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CHAPTER TWO
KEY ELEMENTS OF SERVICE MARKETING

CONTENTS
[A] INTRODUCTION
[B] PRODUCT
[C] PRICE
[D] PROMOTION
[E] PLACE
[F] PEOPLE
[G] PHYSICAL EVIDENCE
[H] PROCESS
[I] POSITIONING
[J] MARKET SEGMENTATION
[K] BALANCING OF DEMAND/SUPPLY
[L] YEILD MANAGEMENT
[M] BRANDING OF SERVICES
[N] QUESTIONS







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A. Introduction
Service marketing is different from product because of the
inherent characteristics such as inseparable, perishable and
intangible. Hence the traditional marketing mix is not
sufficient for service marketing. There is a need for additional
marketing mix (7Ps or 8Ps). These are:
8 Ps of Service Marketing
1. Product
2. Price
3. Place
4. Promotion
5. People
6. Physical Evidence
7. Process
8. Productivity

I. Product: It includes product features, quality level,
accessories, packaging, branding, warranty, usefulness,
convenience.
II. Price: It includes cost plus pricing, penetration pricing,
skimming price, discount, allowance. It covers expenses
incurred by consumers in obtaining benefits from the
core service.
III. Promotion: It includes various marketing
communication mix such as advertising, sales promotion,
publicity, public relations, personal selling, instructional
materials, corporate designs such as signage, interior
dcor, vehicles, stationery, uniform, etc.
IV. People: It includes employees, culture, customer service,
education, training, etc.
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V. Physical Evidence: It includes infrastructure ambience,
signage, employee dress, guarantee, design, etc.
VI. Process: It includes the flow of activities, service
delivery, components, customer involvement, service
standardized/ customized.
VII. Productivity: It includes efficiency, effectiveness,
economy, capacity utilization, level of technology, etc.
















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B. Product [Service Product]

Product mix in case of service can be called as services
product. A service product means the benefits and
performance that the customer buys from service
provider to satisfy his needs or desire. A firm has to
differentiate its services from competitors to create its
own position in the minds of the customer.
A product is anything that can be offered to market
for attention, acquisition, use or consumption that
satisfy a want or need [Kotler]
Service is activities or benefits or satisfactions which is
offered for sale or are provided in connection with the
sale of goods.
Donald Cowell has described the components of
service product as:
Customer benefit concept
Service concept
Service offer
Service Delivery

Customer Benefit Concept: Customer buys a
service for certain specific benefits and values. It is
therefore necessary for the service provider to
highlight these benefits to customer. Customer
looks for benefits rather than features. This can be
seen as below:


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Services Benefit
Airline ticket Travelling
Insurance Policy Risk cover
Banking Loan/ Deposit
Gymnasium Health and Fitness

Service Concept: It implies different levels of services
to satisfy customer needs. This can be classified as
below:
Level Contents Example
Core service Basic Food
Expected Service Basic plus
Minimum
requirement
Fresh food,
cleanliness, menu
card, sitting space
Augmented Service Add on to expected
services
Comfort chair, live
music
Potential Services Beyond customer
expectation
Welcome drink,
anniversary
discount

i. Core Benefit: Without core benefit there are no service
offering. Core benefit is what buyer is really buying. It is
the use, benefit or solution which he is looking for.
ii. Basic Service: The intangible service through which the
core benefit is received is called basic service. The
company adds certain features to core benefits and
translates it into basic service. Basic service consists of
all those factors which consumer assumes to be present
in any offering. For example, airline has aircraft to
implement the service.
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iii. Expected Service: Customers always expect more than
basic services when they purchase service. For example,
restaurants are expected to provide wash rooms.
iv. Augmented Service: When the service quality is beyond
the expectations of the customer, it is called augmented
service. It is a situation of customer delight. It
differentiates service from other competitors. For
examples, providing business center in the airline lounge/
free night suit to overnight passengers.
v. Potential Services: In this case the service firm tries to
find out the better methods of delighting customers. It
provides more enjoyable services. It is the result of
research and innovation. It helps firm to become market
leaders.
vi. Service offer: It includes tangibility and intangibility of
services offered. It aims at satisfying different needs of
customer and providing different levels of customer
satisfaction.
vii. Service Delivery System: It shows how services will be
delivered to customer. It is an interaction between service
provider and customer and between customer and service
facilities.
Managing Service Offering
The scope of managing service offering includes:
a. New service development
b. Service Life Style
c. Service positioning
New Service Development: It is similar to new product
development but it is highly complex and challenging
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because it involves customer interaction. New service
development becomes necessary when:
1. Existing service a level of saturation
2. Spare capacity is available
3. Customer additional needs can be satisfied
4. Retaining existing customer
There are five types of new services. These are:
1. Style change: When there is slight change in the existing
service. Example, Bank offering welcome kit to new
account holder.
2. Service improvement: When there is some modification
or improvement in the existing services. Example, banks
offering ATM. The purpose is to improve efficiency.
3. Process line extension: When there is an addition in the
areas of services. Example, airline offering new route,
banks offering online banking.
4. Supplementary Services: When more services are added
to the core service.
5. Major innovation: When new processes are introduced
with additional benefits and values. Example, railway
ticket computerization.







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The stages involved in the new service development are:
1. Idea Generation: New idea can be generated based
on market needs. The two sources of idea
generation are internal and external. Internal consist
of marketing department, sales department, front
line managers. External sources include customers,
competitors, experts, publications like trade
journals, magazines, etc. The various methods of
idea generation are brainstorming, suggestion box,
market research, gap analysis.
2. Idea Screening: It means short listing the ideas
generated. It is done on the basis of company
mission, philosophy, customer needs, and technical
feasibility.
3. Testing the concept: The next step is to test the
concept both tangible and intangible elements of the
service. The concept can be tested by a group of
consumers and their feedback can be used for
redesigning the service.
4. Business Analysis: The next step is to undertake
business analysis. The objective is to find out
whether the concept or idea is feasible or not. The
focus is on estimation of demand, future growth,
cost volume, profit, etc.
5. Service Development: Once the concept is
economically viable then the idea is to be converted
into actual service design that will be delivered to
customer. The financial feasibility of the service
depends on its design and components of service.
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6. Market Testing: The services can be tested on a
small number of users or consumers. Test marketing
will help in redesigning and remix of services based
on feedback from customers.
7. Commercialization: Once the test marketing is
done, the service can be actually commercialized or
launched in the market. This makes the beginning of
the life cycle of service.
However there may be some
problems/difficulties/issues in the new service
development. These are
1. Service Intangibility may lead to
Risk of confusing consumer with too many
services
Difficulties in conducting market research
Difficulties in measuring services
Impact of new service on corporate image.
2. Service Inseparability may lead to
Increased importance of service delivery
Higher level of customer input
Need for internal organizational involvement
3. Service Heterogeneity may lead to
Difficulties in concept testing
Problem of quality control
4. Service Perishability may lead to
Difficulties in managing demand and supply
Need for higher integration among
departments
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Further there are factors which affect successful development
of new services such as
i. Over estimation of market demand
ii. Improper positioning
iii. Ineffective advertising
iv. Overpricing
v. Rapid change in technology
vi. Improper designing of service process
vii. Higher initial development cost
viii. Stiff competition from other service provider
Service Life Cycle: It refers to stages in the life cycle of
services. These stages have to be considered while deciding
the marketing strategies and marketing mix. Service life cycle
can be seen from the following diagram.
In other words service
life cycle passes
through four stages
viz, Introduction,
Growth, Maturity,
and Decline.
These are explained
as:
i. Introduction: During this period the firm aims to create
awareness about the service sales growth is low in this
stage. There may not be any profit due to high
production and marketing cost. Firm spend more on
advertising and publicity. Pricing may be low to
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establish market share or high to cover the development
cost.
ii. Growth: During this period sales are high. Profit starts
increasing. Firm tries to establish brand image in the
market. Quality level is maintained and additional
features are added to core service. Price is maintained as
the firm enjoys higher demand and less competition.
iii. Maturity: During this stage sales growth rate starts
declining. Sales may rise but at slow rate. Competition is
tough. The main objective of the firm is to retain the
market share. At this stage the service provider must
differentiate service from competitors by adding
supplementary services. Distribution becomes more
aggressive and incentives are offered to channel partners
iv. Decline Stage: During these stage sales starts declining.
Therefore there is a need to bring some innovation to
extend the declining stage. Thus service innovation,
service development or service modification is essential.








