SERVICES MANAGEMENT

Subject Paper Submitted By

Indradeep Guha
(Roll no: BIMS/AC/2/2008/6005)

*Answers to: Q1 (a/b), Q2 (a/b), Q3, Q5 & Q6 (a/b/c/d/e)

Q1. (a) What is the importance of ‘Services’ in the society? Define services and explain characteristics of
services.

A. They touch the life of every person in the country. Each economy – developing, mature, and developed – has its
welfare based upon effective delivery and performance of services. They can be emergency, communication,
food, health and education – to name a few. Prosperity of the nation comprises of economical advances, its social
structure, and its environment concerns; all depends upon management of services to its citizens.

A service is the non-material equivalent of a good. Service provision has been defined as an economic activity
that does not result in ownership and is claimed to be a process that creates benefits by facilitating either a change
in customers, a change in their physical possessions, or a change in their intangible assets.

By composing and orchestrating the appropriate level of resources, skill, ingenuity, and experience for effecting
specific benefits for service consumers, service providers participate in an economy without the restrictions of
carrying stock (inventory) or the need to concern themselves with bulky raw materials. On the other hand, their
investment in expertise does require consistent service marketing and upgrading in the face of competition which
has equally few physical restrictions.

Providers of services make up the Tertiary sector of the economy. The tertiary sector of economy (also known as
the service sector or the service industry) is one of the three economic sectors, the others being the secondary
sector (approximately manufacturing) and the primary sector (extraction such as mining, agriculture and fishing).
The general definition of the tertiary sector is producing a service instead of just an end product, in the case of the
secondary sector. Sometimes an additional sector, the "quaternary sector", is defined for the sharing of
information (which normally belongs to the tertiary sector)

The tertiary sector is defined by exclusion of the two other sectors. Services are defined in conventional economic
literature as "intangible goods".

The tertiary sector of economy involves the provision of services to businesses as well as final consumers.
Services may involve the transport, distribution and sale of goods from producer to a consumer as may happen in
wholesaling and retailing, or may involve the provision of a service, such as in pest control or entertainment.
Goods may be transformed in the process of providing a service, as happens in the restaurant industry or in
equipment repair. However, the focus is on people interacting with people and serving the customer rather than
transforming physical goods.

The generic clear-cut, complete and concise definition of the service term reads as follows:

A service is a set of singular and perishable benefits

• delivered from the accountable service provider, mostly in close coactions with his service suppliers,
• generated by functions of technical systems and/or by distinct activities of individuals, respectively,
• commissioned according to the needs of his service consumers by the service customer from the
accountable service provider,
• rendered individually to an authorized service consumer at his/her dedicated request,
• And, finally, consumed and utilized by the requesting service consumer for executing and/or supporting
his/her day-to-day business tasks or private activities.

Services can be paraphrased in terms of their generic key characteristics.

1. Intangibility

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Services are intangible and insubstantial: they cannot be touched, gripped, handled, looked at, smelled, tasted or
heard. Thus, there is neither potential nor need for transport, storage or stocking of services. Furthermore, a
service cannot be (re)sold or owned by somebody, neither can it be turned over from the service provider to the
service consumer nor returned from the service consumer to the service provider. Solely, the service delivery can
be commissioned to a service provider who must generate and render the service at the distinct request of an
authorized service consumer.

2. Perish ability

Services are perishable in two regards

• The service relevant resources, processes and systems are assigned for service delivery during a definite
period in time. If the designated or scheduled service consumer does not request and consume the service
during this period, the service cannot be performed for him. From the perspective of the service provider,
this is a lost business opportunity as he cannot charge any service delivery; potentially, he can assign the
resources, processes and systems to another service consumer who requests a service. Examples: The hair
dresser serves another client when the scheduled starting time or time slot is over. An empty seat on a plane
never can be utilized and charged after departure.
• When the service has been completely rendered to the requesting service consumer, this particular service
irreversibly vanishes as it has been consumed by the service consumer. Example: the passenger has been
transported to the destination and cannot be transported again to this location at this point in time.

3. Inseparability

The service provider is indispensable for service delivery as he must promptly generate and render the service to
the requesting service consumer. In many cases the service delivery is executed automatically but the service
provider must preparatorily assign resources and systems and actively keep up appropriate service delivery
readiness and capabilities. Additionally, the service consumer is inseparable from service delivery because he is
involved in it from requesting it up to consuming the rendered benefits. Examples: The service consumer must sit
in the hair dresser's shop & chair or in the plane & seat; correspondingly, the hair dresser or the pilot must be in
the same shop or plane, respectively, for delivering the service.

4. Simultaneity

Services are rendered and consumed during the same period of time. As soon as the service consumer has
requested the service (delivery), the particular service must be generated from scratch without any delay and
friction and the service consumer instantaneously consumes the rendered benefits for executing his upcoming
activity or task.

5. Variability

Each service is unique. It is one-time generated, rendered and consumed and can never be exactly repeated as the
point in time, location, circumstances, conditions, current configurations and/or assigned resources are different
for the next delivery, even if the same service consumer requests the same service. Many services are regarded as
heterogeneous or lacking homogeneity and are typically modified for each service consumer or each new situation
(consumerised). Example: The taxi service which transports the service consumer from his home to the opera is
different from the taxi service which transports the same service consumer from the opera to his home - another
point in time, the other direction, maybe another route, probably another taxi driver and cab.

Each of these characteristics is retractable per se and their inevitable coincidence complicates the consistent
service conception and makes service delivery a challenge in each and every case. Proper service marketing
requires creative visualization to effectively evoke a concrete image in the service consumer's mind. From the
service consumer's point of view, these characteristics make it difficult, or even impossible, to evaluate or
compare services prior to experiencing the service delivery.
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 Mass generation and delivery of services is very difficult. This can be seen as a problem of inconsistent service
quality. Both inputs and outputs to the processes involved providing services are highly variable, as are the
relationships between these processes, making it difficult to maintain consistent service quality. For many
services there is labor intensity as services usually involve considerable human activity, rather than a precisely
determined process; exceptions include utilities. Human resource management is important. The human factor is
often the key success factor in service economies. It is difficult to achieve economies of scale or gain dominant
market share. There are demand fluctuations and it can be difficult to forecast demand. Demand can vary by
season, time of day, business cycle, etc. There is consumer involvement as most service provision requires a high
degree of interaction between service consumer and service provider. There is a customer-based relationship
based on creating long-term business relationships. Accountants, attorneys, and financial advisers maintain long-
term relationships with their clients for decades. These repeat consumers refer friends and family, helping to
create a client-based relationship.

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Q1. (b) How one can measure the quality of service? Describe the role of Service Operations Manager.

A. As quality practitioners, we’re accustomed to measuring the physical attributes of a product: dimensions, angles,
power, hardness, tensile strength, color, and many other characteristics. Getting a handle on services can be more
difficult. Often there are no physical attributes to measure, or they don’t clearly affect the essential nature of the
service. We have to think about what really matters to the customer about the service. Although this is the case
with both goods and services, it takes on special significance with a service. Service provision is radically
different from manufacturing. Output measurements that are applied in manufacturing make no sense in a service
situation because the customer has such a strong influence over our environment.

