MK0006 Assignment - Fall 2010 (Jul-Dec)

Service Marketing And Customer Relationship Management

Q1. Explain the bases of classification of services.

Answer:
A service is an activity which has some element of intangibility associated with it, which involves some
interaction with customers or with property in their possession, and does not result in a transfer of
ownership. A change in condition may occur and production of the service may or may not be closely
associated with a physical product. Goods are simply the objects and services are simply the provision of
such information of goods by the seller and the buyers. The goods are visible and shall be purchased by
the buyers and sold by the sellers, whereas the services are the ones received by the guests and
provided by the goods sellers.
The objective in any service classification scheme is to get a deeper understanding of the service product.
Despite the diversity in the range of service products, it is possible to classify and explore them on the
basis of certain factors. There have been more than sixteen studies regarding the classification schemes.
Naturally, some are worthwhile in developing marketing strategies, with others suffer shortcomings.
According to Christopher Lovelock following issues should be considered for the classification of services:
a. Service industries continue to be dominated by operations, with the service managers insisting that
their tasks and challenges in their industry are unique and have nothing in common with those from
other service industries.
b. A managerial mind set evident in many service argues that the marketing of a service industry has
nothing in common with the marketing of another service industry. For example, the marketing of
an airline service has nothing in common with marketing of a banking service or a financial service.
c. Classification schemes should offer strategic marketing insights so as to have managerial value.
Any other simple classification would be insufficient.

As per Payne following factors determine classification of services:

a. Type of services,
b. Type of seller,
c. Type of purchaser,
d. Demand characteristics,
e. Rented versus owned services,
f. Degree of intangibility,
g. Buying motives,
h. Equipment based versus people based,
i. Amount of customer contact,
j. Service delivery requirements,
k. Degree of customization and
l. Degree of labour intensity.

According to Kotler and Station, services classification must be equipment based or people based. The
service may meet a personal need or a business need, according to the difference in their objectives and

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the ownership. The objective may either be for profit or non-profit and the ownership may be private or
public. Accordingly services may be classified as below:
a. Housing,
b. Household operations like utilities, house repairs, repairs of equipments in the house etc.,
c. Recreation,
d. Personal care like laundry, beauty care etc.,
e. Medical and other health care,
f. Private education,
g. Business and other professional services,
h. Insurance and financial,
i. Transportation and
j. Communication.

Lovelock’s Classification Schemes is based on following factors:

a. Nature of the Service Act : In this scheme, the nature of the service act, i.e intangibility etc., and
the recipients of the services are considered. It has wide dimensions and considers how the
customer’s presence, physically or mentally, is required during service delivery and the benefits
gained by the customer. It also considers how the customers change on receipt of the service. It
leads to the consideration of location and scheduling convenience for the presence of the customer
to utilize the service.
b. Relationship with Customer: This classification matrix contrasts the nature of service delivery and
ascertains whether there is a formal relationship between the customer and service marketer. The
knowledge of customers’ identities and addresses gained to meet out specific offers to specify
customers by targeted direct marketing makes market segmentation easier and provides insights
into tradeoff between pricing and usage rates. In the absence of personal relationship, services
may be provided by continuous delivery or by discrete transaction.
c. Customization and Judgment in Service Delivery : In this classification, the degree of customization
of service characteristics is contrasted with the degree of judgment required by customer. The
customized information is very important to the service marketers. They have to balance the cost
of custom made service with a standard service and so the service marketers often seek to limit
the number of options while deciding the extent of customization.
d. Nature of Demand and Supply for Services: This classification contrasts the nature of demand
fluctuations over time and the extent to which the supply is constrained. The business may be lost
to another service provider if the demand exceeds the supply of any particular service. This
classification is useful to contrast different supply demand situations which affect all service
marketers. It emphasizes in establishing demand patterns overtime, and to understand their
existence. Then development of strategies is considered to help change pattern of demand so as
to make them more favourable to the service provider.
e. Method of Service Delivery: The fifth classification focuses attention on examination of the
availability of service outlets, ranging from single to multiple sites, and the nature of the interaction

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between the customer and the service provider. Distribution issues relating to the method of
delivery are focused upon customer convenience which is of important consideration here.

