Chapter four

Marketing Mix strategies for services

The services marketing mix is an extension of the 4-Ps framework. The essential elements of product,
promotion, price and place remain but three additional variables – people, physical evidence and process – are
included to 7–Ps mix. The need for the extension is due to the high degree of direct contact between the CE
providers and the customers, the highly visible nature of the service process, and the simultaneity of the
production and consumption. While it is possible to discuss people, physical evidence and process within the
original-Ps framework (for example people can be considered part of the product offering) the extension allows
a more thorough analysis of the marketing ingredients necessary for successful services marketing.
1. The service product
Product in the marketing context is anything which offered to the market to satisfy the need of customers. in the
context of service it is benefit which offered to the target market . There are two important things to note.
Firstly, Service is bundle of features and benefits and secondly these benefits and features have relevance for a
specific target market. Therefore while developing a service product it is important that the package of benefit
in the service offer must have a customer’s perspective.
Kotler has identified five level of product
i. Core benefit ; the fundamental benefit or service the customers is buying (e .g hotel ; room –sleep or
rest
ii. Basic product ; basic , functional attributes ( hotel ;Room , bed, bath )
iii. Expected product; set of attributes / conditions the buyer normally expect (clean room, large towel,
quietness)
iv. Augmented product; that meet the customers desire beyond expectation (prompt room service and
check in /out, music, smell )
v. Potential product; the possible evaluation to distinguish the offer (all suite of the hotel i.e a set of
instrumental places especially dance intended to be performed together.
1.1 Developing new service offering
In order to develop a service product as a manger you will have to follow the following stages
A. The customer benefit concept : The service product which you offer in the market place must have its
origin in the benefit which the customers are seeking or their expression of the service .
E.g. A centres for the performing Arts may offer Entertainment and Recreation
B. Service concept: using the customer benefit as the starting point, it defines the specific benefit which the
service offers. defining the service concept helps answer the fundamental question , “WHAT BUSINESS
WE IN”. E.g. but within the board framework there can be specific choices path for satisfying the
entertainment objectives such as Drama, Musical Concert, Poetry recreation , Dance
C. Service offer ; the next step is to give a specific shape and form to the basic service concept.
e.g in the category of musical concert the choice may be Vocal or Instrumental with vocal whether light or
classical.
D. Service form ; is answer in what form should the service be made available to the customers. it refer the
various options relating to each service element. e.g. should all the show of the centre be available in
package deal against a yearly membership fee or seasonal ticket ? Should there be daily ticket with the
consumer having the freedom to watch any one or more performance being staged on that particular day, or
should each performance have a separate entrance ticket.
E. Service Delivery System; when we go to your bank to withdrawal money from your Account , you either A
Cheque or A withdrawal slip in which you fill all the particulars and hand it over to the clerk, who after
verifying the details , give you money. the cheque or withdrawal slip and the clerk constitutes the delivery
system.
2. Pricing
In service, different terms are used for different service;
Terminology Service
Admission Theatre entry
Commission Brokerage Service
Fee Legal service
Interest Use of money
Premium Interest
Salary Employee service
Tuition Education
Rent Property usage
 A. pricing and service characteristics
In determining the price of service, different service characteristics have impact , these are
I. pershiablity ; fluctuation in demand cannot be meet though inventory .Hotels and Airlines offering low rates
in off-season are example of how pricing strategy can be used to offset the perishable characteristics of
service.
II. Intangibility; the higher the intangibility, the more difficult it is to calculate cost and greater tendency
towards non- uniform service, such as fee of Doctors, Management consultancy, Lawyer. In such case the
price may sometimes be settled through negotiation between the buyer and seller. on the other hand in
service such as Dry cleaning , the tangible component is higher , and the service provided is homogenous .
It is easier to calculate the cost on a unit basis and have a uniform pricing policy. In general the more unique
a service, the grater the freedom to fix the price at any level. Often the price may be fixed according to the
customer’s ability to pay. In such case price may be used as an indicator of Quality.
III. The prices are subject to regulation either by the government or by trade association .bank charges,
electricity and water rates, air transportation. it helps to avoid undercutting and to maintain quality
standard. in such case , the producers has no freedom to determine his/ her own price.
B. pricing strategy
The two methods which service organizations may use to determine price are;
1. Cost based pricing; the price may be regulated by government or industry associations on the basis
of the cost incurred by the most efficient units. Such pricing strategy is effective in restricting entry
and aiming at minimum profit target.
2. The market oriented pricing; price may either be a result of the compotator or customer –oriented . It
vary according to the customers ability to pay.
C. The non –monetary cost