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C. PRICE MIX
Price is the most important element of marketing mix
because it is the only element that gives revenue,
while all other elements are costs. Service provider
provides a range of services at different price levels to
cater to the needs of different customer segment. For
example, railway offers 1
st
class Ac, 1
st
class (non Ac),
2
nd
Ac, and 3rd Ac etc.
The term price in different services is known as:
Insurance Premium
Banks Interest
Property Rent
Public utilities Service charge
Medical Fees
Road use Toll
Communication Tariff
Education Fees
Stock Brokerage

OBJECTIVES OF PRICING: The various objectives
of pricing are:
i. Survival: One of the objectives is to remain in the
market, face market competition. This objective is
focused during initial market entry or during
product declining stage. Survival means to at least
cover the cost of services if not total cost at least the
variable cost.
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ii. Growth: It means increasing market share,
expanding capacities and utilizing fully existing
capacity. Survival and growth are interdependent.
iii. Profit Maximization: The basic objective of any
firm is to maximize profit. It means raising unit
selling price. However it is possible that the
quantities sold will be less. This is short term
objective.
iv. Sales Maximization: It implies selling large quantity
at low price. Sales maximization is better than profit
maximization as it creates greater customer base. It
helps in capturing higher market share.
v. Service quality leadership: It implies fixing higher
price to indicate quality of the service. It aims at
positioning of the firm as quality leader in the
market.
vi. Stimulating Patronage: Firms try to create patronage
and appeal to specific types of customers. For
example, railway offers discount to senior citizens.

FACTORS AFFECTING PRICE: The various
factors affecting pricing can be classified as:
Internal External
Organizational factors Market Competition
Marketing Mix Market Demand
Positioning Government Regulations
Service Cost


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Internal Factors
1. Organizational Factors: Pricing decisions are the
outcome of two departments i.e. pre production
and marketing. Production department provides
cost data while marketing department consider
the pulse of the market. These organizational
structures have impact on pricing decisions.
2. Marketing Mix: Pricing also depends on the
various elements of marketing mix i.e. product,
place, promotion, people, physical evidence,
influence, value for money. For example, services
in prime location are highly priced. Trained staff,
dcor, efficiency in service delivery also reflect
price of products or services.
3. Positioning: Pricing also depends on the market
segmentation and positioning of the service. It is
critical for marketing managers to understand
different customer attitude and perception about
price and quality.
4. Service Cost: Price depends on the cost of service
plus profit margin. The various elements of costs
are fixed cost and variable cost. Higher the
service cost higher will be the price.







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External Factors
i. Market Competition: Pricing also depends on
market competition. Consumers always
compare prices charged by different sellers. In
case of homogeneous services price must be on
par with other competitors. In case of
differentiated service price may be flexible.
ii. Market Demand: Price charged also depends
on what consumers are ready to pay for the
service. Demand for a particular service
depends on factors like service life cycle,
seasonal variation, peak season, availability of
substitutes etc. In some season demand may be
high and therefore price charged may also be
high.
iii. Government Regulations: In some services like
telecommunications, post and telegraph,
banking, education, railways prices are
regulated by the government. Therefore service
providers have to simply follow government
guidelines in pricing.

Methods of Pricing
The different methods of pricing are

i. Cost based pricing: Pricing depends on cost incurred on
the product both direct as well as indirect. Some
percentage is added to the cost. It is traditional and
simple method.
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ii. Demand based pricing: It is customer oriented pricing. It
is based on customers perception of the value of a
service. Demand is the price determinant. The pricing
changes with variation in demand.
iii. Competition based pricing: In the case of standardized
services pricing tend to be competitive, example, laundry
services. Service provider may fix price above the
competitor or on par with the competitor or below the
competitor depending on the extent of service
differentiation.

PRICING STRATEGIES
The different pricing strategies are

1. New service pricing strategies: New service pricing
strategies include skimming pricing strategy and
penetration pricing strategy. In the case of skimming
pricing, seller fixes high price with the objective of
maximizing profit. Firms target those customers who
are quality conscious and who are not price sensitive.
However gradually firm may reduce price to increase
the market share. In the case of penetration pricing, it
is likely that initial sales may be high in the beginning.
Firm fixes low price in order to gain market share. The
objective is to maximize sales, gradually prices may
be raised.

2. Differential Pricing: It is a pricing strategy in which a
seller charges different price in different market
segments. It may be due to difference in elasticity of
demand, time period, location, and customers

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3. Service Mix Pricing: When a firm has multiple
offering, the service provider may use optional product
pricing, captive pricing, competitive pricing. In the
case of optional product pricing, seller charges extra
for additional service provided. For example, hair
cutting charge will include styling charges. In the case
of captive product pricing the service provider capture
the customer to get additional service along with basic
service. For example, cinema ticket one for one free.
Customers have to buy an additional food coupon at a
price. In the case of competitive pricing the service
provider competes with its own offering.

4. Price Bundling: In the case of price bundling a seller
combines different services in the same package. For
example, air ticket may also include travel insurance.
Price bundling helps in pushing up sales of slow
moving services.

5. Relationship Pricing: In this case the basic philosophy
of service provider is relationship building and to
convert existing customers to loyal customers and
gradually extending customer base.

6. Value Based Pricing: In this case the focus is to
provide value products and services to retain sales and
market share. For example, value meals at McDonalds.







