Module IV- Managing Service Personnel, Pricing and Distribution

Prof. (Dr.) Swaroop Mohanty

02 Price determinants, pricing modifications

03 Approaches to pricing services.

04 Pricing strategies linking to value definitions.

05 Channel structures

06 Distribution-growth options.

05 Case Study

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01 Role of service personnel, Job characteristics,
Internal marketing

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The importance of service personnel
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 The importance of service personnel
• Help maintain firm’s positioning. They are:
– A core part of the product
– The service firm
– The brand
– Affects sales
– Is a key driver of customer
loyalty
– Determine productivity
 Frontline work is difficult and stressful
• Boundary spanners link inside of organization to outside world and often
experience role stress from multiple roles they have to perform
• 3 main causes of role stress:
– Organization vs. Client: Dilemma whether to follow company rules or to
satisfy customer demands
• This conflict is especially acute in organizations that are not
customer oriented
– Person vs. Role: Conflicts between what jobs require and employee’s
own personality and beliefs
– Client vs. Client: Conflicts between customers that demand service staff
intervention
 Frontline work is difficult and stressful
Emotional Labor
• “The act of expressing socially desired emotions during service
transactions” (Hochschild, The Managed Heart)
• Occurs when there is gap between what employees feel inside, and
emotions that management requires them to display to customers
• Performing emotional labor in response to society’s or management’s
display rules can be stressful
• Good HR practice emphasizes selective recruitment, training, counselling,
strategies to alleviate stress
 Frontline work is difficult and stressful
Service Sweatshops
• Deployment of new technology and methods can change the nature of the
work environment
• In many firms, face-to-face contact is replaced by the use of the internet or
call-center services
• Such jobs can offer flexible working hours and part-time employment
• The work is often intense, with a high level of monitoring
• Motivated agents suffer less customer stress
The service talent cycle for
service firms
 Hiring the right people
• Be the Preferred Employer:
– Create a large pool: “Compete for Talent Market Share”
– What determines a firm’s applicant pool?
• Positive image in the community as place to work
• Quality of its services
• The firm’s perceived status
• Select the right people:
– There is no perfect employee
• Different jobs are best filled by people with different skills, styles or personalities
• Hire candidates that fit firm’s core values and culture
• Focus on recruiting naturally warm personalities for customer-contact jobs
 Hiring the right people
Tools to Identify the Best Candidates (1)
• Employ multiple, structured interviews:
– Use structured interviews built around job requirements
– Use more than one interviewer to reduce “similar to me” biases
• Observe candidate behavior:
– Hire based on observed behavior, not words you hear
– Best predictor of future behavior is past behavior
– Hire those with service excellence awards and
complimentary letters
 Hiring the right people
Tools to Identify the Best Candidates (2)
• Conduct personality tests:
– Willingness to treat co-workers and customers with courtesy,
consideration and tact
– Perceptiveness regarding customer needs
– Ability to communicate accurately and pleasantly
• Give applicants a realistic preview of the job:
– Chance for candidates to “try on the job”
– Assess how candidates respond to job realities
– Allow candidates to self select themselves out of the job
 Training service employees actively
• Service employees need to learn:
– Organizational culture, purpose and strategy
• Get emotional commitment to core strategy and core values
• Get managers to teach “why”, “what” and “how” of job
– Interpersonal and technical skills
• Both are necessary but neither alone is enough for performing a job well
– Product/service knowledge
• Staff’s product knowledge is a key aspect of service quality
• Staff must explain product features and help consumers make the right
choice
 Internal marketing and communications
• Especially necessary in large service businesses that operate in widely
dispersed sites
• Employees need to be kept informed about new policies,
changes in service features, and new quality initiatives
• Nurtures team spirit and support common corporate goals across national
frontiers
• Can complement training
– ensures efficient and satisfactory service delivery
– achieves productive and harmonious working relationships
– builds employee trust, respect, and loyalty
02 Price determinants, pricing modifications

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Effective pricing for financial success
 Foundations of a Pricing Strategy
• Pricing Strategy Stands on Three Legs
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03 Approaches to pricing services.

