MOS-final'

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Marketing of ServicesMarketing of Services

CLASS: MBASEMESTER: IIIACADEMIC CONSULTANT: Ms Riju Agarwal Singh

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Course Objectives Course Objectives

Course aims at providing insights to – What services are and identify important trends in services. Different Characteristics of services, differences between goods and

services and its impact on marketing Consumer behavior in services Understanding service quality, its measurement and management Introduce the expanded marketing mix for services Internal marketing Process of operation & delivery of services Impact of technology on service. Marketing of Financial Services International Marketing of Services

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UNIT - I What services are, definition.

Characteristics of Services & their marketing implications.

Classification of Services.

Paradigms -Services Marketing.

Importance of CRM.

Service Quality.

Customer expectation & Zone of Tolerance.

Segmentation, Targeting & Positioning of Services 3

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Lecture no

Contents (sub topics) Slide no

1 What services are, definition 6-152 Characteristics of Services and their marketing

implications. Difference between Product & Services marketing.

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3 Classification of Services 28-41

4 Paradigms in Services Marketing 42-52

5 Importance of CRM 54-69

6 Service Quality 71-91

7 Understanding customer expectation & Zone of Tolerance

93-106

8 Segmentation, Targeting & Positioning of Services 108-126

FAQ’S, CASE STUDY & ASSIGNMENTS 127-133

LECTURE PLAN Unit- I Sub: Marketing of ServicesAcademic Consultant: Riju Agarwal

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Lecture 1Lecture 1

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GoodsGoods - things you can touch - “tangible”

ServicesServices - things you can’t touch - but you can see their effect “intangible”“… services are not physical, they are intangible…”

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Defining ServicesDefining Services Activities, benefits or satisfactions which are offered for sale or provided in

connection with the sale of goods.- AMA (1960)First attempt; does not provide for valuing services involved in producing the tangible goods

Any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. – Philip Kotler (1984)

‘Deeds, processes and performances’.- Zeithmal & Bitner (1996)Deeds are acts/actions of service provider, processes are the steps in the provision of service and performance/experience is the customers’ understanding of how the service has been delivered.

Service is anything intangible that can be offered to someone to satisfy a need or a want.

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““There are no such thing as service There are no such thing as service industries. There are only industries industries. There are only industries whose service components are whose service components are greater or less than those of other greater or less than those of other

industries. Everybody is in service.”industries. Everybody is in service.” -Theodore Levitt

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Tangibility Spectrum

TangibleDominant

IntangibleDominant

Salt, FMCG

Tech dependent- Durables

AdvertisingAgencies/

Internet service provider

AirlinesInvestment

Management/ Teaching

Consulting

Fast-foodOutlets

Fast-foodOutlets

04/08/23

Examples of Service Industries Health Care

hospital, medical practice, dentistry, eye care Professional Services

accounting, legal, architectural Financial Services

banking, investment advising, insurance Hospitality

restaurant, hotel/motel, bed & breakfast ski resort, rafting

Travel airline, travel agency, theme park

Others hair styling, pest control, plumbing, lawn maintenance, counseling

services, health club, interior design

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Importance of Service Importance of Service SectorSector

Service-based economies (in terms of GDP &

employment)-

Services are different than goods.

Services Marketing is different

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Service-based economies

Between 60-80% of GDP comes from the services sector, and

50-90% of all new employment in many economies. In India

the service sector grew from 29% of GDP in 1950-51 to 64%

in 2008-09.

The services sector has been growing at a rate of 8% per

annum in recent years.

This sector dominates with the best jobs, best talent and best

incomes.

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Contributions of Service Industries toContributions of Service Industries toIndia’s GDPIndia’s GDP

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Reasons for growth of Service SectorReasons for growth of Service Sector

Government policies:• Deregulation (LPG); increasing competition

Advances in IT:• High speed Internet• Miniaturisation• Faster, more powerful software• Wireless networkingResulted in e-com, e-services- new ways to

deliver service.

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Social changes:• Increase in affluence- increased desire for buying

experiences and reduces scope of self service• The middle income group is rising• Urbanisation• % of working women is increasing• Nuclear Families on rise• Growth in population of DINKS• Greater Life Expectancy

• Time constraint lifestyle• Customers have become more demanding (Increase in

Exposure, Awareness & Customer Expectation).

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Business Trends:• Demand for specialised services rising. Greater

complexity of products requires services of specialists for mfg & maintenance.

• A Research of Marketing Science Institute says ‘Corporate strategies focused on Customer Satisfaction, Revenue Generation & Service Quality are more profitable than the strategies of Cost Cutting or both.

• Increase in demand for Internal Services.• Service as a business imperative in mfg & IT-

recognizing need to provide revenue-producing services to compete.

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Service vs Customer service Service vs Customer service

Customer service - is the service provided in support of a company’s core product (Supplementary services) may include after-sales service, consultation, finance, shipping, installation, maintenance, upgrades…etc

Marketing of services - where a service itself is the core product

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Lecture 2Lecture 2

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Characteristics of ServicesCharacteristics of Services

Intangibility can’t touch, see, smell

PerishabilityInseparability

SimultaneousProduction

& Consumption

Heterogeneitynot always delivered the same way

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Implications of IntangibilityImplications of Intangibility

Creates feeling of uncertainty/ suspicion Hard to explain and display Services/ communicate Lack of ownership Pricing is difficult. Per unit cost is hard to

determine. Services cannot be inventoried Services cannot be easily patented. Therefore new

service concepts can be easily copied by competitors.

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StrategyStrategy

Manage evidence so that it gives a cue about quality- location, ambience, communication, documentation

Make Intangible tangible to the extent possible. Promote word-off-mouth communication Use Relationship marketing- use personal

information, sources, references.

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Implications of InseparabilityImplications of Inseparability Mass production not possible Quality is highly dependent on what happens in ‘real time’

Employees action/ performance (may differ every hour) Customers action Employee customer interaction Presence of other customers

Heterogeneous Cannot be stored/ not possible to gain economies of scale Customer has to wait

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Implications of HeterogeneityImplications of Heterogeneity

There is no sure knowledge that the service delivered matches what was planned and promoted.

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StrategyStrategy

Use agents/ brokers/ electronic media to promote & expand market.

Have many locations so customers can get to you. Focus on standardization Use of machines in place of humans where ever

possible Maintain high level of quality controls

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StrategyStrategy

Manage and shape customer behavior. Train & educate customer to ensure his efficient & effective participation

Emphasize how much you train your people – so their ability to give good service will be high.

Minimize wait time & make wait pleasant.

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Implications of PerishabilityImplications of Perishability It is difficult to synchronize supply with

fluctuation in demand, as services cannot be stored, returned or resold.

If demand is high Wait

Loss of revenue

If demand is low Underutilization of capacity

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StrategyStrategy Demand-Capacity Management

• Peak period– Hire part-time employees– Cross-train employees– Request overtime– Rent/ share facilities– Subcontract/ outsource activities

• Slack Periods– Perform maintenance & renovations– Schedule vacations– Schedule employee training– Lay-off 27

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Goods versus ServicesGoods versus Services

Source: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, “A Conceptual Model of Service Quality and Its Implications for Future Research,” Journal of Marketing 49 (Fall 1985), pp. 41–50.

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Services Marketing is different New issues and challenges faced. More variables exist in the marketing mix for services. In service, marketing, operations & HR are more closely linked.

A firm’s core b/s is a deed performed by an employee. Service production process is part of the marketing process.

Your people are as much of your product in the consumers’ mind as any other attribute of the service.

Customer interface is a critical component in services. Limitation in distribution & selling- service pdt manager competes for

the ‘mental shelf space’ of the firm’s sales person. (as there cann’t be well-stocked shelves past which the consumer can push a cart & make selections.

Benefits of using price as a promotional weapon are not as apparent. Promotional price cuts tend to erode hard- fought positioning and image.

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Expanded Mix for Services- the 7 Ps Product Price Place Promotion People

All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment.

Physical Evidence The environment in which the service is delivered and where the

firm and customer interact, and any tangible components that facilitate performance or communication of the service.

Process The actual procedures, mechanisms, and flow of activities by which

the service is delivered—the service delivery and operating systems.

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Lecture 3Lecture 3

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How can services be classified?How can services be classified?

Industry-wise Nature of the service act- Who or what is

the direct recipient. High contact versus low contact. Relationship with customers & Discrete vs

continuous services. Customization vs standardisation Nature of demand and supply Method of service delivery Degree of tangibility/intangibility (SEC)

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Industry-wise classification of Industry-wise classification of servicesservices

Entertainment Industry• Movie & TV programmers• Amusement & Recreation services• Theme parks

Hospitality Industry• Hotels & Lodging facilities• Restaurants & Cafes• Food catering and event organization • ski resort, rafting

Trading • Wholesale trade • Retail trade • Online trade

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Contd.Contd.Finance and Insurance Loans and advances Credit cards Banking Insurance Investment, brokerage and advice Real estate Consultancy services such as credit rating

Professional Services• Accounting• Legal• Architectural• Interior designing

Education • School, colleges, etc. • Training and consultancy

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Contd.Contd.

Transportation Air, sea, road, and train travel Travel agency Car hire, charter, and leasing Goods transport by all means Pipeline Mail and courier services

Government services Defence Police and protection Health and education Foreign relations

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Contd.Contd.Health Care Hospitals and medical practice Gymnasium and spa Dentistry & eye care Weight reduction and recuperation programmes De-addiction programmes Telecommunications Telephone, fax, e-mail Data transfer Mobile telephone Video conferencing ISPs - internet service providers Cable services 36

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Contd.Contd.Business services

Cleaning Catering Security Training

Public utilities

Electricity supply Water supply Drainage and sewerage Garbage collection and disposal hair styling pest control Plumbing lawn maintenance 37

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Service Classification – Service Classification – Nature of the Service ActNature of the Service Act

Direct Recipient of the ServiceNature of the Service Act People Things People’s bodies: Physical possessions:

Health care Freight transportationPassenger transportation Repair and maintenance

Tangible actions Beauty salons Veterinary careExercise clinics Janitorial servicesRestaurants Laundry and dry cleaning

People’s minds: Intangible assets:

Education BankingIntangible actions Broadcasting Legal services

Information services AccountingTheaters SecuritiesMuseums Insurance

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Service ClassificationService Classification (Relationship with Customers) (Relationship with Customers)

Type of Relationship between Service Organization & Its CustomersNature of Service Delivery “Membership” relationship No formal relationship

Insurance Radio station

Telephone subscription Police protectionContinuous delivery Electric Utility Lighthouseof service Banking Public Highway

Long-distance phone calls Restaurant Theater series tickets Pay phoneDiscrete transactions Transit pass Toll highway Sam’s Wholesale Club Movie theater Airline frequent flyer Public transportation

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Service ClassificationService Classification (Customization vs Standardisation ) (Customization vs Standardisation )

Extent to Which Service Characteristics Are Customized

Extent to whichPersonnel exercise Judgment High Lowin meeting Customer High Surgery Preventive health programs

Needs Taxi services Education (large classes) Gourmet restaurant Family restaurant

Telephone service Public transportation Hotel services Spectator sports

Low Retail banking Movie theater Cafeteria Institutional food service

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Service ClassificationService Classification(Nature of Demand and Supply)(Nature of Demand and Supply)

Extent of Demand Fluctuation over Time

Extent to which Supply Wide NarrowIs Constrained Electricity Insurance

Peak demand can Telephone Legal servicesusually be met Police emergency Banking

without a major delay Hospital maternity unit Laundry and dry cleaning

Tax preparation Fast food restaurant Peak demand regularly Passenger transportation Movie theater exceeds capacity Hotels and motels Gas station

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Service Classification Service Classification (Method of Service Delivery)(Method of Service Delivery)

Availability of Service OutletsNature of Interaction between Customer and Service Organization Single site Multiple site

Customer travels to Theatre Bus service service organization Barbershop Fast-food chain

Service provider Taxi Mail delivery

travels to customer Pest control service Emergency repairs

Transaction is at Credit card company Broadcast network arm’s length Local TV station Telephone company

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SEC AttributesSEC AttributesHow product qualities affect ease of evaluationHow product qualities affect ease of evaluation

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Examples of the Diversity of Services

Business services– Accountancy– Architecture– Engineering– Legal services– Printing– Insurance– Telecommunications– IT consulting– Logistics consulting– Management consulting– Marketing research

Consumer services – Airline– Banking and finance– Insurance– Medical– Telecommunications– Hotel– Restaurant– Opera/theatre– Football match– Transportation– House cleaning

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Lecture 4Lecture 4

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Service is the fundamental basis of exchange. Indirect exchange masks the fundamental basis of exchangeBecause service is provided through complex combinations of goods, money, and institutions, the service basis of exchange is not always apparent

Goods are a distribution mechanism for service provisionGoods (both durable and non-durable) derive their value through use – the service they provide

Operant resources are the fundamental source of competitive advantageThe comparative ability to cause desired change drives competition

All economies are service economiesService (singular) is only now becoming more apparent with increased specialization and outsourcing

Facts about services

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The enterprise cannot deliver value, but only offer value propositions. The customer is always a cocreator of value. Enterprises can offer their applied resources for value creation and collaboratively (interactively) create value following acceptance of value propositions, but can not create and/or deliver value independently. Implies value creation is interactional.

A service-centered view is inherently customer oriented and relationalBecause service is defined in terms of customer-determined benefit and co-created it is inherently customer oriented and relational

All social and economic actors are resource integratorsImplies the context of value creation is networks of networks (resource integrators)

Facts contd

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Four Rs of Service MarketingFour Rs of Service Marketing

Retention Referrals Relationships Recovery

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Other Considerations in Other Considerations in Marketing ServicesMarketing Services

Impact of Technology:Impact of Technology: Remember, not everyone likes impersonal technology

Performance Measurement:Performance Measurement: Larger firms can use market share, etc. Customer perceptions are essential.

Prospects for Growth:Prospects for Growth: It is very likely that services will continue to take an

increasing share of the consumer dollar. The use of marketing programs in all services is

expected to increase considerably.

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The interdependence of The interdependence of marketing, operations and IT & HRmarketing, operations and IT & HR

Marketing cannot operate in isolation from other functional areas of management.

Operations (i.e. facilities, equipment) is the primary line function in a service business.

HRM is responsible for job definition, recruitment, training, reward systems and quality of work life.

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The service management trinityThe service management trinity

Customers

Marketingmanagement

HumanResources

management

Operations and informationTechnology management

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Paradigms in Services marketing: Keys to Paradigms in Services marketing: Keys to Success Success

Do it right the first time

Speed! Speed!! Speed!!!

Keeping customers perspective always- Understanding and offering what target customers perceive to be superior value.

Understanding that service is a time bound performance comprising core products and supplementary services.

Recognising the importance of understanding and managing the operational processes.

Understanding the customer’s role in the service transaction.

Seeking distinctive market positions for competitive strength.

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The Actions of Efficient CompaniesThe Actions of Efficient Companies

Evaluate and select market segments. Research customer needs and preferences. Monitor competitors’ performance, strategies, strengths and

weaknesses. Tailor the product to suit the chosen market segment. Set prices to reflect costs, competitive strategies and consumer

sensitivity to different price levels. Tailor location, and scheduling of service availability to customers’

needs and preferences. Develop communication strategies, using appropriate media to

transmit messages that inform prospective customers about the service and promote its advantages.

Develop performance standards and measures. Create programs for rewarding and reinforcing customer loyalty.

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Caveats for Service MarketersCaveats for Service Marketers

Setting tough standards for customer service.

Training employees in a continuous matter.

Creating a customer centric culture.

Serving to the best of one’s ability within the constraints.

Explaining the reasons, if the employees fails to deliver upto his true

potential.

Treating every encounter as though the whole of employee’s

business depended on it.

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Lecture 5Lecture 5

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Relationship MarketingRelationship Marketing is a philosophy of doing business, a strategic orientation, that

focuses on keeping current customers and improving relationships with them.

does not necessarily emphasize acquiring new customers. Current customer is usually cheaper approx 5 times (for the firm) keeping a current customer costs less than attracting a new one

thus, the focus is less on attraction, and more on retention and enhancement of customer relationships. i.e. Creation of ‘true customers ’ – customers who are glad they selected a firm, are receiving value and feel valued, who are unlikely to defect to a competitor. Leonard L Berry & A Parasuraman

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Underlying Logic of Customer Underlying Logic of Customer Retention Benefits to the Retention Benefits to the OrganizationOrganization

Customer Retention &Increased Profits

Employee Loyalty

QualityService

Customer Satisfaction

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Profit Impact of 5 % Increase in Profit Impact of 5 % Increase in Retention RateRetention Rate

Source: F. F. Reichheld, “Loyalty and the Renaissance of Marketing,” Marketing Management, vol. 2, no. 4 (1994), p. 15.

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It’s all about Value It’s all about Value

Value are Benefits exceeding the cost (money, time, & effort).

Value for all stake holders:

Customers, more satisfaction

Owners, more profits

Employees, better salaries, promotion, work environment

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It’s all about value (cont.)It’s all about value (cont.)

Place (distribution/logistics) value: using a mobile, email or Internet banking.

Form value: medical, hairdressing.

Problem solving value: buying an experience (e.g. going to the movies) or performance (e.g. Education).

Time value: catching a taxi, employing a gardener.

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Ladder of LoyaltyLadder of LoyaltyCustomer retention

Customer acquisition

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Benefits of Relationship MarketingBenefits of Relationship Marketing Benefits for Customers: Receipt of greater value Confidence benefits:

trust confidence in provider reduced anxiety

Social benefits: familiarity social support personal relationships

Special treatment benefits: special deals price breaks

Benefits for Firms: Economic benefits:

increased revenues reduced marketing and

administrative costs regular revenue stream

Customer behavior benefits: strong word-of-mouth

endorsements customer voluntary performance social benefits to other customers mentors to other customers

Human resource management benefits:

easier jobs for employees social benefits for employees employee retention

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CRM ObjectivesCRM Objectives

Assessment of customers’ value and value to a

customer.

Turning Prospects into Advocates

Minimizing defections

Having a large proportion of loyal advocates

Using cross-selling opportunities without annoying

customers

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New private banks ‘weeding New private banks ‘weeding out’ Corporate Salary out’ Corporate Salary Accounts seen to be ‘non-Accounts seen to be ‘non-remunerative’remunerative’

Not maintain much money in account

Transact heavily, adding to operating costs

Plenty of freebies accompany such accounts.

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Implementing CRM Implementing CRM Empowerment of employees.

Customer-oriented approach with clearly defined

objectives.

Communicate with Customers and make them a part of

team.

Regular service/product innovation to keep it in tune with

expectations.

Tangible benefits to reward loyal customers. eg. Frequent

flier programmers of airlines, second pizza at half price.

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Most profitable customers

Least profitable customers

What segment spends more with us over time, costs less to maintain, spreads positive word-of-mouth?

What segment costs us in time, effort and money yet does not provide the return we want? What segment is

difficult to do business with?

Gold

Iron

Lead

Platinum

The Customer PyramidThe Customer Pyramid

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Strategies for Building Strategies for Building RelationshipsRelationships Core Service Provision:

service foundations built upon delivery of excellent service: satisfaction, perceived service quality, perceived value

Switching Barriers: customer inertia switching costs:

set up costs, search costs, learning costs, contractual costs Relationship Bonds:

financial bonds social bonds customization bonds structural bonds

Relationship Strategies Wheel

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Excellentservice

and value

1. Financial

bonds

2.Socialbonds

4. Structural

bonds

3. CustomizationBonds

Volume and frequency rewards

Bundling and cross selling

Stable pricing

Social bonds among

customers

Personal relationships

Continuous relationships

Customer intimacy

Mass customization

Anticipation/ innovation

Sharedprocesses and

equipment

Joint investments

Integrated information

systems

Levels of Relationship StrategiesLevels of Relationship Strategies

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““The Customer Is NOT The Customer Is NOT Always Right”Always Right”

Not all customers are good relationship customers:wrong segmentnot profitable in the long termdifficult customers

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Can Technology build Can Technology build relationshipsrelationshipsAdvantages:

Improvise services

Convenient (24x7 world)

Cost-cutting

Efficiency

Employees more competent in hyper-competitive environment

Challenges:

Shoots up customer expectation.

Lacks actual customer engagement/ relationship

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Customer Loyalty ExerciseCustomer Loyalty Exercise

Think of a service provider to who you are loyal.

What do you do (your behaviors, actions, feelings)

that indicates you are loyal?

Why are you loyal to this provider?

What factors have influenced the formation of your

loyalty?

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Lecture 6Lecture 6

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Customer Perceptions of Customer Perceptions of Service - Service - Objectives Objectives

Definition and understanding of customer satisfaction

and service quality

Show that service encounters or the “moments of

truth” are the building blocks of customer perceptions

Highlight strategies for managing customer

perceptions of service

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Factors Influencing Factors Influencing Customer SatisfactionCustomer Satisfaction

Product/service quality

Product/service attributes or features

Consumer Emotions

Attributions for product/service success or failure

Equity or fairness evaluations

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Customer Perceptions of Service Customer Perceptions of Service Quality & Quality & Customer Satisfaction Customer Satisfaction

ServiceQuality

Reliability

Responsiveness

Assurance

Empathy

Tangibles

ProductQuality

PricePersonalFactors

CustomerSatisfaction

SituationalFactors

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Outcomes of Outcomes of Customer SatisfactionCustomer Satisfaction

Increased customer retention

Positive word-of-mouth communications

Increased revenues

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Relationship between Customer Relationship between Customer Satisfaction and Loyalty in Satisfaction and Loyalty in Competitive IndustriesCompetitive Industries

0%

20%

40%

60%

80%

100%

Verydissatisfied

Dissatisfied Neithersatisfied nordissatisfied

Satisfied Verysatisfied

Satisfaction measure

Loya

lty (r

eten

tion)

Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.

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Service QualityService Quality

The customer’s judgment of overall excellence of the service provided in relation to the quality that was expected.

