Marketing Mix, Advertising and Branding of
Services
Service Marketing Notes B.Com CBCS Pattern
Expanded Marketing of Services
The services marketing mix is an extension of the traditional
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. These three additional P’s of service marketing are
called, Extended P’s of service marketing. The need for the extension is due to
the high degree of direct contact between the service providers and the
customers, the highly visible nature of the service process, and the
simultaneous 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. The additional Ps have been added because today
marketing is far more customer oriented than every before, and because the
service sector of the economy has come to dominate economic activity in this
country. These 3 extra Ps are particularly relevant to this new extended
service mix. The service marketing mix comprises of the 7’ P’s. These included:
Ø
People.
Ø
Process.
Ø Physical
Evidence.
CHARACTERISTICS OF SERVICE MARKETING MIX
The marketing mix which is a tool used by markets to exhibit
the following features:
1) The
marketing mix represents the important internal elements or ingredients that
make up an organisation' marketing programme.
2) Services
marketing mix is different from traditional marketing mix in the context of
services. The four is Ps of marketing mix namely, product, place, price
and promotion are derived from a list developed by Harvard Business School in
the 1960s. The original list included twelve elements: Product plan, pricing,
branding, channels of distribution, personal selling, advertising; promotion,
packaging, display, servicing, physical handling, fact finding and analysis.
3) According
to Simon Majaro, three factors determine whether or not a specific element
should be included in a firm's marketing mix: (i) The level of expenditure on a
given ingredient in the marketing mix. (ii) The perceived level of elasticity
in customer responsiveness. (iii) Allocation of responsibilities: A well
structured marketing mix needs a clear cut allocation of responsibilities.
4) Making
any decision about marketing mix depends upon how the service is to be
positioned and the market segments to be addressed.
5) Marketing
mix is a blending process.
6) Service
marketing mix is an extended form of traditional marketing mix. The inclusion
of additional elements (people, process, and physical evidence) is the result
of the intangibility, inseparability and heterogeneity of services.
7) Each
element in the marketing mix supports other elements. They reinforce the
positioning of the product and deliver appropriate service quality to achieve
competitive advantage.
Elements of Service marketing mix
Having identified the various features of the framework of service
marketing mix, a brief description of each element is attempted in the
following paragraphs:
1. PRODUCT (SERVICE PRODUCT):
A product is an overall concept of objects or processes which
provide some values to customers. Goods and services are sub-categories of
product. The term produce is used in a broad sense to denote either a
manufactured good or product and a service. Strictly speaking, customers are
not buying goods or services but specific benefits and value from the total
offering. This total offering to the customer is termed as "offer".
Offer represents those benefits that customers derive from the purchase of
goods or service.
Flour levels of product are briefly described
below:
(i) The core or generic product:
The core product represents the basic services of a product. This
product is at its basic level. For example, food served in a restaurant, a bed
in a hotel room for the night, safety of deposits and loanable funds in a bank.
(ii) The expected product: The
expected product consists of the core product together with the minimal
purchase conditions which need to be met. For example, in a restaurant, in
addition to basic food served, aspects such as cleanliness, timely service,
polite and courteous service of bearer,
availability of menu and
background music are expected. In case of
the banking service, apart from the safety of funds invested, customers
expect accuracy of accounts,
timely service, convenient banking hours, courtesy, carrying out the standing instructions are
expected. Customers buying an airline ticket expect a range of additional elements such as
comfortable waiting area, prompt in flight service, good quality food, clean
toilets and timely arrivals.
(iii) The augmented product: Augmented product refers to offerings
(product benefit or services in addition to what customers expect). This
concept enables a product to be differentiated from another. For example,
though IBM has not got technologically advanced core product, they are praised
for excellent customer service. This adds value to their core product in terms of
reliability and responsiveness. The augmented product of a restaurant includes sparkling floors, ambience, smart
employees, courtesy, music of choice,
etc. In the case of banking augmented services may take the form of congenial waiting room, courteous
staff with "May I help you" attitude,
relationship orientation, quicker service, admission of faults, etc.