These classification systems of Lovelock provide frame work for service marketers to consider both the
nature of their business and to what extent they share common characteristics with other seemingly
unrelated service businesses.

Other classification:
Thomas classified the services on the basis of type of equipment or people rendering the services
a. Equipment based : In this case, the equipment’s or the machines being utilized for service position
are important while people play a secondary role. Some of the examples are automatic vending
machines, automatic car washes and movies. In such services, the equipment’s may be operated
automatically or by unskilled or skilled labour.
b. Labour based : Here, the human element is primary in the production and delivery of services. The
equipments or machines, if any, are secondary. This type of services includes counseling, legal
advisory service, catering and hair dressing service. There are services in which both the
equipments and labour have equal importance as in the case of hospitals.

According to Nickles services can also be classified as being convenience, shopping and specialty
services.
a. Convenience services are those which the customer usually purchases frequently, immediately
and with the minimum of efforts. Dry cleaning services, and shoe repairing services are examples
of convenience services. Convenience of availability with minimum efforts determines the buying
decisions. The user is not prepared to go to any effort to secure a supply and will accept a
substitute often compromising on price and quality. So the marketer must secure a widest possible
availability if he is to maximize sales.
b. Shopping services are purchased often comparing quality and price. As information regarding the
service product is important for customer comparisons, a marketing strategy has to be evolved
providing enough information to the customers. Word of mouth is also an important factor in the
selection of shopping services. Shopping services include banks, insurance companies, physicians
and beauticians.
c. Specialty services: Here the customer puts in special purchasing efforts. The customers will be
ready to travel distances and pay a premium for the services. Specialty services include medical
specialist and legal advisors. As the customer is willing to take social purchasing efforts the
marketing strategy will be focused on service product and building customer satisfaction.

According to Hill the services may be classified as follows:

a. Affecting person (e.g. Health) or affecting goods (eg.cargo maintenance),
b. According to the permanent or temporary effects,
c. According to the reversibility or irreversibility of those effects,
d. Physical effects or mental effects and

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e. Individual or collective services.

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Q2. (3)Describe the stages involved in the positioning of services.

Answer:
Positioning is concerned with the identification, development and communication of a differentiated
advantage which makes the organization’s products and service perceived as superior and distinctive to
those of its competitors in the mind of its target customers
Services have a number of distinguishing features which have special implications for the positioning and
attributes to emphasize. Three key characteristics for service positioning are the intangibility, the degree
of variability or heterogeneity in quality of a given service, and inseparability. Positioning can be
considered at several levels such as:
a. Industry Positioning – the positioning of the service industry as a whole.
b. Organizational Positioning – the positioning of the organization as a whole.
c. Product Sector Positioning – the positioning of a range or family of related products and service
being offered by the organization.
d. Individual Product or Service Positioning – the positioning of specific products.

Service positioning involves a number of steps including the following:

1. Determining Levels of Positioning: The first step in positioning is to determine which levels(s) –
service level, product sector level, corporate level-are to receive explicit positioning attention. Some
examples will illustrate the choices that are made by some service organizations. The levels of
positioning to be undertaken are usually fairly clear cut, although some organizations have placed
different emphasis on these levels at different points of time.
2. Identification of Attributes: Once the level of positioning has been determined, it is necessary to
identify the specific attributes that are important to the chosen market segments. In particular, the way
in which purchasing decisions are made should be considered. Individuals use different criteria for
making a purchase decision of a service.
3. Location of Attributes on Positioning Map: The positioning process involves the identification of the
most important attributes and location of various companies’ service for these attributes on a
positioning map. Where a range of attributes are identified, the statistical procedures which exist for
combining these attributes are identified. Statistical procedures are referred to by various names such
as principle components, multi-dimensional scales, factors etc. depending upon how the data were
elicited and which statistical procedures were used.
Products or service are typically plotted on a two dimensional positioning map. The positioning map
can be used to identify the position of competitor’s service in relation to the selected attributes. The
analysis can be further developed by drawing separate positioning maps for each market segment.
Customers in each market segment may perceive the service and its benefit differently, and different
maps will show these different positions.
Positioning maps can be based on either objective attributes or subjective attributes. Maps can also
use a combination of objective and subjective attributes.
4. Evaluating Positioning Options
 Strengthening current position against competitors to avoid head-on attack.

