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Unit 4
Services Marketing
Unit 4 SERVICE DELIVERY AND PROMOTION
Contents
4.1 Positioning Services .................................................................................................................................................2
4.1.a Developing an Effective Positioning Strategy ...................................................................................................3
4.1.b Using Positioning Maps to Plot a Competitive Strategy ...................................................................................3
4.1.c Data Sources .....................................................................................................................................................4
4.2 Strategies for Effective Service Delivery through Intermediaries:...........................................................................5
4.2.a Control Strategies: ............................................................................................................................................5
4.2.b Partnering Strategies ........................................................................................................................................6
4.2. c Empowerment: ................................................................................................................................................7
4.3 PRICING STRATEGIES ...............................................................................................................................................8
4.3.a Retail Cost and Pricing ......................................................................................................................................8
4.3.b Competitive Position ........................................................................................................................................8
4.3.c Pricing Below Competition ...............................................................................................................................8
4.3.d Pricing Above Competition...............................................................................................................................9
4.3.e Multiple Pricing ................................................................................................................................................9
4.3.f Cost Factors and Pricing ....................................................................................................................................9
4.3.g Figuring Costs and Profits for a Consultant Service ........................................................................................10
4.4 PRICING AT A GLANCE: WHEN TO PRICE LOW AND WHEN TO PRICE HIGH ..........................................................10
4.4 a Demands for these products DO change when prices are raised or lowered: ...............................................12
4.4 b Demand for these products DOES NOT change when prices are raised or lowered: ....................................12
4.5 SERVICE MARKETING TRIANGLE ............................................................................................................................12
4.5.a Types of Marketing in Service Firms ...............................................................................................................13
1.
External Marketing .........................................................................................................................................13
2.
Internal Marketing ..........................................................................................................................................14
3.
Interactive Marketing .....................................................................................................................................14
4.6 Integrated Marketing Communications ................................................................................................................14
4.6.a Integrated Marketing Communication (IMC) .................................................................................................14
4.6.b Components of Integrated Marketing Communications ...............................................................................15
4.6.c Origins .............................................................................................................................................................16
4.6.d Model & Stages ..............................................................................................................................................17
4.6.e The Growing Importance of Integrated Marketing Communications ............................................................18
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 4
Services Marketing
Unit 4 SERVICE DELIVERY AND PROMOTION
4.1 Positioning Services
Position a service to distinguish it from its competitors.
Positioning strategy is concerned with creating, communicating, and maintaining distinctive differences
that will be noticed and valued by customers with whom the firm would most like to develop a long-term
relationship. Successful positioning requires managers to understand their target customers’ preferences,
their conception of value, and the characteristics of their competitors’ offerings. Price and product
attributes are two of the four Ps of marketing that are most commonly used in a positioning strategy. For
services, however, positioning often relates also to other Ps of the services marketing mix, including
service personnel, service processes (e.g., their convenience, ease of use), service schedules, locations,
and the service environment.
Jack Trout 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.
These principles apply to any type of organization that competes for customers. Firms must understand
the principles of positioning in order to develop an effective competitive position. The concept of
positioning offers valuable insights by forcing service managers to analyze their firms’ existing offerings
and to provide specific answers to the following six questions:
1. What does our firm currently stand for in the minds of current and potential customers?
2. What types of customers do we serve now, and which ones would we like to target in the
future?
3. What is the value proposition of each of our current service offerings and what market segment
does each one target?
4. How does each of our service products differ from those of our competitors?
5. How well do customers in the chosen target segments perceive our service offerings as meeting
their needs?
6. What changes do we need to make to our service offerings in order to strengthen our
competitive position within our target segment(s)?
One of the challenges in developing a viable positioning strategy is avoiding the trap of investing
too much in points of difference that can easily be copied. As researchers Kevin Keller, Brian Sternthal,
and Alice Tybout note: “Positioning needs to keep competitors out, not draw them in.” When Roger
Brown and Linda Mason, founders of the Bright Horizons chain of childcare centers featured in the
opening vignette of this chapter, were developing their service concept and business model, they took a
long, hard look at the industry. Discovering that for-profit childcare companies had adopted low-cost
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strategies, Brown and Mason selected a different approach that competitors would find very difficult to
copy.
Similarly, it used to be that when large companies were looking for auditing services, they
typically turned to one of the Big Four accounting firms. Now, a growing number of clients are switching
to so-called “Tier Two” accounting firms in search of better service, a lower bill, or both. Grant Thornton,
the fifth-largest firm in the industry, has successfully positioned itself as offering easy access to partners
and having “a passion for the business of accounting.” Its advertising promotes an award from J. D.
Powers ranking it as achieving “Highest Performance among Audit Firms Serving Companies with up to
$12 billion in Annual Revenue”.
4.1.a Developing an Effective Positioning Strategy
Develop an effective positioning strategy.
Since we now understand the principles of positioning, let us discuss how to develop an effective
positioning strategy. As shown in the beginning of this chapter, STP links the 3 Cs (i.e., customer,
competitor, and company) analyses to the services marketing strategy and action plan. From what is
found a position statement can be developed that enables the service organization to answer the questions:
“What is our product (or service concept)? Who are our customers? What do we want it to become? What
actions must we take to get there?”
