MARKETING OF SERVICES

India is projected to become third largest economy in the world by 2050. The service sector remained the key driving force of Indian economy and average growth of this sector at 8.6 per cent was higher than the average growth of 7.5 per cent during the last five years. Eventually service sector contributed above 50 per cent of GDP since 1997-98 and touched 57.6 per cent in 2004-05. Further India ranked 18th largest exporter of global service and touched export revenue of US$ 51,326 million line 2004-05. The Tangibility Spectrum Products and services may be ranked according to their tangibility (page 7, Zeithaml book). Salt is shown as being highly tangible, while teaching is shown to be least tangible. The point of this classification is that the concepts presented in the services marketing literature are especially significant to the services that are least tangible, such as teaching. Basic Characteristics of Services Services differ from products in four important ways: intangibility, heterogeneity, simultaneous production and consumption and perishability. All of these ways affect marketing strategy. Services are intangible and teaching is among the least tangible services. Intangibility leads to two problems. It is difficult to describe teaching and it is difficult to evaluate its quality. Regarding the first difficulty, it is very important to be careful in describing teaching fully and accurately in order to avoid building up unrealistic expectations in the minds of students. Regarding the second difficulty (evaluation), schools have to anticipate that students will use a variety of sources of information in evaluating the quality of the teaching, including people (administrators, faculty, staff and other students), physical evidence (classrooms, lounges, labs, libraries) and processes (instructional and administrative). Services are heterogeneous. Even within one institution, teaching is produced by different people, in different places, at different times, with different students. Therefore, the quality of the service delivered depends on the capabilities, demeanor and motivation of service providers (teachers), the adequacy of the physical surroundings and the interest and behavior of the students. The challenge of maintaining the quality of teaching in an institution requires measures that affect positively the behavior of many people in different places, in the absence of close supervision. Indirect methods, such as marketing to the service providers (teachers) need to be used. See the Service Marketing Triangle (page 23) (Exhibit 11.1) Services are produced and consumed simultaneously. All service providers, administrators, teachers and staff are producers and simultaneously marketers of the

educational service. At the same time, the behavior of students may affect the quality of the education received by all students. These factors lead to two conclusions. To achieve best results, all service providers should have a basic understanding of marketing and possess marketing skills. In addition, students must be selected and oriented and if need be trained, in ways that will enhance the learning experience of all students. Services are perishable. Teaching cannot be stored. It cannot be returned or replaced. To achieve satisfactory financial results proper scheduling becomes an important issue. On the other hand, in order to enable students to get a good education, it may appear necessary, at times to schedule small classes. Conflicting goals may require creative problem-solving. The Expanded Marketing Mix For all services marketing, including teaching, three elements have to be added (26) to the usual four part marketing mix consisting of product, price, promotion and distribution. The following three elements also have to be considered in formulating marketing strategy because all of them play a role in student pre-purchase and postpurchase evaluation: 1. People: administrators, teachers and students. 2. Physical evidence: buildings, classrooms, computer labs, libraries, student lounges. 3. Process: teaching methods, technology, level of student involvement.

On the Five Dimensions of Service Quality

1. Reliability is the ability to deliver important promised results, such as career advancement, consistently. Alumni testimonials and placement and career progress data would have to be offered to support this type of positioning. In addition, some form of guarantees might have to be offered. 2. Responsiveness is the willingness to help students. Substantial advisory and tutoring services would have be offered to support such positioning. 3. Assurance positioning would have to be backed up by evidence of the knowledge and thoughtfulness of administrators, faculty and staff and their ability to inspire trust and confidence. 4. Empathy positioning would have to be supported by evidence that caring, individualized attention is given to students by administrators, faculty and staff. 5. Tangibles positioning would have to be supported by the appearance, usefulness and comfort of physical facilities and the quality and availability of computers, on-line services and library, etc. On the Three Elements of Service Evidence People An essential ingredient to any service provision is the use of appropriate staff and people. Recruiting the right staff and training them appropriately in the delivery of their service is essential if the organisation wants to obtain a form of competitive advantage. Consumers make judgments and deliver perceptions of the service based on the employees they interact with. Staff should have the appropriate interpersonal skills, aptititude, and service knowledge to provide the service that consumers are paying for. Many British organisations aim to apply for the Investors In People accreditation, which tells consumers that staff are taken care off by the company and they are trained to certain standards. Process Refers to the systems used to assist the organisation in delivering the service. Imagine you walk into Burger King and you order a Whopper Meal and you get it delivered within 2 minutes. What was the process that allowed you to obtain an efficient service delivery? Banks that send out Credit Cards automatically when their customers old one has expired again require an efficient process to identify expiry dates and renewal. An efficient service that replaces old credit cards will foster consumer loyalty and confidence in the company.

