Service marketing

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Table of Contents 1.0

Introduction ..................................................................................................................... 1

2.0 Service Marketing ................................................................................................................ 1 2.1 Future Challenges ............................................................................................................ 4 3.0 Demand and Supply ............................................................................................................. 5 4.0 Observation of a restaurant and recommendations .............................................................. 6 5.0

Customer loyalty programs ............................................................................................. 8

5.1 CafĂŠ Citizens Program by Cafe Coffee day ..................................................................... 8 5.2 King Club ......................................................................................................................... 9 6.0

Conclusion ...................................................................................................................... 9

7.0

References ..................................................................................................................... 10

Appendix .................................................................................................................................. 11

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1.0 Introduction Through this document we will understand what service marketing is and how it is different from product marketing. We will also see how organization select their marketing strategy and what are the deciding factors. Focus of the document is to explore challenges in future in service marketing. We will see demand and supply is handled through examples. To get better insight of service marketing we will discuss management and challenges in a restaurant by observation and will suggest a plan to improve the system.

2.0 Service Marketing A service is a something offered by one party to another, essentially intangible and does not result in the ownership of anything. (Lovelock,2011) It may or may not be tied to a physical product. For example hospitality, consultancy, travel etc.

We can categories service by level of association with a physical product.

1.

Pure Service- Such offerings primary of a service. Examples: consultancy, massage.

2.

Major Service with accompanying minor goods- the offerings consist of mainly

service associated with supporting service or product. Examples: Railway, airline.

3.

Hybrid- the offerings with equal contribution of service and product. In such services

both service and product are equally important. Examples: Restaurant.

4.

Tangible goods with accompanying Service: these offerings are basically in product

form and offered with supporting services. Examples: Computers, cellophanes.

5.

Pure tangible goods- these offerings are purely in goods form with no contribution of

service.

Service marketing is different from product marketing due to its four major characteristics. ( Lauterborn,1993)

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Intangibility: unlike products, services cannot be seen, felt, tasted, felt or heard before they are brought. A person taking spa cannot get the benefit before using it. A client cannot see the result before taking the service of consultant.

Inseparability: where products are produced, distributed and consumed later, service are produced and consumed at the same time. In a cinema hall movie is screened and seen at the same time. It cannot be separated from each other.

Variability: Service is dependent upon who is providing. Service from different person will vary depending upon the quality and performance of provider. Two cooks will cook the same food with different tastes.

Perishability: It is not possible to store service. Restaurants must have extra seating capacity to handle rush hour demand.

Keeping these attributes and constraints in mind service marketing is formulated to understand customer’s requirement and generate value and deliver to the customer.

(Lauterborn,1993) In such condition developing and maintaining quality of service is very important. A service may become worthless if quality is missing from it. A businessman travelling for some business meeting will never take a flight which cannot reach to the destination in reasonable time. He may miss his meeting and in that case travelling will be worthless for him. A patient is not treated properly, he may die and it will useless to get surgery then.

Service is treated as a product but it consists of additional attributes. (Lovelock, 2011) Depending upon these characteristics marketing strategy of a service is designed on the basis of following factors, known as marketing mix.

1.

Place: Place in service marketing is determined by where it is produced or located. A

restaurant too far from the population will not get the customers. Similarly best location for a petrol pump is a place with maximum traffic which is a highway not a colony.

2.

Product: Product is intangible in marketing mix. Unlike products it cannot be felt,

measured or seen. So service is to be designed carefully. Tourism industry and education industry are good example of that. A tuition class is totally an experience, it is important to carefully choose the teacher, books and other supporting material.

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3.

Promotion: it is important for both goods and service to promote the product. Due to

its intangible and Inseparability, promotion plays more crucial role in service marketing.

Services are easily generated and duplicated, so building brand image is what separates it from other service providers. We can see now a days banks and insurance companies promoting themselves rigorously. Even hospitals are doing advertisements and other promotional activities to establish their brand.

4.

Price: Different from goods, price of a service is decided by the experience being

offered. In a restaurant food is not the only thing being served. Music, service and ambience are other things which cost to the owner. So even food is same in two restaurants, price will different depending upon the other service in offer.

5.

People: people are the source of a service and cannot be separated from the product.

They define the service. In a hospital, a surgery is defined by the Surgeon. In a school classes are defined by the teacher. In a restaurant food is defined by the chef.

6.

Process: process is the way in which service is delivered to the customer. For example

in courier companies such as FedEx not only provides quick delivery of the package but also provides the status of the deliverable to the customer. Similarly fast food chain like McDonalds has developed a process to provide fast service to the customer.

7.

