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THE FOUNDATION OF SERVICES MARKETING................................................................... 3
BANK MARKETING .................................................................................................................. 21
TOURISM MARKETING............................................................................................................ 31
HOSPITAL MARKETING .......................................................................................................... 41
INSURANCE MARKETING ....................................................................................................... 51
MUTUAL FUND MARKETING................................................................................................. 65
TELECOMMUNICATIONS SERVICES .................................................................................... 73
COURIER SERVICES ................................................................................................................. 80
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AUTOMOBILE SERVICES ........................................................................................................ 89
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THE FOUNDATION OF SERVICES MARKETING
Introduction:
What is a Service?
In economics and marketing, 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 this is
what differentiates it from providing physical goods. It 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.
Dictionary definitions of "Intangible":
1. Lacking substance or reality; incapable of being touched or seen
2. Incapable of being perceived by the senses especially the sense of touch
3. (Of especially business assets) not having physical substance or intrinsic productive value
By supplying some level of skill, ingenuity, and experience, providers of a service 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 marketing and upgrading in the face of competition that has equally few physical
restrictions.
Key attributes of Services
Services can be described in terms of their main attributes.
Intangibility - They cannot be seen, handled, smelled, etc. There is no need for storage. Because
services are difficult to conceptualize, marketing them requires creative visualization to
effectively evoke a concrete image in the customer's mind. From the customer's point of view,
this attribute makes it difficult to evaluate or compare services prior to experiencing the service.
Perishability - Unsold service time is "lost", that is, it cannot be regained. It is a lost economic
opportunity. For example a doctor who is booked for only two hours a day cannot later work
those hours— she has lost her economic opportunity. Other service examples are airplane seats
(once the plane departs, those empty seats cannot be sold), and movie tickets (sales end at a
certain point).
Lack of transportability - Services tend to be consumed at the point of "production" (although
this doesn't apply to outsourced business services).
Lack of homogeneity - Services are typically modified for each client or each new situation
(customized). Mass production of services is very difficult. This can be seen as a problem of
inconsistent 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 quality.
Labour intensity - Services usually involve considerable human activity, rather than a precisely
determined process. Human resource management is important. The human factor is often the
key success factor in service industries. It is difficult to achieve economies of scale or gain
dominant market share.
Demand fluctuations - It can be difficult to forecast demand (which is also true of many goods).
Demand can vary by season, time of day, business cycle, etc.
Buyer involvement - Most service provision requires a high degree of interaction between client
and service provider.
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Client-Based Relationships - Is based on creating long-term business relationships.
Accountants, lawyers, 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.
Service delivery
The delivery of a service typically involves five factors:
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The service providers (e.g. the people)
Equipment used to provide the service (e.g. vehicles, computers)
The physical facilities (e.g. buildings, parking, waiting rooms)
The client
Other customers at the service delivery location
Customer contact
The service encounter is defined as all activities involved in the service delivery process. Some
service managers use the term "moment of truth" to indicate that defining point in a specific
service encounter where interactions are most intense.
Many business theorists view service provision as a performance or act. The location of the
service delivery is referred to as the stage and the objects that facilitate the service process are
called props. A script is a sequence of behaviours followed by all those involved, including the
client(s). Some service dramas are tightly scripted, others are more ad lib. Role congruence
occurs when each actor follows a script that harmonizes with the roles played by the other actors.
In some service industries, especially health care, dispute resolution, and social services, a
popular concept is the idea of the caseload, which refers to the total number of patients, clients,
litigants, or claimants that a given employee is presently responsible for. On a daily basis, in all
those fields, employees must balance the needs of any individual case against the needs of all
other current cases as well as their own personal needs.
The service sector – the tertiary sector
The three-sector hypothesis is an economic theory that divides economies into three sectors of
activity:
 Extraction of raw materials (primary)
 Manufacturing (secondary)
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
Services (tertiary).
According to the theory the main focus of an economy's activity shifts from the primary, through
the secondary and finally to the tertiary sector. The process is essentially positive, and relates to
increase in quality of life, social security, blossoming of education and culture, higher level of
qualifications, humanisation of work, and avoidance of unemployment.
Countries with a low per capita income are in an early state of development; the main part of
their national income is achieved through production in the primary sector. Countries in a more
advanced state of development, with a medium national income, generate their income mostly in
the secondary sector. In highly developed countries with a high income, the tertiary sector
dominates the total output of the economy.
Service Sector is also known as the tertiary sector of industry is one of the three main
industrial categories of a developed economy, the others being the secondary industry
(manufacturing), and primary industry (extraction such as mining, agriculture and
fishing). Services are defined in conventional economic literature as "intangible goods".
According to some economists, the service sector tends to be wealth consuming, whereas
manufacturing is wealth producing. Sir Keith Joseph in his lecture Monetarism Is Not Enough,
contrasted wealth producing sectors in an economy such as manufacturing with the service sector
which tends to be a wealth consuming sector. He contended that an economy declines as its
wealth producing sector begins to shrink.
The tertiary sector of industry 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. However, the focus is on people interacting with
people and serving the customer rather than transforming physical goods. Since the 1960s,
there has been a substantial shift from the other two industry sectors to the Tertiary Sector in
industrialised countries. The service sector consists of the "soft" parts of the economy such as
insurance, government, tourism, banking, retail and education. In soft sector employment, people
use time to deploy knowledge assets, collaboration assets, and process-engagement to create
productivity (effectiveness), performance improvement potential (potential) and sustainability.
Typically the output of this time is content (information), service, attention, advice, experiences,
and/or discussion (also known as "intangible goods"). Other examples of service sector
employment include:
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Franchising
Restaurants
Retailing
Entertainment, including the record industry, music industry, radio, television and
movies.
News media
Leisure industry/hotels
Consulting
Transport
Healthcare/hospitals
Public utilities are often considered part of the tertiary sector as they provide services to people,
while creating the utility's infrastructure is often considered part of the secondary sector, even
though the same business may be involved in both aspects of the operation.
Services Marketing
A wide variety of activities labeled as services are practised by both profit-orientated
organizations and non-profit orientated organizations. The success of these organizations
depends on delivering excellent service quality and creating value to customers. Defining
services is therefore not a simplistic task. Over the years service marketing literature has
provided readers with an assortment of service definitions.
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According to Irons, pure services are intangible but they do usually add value to, or make
available, a tangible product. They do not result in transfer of ownership and may leave
only memories.
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Zeithaml and Bitner claim that in the simplest terms services are deeds, processes, and
performances. Their broader definition states that services include all economic activities
whose output is not a physical product, is generally consumed at the time it is produced,
and provides added value in forms that are essentially intangible concerns of the
purchaser.
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Kotler defines service as an activity that one party offers another that is essential
intangible and does not result in the ownership of anything. Its production may or may
not be tied to a physical product.
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Grönroos identifies a service as an activity or series of activities of a more or less
intangible nature that normally, but not necessarily, takes place in interaction between the
customer and service employees and/or physical resources or goods and/or systems of the
service provider, which are provided as solutions to customer problems.
The conclusion derived from the above definition is that services deal with intangible
components. The purchase of services does not necessarily result in physical transfer or
ownership but still creates a bundle of benefits during or after the service interaction or
experience.
Distinguishing between the tangible and intangible components of a service is extremely
difficult. Therefore, separating the core service from the augmented service helps to simplify this
task. The core service represents the fundamental benefits the service provide to satisfy
customers’ needs. The augmented service incorporates the core service in addition to the tangible
elements and all additional benefits of the service employed to satisfy customers’ needs. The
core services are mostly intangible because of their lack of physical attributes, while augmented
services provide the customer with the impression of the services’ tangibility component,
because it can be seen, touched, and transferred to the customer.
Characteristics of Services/Salient features
The inherent differences that exist between goods and services result in unique management
challenges for service organizations. Services possess five unique characteristics; namely
intangibility, perishability, inseparability, variability, and lack of ownership, that differentiate
them from goods.
These characteristics create distinctive challenges for service marketers in attracting new
customers, and keeping existing customers. These characteristics are explained in the ensuing
sections.
Intangibility
Intangibility is the dominant characteristic of services and is defined as the lack of tangible assets
that can be seen, touched or smelled prior to purchase. However, services vary in the degree to
which they are intangible and most services include some kind of tangible element.
The tangibility spectrum places highly tangible offerings at one end of the continuum and
intangible services on the opposite end of the continuum. It is clear that very few offerings are
totally tangible or intangible. The intangible characteristic of services present service marketers
with several problems. The lack of physical attributes of services makes it difficult to display or
communicate services readily and easily to customers. Customers often find it mentally difficult
to grasp the service performance or experience without tangible evidence, which makes it
difficult to diffuse. Services that rely intensely on customer involvement, present cost calculation
difficulties that lead to price setting inadequacies for service marketers.
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The Tangibility spectrum
These problems can, to a certain extent, be successfully resolved by reducing the intangibility of
service offerings through stressing the tangibility components of offerings, stimulating word of
mouth communication, creating a strong corporate communicate with customers, and using
unique attributable cost and perceived value pricing. Service providers must always take into
account the fact that customers use the tangible elements, such as the people who provide the
service, the environment in which the service encounter takes place, the equipment used, and the
price of the offering, to make assumptions about the quality of the service and to compare it to
the offerings of other service providers.
Variability
Variability refers to the unwanted or random variable levels of service quality customers receive
when they support an organization. The primary reason for variability is the human element
present in the service process, accordingly sustaining the statement of Kotler, that the quality of
service depends on the service provider. Because humans normally perform services, the chance
of two service performances being the same is highly unlikely.
Different service employees will perform the same service process differently and the same
service employee will provide a varying service under different circumstances or at different
times. Nevertheless, the recipients of the service are also human, with their own unique demands
and expectations of the service performance. Service marketers find it difficult to control the
quality of the service performances because it is dependant on fallible employees as one of the
main inputs
The reliance on people’s performances causes standardisation service processes to be almost
impossible. The intentional or unintentional customisation of service processes and output
performances by service employees for individual customers makes promotion of services very
difficult.
Customers in general perceive the person who delivers the service “as the service”. As a result,
service providers have the ability to alter the outcome and level of customer satisfaction. Service
marketers are confronted with the challenge of controlling service quality because consistent
quality service performances play a vital role in the survival of organizations. Service quality is
profoundly dependent on the ability of customers to articulate their needs and level of service
demands. Equally, service quality depends on the ability, and willingness of the service provider
to satisfy customers’ needs and demands. Organizations can put into practice service quality
control and measurements by recruiting service-orientated employees and training them to
provide a service that will meet or exceed customers’ expectations.
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Inseparability
Inseparability refers to the simultaneous production and consumption of a service, thus it is often
difficult to separate the service provider from the service performance. Customers are normally
present at and during the service performance and play an active role in the service production
process. The quality of the service performance is dependent on the interaction between the
service provider and the customer.
The customer’s involvement in the production process of the service can influence the outcome
of the service positively or negatively. Service marketers must recognize that the roles customers
play in the service production process influence the service outcome, not only for themselves but
also for other customers. The inter-client interaction between customers also plays an integral
part in the outcome of service experiences
Service organizations must acknowledge the influential role that service employees play in
service processes. The service employees or the service providers are often seen as the service
itself. The inseparability of production and consumption means that very few service offerings
can be mass-produced, but almost every service offering can be customised to customers’ needs
and demands. Customisation is to the advantage of service organizations, because customers use
the degree of customisation of service offerings to measure the quality of services.
Perishability
Perishability is the inability of a service to be inventoried or stored. This characteristic is of
major concern to service marketers because it inevitably leads to supply and demand problems.
The capacity lost in services can never be regained and to equalise supply and demand is a
difficult task. These distinct service problems present service marketers with the challenge of
setting up good recovery strategies for service process failures. Research has shown that
resolving customer problems effectively has a powerful impact on customer satisfaction and
loyalty. The perishability characteristic of services creates the opportunity for the organization to
develop creative planning for capacity utilization and management of future demand.
Ownership
Ownership is the last characteristic of services that distinguish it from goods. Customers receive
only the right to a service process when they purchase it. Subsequently it is assumed that
payment for services buys only the right of access to a service and not physical transfer of
ownership to customers. Customers view the lack of ownership of a service as a perceived risk.
Firstly they are presented with the uncertainty as to whether the right service has been obtained
and secondly with the uncertainty about the consequences of the service purchase. Since services
are produced and consumed simultaneously, the option of “returning” a service does not exist.
The inability to own a service also has direct implications on the distribution of services. Service
customers usually only have use or access to a facility where a service is performed.
Kotler suggests that services call for special marketing solutions. The characteristics of services
create problems for service marketers that are not experienced by product marketers. If these
problems are not carefully managed, organizations may experience negative influences on
service quality that will ultimately reduce customer retention and organization profits
In this regard, Zeithaml and Bitner have proposed a services marketing triangle that will be
discussed in the next section.
The services marketing triangle
Service marketers face marketing challenges, which revolve around issues such as:
• Understanding customers’ needs and expectations of services,
• Making services tangible to customers and
• Keeping and dealing with promises made to the customers
The services marketing triangle shown in the below figure helps service marketers to address
these challenges. The three points of the service triangle represent the organization, the
customers, and the employees. Between each of the three points of the triangle different
marketing processes such as external marketing, interactive marketing and internal marketing
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must be successfully carried out for service processes to succeed and to build and maintain
relationships with the internal and external customers.
The services marketing triangle
External marketing
The link between an organization and its customers is the external marketing process. External
marketing represents the promises that organizations make to their customers with
reference to products or services they offer. Organizations make promises to customers
concerning their offerings and how delivery of the offerings will be conducted. The external
communication activities of the service provider play a key role in the formation of customers’
expectations, because their expectations are affected by the service provider’s direct and indirect
marketing messages.
In goods as well as services, the traditional marketing activities facilitate external marketing
processes. Promises made in advertisements and through promotions are used by customers to
form service expectations. These can also positively or negatively influence the customers’
initial expectations of the desired level of service compared to the adequate level of service.
Customers use price as an indication of the quality of the offering, while the promise of
availability and accessibility of an offering has an impact on the customers’ service expectations.
However, for service organizations, factors such as service employees, organization image and
visible structures, and the actual service process itself, form the basis for customers’ expectations
of the offering and the delivery thereof. Customers’ expectations and experiences fuse, therefore
much of their final belief is drawn from the environment in which they receive the service and
the personalities and behaviour of the people they encounter during service processes.
The organization’s projected values and integrity must be the priorities that govern the promises
made to the customers during the external marketing process. Customers expect consistent and
realistic promises that will at all times be honoured by the organization. Creating unrealistic
customer expectations create dissatisfied customers. Misleading customers or over-promising to
them can negatively influence the relationship between the organization and the customer.
Interactive marketing
The interactive marketing process is about keeping the promises made by the organization to the
customer along with delivering a quality service to the customer. Interactive marketing is the
actual contact between the service employees and the customers and is called the "moment of
truth" or service encounter. It is the decisive moment in the service process where organizations
actually show what they can do and how they meet the set expectations. At these decisive
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moments, everything about the service process can succeed or fail. The success or failure can be
temporary, complete, or final but the interaction can never be restaged or controlled.
The marketing focus of service organizations has shifted from the offering to the customers, to
the interaction that takes place between the service employees and the customers. Through their
interactions with employees, customers form a perception of the integrity of an organization’s
service promises. They furthermore use the interaction to assess the value of the offering, and to
make the decision to purchase or repeat the purchase of an offering. From a customer’s point of
view, this is the most important stage of the service delivery process as it is during this process
that they receive the value they actually desire. Interactive marketing performs a vital function in
the establishment of a relationship between the organization and the customer. The customer’s
perception of the service is derived from the delivery of the service, and cannot be separated
from the contact they experience with service employees. Therefore, it can be argued that
relationships are an inevitable outcome of service delivery. However, it is important for
organizations to acknowledge the fact that relationships do not necessarily exist between the
organization and the customer, but to a greater extent between the service employees and
customers. The success of these relationships depends profoundly on the attitude service
employees have towards their employment and their loyalty towards the organization. It is the
responsibility of the organization to recruit service-orientated employees very carefully, involve
them in organization activities, and motivate them to follow the examples set by the leaders of
the organization
During interaction, employees and customers meet face to face and the actions of service
employees will be a major factor in influencing the customers’ expectations of the service.
Customers’ evaluation of services is based on their interaction with service employees, therefore
it is of the utmost importance that service organizations continuously strive to improve the
quality of interactions. People forget how fast you performed a service but they remember how
well you did it. Service organizations must therefore ensure that their service employees have the
skills and ability to perform the service to meet the customers’ expectations. The reliability of
services is tested every time a customer interacts with the employees and the service provider
whom they represent.
Internal marketing
The marketing process that enables service marketers to deliver promises to customers is called
internal marketing. Through internal marketing, the organization reveals that it consists of
individuals and departments who are considered to be each other’s customers. Employees do not
only provide a service to the external customers but also to each other within the organization.
Promises are easy to make, but unless organizations have internal systems in place to ensure the
delivery thereof, service processes cannot succeed. The success of internal service systems is
dependent on the relationship between the organization and the employees.
Internal marketing hinges on the assumption that employee satisfaction and customer satisfaction
are interlinked, thus internal marketing must precede external marketing. Organizations whose
objective is to deliver constant high service quality have to enable all employees to practice
customer orientation and marketing. Service organizations must recognize that achieving