There are four basic elements to writing a good positioning statement. They are:
• Target audience—the specific group(s) of people that the brand wants to sell to and serve (e.g.,
wealthy retirees who desire a hassle-free holiday experience)
• Frame of reference—the category that the brand is competing in (e.g., travel agency).
• Point of difference—the most compelling benefit offered by the brand that stands out from its
competition (e.g., customized tour packages that come along with personal guides and designed
for a relaxing experience just for you and your spouse)
• Reason to believe—proof that the brand can deliver the benefits that are promised. (e.g., we are
retirees who know what retirees want in a holiday).
The outcome of integrating the 3 Cs and the STP analyses is the positioning statement that defines the
desired position of the organization in the marketplace. With this understanding, marketers can now
develop a specific plan of action that includes its positioning strategy along the 7 Ps of services
marketing, its customer relationship management and loyalty strategies, and its service quality and
productivity strategies.
Demonstrate how positioning maps help to analyze and develop a competitive strategy.
4.1.b Using Positioning Maps to Plot a Competitive Strategy
Positioning maps are great tools to visualize competitive positioning along key aspects of its
services marketing strategy, to map developments over time, and to develop scenarios of potential
competitor responses. Developing a positioning map, a task sometimes referred to as perceptual
mapping—is a useful way of graphically representing consumers’ perceptions of alternative products. A
map usually has two attributes, although three-dimensional models can be used to show three of these
attributes. When more than three dimensions are needed to describe product performance in a given
market, then a series of separate charts needs to be drawn.
Information about a product (or a company’s position relative to any one attribute) can be
inferred from market data, derived from ratings by representative consumers, or both. If consumer
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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perceptions of service characteristics differ sharply from “reality” as defined by management, then
communications efforts may be needed to change these perceptions.
An Example of Applying Positioning Maps to the Hotel Industry
The hotel business is highly competitive, especially during seasons when the supply of rooms
exceeds demand. Within each class of hotels, customers visiting a large city may find several options to
choose from. Some customers may prefer a higher degree of luxury and comfort; others may focus on
attributes like location, safety, cleanliness, or special reward programs for frequent guests.
Eg. Dubai’s Burj Al Arab is favorably positioned along many determinant attributes like personal
service, level of physical extravagance, and location.
Let’s look at an example, based on a real-world situation, of how to apply positioning maps.
Managers of the Palace, a successful four-star hotel, developed a positioning map showing their own and
competing hotels to get a better understanding of future threats to their established market position in a
large city that we will call Belleville.
Located on the edge of the booming financial district in Belleville, the Palace was an elegant old
hotel that had been thoroughly renovated and modernized a few years earlier. Its competitors included
eight four-star establishments, and the Grand, one of the city’s oldest hotels, which had a five-star rating.
The Palace had been very profitable in recent years and has had an above-average occupancy rate. For
many months of the year, it was sold out on weekdays. This was because it attracted business travelers
who were willing to pay higher room rates than tourists or conference delegates. However, the general
manager and his staff saw problems ahead. Planning permissions had recently been granted for four large
new hotels in the city, and the Grand had just started a major renovation and expansion project, which
included construction of a new wing. There was a risk that customers might see the Palace as falling
behind in the market.
To better understand the nature of the competitive threat, the hotel’s management team worked
with a consultant to prepare charts that displayed the Palace’s position in the business traveler market
both before and after the entrance of new competition. Four attributes were selected for study: room price,
level of personal service, level of physical luxury, and location.
4.1.c Data Sources
In this instance, the Palace’s management did not conduct new consumer research. Instead, they
obtained their customer perceptions data from various sources:
• Published information.
• Data from past surveys done by the hotel.
• Reports from travel agents and knowledgeable hotel staff members who frequently interacted with
guests.
Information on competing hotels was not difficult to obtain, because the locations were known.
Information was obtained through:
• Visiting and evaluating the physical structures.
• Having sales staff who kept themselves informed on pricing policies and discounts.
• To evaluate the service level, they used the ratio of rooms per employee. This is easily calculated
from the published number of rooms and employment data provided to the city authorities.
• Data from surveys of travel agents conducted by the Palace provided additional insights into the
quality of personal service of each competitor.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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Scales and Hotel Ratings
Scales were then created for each attribute, and each hotel was rated for each of the attributes so the
positioning maps could be drawn:
• Price was simple because the average price charged to business travelers for a standard single
room at each hotel was already quantified.
• The rooms-per-employee ratio formed the basis for a service level scale, with low ratios equated
to high service. This rating was then fine-tuned because of what was known about the quality of
service actually delivered by each major competitor.
• The level of physical luxury was more subjective. The management team identified the hotel that
members agreed was the most luxurious (the Grand) and then the four-star hotel that they viewed
as having the least luxurious physical facilities (the Airport Plaza). All other four-star hotels were
then rated on this attribute relative to these two benchmarks.