Physical Evidence Where is the service being delivered? Physical Evidence is the element of the service mix which allows the consumer again to make judgments on the organisation. If you walk into a restaurant your expectations are of a clean, friendly environment. On an aircraft if you travel first class you expect enough room to be able to lay down! Physical evidence is an essential ingredient of the service mix, consumers will make perceptions based on their sight of the service provision which will have an impact on the organisations perceptual plan of the service.

Characteristics of a Service

Consumer Buying Behaviour

What influences consumers to purchase products or services? The consumer buying process is a complex matter as many internal and external factors have an impact on the buying decisions of the consumer. When purchasing a product there several processes, which consumers go through. These will be discussed below.

1. Problem/Need Recognition
How do you decide you want to buy a particular product or service? It could be that your DVD player stops working and you now have to look for a new one, all those DVD films you purchased you can no longer play! So you have a problem or a new need. For high value items like a DVD player or a car or other low frequency purchased products this is the process we would take. However, for impulse low frequency purchases e.g. confectionery the process is different.

2. Information search
So we have a problem, our DVD player no longer works and we need to buy a new one. Whats the solution? Yes go out and purchase a new one, but which brand? Shall we buy the same brand as the one that blew up? Or stay clear of that? Consumer often go on some form of information search to help them through their purchase decision. Sources of information could be family, friends, neighbours who may have the product you have in mind, alternatively you may ask the sales people, or dealers, or read specialist magazines like What DVD? to help with their purchase decision. You may even actually examine the product before you decide to purchase it.

3. Evaluation of different purchase options.

So what DVD player do we purchase? Shall it be Sony, Toshiba or Bush? Consumers allocate attribute factors to certain products, almost like a point scoring system which they work out in their mind over which brand to purchase. This means that consumers know what features from the rivals will benefit them and they attach different degrees of importance to each attribute. For example sound maybe better on the Sony product and picture on the Toshiba , but picture clarity is more important to you then sound. Consumers usually have some sort of brand preference with companies as they may have had a good history with a particular brand or their friends may have had a reliable history with one, but if the decision falls between the Sony DVD or Toshiba then which one shall it be? It could be that the a review the consumer reads on the particular Toshiba product may have tipped the balance and that they will purchase that brand.

4. Purchase decision
Through the evaluation process discussed above consumers will reach their final purchase decision and they reach the final process of going through the purchase action e.g. The process of going to the shop to buy the product, which for some consumers can be as just as rewarding as actually purchasing the product. Purchase of the product can either be through the store, the web, or over the phone.

Post Purchase Behaviour

Ever have doubts about the product after you purchased it? This simply is post purchase behaviour and research shows that it is a common trait amongst purchasers of products. Manufacturers of products clearly want recent consumers to feel proud of their purchase, it is therefore just as important for manufacturers to advertise for the sake of their recent purchaser so consumers feel comfortable that they own a product from a strong and reputable organisation. This limits post purchase behaviour. i.e. You feel reassured that you own the latest advertised product.

Factors influencing the behaviour of buyers.

Consumer behaviour is affected by many uncontrollable factors. Just think, what influences you before you buy a product or service? Your friends, your upbringing, your culture, the media, a role model or influences from certain groups? Culture is one factor that influences behaviour. Simply culture is defined as our attitudes and beliefs. But how are these attitudes and beliefs developed? As an individual growing up, a child is influenced by their parents, brothers, sister and other family member who may teach them what is wrong or right. They learn about their religion and culture, which helps them develop these opinions, attitudes and beliefs (AIO) . These factors will influence their purchase behaviour however other factors like groups of friends, or people they look up to may influence their choices of purchasing a particular product or service. Reference groups are particular groups of people some people may look up towards to that have an impact on consumer behaviour. So they can be simply a band like the Spice Girls or your immediate family members. Opinion leaders are those people that you look up to because your respect their views and judgements and these views may influence consumer decisions. So it maybe a friend who works with the IT trade who may influence your decision on what computer to buy. The economical environment also has an impact on consumer behaviour; do consumers have a secure job and a regular income to spend on goods? Marketing and advertising obviously influence consumers in trying to evoke them to purchase a particular product or service. Peoples social status will also impact their behaviour. What is their role within society? Are they Actors? Doctors? Office worker? and mothers and fathers also? Clearly being parents affects your buying habits depending on the age of the children, the type of job may mean you need to purchase formal clothes, the income which is earned has an impact. The lifestyle of someone who earns 250000 would clearly be different from someone who earns 25000. Also characters have an influence on buying decision. Whether the person is extrovert (out going and spends on entertainment) or introvert (keeps to themselves and purchases via online or mail order) again has an impact on the types of purchases made.