Customer perceptions are critical in any product context. In the world of service delivery, they’re especially
important due to the personal and interactive nature of services. You may satisfy every stated requirement and
still fail to satisfy the customer in a profound way. The ground is shifting as the service is performed, and what
you think was perfect may be far from satisfactory. That’s why we must specifically ask your customer what he or
she thinks about your services. Don’t provide a long survey that probes every aspect of the service experience;
just start with two simple questions: “How satisfied are you with the quality of our services?” and “How likely are
you to recommend our services to a colleague?”

These two questions apply to nearly any service situation and industry. The first question addresses basic
satisfaction, essentially asking if the services met all requirements. The second question takes this a step further
and addresses true commitment: Do you feel strongly enough to recommend our services to somebody else?
These represent two different places on the same continuum (as seen in figure 1), and both are necessary for long-
term success.

It’s worth noting that satisfaction falls only in the middle range of the continuum. The blunt reality of business is
that basic customer satisfaction is no longer adequate for businesses to remain successful. Basic satisfaction
simply means that they might use your services in the future--unless a better offer comes up. Satisfaction is little
more than the absence of dissatisfaction, and there’s no glory in just squeaking by. Satisfaction is a reasonable

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starting point, but the ultimate goal is the kind of commitment that results in customers telling their friends and
colleagues about your organization and recommending your services. That’s what you should be striving for.

The two survey questions include a four-point response scale. Some data gurus might question whether this
provides much constructive information. Keep in mind, however, that people aren’t reliable measuring
instruments. With subjective judgments, four or five degrees of resolution are about as precise as you can expect.
Combine the preceding questions with the following two open-ended questions and you’ll have a very useful tool
for measuring your services:

• How can we improve our existing services? This is one of the simplest yet most effective questions ever
conceived. It strikes at the heart of quality: improvement. It gives customers control of the dialogue, and they can
do with it what they will. The responses will provide a clear path to making improvements that your customers
value.

• What services would you like to see us offer in the future? Innovation is the key to long-term survival,
and this question enlists your customers’ help in making you an innovator. The range of responses is limited only
by your customers’ imaginations.

In the case of the open-ended questions, the results can be sorted into similar categories. These can then be plotted
on a Pareto diagram to provide guidance on the actions that should be taken. Many quality practitioners bristle at
open-ended questions because they don’t produce data in a traditional sense. The responses can be converted to
data, however, without much difficulty. Even more important, the results point the way to exactly the
improvements and innovations that your customers desire.

You now have a dynamic tool that will take less than a minute of somebody’s time. The scaled questions probe
two timeless issues--satisfaction and commitment--and produce solid data that can be tracked, while the open-
ended questions provide direction for your improvement efforts. Together you have one of the most streamlined
and effective service surveys imaginable.

Ask customers for their feedback as soon as the effects of the service are felt. This might be immediately after
performing the service or six months later; it all depends on the type of product you’re addressing and the sorts of
contractual obligations that were made with the customer. Consider these service scenarios:

• Restaurant. Feedback could be provided immediately following the experience, or certainly within a day or
two of it.

• Appliance repair. Feedback could be provided immediately on certain aspects of the service, but it would
probably take weeks to know how effective the repair was. Most appliance-repair companies warranty their
repairs for a certain length of time, so the feedback horizon could follow a similar time frame.

• Management consulting. Complex consulting projects that aim to increase a company’s profitability and
competitiveness might take up to a year to evaluate. Asking for feedback any sooner would be premature.

These three examples illustrate a range of time frames for feedback, from immediately after the service to a year
later. Each organization must decide for itself when the effects of its services can be determined and, thus, when
it’s appropriate to solicit feedback.

Once you’ve determined when to capture feedback, the next logical question is how to do it. Yes, you already
have the tool, but how exactly will it be administered? Your choices are many: in person or by telephone, e-mail,
web site, fax, postal mail, or text message. The chosen method should reflect the most convenient process for
your customers. In general, try not to add another communication burden to your customers. If you have frequent
face-to-face contact with them, use these interactions for getting their feedback. This also goes for existing

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communications via telephone and e-mail. If it’s already happening, use it. Providing feedback will only add a
minute of extra time, and that’s an investment that most customers are glad to make.

Everything we’ve discussed so far is related to subjective measures of service quality. In other words, we’re
asking someone’s opinion of how we performed. They probably don’t have data to back up their opinions, and
they may not even be able to provide specific examples. These opinions are the basis for making buying
decisions, however, so they’re valuable to you as a service supplier.

Besides subjective performance measures, there are also many objective measures that can be applied to your
services. You need only look as far as your service guarantees and contracts to find some effective metrics.
Nearly every service provider commits to performing its service within a certain time frame. This naturally gives
rise to the question: Was the service performed on time? No opinions are necessary here; you either met your
commitments or you didn’t. The data can easily be gathered, charted, and analyzed by your own organization.
Hard data provide an excellent counterpoint to customer feedback, and they usually substantiate the themes
revealed through customer feedback. When data don’t support these themes, it’s useful to explore the reason for
the gaps; e.g., “Our customers think we’re always late, yet our data show this isn’t the case. What’s causing this
difference in perceptions?” When there’s a difference of this sort, one of two things typically must happen:

1. The data-collection method must be changed to better match what the customer experiences.

2. The customer must be educated at the performance level. Sometimes providing objective data can shape
people’s perceptions, and there’s nothing wrong with doing this.

So, what sorts of measures are helpful in managing service quality? Here are some of the most common:

• On-time delivery. The scheduled date and time is agreed upon between the customer and services provider,
and deviations from this schedule can cause serious problems. On-time delivery is an excellent measure that’s
usually easy to track.

• Responsiveness. This means your ability to respond to the customer within a reasonable amount of time.
The response could be related to a question, problem, quote, inquiry, or order change. Organizations that cultivate
“customer intimacy” are usually concerned about how responsive they are.

• Effectiveness. All services are supposed to accomplish something: provide information, repair an appliance,
process a transaction, or develop a program, among others. If you’re able to determine if your service was
effective, then this is an important measure. Keep in mind that I’m talking about an objective measure of
effectiveness, not the customer’s perception of effectiveness.

• Availability. Services that are up and running must be concerned with availability. Examples include
utilities providing water, electricity, gas, telephone, or other resources exactly when they’re needed. Being down
for a few hours can cause millions of dollars in losses and huge claims.

• Audit results. Processes that provide a service can usually be audited. Either through in-person observation
or by examining records, an audit can reveal whether the service was performed as planned. Ideally, conformity
with the plan would mean that the service is effective, though this isn’t always the case.

• Cost control. This means adhering to established budgets and spending plans while meeting other service
objectives. Notice I didn’t say “cost reduction,” which often is used to justify a reduction in service quality.