Process and outcome quality are both important.

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Managerial imperativeManagerial imperative1970s - Productivity i.e. working faster &

more efficiently in order to reduce cost

1980s - Improving Quality i.e. creating better service processes &

outcomes to improve customer satisfactionEarly 21st century - Value i.e. quality offered at the

right price

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What is service QualityWhat is service QualityDavid GarvinDavid Garvin

Product based approachOperations based approachUser based approachValue based approachTranscendent view

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SERVEQUALSERVEQUALDeterminants of service Determinants of service qualityqualityParasuraman, Ziethmal & Berry (1988)Parasuraman, Ziethmal & Berry (1988)

Ability to perform the promised service dependably and accurately. Knowledge and courtesy of employees and their ability to convey trust and confidence.Physical facilities, equipment, and appearance of personnel.

Caring, individualized attention the firm provides its customers.

Willingness to help customers and provide prompt service.

Tangibles

Reliability

Responsiveness

Assurance

Empathy

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SERVQUAL Attributes

Providing service as promised Dependability in handling customers’ service

problems Performing services right the first time Providing services at the promised time Maintaining error-free records

Keeping customers informed as to when services will be performed

Prompt service to customers Willingness to help customers Readiness to respond to customers’ requests

RELIABILITY

RESPONSIVENESS

Employees who instill confidence in customers Making customers feel safe in their transactions Employees who are consistently courteous Employees who have the knowledge to answer

customer questions

ASSURANCE

Giving customers individual attention Employees who deal with customers in a

caring fashion Having the customer’s best interest at

heart Employees who understand the needs of

their customers Convenient business hours

EMPATHY

Modern equipment Visually appealing facilities Employees who have a neat,

professional appearance Visually appealing materials associated

with the service

TANGIBLES

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OtherOther Determinants of service qualityDeterminants of service qualityParasuraman, Ziethmal & Berry (1988)Parasuraman, Ziethmal & Berry (1988)

Credibility – trustworthinessSecurity – freedom from danger/ riskAccessibility – approachability & ease of

contactCommunication – of necessary information to

customersCompetence - possession of the required

skills & knowledge

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The Service EncounterThe Service Encounter is the “moment of truth” occurs any time the customer interacts with the firm can potentially be critical in determining customer

satisfaction and loyalty types of encounters:

remote encounters phone encounters face-to-face encounters

is an opportunity to: build trust reinforce quality build brand identity increase loyalty

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The Gaps Model of Service The Gaps Model of Service QualityQuality

The Customer GapThe Provider Gaps:

Gap 1 – not knowing what customers expect Gap 2 – not having the right service designs and

standards Gap 3 – not delivering to service standards Gap 4 – not matching performance to promises

Putting It All Together: Closing the Gaps

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Expectedservice

Perceivedservice

Customer Gap

The Customer GapThe Customer Gap

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Gaps Model of Service QualityGaps Model of Service QualityCustomer Gap:

difference between customer expectations and perceptions

Provider Gap 1 (The Knowledge Gap):not knowing what customers expect

Provider Gap 2 (The Service Design & Standards Gap):not having the right service designs and standards

Provider Gap 3 (The Service Performance/delivery Gap):not delivering to service standards

Provider Gap 4 (The Communication Gap):not matching performance to promises

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Provider Gap 1: Not knowing what customers expect

Provider Gap 2: Not selecting the right service designs and standards

Provider Gap 3: Not delivering to service standards

Provider Gap 4: Not matching performance to promises

Customer Expectations

Customer Perceptions

Key Factors Leading to the Customer Key Factors Leading to the Customer GapGap

CustomerGap

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Customer Expectations

Company Perceptions of Customer Expectations

Inadequate marketing research orientation Insufficient marketing research Research not focused on service quality Inadequate use of market research

Lack of upward communication Lack of interaction between management and customers Insufficient communication between contact employees and managers Too many layers between contact personnel and top management

Insufficient relationship focus Lack of market segmentation Focus on transactions rather than relationships Focus on new customers rather than relationship customers

Inadequate service recovery Lack of encouragement to listen to customer complaints Failure to make amends when things go wrong No appropriate recovery mechanisms in place for service failures

Key Factors Leading to Provider Key Factors Leading to Provider Gap 1Gap 1

Gap1

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Customer-Driven Service Designs and Standards

Management Perceptions of Customer Expectations

Poor service design Unsystematic new service development process Vague, undefined service designs

Failure to connect service design to service positioning Absence of customer-driven standards

Lack of customer-driven service standards Absence of process management to focus on customer

requirements Absence of formal process for setting service quality goals

Inappropriate physical evidence and servicescape Failure to develop tangibles in line with customer expectations Servicescape design that does not meet customer and

employee needs Inadequate maintenance and updating of the servicescape


Gap2

91Service Delivery


Deficiencies in human resource policies Ineffective recruitment Role ambiguity and role conflict Poor employee-technology job fit Inappropriate evaluation and compensation systems Lack of empowerment, perceived control, and teamwork

Customers who do not fulfill roles Customers who lack knowledge of their roles and responsibilities Customers who negatively impact each other

Problems with service intermediaries Channel conflict over objectives and performance Difficulty controlling quality and consistency Tension between empowerment and control

Failure to match supply and demand Failure to smooth peaks and valleys of demand Inappropriate customer mix Overreliance on price to smooth demand


Gap3

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Service Delivery Lack of integrated services marketing communications

Tendency to view each external communication as independent Not including interactive marketing in communications plan Absence of strong internal marketing program

Ineffective management of customer expectations Absence of customer expectation management through all forms of

communication Lack of adequate education for customers

Overpromising Overpromising in advertising Overpromising in personal selling Overpromising through physical evidence cues

Inadequate horizontal communications Insufficient communication between sales and operations Insufficient communication between advertising and operations Differences in policies and procedures across branches or units

External Communications to

Customers


Gap4

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PerceivedService

Expected Service

CUSTOMER

COMPANY

CustomerGap

Gap 1

Gap 2

Gap 3

External Communications to

CustomersGap 4Service

Delivery


Company Perceptions of Consumer Expectations

Gaps Model of Service QualityGaps Model of Service Quality

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Lecture 7Lecture 7

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Customer Expectations of Customer Expectations of ServicesServicesAre beliefs about service delivery, that function as reference points against which the performance is judged. Customer satisfaction depends on the extent to which the service provider is able to meet customer expectations. 2 levels:Desired Service level – the ‘wished for’ service

Adequate Service level– the service that would be acceptable i.e. the threshold/ minimum tolerable expectation

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Dual Customer Expectation Levels &

Zone of Tolerance (ZOT)

Adequate Service

Desired Service

Zone ofTolerance

ZOT is difference between the desired service and the adequate service

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Changes in ZOTChanges in ZOT

ZOT is not constant, it shrinks or expands.It shrinks i.e. customer expectations has risen, if:Crucial/ important factorsCase of recovery- service provision effort when the first service delivery has failed

Personality

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Zones of Tolerance VARY forDifferent Service Dimensions

Most Important Factors Least Important FactorsSource: Berry, Parasuraman, and Zeithaml (1993)

Adequate Service

Desired Service

Zone ofToleranc

eDesiredService

AdequateService

Zone of

Tolerance

Desired Service

Adequate Service

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Zones of Tolerance VARY forFirst-Time and Recovery Service

First-Time Service

Outcome

Process

Outcome

Process

Recovery Service

ExpectationsLOW HIGHSource: Parasuraman, Berry and Zeithaml (1991)

100

Factors that InfluenceDesired Service

DesiredService

AdequateService

Zone of

Tolerance

Enduring Service Intensifiers-

•Derived expectations of others

•Personal expectations

Personal Needs-•Physical•emotinal•social•Psycological

101

Factors that InfluenceAdequate Service

DesiredService

AdequateService

Zone of

ToleranceSelf-PerceivedParticipation ability

Situational Factors

Perceived ServiceAlternatives

Transitory ServiceIntensifiers –

temporary

102

Factors that InfluenceDesired and Predicted Service

DesiredService

AdequateService

Zone of

TolerancePredicted Service

Explicit ServicePromises

Implicit ServicePromises- indirect

Word-of-Mouth

Past Experience

103

Possible Influence Strategies Possible Influence Strategies affecting customer service expectationsaffecting customer service expectations

Controllable factors:Explicit Service promises

Make realistic & accurate promises Take feedback on the accuracy of promises Avoid engaging in competitive warfare Formalize service promises through providing service guarantees

Implicit service promises Ensure service tangibles accurately reflect the service Ensure price premiums are justified by high level of performance

104

Contd.Contd. Less controllable factors:

Personal needs & wants- Educate customers on ways the service addresses their needs

Derived expectations of others- Use market research to determine sources & focus marketing strategy

Personal expectations-Use market research to profile personal service philosophies of customers

-

105

Contd.Contd.

Perceived service alternatives- be fully aware of & match competitive offerings.

Self perceived service role – educate customers to understand their roles & perform better.

Emergencies – in peak periods increase service delivery. Situational factors – use service guarantees to assure

customers about service recovery. Word of mouth communication- Use incentives & simulate

favorable word-of-mouth. Past experience – Use market research to profile customers’

previous experiences with similar services.

106

Understanding Customer Understanding Customer response w.r.t. ZOTresponse w.r.t. ZOTLevels of Service performance

1. Exceeds Desired level

2. Meets Desired level3. Lies in ZOT- between

desired & adequate level4. Meets Adequate level5. Falls below Adequate level

Customer responseDelighted

Becomes a loyal customerBrand ambassadors

SatisfiedIndifferent/ service go

unnoticedDissatisfiedFrustated

Search for alternative & shiftsNegative publicity

107

In services, the last In services, the last experience remains experience remains uppermost in customers’ uppermost in customers’ mind.mind. Therefore, it is not enough Therefore, it is not enough to be good, you have to be to be good, you have to be consistently good.consistently good.

108

QuestionsQuestions

What are the basic characteristics of services vs. goods?

Discuss the managerial implications of difference in characteristics of services.

109

Lecture 8Lecture 8

109

110

Market segmentationMarket segmentation

Dividing large, heterogeneous market into smaller groups of buyers called segments having distinct needs, characteristics, or behavior and therefore require separate products or marketing mixes, so that they can be reached more efficiently and effectively with products and services that match their unique needs.

110

111

Why Market segmentation?Why Market segmentation?

Buyers differ in Wants Resources Locations Buying attitudes Buying practices

Limited resources which should be utilized efficiently & effectively

111

112

Steps in STPSteps in STP (Segmentation, Targeting & (Segmentation, Targeting & Positioning)Positioning)

Market segmentation

1. Identify bases for segmenting the market.

2. Develop segment profiles

Target marketing

3. Develop measure of segment attractiveness

4. Select target segments.

Market positioning

5. Develop positioning (differentiation) for target segments.

6. Develop a marketing mix for each segment.

112

113

Bases of SegmentationBases of Segmentation

Geographic• Demographic- Age, Gender, Family size, Family life cycle, Income,

Occupation, Education, Religion, race and nationality . Most popular

Income Psychographic- social class, lifestyle or personality characteristics

Behavioral- consumer knowledge, attitude, occasion, use, benefit sought or response to a product

Using Multiple segmentation bases is common in an effort to identify smaller, better defined target groups

113

114

Segments--ExampleSegments--Example Air Travel

Business/Executive: Inflexible; relatively price insensitive (Small number of people, but travel often)

Leisure Traveler/Student: Relatively flexible; very price sensitive (other methods of travel--e.g., bus, car, train--are feasible; travel may not be essential) (Very large segment)

Comfort Travelers: Comfort (e.g., space, food) important; willing to pay (Small segment)

114

115

Levels of Market Levels of Market Segmentation Segmentation

Segment marketing Individual marketing Niche marketing- Marketers effort to position

their service in very smaller markets that have similar attributes and have been neglected by other marketer. Segment further divided into sub segments to cater unsatisfied needs of small group is called as niche.

Local marketing- marketers offer customized products to suit the local markets. KFC introduced “Muslimized” or “Pakistani” products such as Spicy Chicken, Hilal Chicken, Zinger Extreme and more…

115

116

Requirements for effective Requirements for effective segmentationsegmentation Measurable Accessible Differentiable (segment is unique) Actionable (can perform marketing mix to

reach this segment)

116

117

Target marketing Target marketing

The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter

Target market is a set of buyers sharing common needs or characteristics that the company decides to serve

117

118

Evaluating market segmentsEvaluating market segmentsSegments must differ meaningfully from others-

Segment attractiveness• large enough to be profitable-

Segment size• be serviceable (have need that can be

met cost effectively) Growth Company objectives and resources

118

119

Targeting StrategiesTargeting Strategies

Undifferentiated Strategy

One marketing mix for the whole market

Concentrated (niche) Strategy

One marketing mix and one segment

Differentiation Strategy

Two marketing mix and 2 different segmentChipsy BMW

119

120

Product positioning Product positioning

The way that product is defined by consumers on important attributes - the place the product occupies in consumer’s minds relative to competing products

120

121

Positioning StrategiesPositioning Strategies

“Head-on” competition Airlines (want to differentiate but have difficulty pulling it

off in practice) Beef products

Differentiation Burger King: Grilled instead of McDonald’s fried burgers Halmark: “When you care to send the very best…” Hertz (vs. “Not exactly”) Zachy Farms (chicken)

121

122

Developing and Communicating a Developing and Communicating a Positioning StrategyPositioning Strategy

Positioning According to Ries and Trout Strengthen own current position Grab an unoccupied position De-position Re-position Product ladders

122

123

Positioning: How many ideas to promote? Unique selling proposition

Four major positioning errors1. Underpositioning2. Overpositioning3. Confused positioning4. Doubtful positioning

Developing and Communicating a Developing and Communicating a Positioning StrategyPositioning Strategy

123

124

Theme park’s positioning Theme park’s positioning possibilities:possibilities:

Attribute positioning Benefit positioning Use or application positioning User positioning Competitor positioning Product category positioning Quality or price positioning

Which Positioning to Promote?124

125

Differentiation ToolsDifferentiation Tools

Differentiation criteria: Important Distinctive Superior Preemptive Affordable Profitable

Performance QualityConformance QualityDurabilityReliabilityReparabilityStyleDesign: The Integrating Force

125

126

Differentiation ToolsDifferentiation Tools Services Differentiation

Ordering EaseDelivery

Quick response system Installation Customer TrainingCustomer

ConsultingMaintenance

and Repair126

127

Differentiation ToolsDifferentiation Tools

Personnel Differentiation Competence Courtesy Creditability Reliability Responsiveness Communication

127

128

Differentiation ToolsDifferentiation Tools Channel Differentiation Image Differentiation

Identity Image

Symbols, Colors, Slogans, Special AttributesPhysical plantEvents and SponsorshipUsing Multiple Image-Building Techniques

128

129

Questions

129

130

QuestionsQuestions

1. Define Services. Why is there a need to study Service marketing?

2. What are the main reasons for the growing share of the service sector in India?

3. Why do marketing, operations, and HR have to be more closely linked in services than in

manufacturing? Give examples.

4. Describe how consumer behavior in services differs from consumer behavior in the

purchase of goods.

5. Discuss briefly any two of the following:1. Zone of Tolerance2. Credence Qualities3. Demand-capacity management

130

131

QuestionsQuestions

3. What are the basic characteristics of services vs. goods?

4. Discuss the managerial implications of difference in characteristics of services.

5. To what extent do you consider that the principles of marketing which have been

traditionally applied to the goods sector are appropriate for the service sector?

6. Discuss the different characteristics of services, the problems faced by service

provider due to them and strategic solutions.

7. How can services companies overcome the problem of inseparability?

131

132

QuestionsQuestions

8. Review each of the different ways in which services can be classified. How would

you explain the usefulness of each framework to managers?

9. Make a list of 16 services that you have used during the past month. Categorize

them by type of process.

10. What are search and credence qualities of service? Give 5 examples of services

rich in each of them.

132

133

Questions Questions 11. List and define the five dimensions of service quality. Describe the services provided

by your college/ bank on each of these dimensions. In your mind, has this organisation distinguished itself from its competitors on any particular service quality dimension?

12. Describe any service encounter that you have had recently. How did you evaluate the encounter, and what were the most important factors determining your satisfaction/ dissatisfaction?

13. Assume you are the manager of a health club. Discuss general strategies you might use to maximize customers’ positive perceptions of your club.

14. What are the basic characteristics of services vs. goods?

15. Discuss the managerial implications of difference in characteristics of services.

134

Interactive Class ExerciseInteractive Class Exercise

The class breaks into five groups and each group is assigned one of the service classifications (e.g., nature of act, relationship with customer, customization, nature of demand, or method of delivery) to come up with an example for each of the four quadrants in the matrix.

134

135

Exercise to Exercise to Identify Service AttributesIdentify Service Attributes

In groups of five, choose a services industry and spend 10 minutes brainstorming specific requirements of customers in each of the five service quality dimensions. Be certain the requirements reflect the customer’s point of view.

Reliability:

Assurance:

Tangibles:

Empathy:

Responsiveness:

136


UNIT - II Services Marketing Mix- Augmented marketing mix

• Product

• Price

• Place

• Promotion

• People

• Process

• Physical Evidence

• Role of Technology

137

Lecture no


1 Augmented Marketing Mix 138-149

2 Augmented Marketing Mix 151-165

3 Developing service product 167-171

4 Service Product Planning 173-188

5 Service Pricing Strategy 190-198

6 Service Pricing Strategy 200-209

7 Services Promotion 211-218

8 Services Promotion 220-231

LECTURE PLAN Unit- II Sub: Marketing of ServicesAcademic Consultant: Riju Agarwal

138

Lecture no


9 Services distribution 233-236

10 Services distribution 238-242

11 Role of communication in Service Marketing- Internal Communication

244-255

12 Role of communication in Service Marketing: Customer

257-262

13 Process of Operations 264-273

14 Delivery of Services 275-282

15 Role of Technology Services Marketing 284-295

16 Role of Technology Services Marketing 297-303

FAQ’S & ASSIGNMENTS

LECTURE PLAN Unit- II Sub: Marketing of ServicesAcademic Consultant: Riju Agarwal

139

Lecture 1Lecture 1

140

Table 1.3

Expanded Marketing Mix for Services

141

The Service Marketing Mix

142

The Marketing Mix

The tools available to a business to gain the reaction it is seeking from its target market in relation to its marketing objectives

7Ps – Price, Product, Promotion, Place, People, Process, Physical Environment

Traditional 4Ps extended to encompass growth of service industry

143

The Marketing Mix

Blend of the mix depends upon: Marketing objectives Type of product Target market Market structure Rivals’ behaviour Global issues – culture/religion, etc. Marketing position Product portfolio

Product lifecycle Boston Matrix

144

Price

145

Price

Pricing Strategy Importance of:

knowing the market elasticity keeping an eye

on rivals

146

Pricing ServicesThe characteristics of perishability, inability to store,

and fluctuating demand for services create pricing challenges.

• Pricing Strategies include:• Discount strategies: Cheaper by the

week.• A variable pricing strategy: Kids eat

free, movies cheaper on Tuesdays.• Price competition.

147

Product

148

Product Methods used to

improve/differentiate the product and increase sales or target sales more effectively to gain a competitive advantage e.g. Extension strategies Specialised versions New editions Improvements – real or

otherwise! Changed packaging Technology, etc.

149

Strategic Product Implications

service organizations have to plan the introduction of new services and the management of the life cycle

the core service can be enhanced through the addition of supplementary services, thereby creating added value

the life cycle of services has to be managed the branding of a service can be difficult as the

customer often has nothing tangible to show

150

Price

151

Price

Pricing Strategy Importance of:

knowing the market elasticity keeping an eye

on rivals

152

Pricing ServicesThe characteristics of perishability, inability to store,

and fluctuating demand for services create pricing challenges.

• Pricing Strategies include:• Discount strategies: Cheaper by the

week.• A variable pricing strategy: Kids eat

free, movies cheaper on Tuesdays.• Price competition.

153

Lecture 2Lecture 2

154

Promotion

155

Promotion Strategies

to make the consumer aware of the existence of a product or service

NOT just advertising

156

Promotion of Services customer contact personnel represent the main

channel of customer communication service providers must ensure that each

service encounterservice encounter is a positive one if customers are to develop a positive image

many professional service firms are now permitted to advertise

other elements of the promotional mix are used, including publicity and community affairs

157

Place

158

Place

The means by which products and services get from producer to consumer and where they can be accessed by the consumerThe more places to buy the product and the

easier it is made to buy it, the better for the business (and the consumer?)

159

Distribution Place of Services because most services are tied directly to a

specific service provider, most have been distributed directly to customers

with advancing technology, many firms are now delivering services through machines

channels of distribution are necessarily short; some firms use one agent intermediary, such as insurance, real estate, and travel agents

some firms use franchisesfranchises to distribute services

160

People

161

People

People represent the business The image they present can be important First contact often human – what is the lasting image

they provide to the customer? Extent of training and knowledge

of the product/service concerned Mission statement – how relevant? Do staff represent the desired culture

of the business?

162

PEOPLE SERVICE PERSONNEL CUSTOMERS1. CAREFUL SELECTION AND TRAINING2. LAYING DOWN NORMS, RULES,

PROCEDURES FOR PERSISTENCE PERFORMANCE

3. CONSTITANCE APPEARANCE4. REDUCE INTERFACE – AUTOMATION-

COMPUTERISATION

163

Process

164

Process How do people consume services? What processes do they have to go through

to acquire the services? Where do they find the availability

of the service? Contact Reminders Registration Subscription Form filling Degree of technology

165

Process – this means procedures, mechanism and flow of activities by which a service is acquired. Process decisions radically affect how a service is delivered to customers. The service in CE includes several processes e.g. first contact with customers, administrative procedure regarding course delivery, preparation, delivery and evaluation of the courses.