• Location was defined using the stock exchange building in the heart of the financial district as a
reference point. Past research had shown that a majority of the Palace’s business guests were
visiting destinations in this area. The competitive set of 10 hotels lay within a four-mile, fanshaped radius, extending from the exchange through the city’s principal retail area (where the
convention center was also located) to the inner suburbs and the nearby airport.
4.2 Strategies for Effective Service Delivery through Intermediaries:
• Control Strategies:
– Measurement
– Review
• Partnering Strategies:
– Alignment of goals
– Consultation and cooperation
• Empowerment Strategies:
– Help the intermediary develop customer-oriented service processes
– Provide needed support systems
– Develop intermediaries to deliver service quality
– Change to a cooperative management structure
4.2.a Control Strategies:
Control strategy development is the process of assessing specific abatement measures,
management practices, or control technologies to determine the best combination of approaches to
provide the emission reductions necessary to achieve the air quality standard or goal. Three primary
considerations in designing an effective control strategy are:
(1) Environmental: factors such as equipment locations, ambient air quality conditions, adequate utilities
(i.e., water for scrubbers), legal requirements, noise levels, and the contribution of the control system as a
pollutant;
(2) Engineering: factors such as contaminant characteristics (abrasiveness, toxicity, etc.), gas stream
characteristics, and performance characteristics of the control system; and
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(3) Economic: factors such as capital cost, operating costs, equipment maintenance, and the lifetime of the
equipment. Air pollution officials should also consider pollution prevention which includes eliminating
as much of the pollution emissions as possible at the source, substituting raw (and less toxic) materials,
considering alternative manufacturing processes, and improving process control measures.
Controls on major stationary, mobile, and area sources are part of a successful control strategy.
These controls should utilize reasonably available control technology. Examples include controls on
volatile organic compounds from solvent and paint usage as well as controls on nitrogen oxide emissions
from combustion units. For mobile sources, examples include tighter emission controls for vehicles and
low-sulfur fuel standards. For major stationary sources, it is beneficial to issue permits including
emission limitations for any major sources, new and existing. The basic types of emission control
technology are mechanical collectors, wet scrubbers, bag houses, electrostatic precipitators, combustion
systems (thermal oxidizers), condensers, absorbers, absorbers, and biological degradation. The selection
procedure should be based on the environmental, engineering, and economic considerations described
above.
National or local governments new to the air quality management process should focus on
obvious sources of air pollution and the quickest means of control - more sophisticated and
comprehensive strategies can be developed over time. Innovative strategies such as emissions trading,
banking, and emissions caps can be incorporated as a further refinement as the strategy continues. These
strategies may be used in addition to the "command-and-control" type regulations which have
traditionally been used by air pollution control agencies. Local and regional controls measures and are
both necessary for a successful strategy.
A control strategy developed by a local government may include locally appropriate measures, as
well as control measures that the national government mandates be implemented nation-wide. Successful
control strategies are usually adopted into a regulatory program with implementation deadlines and
mechanisms for enforcement. Different control measures may be mandated at different levels of
government, from local to provincial, state level to national. In general, regulations established at the
national level tend to have the most benefit while minimizing boundary and competition issues. The goal
for all control strategies is to achieve real and measurable emission reductions.
4.2.b Partnering Strategies
A strategic partnership is a formal alliance between two commercial enterprises, usually
formalized by one or more business contracts but falls short of forming a legal partnership or, agency, or
corporate affiliate relationship.
Typically two companies form a strategic partnership when each possesses one or more
business assets that will help the other, but that each respective other does not wish to develop internally.
One
common
strategic
partnership
involves
one
company
providing engineering, manufacturing or product development services, partnering with a
smaller, entrepreneurial firm or inventor to create a specialized new product. Typically, the larger firm
supplies capital, and the necessary product development, marketing, manufacturing, and distribution
capabilities, while the smaller firm supplies specialized technical or creative expertise.
Another common strategic partnership involves a supplier / manufacturer partnering with a
distributor or wholesale consumer. Rather than approach the transactions between the companies as a
simple link in the product or service supply chain, the two companies form a closer relationship where
they mutually participate in advertising, marketing, branding, product development, and other business
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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functions. As examples, an automotive manufacturer may form strategic partnerships with its parts
suppliers, or a music distributor with record labels.
There can be many advantages to creating strategic partnerships. As Robert M. Grant (2008, p.
44) states in his book Contemporary Strategy Analysis, "For complete strategies, as opposed to
individual projects, creating option value means positioning the firm such that a wide array of
opportunities become available". Firms taking advantage of strategic partnerships can utilize other
company's strengths to make both firms stronger in the long run.
Strategic partnerships raise questions concerning co-inventorship and other intellectual
property ownership, technology transfer, exclusivity, competition, hiring away of employees, rights to
business opportunities created in the course of the partnership, splitting of profits and expenses, duration
and termination of the relationship, and many other business issues. The relationships are often complex
as a result, and can be subject to extensive negotiation.
4.2. c Empowerment:
The term covers a vast landscape of meanings, interpretations, definitions and disciplines ranging
from psychology and philosophy to the highly commercialized self-help industry and motivational
sciences.
