UNIT II--Marketing Research

                                                 UNIT 2 

Q-1. Define marketing mix of service marketing ? What are the 7P’s of service marketing?

Ans. Marketing Mix:- “A selection of services developed to offer customers a choice within a particular range. The elements of a services marketing mix are sometimes called the seven Ps: the four Ps of the marketing mix, plus three Ps of services: people, physical evidence, and process (of service assembly).”

The service marketing mix is also known as an extended marketing mix and is an integral part of a service blueprint design. The service marketing mix consists of 7 P’s as compared to the 4 P’s of a product marketing mix. Simply said, the service marketing mix assumes the service as a product itself. However it adds 3 more P’s which are required for optimum service delivery.

The product marketing mix consists of the 4 P’s which are Product, Pricing, Promotions and Placement. These are discussed in my article on product marketing mix – the 4 P’s.

The extended service marketing mix places 3 further P’s which include People, Process and Physical evidence. All of these factors are necessary for optimum service delivery. Let us discuss the same in further detail.

Product:- The product in service marketing mix is intangible in nature. Like physical products such as a soap or a detergent, service products cannot be measured. Tourism industry or the education industry can be an excellent. For example- At the same time service products are heterogeneous, perishable and cannot be owned. The service product thus has to be designed with care. Generally service blue printing is done to define the service product. For example – a restaurant blue print will be prepared before establishing a restaurant business. This service blue print defines exactly how the product (in this case the restaurant) is going to be.

Place:- Place in case of services determine where is the service product going to be located. The best place to open up a petrol pump is on the highway or in the city. A place where there is minimum traffic is a wrong location to start a petrol pump. Similarly a software company will be better placed in a business hub with a lot of companies nearby rather than being placed in a town or rural area.

Pricing:- Pricing in case of services is rather more difficult than in case of products. If you were a restaurant owner, you can price people only for the food you are serving. But then who will pay for the nice ambience you have built up for your customers? Who will pay for the band you have for music? Thus these elements have to be taken into consideration while costing. Generally service pricing involves taking into consideration labor, material cost and overhead costs. By adding a profit mark up you get your final service pricing. You can also read about pricing strategies.

Promotion:- Promotions have become a critical factor in the service marketing mix. Services are easy to be duplicated and hence it is generally the brand which sets a service apart from its counterpart. You will find a lot of banks and telecom companies promoting themselves rigorously. Why is that? It is because competition in this service sector is generally high and promotions is necessary to survive. Thus banks, IT companies, and dotcoms place themselves above the rest by advertising or promotions.

Here on we start towards the extended service marketing mix.

People:- People is one of the elements of service marketing mix. People define a service. If you have an IT company, your software engineers define you. If you have a restaurant, your chef and service staff defines you. If you are into banking, employees in your branch and their behavior towards customers defines you. In case of service marketing, people can make or break an organization. Thus many companies nowadays are involved into specially getting their staff trained in interpersonal skills and customer service with a focus towards customer satisfaction. In fact many companies have to undergo accreditation to show that their staff is better than the rest. Definitely a USP in case of services.

Process:-Service process is the way in which a service is delivered to the end customer. Lets take the example of two very good companies – McDonalds and FedEx. Both the companies thrive on their quick service and the reason they can do that is their confidence on their processes. On top of it, the demand of these services is such that they have to deliver optimally without a loss in quality. Thus the process of a service company in delivering its product is of utmost importance. It is also a critical component in the service blueprint, wherein before establishing the service, the company defines exactly what should be the process of the service product reaching the end customer.

Physical Evidence:- The last element in the service marketing mix is a very important element. As said before, services are intangible in nature. However, to create a better customer experience tangible elements are also delivered with the service. For example- a restaurant which has only chairs and tables and good food, or a restaurant which has ambient lighting, nice music along with good seating arrangement and this also serves good food. Which one will you prefer? The one with the nice ambience. That’s physical evidence. Several times, physical evidence is used as a differentiator in service marketing. Imagine a private hospital and a government hospital. A private hospital will have plush offices and well dressed staff. Same cannot be said for a government hospital. Thus physical evidence acts as a differentiator.

Q-2. Explain the pricing strategy used for service marketing?