Physical evidence: normally services are delivered with some goods or supporting

environment. In restaurant only taste of food is not important. People pay for experience and experience come from ambience, music, color, furniture etc. Uniform of staff in any company is also example of physical evidence. Kingfisher airline differentiates itself from other service providers by its smartly dressed staff.

Above factors should be used wisely in order to make blueprint for marketing strategy for a service sector company. But it should not be restricted to mentioned factors only. Depending upon the sector and industry new factors can be significant as well.

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2.1 Future Challenges Service industry is not only about providing core facility or experience. With more providers coming in the market and better services being offered expectation of customers is also increasing. Service industry is booming and so many big market players are taking their chances. They are challenging to already established local small players and by their aggressive branding and promotional activity gaining share of the market. Maintaining quality is also one concern here. Customers don’t want to compromise in quality when it comes to a service. There is some least quality expectation, below which service product is not useful for them. Following are major challenges faced in the service industry in future.

1.

Rising expectation of customers: Service industry is as innovative as product

industry. Based on experience and customer’s expectation, there is continuous improvement in the service product. Customers are getting better products and after sometime these extra offerings become a part of main offer and customer expects for something extra. These additional offerings take a cost and price for the service increases. To deliver a service accompanying customer’s expectation in acceptable will be a challenge.

2.

Tougher industry competition: As well as market of service industry is increasing

more market players are entering in the industry. So market competition is increasing to capture bugger pie of market share. Initially mainly local and small players dominated the market in few sectors like hospitality but now many big players are coming in too. We can see many hotel chains and restaurant chains expanding themselves. So it’s a bigger headache for local players who don’t have enough deep pocket to compete.

3.

Quality Management: Service products are intangible and can be felt only by using

them. This factor makes it important to maintain quality of service so that customer perceive value and come again to buy service. Quality comes by following proper process and maintaining standards.

4.

Hiring skilled human resource: people are one of the factors in marketing mix of

service industry. With increasing service providers there is more need of human resource. But to maintain quality and getting best result in minimum resources it is important to hire skilled people, which is very scarce. Whether we talk about software engineers in Information 4

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technology companies, chefs in restaurant or a singer in opera they are the key resource and there will always need of skilled resources. So there will be more need of training activities to convert unskilled into skilled one.

5.

Creating and maintaining brand image: to differentiate your service from other

providers, it is important to create brand image in the mind of customer. Many players have started to promote their brand by advertisements, campaign and other activities. Out of these, few belong to industry which was used to be fully untouched from promotion. “Visit Sri Lanka� campaign to promote tourism in Sri Lanka is a very good example in this case. But creating brand image is not the only thing. Maintaining the brand image and market share is even more crucial. So companies will be spending heftily in these activities.

6.

Generating new ideas in service: Service is improved by innovative and creative

ideas. To differentiate your service from other there you have to offer something different from other players. So there is always place for new ideas in service industry.

So on one hand where service industry is having lots of scope for market player to enter and expand, on the other hand it is full of challenges. It is necessary to understand these challenges in advance and have a proper defense plan to handle them.

3.0 Demand and Supply Services are perishable, means they cannot be store. You have to produce the service when demanded, so service provider should have the scope the capacity of providing service in peak hours. For example bus service provider keeps some extra buses to extend service in peak hours. These buses will not always be used but if they are not kept, customers will be missed. Second good example of demand and supply in service industry is airline industry.

Despite of bearing losses, airline companies are booking aircrafts to be delivered in coming five to ten years, anticipating high increase in number of domestic flyers. In few sectors experience and analyzing trend is the best way to anticipate demand and plan accordingly to supply service. In restaurants food is prepared in advance, owner knows average numbers of customer coming everyday and rise and fall in numbers due to factors like holiday, festival etc so he keeps stock of material and make preparations.

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Doctors know that more patients will come in rainy season due to fever, cough, dengue and other disease so he either increases sitting hours or increase number of patients he sees in an hour. So these are few simple examples of how demand and supply is handled in service industry. Refer Appendix-1

4.0 Observation of a restaurant and recommendations

On visiting a nearby restaurant (Refer Appendix-2) and observing management of customers and feed, I felt that peak hour is 1-3 PM for lunch and 8-10 PM for dinner. In holidays it is difficult to serve all the customers properly and there is a queue waiting for the tables to be free. The main specialty of the restaurant is its Chinese food. Seating capacity of the restaurant is 40 people. Few seats are also kept outside for the customers waiting for their table. Many times waiting queue becomes as long as 20 people. In such cases many new arriving customers move to other restaurant for the food. So restaurant misses some customers. Restaurant is famous for the food and ambience so the charges are on the higher side compared to other restaurants in the city.

