UNIT – II

SERVICES MARKETING - PLANNING PROCESS & DEVELOPING AN EFFECTIVE SERVICE

STRATEGY

Service marketing management represents marketing concept in action. The service firm must be customer-
oriented & must develop a competitive marketing strategy which consists of two steps:

 Identifying target markets and their needs

 Developing a marketing mix that satisfies the unique needs of these target markets

Developing a Service Strategy

The development of a services strategy lies at the heart of the service provider organisation. Increasingly,
services providers are finding themselves operating in very fluid market places that are subject to constant
change. These changes are characterised by an increased demand for services, increasing costs for service
organisations, difficulty in achieving a balance between the development of standardised or personalised
services and the advent and use of technology. Given these market conditions, service organisations must take a
structured approach to the development of strategy.

Marketing Plans for Services

Planning and strategy are linked concepts. The major phases in planning consist of the following:

 Understanding the strategic context. (Situation Analysis/Marketing Audit) and defining the
organisational Direction (Mission; Goals; Objectives)
 Situation review.
 Marketing strategy formulation.
  Plan development – Resource allocation
 Plan implementation and monitoring.

Although the process is shown as individual steps, many of the steps are interrelated and the process is
interactive. Also the degree to which each step should be emphasised in a given service firm will depend on the
size and nature of the organisation.

Marketing Planning and Services

Effective marketing is greatly enhanced by a well thought through and developed marketing plan. Such a plan
helps bring all the service firm’s marketing activities together in an integrated manner and helps create a
positive future for the firm. However, particularly in services sector organisations, a number of problems create
barriers to the development and implementation of marketing planning. These include the following:

 Confusion between tactics and strategy.

 Isolating the marketing function from operations.
 Confusion between the marketing function and the marketing concept.
 Organizational barriers.
 Lack of in-depth analysis.
 Confusion between process and output.
 Lack of knowledge and skills.
 Lack of a systematic approach to marketing planning.
 Failure to prioritise objectives.
 Hostile corporate cultures.

When competing in the marketplace, a services firm has a broad range of alternatives available to it. However it
first must create an economically viable service formula on which to build. Competing for market share can take
place in one or many markets at the same time and can involve expansion of both the services offered and the
segments served.

Competing for markets is based on the premise that service formulas are often easy to copy and success,
therefore, comes from rapid target market expansion.

A clearly defined strategy can also simplify the nature of the task for the service provider. If they know what the
organisation is supposed to be delivering, to whom it is to be delivered, how it is to be delivered and with what
image defined, then the probability of success is increased. If a firm possesses a “strategic service vision,” that
vision will guide the behaviour of both the service provider and the consumers.

MARKET SEGMENTATION

Defining a market is the basis of segmentation. Service firms vary widely in their abilities of serving. It would
then, not be wise to compete in an entire market. Instead, organisations should focus on the set of customers
they can serve best.

Market segmentation is defined as the process of dividing the market into distinct groups that share common
characteristics, needs, purchasing behaviour or consumption patterns. Market segmentation is a strategy that
recognises the need of ‘specialisation’ to suit the needs of a segment of the market rather than trying to be ‘all
things to all people’.

Why market segmentation is important?

 It leads to efficient and effective utilization of resources.

 Improves manageability of the market by dividing the markets into smaller parts.
 Helps to improve the company’s ability to satisfy customers.
Objectives of Segmentation

 Identify the similarity of needs of potential buyers within a segment and pursue them with tailored
products.
 Identify the difference between needs of buyers among segments and try to cater to these different
needs.
 Once the specific segment has been chosen for the marketing efforts, the organization is more
focused in its efforts and there is a potential for increased return on investment.
 It is cost effective for the marketers to assign the buyers to different segments on the basis of a
number of parameters.

Bases for Market Segmentation

Following are the broad bases for segmentation:

1. Geographic:
a. Region – Far east, south-east Asia, Middle-east, European, Atlantic, Pacific, North/South America,
Polar, Siberian, Deserts etc. In India, North, South, West, East & North-east
b. City or metro size – below 1L, 1-10L, 10L-1Cr, >1Cr etc.
c. Density – Urban, Sub-urban, Rural
d. Climate – Hot, Cold, Humid, Tropical, Rainy, Deserts
2. Demographic:
a. Age – Childhood, Adolescence, Young, Middle age, Old
b. Gender – Male, Female
c. Marital Status – Single, Married, Divorced, Widowed
d. Family Size – 2, 4, 6 or more, joint, nuclear, etc.
e. Family Life Cycle - Young Single, Young Married (no children), Young Married (small children),
Middle aged with or without children, Old with or without children, Single survivor
f. Income - <5K, 5-10K, 10-25K, 25-50K, 0.5-1L, >1L pm.
g. Purchasing Capacity – with or without disposable surplus, low or high
h. Price preference – general, or premium; min / avg / high
i. Education – Secondary, Senior secondary, Graduation, Post Graduate, Technical / Higher specialised
Qualification
j. Occupation – un-employed, students, farmers, workers, Govt. Employees, Self-employed,
Professionals, Business Owners, Retired Persons,
3. Psychographic:
a. Lifestyle – Culture Oriented, Sports Oriented, Outdoor Oriented, Urban Mobile, Couch Potato
b. Personality – Ambitious, Compulsive (with Obsession), Gregarious (liking of association or
companionship), Authoritarian, Aggressive, Introvert, Extrovert
4. Behavioural:
a. Benefit Segmentation – Economic, Durable, Value for money, Convenient
b. Purchase Occasion
i. Time – Leisure, Work, Rush, Morning, Night
 ii. Objective – Personal, Fun, Gift, Time-pass, Achievement
iii. Location – Home, Office, Road, Restaurants, In-store
iv. Person – Self, Family members, Boss, Friends, Peers
c. User Status – Nonuser, Ex-user, Potential User, First-time user, Regular User
d. Usage rate :
i. Usage Rate – Heavy users, Medium user, Light users, Active users, Rare users, Non users
ii. Awareness Status – Unaware, Aware, Interested, Enthusiastic,
iii. Attitude towards Product - Negative, Positive, Indifferent, Hostile
e. Brand Loyalty – High, Moderate, Low, Non-Loyal
f. Buyer Readiness & marketing Factor – some customer are more willing to buy certain goods &
services than others, may be due to their prior knowledge or exposure.