(iv) The potential product: Potential product refers to doing
everything potentially feasible to hold and attract the customers. The concept of potential product of a restaurant is viewed in terms of a pleasing flower arrangement,
manager's word of thanks, readiness to go out of the way to serve, etc. The banking service may include
occasional greetings at home, "The
how are you Mr. X" culture, surprise gifts, readiness to go out of
the way to serve the individual customer, etc. The potential product consists of added features and benefits that
mayor may not give benefits to the customers. Potential product offers scope
for redefinition of the product
in order to attract new customers.
2. PRICE:
Price
plays a significant role in the marketing mix by attracting revenue to the
marketer. Pricing decisions are important for determining the value of the
service as perceived by the customer building of an image for the service.
Price serves as a basis for perception of quality. The pricing strategy
should be in tune with the marketing strategy. Pricing strategy should gain
competitive advantage for the firm. Generally, firms add a percentage mark up
on cost.
3. PROMOTION:
Promotion
is an important part of the marketing mix for many marketers. The promotion
element of the service marketing mix communicates the positioning of the
service to customers. Promotion adds tangibility and helps the customer
evaluate the service offer. The promotion of services encompasses a number of
areas namely:
(a) Advertising
(b) Personal selling
(c) Sales promotion
(d) Public relations,
(e) Word of mouth; and
(f) Direct mail.
4. 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. Read more
about the role of business
locations or Place element.
5. 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.
6. PHYSICAL EVIDENCE:
Physical evidence is another important variable to be considered in the context
of services marketing. Since a service is intangible, it is important for the
client to search for evidences which enables him to evaluate the, service.
Physical evidences are those tangible clues which customers may receive during
the process of receiving the service. The customers evaluate the worthiness of
the service with the physical evidences they receive. Physical evidences can be
successfully employed to describe the service-product and its distinguishing
qualities.
7. PROCESSES:
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.
👉👉Also Read Service Marketing Notes - Full Notes vailable in DTS App
👉Also Read: Dibrugarh University Service Marketing Question Papers
👉Also Read: Dibrugarh University Service Marketing Solved Question Papers
Advertising for services
Advertising is the impersonal communication used by service
firms. Advertising in service marketing adds to the customer's knowledge of the
service, persuades the customer to buy and differentiates the service from
other service offerings. Persistent advertising is ,therefore, a must for the
success of the marketing of the service. Since the core product is intangible,
service marketers find promotional aspects difficult. They choose the tangible
elements that come along the product for promotion. Airlines, for example,
promote their service by advertising about the quality of cuisine, the width
and pitch of seats and the quality of their in-flight service. Nowadays, advertising
is extensively undertaken for financial services, telecommunication, retailing,
etc. Service firms spend a considerable Sum on advertising. Objectives of
advertising have been identified as:
a) creating
an understanding of the company in the customers' minds by describing the
company's services, activities and its areas of expertise
b) creating
a positive image for the company
c) building
a strong sense of identification with the customer by turning his needs, values
and attitudes
d) creating
a positive background for the sales people to sell the services by providing
all relevant information about the company.
Significances of Advertising:
Advertising is the most
commonly used tool of promotion. It is an impersonal form of communication,
which is paid by the marketers (sponsors) to promote goods or services. Common
mediums are newspaper, magazine, television & radio. Advertisements play a
very important role in offering innumerable benefits to the manufacturers,
customers and to the society in general. Following are the benefits of
Advertisements:
1.
Advertisements attracts new buyers and
maintains existing customers and to the society in general.
2.
Advertisements inform the consumers about the
quality and uses of the product.
3. Advertising also acts as an information service and educates the consumer.
It enables him to know exactly what he wants and where to get it.
4.
Advertising stimulates
production and reduces the cost per unit. This reduction in the cost is
generally passed on to the consumer.
5.
Advertising also makes it
possible to sell direct to the consumer by Mail Order Business.
6.
Advertising helps in creating goodwill, brand
image and brand loyalty.
7.
Advertisements help the retailers in selling
the advertised products.
8.
It is also helpful in getting better employees
and executives.
