2003
The passengers were through with their final security check and were boarding the
aircraft The LOTUS Airlines personnel were awaiting the arrival of a V.I.P. to clear the
take off. Finally the V.I.P arrived half an hour late and went directly for the security
check. During the check the security personnel came across weapon with live cartilages.
He was requested not to carry the weapon with live cartilages. He was requested not to
carry the weapon on flight. However the V.I.P. refused to part with the weapon for
personal security. When he was asked for the license, he said he was not carrying it. The
security personnel refused to give permission to the V.I.P. to board the aircraft .This led
to heated argument and in rage 'Lille V.I.P. threw one of the security staff across the
floor.
This further delayed the flight. The passengers were very restless since they were in the
aircraft last 1½ hours. To top it up they were not allowed to leave the aircraft for security
purpose.
Questions:
i) In this case, where do the service gaps exist and how would you close the gaps?
ii) Elaborate the importance of "People" in airline services?
iii) As service provider how would you manage this kind of service encounter? What
is a service encounter?
iv) What would you do when prevention fails and damage is done?
NOV: 2004
Krishnan was delighted to get a phone call one evening from the finance company,
saying that the new car that had been launched only a month back was ready for delivery.
The appointment was fixed for next morning at 10. Krishnan and his family reached the
show room promptly at 10, hoping to collect the vehicle before the inauspicious "rahu
kalam" began at 12. When he entered the showroom, nobody, not even the receptionist
asked him who he was and what he wanted. After standing around for sometimes, he
asked a gentleman who was walking past, whether he would be attended to. He was told
to wait. An empty chair was pointed out him. The rest of the family had to stand. After a
few minutes, a young lady came with a file, and all small smiles, asked whether he had
brought the balance money? "What balance "asked Krishnan? I was, told that all
payments had been made and I can take the car this morning". The lady went to check.
AS Krishnan was waiting, another well-dressed person, all smiles again, came and asked
whether he would like to select accessories from the list, which were two full pages. "Let
me get the car first", shouted Krishnan. The original Lady returned all smiles again,
confirming that no payments were due and handed him the papers. One was an insurance
receipt. Krishnan wanted to know what insurance cover had been taken. "This is the
insurance cover," the lady said, "Yes what kind of cover", Krishnan wanted to know. She
went back to check again and confirmed that it was a comprehensive cover. Krishnan was
then required to go to the workshop, where, after more delay and paper work, he got the
car at 12.30 pm.
Questions:
i) Identify the Service Gaps in this case and how would you rectify the same?
ii) Explain the "core" and "supplementary" products in the context of above case.
iii) How do you find the "people" factor in the above case? What skills, according to
you, are lacking in them?
iv) As a show room manager what service recovery measures would you take?
NOV: 2005
The computerized reservation system in Mumbai was closed on 10" January, 1988. The
software was being upgraded for better service. On the day, manual systems were put into
operation, but only to attend to needs of passengers leaving by trains up to 12 noon on the
11`h A person, who was booked on the train leaving at 7 a.m. on the 12", could not avail
of the manual facilities for cancellation. !f he had done so, he would have lost Rs. 30 as
cancellation charges. He could only cancel his ticket on the 11th, and as per rules, he
would loose 25%. But when he went to cancel it on that day, the cancellation charges
would go upto 50% of the cost of the ticket. He pleaded with the local officers to certify
on the ticket that he [lad come to cancel it, and that he could make a separate claim for
refund later but this could not be done, as per rules. Only the ticket collector on the train
was authorised to endorse on the ticket the fact of non-utilization. Nobody could help,
beyond stating the rules, "The procedure and their helplessness.
Questions:
i) Discuss this case with the help of, the cause & effect analysis.
ii) What is "flower of service"? Bring out the deformed petals in this case.
iii) List out the critical and non critical incidents.
NOV: 2006
Kool Travels Pvt. Ltd., a Holiday Company has been arranging regular holiday tours to
Rajasthan. Kool Travels had regular arrangements with Maharaja Hotels for
accommodation of their tourists in Jaipur.
In December, 2005 Mr. Tejas and his family booked a Rajasthan Tour Package with Kool
Travels and checked into Maharaja Hotel in the room allocated to him and his family.
However Mr.Tejas did not like the room and decided to register his complaint about the
room. In the meantime his wife, Pooja, switched on the television and was greeted by a
screen with Maharaja Hotel Customer Survey. Using the remote control, Mr. Tejas
punched in his evaluation. To his surprise within two minutes of the receiving the
electronic communication, the Hotel Manager called him to say that because the Hotel
was entirely booked this being a busy season, the room could not be exchanged, however
the Guest could expect a Hospitality Gift from the Hote! for his inconvenience.
The next day a garden facing room was available and the Hotel Manager offered the
same to Mr. Tejas if he wished to shift. Mr. Tejas declined and told the Manager that he
and his family were quite comfortable in the present room.
Questions:
i) Give your opinion about expected level of expected level of service in the case.
ii) Analyse the service recovery in the case.
iii) What would be the effect of this incident on the Kool Travels?
iv) Why do you feel Mr. Tejas declined to change his room?
NOV: 2007
Dear Customer Service Manager,
Through the XYZ Travel Agency, my wife and I booked round trip first class seats on the
following Dorby Airlines flights on the dates indicated:
1st July DBA 3072 Mumbai to Heathrow