166

Physical Environment

167

Physical Environment

The ambience, mood or physical presentation of the environment Smart/shabby? Trendy/retro/modern/old fashioned? Light/dark/bright/subdued? Romantic/chic/loud? Clean/dirty/unkempt/neat? Music? Smell?

168

Physical evidence – this is the environment in which the service is delivered and any tangible goods that facilitate the performance and communication of the service. Customers look for clues to the likely quality of a service also by inspecting the tangible evidence. For example, prospective customers may look to the design of learning materials, the appearance of facilities, staff, etc.

169

Lecture 3Lecture 3

170

New Service Development Cycle

• Service design and testing• Process and system design and testing• Marketing program design and testing• Personnel training• Service testing and pilot run• Test marketing

People

Technology Systems

Product

Full Launch Development

Design Analysis

Orga

niza

tiona

lCo

ntex

t Teams

Tools

Enablers

• Formulation of new services objective / strategy• Idea generation and screening• Concept development and testing

• Business analysis• Project authorization

• Full-scale launch• Post-launch review

171

Levels of Service InnovationRadical Innovations

Major Innovation: new service driven by information and computer based technology

Start-up Business: new service for existing market New Services for the Market Presently Served: new services

to customers of an organizationIncremental Innovations

Service Line Extensions: augmentation of existing service line (e.g. new menu items)

Service Improvements: changes in features of currently offered service

Style Changes: modest visible changes in appearances

172

Technology Driven Service Innovation Power/energy - International flights with jet

aircraft Physical design - Enclosed sports stadiums Materials - Astroturf Methods - JIT and TQM Information - E-commerce using the Internet

173

Adoption of New Technology in Services Challenges of Adopting New Technology

The Process is the ProductBack Office vs Front Office ChangesNeed for Standardization

Managing the New Technology Adoption Process

Ten step process with concern for employees and customers

174

Generic Approaches to Service Design

Production-line• Limit Discretion of Personnel• Division of Labor• Substitute Technology for People• Standardize the Service

Customer as Coproducer• Substitution of Customer Labor for Provider• Smoothing Service Demand

Customer Contact• Degree of Customer Contact• Separation of High and Low Contact Operations

Information Empowerment• Employee and Customer

175

Lecture 4Lecture 4

176

Product Planning: Devising and Managing Products That Satisfy Product planning is systematic decision making

relating to all aspects of the development and management of a firm’s products, including branding and packaging.

Each product consists of a bundle of attributes, which are features, functions, benefits, and uses.

Each product is capable of exchange or use, and is usually a mix of tangible and intangible forms.

177

A Tangible Product A tangible product is a basic physical entity,

service, or idea. It has precise specifications and is offered

under a given description or model number. It denotes color, style, size, weight, durability,

quality, and price features.

178

An Augmented Product

An augmented product includes tangible elements of a product, as well as clusters of image and service features.

For example, a political candidate may possess appeal or charisma.

The concepts of image, status, prestige, and value-added qualities are conveyed.

179

Generic Products: A Customer Perspective

A generic product centers on what the product means to the customer, not the seller.

Cosmetics sells hope. Computers represent solutions. Pharmaceuticals represent cures. Firms must discover what each product means to the

consumer before product planning.

180

Product Mix

An item is a specific model. A line has related items. A mix comprises all of the

firm’s offerings. Width refers to all of the

firm’s lines. Depth refers to the number

of items within each product line.

The consistency of a product mix is based on the relationship among product lines, such as, sharing common end-uses, distribution outlets, consumer groups, and price ranges.

181

Product Mix Alternatives

Few models in each of several different product lines

Few models in one or a few product

lines

Many models in one or a

few product lines

Many models in each of several different

product lines

Width of Product MixNarrow Wide

Shallow

Deep

Depth of Product Mix

182

The Role of Product Positioning

Product positioning maps out consumer perceptions of product attributes.

Ideal points show the most preferred attributes.

Firms must constantly monitor the environment to determine change and customer perceptions.

183

Branding Terms

BrandBrand -- a name, term, design, symbol, or other feature that identifies the goods and services of a seller.

Brand NameBrand Name -- a word, letter (number), group of words, or letters (numbers) that can be spoken.

Brand MarkBrand Mark -- a symbol, design, or distinctive coloring or lettering that cannot be spoken.

Trade CharacterTrade Character -- a brand mark that is personified.

TrademarkTrademark -- a brand name, brand mark, or trade character or combination thereof that is given legal protection.

184

Branding Decisions

1. Selection of corporate symbols

2. Creation of a banding philosophy

3. Selection of brand names

4. Decision on whether or not to seek trademark protection

Regular Reappraisal

185

Mixed-Brand Strategy

This is a cooperative strategy among channel members to gain market share and improve sales.

Manufacturers and distributors negotiate agreements with retailers re: co-op advertising; P.O.S. signing, square footage, inventory control, sales training, gift w/ purchase, purchase w/purchase, etc.

186

Battle of the Brands

Occurs when: Highly competitive behavior is evident,

particularly in the food industry. Dominating brands often control entire

markets. Some groceries demand “slotting” fees to

gain access to their store shelves. There is a battle for end-aisle space.

187

The Consumer’s Brand Decision Process

Nonrecognition Recognition

Preference Insistence

Dislike Aversion

188

The Boston Consulting Group’s Growth-Share Matrix

20%-20%-18%-18%-16%-16%-14%-14%-12%-12%-10%-10%- 8%-8%- 6%-6%- 4%-4%- 2%-2%- 00M

arke

t Gro

wth

Rat

e

3 ?Question marks

? ??2

1

Cash cow

6

Dogs

87

10x 4x 2x 1.5x 1x 10x 4x 2x 1.5x 1x Relative Market Share

.5x .4x .3x .2x .1x .5x .4x .3x .2x .1x

Stars

5

4

189

Market Attractiveness: Competitive- Position Portfolio Classification

MA

RK

ET A

TTR

AC

TIVE

NES

SM

AR

KET

ATT

RA

CTI

VEN

ESS

5.005.00

3.673.67

2.332.33

1.001.00

Low

Low

Med

ium

Med

ium

Hig

hH

igh

Reliefvalve

Flexiblediaphragms

Fuelpumps

Aerospacefittings

Clutches

Hydraulicpumps

Joints

StrongStrong MediumMedium WeakWeakBUSINESS STRENGTHBUSINESS STRENGTH

1.001.002.332.333.673.675.005.00

Invest/growInvest/grow Selectivity/earningsSelectivity/earnings Harvest/divestHarvest/divest

190

Sale

sSa

les

10105500Time (yearsTime (years)

The Strategic-Planning Gap

Desiredsales

Integrative growth

Intensive growth

Currentportfolio

Strategic-Strategic-planningplanning

gapgap

DiversificationDiversification growthgrowth

191

Three Intensive Growth Strategies: Ansoff’s Product/Market Expansion Grid

4. Diversification2. Marketdevelopment

Newmarkets

1. Marketpenetration

Existingmarkets

Existingproducts

3. Productdevelopment

Newproducts

192

Lecture 5Lecture 5

193

Pricing Strategies

194

Penetration Pricing

Price set to ‘penetrate the market’ ‘Low’ price to secure high volumes Typical in mass market products – chocolate

bars, food stuffs, household goods, etc. Suitable for products with long anticipated life

cycles May be useful if launching into a new market

195

Market Skimming High price, Low volumes Skim the profit from the

market Suitable for products that

have short life cycles or which will face competition at some point in the future (e.g. after a patent runs out)

Examples include: Playstation, jewellery, digital technology, new DVDs, etc.

Many are predicting a firesale in laptops as supply exceeds demand.Copyright: iStock.com

196

Value Pricing Price set in

accordance with customer perceptions about the value of the product/service

Examples include status products/exclusive products

Companies may be able to set prices according to perceived value.

Copyright: iStock.com

197

Loss Leader Goods/services deliberately sold below cost to

encourage sales elsewhere Typical in supermarkets, e.g. at Christmas,

selling bottles of gin at £3 in the hope that people will be attracted to the store and buy other things

Purchases of other items more than covers ‘loss’ on item sold

e.g. ‘Free’ mobile phone when taking on contract package

198

Psychological Pricing

Used to play on consumer perceptions Classic example - £9.99 instead of £10.99! Links with value pricing – high value goods

priced according to what consumers THINK should be the price

199

Going Rate (Price Leadership)

In case of price leader, rivals have difficulty in competing on price – too high and they lose market share, too low and the price leader would match price and force smaller rival out of market

May follow pricing leads of rivals especially where those rivals have a clear dominance of market share

Where competition is limited, ‘going rate’ pricing may be applicable – banks, petrol, supermarkets, electrical goods – find very similar prices in all outlets

200

Tender Pricing

Many contracts awarded on a tender basis Firm (or firms) submit their price for carrying out the

work Purchaser then chooses which represents best value Mostly done in secret

201

Price Discrimination

Charging a different price for the same good/service in different markets

Requires each market to be impenetrable

Requires different price elasticity of demand in each marketPrices for rail travel differ for the same

journey at different times of the day

Copyright: iStock.com

202

Lecture 6Lecture 6

203

Destroyer/Predatory Pricing

Deliberate price cutting or offer of ‘free gifts/products’ to force rivals (normally smaller and weaker) out of business or prevent new entrants

Anti-competitive and illegal if it can be proved

204

Absorption/Full Cost Pricing

Full Cost Pricing – attempting to set price to cover both fixed and variable costs

Absorption Cost Pricing – Price set to ‘absorb’ some of the fixed costs of production

205

Marginal Cost Pricing Marginal cost – the cost of producing ONE extra

or ONE fewer item of production MC pricing – allows flexibility Particularly relevant in transport where fixed

costs may be relatively high Allows variable pricing structure – e.g. on a flight

from London to New York – providing the cost of the extra passenger is covered, the price could be varied a good deal to attract customers and fill the aircraft

206

Marginal Cost Pricing Example:

Aircraft flying from Bristol to Edinburgh – Total Cost (including normal profit) = £15,000 of which £13,000 is fixed cost*Number of seats = 160, average price = £93.75MC of each passenger = 2000/160 = £12.50If flight not full, better to offer passengers chance of flying at £12.50 and fill the seat than not fill it at all! *All figures are estimates only

207

Contribution Pricing

Contribution = Selling Price – Variable (direct costs)

Prices set to ensure coverage of variable costs and a ‘contribution’ to the fixed costs

Similar in principle to marginal cost pricing Break-even analysis might be useful in

such circumstances

208

Target Pricing

Setting price to ‘target’ a specified profit level

Estimates of the cost and potential revenue at different prices, and thus the break-even have to be made, to determine the mark-up

Mark-up = Profit/Cost x 100

209

Cost-Plus Pricing

Calculation of the average cost (AC) plus a mark up

AC = Total Cost/Output

210

Influence of Elasticity

Any pricing decision must be mindful of the impact of price elasticity

The degree of price elasticity impacts on the level of sales and hence revenue

Elasticity focuses on proportionate (percentage) changes

PED = % Change in Quantity demanded/% Change in Price

211


Price Inelastic: % change in Q < % change in P e.g. a 5% increase in price would be met by a fall

in sales of something less than 5% Revenue would rise A 7% reduction in price would lead to a rise in

sales of something less than 7% Revenue would fall

212


Price Elastic: % change in quantity demanded > % change in

price e.g. A 4% rise in price would lead to sales falling by

something more than 4% Revenue would fall A 9% fall in price would lead to a rise in sales of

something more than 9% Revenue would rise

213

Lecture 7Lecture 7

214

Elements of the Promotional Mix

Promotional mixPromotional mix: blend of personal selling and nonpersonal selling designed to achieve promotional objectives Personal sellingPersonal selling: interpersonal promotional

process involving a seller’s person-to-person presentation to a prospective buyer

Nonpersonal sellingNonpersonal selling includes: Advertising, Product placement, Sales promotion, Direct marketing, Public relations

215

AdvertisingAdvertisingPaid, nonpersonal communication through

various media by a business firm, not-for-profit organization, or individual identified in the message with the hope of informing or persuading members of a particular audience

Product PlacementProduct PlacementMarketer pays a motion picture or television

program owner a fee to display his or her product prominently in the film or show

216

Sales PromotionSales PromotionMarketing activities that stimulates

consumer purchasing (includes: displays, trade shows, coupons, premiums, contests, product demonstrations, and various nonrecurrent selling efforts)

Trade promotion

217

Public relationsPublic relations: firm’s communications and relationships with its various publics

PublicityPublicity: stimulation of demand for good, service, place, idea, person, or organization by unpaid placement of commercially significant news or favorable media presentations

218

Guerilla MarketingGuerilla Marketing: Unconventional, innovative, and low-cost marketing techniques designed to get consumers’ attention in unusual ways.

219

Sponsorships Provision of funds for a sporting or

cultural event in exchange for a direct association with the events or activity

220

Growth of SponsorshipsGrowth of SponsorshipsSponsorship has grown rapidly during the

past 30 yearsCorporate sponsorship spending has

increased faster than promotional outlays for advertising and sales promotion

How Sponsorship Differs from How Sponsorship Differs from AdvertisingAdvertisingSponsor’s degree of controlNature of the messageAudience reactionAmbush marketing

221

Assessing Sponsorship ResultsAssessing Sponsorship ResultsMarketers utilize some of the same

techniques to measure both advertising and sponsorship

The differences between the two promotional alternatives often necessitate some unique research techniques

Despite the impressive visibility of special events like soccer’s World Cup and football’s Super Bowl, the demands do not necessarily lead directly to increased sales or improved brand awareness

222

Lecture 8Lecture 8

223

Developing an Optimal Promotional Mix

Factors that influence the effectiveness of a promotional to mix:Nature of the marketNature of the productStage in the product life-cyclePriceFunds available for promotion

224

Nature of the marketNature of the market Personal selling may prove effective with a market

composed of a limited number of buyers Advertising is more effective when a market has large

numbers of potential customers scattered over sizable geographic areas

Personal selling often works better for intermediary target markets

Nature of the productNature of the product Highly standardized products with minimal servicing

requirements usually need less personal selling than custom products with complex features and/or frequent maintenance needs

Consumer products are more likely to rely heavily on advertising than are business products

225

Stage in the product life-cycleStage in the product life-cycle Promotional mix must be tailored to the products

stage in the product life-cycle In the introductory stage, there is a heavy emphasis

on personal selling to the to the intermediaries However, advertising and sales promotion help to

create awareness and stimulate initial purchases In the growth and maturity stages, advertising gains

relative importance Personal selling efforts at marketing intermediaries to

expand distribution is continued In the maturity and early decline stages, firms

frequently reduce advertising and sales promotion expenditures

226

PricePrice Advertising dominates the promotional mix for low-

unit-value products due to the high personal contact costs of personal selling

Consumers a high-priced items like luxury cars expect lots of well-presented information via videocassettes, CDs, fancy brochures, and personal selling

Funds available for promotionFunds available for promotion A critical element in the promotional strategy is the

size of the promotional budget While the cost-per-contact of a $2 million, 30-second

TV commercial during the Super Bowl is relatively low, such an expenditure exceeds the entire promotional budgets of many, if not most firms

227

Push Versus Pull Strategy

Producer

Producer

Interme-diaries

Marketingactivities End users

Marketingactivities

Demand Interme-diaries

Demand

Push Strategy

Pull Strategy

End users

Marketing activities

Demand

228

Pulling and PushingPromotional Strategies Pulling strategyPulling strategy: promotional effort by a

seller to stimulate demand among final users, who will then exert pressure on the distribution channel to carry the good or service, pulling it though the marketing channel

Pushing strategyPushing strategy: promotional effort by a seller to members of the marketing channel intended to stimulate personal selling of the good or service, thereby pushing it through the marketing channel

229

Budgeting for Promotional Strategy

Percentage-of-sales method

Fixed-sum-per-unit method

Meeting competition method

Task-objective method

230

Method Description ExamplePercentage-of-sales method

Promotional budget is set as a specified percentage of either past or forecasted sales.

“Last year we spent $10,500 on promotion and had sales of $420,000. Next year we expect sales to grow to $480,000, and we are allocating $12,000 for promotion.”

Fixed-sum-per-unit method

Promotional budget is set as a predetermined dollar amount for each unit sold or produced.

“Our forecast calls for sales of 14,000 units, and we allocate promotion at the rate of $65 per unit.”

Meeting competition method

Promotional budget is set to match competitor’s promotional outlays on either an absolute or relative basis.

“Promotional outlays average 4 percent of sales in our industry.”

Task-objective method

Once marketers determine their specific, promotional objectives, the amount (and type) of promotional spending needed to achieve them is determined.

“By the end of next year, we want 75 percent of the area high-school students to be aware of our new, highly automated fast-food prototype outlet. How many promotional dollars will it take, and how should they be spent?”

231

Measuring the Effectiveness of Promotion Two basic measurement tools:

Direct sales results measures the effectiveness of promotion by revealing the specific impact on sales revenues for each dollar of promotional spending

Indirect evaluation concentrates on quantifiable indicators of effectiveness like:

Recall - how much members of the target market remember about specific products or advertisements

Readership – size and composition of a message’s audience

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Measuring Online PromotionsMeasuring Online PromotionsEarly attempts at measuring online promotional

efforts involved counting hits and visits Incorporating direct response and comparing

different promotions for effectivenessTwo major techniques for setting online

advertising rates: Cost per impression (CPM), technique that related

the cost of an ad to every thousand people who read it

Cost per response (click-throughs), which assumes that those who actually click on an ad want more information

233

Business ImportanceBusiness ImportancePromotional strategy has become

increasingly important to both small and large firms

Its effectiveness to encourage attitude changes, brand loyalty and increase sales is well-documented

Both business and nonbusiness enterprises recognize the importance of promotional efforts

Nonbusiness organizations using promotion include governments and religions

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Economic ImportanceEconomic ImportanceEffective promotion has allowed society to

derive benefits not otherwise availablePromotion increases the number of units

sold; the resulting economies of scale lower production costs and allows lower sales prices

Subsidizes the information contents of newspapers and the broadcast media

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Lecture 9Lecture 9

236

Distribution Channel Functions

Ordering

Payments

CommunicationTransfer

Negotiation

FinancingRisk Taking

PhysicalDistribution

Information

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Channel Management Decisions

Selecting

FEED

BA

CK

Motivating

Training

Evaluating

238

Types of Vertical Marketing Systems

CorporateCommon Ownership at Different

Levels of the Channel

ContractualContractual Agreement Among

Channel Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

239

Conventional Distribution Channel vs. Vertical Marketing Systems

VerticalVerticalmarketingmarketingchannelchannel

Manufacturer

Retailer

ConventionalConventionalmarketingmarketingchannelchannel

Consumer

Manufacturer

Consumer

Retailer

Wholesaler

Who

lesa

ler

240

Lecture 10Lecture 10

241

Direct MarketingDirect MarketingDirect communications other than

personal sales contact between buyer and seller, designed to generate sales, information requests, or store visits

242

Direct Mail Direct Mail Marketers combine information from internal

and external databases, surveys, coupons, and rebates that require responses to provide information about consumer lifestyles, buying habits, and wants

CatalogsCatalogsOver 10,000 different consumer mail-order

catalogs and thousands more for business-to- business sales are mailed each year generating over $57 million in consumer sales and $36 million in B2B sales

243

TelemarketingTelemarketing: promotional presentation involving the use of the telephone for outbound contacts by salespeople or inbound contacts initiated by customers who want to obtain information and place orders

244

Direct Marketing via Broadcast Direct Marketing via Broadcast ChannelsChannelsBroadcast direct marketing includes:Brief (30 to 90 and second) direct response

ads on television or radioHome shopping channels like:

Quality Value Channel (QVC) Home Shopping Network (HSN)

Infomercial: promotional presentation for a single product running 30 minutes or longer in a format that resembles a regular television program

245

Electronic Direct Marketing ChannelsElectronic Direct Marketing ChannelsWeb advertising is an important

component of electronic direct marketingE-mail direct marketing is a natural and

easy extension of traditional direct mail marketing

Other Direct Marketing ChannelsOther Direct Marketing ChannelsPrint media is generally not as effective as

Web marketing or telemarketing for direct marketers

Magazine and newspaper ads with toll-free telephone numbers, kiosks, and other media are still useful in many situations

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247

Role of Communication Provide InformationProvide Information

Inform the market about the availability of a particular good or service

Increase DemandIncrease DemandSome promotions are aimed at increasing

primary demand, the desire for a general product category

More promotions are aimed at increasing selective demand, the desire for a specific brand

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Differentiate the ProductDifferentiate the ProductHomogenous demand for many products

results when consumers regard the firm’s output as virtually identical to its competitors’– then, the firm has virtually no control over marketing variables

Accentuate the Product’s ValueAccentuate the Product’s ValuePromotion can explain the greater ownership

utility of a product to buyers, thereby accentuating its value and justifying a higher price

249

Stabilize SalesStabilize SalesFor the typical firm, sales

fluctuations may result from cyclical, seasonal, or irregular demand

Stabilizing these variations is often an objective of promotional strategy

250

Objectives

The Communications Process Developing Effective Communications Deciding on the Marketing

Communications Mix Managing and Coordinating Integrated

Marketing Communications

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Advertising

Personal Selling

Any Paid Form of Nonpersonal Presentation by an Identified Sponsor.

Sales Promotion Short-term Incentives to Encourage Trial or Purchase.

Public Relations

Direct Marketing Direct Communications With Individuals to Obtain an Immediate Response.

Protect and/or Promote Company’s Image/products.

Personal Presentations.