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D. PROMOTION

Service communication is a medium which service
provider uses to communicate what it offers to the
customers. It includes different tools of promotion such
as advertising, sales promotion, personal selling, word of
mouth, public relations, and direct marketing.
The steps in developing suitable communication
programmed are
i. Identify target audience: Deciding the market
segment to which all communication can be
targeted
ii. Deciding promotion objective: To decide the
communication objective that the firm seeks to
achieve. The objective can be enhancing brand
image, informing customer about the service,
persuading customer to buy, reinforcing,
positioning, etc.
iii. Development of the message: It involves deciding
message content (what to say), message structure
(how to say), message style (creating strong
presence), message source (who should develop it).
iv. Selection of communication mix: It involves
selection of most suitable tools which include
personal communication (eg. Sales activity, word of
mouth, personal interaction). Non personal
communication (eg. Advertising, point of sale,
brochure).





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GUIDELINES FOR EFFECTIVE SERVICE
COMMUNICATION/ PROMOTION

i. Provide tangible clues: Service package should include
tangible clues which can help the customer see and feel
and can also help in differentiating the service. Example,
the interior dcor of a hotel.
ii. Make service easy to understand: Use of tangible clues
like material, people, sign, and help customer to
understand the service.
iii. Communicate continuously: A consistent and continuous
communication is an important element of promotion.
Any change in theme can create confusion in the mind of
customer.
iv. Promise what is possible: The service provider should
promise only what he is capable of delivering, otherwise
it leads to customer dissatisfaction or service failure.
v. Capitalizing word of mouth: A positive word of mouth
has great impact. This is the fastest and cheapest method
of communication. Service provider should capitalize on
positive word of mouth.
vi. Direct communication to employees: In service delivery
internal staff or internal customer first interact with the
external customer. Therefore the internal staff must be
motivated, trained, and competent for service offering.

TOOLS OF SERVICE PROMOTION

i. Advertising: It refers to communication established
with the target customers through the use of paid form
of mass media. For example, print media, outdoor
media, and electronic media. The service provider
makes use of these media to influence the consumer
and generate higher volume of sales and profit.
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ii. Sales Promotion: Sales promotion is done to increase
the usage rate of services by existing customer and to
attract new customers. Different sales promotion
offers are given, for example, sampling, buy one get
one free, discount, coupons, gifts, prize promotion.
Sales promotion can be carried out by reaching
customer at home or at office or retail outlet or
exhibition, etc.
iii. Word of Mouth: In service industry word of mouth
plays an important role. Personal references and
recommendations work wonders in this section. For
example, doctors, tutors, tailors, jewelers are hired by
customers based on recommendation of other
customers. Customers are thus the hidden sales force
of any industry. When customers share their
experiences with others they are indirectly selling or
deselling the service they have experienced.
iv. Personal Selling: It means personally persuading a
prospective customer in purchasing a product or
service. It is an effective way to manage personal
customer relationship. The sales personnel act on
behalf of the organization. It depends on techniques
and soft skills of the sales staff. Therefore the staff
should be well trained. It can be aimed at specific
target market. It provides direct feedback than other
promotional techniques.
v. Direct Marketing: In the case of direct marketing the
sales staff contacts customer directly through
telemarketing, direct mail, trade shows, presentation,
press release, news letter etc. Today direct marketing
has become more economical because of the
development of technology, internet access, and
availability of large data base.
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vi. Public Relations (PR) and Publicity: PR is the
deliberate and planned efforts to establish and
maintain mutual understanding between an
organization and public. It aims at creating positive
image of the company. The various tools in PR are
publicity through media, sponsorship of events,
lobbying, corporate brochure, journal, social and
community initiatives etc.


























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E. PLACE

Place is the only marketing variable which satisfies
demand while all other variables are demand
determining. Place is also known as channel,
distribution or intermediaries. It is a mechanism through
which services are offered to the user at the place of
consumption. In service sector there are three types of
interaction between customer and service provider. These
are:
i. Customer goes to the service provider
ii. Service provider goes to the customer
iii. Both interact mutually
This can be seen from the following table

Description
Places
Single site Multiple site
Customer goes to
the service
provider
Barber shop
Cinema hall
Bus service
Fast food
Service provider
goes to the
customer
House painting
Car wash
Mail delivery
Auto club
Road service
Both mutually
interact
Credit card
company
Local tv operators
Tele company
Broadcast
company








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Services also depend on the level of customer
participation. This can be seen as below:


LEVEL OF CUSTOMER PARTICIPATION




Low Moderate High
(Bus Travel) (Hair cut) (Marriage)

Service location depends on the degree of participation of
customer and service provider. When customer goes to service
provider, location becomes most important. For example,
retail outlet, entertainment, hotels, spend more time in
choosing location. When service provider goes to the
customer, location is less important and when mutually
interacts, location is least important.
Place is important because it is a marketing tool for giving
customer services. Place is important because the offer cannot
be stored (intangibility and perishability of the services). The
offer has to be produced and consumed at the same time. Two
factors are important viz,.
i. Availability of the service
ii. Accessibility of the service.
The normal decisions regarding location and selection of
channel are:
I. How to deliver service to the customer?
II. Where and when the delivery should take place?
III. What is the role of the middlemen?
IV. How location can help business?
V.
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The following factors should be considered while deciding
location for services:

i. Nature of services: It implies the degree of flexibility
involved in services. For example, insurance and
telecommunication services are delivered without direct
contact with the customers. Thus there is flexibility in
location. It can be set according to the needs of the
service provider. On the other hand, when there is less
flexibility involved then location is costly as there is
greater need of service provider.
ii. Nature of interaction: It depends on where the service is
to be delivered. For example, in banks customers go to
the service provider and therefore location must be
convenient to customer.
iii. Customer needs/demands: It depends on customer
segment. Some customers want convenience in service,
some prefer other features and go to any location.
iv. Natural/ Geographical location: Some tourist places are
decided on the basis of natural/geographical location.
Service provider must add other features to attract
customers.
v. Competitive position: A service provider can create
artificial barriers to the entry by holding prime location
and improve its competitive position.
vi. Extent of technology used: With the advancement in
technology, location decisions will be flexible depending
on customer needs and requirements. For example, ATM
banking.
vii. Dependence on other services: Certain services are
interdependent. For example, medical services like x ray,
pharmacy, laboratories etc. These are located in a cluster.
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viii. Infrastructure Needed: Some services need high
infrastructure and communication facilities, example,
financial services. Hence it is located in the urban areas.
ix. Target market: Location must be closer to target markets.

DISTRIBUTION CHANNELS: After the selection of
location of service delivery, the next question is to select
the channels of distribution. The different channels of
service distribution are:




ZERO LEVEL ONE LEVEL TWO LEVEL ONE LEVEL














It can be seen from the chart that there are less number of
middlemen or intermediaries in services. This is due to
intangible nature of services. In case of tangible goods, there
are large numbers of middlemen like manufacturer,
wholesaler, semi wholesaler, retailer, etc.
Thus the various service intermediaries can be
classified as
SERVICE PROVIDER
AGENT
BROKER
SELLERS
AGENT
BUYERS
AGENT
FRANCHISE
CUSTOMER
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Agents and Brokers: Agent is a person who acts on
behalf of the company. For example, travel agent,
insurance agent. He gets commission or fixed fee for
providing his services. Broker is a person who brings
service provider and customer together for which he gets
commission. The advantages are:
i. Closer to customer,
ii. Possess special skills,
iii. Wide market coverage.
The disadvantages are:
i. Service firm has no control
ii. Too much dependency on intermediaries.

