Category: University of Mumbai BMS Notes

Service recovery refers to the ‘actions taken by an organisation in response to a service failure’. Failures occur for all kinds of reasons the service may be unavailable when promised, it may be delivered late or too slowly, the outcome may be incorrect or poorly executed, or employees may be rude or uncaring. All of these types of failures bring about negative feelings and responses from customers.

The goal of service recovery is to identify customers with issues and then to address those issues to the customers’ satisfaction to promote customer retention. However, service recovery doesn’t just happen. It is a systematic business process that must be designed properly and implemented in an organization. Perhaps more importantly, the organizational culture must be supportive of idea that customers are important and their voice has value.

Research has shown that the customers who, have had a service failure resolved quickly and properly, are more loyal to a company than the customers who have never had a service failure significantly more loyal. Service Recovery practices are a critical element in a Customer Loyalty Program.

Think about your own experiences with service or product problems. Did you get a quick acknowledgement of the problem, speedy resolution of the problem, and perhaps compensation for your troubles? (Imagine if you got a truly sincere apology and not some phony empathy?) Weren’t you more likely to buy from that company again because of the confidence you now had in their business practices? That’s the key value to effective service recovery and complaint handling customer retention.

One way to think about service recovery is that it is a positive approach to complaint handling. Complaint handling has serious negative connotations; whereas, service recovery has positive connotations. Complaint handling is placating people, minimizing a negative. Service recovery practices are a means to achieve the potential, latent value a customer holds for a company by fostering an ongoing positive relationship. Service recovery has a secondary value. It creates positive word-of-mouth about your company and minimizes the bad spin that lack of service recovery practices can create.

The Service Recovery Paradox Theory:

The recovery paradox theory advances the contention that if a service firm exhibits an excellent recovery in the event of a service failure, then the customer’s satisfaction may exceed pre-failure levels. While a number of researchers have provided evidence in support of the recover paradox, several recent studies have failed to find such support.

This study theoretically and empirically examines factors that moderate the occurrence of a ‘recovery paradox’ in the event of a service failure. Research findings indicate that, under appropriate conditions, a customer can experience a paradoxical satisfaction increase after a service failure.

Certainly, the recovery paradox is more complex than it may seem on the surface. First of all, it is expensive to fix mistakes, and it would appear somewhat ludicrous to encourage, service failures after all, we know that reliability (“doing it right the first time”) is the most critical determinant of service quality across industries. Second, empirical research suggests that only under the very highest levels of customers’ service recovery ratings we shall observe increased satisfaction and loyalty.

This research suggests that customers weigh their most recent experience heavily in their determination of whether to buy again. If the experience is negative, overall feelings about the company will decrease and repurchase intentions will also diminish significantly. Unless the recovery effort is absolutely superlative, it cannot overcome the negative impression of the initial experience” enough to build repurchase intentions beyond where they would be if the service had been provided correctly in the first place.

These conclusions are somewhat complicated by a recent study that shows no support at all for the recovery paradox. In the context of that study, overall satisfaction was consistently lower for those customers who had experienced a service failure than for those who had experienced no failure, no matter what the recovery effort was. An explanation for why no recovery paradox occurred is suggested by the magnitude of the service failure in this study a three-hour aeroplane flight delay. This type of failure may be too much to be overcome by any recovery effort. Even in this study, however, strong service recovery was able to mitigate, if not reverse, the effects of the failure by reducing overall dissatisfaction.

Given the somewhat mixed opinions on whether a recovery paradox exists, it is safe to say “doing it right the first time” is still the best and safest strategy. However, when a failure does occur, every effort at a superior recovery should be made to mitigate its negative effects. In cases where the failure can be fully overcome, the failure is less critical, or the recovery effort is clearly superlative, it may be possible to observe evidence of the recovery paradox.

Basically, how do consumers respond to service firm efforts to recover from inevitable service failures such as cable not working in a hotel room or unsatisfactory service in a rest section rant. If the service firm can put in order the situation quickly and to the satisfaction of the consumer, overall satisfaction can occur. When there are excessive service failures, it is unlikely the firm can recover.

Why does Service Recovery get no Respect?

So why service recovery part of every organizations’ business isn’t processes? No easy answer exists. Perhaps it’s the contention between operations and marketing.

(i) Customer Acquisition is Attractive: Marketing conducts expensive research, fine tunes the 4Ps that comprise its marketing strategy (Product, Place, Promotion, and Price), and penetrates new customer bases through its sales and marketing programs. Companies spend big bucks on achieving sales growth and expanding market share.

(ii) Service Recovery isn’t Attractive: It’s an operational task that involves negotiating with angry customers. The budget typically falls in the customer service department one of those loathsome cost centres that drain profit. Isn’t it easier to just dismiss these upset customers and move on to greener fields?

In some cases, probably it is easier and appropriate. Some customers cannot be recovered, only ameliorated so they don’t bad mouth the organization. This may seem like heresy from a self-proclaimed customer service nut, but customers are not always right. (Great Brook had a person from a Pacific Island nation who contacted us to buy our Customer Survey book. They weren’t willing to pay prior to shipment; they wanted to be invoiced. And they wanted an electronic copy of the book. We declined their business.)

However, most customers can be recovered through simple application of the Golden Rule, and those recovered and retained customers become profit centres. They buy more and they give positive recommendations to friends and colleagues, which is the most important form of “advertising.”

For a rough calculation on the potential value of a Service Recovery Program in your organization, find out the annual sales volume per customer, then apply the operating profit margin to find the profit per customer. Next, find out the annual customer churn, i.e., how many customers stopped buying from you—especially long-standing customers.