1st July DBA 86 Heathrow to Munich
21st July DBA 87 Munich the Heathrow
21st July DBA 3073 Heathrow to Mumbai.
In addition, we had booked domestic flights between Udaipur-Mumbai and back for the
respective dates on another airline.
The out bound flights 3072 and 86 seemed pleasant enough at the beginning. However,
mid flight on 86, we discovered that we had been poisoned on flight 3072, apparently by
the chicken sandwich that was served in first class that day. My wife was so ill dying to
get to the restroom to throw up, she passed out cold, hitting her head and we discovered
over the next few days, apparently damaging her back. In addition to the nausea and
diarrhea, she had a large knot on her head and headaches far several days. Her lower back
has been in constant pain ever since. I, too, was very ill for several days. A nice start for a
vacation: But it gets worse.
During the long layover between flights at Heathrow, there was a tremendous rainstorm,
and our baggage apparently was left out in it, a situation that we discovered when we
arrived at our first nights lodging and discovered of our clothing was dripping wet. In
addition, four art prints that we were bringing as gifts for our friends were ruined.
The return flights were better only in that we did not get poisoned; instead we did not get
fed! We had to ask for drinks-, the meals ran out and we were given no choice but an
overdone piece of stale meat, with tomato-sauce on it. Given our previous experience
with the food, we decided not to eat.
Flights 87 was delayed in boarding by two hours, due to the "slowness in cleaning the
aircrafts and late arrival of the crew" we were told. Also, thanks to heavy rainstorm that
hit Heathrow again, our flight take off was further delayed-, all of which could have been
avoided, if the plane had taken off before the rainstorm had started, as scheduled, had the
crew and the cleaning done their jobs on time.
Due to the excess delay at Heathrow, flight 87 was very late and we could not make our
connection from Mumbai to Udaipur. As it turned out we would have barely been able to
make it if the flight has been on time because Dorby Airlines had changed not only the
flight numbers but also the flight times on the Heathrow - Mumbai leg of our journey-
AND WE WERE NEVER NOTIFIED OF THIS CHANGE UNTIL WE ARRIVED AT
THE AIRPORT. As first class passengers we have been treated as cattle!
In Disgust,
J. D'Souza
Questions:
i) What are services? What are critical incidences in this case?
ii) What according to you are the causes for poor service deliver in this case?
iii) Discuss the core and supplementary service in this case.
iv) What is service recovery? How would you design a complaint handing process?
NOV: 2008
The success of the package holiday firm Club Med in becoming a household name in the
holiday business is no accident. Everyone at Club Med, from the C.E.O. to the kitchen
porter, is committed to the ideal of customer satisfaction through every element of the
package. Every member of the staff is aware that guests are coming to experience a
combination of the resort location, the excellent facilities and the all-important element of
personal interaction. Guests come for a total experience not just to have a few days away
from home and work.
Club Meds success can be attributed to the creative inclusive packages it has developed –
all combining the basic mix of location, facilities and personal interaction. A typical Club
Med inclusive packago is comprised of three meals a day, beer or wine with lunch arid
dinner a swimming pool and gymnasium, sailing, kayaking, snorkeling, tennis, water
exercise, rock climbing, archery, aerobics, volleyball, basket ball, table tennis, billiards,
picnics, evening entertainment and dancing a night club and conference facilities.
Club Med offers different holiday plans – a budget plan, a moderate plan, and a deluxe
plan –from which customers can choose in accordance with their expectations and
expenditure. Within these categories they offer various packages primarily for couples,
packages primarily for singles and packages primarily for families. The family package
incorporates sub packages selected by parents for their children according to age – kids
club. Petit club, Mini club and Baby/nursery club. With these various packages, Club
Med offers not merely a holiday, but a hassle free vacation package.
In the 1970s and 1980s Club Med was in vogue as "the" holiday destination for many
single people in Europe. As these customers grow older, got married, and began having
children, their needs changed. In response, Club Med extended its services and packages-
thereby successfully maintaining the loyalty of its original customers many years.
Using various specialized packages, Club Med has maintained its basic customer's base
while simultaneously extending its market demand to other customer groups.
Questions:
i) Explain the product / services offered by Club Med.
ii) Explain the market segmentation of Club Med.
iii) Explain the importance of team work in service sector.
iv)
SERVICE SECTOR MANAGEMENT
INDEX
NO. CHAPTER PAGE NO.
1. Introduction of Services Marketing 1
2. Key Elements of Services Marketing 31
3. Service Quality 61
4. Services Management 70
5. Case Study 76
P's Of Service Sector Management
Sr. Sector Product Place Price Promotion Physical People Process