Customers always pay when perceived value is greater than the price. This perceived value is the difference between all perceived benefits less all perceived cost. (Lehmann. 1994)

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Customer Perceived value

Total Customer Benefit

Total Customer Cost

Product Benefit

Monetary Cost

Service Benefit

Time Cost

Personnel Benefit

Energy Cost

Image Benefit

Psychological Cost

So customer not only pays in the form of money but also in terms of time and energy. When a customer waiting outside sees less value then price he would be paying he moves to another restaurant with lesser crowd. To improve revenue of the restaurant, owner has to manage the customers in peak hour. So that he could serve more customers. One way of doing this can be faster service so that people don’t wait long for their food and finish early. This will decrease waiting time of customers in queue. (Refer Appendix- 3)

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5.0 Customer loyalty programs Service providers offer extra benefits to the frequent and loyal customers. These benefits are offered by customer loyalty program. Here for this report two loyalty programs in the service market have been discussed. Following are the example of such programs:

5.1 Café Citizens Program by Cafe Coffee day Café Coffee Day (Refer Appendix- 4) observed that it is becoming favorite hang-out place for youngsters. So to get more loyalty of customers by giving them benefit, CCD launched this program on July 1, 2010. Any customer who bills a minimum amount of Rs. 100 is eligible for membership to this program. Member of Café Citizens Program is entitled to avail 10% discount on all food and beverage bills for one year from the month of membership. Also, member will receive surprise gift when they reach total billing amount of Rs. 2000 (first milestone), Rs. 5000 (second milestone) and Rs. 10000 (3rd milestone). (The Indian Institute of planning And Management, New Delhi, n.d) Strength of this program is that it attracts young coffee lovers, who have CCD in their work place, college and house. Customer find this program high beneficial for them and it will increase number of footprints per month. Weakness of this program is not targeting new customers. Also, it is an additional cost to the company. Therefore it is important to focus to design another loyalty program which benefit for new customers.

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5.2 King Club In travel industry, Kingfisher offers discount and other facilities by its customer loyalty program King Club (Refer Appendix- 5).Members earn credit points called as King Miles each time they fly with kingfisher. In response customer can avail discounts in airline fare, hotels, car booking and even they get free membership of a club where they can enjoy food and drink while waiting for their flight to come. (Fly king fisher: king club, n.d) Strength of this program is that it attracts corporate and business travelers which contribute majorly in revenue. Corporate person enjoy extra treatment on airports and having a club in airport is a good option for them. So it attracts this segment. Weakness of this program is that it doesn’t target domestic low fare flyers, which is a very potential segment. Kingfisher flights are already costlier than other and customer perceive such benefits as extra cost for unnecessary services. So target segment of this offer is not very broad. Therefore it is important to have a loyalty program for every segment of the customers which will enhance their own satisfaction. Moreover King Club should allow the member’s travel agents to redeem the King Miles on behalf of them.

6.0 Conclusion In this document we discussed that service marketing is as crucial as product marketing but it takes more factors to consider before designing a blueprint for the same. Increasing competition for market share, lack of skilled human resource, increasing expectation of customers, need for innovation and maintaining quality of service are major challenges in service industry. In order to create brand image and earn loyalty of customers initiating customer loyalty program is good idea but now always profitable.

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7.0 References  Anderson, Eugene W., Claes Fornell, and Lehmann, D.R. 1994. “Customer Satisfaction, Market Share and Profitability: Findings From Sweden.” Journal of Marketing 58 (July)  Fly King Fisher: King Club; http://www.flykingfisher.com/international/king_club.html [retrieved on 18 Dec 2011]  Lauterborn, R.F, Schultz, D.E & Tannenbaum, S.I (1993). Integrated Marketing Communications, McGraw-Hill Professional.  Lovelock, C and Wirtz, J. (2011), Services Marketing – People, Technology, Strategy. 7th ed., Upper Saddle River, New Jersey: Prentice Hall  Lovelock, C., (2004) Services Marketing: People, Technology, Strategy, Pearson Education.  Lovelock, C.H, “Classifying Services to Gain Strategic Marketing Insights,” Journal of Marketing, 47, 3 (Summer 1983):17  Panacea Publishing, 2011, Kingfisher Airlines loyalty Programs, [online], Available: http://www.businesstraveller.asia/news/marriott,-kingfisher-airlines-loyaltyprograms- [Accessed 26 December 2011].  Schullz, D.E, Tannenbaum,S.T, Lauterborn, R.F, (1993)“Integrated Marketing Communications,”NTC Business Books, a division of NTC Publishing Group.  Service Performance, 2011, The 5 Service Dimensions All Customers Care About, [online], Available: http://www.serviceperformance.com/articles/33_Five_Service_Dimensions.php [Accessed 27 December 2011].  The Indian Institute of planning And Management, New Delhi, n.d,[Online], Available:http://www.netcarrots.net/net/press-room/cafe-coffee-day-launches-cafecitizens-program.aspx  Zeithaml, V.A, Bitner, M.J, Gremler, D.D and Pandit, A (2008). Service Marketing.