Multiply, the churn by the profit margin and you have the potential value of the Service Recovery Program’s annual budget. You’ll probably find that even reducing a small amount of the churn will more than pay for the program. And this doesn’t even include the reduced sales from customers who didn’t leave but still have stayed with the organization!

Stages of Service Recovery Maturity:

Service Recovery in an organization progresses through a series of stages as shown in the Figure.

(i) Stage 1: Moribund: There is no complaint handling. Angry customers are ignored. Drugstore.com is an example of a company with totally moribund service recovery practices. Letters to VPs and even the CEO about a damaged shipment go unanswered.

(ii) Stage 2: Reactive: Customer complaints are heard, and a response is made. But it’s a haphazard process with no defined goals for the response, and no one owning this business process.

(iii) Stage 3: Active Listening: At this stage, the response to issues voiced by customers is structured. Specific people have the responsibility to respond to complaints and guidelines are in place for the response. However, it is still reactive.

(iv) Stage 4: Solicitous: The critical change from Stage 3 to 4 is the move from reactive to proactive solicitation of customers with issues. The reason is that most customers don’t bother to complain. They just move on to other suppliers of products. Haven’t we all done this? It’s a lot of work to complain! The solicitous role is accomplished by encouraging customer to voice their complaints.

Event surveys (also known as transactional or transaction-driven survey) are a commonly used technique to get issues voiced. The survey design must be such that more than just high level measurement of customer satisfaction is captured. The design must allow for action to be taken. The desire for anonymity complicates the task.

(v) Stage 5: Infused: The pinnacle of Service Recovery Practices is achieved when the complaint identification merges with business process improvement or six sigma programs to support root cause identification and resolution. The owners of business processes that cause customer issues are notified of the occurrences to prompt reexamination of the process design.

In essence, we see two levels of feedback loops. First, feedback from the customer to the organization. Second, feedback from the customer-facing groups to its business partners within the organization. While company culture is clearly critical to implementing this level of feedback management, certain technologies can infuse this information sharing into business practice.

Like motivation, involvement too is an internal state of mind which a consumer experiences. It makes one analyze and rationalize his/her choice. Involvement of consumers can be induced by external sources and agencies. Involvement is the embodiment of time, effort, consideration given and the enjoyment that is derived by consumer while choosing a product or service.

The involvement theory holds that there are low and high involvement purchases. Consumers’ involvement depends on the degree of involvement of purchase to a consumer. For example, while buying a loaf of bread, the consumer does not feel very much involved. It is because the life of the product is very short. Once it is consumed, it gets exhausted. If the consumer is not satisfied with the particular bread brand, he will purchase some other brand next time.

In the case of purchase of consumer durable (Laptop, refrigerator, household furniture, two wheeler etc.), the involvement of the consumer in making the purchase decision is high. Consumers take a decision after much deliberations. These products have long-term consequences. Consumers make lot of inquiries before they purchase the products which have a high degree of involvement.

The following table shows various degrees of involvement depending upon the nature of the product or service.

Types of consumer involvement in buying or Servicing

Certain factors affect the degree of involvement of buyers in making purchase decisions. These include their level of knowledge, information, psychology, culture, lifestyle, social system, etc. Even for the same product or service the degree of involvement of an individual may vary depending upon the circumstances. There are five types of involvement.

1. Ego involvement

Ego involvement is intended to satisfy one’s ego. For example, all the members of the family involve themselves in purchasing a product for a single member belonging to that family. Wife involves herself in the purchase of garments for her husband and husband involves himself in the purchase of cosmetics for his wife. Sons and daughters of the family significantly influence the purchase of laptop, TV, car, household furniture, etc. The ego of each family member is satisfied by consulting him/her before the purchase.

2. Commitment

Commitment is another important form of involvement. When a member of the family falls sick, the other family members are committed to arrange medical treatment for the suffering members. Similarly, functions like marriages entail the commitment of the entire family.

3. Communication in involvement

Communication involvement signifies sharing the available information with others in the family or organization. If one member has some information on the subject matter of decision, he should communicate it with the other members before arriving at a decision.

4. Purchase importance

Involvement of individuals depends upon the degree of importance of purchase. Suppose e flat costing lakhs of rupees is purchased, then the purchase decision assumes a great deal of importance in respect of location and area of the flat. The title deeds should be free from encumbrance.

5. Extent of information

Once the consumer recognizes the need, he then engages in a search process. Search means acquisition of information from the environment. The extent of information search is part of purchase importance. When the purchase is important, information is sought from all possible sources. But in the case of routine purchase of products and services, information search will be rather minimum.

Market Positioning refers to the ability to influence consumer perception regarding a brand or product relative to competitors. The objective of market positioning is to establish the image or identity of a brand or product so that consumers perceive it in a certain way.

For example:

A handbag maker may position itself as a luxury status symbol

A TV maker may position its TV as the most innovative and cutting-edge

A fast-food restaurant chain may position itself as the provider of cheap meals

Types of Positioning Strategies

There are several types of positioning strategies. A few examples are positioning by:

Product attributes and benefits: Associating your brand/product with certain characteristics or with certain beneficial value

Product price: Associating your brand/product with competitive pricing

Product quality: Associating your brand/product with high quality

Product use and application: Associating your brand/product with a specific use

Competitors: Making consumers think that your brand/product is better than that of your competitors

How to Create an Effective Market Positioning Strategy?

Create a positioning statement that will serve to identify your business and how you want the brand to be perceived by consumers.