No. Evidence
1 Roadway Tar road, Cities, Towns, Material , Publicity, Committees, Digging, Laying,
(Public Utility Medians, village, Forests, Wages, Word-of-Mouth Signs, Govt.dept. Repair, Rolling,
Services) Pavement Toll gates Salary, Promotion, Milestone, Road traffic police, Purchasing,
Survey Public Relation Roller Engineer, Contracting,
Labour
2 Railway Coaches, Station Travel Class, Advertising, Driver, Guards, Routing,
(Public Utility Tracks, Distance Publicity, Railway Police, Ticketing,
Tracks, Signals,
Services) Signals, traveled, Word-of – Maintenance Repair,
Station Stalls,
Bridges, Luggage mouth staff, Station Truck Laying ,
Trains
Tickets promotion , Master Transporting etc
Public Relation
3 Postal and Letter, Cards, Post Office, Distance , Advertising, Letter, Packets, Government Enquiries,
Courier Stamps, Post Box, Weight, Publicity, Parcels, Mail service, Booking,
( Public Utility Saving, Collection Nationality, Word-of – Van, Document, Postman, Transportation,
Services) Scheme, Post centers, Door Speed Size mouth Receipt, Post Delivery boy, Documentation,
boxes, Mail receipt promotion , Box, Stamp Booking staff, Etc
Bags Public Relation seal, Pin codes Logistic staff etc
etc
4 Fire Control Fire Engine, Wherever fire Free service Advertising, Trauma care Training, fire
( Public Utility Helmets, erupts e.g. for Publicity, Fire engine, first personnel, fighting, Medical
Service) Clothing Houses, public which Word-of – aid kits, hoses, driver, fire - aid, Counseling,
Offices, Forests is mouth water, fire proof fighter Safety education
indirectly promotion , clothing, cranes
collected from Public Relation fire station
tax
004, Ground Flr., Vyas Apartment, Panchrishi Chs., Sant Namdev Path, Near Gograswadi Gate, Dombivli (E) Dist Thane,Contact : 9820339236 ,
9987761430 , 8097133892
5 Civil Aviation Airplanes, Airport Distance Advertising, Airplanes, Pilots, Cabin Ticketing,
(Public Utility Tickets, Traveled, Publicity, Airport, Crew, Caterer, Boarding,
Service) Magazines, Travel class, Word-of – Tarmacs, Administrative Transporting,
Skyshoping Schemes mouth Radars, Control staff, Hospitality,
promotion , Tower, Techniques, Booking,
Public Aerobridges, Engineer, Announcement
Relation, Passengers, Security, Helper Etc
Broadcasting Cargo,
Conveyors
6 Electricity Meter, Homes, Offices, Industrial Advertising, Transmission Electricity Generation,
( Public Utility transformer, Factories, consumption, Publicity, tower, grids, boards, Supply,
Services) switch boards, Commercial Domestic Word-of – transformer, technician, Metering,
Distribution Establishments, consumption, mouth meters, fuses, administrative Billing,
tower and lines, Manufacturing, Subsidies promotion , lines, generating staff Collection,
energy, fuses Agriculture, Public Relation station, meter Repairs,
Medical Centers reading cards, Emergency calls,
Bills Installation
7 Service Telephone, Telecom center Distance , Advertising, Directories, Operators, Machine
Telecommuni Telegraph, Fax, Home, Time Publicity, Bills, Service Operation,
cation Internet , Workplace, of the day, Word-of Telecom Personnel Billing,
(Public Utility Intranet Private operator Duration mouth equipment Collection
Service) Service promotion , Yellow colors
charges Public Relation display board
8 Service: Diagnostic and Clinic, Hospital, Length of stay, Advertising, Hospital, Doctors, Testing, Surgery,
Health Care Surgical Camps Level of illness, Publicity, Intensive care, Nurses, Para First Aid,
equipment, type of room, Word-of – Wards, Medical medicines, Physical
First aid kits, specialist, Tests mouth shop Pharmacists, examination,
required ambulance,
Medicines promotion , Specialists Catering,
Mortuary,
Public Relation Laundry
Emergency
9987761430 , 8097133892
9 Service: Cottage, Pubs, Hill station, Distance, Advertising, Monument, Tour operator, Training,
Tourism Restaurant, Beaches, Accommodati Publicity, Leisure centers, Government, Guiding,
Shops, Palaces, Places on, Food, Word-of Healing Travel agent, Explaining,
Accommodatio of workship, Drinks, mouth Location, Tourist guide, Preserving,
n Heritage sites Guides, Entry promotion , Historic places, Documentation
: 5 – 1 star fees Public Relation Monument
10 Service: Reception, Near airport, Occupancy Advertising, House keeping House keeping,
Tariff cards,
Hotel Rooms, Areas, Bus Stand, periods, star Publicity, staff, Bill boy, Food Preparation
Menu cards,
(Hospitality Entertainment, Railway station, category, word-of – Receptionist check- in & out,
Interior
Service) Shopping, Ports, Tourism room mouth staff, Chefs, Foreign
decoration,
Personal care, spots, capacity, Air promotion , Waiter, exchange, Room
Furnishing,
Parks, Shopping conditions, Public Administrative service, Meeting
House Keeping,
Swimming areas, Place of Location, Relation, staff arrangement
Display board,
pools workship Room Telemarketing
lighting, Valets
service, taxes Broadcasting
11 Service Luxury, Tourist places, Distance Advertising, Drivers, Booking,
Travel Express, Point- Business traveled, hours Publicity, Word- Vehicle, Maintenance vehicles
(Hospitality in-point, Establishment, traveled, flat of – mouth booking staff, booking purchase,
Services) Ordinary Personal Visits, rates, drivers promotion , office, tariffs, staff, PRO. marketing,
Service, Light Airport, Station tips, luggage, Public Relation brochures, Liaison officers billing,
& heavy fuel Telemarketing , mobile displays collection,
vehicles consumed, Broadcasting documentation
12 Service: Policies- whole Branches, Premium, rate Advertising, Brochure, Brokers, agents,
Insurance life, ordinary, offices, home of Publicity, Word- leaflet, company staff
( Financial limited, death, rate of of – mouth environment, Application,
Service) payment, interest, promotion , people, verification,
convertible, expenses Public Relation currency, sanction, receipt
Marriage, incurred Telemarketing client, interior,
Accident etc Broadcasting decoration
9987761430 , 8097133892
13 Service: Media Agency offices, Media involved, Advertising, Editors,

