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Friday, November 13, 2009

7 P's of Marketing

The First P: Service Product or Service Package:
A service is a bundle of features and benefits. However these benefits have relevance to a specific target market. Hence while developing a service package it is important that the package of benefits in the service offer must have a customer perspective. Gronroos constructed that the services are product offers consists of 3 levels. The first level is that of basic service package which includes core service, facilitating services and supporting services. The 2nd level is that of an augmented service offering where accessibility interaction and customer participation is given equal importance in delivering the service product . the third level is that of the market communication of the service offering as in its absence the augmentation service package doesn’t have any relevance to the customer.

The service package:
The package concept of service product suggests that what you offer to the market is a bundle of different services, tangible and intangible, but there is a main or substantive or core service and around it are built the auxiliary or peripheral or facilitator services. It is important to note that facilitating services are mandatory and if these were left out, the entire service would collapse. In the service package there are yet other type of services called supporting services. The basic difference between the 2 is that supporting services don’t facilitate the consumption of core services but are used to increase the value and thus differentiate it from competition
e.g. in a 500 room hotel the core service is lodging and room service, bellboy services are facilitating services and health club , car rental are support services. However it may not always be possible to draw a line of distinction between facilitating and support services. For e.g. in a typical city hotel business center might be the support service but in a business and convention hotel the same service would be facilitating service

The augmented service offering:
The basic service package is not equivalent to the service product the customer perceives, which is infact based on customer experience and evaluation. Therefor there is a need to involve the customer in the production of service offering and thereby reinforcing that the basic service package has to be expanded to a more holistic model of augmented service offering. The issues related to the accessibility of the service interaction with the service organisation and consumer participation are also integral elements of the service product.

Market communication of the service offering:
A favorable image enhances the service experience and a bad image may even destroy it. In such a scenario the issue of management of image through communication becomes a integral part of developing the service product but the important point to note here is that apart from the conventional methods of promotion corporate image and word of mouth are, if not more, equally important. A negative comment from a fellow customer is more than adequate to neutralize the effect of your efforts of mass media advertising, media blitz and direct promotion.

Developing a service offering:
The first step in developing a new service offering is to assess the customer benefits, which is done through market research and available appropriate information.

In the second step, these consumer benefits have to be translated into core, facilitating and support services, with a view to defining what general benefits these service organizations would offer to its customers.

The third stage is that of developing the augmented service offer.
A careful planning at the fourth stage is essential because of the right service in the right form and in the right quality and quantity is not delivered, the entire customer oriented plan would collapse.

Finally the appropriate market communication strategy should be prepared and its implementation plan should be defined not only to inform and persuade the customers but also to enhance the desired image.

The 2nd P: Pricing
A particular product or service is acceptable to the customer at a particular price and if the price ids increased it is likely that the same product or service might become less acceptable to the customer. Another issue related to pricing is that of perceptions about quality. Generally to most customers high price means high quality.

Service pricing follows the principles and practices of pricing of goods and therefore they are either cost based or market based.
Following aspects should be taken into consideration while pricing services:
1. Demand fluctuations should be successfully handled
2. Service prices should be based on costs so as to take into account the tangible clues
3. Service pricing should be such as to provide value addition and quality indication
4. The pricing strategy should cope up with the degree of competition.

Pricing objectives:
The pricing of services is greatly influenced by the basic service characteristics. However in setting price objectives several factors in relation to the overall marketing strategy of the corporation should be considered

Planned market position for the service product: Gitlow suggested that price not only influences the market position but also affect the customers perceptual positioning. It is therefore important to keep market or customer position while deciding on pricing strategy
Product life cycle: the stage of life cycle of the service product is of utmost importance. For instance, At the introductory stage if there is no competition and the demand is high you may opt for high price, to make maximum gains in the short term (skimming policy). In a similar situation but with a low demand you may opt for low prices to penetrate into the market. Also you have to consider the elasticity of demand i.e. whether the demand is sensitive to the change in price or not.
Competition: competition should be studied both from the point of interbrand and also from the viewpoint of the brand that provides the same need satisfaction. For e.g. a private airline is facing competition from the national and other private airlines but also from the railways faster trains on the same routes during convenient timings
Strategic role of pricing: Lastly it is important to understand the strategic role of pricing in your overall marketing strategy. For e.g. a hotel chain might offer a package of low price or discount with a view to making people try out their services. It is likely that in the short run it might be a loosing proposition but in the long run, it may give more customer satisfaction and thereby better utilization of services

The 3rd P: Place:
Because of intangibility of services they cannot be stored, transported and inventoried. Also because of inseparability, they must be created and sold at the same time. These 2 characteristics make the channel very short and direct. Most service is distributed through direct sales at best one direct agent and middleman can be added to it. For e.g.: an insurance agent, courier service. Keeping in view the characteristics and potential management problems, there are distinct channel configurations that can be noticed:
The dominant channel configuration in the service sector is where agents and brokers play an imp role. The major function of these agents and brokers is to bring together the producer and consumer of service. These agents can be classified as broker or sales agents. E.g.: travel agents
The agents may be trained in the creation and production of service and then franchised to sell it. E.g.: Shehnaz Hussain beauty parlours.
In some cases actual product is not transferable & therefore tangible representations are created and transferred. This kind of tangible is used for marketing insurance services where a contact document exists as a physical & tangible representation of the service.