Franchising: It is a right granted to an individual or
agency to market companys services within certain
territory. An individual who purchase a franchise is
called Franchisee and the company that gives franchise
is called Franchisor. It is most common in retail
services. Examples of franchising are Dominos Pizza,
Subway, and McDonalds. The essence of franchising are:
i. A contractual relationship,
ii. Franchisor owns trade name,
iii. Franchisor is responsible for introducing the
franchisee to all business operations,
iv. Franchisee must own his business,
v. Fees or royalty is paid.

Franchising is fast growth strategy when:
i. Resources are limited
ii. Long term commitment is crucial
iii. Local market is important
iv. Fast growth is essential to overcome market competition

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BENEFITS OF FRANCHISING

TO FRANCHISER TO FRANCHISEE
Faster Growth Established brand
Reduced Risk Risk coverage
Consistent service offering
Global standards

DRAWBACKS OF FRANCHISING

Motivational level Limited margin
Corporate Image Fear of business poaching
Quality Inconsistency Strict rules and regulations
Challenge of CRM


i. Faster business growth: It provides faster
business growth route to franchiser. For example,
Barista, Caf Coffee Day, McDonalds have
expanded their business in India by franchising.
ii. More capital and less risk: Franchise makes their
investments into the business of franchiser, thus
bringing more capital and resources. The risk of
business gets divided.
iii. Consistent service offering: The franchiser can
provide similar kind of ambience, dcor, and
other physical evidence or consistent service
offering.
iv. Global standards adapted to local needs: Global
standards and the local knowledge of the
franchisee adapt to each other in this business
partnership. Local franchisee learns about global
system and the franchiser learns local habits and
culture.

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There are some challenges with this type of
distribution. These are:
i. Motivational level of franchisee: It is very
difficult to deal with business partner of different
nationalities, religion, and culture. Each one has
own way of operating and motivating himself.
ii. Corporate Image: The franchisee may not be able
to keep the same standards and inconsistency
becomes noticeable. This will affect corporate
image.
iii. Quality inconsistency: The quality of the service
has always been a major challenge for all
franchisee outlets. It is physically the operations
by way of remote control.
iv. Challenge of CRM: The franchiser is never in a
position to maintain a direct relationship with
customer and in the long run it may not be
advantageous.
Some of the advantages to franchisee are:
i. Established brand and business system: The
franchisee does not have to start the business from
the beginning. He gets the benefit of established
business
ii. Risk coverage: A franchisees risk of investment
gets fully covered due to expertise of the franchiser.
The franchiser makes sure that his franchisee
becomes successful.

Some drawbacks are:
i. Limited profit margins: Franchisee gets limited
profit margin as profit margin. Customer
schemes are decided by the franchiser.
ii. Fear of business poaching: The franchisee is
not free from the fear of losing out his market
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share to other franchisee. For example, Maruti
started with one franchisee in major cities and
subsequently many franchisees started,
resulting in loss of revenue.
iii. Following strict rules: Franchisee has to follow
the rules set by franchiser. Sometimes it
becomes difficult to change the mind sets of
the people employed by the franchisee.


Internet and Electronic Channels: Today services can
also be provided through the internet and electronic
channels. Educational counseling, travel agencies,
entertainment, information, BPO, KPO, banking,
insurance, etc, services are available on the internet.
Internet has reduced the distance between the service
provider and the customer through mobile telephones.
The advantages of electronic channels are too many and
each day there is some innovation in the field of internet.
The world has been brought on one platform by online
channels and World Wide Web. The various benefits of
electronic channels are:
i. Creation of new business opportunities
ii. Creation of electronic shopping malls
iii. Consistency in service quality and service delivery.









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F. PEOPLE

It refers to all the employees of an organization who are
engaged in service delivery in front office or in the
supportive back office. In services people are the key. It is
the only key. It is the only factor which can differentiate a
firm from other competitors. It includes managing the internal
customer and managing external customer. The different types
of service personnel are:
i. Professional Service Personnel: Those who have
knowledge, skill, and expertise in particular field of
specialization. Example: doctors, lawyers, CA, engineers
etc. They need training in interpersonal skills,
communication skills and other cultural qualities, so that
they provide proper professional service to the customer.
ii. Consumer Service Personnel: People who provide
services in shopping malls, retail outlets, fast food
centers who do not need high technical skills. They need
training in inter personal skills, communication skills,
and people handling skills. They need growing in
personal presentation, manners and social skills.
iii. Contact Service Personnel: These employees generally
handle direct sales calls, after sales service. They come in
direct contact with the customers. They need to be
trained in technology of service equipment maintenance
and after sales service. They should be trained in
attending service complaints and service recovery
techniques, art of inter communication and people
handling skills.
iv. Moderate Contact Personnel: They are not in touch with
the customer buy they must understand customer needs
completely in order to satisfactorily cater to them. They
are back office people but readily available to contact the
customer.
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v. Back Office Staff Personnel: They provide complete
functional and equipment support to the front office staff.
Example, cleaning and maintenance staff, housekeeping
staff, order handling staff and event management staff.
vi. Management Staff: It includes the management staff that
decides the service policy, strategy, mission, objectives
for the organization. They need to be sensitive to the
service excellence. They get first hand information from
internal staff.

People Mix covers the following areas:
1. Employees
2. Recruitment
3. Training
4. Motivation
5. Reward
6. Team Work
7. Education

Issues concerning services people
All businesses are run by people, the human element
of the service business is the most important of all
components because the systems, the machines and the
equipment are meant for and run by the human element.
The success of any organization depends on its people. It is
therefore important that human element is especially taken
care of and their issues are attended to promptly by the
management of the service firms. In order t deliver service
quality the organization must take the following measures:

i. Hire right persons: Matching the profile to the job is very
important in services. Employee must perform their job
with positive frame of mind. Employees are part of the
32

service product and therefore customer will evaluate the
total service on the basis of employees attitude.
ii. Develop people to deliver service quality: The
organization must develop people to deliver service
quality. This can be done by proper training, motivation,
and empowerment etc.
iii. Provide support system: Employees need proper support
in delivering customer service. It includes emotional
support (decisions taken by employees are backed by
managers), communication support (information that
explains complex transactions) and technological support
(the tools and equipments to do the job).
iv. Retain the best people: Retention of the best people is
essential in service organization because services are run
on the basis of relationship marketing. A company has to
sell itself internally first before it asks its people to go
out and sell services. The organization must create a
sense of job satisfaction to retain its staff.
v. Make employees aware of their role: The service
organization must explain each employee his role and
responsibilities, contribution to the organization. Once
the employee understands that his contribution to the
organization is important, his attitude towards the
customer also becomes responsible.
vi. Train in technical and interactive skills: Organization
must provide training to employees in technical and
interactive skills so that employees perform better and
provide proper service to the customer.
vii. Provide periodic review: The service expectations of
customers may change due to change in technology,
innovation, life style, status etc. The organization must
take periodic review of the changes and bring changes in
service delivery.
33

viii. Establish employee empowerment: The employees at
different levels should have proper authority to take
decisions. It does not mean absolute power.
Empowerment means employees are fully involved in
key decisions and properly rewarded.
ix. Established appraisal system: Organizations should
identify special needs of the employees by way of self
appraisals, peer appraisal and supervisory appraisal.


