For example, the positioning statement of Volvo: “For upscale American families, Volvo is the family automobile that offers maximum safety.”

1. Determine company uniqueness by comparing to competitors

Compare and contrast differences between your company and competitors to identify opportunities. Focus on your strengths and how they can exploit these opportunities.

2. Identify current market position

Identify your existing market position and how the new positioning will be beneficial in setting you apart from competitors.

3. Competitor positioning analysis

Identify the conditions of the marketplace and the amount of influence each competitor can have on each other.

4. Develop a positioning strategy

Through the preceding steps, you should achieve an understanding of what your company is, how your company is different from competitors, the conditions of the marketplace, opportunities in the marketplace, and how your company can position itself.

Importance of Positioning

Positioning involves both launching new brands into the marketplace (new brand positioning), and repositioning old brands. It is concerned with the differentiation of products and services and ensuring that they do not degenerate into a commodity. To maximize its potential a company should position itself in its core market segments, where it is objectively or subjectively differentiated in a positive way over competing offerings.

Positioning is particularly import for services in the market. As a result of competitive pressure the consumer is becoming increasingly confused by the huge offering of services within each market sector. These offering are communicated by a vast number of advertising messages promoting different features of the services. The key to a successful positioning strategy is to promote the feature which the company is best and which exactly matches the needs of the customer.

Because of intangibility and other features associated with services, consumers find that differentiation of services can be more difficult and complex. Successful positioning makes it easier for the customer to see a company‟s services as being different from others and exactly what is wanted.

Positioning is a strategic marketing tool which allows managers to determine what their position is now,

What they wish it to be and what actions are needed to attain it. The permits market opportunities to be identified, by considering positions which are not met by competitors‟ products. It therefore helps influence both product development and the redesign of existing products. It also allows consideration  of competitor‟s possible moves and response often considered at the product level although it is also relevant at the product sector and organizational level. Positioning involves giving the target market segment the reason for buying your services and thus underpins the whole marketing strategy. It also offers guidelines for development of a marketing mix with each element of he it being consistent with the positioning.

The division of consumables into services is a simplification: these are not discrete categories. Most business theorists see a continuum with pure service at one endpoint and pure tangible commodity goods at the other. Most products fall between these two extremes. For example, a restaurant provides a physical good (prepared food), but also provides services in the form of ambience, the setting and clearing of the table, etc. Although some utilities, such as electricity and communications service providers, exclusively provide services, other utilities deliver physical goods, such as water utilities. For public sector contracting purposes, electricity supply is defined among goods rather than services in the European Union, whereas under United States federal procurement regulations it is treated as a service.

Goods are normally structural and can be transferred in an instant while services are delivered over a period of time. Goods can be returned while a service once delivered cannot. Goods are not always tangible and may be virtual e.g. a book may be paper or electronic.

Marketing theory makes use of the service-goods continuum as an important concept which ‘enables marketers to see the relative goods/services composition of total products’.

In a narrower sense, service refers to quality of customer service: the measured appropriateness of assistance and support provided to a customer. This particular usage occurs frequently in retailing.

The goods and services continuum enables marketers to see the relative goods/services composition of total products. A product’s position on the continuum, in turn, enables marketers to spot opportunities. At the pure goods end of the continuum, goods that have no related services are positioned. At the pure services end are services that are not associated with physical products. Products that are a combination of goods and services fall between the two ends. For example, goods such as furnaces, which require accompanying services such as delivery and installation, are situated toward the pure goods end. Products that involve the sale of both goods and services, such as auto repair, are near the center. And products that are primarily services but rely on physical equipment, such as taxis, are located toward the pure services end.

A few observations of the Continuum model can be made:

• The offerings of a firm range from pure goods to pure services.
• Those that are mostly goods are tangible and are very easy to evaluate by the consumer (like fabrics, jewellery, a house etc.). A consumer finds it very difficult to evaluate those offers which are mostly services because of their intangibility (like legal and counselling advice, medical diagnosis etc).
• The range of offers has different qualities in themselves and the customer looks for or seeks these qualities:

Those that are mostly goods show search qualities. Customers know exactly what they want and look for those features in the offer. Thus, an apartment hunter would look for a 2­bedroom-hall-kitchen property in Bandra admeasuring 900 square feet in car.pet area. Or, a lady might look for specific designs in a 23-carat bangle from a Tanishq outlet. Mr. Joseph looks for worsted, blue woollen suit material for himself etc.

Thus a marketer can put the search quality features on prominent display and make it easier for customers to get details or access. If the customers do not find these features in their search they may become anxious and may not buy or they may go for rival products where there is easier access to information.

Those offers that are mostly services evince credence qualities There are no tangible features for the customer to search for. He then looks for credo qualities in the offer Reputation of the offer becomes the decisive factor. He has very few other alternatives to compare. Thus, Mrs. Manjrekar would choose only that lawyer to fight her divorce and custody battle who has a reputation for winning such court cases. A patient would. choose his doctor or surgeon on the basis of his reputation.