Limitations of Advertising:
Several
objections have been raised against advertising and some people criticize
advertising as a social waste. The main point of criticism is as follows:-
a) Creates
Monopoly in the Market: Advertisement leads to promotion and cover mass level
of customers at a time. Large firms can bear the advertisement expenditure but
not the small firms, due to that it can eliminate the small firms from the
market and creates its monopoly authority in the market.
b) Higher the
Prices of Product: Investment of money in advertisement leads to increase in
the price of goods and services for which consumer has to face high prices and
pay for it. Hence, more the advertisement cost- more the product cost.
c) Misleading
the consumers: Now days, advertisement misleads the consumers on false
representation regarding their goods. Consumer attracts to those goods which
are not necessary for them. Thus, advertisement misleads the consumer and sale
goods to them.
d) Wasteful
Consumption by the Consumers: Advertisement attracts the consumers for wasteful
products which are not necessary for consumers. Due to advertisement
businessmen takes undue advantage from them. They sale unhealthy and artificial
goods to them and exploits consumer emotions.
e) Wastage of
National Resources: There will be wastage of national resources, valuable
stationary, time and energy used by the people or is ignored by them. Here,
Valuable resources that can be used to create new industries are wasted in the
production of needless varieties and designs.
Branding in Services
Brand is a perceptual activity. It resides in the mind set of
the customer. It is the brand on the basis of which the customer is able to
distinguish the services of one provider from another. Brand means an image
that the customer carries about a particular product/service. Branding deals
with perceptual mapping and the virtual perceptual space. It is the brand that
commands the particular price and hence its position as compared to its competitors.
According to AMA branding has been defined as the “The name, term, sign, symbol, design or a
combination of them to identify the goods and services of one seller or group
of sellers and to differentiate them from those of the competitors.”
Branding besides providing the differentiation also helps in
recognition this also aids in the value reinforcement which ultimately leads to
the repeat purchases by the customers. Branding is the end result of the
customer relationship building.
Role of Branding in Service marketing
Brand value is the value that the brand commands in terms of
the customer loyalty, Franchise, customer commitment. In other words the brand
is said to exhibit the brand value when no other rival brand comes close to it
to substitute or displaces it from its current market positions. The best
example for brand value among the Insurance sector is the Indian public sector
organization LIC. It is the trust of customers in LIC that carries the highest
brand value amongst the competitors. Discussing about the brand value is quite
easy but the fact remains that how to gel and bond with the customers. Role of
Branding are mentioned below”
a) GENERATE SERVICE FUNCTIONALITY:
It is
the benefits that the customers are looking for while purchasing the services
of a particular service provider. Any service provider that has the ability to
provide these functional benefits is the one that would command the
competition. Some brands develop customer loyalty and commitment on the
strength of their ability to deliver superior functional benefits. Actually the
service is the bundle of ingredients, attributes, technology and form. Some
brands draw their relevance and distinction from the services which they are
offering such as Airtel that commands the no number position among the various
competitors.
b) PROVIDE THE EMOTIONAL BENEFITS:
Emotions
ride and finally shape the behavior of the individual. It is responsible for
the way a person perceives the brand. More often the brand is able to provide
the emotional satisfaction to the customer better it is considered. Beyond the
physical side of human there is an integral and important side of emotions.
Like functional satisfaction customers also seek emotional satisfaction. People
care for love, empathy, romance, security, achievement, and humour. Brands
delivering emotional benefits engender specific feeling during purchase and
use. The idea is to trigger those feelings that the brand is designed to
trigger in the emotional psyche of the customer. For instance, Maruti Suzuki
brand is designed to make its owner feel Proud, safe and above all provide the
much required service backup even in the remotest of the areas.
c) SELF IDENTIFICATION BENEFITS:
As per
the Maslow need hierarchy people need to identify themselves in the society
which they are the part of they need to express self-identity on others. For
instance, a person likes to express himself, confident, strong or adventurous.
Brands achieve this association with the customers by becoming a means for such
self-expression. Certain brands really command the respect and of course the
customers who own such brands would be the proud ones. Talking about the big
shot Institutions such as Harvard, LBS MIT all these are the big brands in the
professional education and the students who have been associated with these
brands command respect and are considered to be par excellence. Inherent to any
strong brand is promise of delivery of satisfaction. Brands are carriers of
unique value or benefits coveted by the target customer group. Brands become
trustworthy for their consistent delivery of promised value. Consistency of
delivery is crucial in any brand building effort.