target audience,
Photographs, Layout,
Advertising campaign, client offices, Publicity, Word- copywriter,
time, no. of brochures, copywriting ,
Agency layouts, other meeting of -- mouth creative
persons, printouts, logo, typography,
(Professional accounts, venues promotion , thinkers, artists,
physical work trademarks, photo
Service) video, Public Relation media personnel
brand names setting
audio tapes
14 Service: Branches, Interest, Advertising, Staff, cheque Staff, agent ,
Deposits, letter Canvassing,
Banking branch and off- commission, Publicity, Word- book, currency auditors, board
of credit, application,
( Financial site ATM's, dividend, of – mouth receipt, of directors,
foreign verification,
Service) online banking shares, bonds, promotion , application trade union,
currency, sanctioning,
non– Public Relation form, counters, Reserve Bank of
consultancy, delivering,
performing, ATM's, credit India
merchant, documentation,
cards,
banking
15 Service Studios, movie Salary, wages, Advertising, Art director, Editing, Directing,
Camera, filters, signing amount,
Vans, generator,
Entertainment theaters, films Publicity, Word- artistic, choreographer,
lights, reflectors, location, rental, lights, studios,
( Film cities, dubbing of -- mouth audiographers, stunts, music,
clap boards, shooting period, theaters, tickets,
Marketing) theaters, labs, promotion , designer, production, acting
films, cable, costumes, hoarding,
recording Public Relation choreographers, financing, casting
liquids, make-up special effects crowds,
theaters, Telemarketing , suppliers, scripting, dubbing,
kits, animators copyrights,
Broadcasting technicians mixing,
16 Service Natural Environment Advertising, Raw material, Environmentalist
Healthcare,
Green environment friendly raw publicity, word energy Activities,
pollution, Preserving,
Marketing materials, – of – mouth efficiency, scientists,
abatement
cleaner process educating,
equipment, promotion, waste pollution, conservation list
and technology, documentation,
bucket of public relation, packaging, educationalist
earthworms to
compiling with canvassing,
broadcasting lifespan,
new green law researching
improve soil reusability ,
quality of garden recyclables
9987761430 , 8097133892
9987761430 , 8097133892