In summary, a two-pronged approach is the most effective way to measure service quality. Gauge service
effectiveness through customer perceptions and through objective data, and remember that measures are worthless
unless you take action.

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 Service Operation managers perform the role of both production and marketing function, They primarily ensure
that the organization they work for satisfies its customers' needs. They may work at various levels, from head
office to the front end of the business. Work might include:

 helping to develop a customer service policy for an entire organization;

 managing a team of customer services staff;
 Handling face-to-face enquiries from customers.

Possible roles vary widely and job titles in services management include customer care manager, corporate
services manager, customer relationship manager and customer operations manager. In all of these roles, customer
service managers are expected to understand and satisfy their customers' requirements and exceed their
expectations if possible.

The main aim of a Service operation manager is to provide excellent customer service.

Although the work varies, depending on the type and size of the employing organization, typical activities are
likely to include some or all of the following:

 providing help and advice to customers using your organization's products or services;
 communicating courteously with customers by telephone, email, letter and face to face;
 investigating and solving customers' problems, which may be complex or long-standing problems that have
been passed on by customer service assistants;
 handling customer complaints or any major incidents, such as a security issue or a customer being taken ill;
 issuing refunds or compensation to customers;
 keeping accurate records of discussions or correspondence with customers;
 analyzing statistics or other data to determine the level of customer service your organization is providing;
 producing written information for customers, often involving use of computer packages/software;
 writing reports analyzing the customer service that your organization provides;
 visiting customers to provide a one-to-one service;
 developing feedback or complaints procedures for customers to use;
 developing customer service procedures, policies and standards for your organization or department;
 meeting with other managers to discuss possible improvements to customer service;
 being involved in staff recruitment and appraisals;
 training staff to deliver a high standard of customer service;
 leading or supervising a team of customer service staff;
 learning about your organization's products or services and keeping up to date with changes;
 keeping ahead of developments in customer service by reading relevant journals, going to meetings and
attending courses.

Q2. (a) In the modern business environment, what are the types of services available in the market? Also
explain the features of services.

A. There are many different acts or types of services. Some of them are listed as under:

• Civil service, career employees of government

• Community service, volunteer service for the benefit of a community
• Customer service, provision of assistance to customers or clients in different industries
• Domestic service, employment in a residence
• Military service, a country's armed forces
• Public services, services carried out with the aim of providing a public good
• Media Services, like newspapers, magazines, TV and radio advertisements, design services, etc.

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 • Health Services, Hospitals, nursing homes, X-Ray centers, dental and cosmetic centers, etc
• Professional Services, like tax consultants, architects, lawyers, CAs, etc
• Financial Services, like banks, housing and personal financer, forex exchange, etc
• Hospitality, like tourism, airlines and railway services, taxi services, hotels, etc.

Any service can be clearly, completely, consistently and concisely specified by means of the following 12
standard attributes which conform to the MECE principle (Mutually Exclusive, Collectively Exhaustive)

1.Service Consumer Benefits

2.Service-specific Functional Parameter(s)
3.Service Delivery Point
4.Service Consumer Count
5.Service Readiness Times
6.Service Support Times
7.Service Support Language(s)
8.Service Fulfillment Target
9.Maximum Impairment Duration per Incident
10. Service Delivering Duration
11. Service Delivery Unit
12. Service Delivering Price

The meaning and content of these attributes are:

1. Service Consumer Benefits describe the (set of) benefits which are callable, receivable and effectively
utilizable for any authorized service consumer and which are provided to him as soon as he requests the
offered service. The description of these benefits must be phrased in the terms and wording of the intended
service consumers.

2. Service-specific Functional Parameters specify the functional parameters which are essential and unique
to the respective service and which describe the most important dimension of the services cape, the service
output or outcome, e.g. maximum e-mailbox capacity per registered and authorized e-mail service
consumer.

3. Service Delivery Point describes the physical location and/or logical interface where the benefits of the
service are made accessible, callable, receivable and utilizable to the authorized service consumers. At this
point and/or interface, the preparedness for service delivery can be assessed as well as the effective delivery
of the service itself can be monitored and controlled.

4. Service Consumer Count specifies the number of intended, identified, named, registered and authorized
service consumers which shall be and/or are allowed and enabled to call and utilize the defined service for
executing and/or supporting their business tasks or private activities.

5. Service Readiness Times specify the distinct agreed times of day when

• the described service consumer benefits are

• accessible and callable for the authorized service consumers at the defined service delivery point
• receivable and utilizable for the authorized service consumers at the respective agreed service level
• all service-relevant processes and resources are operative and effective
• all service-relevant technical systems are up and running and attended by the operating team
• the specified service benefits are comprehensively delivered to any authorized requesting service
consumer without any delay or friction.

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 The time data are specified in 24 h format per local working day and local time, referring to the location of
the intended service consumers.

6. Service Support Times specify the determined and agreed times of day when the usage and consumption
of commissioned services is supported by the service desk team for all identified, registered and authorized
service consumers within the service customer's organizational unit or area. The service desk is/shall be the
so called the Single Point of Contact (SPoC) for any service consumer inquiry regarding the commissioned,
requested and/or delivered services, particularly in the event of service denial, i.e. an incident. During the
defined service support times, the service desk can be reached by phone, e-mail, web-based entries and/or
fax, respectively. The time data are specified in 24 h format per local working day and local time, referring
to the location of the intended service consumers.

7. Service Support Languages specifies the national languages which are spoken by the service desk team(s)
to the service consumers calling them.

8. Service Fulfillment Target specifies the service provider's promise of effective and seamless delivery of
the defined benefits to any authorized service consumer requesting the service within the defined service
times. It is expressed as the promised minimum ratio of the counts of successful individual service
deliveries related to the counts of requested service deliveries. The effective service fulfillment ratio can be
measured and calculated per single service consumer or per consumer group and may be referred to
different time periods (workday, calenderweek, workmonth, etc.)

9. Maximum Impairment Duration per Incident specifies the allowable maximum elapsing time hh:mm
between

• the first occurrence of a service impairment, i.e. service quality degradation or service delivery
disruption, whilst the service consumer consumes and utilizes the requested service,
• the full resumption and complete execution of the service delivery to the content of the affected
service consumer.

10. Service Delivering Duration specifies the promised and agreed maximum period of time for effectively
delivering all specified service consumer benefits to the requesting service consumer at the currently chosen
service delivery point.

11. Service Delivery Unit specifies the basic portion for delivering the defined service consumer benefits.
The service delivery unit is the reference and mapping object for all cost for service generation and delivery
as well as for charging and billing the consumed service volume to the service customer who has
commissioned the service delivery.