objectives and creating change can only be achieved through employees. Service providers need
to recruit, train, and provide tools to employees to perform superior service. People are valuable
assets to an organization. They should therefore be fully equipped to provide the best service to
the external and internal customers. Employees who understand their functions within the
organization are more likely to create a harmonious work environment that will pave the way for
less role ambiguity, less conflict, and more satisfied employees in the workplace.
The examples set by management for their employees are critical factors for the success of the
internal marketing process. There is a direct link between internal marketing and the actual
delivery of the service, because customers believe that “what you are is what matters not what
you say”.
The success of services relies on the three marketing activities to be carried out successfully and
to be aligned with each other. Each of the activities presents a challenge and it is important to
find strategies that support them all. Successful external relationships will be repeated internally.
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Services marketing mix - the 7 Ps (The concept)
The traditional marketing mix is the most basic concept in marketing and is defined as elements
which organizations control and use to satisfy or communicate with customers. The components
of the traditional marketing mix are the four P’s: product, price, place, and promotion.
Careful management of these components is essential for the successful marketing of goods and
services in both long-term and short-term marketing strategies of organizations. Conversely, the
traditional marketing mix components have been found to be too limited in their
application of services.
The intangibility of service offerings is not taken into consideration because the focus is on the
tangibility of products. The price component overlooks the fact that many services are produced
without a price being charged to the final customers, and customers frequently use price as an
indication of service quality. Equally, the simultaneous production and consumption of service
offerings make the distribution component difficult to implement and control. While the
promotion component of the traditional marketing mix concerns itself with advertising, sales
promotions and publicity, services marketing involves service employees and customers in the
real time marketing of services during the interaction process. The limitations of the traditional
marketing mix have lead to exploitation by service marketers of additional components that
services can utilise to satisfy and communicate with customers, resulting in the adoption of the
service mix.
The elements off this new concept are:
1. Service offerings (product)
2. Price
3. Distribution (place)
4. Promotions
5. People
6. Physical evidence
7. Processes.
The three new components address the uniqueness of three of the service characteristics. They
focus, firstly, on the inseparability of service marketers from customers, secondly, on the
inability to hold service in inventory which makes it critical for the service process to flow
smoothly and lastly, on the fact that a highly intangible service offering must appear tangible The
additional components of the service mix can be fully controlled by the service organization and
play a vital role in ensuring that marketing is customer focused, not product. The ensuing
sections will provide a detailed description of the service mix.
Service offerings (Product)
A product is anything that an organization offers to customers that might satisfy a need, whether
it is tangible or intangible. In contrast, the decisions that face service marketers concerning
service offerings are very different from those related to goods. An analysis of service offerings
shows that it can be divided it into two distinct components namely:
 A core service offering that represents the intangible core benefits of services
 A secondary service offering that represents the tangible and augmented elements of the
service offerings.
The core service offerings are developed with customers’ benefit in mind and place the emphasis
on the customers’ perception of services. The secondary service offerings illustrate the additional
benefits that the service offers to meet customers’ additional needs, and serve to differentiate the
offerings from those of competitors’. These benefits can combine both the tangible and
intangible elements of service offerings that facilitate the customer to comprehend the core
service.
Because of its intangibility, services are difficult to control and display to customers.
Consequently, service marketers often emphasise the tangible elements of service offerings. The
more intangible a service, the greater is the need for tangible evidence. Tangible evidence
includes packaging, brand name, corporate image, service delivery, and service employees.
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Price
In the determination of price, service marketers deal very much with the same price issues as
goods marketers. Subsequently, the differences present itself when the intangible characteristic
of services specifies that price becomes a quality indicator. The art of successful pricing is to
establish a price level that is low enough for the exchange to represent good value to customers,
but high enough to allow service providers to achieve their financial objectives. The perishable
nature of services makes it important to control the demand and supply of the service offerings.
The price component is the easiest to change and normally provides the quickest results.
Manipulation of the price can influence and control quantity demand. An increase in price will
reduce the demand and/or cause a shift to lower usage periods. Equally, a decrease in price will
cause an increase in demand and stimulate new demand for the service.
The price of service offerings is often used by customers as an input into their expectations,
purchase decisions, and evaluation of service quality. It is seen as a tangible cue in services with
a high risk and experience properties, to form expectations of the service. Price is used as an
indicator of quality by customers. Thus, the assumption is formed that the higher the price of
service offerings, the more is expected of it by customers.
Distribution (Place)
The distribution decision refers to the availability and accessibility of service offerings to
customers. Availability from the customers’ point of view signifies that services are on hand
when they want them, while accessibility is the relative ease with which customers can conduct
service processes with the service providers. For pure services, the distribution decision is of
little relevance, though most services involve a tangible component. As a result, the distribution
decision involves physical locations and decisions which intermediaries use to provide the
services.
Promotions
The promotion mix for the traditional marketing mix is usually broken down into four
components namely advertising, sales promotions, public relations, and personal selling.
However, with the promotion of services, there is a greater need to emphasise the tangible
elements of services such as packaging, brand name, corporate image, service delivery, and
service employees.
The distinctive promotional needs of services stem directly from some of the unique
characteristics of services. The intangibility characteristic of services results in customers
perceiving them as high-risk purchases, with a need for tangible components as evidence of the
service. The inseparability characteristic of services emphasises the fact that the promotion of
service offerings cannot be isolated from service providers. Therefore, the visible production
process, especially the part played by service employees during interaction, is a critical element
in the promotion process. The service promotion challenge is to transform invisibility into
visibility, vagueness into sharpness, uncertainty into evidence and risk into benefit.
The development of a promotional mix for services relies on the detailed specification of
promotion objectives to ensure that that appropriate messages are chosen and effectively
channeled in a cost effective manner to reach the target market. Typical service promotional
objectives are:
• To develop an awareness or interest in the organization and its services
• To communicate the benefits of purchasing a service
• To build a positive image of the organization
• To differentiate the organization from its competitors
• To remind customers of the existence of the service and the service organization
The services promotion mix uses a combination of channels to convey messages to the target
market. These messages are received from sources within the organization and externally.
External sources include word of mouth communications or press editorials, while internal
communications originate from the traditional marketing mix and from the frontline employees.
The combination of communication channels depends on the characteristics of the target market,
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the size of the service, the nature of the service and the cost of the various channels. The
promotional mix of a service organization involves the transmission of messages to past, present
and future customers. The ultimate aim is to make future customers aware of the service and
influence them towards purchase.
People
People as an element in the service mix include all the human actors - the firm’s employees
(internal customers), the buyers (external customers), and other customers - who play a part in
service delivery and accordingly influence the buyers’ perception of choice in the service
environment. Service employees interact with customers during service delivery processes and
provide cues to external customers concerning the services. Hence, it can be said that service
employees’ competence, attitude, and appearance influence customers’ perception of services.
Customers often experience service employees as synonymous with the service and no matter
how small or large a part they play in the actual delivery of the service, they are still the focal
point of the service for customers. It is crucial that service organizations stipulate very
specifically to their employees what is expected of them during interactions with customers. To
achieve the desired standards of service, service organizations’ recruitment and training cannot
be left to the human resources department only, but should form an integral part of the service
mix decisions.
Within successful service organizations, the human resources department, and the marketing
department work together to establish hiring criteria, training needs, and promotion activities to
attract and retain employees who can deliver the quality service expected by the organizations’
target market.
The marketing department plays an important role in influencing the experience that both
internal customers and external customers will have. External customers choose to visit a service
organization because of the messages relayed through the service mix, or word of mouth
messages communicated by other customers. External customers, who encounter an
unacceptable level of service from internal customers, convey negative word of mouth messages
about the service received to other customers. Consequently, it is crucial that marketing
departments and human resources departments work together to ensure that the quality of service
delivery by internal customers leads to positive word of mouth messages to external customers.
Every employee in an organization must serve other employees in some way or another.
Therefore, just as external customers are needed, so are quality employees (internal customers)
needed. The responsibility lies with service marketers to involve all employees in the marketing
process of an organization. A high level of employee involvement and motivation is directly
linked to an improvement in sales, profitability and customer loyalty.
Processes
Processes are the actual procedures, mechanisms, and flow of activities by which services are
delivered. Customers judge services on the operational flow or on the actual delivery thereof.
The inseparability characteristic of services requires customers to follow a series of extensive or
complicated actions to complete the process. Often the logic of these actions escapes the
customers. Whether the service process is standardised or customised, it is used as evidence by
customers to judge service quality. Standardised services will follow a production-line approach,
while customised services command a greater degree of empowerment. Nonetheless, the moment
of truth where customers experience the evidence, is not a once-off event but an ongoing
process.
The main ingredients of services processes are the people who participate in it. Services are of an
integrated nature and the organization’s employees continuously fuse with the external
customers. The production and consumption usually takes place at the same time and research
into customers’ attitudes towards service organizations suggests that customers see a service as
an integral process in which they are intensely involved. The difference between service
processes and manufacturing processes are that:
• The customers are participants in the service processes
• Service processes are difficult to structure
Service Sector Management: BBA-III.
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• The outcome of services is dependent on internal and external factors
• The output of service processes leaves only promises and memories
• Service processes play an integral part in customer satisfaction.
As a rule, services cannot be fixed to a definite time span, because depending on the nature of the
service; it can take anything from a moment to months to complete. A service can be a welldefined process, where all participants are aware of the process but a service can also be ill
defined or not obvious to the participant in the process. Services that offer high degrees of
customisation are usually ill defined. When service processes progress smoothly, they are hardly
noticed by the customers, who are under the assumption that the process will occur without any
problems every time it is performed. However, when the service process is not completed
successfully, both the internal and external customers are frustrated and distrustful of the service
organization. The success of service processes depends on the loyalty and trust- relationships
organizations can build with customers.
Marketing and the other organizational functions should work together to determine the needs of
the internal and external customers and satisfy those needs by designing and refining effective
and efficient customer-friendly service delivery processes.
The actual service delivery process can be performed in three locations namely, • the customer’s
environment, • at a store or an office or • electronically or via telecommunications. Management
has a great deal of control over the last two service delivery processes.
A service can also be performed on customers, objects, and technological equipment. Knowing
this helps to understand the perceived risk for customers attached to the service purchase.
Service organizations must consider the importance of communication strategies, appearance,
skills, and attitude of service employees. The physical evidence of delivery processes, such as
the delivery vehicles, print matter and delivery employees must also support a service
organizations’ image. The perishability characteristic of services influences the service delivery
process through the difficulty it presents in managing supply and demand. Supply and demand
cannot be readily adjusted but techniques such as flexible service hours, price advantages for
customers who buy during low demand periods, special offers that can only be redeemed during
slack time, and refinement of delivery processes, can provide solutions to service organizations.
Physical evidence
The environment in which the service provider delivers the service and where the customers and
the organization interact, as well as any tangible component that facilitates performance or
communication of the service, is referred to as physical evidence.
Service organizations need to provide tangible evidence of the service to develop an image in the
mind of current and prospective customers. Often physical evidence overlaps with the promotion
and distribution mix of the service mix. All tangible representations of services, such as
brochures, letterheads, business cards, report formats, signage, equipment, and physical
facilities where service are rendered, represent the physical evidence of services.
Physical evidence provides service organizations with excellent opportunities to send strong,
consistent, and positive messages regarding the nature of service offerings to customers. Physical
evidence is most successful if it is integrated throughout the organization, meaning that it should
be included in an organizations’ strategic planning. Once it has been accepted by management, it
is the responsibility of the marketing department to implement it throughout the entire
organization.
The more intangible a service is, the more it relies on physical evidence to convey an appropriate
message to customers. Physical evidence elements are employed to reduce the level of perceived
risk experienced by customers. Due to the intangibility characteristic of services, it is hard to
evaluate services in advance or to know the outcome of service experiences. Customers are
forever looking for tangible cues by which to judge service quality. They tend to reduce the risk
attached to the service offering by comparing the physical evidence of services to the offerings
of competitors, use their previous experience as a framework, or rely on the opinion of others.
Extremely intangible services do not necessarily provide the greatest risk to the customers. Only
\
Service Sector Management: BBA-III.
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when a price is attached to service offerings, can customers truly evaluate the risk attached to it.
The unique characteristics of services cause customers to search for evidence of the service in
each of their interactions with the organization. The new elements of the service mix, namely
people, process, and physical evidence, provide customers with that evidence and allow them to
form their own judgment.
Difference between goods and services
Intangibility: The most basic and universally cited, difference between goods and services is
intangibility. 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 intangible goods. E.g., health
care services are actions (surgery, diagnosis, examination and treatment) performers by providers
and directed towards the patients and their families. The services cannot be actually seen or
touched by the patients, although the patient may be able to see or touch the tangible components
of the service (e.g. equipment, hospital room)
Intangibility presents several marketing challenges: Services cannot be inventoried, and therefore
fluctuations in demand are often difficult to manage. E.g. there is tremendous demand for resort
accommodations in phoenix in February, but little demand in July. Yet the resort owners have
the same number of rooms to sell year-round. Services cannot be patented legally, and new
service concepts can therefore easily be copied by the competitors. Services cannot be readily
displayed or easily communicated to the customers, so quality may be difficult for the consumers
to assess. Decisions about what to include in advertising and other promotional materials
challenging, as is pricing. The actual cost of a “unit of service” is hard to determine and the
price-quality relationship is complex.
Heterogeneity: Because services are performances, frequently produced by humans, no 2
services will be precisely alike. Heterogeneity also results because no two customers are
precisely alike; each will have unique demands or experience the service in a unique way. Thus,
the heterogeneity connected with services is largely the result of human interaction (between and
among employees and customers) and all of the vagaries that accompany it.
E.g. a tax accountant may provide a different service experience to two different customers on
the same day depending upon their personal needs and personalities.
Because services are heterogeneous across time, organizations and people, ensuring consistent
service quality is important. Quality actually depends on many factors that cannot be fully
controlled by the service supplier, such as ability of consumer to articulate his needs, willingness
& ability of the personnel to satisfy those needs, presence of other consumers and level of
demand for the service.
Simultaneous production and consumption: Whereas most goods are produced first, then sold
and consumed, most services are sold first and then produced and consumed simultaneously. For
example, an automobile can be manufactured in Detroit, shipped to San Francisco, sold 2 months
later and consumed over a period of years. But restaurant services cannot be provided until they
have been sold, and the dining experience is essentially produced and consumed at the same
time. This means that the customer is present while the service is being produced and thus his
views are taken in the production process.
Because services are often produced and consumed at the same time, mass production is
difficult. The quality of service and customer satisfaction depends on the real time including
actions of employees and interaction between employees and customers. It is not possible to gain
economies of scale through centralization. If the services are decentralized they can be delivered
to the consumer in convenient locations. As the customer is part of the production process, they
Service Sector Management: BBA-III.
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affect the outcome of the service. A ‘problem’ employee can cause problems for themselves and
for others in the service setting leading to lower level satisfaction.
E.g. in a restaurant setting, an over demanding and intoxicated customer will command extra
attention of service provider and negatively impact the experiences of other customers.
Perishability: Refers to the fact that services cannot be saved, stored, resold or returned. A seat
on an airplane or restaurant not used cannot be reclaimed or used or resold at a later time.
Due to this nature a service cannot be inventoried. Demand forecasting and creative planning for
capacity utilization are therefore important. Since services cannot typically be returned or resold
it implies strong recovery strategies when things go wrong. E.g. a bad haircut cannot be returned,
the customer should have strategies to recover the customers good will if and when such
problems occur
Why marketing of services? / Growth in the service sector:
It is obvious that the growth in the services sector has been substantive. Households as well as
firms are demanding more services as well as services of increasing quality and sophistication.
There are number of reasons for this growth in the service sector as mentioned below:
Greater affluence:
With the increasing affluence of people resulting from the growth of economies there has been a
greater desire for Quality life. Consumers are willing to spend more on leisure resulting in
greater demand for recreation and entertainment facilities, tourist resorts and other hospitality
services. Also, there has been a tendency on externalization of services production from
households to the formal economy. Demand for services like interior decoration, laundry, care of
household products etc. has increased which consumers used to perform themselves earlier.
Also, with increased incomes, there has been a greater demand for financial services.
Leisure time: - People do get some time to travel and holiday and therefore there is a need for
travel agencies, resorts, hotels, and entertainment. There are others who would like to utilize this
time to improve their career prospects and therefore there is a need for adult education/distance
learning/part time courses.
Working women:
As more and more women have started working, the time has become most scarce commodity in
family life. This has led to more demand for crèches, baby-sitting, household domestic help etc.
Further, working women and the resulting two income households have created greater demand
for, certain services like retailing, real estate and personal finance services
Greater life expectancy:
The economic growth and increasing standard of living have also resulted in the greater life
expectancy and thereby an expanding old age population. Thus there is an increased need for
services like old age homes, nursing homes, healthcare centers, etc.
Greater complexity of products:
With rapid development in technology, the consumer today uses a lot of complex products in his
day-to-day life. Thus there is a greater demand for specialists who provide maintenance and
upkeep of such products like cars, home computers, household appliances etc.
Increased complexity of life:
The greater complexity of life has created demand for a wide range of services, especially legal
and financial advice. The number of specialists in income tax, labor laws, legal affairs, marriage
counseling, employment services etc. has been increasing.
Globalization
Globalization of economies has led to an increased demand of communication, travel and
information services. Also there has been an increased and new demand on legal and other
professional services.
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Resource scarcity and ecology: - As the natural resources are depleting and need for
conservation is increasing, we have seen the coming up of service providers like pollution
control agencies, car, pools, water management, etc.
New products: - the development in information technology has given rise to services like
PCOs, Pager service providers, Web Shoppe, etc
While the role of agriculture has been reducing in the economies of industrial societies that of
service sector has been increasing at a fast pace. Thus, as the economies shift from developing to
developed economies the, they show more and more shift towards services.
Buyer Behaviour in Services
In buying decisions many times other people also influence the decision. In services these roles
are played by many persons. In purchase of any service six distinct roles are played