Maslows Hierarchy of Needs

Abraham Maslow hierarchy of needs theory sets out to explain what motivated individuals in life to achieve. He set out his answer in a form of a hierarchy. He suggests individuals aim to meet basic psychological needs of hunger and thirst. When this has been met they then move up to the next stage of the hierarchy, safety needs, where the priority lay with job security and the knowing that an income will be available to them regularly. Social needs come in the next level of the hierarchy, the need to belong or be loved is a natural human desire and people do strive for this belonging. Esteem need is the need for status and recognition within society, status sometimes drives people, the need to have a good job title and be recognised or the need to wear branded clothes as a symbol of status. Self-actualization the realization that an individual has reached their potential in life. The point of self-actualization is down to the individual, when do you know you have reached your point of self-fulfilment? But how does this concept help an organization trying to market a product or service? Well as we have established earlier within this website, marketing is about meeting needs and providing benefits, Maslows concept suggests that needs change as we go along our path of striving for self-actualization. Supermarket firms develop value brands to meet the psychological needs of hunger and thirst. Harrods develops products and services for those who want have met their esteem needs. So Maslows concept is useful for marketers as it can help them understand and develop consumer needs and wants.

Types of buying behavior.

There are four typical types of buying behaviors based on the type of products that intends to be purchased. Complex buying behaviors is where the individual purchases a high value brand and seeks a lot of information before the purchase is made. Habitual buying behaviors are where the individual buys a product out of habit e.g. a daily newspaper, sugar or salt. Variety seeking buying behaviors is where the individual likes to shop around and experiment with different products. So an individual may shop around for different breakfast cereals because he/she wants variety in the mornings! Dissonance reducing buying behaviors is when buyer are highly involved with the purchase of the product, because the purchase is expensive or infrequent. There is little difference between existing brands an example would be buying a diamond ring, there is perceived little difference between existing diamond brand manufacturers.

White Labelling

Where a product or service is produced by one organisation but offered to the public by another.White labelling is used in a wide variety of industries including food, technology and financial products. Advantages of white labelling. Producer can access a wider market for their goods. For the distributor they do not have the R&D cost of having to invest in a new product, whilst benefiting from the advantages of having their own product. Examples of white labelling within the food industry Many supermarkets offer own brand label products. There are two ways of doing this. 1. Either the supermarket will select a producer who also produces goods under their own name or they will select a producer who manufacturers goods solely in other organisation names for example Northern Foods within the UK produces many branded and own brand label product. 2. They will use another company to manufacturer the product. In the UK Weetabix produce cereals for the supermarkets and allow the supermarkets to label it as their own brand. Examples of white labelling within the financial industry Financial products are offered by many organisations some of these organisations will use white labelling because they do not have the infrastructure required to offer financial products. For example small banks will ask large banks to handle their credit card operations as this is cheaper then dealing with it themselves. You may also get new financial organisations such as supermarkets who want to offer financial products using white labelling, because they do not have the financial licence required to offer the financial services. Components of customer services Good customer service stretches from before the customer purchases the product to after the purchase transaction has been completed. The components of customer consist of the following. Pre Transactional Strategies This is all about the strategies a firm uses to get the consumer into the store. This could involve using various promotional strategies such as offers to tempt customers. Many stores now offer cafes, have leaflets that will give detailed product information.

Transactional Strategies Once in the store, how can the store support the potential customer? Sales persons should be able to answer questions confidently about a product and demonstrate the product if asked. The buying process should also be straight forward and simple, so the customer does not walk away. Post Transactional Strategies After the purchase transaction if there is a problem with the product, how is the complaint dealt with? Is the problem dealt with quickly for the customer? What is after sales service like? Should you contact the customer to ask them if they wish to extend their warranty or purchase any complimentary products. Customer Services Customers Services is all about looking after potential and current customers and making sure that their needs are met. This can happen before the customer transacts with the company, during the transactional process and after the transaction has been completed. The above is known as the components of customer services and is talked about further here. Good customer services is an essential part of a companys strategy particularly if the company wishes to retain customers for the long-term. Customers are more likely to spend more with your firm if they are looked after well. Good customers services can take place in many forms. These include: Having a visible customer services desk. Customers should be able to find customer services very easily within a retail store and this desk should always be staffed. This sends out a good impression to customers visiting the store. Skilled staff. Staff should have the area of expertise within the section they are working within. Certainly they should know more than the average customer. This builds confidence and trust with the potential customer. Store policies: What are the policies on product returns? Customers will feel more confident with a retail store knowing they can return the product if it develops a fault. UK firm Argos have a 14 day money back guarantee on most products that are purchased. So if consumers change their mind about the product within that period, they can return it. This policy goes beyond UK law, showing their dedication to customer service. Phone line: If there is a phone line, customer calls should be answered within a reasonable time. Is the customer service line picked up as quickly as the firms sales line?