12. Service Delivering Price specifies the amount of money the service customer has to pay for the distinct
service volumes his authorized service consumers have consumed. Normally, the service delivering price
comprises two portions

• a fixed basic price portion for basic efforts and resources which provide accessibility and usability of
the service delivery functions, i.e. service access price
• a price portion covering the service consumption based on
• fixed flat rate price per authorized service consumer and delivery period without regard on the
consumed service volumes,
• staged prices depending on consumed service volumes,
• fixed price per particularly consumed service delivering unit.

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(b) As a Service Manager how would you forecast the demand for services? In what way you would manage
service capacity?

A. Demand forecasting is the activity of estimating the quantity of a product or service that consumers will
purchase. Demand forecasting involves techniques including both informal methods, such as educated guesses,
and quantitative methods, such as the use of historical sales data or current data from test markets. Demand
forecasting may be used in making pricing decisions, in assessing future capacity requirements, or in making
decisions on whether to enter a new market.

No demand forecasting method is 100% accurate. Combined forecasts improve accuracy and reduce the
likelihood of large errors

There are essentially 3 Methods that rely on for forecasting demands of services are as follows:

• Subjective Method or Delphi Model - The Delphi method is a systematic, interactive forecasting
method which relies on a panel of experts. The experts answer questionnaires in two or more rounds.
After each round, a facilitator provides an anonymous summary of the experts’ forecasts from the
previous round as well as the reasons they provided for their judgments. Thus, experts are encouraged to
revise their earlier answers in light of the replies of other members of their panel. It is believed that during
this process the range of the answers will decrease and the group will converge towards the "correct"
answer. Finally, the process is stopped after a pre-defined stop criterion (e.g. number of rounds,
achievement of consensus, and stability of results) and the mean or median scores of the final rounds
determine the results.

Delphi is based on the principle that forecasts from a structured group of experts are more accurate than
those from unstructured groups or individuals. The technique can be adapted for use in face-to-face
meetings, and is then called mini-Delphi or Estimate-Talk-Estimate (ETE). Delphi has been widely used
for business forecasting and has certain advantages over another structured forecasting approach,
prediction markets.

• Causal model Causal models are based on prior knowledge and theory. Time-series regression and
cross-sectional regression are commonly used for estimating model parameters or coefficients. These
models allow one to examine the effects of marketing activity, such as a change in price, as well as key
aspects of the market, thus providing information for contingency planning.

To develop causal models, one needs to select causal variables by using theory and prior knowledge. The
key is to identify important variables, the direction of their effects, and any constraints. One should aim
for a relatively simple model and use all available data to estimate it (Allen and Fildes 2001).
Surprisingly, sophisticated statistical procedures have not led to more accurate forecasts. In fact, crude
estimates are often sufficient to provide accurate forecasts when using cross-sectional data (Dawes and
Corrigan 1974; Dana and Dawes 2005).

Statisticians have developed sophisticated procedures for analyzing how well models fit historical data.
Such procedures have, however, been on little value to forecasters. Measures of fit (such as R2 or the
standard error of the estimate of the model) have little relationship with forecast accuracy and they should
therefore be avoided. Instead, holdout data should be used to assess the predictive validity of a model.
This conclusion is based on findings from many studies with time-series data (Armstrong, 2001c).
Statistical fit does relate to forecast accuracy for cross-sectional data, although the relationship is tenuous.

Causal models are most useful when (1) strong causal relationships are expected, (2) the direction of the
relationship is known, (3) causal relationships are known or they can be estimated, (4) large changes are
expected to occur in the causal variables over the forecast horizon, and (5) changes in the causal variables

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can be accurately forecast or controlled, especially with respect to their direction. Reviews of commercial
software that can be used to develop causal models are provided at the forecastingprinciples.com site.

• A time series is a set of evenly spaced numerical data and is obtained by observing responses at
regular time periods. In the time series model , the forecast is based only on past values and assumes that
factors that influence the past, the present and the future sales of your products will continue.

The time series forecasting methods are described below:

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Time Series Description
Forecasting
Method
Naïve Approach Assumes that demand in the next period is the same as demand in most
recent period; demand pattern may not always be that stable.
For example: If July sales were 50, then Augusts sales will also be 50
Moving Averages MA is a series of arithmetic means and is used if little or no trend is present
(MA) in the data; provides an overall impression of data over time.

A simple moving average uses average demand for a fixed sequence of

periods and is good for stable demand with no pronounced behavioral
patterns.

Equation:

F 4 = D 1 + D2 + D3] / 4

F – forecast, D – Demand, No. – Period

A weighted moving average adjusts the moving average method to reflect

fluctuations more closely by assigning weights to the most recent data,
meaning, that the older data is usually less important. The weights are based
on intuition and lie between 0 and 1 for a total of 1.0

Equation:

WMA 4 = (W) (D3) + (W) (D2) + (W) (D1)

WMA – Weighted moving average, W – Weight, D – Demand, No. – Period

Exponential The exponential smoothing is an averaging method that reacts more
Smoothing strongly to recent changes in demand by assigning a smoothing constant to
the most recent data more strongly; useful if recent changes in data are the
results of actual change (e.g., seasonal pattern) instead of just random
fluctuations

F t + 1 = a D t + (1 - a ) F t

Where

F t + 1 = the forecast for the next period

D t = actual demand in the present period

F t = the previously determined forecast for the present period

• = a weighting factor referred to as the smoothing constant

Time Series The time series decomposition adjusts the seasonality by multiplying the
Decomposition normal forecast by a seasonal factor

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 Service Capacity

Service is a perishable commodity, e.g., a plane flying with empty seats has lost revenue forever the revenue
opportunity of flying with 1 more passenger. American Airlines realized this first, and applied Yield
management, also known as revenue management, is the process of understanding, anticipating and influencing
consumer behavior in order to maximize revenue or profits from a fixed, perishable resource (such as airline seats
or hotel room reservations). This process was first discovered by Dr. Matt H. Keller.

Service is produced and consumed simultaneously – it is an intangible personal experience, which cannot be
either stored in warehouse or transferred from one person to another. Whenever demand is short of capacity or
supply of service idle servers and facilities result.

Variability on service demand is pronounced; there are cultural and economic reasons, we eat meals at the same
time, take vacations at the same time and even cash our cheques at the same time. Even hospitals have low
utilization in summer and dry months. These create idle periods of service at the some time and consumers
waiting at other time.

Below shows as to how the service capacity can be managed:

Managing Demand Managing Supply

Partitioning demand Sharing capacity
Establishing price incentives Increase customer participation
Promoting off-peak demand Creating adjustable capacity
Develop complementing service Cross training employees
Develop reservation system Using part time employees
Scheduling work shifts

Q5. What do you understand by Medical Transcription? Do you feel this an essential aspect of service
management in relations to service industries and society?

A. Medical transcription, also known as MT, is an allied health profession, which deals in the process of
transcription, or converting voice-recorded reports as dictated by physicians and/or other healthcare professionals,
into text format.

The evolution of transcription dates back to the 1960s. The method was designed to assist in the manufacturing
process. The first transcription that was developed in this process was MRP, which is the acronym for
Manufacturing Resource Planning, in 1975. This was followed by another advanced version namely MRP2. But
none of them yielded the benefit of medical transcription.