We tend to give our computers or for -repair on the basis of the reputation of the repairman. A marketer of such offers has to be doubly careful in highlighting the credibility of the service provider. An actor is never called again for a stage play if his histrionic talent is in question; a doctor or surgeons whose ethical reputation is in question right never have patients. Thus, in the product-service continuum’, services can be classified in three ways, under the range or degree of tangibility highly tangible to highly intangible. They are:

Highly tangible services:

They have high degree of tangibility. This is mainly because the services are rendered over certain goods, e.g., car rentals. It is a service based entirely on cars. If a place had no cars, such a service would cease to exist. For the marketer, it is both a boon and a curse. As mentioned, car rentals exist only because cars exist. It’s easy for the service marketer to be persuasive and “tangibles” the offer. He only has to include the car in his communication; the service concept could be easily comprehended by the consumer. In addition, if the car has a good brand image and is looking spick and, the car rental basks in the reflected glory. If the car rental mentions in its advertisements about the type of cars in its pool, the consumers perceive the quality of the company accordingly. Alternatively, if the car breaks down during a rental service, the consumer will have a poor impression and image of the car rental company. He would not reason that it was the car that broke down and failed and that the car rental company should really not be blamed.

Examples of car rental companies in India are Dial-a-Cab, in Delhi, and -Wheels-Rent-A­-Car (WRAC) of the Bhoruka group, who also own Transport Corporation of India, the giant fleet trucking enterprise. Other car rental companies are Hertz-Rent-A-Car and Avis in the United States.

Service linked to tangible goods: Here the service is linked to goods, either independently, or as part of the marketer’s offer. If it is the latter, the service becomes a part of the total product concept. This takes place when Videocon, the home appliance company, includes repair as part of its marketing mix. Even if it is not included, home appliance repair is a service that is forever linked to goods. If there were no home appliances in the world, such services would be non-existent. A whole range of services exists in the housing sector especially post-construction like repair and maintenance.

Highly intangible services: In this classification under the continuum model, service is highly intangible. The services cannot be touched, felt or seen, e.g., counselling, consultancy, psychotherapy, physiotherapy, a guest lecture, etc.

Marketing of products and services involves different strategies due to the dissimilarities in their characteristics. While in goods marketing, the aim is to fulfil the needs and wants of the target population.  As against, in service marketing, the firm seeks to create a good relationship with the customer, to win their trust.

The two most important activities undertaken by the business is production or procurement of products and its distribution to the end user. The procurement of raw materials and its conversion into a finished goods is an easy job. However, the disbursement of the goods is a strenuous one, because creating a place for a goods in the market is a bit difficult task, as the market is already flooded with lacs and lacs of products, where no one knows about your goods and in this way the marketing comes into the picture.

Nowadays, marketing is not confined to the product, but services, ideas, property, experiences and even people are marketed. The marketing activities are aimed at creating an impression of the goods or service in the consumer mind, in such a manner, that your brand becomes a synonym for that particular goods or service.

Goods Marketing

The entire process, right from the market analysis, to delivering goods to the customer and receiving feedback, is called goods marketing. The process is aimed at finding out the right market for its goods and its placement in such a way that it gets good customer response. It entails promotion and sale of a goods to its target audience, i.e. prospective and existing buyers.

Various activities involved in the goods marketing involves analysis of the market, identification of consumer demand, designing and development of product, pricing, pitching of a new product, communicating, advertising, positioning, distributing, selling, review and feedback.

Example: Marketing for tangible objects like books, handbags, laptops, mobiles, clothes and so on.

Service Marketing

When a person or business entity promotes services it offers to its customers or clients, it is known as service marketing. It is aimed at providing solutions to the problems or difficulties of the clients. It includes both business-to-business (B2B) and business-to-consumer (B2C) marketing.

A service is an act of performing something for someone in exchange for adequate consideration. It is intangible, consumed at the time of its production, can’t be inventoried and resold. Each service offering is unique in itself because it cannot be repeated exactly alike, even if the service is rendered by the same person.

Example: Marketing of professional services, beauty parlours or salon, spa, coaching centres, health services, telecommunication, etc.

1. The process in which the marketing activities are aligned to promote and sell a specific goods for a particular segment is called goods marketing. The marketing of economic activities, offered by the business to its clients for adequate consideration, is known as service marketing.
2. In a goods marketing, only 4 P’s of the marketing mix are applicable which are product, price, place and promotion, but in the case of service marketing, three more P’s are added to the conventional marketing mix, which are people, process and physical existence.
3. When a goods is marketed, the company offers value, as it fulfils customer’s requirements. Conversely, when service is marketed by a company, it offers a relationship to its clients.
4. One thing to be noted that, in goods marketing, the company promotes something whose ownership can be transferred/resold to another party. But in the case of service marketing, the company promotes something, whose ownership can neither be transferred nor it is resold to the other party.
5. In goods marketing, products reach the buyers, as they can be transported from one place to another through various distribution channels. Unlike service marketing, where customers come to the services or the service provider visit customer because services cannot be transported, they are location based.
6. Products are tangible in nature, they can be felt and touched, which make its promotion easier. On the other hand, services are intangible, people can only experience it, and so marketing of services is a bit difficult.
7. If the quality of a certain goods is not up to the mark, or it does not fulfil the desired requirement, it can be returned to the seller. However, it is impossible in the case of services, because once the services are delivered, they cannot be taken back. So, the marketing of services, should be done keeping the returnability factor in mind.
8. In goods marketing, the goods can be separated from its producer, and so they are durable and can be inventoried. On the contrary, in service marketing, services can not be separated from its source, i.e. service provider. Hence the production and consumption of services are simultaneous; they are perishable.
9. Goods offered by a company under a particular segment are standardised; they cannot be changed or altered as per customer’s requirement. In contrast, services offered by a company are highly variable and can be easily customised as per the requirements.
10. It is a human tendency, that we respond quickly, to what we see and it is a major pro, of goods marketing that it grabs our attention, and encourages sales. As against this, services can’t be seen it can only be experienced and so the response it a little slow, while marketing services.
11. In goods marketing, the quality of the goods can be measured by making a comparison between various products, but this is just opposite in service marketing, where the measurement of services is not possible.