34

G. Physical Evidence

Physical evidence is often referred to as the
environment that facilitates the performance and the
communication of the service. In service organization
as the service is intangible, physical evidence provides a
message to the customer.
Physical evidence includes













Physical Facilities: Customer gets impression about service
organization on the basis of physical facilities like building,
furniture, and equipment. It includes essential and peripheral
facilities. Essential refers to technical facilities without which
service delivery is not possible. For example, aircraft in
airline, furniture in firm.
Peripheral facilities are the supportive facilities not very
visible but they have impact on the customer. For example,
brochure, visiting card, stationery, etc. These are important
source of competitive differentiation. Services can be
performed without these facilities but they ca be used to
increase corporate image.

PHYSICAL
FACILITIES
PHYSICAL
SETTINGS
SOCIAL
SETTING
ESSENTIAL PERIPHERAL AMBIENCE SPACE DCOR

35

Example of physical evidence
in fast food restaurant

Physical evidence Inferences
Food Taste, smell, presentation
Seating Comfort, layout, availability
Overall appearance Dcor, cleanliness
Accessibility Location, parking
Atmosphere Friendly, cold, indifferent.


Physical setting: It is the service environment in which
services are delivered. It includes:

Ambience Space Dcor
Temperature Ease of access Sign board
Quality of air Good visibility Symbols
Noise Proximity to linked
services
Artifacts
Music
Smell
Space
Layout/ Design
Equipment
Furnishing
Colour
Lighting

Social setting: The appearance and attitude of the service
personnel play an important role in service sector. It indicates
whether employees are friendly, approachable, empathetic,
professional, confidential etc. Customer evaluates the service
staff in terms of technical skills, interactive, personalities,
attitude, and consistency of quality performance.

ROLE OF PHYSICAL EVIDENCE IN SERVICE
MARKETING
36

In service marketing physical evidence plays an
important role in influencing the perception of customers.
This can be seen as below:

i. Shaping first impression: It provides an opportunity
to the service provider to create first impression on
customers.
ii. Managing trust: The consistency in quality of
physical settings help in managing trust of
customers.
iii. Facilitates quality of services: Good physical
evidence facilitates employee customer participation
in the service production, delivery and consumption
process.
iv. Changing the image: A change in the physical
environment also result in change in the image of
the service provider. For example, class room
converted into AC classroom.
v. Socializing Employees: Social bonding is created
among employees due to interaction and better co
ordination.
vi. Differentiation from competitors: Good physical
evidence differentiates a firm from other
competitors.
vii. Repositioning of Services: It helps a firm to
reposition its place in the market segment and
among customers.
viii. Increase in productivity: Good physical evidence
including physical facilities like infrastructure,
physical setting (ambience, space and dcor), social
setting helps in providing better services to
customer and thus it contributes to higher efficiency
and productivity.

37

H. PROCESS

If you cannot describe what you are doing as a process,
you dont know what you are doing- Demming
Process refers to the steps, procedures, mechanism and all
those activities by which service is delivered. The objective is
to optimize service delivery process and maintain service
quality. At each stage of the process the service provider
must:
i. Deliver value through all elements of marketing mix to
enhance customer experience.
ii. Take feedback so that marketing mix can be altered.
iii. The process itself can be changed to fulfill the needs of
customer.

Service Designing Process: The factors to be considered in
service designing process are:

1) Nature of services: The service can be technology driven
or people driven. For example, ATM is technology
driven process while withdrawing cash from bank is
people driven.
2) Customer participation: Process designing also depends
on customer participation in the service delivery. Service
can be self service (Example: Retail mall) or complete
dependence on service provider.
3) Degree of customer contact: Some services involve high
customer contact and customer determines the timing of
demand and nature of services. For example, hair cutting
service/ doctor services/ counselor services. On the other
hand some services involve low contact.
4) Degree of Divergent: It means to what extent service can
deviate from the standard procedures and systems set up
or service delivery. Divergence helps in customizing
38

services and meets customer expectations. Routine
service involve low divergence and hence low technical
skills while customized services involve higher
divergence and high technical skills.
5) Location of service delivery: Service can be provided at
customer place or at place of service provider. For
example, medical service, legal advice is provided at the
place of service provider while painting and carpet
cleaning can be provided at customer place.
6) Complexity of services: Service provider has to take into
account the complexity of service production process.
For example, hotel service involves high complexities
while teaching service involves low complexities. The
service provider can bring down the complexities by
specializing in certain basic steps. For example, take
away service.

SERVICE PROCESS PLANING
The planning of service begins with service provider taking
decisions on the following aspects:
1) Use of technology: A service provider has to carefully
select technology that is user friendly to his staff and
customers. He has to upgrade technology from time to
time.
2) Conversion process: It implies adaptation and
conversion process. The service provider has to
educate customer about the use of technology. For
example, many airlines have taken the best use of
technology to make the air travel convenient and user
friendly by introducing self purchase, online getaways,
and self check in kiosks at the airport.
3) Service equipment: In addition to the technology
adopted the service provider must provide sufficient
service equipments so that technology can be accessed
39

through technology use. For example, if a bank adopts
mobile technology it must provide sufficient number
of telephone lines so that customer can access the
system a do not have to wait in queue for long time.
4) Service flow process: The service provider will have
to take into account the nature of services to determine
the service flow chart to make it convenient to the
customer. It is also based on service blue print, layout
and benchmarking.
5) Service personnel: People are very important factor in
the satisfactory delivery of the services. Though some
services are technology driven but we need people to
make customer friendly.

SERVICE BLUEPRINT
It is a tool for showing service process, the point of
customer contact and the evidence of the service from the
customer point of view. In other words it is a graphical or
visual representation of the process involved in providing a
service. It is made up of five components namely:
i. All steps taken by customer as part of service delivery
process.
ii. Actions of frontline contact employees or face to face
encounter with customer.
iii. Back stage staff whose actions are not visible but they
are part of the service delivery process.
iv. Support processes that are actions of individuals in a
company who are not contact employees but whose
functions are crucial to the carrying out of service
processes.
v. Physical evidence i.e. all the tangibles that customers are
exposed during their contact with company.


40

SERVICE MAPPING
It means finding out how the service is created and
delivered. The purpose is to understand the service process. It
helps in showing the activities experienced by consumer in
ordering, using and paying for specific services.

FRONT AND BACK OFFICE
Front office is that part of the system which is directly
experienced and visible to customer. Here actual service is
delivered. On the other hand back office is that part of the
system which is not directly experienced and visible to
customer. Example, storeroom and kitchen.