However, transcription equipment has changed from manual typewriters to electric typewriters to word processors
to computers and from plastic disks and magnetic belts to cassettes and endless loops and digital recordings.
Today, speech recognition (SR), also known as continuous speech recognition (CSR), is increasingly being used,
with medical transcriptionists and or "editors" providing supplemental editorial services, although there are
occasional instances where SR fully replaces the MT. Natural-language processing takes "automatic" transcription
a step further, providing an interpretive function that speech recognition alone does not provide (although MTs
do).

In the past, these medical reports consisted of much abbreviated handwritten notes that were added in the patient's
file for interpretation by the primary physician responsible for the treatment. Ultimately, this mess of handwritten
notes and typed reports was consolidated into a single patient file and physically stored along with thousands of
other patient records in a wall of filing cabinets in the medical records department. Whenever the need arose to
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review the records of a specific patient, the patient's file would be retrieved from the filing cabinet and delivered
to the requesting physician. To enhance this manual process, many medical record documents were produced in
duplicate or triplicate by means of carbon copy.

In recent years, medical records have changed considerably. Although many physicians and hospitals still
maintain paper records, there is a drive for electronic records. Filing cabinets are giving way to desktop computers
connected to powerful servers, where patient records are processed and archived digitally. This digital format
allows for immediate remote access by any physician who is authorized to review the patient information. Reports
are stored electronically and printed selectively as the need arises. Many MTs now utilize personal computers
with electronic references and use the Internet not only for web resources but also as a working platform.
Technology has gotten so sophisticated that MT services and MT departments work closely with programmers
and information systems (IS) staff to stream in voice and accomplish seamless data transfers through network
interfaces. In fact, many healthcare providers today are enjoying the benefits of handheld PCs or personal data
assistants (PDAs) and are now utilizing software on them for dictation.

Pertinent, up-to-date, confidential patient information is converted to a written text document by a medical
transcriptionist (MT). This text may be printed and placed in the patient's record and/or retained only in its
electronic format. Medical transcription can be performed by MTs who are employees in a hospital or who work
at home as telecommuting employees for the hospital; by MTs working as telecommuting employees or
independent contractors for an outsourced service that performs the work offsite under contract to a hospital,
clinic, physician group or other healthcare provider; or by MTs working directly for the providers of service
(doctors or their group practices) either onsite or telecommuting as employees or contractors. Hospital facilities
often prefer electronic storage of medical records due to the sheer volume of hospital patients and the
accompanying paperwork. The electronic storage in their database gives immediate access to subsequent
departments or providers regarding the patient's care to date, notation of previous or present medications,
notification of allergies, and establishes a history on the patient to facilitate healthcare delivery regardless of
geographical distance or location.

The term transcript or "report" as it is more commonly called, is used as the name of the document (electronic or
physical hard copy) which results from the medical transcription process, normally in reference to the healthcare
professional's specific encounter with a patient on a specific date of service. This report is referred to by many as
a "medical record". Each specific transcribed record or report, with its own specific date of service, is then
merged and becomes part of the larger patient record commonly known as the patient's medical history. This
record is often called the patient's chart in a hospital setting.

Medical transcription encompasses the MT, performing document typing and formatting functions according to
an established criteria or format, transcribing the spoken word of the patient's care information into a written,
easily readable form. MT requires correct spelling of all terms and words, (occasionally) correcting medical
terminology or dictation errors. MTs also edit the transcribed documents, print or return the completed documents
in a timely fashion. All transcription reports must comply with medico-legal concerns, policies and procedures,
and laws under patient confidentiality.

In transcribing directly for a doctor or a group of physicians, there are specific formats and report types used,
dependent on that doctor's specialty of practice, although history and physical exams or consults are mainly
utilized. In most of the off-hospital sites, independent medical practices perform consultations as a second
opinion, pre-surgical exams, and as IMEs (Independent Medical Examinations) for liability insurance or disability
claims. Some private practice family doctors choose not to utilize a medical transcriptionist, preferring to keep
their patient's records in a handwritten format, although this is not true of all family practitioners.

Currently, a growing number of medical providers send their dictation by digital voice files, utilizing a method of
transcription called speech or voice recognition. Speech recognition is still a nascent technology that loses much
in translation. For dictators to utilize the software, they must first train the program to recognize their spoken
words. Dictation is read into the database and the program continuously "learns" the spoken words and phrases.

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 Poor speech habits and other problems such as heavy foreign accents and mumbling complicate the process for
both the MT and the recognition software. An MT can "flag" such a report as unintelligible, but the recognition
software will transcribe the unintelligible word(s) from the existing database of "learned" language. The result is
often a "word salad" or missing text. Thresholds can be set to reject a bad report and return it for standard
dictation, but these settings are arbitrary. Below a set percentage rate, the word salad passes for actual dictation.
The MT simultaneously listens, reads and "edits" the correct version. Every word must be confirmed in this
process. The downside of the technology is when the time spent in this process cancels out the benefits. The
quality of recognition can range from excellent to poor, with whole words and sentences missing from the report.
Not infrequently, negative contractions and the word "not" is dropped all together. Voice recognition is similar to
the voice prompts one hears on dialing "411", when information provides the wrong number and charges for the
"411" call. These flaws trigger concerns that the present technology could have adverse effects on patient care.
Control over quality can also be reduced when providers choose a server-based program from a vendor
Application Service Provider (ASP).

Downward adjustments in MT pay rates for voice recognition are controversial. Understandably, a client will seek
optimum savings to offset any net costs. Yet vendors that overstate the gains in productivity do harm to MTs paid
by the line. Despite the new editing skills required of MTs, significant reductions in compensation for voice
recognition have been reported. Reputable industry sources put the field average for increased productivity in the
range of 30%-50%; yet this is still dependent on several other factors involved in the methodology. Metrics
supplied by vendors that can be "used" in compensation decisions should be scientifically supported.

Another unresolved issue is high-maintenance headers that replace simple interfaces to become the "platform" of
choice. Pay rates should reflect this lost-opportunity cost for the MT.

Operationally, speech recognition technology (SRT) is an interdependent, collaborative effort. It is a mistake to

treat it as compatible with the same organizational paradigm as standard dictation, a largely "standalone" system.
The new software supplants an MT's former ability to realize immediate time-savings from programming tools
such as macros and other word/format expanders. Requests for client/vendor format corrections delay those
savings. If remote MTs cancel each other out with disparate style choices, they and the recognition engine may be
trapped in a seesaw battle over control. Voice recognition managers should take care to ensure that the
impositions on MT autonomy are not so onerous as to outweigh its benefits.

Medical transcription is still the primary mechanism for a physician to clearly communicate with other healthcare
providers who access the patient record, to advise them on the state of the patient's health and past/current
treatment, and to assure continuity of care. More recently, following Federal and State Disability Act changes, a
written report (IME) became a requirement for documentation of a medical bill or an application for Workers'
Compensation (or continuation thereof) insurance benefits based on requirements of Federal and State agencies.