Ans. Pricing strategy:-Pricing strategy in marketing is the pursuit of identifying the optimum price for a product. This strategy is combined with the other marketing principles known as the four P's (product, place, price, and promotion), market demand, product characteristics, competition, and economic patterns. The pricing strategy tends to be one of the more critical components of the marketing mix and is focused on generating revenue and ultimately profit for the company. The success in pricing strategies for businesses is heightened with clarity on market conditions, an understanding of the consumer's unmet desire, and the amount they are willing to pay to fulfill it.

Cost-plus Pricing – Cost-plus pricing is an effective way to build a profit margin directly into the price of your product or service. It’s just what it sounds like: you calculate the cost to deliver a product or service (cost) and then add a 10% margin, for example (plus). Cost-plus is straightforward for the entrepreneur, but doesn’t take into account the mindset of the customer. You may also leave money on the table by focusing on cost.

Competitive Pricing – Competitive pricing focuses neither on costs or customers. Instead, competitive pricing is all about the existing market for your product or service. In competitive pricing, your job is to research the pricing strategies of many competitors to establish a pricing range. The range should have a high end and a low end, and the price of your product or service should fall somewhere between those bookends so that it is competitive.

Luxury Pricing – Luxury pricing is a classic strategy used by brands like Louis Vuitton, Mercedes, and Rolex. The price has more to do with the aspirations and image of the person making the purchase than anything else. By buying a product or service at a luxury price, we are buying our way into a club. That club is a representation of how we want others to see us in the world.

Rate-based Pricing – Also known as hourly pricing. Freelancers, consultants, and coaches most commonly use rate-based pricing for their services. The downside is that you have to trade time for money. The upside is that you’re guaranteed to get paid for every hour of work. Clients are sometimes hesitant about hourly pricing because they fear the incentive is to work more hours to make more money as opposed to being efficient.

Project-based Pricing – Project-based pricing is a flat fee arrangement agreed to at the outset of a project. The entrepreneur may make an estimate of how many hours she thinks the project will take and then price accordingly. Or, she may combine this strategy with some of the upcoming pricing strategies to charge more. The incentive is to finish the work quickly and with high quality. For this to work well, the scope of work should be well defined up front.

Value-based Pricing – Value-based pricing takes into account two key questions: 1) Can they pay?; 2) Will they pay? They are the customers, which makes value-based pricing a customer-centered approach to pricing. The determinant factor in this pricing strategy is how much your customers are willing to pay, rather than how much a product or service costs to produce or deliver. There is huge upside for the entrepreneur when value-based pricing is used well.

Tiered Pricing – A tiered pricing strategy gives consumers the option of choosing between different versions of the same product or service. For example, imagine considering a single gear bike for $299, a three-gear bike for $399, and a seven-gear bike for $499. A tiered pricing strategy turns a yes or no decision into an either or decision for the potential customer. It also provides a price anchor (as a consumer, I can convince myself I am being frugal by spending $299 on the single gear bike as compared to $499 on the seven-gear).

Pay What You Want Pricing – Also known as a donation-based pricing strategy, pay what you want pricing allows the customer to make the decision on how much the product or service is worth to her. Pay what you want allows you to test market demand without knowing the price elasticity for your thing. When combined with a “suggested price,” a pay what you want pricing strategy can sometimes lead to more profit than a set price.

Q.3:- Explain the various modes, method or techniques of promotion and distribution of services.

Ans. Important techniques of sales promotion are as follows:

(1) Rebate- Under it in order to clear the excess stock, products are offered at some reduced price. For example, giving a rebate by a car manufacturer to the tune of 12,000/- for a limited period of time.

(2) Discount- Under this method, the customers are offered products on less than the listed price. For example, giving a discount of 30% on the sale of Liberty Shoes. Similarly giving a discount of 50% + 40% by the KOUTONS.

(3) Refunds- Under this method, some part of the price of an article is refunded to the customer on showing proof of purchase. For example, refunding an amount of 5/- on showing the empty packet of the product priced 100/-.

(4) Product Combination- Under this method, along with the main product some other product is offered to the customer as a gift. The following are some of the examples:

(5) Quantity Gift- Under this method, some extra quantity of the main product is passed on as a gift to the customers. For example, 25% extra toothpaste in a packet of 200 gm tooth paste. Similarly, a free gift of one RICH LOOK shirt on the purchase of two shirts.