LAYOUTS
It can be process layout, product layout or a combination
of both. In process layout there is specialization according
to process or function. In product layout the process moves
from one system to another. Example, car servicing.

BENCHMARKING
It is a process of comparing one business processes or
performance to the best practices of that industry. In other
words the best firm in the industry is identified and the results
of other firms are compared with the best firm. It can be in
terms of quality, time, cost or any other parameters. It can
relate to consumer services, distribution channel, product
development, cost reduction, maintenance operations, human
resource, inventory level and quality level
The steps involved in benchmarking are:
i. What to benchmark: The first step is to decide what to
benchmark i.e particular operations, function or services.
It is also needed to find out what statistics are available
both internally and externally. External sources may be
41

from industry, trade associations, publications,
government sources etc.
ii. Identify best competition: The next step is to identify the
best practices prevalent in the industry. Benchmark can
focus on role, processes and existing practices.
iii. Determine data collections: Benchmarking uses different
sources of information including published material,
trade meetings and conversion with industry experts,
consultants, and customers. The emergence of internet
technology has facilitated benchmarking process. The
internet also enables companies to conduct electronic
surveys to collect benchmarking data.
iv. Determine performance gap: The next step is to find out
the gap between the actual performance and the
benchmark companys performance with the benchmark
industry performance.
v. Identify the factors: The next step is to find out the
causes or factors responsible for the variations so that
efforts can be taken to overcome these factors.
vi. Action plan: The next step is to establish suitable action
plan and implement the same and monitor the
performance from time to time.
The various benefits of benchmarking are:
1) Provides realistic and achievable targets.
2) Creates an atmosphere for continuous improvement.
3) Creates a sense of urgency for improvement.
4) Creates a need for change.
5) Helps to identify weak areas and what needs to be done.
6) Overcomes any resistance from internal employees for
change.




42

I. POSITIONING

It is the process of creating the image of the service in the
minds of target customers. The STP process (segmentation,
targeting, positioning) can be seen as below:

MARKET SEGMENTATION POSITIONING




MARKET TARGETING MARKET PLANNING



Thus the first step is market segmentation, then market
targeting, and then market positioning and finally market
planning.

DIFFERENTIATION OF PLANNING: It is very essential
for a service provider to differentiate his services from other
competitors for the following reasons.
i. To create separate identity.
ii. To establish leadership position.
iii. To create differential advantage for the segment.
iv. To create a perception.
v. To build profitability for the services offered.

Differentiation of service must fulfill the following criteria:
i. Importance to service seeker.
IDENTIFICATION OF CUSTOMER NEEDS
AND MARKET SEGMENTS.
DEVELOP PROFILE OF RESULTING
MARKET SEGMENTS.
EVALUATE THE ATTRACTIVENESS OF
EACH SEGMENT
SELECTION OF TARGET SEGMENT
DIFFERENTIATING THE
MARKET OFFERING TO
SUPERIOR VALUE
POSITION THE OFFERING IN THE
MINDS OF THE CUSTOMER.
DEVELOPMENT OF MARKETING
MIX FOR TARGETED SEGMENT
43

ii. Unique in features.
iii. Communicated to the target customer.
iv. Superior to other competitors.
v. Affordable to pay.
vi. Profitable to service provider.

Steps in developing position strategy: The steps in
developing position strategy are.

i. Determining the level of positioning: A hotel can be
position at top corporate level, middle social level
depending upon the level of positioning.
ii. Identification of attributes: The next step is to identify
the attributes that are significant for the target market
segment. Identify unique features, specific uses, value
addition, and benefits etc.
iii. Location of attributes on position map: The next step is
the location of attributes on position map. This will help
the service firm to compare its positioning with the other
competitors in the market. The attributes can be (in case
of bank service) high interest rate, low interest rate, high
service, low service, etc. This can be seen as below

Position Mapping





LOW SERVICE HIGH SERVICE









HIGH INTEREST






LOW INTEREST
44

Evaluating position options: After locating attributes on
position map the next step is to evaluate the position
options i.e., what is the present position, what is the
unoccupied position and how the positioning can be
changed (repositioning).
Implementation: The last step is to implement the
strategies for repositioning. The strategy of repositioning
aims at making differentiation. A service provider needs
to continuously evolve new positioning and competitive
strategies for his service offer to stay ahead of the
competitors. Implementation means adopting the new
marketing plan.

POSITIONING STRATEGIES: The different positioning
strategies are:
i. Service positioning: A service organization can position
the service attributes such as facilitating services and
supporting services. For example, SBI has positioned its
services stating product attributes as Pure banking,
nothing else.
ii. Price positioning: This positioning is to communicate the
best value for the price consumer pays. For example,
Wal Mart has positioned as the lowest price retailer 9in
the world. It has concept of EDLP (Every Day Low
Price) strategy.
iii. Quality positioning: Here the focus is on the best quality
leadership in services. For example, in education sector
IIMs have positioned as the best management education
institute in the country.
iv. Competitive positioning: This may be against
competition. For example, the positioning of IIPM, Dare
to think beyond IIM.
v. Service Application positioning: It provides services to
satisfy needs of some people in service application. For
45

example, Timesjob.com provides services in the form of
job portal.
vi. Service benefit positioning: It focuses on the benefits of
using the service to the consumer. For example, ICICI
uses the concept of sindoor for concept selling in life
insurance.
vii. Leadership positioning: It indicates that the service
provider enjoys major market share or leadership in the
particular market.
viii. Excellence positioning: The positioning is based on the
performance and efficiency of firm.























46

J. MARKET SEGMENTATION

Act of dividing the market in two distinct groups of
buyers who might require separate products or
marketing mixes. (Kotler)
Market segmentation is the process of dividing the
total heterogeneous market for goods and services
into several segments each of which tends to be,
homogeneous in all significant aspect. (William
Stanton)
The purpose of segmenting a market is to allow
marketing/ sales programme to focus on specific segment
to ensure higher returns.

ESSENTIALS OF EFFECTIVE MARKET
SEGMENTATION

The essentials of effective market
segmentations are:

i. Heterogeneity of consumers: There should be
heterogeneity of consumers in a particular market so
that it can be sub divided into different but
homogeneous segments.
ii. Sustainability: Market segmentation should be
sustainable i.e should be large enough to practice
and implement.
iii. Accessibility: It should be possible to reach
different segments in regard to promotion and
distribution. Organization must be able to focus on
the chosen segment.
iv. Measurability: The variables of market segments
should be measurable. For example, market segment
47

for car can be determined on the basis of variables
like economy, status, quality, safety and comfort.
v. Responsiveness: A well defined segment must react
to changes in any elements of marketing mix.

PROCESS OF MARKET SEGMENTATION

There are three approaches to target market. These are:

1. Undifferentiated marketing approach i.e., mass
distribution, mass promotion of one service.
2. Differentiated marketing approach i.e., different
distribution and promotion for different segments.
3. Concentrated market approach i.e., focuses on one
market segment.