STRATEGIES FOR CREATING OF A STRONG SERVICE BRAND:
Some of the strategies for creating the
strong service brand include the
a) DELIVERING AS PROMISED:
Services are
just the promises that need to be kept at any cost. Promises that are made to
the customers have to be realistic in nature and they need to be fulfilled. Any
promise that is not met would result in the dissatisfaction and ultimately the
overall brand value would come down. Employees play an important role in this
regards because they are the ones who interact with the customers and any type
of overpromising on their behalf would means lowering of the brand value. In
simple words the service delivery, the employees and the service structure
should be aligned to delivery quality to the customers.
b) CREATE DIFFERENTIATION:
It is often said
that those individuals succeed who do the things differently, realizing and
identifying the needs of the customer is an important parameter for the
branding of the services. One brand of service provider needs to be different
from the other. Differentiation can be on different parameters that may include
the Service contents, quality, availability, delivery etc.
c) AVOID VARIABILITY:
Variations in the
same service provided to the same segment of the customers has to be minimum.
Variations create will and the customers start comparing. This comparison often
is detrimental for the service provider. Heterogeneity of a product can kill a
brand. Service heterogeneity must be checked and controlled by employing
various mechanisms. Employee training and controls can standardize employee
performance.
d)
SERVICE
EVALUATION:
Evaluation of the services of a particular service provider
depends on the nature of the services. Services with high credence and
experience qualities are difficult to evaluate. In a situation of pre-purchase
quality difficulty, the customer is forced to rely on other available clues and
evidences. As a service provider the effectiveness would depend on the fact
that how well the service provider can discover these clues and evidences and
employ them creatively while communicating with the prospects.
e)
EDUCATE
CUSTOMER:
Since services are inseparable in nature therefore the service
provider should impart the training and should educate the customer about the
role he is supposed to play in the service delivery. If this does not happen
the role that the customer would play would be faulty still it would be the
overall image of the service provider that would be tarnished because the
customer will not be ready to admit his mistakes.
f)
CUSTOMER
FOCUS:
What ever be the nature of the service to be provided the service
provider should never more the customer away from its focus. This means that
the service provider should always remain in contact with the customer and keep
in updated about the recent developments. Companies that lack the customer
focus and orientation are bound to be out of the competition and the market.
g)
GENERATE
EMOTIONAL HOOK:
Branding is not always reasoning. It is the bond and
connection that the service provider creates with the customer that would
always hook the customer to the service provider. Actually it is the process of
personalization of the services that the service provider should provide.
Personalization helps the customer to feel like a king which in turn would
maintain the brand loyalty of the customer.
h)
CUSTOMER
FEDBACK:
We all know how important the feedback is for the service provider
and the customer also. It is the feed back through which the service provider
can come to know about the relevance of the brand value in consumer mindset.
The service provider needs to develop the efficient feed back mechanism with
which the customer would feel free to give his views about the service provider
and the services it is providing.
Service Packaging
Service managers have difficulty identifying their product.
This problem is partly a result of the intangible nature of services, but it is
the presence of the customer in the process that creates a concern for the
total Service experience. Consider the following examples. For a sit-down restaurant,
atmosphere is just as important as the meal, because many diners regard the
occasion as a way to get together with friends. A customer’s opinion of a bank
can be formed quickly on the basis of a teller’s cheerfulness or length of the
waiting line. The service package is defined as a bundle of goods and Services
that is provided in some environment. This bundle consists of the following
four features:
a) Supporting
facility: The physical resources that must be in place before a service can be
offered. Examples are a golf course, a ski lift, a hospital, and an airplane.
b) Facilitating
goods: The material purchased or consumed by the buyers, or the items provided
by the customer. Examples are golf clubs, skis, food items, replacement auto
parts, legal documents, and medical supplies.
c) Explicating
services: The benefits that are readily observable by the senses and that
consist of the essential or intrinsic features of the Services. Examples are
the absence of pain after a tooth is repaired, a smooth-running automobile
after a tune-up, and the response time of a fire department.
d) Implicit
services: Psychological benefits that the customer may sense only vaguely or
the extrinsic features of the service. Examples are the status of a degree from
an Ivy League school, the privacy of a local office, and work-free auto repair.
