UNIT 3

Integrated service marketing communications

It is essential for organizations to promote their brands well among the end-users not only to
outshine competitors but also survive in the long run. Brand promotion increases awareness of
products and services and eventually increases their sales, yielding high profits and revenue for
the organization.
Brand communication is an initiative taken by organizations to make their products and
services popular among the end-users. Brand communication goes a long way in promoting
products and services among target consumers. The process involves identifying individuals who
are best suited to the purchase of products or services (also called target consumers) and
promoting the brand among them through any one of the following means:
 Advertising
 Sales Promotion
 Public Relation
 Direct Marketing
 Personal Selling
 Social media, and so on
Integrated marketing communication refers to integrating all the methods of brand
promotion to promote a particular product or service among target customers. In integrated
marketing communication, all aspects of marketing communication work together for increased
sales and maximum cost effectiveness.
Let us go through various components of Integrated Marketing Communication:
1. The Foundation - As the name suggests, foundation stage involves detailed analysis of
both the product as well as target market. It is essential for marketers to understand the
brand, its offerings and end-users. You need to know the needs, attitudes and
expectations of the target customers. Keep a close watch on competitor’s activities.
2. The Corporate Culture - The features of products and services ought to be in line with
the work culture of the organization. Every organization has a vision and it’s important
for the marketers to keep in mind the same before designing products and services. Let us
understand it with the help of an example.
Organization A‘s vision is to promote green and clean world. Naturally its products need
to be eco friendly and biodegradable, in lines with the vision of the organization.
1. Brand Focus - Brand Focus represents the corporate identity of the brand.
2. Consumer Experience - Marketers need to focus on consumer experience which refers
to what the customers feel about the product. A consumer is likely to pick up a product
which has good packaging and looks attractive. Products need to meet and exceed
customer expectations.
3. Communication Tools - Communication tools include various modes of promoting a
particular brand such as advertising, direct selling, promoting through social media such
as facebook, twitter, Linkedin and so on.
4. Promotional Tools - Brands are promoted through various promotional tools such as
trade promotions, personal selling and so on. Organizations need to strengthen their
relationship with customers and external clients.
5. Integration Tools - Organizations need to keep a regular track on customer feedbacks
and reviews. You need to have specific software like customer relationship management
(CRM) which helps in measuring the effectiveness of various integrated marketing
communications tools.
Integrated marketing communication enables all aspects of marketing mix to work
together in harmony to promote a particular product or service effectively among end-
users.
Integrated marketing communication plan needs to include:
 Detailed summary of your marketing plan as to how it intends to promote products and
services among target customers.
 Background, history and vision of your organization.
 Know your products well. Include features and essential components of your brand.
 Target market needs to be described well. Plan out how your brand can meet and exceed
customer expectations. Have clarity as to how your brand is better than your competitors
and why should consumers only buy your product and not go anywhere else. It is
essential to read customer’s mind and know their perceptions.
 Compare your brand with the competitors. Write down how your brand is better than
competitors? You need to keep a close watch on competitor’s activities.
 Do a SWOT analysis which highlights the strengths, weaknesses, threats and
opportunities of the marketing plan.
 Specify the tools and methods which would help you create awareness of your brand.

1. The need for coordination in marketing communication

Although it can be said there are a number of reasons for the important shift to integrated

marketing communications, the following are some of the major catalysts of note for the public

sector:

 By coordinating marketing communication efforts, organizations can avoid duplication,

take advantage of synergy across communication tools, and develop more efficient and

effective marketing communication programs.

 The shift of marketing communication dollars from media advertising to other forms of

promotion.

 The movement away from relying on advertising-focused approaches, which emphasize

mass media such as network television and national newspapers and magazines, to solve

communication problems.

 The fragmentation of media markets, which has resulted in less emphasis on mass media

and more attention to smaller, targeted media alternatives.

 The rapid growth and development of database marketing which has prompted many

marketers to target consumers through direct mail, direct response advertising etc.

 The growth of the Internet especially digital/on-line marketing, which has changed the

very nature of the way organizations communicate and interact with target audiences.
 Demands for greater accountability from advertising agencies and changes in the way they

are compensated which motivated agencies to consider a variety of marketing

communications tools and less expensive alternatives to mass media advertising.

Internal marketing communication is an important tool for small businesses. Your employees and

business partners interact with customers and prospects, so it is important that they communicate

the same marketing and product messages that you build into your external promotional

campaigns. By keeping your employees and business partners aware of your marketing goals and

programs through internal communication, you can ensure that they play their part in increasing

sales and customer satisfaction.

2. Key service communication challenges

Discrepancies between what is communicated about a service and what a customer receives — or

perceives that she receives — can powerfully affect consumer evaluations of service quality. The

factors that contribute to these communication challenges include

 Service intangibility

 Management of service promises

 Management of customer expectations

 Customer education

 Internal marketing communication

Service intangibility: Consumers can see and touch goods — they’re a physical product. They

know exactly what they’re buying when they’re spending their money. They may even be able to

carry the item away with them — although they have to drive off the lot when they buy a car.

This portability is not the case with services. The effects of services may not be apparent

immediately, and what’s done is not always obvious. The client of a management consultant, for

example, may have to wait for months (or years) before they can see the results.

Management of service promises: A serious problem occurs when companies fail to manage

service marketing communications — the vows made by salespeople, advertising, and service

personnel — and service falls short of what is promised.

Management of customer promises: A serious problem occurs when companies fail to manage

service personnel — and service falls short of what is promised. This sometimes occur because
the part of the company making the promise lacks the information necessary to make accurate

statement.

Management of customer expectations:Appropriate and accurate communication about services

is the responsibility of both marketing and operations. Marketing must accurately reflect what

happens in actual service encounters; operations must deliver what is promised in

communications.

Customer Education: Service companies must educate their customers. If customer are unclear

about how services will be provided, what their role in delivery involves, and how to evaluate

services they have never used before, they will be disappointed.

Internal marketing communication: Multiply function in the organization, such as marketing

and operations, must be coordinated to achieve the goal of quality service provision. Because

service advertising and personal selling promise what people do, frequently and effective

communication across functions — horizontal communication — is critical.

3. Five categories of strategies to match service promises with delivery

The goal is to deliver service that is greater than or equal to promises made. and

Address service intangibility: Approaches to address service intangibility are

 Advertising and other communication strategies that clearly communicate service

attribution and benefits to consumers

 Strategies designed to encourage word-of-mouth communication

If service companies recognize the challenges they face due to intangibility, they can use selected

strategy to compensate. In one way or other, each of the individual strategies we discuss here

focuses on way to make the message dramatic and memorable.

Manage service promises: In manufacturing physical goods, the department that make promises

and those that deliver them can operate independently. Goods can be fully designed and produced

and then over to marketing for promotional sale. In services, however, the sales and marketing

department make promises about what other employees in the organization will fulfill. Because

what employees do cannot be standardized, great coordination and management of promises are

required. This coordination can be accomplished by creating a strong service brand and by

coordinating all of the company’s marketing communications.

Manage customer expectations: Accurately promising when and how service will be delivered

is one of the most important ways to close the communication gap. Among the most effective

strategies to manage customer expectations are to make realistic promises; to offer service

guarantees, options, and tiered-value offering; and to communicate criteria customers us to assess

service

Manage customer education: Customers must prefer their role properly for many services to be

effective. If customers forget to perform their role, or performance them improperly,

disappointment may result. For this reason, communication to customers can take the form of

customer education.