Initiator: The person who has a specific need and proposes to buy a service
Influencer: The person or group of persons whom the decision maker refers to or who
advice the decision maker.
Gate Keeper: The person or organization or promotional material, which act as filter on
the range of services which enter the decision choice
Decider: The person who makes the buying decision
Buyer: The person makes the actual purchaser
User: The actual user.
For example if a sales executive wants to do a market tour:
His boss may be the initiator
The travel agency may act as a Gatekeeper
The finance department may be the influencer
The administrative department the buyer
The executive the user.
In this case the user may have no role in the buying process. Hence while targeting a customer
the service provider may have to influence other persons.
The Consumer decision-making
The consumer’s decision to purchase or reject a product or service is the moment of final truth
for the marketer. It signifies the marketing strategy has been wise, insightful and effective,
whether it was poorly planned and missed the mark. Marketer are, therefore, interested in the
consumer decision-making process by which a consumer selects an alternative amongst the lot
available. The decision not to buy is also an alternative.
A simple consumer decision-making model, ties together the psychological, social and cultural
concepts into an easily understood framework. The decision model has three distinct sets of
variables:
1. Input Variables,
2. Process Variables,
3. Output Variables.
Input Variables:Input variables are those variables that affect the decision making process and include
commercial marketing efforts as well as non-commercial influences from the consumer’s sociocultural environment.
Decision Variables: The decision process variables are influenced by consumer’s own psychological fields, which
affect their recognition of a need, their pre-purchase search for information and their evaluation
of alternatives.
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Output Variables:The output phase of the model includes the actual purchase (either trial or repeat purchase) and
post purchase evaluation. Both pre-purchase and post-purchase evaluation feed back in the form
of experience into the consumer’s psychological field and serves to influence future decision
processing. (On a holiday a customer may change hotels in between his stay).
Factors Influencing The Buying Behaviour
Situational Factors: Time, Store’s atmosphere, Marketing Stimuli (the occasion)
Personal Factors: Personality, life style, other demographic factors like age, gender, occupation
etc.
Social Factors: Culture, reference group, family
Psychological Factors: Perception, attitude, motivation
Consumer evaluation of services
For ‘consumer’ evaluation process the concept of “goods” has to be considered, as service
characteristics have definite implication on the consumer evaluation process. Therefore for
service industry, the service provider must understand how consumers choose and evaluate their
offerings.
There are three types of products:
Search product: - search qualities are those attributes of a product that the customer can
determine before the purchase. This is more common in physical goods.
Experience product: - experience qualities are those attributes that can only be determined after
the purchase, or during the period of consumption.
Credence product: - it is being said that certain products have such characteristics which the
consumer cannot evaluate even after consumption or purchase. Such characteristics exist
invariably in services. e.g.: wheel aligning of the car, astrology etc.
Ten such qualities that influence the consumer’s evaluation of services (Quality Dimensions
of Services)
 Consistency: - it involves consistency and reliability of performances and dependability.
It means that the firm performs the service right the first time. It also means that the firm
honours its promises especially in terms of accuracy in billing, record keeping and
performing the service at the designated time.
 Concern: -it is the willingness or responsiveness of employees to provide the service. It
involves timeliness of service or giving prompt service, calling the customer back quickly
or mailing the transaction slip immediately.
 Competence: - it means having the required skills and knowledge to perform the service.
It involves knowledge and skill of the contact personnel, knowledge and skill of
operating support personnel and research capability of the organization. E.g. securities
brokerage firm.
 Contact: - it involves approachability, access and ease of contact. It means that the
service is easily accessible by telephone; waiting time to receive the services is not
extensive, convenient hours of operation and convenient location of service facility.
 Courtesy: - it involves politeness, report, consideration and friendliness of contact
personnel. It includes consideration for the consumer’s property. Clean and neat
appearance of public contact personnel. E.g. no muddy shoes on the carpet, proper
telephone operators etc.
 Communication: - it means keeping consumers informed in a language that they can
understand and listen to them. It may mean that the company has to adjust its language
for different consumers – increasing the level of sophistication with a well-educated
consumer and speaking simply and plainly with a novice. It involves explaining the
service itself and how much the service will cost explaining the trade-off between service
and cost and assuring the customer that a problem will be handled.
 Credibility: - it involves trustworthiness, believability, honesty. It involves having the
customer’s best interest at heart thus contributing to credibility, company name and
reputation, personal characteristics of the contact personnel and degree of hard sell
involved in interaction with the customer.
 Confidentiality: - the security and the freedom from risk or doubt, involving physical
safety, financial security or confidentiality.
Service Sector Management: BBA-III.
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