Sociological empowerment often addresses members of groups that social discrimination
processes have excluded from decision-making processes through - for example - discrimination based on
disability, race, ethnicity, religion, or gender. Empowerment as a methodology is often associated
with feminism: see consciousness-raising.
"Marginalized" refers to the overt or covert trends within societies whereby those perceived as
lacking desirable traits or deviating from the group norms tend to be excluded by wider society and
ostracized as undesirables.
Sometimes groups are marginalized by society at large, but governments are often unwitting or
enthusiastic participants. This Act made it illegal to restrict access to schools and public places based on
race. Equal opportunity laws which actively oppose such marginalization, allow increased empowerment
to occur. They are also a symptom of minorities' and women's empowerment through lobbying.
Marginalized people who lack self-sufficiency become, at a minimum, dependent on charity, or
welfare. They lose their self-confidence because they cannot be fully self-supporting. The opportunities
denied them also deprive them of the pride of accomplishment which others, who have those
opportunities, can develop for themselves. This in turn can lead to psychological, social and even mental
health problems.
Empowerment is then the process of obtaining these basic opportunities for marginalized people,
either directly by those people, or through the help of non-marginalized others who share their own access
to these opportunities. It also includes actively thwarting attempts to deny those opportunities.
Empowerment also includes encouraging, and developing the skills for, self-sufficiency, with a focus on
eliminating the future need for charity or welfare in the individuals of the group. This process can be
difficult to start and to implement effectively.
One empowerment strategy is to assist marginalized people to create their own nonprofit organization,
using the rationale that only the marginalized people, themselves, can know what their own people need
most, and that control of the organization by outsiders can actually help to further entrench
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marginalization. Charitable organizations lead from outside of the community, for example, can
disempower the community by entrenching a dependence charity or welfare. A nonprofit organization can
target strategies that cause structural changes, reducing the need for ongoing dependence. Red Cross, for
example, can focus on improving the health of indigenous people, but does not have authority in its
charter to install water-delivery and purification systems, even though the lack of such a system
profoundly, directly and negatively impacts health. A nonprofit composed of the indigenous people,
however, could ensure their own organization does have such authority and could set their own agendas,
make their own plans, seek the needed resources, do as much of the work as they can, and take
responsibility - and credit - for the success of their projects (or the consequences, should they fail).
4.3 PRICING STRATEGIES
Pricing goods and services - it may be the most difficult task in the business arena.
It's generally agreed that the primary goal of business is to make a profit. But many small
businesses fail to master this objective simply because they don't consider all the factors necessary to
make prices competitive and yield that elusive profit.
Before setting prices, you must understand your market, distribution costs and competition.
Remember, the marketplace responds rapidly to technological advances and international competition.
You must keep abreast of the factors that affect pricing and be ready to adjust quickly.
There are several pricing strategies; select the approach that will make your goods or services the
most competitive and will help you reach your profit goals.
4.3.a Retail Cost and Pricing
A common pricing practice among small businesses is to follow the manufacturer’s suggested
retail price. The suggested retail price is easy to use, but it does have one major shortcoming - it doesn't
adequately account for the element of competition.
4.3.b Competitive Position
An alternative is to base your price on those of your competitors. A small retailer, for example,
should compare prices with a store that's comparable in size and customer volume. It's very chancy to
compete with a large store's prices, because they can buy in larger volume and their cost per unit will be
less. Instead, price products based on your local small-store analysis, and then highlight other competitive
factors, like personalized customer service and convenient location. There are any number of factors that
influence a consumer's decision to buy from a certain business, including price, convenience, and
courteous and attentive service.
4.3.c Pricing Below Competition
Some vendors have been very successful pricing their goods or services below the competition.
Since this strategy reduces the profit margin per sale, it requires a company to reduce its costs and 



Obtain the best prices possible for merchandise
Locate the business in an inexpensive location or facility
Closely control inventory
Limit the lines to fast-moving items.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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Design advertising to concentrate on price specials, and
Limit other services.
One word of caution: Pricing goods below the competition can be difficult to sustain. Why? Because
very cost component must be constantly monitored and adjusted. It also exposes a business to pricing
wars. Competitors can match the lower price, leaving both parties out in the cold.
4.3.d Pricing Above Competition
This strategy is possible when price is not the customer's greatest concern. Considerations
important enough for customers to justify paying higher prices include 


Service considerations, including delivery, speed of service, satisfaction in handling customer
complaints, knowledge of product or service, and helpful, friendly employees.
a convenient or exclusive location; and
Exclusive merchandise.
Price Lining
This strategy targets a precise segment of the buying public by carrying products only in a
specific price range. For example, a store may wish to attract customers willing to pay over Rs.50 for a
purse. Price lining has certain advantages:



Ease of selection for customers
Reduced inventory; and
Reduced storage costs, due to smaller inventory.
4.3.e Multiple Pricing
This approach involves selling a number of units for a single price - for example, two items for
Rs.89. This is useful for low-cost consumable products, such as shampoo or toothpaste. Many stores find
this an attractive pricing strategy for sales and year-end clearances.
4.3.f Cost Factors and Pricing
Every component of a service or product has a different, specific cost. Many small firms fail to
analyze each component of their commodity's total cost, and therefore fail to price profitably. Once this
analysis is done, prices can be set to maximize profits and eliminate any unprofitable service.