The Marketing Communications Mix

252

Elements in the Communication Process

SENDEREncoding Decoding

RECEIVER

Media

Message

Feedback Response

Noise

253

Effective CommunicationsStep 1. Identifying the Target Audience

Purchase

Conviction

Preference

Liking

KnowledgeAwareness

Step 2. Determining the Communication ObjectivesBuyer Readiness Stages

254

Message SourceExpertise,

Trustworthiness,Congruity

Step 3. Designing the Message

Message FormatLayout,

Words, & Sounds,Body Language

Message StructureDraw Conclusions

Argument TypeArgument Order

Message ContentRational Appeals

Emotional AppealsMoral Appeals

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Step 4. Select Communications Channel

Nonpersonal CommunicationChannels

Personal CommunicationChannels

256

Step 5. Establish the Budget

CompetitiveParity

Objective& Task

Affordable % OfSales

257

Step 6. Decide on Communications Mix

AdvertisingPublic, Pervasive, Expressive, Impersonal

Sales PromotionCommunication, Incentive, Invitation

Public Relations & PublicityCredibility, Surprise, Dramatization

Personal SellingPersonal Confrontation, Cultivation, Response

Direct MarketingNonpublic, Customized, Up-to-Date, Interactive

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Step 7. Measure Results

Step 8. Manage the IMC Process

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260

Employees’ Roles in Service Delivery Objectives

Illustrate the critical importance of service employees in creating customer satisfaction and service quality

Demonstrate the challenges inherent in boundary-spanning roles

Provide examples of strategies for creating customer-oriented service delivery

Show how the strategies can support a service culture where providing excellent service is a way of life

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Service Employees

They are the service They are the firm in the customer’s eyes They are marketers Importance is evident in

The Services Marketing Mix (People)The Service-Profit ChainThe Services Triangle

262

Service Employees

Who are they?“boundary spanners”

What are these jobs like?emotional labormany sources of potential conflict

person/role organization/client interclient quality/productivity

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Human Resource Strategies for Closing GAP 3

Customer-oriented Service Delivery

Hire theRight People

ProvideNeeded Support

Systems

Retain theBest

People

DevelopPeople toDeliverServiceQuality

Compete for

the Best

People

Hire for Service

Competencies and Service

Inclination

Provide Supportive Technology

and Equipment

Trea

t Em

ploy

ees

as

Cust

omer

s

Empow

er Em

ployees

Be the Preferred

Employer Train for

Technical

and

Interactive

Skills

Prom

ote

Team

wor

k

Measure

Internal

Service

Quality

Develop Service-

oriented Internal

Processes

Mea

sure

an

d Re

war

d St

rong

Se

rvic

e Pr

ovid

ers

Include

Employees

in the

Company’s

Vision

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Service Culture

“A culture where an appreciation for good service exists, and where giving good service to internal as well as ultimate, external customers, is considered a natural way of life and one of the most important norms by everyone in the organization.”

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267

Customers’ Roles in Service Delivery Objectives

Illustrate the importance of customers in successful service delivery

Enumerate the variety of roles that service customers play• Productive resources• Contributors to quality and satisfaction• Competitors

Explain strategies for involving service customers effectively to increase both quality and productivity

268

Importance of Other Customers in Service Delivery

Other customers can detract from satisfaction

disruptive behaviors excessive crowding incompatible needs

Other customers can enhance satisfaction

mere presence socialization/friendships roles: assistants, teachers, supporters

269

How Customers Widen Gap 3

Lack of understanding of their roles Not being willing or able to perform their roles No rewards for “good performance” Interfering with other customers Incompatible market segments

270

Customer Roles in Service Delivery

Productive Resources

Contributors to Quality and Satisfaction

Competitors

271

Customers as Productive Resources

“partial employees”contributing effort, time, or other resources

to the production process customer inputs can affect

organization’s productivity key issue:

should customers’ roles be expanded? reduced?

272

Customers as Contributors to Service Quality and Satisfaction

Customers can contribute to their own satisfaction with the service

by performing their role effectively by working with the service provider

the quality of the service they receive by asking questions by taking responsibility for their own satisfaction by complaining when there is a service failure

273

Customers as Competitors

customers may “compete” with the service provider “internal exchange” vs. “external exchange” internal/external decision often based on:

expertise resources time economic rewards psychic rewards trust control

274

Strategies for Enhancing Customer Participation

EffectiveCustomer

ParticipationRecruit, Educate,

and Reward Customers

Define CustomerJobs

Manage theCustomer

Mix

275

Strategies for EnhancingCustomer Participation

1. Define customers’ jobs- helping himself- helping others- promoting the company

2. Individual differences: not everyone wants to participate

276

Strategies for Recruiting,Educating and Rewarding Customers

1. Recruit the right customers2. Educate and train customers to perform effectively3. Reward customers for their contribution4. Avoid negative outcomes of inappropriate customer participation

Manage the Customer Mix

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278

Process

means procedures, mechanism and flow of activities by which a service is acquired. Process decisions radically affect how a service is delivered to customers. The service in CE includes several processes e.g. first contact with customers, administrative procedure regarding course delivery, preparation, delivery and evaluation of the courses.

279

Characteristics of process

Divergence Complexity Service location Customer participation & interaction The service itself

280

Planning a Service Process

Important decisions about process are related to: Technology Conversion process Equipment Flow of process Service personnel Service location Layout design Organizational structure

281

Process efficiency

Factors influencing process efficiency are Planning Service personnel Technology Location & decor Customer’s role

282

Service Mapping/Blueprinting

A tool for simultaneously depicting the service process, the points of customer contact, and the evidence of service from the customer’s point of view.

ServiceMapping

ProcessPoints of ContactEvidence

283

Service Blueprint ComponentsCUSTOMER ACTIONS

line of interaction

“ONSTAGE” CONTACT EMPLOYEE ACTIONSline of visibility

“BACKSTAGE” CONTACT EMPLOYEE ACTIONSline of internal interaction

SUPPORT PROCESSES

284

Overnight Hotel StaySU

PPOR

T PR

OCES

SCO

NTAC

T PE

RSON

(Bac

k St

age)

(On

Stag

e)CU

STOM

ER

HotelExteriorParking

Cart for Bags

DeskRegistrationPapersLobbyKey

ElevatorsHallwaysRoom

Cart for Bags

RoomAmenitiesBath

Menu DeliveryTrayFoodAppearance

FoodBillDeskLobbyHotelExteriorParking

Arriveat

Hotel

Give Bagsto

BellpersonCheck in Go to

RoomReceive

BagsSleep

ShowerCall

RoomService

ReceiveFood Eat

Check outand

Leave

Greet andTakeBags

ProcessRegistratio

n

DeliverBags

DeliverFood

ProcessCheck Out

Take Bagsto Room

TakeFoodOrder

RegistrationSystem

PrepareFood

RegistrationSystem

PHYS

ICAL

EVID

ENCE

285

Building a Service Blueprint

Step 1

Identify the process to be blue-printed.

Step 2

Identify the customer or customer segment.

Step 3

Map the process from the customer’s point of view.

Step 4

Map contact employee actions, onstage and back-stage.

Step 5

Link customerand contact person activities to needed support functions.

Step 6

Add evidence of service at each customer action step.

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287

Application of Service Blueprints New Service Development

concept development market testing

Supporting a “Zero Defects” Culture managing reliability identifying empowerment issues

Service Recovery Strategies identifying service problems conducting root cause analysis modifying processes

288

Blueprints Can Be Used By: Service Marketers

creating realistic customer expectations service system design promotion

Operations Management rendering the service as

promised managing fail points training systems quality control

Human Resources empowering the human element

job descriptions selection criteria appraisal systems

System Technology providing necessary tools:

system specifications personal preference databases

289

Service Recovery Objectives

Illustrate the importance of recovery from service failures in building loyalty

Discuss the nature of consumer complaints and why people do and do not complain

Provide evidence of what customers expect and the kind of responses they want when they complain

Provide strategies for effective service recovery Discuss service guarantees

290

Unhappy Customers’ Repurchase Intentions

95%

70%

46%

37%

82%

54%

19%

9%

Complaints Resolved Quickly

Complaints Resolved

Complaints Not Resolved

Minor complaints ($1-$5 losses)Major complaints (over $100 losses)

Unhappy Customers Who Don’t Complain Unhappy Customers Who Do Complain

Percent of Customers Who Will Buy Again

Source: Adapted from data reported by the Technical Assistance Research Program.

291

Customer Response Following Service Failure

Service Failure

Do NothingTake Action

Stay with ProviderSwitch Providers

Complain to Provider

Complain to Family & Friends

Complain to Third Party

Stay with ProviderSwitch Providers

292

Service Recovery Strategies

Learn fromRecovery

Experiences Treat Custo

mers

Fairly

Learn fromLost Custom

ers

Welcome and

Encourage Complaints

Fail Safe th

e

ServiceAct Q

uicklyService Recovery Strategie

s

293

Causes Behind Service Switching

Service Switching Behavior

• High Price• Price Increases• Unfair Pricing• Deceptive Pricing

Pricing

• Location/Hours• Wait for Appointment• Wait for Service

Inconvenience

• Service Mistakes• Billing Errors• Service Catastrophe

Core Service Failure

• Uncaring• Impolite• Unresponsive• Unknowledgeable

Service Encounter Failures

• Negative Response• No Response• Reluctant Response

Response to Service Failure

• Found Better ServiceCompetition

• Cheat• Hard Sell• Unsafe• Conflict of Interest

Ethical Problems

• Customer Moved• Provider Closed

Involuntary SwitchingSource: Sue Keaveney

294

Service Guarantees

guarantee = an assurance of the fulfillment of a condition (Webster’s Dictionary)

for products, guarantee often done in the form of a warranty

services are often not guaranteedcannot return the serviceservice experience is intangible

(so what do you guarantee?)

295

Characteristics of an Effective Service Guarantee

Unconditional The guarantee should make its promise unconditionally -

no strings attached.Meaningful

It should guarantee elements of the service that areimportant to the customer.

The payout should cover fully the customer'sdissatisfaction.

Easy to Understand and Communicate For customers - they need to understand what to expect. For employees - they need to understand what to do.

Easy to Invoke and Collect There should not be a lot of hoops or red tape in the way

of accessing or collecting on the guarantee.

Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.

296

Why a Good Guarantee Works forces company to focus on customers

sets clear standards

generates feedback

forces company to understand why it failed

builds “marketing muscle”

297

Service Guarantees Does everyone need a guarantee?

Reasons companies do NOT offer guarantees:guarantee would be at odds with company’s image too many uncontrollable external variables fears of cheating by customerscosts of the guarantee are too high

298

Service Guarantees service guarantees work for companies who are

already customer-focused effective guarantees can be BIG deals - they put

the company at risk in the eyes of the customer customers should be involved in the design of

service guarantees the guarantee should be so stunning that it comes

as a surprise -- a WOW!! factor “it’s the icing on the cake, not the cake”

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300

Role of Technology in the Service Encounter

Technology Technology Technology

Technology Technology

Customer Customer

Server

Server

Server

Server

Server

CustomerCustomer

Customer

D. Technology-MediatedService Encounter

E. Technology-GeneratedService Encounter

A. Technology-FreeService Encounter

B. Technology-AssistedService Encounter

C. Technology-FacilitatedService Encounter

301

Evolution of Self-serviceService Industry Human Contact Machine Assisted

ServiceElectronic Service

Banking Teller ATM Online banking

Grocery Checkout clerk Self-checkout station Online order/ pickup

Airlines Ticket agent Check-in kiosk Print boarding pass

Restaurants Wait person Vending machine Online order/ delivery

Movie theater Ticket sale Kiosk ticketing Pay-for-view

Book store Information clerk Stock-availability terminal Online shopping

Education Teacher Computer tutorial Distance learning

Gambling Poker dealer Computer poker Online poker

302

Technology Convergence Enabling E-Business

InternetGlobal telephone systemCommunications standard TCP/IP

(Transfer Control Protocol/Internet Protocol)Addressing system of URLsPersonal computers and cable TVCustomer databasesSound and graphicsUser-friendly free browser

303

Electronic and Traditional Services

Features Electronic Traditional

Encounter Screen-to-face Face-to-face

Availability Anytime Working hours

Access From anywhere Travel to location

Market Area Worldwide Local

Ambiance Electronic interface

Physical environment

Payment Credit card Cash or check

Differentiation Convenience Personalization

Privacy Anonymity Social interaction

304

Grocery Shopping Comparison

On-lineShopping

TraditionalShopping

Advantages ConvenienceSaves timeLess impulsebuying

See new itemsMemory triggerProduct samplingSocial interaction

Disadvantages Forget itemsLess controlNeed computerDelivery fee

Time consumingWaiting linesCarry groceriesImpulse buying

305

Challenges of Adopting New TechnologyThe Process is the ProductBack Office vs Front Office ChangesNeed for Standardization

Managing the New Technology Adoption ProcessTen step process with concern for employees

and customers

Adoption of New Technology in Services

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307

Questions

308

Questions1. What is service blueprinting? Explain its importance in services

marketing.2. What is service product mix? What are the decision areas in

developing service lines?3. What is service branding? What are the benefits of service branding?4. What are the qualities of a good service brand?5. Discuss the pricing strategies applicable for services with suitable

examples.6. Suggest and discuss pricing strategies for segments that perceive

value is low price.7. What is value pricing? How can markets be divided, based on value

perceptions?8. Evaluate the suitability of different types of intermediaries for service

distribution.9. Suggest measures for the efficient functioning of a service

distribution system.10. Discuss various strategies for channel management.

309

11. Explain the concept of internal marketing and analyze different roles the employees play in the service process.

12. What is employee empowerment? Why is empowerment essential in services?

13. Discuss different strategies of Internal Marketing.14. What is the role of external marketing in service business?15. How do you design promotional mix for services? 16. Discuss various promotional themes in external marketing.17. How do customers respond to a service failure? 18. What do customers expect when they complain?19. What do you mean by service recovery?20. What are the different Recovery Strategies to be undertaken by the

marketer?21. Explain the moments of truth in a service process.

310

Assignment

1. Take a service industry of your choice and work out its Marketing mix, referring to all its 7 p’s

2. Take a service industry of your choice and work out the role technology in service provisions

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312


UNIT - III Marketing of Financial Services• Credit Cards

• Home Loans

• Insurance

• Banking

• Telecom

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313

Lecture no


1 Credit Cards 312-3162 Home Loans 318-321

3 Home Loans 323-327

4 Insurance Industry 329-344

5 Insurance Industry 346-359

6 Banking Industry 361-373

7 Banking Industry 375-410

8 Telecom Industry 412-425

FAQ’S & ASSIGNMENTS 427-428

LECTURE PLAN Unit- III Sub: Marketing of ServicesAcademic Consultant: Riju Agarwal

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Lecture 1Lecture 1

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315

Credit CardsCredit Cards A credit card is a plastic card with a magnetic strip

containing data, and is a financial instrument allowing the holder for pay for goods or services on credit and in lieu of cash. While credit card companies provide the infrastructure to settle the transactions, the cards are issued by banks and increasingly by retail outlets and other consumer-oriented entities.

315

316

Credit cards allow customers to buy goods and services immediately and then settle the bill for aggregated transactions at a later date. Debit cards, on the other hand, allow customers to buy using funds directly debited from their accounts.

Visa and Mastercard are the two largest credit card companies worldwide. Both were originally formed by consortia of banks. American Express is both a credit card provider and a bank. JCB is popular in Japan and Diners Club is also a major worldwide provider.

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Types of credit cardTypes of credit card

Premium Credit Cards, Cash Back Credit Cards, Gold Credit Cards, Airline Credit Cards, Silver Credit Cards, Business Credit Cards, Balance Transfer Credit Cards, Co-branded Credit Cards, Low Interest Credit Cards, Lifetime Free Credit Cards and Rewards. The Rewards credit cards may be subdivided into Points, Hotels/Travels, Retail, Auto and Fuels cards.

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Major issuersMajor issuers

American Express, HSBC, ANZ, Macquarie Bank, Aussie, NAB, BankWest, St George, Bank of Queensland, Suncorp Metway, Citibank, Westpac and Commonwealth Bank. The major credit card providers in India are ABN Amro, HDFC, American Express, ICICI Bank, Axis Bank, SBI, Bank of Baroda, Canara Bank, Citibank, Visa, HSBC, MasterCard, Deutsche Bank, Amex, Barclays Bank, Diners Club, Standard Chartered and Kotak Mahindra.

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Credit Card ComparisonCredit Card Comparison

There are many Credit Card options one can find in the market in today's faster growing world financial market. Comparison on having a credit card can be made by considering following points:

· Standard Interest Rates · Interest Free Introductory Offer · Various Kind of Rewards · Cash Back Policy

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320

Lecture 2 Lecture 2

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321

SBI Home Loans SBI Home Loans

"THE MOST PREFERRED HOME LOAN PROVIDER" voted in AWAAZ Consumer Awards along with the MOST PREFERRED BANK AWARD in a survey conducted by TV 18 in association with AC Nielsen-ORG Marg in 21 cities across India.

SBI HOME LOANS now offers Interest Rates concessions on GREEN HOMES in accordance with SBI's commitment to Environment protection.

SBI Home Loans come to you on the solid foundation of trust and transparency built in the tradition of State Bank of India.

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322

Best Practices followed in Best Practices followed in SBISBI

People dealing with you- End to End service by Permanent employees of SBI

who are accountable to you. Place-

SBI branch of your choice will service your loan account. You can always meet our employees face to face.

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323

Price Complete transparency. Interest charged on the daily reducing balance.

Prepayment charges No penalty for prepayments made, out of bonafide

savings or windfall gains for which evidence is produced.

No hidden costs Transparency

Complete transparency. All the features of our product, including interest rates, are in the public domain.

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‘‘SBI-Flexi’ Home LoansSBI-Flexi’ Home LoansA customized product designed to enable borrowers to hedge their Home Loan against unfavourable movement in interest rates. The product gives you a one time irrevocable option to choose one of the three customized combinations of fixed and floating interest rates and also to choose the order in which the fixed and floating rate will be availed.

Minimum Loan Amount: Rs.5 lacs

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Lecture 3Lecture 3

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326

‘‘SBI-Maxgain’ Home LoansSBI-Maxgain’ Home LoansAn innovative and customer-friendly product to enable you to earn optimal yield on your savings and minimize interest burden on Home Loans, with no extra cost.

The loan is granted as an Overdraft facility with the added flexibility for you to operate your Home Loan Account like your SB or Current Account.

The product serves to minimize your interest cost by enabling you to park your surplus funds in ‘SBI-Maxgain’ (with the benefit to withdraw the surplus funds whenever you require), specially in the wake of low yields from other deposit/ investment avenues.Minimum Loan Amount: Rs.5 lacs

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327

‘‘SBI-OPTIMA’ ADDITIONAL HOME LOANSSBI-OPTIMA’ ADDITIONAL HOME LOANS‘SBI-HOMELINE’ SPECIAL PERSONAL LOANS‘SBI-HOMELINE’ SPECIAL PERSONAL LOANS

Innovative and value added products extended to existing Home loan borrowers with a satisfactory repayment record of 3 years and whose loan is Standard Asset, with a view to reinforce the customer loyalty and to maintain long term relationship with the borrowers.

Purpose ‘SBI-Optima’ Additional Home Loans - to meet expenditure towards

major repair, renovation, addition to their house/flat, purchase of furniture, fixtures and consumer durables

‘SBI-Homeline’ Special Personal Loans - General purpose loan to meet expenditure to meet forseen/unforeseen contingencies

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328

‘‘SBI-Freedom’ Home LoansSBI-Freedom’ Home Loans A revolutionary product designed for customers who are on the look out

for a source of finance for a property they want to invest in without mortgaging the same. All you have to do is pledge any financial security that you have and you will get a Home Loan for your dream home.

A must-take for those who do not want to pay stamp duty for mortgage of their property or go through the hassles of creation of mortgage.

You also have an option to take the loan by way of mortgage of the property and pledge financial securities in lieu of margin money.

Repayment is highly customized, giving you the option to repay through regular EMIs or through maturity proceeds of the securities pledged.

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‘‘PRASHASAN PLUS’, ‘TEACHER PRASHASAN PLUS’, ‘TEACHER PLUS’ AND ‘OIL PLUS’PLUS’ AND ‘OIL PLUS’

The above ‘ plus’ schemes offer concessional interest rate of 0.25% below the applicable interest rates on Home Loans to niche client groups like Government Employees, Teachers, employees of public sector oil companies etc.

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‘‘SBI-Realty’ Home LoansSBI-Realty’ Home LoansA unique product if you are on the look out for a loan to purchase a plot of land for house construction. The loan is available for a maximum amount of Rs.1 crore* and with a comfortable repayment period of upto 25 years.

You are also eligible to avail another Housing Loan for construction of house on the plot financed above with the benefit of running both the loans concurrently.

(House construction should commence within 2 years from the date of availment of ‘SBI-Realty’ Housing Loan)

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Lecture 4 Lecture 4

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332

The Insurance IndustryThe Insurance Industry

Insurance is a hedging instrument used as a precautionary measure against future contingent losses. This instrument is used for managing the possible risks of the future.

This is a mode of financially insuring that if such a incident happens then the loss does not affect the present well-being of the person. Thus, through insurance, a person buys the future happiness and smooth living.

Though loss of life or injuries cannot be measured in financial terms, still in this materialistic world it is quantifiable which tries to compensate the potential future loss financially. Meaning of Insurance can be defined as the process of reimbursing or protecting a person from contingent risk of losses through financial means.

It may sound that the financial reimbursement by the insurance giving company come free of cost. But in real life, insurance is not a free commodity. The Insurance companies do charge a regular payment from the insurance customers (known as Insurance Premium) which are reimbursed, either in part or entirety, to the customers in cases of actual loss (for which the insurance has been bought).

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MARKETING –MIX FOR MARKETING –MIX FOR INSURANCE INSURANCE COMPANIESCOMPANIES

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Types of InsuranceTypes of InsuranceLife InsuranceIt insures the life of the person buying the Life Insurance Certificate. Once a Life Insurance is sold by a company then the company remains legally entitled to make payment to the beneficiary after the death of the policy holder.

Medical InsuranceThis is also known as mediclaim. Here, the policy holder is entitled to receive the amount spent for his health purposes from the insurance company.

General InsuranceThis insurance type involves insuring the risks associated with the general life such as automobiles, business related, natural incidents, commercial and residential properties, etc.