Market Targeting in Services

1. Once the firm has identified its market segment opportunity, it has to decide how many and which one to
target. The firm must look at two factors :
a. Segment size & growth potential: The size of different segments in the market should be compared on
the basis of their present capacity and their future potential to grow.
b. The segment’s overall attractiveness & profitability: Marketers should analyse several factors like
competition – present & future, presence of substitutes – present & future, availability – present &
future. Then on the basis of the critical assessment, targeting should be decided.
c. The company’s objectives & resources: Companies differ in sizes, styles, resources, specialisations,
expertise, standings, objectives, etc. The target selection should match the overall objectives &
resources of the company
2. Targeting Strategies
Having evaluated different segments, the company can consider five patterns of target market selection :
a. Single segment concentration (concentration strategy) – Only a single segment is targeted and
concentrated effort is given,
b. Selective specialisation (Selective segmentation strategy) – Only a few segments are targeted
depending on the company criteria and concentrated effort is given,
c. Product/Service specialisation strategy – All the available market segments are targeted for a single
category of products & services,
d. Market specialisation strategy – Only a particular market segment is targeted for all the categories of
products & services,
e. Full market coverage – All the available market segments are targeted for all the categories of products
& services.
3. Counter segmentation – The market & its segmentations don’t remain static. The difference between the
segments may get more insignificant over time and some other segments no longer remain viable. This is a
result of several variable factors changing independently or dependently. In such situation clubbing of two
or more segments is done to have a common strategy of marketing mix. This is called “Counter
segmentation”.
POSITIONING AND DIFFERENTIATION OF SERVICES

Positioning is defined as the process of establishing and maintaining a distinctive place in the market for an
organisation and/or its products/services offerings. This is the creating of a distinct place in the minds of a
customer, or the perception of a customer with respect to other companies or their products/services.

Jack Trout has distilled the essence of positioning into the following four principles:

1. A company must establish a position in the minds of its targeted customers.

2. The position should be singular, providing one simple and consistent message.
3. The position must set a company apart from its competitors.
4. A company cannot be all things to all people—it must focus its efforts.

According to Michael Porter, there are three basic positioning alternatives, like:
(1) As a product/service differentiator
(2) As a low-cost leader, and
(3) As a niche market offerer.
He suggested that the marketer should be specialist for a few strategies rather than a generalist for several
strategies.

The strategies can be based on several attributes as:

 Attribute Positioning: Based on a single attribute or feature of a service like Malayala Manorama - no.1
in circulation, Allahabad Bank- the oldest bank etc.
 Benefit Positioning: Based on some benefit the customer derives using a particular service, like some
new generation private banks offering ATMs and internet banking, etc.
 Use/Application Positioning: Positioning as the best for a particular service application, like SBI
offering education loans, etc.
 User Positioning: Based on the requirements of some specific target groups, like India positioning itself
as the destination of tourists seeking inner peace of mind etc.
 Competitor Positioning: This service is positioned primarily against a particular competitor, like IIPM
positioning itself against IIMs – dare to think beyond IIMs
 Category Positioning: Positioning as a leader of a particular category, so that it becomes synonymous
with that service, like Xerox means photocopying, Essel World means family holiday entertainment,
etc.
 Quality/Price Positioning: On the basis of quality standard at a particular price like Oberoi hotels offer
high class service at a high price range, other budget hotels offering decent minimum comfortable stay
and service with all modern amenities (but not luxury) for affordable prices.

Marketers should be careful about their positioning strategies to prevent certain situations. Some brands are
over-positioned when the segment is too narrow for the offer and many potential customers fail to notice, some
brands are under-positioned when the customers fail to notice any distinctive edge. Some brands communicate
conflicting features/benefits to create confusion, some brands offer irrelevant or redundant features/benefits,
some brands offer promises which the customer doubt whether the marketer can deliver.

Market positions are rarely permanent. Competitive activity, new technologies, and internal changes may cause
a company to reposition itself and its services. Repositioning involves changing the position a firm holds in a
consumer's mind relative to competing services.

Differentiation is providing a special or competitive advantage to the service over that of the competitors, in
any attributes, price, quality, benefit, features, delivery, etc. The customers must feel that the service offered by
the company is something special or superior to others and thereby perceive the service and the company as a
favourable and respectable image in their mind. For this all the elements of the marketing mix play a role.
Effective differentiation should have the following criteria:

 Important: Customers in the target group attach some value and importance to the services offered by
the company
 Distinctive: Customers feel that the services offered by the company have some speciality, advantage,
difference, uniqueness, etc. as compared to that of the competitors
 Superior: Customers feel that the services offered by the company is superior to the rest in all respects
 Communicable: The ease with which the company communicates with the customers regarding their
service offer
 Pre-emptive: The differentiation is such that it can’t be easily copied or duplicated or equalled
 Affordable: Customers should be able to pay for the difference willingly
 Profitable: The company should maintain its profitability or profits in offering the difference, or in
other words it should be profitable.