Service Marketing

Unit 1
• The American Marketing Association defines services as -
“Activities, benefits and satisfactions which are offered for
sale or are provided in connection with the sale of goods.”
CHARACTERISTICS OF SERVICES

• Intangibility
• Heterogeneity/Variability
• Perishability
• Inseparability/Simultaneity of production and consumption
Importance of Marketing of Services
• A Key Differentiator
• Importance of Relationships
• Customer Retention
• Helps in Building Relationships
• Offers Higher Customer Retention
• Technology Impact
• Assists in Affecting Customers’ Perception
Reasons for The Growth of Services In India
• 1. Economic affluence
• 2. Changing Role of Women
• 3. Cultural Changes
• 4. I.T. Revolution
• 5. Development of Markets
• 6. Health-Care Consciousness
• 7. Export potential
TYPES OF SERVICES
• Business Services
• The services used by business organizations to conduct activities are known as
business services.
• Social Services
• The services provided by an individual or a group of individuals voluntarily
for the accomplishment of some social goals are known as social services.
• Personal Services
• The services that give different customers’ a different experience are known as
personal services.
• Types of Business Services
• Banking
• Commercial banks play an essential role in an economy by providing their
customers with institutional credit. These commercial banks transact the
banking business
• Insurance
• Insurance services involve facilitating the companies with insurance for their
business. In simple terms, insurance companies sign an agreement with
companies, charge a premium fee, and then transfer their risk to themselves.
• Transportation
• Transportation refers to the transfer of people, goods, raw materials, etc., from
one place to another.
• Warehousing
• Warehousing means storing goods, materials, etc., in a scientific and systematic
manner.
• Communication
• Communication is the process of creating a common understanding amongst
people by exchange of messages through different sources.
Difference Between Services and Goods
CHALLENGES AND ISSUES IN SERVICE MARKETING

Tangibility

Relationship and Value

Service marketing mix
1.Product
2.Pricing
3.Place
4.Promotion:
5.People
6.Process
7.Physical Evidence
 Elements of the Marketing Mix
1.Product :-
• Product design
• Product positioning
• Product name and branding
• Packaging and labeling
• Breadth and depth of product line
• Level and type of customer service
• Product warranty
• New product development process
• Product life cycle strategies
2. Price :-
• Manufacturer, wholesaler and retailer selling prices
• Terms and conditions
• Bidding tactics
• Discount policies
• New product pricing (Skim Vs. Penetrating pricing)

3. Promotion (marketing communications) :-

• Advertising
• Sales force policies
• Direct marketing (mail, catalog)
• Public relations
• Price promotions – for the consumers and the channel
4. Place (distribution channels) :-
• Direct Vs. Indirect channels
• Channel length
• Franchising policies

5. People :-
• Employees - Recruiting - Training - Motivation - Rewards – Teamwork
• Customers - Education- Training
6. Physical evidence
• Facility design
• Service ambience
• Equipment
• Signage
• Employee dress
• Point-of-sale displays
• Other tangibles (e.g. business cards)

7. Process :-
• Flow of activities
• Service script (number of steps)
• Customer involvement.
Market Segmentation
• Market segmentation - It is the process of dividing the total
heterogeneous market into a small group of customers who share a
similar set of needs and wants and hence represent a homogeneous
group.
• "Market Segmentation is subdividing of a market into distinct and
increasing homogeneous subgroups of customers where any group can
conceivably selected as a target market to be met with a distinct
marketing mix." - Philip Kotler
 Benefits/Advantage of Market Segmentation

• Increased resource efficiency.

• Stronger brand image.
• Stronger market differentiation.
• Better targeted advertising
• Developing effective marketing strategies
• Better response rates and lower acquisition costs
• Attracting the right customers
• Increasing brand loyalty
• Differentiating your brand from the competition
• Identifying niche markets
• Driving growth
• Enhanced profits
• Product development
•
Basis for market segmentation
 Levels of Marketing Segmentation

• Mass Marketing: Coca-Cola once made just one beverage for the whole market,
expecting that it would be popular with everyone.
• Segment Marketing: By focusing primarily on the customers it can most effectively
and profitably serve, the organization is able to sell its goods and services,
communications, and channel initiatives.
• Niche Marketing: A niche is a more specifically defined group, typically defined by a
group of people who exhibit distinctive behavior and may be looking for a unique
combination of benefits.
• Micro marketing: Micromarketing is the process of tailoring items to the preferences
of particular people and places. Local marketing is a part of micromarketing (Local
marketing includes tailoring brands and promotions to the needs and wants of local
consumer groups— neighborhoods, cities, and even specific stores).
 Essential Factors in Effective Market Segmentation