Due to the increasing demand to document medical records, countries started to outsource the services of medical
transcription. In the United States, the medical transcription business is estimated to be worth US$10 to $25
billion annually and growing 15 percent each year. The main reason for outsourcing is stated to be the cost
advantage due to cheap labor in developing countries, and their currency rates as compared to the U.S. dollar.

Among outsourcing countries, the India has recently attracted increased amounts of MT outsourcing from the
United States due to the fact that aside from the Hindi language, English is one of the official languages used in
almost all government transactions in the country and the high literacy in the English language and perhaps, the
capability of average Indian to understand American idioms, colloquialism, and slang used in medical
transcription.

Q3. Enumerate the concept of marketing the services which should be adopted for its success. Also describe the
marketing attributes related to services.

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A. What exactly are the characteristics of a service? How are services different from a product? In fact many
organizations do have service elements to the product they sell, for example McDonald’s sell physical products
i.e. burgers but consumers are also concerned about the quality and speed of service, are staff cheerful and
welcoming and do they serve with a smile on their face?

There are five characteristics to a service which will be discussed below.

1. Lack of ownership.

You cannot own and store a service like you can a product. Services are used or hired for a period of time. For
example when buying a ticket to the USA the service lasts maybe 9 hours each way , but consumers want and
expect excellent service for that time. Because you can measure the duration of the service consumers become
more demanding of it.

2. Intangibility

You cannot hold or touch a service unlike a product. In saying that although services are intangible the experience
consumers obtain from the service has an impact on how they will perceive it. What do consumers perceive from
customer service? The location and the inner presentation of where they are purchasing the service?

3. Inseparability

Services cannot be separated from the service providers. A product when produced can be taken away from the
producer. However a service is produced at or near the point of purchase. Take visiting a restaurant, you order
your meal, the waiting and delivery of the meal, the service provided by the waiter/ress is all apart of the service
production process and is inseparable, the staff in a restaurant are as apart of the process as well as the quality of
food provided.

4. Perishibility

Services last a specific time and cannot be stored like a product for later use. If traveling by train, coach or air the
service will only last the duration of the journey. The service is developed and used almost simultaneously. Again
because of this time constraint consumers demand more.

5. Heterogeneity

It is very difficult to make each service experience identical. If traveling by plane the service quality may differ
from the first time you traveled by that airline to the second, because the airhostess is more or less experienced.
A concert performed by a group on two nights may differ in slight ways because it is very difficult to standardize
every dance move. Generally systems and procedures are put into place to make sure the service provided is
consistent all the time, training in service organizations is essential for this, however in saying this there will
always be subtle differences.

Characteristics of a Service

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Having discussed the characteristics of a service, let us now look at the marketing mix of a service.

The service marketing mix comprises off the 7’p’s. These include:
• Product
• Price
• Place
• Promotion

• People
• Process
• Physical evidence.

Let’s now look at the remaining 3 p’s:

People

An essential ingredient to any service provision is the use of appropriate staff and people. Recruiting the right
staff and training them appropriately in the delivery of their service is essential if the organization wants to obtain
a form of competitive advantage. Consumers make judgments and deliver perceptions of the service based on the
employees they interact with. Staff should have the appropriate interpersonal skills, aptititude, and service
knowledge to provide the service that consumers are paying for. Many British organizations aim to apply for the
Investors In People accreditation, which tells consumers that staff are taken care off by the company and they are
trained to certain standards.

Process

Refers to the systems used to assist the organization in delivering the service. Imagine you walk into Burger King
and you order a Whopper Meal and you get it delivered within 2 minutes. What was the process that allowed you
to obtain an efficient service delivery? Banks that send out Credit Cards automatically when their customer’s old
one has expired again require an efficient process to identify expiry dates and renewal. An efficient service that
replaces old credit cards will foster consumer loyalty and confidence in the company.

Physical Evidence

Where is the service being delivered? Physical Evidence is the element of the service mix which allows the
consumer again to make judgments on the organization. If you walk into a restaurant your expectations are of a
clean, friendly environment. On an aircraft if you travel first class you expect enough room to be able to lay
down!
Physical evidence is an essential ingredient of the service mix, consumers will make perceptions based on their
sight of the service provision which will have an impact on the organizations perceptual plan of the service.

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 To summarize service marketing looks at:

The Characteristics of a service that are:

(1) Lack of ownership

(2) Intangibility
(3) Inseparability
(4) Perish ability
(5) Heterogeneity.

The Service marketing mix involves analyzing the 7’p of marketing involving, Product, Price, Place, Promotion,
Physical Evidence, Process and People.

To certain extent managing services are more complicated then managing products, products can be standardized,
to standardize a service is far more difficult as there are more input factors i.e. people, physical evidence, process
to manage then with a product.

Q6. Write any 5 short notes:

(a) Consumer Relationship Management
(b) CRM Programmes
(c) Types of Financial Services
(d) Yield Management
(e) Housing Finance as a service

A. (a) Customer relationship management (CRM) consists of the processes a company uses to track and organize
its contacts with its current and prospective customers. CRM software is used to support these processes;
information about customers and customer interactions can be entered, stored and accessed by employees in
different company departments. Typical CRM goals are to improve services provided to customers, and to use
customer contact information for targeted marketing.

While customer relationship management can be implemented without major investments in software, software is
often necessary to explore the full benefits of a CRM strategy. However, most CRM software vendors stress that a
successful effort requires a holistic approach. Many initiatives often fail because implementation was limited to
software installation, without providing the context, support and understanding for employees to learn, and take
full advantage of the information systems. Tools for customer relationship management should be implemented
"only after a well-devised strategy and operational plan are put in place".

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 Other problems occur when failing to think of sales as the output of a process that itself needs to be studied and
taken into account when planning automation.

From the outside, customers interacting with a company perceive the business as a single entity, despite often
interacting with a number of employees in different roles and departments. CRM is a combination of policies,
processes, and strategies implemented by an organization to unify its customer interactions and provide a means
to track customer information. It involves the use of technology in attracting new and profitable customers, while
forming tighter bonds with existing ones.

CRM includes many aspects which relate directly to one another:

• Front office operations — Direct interaction with customers, e.g. face to face meetings, phone calls, e-mail,
online services etc.
• Back office operations — Operations that ultimately affect the activities of the front office (e.g., billing,
maintenance, planning, marketing, advertising, finance, manufacturing, etc.)
• Business relationships — Interaction with other companies and partners, such as suppliers/vendors and
retail outlets/distributors, industry networks (lobbying groups, trade associations). This external network
supports front and back office activities.
• Analysis — Key CRM data can be analyzed in order to plan target-marketing campaigns, conceive business
strategies, and judge the success of CRM activities (e.g., market share, number and types of customers,
revenue, profitability).