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 Cost-Based Pricing
• Set prices relative to financial costs (problem: defining
costs)
• Activity-based costing
• Pricing implications of cost analysis
 Competition-based pricing
• Non-price-related costs of using competing alternatives
are high
• Personal relationships matter
• Switching costs are high
• Time and location specificity reduces choice
• Managers should not only look at competitor’s prices
dollar for dollar, but should examine all related financial
and non-monetary costs
 Putting strategy into practice
• How much to charge?
• What basis for pricing?
• Who should collect payment?
• Where should payment be
made?
• When should payment be
made?
• How should payment be
made?
• How to communicate prices?
04 Pricing strategies linking to value definitions.

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Pg. No 456

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Ref. - Technology Spotlight- Dynamic Pricing on the Internet Allows Price Adjustments Based on
Supply and Demand (Pg. No : 460)
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 Value-based pricing
• Understanding Net Value:
– Customers weigh the perceived benefits of the service
against the perceived costs they will incur.
• Value is a low price.
• Value is whatever I want in a product.
• Value is the quality I get for the price I pay.
• Value is what I get for what I give.
• Managing the Perception of Value:
– Effective communications and even personal explanations
are needed to help customers understand the value they
receive.
 Value-based pricing
Reducing Related Monetary and Non-Monetary Costs
• Reduce related-monetary costs.
– Cut time spent searching for, purchasing and using service
• Reduce non-monetary costs.
– Time Costs
– Physical Costs
– Psychological (Mental) Costs
– Sensory Costs (unpleasant sights, sounds, feel, tastes, smells)
 Value-based pricing
• Service users can incur costs during any of the three
stages of the service consumption model
05 Channel structures

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The services marketing communications mix
The services marketing communications mix
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 Traditional Marketing Channels
Advertising
• Build awareness, inform, persuade, and remind
• Challenge: How stand out from the crowd?
• Effectiveness remains controversial
• Research suggests that less than half of all ads
generate a positive return on their investment
 Traditional Marketing Channels
Direct Marketing
• Mailings, recorded telephone messages, faxes, email
• Potential to send personalized messages to highly targeted
microsegments
– Need detailed database of information about customers and
prospects
• Advance in on-demand technologies empower consumers to decide
how and when they prefer to be reached, and by whom
– e.g., email spam filters, pop-up blockers, podcasting
 Traditional Marketing Channels
Sales Promotion
• Defined as “Communication that comes with an incentive”
• Should be specific to a time period, price, or customer group
• Motivates customers to use a specific service sooner, in greater volume
with each purchase, or more frequently
• Interesting sales promotions can generate attention and put firm in
favorable light (especially if interesting results publicized)
 Traditional Marketing Channels
Personal Selling
• Interpersonal encounters educate customers and promote
preferences for particular brand or product
• Common in b2b and infrequently purchased services
• Many b2b firms have dedicated salesforce to do personal selling
– Customer assigned to a designated account manager
• For services that are bought less often, firm’s representative acts as
consultant to help buyers make selection
• Face-to-face selling of new products is expensive—telemarketing is
lower cost alternative
 Traditional Marketing Channels
• Public Relations
• PR/Publicity involves efforts to stimulate positive interest in an
organization and its products through third parties
– e.g., press conferences, news releases, sponsorships
• Corporate PR specialists teach senior managers how to present
themselves well at public events, especially when faced with hostile
questioning
• Unusual activities can present an opportunity to promote company’s
expertise
– e.g., FedEx – safely transported two giant pandas
from Chengdu, China, to the National Zoo in
Washington, D.C. in a FedEx aircraft renamed
FedEx PandaOne
 Messages Transmitted Online
Company’s Website
• The web is used for a variety of communication tasks
– Creating consumer awareness and interest
– Providing information and consultation
– Allowing two-way communication with customers through email
and chat rooms
– Encouraging product trial Allowing customers to place orders
– Measuring effectiveness of advertising or promotional
campaigns
• Innovative companies look for ways to improve the appeal and
usefulness of their sites
 Messages Transmitted Online
Online Advertising
• Banner advertising
– Placing advertising banners and buttons on portals such as
Yahoo, Netscape and other firms’ websites
– Draw online traffic to the advertiser’s own site
– Web sites often include advertisements of other related, but
non-competing services.
• e.g., advertisements for financial service providers on
Yahoo’s stock quotes page
 Messages Transmitted Online
Online Advertising
• Search engine advertising
– Reverse broadcast network: search engines let advertisers
know exactly what consumer wants through their keyword
search
– Can target relevant messages directly to desired consumers
– Several advertising options:
• Pay for targeted placement of ads to relevant keyword searches
• Sponsor a short text message with a click-through link
• Buy top rankings in the display of search results
 Messages Transmitted Online
Moving from Impersonal to Personal Communications
• There used to be a difference between personal and impersonal
communication
• Technology has created a gray area between the two
• Direct mail and email can be personalized
• Electronic recommendation agents can also personalize
communications
• With advances of on-demand technologies, consumer are
increasingly empowered to decide how and when they like to be
reached
 Messages through Service Delivery Channels
• Service outlets
– Can be through banners, posters, signage, brochures, video
screens, audio etc.
• Frontline employees
– Communication from frontline staff can be for the core service or
supplementary elements
– New customers in particular need help from service personnel
• Self-service delivery points
– ATMs, vending machines and websites are examples
06 Distribution-growth options