Manage internal marketing communication: The fifth major category of strategies necessary to

match service delivery with promises is managing internal marketing communications. Internal

marketing communications can be both vertical and horizontal. Vertical communication are either

downward, from management to employees, or upward, from employees to

management. Horizontal communications are those across functional boundaries in an

organization. A third strategy in internal branding, which consists of various strategies to sell the

brand inside the company.

How to create an integrated marketing communication strategy

The application of an integrated marketing strategy can help you build brand loyalty across a
specific customer base to maximize your profits. It may attract new customers to your brand, and
your brand can gain a reputation for its consistent message and reliability. Integrated marketing
communication aims at the long-term benefits of creating a solid brand identity consistent with
the goals of the brand. These steps can help you begin an integrated marketing communication
strategy:
1. Identify and understand your target audience
Primary to all marketing strategies, including integrated marketing, is the focus on your target
audience and goal. Discover what audience you want to reach, what needs they have in common
and what drives them to products and [Link] consumer research to identify
consumer rationale can be your initial focus. Consider limiting your focus to a select group
within a centered range to maximize your efforts. Through strategic selection and a data-driven
decision-making approach, you can gain a strong insight into the buying habits and needs of your
customer base.
2. Define your unique selling point
Next, consider an analysis of your strengths, weaknesses, opportunities and threats, which is
a SWOT analysis. Interview or survey any customer base you currently have and gain insight
into customer motivation. Understanding the challenges in advance can help you overcome them
as you progress through your campaign, and you can harness your strengths to boost success.
3. Understand your competition
Measure your brand's defining characteristics against that of your competition. Identify what
aspects of your brand are challenging to replicate and focus on those characteristics to give
yourself an advantage. The harder your brand qualities are to duplicate, the stronger advantage
you may have.
4. Determine your channels
Delineate the mix of media you plan to use to reach existing and potential customers. Consider
the range of target customers you have and their qualities. Local cable television commercials
may not be appropriate for a younger generation but can reach an older generation, for example.
Select the marketing media that is most cost-effective to reach the best results. It may be any
combination of modes, such as social media, radio advertising, television spots, print media,
billboards and live events.
5. Implement your plan
Creatively mold your branding identity around your brand's defining characteristics and target
customer needs and characteristics. Your brand identity can be the focal point of your integrated
marketing strategy and present in each communication that you send to customers. Keep your
original message consistent across different platforms, even if the mode of communication
differs.
6. Evaluate and adjust
Use quantifiable data to measure the success of your integrated marketing strategy. Analyze the
success across all communication platforms you used through vanity metrics, website visits,
acquired leads, customer survey responses and sales statistics. Active monitoring can help
inform your future decisions and continued strategy.
Benefits of integrated marketing communication
Before investing valuable time, effort and resources into a marketing strategy, it’s essential to
review the benefits, which include:
Building relationships
IMC is customer-centered and lends authenticity and validity to the buying experience. The plan
validates the customer’s feelings, and it creates a reputation in the consumer's mind, resulting in
better brand positioning.
Being effective and cost-effective
IMC is an effective strategy that reduces cost by creating and implementing multi-use materials
for a campaign. The ensured consistency embedded in this method organically creates trust for
your brand and improves brand recognition.
Being ubiquitous
By being ever-present, IMC creates a familiarity with consumers. As exposure to a brand
becomes more consistent, the likelihood a consumer chooses it increases exponentially.

Pricing of services

According to one of the leading experts or pricing, most service organization use a “naive and

unsophisticated approach to pricing without regard to underlying shift in demand, the rate that

supply can be expanded, price of available substitute, consideration of the price — volume

relationship, or the availability of future substitution”.

There are three key differences between customer evaluation of pricing service and goods.

1. Customers often have inaccurate or limited reference price for services.

2. Monetary price is not the only price relevant to service customers.

3. Price is a key signal of quality in service.

These three differences can have profound impact on the strategies companies use to set and

administered price for services.

1. Approaches to pricing service

For every product, the company has to choose a price. But determining the price can take many

ways. Most importantly, it should follow a predetermined strategy. 3 major pricing strategies can

be identified:

 Cost based pricing

 Competition based pricing

 Demand based pricing

Cost based pricing: While in customer value-based pricing, customers’ perceptions of value are

key to setting prices, in cost-based pricing the seller’s costs are the primary consideration. Costs

set the floor for the price that the company can charge. Therefore, cost-based pricing involves

setting prices based on the costs for producing, distributing and selling the product. In order to

make some profit, a fair rate of return is added to account for efforts and risks.

Some companies, such as Ryanair or Walmart, pursue a low-cost strategy and aim to offer the

lowest prices. This goes along with accepting smaller margins but greater sales. Other companies,

such as Apple or BMW, do not compete based on low prices. By offering superior customer

value, they can claim higher prices and margins — they pursue a customer value-based pricing

strategy. We can see that choosing between the 3 major pricing strategies is closely related to the

overall marketing strategy — actually it is an integral part of it.

Competition based pricing: competition-based pricing involves setting prices based on

competitor’s strategies, costs, prices and market offerings. In highly competitive markets,

consumers will base their judgments of a product’s value on the prices that competitors charge for

similar products. For instance in the gasoline industry, competition-based pricing is applied.
Demand based pricing: Demand Based Pricing is a pricing method based on the customer’s

demand and the perceived value of the product. In this method the customer’s responsiveness to

purchase the product at different prices is compared and then an acceptable price is set.

One of the most appropriate ways that companies price their service is basing the price on the

perceived value of the service to customers. When consumers discuss value, they use the term in

many different ways and talk about myriad attributes or ferent ways and talk about myriad

attributes or components. What constitutes value, even in a single service category, appears to be

highly personal and idiosyncratic, customers define value in four ways:

 Value is low price

 Value is whatever I want in a product or a service

 Value is the quality I get for the price I pay

 Value is what I get for what I give

2. Pricing strategies that link to the four value definition
2.1 pricing strategies when the customer means “value is low price”

When monetary price is the most important determined of value to a customer, the company

focuses mainly on price. This focus does not mean that the quality level and intrinsic attributes are

always irrelevant, just that monetary price dominates in importance. Some of the specific pricing

approaches appropriate when customer define value as low price are:

 Discounting: Service providers offer discount to communicate to price-sensitive buyers

that are receiving value.

 Odd Pricing: It is the pricing service just below the exact dollar amount to make buyers

perceive that they are getting a lower price.

 Synchro-pricing: Ir is the use of price to manage demand for a service by capitalizing on

customer sensitivity price.

 Penetration pricing: It is a strategy in which new services are introduced at low price to

stimulate trial and widespread use

2.2 Pricing strategy when the customer means “value is everything I want in a service”

When the customer is concerned principally with the “get” components of a service, monetary

price is not of primary concern. The more desirable intrinsic attributes a given service possesses,

the more highly valued service is likely to be and higher the price the market can set
  Prestige Pricing: It is a special form of demand-based pricing by service marketers who

offer high-quality or status services. Marketing strategy where prices are set higher than

normal because lower prices will hurt instead of helping sales, such as for high-end

perfumes, jewelry, clothing, cars, etc. Also called image pricing.

