Nilanchal Sahu

Roll No : 510922671

Marketing and Customer Relationship Management

Code No: - ML0006
MBA Semester 4
Assignment Set- 1

Q.1A. Point out the distinctive characteristics of services

with examples.

Stanton points out that the special nature of services stems form several
distinctive characteristics and he singles out four for particular comment.
They

1. Intangibility

2. Inseparability

3. Heterogeneity (Kotler terms this as variability), and

4. Perishability and fluctuating demand.

These four have been identified by Kotler also as the major characteristics
greatly affecting the design of marketing programmers for services.

1. Intangibility

Services are essentially intangible. Because services are performances or

actions rather than objects, they cannot be seen, felt, tasted, or touched
in the same manner that we can sense tangible goods. For example,
health-care services are actions e.g. surgery, diagnosis, examination,
treatment performed on the patient, although the patient may be able to
see and touch certain tangible components of the service e.g. equipment,
hospital room. In fact, many services such as health care are difficult for
the consumer to grasp even mentally. Even after a diagnosis or surgery
has been completed, the patient may not fully comprehend the service
performed.

Marketing Implications

Intangibility presents several marketing challenges. Services cannot be

inventories, and therefore fluctuations in demand are often difficult to
manage. For example, there is tremendous demand for resort
accommodations in Simla/Ooty in May, but little demand in December. Yet
resort owners have the same number of rooms to sell year-round.
Services cannot be patented legally, and new service concepts can
therefore be communicated to competitors. Services cannot be readily
displayed or easily communicated to customers, so quality may be
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Roll No : 510922671

difficult for consumers to assess. Decisions about what to include in

advertising and other promotional materials are challenging, as is pricing.
The actual cost of a “unit of service” is hard to determine and the price/
quality relationship is complex.

2. Inseparability

Services are created and consumed simultaneously and generally they

cannot be separated from the provider of the service. The service provider
customer interaction is a specialist of service marketing.

Unlike the tangible goods, service cannot be distributed using

conventional channels. Inseparability makes direct sales as the only
possible channel of distribution and thus delimits the markets for the
seller’s services. This characteristic also limits the scale of operation of
the service provider. For example, a doctor can give treatment to limited
number of patients only in a day.

This characteristic also emphasizes the importance of the quality provided

to clients in services. This poses another management challenge to the
service marketer. For example, an airline company may provide excellent
fight service, but a discourteous onboard staff may keep the customer
permanently off that company.

There are exemptions also to the inseparability characteristic. A television

coverage, travel agency or stock broker may represent and help
marketing the service provided by another service firm.

Marketing Implications

Because services often are produced and consumed at the same time,
mass production is difficult if not impossible. The quality of service and
customer satisfaction will be highly dependent on what happens in “real
time”, including actions of employees and the interactions between
employees and customers.

3. Heterogeneity

This characteristic is referred to as variability by Kotler. We have already

seen that services cannot be standardized. They are highly variable
depending upon the provider, the time and place where they are
provided. A service provided on a particular occasion is somewhat
different from the same service provided on other occasions. Also the
standard of quality perceived by different consumers may differ
accordingly. For example, the treatments given in a hospital to different
persons on different occasions cannot similar. Consumers of services are
aware of this variability and by their interaction with other consumers

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they also get influenced or influence others in the selection of service

provider. Marketing Implications

The services are heterogeneous across time, organizations, and people

ensuring consistent service is fully controlled by the service supplier; such
as the ability of the consumer to articulate his or her needs, the ability
and willingness of personnel to satisfy those needs, the presence (or
absence) of other customers, and the level of demand for the services.

4. Perishability and Fluctuating Demand

Perishability refers to the fact that a seat in an airplane or in a restaurant,

an hour of a lawyer’s time, or telephone line capacity not used cannot be
reclaimed and used or resold at a later time. This is in contrast to goods
that can be in inventory or resold another day, or even returned if the
consumer is unhappy.

Marketing Implications

A primary issue that marketers face in relation to service perish ability is

the inability to inventory. Demand forecasting and creative planning for
capacity utilization is therefore important in challenging the decision
areas. The fact that services cannot typically be returned or resold also
implies a need for strong recovery strategies when things do go wrong.
For example, while a bad haircut cannot be returned, the hairdresser can
and should have strategies for recovering the customer’s goodwill if and
when such a problem occurs.

B. Discuss briefly the significance of process and

physical evidence in services.

The process by which the service is created and delivered to the customer
is critical to the service operations as customer often perceive the service
delivery system as part of the service itself.

Process means all work activities. Process involve the procedures, tasks
schedules, mechanisms, activities and routines by which a product or
service is delivered to the customer. It involves policy decisions about
customer involvement and employee discretion. Identification of process
management as a separate activity is a must for service quality
improvement. Its importance in service businesses is evident because of
the inseparability of production and consumption. The customer not only
thinks about the service product alone but also attaches importance to
the manner in which it is delivered. Under these circumstances, a poorly
designed service process leads to poor service quality. Banks provide a
good example of this. By reconfiguring the way they deliver service
through the introduction of automatic teller machines (ATMs) banks have
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been able to free staff to handle more complex customer needs by

diverting cash only customers to the ATMs.

Processes are seen as structural elements that can be engineered to help

deliver a desired strategic positioning. They can be analyzed according to
the complexity and divergence. Processes can be changed to reinforce the
positioning. A clear understanding of the configuration processes in terms
of this complexity and divergence, on a balance of marketing and
operations activities are important factors for improving service systems.
Processes are thus a marketing mix element which can have a substantial
role in reinforcing positioning and in product development.