All these features are experienced by the customer and form
the basis of his or her perception of the service. It is important that the
Service manager offer a total experience for the customer that is consistent
with the desired service package. Take for example, a budget hotel. The
supporting facility is a concrete-block building with austere furnishings.
Facilitating goods are reduced to the minimum of soap and paper. The explicit
service is a comfortable bed in a clean room, and implicit service might
include a friendly desk clerk and the security of a well-lighted parking area.
Deviations from the service package, such as adding bellhops, would destroy the
bargain image.
Service Quality
Service quality is the degree of excellence and perfection
achieved in performing a service. Quality in services is basically a
customer-oriented phenomenon. It must begin with customer needs and end with customer
satisfaction. Customers are satisfied when their expectations are met, and delighted
when their expectations are exceeded. Quality of service is the key to creating
customer value and satisfaction. Quality is achieved when customers are
provided with the best solutions or the best value for money.
Quality is subjective and hence it is difficult to give a precise definition.
However, "the quality of services is the degree of conformance of all the
relevant features and characteristics of service to all the aspects of the customer's
needs limited by the price and delivery he or she will accept". Service
quality when defined in terms of customer satisfaction is the degree of
conformance of the perceptions of the service received to the expectations of the
service desired. It is the totality of the features and characteristics of a
service that bear on its ability to satisfy-stated or implied customer needs.
The nature and characteristics of services can have an impact on quality
issues:
a) The
intangibility of many services means that, it can be very difficult for service
quality to be measured and assessed.
b) Inseparability
of the service itself from the service provider highlights the role of people
in the service transaction and their influence on quality levels.
c) The
heterogeneous nature of services means that a service is never exactly repeated
and will always be variable to some extent.
d) The
perishable nature of services can lead to customer dissatisfaction if demand
cannot be met.
SERVICE QUALITY GAPS/GAPS MODEL OR REASONS AFFECTING SERVICE QUALITY
Assessing the quality of the services is the most important
as well as the most cumbersome process to be carried out by any organization.
Service Quality may be defined as “The difference between customer expectations
of service and perceived service.”
If expectations are greater than performance, then perceived
quality is less than satisfactory and hence it results in customer
dissatisfaction. The most lucid and well explained approach towards measuring
the service quality is given in the GAPS MODEL, of service quality. Five major
gaps have been identified that affect the service quality.
a) GAP – 1: CUSTOMERS’ EXPECTATIONS VERSUS MANAGEMENT :
In simple terms this gap is the difference
between the expectations that the customers have about the service and service
provider and the understanding that the service provider develops about the
customers’ expectations. Customer Perceptions are the subjective views carried
by the customers about the service quality, whereas customer expectations are
the standards or reference against which the experiences of the service would
be compared. This Gap may exit due to of the lack of marketing research
orientation, inadequate upward communication and too many layers of management
in the organization. The customer expectations are generated by the image that
is created by the organization through advertisement, CRM, Promotion etc, due
to which the management develops a different perception about customer’s
expectation resulting in this gap.
b) GAP – 2: ORGANIZATION’S PERCEPTIONS VERSUS SERVICE SPECIFICATIONS:
Customer driven
standards and service specification may not be same as the organizations view
about customer expectations and this result in the Existence of Gap no II. This
gap may develop due to following reasons.
1) Unrealistic customer expectations: Organization
believes that the customer expectations are unrealistic in nature and cannot be
fulfilled at any cost.
2) Lack of commitment: Management believes
that service quality is difficult to maintain and does not show commitment of
any kind towards the service quality.
3) Infeasible: Feeling and perception of
Infeasibility.