 Skimming Pricing: Price skimming is a pricing strategy in which a marketer sets a

relatively high initial price for a product or service at first, then lowers the price over time. It

is a temporal version of price discrimination/yield management.

2.3 Pricing strategies when the customer means “value is the quality I get for the price I
pay”

Some customers primarily consider both quality and monetary price. The task of the marketer is

to understand what quality means to the customer and then to match quality level with price level.

Specific strategies are:

 Value pricing: Value-based pricing means setting a price customers are willing to pay

based on the perceived value to them of your product or service — not on the cost of

providing it. Pricing strategist Mark Striving of Pragmatic Pricing explains. Value-based

pricing (or value pricing) is the most highly recommended pricing technique by consultants

and academics. The basic idea is to set a price that’s based on what your customers are

willing to pay.

 Market segmentation pricing: A service marketer charges different prices to groups of

customers for what are perceived to be different quality levels of service, even though there

may not be corresponding differences in the costs of providing the service to each of these

groups. This form of pricing is based on the premise that segments show different price

elasticizes of demand and desire different quality levels.

2.4 Pricing strategies when the customer means “Value is all that I get for all that I give”

Some customers define value as including not just the benefits they receive but also the time,

money, and effort they put into a service.

 Price framing: Because many customers do not posses accurate reference price for

services, services marketers are more likely than good marketers to organize price infiltration

for customer so they know how to view it. Customer naturally look for price anchor as well

as familiar services against which to judge focal services.

 Price building: Price building is one method of determining the value of your company as

you prepare to sell your business. Price building is a valuation method that simply looks at

the hard facts: assets, leases, real estate, and goodwill (i.e., the value of the business’s good

name and reputation and demonstrated ability to consistently turn a profit). It is the amount

over and above the market value of the tangible assets on the balance sheet that a buyer

should be expected to pay for the business.

 Complementary pricing: Method in which one of the complementary products (shaving

razor, for example) is priced to achieve maximum sales volume, (without cost or profit

considerations) to stimulate the demand for the other product (razor blades). The objective is

to generate a level of profit that adequately covers losses sustained by the first product.

 Results-based pricing: In service industries in which outcome is very important but

uncertainty is high, the most relevant aspect of value is the result of the service.

Service Pricing Strategies

Service Pricing Strategies

Price is the medium for exchange of value between a buyer and a seller. It is an influencing
factor in consumer decision making, related to purchase. (K. Rama Mohana Rao).Price
represents one of the important traditional marketing mix variables, because it is only price
which generates inflow of revenues to company while all other variables are associated with a
cost.

According to D.D. Shipley and D. Jobbers, ‘If effective product development, promotion and
distribution sow the seeds of business success, effective pricing is the harvest.’ Price is a key
determinant of performance, so it is critical element in competitive strategy. Price is the measure
by which customer judge the value of an offering, and it strongly impacts brands selection
among competing alternatives. Several services used different terminology to denote price. For
example, for educational institutions, it is tuition fees; in the bank, it is interest. The concept of
pricing applicable to products applies equally to service. However, a service marketer needs to
be extra careful in approaching pricing decisions because the service characteristics have some
interfering effects. Pricing decision in services is not a matter of putting a monetary figure for the
service use. A marketer needs to be careful as to what ‘other overtones’ the price has for a buyer.
([Link]). Service companies must understood how pricing works, but first they must
understand how customers perceive price and price changes.

Following are the ways in which customer perceives services (Valarie [Link]):-

1. Customer Knowledge of Service Prices- Often the customers are not aware of cost of
service and are unable to assess price- value relationship, generally, customers use personal
reference prices. It is a price point in memory for a good or a service and can consist of price last
paid, the price most frequently paid, or the average of all prices customer have paid for similar
offerings.(K. Rama Mohana Rao).Service firm can make use of this reference price in order to
determine the price of their service but there is very uncertainty in regard to knowledge of
reference price because of following reasons:-

(i) Service variability limits knowledge-As services are variable in nature, the service firms
explore it to bring flexibility in the configuration of services. Firms offer an infinite variety of
combinations and permutations, leading to complex pricing structures. For example, in case of
life insurance it is difficult to get comparable price quote because different companies offer
different features such as life insurance or term insurance.

(ii) Providers are unwilling to estimate prices- Another reason customer lack accurate
reference prices for services is that many providers are unable to estimate the price in advance
because they do not know what services will involve until they have fully examined the client’ s
situation, e.g., in case of medical services.

(iii) Individual customers’ needs vary – Heterogeneity feature is linked with almost all the
services because services can be uniquely tailored according to customer’s needs. Each service
transaction has to have its own pricing structure, for example, in case of hair styling service.
(Harsh V. Verma)

(iv) Collection of price information is overwhelming in services- Another reason is that

customers feel overwhelmed with the information they need to gather. With most goods, retail
stores display the product by category to allow the customer to compare and contrast the prices
of different brands and sizes.

(v) Prices are not visible- In most of the services customers do not know how they are
charged or what they pay. There are many situations where the customers do not see the price at
all until after they receive certain services. For example, in case of credit card fees, customer
knows the interest rates charged, but do not know how the interest amount is calculated.( Valarie
A. Zeithaml)

2. Role of Monetary Costs-: Monetary price is not only sacrifice consumers make to obtain
services. Demand for service is also influenced by the other cost as well, such as non-monetary
cost. It represents the other sources of sacrifice perceived by consumers when buying and using a
service.(Harsh V. Verma). The types of non-monetary cost are-

(i) Time cost- It refers to the time the customer hasto spend to acquire the service, for
example, waiting time, service process time, travelling time etc.

(ii) Energy cost- It signifies the physical energy spent by the consumer to acquire the service

(iii) Psychic cost- It denotes the mental energy spent by customer to acquire the service.(R.
Srinivasan), for
example, fear of not understanding (insurance), fear of rejection (bank loans) etc.

(iv) Search cost- It refers to the efforts put in by customer in collecting the information
relating to service and service provider in order to make the correct decision.

(v) Convenience cost – Customers have to face inconvenience in order to acquire the service.
For example, service provider’s hours may coincide with customer’s time.(Valarie A. Zeithaml).

3. Prices are Indicator of Service Quality- As the services are intangible in nature, the
service customers’ bank on price to signal the service quality. Price is often used by customers in
making pre- purchase quality assessments.( Harsh V. Verma) . Apart from covering the service
cost and matching competitors, the price should also convey quality. From the strategic
marketing perspective, knowing how the customer uses the price quality cue in their decision is
critical to optimal position of the brand. If prices are too low, it might indicate low quality of
services to consumers. On the other hand, high prices may raise customer expectations on
quality. So, it should be determined carefully.

Objectives of Pricing

The first process in the pricing process is to decide the objectives of pricing. These objectives
provide company direction for action when setting prices. These should be flexible and change
over the time in tune with environmental conditions. Different objectives are-:

1. Revenue-oriented Objectives: Price is determined by considering the profit and sales

maximization objective. Price should cover both cost incurred on the provision of service.

[Link]- oriented objectives: Some service organizations are constrained by capacity.

They try to match with demand and supply in order to ensure optimum use of their productive
capacity at any given time. Services firms need to change prices frequently to match demand and
supply.