is the sacrifices perceived by the consumers’ , other than monetary cost when buying and using a
service .includes
I. Time cost; because services are inseparable most of them would require direct participation of the
consumers, i.e. .they involve time. The time required by a consumer would include actual time of
interaction with the service providers, travelling time when required as well as the waiting time.
II. Search cost; these involve the effort put in by the consumer in searching information, finding out
alternatives and evaluating them. it was highest when we compare with goods because service
being rich in experience and credence quaiies are rarely displayed on shelves in service outlets for
customers to evaluate them. Also in many service it is difficult to know the price in advance.
 III. Psychic costs; these include fear of not understanding or fear of rejection or fear of uncertainty.
e.g. while Appling for a bank loan the customer has fear of the loan application being rejected. at
time , customer may find the service product difficult to understand like various options in life
insurance or difficult to use like ATMs , on line trading .
D. pricing strategies
1. Differential or flexible pricing; used to reduce the “pershiblity “characteristics of service iron out the
fluctuation in demand. it implies charging different price according to ;
a. customers ability to pay differentiation ( as in professional services of management consultants,
lawyers),
b. price time differentiation(used in hotels, airlines, telephones where there is concept of season , off
season and peak season.
c. place differentiation; used in rent of property – Stadium seat pricing(mismar tera ticket are less
expensive VIP seat and house in better located colonies command high rent.
2. Discount pricing; refers to the practice of offering a commission or discount to intermediates such as
advertising agencies, stock brokers, property deals for rendering a service. It may also be used as a
promotional device to encourage use during low – demand time slots or to encourage customers to try a
new service (such as introductory discount).
3. Diversionary pricing; refers to low price which is quoted for a basic service to attract customers.
Restaurant may offer a basic meal at a low price but one which includes no soft drink or sweet dish. Once
the customer attracted because of the initial low price he/her may tempted to buy a drink or an ice –cram
or an additional dish. Thus he/she may end up buying more than just the basic meal.
4. Guaranteed pricing; refers to pricing strategy in which payment is to be made only after the results are
achieved. Employment agencies charged their fee only when a person actually gets a job, a property
dealers charges his/ her commission only after the deal is actually transacted.
5. High price maintenance; is used when high price associated with the quality of the service. Many doctors,
lawyers and others professional follow this pricing strategy.
6. Loss leader pricing ; is one in which intial low price is charged in the hope of getting more business as
subsequently better prices. The danger is that the initial law price may become the price for all times to
come.
7. Offset pricing. Is which a basic low price is quoted but the extra services are rather highly priced. a
gynaecologists may charge low price fee for nine months of pregnancy through which she regularly
checks her patient , but many charge extra for performing the actual delivery and post – delivery visits.
 3. Place / distribution
the most important decisions elements in the distribution strategy are related to
a. location of the service ; in deciding to locate your service , you should rise questions like
 How important is the location of the service to customers? Will an inconvenient location lead to
purchase being postponed or being taken over by competitor? In case of dry cleaning, convenience is
critical but in case of service provided by doctors and beauty parlours where customer’s involvement
with the provider of the service is very high and the decision is made on the basis of reputation,
competence and past experience.
 Is service, technology –based or people based? How flexible is the service ? can the equipment and
people be moved to another location without loss in quality.
 How important are complementary service to location decision? e.g. Garages and mechanic shops
located next to petrol stations.
b. Whether to sell directly to the customers or through intermediaries; in case of services which are
inseparable from the performer direct sale is best, in case of service like life insurance though
middlemen.
c. How provide the service to a maximum number of customers in the most cost effective manner.
III.1 methods of distribution in service
1. direct sale ; it helps in maintain better control over how the service is provided or performed and also
helps to in obtaining direct feedback from customers. On the other side there is a problem in this
method on expanding the business and coping with high workload, also limited in geographic market
coverage.
a. electronic channels helps to
 consistence delivery for standardized services
 low cost , customer convenience and wide distributions
b. Franchising; is the granting of right to another person or institution to exploit a trade name, trade
mark or product in return for lump-sum payment or royalty.
c. quasi retailing ; sell service than goods like travel agency , car hire agencies,
restaurants ,employment agencies
2. sales via intermediaries (indirect);
a. agent; is an independent intermediary , who may act in the name of or for a principal
b. Brokers; is an independent intermarry b/n buyer and seller, who bring parties together to
facilitate the conclusion of sales contract.
 These two intermediaries have advantage on ;
 reducing selling and distribution cost
 possess special skills and experience
 wide representation
 knowledge of local market