Customer knowledge: - it involves making the effort to understand the customer’s
needs, i.e. learning the customer’s specific requirements, providing individualized
attention and recognizing the regular customer.
Tangibles: - it includes physical evidence of the service, physical facilities, and
appearance of personnel tools or equipments used to provide the service, physical
representations of the service such as a plastic credit card or a bank statement and other
customers in the service facility.
Emerging key services





As economy shifts from developing to developed stage, they will show more and more
shift toward services
Today, the fastest growing segments of the US economy is services
In 1948 54% of the GDP of US was generated by services which is 80% now
Employment in this sector which was 55% in 1950 is now 83%
The US balance of trade in goods has remained in the red for many years, but there has
been a trade surplus in services
Today service sector dominates the economics of many developed nations. As countries develop
the role of agriculture in the economy declines and that of services increase. (China has 50%
GDP from service, 35% from industry, and 15%from agriculture). During recession it has been
seen that service output declines less than industrial output – the service employment is less
sensitive to business cycle fluctuation. Globalisation as strategy for service firm is becoming
more important
INDIAN SCENARIO
 The service sector now accounts for more than half of India's GDP: 51.16 per cent in
1998-99. This sector has gained at the expense of both the agricultural and industrial
sectors through the 1990s. The rise in the service sector's share in GDP marks a structural
shift in the Indian economy and takes it closer to the fundamentals of a developed
economy (in the developed economies, the industrial and service sectors contribute a
major share in GDP while agriculture accounts for a relatively lower share).
 The service sector's share has grown from 43.69 per cent in 1990-91 to 51.16 per cent in
1998-99. In contrast, the industrial sector's share in GDP has declined from 25.38 per
cent to 22.01 per cent in 1990-91 and 1998-99 respectively. The agricultural sector's
share has fallen from 30.93 per cent to 26.83 per cent in the respective years.
 Some economists caution that if the service sector bypasses the industrial sector,
economic growth can be distorted. They say that service sector growth must be supported
by proportionate growth of the industrial sector; otherwise the service sector grown will
not be sustainable. It is true that, in India, the service sector's contribution in GDP has
sharply risen and that of industry has fallen (as shown above). But, it is equally true that
the industrial sector too has grown, and grown quite impressively through the 1990s
(except in 1998-99). Three times between 1993-94 and 1998-99, industry surpassed the
growth rate of GDP. Thus, the service sector has grown at a higher rate than industry that
too has grown more or less in tandem. The rise of the service sector therefore does not
distort the economy.
 The share of agriculture sector to GDP has come down from 50% in 1960 to 24%
 Service sector contribution to GDP is around 54% with an annual growth of 8%
 Employment in this sector is around 50%
 The response to liberalization has been more in service sector, partly because lower fixed
investment requirements, example:- today’s concept of banking
 Technological advances have made it possible for India to compete on global basis in
areas like SOFTWARE, IT, HEALTH, EDUCATION, etc.,
 In addition lower wage structure has helped to develop CALL CENTRES, MEDICAL
 TRANSCRIPTION, etc.,
 From 1996 BSE has given a prominent place to service industry in its 30-share index
 Since no tax is imposed on agriculture sector, most of the tax came from manufacturing
sector. Now services are being taxed
 Service tax collection is to the tune of 5000 crore. 83% of this is contributed by service
sectors. 51% -Telecom, others are Insurance, AD agencies, Courier and stockbrokers.
Service Sector Management: BBA-III.
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




Many export benefits like EPCG is now extended to the service sector.
In last 25 years the increase in employment in the organized sector is 57% while if only
service sector is considered it is 70%(other than service sector it 41%)
India’s service exports in1997 were 9.3 billion $ against its merchandized exports of
$32.2 billion. It is expected that service exports could a third of merchandize exports now
this will be well above the global average of ¼. It implies that India which has failed to
catch the bus in the exports of manufactures is among the early leaders of the developing
world in the race for service exports.
Within the services sector, the share of trade, hotels and restaurants increased from 12.52
per cent in 1990-91 to 15.68 per cent in 1998-99. The share of transport, storage and
communications has grown from 5.26 per cent to 7.61 per cent in the years under
reference. The share of construction has remained nearly the same during the period
while that of financing, insurance, real estate and business services has risen from 10.22
per cent to 11.44 per cent.
The fact that the service sector now accounts for more than half the GDP probably marks
a watershed in the evolution of the Indian economy.
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BANK MARKETING
Introduction:
The banking sector in India has been widening its scope due to liberalization. Banks today
are not mere suppliers of money. They have become providers of services such as selling
insurance, mutual funds, investment opportunities, etc. In the past, the banks did not find
any attraction in the Indian Economy because of the low level of economic activities and
few business prospects. Today we find positive changes in the National Business
Development Policy. The private sector banks failed in serving the society. This resulted
in the nationalization of 14 commercial banks in 1969.
Nationalization of commercial banks paved the way for the development of Indian
economy and canalized financial resources for the upliftment of weaker sections of the
society. The involvement of Public Sector banks transformed the Indian economy. It was
felt that bankers review their services not only as financial intermediary but also as a
pacesetter.
Adequate financial resources are required for completing welfare projects. The
entrepreneurs need large-scale credit facilities on liberal terms and conditions. Individuals
have developed new hopes and aspirations from banks and the rural population and
backward regions strongly claim their right for a sound and balanced development.
Banking marketing:
The banking industry is undergoing a revolution caused by deregulation. This scenario is
reflected in the evolution of bank marketing. Banking systems may vary in different parts
of the world, the reasons for the variation maybe due to features like social banking, low
degree of technological sophistication and cumbersome legal systems.
Marketing of banking services is concerned with product, place, distribution, pricing and
promotion decisions in the changing socio-economic and business environment.
The users of banking services or the prospects play a very significant role in the
formulation of overall marketing strategies. The bank marketing activities are concerned
with the designing of product strategies keeping in view the needs and requirements of
prospects.
The causes of Bank Marketing can be seen as:

Rising customer needs and expectations due to improvements in general standard of
living.

Entry of foreign and private sector banks in India.

Economic liberalization of Indian economy.

Phenomenal growth of competition due to economic liberalization.

Rise in the Indian middle class with considerable resources.

Government intervention in protecting the interests of consumers.
A comprehensive definition of bank marketing by Deryk Weyer of Barclay’s bank states
that: “It consists of identifying the most profitable market now and in future by assessing
the present and future needs of the customer. This is done by setting business
development goals, making plans to meet them, managing and promoting the various
services to achieve these goals. Bank marketing is not just advertising and promotion
campaigns but a managerial process by which services are matched with markets. This
indicates evolving a suitable marketing strategy which suits the need of the
customer.”
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Banking structure in India
Socio-economic factors affecting savings:
The social and economic factors have a far-reaching impact on the behaviour of customers.
This is due to the fact that human beings are directly influenced by the socio-economic
consideration.
Social factors
a) Group of family,
b) Family life-cycle,
c) Family decisions, and
d) Role of opinion leaders.
Economic factors
a) Disposable income,
b) Price Index
c) Stages of economic transformation
d) Global economic co-operation.
MARKET SEGMENTATION
In banking services, the banks are expected to satisfy rural customers, urban customers,
and high-earning and low-earning customers, small-scale and large-scale entrepreneurs
and so on.
Importance of segmentation in banking services:
Since the banks have to deal with different types of customers from different fields and
localities, banking services need segmentation.
The purchasing power of potential customers is different. In respect of term deposits of
different maturities or deposit schemes, the potential customers are required to be
influenced. These potential customers may be located in various pockets of urban areas.
In the Indian setting, we find the emergence of a wide rural market. Here, it is necessary
that the segmentation be done in tune with the changing socio-economic conditions of the
rural customers.
Thus, market segmentation is important not only from the perspective of expanding the
market but also with the motto of satisfying the client. If the marketing decisions of the
banks are on the basis of micro-level market segment, only then a fine blend of service and
profit elements is possible.
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MARKETING MIX
PRODUCT
Banks products:
(A) Deposits:
Savings, Current, Fixed etc.
(B) Advances:
(1) Fund Oriented:
a)
b)
c)
d)
e)
f)
g)
Term Loan,
Clean Loan,
Bills Discounting,
Advances,
Pre-shipment Finance,
Post-shipment finance,
Secured and Unsecured lines of credit.
(2) Non-fund oriented:
a)
b)
Guarantees, and
Letter of Credit.
(C) International banking:
a)
b)
Letter of Credit, and
Foreign Currency.
(D) Consultancy:
a)
b)
c)
d)
Investment Counselling,
Project Counselling,
Merchant Banking, and
Tax Consultancy.
(E) Miscellaneous:
a)
b)
c)
d)
e)
f)
g)
Traveller Cheques,
Credit card,
Remittances,
Collections,
Sale of Drafts,
Standing instructions, and
Trusteeship.
In the banking the products are services. Services cannot be seen or protected like goods.
The potential buyer of the services can form an opinion about the services offered.
The changing trends in the non-banking investments compel certain modifications to be
made in the existing product line. The product should suit the market needs.
Bank services are viewed in terms of the satisfaction they deliver and not just the things
that are created with value. For instance, a bank account is seen in terms of customer
satisfaction such as safety, convenience of paying dues, keeping records, transferring
funds, status, and pride in one’s bank. The various deposits, loans and advances,
consultancy services, international banking, safe deposits, credit cards, etc. are the
products sold by the bank.
Bankers need to identify their core and supplementary product services as it has more
marketing implication. The banker should offer an optimum mix of the core and
augmented products.
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 CORE PRODUCT: It is the fundamental benefit the customer buys from the bank.
They define what kind of business the firm does, for example, the business of commercial
bank. But customers do not buy the core product, they only buy the benefit. The role of the
bank marketer is to convert the core products into a generic product, which satisfies the
needs of the customer.
 AUGMENTED PRODUCT: This is the basic product with some ancillary attached to
it. For example, when one opens a Suvidha Account with Citibank, he gets an ATM Card
free. The bank marketer must offer a multidimensional product or what is called a ‘product
package’.
The product related strategy includes:

Introduction of new schemes- EXAMPLE: DEMAT ACCOUNT.

Modification of the product offered by incorporating technological
EXAMPLE: Telebanking, Online Banking, etc.