(6) Instant Draw and Assigned Gift- Under this method, a customer is asked to scratch a card on the purchase of a product and the name of the product is inscribed thereupon which is immediately offered to the customer as a gift. For example, on buying a car when the card is scratched such gifts are offered – TV, Refrigerator, Computer, Mixer, Dinner Set, Wristwatch, T-shirt, Iron Press, etc.

(7) Lucky Draw- Under this method, the customers of a particular product are offered gifts on a fixed date and the winners are decided by the draw of lots. While purchasing the product, the customers are given a coupon with a specific number printed on it.

On the basis of this number alone the buyer claims to have won the gift. For example, ‘Buy a bathing soap and get a gold coin’ offer can be used under this method.

(8) Usable Benefits- Under this method, coupons are distributed among the consumers on behalf of the producer. Coupon is a kind of certificate telling that the product mentioned therein can be obtained at special discount.

It means that if a customer has a coupon of some product he will get the discount mentioned therein whenever he buys it. Possession of a coupon motivates the consumer to buy the product, even when he has no need of it.

Such coupons are published in newspapers and magazines. Some companies distribute coupons among its shareholders. Sellers collect the coupons from the customers and get the payment from the company that issues the same.

(9) Full Finance @ 0%- Under this method, the product is sold and money received in installment at 0% rate of interest. The seller determines the number of installments in which the price of the product will be recovered from the customer. No interest is charged on these installments.

(10) Samples or Sampling- Under this method, the producer distributes free samples of his product among the consumers. Sales representatives distribute these samples from door-to-door.

This method is used mostly in case of products of daily-use, e.g., Washing Powder, Tea, Toothpaste, etc. Thus, the consumers willy-nilly make use of free sample. If it satisfies them, they buy it and in this way sales are increased.

(11) Contests- Some producers organise contests with a view to popularizing their products. Consumers taking part in the contest are asked to answer some very simple questions on a form and forward the same to the company. The blank form is made available to that consumer who buys the product first.

Distribution method :-What is a Distribution Channel?

The distribution function of marketing is comparable to the place component of the marketing mix in that both center on getting the goods from the producer to the consumer. A distribution channel in marketing refers to the path or route through which goods and services travel to get from the place of production or manufacture to the final users. It has at its center transportation and logistical considerations.

Business-to-business (B2B) :-distribution occurs between a producer and industrial users of raw materials needed for the manufacture of finished products. For example, a logging company needs a distribution system to connect it with the lumber manufacturer who makes wood for buildings and furniture.

Business-to-customer (B2C) distribution occurs between the producer and the final user. For instance, the lumber manufacturer sells lumber to the furniture maker, who then makes the furniture and sells it to retail stores, who then sell it to the final customer.

Direct vs. Indirect- In marketing, goods can be distributed using two main types of channels: direct distribution channels and indirect distribution channels.

Direct Distribution- A distribution system is said to be direct when the product or service leaves the producer and goes directly to the customer with no middlemen involved. This occurs, more often than not, with the sale of services. For example, both the car wash and the barber utilize direct distribution because the customer receives the service directly from the producer. This can also occur with organizations that sell tangible goods, such as the jewelry manufacturer who sells its products directly to the consumer.

Indirect Distribution- Indirect distribution occurs when there are middlemen or intermediaries within the distribution channel. In the wood example, the intermediaries would be the lumber manufacturer, the furniture maker, and the retailer. The larger the number of intermediaries within the channel, the higher the price is likely to be for the final customer.

Q.4:-Explain the role of people internal communication in services marketing.                           

Ans. Internal communication is a subset of effective business communication, which is built around this simple foundation: communication is a dialogue, not a monologue. In fact, communication is a dual listening process.

So Internal Communication, in a business context, is the dialogic process between employees and employer, and employees and employees.

So many times that latter process is forgotten by strategists and PR professionals – it should always be remembered that communication between employees is very often far more powerful than any communication from employer to employee.

Whereas the ‘top-down’, employer-driven communication is great for setting a communication agenda or discussion point, it is the peer-to-peer employee communications that determine the tone of the response back to the employer.

So, to sum up, ‘Internal Communication’ is the conversations that businesses have with their staff and those staff have with each other.

What activities and tactics are traditionally used for internal communication?

Over the years there have evolved various ways of communicating internally.