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 Identifying an unoccupied market position that was not filled by a competitor.

 Repositioning the competition.

Once a company had identified where it is positioned at present, needs to determine how to enhance or
sustain its position relative to its competitors.
Criteria for Good Positioning are
 The positioning should be meaningful.
 The positioning must be believable.
 The positioning must be unique.
5. Implementing Positioning and the Marketing Mix: How a company and service is positioned, needs to
be communicated throughout all of its implicit and explicit interactions with customers. This suggests
that all elements of the company; its staff, policies and image will together convey the desired position
to the market place. This means that a company must establish strategic positioning directions, which
are followed through in all of its tactical marketing and sales activities.
A successful positioning strategy should make the service clearly distinguishable by features which
are desirable and important to the target customer segment. This means that the positioning strategy
should be examined from time to time to ensure that it does not become outdated and that it is still
relevant to the target market segment.

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Q.3 (4)Explain in detail seven Ps of service marketing.

Answer:
The marketing mix concept is a well established tool used as a structure by markets. It consists of the
various elements of a marketing program which need to be considered in order to successfully implement
the marketing strategy and positioning in the company’s markets. Essentially the marketing mix
represents the factors which need to be considered when determining a service firm’s marketing strategy.
The marketing strategy for a service company depends on seven Ps which are - product, price, place,
promotion, people, processes and physical evidence. The underlying concept in developing each of these
elements is to use them to support each other to reinforce the positioning of the service product and to
deliver appropriate service quality to achieve competitive advantage.

1. Product:
The term ‘product’ is frequently used in a broad sense to describe either a manufactured good or service.
Thus, goods and services are two types of product. A service product denotes an activity or activities that
a service provider offers to perform, which results in satisfaction of a need or want of predetermined
customers.
In planning the offer of products and services, good marketing manager devices a strategy whereby the
offers are viewed at various levels to achieve unmatched product differentiation and superlative customer
service. Generally, four levels of service products are identified which are as follows:
a. The Core or Generic Product It is the basic service product. Although the term ‘generics’ is the most
usual descriptive term, the generic products have also been described as brand free, no names and
unbranded products. A typical example would be a bed in a hotel room for a night.
b. The expected product: It is the minimum set of benefits expected by a customer from a service
product. It consists of the generic product and the minimal purchase conditions which have to be
met. Thus, a customer having a transaction with bank will expect, in addition to the service, a correct
transaction recording, timely service and minimum courtesy.
c. The Augmented Product : They are the offerings what the customers expect besides the benefit
expected by them. The augmented product is described as the complete bundle of attributes
perceived by or offered to an individual buyer incorporating:
d. The Potential Product: It consists of potentially feasible added features and benefits to hold and
attract customers. It includes the potential for redefinition of the product to take advantage of new
users and the extension of existing applications.
A service product is a complex set of value satisfactions. People buy services to solve problems and they
attach value to them in proportion to the perceived ability of the service to do this. Value is assessed by
the buyers in relation to the receivers. But it has to be recognized that customers differ and that their
requirements for different attributes vary by market segment.

2. Pricing
Until recently, two board strategic approaches to prices were in vogue. They are (i) Skimming and (ii)
Penetration. Skimming strategy is based on the perceived need of the users which tend to affect their

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sensitivity to the prices. When they are insensitive to the prices it could be exploited by setting a very high
price to skim the cream off market. Whereas, a penetration strategy assumes that by producing a product
similar to that of a competitor and then under pricing it and thereby some or all its market share can be
taken away. The recent trend is an alternative value-based strategy based on the belief that the
appropriate concept is the perceived value held by the customer.
Pricing Objectives: The pricing methods being adopted should consider the pricing objective of the
service firm. The most typical pricing objectives that a company could have are as follows:
a. Pricing to achieve a desired return on investment:
b. Stabilization of pricing margin to ensure maximum profit;
c. Pricing to realize the target market share; and
d. Pricing to meet and prevent competition for survival.
These represent some of the more common, pricing objective.
The decision on pricing will be dependent on a range of factors including:
a. Corporate objective
b. Positioning of the service
c. The nature of competition
d. Lifecycle of the service(s)
e. Elasticity of demand
f. Cost structures
g. Shared resources
h. Prevailing economic conditions
i. Service capacity