Change in the product line or package – EXAMPLE: From Corporate Banking to
Personal Banking; or even deleting an existing service line.
development –
PRICE
Pricing in Banking relates to the interest rates paid by the banker on deposits, interest
charged by the banker on loans and demand drafts, charges for various types of
transactions and fees for certain services. In India, banks adopt administered pricing
structure to some extent as the deposit and lending rates are prescribed by RBI. The
charges for banking services are agreed upon by Indian Banks Association. Pricing
policy of a bank is considered important for raising the number of actual customers. But
even in this regulated pricing environment, pricing
can be used as a tool in their marketing strategy. The specific pricing methods that can be
adopted in deregulated environments are:
 Cost plus pricing which calls for a detailed analysis of cost structure of various bank
products and services.
 Market Oriented Approach which indicates what the market can bear or accept as
in the case of a corporate client who may not be price sensitive as against an individual
client.
 Competition related Approach, where the price is decided based on the competitor’s
price. In this case, the ‘value’ like high return, convenience, and speedy service must be
highlighted.
The banks are required to frame two-fold strategies. Strategies concerned with interest and
commissions to be paid to the customers and interest and commissions to be paid by the
customer for different types of services.
PROMOTION
The objects of a promotion programme are to inform about the new service product, to
persuade the customer, to remind the customer, build image of the bank, etc.
Banking services can be promoted in two ways:
1. Personal promotion: The bank marketer gets the best opportunity to tangibilise the
product through personal selling; persuasion is more effective with direct contact. It helps
in creating impulse buying.
2. Impersonal Promotion: i.e. advertising, publicity and sales promotion measures. An
advertisement in banking is a promise- a promise of satisfaction to prospects who buy the
service offered by the bank. Banks use all types of advertisement such as newspaper,
radio, television, magazines and hoardings. Also, sales promotion devices such as Point of
Purchase material, brochures and advertisement specialties like ball pens, calendars,
diaries, etc.
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Publicity is a major strength as a promotion tool than advertising as customers tend to
believe a news item rather than an advertisement. Word of promotion is yet another
important promotion tool as it is a better persuader and convincer than advertising and
personal selling, as banking services are narrated by customers themselves. Besides, as
Social Welfare and Corporate Social Responsibility are considered to be an important part
of banking services, the publicity measures need due care.
PLACE
The place decision mainly deals with selection of a suitable location for the branch. Sound
location decisions help in activating the business. The location should have adequate
availability of transportation, communication, electricity and other necessary facilities for
the smooth functioning of the bank. Technological developments, increased customer
satisfaction, inadequacy of the traditional channel to serve all customer segments have
brought bout ATM, telebanking, home banking, Internet banking and now SMS Banking.
Another significant development is a strategic alliance set up by the private banks to
overcome the handicap of limited branch network. In such alliances the branch network of
one branch will be used by the other for selected transactions like bill collection, cheque
collection, etc.
PEOPLE
Banking products cannot be separated from the person (banker) who markets them. The
product and the seller together constitute the banking product. Banks should adopt internal
marketing in order to make the whole business customer-oriented. The bank products
should be marketed to the employees first before they are marketed to customers. The
corporate mission should be communicated repeatedly and effectively to all employees by
the top management.
The placement policy should emphasize that the recruits should not only be conversant
with all aspects of banking business but also have the skill for social interaction and
tolerance for interpersonal contact.
PROCESS
It involves all activities right from the product conception stage, to product designing and
development down to its marketing at the branch level. Banks which were more focused or
activity-oriented have shifted to customer-oriented service delivery. This is essentially due
to the technological advances. Automation of transactions, accounting procedures, data
handling, as well as process re-engineering has helped reduce delays in processing
transactions- example: Loan applications, clearing cheques, etc.
PHYSICAL EVIDENCE
Banking products are intangible and physical evidence focuses the banker’s attention on
this aspect. The environment of banks is changing. It is becoming friendlier with attractive
layouts and décor. Most private and foreign banks like ICICI, Citibank, and HDFC portray
a new welcoming and friendly look to the customers rather than drudgery banking
counters. Attractive brand names, logos, symbols, etc. add to the customer’s perception of
service quality.
PRODUCTIVITY
Productivity relates to how inputs are transformed into outputs that are valued by
customers. Improving productivity keeps cost in control.
Banks have improve productivity through computerization, by changing transaction
systems – like the new banks do not have pass books – they only send quarterly
statements; the specimen signatures are also checked through the computers.
Bank Marketing in the Indian Perspective
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The Indian banking can be broadly categorized into nationalized (government owned), private
banks and specialized banking institutions. The Reserve Bank of India acts a centralized body
monitoring any discrepancies and shortcoming in the system. Since the nationalization of banks
in 1969, the public sector banks or the nationalized banks have acquired a place of prominence
and has since then seen tremendous progress. The need to become highly customer focused has
forced the slow-moving public sector banks to adopt a fast track approach. The unleashing of
products and services through the net has galvanized players at all levels of the banking and
financial institutions market grid to look anew at their existing portfolio offering. Conservative
banking practices allowed Indian banks to be insulated partially from the Asian currency crisis.
Indian banks are now quoting al higher valuation when compared to banks in other Asian
countries (viz. Hong Kong, Singapore, Philippines etc.) that have major problems linked to huge
Non Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble footed in
approach and armed with efficient branch networks focus primarily on the ‘high revenue’ niche
retail segments.
The Indian banking has finally worked up to the competitive dynamics of the ‘new’ Indian
market and is addressing the relevant issues to take on the multifarious challenges of
globalization. Banks that employ IT solutions are perceived to be ‘futuristic’ and proactive
players capable of meeting the multifarious requirements of the large customer’s base. Private
Banks have been fast on the uptake and are reorienting their strategies using the internet as a
medium The Internet has emerged as the new and challenging frontier of marketing with the
conventional physical world tenets being just as applicable like in any other marketing
medium.
The Indian banking has come from a long way from being a sleepy business institution to a
highly proactive and dynamic entity. This transformation has been largely brought about by
the large dose of liberalization and economic reforms that allowed banks to explore new
business opportunities rather than generating revenues from conventional streams (i.e.
borrowing and lending). The banking in India is highly fragmented with 30 banking units
contributing to almost 50% of deposits and 60% of advances. Indian nationalized banks (banks
owned by the government) continue to be the major lenders in the economy due to their sheer
size and penetrative networks which assures them high deposit mobilization. The Indian
banking can be broadly categorized into nationalized, private banks and specialized banking
institutions.
The Reserve Bank of India acts as a centralized body monitoring any discrepancies and
shortcoming in the system. It is the foremost monitoring body in the Indian financial sector.
The nationalized banks (i.e. government-owned banks) continue to dominate the Indian
banking arena. Industry estimates indicate that out of 274 commercial banks operating in
India, 223 banks are in the public sector and 51 are in the private sector. The private sector
bank grid also includes 24 foreign banks that have started their operations here.
The liberalize policy of Government of India permitted entry to private sector in the banking,
the industry has witnessed the entry of nine new generation private banks. The major
differentiating parameter that distinguishes these banks from all the other banks in the
Indian banking is the level of service that is offered to the customer. Verify the focus has
always been centered around the customer – understanding his needs, preempting him and
consequently delighting him with various configuration of benefits and a wide portfolio of
products and services. These banks have generally been established by promoters of repute or
by ‘high value’ domestic financial institutions.
The popularity of these banks can be gauged by the fact that in a short span of time, these
banks have gained considerable customer confidence and consequently have shown impressive
growth rates. Today, the private banks corner almost four per cent share of the total share of
deposits. Most of the banks in this category are concentrated in the high-growth urban areas in
metros (that account for approximately 70% of the total banking business). With efficiency
being the major focus, these banks have leveraged on their strengths and competencies viz.
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Management, operational efficiency and flexibility, superior product positioning and higher
employee productivity skills.
The private banks with their focused business and service portfolio have a reputation of being
niche players in the industry. A strategy that has allowed these banks to concentrate on few
reliable high net worth companies and individuals rather than cater to the mass market. These
well-chalked out integrates strategy plans have allowed most of these banks to deliver
superlative levels of personalized services. With the Reserve Bank of India allowing these banks
to operate 70% of their businesses in urban areas, this statutory requirement has translated into
lower deposit mobilization costs and higher margins relative to public sector banks.
LATEST DEVELOPMENTS
ATMs may be treated at par with bank branches: The spreading ATM culture looks set to get hard knock with the Reserve Bank of India
planning to treat them at par with bank branches.
The RBI on Saturday sent a draft circular on a branch authorization policy to all the banks.
For the purpose of authorization, the RBI said a “branch” would include a full-fledged
branch, a
satellite office, an extension counter as well as offsite ATMs. However, call centers have
been kept out of it.
This means that the banks will need the RBI’s advance approval for setting up as well as
closing down ATMs. So far, banks could set up ATMs on their own and keep the local
RBI offices informed at the time of operationalising them.
The State Bank of India has over 7,000 ATMS – roughly half the number of its branches.
ICICI Bank has about 2,000 ATMs, four times its branch network. UTI Bank and HDFC
Bank, too, have sizable number of offsite ATMs. The total number of ATMs could be
18,000 throughout the country.
Telebanking and electronic banking: A customer can access information about his/her account through a telephone call and by
giving the coded Personal Identification Number (PIN) to the bank by Telebanking. Some
banks like SBI, Andhra Bank, etc. have made this facility available to some branches.
Automatic withdrawals and transmission of cash balance data and other information about
an account is another facility that is offered by banks in a consolidated form through fax or
telex. Some banks have also adopted the use of E-mail service for data and information
transmission.
Banks have also started with the Electronic display of information through Satellite
Communication System and transfer of funds through the same channel for inter branch
and inter-bank adjustment and clearance of cheques, drafts, etc.
Cell phone banking and inernet banking: Through Inter-net banking one can visit the website of each bank by entering his password
and know the account balance and even pass his own credit and debit entries.
This means that we can do our banking through our personal computer sitting at home.
Banks may soon allow zero balance savings accounts through Internet facility only.
Customers can now make balance enquiries, download statements and open fixed deposits
over the net. They will soon be able to carry out all their transactions over the net. So
visiting a bank would become needless.
Time to come, Mobile phones will drive banking transactions. These mobile phones will
be equipped with smart cards that are embedded with banking and other information. This
mobile phone banking facility is yet to come but the mechanics of linking the banking with
the cell phone is being sorted out.
Teller machines are being installed in the banks for the Electronic banking facility. The
use of e-mail for banking will open up new avenues for Internet banking.
Banking will be on wheels and mobile by the use of smart banking.
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CHARACTERISTICS OF SERVICES – with reference to Banking
Intangibility
Financial services are generally intangible, but the service providers go to considerable
lengths to ‘tangibilise’ the service for customers. Regular bank statements, ‘gold’ credit
cards, and insurance policies are all examples of the way in which the financial services
are presented to
customers. They can enhance the image of the service and the provider can even bestow
status or implied benefits upon the user as with a gold card. Physical reminders of the
service product, brand name and value serve to reassure the consumer and help the
organisations positioning.
Inseparability
The degree of inseparability depends upon the type of service and the actual supplier.
Many everyday transactions are carried out now via automated services- the automated
teller machines (ATMs), net banking etc.
Additionally, many financial services are sold by brokers and agents of various kinds.
Services are frequently handled by agents are credit card and other currency/travelers
cheque encashment.
Heterogeneity/variability
The complexity of the service transaction process will determine the extent of variability
and this can differ to a large extent between institutions and even with one institution. The
greater the degree of automation within any transaction process, the greater the degree of
standardization. Thus simple transactions may be carried out via ATMs and completely
standardized or via branch counter where they might be fairly standardized but subject to
some variation in quality.
Total standardization is not necessarily desirable from the consumer’s point of view. A
friendly greeting or being addressed by name can enhance service delivery and while an
ATM cannot arrange an emergency overdraft facility when funds are low, branch staff can
look at the standing of individual customers and make arrangements when appropriate,
satisfying the customer and profiting from charges applying to the account.
Perishability
The degree of Perishability depends on the type of service. If a cheque needs to be cleared
by a certain date and the system causes delay then the benefits to the consumer are lost so
the service could be said to be perishable. By and large, money and financial services are
enduring in nature. If a bank’s reserves are not fully utilized profitably through lending or
investment they will still retain their worth and may be utilized again at a later date. A
bank branch, which does not have any customers at all on a particular day, may actually
gain rather than lose profit as staff may be able to use the peace and quite to catch up on
other work.
PEST Analysis for financial services
Political/ Legal
Influences which have an impact on financial services and consumer confidence include
the following:
 State provision of pensions
 Government encouragement of savings and investment (for e.g. via tax benefits)
 Regulatory control and protection (to prevent the collapse of financial institutions and
protect investors money)
Economic
Economic factors are key variables which have an impact on the activity in the financial
services sector. The level of consumer activity is governed by income levels and personal
wealth. As income levels grow, more discretionary income is available to spend on
financial services. Consumer confidence in the economy and in job security also has a
major impact; if lean times are foreseen ahead, savings will take priority over loans and
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other forms of expenditure. Consumers may also seek easy access savings and be willing
to tie up their money for longer periods with potentially more attractive investments.
The main economic factors that should be monitored with regard to fianacial services
marketing are as follows:








Personal and household disposable income
Discretionary income levels
Employment levels
The rate of inflation
Income tax levels and taxation structures
Savings and investment levels and trends
Stock market performance
Consumer spending & Consumer credit
Socio-cultural
Many demographic factors have an important bearing on financial services markets.
 Changing attitude towards consumer credit and debt
 Changing employment patterns
 Numbers of working women
 The ageing population
 Marriage/divorce/birth rates
 Consumption trends
Technological
Technology has a major impact on many industries including financial services and
banking in particular. ATM services which not only provide cash but also allow for bill
payments, deposits and instant statements are widely used. From the customers’ viewpoint,
technology has played a major role in the development of the process whereby the service
is delivered. Automated queuing systems have made visits to the bank easier and more
convenient. Telephone Banking and insurance services are now being used in place of the
traditional branch-based service process. Technology has also played a major role within
organizations, bringing about far greater efficiency through computerized records and
transaction systems and also in business development, through the setting up of detailed
customer databases for effective segmentation and targeting.
The main technological developments fall within these categories;
 Process developments
 Information storage and handling
 Database system
MERCHANT BANKING
Merchant banking may be defined as an institution, which covers a wide range of activities
such as management of customer services, portfolio management, credit syndication,
acceptance credit, counseling, insurance, etc.
The notification of the Ministry of Finance defines a merchant banker as, "any person who
is engaged in the business of issue management either by making arrangements regarding
selling, buying or subscribing to the securities as managers, consultant, adviser or
rendering corporate advisory service in relation to such issue management"
Services of Merchant Banks:
The services of merchant bankers are described in detail in the following way:
 Project Counseling:
 Issue Management:
 Underwriting of Public Issue:
 Managers, Consultants or Advisers to the Issue:
 Portfolio Management:
 Advisory Service Relating to Mergers and Takeovers:
 Off Shore Finance:
 Loan Syndication:
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
Corporate Counseling:
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TOURISM MARKETING
Definition
Tourism is a temporary, short-term movement of people to destinations outside the places where
they normally live and work. It involves travels and stay for temporary period to a place distant
from the residence ranging from weekend to a few weeks or months.
Introduction:
Who is a Tourist?
Tourist is a temporary visitor to a country other than the one, which he usually resides for any
reason other than following an occupation remunerated within the country visited.
The temporary period should not be less than 24 hours. There is a considerable cross border day
traffic amongst many groups of neighboring countries. Such visitors are defined as Excursionist.
The Tourism Industry
The tourism industry comprises of the following main and distinctive sectors:




Transportation
Accommodation
Tour operators
Tourism Destination Operators/ Destination Management
FORMS OF TOURISM
Tourism is a generic term, which includes several types of travel and stay depending upon the
motivations that impel people to move from place to another. The main purpose of travel is to
determine the form of tourism. Following are the forms of tourism.
a. Domestic tourism/ Internal Tourism
b. International tourism/ External tourism
c. Holiday tourism-It has many forms. They are as follows.