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Types of InsuranceTypes of Insurance Life Insurance:

More than 80% of the life insurance business is from Endowment Assurance (Participating), and Money Back (Participating products.The life insurance policy describes the terms and conditions for accessing the insurance on life along with the premium particulars, benefits associated with it. The span of time for the life insurances generally have a long period of maturity. If the insured person dies within the given time frame then the insurer, that is the insurance company, would have to compensate the beneficiary of the policy holder with the assured sum (as mentioned in the Insurance Policy).

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Contd.Contd. General Insurance:

This policy encompasses a wide array of policies ranging from residential property risks to commercial property risks, policies associated with the risk of the crops, automobile related risks, etc. The different policies under this extensive arena describes all the terms& conditions, premium structure and benefits related with this insurance scheme.

Fire and Miscellaneous insurance businesses are predominant. Motor Vehicle insurance is compulsory.

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Contd.Contd. Medical Insurance Policy

The medical Insurance Policy describes the terms and conditions associated with the mediclaim contracts. These policies are meant for insuring the health of the policy holder through repayment of the costings associated with the health of a person. Medical insurance companies generally reimburse the policy holder all his expenditures associated with his ill health.

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PRODUCTPRODUCT

In India, the Life Insurance Corporation of India (LIC) and the General Insurance Corporation (GIC) are the two leading companies offering insurance services to the users. Apart from offering life insurance policies, they also offer underwriting and consulting services.

When a person or an organisation buys an Insurance policy from the insurance company, he not only buys a policy, but along with it the assistance and advice of the agent, the prestige of the insurance company and the facilities of claims and compensation.

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Contd.Contd. It is natural that the users expect a reasonable return for their investment and

the insurance companies want to maximize their profitability. Hence, while deciding the product portfolio or the product-mix, the services or the schemes should be motivational. The Group Insurance scheme is required to be promoted, the Crop Insurance is required to be expanded and the new schemes and policies for the villagers or the rural population are to be included.

The Life Insurance Corporation has intensified efforts to promote urban

savings, but as far as rural savings are concerned, it is not that impressive. The introduction of Rural Career Agents Scheme has been found instrumental in inducing the rural prospects but the process is at infant stage and requires more professional excellence. The policy makers are required to activate the efforts. It would be prudent that the LIC is allowed to pursue a policy of direct investment for rural development.

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New productsNew products New products have been launched by life insurers. These include

linked-products. Insurance products from the new insurance companies now give a lot more options to customers. New insurance products are more transparent, flexible & customized to the need of different types of individuals. "Free-look" period of 10 days where customer has the option of returning the policy within 10 days if it does not meet his requirements. Loading of riders to basic range of products & thus providing lots of flexibility to the customers are few of the examples.

Insurance Companies are now providing information about their performance on a regular interval to bring transparency in declaring bonuses.

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ExamplesExamples ICICI Prudential has launched the unit-linked variant of its regular policy for children, SmartKid. It

provides three scheme options: Maximiser, which has a skew towards equities; Protector, which is biased towards debt; and Balancer, a blend of the Maximiser and Protector. Withdrawals can be made after five policy years; a total of five withdrawals can be made over the policy term. On the death of the parent, the sum assured is paid out immediately; payment of all future premiums is waived and the policy benefits remain in force.

OM Kotak Mahindra Life has launched an investment-cum-protection plan - the Kotak Safe Investment Plan -- that offers safety of capital while permitting the policyholder to benefit from investment opportunities in the equity, debt and money markets. This unit-linked insurance plan is unique in that the various funds give the policyholder access to growth markets while the plan guarantees the sum assured - on maturity or death — regardless of the performance of the funds.

ING Vysya Life has launched "conquering life critical illness plan", a total protection plan combining a term life cover and a unique critical illness benefit. It plan covers the basic need for protection and also provides for cover against 10 major critical illnesses.

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Contd.Contd. ICICI Prudential has launched the unit-linked variant of its regular policy for children, SmartKid. It

provides three scheme options: Maximiser, which has a skew towards equities; Protector, which is biased towards debt; and Balancer, a blend of the Maximiser and Protector. Withdrawals can be made after five policy years; a total of five withdrawals can be made over the policy term. On the death of the parent, the sum assured is paid out immediately; payment of all future premiums is waived and the policy benefits remain in force.

OM Kotak Mahindra Life has launched an investment-cum-protection plan - the Kotak Safe Investment Plan -- that offers safety of capital while permitting the policyholder to benefit from investment opportunities in the equity, debt and money markets. This unit-linked insurance plan is unique in that the various funds give the policyholder access to growth markets while the plan guarantees the sum assured - on maturity or death — regardless of the performance of the funds.

ING Vysya Life has launched "conquering life critical illness plan", a total protection plan combining a term life cover and a unique critical illness benefit. It plan covers the basic need for protection and also provides for cover against 10 major critical illnesses.

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Contd.Contd. ICICI Bank has decided to offer `Life Time Pension Triple Advantage' exclusively designed life

insurance product from ICICI Prudential Life Insurance to its high net-worth credit cardholders across the country. The product is a flexible unit-linked pension plan gives the customers the advantage of reducing their tax burden along with safeguarding their post-retirement years. Besides the tax advantage, the product also offers to provide the cardholders regular pension, guaranteed for life.

TATA AIG Life Insurance Co Ltd has launched `Nirvana', a pension plan for individuals. With a minimum cover of Rs 50,000, this policy is available for anyone between 18 and 55 years of age with the flexibility to retire between 50 and 65 years. The `Nirvana' policyholder has to pay premiums each year till retirement, when he/she gets a maximum of 25 per cent of the sum accumulated. This pension plan also offers a guaranteed addition of 10 per cent of the sum assured, which will be payable either on death or on survival at the time of retirement, provided the policy has been in force for 10 years.

Aviva Life Insurance has also launched two individual products - PensionPlus and Secure Life. Aviva is the fifth private insurance player to introduce a pension product. Others include-ICICI Prudential Life, HDFC Standard Life, OM Kotak Mahindra Life and Tata AIG Life.

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Contd.Contd. Life Insurance Corporation of India has launched its first co-branded

bancassurance product - Corp Jeevan Raksha, a group insurance scheme on the life of deposit holders of Corporation Bank. This scheme is available to all personal account holders of Corporation Bank including those having fixed deposits, savings account and current account provided they are between 18 to 55 years of age.

Those customers of Corporation Bank who opt for this scheme will be eligible for a life insurance cover of Rs 1 lakh in case of natural death & Rs 2 lakh for death by accident. In the absence of any bancassurance norms, Corpbank's role will be that of a facilitator for payment of premium to LIC and for payment of claims to deposit holders. The admission of claims will however be subject to clearance by LIC.

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PRICINGPRICING In the insurance business the pricing decisions are concerned with:

i) The premium charged against the policies,ii) Interest charged for defaulting the payment of premium and credit facility, andiii) Commission charged for underwriting and consultancy activities.

With a view of influencing the target market or prospects the formulation of pricing strategy becomes significant. In a developing country like India where the disposable income in the hands of prospects is low, the pricing decision also governs the transformation of potential policyholders into actual policyholders.

The strategies may be high or low pricing keeping in view the level or standard of customers or the policyholders.

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Factors for determining the Factors for determining the Premiumum under a life insurance Premiumum under a life insurance

• Mortality(deaths in a particular area):When deciding upon the pricing strategy the average rate of mortality is one of the main considerations. In a country like South Africa the threat to life is very important as it is played by host of diseases.

• Expenses:The cost of processing, commission to agents, reinsurance companies as well as registration are all incorporated into the cost of installments and premium sum and forms the integral part of the pricing strategy.

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• Interest:The rate of interest is one of the major factors which determines people’s willingness to invest in insurance. People would not be willing to put their funds to invest in insurance business if the interest rates provided by the banks or other financial instruments are much greater than the perceived returns from the insurance premiums. The premium rates are revised if there are any significant changes in any of these factors.

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Lecture 5Lecture 5

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PLACEPLACE

This component of the marketing mix is related to two important facets – i) Managing the insurance personnel, and ii) Locating a branch. The management of agents and insurance personnel is found significant with the viewpoint of maintaining the norms for offering the services. This is also to process the services to the end user in such a way that a gap between the services- promised and services – offered is bridged over. In a majority of the service generating organizations, such a gap is found existent which has been instrumental in making worse the image problem.

The transformation of potential policyholders to the actual policyholders is a difficult task that depends upon the professional excellence of the personnel. The agents and the rural career agents acting as a link, lack professionalism. The front-line staff and the branch managers also are found not assigning due weightage to the degeneration process. The insurance personnel if not managed properly would make all efforts insensitive. Even if the policy makers make provision for the quality upgradation, the promised services hardly reach to the end users.

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Contd.Contd. It is also essential that they have rural orientation and are well aware of the lifestyles of the

prospects or users. They are required to be given adequate incentives to show their excellence. While recruiting agents, the branch managers need to prefer local persons and provide them training and conduct seminars. In addition to the agents, the front-line staff also needs an intensive training programme to focus mainly on behavioral management.

Another important dimension to the Place Mix is related to the location of the insurance branches. While locating branches, the branch manager needs to consider a number of factors, such as smooth accessibility, availability of infrastructural facilities and the management of branch offices and premises. In addition it is also significant to provide safety measures and also factors like office furnishing, civic amenities and facilities, parking facilities and interior office decoration should be given proper attention.

Thus the place management of insurance branch offices needs a new vision, distinct approach and an innovative style. This is essential to make the work place conducive, attractive and proactive for the generation of efficiency among employees. The branch managers need professional excellence to make place decisions productive.

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PROMOTIONPROMOTION The insurance services depend on effective promotional measures. In a

country like India, the rate of illiteracy is very high and the rural economy has dominance in the national economy. It is essential to have both personal and impersonal promotion strategies. In promoting insurance business, the agents and the rural career agents play an important role. Due attention should be given in selecting the promotional tools for agents and rural career agents and even for the branch managers and front line staff. They also have to be given proper training in order to create impulse buying.

Advertising and Publicity, organisation of conferences and seminars, incentive to policyholders are impersonal communication. Arranging Kirtans, exhibitions, participation in fairs and festivals, rural wall paintings and publicity drive through the mobile publicity van units would be effective in creating the impulse buying and the rural prospects would be easily transformed into actual policyholders.

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PEOPLEPEOPLE Understanding the customer better allows to design

appropriate products. Being a service industry which involves a high level of people interaction, it is very important to use this resource efficiently in order to satisfy customers. Training, development and strong relationships with intermediaries are the key areas to be kept under consideration. Training the employees, use of IT for efficiency, both at the staff and agent level, is one of the important areas to look into.

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PROCESSPROCESS The process should be customer friendly in insurance industry. The

speed and accuracy of payment is of great importance. The processing method should be easy and convenient to the customers. Installment schemes should be streamlined to cater to the ever growing demands of the customers. IT & Data Warehousing will smoothen the process flow.

IT will help in servicing large no. of customers efficiently and bring down overheads. Technology can either complement or supplement the channels of distribution cost effectively. It can also help to improve customer service levels. The use of data warehousing management and mining will help to find out the profitability and potential of various customers product segments.

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PHYSICAL DISTRIBUTIONPHYSICAL DISTRIBUTION Distribution is a key determinant of success. Building a distribution network is

very expensive and time consuming. If the insurers are willing to take advantage of India’s large population and reach a profitable mass of customers, then new distribution avenues and alliances will be necessary.

Initially insurance was looked upon as a complex product with a high advice and service component. Buyers prefer a face-to-face interaction and they place a high premium on brand names and reliability. As the awareness increases, the product becomes simpler and they become off-the-shelf commodity products. Today, various intermediaries, not necessarily insurance companies, are selling insurance. For example, in UK, retailer like Marks & Spencer sells insurance products.

The financial services industries have successfully used remote distribution channels such as telephone or internet so as to reach more customers, avoid intermediaries, bring down overheads and increase profitability. A good example is UK insurer Direct Line. It relied on telephone sales and low pricing. Today, it is one of the largest motor insurance operator.

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Contd.Contd. Technology will not replace a distribution network though it will offer advantages like

better customer service. Finance companies and banks can emerge as an attractive distribution channel for insurance in India. In Netherlands, financial services firms provide an entire range of products including bank accounts, motor, home and life insurance and pensions. In France, half of the life insurance sales are made through banks.

In India also, banks hope to maximize expensive existing networks by selling a range of products. It is anticipated that rather than formal ownership arrangements, a loose network of alliance between insurers and banks will emerge, popularly known as bancassurance.

Another innovative distribution channel that could be used are the non-financial organisations. For an example, insurance for consumer items like fridge and TV can be offered at the point of sale. This increases the likelihood of insurance sales. Alliances with manufacturers or retailers of consumer goods will be possible and insurance can be one of the various incentives offered.

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Insurance PremiumInsurance Premium

Insurance Premium is the payment made by the policy holder to the insurance company on a regular time span. This payment has to be made by the insured person till the maturity of the insurance. Insurance Premium may vary from company to company along with the coverage limit. Thus, while selecting an insurance policy one should be very careful and should compare all the possible options through online website services. The customers are advised to compare the quotes offered by the different insurance companies and select from the wide variety of options available to them.

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Contd.Contd. Insurance brokers play an important role in finding the appropriate

insurance for the customer by assessing and titrating the different insurances available in the market. The brokers or agents calculate the premiums on the basis of the requirement particulars of the customer. The lowest quote offered by the insurance company is considered to be the most suitable one for the customer.

The above mentioned work of insurance premium calculation now-a-days are also done by the specialized websites doing the searching, comparing and calculating the insurance premium on behalf of the customers.

The insurance premium generally increases with the increase in the risk perception of the company about that person.

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Contd.Contd. In case of medical insurance or mediclaim, the cost of premium is

more for the smokers than the non-smokers because the insurance company considers that the smoker possesses a greater risk of health hazard than the non-smoker. Hence the cost of premium is directly proportional to the risk associated.

In case of the car insurance, the cost of premium is generally higher than a older one because the insurance company considers that the younger driver is more prone to accident than the latter.

In case of Life Insurance, the insurance company considers the aged person to be more prone to death. Hence it charges a higher premium than from him. But when it comes to a younger person seeking life insurance, then the premium charged from him is less. The reason behind it is that in normal conditions a younger person stands more chance in living a longer life span.

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Insurance BenefitsInsurance Benefits

Insurance Benefits encompass the facilities associated with buying of insurances. Insurance is mainly a instrument used by consumers for hedging the future contingent risks related with life, health and non-life general issues. Insurance benefits help the policy holder or beneficiary in combating with the losses or hazards associated with him/her.

The policy holder buys the insurance to hedge against the future perceived losses by paying a regular amount to he insurance company known as the Premium. Insurance companies ensure financial reimbursement of the insured losses to the policy holders or his/her beneficiary. This is the most coveted Insurance Benefits.

But with time, more and more insurance companies have cropped up and consequently the competition among them has increased. Every company is trying to woo all the customers into its fold and in a way offering more and more innovative Insurance Benefits to the consumers.

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Contd.Contd. Affordability of Insurance

The foremost insurance benefit in todays world is the low insurance rate and premium one has to pay. While choosing a insurance policy, every customer looks at this rate first and then to the other associated benefits. The lesser the insurance rate, the more affordable the insurance becomes. Thus, among all the insurance benefits, low insurance rate and premium is the most coveted one.

Accessibility Of InsuranceThe easy accessibility of a insurance is the next most coveted Insurance Benefits that the customers look for. The online access to insurance companies and their policies has made them more lucrative to the customers. Now-a-days, customers can search, compare and select their insurance coverage through the click of a mouse from their own residence. This has been observed that through online services, the insurance companies have been able to reach more number of customers and consequently their customer base has also mopped up significantly.

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Contd.Contd. Some of the other Insurance Benefits are :-

Basic benefits of the insurance policy. That is, the person enrolling for the policy is entitled to receive the financial compensation in case of actual occurrence of the loss/hazard/damage.

Optional Insurance Benefits are also given by the companies to their policy holders in order to entice them to access their insurance package. These optional benefits include

health and dental insurance of the family, life insurance of the spouse and the child,

accidental death policy for the policy holder in addition to the actual insurance for which he/she has enrolled for,

long term and short term insurance plans against disability of the policy holder unit linked insurance schemes meant for appreciation of the accumulated capital

during the life span of the same, managed by an experienced and well-learned fund manager

Pre-tax insurance benefitsThese benefits are an added advantage to the insurance holders because they help them in saving a large portion of their tax payment. When the tax-payment gets curtailed then consequently their disposable income increases leading to more enjoyment out of a secured life.

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Insurance PolicyInsurance Policy - -characteristicscharacteristics Type of Insurance, namely, life or non-life or medical Regular premium amounts needed to be paid by the insurance

policy holder Purpose of the insurance Assured amount of money to be reimbursed by the insurance

company in case of completion of the maturity period or in case of casualty or hazard or certain loss

Parameters issued by the specific applications Coverage limit of the scheme The ways and requirements to be fulfilled for initiation of the scheme Suitability criterion

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Lecture 6 Lecture 6

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BANK MARKETING Provides services Aimed to satisfy customer’s needs and

wants Needs and wants may be non financial

in nature Competitive element, efficiency and

effectiveness Organizational objectives are still the

driving forceCommercial objective to make

profitSocial Objectives

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Essentials for a Banks SuccessCannot exist without customerCreate, win and keep customersOrganizational design should be

oriented to the customerDeliver total satisfaction to the

customer Customer satisfaction is affected by

the performance of all the personnel of the bank.

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Wining companies are those that can meet customer needs economically and conveniently and with effective communication

Services Marketing Mix – 7P’sProduct, Price, Place, Promotion, People, Physical evidence, Process

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Marketing strategy of ICICIMarketing strategy of ICICI

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IntroductionIntroduction

India’s second largest bank 614 branches and extension counters 2200 ATM’S Biggest private sector bank in India Most valuable bank in India in terms of market capitalization Described by the competitors and industry expert in one word –

“Aggressive”

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Firsts in the IndustryFirsts in the Industry

Introduced concept of branding in the Indian banking industry Process, People and Physical evidence – brought to life by ICICI Product Innovation – Put the ‘customer first’ in the true sense Cash on the celebrity fever – Introduced the concept of brand ambassadors Introduction of DSA’s and DST’s Unleashed the power of the internet – introduced the concept of net banking

and e-mail marketing First bank to focus on retail banking as a driver for growth Comprehensive data centre availability & data protection solutions

In effect – changed and shaped the Indian Banking Industry

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Focus areas of marketing effortFocus areas of marketing effort Target marketing and customer acquisition Share of wallet Channel strategy and management Relationship management and database marketing Product development & innovation

Credit approval

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Basis for segmentationBasis for segmentation

Occupation Different products for different occupational segment identified Income Minimum balance serves as a income segment barrier Geographical Concentrated on Tier 1 & Tier 2 Cities trying to extend reach Age Different products like student account

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Nature of banking in IndiaNature of banking in India

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Banking in India was focused on the upper income group

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TargetingTargeting

Differentiated Marketing Strategy

Tailors its marketing campaigns to meet the needs of its target prospects

Creates differentiated product offering for different segment Use of technology in tracking customer segment

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Targeting Targeting

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PositioningPositioning Core proposition – ‘Hum hain na’ – trust, credibility, total financial solution

provider (brought about through its cross selling effort) Modernization – process and physical evidence – technology as the backbone

and accelerator Caveat ICICI bank is absolute appalling. Their slogan of “Hum hain na” is very apt, only

that it applies to their customers (i.e. us poor mortals). Hum hain na &&& to bank with ICICI.

ICICI bank the most amazing bank with a punch line as “Hum Hain Na”, i think they mean ” Hum hain - -na (not available)”

(Earlier I was with ICICI) I must say they rock; very good bank with great customer support. […]

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Need identificationNeed identification

Adapting international practices to the local context Information system warehouse Product development department – continuously studies market and

analyses competitive landscape

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Lecture 7Lecture 7

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all different product lines a company offers to its customers.

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Product PortfolioProduct Portfolio

ICICI Bank

Personal BankingDepositsLoansInvestmentsCardsInsuranceDemat ServicesOnline Services

NRI BankingMoney TransferBank AccountsInvestmentsProperty SolutionsInsuranceLoans

Corporate BankingCorporate Net BankingCash ManagementTrade ServicesTradewayForex OnlineSME Services

http://icicibank.com/pfsuser/icicibank/depositproducts/bank.htm

http://icicibank.com/pfsuser/loans/loans.htm

http://icicibank.com/Pfsuser/icicibank/investments/inv_index.htm

http://icicibank.com/pfsuser/cards/cards.htm

http://icicibank.com/pfsuser/icicibank/insurance/insurance.htm

http://icicibank.com/pfsuser/demat/demathome.htm

http://icicibank.com/pfsuser/demat/demathome.htm

http://icicibank.com/pfsuser/icicibank/online/online_index.htm

http://icicibank.com/pfsuser/icicibank/ibank-nri/nrinewversion/m2i.htm

http://icicibank.com/pfsuser/icicibank/ibank-nri/nrinewversion/Accounts.htm

http://icicibank.com/pfsuser/icicibank/ibank-nri/nrinewversion/investments.htm

http://icicibank.com/Pfsuser/icicibank/ibank-nri/nrinewversion/home_loans.htm

http://icicibank.com/Pfsuser/icicibank/ibank-nri/nrinewversion/Insurance.htm

http://icicibank.com/Pfsuser/icicibank/ibank-nri/nrinewversion/loans_fd.htm

https://cib.icicibank.com/

https://ebusiness.icicibank.com/imarkets/login/cms_login.asp

http://ebusiness.icicibank.com/imarkets/trade_portal/index.asp

http://ebusiness.icicibank.com/imarkets/login/tradeway.asp

http://ebusiness.icicibank.com/ca/fx_login.asp?partid=4&choice=FX

http://ebusiness.icicibank.com/ca/fx_login.asp?partid=4&choice=FX

http://www.sme.icicibank.com/

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Creating conceptsCreating concepts

Cash Back

BalanceTransfer

Loans onCredit CardsCo-Branding

CrossSelling

PRODUCTS

CONCEPTS

Selling Gold

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Offering Offering

ATM Network 7-Day Banking Telebanking iConnect-Internet Banking 24-Hour ATMs Photo card And lots more

http://www.utibank.com/atm/atmlocate.asp

http://www.utibank.com/telebank/telebanking.html

https://www.utibank.co.in/BANKAWAY?IWQRYTASKOBJNAME=bay_sign_on&BAY_BANKID=211

https://www.utibank.co.in/BANKAWAY?IWQRYTASKOBJNAME=bay_sign_on&BAY_BANKID=211

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PRODUCT WIDTH AND DEPTHPRODUCT WIDTH AND DEPTH

Widthnumber of product lines a company is offering. The product

width could be a narrow one or a wide one depending from bank to bank. A wide mix encourages more sales since the banks are able to diversify and provide more to their customers and they also appeal to a larger target market.