BASES OF MARKET SEGMENTATION: The various
bases of market segmentation are

1. Geographical segmentation: Under this type of
segmentation the market is divided into different
geographic units. For example, a bank can segment on
the basis of north zone, south zone, west zone, etc.
2. Demographic segmentation: Under this the market is
divided on the basis of age, income, occupation and sex.
For example, a bank has account for senior citizen and
bank pays higher interest on this account.
3. Psychographic segmentation: It is division of market on
the basis of social class, life style, personality, etc. For
example, BMW car and Maruti Zen car are meant for
different class of people.
4. Behavioral segmentation: Under this type of market
segment the division of market is based on user status,
loyalty, attitude, response, etc. The grouping is done on
48

the basis of benefits that buyers want from a product or
the frequency of purchase or the response to promotion.
5. Technological segmentation: This segmentation is based
on the degree of tech savvy customers and their
willingness to try new services. For example, 3G phone
is targeted towards 3
rd
generation telephone.
6. Service segmentation: It is based on varying service
offerings. Customers are divided on the basis of service
offers and differentiation of service package.

























49



K. BALANCING DEMAND AND SUPPLY

Introduction: The demand for services is unpredictable. It
fluctuates from time to time depending on factors like season,
preference, timings, customer constraints, recession, inflation,
technological advancement, competition, etc. This creates gap
between demand and service providers capacity to supply.
The sudden rise in demand cannot be met due to supply
constraints. The service provider needs to understand the
demand pattern so that demand can be met without much
difficulty.


Service Productivity Constraint: Productivity of services
refers to the capacity of the service organization to produce
services. Services are not like goods and products. Services
cannot be stored. Services have to be produced instantly in the
presence of the service customer at the service delivery point.
The productivity constraints are;

1) Constraint of time: A professional like doctor, lawyer,
software engineer have constraint of time. They cannot
expand their services if demand suddenly expands. On
the other hand when their services are not much in
demand they have plenty of time with them.
2) Constraint of labor: Services are offered by employees,
when demand rises it is not possible to recruit more
personnel and when demand falls it is not possible to
remove them. For example, in a specialty hospital it is
not possible to ask doctor to conduct operation beyond
his physical capacity and risk the life of patient. In the
same way a company offering car repair service may not
50

be in a position to accept more cars for repair because of
labor constraint.
3) Constraint of equipments: Services are performed with
the help of special tools and equipments. The equipments
again are specific to services. Every service provider
cannot expand or contract equipments as per demand. It
is like one airline asking another airline to lease out their
aircraft just because there is sudden rise in demand for its
flight services. There is every possibility that other
airline will have similar rushes of customers and hence
may not be able to lease out.
4) Constraint of facilities: Many services are run by
providing facilities to the customer. The capacity of a
hotel is limited by the number of rooms. The hotel will
lose business if more customers come or when there are
fewer customers. The hotel will have to balance between
optimum and maximum level.

MANAGING SERVICE DEMAND SUPPLY GAPS








I. MANAGING DEMAND TO MATCH SUPPLY: The
strategies for managing demand to match capacity are:
i. Shifting the demand: Service provider shifts the bulk of
business during peak season to convenient timings and
divert the flow of customers. This is done to retain
customer loyalty. For example, happy hours in bars,
subsidized flight fares during late night,
MANAGING
DEMAND TO
MATCH CAPACITY
MANAGING
CAPACITY TO
MATCH DEMAND
STRATEGIES WHEN
DEMAND AND
CAPACITY CANNOT
BE MATCHED
51

ii. Variation in service offering: Service provider provides
special services like birthday parties, kitty parties during
lean hours. Luxury hotels offer marriage venues,
conference arrangements during off season.
iii. Developing complementary services: For example, hotel
may offer bar to divert customers. Complementary
services are offered to occupy waiting customers.
iv. Promoting off speak demand: Telephone companies offer
lowest fare to encourage long distance calls.
v. Pricing incentives: Higher prices during peak period and
lower prices during lean time. Movies have matinee
specials.
vi. Communicate with customers: A good customer
communication always helps. Customer will appreciate
of telling in advance about rush hours, convenient
timings. For example, Globus and Westside offer special
shopping hours to its regular customer whenever these
stores announce special offers.
vii. Extending working hours: Timings can be changed as per
the demand pattern. Many service organization function
till late night during season and close shop earlier during
off season.
viii. Advertising and Sales promotion: Sales promotion can
be taken up during off season to increase demand for
services.

II. MANAGING CAPACITY TO MATCH DEMAND
The various strategies to manage capacity to match
demand are:
i. Customer involvement: Some services can be converted
into self service so that personnel can be diverted to
some other services. For example, buffets in hotel.
ii. Using part time employees: Service provider use part
time employees to provide additional services when
52

demand rises. Airlines and hospitals have standby staff
who are called when need arises.
iii. Cross training employees: Cross training of employees to
perform multi task or different operations create flexible
capacity. For example, a person is appointed for the job
of driving as well as peon or attendant.
iv. Modify facilities/equipments: Existing capacity can be
stretched to match demand. This is done by stretching
time, labor, equipments and facilities. Example, railways
run summer special or add additional bogies during
festival season.
v. Sharing capacity: During lean time it is possible to find
out other user for the capacity or facilities. For example,
many airlines share gate, ramps, luggage handling
equipments and ground personnel.
vi. Modify facilities: Airline can modify its facilities like
business class, economy class by adjusting seating
arrangements within the aircrafts.
vii. Schedule down time: It is possible to schedule repair,
maintenance and renovation during off season. This will
ensure that the resources are in good condition when
needed.

III. STRATEGIES WHEN DEMAND AND
CAPACITIES CANNOT BE MATCHED.
Some of the strategies that can be used to manage
demand and capacities are:
i. Reservation: This strategy is adopted to avoid
unnecessary rush and sense of disappointment amongst
the customers. Airlines always book its seats in advance.
It allows service provider to book more than capacity so
that in the event of cancellation, optimum capacity can
be used.
53

ii. Waiting lines: For example, many hotels have waiting
area, companies put music when telephone line is busy
etc. During waiting it is essential to keep customer
informed, reduce waiting anxiety, provide reasons for
waiting, waiting should be equitable and transparent, etc.
Also ensure that customer remain occupied during
waiting times.
iii. Queuing situations: Queues have an important role to
play in service delivery system and management of
capacity. There are number of parameters in queuing
system like arrival pattern of customer, service times, the
number of customers, etc.
iv. Triage: It means sorting different types of services and
different route to service process. For example, hospital
has emergency services for critical patients.



