Service Sector Management Notes - 185357706

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Service Sector Management Notes - 185357706

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Achiever’s Academy 1 www.BMS.co.

Ch-1 Introduction to Services Marketing

3. Inseparability: Services are generally created or supplied simultaneously. They

4. Heterogeneity: This character of services makes it difficult to set a standard for

6. Simultaneity: Services cannot move through channels of distribution and cannot

7. Quality Measurement: A service sector requires another tool for measurement.

Give a brief classification of services.

Direct Recipient of the Service

Type of Relationship between Service Organization and its customers

Nature of Membership relationship No formal relationship

3. Scope for customization and judgment in service delivery:

Extent to which Service Characteristics are Customized

Extent to Which Customer High Low Contact Personnel Exercise

4. Nature of Demand and supply for the Service:

Extent to which Supply is Wide Narrow

5. Method of Service Delivery:

Availability of Service Outlets

Distinguish between Goofs and services

(9) Movable (9) Immovable

Explain growth of service sector?

3. Economic changes: The demand for communication, travel and information

widespread unemployment have driven people to seek work in the informal

REASONS FOR THE GROWTH OF SERVICES IN INDIA:

2. Changing Role of Women: Traditionally the Indian woman was confined to

3. Cultural Changes: Change is the underlying philosophy of culture place of change

domestic market as well as the international market has grown substantially.

6. Market orientation: The changing competitive situation and demand supply

7. Health-Care Consciousness: In India, the healthcare market has grown

8. Economic liberalisation: The economic liberalisation of the 1991 has brought

MARKETING CHALLENGES OF SERVICES:

Services Marketing Environment

Importance of Business Environment

3. Continuous Learning: Environmental analysis makes the task of managers easier

4. Image Building: Environmental understanding helps the business organisations in

6. Identifying Firm's Strength and Weakness : Business and Weakness: Business

Business environment is broadly divided into two types:

2. Corporate image: Every organisation enjoys an image among the employees.

Value system is internal to business and differs from enterprise to enterprise.

ii. External Environment:

Important Economic Policies

2. Social and culture Environment

The Goods-service Continuum

– The offerings of a firm range from pure goods to pure services.

1. Highly tangible services:

3. Highly intangible services: In this classification under the continuum model,

Buying Behaviour of the Service Consumer

Why does the customer buy?

High involvement service products have the following characteristics

1. Complexity of features: If the servicer product has complex features, it will

they would for a haircut.

3. High perceived risks: A consumer perceives risk in consumption in two forms:

4. Large differences in features: If the consumers perceive that across a service

Low involvement service products have the following features:

What are the stapes of the buying decision process?

product, how and how satisfied they are after purchase.

2. Information Search: An aroused consumer will be inclined to search for more

3. Evaluation of Alternatives: The consumer evaluates the alternative services that

4. Purchase Decision: After carrying out a thorough evaluation of the various

customer needs. Production and consumption of service is a simultaneous activity.

Stage in Cycle Characteristics Relevance of Retailing

independent- High-income durables for children.

TYPES OF BUYING BEHAVIOUR:

2. Dissonance - Reducing Buyer Behaviour: Sometimes the consumer is highly