Cost components include material, labor and overhead costs.
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

Material Costs are the costs of all materials found in the final product. For example, the wood,
glue and other materials used in the manufacturing of a chair are direct materials.
Labor Costs are the costs of the work that goes into the manufacturing of a product. An example
would be the wages of all production-line workers producing a certain commodity. Multiplying
the cost of labor per hour derives the direct labor costs by the number of personnel-hours needed
to complete the job.
Remember to use not only the hourly wage but also the dollar value of fringe benefits. These
include social security, workers' compensation, unemployment compensation, insurance,
retirement benefits, etc.
Overhead Costs are any costs not readily identifiable with a particular product. These costs
include indirect materials, such as supplies, heat and light, depreciation, taxes, rent, advertising,
transportation and insurance. Overhead costs also cover indirect labor costs, such as clerical, legal
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and janitorial services. Be sure to include shipping, handling and/or storage as well as other cost
components.
Part of the overhead costs must be allocated to each service performed or product produced. The overhead
rate can be expressed as a percentage or an hourly rate.
It is also important to adjust your overhead costs annually. Charges must be revised to reflect inflation
and higher benefit rates.
It's best to project the costs semiannually; including increased executive salaries and other projected costs.
4.3.g Figuring Costs and Profits for a Consultant Service
As a consultant, you will most likely price your services by the hour. Remember to charge for an
adequate number of hours. Travel time is usually listed as an extra charge.
It's unlikely that all your time will be billed to clients. There- fore, hourly or contract fees must be
set high enough to cover expenses during slow periods. That is why one-half of the total normal working
hours for a given year are used in figuring overhead rates. Try to obtain long-term, monthly or contract
assignments when possible.
Summary
Your pricing structure and policy are major components of your public image and are crucial to
securing and keeping your clientele. Pricing for service businesses may be more complex than retail
pricing. The equation, however, is the same:
Cost + Operating expenses + Desired profit = Price.
The key to success is to have a well-planned strategy. Establish your policies and constantly
monitor prices and operating costs to insure profit. Accuracy increases profits!
4.4 PRICING AT A GLANCE: WHEN TO PRICE LOW AND WHEN TO
PRICE HIGH
"Pricing is a numbers game," claim Cochrane Chase and Kenneth L. Barasch in "Marketing
Problem Solver." Despite all the detailed decision charts, task breakdowns and other price rationalizes
included in their book, they conclude that instinct, not formulas, provides the best guide to good pricing.
"After reviewing all information and relationships among factors," they write, "It is time to use a good
instinctive feel for the market and its environment."
The following charts, compiled from Chase and Barasch's book and a variety of other texts,
should help get your instincts flowing.
Pricing low is a good strategy if items are...
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





Widely available
Usable for a long time
Not very durable
Used for one thing only
Low-tech; unlikely to receive rapid changes or upgrades
Fast moving; high turnover
A source of long-term profits
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Sold in a highly competitive environment
Part of a line of related products
Compatible with no or few sellable services like installation and training
Pricing high is a good strategy if items are...











Rare or customized
Outmoded rapidly
Durable over many years
Versatile; multiple uses
High-tech; likely to receive rapid changes or upgrades
Slow moving; lows turnover
A source of short-term profits
Sold in a market with little competition
Single, unrelated, stand-alone products
Compatible with sellable services like installation and training
Impulse or emergency items
Pricing low is a good strategy if you, as a manufacturer or distributor, want...







Introduction of a new capital-intensive product, whose unit cost will decrease rapidly with
volume production
A simple distribution system involving one distributor
A large or mass-market share
Little or no use of promotional support through advertising and sales activities
Entry into a well-developed market penetrating many industries
Entry into a mature, highly competitive market
Easy market penetration
(Note: Downside of low-balling is that low price does not always generate volume sales.)
Pricing high is a good strategy if you, as a manufacturer or distributor, want...







Introduction of a new labor-intensive product, whose unit cost will increase rapidly with volume
production
A complex distribution system involving multiple levels of distribution
A small, select market share of upscale buyers
Considerable use of promotional support through advertising and sales activities
Entry into a poorly developed market penetrating few industries
Entry into a new or developing market
High profits for the short-term only
(Note: Downside of highballing is that it discourages some buyers, attracts competition and may
wrongly assume availability of buyers willing to pay a higher price for higher quality.)
Be aware that price shifts can raise or lower demand and sales for certain kinds of products, but have
little or no effect on other products. For example, lowering the price of paper clips would not induce
customers to buy and consume more than they would otherwise. Lowering the price of laptop computers,
however, would indeed stimulate greater demand and a higher volume of sales.