Delivery of service involves creating time and place utilities, thus, factor of location keeping in mind the potential markets is significant in channel selection decision. The problem of standardisation and uniformity restrains the use of middlemen & the geographical area that can be catered. Thus, it is impt to select a good location to attain maximum coverage of the market place.

The 4th P: Promotion
There are clear differences in information usage between goods and services. First, the difference is that the consumers of services are less likely to purchase without information, than those of goods. Second, the consumer of services will prefer personal sources to impersonal sources of information. And third, the basic characteristics of services have implications for communication strategies. The above three differences influence the decisions regarding the -
Communications objectives
Target audiences
Planning of each of the sub elements in the promotion mix

Promotion objectives: the basic objective of promotion would be to develop public relations and create a brand image. The promotion mix should use indirect selling techniques, packaging and customization.

Target audiences: In service sector there should be a direct contact between the customers and there service providers. Therefore some promotion should be directed towards the employees so as to motivate them to serve the customers better. The target audience also includes buyers, influencer and the decider or user of the buying cycle.

Planning the Promotion mix: a customer is buying the performance of the service personnel and therefore the advertising in service industry shouldn’t only restrict itself to encouraging consumption, but also it should encourage employees to perform well. Effective advertising programs should be such that they have a positive effect on contact personnel, capitalize on word of mouth, provide tangible clues, make offer easily understandable and contribute continuity.

Planning for promotion mix: planning the promotiom mix calls for the right advertising strategies, consumer promotions, efficient selling methodologies and good public relations for the right kind of publicity.

Advertising of services:
Consumer promotions in service marketing: in execution of any kind of promotion scheme, the service marketer should carefully consider six basic elements, namely, product scope, market scope, value, timing, identification of the beneficiary & protection against competition.
To give an element of intangibility, premiums can be frequently used.
Price/quantity promotion can help generating long term commitment from consumers eg. Group rates for hotels.
Prize promotions can be used frequently and add excitement and involvement.

Selling services: since services are intangible in nature, it is of utmost importance to sell them in a manner, that will convince your target customer.

The sales person must develop a personal relationship with the client. Quite often it is the personal relationship rather than the service itself that results in satisfaction or dissatisfaction of the service.
The seller must adopt a professional orientation and make a strong impression of competency, honesty and sincerity.
He can use indirect selling techniques by creating a derived demand or playing the role of a buying consultant. Eg most hotels first sell the location and then the hotel to the customer.
They have to build and maintain a favourable image as public opinion and word of mouth publicity plays an important role in the marketing of services.
A service seller deals with a host of services rather than one. Their thoroughness on each and ability to package them to suit each customer's need would determine the success. Therefore the ability of the seller to customize the service offering is very important.

Public relations and publicity:
Promotional activities like community relations, event management, media blitz, corporate identity programmes have relevance and should be used effectively by marketers.
Eg: a medical doctor specialising in eye care running his own clinic cum nursing home and organizing free eye camps in competence. all over the region. This community service will not only spread his name but also prove his

Communication strategy:
The service marketer should attempt to reflect a consistent & attractive personality in all manifestations of the organizations that reach the public.
Also one must aim for a recognizable human personality to endorse the service.
Stress on specialization, rather than all things for all people. This will help in creating a unique positioning.

The 5th P: People
It is the employees of an organisation which represent the organisation to its customers.

In a service organization, employees are essentially the contact personnel with customer. Therefore, an employee plays an important role in the marketing operations of a service organisation.

To realize its potential in services marketing, a firm must realize its potential in internal marketing - the attraction, development, motivation and retention of qualified employee-customers through need meeting job-products. Internal marketing paves way for external marketing of services. In internal marketing a variety of activities are used internally in an active, marketing like manner and in a coordinated way.

The starting point in internal marketing is that the employees are the first internal market for the organization.

The basic objective of internal marketing is to develop motivated and customer conscious employees.

A service company can be only as good as its people. A service is a performance and it is usually difficult to separate the performance from the people. If the people don’t meet customers' expectations, then neither does the service. Therefore, investing in people quality in service business means investing in product quality.


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