Proponents of CRM software claim that it doesn't only allow more effective ways of managing customer
relationships, but also more customer-centric ways of doing business. Executives often cite the need for the
proper tools as a barrier to delivering the experience their customers expect. A 2009 study of over 860 corporate
executives revealed only 39% believes that their employees have tools and authority to solve customer problems.

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(b) There are several different approaches to CRM, with different software packages focusing on
different aspects. In general, Customer Service, Campaign Management and Sales Force Automation (SFA) form
the core of the system.

Operational CRM

Operational CRM provides support to "front office" business processes, e.g. to sales, marketing and service staff.
Interactions with customers are generally stored in customers' contact histories, and staff can retrieve customer
information as necessary.

The contact history provides staff members with immediate access to important information on the customer
(products owned, prior support calls etc.), eliminating the need to individually obtain this information directly
from the customer. Reaching to the customer at right time at right place is preferable.

Operational CRM processes customer data for a variety of purposes:

• Managing campaigns
• Enterprise Marketing Automation
• Sales Force Automation
• Sales Management System

Analytical CRM

Analytical CRM analyzes customer data for a variety of purposes:

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 • Designing and executing targeted marketing campaigns
• Designing and executing campaigns, e.g. customer acquisition, cross-selling, up-selling, addon-selling
• Analyzing customer behavior in order to make decisions relating to products and services (e.g. pricing,
product development)
• Management information system (e.g. financial forecasting and customer profitability analysis)

Analytical CRM generally makes heavy use of data mining and other techniques to produce useful results for
decision-making. It is at the analytical stage that the importance of fully integrated CRM software becomes most
apparent. Logically speaking, the more information that the analytical software has available for analysis, the
better its predictions and recommendations will be.

Sales Intelligence CRM

Sales Intelligence CRM is similar to Analytical CRM, but is intended as a more direct sales tool. Features include
alerts sent to sales staff regarding:

• Cross-selling/Up-selling/Switch-selling opportunities
• Customer drift
• Sales performance
• Customer trends
• Customer margins
• Customer alignment

Campaign Management

Campaign management combines elements of Operational and Analytical CRM. Campaign management
functions include:

• Target groups formed from the client base according to selected criteria
• Sending campaign-related material (e.g. on special offers) to selected recipients using various channels (e.g.
e-mail, telephone, SMS, post)
• Tracking, storing, and analyzing campaign statistics, including tracking responses and analyzing trends

Collaborative CRM

Collaborative CRM covers aspects of a company's dealings with customers that are handled by various
departments within a company, such as sales, technical support and marketing. Staff members from different
departments can share information collected when interacting with customers. For example, feedback received by
customer support agents can provide other staff members with information on the services and features requested
by customers. Collaborative CRM's ultimate goal is to use information collected by all departments to improve
the quality of services provided by the company. CRM also plays a role of data distributor within customers,
producers and partners. Producers can use CRM information to develop products or find new market. CRM
facilitates communication between customers, suppliers and partner by using new information system such email,
link and data bank.

Consumer Relationship CRM

Consumer Relationship System (CRS) covers aspects of a company's dealing with customers handled by the
Consumer Affairs and Customer Relations contact centers within a company. Representatives handle in-bound
contact from anonymous consumers and customers. Early warnings can be issued regarding product issues (e.g.
item recalls) and current consumer sentiment can be tracked (voice of the customer).

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 Simple CRM

A relatively new spin-off of the traditional CRM model first appearing in 2006. At their core, CRM tools are
designed to manage customer relationships. As described above there are countless supplemental features and
capabilities. Simple CRM systems breakdown the traditional CRM system to focus on the core values--managing
contacts and activities with customers and prospects. These systems are designed to create the most value for the
immediate end user rather than the organization as a whole. Many times they focus on satisfying the needs of a
particular marketplace niche, organizational unit, or type of user rather than an entire organization.

Social CRM

Beginning in 2007, the rapid growth in social media and social networking forced CRM product companies to
integrate "social" features into their traditional CRM systems. Some of the first features added are social network
monitoring feeds (ie Twitter timeline), typically built into the system dashboard. Other emerging capabilities
include messaging, sentiment analysis, and other analytics. Many industry experts contend that Social CRM is the
way of the future, but there are still many skeptics. Top CRM minds agree that online social communities and
conversations carry heavy consequences for companies. They must be monitored for real-time marketplace
feedback and trends.

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(c) Financial services refer to services provided by the finance industry. The finance industry encompasses a
broad range of organizations that deal with the management of money. Among these organizations are banks,
credit card companies, insurance companies, consumer finance companies, stock brokerages, investment funds
and some government sponsored enterprises. As of 2004, the financial services industry represented 20% of the
market capitalization of the S&P 500 in the United States.

The term "financial services" became more prevalent in the United States partly as a result of the Gramm-Leach-
Bliley Act of the late 1990s, which enabled different types of companies operating in the U.S. financial services
industry at that time to merge. Companies usually have two distinct approaches to this new type of business. One
approach would be a bank which simply buys an insurance company or an investment bank, keeps the original
brands of the acquired firm, and adds the acquisition to its holding company simply to diversify its earnings.
Outside the U.S. (e.g., in Japan), non-financial services companies are permitted within the holding company. In
this scenario, each company still looks independent, and has its own customers, etc. In the other style, a bank
would simply create its own brokerage division or insurance division and attempt to sell those products to its own
existing customers, with incentives for combining all things with one company.

A "commercial bank" is what is commonly referred to as simply a "bank". The term "commercial" is used to
distinguish it from an "investment bank", a type of financial services entity which, instead of lending money
directly to a business, helps businesses raise money from other firms in the form of bonds (debt) or stock (equity).

• Private banking - Private Banks provide banking services exclusively to high net worth individuals. Many
financial services firms require a person or family to have a certain minimum net worth to qualify for
private banking services. Private Banks often provides more personal services, such as wealth management
and tax planning, than normal retail banks.
• Capital market bank - bank that underwrite debt and equity, assist company deals (advisory services,
underwriting and advisory fees), and restructure debt into structured finance products.
• Bank cards - include both credit cards and debit cards. Bank of America is the largest issuer of bank cards.
• Credit card machine services and networks - Companies which provide credit card machine and payment
networks call themselves "merchant card providers".

Foreign exchange services are provided by many banks around the world. Foreign exchange services include:

• Currency Exchange - where clients can purchase and sell foreign currency banknotes
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 • Wire transfer - where clients can send funds to international banks abroad
• Foreign Currency Banking - banking transactions are done in foreign currency

This is the statement given by the vedant kulshrestha.........

In Investment Services

• Asset management - the term usually given to describe companies which run collective investment funds.
• Hedge fund management - Hedge funds often employ the services of "prime brokerage" divisions at major
investment banks to execute their trades.
• Custody services - Custody services and securities processing is a kind of 'back-office' administration for
financial services. Assets under custody in the world were estimated to $65 trillion at the end of 2004.