Whether, it’s a goods marketing or a service marketing, the task is equally onerous. However, with the former, there are some advantages such as tangibility, separability, durability, transferability, etc. which the latter lacks, making it a bit difficult. Demonstration of goods or service is one of the best ways to promote it. Further, word of mouth also helps in marketing them.

The service marketing environment refers to all internal and external factors, which directly or indirectly influence the organization’s decisions related to marketing activities. Internal factors are within the control of an organization; whereas, external factors do not fall within its control. The external factors include government, technological, economic, social, and competitive forces; whereas, organization’s strengths, weaknesses, and competencies form the part of internal factors.

Marketers try to predict the changes, which might take place in future, by monitoring the marketing environment. These changes may create threats and opportunities for the business. With these changes, marketers continue to modify their strategies and plans.

Features of Marketing Environment

1. Specific and General Forces

It refers to different forces that affect the marketing environment. Specific forces include those forces, which directly affect the activities of the organization. Examples of specific forces are customers and investors. General forces are those forces, which indirectly affect the organization. Examples of general forces are social, political, legal, and technological factors.

2. Complexity

It implies that a marketing environment include number of factors, conditions, and influences. The interaction among all these elements makes the marketing environment complex in nature.

3. Vibrancy

Vibrancy implies the dynamic nature of the marketing environment. A large number of forces outline the marketing environment, which does not remain stable and changes over time. Marketers may have the ability to control some of the forces; however, they fail to control all the forces. However, understanding the vibrant nature of marketing environment may give an opportunity to marketers to gain edge over competitors.

4. Uncertainty

It implies that market forces are unpredictable in nature. Every marketer tries to predict market forces to make strategies and update their plans. It may be difficult to predict some of the changes, which occurs frequently. For example, customer tastes for clothes change frequently. Thus, fashion industry suffers a great uncertainty. The fashion may live for few days or may be years.

5. Relativity

It explains the reasons for differences in demand in different countries. The product demand of any particular industry, organization, or product may vary depending upon the country, region, or culture. For example, sarees are the traditional dress of women in India, thus, it is always in demand. However, in any other western country the demand of saree may be zero.

Types of Marketing Environment

The sale of an organization depends on its marketing activities, which in turn depends on the marketing environment. The marketing environment consists of forces that are beyond the control of an organization but influences its marketing activities. The marketing environment is dynamic in nature.

Therefore, an organization needs to keep itself updated to modify its marketing activities as per the requirement of the marketing environment. Any change in marketing environment brings threats and opportunities for the organization. An analysis of these changes is essential for the survival of the organization in the long run.

A marketing environment mostly comprises of the following types of environment:

• Micro Environment
• Macro Environment

The discussion of these environments are given below:

1. Micro Environment

Micro environment refers to the environment, which is closely linked to the organization, and directly affects organizational activities. It can be divided into supply side and demand side environment. Supply side environment includes the suppliers, marketing intermediaries, and competitors who offer raw materials or supply products. On the other hand, demand side environment includes customers who consume products.

Let us discuss the micro environment forces in the following points:

(i) Suppliers

It provides raw material to produce goods and services. Suppliers can influence the profit of an organization because the price of raw material determines the final price of the product. Organizations need to monitor suppliers on a regular basis to know the supply shortages and change in the price of inputs.

(ii) Marketing Intermediaries

It helps organizations in establishing a link with customers. They help in promoting, selling, and distributing products.

Marketing intermediaries include the following:

• Resellers: It purchases the products from the organizations and sell to the customers. Examples of resellers are wholesalers and retailers.
• Distribution Centers: It helps organizations to store the goods. A warehouse is an example of distribution center.
• Marketing Agencies: It promotes the organization’s products by making the customers aware about benefits of products. An advertising agency is an example of marketing agency.
• Financial Intermediaries: It provides finance for the business transactions. Examples of financial intermediaries are banks, credit organizations, and insurance organizations.

(iii) Customers

Customers buy the product of the organization for final consumption. The main goal of an organization is customer satisfaction. The organization undertakes the research and development activities to analyze the needs of customers and manufacture products according to those needs.

(iv) Competitors

It helps an organization to differentiate its product to maintain position in the market. Competition refers to a situation where various organizations offer similar products and try to gain market share by adopting different marketing strategies.

2. Macro Environment

Macro environment involves a set of environmental factors that is beyond the control of an organization. These factors influence the organizational activities to a significant extent. Macro environment is subject to constant change. The changes in macro environment bring opportunities and threats in an organization.

(i) Demographic Environment

Demographic environment is the scientific study of human population in terms of elements, such as age, gender, education, occupation, income, and location. It also includes the increasing role of women and technology. These elements are also called as demographic variables. Before marketing a product, a marketer collects the information to find the suitable market for the product.

Demographic environment is responsible for the variation in the tastes and preferences and buying patterns of individuals. The changes in demographic environment persuade an organization to modify marketing strategies to address the altering needs of customers.

(ii) Economic Environment

Economic environment affects the organization’s costs structure and customers’ purchasing power. The purchasing power of a customer depends on the current income, prices of the product, savings, and credit availability.