4) Lack of Goal Setting: Inadequate task
standardization and absence of formal goal setting.
c) GAP – 3: SERVICE SPECIFICATIONS AND STANDARDS VERSUS:
This gap arises due to mismatch
between the Service specification and actual service delivery. The most common
reasons for this type of mismatch are:
1)
Role
ambiguity and conflict among the employees: Employees are not clear about
the role they need to play is the effective delivery of services to the
customers thereby causing confusion among the customers.
2)
Poor
Employee-job: the requirements of the job and the skills of the person do
not match with each other.
3)
Poor
Technology-job fit: Employees have not been upgraded and are unable to
provide the services through the technologically advanced systems.
4)
In
appropriate supervisory control systems: The system that is needed to
access the performance of the employees and generate control over them is not
as desired by the employees.
5)
Lack
of teamwork: Employees lack the feeling of team work hence they are unable
to work as teams.
6)
Inadequate
service delivery intermediaries: All the intermediaries that are
responsible for the service delivery are either inadequate or unable to provide
the desired levels of the service.
7)
Inability
to address to the need of variability: Variability means providing
different format of services according to the varying needs of the customers.
d) GAP – 4: SERVICE PERSORMANCE VERSUS PROMISES:
This is a gap that occurs when there is a
difference between the service delivery and service provider’s external
communication. Promises that the service organizations have made to the
customers through the advertisements, sales force and other media raise the
potential expectations of the customers regarding the service quality whereas
when it comes to the actual delivery of the promises the service performance is
not up to the mark. The reasons for this kind of gap are:
1)
Inadequate
horizontal communication: The horizontal communication among the peer group
may be inadequate that may lead to miscommunication and hence wrong promises.
2)
Propensity/Tendency
to over-promise: Employees in order to achieve their targets sometimes over
promise the customer about the service which actually does not exit or cannot
be delivered hence this leads to the failure of service.
e) GAP – 5: DIFFERENCE BETWEEN THE PERCEIVED SERVICE AND EXPECTED SERVICE:
Customers always carry
a perception regarding certain levels of the service that they think would be
getting whereas in reality their expectations from the services may be
altogether different, this mismatches results in the form of a gap that needs
to be bridged to make a service a quality service.
Dimensions and perspective of Service Quality
The most important
service quality model is the SERVQUAL developed by Parasuraman, Zeithaml and Berry.
There are five main criteria on the
basis of which service quality is determined. They have been arranged in the order of importance as given below:
1. Reliability: This
implies the capacity of the service firm to deliver the promised service
dependably and accurately. It means that the same
service is performed every time, on time, in the same way and without mistakes.
2. Willingness: This
refers to the willingness to
help customers and provide prompt
service. Customers do not like to wait unnecessarily and if it happens it reflects badly on the quality of
service. Similarly in case of service
failure, the ability of the firm to respond professionally and quickly can create a good impact on service quality.
3. Assurance: This
means the knowledge that the providers possess which
enables them to perform the service competently. It also includes
courtesy aspects such as politeness
and respect for customers. This conveys trust and
confidence and generally convinces the customer that the service provider has the customer's best interest at
heart.
4. Empathy: It
basically means the power of understanding the customer's feelings and needs which allows the server to
care for him and provide personal attention to him. Due to this a
customer feels that he can approach
the server with confidence and has a feeling of security.
5. Tangibles: This
includes the overall appearance of the surroundings,
equipment, information materials and personnel. This can be visible evidence of the care and attention to details
shown by service firm. Service
quality has two important implications for the organization providing the service. First, decisions must
be made on the basic level of quality,
which will be provided to match the quality, which is expected by consumers. Secondly, decisions have to be made
on the management of quality over time. These decisions have significant
influence on the service offerings in
the long term.
Need for New Service Development
One of the most important aspects of product strategy relates
to the issue of the development of new products, a strategy, which is becoming
increasingly important as the intensity of the competitive environment
increases. The cost associated with the development and launch of a completely
new product can be phenomenal and if the product fails to meet target sales
figures, then the company may not survive. Although the risk associated with
failure may be less for service providers when compared to manufacturers. Few
reasons for new services development may be:
a)
When a service has reached the maturity stage of
its life cycle and may be moving towards decline stage,
b)
When there is spare capacity.
c)
To balance an organization’s existing sales
portfolio and thus reduce risk of dependency on only a few services offered
within a range.
d)
To cater, to customer’s diverse needs.