54

L. YEILD MANAGEMENT

INTRODUCTION: It is the process of allocating the right
type of capacity to the right kind of customer at the right price
so as to maximize revenue or yield. It is a balance between
i. Prices charged
ii. Capacity used.
iii. Market segment.
In services because of the fluctuation in demand and because
of limitation on supply it becomes difficult to manage
services.
When demand raises service provider cannot supply
more services and hence cannot enjoy more revenue. On the
other hand when demand falls service provider cannot control
cost and hence cannot get higher revenue. For example, an
airline having 300 capacities cannot book more than 300
seats. On some occasion when the number of seats booked are
only 200 then there is loss of revenue of 100 seats. Therefore,
yield management aims at maximizing the revenue by
balancing the price, the customer and the capacity

Process of Yield Management: The process of yield
management is;

i. Segment the customer base: As per the needs, capacity to
pay so that service provider can focus on each segment
and devise yield management separately for each
segment keeping an eye on total yield.
ii. Establish data base: Service provider can maintain proper
data base of the entire customer to know the
consumption pattern and behavior pattern during season
and off season.
iii. Fixing price differentials: The service provider can fix
different price for each segment keeping in mind
55

breakeven point and yield expectations. However this
also need providing service differences otherwise
customer will not pay different price for the same
service.
iv. Strong customer relationship management: The strategy
will succeed in yielding better returns only if the
organization is able to establish strong CRM and strong
information system and communicate regularly with
customer.
v. Advance booking: Service provider can also book
service/ capacity in advance. For example, airline
provides reservation of seats in advance at a discount
rate.
Service firm who show the following characteristics can use
yield management.
i. Fluctuating demand.
ii. Products sold in advance.
iii. Low marginal cost and higher marginal capacity cost.
iv. Relatively fixed capacity.
v. Ability to segment the market.
vi. Perishable inventory.
Advantages: Yield management provides the following
benefits to the organization.
i. Higher yield from each segment. The price realization
from each segment can be based on their paying capacity
and propensity.
ii. The price differentials can be established for services that
can be sold on a premium on a full value price and on
discounted price.
iii. The revenue earnings can be planned in advance by
predicting the price and the level of each category
separately.
iv. It helps the service provider to plan inventory facilities,
equipment and reduce service uncertainties.
56

M. BRANDING OF SERVICES

Brand is a name, term, symbol or design or combination
of them which is intended to identify the goods and
services of one seller or a group of sellers and to
differentiate them from those of competitors. (Kotler)
Branding is important in service marketing as it provides
tangible element to services. Most service companies promote
brand name along with corporate name. For example, Airtel,
Vodafone, Reliance, BSNL, TATA cellular. Top 10 brands in
services are SBI, PNB, CBI, Indian Airlines, ICICI, BSNL,
BOI, LIC, and Kendriya Vidyalaya.

Advantages: Branding provides the following benefits;
i. Corporate identity.
ii. Relationship building.
iii. Image of quality.
iv. Reduce price comparison.
v. Customer satisfaction.
vi. Service advantage.
vii. Repeat purchases.
viii. Support positioning.
ix. Easy penetration.
x. Customer develop value proposition.

Characteristics of good brand: The characteristics of a good
brand are
i. Distinctiveness: Consumer should be able to identify a
service provider and distinguish it from other
competitors.
ii. Memorability: The brand should be simple and easy to
remember.
57

iii. Likeability: The brand should be likeable visually and
emotionally. Brands like LIC, SBI or TATA are highly
liked by consumers.
iv. Suggestive: The name should convey the essence of
service.
v. Meaningful: The name should communicate creditability
and the nature of services.
vi. Flexibility: Some brands like Times of India, Tata have
less flexibility to become international brands. However
companies should have some flexibility in branding their
services as they grow in size.
vii. Adaptable: The brand should have the potential to adapt
to changes in the environment. It should be capable of
showing the core value of business.
viii. Protect ability: Brand should be legally protectable. The
Trademarks Act 1999 provides legal protection for
brands.

Types of brand: The different types of brands are









Brand Image/ Brand Equity: Brand image refers to the feeling
one gets about a particular brand. It is an important attributes
of measuring the success of a brand.



Individual brands
Naming each
product differently
Family brands
Branding all products
with same name
Line Family brand
Family brand for all
product of a line
Brand Extension
Each product different
name along with main
brand name. Example,
TATA Tea, TATA
Indica

BRAND= PRODUCT + IMAGE
SERVICE BRAND= SERVICES RECEIVED + IMAGE
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The factors that affect brand image are:
i. Content of advertizing (Woodland shoe ad is shot in a
jungle giving image of rough and tough)
ii. Media used
iii. Personalities used
iv. Symbols (Air India Maharaja)
v. Sponsor of event (DLF- IPL, FEMINA MISS INDIA)
vi. Price factor (NANO lowest price car)
vii. Product/ Service
viii. Packaging
ix. Distribution
A powerful brand has high brand equity. Brand equity is the
positive differential effect on consumer response to a product
or service. One measure of brand equity is the extent to which
customers are willing to pay for the brand. High brand equity
provides company with many competitive advantages.
Brand value proposition depends on Functional benefits,
Emotional benefits and Self expressive benefits.

Functional benefits Product quality and features
Emotional benefits Feeling, emotion, care, love and security
Self expressive benefits Express himself confident, strong,
adventurous

Challenges in service branding: In the international ranking of
branding in the top 20 list there are 07 services brands and in
the top 50 list there are 21 service brands. It shows that
service brands are also popular like product and the
importance is growing.
Although the principles of branding of goods and services are
the same but there are certain challenges in service branding.
Product branding is easier than service branding as it is easier
to show evidence between advertising message and actual
product experience. Since product quality is not variable,
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advertisement can easily create consumer trust and confidence
about a particular product.
On the other hand services are intangible. They are not
produced but performed. There is greater variation in the
service delivery. Perceptions of service differentials are built
more through actual experience than advertising. This makes
it difficult for service brands to build consumer trust and
confidence.
The task of service branding is to bring tangibility to the
intangible. The approaches to building service brands are:
Dare to be different.
Identify service customer needs that you want to cater.
Connect at an emotional level.
Internalize the brand i.e., the service provider must
manage perceptions attitude and beliefs of the service
personnel. Employees, their action can make or break a
brand.
Thus service branding is the blend of art and science that
manages associations between a brand and memories in the
mind of the brand audience. It involves focusing resources to
differentiate the brand in an attractive, meaningful and
compelling way for the target customers.

N. QUESTIONS

1) Explain the following terms:
a. Levels of customer contact.
b. Market segmentation.
c. Branding of services.
d. Positioning of services.
e. Facilitating services.
f. Communication mix in services.
g. Personal selling.
h. Word of mouth.
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i. Franchising
j. Core Service
k. Yield management
l. Augmented services
m. Public relations
n. Service blueprint
o. Benchmarking
p. Ambience and dcor in physical setting
q. Service mapping
r. Brand image and Brand equity.

2) Answer the following questions
i. Explain the product service concept.
ii. Explain stages involved in new service
development.
iii. Describe service life cycle.
iv. Explain the importance of pricing.
v. Explain extended Ps of service marketing.
vi. Explain the role of physical evidence.
vii. Explain service positioning.
viii. What are the characteristics of a good brand?
ix. Explain the bases of market segmentation.
x. Discuss the extended Ps in service marketing with
reference to tourism sector.
xi. Explain the different situations a service marketers
experience due to demand capacity interactions
using examples from any two service sectors.