3. Patronage- oriented Objectives: Price may be used effectively to develop loyalty and
relationship with customers. Many companies now prefer patronage building to profit
maximization as a future- oriented strategic option.(Christopher Lovelock)

Approaches to Pricing

The approaches for services pricing are more or less same as that of pricing of goods. There
are three pricing approaches which a marketer can choose depending upon the market condition.
These approaches are as follows:-

1. Cost Based Pricing

It is a traditional and simple method. The company determines the expense incurred- either
direct or indirect- on production and adds a desired profit margin to arrive a price. The popularity
of this might be attributed top the simplicity of its application, the fact that is considered fair for
both customers and competitors, and the price stability that it tends to establish in an industry.
The rationale of this method is to add a percentage mark- up to cost of producing and delivering
the service.(K. Rama Mohana Rao)

The basic formula for cost based pricing is

Price = Direct Cost + Overhead Cost + Profit Margin

Here in Direct cost involved the material and labor associated with delivering the service,
overhead cost are the share of fixed cost and profit margin is percentage of full cost.

Special challenges in Cost- Based pricing for services-: Various challenges faced by
companies using these methods are:

(i) Costs are difficult to trace in service businesses, particularly where multiple services are
provided by firm
(ii) A major component of cost is employee time rather than materials, and the value of
people’s time is not easy to estimate.
 (iii) It involves defining the units in which service is purchased, which is vague entity in case
of manufactured goods.(Valarie [Link])

This approach is convenient when there is supply demand balance at optimum capacity of
firm. The firms have fluctuating demand trends cannot use this method. This method is criticized
on following fronts:

· It ignores the image and market position of the firm

· It ignores the demand- price relations

· Some hidden costs are usually forgotten. Therefore, true margins may be lower than what
are realized.

· Competitors can lower the price to win the business by having a lower cost base or lower
profit margins

· It assumes that the company will achieve the sales target to break even.(K. Rama Mohana
Rao)

2. Competition- based Pricing -: This method uses anticipated or observed price level of
competitors as a primary source for setting the price. There are two situations in which
competition based pricing is most suitable- when all the services provides offer the services more
or less of the same standard, or when the oligopoly competitive situation is present in the market.
Companies have three main choices under this approach: pricing above the competition, below
the competition or at par with the competition. The decision depends upon the extent to which
services differs from those of their competitors, the intensity of competition and the company’s
position in the market.

3. Demand based Pricing

This method is customer- oriented pricing because this approach takes into consideration the
customer’s sensitivity to non- monetary costs, the customer’s perception of the value and
customer’s acceptability of service at price. This method promotes “Value Pricing ’’concept
which uses the value that a service delivers to the customers as main factor for setting price. (K.
Rama Mohana Rao).Here in this method there is challenge to determine the value to customers
of each of the non- monetary aspects is involved. Under this method price isbased on what
customers well pay for the services provided. (Valarie [Link]).

Understanding Customer Perception of Value

In order to understand the demand based, it is imperative to find out what does a value means
to a customer. The value perception of service varies among different group of customers.
Service customers generally perceive the following important value perceptions:-

1. Low or Reduced Price is Value- Some consumers equate value with low price, indicating
that what they have to give up in the terms of money is most salient in their perceptions of value.
As money is important limitation for them in purchasing, they attach value to low price; i.e.
product with low price will have more value in their eyes. For example, value is getting discount
coupons.
 2. Value is Everything Expected in a Service- Some customers may consider the benefits
that they receive from the service as the most important component in assessing the value of the
service. As this group of people has enough money, they do not give importance to price. These
customers give value to the suitability, quality or features of services.

3. Value is Price Versus Quality Relationship- This group of customers see a tradeoff
between the money they pay and the quality of service they receive. They evaluate the
alternatives rationally and try to optimize their benefited from every transaction. [Link] is
Special Packages Offered by Company- this group of customers considers the total benefit
received and the total sacrifices made by them, including money, time, effort, when assessing the
value of services. The special packages offered by company attract these customers. They prefer
those service providers who can give more customer delivered value.

Whatever the approach, the customer relates value with benefits from the service offer. (K.
Rama Mohana Rao). Every customer will like to choose that product which provides them
highest value. The customer perceived value is the difference between the customer’s evaluation
of all benefits and all cost of an offer. It is ratio between what a customer sacrifices and what he
gets in a marketing exchange.

Customer delivered value= TCV – TCC

Here above TCV stands for Total customer value that is the sum of variables that the
customers attach to specific values in relation to a service. Following are the some of the values
consumers generally try to measure in a service

1. Core Service Value: it signifies the relevance and suitability of the service to the prime
need of the customer.

2. Supporting Service Value: Customer also assess the additional services associated with
the core service and their capacity to enhance value of the service.

3. Personal Value: The suitability of the service to the can be measure for value assessment.

4. Image Value: The corporate image and the local image of service provider influences
value perception of the customers.

5. Other Values: Consumers may perceive some additional values in such cases as
emergency, impulse and other emotional and psychological values which may be associated with
service offer.

TCV stands for Total Customer Cost is the sum of cost, monetary and non- monetary, that
customer incurs in having a service. Whereas CDV stands for customer derived value which is
the value that customer obtain over and above the cost they incur in obtaining service.(K. Rama
Mohana Rao)

Pricing Strategies Linked to Value Perceptions

As there are different types of value perception that consumer can develop in relation to
service, so service provider should adopt different types of pricing strategies against those
perceptions, while determining the price of service. These strategies are given below:-

A) Pricing Strategies When the Customer Meant ‘Value Is Low Price’: When monetary
price is the most important determinant of value to a customer the company focus mainly on
price and follows strategies given below-
 (i) Discounts: The price sensitive consumers can be lured to service through discounts or price
cuts, especially when the competition is tough and the supply of the service is more than
demand.

(ii) Psychological Pricing/ Odd Pricing: This strategy is used to influence the consumers
psychologically by fixing the price in odd numbers like INR 6999,199, and so on. The intention
is to make the customer feel that they are offered services at low prices.( K. Rama Mohana Rao)

(iii) Penetration Pricing: In this strategy in which new services are introduced at low prices
to stimulate the trial and widespread use.

(iv) Synchro- Pricing: It is use of price to manage demand for aservice by capitalizing on
customer’s sensitivity to prices. Service companies offer the low price to smooth the demand and
to gain incremental revenue, for example, loweringof the charges on telephone call after 11 p.m.
Under this strategy time, place, quantity and incentive differentials are used effectively.

B) Pricing Strategies When the Customer Means ‘Value Is Everything I Want in a

Service’: For a customer group that perceives value to be everything, following strategies are
suitable-

(i) Prestige Pricing: Prestige pricing is a special form of demand- based pricing by service
marketers who offer high- quality or status service. This strategy intends to attract premium
segments of the market. Customers attach more value to high price of the service. For example,
Membership of premium health club, luxury hotel etc.

(ii) Skimming Pricing: It is a strategy in which new services are introduced at a high price. It
is an effective approach when services are major improvements over past services. This is
suitable in case of products having a short life cycle, due to technology obsolescence.

C)Pricing Strategies When Customers Means ‘ Value Is the Quality I Get for the Price I

Pay’: Under this strategy Marketer should first understand what quality means to the customer
and then to match the quality level with the price [Link] following strategies are followed-

(i) Value Pricing: This strategy is followed to satisfy the customer who is looking for the
deal, which give the ‘more for less’. For Example, McDonald, Burger king offers buffet.