The factors economic environment is as follows:

• Inflation: It influences the customers’ demand for different products. For example, higher petrol prices lead to a fall in demand for cars.
• Interest Rates: It determines the borrowing activities of the organization. For example, increase in interest rates for loan may lead organizations to cut their important activities.
• Unemployment: It leads to a no income state, which affects the purchasing power of an individual.
• Customer Income: It regulates the buying behavior of a customer. The change in the customer’s income leads to changed spending patterns for the products, such as food and clothing.
• Monetary and Fiscal Policy: It affects all the organizations. The monetary policy stabilizes the economy by controlling the interest rates and money supply in an economy; whereas, fiscal policy regulates the government spending in various areas by collecting the revenue from the citizens by taxing their income.

(iii) Natural Environment

Natural environment consists of natural resources, which are needed as raw materials to manufacture products by the organization. The marketing activities affect these natural resources, such as depletion of ozone layer due to the use of chemicals. The corrosion of the natural environment is increasing day-by-day and is becoming a global problem.

(iv) Socio-Cultural Environment

Socio-cultural environment comprises forces, such as society’s basic values, attitudes, perception, and behavior. These forces help in determining that what type of products customers prefer, what influences the purchase attitude or decision, which brand they prefer, and at what time they buy the products. The socio-cultural environment explains the characteristics of the society in which the organization exists. The analysis of socio-cultural environment helps an organization in identifying the threats and opportunities in an organization.

For example, the lifestyles of people are changing day-by-day. Now, the women are perceived as an active earning member of the family. If all the members of a family are working then the family has less time to spend for shopping. This has led to the development of shopping malls and super markets, where individuals could get everything under one roof to save their time.

(v)  Technological Environment

Technology contributes to the economic growth of a country. It has become an indispensible part of our lives. Organizations that fail to track ongoing technological changes find it difficult to survive in today’s competitive environment.

Technology acts as a rapidly changing force, which creates new opportunities for the marketers to acquire the market share. Marketers with the help of technology can create and deliver products matching the life style of customers. Thus, marketers should observe the changing trends in technology.

Service economy can refer to one or both of two recent economic developments:

The increased importance of the service sector in industrialized economies. The current list of Fortune 500 companies contains more service companies and fewer manufacturers than in previous decades.

The relative importance of service in a product offering. The service economy in developing countries is mostly concentrated in financial services, hospitality, retail, health, human services, information technology and education. Products today have a higher service component than in previous decades. In the management literature this is referred to as the servitization of products or a product-service system. Virtually every product today has a service component to it.

Services include a wide range varying from education, transportation, hospitality, finance, real estates, accounting, banking, insurance, taxation, consultancy, health care etc. These services are together called the services sector or the tertiary sector.

Everything that grows also changes its structure and change is inevitable. A human being passes through different phases-infancy to old age and during which he constantly changes in terms of perception, attitude, physical and mental attributes etc.

Similarly a growing economy changes the proportions and interrelations among its basic sectors namely agriculture, industry, and services and between other sectors like rural and urban, public and private, domestic-and export-oriented etc. All growing economies are likely to go through these stages.

A service is a set of consumable and perishable benefits delivered by a service house to a customer to ensure customer satisfaction.

Goods and services are produced in every economy. In a crude way, a good is something one can take with him after purchase, whereas a service cannot be taken as it is intangible. Example when a person goes to a dentist he use the services of the dentist and returns with a relief. In the process he does not get any physical commodity but still he has consumed a service.

Core goods providers provide a significant service component as part of their businesses. For example, automobile manufacturers provide extensive spare parts distribution services to support repair centers at dealers. Core service providers must integrate tangible goods with intangible services.

For example, a cable television company must provide cable hookup, repair services and also high-definition cable boxes. Pure services, such as may be offered by a financial consulting firm, may need little in the way of facilitating goods, but what they do use such as textbooks, professional references, and spreadsheets are critical to their performance.

The recent services are the ones related to IT, BPO, KPO, BT etc. These sectors are growing phenomenally.

A commercial service is a type of economic activity that is intangible, cannot be stored and does not result in any ownership. A service is consumed at the point of sale itself. Services are one of the two key components of economics, the other one being goods.

Sometimes services are difficult to identify because they are closely associated with a good; such as the combination of a diagnosis with the administration of a medicine. No transfer of possession or ownership takes place when a service is sold.

The American Marketing Associations defines services as “(1) activities, benefits or satisfaction which are offered for sale, (2) are provided in connection with the sale of goods”. The services described in the second half of the definition are those included in the sale of goods to the customer, viz., pre-sale and after sale services, e.g., services on installation of machinery, its maintenance and repairs, credit and delivery services etc.

The first part of the said definition, viz., “activities, benefits or satisfactions which are offered for sale.” The marketing of these kinds of services usually does not include the sale of goods to the customer. Such activities, benefits or satisfactions offered for sale are intangible in nature, i.e., they are not concrete objects which can be seen, tasted, felt, moved and so on.

There is a regular market for such services represented by activities, benefits and satisfactions offered for sale by providers of services. These services may be labour services, personal services, professional services or institutional services such as offered by transport, banking, insurance, warehousing, advertising and such other services organisations.

When a customer buys a service in the service market be buys the time, knowledge, still or resources of someone else who is the provider or supplier of a service. The buyer receives satisfactions or benefits from the activities of the provider who be an individual, a firm or a company, i.e., and institution specialising in selling certain benefits or satisfaction.

The importance of service Sector in economy is growing rapidly.

• Services account for more than 60 percent of GDP worldwide
• Almost all economies have a substantial service sector
• Most of the new employment is provided by services (Fastest growth expected in knowledge-based industries)
• Strongest growth area for marketing

Those who work in a service business often face greater marketing challenges than those who offer tangible products. The service marketer typically does not have the advantage of demonstrating the physical features of a product, so it may be difficult for the prospect to comprehend the benefits of the service. Additional creativity is often required to market services successfully.