Depthnumber of product items in each product line. Banks with more schemes and services have more depths than those offering only a few.

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PRODUCT WIDTH AND DEPTHPRODUCT WIDTH AND DEPTH

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PRODUCT LEVELSPRODUCT LEVELS

CoreProduct

BasicProduct

Expected Product Augmented Product Potential Product

The basic necessity to use banking services in order to handle finance more efficiently

Safety of depositsLoanable funds etc.

Timely serviceLong banking hoursLow interest rates

Goods waiting roomsExtensive ATM networkPromotional Discounts

Mobile and internet BankingNew Schemes tailored for specific customers

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PRICE MIX :PRICE MIX :The price mix in the banking The price mix in the banking sector is nothing but the interest rates charged by sector is nothing but the interest rates charged by the different banks.the different banks.

ATM Card Issue Free – 2 ATM cards issued free if it joint account

Add – on Card RS. 100 – Beyond 2 cards

Duplicate Card Rs. 100

Other general chargesCurrent Account Savings Account

Transaction Charges NIL NIL

Charges for issue of Cheques book NIL NIL

Issue of duplicate statement Rs. 25 per page Rs. 25 per page

Account closure Rs.100 Rs.100

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inspite of the constraints in the pricing policy due inspite of the constraints in the pricing policy due to the RBI directives there are mainly three types to the RBI directives there are mainly three types of pricing methods adopted by banks. of pricing methods adopted by banks.

Value pricing: Going Rate pricing Mark up pricing:

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PricingPricing

Penetrative pricing aimed at achieving large market share Philosophy of profit through volume Effort to drive out competition Price leader in retail banking product Aggressive pricing facilitated through low cost of fund acquisition

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PricingPricing

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Duration Interest Rates (% p.a)

SBIInterest Rates (% p.a)

ICICI

7 days to 14 days 3.50 3.75

15 days & upto 45 days 4.75 4.5

46 days and upto 179 days 5.25 6.00

180 days to less than 1 year 6.25 6.30

1 year to less than 3 years 6.75 7.71

3 years to less than 5 years 7.00 8.32

5 years and up to 10 years 7.25 10.09

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PLACE MIX :PLACE MIX :the location analysis for the location analysis for banks branchesbanks branches The trade area Population characteristics Commercial structure Industrial structure Banking structure Proximity to other convenient outlets Real estate ratesProximity to public transportation Drawing time Location of competition Visibility Access

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Distribution StrategyDistribution Strategy

Cross selling of products as a major area of focus Creation of concept of DSA (Direct Selling Agent) Creation of concept of DST (Direct Selling Team) Effort on the part of the bank to reach the customer rather than

waiting for the customer Use of internet, mobile, ATM’s and other technological device to

reach and serve the customers

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Channel Strategy Channel Strategy

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Channels for banking productsIntangibilityInseparabilityVariabilityPerishabilityClient relationship

BranchesOther channels

Tele-bankingATMsComputerizationPlastic CardsVirtual branches and automated video banking

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Intermediaries in banking services

DSAAutomobile DealersMerchant establishments

Physical distributionTransportationWarehousingInventory

Tasks of physical distributionForecastingOrder processingInventory management

StorageProtective

packagingTransportation

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Promotion Mix Promotion Mix Two of the fastest growing Two of the fastest growing modern tools of communicating with the customers are:modern tools of communicating with the customers are:

Internet BankingInternet BankingMobile BankingMobile Banking SMS services

Finalizing the Budget Selecting a suitable vehicle Making possible creativity Testing the Effectiveness Instrumentality of Branch Managers

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Different Ways of PromotionDifferent Ways of Promotion

Public Relations: Personal Selling: Sales Promotion: Word – of – mouth Promotion: Telemarketing: Internet:

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PromotionStrategy

Corporate Branding Product Branding

397Hum Hain Na

Providing experiencesto the customer which customers connect with

Customer’s Mind & Heart

Challenging Conventions…The Brand ICICI

OutcomesAttitudes

PreferenceICICI

Interactions

(Image formedin the mind and heart of

the customer )

CustomerInterface

Loyalty

Attachment

BusinessProcesses

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Product PromotionProduct Promotion

Aimed at generating sales Communicates product features and benefits Mainly through print media Point of purchase promotion tools for different products to reach the

relevant customer segment

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AdvertisingAdvertising

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A man strolls down a beach, "Zindagi naam hai, mushkil ko aasaan banaane ka. Zindagi naam hai zindagi ko aasaan baane ka."

Cut to a house, a man addresses the members, "I am Ajay Sharma from ICICI. Ma'am your home loan has been sanctioned."

Amitabh Bacchan turns to face the camera, "Bas. Ek bharosemand saathi hona chahiye."

MVO: "Saathi jo zindagi ko aasan banaaye." Super: 'ICICI Group. Saral. Surakshit. Samajhdar.'

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An old woman tells her daughter about their neighbour's plans for going to Haridvar

"Ab is umar mein kya jaayenge? You want to ka matlab nahin you have to", continues the mother.

While the young woman, with her ICICI credit card, books tickets for her, online.

As the older woman takes a peek at the screen, she is pleasantly surprised.

The site downloads and the super reads, 'Haridwar in a week.' As the daughter tries to convince her...

...the MVO adds "ICICI Credit cards. The power to give your loved ones what they really, really want."

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A couple enter ICICI Bank and are served coffee as they wait to open an account.

Super: How long does it take to open an account with ICICI Bank?

The man takes a swig from his cup...Super: Before your coffee goes cold. The executive smiles at their...

... disbelief and hands over the documents. VO: Have you opened an ICICI Bank account as yet?

403

PeoplePeople

employees that are the service providers. In a banking sector, the service provider plays a very important and determinant role in rendering the customers a satisfactory and a good service. It is extremely essential that the service provider understand what his customers expect from him. In the banking sector, the customer needs to be guided in a lot of matters, which is possible only with the help of the service provider.

The position in the eyes of the customer will be perceived by appearance, attitude and behavior of the customer contact employees. Not only does the customer contact employee influence the customer’s perception but also the customer base of the organization does so.

404

Process MixProcess Mixthe overall procedure involved in using the services offered by the the overall procedure involved in using the services offered by the bank. It is very necessary that the process is very customer friendly. bank. It is very necessary that the process is very customer friendly.

Let’s take for example the process for application for a car loan.

Now this mainly involves 3 things. Producing proper documents Filling up of application form Paying for the initial down payment.

405

Public RelationsPublic Relations

Purpose - To deliver communication that is uniform in its message and yet customised for specific target audiences

Media relations Press conferences Press Releases 1-1 interviews

Investor relations Analyst relations Government relations

Hum Hain Na

406

Outdoor Activities Outdoor Activities

‘Need to be seen…everywhere!!’

Events at corporate campus Promotional material at channel partner outlets Billboards Signages Kiosks in residential and commercial complexes

Hum Hain Na

407

Other Initiatives Other Initiatives In-film promotions - Baghban Co-Branding Initiatives

Alliance with Amway India for launch of the international credit card. The card will enable Amway distributors to purchase Amway products and earn and redeem reward points

Indian Railways Catering And Tourism Development Corporation, in conjunction with ICICI Bank, announced the launch of mobile payments and ticketing system, offering IRCTC customers to book railway tickets via SMS and make payments through their ICICI Bank accounts

408

Other Initiatives Other Initiatives

Cross brand associations - acquiring databases of high net worth clientele of lifestyle products : Tie-up with ‘Woven Hues’

Young Stars Account – Promotion through tie-up with Cartoon Network, and in-series promotion through Tom & Jerry

Seminars in partnership with media channels

409

PeoplePeople

Orientation towards customer service Division of SME, Personal Banking

and other functions at the branch level Effort towards providing sophisticated

and modern image of the bank through its people

Hum Hain Na

410

ProcessProcess

Use of technology for both internal and external processed Process are system driven and independent of the people handling

it Standardization of service across the branches Extensive investment in software solutions for process

systemization

Hum Hain Na

411

Physical EvidencePhysical Evidence

Ambience in the branch which projects modernization and sophistication

Consistency across branches in construction ambience etc.

Hum Hain Na

412

PHYSICAL EVIDENCE PHYSICAL EVIDENCE is the overall layout of is the overall layout of the place i.e. how the entire bank has been designed. Physical the place i.e. how the entire bank has been designed. Physical evidence refers to all those factors that help make the process much evidence refers to all those factors that help make the process much easier and smoother.easier and smoother.

Like HSBC is planning to introduce uniform system for its staff all over india ,this will help customers to easily identify the office staff and this will also add to the uniformity among the office staff

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Recommendation Recommendation

Extensive use of biometric chips Dresscode system like HSBC Collaboration with NGOs to explore remote areas Use of contingency human capital during lunch

hours Door to door service for collection of cheques &

cash for deposits More use of electronic clearance system

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Lecture 8Lecture 8

Airtel-STP

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IntroductionIntroduction Owner- Sunil Bharti Mittal. Bharti Airtel formerly known as Bharti Tele- Ventures

Limited (BTVL). India’s largest cellular service provider. Known for its

service. First cellular operator to set up cellular showrooms

‘Airtel Connect’. First cellular company to install a second mobile

switching centre. First cellular service to provide roaming services and

other value added services. Efficient customer care service. E-commerce portal. Introduced and involves in broadband services, long

distance services, and internet services.

416

Market Share of Cellular Service Provider 30.00% Airtel 25.00% Reliance 20.00% Vodafone BSNL market share(%) 15.00% TATA 10.00% Idea 5.00% Aircel 0.00% Spice 1 MTNL service provider BPL

417

SegmentationSegmentation

► On the basis of Geography -divided Indian market in telecom circles. -Subdivided States into category A, B and C.

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TargetingTargeting

► Earlier elite class above age group of 25 years.

► Corporate people and business men. ► Again targeted youth by introducing

YOUTOPIA plan. ► Targeted women and senior citizens by

introducing post paid plans.

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Positioning Positioning

► Tagline- “power to keep in touch”.► Positioned in premium category aimed at elite

class of society. ► Perception of aspirational and lifestyle brand.► Airtel decided that the brand should always

connote leadership - be it in network, innovations, offerings or services

► Sponsored games like Golf.

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RepositioningRepositioning

► Tagline- “touch tomorrow”. ► Started capturing mass market. ► New look and the feel of the brand logo

indicated the core values of the brand i.e. leadership, performance and dynamism.

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Again Repositioning Again Repositioning

► Tagline- “Live Every Moment”. ► Brand Ambassador - Sachin Tendulkar -

Shahrukh Khan - Kareena Kapoor. ► The advertisement which changed the whole

look of Airtel in the minds of Indian consumers was full with emotions and reactions, which one will experience in a lifetime.

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Again Repositioning Again Repositioning

► Tagline- “Express Yourself.” ► Changed its logo to give more energetic

and younger look. ► Advertisements in regional languages

with emotional touch. ► Advertisements were made to highlight

the capability of Airtel's network coverage.

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► In 2002, Airtel signed on music composer A. R Rehman and changed its tune to \"Live every moment.

► Used 360 degree marketing. e.g. organized Airtel Scholar Hunt with NDTV.

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MARKETING MIX -Product MARKETING MIX -Product • Airtel Pre-paid • Airtel Post-paid • Blackberry Wireless Handheld • Value Added Services (VAS) The different value added services provided by Caller line

24Hr recharge Facility Instant Balance Enquiry Call Hold, Call divert, Call wait identification & Multimedia messagingSMS based Information Service BVIMSR Airtel Live Portal service (MMS)

Hello Tunes Easy Post-paid Voice Mail Service Ring Tones Gifting of Ring Tones bill collection & GPRS • Business Hello Tunes Solutions BVIMSR

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Price Price

• Customer based pricing strategies.• Flexible pricing mechanism• Controlled by TRAI. BVIMSR

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Place Place

It has wide and extensive presence even in the remotest areas

Airtel Customer Care Touch Points Distributors like E.g. Paan shops,

grocery stores, chemists, outlet etc. BVIMSR

Outlets BVIMSR

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Promotion Promotion Large scale print and video advertising. Big celebrities like SRK and Sachin are roped in to

endorse the product In 2002 Airtel got its Signature tune from A.R. Rehman,

this signature tune is perhaps the most downloaded tune in India.

Provides innovations such as Bollywood movie premiers, music services such as ring back tones & many more. BVIMSR

\"Friendz\" pre-paid connection for youth,\" Ladies Special\" plan, Seniors plan.

Executives corporate plan(First to give prepaid in this category).

Special discounts in calling rates & sms services. Providing wallpapers and screensavers on website.

BVIMSR

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ConclusionConclusion

► Most successful brand in India with largest market share.

► Success is based on three pillars- connectivity, affordability and innovation. The core is connectivity, i.e. the network

► Doesn’t promote its product always by celebrities.

► Pre paid services are more expensive than post paid service.

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Questions

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430

QuestionsQuestions

1. Discuss the Marketing Mix Strategy of any one of the following-

ICICI

SBI Bank

2. Discuss the STP of :LICICICIAirtelBharti

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AssignmentsAssignments

1. Choose any two service provider in each of the following sectors and

compare their STP & Marketing Mix Strategy:

Credit Cards

Home Loans

Insurance

Banking

Telecom

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432



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UNIT - IV What is Global

Marketing Recent trends Principal driving force in

Global marketing of services

Key decisions in Global marketing

Service strategy Organising for global

marketing433

434

Lecture no


1 What is Global Marketing 6-9

2 Recent Trends 10- 18

3 Principal driving force 19- 23

4 Key decisions 24-32

5 Service Strategy 33-38



8 Organizing for Global Markets 49-52

FAQ’S, CASE STUDY & ASSIGNMENTS 53-59

LECTURE PLAN Unit- IV Sub: Marketing of ServicesAcademic Consultant: Riju Agarwal

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435

Lecture 1Lecture 1

What is Global Marketing?

How is it different from regular marketing?

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IntroductionIntroduction Marketing

Process of planning and executing the conception pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organization goals

Global Marketing Focuses resources

on global market opportunities and threats; the main difference is the scope of activities because global marketing occurs in markets outside the organization’s home country

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Reasons for Global MarketingReasons for Global Marketing

Growth Access to new markets Access to resources

SurvivalAgainst competitors with lower costs (due to

increased access to resources)

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Overview of MarketingOverview of Marketing One of the functional areas of a business

that is distinct from finance and operations Primary tools in marketing are product,

price, place, and promotion Marketing is an activity that comprises the

firm’s value chain Current trend is to involve marketers in all

value-related decisions – called boundaryless marketing

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Boundaryless MarketingBoundaryless Marketing Goal is to eliminate

communication barriers between marketing and other business functional areas

Properly implemented it ensures that a market orientation permeates all value creating activities

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Goal of MarketingGoal of Marketing

Surpass the competition at the task of creating perceived value for customers

The Guide line is the value equation –

Value = Benefits/Price (Money, Time, Effort, Etc.)

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Value Chain and Boundaryless Value Chain and Boundaryless MarketingMarketing

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Competitive AdvantageCompetitive Advantage

Success over competition in industry at value creation

Achieved by integrating and leveraging operations on a worldwide scale

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GlobalizationGlobalization

Globalization is the inexorable integration of markets, nation-states, and technologies to a degree never witnessed before - in a way that is enabling individuals, corporations, and nation-states to reach around the world farther, faster, deeper and cheaper than ever before, and in a way that is enabling the world to reach into individuals, corporations, and nation-states farther, faster, deeper, and cheaper than ever before. - Thomas Friedman

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Global IndustriesGlobal Industries An industry is global to the extent that a company’s

industry position in one country is interdependent with its industry position in another country

Indicators of globalization: Ratio of cross-border trade to total worldwide production Ratio of cross-border investment to total capital

investment Proportion of industry revenue generated by companies

that compete in key world regions

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Competitive Advantage, Competitive Advantage, Globalization and Global IndustriesGlobalization and Global Industries Focus

Concentration and attention on core business and competence

Nestle is focused: We are food and beverages. We are not running bicycle shops. Even in food we are not in all fields. There are certain areas we do not touch…..We have no soft drinks because I have said we will either buy Coca-Cola or we leave it alone. This is focus.

Helmut Maucher

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Global Marketing: What it is and Global Marketing: What it is and What it isn’tWhat it isn’t Strategy development comes down to two

main issues similar to single country marketingTarget marketMarketing Mix

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Global Marketing: What it is and Global Marketing: What it is and What it isn’tWhat it isn’t

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448

Global Marketing: What it is and Global Marketing: What it is and What it isn’tWhat it isn’t Global marketing does not mean doing

business in all of the 200-plus country markets

Global marketing does mean widening business horizons to encompass the world in scanning for opportunity and threat

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The Importance of Global The Importance of Global MarketingMarketing For US-based companies, 75% of sales

potential is outside the US.About 90% of Coca-Cola’s operating income

is generated outside the US. For Japanese companies, 85% of potential

is outside Japan. For German and EU companies, 94% of

potential is outside Germany.

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450

Management OrientationsManagement Orientations

Ethnocentric:Home country is

Superior, seesSimilarities in foreign

Countries

Regiocentric:Sees similarities and differences in a world

Region; is ethnocentric or polycentric in its view of

the rest of the world

Geocentric:World view, seesSimilarities and

Differences in homeAnd host countries

Polycentric: Each host country Is

Unique, sees differencesIn foreign countries

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451

Lecture 2Lecture 2

451

452

Recent TrendsRecent Trends Increasing globalization or internationalization of

markets Increasing investments between countries Increasing cooperation amongst trading nations

through GATT, now the WTO Growth of regional cooperation groups such as

EU, NAFTA

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453

Recent TrendsRecent Trends

Greater acceptance of free market system Eastern European countries, China, India,

Latin American countries Liberalizing their policies

Tremendous impact of media or internet on dissolving borders

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454


Pivotal role played by IMF, World Bank, and WTO in fostering growth internationally, particularly developing countries

Growth focus on countries such as China and IndiaHuge populations and a growing consuming

middle class

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455


New trend in international business is the outsourcing of services:Call centersHealth data management Software and IT servicesHealthcare and Banking - backendResearch and Development moving to lower cost

locations

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456456

Lecture 3

457

Forces Affecting Global Integration Forces Affecting Global Integration and Global Marketingand Global Marketing

GlobalIntegration

andGlobal

Marketing

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Global Integration ForcesGlobal Integration ForcesDriving ForcesDriving Forces Technology Culture Market Needs & wants Free Markets Economic Integration Peace Transportation and communication improvements Product development costs Quality Management Vision, Strategy and Action

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Global Integration ForcesGlobal Integration ForcesRestraining ForcesRestraining Forces Culture Market Differences Costs National Controls Nationalism Peace vs. War/ Stability Management Myopia Organizational culture Domestic Focus

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460

ChallengesChallenges Huge Foreign indebtedness Unstable governments Foreign-exchange problems Foreign entry and government bureaucracy Tariffs and other trade barriers Corruption E-commerce---doesn’t offer complete solutions Technological pirating High cost of product and communication

adaptations

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461

ChallengesChallenges Markets can present higher profit

opportunities than present markets. Markets can offer size but not profits. Company needs a larger customer base

for economies of scale. Present customers are needing service

and products as they go international.

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462

Global MarketingGlobal Marketing Marketing has become more complex. Increases in new products, product extensions,

high cost of distribution and shelf space. Expansion of retailer control and power,

changing media habits, overload of information, and array of communication choices.

Ultimate goal of programs Timing goals

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Global MarketingGlobal Marketing Denotes the use of advertising and marketing on a

global basis. Marketing is at the threshold of a new and exciting

era: e-business, e-commerce and e-marketing Business has two basic functions: marketing and

innovation (Drucker) New era of competition, demanding customers More stakeholders (customers, employees, media).

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464

Global MarketingGlobal Marketing Advantages, especially if the companies

emphasize selection, availability, quality, reliability and lower prices.

Economies of scale. Lower marketing and advertising costs in

planning and control. Lower advertising production costs.

Exploiting your best ideas on a worldwide basis.

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465

Lecture 4

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466

Key DecisionsKey Decisions Deciding to go abroad Deciding which markets Deciding how to enter markets Deciding on marketing programs Deciding on marketing organization

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467

Standardization versus Standardization versus AdaptationAdaptation Globalization (Standardization)

Developing standardized products marketed worldwide with a standardized marketing mix

Essence of mass marketing Global localization (Adaptation)

Mixing standardization and customization in a way that minimizes costs while maximizing satisfaction

Essence of segmentation Think globally, act locally

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Standardization versus Standardization versus AdaptationAdaptation

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469

Global MarketingGlobal MarketingGlobal Standardization or Adaptation Toyota built the Corolla on a world platform.

Ford with its Focus. McDonald’s uses chili sauce (salsa) on its

hamburgers in Mexico. Coca-Cola is can be sweeter, or less carbonated.

Adaptation elements: Product features, brand name, labeling, packaging, colors, materials, prices, sales promotion, advertising themes, media, execution.

Marketing programs do work best when they are tailored to each target group.