(ii) Segmentation Pricing: This strategy aims at charging different prices from different
group of customers demanding different level of service quality. The customers are likely to
perceive more value in distinctive identity.

D) That Pricing Strategies when the customer Means ‘Value Is All That I Get for All
That I Give’: This Group consists of consumers who are highly evaluative and look for
beneficiary service packages. The following strategies are suitable for this group:

(i) Price Framing: It means providing total information on pricing of various service
packages so that the customers can group the desired services at the price to place an order. A
detailed list of prices should be communicated through an appropriate media, e.g., a price
anchor.
 (ii) Complementary Pricing: Under the head of complementary pricing, the following three
closely related pricing strategies can be adopted:

· Captive Pricing: Under this pricing scheme, the service firm offers a basic service or
product and continues supplies or peripheral services that are needed. In case of a cable network
firm, the first cable connection is provided for a price or a deposit

· Two-part Pricing: Under this strategy, the price of the services is divided into two parts.
The first part may be compulsory and the second part depends on the users of the service. The
telecommunication industry adopts this pricing strategy. The rental charges and fixed no of free
calls constitutes the first part. The second part of pricing depends on the level of usage of the
service.

· Loss-Pricing Leader- The objective of this strategy is to attract a large number of customers
to the service outlet. Some supplementary services, generally, are offered at a very low price for
attracting customers to the business.(K Rama Mohana Rao)

(iii)Price Bundling: It means pricing and selling services as a group, not individually. Under
this, two or more goods or services are offered in a single package for a special price. It is of two
types which is as follows-:

(i) Pure Bundling- Two or more services, not sold individually, combined into a single
package. It is used when the combinations of goods or services is more valuable to the customer
than any of them would be independently.
(ii) Mixed Bundling- Under this two or more service, sold individually combined into a single
package. For example, banks offer several packages for their checking account customers
(iii) Mixed Leader Bundling- Under this marketer offer service B for a discount if you
purchase service A.
(iv) Mixed Joint Bundling – Under this strategy, customer is offered two or more services at
a special price. (David L. Kurtz)

Service Innovation and Design

Service innovation, as the term suggests, refers to a new and improved way of providing
customer service. Currently, it involves employing digital and technological innovations to offer
a satisfactory customer experience. The main focus of any innovation should be on making a
process easy and less time-consuming for customers.
Types
Here are the main types of service innovations classified based on their nature:
#1 – Degree Of Change
An organization might have existing service offerings in its basket. When it introduces a new
service, the extent to which it differs from its earlier service category can be either radical or
incremental. An incremental innovation can be an extension of the earlier ones. It can be an
addition to a few features. Radical innovation means an entirely new service that has no
association with what the company previously offered.
Example: Amazon entering the entertainment industry from e-commerce was a radical change
back then.
Type of change Innovations can be made in the service, process, organization, or marketing
function. This shows that innovation doesn’t have to be external or always has to reach the
customer visibly. For example, an innovation in itself is an organizational process that brings
intelligent and experienced minds into its think tank leading to service innovation. Thus, the
point of change is important.
 Example: AR-VR calibrated websites to present customers with an innovative marketing
experience.
#2 – Newness
This is probably an easily digestible classification – how new the product is to the firm or the
market. Innovation, in its most common sense, means something new. The change can exist in
the market, but the firm only adapted to it recently, or it can be the never-before-seen kind. The
former isn’t good as it makes customers feel left out and leads to the firm losing them, whereas
the latter is good and can lead to heightened customer loyalty and acquisition.
Example: Cryptocurrencies, when first introduced, were a disruptive innovation.
#3 – Means Of Provision
The provision of an offering refers to the channel through which it reaches the customers. Based
on this, the service can be an e-innovation or a p-innovation. The former uses the internet as its
medium. It is most apt in this digital era, and more and more services will take this route in the
future too. On the other hand, p-innovation uses human interaction as its medium. Though a little
outdated, it would sometimes become inevitable.
Example: During COVID-19 lockdowns, online customer service became prominent, where
technicians offered support through video calls and videos. This is an e-innovation.
Examples
Let’s take the help of some examples to understand service innovation ideas.
Example #1
Suppose BookXYZ is a book retailer. They have always managed to keep up with the new
market trends – e-books, audiobooks, etc. Recently, they launched a VR platform where
customers can experience the story in real-life using the headset. The company started by
introducing classics and bestsellers. This innovation was the first of its kind in the market and
attracted a lot of customers.
Example #2
Check out this example for financial service innovation with the 2022 ISG Provider Lens Digital
Banking Services report for Switzerland. According to the report, Swiss banks want to introduce
major digital transformations as the competition gets tough. Multinational corporate giants like
Google, Apple, Amazon, etc., offer innovative banking services, online payments, investments,
and innovative lending, all of which attract customers, especially the young, who prefer ease.
The report evaluated 27 service providers across four parameters –
(i) core modernization and integration services
(ii) technology transformational services for digital banking
(iii) banking governance, risk, and compliance services
(iv) payment and card processing services.
Benefits
These are the main benefits of service innovation:
 The profit of any firm depends on the level of satisfaction its customers or clients
experience.
 Satisfaction of existing customers brings in new customers to the firm and ensures their
loyalty. This increases the firm’s market share.
 More customers equate to higher revenue and higher profits.
 Increased cash inflow implies that businesses can spend more on research and
development, thus generating more innovations.
 It can help a business set itself apart from its competitors and become the market leader.
 Besides, innovation can help reduce wastage and costs within an organization.
 Also, an innovative environment keeps the employees active and stimulated, thus
providing the thinking ground for more ideas.
Difference Between Product Innovation And Service Innovation
Let’s understand the distinction between service and product innovation.
 Product innovation is a tangible feature. It is any physical improvement that enhances the
functionality or appearance of a product. Likewise, innovative services are intangible, thus
enhancing service offerings.
 Service innovation is important for service-based and product-based companies, whereas
product innovation is important for product-based companies and often not applicable for
service-based firms.
 Generally, product innovation is considered more expensive. This is due to the raw
material cost, manufacturing, design, research, and development expenditure involved.
Consequently, the risk involved in product innovation is relatively higher than in service
innovation. This is because it does not involve a simple algorithmic change or modifications in
human interactions.

1. Challenges of service innovation and design

Services are largely intangible and process oriented, they are difficult to describe and

communicate. Some of the main challenges that are faced in the service sector are

 Oversimplification: “To say ‘something flies’. Some people will picture a bird, some a

helicopter and some an angel”. In our modern global economy, service system have

significantly increased in complexity, often involving networks of service firms, customers,

and evolution of offering over time.

 Incompleteness: In describing services, people tend to omit details or elements of the

service with which they are not familiar.

 Subjectivity: Any one person describing a service in words will be biased by personal

experience and degree of exposure to the service.

 Biased Interpretation: No two people will define “responsive”, “quick” or “flexible” in

exactly the same way.

2. Services Innovation

Service innovation has been defined in various ways. McDonald corporations significant

restaurant redesign and menu changes in the recent years are examples of offering innovations. In

other cases service innovation is associated with new internal service processes that will make an

organization more productive and efficient.

For example, many of IBM’s current Smarter Planet initiative are aimed at transforming entire

service system, including health care, education, transportation, and government, through service

innovation.
3. Important considerations for service innovation

It is important to involve both customer and employee at various points on the innovation process.