But also have disadvantage on;

 loss of control over pricing other aspect of marketing
 Representation of multiple services principal.
4. promotion
Objectives of service promotion;
 develop personal relations with client(personal relations might result in satisfaction , more that their
service offer)
 make a strong impression of competency , honesty and sincerity (professional orientation to service
transaction so as to win buyers confidence in sellers abilities to deliver the service)
 Should able to use indirect selling techniques (creating derived demand or act as a buying
consultant).
 Manage to maintain a fine image by positive word of mouth.
 Packaging and customization.
4.1 promotion mix
A. Advertising: any kind of paid non-personal method of promoting by identified organizations or individuals.
it helps to provide information about the service usage and attract more customers . while you use
advertising you need to kept in mind.
 use simple , clear message
 emphasise the benefit of the service
 promise only that which can be delivered and do not exaggerate
 build on positive word of mouth communication by using testimony of actual consumers in
advertisement
 Provide tangible clues to service by using well –known personalities or objects to help customers
identify the service.
B. publicity ; there are very successful example like A medical doctor specializing in eye care running his
own clinic –cum-nursing home and organizing free eye camps in all over the region . This community
 service not only spread his name but also proved his competence. The local newspapers might carry stories
about such camp to give further boost to the promotion.
C. Word of mouth; service being rich in experience qualities , it plays an important role in prompting services.
Given below are some suggestions for stimulating a positive word of mouth (apart from providing
excellent service quality).
 Offering a gift, discount or other reward to customers who bring in new customer.
 Asking customers who express satisfaction, to tell their friends.
 Running a newsletters, stories or ideas.
 Reward your regular customers with some freebie(give something to customers without payment).
 Target opinion formers.
Extended marketing mix for service
Reason for the need to have additional marketing mix in service marketing
I. the traditional marketing mix was developed for manufacturing industries
II. marketing practitioners in the service sector found that the marketing mix do not address to their
need
III. The marketing models and concepts have to be developed in the direction of the services sector.
5. people
All human actors who play a part in service delivery and that influence the buyers perception ,namely
the firm personnel( performers of service) and as customer.
A. service personnel’s : “customers see a company though its employee”
Service personnel are important in all organizations but more so in an organization involved in
providing service. As a marketer manager you have to be concerned with ways in which you can
improve the quality and performance of your service personnel.
this can be done :
 careful selection and training of personnel
 laying down norms ,rules and procedures to ensure consistent behaviour
 ensuring consistent appearance
 Reducing the importance of personnel contact by introducing automation computerisation
wherever possible. .
B. Customers: are important because they are source of influencing other customers. In the case of
doctors, lawyers’, consultants one satisfied customers will lead to a chain reaction, bringing in his
/her wake a number of other customers. This as a marketing manager, your first task should be to
 ensure complete satisfaction of the existing customers. In addition to this those different kind of
customers also disturbs to each other. for example when we take the hotel service it may provide
different service for different kind of customers like those we need dinner service with slow music
on one areas within that hotel, and other who need entreating with hot dancing and seeing hot music
on the other area, so if the hotel mangers manage all the hotel customers they may disturb to each
other.
6. physical evidence
The common element in these is that all physical, tangible and controllable aspects of a service
organization. There may be two kinds of physical evidence:
A. periphereral evidence
B. Essential evidence.
A. periphereral evidence
Is actually possessed as a part of the purchase of service but by itself is of no value. For example an
Air Ticket, A cheque book, or Receipts for confirmed reservation in hotel. It adds on to value to the
value of essential evidence. Because A cheque book is of value only if you have money in the bank.
On the other way in a hotel you may find a matchbox, writing pad, pen, complementary flowers and
drinks, which you may take away. Such evidence must be designed keeping in mind the overall image
which the organization wish to project and the reminder value of the evidence in its ability to remind
the customer about the organization.
B. Essential evidence
Whereas peripheral evidence is possessed and taken away by the customers, the essential evidence
cannot be possessed by the customers: for example
 the building,
 its size and design
 interior layout and decor
 logo , equipment etc
You can use physical evidence for two purposes
 to build a strong association in the customer mind
 to differentiate your service from the competitor
as a marketing manger it is your responsibility to manage the physical evidence in order to
create ideal environment .for your service ;
A. by making the service more tangible , these can be done through
  Developing a tangible representation of the service as is done in the case of credit
card. Credit cards have a physical entity and are identifiable by their brand name
(American express, Visa etc) and distinct looks of the card.
 Standardizing the physical attributes such as location, interior decor, colour,
scheme, etc e.g. Most air lines use a uniform for all staffs to help to create a sense
of identification.
B. By making it easier for the customers to grasp the concept of the service. though
 Present the service with easily perceived objects and ideas.
 Stressing the organization and customer relationship.
7. process

In the service organization the system by which you receive delivery of the service constitutes
the process. It is in general deals with the actual procedure, Mechanisms, and flow of activities
by which the service is delivered, or the delivery and operating system of the organization. As
marketing manager you need to manage the process to:
 assesses service availability
 assesses consistent quality
To do so, the following issues must be given due attention I.e.
1. Process planning and control: operation specification to achieve service output in terms of
quantity, quality, delivery and costs.
2. Operation planning: detailed specification of each sub systems.
3. Facilities design: design, layout, location, materials handling, and maintenance.
4. Scheduling; detailing the timing at which the service operation should be completed by agreed
delivery promises within available resources and with their economic utilization.
5. Inventory planning and control: planning and controlling the inventory of people and capacity.
6. Quality control: quality standards are attained in each service system.
7. Operation control: information flows into and out of service systems and ensures that operations
are undertaken at specific tunes as per schedule.
8. Forecasting and long term planning: anticipating demands and forecasting capabilities that need
to be induced in the system.
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