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470

Global MarketingGlobal Marketing Companies need new set of guidelines, values

and insight Marketing is a Strategic Business Concept Marketing is too important to be left to the

Marketing Department. (David Packard) Formulated, integrated, long-term Hold to the responsibilities of customers,

employees, investors

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Global MarketingGlobal MarketingDeciding How to Enter a Market Indirect Export-Thru export and thru others. Direct Export-Handle own exports. Licensing-License a foreign company to use

trademark, manufacturing process, trade secret, or other item for a fee or royalty.

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Global MarketingGlobal Marketing Joint Ventures- Join with local investors Direct Investment- Ultimate form is

direct ownership of foreign-based assembly or manufacturing facilities. Can buy part or full interest in a local company.

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473

Alternative Market-Entry Alternative Market-Entry StrategiesStrategies An entry strategy into the international market should reflect on analysis of market

characteristics such as: Potential sales Strategic importance Strengths of local resources Cultural differences Country restrictions

Companies most often begin with modest export involvement. A company has four different modes of foreign market entry from which to select:

Exporting Contractual agreements Strategic alliances Direct foreign investments

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ExportingExporting Exporting accounts for some 10% of global activity. Direct exporting - the company sells to a customer in another

country. Indirect exporting – the company sells to a buyer (importer or

distribution) in the home country, who in turn exports the product. The Internet

Initially, Internet marketing focused on domestic sales, however, a surprisingly large number of companies started receiving orders from customers in other countries, resulting in the concept of international Internet marketing (IIM).

Direct salesParticularly for high technology and big ticket industrial products.

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Indirect exporting and ImportingIndirect exporting and Importing

No involvement or commitment. Very little control. Less Market Knowledge and knowhow. No opportunity to develop relations with

foreign customers or markets.

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476

Direct exporting and ImportingDirect exporting and Importing

Knowledge and control. Relationships and growth opportunities. Learn about markets and competitive

advantages. Obstacles in identifying segments,

promotions etc.

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477

International Intermediaries.International Intermediaries. For initial market entry or long term strategic collaboration (Table

11.2 - Advantages). Export management companies - EMC’s As an agent - commission based, establishing contacts and developing sales strategies. As a distributor- takes title, more risk, higher profits.

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Export Management Companies - Export Management Companies - EMCsEMCs An EMC is the specialist for manufacturers who want export profits but does

not have the experience or resources to directly sell abroad. EMCs generally act as the firm’s export department. In short, the EMC takes full responsibility for the export end of the business. For further understanding, read the material/discussion on

http://fita.org/aotm/0499.html

478

http://fita.org/aotm/0499.html

479

Services Provided by EMCsServices Provided by EMCs Research foreign markets for a client’s products Travel overseas to find the best method of distributing the product Appoint distributors or commission representatives, frequently within an

already existing network Exhibit the client’s products at international trade shows Handle the routine details in getting the product to the foreign customer

– export declarations, shipping & customs documents, insurance, banking, and instructions for export packing and marking

Prepare advertising/sales literature & adapt it to overseas requirements Correspond in the necessary foreign language Handle LOC details

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480

Trading companies.Trading companies. Sogoshosha - Mitsubishi, Mitsui, etc. Importing, exporting, countertrading, investing, and manufacturing Resources, market knowledge, and economies of scale. Exist in several countries including Japan, Korea, Brazil, Turkey and U.S. U.S. encourages T.C. ; bank participation, relaxed antitrust provisions.

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Sogo Shosha: Sogo Shosha: Japanese Trading Companies Japanese Trading Companies

The major sogo shosha are part of large corporate networks or keiretsu, which center on either a major bank or industrial group.

There are hundreds of general trading companies in Japan, but the sixteen largest control the vast majority of Japan’s exports and imports.

Websites that may help you better understand sogo shosha are: www.mitsui.com or www.misui.co.jp www.mitsubishi.com or www.mitsubishi.co.jp www.itochu.com or www.itochu.co.jp www.marubeni.com or www.marubeni.co.jp www.sumitomocorp.com or www.sumitomocorp.co.jp

481

http://www.mitsui.com/

http://www.misui.co.jp/

http://www.mitsubishi.com/

http://www.mitsubishi.co.jp/

http://www.itochu.com/

http://www.itochu.co.jp/

http://www.marubeni.com/

http://www.marubeni.co.jp/

http://www.sumitomocorp.com/

http://www.sumitomocorp.co.jp/

482

Informal Cooperation & Contractual Agreements.Informal Cooperation & Contractual Agreements.

Informal cooperation - No binding agreement, Exchange information, management knowhow, and personnel.

Contractual agreements are long-term, nonequity association between a company and another in a foreign market.

Contractual agreements - Cross-marketing or R&D., Outsourcing, Licensing, Franchising, Contract manufacturing, Management Contract (turnkey operation).

Cross-Marketing - E.g., Nestle and General Mills – Honey nut Cheerios and Golden Grahams made in US plants by GM and shipped in bulk to Europe for packaging by Nestle – Complimentary Marketing or Piggybacking.

Outsourcing – General Motors buys cars and components from Daewoo; Siemens buys computers from Fujitsu.

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483

Contractual Agreement -Contractual Agreement -LicensingLicensing

• A means of establishing a foothold in foreign markets without large capital outlays.

• A favorite strategy for small and medium-sized companies.• Legitimate means of capitalizing on intellectual property in a foreign

market. Licensing - Patents, trademarks, copyrights, technology, technical

knowhow, business skills. Less resources, less commitment, govt. regulations, test market,

preempt market - requires little depth of market knowledge, can be put in place fairly quickly, is relatively little investment.

Risks associated with Licensing - “Leakage” -- The dissipation of one’s proprietary advantage; Your reputation now depends on another’s performance; Creation of a new competitor.

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Contractual Agreement – Contractual Agreement – Franchising Franchising

• Franchiser provides a standard package of products, systems, and management services, and the franchise provides market knowledge, capital, and personal involvement in management.

• Despite temporary setbacks, franchising is still expected to be the fastest-growing market-entry strategy.

• Two types of franchise agreements: Master franchise – gives the franchisee the rights to a

specific area with the authority to sell or establish sub franchises.

Licensing

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Franchising.Franchising. Franchising - Unique product, systems (mgmt./Mktg. knowhow), brands or unique

selling propositions. Capital, market knowledge, personal involvement. Manufacturer-retailer (car dealerships); Manufacturer-wholesaler (soft drink

companies); and service firm-retailer (Fast food or hotels)

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Strategic International AlliancesStrategic International Alliances A strategic international alliance (SIA) is a business relationship established by two

or more companies to cooperate out of mutual need and to share risk in achieving a common objective

SIAs are sought as a way to shore up weaknesses and increase competitive strengths.

Firms enter SIAs for several reasons: Opportunities for rapid expansion into new markets Access to new technology More efficient production and innovation Reduced marketing costs Strategic competitive moves Access to additional sources of products and capital

Many companies also are entering SIAs to be in strategic position to be competitive and to benefit from the expected growth in the single European market.

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Strategic International Alliances Strategic International Alliances (continued)(continued) International Joint Ventures

A joint venture is a partnership of two or more participating companies that have joined forces to create a separate legal entity.

Four Characteristics define joint ventures: JVs are established, separate, legal entities The acknowledged intent by the partners to share in the management

of the JV There are partnerships between legally incorporated entities such as

companies, chartered organizations, or governments, and not between individuals

Equity positions are held by each of the partners

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Equity participation, Joint ventures.Equity participation, Joint ventures.

Equity participation - minority ownership in companies -strengths of partner (Ford owns 33.4% of Mazda).

Joint Ventures - Govt. regulations, Special skills, Distribution System, Resources, Access to raw materials, Export base, Political Risk.

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Strategic International Alliances Strategic International Alliances (Consortia)(Consortia) Consortia

Consortia are similar to joint ventures and could be classified as such except for two unique characteristics:

They typically involve a large number of participants They frequently operate in a country or market in which

none of the participants is currently active. Consortia are developed to pool financial and

managerial resources and to lessen risks.

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Direct Foreign InvestmentDirect Foreign Investment

Factors that have been found to influence the structure and performance of direct investments: Timing The growing complexity and contingencies of contracts Transaction cost structures Technology transfer Degree of product differentiation The previous experiences and cultural diversity of acquired

firms Advertising and reputation barriers

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““Global Acquisitions”Global Acquisitions”

Acquisition may make most sense when you want to…. Diversify your product line Access new technologies, skills, distribution channels Overcome barriers to entry (e.g., local content, quotas,

subsidy) Reduce market/competitive risk Get immediate results (e.g., competitive response)

Especially if your research and planning is sufficient to minimize the risks attending……… Ignorance Over valuation (pay too much?) The high failure rates that usually attend cross-cultural

deals

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Lecture 5 & 6

493

Global MarketingGlobal MarketingPrinciple of Research

Understand the consumer-behavior perspectives. Be sure you are asking right questions. Use appropriate research techniques and controls. Present clear, comprehensive and “actionable”

results. We study people using geographics, demographics,

psychographics, lifestyles, and behaviors.

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Global MarketingGlobal Marketing Bodily adornment, cooking, courtship, food

taboos, gift giving, language, marriage, status, sex, and superstitions, in all societies, although each society attaches different values and traditions.

The world, countries, regions, and subcultures. Different groups of people share subcultures---

values, customs, and traditions. Geomarketing uses these differences in foods,

terminology, subculture identities.

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Global MarketingGlobal Marketing Example: Global youth are notorious for

challenging norms and defying labels. A study of 27K teenagers in 44 countries. Insights and motivations.

Six different segments. But remember that even in a specific country the

teenagers are not homogeneous. Six segments in a Teen World values research

study.

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Global MarketingGlobal Marketing Thrills and Chills. Driving principles---fun,

excitement, irreverence and friends. Expect everything in life. Make it a goal to get as much and as many good times. Popular kids in schools. Brand loyal. Mostly in Germany, England, Greece, South Africa, Netherlands, US, Belgium and Canada. 18%

Resigned: Fun, Friends and Low expectations. Little discretionary income. Cynical. Denmark, Sweden, Korea, Norway, Germany, Belgium, Argentina, Canada and Turkey 14%

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Global MarketingGlobal Marketing World Savers. Defining principles: Fun,

Humanism, and friends. Models of what gives hope to next generation. Good kids, who care. Technologically advanced. Motivated by new and exciting. Attracted by honest and sincere messages. Sophisticated, sense of humor. Hungary, Philippines, Venezuela, Brazil, Spain, Argentina, Russia, France, Poland. 12%

Quiet Achievers. Success, quiet, anti-indi-vidualism, social optimism. Have deter-mination and restraint. Study hard. Do well in school. Limit outside activities. Thailand, China, Hong Kong, Korea, Russia, Peru. 15%

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498

Global MarketingGlobal Marketing Bootstrappers. Defining principles:

Achievement, Individualism, optimism, determination, power. Try hard to please parents. Determined to succeed. Positive values. One in four in US; 14% overall. Nigeria, Mexico, US, India, Chile, Puerto Rico, Peru and Venezuela.

Upholders. Family, tradition, respect for individuals. Dreamy. Quiet. Good teens. Follow their parents. Don’t like risks. Use proven products. Vietnam, Indonesia, Taiwan, China, Italy, Peru, India, 16%

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Global MarketingGlobal MarketingPrinciple of Integrated Marketing: Marketing is everyone’s business. “Marketing Community”

Examples: Coca-Cola, Merrill Lynch, Xerox, American

Express, British Airways, Gillette.

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500

Global MarketingGlobal Marketing When all of the departments work together to

serve the customer’s interests. Works on two different levels: All of the various

marketing functions work together: sales force, sales promotion, advertising, PR, Product development, Marketing research

Plus all of the departments work together. They must “Think Customer.”

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501

Global MarketingGlobal MarketingAn endless process or principle: Customer attraction Customer satisfaction Customer retention. CEO is also the Chief Marketing Officer.

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502

Global MarketingGlobal MarketingPrinciple of Competition: Value War Create long-tern customer value. Continuously and consistently crated customer

value. Look at total customer benefits vs. customer

expenses Ultimate goal of project Relationship to other projects High-level timing goals

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503

Global MarketingGlobal MarketingPrinciple of Customer Satisfaction and

Retention Look at overall satisfaction and customer

loyalty Easier to retain a customer than to gain or

win a new one. Consistently improve customer value to

win the marketing war.

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Global MarketingGlobal MarketingPrinciple of Integration: Learn about the needs and wants. There are no “average” customers. Concentrate on the individual differences

while looking at segmentation, targeting and positioning.

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Global MarketingGlobal MarketingMore on Integration: Plan for and review differences in culture,

markets, economic development, consumer differing needs, usage patterns, media availability and legal restrictions.

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Global MarketingGlobal MarketingPrinciple of Anticipation and Being Proactive. Not

Reactive. Are you ready for change? Being adaptive to the

marketplace. Macroenvironment Changes. The high income

growth country has shifted from Japan to US. Low to medium has been concentrated in Southeast Asia and southern Asia with China as a unique, high-growth, large country in the region and the world. Also look at Singapore, Taiwan and South Korea.

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Global MarketingGlobal MarketingPrinciple of the Growth of Internet and Information Technology.

Principles of: Marketing Planning Marketing Mix 7P’s

Controls.

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Global MarketingGlobal Marketing The old trade model is just old. It stated that as a product matures,

production would shift to low-wage countries. Today, must look at transportation costs,

availability of skilled labor, market responsiveness, market access and innovation in product design and manufacturing. Especially of products with less than 15% of labor in total cost.

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Planning for Global MarketsPlanning for Global Markets Planning is the job of making things happen that might not otherwise occur. Planning allows for rapid growth of the international function, changing markets,

increasing competition, and the turbulent challenges of different national markets. Planning relates to the formulation of goals and methods of accomplishing them,

so it is both a process and philosophy. Corporate planning – long-term generalized goals for the organization –

corporate philosophy, international commitment etc. Strategic planning – Dealing with products, capital and research and

long/short term allocation of strategic resources. Tactical planning – specific actions and tactics in local markets.

Successful planning is evaluating company objectives, including management’s commitment and philosophical orientation to international business.

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Planning for Global Markets Planning for Global Markets (cont’d)(cont’d) Company objectives and resources

Each new market can require a complete evaluation, including existing commitments, relative to the parent company’s objectives and resources.

Defining objectives clarifies the orientation of the domestic and international divisions, permitting consistent policies.

International commitmentCommitment in terms of:

Dollars to be invested Personnel for managing the international organization Determination to stay in the market long enough to realize a return in investments.

The degree of commitment to an international marketing cause reflects the extend to a company’s involvement

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The Planning ProcessThe Planning Process

Phase 1: Preliminary Analysis and Screening – Matching Company and Country Needs.

Phase 2: Adapting the Marketing Mix to Target Markets.

Phase 3: Developing the Marketing Plan Phase 4: Implementation and Control

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International Planning ProcessInternational Planning Process

Insert Exhibit 11.1

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Global MarketingGlobal MarketingPrinciple of Branding: The umbrella. Determines price and value. Be

more than a commodity. A brand is a name, term, sign, symbol, or

design or a combination of them to identify the goods and services of a seller and to differentiate them from the competitors.

Identifies seller or maker. We see a huge increase in the global brands for autos, food, clothing, electronics and more.

Increasing number of cross-border marketing alliances.

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Global MarketingGlobal MarketingPrinciple of Service: Service before, during and after sale. Create long-term value and connect with

customer. Both products and services. It’s creating

more value.

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Global MarketingGlobal MarketingPrinciple of Process: Commands the company to be the captain of its

supply-chain. It should manage from raw materials to finish goods. Enhance value-creating activities.

Look at Strategic Alliances/Partners . Can be suppliers, customers and even parts of competitors. Benchmarking, reengineering, outsourcing, mergers, and acquisitions are examples.

Brand, service and process are three value-creating principles and drivers to win customers and deliver market share.

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Global MarketingGlobal MarketingPrinciples of STP: Segmentation, Targeting and Positioning Process of segmenting. Look at

demographics, geographics, psychographics and behavior variables.

Look for market opportunities.

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Global MarketingGlobal MarketingPrinciple of Differentiation: Don’t be different just to be different. Design and plan for meaningful

differences versus the competitors. Design truly different and unique products

for customers.

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Global MarketingGlobal MarketingPrinciple of Marketing Mix: Integrate 4P’s and 7P’s. Offer, Logistics and Competition. The whole marketing concept.

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Global MarketingGlobal MarketingPrinciple of Selling: Integrate Company, Customers and

Relationships/Partnerships. Create long-term relationships with customers. More than personal selling. Features and benefits of the product. AIDA: Awareness-Interest-Desire-Action. Manage communication.

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Global MarketingGlobal MarketingPrinciple of Balance: After focusing on the elements of marketing---

segmentation, targeting, positioning (STP), differentiation, marketing mix, selling, branding, service and process, you need to balance the strategies, tactics and implementation.

Share of Heart and Mind. Share of Voice. Dynamic environment. Timing. High-level timing goals

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Global MarketingGlobal MarketingPrinciple of Positioning: The act of designing the product or service

(company’s offering and image) to occupy a distinctive place in the target market’s mind.

Ultimate goal of product. Differentiation Relationship to other products.

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Global MarketingGlobal MarketingPrinciple of Future: Manage today’s products by managing a

profit and by servicing customers of today and tomorrow.

Develop tomorrow’s products. Look at Marketing Myopia.

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Global MarketingGlobal MarketingPrinciple of Global Experience Counts for companies Counts in the job market for employees. Marketing Audits. Marketing is not a destination, or a goal.

It’s a process. A moving target.

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Wrap-up on Global Wrap-up on Global Marketing PrinciplesMarketing Principles Companies cannot stay domestic and

expect to maintain their markets. Companies need to define their global

policies and objectives. Companies need to decide on how much

to adapt marketing mix.

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Wrap-up on Global Wrap-up on Global Marketing PrinciplesMarketing Principles Market entry and market control costs can

be high. Product and communication adaptation

costs can be high. Dominant foreign firms can establish high

barriers of entry. Which types of markets and countries?

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Global MarketingGlobal Marketing Ultimate goal of project Relationship to other projects High-level timing goals Attractiveness influenced by the

product, geography, income, population, political climate and more factors.

Review Forces: ---Driving and Restraining

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Globalization Framework of Service Globalization Framework of Service BusinessesBusinesses

Special Characteristics of Service Businesses Performance not an object Customer involvement in production People as part of service experience Quality control problems Harder for customers to evaluate Lack of inventories Importance of time factor Electronic channels of distribution

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Globalization Framework for Service Globalization Framework for Service BusinessesBusinesses

Three Categories of Services People processing services – involve tangible actions to

customers in person. The customer becomes a part of the production process, which tends to be simultaneous with consumption.

ex: passenger transportation, health care, food service. Possession processing services – involve tangible actions to

physical objects to improve their value to customers. The object needs to be involved in the production process, but the customer does not.

ex: freight service, car repair, laundry. Information based services – involve collecting, manipulating,

interpreting, and transmitting data to create value. ex: accounting, banking, education, legal services.

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Globalization Framework for Service Globalization Framework for Service BusinessesBusinesses

Global Strategy Global market participation strategy – building significant share

in global strategic markets. ex: Tokyo, London, New York.

Global services – a standardized core product or service that requires a minimum of local adaptation.

ex: In Britain, McDonald’s includes both coffee and tea on the menu, while it serves beer in France and Germany.

Global location value chain – where to locate a business’s activities and how to coordinate them.

ex: sending checks to be processed in a different country. Global marketing of services – applying a uniform marketing

approach around the world, although not all elements of the marketing mix need to be identical.

ex: a strong global brand image.

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Supplementary ServicesSupplementary Services

The Flower of Service – composed of eight supplementary service categories.

Supplementary services - are used to add value and provide differentiation from competition, enabling firms do develop effective globalization strategies.

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8 Supplementary Services to the Core 8 Supplementary Services to the Core Process.Process.

Information – giving customers rlevalnt information about the service. Payment – ease and convenience of payment. Consultation – involves a dialogue to probe customer requirements and then

develop a tailored solution. Order Taking – making it wasy to place orders or reservations in the

language of their choice. Hospitality – take care of the customer by considering cultural definitions of

appropriate hospitality, which may differ widely from one country to another. Safekeeping – looking after a customer’s possessions. Exceptions – fall outside of normal service delivery. This includes special

requests, handling customer complaints, and problem solving. Billing – clear and timely billing.

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Implications for Types of Service Implications for Types of Service BusinessesBusinessesGlobal Market Participation

•Adopt a professional style that fits the local culture through extensive advertising and public relations as well as hiring host country nationals who have obtained education and work experience in other countries.

ex: Law firms and other professional service providers .

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Implications for Types of Service Implications for Types of Service BusinessesBusinessesGlobally Standardized Service

•Possession processing businesses can provide the most globally standardized offerings. These services need to cope with cultural and taste differences that vary geographically like different voltage or measurement systems.

•People processing services almost always need some deviation from standardization.

•Information based services deviation will vary widely from none to near total.

ex: information on international flight schedules (none), or tax advice (nearly total).

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Implications for Types of Service Implications for Types of Service BusinessesBusinessesGlobal Location of Value Chain

•People processing and possession processing services depends on the extent of local presence needed. Usually more local sites will be needed for people-processing, making that service the most difficult to operate globally.

•Information based services should find it the easiest to locate globally due to their “virtual nature” where no physical presence is needed. However when information services have a physical component, or require specialized delivery equipment, a physical presence should be provided.

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Implications for Types of Service Implications for Types of Service BusinessesBusinessesGlobally Uniform Marketing

•All three types of services should be able to make use of globally uniform marketing, but the extent will differ for each element of the marketing mix.

•People processing services have the most to gain from uniform branding as a way to build both local and foreign customers.

•Possession processing services often attract multinational customers making it necessary to coordinate global marketing strategy and offer uniform terms of service.