We started with informal and formal one-to-one and one-to-many meetings, where ‘the boss’ would communicate in a highly one-way fashion with employees.

Of course, the employees would then informally discuss with each other their views and opinions, out of earshot of ‘the boss’.

Communication then evolved to include printed materials for formal, top-down message transmission – newsletters, annual reports, memos, and so on.

The advent of digital technology, and in particular the internet, introduced email into the business setting and with it the nature of communication radically changed.

No longer did a communication take a little while to produce, allowing for a period of reflection and consideration. Now anyone could ‘bang off an email’ at a moment’s notice, often without consideration of the impact of the message.

Those who were unskilled and untrained in the art and impact of communication suddenly found themselves causing more angst than they realized.

Training took place amongst senior managers in the more enlightened organizations to show them the effects of poor communication habits.

Today there are a plethora of techniques and technologies used to communicate, both up/down and side-to-side within an organization:

One-on-one meetings

Staff/team meetings

Emails

Voice mails

Video broadcasts

Intranets

Audio files (usually downloadable audio, but increasingly sent out via rss technology [‘podcasts’])

Staff-to-staff newsletters

Corporate newsletters

Annual Reports

Quarterly Reports

Roadshows.

Four essential elements of successful internal communications

If you ensure that your internal communications have taken into consideration the following four elements, you can be assured that your message will have a very high chance of not only being noticed, but actually achieve its communication goal:

Is focused on one (only) specific strategic business issue.

Is written in language the receiver is able to comprehend.

Has an outcome that is specific and measurable.

Is delivered in a timely manner and in a medium that the receiver is willing and happy to receive it in.

Q.5:- "physical evidence place an important role in communicating service to it's customers". Comment

Ans. It’s important of course that the physical environment is consistent with the other aspects of the marketing mix.  For example, it’s difficult to justify a high quality restaurant status that has excellent food,   a strong positive brand image and a price to match if the premises themselves are of poor quality.

To the customer or potential customer, the physical environment has to feel right and be in line with their expectations.  There was a time when all bank branch staff were hidden away behind glass screens, dealing with customers through a small opening.  This was inconsistent with the open and approachable stance that the banks were trying to develop.  So slowly the banks started to move some staff outside into the public area so they could better interact with customers.  The physical environment then became consistent with other elements of the marketing mix.

We all have expectations of an airline when we book a ticket based on our exposure to other aspects of the marketing mix e.g. price, promotional activities and the route and timings being offered.  But our expectations of what we should experience, in terms of the physical environment, may well differ depending upon which airline we booked with.  We may put up with an aircraft that is perhaps in need of some internal refurbishment if we have booked with a budget airline.  But we perhaps wouldn’t be so accommodating if we had paid a higher price to book with the national carrier.  This is another example of where the physical environment is inconsistent with other aspects of the marketing mix, leading to customer dissatisfaction.

There are other physical clues that we could include in the category of physical evidence.  Do the staff that we come into contact with look smart and tidy?  Are they dressed in the way that we expect?  The use of uniforms or a clearly defined dress code can deal with this issue.

We use other senses apart from sight to make judgements about the physical environment we find ourselves in.  The smell of freshly baked bread is what we expect in supermarkets and other businesses promoting an image of freshly baked products.  If we didn’t experience that smell, then we may begin to question the credentials of the business that have been built up through our exposure to other aspects of the marketing mix.  We expect to smell food in a food establishment not the smell of cleaning products.

Company vehicles are another example of physical evidence that customers take note of.  When did you last see a Marks and Spencer vehicle on the motorway that was badly in need of cleaning?  Probably never.

But of course we can also experience the physical environment in the digital world.  It would be inconsistent to experience a slow and unresponsive website for a company who are promoting a fast and efficient response to customer enquiries.  Poor use of language in digital communications from an educational institution could also be classed as inconsistent physical evidence.  Inadequate packaging of a product from what we perceive to be a high quality online retailer might also be seen as an inconsistency in the physical evidence.

Digital tools and techniques now play an increasingly important role in providing physical evidence that can either support or detract from the other elements of the marketing mix.  Websites, blogs, social media and other forms of digital activity are now an important part of the physical evidence element of the extended marketing mix.  For many people, that is the only type of physical evidence that they will be exposed to.  So marketers will need to pay particular attention to this in the future.