Types of New Services: Due to intangible nature of services, it is
often quite easy to make slight variations of an existing service. Thus, the
term ‘new service’ can mean anything from a minor style change to a major
innovation. Lovelock has indentified five types of ‘new services’:
a) Change
of style: This may include changes in décor or design or logo of a product.
b) Service
improvements: These include the actual change to a feature of the service which
is already an offer to an established market. For example, introducing computer
reservation system in a travel agency to improve the efficiency of operations
to satisfy the customers.
c) Service
line extensions: There may be development of additional services to the
existing service product range.
d) New
service: The new services that are offered to its existing customers although
they may be currently available from its competitors. For example, ATM service
if offered by Stage Bank of Mysore.
e) Major
innovations: These are purely new services through innovations for new markets.
The New Service Development Process
It is a systematic, staged process, which organizations
should adopt to screen new service ideas and maximize their chances of success
in the market. There are a variety of frameworks proposed to guide new service
development. An appropriate framework (process) comprises the following stages:
1.
Generation of ideas.
2.
Screening.
3.
Testing the concept.
4.
Business analysis/evaluation.
5.
Development.
6.
Market testing.
7.
Product launch.
1.
Idea
of Generation: Ideas can be generated from within an organization and also
from outside, either formally or informally in other words it can come from
both internal and external sources. The internal sources could be from sales
staff, front line personnel, the suggestion box, new developments arising from
existing services, and external sources could be from customers, experts in the
field, market demand analysis and gap analysis.
2.
Screening:
A number of ideas generated in the first stage must be screened to ensure.
·
Their consistency with the organization’s
existing strategy.
·
The extent to which they fit the image of the
organization and its capability, their appeal to particular segment and
·
Their cost and profitability implications.
Screening requires thorough evaluation, the application of
weights to the different criteria and the development of ranking for the
various ideas in terms of the suitability.
3.
Testing
the Concept: The ideas which constitute the new product or service must be
translated into a specific feature and attributes which the product or service
will display. Concept testing is usually done through marketing research. It
involves presenting the idea or concept, to the target market and studying
their reactions to make necessary modifications to the product before it is
launched. The extensive test marketing should be carried out to set the
benefits, not only in terms of feedback but also in terms of developing an
appropriate marketing/campaign to find the product launch.
4.
Business
Analysis: At this stage, ideas which have been selected to be developed
further require in depth exploration and evaluation. The important task is to
produce a formal analysis of market potential of the ideas in terms of
forecasting all aspects of developing and launching the service. The idea is
now translated into a business proposal. The business analysis focuses on
defining the market, market size and structure, consumer trends in the market,
levels of demand, current and future, external environment factors likely to
affect performance, competition, market share forecasts, financial forecasts,
costing, breakeven analysis, etc.
5.
Practical
Development: At this stage preparations are made for developing and
launching the service. The service providers undertake the work of designing
and supply of literature and supporting materials. A detail marketing programme
is developed to cover all aspects of marketing mix. They are Advertising and
Promotional Campaigns, channel selection, packaging the new service offering,
pricing policy and staff training.
6.
Market
Testing: Marketing research is carried to test the concept; it is necessary
to test the market to reduce the risk. This may be done artificially by using
panels of consumers who will use the product or service at their residence or
testing in the actual market but in a small area may do it. The test marketing
can help organizations to blend the elements of marketing mix to optimize the
chances of success, and also be a strong indication of likely performance in
the wider market.
7.
Launch:
The product launch is the final stage and the organization now can make
decisions on when to introduce the new service, where, to whom and how to
introduce the new service. It is at this stage that the life cycle is said to
commence and the new service moves from being purely cost, to bringing in
revenue. At this stage major decisions are taken regarding the timings of the
launch, the geographical location of the launch and the specific marketing
tactics to be used in support of that launch. There are different ways in which
the success of new product and service can be measured. The evaluation of a new
launch can vary according to which measure of success is used.