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Key Concepts:
• Distribution Growth refers to expanding the availability and reach of a product to a larger
consumer base.
• It plays a critical role in shaping consumer behavior by influencing access to products,
customer convenience, and purchase decisions.
Growth Strategies:
• Geographic Expansion:
1. Moving into new regions, cities, or countries to tap into different consumer segments.
2. Benefits: Increased reach, tapping into new customer needs.
• Channel Expansion:
1. Utilizing multiple distribution channels (e.g., online, physical stores, direct sales).
2. Benefits: Accessibility, flexibility, convenience for different consumer preferences.
• Retail Partnerships:
1. Collaborating with retailers or wholesalers to expand product availability.
2. Benefits: Increased product exposure, greater consumer trust through established retail
networks.

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 Consumer Behavior and Distribution Channels
Impact of Distribution on Consumer Behavior:
• Convenience:
• Consumers prefer brands that make purchasing easy and accessible. Distribution decisions influence
how fast and efficiently a product reaches consumers.
• Perceived Value:
• The way a product is distributed (exclusive vs. mass-market) affects how consumers perceive its value or
prestige.
• Brand Loyalty:
• Consistent and reliable distribution methods can foster consumer trust and brand loyalty, especially when
products are always available.
Trends in Distribution Growth:
• E-commerce Growth:
1. Rise of online shopping affecting distribution strategies.
2. Companies are focusing more on digital platforms for reaching consumers.
• Omnichannel Retailing:
1. Offering a seamless shopping experience across physical and digital platforms.
• Sustainability:
1. Increasing consumer demand for eco-friendly distribution methods, including less packaging and carbon-
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conscious delivery services.
 Discussion Questions
1. Which approach to pricing (cost-based, competition-based, or demand-based) is the
most fair to customers? Why?
2. Is it possible to use all three approaches simultaneously when pricing services? If you answer
yes, describe a service that is priced this way.
3. For what consumer services do you have reference prices? What makes these services
different from others for which you lack reference prices?
4. Name three services you purchase in which price is a signal to quality. Do you believe that
there are true differences across services that are priced high and those that are priced low?
Why or why not?
5. Describe the nonmonetary costs involved in the following services: getting an automobile
loan, belonging to a health club, having allergies diagnosed and treated, attending an executive
education class, and getting braces.
6. Consider the specific pricing strategies for each of the four customer value definitions.
Which of these strategies could be adapted and used with another value definition?

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 Case Study

• Group 4:Managing Customer Complaints: The Case of Imperial

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Thank You

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