Recreational tourism
Health tourism
Sports tourism
Cultural tourism
d. Business travel –
e. Common interest tourism - It includes visitors who travel for specific purpose
and objectives other than that of holiday and business. The return of people to the
country of their origin labeled as Ethnic Tourism also falls in this category
Some Concepts :
Time Sharing: Vacation property ownership without the up-front cost of owning a property year
round, you pay for the time you use. You may use your home resort every year or trade to
thousands of other affiliated resorts worldwide.
The time-share market, across the globe, is approximately USD 6 billion industry at present and
is growing at an average rate of 20 percent every year.
There are only 45,000 – 50,000 timeshare owners in India registered with the RCI. Reputed
companies like Marriot, Hyatt, and Radisson etc are venturing into the time-share business.
Pilgrimage Tourism- It involves visiting various places of worship. Today more than 50% of
the 9.2 million domestic tourists travel to such places. In 1998 more than 95 lakh people
assembled at the Kumbh Mela, the largest and the last of its kind in the 20th century.
Beach tourism: India with its coastline of 7500 kms, offers some of the most exotic beach
holidays in the world. India boasts of many beaches of Goa, Kovalam and Gopalpur. On the west
coast, Lakshadweep offers a chain of coral islands and perfect beaches to the tourists. On the other
hand, Orissa offers its ample golden and sunny beaches to the tourists. At the tip of the Indian
mainland we have Kanyakumari.
Adventure tourism: India’s vast geographical diversity provides a vast potential for adventure
tourism and also the prices here are very low. Travel agents offer packages for individuals and
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groups. Mountaineering, trekking, etc are some of the possibilities. There are sports like skiing,
scuba driving, angling, wild life and bird watching, etc.
Features Of Tourism Product:

Each component of tourism is highly specialized and together makes the final product
and cannot be provided by single enterprise.

Sales intermediaries like tour operators, travel agent and hotel brokers play a dominant
role.

Demand for tourism is highly unstable due to seasonal, economic, and political factors.
MARKETING MIX.
PRODUCT.
The panoramic view of the location, travel to the destination, the accommodation and facility as
well as entertainment at the destination all forms the tourism product.
Components Of Tourist Product
BENEFIT
CORE BENEFIT
MEANING
WITH RESPECT TO THE TRAVEL
AND TOURISM INDUSTRY
The fundamental benefit or service that Traveling
the customer is buying
BASIC PRODUCT Basic, functional attributes
Ticketing, hotel reservation
EXPECTED
PRODUCT
Set of attributes/conditions the buyer Customer friendliness, good food
normally expects
AUGMENTED
PRODUCT
Prompt services, comfortable and
That meets the customers desires
convenient trip, spectacular sights,
beyond expectations
music
POTENTIAL
PRODUCT
The possible evolution to distinguish Totally customized tour packages, A
the offer
grade service at every stage
Transportation.
Without the transportation facility the attraction is of no use. The infrastructure and equipment
are the components of transportation
Apart from the various components of tourist product, there are three levels of service package
for tourist products and they are as follows:
Core product: comprises of essential need or benefit sought by customer. For e.g.: relaxation,
fun, self-fulfillment etc.
Tangible product: comprises of the formal offer the product as set out in the brochure. For e.g.:
inclusion of breakfast, facilities like television, swimming pool etc.
Augmented product: it expresses the idea of value added over and above the formal offer. For
e.g.: free entrance tickets to local attractions, complimentary bottle of wine on arrival.
All these components help in identifying the images and perceptions of the tourist products as
well as tourist organizations.
PRICE
The objective of pricing is to fetch a target market share, to prevent competition, and to take care
of the price elasticity of demand.
Methods Of Pricing In Tourism Industry.
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Cost based pricing: the price charged must be sufficient to cover fixed and variable cost to have a
reasonable return on investment. Organization resort to price fixation at marginal cost to attract
more customers.
Demand based pricing: refers to balancing costs and revenues. This pricing will suit to the
seasonal characteristics as at peak times many leisure facilities have excess demand so firms use
high price as tactic.
Competition based pricing: in case of new tourism product, if the strategic objective is market
penetration, then prices must be set very competitive to attract more customers. In case of niche
strategy, the price should portray this aspect complimented with additional benefits of the service
offer.
PROMOTION
The promotion mix plays a vital role as the users of service feel a high degree of involvement
and uncertainty about the product and their role in the buying process. The important aspects of
promotion are advertising, publicity, sales support and public relations. Advertising the messages
attractively and sales promotion activities in tourism can be effective when supplemented by
publicity and personal selling. The word-of-mouth promotion is an important tool in tourism
marketing. Apart from that, incentives to be given for a short period of time like price cuts,
discounts, free gifts etc. and circulating brochures to the customers are also an important tool in
tourism marketing.
PLACE
In most of the cases the tourist destinations may be natural, historical attractions. But,
infrastructural facilities, transportation, communication are important for the development of a
tourist center. Place or distribution management is concerned with two things – availability and
accessibility.

To extend the number of sale or access, away from the location at which services are
performed or delivered.

To facilitate the purchase of service in advance.

Different distribution strategies may be selected to reflect the company’s overall
objectives. The tourist products are bought by the travel agent or tour operator. However,
the late

Best mode of reaching the tourist is through internet. Ticket booking can be done through
the internet and payment is made with credit card.
PEOPLE
We can’t deny the fact that sophisticated technologies have been successful in accelerating the
pace of development. We also agree with this view that new generation of information
technologies have simplified the task of decision makers. At the same time we also have to
accept the fact that the sophisticated technologies can’t deliver goods to the development process
if the employees operating and maintaining these technologies are not of world class.
Technologies need due support of human resources who invent, innovate and develop
technologies. Like other industries, the tourism industry depends substantially on management of
human resources. The tourism industry is an amalgam of the services of a lot of people and
hence this industry cannot work efficiently if the travel agents, tour operators and travel guides
lack world class professional excellence. Of course the offices of travel agents depends on the
new technology but after all employees and the other staff contribute significantly to the process.
The travel guides need professional excellence since the projection of a positive image regarding
a destination in particular requires their due cooperation, failing which even the world class
services offered by the travel agents are found meaningless. The tour operators also need to
manage human resources efficiently.
In the management of people, the related organizations are required to think in favour of
developing an ongoing training program so that we find a close relation between the
development of technologies and the quality of personnel who are supposed to operate and
maintain the same. They need a lot of credentials to fulfill the expectations of the customers. The
organization has to make the environmental conditions conducive and focus has to be laid on the
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incentives to the employees for energizing the process of performance orientation. Employee
orientation requires due weightage to efficiency generation, value-orientation and perfection.
In the tourism industry the travel agents and the travel guides are the two most important people
who speak a lot about the industry. Hence it is imperative that they have to be at their best at all
times. Travel guides especially, are expected to have a lot of patience, good sense of humor, tact
to transform the occasional tourists into habitual ones, thorough knowledge of the places,
linguistic skills etc.
PROCESS
The operation process of the tourism firm will depend on the size of the tourist firm. The steps
involved in the delivery of the tourist product are as follows:

Provision of travel information- refers to information regarding the travel is provided at a
convenient location where the tourist seeks clarifications about his proposed tour.

Preparation of itineraries- it is composition of series of operations that are required to plan a
tour

Liaison with providers of services-contracts have to be entered with the providers of services
like transportation companies, hotel accommodation etc., before any form of travel is sold to
a customer.

Planning and costing tours- the task of planning and costing the tour will depend on the tour
selected as well as individual requirements.
New concepts in Tourism Industry:
Eco Tourism: Eco Tourism is an enlightening travels experience that contributes to the
conservation of the eco system while respecting the integrity of the host communities.
Productivity /quality
Productivity in services refers to how you transform the inputs into outputs, which are valued by
the customer. Quality refers to the degree to which the service satisfies the customer by meeting
their wants and expectations. Productivity and quality need to be omnipresent for the industry to
complete its service obligations aptly. Only if your firm is productive and the quality meets the
requirements of the customers can your performance be graded as excellent.
Here are five key things to consider when developing the performance strategy for your business.





Have you found a way to fit marketing into your schedule?
Do you keep track of both your long and short-term projects (including marketing projects),
and review that list daily?
Do you have a way of combating procrastination and delay?
Do you maintain the highest standards of integrity and excellence?
Are you continually working to improve your skills in all areas of your business?
PROMOTION
Includes advertising, publicity, Sales, public relations etc.
Creation of awareness has a far-reaching impact. The tourist organizations bear the
responsibility of informing, persuading and sensing the potential tourists in a right fashion. The
marketers need to use the various components of promotion optimally so that they succeed in
increasing the number of habitual users. Promotion helps in maximizing the duration of stay,
frequency of visit by offering new tourist products in the same country to areas, which hitherto
have remained untapped or partially tapped. The various dimensions of tourism promotion are as
follows:
Advertising: Advertisement helps in furnishing important information to the actual and potential
tourists. Its coverage is wide. Advertising is aimed at the public to create awareness of the travel
offers available on a resort and its attractions to influence their business decisions. Intangibility
can be compensated with the help of visual exposure of scenes and events. We can project hotel
bedrooms, well-arranged restaurants and cafeterias, swimming pools etc.
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Publicity: It focuses attention on strengthening the public relations measures by developing a
rapport with media people and getting their personalized support in publicizing the business. It
helps in projecting the positive image of tourist organizations since the prospects trust on the
news items publicized by the media people. Eg. Kumarakom in Kerala after Prime Minister A B
Vajpayee’s visit. The publicity programme include regular publicity stories and photographs to
the newspapers, travel editors, contact with magazines on stories etc. There are different groups
in publicity, such as advertising publicity, projected publicity, structural publicity and personal
publicity.
Sales promotions: Sales promotion measures are the short term activities seeking to boost sales
at peak demand periods to ensure that the firms obtain its market share and are used to help
launch a new product or support an ailing or modified one. The tool of sales promotions is
designed to appeal particularly to those customers who are price-sensitive. There are a number of
techniques to promote sale and the tourist professional need to use them in the face of their
requirements vis-à-vis the emerging trends in the business. Eg. In the tourism industry, a travel
company offers give-always to their clients, such as flight bags, wallets for tickets and Forex and
covers of passport. The hotels offer a number of facilities like shoe shine clothes, first aid sewing
kits, shower caps and shampoo. Further, the VIP clients also get fruits and flowers in their
rooms.
Thomas Cook offered 3 tier sales promotion based on price and one more novel technique as
detailed below:

Cook agreed to match the price of any holiday they sold which was known as price promise.

Money back guarantee to the clients who purchase the product or any tour operator known as
trading charter.

Matching of customers need with a particular holiday known as formal guarantee.