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4.4 a Demands for these products DO change when prices are raised or lowered:

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
Products for which many substitutes are available
High-ticket items
Luxury goods
Highly durable items
Products that satisfy a hard-to-fulfill need
Products that buyers can postpone purchasing
4.4 b Demand for these products DOES NOT change when prices are raised or
lowered:






Products for which no substitutes are available
Low-ticket times
Necessity goods; staples
Not very durable items
Products that satisfy an easy-to-fulfill need
Products that buyers need now and cannot postpone purchasing
4.5 SERVICE MARKETING TRIANGLE
Service marketing triangle–a dynamic model where there are three interlinked groups that work
together to develop, promote, and deliver services. These key players are labeled on the points of the
triangle – Company, Customer, Providers. Between these three points on the triangle, there are three
types of marketing that must be successfully carried out for a service to succeed – external marketing,
internal marketing, and interactive marketing. All these activities revolve around making and keeping
promises to customers. For services, all three types of marketing activities are essential for building
and maintaining relationships with customers. Those are described below:
According to Philip Kotler, service marketing requires both external marketing and internal as
well as interactive marketing. The three types of marketing in service industries are shown in the
following figure. The right side of the triangle shows the external marketing (setting promises). It is the
normal activity of the firm to develop price, promote and distribute the service offering to the customers.
Anything that is communicated to the customer before service delivery is seen as a part of external
marketing.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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Services Marketing
The left side of the triangle shows the internal marketing (enabling the promise). The internal
marketing activities of the firm are to train and motivate its employees to work as a team in order to
deliver the service. It emphasis on the critical role that enables the employees to keep the promises made
to the customer.
The bottom part of the triangle describes the employee’s skill in handling customer contact. It is
the real time marketing of “moments of truth” where the employees directly interact with the customer in
order to fulfill the promise.
4.5.a Types of Marketing in Service Firms
All the three sides mentioned in the triangle are critical to successful services marketing. The service
triangle also has a number of fundamental strategic implications:
1. The key factor is customer focus and, not functions. Customer satisfaction should be the function of
the entire organisation.
2. The internal environment is reflected in the external culture. It is directly linked to how the staff
serves the customer.
3. One who delivers the service must not only have the skill and knowledge but also the authority to
serve the customer to his satisfaction.
4. The organizational values, in relation to the service culture need to be simple, clear and shared by all
5. During interaction the customers infer the quality. Therefore, it becomes necessary to develop good
delivery associated activities.
There are three kinds of service marketing triangle that includes:
 EXTERNAL MARKETING
 INTERNAL MARKETING
 INTERACTIVE MARKETING
1.
External Marketing
In an external marketing, marketers interact directly to the end users. They try to understand the need
of customers and satisfy them after fulfilling their demands.
In an external marketing, marketers set the pricing policies and create awareness about the products
and design promotional strategies and techniques that help to attract the customers towards their products
and services.
They communicate with their customers directly and convince them to buy their products. They
involve in constructive group of activities that helps to design excellent products that meet the customer’s
demands efficiently.
Their goal is to create awareness about their products or services among users by communicating with
them directly. They also grab the attention of the market and produce interest in their services. External
marketing is one of the important parts of service marketing triangle.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 4
2.
Services Marketing
Internal Marketing
In an internal marketing, marketers try to interact with their employees in order to know about the
strengths and weaknesses of their organization. The owner of the company tries to involve all of his
employees in general discussion, believe on teamwork.
Internal marketing involves general discussions, teamwork, training, motivation and rewards on
best performance. Employees communicate with themselves on specific project. Teamwork helps to
involve employees in their assigned tasks and generate output quickly.
Organizational rewards motivate employees to make their performance effective. All employees
understand the goals and objectives of the company clearly and try to meet organizational goals. They
also know how to grab the attention of their customers.
Customers are highly satisfied with their products or services. They always try to satisfy their
clients at any cost. If employees of the company are satisfied with their job and performance rewards,
they can become an effective asset of any organization.
Executives of the organizations fully understand the service marketing triangle if they want to
gain a competitive advantage in the market.
3.
Interactive Marketing
Interactive marketing involves in the delivery of products or service to the customers and front –
office employees of the company. It is the most important part of the service marketing triangle because
it establishes a long term or short term relations with customers.
Customers who are highly satisfied with their products or services can become regular customers
of their brand. Marketers who cannot compromise on quality and deliver high quality products to their
customers have a great community of loyal customers. Their loyal customers always prefer them to buy
products.
Service marketing triangle has great importance and its components are essential in the success of
any business. A well established business always follows the strategies of service marketing triangle.
Today, marketers who know how to remove the company’s weaknesses and increase the strengths
and assets are market leaders. They are aware of external threats and opportunities that boost up their
business. They also know how to communicate with their customers, clients and employees in order to
achieve organizational goals.
4.6 Integrated Marketing Communications
4.6.a Integrated Marketing Communication (IMC) is a term that emerged in the late 20th
century regarding application of consistent brand messaging across myriad marketing channels. The term
has varying definitions and the differences can play a part in how IMC is viewed and used:
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 4
Services Marketing
1. The first definition for integrated marketing communication came from the American Association
of Advertising Agencies (also 4A's) in 1989, defining IMC as "an approach to achieving the
objectives of a marketing campaign through a well-coordinated use of different promotional
methods that are intended to reinforce each other." The 4A's definition of IMC recognizes the
strategic roles of various communication disciplines (advertising, public relations, sales
promotions, etc.) to provide clarity, consistency, and increased impact when combined within a
comprehensive communications plan. Basically, it is the application of consistent brand
messaging across both traditional and non-traditional marketing channels.