Pricing Method: After considering the demand, cost, competitors and all the other relevant factors in the
light of the pricing objective, the service marketer should consider the method by which the prices are
fixed. There are different methods and some of them are:
a. Cost-plus Pricing: It includes all methods of setting prices with exclusive reference to cost. By
adding an amount of money to an estimated product cost a selling price is arrived at. This money
which is added is considered as the profit expectation, if the sale is made on the basis of adding this
anticipated profit to total or full costs.
b. Competition Pricing: Pricing based on market conditions where firms compete with one another by
undercutting others prices, rather than other forms of competition such as product quality, product
differentiation and advertising.
c. Competitive Parity Pricing: Pricing is done on the basis of those that are followed by the competitor
or market leader.
d. Loss Leading Pricing: The price of a product or service is deliberately cut to a point below its cost,
aiming to attract additional customers willing to buy profitable items. It is usually applied on a short-
term basis to establish position in the market.
e. Rate of Return Pricing: It is also referred to as target return pricing. The prices are set to achieve a
given rate of return on investments and assets.

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f. Value Based Pricing: It is market driven and reinforces the positioning of the service and the benefit
the customer receives from the service. In value based pricing, prices are based on the services
perceived value to a given consumer segment.
g. Relationship Pricing: The future potential profit streams over the lifetime of customers, forms the
basis for relationship pricing. It is considered that the relationship pricing is the appropriate form of
pricing where there is an ongoing contact between the customer and the service provider. It is said
that the relationship pricing follows closely the market oriented approach of value based pricing but
takes lifetime value of the customer into account.
h. Prestige Pricing: The pricing above the given market price on the basis that many buyers regard
price as an indicator of quality and so will perceive enhanced quality to products with higher than
usual prices. In such cases sellers will be able to ask prestige prices for products which have
distinctive brand names and reputation.

3. Place & Location

The location and channels used to supply services to target customers are two key decision areas.
Location and channel decisions are essential to consider how and at which place the services can be
delivered to the customer. They become more relevant to service as they cannot be stored and mostly
are produced and consumed at the same point. The environment in which the delivery of service takes
place and the manner of its delivery is important attributes of the service when its value is perceived.

Location: Service location is an important consideration in place strategy. A service firm should decide
where its operations and staff are situated, because if they are not conveniently located, the customers
may turn to rival service provider who, in their perception, are conveniently placed. The type and degree
of interaction is an important factor involved in the location of services. Depending upon the nature of the
service,
a. the customer may go to the service firm, or
b. the service firm may go to the customer or
c. the service provider and the customer may transact business at arm’s length.
In the first type of interaction mentioned above, where a customer goes to the service provider, location
selection becomes very important. For a service business such as a restaurant, location may be one of
the main reasons for patronage. In this type of interaction, service at more than one location is called for.
In the second type of interaction, where the service provider can go to the customers, site location
becomes much less important, provided it is sufficiently close to the customers for good quality service to
be received. In some circumstances, the service provider at the customers promises. This is the case with
a wide range of maintenance services such as lift repair, pest control and cleaning services. In other
cases, service providers have discretion in whether they decide to offer their services at the customer’s
home or office, as do hairdressers and TV repair firms. Some dry cleaning and laundry firms have built up
profitable businesses by dispensing with the need for expensive multiple high street locations and locating
their operations in a low cost area and providing a pick-up and delivery service.

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However, when the customer and service organization transact at arm’s length, location may be largely
irrelevant. The customers are not concerned with the physical locations of suppliers of service such as
electricity, telephone or insurance, provided efficient mail or electronic communications are in place.