It is also important to use a systems or design mind-set to be sure all elements are considered and

integrated.

 Involve customer and employee: Because services are produced, consumed, and co-

created in real time and often involved interaction between and among employees and

customers, it is critical that innovation and new service development processes involve bot

employees and customers.

 Employee service design thinking and techniques: Recognizing the complexities and

requirements of service innovation, the field of “service design” has emerged and is gaining

increasing attention from business practitioner, design consultants, service marketers, and

variety of academic disciplines.

4. Stages in service innovation and development

The challenges typically lie in defining the concept in the early stages of development process and

against at the prototype development stage. An underlying assumption of new product

development process models is that new product ideas can be dropped at any stage of the process

if they do not satisfy the criteria for success at that stage.

The front end determines what service concepts will be developed, whereas the back end

implements the service concepts. When asked where the greatest weakness in product and service

innovation because of its relative abstractness, which is even more apparent with intangible,

complex, and variable services than with manufactured products.

4.1 Front End Planning:

1. Business Strategy Development:

The first Step is to review the vision and mission of the company. The new service strategy and

specific new service idea must fit within the large strategic mission and vision of the organisation.

2. New Service Strategy Development:

The product portfolio strategy and a defined organizational structure for new product / service

development are critical for the foundation of success. (Possibility in terms of markets, types of

services, time horizon, profit criteria).

The framework allows an organization to identify possible directions for growth.

Offerings are some of the most common approaches.

 There should be formal mechanism for ensuring an ongoing stream of new service

possibilities.

 The mechanism may include a formal new service development department with

responsibility for generating new ideas, suggestion boxes for employees, customers, new

service development teams to identify new services.

3. Idea Generation:

Formal brainstorming, solicitation of ideas from employees and customers, lead-users researchers

and learning about competitors.

[Link] Concept development and evaluation:

After clear definition of the concept, it is important to produce a description of the service that

represents its specific features and then to determine initial customer and employee responses to

the concept.

5. Business Analysis:

Assuming the service concept is favorably evaluated by customers and employees at the concept

development stage, the next step is to determine its feasibility and potential profit implications.

This stage will involve preliminary assumptions about the costs of hiring and training personnel

delivery system enhancements, facility changes. The organization will pass the results of the

business analysis through its profitability and feasibility screen to determine whether the new

service idea meets the minimum requirements.

4.2 Implementation:

6. Service development and testing:

It involves construction of product prototype and testing for consumer [Link] this

phase, the concept is refined to the point where a detailed service blueprint representing the

implementation plan for the service can be produced.

7. Market testing:

The new service may be offered to employees of the organization and their families for a time to

assess their responses to variations in marketing mix. At this stage, pilot study has to be done for

the service, to be sure that the operational details are functioning smoothly.

8. Commercialization:

At this stage, the service goes live and introduced to the market place.
  The first is to build and maintain acceptance of the new service among large numbers of

service delivery personnel who will be responsibility day-to-day for service quality.

 To monitor all aspects of the service during introduction and through the complete service

cycle.

9. Post introduction evaluation:

At this stage, the information gathered during commercialization of the service can be viewed and

changes made to the delivery process, staffing or marketing –mix variables on the basis of actual

offering to the market response.

5. Service Blueprint

A service blueprint is a picture or map that portrays the customer experience and the service

system, so that the different people involved in providing the service can understand it

objectively, regardless of their roles or their individual point of view.

Service blueprints give an organization a comprehensive understanding of its service and the

underlying resources and processes — seen and unseen to the user — that make it possible.

Focusing on this larger understanding (alongside more typical usability aspects and individual

touchpoint design) provides strategic benefits for the business.

Blueprints are treasure maps that help businesses discover weaknesses. Poor user experiences are

often due to an internal organizational shortcoming — a weak link in the ecosystem. While we

can quickly understand what may be wrong in a user interface (bad design or a broken button),

determining the root cause of a systemic issue (such as corrupted data or long wait times) is much

more difficult. Blueprinting exposes the big picture and offers a map of dependencies, thus

allowing a business to discover a weak leak at its roots.

Tips for Businesses to Increase Customer Value
1. Evaluate your customer experience. Make it convenient for the customer to buy, and
provide options in how the customer wants to buy and pay.
2. Focus on more than price. Reduce the price, or don’t, but provide something extra over
the competition (this could be improved service, better attention, community, improved quality,
warranties, and other add-ons to the product or service).
3. Collect customer data. Consider surveys, focus groups, observation, trends analysis,
buying behaviour, needs/wants, and preference history.
4. Target your most loyal customers. Keep these customers by providing the benefits that
bring them value.
5. Segment your customer base. Different segments have different needs for different
benefits.
Physical Evidence
 Physical evidence is to a service what the product package is to a product. Physical evidence is
everything that a company physically exhibits to the customer. It includes the physical
environment of the service outlet, the exterior, the interior, all tangibles such as machinery,
vehicles, stationery, service personnel and so on. It is often referred to as environment that
facilitates the communication of the service. (K. Rama MohanaRao)

Customers often rely on tangible cues or physical evidence to evaluate the service before its
purchase and to assess their satisfaction with service and after consumption. (Valarie A.
Zeithaml)
Elements of Physical Evidence
Servicescape Other Tangibles

Facility Exterior Business Card

Exterior Design Stationery

Signage Billing Statement

Parking Report

Landscape Employee Dress

Facility Interior Uniform

Interior Design Web Page

Equipment Brochures

Layout Virtual Servicescape

Temperature

Lightning

The elements of physical evidence can be broadly referred to as physical environment of the
service unit and other tangibles. They include all the aspects of organizations physical facility
(Servicescape) as well as other forms of tangible communication. (Valarie A. Zeithaml)

Concept of ServiceScape

The concept of servicescape was first developed by [Link] and M.J. Bitner. They defined
servicescape as“the environment in which the service is assembled and in which seller and
consumer interact combined with tangible commodities that facilitate the performance or the
communication of the service.” The design of servicescape should take into consideration two
important aspects: spatial layout and functionality, and aesthetic appeal. Spatial layout and
functionality refers to the ways in which seats, equipments, furnishings, and entrances, and exits
are designed and arranged. Aesthetic Appeal refers to factors such as surrounding, external
environment, cleanliness, and upkeep of facilities etc. that influence customer perception and
evaluation. ([Link] MohanaRao)

Types of Servicescapes

Service Companies design servicescapes based on the nature of the interaction required for the
service production and delivery. Based on usage servicescape can be classified into three types:-
 1. Self- Service: These services are dominated by customer presence in the servicescape and
their actions. The customers acquire service on his or her own. ATMs, fast-food centre, and
movie theatres are the examples of the self-service environment. The creation of physical
environment must focus on customer needs. The customer must find the facility attractive, easy
to use, and emotionally satisfying. (Harsh V. Verma)

2. Interpersonal Services: In this type of servicescape both employees and customers are
given adequate importance. The examples of these services include restaurant, hotel, health
clinics, banks and airlines. The servicescape should contribute to social interactions between and
among customers and employees. (K. Rama MohanaRao)

3. Remote Services: In these services only employees perform the action in service scape
as these services are used by the customer from the distance. The example of remote services
includes telephone, insurance, utility services and mail order. The servicescape must pay
attention to their needs, efficiency, motivation and satisfaction.