If your customers have any queries or complaints they should be dealt with very quickly. Any praise given to the firm should also be acknowledged and thanked, remember the customer has taken time out of their busy schedule to thank you and praise you. Customer Services must be treated seriously. Failure to do so may result in the firm losing out to competitors and developing a bad reputation within the market.

Benefits of relationship marketing

Retaining customers for the long-term offers many benefits. The aim is for the company to obtain life time custom. Some of the benefits of relationship marketing include: 1. Loyal customers will recommend your business to others, thus expanding your business for you. 2. Loyal customers are willing to try some of your new products, because they trust you. 3. Customers will be willing to pay more for your services/products if there are adjustments in pricing because they are loyal to you and trust your services/products. 4. Loyal customers will tell you about problems with your products/services enabling to improve your products/services. 5. The ultimate benefit will be an increase sales, market share and dominance.

International Marketing
So you decided you want to sell your product overseas. The world is becoming a smaller place because of technology (the internet) and social mobility, that is, people are travelling more and are seeing familiar brands around the world, and, you can identify similar segment in overseas markets, so, lets go global!

So why go Global?
Competition within your national market is becoming too intense so you decide to push sales in overseas markets. Your products within your national markets are reaching the end of the life cycle so you wish to push it into national markets. Sales and profit are generally declining in national markets. You wish to become a global player. One of Ansoffs strategies (Market development) does looks at exploiting products in overseas markets as an option to plug falling sales. International Marketing Environment Entering global markets. There are a number of steps that need to be taken before you decide to enter international markets. Analyze the international marketing environment. A PEST/STEP analysis needs to be conducted on the market you enter, to assess whether it is worthwhile or not. Lets briefly look at some factors that may influence an international decision. Political factors Consider:

The political stability of the nation. Is it a democracy, communist, or dictatorial regime? Monetary regulations. Will the seller be paid in a currency that they value or will payments only be accepted in the host nation currency?

Economical Factors Consider:

Consumer wealth and expenditure within the country. National interests and inflation rate. Are quotas imposed on your product. Are there import tariffs imposed. Does the government offer subsidies to national players that make it difficult for you to compete?

Social Factors Consider

Language. Will language be a barrier to communication for you? Does your host nation speak your national language? What is the meaning of your brand name in your host countrys language? Customs: what customs do you have to be aware of within the country? This is important. You need to make sure you do not offend while communicating your message. Social factors: What are the role of women and family within society? Religion: How does religion affect behaviour? Values: what are the values and attitudes of individuals within the market?

Technological Consider:

The technological infrastructure of the market. Do all homes have access to energy (electricity) Is there an Internet infrastructure. Does this infrastructure support broadband or dial up? Will your systems easily integrate with your host countrys?

Market entry methods After assessing the environment in your selected country, how do you decide which are the best countries to enter? Paliwood (1993) suggests that before you enter an overseas market there are six factors that need to be considered: Speed How quickly do you wish to enter your selected market? Costs- What is the cost of entering that market? Flexibility How easy is it to enter/leave your chosen market? Risk Factor What is the political risk of entering the market? What are the competitive risk? How competitive is the market? Payback period When do you wish to obtain a return from entering the market? Are there pressures to break even and return a profit within a certain period? Long- term objectives- What does the organisation wish to achieve in the long term by operating in the foreign market? Will they establish a presence in that market and then move onto others? Trading overseas

There are a number ways an organisation can start to sell their products in international markets. 1. Direct export. The organisation produces their product in their home market and then sells them to customers overseas. 2. Indirect export The organisations sells their product to a third party who then sells it on within the foreign market. 3.Licensing Another less risky market entry method is licensing. Here the Licensor will grant an organisation in the foreign market a license to produce the product, use the brand name etc in return that they will receive a royalty payment. 4.Franchising Franchising is another form of licensing. Here the organisation puts together a package of the successful ingredients that made them a success in their home market and then franchise this package to oversea investors. The Franchise holder may help out by providing training and marketing the services or product. McDonalds is a popular example of a Franchising option for expanding in international markets. 5.Contracting Another of form on market entry in an overseas market which involves the exchange of ideas is contracting. The manufacturer of the product will contract out the production of the product to another organisation to produce the product on their behalf. Clearly contracting out saves the organisation exporting to the foreign market. 6.Manufacturing abroad The ultimate decision to sell abroad is the decision to establish a manufacturing plant in the host country. The government of the host country may give the organisation some form of tax advantage because they wish to attract inward investment to help create employment for their economy. 7.Joint Venture To share the risk of market entry into a foreign market, two organisations may come together to form a company to operate in the host country. The two companies may share

knowledge and expertise to assist them in the development of company, of course profits will have to be shared out also.