Operations management in service businesses is primarily concerned with the “how” of the organization in other words how the service product can be produced and delivered to specification and in such a way as to achieve the organization’s objectives. It is also important to have a clear understanding of the “what”, i.e. the nature of the service product and how it meets the users’ requirements.  Clearly if the “how” is delivered with little reference to the “what” it would be surprising if this were particularly effective. This leads therefore to a number of challenges faced by service operations:

1. Knowing who the customer is

This might sound obvious however it is not always the case. In many service operations the same service will attract different customers who have different needs. The “customer” could be defined in a number of ways the user (the person that uses the service), the buyer (the person that purchases the service) and the funder (the person that funds the transaction).  This could be one person, this could be three different people all with different needs and benefits. Understand who are the various customers, understanding their needs, developing relationships with them and managing the various customers are key challenges for services.

2. Knowing what the organization is selling / providing

There may be differing views about what the organization is selling. One customer may have one benefit in mind and another has a completely different perspective.  This leads, in effect, to the perception that the organization is selling different services. Articulating and communicating the service concept to its different customers is critical for clarifying the organization’s product to all of its customers and in ensuring it can be delivered to meet all of its customers’ expectations.

3. Managing the outcome and experience

One of the challenges of service businesses is that, for many, there is no clear distinction between the what and the how at the customer interface. For example, a customer in a restaurant is buying both the meal and the way in which they are served. This is completely different to manufacturing operations where the production and delivery to the customer are completely separate. A critical challenge therefore for service businesses is managing outcomes and experiences simultaneously.

4. Managing the customer

Many service businesses face a challenge not shared by manufacturing, that of the presence of the customer, often as an essential part of the service production process. The design of the service must manage the customer through the process with an awareness of moods and attitudes of individual customers.

The presence of the customer also renders the operation visible to the customer, so the servicescape needs to be designed to create the right atmosphere for the service.

5. Service is real-time

Many services happen in real-time, they cannot be delayed or put off. A passenger wanting to purchase a ticket for immediate travel may not be willing to return tomorrow if the sales agent is busy. Furthermore, during a service encounter it is not possible to undo what is done or said, things in the heat of the moment or promises that cannot be kept. In service there is no rewind button.  Managing capacity and creating an appropriate culture are key challenges in managing real-time services.

6. Co-ordination

Service businesses are extremely demanding, requiring integration of marketing, resource management, people management and so on. The small service business owner is responsible for co-ordinating these various parts of the organization to deliver the service and understand and meet the needs of the customer.

7. Knowing the relationship between operations decisions and business success

It may sound obvious but making the right decisions that will lead to business success is a key challenge for all service business owners. Business success may mean satisfying and retaining customers, attracting new customers, entering new markets, making profit, reducing costs. The problem is in knowing how they all interrelate and how changing one impacts on the others.

8. Improving the operation

A challenge faced by all small service business owners is how to continually improve and develop their processes and products, ensure that the outcomes are real improvements and that there is a culture that is supportive of service and change.  An important challenge in this area is managing the increased complexity resulting from change.

When a customer is considering a purchase that is more expensive or requires some kind of monthly commitment they will usually spend more time thinking about it. They may want to research different options, talk to a friend or family member about it, and weigh the pros and cons of going through with the sale.

In business, this process is often portrayed as a sales funnel with more and more people dropping off as they move further into the funnel.

At each point during this process, the customer will go through a specific thought pattern. To help your customer follow through with the sale, you must understand what their needs are at each point.

Let’s look at the six stages of the buying process below:

Stage 1: Problem Recognition

This is the most important step in the decision process because your customer has to realize they need your product before a purchase can take ever place. This presents you with both the opportunity and the challenge of identifying with your customer. The best strategy is to articulate their problem in your marketing efforts.

With traditional marketing or PR, this can be done through advertising: having an ad that explains what the customer’s problem is, and how the product or service can solve it.

With any online business, on the other hand, the best way to influence the “problem recognition” stage is through content marketing. With the right content, you could identify with your audience, articulate their needs, and offer helpful resources and tools.

Stage 2: Information Search

Now the customer will begin searching for information to help them find the best solution to their problem. Most people will immediately turn to friends, family members, and colleagues for recommendations.

While you can’t really talk the above-mentioned friends or family members into endorsing your product, there are several things you could do.

• Focusing on the Product: If your product is really good, people are going to start being your brand advocates, and you won’t even have to pay them.
• Build Authority: This one’s pretty generic, and translates into regular marketing. It could mean working on your company web presence, for example, so that it’s easy for your customers to find you and learn more about your product.
• Reviews & Partnerships: Other than friends and family, there’s something else that’s extremely helpful in influencing decision-making: the influencers. Establishing connections with experts in your field (or bloggers, review websites, etc.) will help you stand out.

Stage 3: Evaluation of Alternatives

Although some people will come to a quick decision, most customers will not settle for the first solution they find. They will evaluate several different options and the possible benefits or drawbacks to each. And even if your company has the best product to meet their needs, they still may decide to go with someone else.

So, the one thing you could do at this stage is to offer a lot more value than your competition & communicate that with your customers. This can be easier in some industries (software, for example, where you can add more powerful features), but hard in others (consumer goods. Who looks at the brand of their toilet paper, anyway?)

Stage 4: Purchase Decision

Once the customer has explored their options they will make a decision about whether or not to move forward with the purchase. Yes, even though they have reached the middle of the buying process they could still choose to walk away.