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• Domestic International Global marketing

• Global marketing evolution : Globalization drivers

- Marketing factors- Cost factors- Environmental factors- Competitive factors

• Strategic planning models

- BCG (Boston Consulting Group) model- Ansoff’s model- GE model

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Lecture 7

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Business Portfolio Models

A. Boston Consultin Group (BCG) Model

Star ?

Cash cow Dog

Marketing G

rowth R

ate

Lo Lo Hi

Hi

Market Share – Growth Matrix

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B. Ansoff’s Product-Market Development Model

Market Penetration Product Development

Market Development Diversification

Existing Product New Products

ExistingMarket

NewMarket

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C. G.E Strategic Planning Model

Strong Average Weak Business Strength

Industry Attractiveness

High

Medium

Low

Business Strength Index Industry Attractiveness Index

* Market Share * Market size * Price Competitiveness * Market Growth * Product Quality * Industry Profit Margin * Customer Knowledge * Amount of Competition * Sales Force and Effectiveness * Seasonality * Geographic Advantage * Cost Structure * Others * Etc.

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THE STRATEGIC PLANNING PROCESS

Assessment and adjustment of core strategy

(market / competitive analysis, internal analysis)

Formulation of global strategy

(choice of target countries, segments and competitive strategy)

Development of global marketing program

Implementation (organization structure, control)

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UNDERSTANDING AND ADJUSTING THE CORE STRATEGY

• The SBU : Based on product- market similarities

- Similar needs or wants to be met- Similar end user customers to be targeted- Similar products or services used to meet needs of specific customers

• Analysis is the first step- Market analysis- Competitor analysis- Internal analysis

• Formulating global marketing strategy starts with a series of decisions

- Country-market choice- Choice of competitive strategy- Segmentation choices

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• Country- Market choice- Concentration- Diversification

• Factors in country selection- The stand-alone attractiveness of the market- Global strategic importance of the market- Possible synergies offered by the market

• Choice of competitive strategy alternatives- Cost Leadership- Differentiation - Focus

• Basis for global market segmentation

- Environmental variables (Economics, Geographic, cultural, ….) - Marketing-mix (Product, Price, Promotion, Distribution) variables

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• Global marketing program development decision

- Degree of standardization in the product offering- Marketing program beyond the product variable- The location and extent of value-adding activities- Competitive moves to be made

• The marketing approach to globalization “ Think globally but act locally ”

• The location of value-added activities- Pooling production- Exploiting factor costs or capabilities- Strategic alliances- Concurrent engineering

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• Competitive moves- Cross-subsidization (Resources accumulated in one part of the world used to fight competition in another part)

• Implementing global marketing strategy- Success is based on a balance between local, regional/global concerns

• The challenges of global marketing and the pitfalls to be avoided- Insufficient research- The tendency to over standardize- Inflexibility in planning and implementation• The “Not-Invented-Here” (NIH) syndrome• Localizing global marketing

- Achieving balance between local and global managers at headquarter

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• The management process- Enhancing the global transfer of communications- Personnel interchange to gain experience aboard- HQ should coordinate and leverage resources - Permit local managers to develop their own programs within defined parameters

• How to avoid the NIH syndrome- Ensure local managers participation in development of global marketing strategies- Encourage local managers to be creative- Product portfolio with local, regional/global brands- Decentralization of marketing decisions

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Lecture 8

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EMERGING GLOBAL ORGANIZATION STRUCTURES

- Global account management- Changes in the corporate culture for going global- Planning and executing programs on a world wide basis- Product choices for individual markets and regions- Make decisions between single segments and multiple segments

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Organizing for Global Organizing for Global CompetitionCompetition

Because organizations need to reflect a wide range of company-specific characteristics, devising a standard organizational structure is difficult.

Companies are usually structured around one of three alternatives:

Global product divisions responsible for product sales throughout the world

Geographical divisions responsible for all products and functions within a given geographical area

A matrix organization consisting of either of these arrangements with centralized sales and marketing run by a centralized functional staff, or a combination of area operations and global product management

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Organizing for Global Organizing for Global Competition (cont’d)Competition (cont’d)

Locus of decision Considerations of where decisions will be made, by whom, and by which

method constitute a major element of organizational strategy. Centralized versus decentralized organizations

An infinite number of organizational patterns fro the headquarters activities of multinational firms exist, but most fit into one of three categories:

Centralized Regionalized Decentralized

No single traditional organizational plan is adequate for today’s global enterprise seeking to combine the economies of scale of a global company with the flexibility and marketing knowledge of a local company.

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Schematic Marketing Organization Plan Schematic Marketing Organization Plan Combining Product, Geographic, and Functional Combining Product, Geographic, and Functional ApproachesApproaches

Insert Exhibit 11.4

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Organizational StructureOrganizational Structure Stages of Companies’ “internationalization”

Sales through Domestic sales departmentExport Sales (& marketing) department International Division

Overseas offices Overseas Subsidiaries Reporting to Division VP, or SVP WW sales.

MNC with semi-autonomous subsidiaries Shared global strategy Each subsidiary operates on own P/L Reports in at the Board level

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Organizational StructureOrganizational Structure Internationalization con’t

Product development affected by int’l requirements.

Marketing affected by need to both internationalize “look & feel”, but also localize to suit markets

Senior management affected by need for top level representation

HR affected by differing labor laws.

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Patterns of International Patterns of International Organizational DevelopmentOrganizational Development Organizations vary in

SizePotential of targeted global marketsLocal management competence

Conflicting pressures may ariseFor product and technical knowledgeFunctional area expertiseArea and country knowledge

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Organizational StructureOrganizational Structure Different ways to organize

Product groups Country/Regional Groups Functional Groups Process Groups Customer focused organization Matrix structure (function/product/geography) Hybrid structure

“Flattening the organization” Networked global Organization

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International Division StructureInternational Division Structure

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Organizational StructureOrganizational Structure

President

FinanceProductionMarketing R&D HRSales

US Mrktg US Sales

Int’l Sales

EU Sales Asia Sales ROW SalesAsia MrktgEU Mrktg

Export Sales Stage

Important variable

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Regional Management CentersRegional Management Centers

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International Division StructureInternational Division Structure Four factors that lead to this structure

Top management’s commitment to global operations has increased enough to justify the position

Complexity of international operations requires a single organizational unity

The firm has recognized the need for internal specialists to deal with the demands of global operations

Management recognizes the importance of proactively scanning the global horizon for opportunities and threats

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Organizational StructureOrganizational Structure

President

LATAM Div

Euro Div ROWDiv

Asia Pac Div

EU RegionSales

Paris office

International Division StageHQ staff

Asia/PacRegion Sales

Munich office

Beijing office

S’pore office

RegionalMktg

RegionalMktg

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Geographical & Product Geographical & Product DivisionsDivisions

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The Matrix DesignThe Matrix Design

Product or business, function, area, and customer know-how are simultaneously focused on the organization’s worldwide marketing objectives

Management must achieve organizational balance that brings together different perspectives and skills to accomplish organizational objectives

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Geographic knowledge – understanding of economic, social, political, and governmental market and competitive dimensions

Product knowledge and know-how – Product managers that have a worldwide responsibility can achieve new levels of product competency

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Functional competence – corporate staff with worldwide responsibility contributes toward the development of functional competence on a global basis

Knowledge of customer or industry and its needs – staff with responsibility for serving industries on a global basis assist organizations in their efforts to penetrate specific customer markets

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Benefits of Global MarketingBenefits of Global Marketing When large market segments can be identified, economies of

scale in production and marketing can be important competitive advantages for global companies.

Transfer of experience and know-how across countries through improved coordination & integration of marketing activities.

Marketing globally also ensures that marketers have access to the toughest customers.

Diversity of markets served carries with it additional financial benefits.

Firms that market globally are able to take advantage of changing financial circumstances.

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Organizing for Global Organizing for Global CompetitionCompetition Because organizations need to reflect a wide range of

company-specific characteristics, devising a standard organizational structure is difficult.

Companies are usually structured around one of three alternatives: Global product divisions responsible for product sales throughout the

world Geographical divisions responsible for all products and functions

within a given geographical area A matrix organization consisting of either of these arrangements with

centralized sales and marketing run by a centralized functional staff, or a combination of area operations and global product management

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Organizing for Global Competition Organizing for Global Competition (cont’d)(cont’d) Locus of decision

Considerations of where decisions will be made, by whom, and by which method constitute a major element of organizational strategy.

Centralized versus decentralized organizationsAn infinite number of organizational patterns fro the headquarters activities

of multinational firms exist, but most fit into one of three categories: Centralized Regionalized Decentralized

No single traditional organizational plan is adequate for today’s global enterprise seeking to combine the economies of scale of a global company with the flexibility and marketing knowledge of a local company.

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Schematic Marketing Organization Plan Schematic Marketing Organization Plan Combining Product, Geographic, and Functional Combining Product, Geographic, and Functional ApproachesApproaches

Insert Exhibit 11.4

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Lessons for Service ManagersLessons for Service Managers

Management needs to understand the components of a service and the processes by which its different elements are created and delivered by:

- First, distinguishing between the core product and the supplementary service elements- Second, recognizing the three broad categories of the core product/service- Third, using the Flower of Service model as a means of understanding and disaggregating the package of supplementary services that augment and add value to the core product/service.

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Conclusion Conclusion

Companies can develop effective global strategies by systematically analyzing the specific globalization drivers affecting their industries and the distinctive characteristics of their service businesses.

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FAQ’sFAQ’s

1. For a company of your choice, identify the “push” and “pull” factors that have led it to explore foreign market opportunities

2. What is likely to be the long-term impact, if any, of the internet on the development of a global market in health care industry?

3. To what extent is it true to talk about an overwhelming tendency towards cultural convergence affecting the market for broadcast television services?

4. Discuss the driving forces for a going global.

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AssignmentAssignment

List the stages in International Marketing involvement.

What are the strategic orientations of firms?

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Self – Quiz..Self – Quiz..

What is International Marketing and how does it differ from domestic marketing?

What are the major trends in international trade and marketing?

Define self reference criterion and ethnocentrism.

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MCQS

Mark the correct answers from a-d. 1. The most important reason why marketers need to classify services is to: a) standardise advertising programmes. b) allocate personnel duties. c) determine prices. d) identify similarities in marketing needs. 2. Inseparability necessarily implies: a) a high level of consumer-producer interaction. b) intangibility of the service offering. c) a high level of tangibility in the service offering. d) variable output. 3. Inseparability can be most effectively reduced by: a) reducing the tangible element of the service offer. b) increasing the labour content of service inputs. c) using electronic means of service delivery. d) de-skilling of employees' tasks. 4. Intangibility necessarily implies a lack of:: a) quality control. b) physical ownership. c) product specification. d) consistency.

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MCQS 5. Services with high levels of variability tend to be: a) people based. b) services provided on a one-to-one basis. c) customised services. d) all of the above. 6. The extended marketing mix for services has been developed on the basis of: a) scientific analysis of actual decisions made by services marketing managers. b) the need for a realistic framework for analysis. c) intuition. d) the need to incorporate service quality as a core element of the marketing mix. 7. Services can best be described as processes rather than outcomes. Which of the following

is a technique for graphically describing a service process? a) Bar Charting b) Blueprinting c) Process charting d) Flow analysis 8. Industrialisation of services is best facilitated by: a) incorporating more intangibles into the service offer. b) the contracting out of services. c) replacing human operators with machines. d) increasing levels of customisation.

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MCQS9. Compared with high-contact services, customers of low-contact services are more likely to

judge service quality on the basis of: a) outcomes. b) processes. c) quality of personnel. d) waiting time. 10. In the services sector, critical incidents: a) occur each time an organisation interacts with its customers. b) necessarily involve front line employees. c) can only be defined by management. d) can only be defined by customers.11. For a UK budget hotel chain seeking expansion in overseas markets, a 'push' factor may be

represented by: a) new opportunities emerging in Eastern Europe.subsidies available for overseas expansion b) subsidies available for overseas expansion. c) increasing levels of competition in the domestic market. d) increasing levels of competition in overseas markets. 12. A high level of exports of luxury consumer goods to a country with a low average level of

GDP per capita may be indicative of that country's: a) low level of real GDP. b) high level of GDP. c) high level of GDP per capita. d) uneven distribution of GDP.

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MCQS13. A theme park operator considering setting up an operation in an overseas country, is most

likely to begin its research by: a) conducting secondary research in its target market. b) conducting primary research in its target market. c) conducting secondary research at home. d) conducting primary research at home. 14. Adaptation of both promotion and product specification to the requirements of overseas

markets is likely to be most thorough for: a) an international hotel chain. b) a car rental ca local utility sub-contractor.hain. c) a local utility sub-contractor. d) an airline. 15. Which of the following overseas market entry strategies is likely to give a restaurant

operator the highest level of control? a) direct investment b) joint venture c) management contracting d) franchising 16. Which of the following overseas market entry strategies is likely to present a restaurant

operator the lowest level of risk? a) direct investment b) joint venture c) management contracting d) franchising

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MCQS 17. The theory of comparative cost advantage holds that a national economy will: a) aim to minimise the cost of its producers. b) export what it is good at and import goods where it is weak. c) import what it is good at and export goods where it is weak. d) always aim to produce goods and service at a comparable cost compared to the most

efficient economy. 18. A trading bloc has the effect of: a) blocking trade with all other countries. b) increasing trade between bloc members: favouring it against other countries c) reducing trade between bloc members: favouring against other countries. d) reducing trade between bloc members: discriminating against other countries. 19. All of the following are examples of limitations on the concept of comparative cost

advantage except: a) imposition of tariffs. b) quotas on imports. c) subsidies for export of goods. d) lower standards of social welfare legislation. 20. Joint ventures are a desirable way to expand overseas because: a) joint ventures are a risk free method of expansion. b) only the local partner is liable for tax. c) joint ventures always involve a local partner with detailed knowledge of the local market. d) it can help overcome barriers such as access to intermediaries or government rules of the

ownership of firms.

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Answers

1-d) 2-a) 3-c) 4-b) 5-d) 6-b) 7-c) 8-c) 9-a) 10-d) 11-c) 12-d) 13-c) 14-c) 15-a)16-c) 17-b) 18-b) 19-d) 20-d)

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CASE STUDY - HOW MUCH SHOULD A TRAIN TICKET COST?

The pricing of train fares in Britain has evolved over the past thirty years in response to changes in the operating environment of railways. As it has evolved from a centrally planned public service to a competitive private sector industry, new forms of pricing have emerged.

One constant theme in the development of railway pricing has been the proliferation of fares between any two points. For a return journey from Leicester to London, no fewer than 23 different fares are currently charged. A number of market segments have been identified and a distinctive marketing mix has been developed for each. The business traveller typically has a need for the flexibility of travelling at any time of the day and because an employer is often picking up the bill, this segment tends to be relatively insensitive to the price charged. Some segments of the business market demand higher standards of quality and are prepared to pay a price of £73.00 for an executive package which includes "First Class" accommodation and additional services such as meals and car parking. Leisure segments are on the whole more price sensitive and prepared to accept a lower level of flexibility. Those who are able to book their ticket one week in advance can pay just £18.

A keen eye is kept on the competition in determining prices. Student are more likely than business travellers to accept the coach as an alternative and therefore the Leicester to London student rail fare of £15.20 is pitched against the equivalent student coach fare of £11.75, the higher rail fare being justified on the basis of a superior service offering. For the business traveller, the comparison is with the cost of running a car, parking in London, and more importantly, the cost of an employed person's time. Against these costs, the executive fare of £73.00 is probably good value. For the family market, the most serious competition is presented by the family car, so a family discount railcard allows the family as a unit to travel for the price of little more than two adults.

The underlying cost of a train journey is difficult to determine as a basis for pricing. Fixed costs have to be paid by train operating companies to Network Rail for the use of the track and terminals. In addition, trains and staff represent a fixed cost, although many companies have sought to make these more flexible. Companies recognise that trains operating in the morning and afternoon peak periods cost more to operate as fixed costs of vehicles used solely for the peak period cannot be spread over other off‑peak periods. The underlying costs of running commuter trains has been publicly cited by train operating companies as the reason for increasing season ticket charges by greater than the rate of inflation during recent years, although the fact that commuters often have no realistic alternative means of transport may have also been an important consideration in raising prices.

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The political environment has had an important effect on rail pricing policies. Before the 1960s, railways were seen as essentially a public service and fares were charged on a seemingly equitable basis which was related to production costs. Fares were charged strictly on a cost per mile basis, with a distinction between first and second class, and a system of cheap day returns which existed largely through tradition. From the 1960s, British Rail moved away from social objectives with the introduction of business objectives. With this came a recognition that pricing must be used to maximise revenue rather than to provide social equality. However, government intervention occasionally came into conflict with British Rail's business objectives ‑ for example it was instructed to curtail fare increases during the 1980s as part of the government's anti‑inflation policy and again in the Autumn of 1991 it was instructed to reduce some proposed Inter City fare increases on account of the poor quality of service on some routes.

The privatisation of British Railways in the mid-1990s led to further developments in pricing. Recognising the importance of maintaining an integrated passenger network, the government appointed a regulator of rail services with powers to specify fares charged for a range of types of tickets and to ensure that through tickets are still available for journeys which involve more than one rail company. However, the newly privatised companies have exploited opportunities to offer new types of tickets targeted at different segments of the population. Virgin Railways used the experience of its airline to promote book-ahead tickets which offered bargain prices to fill off-peak capacity. At the same time, signs of genuine price competition between rival rail operators began to appear. Segments of the London-Scotland market were contested by Great North Eastern Railways and Virgin, while Chiltern Railways sought to appeal to the price sensitivity of travellers from Birmingham to London.

Privatisation had resulted in a huge range of new marketing initiatives, and a seemingly bewildering array of special ticket prices appeared from each of the 26 rail franchise operators. With titles such as "Virgin Value 7" and "Network Stayaway", the public had become confused by the choices available. As a result, the Train Operators' Association, which represents the franchise operators, agreed to co-operate in offering just six "families" of ticket types, based on the validity of the ticket.

CASE STUDY REVIEW QUESTIONSShould governments intervene to regulate rail fares?Evaluate the financial benefits to rail operators of offering reduced fares to students.Are train fares too expensive?

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CASE STUDY - INVESTING IN ADVERTISING

It is widely accepted that a good proportion of advertising expenditure is wasted and techniques are constantly being developed to ensure that a firm's advertising achieves maximum possible effect. Most effort has been directed at trying to establish the effect of advertising on sales. However, another important dimension is understanding the effects of advertising on a company's share price. With advertising expenditure in the UK reaching over £14 billion by 1998, the search for better evaluation techniques has never been greater.

Recent research carried out in the USA by James Gregory, CEO and founder of brand strategy company Corporate Branding, has suggested that advertising not only helps sales, but has a positive impact on share price too. His analysis indicates that advertising expenditure is the single biggest contributor to brand image. The research built on earlier research, which studied fifty Fortune 100 companies over a seven‑year period to establish a link between advertising expenditure and corporate reputation. Gregory's work, under way since 1997, widened this to a study of 220 companies. It measured different contributing factors which influenced share price, including a company's size, financial strength, expected cash flow growth and new product developments. Brand image was defined as having two distinct elements: familiarity and favourability. Familiarity is a quantitative measure of the number of buyers familiar with the company. Favourability is the qualitative aspect of its image, based on individuals' perceptions of a company's reputation, management, and investment potential.

Gregory discovered that corporate brand image directly explained 5 per cent of the variation of company share price, which he described as ‘hugely significant'. The figure is not large when compared with cash flow, earnings, and dividends (30 per cent), but it is nearly as important as the 6 per cent explained by financial strength (stable earnings and amount of debt). Furthermore, the research indicated that brand image has an indirect influence on 70 per cent of all the other factors which determine the share price. Such indirect influence was manifested through cash flow, earnings and dividends, share price growth and expected cash flow growth. The research also examined the factors that contributed towards brand image, and advertising was shown to contribute 30 per cent of the effect. Company size was also important, contributing some 23 per cent towards brand image, with other factors such as publicity, management changes, and products contributing 22 per cent.

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CASE STUDY - INVESTING IN ADVERTISING

Some validation of Gregory's findings can be seen in separate research undertaken by WCRS and Lehman Bros on behalf of the UK mobile phone operator Orange. The company won the Institute of Practitioners in Advertising's 1998 Advertising Effectiveness Award for its paper, which analysed the contribution of advertising to the success of Orange as a FTSE 100 company. An advertising campaign launched in 1994 through television, radio, and newspapers featured the memorable slogan ‘The future is bright, the future is Orange'. Research suggested that the advertising campaign created an earnings payback in excess of six times its expenditure and increased Orange's implied share value by £2.49 billion. At the time of launching the campaign, analysts had accused Orange of not fulfilling its marketing pledge, for example its coverage was perceived as being much inferior to its main competitors, Vodafone and Cellnet. By the end of 1998, however, the company's market capitalization had increased to around £10 billion, and while much of this further rise could undoubtedly be attributed to the strength of demand for mobile phones, it confounded earlier sceptics who had accused Orange of short‑termism and a preoccupation with advertising over network development.

Many factors which affect share price are out of a company's hands, but image is within its control. It is therefore a tool that can be used to manipulate share price performance. It follows that advertising should be seen as an investment which yields measurable results in terms of a company's market value. Debate about how a brand should be valued in a company's balance sheet has continued, but many take‑over bids have been focused on the portfolio of brands which a target company owns.

Adapted from ‘Waking the City up to the Value of Brand Marketing', Marketing , 27 May 1999, p. 19.

CASE STUDY REVIEW QUESTIONSWhat difficulties exist in trying to determine the link between a company's advertising expenditure and its share

price performance?What factors other than advertising might have explained the strong share performance of Orange?To what extent should advertising expenditure be capitalized and recognized as an asset in a company's

balance sheet?

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References

Services Marketing- Zeithmal & Bitner Services Marketing- Lovelock Services Marketing- Rajendra Nagandukar Services Marketing- Govind Apte

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