A business travel challenge in which the details of expenditure on staff business travel
booked through other agents over a 3 months period were submitted by companies to Cook,
specially to calculate expected savings, provided the bookings are made through them.
Word-of-mouth Promotion: Most communication about tourism takes place by word-of-mouth
information, which in a true sense is word-of-recommendation. In the tourism industry it is found
that the word-of-mouth promoters play the role of a hidden sales force, which instrumentalize the
process of selling. The high magnitude of effectiveness of this tool of promotion is due to high
credibility of the channel, especially in the eyes of the potential tourists. The sensitivity of this
tool makes it clear that tourist organizations need to concentrate on the quality of services they
promise and offer. The marketers or the tourist organizations need to keep their eyes open,
identify the vocal persons or the opinion leaders and take a special care of them so that they keep
on moving the process of stimulating and creating demand.
Personal Selling: Personal Selling is based on the personal skill of an individual. The oral
representation in conversation bears the efficacy of transforming the motivation into persuasion.
The travel and hotel business depend considerably on the personal selling. The development of
travel and tourism has been possible due to well-educated and trained sales personnel. The
development of tourism business has been influenced by the services rendered by the travel
agents and travel guides since they work as information carriers. Personal selling is the personal
presentation of a tangible product or intangible services or ideas to the personal customers. It is
important to mention that in the tourism industry, the personnel who attend tourists form an
essential ingredient of the product, such as sales personnel are found responsible for dealing with
customers behind the counter, the resort representatives cater to the need of tourists when they
reach the destination etc. all of them play a vital role in ensuring that the tourism products satisfy
the tourists. The phrase- the customer is always right applies specifically to the tourism industry.
No reduction in price would compensate for impolite and indecent travel guide, a solvent waiter
and a surly or a haughty coach driver. These facts are testimony to the proposition that the travel
business is linked with the performance and behaviour of sales personnel or travel staff.
Telemarketing: it is a method of selling in which a professionally sound telemarketer expands
the business. The quality of technology and the communicative ability of the telemarketers
determine the magnitude of success of this component. In tourism, the travel agents, offices of
airways, receptionist, and secretaries can’t work efficiently if the telephonic services are not up
to the mark. This makes a strong advocacy in favour of recruiting a person considered to be
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professionally sound, personally committed sales personnel having an in-built creativity,
innovation and imagination.
PHYSICAL EVIDENCE
It is a very important factor for the travel and tourism industry. This marketing p is important in
2 distinct ways:
1) as the environment in which the sales takes place
2) the environment where the product is consumed
Explanation of the first case
When the purchasing of the product is taking place, however the customer cannot be sure
whether they will enjoy the product or not. In the mean time their expectations and emotions are
influenced by factors like layout of the room, the furniture, noise level, temperature, lights and
other factors like the brochure of the company. In case of customers who by electronically the
appearance of the website is the physical evidence.
Explanation of the second case
In the travel industry where the product is being experienced s particularly important in securing
repeat business thus extensive facilities that prove to be physical evidence are provided to lure
and woo the customer
The tangibles include flat beds in business class, Wi-Fi connection in hotels, customized meals
on board, tele checking 8hrs booking in hotels, hotels providing laptops on request, internet
access as complimentary for the corporate packages.
The critical incidences in this process are
 Understanding the customers needs and expectations from the holiday or business tour
which ever he or she is opting for
 Making an apt travel plan and route adhering to the requirements of the customer
Execution of the planned itinerary is the most critical one. As a company has committed some
thing and this is the time when the customer is actually experiencing the entire product and if any
one of the commitments don’t materialize then the zone of tolerance is affected and lot as it is
already low because the customer on a tour whether leisure or business expects perfection.
Major players in tourism industry:
These players can be divided into 2
1.
The ones, which take the local residents out of the country
2.
The others, which get the foreigners into the country.
For eg: SOTC
SOTC floated a new package called “Brahman Mandal” aimed at Marathi speaking population
and “Vishwa Darpan” aimed at Hindi speaking population of the country. This kind of
segmentation will enable the companies to target effectively to boost their revenues. In fact,
SOTC business improved substantially in Mumbai & Pune circles after the announcement of
these separate packages.
Factors affecting tourism industry:
1.
Cross border terrorism in Jammu & Kashmir
2.
Terrorist Attack in April 1999
3.
11th September Attack on US
4.
Gujarat riots
SWOT Analysis:
Strengths:
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India a culmination of deserts, forests, mountains, beaches& it has a diversity of culture i.e. a
blend of various civilizations & their traditions, a number of archeological sites & historical
monuments.
Weaknesses:
Lack of adequate infrastructure & improper marketing of Indian tourism abroad.
Opportunities:
Growth of domestic tourism and special packages offered.
For eg: Thomas Cook says “Travel Now Pay Latter.” Affordable traveling at leisure, plenty of
job opportunities.
Threats:
Economic conditions and political turmoil in other countries affects tourism. Aggressive
strategies adopted by other countries like Australia, Singapore, in promoting tourism.
Current scenario:
Growth in domestic tourism in the country during the last one-decade 146 million tourist visits in
2000.
Tourism provides enormous opportunities for employment generation. 9.3 million in India for
every 10 lakh invested in hotels/restaurants.
Future scenario:
The industry body, Confederation Of The Indian Industry (CII) has a vision for tourism in India
called “Tourism Vision 2020” CII expects to host 40 million tourists by then & the tourism
economy contributing Rs.1tn.
Problems:
1.
Lack of Infrastructural facilities.
2.
Lack of reasonable priced accommodation.
3.
Tax burden for industry leaders. For eg: for every $ spent in India by a tourist he pays as
much as 27% in taxes on average with figures going upto 35% in states such as West
Bengal, but for other major global destinations the tax burden is only in the range of 4-8%
4.
Along with expenditure tax, tourist has to pay service tax, sales tax, and luxury tax.
PEST Analysis of the Industry:
Environmental influences can be analysed by using the PEST analysis.
Political/Legal:
Political factors are the main driving force of the industry. Govt. support & co-operation to
Indian Tourism Industry, railways and roads, hotel industry, airline industry, tourist operators.
Downfall of tourism industry because of unconducive political environment eg Kashmir,
Legal:
Law is different for different country & is the major determinant for the industry. “Tax paid by
tourists in India is the highest in the world. Indian hotels charge about 40% tax compared to
other Asian countries where it varies between 3% and 6%".
Economic:
The criteria here is the more the people spend the more the industry grows. As we are
concentrating on the International tourists, this has led to the tourism boom. Increase in spend
has led to increase in the number of luxury hotels, & increase in air industry.
Social:
The general perception for tourism destruction of the social fabric of a place. The more the
tourists coming at the place the more the risk of that place loosing its identity.
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Technology:




Better technology in cheaper cost to remote and inaccessible area.
It can help the country to get connected to the world.
It is very much necessary to have better technology to have that place on world tourist
map.
Frequent flights.
Various innovations in the tourism

Euro rail: Euro rail International is one of North America’s leading sources for European
rail. The main feature is that it has a concept wherein a passenger can buy a single ticket
and travel all over Europe without any stoppages as this railway line covers the entire
Europe almost up to Russia.

Palace on wheels: This concept is very much prevalent in the state of Rajasthan where
people come to experience the historical palace, and royal way of living. in this every
thing is made available in the coaches of train so as to make the trip exciting.

Ring route: this is one plan in mass rapid transit system, which is being developed in
thane district to make transportation better. It will be 16.2 Km long. This will help the
commercial as well as the industrial sector. It will transport more economical, efficient
and environment friendly.

Cruise liners: in this era people try different forms of travel cruise is one such, in India
many cruise liners have come to existence like star, Virgo etc. and every Childs dream
Disney cruise.

Safari: exploration of lesser-known area. Tourists are more attracted towards it as this
gives them adventure. Safari is generally via road. There is some destination where one
has to go by foot long distance.
POTENTIAL FOR GROWTH OF TOURISM
Although India is at the lowest ebb in international tourism (only 0.34% of global tourist traffic),
there are several distinguishing features that would help in achieving its set goal. Some of these
are given below:

The rate of growth in tourist traffic to India has been greater than the global average.

The average duration of stay of foreign tourist in India is one of the highest in the world.
On an average, it exceeds 27 days in the case of non-package tourist and is 14 days in the
case of package tourist.

The major share of the international visitors emanates from West Europe and North
America.

The tourists on package tours spend nearly 65 per cent of their expenditure on shopping.

There is high degree of seasonality in the foreign tourist traffic.

The hotels and tourism related industry has been declared as a "High Priority Industry"
for development.
CUSTOMER PROFILE & MARKET SEGMENTATION
Users Of Tourism Services
The users of tourism services can be categorized in a number of ways.
One such way of classifying the users is by dividing them into categories such as General, Sex,
Region, Education, etc.




General: Domestic, Foreign Kids, Teens, Youths, Seniors, Students, Executives, Artists
Politicians, Movie stars
Sex: Men, Women
Region: Rural, Urban
Education: Literate, Illiterate
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


Status: Rich, Poor
Profession: Executives, Academics, Sportsmen, Artists
Occupation: White collar, Blue collar
Another method of classifying users of tourism services is on the basis of the frequency of usage
of services.





Non-users: They lack the willingness, desire and ability (income & leisure time).
Potential Users: They have the willingness but the marketing resources have not been
used optimally to influence their impulse.
Actual Users: They are already using the services generated by the tourist organizations
Occasional Users: They have not formed the habit of traveling
Habitual Travelers: They have formed a habit and avail of the services regularly.
Need For Segmentation
Consumer behavior can be defined in psychological terms as the whole range of the generation
of wants and their transformation into buying or using decisions. Users have values, perceptions,
preferences and expectations, which are the result of environmental influences. There are a
number of factors that influence the behavioral profile of consumers. In recent years, the users
have become more discriminating in their using habits and therefore their needs for different
services, products and brands change constantly. This makes it essential that the marketers
analyze their behavioral profile and undertake segmentation so that they know the level of
expectations.
In a nutshell, tourist organizations need to undertake segmentation in order to simplify their task
of creating and stimulating demand. In this way they can identify the potential tourists, transform
them into actual tourists and further into habitual tourists.
Segmentation
Though there are a number of bases for segmentation of tourists, one of the most important is
Lifestyle. Traveling decisions are fantastically influenced by changing lifestyles. They are also
affected by other factors such as level of income, availability of leisure time, etc.
Such segmentation is useful when deciding the offerings to target a particular segment. For
example:

The mass market consists of vacationers that travel in large groups and prefer all-inclusive
tours. They are generally conservative.

The popular market consists of smaller groups going on inclusive or semi-inclusive tours.
This group includes pensioners and retired people.

The individual market consists of chairmen, senior executives, etc.

As the lifestyle changes, consumption of services might change. For example, a newly
married couple might prefer romantic holidays, but once they have children they would
prefer family vacations where there are plenty of activities to entertain kids.

Teens and youth might prefer adventure holidays whereas senior citizens would probably
prefer more relaxing vacations.
Unique Characteristics Of The Tourism Industry

Inflexibility: The tourism industry is highly inflexible in terms of capacity. The number
of beds in a hotel or seats on an airplane is fixed so it is not possible to meet sudden
upsurges in demand. Similarly, restaurant tables, hotel beds and airplane seats remain
empty and unused in periods of low demand. The seasonal nature of tourism activity
exacerbates this problem. Offering attractive and discounted prices is strategy to
overcome this problem.

Perishability: Tourism services are highly perishable. An unused hotel bed or an empty
airplane seat represents an immediate loss of that service as a means of earning profit.
This has an impact on overall industry profitability.

Fixed location: Tourism destinations are fixed locations so effort must be concentrated
in communicating the facility to the potential consumer. A consumer can conveniently
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watch a Hollywood movie at the local cinema but has to be persuaded to travel to India to
see the Taj Mahal.

Relatively Large Financial Investment: Every modern tourist establishment and facility
requires large investment, frequently over a long time scale. This means that the level of
risk and the rate of return are critically important to tourism management.

Tourism Services are high contact services, as people interact with people at virtually
EVERY stage of the way. Tourism services are very people-oriented services, and the
service people are plenty and have high contact with the consumers. The consumer
interacts with a myriad of service people starting from when he books his ticket and
throughout the course of his holiday.
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HOSPITAL MARKETING
Major inputs of health care industry
The major inputs of health care industries are as listed below:
I.
Hospitals
II
Medical insurance
III.
Medical software
IV.
Health equipments
Health care sector in India: Conceptual Framework
India’s healthcare sector has made impressive strides in recent years. It has transformed to a US$
17 billion industry and is surging ahead with an annual growth rate of 13% a year. The
healthcare industry in India expected to grow in size to Rs 270,000 core by 2012. The
healthcare industry employs over four million people, which makes it one of the largest
service sectors in the economy of our country.
Healthcare is dependent on the people served; India’s huge population of a billion people
represents a big opportunity. People are spending more on healthcare.
PEST ANALYSIS
Political factors
Most of the healthy nations are also wealthy nations. In India even after 53 years of
independence we all have to accept that government has failed to provide basic healthcare.
Healthcare is the neglected field, only meant for slogans by our politicians. To improve
healthcare facilities we have to provide special assistance to private healthcare sector. The reality
in private healthcare sector is that as an industry it has long gestation period and so most of the
bigger projects fail.
Government has to give certain concessions to private health sector. It can be in the form of free
land for small hospitals at district levels or concession in power tariff. Government later on gets
back revenue in the form of tax when these institutions start making profits. Concessions can be
limited to first five years or so. Maharashtra government is playing an important role in the
development of the hospital sector.
Economic factors
The Indian healthcare is the next boom in the country after the IT euphoria. Setting up
hospitals is not an easy task. The amount of hospitals in India is very less when compared to
the other developed countries. Even the urban areas do not have enough medical facilities. In
the rural areas one village has only one doctor, who may not be very well qualified.
The other governments of other states should take up a cue from the Maharashtra government, in
setting up similar Joint ventures all over the state with the assistance of World Bank. The World
Bank can make available funds of around Rs 700 crore for state health systems and development
projects.
The people in India do not avail of the hospital facilities very soon. This is because of the high
cost related to it. However this may all change because of the increasing deployment of third
party payment either in the form of Medical and Allied Insurance, or in the form of
reimbursements from the State. This in turn will increase the employment opportunities to many
people.
Social Factors
1. Certain percentages of beds have to be kept for poor people. E.g. in Mumbai 20% of beds
has to be kept reserved for poor people.
2. Look after the needs of local poor people.
3. Open counseling and relief centers.
4. Teach hygiene, sanitation among the poor masses.
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5. Safe disposal of hospitals wastes like used injection needles, waste blood etc. and taking
due care of environment.
6. Spreading awareness about various diseases through campaigns and free medical check
ups.
7. In brief the social aspect of hospitals industry is to see that latest treatment and medicines
are available to people at large at concessional rates or free of cost and that its activities
are not only restricted to rich people.
Technological Factors
We are witnessing Information technologies transforming the way health care shall be delivered.
Innovations such as computer based hospital information systems, medical records; decision
support systems, health information networks, telemedicine, real time image transfers and newer
ways of distributing health information to consumers are beginning to affect the cost, quality,
and accessibility of health care. The technologies today can support vast databases, network
communications, quick distribution and reliable image transfers.
Types of hospitals
The classification of Hospitals on the basis of objective, ownership, path and size.
1. On the basis of the OBJECTIVE there are three types:
 Teaching cum research for developing medicines and promoting research to improve the
quality of medical aid.
 General hospital for treating general ailments.
 Special hospitals for specialized services in one or few selected areas.
2.