Insurance

• Insurance brokerage - Insurance brokers shop for insurance (generally corporate property and casualty
insurance) on behalf of customers. Recently a number of websites have been created to give consumers
basic price comparisons for services such as insurance, causing controversy within the industry.
• Insurance underwriting - Personal lines insurance underwriters actually underwrite insurance for
individuals, a service still offered primarily through agents, insurance brokers, and stock brokers.
Underwriters may also offer similar commercial lines of coverage for businesses. Activities include
insurance and annuities, life insurance, retirement insurance, health insurance, and property & casualty
insurance.
• Reinsurance - Reinsurance is insurance sold to insurers themselves, to protect them from catastrophic
losses.

Other financial services

• Intermediation or advisory services - These services involve stock brokers (private client services) and
discount brokers. Stock brokers assist investors in buying or selling shares. Primarily internet-based
companies are often referred to as discount brokerages, although many now have branch offices to assist
clients. These brokerages primarily target individual investors. Full service and private client firms
primarily assist execute trades and execute trades for clients with large amounts of capital to invest, such as
large companies, wealthy individuals, and investment management funds.
• Private equity - Private equity funds are typically closed-end funds, which usually take controlling equity
stakes in businesses that are either private, or taken private once acquired. Private equity funds often use
leveraged buyouts (LBOs) to acquire the firms in which they invest. The most successful private equity
funds can generate returns significantly higher than provided by the equity markets
• Venture capital is a type of private equity capital typically provided by professional, outside investors to
new, high-potential-growth companies in the interest of taking the company to an IPO or trade sale of the
business.
• Angel investment - An angel investor or angel (known as a business angel or informal investor in Europe),
is an affluent individual who provides capital for a business start-up, usually in exchange for convertible
debt or ownership equity. A small but increasing number of angel investors organize themselves into angel
groups or angel networks to share research and pool their investment capital.
• Conglomerates - A financial services conglomerate is a financial services firm that is active in more than
one sector of the financial services market e.g. life insurance, general insurance, health insurance, asset
management, retail banking, wholesale banking, investment banking, etc. A key rationale for the existence
of such businesses is the existence of diversification benefits that are present when different types of
businesses are aggregated i.e. bad things don't always happen at the same time. As a consequence,
economic capital for a conglomerate is usually substantially less than economic capital is for the sum of its
parts.

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 (d) Internal marketing (IM) is an ongoing process that occurs strictly within a company or organization whereby
the functional process aligns, motivates and empowers employees at all management levels to consistently deliver
a satisfying customer experience. According to Burkitt and Zealley, "the challenge for internal marketing is not
only to get the right messages across, but to embed them in such a way that they both change and reinforce
employee behavior".

Key concepts of internal marketing include:

• IM functioning as a continual internal 'upskilling' process.

• Alignment of the organization’s purpose with employee behavior.
• Employees internalizing the core values of the organization.
• Motivation, reframing and empowerment of employee attitude.
• Inside-out management approach.
• Retaining a positive customer experience throughout the business objectives

The following are the features of an internal marketing-oriented business:

1. Creating enabling culture: this is done when employees are empowered by management through allowing
creativity, innovation, allowing initiatives and accountability and responsibility of their decisions.

2. Practicing participative hiring: that is involving current employees in the process of hiring new employees.

3. Ensuring equitable recognition and reward: business must exercise employee recognition with reward to
what employee has achieved.

4. Demonstrating fairness during hard times: fair treatment of employees when faced with hard times and
difficult moments like death of the near family members. This can be achieved by setting aside emergency
funds.

5. Good organization structure that allows learning, total quality management and re-engineering.

Benefits of Internal Marketing

Internal marketing

• encourages the internal market (employees) to perform better;

• empowers employees and gives them accountability and responsibility;
• creates common understanding of the business organization;
• encourages employees to offer superb service to clients by appreciating their valuable contribution to the
success of the business;
• helps non-marketing staff to learn and be able to perform their tasks in a marketing-like manner;
• improves customers retention and individual employee development;
• integrates business culture, structure, human resources management, vision and strategy with the
employees' professional and social needs;
• creates good coordination and cooperation among departments of the business.

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(e) Yield management, also known as revenue management, is the process of understanding, anticipating and
influencing consumer behavior in order to maximize revenue or profits from a fixed, perishable resource (such as
airline seats or hotel room reservations). This process was first discovered by Dr. Matt H. Keller.

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The challenge is to sell the right resources to the right customer at the right time for the right price. This process
can result in price discrimination, where a firm charges customers consuming otherwise identical goods or
services a different price for doing so. Yield management is a large revenue generator for several major
industries; Robert Crandall, former Chairman and CEO of American Airlines, has called yield management "the
single most important technical development in transportation management since we entered deregulation."

Deregulation is generally regarded as the catalyst for yield management in the airline industry, but this tends to
overlook the role of Global Distribution Systems (GDS’s). It is arguable that the fixed pricing paradigm occurs as
a result of decentralized consumption. With mass production, pricing became a centralized management activity
and customer contact staff focused on customer service exclusively. Electronic commerce, of which the GDS's
were the first wave, created an environment where large volumes of sales could be managed without large
numbers of customer service staff. They also gave management staff direct access to price at time of consumption
and rich data capture for future decision-making.

There are three essential conditions for revenue management to be applicable:

• That there is a fixed amount of resources available for sale.

• That the resources sold are perishable. This means that there is a time limit to selling the resources, after
which they cease to be of value.
• Those different customers are willing to pay a different price for using the same amount of resources.

If the resources available are not fixed or not perishable, the problem is limited to logistics, i.e. inventory or
production management. If all customers would pay the same price for using the same amount of resources, the
challenge would perhaps be limited to selling as quickly as possible, e.g. if there are costs for holding inventory.

Yield management is of especially high relevance in cases where the constant costs are relatively high compared
to the variable costs. The less variable cost there is, the more the additional revenue earned will contribute to the
overall profit. This is because it focuses on maximizing expected marginal revenue for a given operation and
planning horizon. It optimizes resource utilization by ensuring inventory availability to customers with the highest
expected net revenue contribution and extracting the greatest level of ‘willingness to pay’ from the entire
customer base. Revenue management practitioners typically claim 3% to 7% incremental revenue gains due to
revenue management activity. In many industries this can equate to over 100% increase in profits. A competent
revenue management analyst with good decision support tools can generate $10,000 per hour.

Yield management has significantly altered the travel and hospitality industry since its inception in the mid 1980s.
It requires analysts with detailed market knowledge and advanced computing systems who implement
sophisticated mathematical techniques to analyze market behavior and capture revenue opportunities. It has
evolved from the system airlines invented as a response to deregulation and quickly spread to hotels, car rental
firms, cruise lines, media, and energy to name a few. Its effectiveness in generating incremental revenues from an
existing operation and customer base has made it particularly attractive to business leaders that prefer to generate
return from revenue growth and enhanced capability rather than downsizing and cost cutting.

- END -

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