The International Marketing Mix

When launching a product into foreign markets do you standardise or adapt your marketing mix to the foreign market? A company can adopt to use a standardised marketing mix around the world or an adapted marketing mix in each country.

International Product Strategies Standardisation Vs Adaption

So what should an organisation do? Adapt or sell a standardised product? Basic marketing concepts tell us that we will sell more of a product if we aim to meet the needs of our target market. In international markets ,we have to take into consideration consumers cultural background, buying habits, levels of personal disposable income etc in order to deliver a tailored marketing mix program to suit their needs. The arguments however for standardisation suggest that if you go through the process of adapting the product to local markets it does little but add to the overall cost of producing the product and weakens the brand on the global scale. In todays global world, where consumers travel more, watch satellite television, communicate and shop internationally over the internet, the world now is becoming a lot smaller. Because of this there is no need to adapt products to local markets. Brands such as Coca-Cola, MTV, Nike, Levis are all successful global brands where they have a standardised approach to their marketing mix, all these products are targeted at similar groups globally. In many circumstances a company will have to adapt their product and marketing mix strategy to meet local needs and wants that cannot be changed. Mcdonald is a global player however, their burgers are adapted to local needs. In India where a cow is a sacred animal their burgers are served with chicken or fish. In Mexico burgers come with chilli sauce. Coca-cola is some parts of the world taste sweeter then in others. Yes we can argue that standardisation is better for the organisation because it reduces cost, however many organisations will have to think global, but act local if they are to successfully establish them selves in foreign markets.

International Promotion Strategy

As with international product decisions an organisation can either adapt or standardise their promotional strategy and message. Advertising messages in countries may well have to be adapted because of language barriers or the current message used in the national market may be offensive to overseas residents.

The use of certain colours may also need to be thought about. In India red is the colour worn by the bride in weddings, white is the colour for mourning in Japan. The level of media development has to also be taken into account. Is commercial television well established in your host country? What is the level of television penetration? How much control does the government have over advertising on TV and radio? Is print media more popular then TV? Many organisation go for a strategy of adapting advertising messages to local markets to best meet consumer demand.

International Pricing Strategies

Pricing on an international scale is difficult. As well as taking into account traditional price considerations (see marketing mix pricing) i.e.: Fixed and variable costs, Competition, Company objectives , Proposed positioning strategies, Target group and willingness to pay, the organisation needs to consider the costs of transport, any tariffs or import duties that may be levied on their product(s) when they are sold on the international scale. Also what currency do you expect to be paid in? Will it be home or international currency? Exchange rate fluctuation will also impact profitability and influence pricing decisions. Other factors to consider include local incomes, what are income and PDI levels. What is the general economic situation of the country and how will this influence pricing? The internet is now making pricing more transparent for consumers. Goods can be purchased online from any overseas organisations at local currency prices, a prime examples is dvds which are purchased from sites like www.dvdsoon.com which deliver internationally.

International Distribution Strategies A standard distribution channel in the UK may go from a Manufacturer, wholesaler, retailer to consumer or direct from a manufacturer to a retailer. In an overseas market there may well be more intermediaries involved. For example in Japan there are approximately five different types of wholesaler a product goes through before the product reaches the final consumer. In your international market , is it dominated by

major retailers or is the retail sector made up of small independent retailers? Is internet distribution common for your product.

iPAD to S-pad to Black Pad: Tablet Marketing

From iMacs to iPods to iTouch to iPhones and now the iPad. Apple is no doubt an innovative company changing the various sectors they operate in. The business issue with the tablet market is, will they become a substitute for netbook computers? For advertisers and developers it is another medium to consider when developing their marketing strategy. Which tablet device should they gear their website towards? For whom should they write apps for? Writing business apps maybe a feasible option for business tablet users, as currently, business segments seem to be the main users. Apple currently is the market leader, but it only takes one manufacturer offering the right combination of price and quality to impact Apple iPad sales. But who will that be? As the iPad takes off, competitors rush to bring in alternative tablet machines, to capture this growing market. The S Pad by Samsung has a 7 inch screen running Googles Android operating system, whilst the iPad has a 10 inch screen. Blackberry have also announced their Black Pad, aimed at the business segment.