Objectives and Goals of the Servicescape

The objectives of servicescape vary depending on whether service firm’s primary focus is on
customers, employees or the firm itself. The servicescape objective of the firm operating in the
cost-efficiency operational sector is to reduce costs and increase productivity.

1. Focus on Customers: If the servicescape is designed to focus on the needs of customers,

then the service company has three primary goals it will want to accomplish with the
servicescape: customer attraction, customer satisfaction, and customer retention.

2. Focus on Employees: If the firm has chosen technical service quality, the primary goal of
the servicescape is to focus on the needs of service employees, including employee satisfaction,
employee motivation and employee operational efficiency. If employees are happy with the
servicescape in which they work; they will produce a higher level of service.

Although customer needs must be met, the emphasis on facility design with this approach is
toward employees.

3. Focus on the Firm: Firms using this cost-efficiency operational approach will want to
design their physical facility to focus on the needs of the firm. The objective of the physical
design is to provide optimal cost efficiency and productivity. (David L. Kurtz)
 Dimensions of Servicescape

Service companies often introduce changes in physical surroundings to create an impression of

newness but many companies initiate these changes without properly understanding the impact
of changes in design of servicescape on the ultimate user of service facility. Critical analysis of
various dimensions and strategic approach is necessary to design servicescape to achieve desired
result. These dimensions are explained as follows:-

A) Ambient Conditions: Ambience represents the surrounding atmosphere of a servicescape.

Ambient conditions affect customers and employees physiologically. These factors include
things such as temperature of a facility, noise, music, air quality and odors. These conditions
impact one of the five senses. These are explained as follows:

(i) Temperature- The temperature that exists in service environments has the capability to
influence behavior in a air- conditioned environment both employers and customers feel
comfortable. In a known air – conditioned environment, seasonal influences on temperature
affect the behavior. In summer, the temperature will be above normal and during winter is below
normal in many parts of India. The variations in temperature create inconvenience to consumers
and employees. It influences the approach, stay, waiting and also social interactions.

(ii) Quality of Air- The quality of service interaction will be greatly influenced by the quality
of air. No smell, foul smell, dust and fresh air will attract different reactions from the people. An
assurance of pollution free air can also become selling proposition for service companies.

(iii) Noise– The noise level ranging from absolute silence to high-decibel sounds will have
the influence on the behavior. Noise may be internal or external. If the noise is internal, but
unavoidable, care must be taken to reduce the effect by using sound- proof material or keeping
the customer contact point away from the generator place. If it is from outside, it is better to
avoid such a location, or to use sound- proof material to minimize the disturbance. Noise and
loudness of sound have usually been perceived as irritating and annoying. Two components of
sound are volume, which relates to amplitude or height of sound waves, and pitch, which is the
frequency of sound waves. Loudness is perceived as negative stimulation, especially when the
sound is unexpected or is subjectively perceived as undesirable. Too much sound may result in
decreased concentration, increased activity, irritability and tension.

(iv) Music-Music is a very powerful stimulator of feelings in human beings. People have
different in music. Some like classical, some like western, some like old, and some like new. If
music is arranged, while taking into consideration the preferences of the customer groups,
positive behavior can be expected. In a servicescape, guest takes note of music and noise as
auditory components of their evaluations. Studies on music and consumer behavior have
demonstrated that music can be used as an effective tool to minimize the negative consequences
of waiting in every service operation.

(v) Smell- Different likings as far as smell is concerned a right combination makes the
environment pleasant.

(B) Signs, Symbols and Artifacts: Sign boards’displays on the exterior poor interior
provide explicit communication. This can be used to communicate rules, directions, cautions,
processes, layout details and so on. Signs provide relief to such customer who are poor
communicators or are not comfortable interacting with others. Sign can also be used to reduce
perceived crowdingof physical structures at work. The quality of materials used in the
construction of physical structures at work, the presence of certificates and photographs, the
floor coverings and architectural values communicates symbolic meanings and create an
aesthetic impression. Signs, symbols and artifacts influence the formation of the first impressions
of the customers. Sign boards displayed on the exterior or interior provide explicit
communication. When customers are not familiar with the service environment they look for
environmental clues for initial help. ([Link])

C) Space and Functional Conditions: The living space and functional support facilities
form an important part of the servicescape. Following are the influencing factors with regard to
the space/ function on the behavior of the employees and customer.

(i) Layout and Design– The layout should be spatial which refer to the ways in which
machinery, equipment and furnishing are arranged and the size and the shape of those items and
relationship among them.

(ii) Equipments- Service firm should acquire such equipment that facilitate accomplishment
of customer and employee goals. These should be customer friendly.

(iii) Furnishing-The provision of furnishing their quality and maintenance has an impact on
the behavior of the people who use them.

([Link] servicescape)

(iv )Color- Color influence the moods, emotions of the service consumer and thereby their
attitude toward the service and their perceptions of the service experiences. So the color must
pervade every aspect of our lives, give beauty and drama to everyday object.
 (v) Lighting- Lighting provides cues for defining and perceiving the quality of space and
influence consumer’s awareness of physical, psychological and spiritual aspects of servicescape.
(K. Rama MohanaRao)

D) Interpersonal Conditions: These conditions create either cognitive or affective responses

which in turn to lead to specific behavior. These include:

(i)Employee Appearance and Behavior– The appearance of employees will often affect the
customer’s cognitive beliefs about the quality of the service they will receive. The employee
moods and behavior impact customer.

(ii) Impact of Crowding– Crowding normally produces negative reaction and avoidance
behavior. The customer perceptions of crowding are affected by shopping motives,
environmental cues, constraint and expectations of crowding.

E) Location: When choosing a site location services must examine six criteria which are as
follows:

(i) Operational Position– Firms using cost efficiency approach must locate business where
they can generate high volume of customer traffic whereas firm using customization approach
will locate the business where they can obtain prestige and image that will impress their
customers.

(ii) Merchantability- It refers to distance from which customer can make a transaction with a
firm. Service high in merchantability can be conducted without the customer being physical
present.

(iii) Traffic Inspection– It refers to the type and volume of both vehicular and pedestrian
traffic that passes the business. Service businesses that rely on volume must be located where
large numbers of vehicles or pedestrians pass their facility.

(iv) Competitive Compatibility–It refers to the degree that businesses interchange customers.
The more businesses interchange customers the greater the benefit of being in complementary
cluster with other businesses.

(v) Accessibility– It refers to ease; potential buyers have in approaching, entering and exiting
the service business. (David L. Kurtz)

Role of Physical Evidence in Services Marketing

In services marketing, physical evidence plays a definitive role in influencing the perceptions
of customer and employees by exposing them to the critical objects of servicescape. The role of
physical evidence is as follows:-

1. Shaping first impression: Consumer form initial impression once they are exposed to the
exterior and the interior of service outlet. The first flash quickly creates an impression on the
service provider. Such first impressions condition the mind and influence perception of situation
that follows in service process.

2. Managing trust: Physical Environment and the tangibles used in service processes stand as
clues to consumers. The positive clue will clarify the doubts of the consumers and build the trust.
The consistency in the quality of the physical settings will help in managing the consumer trust.
 3. Facilitating quality of service: A good servicescape facilitates employee-customer
participation in the service production, delivery and consumption process.