4th ed. Tata McGraw-Hill Education

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Appendix

Appendix 1 Nature of the demand relate to supply Extend of demand fluctuations over time Extent to which supply is

Wide

Narrow

1

2

constrained Peak demand can usually be met without a major Electricity delay

Insurance

Nature gas

Legal services

Telephone

Banking

Hospital and fire

Laundry and dry cleaning

Emergencies Peak

demand

exceeds capacity

regularly

4

3

Accounting and tax

Services similar to those in 2

Preparation

but which have insufficient

Passenger and motels

capacity for their base level

Restaurants

of business

Theatres

Source: Christopher H. Lovelock, “Classifying Services to Gain Strategic Marketing Insights,� Journal of Marketing, 47, 3 (Summer 1983):17

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Appendix 2

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Appendix 3

Strategies for Shifting Demand Demand Too High 

Demand Too Low

Use signage to communicate busy



days and times 

business from current market segment

Offer incentives to customers for



usage during non-peak times 

Use sales and advertising to increase

Modify the service offering to appeal to new market segments

regular



Offer discounts or price reductions

Advertise peak usage times and



Modify hours of operations



Bring the service to the customers



Perform maintenance renovations

Take

care

of

royal

or

customers first 

benefit non-peak use 

Charge full price for the service – no discounts



Stretch time, labor, facilities and equipment



Cross train employees



Schedule employee training



Hire part time employees



Lay off employees



Subcontract or outsource activities

Source: Christopher H. Lovelock, “Classifying Services to Gain Strategic Marketing Insights,” Journal of Marketing, 47, 3 (Summer 1983):17

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Appendix 4 Cafe Coffee Day Profile It was in the golden soil of Chikmagalur that a traditional family owned a few acres of coffee estates, which yielded rich coffee beans. Soon Amalgamated Bean Coffee Trading Company Limited, popularly known as Coffee Day was formed. With a rich coffee growing tradition since 1875 behind it coupled with the opportunity that arose with the deregulation of the coffee board in the early nineties, Coffee Day began exporting coffee to the connoisseurs across USA, Europe & Japan. In the calendar year 2000, Coffee Day exported more than 27000 tonnes of coffee valued at US$ 60 m to these countries and, for the second time in its short career of 7 years retained the position as the largest coffee exporter of India. Coffee Day has a wide and professional network in the major coffee growing areas of the country comprising over 48 agents and 50 collecting depots. Coffee Day's two curing works at Chikmagalur and Hassan cure over 70,000 tons of coffee per annum, the largest in the country. Coffee Day has a well-equipped roasting unit catering to the specific requirement of the consumers. The process is carried out under the control of experienced personnel to meet highest quality standards. The most modern technology available is used to maintain consistency and roast the coffee beans to the demanding specifications of the discerning coffee consumers.

Coffee Day Comprises of the following Sub Brands Coffee Day - Fresh & Ground Café Coffee Day Coffee Day – Vending Coffee Day - Xpress Coffee Day – Exports Coffee Day - Perfect Café Coffee Day currently owns and operates 213 cafes in all major cities in India. It is a part of India's largest coffee conglomerate named Coffee Day, ISO 9002 Certified company.

Coffee Day's most unique aspect is that it grows the coffee it serves.

Source: The Indian Institute of planning and Management, New Delhi, n.d

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Appendix 5 King Club As India’s most rewarding frequent flyer programme, King Club offers members a whole new world of personalized recognition, attractive rewards and unique benefits. As a King Club member, you earn King Miles each time you fly with Kingfisher Airlines. Members can enjoy exclusive privileges and earn King Rewards faster when you choose services from our select programme partners, which include leading international airlines, credit cards, luxury & business hotels, car rental agencies and lifestyle brands.

It gives us great pleasure to inform you that Kingfisher Airlines, India's only Five Star airline, rated

by Skytrax, now offers you an unmatched flying experience from Delhi to London, Bangkok, Hong Kong, Dubai & Kathmandu and Mumbai to Bangkok and Dubai.

Source: Fly King Fisher: King Club; http://www.flykingfisher.com/international/king_club.html [retrieved on 18 Dec 2011]

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