2. The Journal of Integrated Marketing Communication from the Medill School of
Journalism at Northwestern University refers to IMC as "a strategic marketing process
specifically designed to ensure that all messaging and communication strategies are unified
across all channels and are centered around the customer." IMC is used practically to allow one
medium's weakness to be offset by another medium's strength, with elements synergized to
support each other and create greater impact.
3. A more contemporary definition states, "True IMC is the development of marketing strategies
and creative campaigns that weave together multiple marketing disciplines (paid advertising,
public relations, promotion, owned assets, and social media) that are selected and then executed
to suit the particular goals of the brand." Instead of simply using various media to help tell a
brand's overall story, with IMC the marketing leverages each communication channel's intrinsic
strengths to achieve a greater impact together than each channel could achieve individually. It
requires the marketer to understand each medium's limitation, including the audience's
ability/willingness to absorb messaging from that medium. This understanding is integrated into
a campaign's strategic plan from the very beginning of planning - so that the brand no longer
simply speaks with consistency, but speaks with planned efficacy. This concept inherently
provides added benefits that include: a singular/synchronized brand voice and experience, cost
efficiencies generated through creativity and production, and opportunities for added value and
bonus.
4.6.b Components of Integrated Marketing Communications
IMC weaves diverse aspects of business and marketing together. These include:

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
Organizational culture
 The organization's vision and mission
 Attitudes and behaviors of employees & partners
 Communication within the company
Four P's
 Price, pricing plans, bundled offerings
 Product (product design, accessibility, usability)
 Promotion
 Place (point of purchase, in-store/shopper experience)
Advertising
 Broadcasting/mass advertising: broadcasts, print, internet advertising, radio, television
commercials
 Outdoor advertising: billboards, street furniture, stadiums, rest areas, subway advertising, taxis,
transit
 Online advertising: mobile advertising, email ads, banner ads, search engine result pages, blogs,
newsletters, online classified ads, media ads
 Direct marketing: direct mail, telemarketing, catalogs, shopping channels, internet sales, emails,
text messaging, websites, online display ads, fliers, catalog distribution, promotional letters,
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 4
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Services Marketing
outdoor advertising, telemarketing, coupons, direct mail, direct selling, grassroots/community
marketing, mobile
Online/internet marketing
 E-commerce
 Search engine optimization (SEO)
 Search engine marketing (SEM)
 Mobile Marketing
 Email marketing
 Content marketing
 Social Media ( Facebook, Twitter, LinkedIn, Google +, Foursquare, Pinterest, Youtube,
Wikipedia, Instagram)
Sales & customer service
 Sales materials (sell sheets, brochures, presentations)
 Installation, customer help, returns & repairs, billing
Public Relations
 Special events, interviews, conference speeches, industry awards, press conferences,
testimonials, news releases, publicity stunts, community involvement, charity involvement &
events
Promotions
 Contests, coupons, product samples (freebies), premiums, prizes, rebates, special events
Trade shows
 Booths, product demonstrations
Corporate philanthropy
 Donations, volunteering, charitable actions
When these diverse aspects of business and marketing are weaved together properly an effective
campaign can be achieved. Effective campaigns are demonstrated on the Integrated Brands showcase
which recognizes brands that are innovative, strategic and successfully growing their sales. By effectively
leveraging each communication channel greater impact can be achieved together than achieved
individually.
4.6.c Origins
First defined by the American Association of Advertising Agencies in 1989, IMC was developed
mainly to address the need for businesses to offer clients more than just standard advertising. The 4As
originally coined the term the "new advertising," however this title did not appropriately incorporate
many other aspects included in the term "IMC" - most notably, those beyond traditional advertising
process aside from simply advertising.
Overall, an influx of new marketplace trends in the late 20th century spurred organizations to
shift from the standard advertising approach to the IMC approach:



Decreasing message impact and credibility: The growing number of commercial messaging made
it increasingly more difficult for a single message to have a noteworthy effect.
Decreasing costs of databases: The cost of storing and retrieving names, addresses and information
from databases significantly declined. This decline allowed marketers to reach consumers more
effectively.
Increasing client expertise: Clients of marketing and public relations firms became more educated
regarding advertising policies, procedures and tactics. Clients began to realize that television
advertising was not the only way to reach consumers.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 4
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Increasing mergers and acquisitions of agencies: Many top public relations firms and advertising
agencies became partners or partnered with other communication firms. These mergers allowed for
more creativity, and the expansion of communication from only advertising, to other disciplines such
as event planning and promotion.
Increasing global marketing: There was a rapid influx in advertising competition from foreign
countries. Companies quickly realized that even if they did not conduct business outside their own
country, they were now competing in global marketing.
Increasing media and audience fragmentation: With the exception of the decline of newspapers,
media outlets, such as magazines and television stations, increased dramatically from 1980 to 1990.
Additionally, companies could use new technologies and computers to target specialized audiences
based on factors such as ethnic background or place of residence.