4. Changing the image: A change in the physical environment has potential to change the
image of the service outlet and the service provider. The up-scaling of facilities and structure like
conversion of non A/C to A/C, new dresses to contact employees, new machines etc. contributes
for the change of the image of the service provider.

5. Providing sensory stimuli: The aesthetics of the service environment has potential to
stimulate the senses. Such stimulations support the customer in participation of service
production and in quality perception.

6. Socializing employees: Many services need employee-employee cooperation and

coordination in creating quality experience to customers. Servicescape facilitates employee
interactions formally and informally and helps in developing social bondage among them. (K.
Rama MohanaRao)

Framework for Understanding Servicescape Effects on Behavior

Although it is useful from the strategic point of view to think about the multiple roles of the
servicescape and how they interact making actual decisions about servicescape design requires
an understanding if why the effects occur and how they manage them. The framework for
understanding servicescape effects on behavior follows from basic stimulus-organism- response
theory. In the framework multidimensional environment is stimulus, consumers and employees
are organisms that respond to the stimuli and behaviors directed at the environment are the
responses. The assumptions are that dimensions of the servicescape will affect customers and
employees and that they will behave and respond in different ways depending on their internal
reactions to the servicescape. The use and design of servicescape and interaction of customers
and employees provide profound effects on the behaviour relationships in service industry. One
of the major applications of this model is consumer behaviour. The framework includes
following elements (Valarie A Zeithaml):-

I. Internal Responses: Servicescape do not influence behavior directly rather, physical

environment influences behaviour through internal states that are caused by it. The employees
and the customers respond to environmental dimensions cognitively, emotionally and
physiologically. It is these states that in turn affect behaviour. Internal responses further consist
of three types which are as follows:-

1) Cognitive Response–These responses are the thought processes and the beliefs of
individuals. Firm’s physical environment act as non- verbal communication and helps the
customer to form the belief regarding the quality of the service. Employees too form their beliefs
on the basis of servicescape and their layout.

2) Emotional Response– Emotional Responses are without thinking, they just happened.
Physical evidence of the service provider must stimulate positive and pleasing emotions that can
create an environment where customers wish to come and spend their money; and employees
love to work.

3) Physiological Response– Physiological Responses are linked with physical comfort and
pleasure. Physical Environment should be friendly and comfortable.

II. Behavior in Servicescape: Physical spaces and designs put great effect on consumer
behavior. This part involves two aspects which are as follows:-
 1)Individual Behavior– Individuals react to places with two general, and opposite, forms of
behavior: approach and avoidance. Approach behaviors include all the positive behaviors that
might be directed at a particular place, such as desire not to stay, explore, work, and affiliate.
Avoidance behaviors reflect the opposite. The physical settings can influence the perception of
the consumer and the ability of the employees to do their job effectively.

2)Social Interactions– In addition to its effects on their individual behaviors, the servicescape
influences the nature and quality of customer and employee interactions, most directly in
interpersonal services. It has been stated that all social interaction is affected by physical
container in which it occurs, in terms of the duration of interaction and the actual progression of
events. (Valarie A. Zeithaml).

Guidelines for Physical Evidence Strategy

Physical evidence management is crucial for the success in service business .It has powerful
impact on employee and consumer behavior. Some of the guidelines for effective physical
evidence are as follows:-

1)Recognize the strategic impact of physical evidence: For an evidence strategy to be

effective it must be linked clearly to the organization’s overall goals and vision. Thus, planners
must know what those goals are and then determine how the evidence strategy can support them.

2) Map the physical evidence of service: Everyone should be able to see the service process
and the existing elements of the physical evidence. An effective way to depict the service
evidence is through service map, or blueprint.

(i) Clarify the strategic role of servicescape– Physical evidence is not equally important for
all kinds of services. In some services, physical evidence management offer more opportunities
and challenges while in others it is much less.(Harsh V. Verma )

(ii) Assess and identify opportunities– Once the current forms of evidence and the roles of the
servicescape are understood, possible changes and improvements can be identified.

(iii) Update and modernize the evidence– The physical evidence cannot be created to last
forever. With changing market conditions and customer requirements, the servicescape needs to
be changed.

(iv) Work cross –functionally–A multifunction team approach to physical evidence strategy is
often necessary, particularly for making decisions about the services cape. (Valarie A. Zeithmal)

WHAT IS SERVICE DELIVERY?

Service delivery is a business idea and framework, the main goal of which is to provide services
from a vendor to a customer. This includes the regular interactions between the two parties
throughout the entire process of the business supplying the service and the client purchasing it.
This includes the initial interaction, onboarding, set up, and any follow-up interactions.

WHY IS SERVICE DELIVERY IMPORTANT?

When a business has neither the capacity nor the skills to perform a certain service, they
outsource this work.
Service delivery is so important because it helps to bridge the gap between a business or an
individual not having the means to perform a task, and a service provider looking to sell their
product. Companies can tailor their service delivery to meet the needs of each customer either
through price or function. Companies who engage in efficient, customer-focused service delivery
may also be able to distinguish themselves from the competition by providing a higher quality
service. Read our guide on what you need to know about service delivery in 2023.

TYPES OF SERVICE DELIVERY EXAMPLES

There are a wide range of industries that provide a multitude of service delivery that cover many
products. Some of these service delivery examples are shown below.

Consultancy / Professional Services Delivery

A consulting service that businesses provide could be anything from business turnaround to IT
consultancy. They help a wide array of businesses that need it, and can bring in unique expertise
and skills that the customer does not usually have access to. A key benefit of a consultant is that
they can often provide a view from the outside of the company, and give unbiased advice, two
things which the customer may not see due to the fact that they are too close to the business.

Support Services Delivery

An effective customer support service involves assisting customers during both the pre and post-
sale journey. Any issues customers run into or any questions they have, your support team will
be on hand to provide answers and help them understand your product better. While your support
team is crucial to the success of your customers with your product, the way in which your
support can be delivered can go beyond your team.

Video guides, FAQ’s, and knowledge pages all serve as support materials your customers can
use to get the most out of your software. Concise, easily digestible support content at your
disposal can sometimes be just as crucial as your actual team because much of this external
support can be used at any time, completely eliminating office hours or long virtual queues.
Ensuring this content can be accessed easily by your customers is another important step, as
delivering these services should be as easy as possible for those who are looking for it who may
be facing existing issues with the software, and need no further hassle when looking for the
material to aid them.

Onboarding Services Delivery

Onboarding is the first opportunity to create a great and truly memorable customer experience.
You only get one chance to make a good first impression and this is that chance!

Unfortunately, many companies don’t instill a solid onboarding into their culture. In many cases,
just one person will cover multiple roles, aiming to satisfy the demands of Support, Account
Management AND Customer Onboarding. This is not a future-focused strategy and will
eventually succumb to the weight of demand. Keeping customer success at the heart of the
business goals will allow onboarding to take its rightful place in your organization’s strategy.

How an effective customer onboarding strategy is delivered can have many steps to it. A
dedicated onboarding team is where you should begin. No more thinly spread team members
who are trying to do three jobs at once. An onboarding team will be able to guide each new
customer through the whole process, with a more personalized approach.

Another key aspect of delivering a great onboarding service is to utilize onboarding playbooks.
This provides you with a repeatable process that the team can follow for every new customer,
guaranteeing consistency and creating the ideal customer experience.