4.8 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 is known as physical
evidence in service.

The physical evidence of service includes all of the tangible

representations of the service such as brochures, letterhead, business
cards, report formats, signage, and equipment. In some cases, it includes
the physical facility. Physical evidence cues provide excellent
opportunities for the firm to send consistent and strong messages
regarding the organization’s purpose, the intended market segments and
the nature of the service

Q.2 Briefly explains the gaps model in service marketing.

Quality can be viewed from two perspectives – internal and external.

Internal quality is based on conformance to specifications. External quality
is based on relative customer perceived quality. It is essential that quality
is measured from the customer perspective, not from what managers
within a company think their customer views are!
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Roll No : 510922671

A model has been developed by Parasuraman and his colleagues which

helps to identify the gaps between the perceived service qualities that
customers receive and what they expect. The model identifies five gaps:

1. Consumer expectation – management perception gap.

2. Management perception – service quality expectation gap.

3. Service quality specifications – service delivery gap.

4. Service delivery – external communications to consumer’s gap.

5. Expected service – perceived service gap.

Gap – 5 is the service quality shortfall as seen by the customers, and gaps
1-4 are shortfalls within the service organization. Thus gaps 1-4 contribute
to gap – 5. These gaps are given in the following

Figure 2.1

The first gap is the difference between consumer expectations and

management perceptions of consumer expectations. Research shows that
financial service organizations often treat issues of privacy as relatively
unimportant, whilst consumers consider them very important.

The second gap is the difference between the management perceptions of

consumer expectations and service quality specifications. Managers will
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set specifications for service quality based on what they believe the
consumer requires. However, this is not necessarily accurate. Hence many
service companies have put much emphasis on technical quality, when in
fact the quality issues associated with service delivery are perceived by
clients as more important.

The third gap is the difference between service quality specification and
the service actually delivered. This is of great importance to service where
the delivery system relies heavily on people. It is extremely hard to
ensure that quality specifications are when a service involves immediate
performance and delivery in the presence of the client. This is the case in
many service industries: for example, a medical practice is depending on
all the administrative, clerical and medical staff performing their tasks
according to certain standards.

The fourth gap is the difference between service delivery intention and
what is communicated about the service to customers. These established
expectations within the customer may not be met. Often this is the result
of inadequate communication by the service provider.

The fifth gap represents the difference between the actual performance
and the customer perception of the service. Subjective judgment of
service quality will be affected by many factors, all of which may change
the perception of the service which has been delivered. Thus a guest in a
hotel may receive excellent service throughout his stay, apart from poor
checking out facilities. But this last experience may damage his entire
perception of the service, changing his overall estimation of the quality of
the total service provided from good to poor.

The gap model outlined above provides a framework for developing a

deeper understanding of the causes of service quality problems,
identifying shortfalls in service and determining the appropriate means to
close the gaps.

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 Nilanchal Sahu
Roll No : 510922671

Q3.What are the bases for segmenting in services

marketing? Explain with examples.
Market segmentation is the process of aggregating customers with similar
wants, needs, preferences, or buying behaviour. Market targeting involves
evaluating the attractiveness of the segments and selecting the ones that
the firm will serve. In other words, segmentation is the analysis conducted
about customers and targeting is the managerial decision about whom to
serve. Both of these are required for effective market positioning, which
involves establishing the competitive position for the service in the mind
of the customer and creating or adapting the service mix to fit the
position.

Segmentation by Service

One area which has received relatively little attention is the consideration
of how customers respond to varying service offerings. This may be
considered a subset of benefit segmentation, but it is of sufficient
importance to be addressed separately. The various elements of customer
service that can be offered, and possible differentiation in terms of service
levels within these elements, represent a considerable opportunity to
design service packages appropriate to different market segments.

Segmenting markets by service involves addressing the following issues:

 Can groupings of customers be identified with similar service

requirements?
 Can we differentiate our service offering?
 Do all our products require the same level of service?

The types of segmentation outlined above are illustrative of the main

forms of segmentation used by services companies. They are, however,
by no means exhaustive. To a large extent the identification of
segmentation bases involves the element of creativity and those
marketing services should constantly be considering alternative ways of
segmenting the market and seeking ways in which they can alternative
advantage over their competitors. This stage of the segmentation process
should result in the selection of the best bases(s) for segmentation.

The segmentation process should result in one of the four basis decisions
being reached:

1. The service firm may decide to target one segment of the market.
2. The service firm may decide to target several segments and so will
develop different marketing mix plans for each segment.

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Roll No : 510922671

3. Management may decide not to segment the market but to offer the
service to the mass market. This may be appropriate if the market is very
small and single portion would not be profitable.
4. Analysis may show that there is no viable market niche for the service
offering.

The relevance of market segmentation is now being increasingly

recognized in the service sector. A number of studies have pointed to the
importance of market segmentation. One study ranked ‘problems in
recognizing, defining, understanding and segmenting markets’ as the
most important problem facing the senior executives surveyed. Another
survey ranked the segmentation as the third most important marketing
tool. However, despite the recognition of the importance of market
segmentation methodology, some service firms are still basing their
marketing strategies methodology, some service firms are still basing
their marketing strategies and tactics on either aboard approach to the
market, or a relatively unsophisticated approach to segmentation. Many
service firms need to be more disciplined in their focus on their
marketplace.

Segmentation is at the heart of marketing strategy and is concerned with

the development of a market position that minimizes competitor’s
strengths and maximizes the strength of the service provide.
Segmentation and the associated steps of positioning provide the
opportunity to tailor the service offered to better meet the needs of
specific segments.

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 Nilanchal Sahu
Roll No : 510922671