Increasing number of overall products: Manufacturers flooded retailers with a plethora of new
products, many of which were identical to products that already existed. Therefore, a unique
marketing and branding approach was crucial to attract customer attention and increase sales.
4.6.d Model & Stages
Similar to the definition of IMC, models of the IMC approach vary according to the source cited.
Frequently, models stress the importance of blending various marketing tools to maximize the customer
experience and value. IMC models also often emphasize the lack of a specific hierarchy of importance in
the IMC stages: all components of the model play an equally important role and a company may or may
not choose to immediately implement any or all of the integration strategies.
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Stage one: Awareness: Knowledge of changing business, social, political and cultural trends creates
the demand for a new approach to marketing.
Stage two: Image integration: Having a consistent image, message and feel to an organization is
crucial. The image reflected in corporate symbols serves as an important element for maintaining
consistency in an organization.
Stage three: Functional integration: Analyzing the strengths and weaknesses of each functional
area of communication (public relations, event planning, media, etc.), and determining how the
different areas can come together to create an effective campaign.
Stage four: Coordinated integration: All communication functions become equal in their potential
to influence company marketing efforts and many integration barriers cease to exist.
Stage five: Consumer based integration: The elements of the different communication functions
begin to work together. The campaign begins to achieve greater marketing effectiveness because only
fully targeted consumers are exposed to the strongest and most effective forms of marketing and
media.
Stage six: Stakeholder based integration: Beyond just the customer, there are stakeholders who
depend on the positive outcome of marketing campaigns. Companies carefully identify stakeholders,
determining who can or will be affected by the success or failure of their campaign. At this stage of
integration, the IMC expands from a sales-driven goal to a broader communication goal. This means
that a company needs to enhance past marketing efforts through clear, correct and open
communication between all parties involved.
Stage seven: Relationship management integration: A fully integrated communication strategy
exists that brings customers and stakeholders into direct contact with the business.
Schultz and Schultz identified four levels of IMC through which organizations appear to progress.
These stages are not discrete, finite stages with well-defined boundaries Ultimately, however, to be truly
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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integrated an organization needs to demonstrate competency in the activities and requirements of each of
the four levels.
Four
levels
of
IMC
developed by Schultz and Schultz (1998)
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

Level 1: Tactical Coordination and Marketing Communications Initial IMC focus is on the
tactical coordination of diverse marketing such as advertising, promotion, direct response, public
relations, and special events. This level focuses on delivering “one sight, one sound” via marketing
communication.
Level 2: Redefining the Scope of Marketing Communication The organization begins to examine
communications from the customer’s point of view. Marketing communication begins to give
consideration to all sources of brand and company contact a customer has with the product or service.
Management broadens the scope of communication activities to encompass and coordinate internal
marketing employees, suppliers, and other business partners and align with the existing external
communication programs.
Level 3: Application of Information Technology An organization’s application of empirical data
using information technology to provide a basis identity, value, and monitor the impact of integrated
internal and external communication programs to key customer segments over time.
Level 4: Financial and Strategic Integration The emphasis shifts to using the skills and data
generated in the earlier stages to drive corporate strategic planning using customer information and
insights. Organizations re-evaluate their financial information infrastructure.
4.6.e The Growing Importance of Integrated Marketing Communications
Integration has become an essential concept in marketing because technological advances have
changed how business stakeholders interact. Marketing theory that was established during the discipline’s
formative years has been overtaken by the complexities of real-time, multimodal, multi directional
communication.
A few examples help illustrate the growing importance of integration:
Search marketing: When someone is considering buying a product or service they will often conduct an
online search. What they find, on Google and other search engines, as well as information from news
sites, review sites, directories, videos and place-based searches, are presented together, so like it or not,
there is a level of integration. The online experience will affect their attitudes towards a brand and their
behaviour. Marketers therefore need to concern themselves with making sure their brand is found ahead
of competitors' and then ensuring their audience has a positive and helpful experience.
Accessibility & convenience: Consumers expect information and services that relate to a brand to be
conveniently accessible via its website. For instance when a consumer visits Virgin.com they are able to
book a flight, manage their money, top up their mobile phone plan or find up-to-date news about the
company.
Aggregation of information and services: The traditional demarcation between a company, its suppliers
and customers has become confused. For instance the Apple iTunes app store aggregates software and
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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information from app makers, along with reviews provided by consumers. Product promotion, delivery,
service and information from many different sources are seamlessly presented together.
Social media: Traditionally businesses were largely in control of their brand communications. Now brand
communications are multidirectional as consumers can easily share, comment and create content. Brands
can use this to their advantage by creating appealing content. For instance Unilever’s campaign for Dove,
The Dove Real Beauty Sketches went viral with over 54 million views on YouTube.
Growth of mobile: The growing penetration of smart phones with fast internet connectivity means that
marketers need to take into consideration integration between the online experience and place-based
experiences. For instance when a consumer downloads the Target app they are able to receive coupons to
their mobile phone and redeem them at the checkout by presenting the coupon barcode to the cashier.
*********************************ALL THE BEST*********************************
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.