Some of the critical factors affecting the location decision are:

a. Convenience perceived by the customer,
b. Operating cost,
c. Comparative proximity with that of the competitors,
d. Geographic and supporting systems,
e. Geographic and environmental factors,
f. Business climate in the particular location,
g. Availability of communication networks,

4. Promotion and Communication

Promotion is a set of activities designed to increase by consumers and is the through which the service
provider communicates with his target markets. The promotion of services covers a number of areas or
promotional tools which form the communications mix or promotions mix. These include:
a. Advertising
b. Personal selling
c. Sales promotion
d. Public relationship
e. Word of mouth, and
f. Direct mail.
The use of promotional tools in service sector is a comparatively recent aspect. Now, the fiercely
competitive environment has made the service marketers use promotional tools actively. But promotional
exercise as it is done in consumer goods companies is not the same for service industry.
A communication program for a service organization may consist of a wide variety of alternative
communications and promotion. To communicate the target markets, the various elements of the
communication mix must be integrated within the promotion and communication program. This process
involves many tasks among which the following are considered important.
a. Identification of target audience,
b. Determination of promotion objectives,
c. Selection of communications mix.
The choice of the communications mix for service involves decisions on such issues as whether to
advertise, use personal selling or generate publicity through greater public awareness by such means as
through editorials, publications and press activity. The choice of medium is determined by decisions on
how to create the most favourable awareness amongst the target audience.

Advertising is one of the main forms of impersonal communication used by service firms. The role of
advertising in service marketing is to build awareness of the service, to add to the customer’s knowledge

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of the service from other service offerings. Relevant and consistent advertising is therefore of great
importance to the success of the marketing of the service.
Selection of appropriate media and determining the balance between them is essential to obtain the most
effective return on advertising expenditure. A consideration of the specific advertising goals to be
accomplished will facilitate this process.

5. People
The success of marketing a service is tied closely to the selection, training, motivation and management
of people. There are many examples of services failing or succeeding as a consequence of the ineffective
or effective management of people.
All the people participating in the delivery of service provide cues to the customer regarding the nature of
the service itself. How these people are dressed up, their personal appearance and their attitudes and
behaviours influence the customer’s perceptions of the service.
Kotler says that, “if the service personal are cold or rude, they can undermine all the marketing work done
to attract customer. If they are friendly and warm, they increase customer satisfaction and loyalty”. Hence,
the importance of people within the marketing of services has gained much interest in internal marketing.
In turn, the company made employees feel wanted and cared for, building on the principle that those who
are looked after will pass on this caring attitude. The success of this new direction for the airline brought
increased profits matched by greater customer and employee satisfaction.

6. Process
The process by which the service is created and delivered to the customer is critical to the service
operations as customer often perceive the service delivery system as part of the service itself.
Process means all work activities. Process involve the procedures, tasks schedules, mechanisms,
activities and routines by which a product or service is delivered to the customer. It involves policy
decisions about customer involvement and employee discretion. The customer not only thinks about the
service product alone but also attaches importance to the manner in which it is delivered. Under these
circumstances, a poorly designed service process leads to poor service quality. Banks provide a good
example of this. By reconfiguring the way they deliver service through the introduction of automatic teller
machines (ATMs) banks have been able to free staff to handle more complex customer needs by
diverting cash only customers to the ATMs.
Processes are seen as structural elements that can be engineered to help deliver a desired strategic
positioning. They can be analyzed according to the complexity and divergence. Processes can be
changed to reinforce the positioning. A clear understanding of the configuration processes in terms of this
complexity and divergence, on a balance of marketing and operations activities are important factors for
improving service systems. Processes are thus a marketing mix element which can have a substantial
role in reinforcing positioning and in product development.

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7. Physical Evidence
The environment in which the service is delivered and where the firm and customer interact, and any
tangible components that facilitate performance or communication of the service is known as physical
evidence in service.
The physical evidence of service includes all of the tangible representations of the service such as
brochures, letterhead, business cards, report formats, signage, and equipment. In some cases, it includes
the physical facility. Physical evidence cues provide excellent opportunities for the firm to send consistent
and strong messages regarding the organization’s purpose, the intended market segments and the nature
of the service.

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