• Measurable: Measurable means, ability to calculate or estimate how much

segment will spend on product. For example, one of your segments may be made
up of people who are more likely to shop during a promotion or sale.
• Accessible: Understanding customers and being able to reach them are two
different things. segments’ characteristics and behaviors should help to identify the
best way to meet them.
• Substantial: The market segment must have the ability to purchase. For example,
if you are a high-end retailer, your store visitors may want to purchase your goods
but realistically can’t afford them.
• Actionable: The market segment must produce the differential response when
exposed to the market offering. This means that each of your segments must be
different and unique from each other.
Market Targeting
• Market targeting is a process of selecting the target market from
the entire market. Target market consists of group/groups of
buyers to whom the company wants to satisfy or for whom
product is manufactured, price is set, promotion efforts are
made, and distribution network is prepared.
• The process of evaluating and selecting market segments is
known as market targeting.
 Strategies (Methods) for Market Targeting:
• 1. Single Segment Concentration:
• It is the simplest case. The company selects only a single segment as target market and offers
a single product. Here, product is one; segment is one.
• Merits:
• (1) Company can gain strong knowledge of segment’s needs and can achieve a strong market
position in the segment.
• (2) Company can specialize its production, distribution, and promotion.
• (3) Company, by capturing leadership in the segment, can earn higher return on its investment.
• Demerits:
• (1) Competitor may invade the segment and can shake company’s position.
• (2) Company has to pay high costs for change in fashion, habit, and attitude. Company may
not survive as risk cannot be diversified.
2. Selective Specialization:

• In this option, the company selects a number of segments. A company

selects several segments and sells different products to each of the
segments. Here, company selects many segments to serve them with
many products. All such segments are attractive and appropriate with
firm’s objectives and resources.
• There may be little or no synergy among the segments. Every segment
is capable to promise the profits. This multi-segment coverage strategy
has the advantage of diversifying the firm’s risk. Firm can earn money
from other segments if one or two segments seem unattractive. For
example, a company may concentrate on all the income groups to
serve.
• 3. Product Specialization:
• In this alternative, a company makes a specific product, which can be sold to
several segments. Here, product is one, but segments are many. Company offers
different models and varieties to meet needs of different segments. The major
benefit is that the company can build a strong reputation in the specific product
area. But, the risk is that product may be replaced by an entirely new technology.
Many ready-made garment companies prefer this strategy.
• 4. Market Specialization:
• This strategy consists of serving many needs of a particular segment. Here,
products are many but the segment is one. The firm can gain a strong reputation
by specializing in serving the specific segment. Company provides all new
products that the group can feasibly use. But, reduced size of market, reduced
purchase capacity of the segment, or the entry of competitors with superior
products range may affect the company’s position.
• 5. Full Market Coverage:
• In this strategy, a company attempts to serve all the customer groups
with all the products they need. Here, all the needs of all the segments
are served. Only very large firm with overall capacity can undertake a full
market coverage strategy.
• Methods of Full Market Coverage:
Methods of Full Market Coverage:
Market positioning
• Market positioning is a marketing strategy that focuses on creating a
unique image or perception of a brand, product, or service in the
customer’s mind. A business can create that unique image by any
means.
Advantages of Market Positioning
• Easy to Promote A New Product
• Create A Brand Identity
• Effective Communication
• Revenue Generation
• Building Brand Loyalty
• Competitive Advantage
Product differentiation
• Product differentiation (or just differentiation) is a marketing process
of differentiating an offering (product or service) from others in the
market to make it more appealing to the target audience.
• Product differentiation is the introduction of unique, distinctive
characteristics or features to a product to ensure a USP (unique selling
proposition) of the product. The differentiation enables a company to
achieve a competitive advantage over other companies offering
similar product substitutes.
 Advantages of Product Differentiation
• Creates Value: Product differentiation gives a reason to the customers to
choose the brand over others.
• Helps in defending high prices: It helps the companies to give a reason why
they charge a high price for their product.
• Helps in non-price competition: It allows the companies to compete in areas
other than price.
• Creates brand loyalty: A successful differentiation strategy creates brand
loyalty among the customers.
• Creates a perception of no close substitutes: A successful product
differentiation strategy may create a perception among the customers that
there isn’t any substitute available in the market.
Disadvantages Of Product Differentiation
• Added pressure on the manufacturers: Product differentiation adds
a substantial amount of pressure on the manufacturers to decide which
attribute could turn out to be the USP for that product.
• Can increase prices: Sometimes, differentiating a product adds to the
production and marketing costs which can be transferred to the end-
users.
• Increased Revenue Not Guaranteed: Product differentiation doesn’t
guarantee more sales and more revenue as a business can even fail in
predicting whether the customer would appreciate the USP or not.
Types of Product Differentiation
• Horizontal Differentiation
• Horizontal differentiation refers to any differentiation that
is not associated with the product’s quality or price point. Instead,
these products offer the same thing at the same price point. When
making decisions regarding horizontally differentiated products, it
often boils down to the customer’s personal preference.
• Examples of Horizontal Differentiation: Pepsi vs. Coca-Cola,
bottled water brands, types of dish soap.
• Vertical Differentiation
• In contrast to horizontal differentiation, vertically differentiated products are extremely
dependent on price. With vertically differentiated products, the price points and marks of
quality are different. And, there is a general understanding that if all the options were the
same price, there would be a clear winner for “the best.”
• Examples of Vertical Differentiation: Branded products vs. generics, A basic black shirt
from Hanes vs. a basic black shirt from a top designer, the vehicle makes. Choosing
Duracell over other batteries because the customer believes that it lasts longer.

Mixed Differentiation
• Also called “simple differentiation,” mixed differentiation refers to differentiation based on
a combination of factors. Often, this type of differentiation gets lumped in with horizontal
differentiation.
• Examples of Mixed Differentiation: Vehicles of the same class and similar price points
from two different manufacturers.