At this point, customers need a sense of security. They also needed to be reminded of the problem that brought them here in the first place.

And if a customer does decide to walk away this is the best point in the process to bring them back. Depending on your industry, this could be a simple email reminder, for example (“hey, you were interested in out software!”).

Stage 5: Purchase

At this stage, you want to make it as easy as possible for your customers to buy from you. Does your website load too slowly? Can they order from their phone just as easily as on a desktop? These are questions you should consider.

The customer already decided that they want to do business with you, you don’t want to make it hard for them. Let’s say if your payment processing software is being laggy, they might just decide to ditch and go to your competitor!

Stage 6: Post-Purchase Evaluation

You may think you are in the clear now but your work doesn’t end after the customer makes their purchase! Customers will evaluate their purchase based on previous expectations and decide whether or not they are satisfied. If they’re not happy with your product, they’ll just never use it again and everyone knows that recurring customers are much better than those buying just once.

Or it could end up going even worse, with the customer asking for their money back.

Depending on how you handle this situation, the customer will react differently. If you put their concerns at ease & even make them feel better, they’re much more likely to come back or even refer their friends. Or, if you treat them wrong, you’re never going to see them (or their friends) again.

There are a couple of ways to work with this stage…

• Good Customer Service: Being able to talk to your customers & help them use their product can take you a long way.
• Follow-Up Emails, Survey: Showing the customer that you care about their experience is a pleasant experience on its own.
• Fair Treatment: Sometimes, the product might just end up not being what the customer is looking for. If you treat them with respect & offer a refund, they’re more likely to come back for a different purchase. If you shut them down, they’re lost forever.

Hopefully, these six steps have given you a better understanding of the thought process that goes into making a purchase. They can be extremely helpful if used as a framework to analyze your customer’s thinking, and then use what you learn in combination with other marketing efforts.

The service marketing triangle or the Service triangle as it is commonly called, underlines the relationships between the various providers of services, and the customers who consume these services.

As we know, relationships are most important in the services sector. The service triangle outlines all the relationships that exist between the company, the employees and the customers. Furthermore, it also outlines the importance of systems in a services industry and how these systems help achieve customer satisfaction.

As the name suggests, the service marketing triangle can also be used to market the service to consumers. The marketing completely depends on the interaction going on between the customer and the service provider. We will look at each of these interactions in detail, and also read on how to market to your customer based on the interaction.

There are 6 main relationships in the Service triangle. And based on these relationships, there are three ways to apply marketing tactics.

Let us first go through the 6 relationships in the Service marketing triangle

1. Company to Customers

One of the critical thing is to communicate the service strategy to the customers. Most of the E-commerce companies are nowadays employed in convincing the customers to buy from their portal only. For this buying, they are communicating various service advantages which the customers have.

Communication of the service strategy to customers is important to build the trust of customers and hence to convert the customers to be loyal to the company.

2. Company to employees

Another important relationship in the service triangle is that between the company and the employees. Imagine an Airline where the flight attendants themselves are frustrated with the company. You, as a customer, will land up with the poorest services.

Hence, training employees, building value and trust, and empowering employees are some of the ways that the company can make their employees a positive influencing force for the customers.

3. Company to systems

To keep customers happy, efficient and productive systems need to be developed. Imagine your bank in the 1960’s where everything was done by paper. If you wanted to transfer money, you will have to fill many forms, and the recipient had to fill many forms. Ultimately it was a tedious process.

However, due to advanced systems, nowadays you can not only transfer money to others sitting at home, you can practically do 80% of the banking work sitting at home from your laptop. That’s the importance of systems in a service marketing triangle.

4. Customers to systems

Although building systems are important, these systems should be most useful to customers. Taking the same example of banking systems above, it is surprising that even today when you go to a bank, there is a queue. Look at retail stores. There’s always a big line to check out.

The interaction between customer and system is critical to build the service brand. Taking the example of E-commerce systems, when the customer is promised various service advantages, and when he fails to return a product due to system errors or logistics errors, he becomes dissatisfied with the service.

For a company, it is important not only to build systems, but ensure that the systems comply to the customers and give excellent experience to customers.

5. Employees to system

Not only do systems leave customers frustrated, they also leave the employees frustrated. Imagine a McDonald’s where orders taken at the front desk are not reaching the kitchen. Or imagine a service center, where although you have entered a grievance, the employee is not getting your complaint and hence not calling you. Ultimately it is the employee on whom you are going to get angry!!

In one of the consumer durable companies i know, the systems were top of the line, but they had so many processes with regards to outstanding and inventory, that a simple order processing took 20 minutes. This same company had at least 1 lakh dealers and distributors. So imagine the continuous delay in order processing and the pressure on employees due to this system issue. The system was working excellently, but it was creating friction between the employees and the system.

Both, Employee motivation, and the empowerment of employees depends on the type of system you hand over to your employees. If the systems are very good and your employees are able to make good use of it, you will get very happy and satisfied customers.

6. The most important relationship in the service triangle: Employee to Customers

The employee to customer interaction is also known as the “moment of truth” or “critical incidents”. A single customer can become dissatisfied with the way the employee treated him. Or that single customer can buy a lot of material from the same store, because the employee treated him or her like a king or queen.

That’s the difference your employees can create when they interact with customers. There are companies which are high in the customer satisfaction index, just because their employees are well-trained and are empowered to take their own decisions. More importantly, these employees are ingrained with the habit that “Customer is king”.

Once your employees starts treating the customer as if they are really king, the whole service triangle gets completed, and you will get the best results from all processes employed.