On the basis of the OWNERSHIP, there are four types:
Government hospital, which is owned, managed and controlled by government
Semi-government hospital, which is partially shared by the government.
Voluntary organisations also run hospitals.
Charitable trusts also runs hospitals.
3. On the basis of PATH OF TREATMENT, there are:
 Allopath which is the system promoted under the English system.
 Ayurved, which is based on the Indian system where herbals are used for preparing
medicines.
 Unani
 Homeopath
 Others
4. On the basis of the SIZE, there are:

Teaching hospitals – generally have 500 beds, which can be adjusted in tune with
number of students.

District hospital – generally have 200 beds, which can be raised to 300 in
contingencies.

Taluka hospital – generally have 50 beds that can be raised to 100 depending on the
requirement.

Primary health centres – generally have 6 beds, which can be raised to 10.
I’s of hospital industry
Intangibility
Intangibility indicates that the service has no physical attributes and as a result, impossible for
customer to taste, hears, feel or smell before they actually use it. Hospital industry is where the
customers (patients) get treated for physical problems they have. The customers can’t really
realize the service provided until they get well. For this they have to provide good supplementary
Service Sector Management: BBA-III.
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services.The only way they can provide tangible clues to make the service provided a success.
For e.g. the hospitals provide extra facilities like television, or then friendly personnel’s can
make a difference.
Inconsistency
It’s also referred to as heterogeneity or variability. The inconsistency occurs largely because of
 Different service providers perform differently on different occasions.
 Interaction between customer and provider may vary from customer to customer.
Standardization is hard to maintain. Every doctor is not the same and may not give the same
diagnosis. Also a patient may not each diagnosis in a different way. Also since the quality of
work done can be determined only after the service is performed the providers have to be well
trained in case of performing the service process.
Inseparability
Inseparability means that the service cannot be separated from the creator-seller of the service. In
fact there are many services that are created delivered and consumed simultaneously through
interaction between customer and service producers.
Here too the customer, i.e. the patient has to come up to the hospital to get the treatment. The
customer has to be present when the service is performed. In fact in case of hospitals the service
is created and delivered simultaneously. The type of service to be provided depends on the
customer.
Inventory
Services can not be easily saved, stored or inventoried. This is all due to the perishable nature of
the services. Also there’s cost also associated with the carrying of inventory. Here the costs are
more subjective and are related to capacity utilisation for e.g. if a doctor is available but there’s
no patient during that period, the fixed cost of the idle physicians salary is a high inventory
carrying cost.
Also due to demand fluctuations the services cannot be stored. E.g. there’s a lot of rush at the
dentists clinic in December and January as that’s the time when there are lots of tourist visiting
India.
Justification for marketing hospitals
Marketing in Hospitals is unethical was the frequent refrain in the eighties, when very few
hospitals realized that it was necessary to incorporate marketing as an integral function in the
hospital operations. But the major argument at that time lay in understanding whether this
professional orientation was really required for its viability, profitability and sustainability. This
argument however became favorable in the late nineties as corporate companies like Wockhardt
and Max India started venturing into the hospital industry, apart from the ongoing mergers and
acquisitions that were already taking place at that time. Hospitals started building tie-ups with
corporate clients, as there was already an abysmal utilization of resources in the existing
hospitals. In addition to the above a major factor that contributed to the acceptance of marketing
in hospitals was an increase in the delivery of services.
Perception of patients was another important consideration for hospitals, as they felt that the
patients would take them as profit oriented organization rather than service-oriented
organization. Ultimately, marketing was accepted only by a few while others discarded the
concept Hospitals who accepted marketing also carried out their function by concentrating
around corporate clients. Lately it has been felt that many Indian hospitals have a dilemma
regarding the functions of marketing. In an era where hospitals are experiencing a major shift in
their clientele, they are worried more about the patients’ perception of hospitals and therefore the
concept of brand restructuring and brand engineering is vital.
As hospitals spend millions of rupees in technology and infrastructure, it becomes necessary, that
they attract patients and generate funds. In order, to do the same, the hospitals follow various
marketing and brand building exercises. Some of them are listed below:
1. Many hospitals have eminent personalities from the industry in their Board of trustees. This
indirectly leads to increase in, inflow of patients, working in the companies of these Trustees.
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Besides the presence of eminent personalities creates a sense of confidence in the minds of
people.
2 Private hospitals can attract their shareholders by offering discounts. For example, a special
discount of 20 percent on all preventive health checks is offered to all shareholders of Apollo
Hospitals Limited.
3. Hospitals have a long-term understanding with PPO’s (Preferred Provider Organization),
which further have understanding with corporates. Any case of sickness found in the employees
of these corporates refer them to the PPO’s which further sends them to the hospital for checkups and treatment.
4. The success rate of crucial operations and surgeries, reflect the technological and knowledgebased edge of the hospital over the’ competitors. Such successes are discussed in health
magazines and newspapers, which become a natural advantage for the hospital.
5. Some hospitals by means of their past track record have created a niche market for
themselves. For example, Hinduja is known for its high-quality healthcare at reasonable rates,
whereas Lilavati Hospital is known for its five star services.
6. Hospitals hold seminars and conferences relating to specific diseases, where they invite the
doctors from all round the country, for detailed discussion. This makes the hospital well known
amongst the doctors, who could in future refer complicated cases to the hospital.
7. Hospitals can also promote medical colleges. This helps them to generate extra resources in
form of fees using the same infrastructure.
Marketing Mix
PRODUCT
The service product is an offering of a commercial intent having features of both tangible and
intangible seeking to satisfy new wants and demands of the consumer, hospital industry is action
oriented and there is a lot of interaction with the customers. The service products of the hospitals
have the following features:
 Quality level
Supporting services play an important role having the quality of Medicare. These services,
which include laboratory, blood banks, catering, radiology and laundry, in a true sense
determine the quality of services made available by medical and paramedical personnel.
 Accessories
This is a very good way of segmenting customers. Many hospitals provide additional services
such as catering, laundry, yoga sessions, cafeterias, etc. for the customers who are willing to
pay extra. Hospitals have different wards-General and special. Certain hospitals provide
services for the family members of the patients –when they are not the same-city for
accommodating and catering.
 Packaging
It is the bundling of many services into the core service. E.g. Apollo hospital offers a full
healthcare checkup to the patients.
 Product Line
Hospitals through their services offer many choices to the patient and cover a wide range of
customer needs. For example: Apollo has a dental department, cardiology department etc.
and within the dental department it has dental surgery, root canal, etc.
 Brand name
Hospitals, to differentiate themselves and their services from others use a brand name. The
intangibility factor of the service makes it all-important for the hospitals to do so.
Government Hospitals:
This as a product is fairly good. In some hospitals like J.J. hospital, Mumbai they provide
quality services at cheaper rates and also is technically well equipped. But most of the
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government hospitals in spite of government grants do not provide quality service. Hence it
is perceived as of low quality.
Private hospitals:
Private hospitals like Bombay Hospital, Apollo are well equipped and the services provided
are of good quality but they charge huge price for it. Hence the middle-income group
perceives them as elite class hospitals.
PLACE
Incase of hospitals the location plays a very important role. The kind of services a hospital is
rendering is also very important for determining the location of the hospital.
Example: Tata Memorial Hospital in Mumbai specializes in cancer treatment and is located
at a center place unlike other normal hospitals, which you can find all over other places.
In a country like India which is geographically vast and where majority of the population
lives in the rural areas place factor for a hospital plays a very important role. A typical small
village or town may be having small dispensaries but hey will not have super specialty
hospitals. For that they will have to be independent on the hospitals in the urban areas.
PEOPLE
Under hospital marketing mix people includes all the people involved in the service
providing process which includes doctors, nurses, supporting staff etc. the earliest and best
way of having control on the quality of people will be by approving professionally sound
doctors and other staff.
Hospital is a place where small activity undertaken can be a matter of life and death, so the
people factor is very important.
Under hospital marketing a right person for the right job has to be appointed and they
should be adaptable possess versatility. The patients in the hospitals are already suffering
from trauma, which has to be understood by the doctors and staff. The people of the hospital
should be constantly motivated to give best of their effort.
Government Hospital:
In Indian government hospitals except a few almost all the hospitals and their personnel
hardly find the behavioral dimensions significant. Hence even if the patients get the correct
treatment they are often dissatisfied with the behavioral pattern of the staff.
Private Hospital:
They have pleasing manners and behave softly with the patients. They provide timely care
and are present always in times of need.
PROCESS
Process generally forms the different task that are performed by the hospital. The process
factor is mainly dependant on the size of the hospital and the kind of service it is offering.
Government Hospital:
There is lot of paper work involved in the whole process. Hence the whole process from
admission to discharge is tedious.
Private Hospital:
With the advent of information Systems in hospitals all the paper work is reduced and the
process is smooth and fast.
PHYSICAL EVIDENCE
It does not play an important role in the health care services, as the core benefit the customer
seeks is proper diagnosis and proper cure of the problem.
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Physical evidence can be in the form of smart buildings, logos, mascots etc a smart building
infrastructure indicates that the hospitals can take care of all needs of the patients.
Government Hospital:
Government hospitals have a huge building, but are not properly maintained; hence it creates
a bad impression among its patients that the hospital is unhygienic.
Private Hospital:
Private hospital like Bombay Hospital has got a smart building, which helps, in developing
the minds of the people, the impression that it is the safest option among the different
hospitals available to the people.
PROMOTION
Hospitals for promotions use either advertisements or P.R or both after taking in to
consideration the target customers, media type, budget and the sales promotion. The health
care field has become very competitive. Although one fourth of our population stays in urban
India, three fourth of the total doctors have engaged themselves in this part. Word of mouth
plays an important role during information acquisition stage of the customers, as there are no
objective performance measures to judge the various alternatives available to them.
Therefore satisfied past patients of the hospital can bring more number of patients to that
hospital than a number of advertisements.
In a competitive market place the images of the firms will affect their competitive standing.
One factor that is likely to have significant impact of the health care scene is the growing
hospital chains such as Apollo, Birla health centers, etc. artificial heart transplants and other
complex operations although are few in number and generate a small potion of the total
revenue, they help in generating word of mouth which health care providers are actually
interested. Many of these companies are spending a lot in corporate advertising for image
building.
Government Hospital:
They do not undertake major promotion programmes and hence are not very popular among
the masses.
Private Hospital:
They undertake extensive promotion. Along with this they undertake massive complex
operations which if successful create a good brand value of the hospitals.
PRICE
Pricing in Government / Trust Hospitals
In the Indian setting where a number of persons are below poverty line it is challenging task
to formulate a pricing strategy, which is successful in serving the social interests and
generating profits. Hospitals need to invest a lot in sophisticated equipment and technologies
to improve the quality of medical aid. Even the affluent sections of the societies expect; low
cost services form the social institutions in general and hospitals in particular the task of
services innovative in line with latest developments in field of physical sciences is difficult.
It is due to this that the most government hospitals are in deplorable condition. The exchecker finds it difficult to finance hospitals and further, the government regulations also
close doors foe generating finance from internal sources. The ultimate sufferers are the
society and specially the poorer sections. Since the affluent sections have the options to avail
the expensive medical services made available by the hospitals. The societal marketing
principles make can advocacy in favor of protecting the public interests but it not meant that
the hospitals have a uniform pricing/fee structure for all the users. The fee strategy for all the
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hospitals should be in proportion to the incomes of users, which would engineer a sound
foundation for qualitative or quantitative improvements.
For social institutions like government hospitals a discriminatory fee structure is preferred
since it provides even the weaker sections of society, an opportunity to avail the quality
medical services. This enables hospitals to innovate services to keep pace with the latest
developments in the medical sciences.
Government / Trust
Hospitals
FEE/CHARGE
1.
2.
FREE
(For no income
group)
Subsidized
(For low-income
groups)
Discriminatory
Pricing
3.
Cost + losses from 2
(Middle-income
group)
4.
Cost + surplus to
make up the losses
of 1.
Pricing in Private Hospitals

Cost based pricing: Price = Direct costs + overhead costs + profit margin. In hospital
services, this method is cumbersome because the tracking and identification of costs are
difficult. Fee for services, however can be used by doctors. Notwithstanding, some
hospitals in the private sector follow this method.

Competition based pricing: using other price as an anchor for the hospitals price,
heterogeneity of service across and within providers makes the approach complicated.

Demand based pricing: Cost based pricing and competition based pricing do not consider
certain criteria. Demand based pricing involves price setting consistent with customer
perception of value. Prices are based on what will par for the services provided.
Perceived Value
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What customer perceive about value
Service offered accordingly
Could be offered on weekends
Health spas in off season
Value is low price
Differentiated as incentives
Free consultation by dentist/doctors
Prestige pricing-health club
Value is everything I want in service
Bombay hospitals of Arabs (value is high quality)
Value is the quality I get for the price I pay
Market segmentation pricing based on affordability
to pay, value is affordable quality
Value is all that I get for what I give
Value is getting excellent treatment in shortest
possible time e.g. treatment in Mumbai hospital,
Breach Candy, Jaslok.
Perceived value is the customers overall assessment of the utility of a service based on
perception of what is received and what is given.
Differential pricing in the hospital industry happens
 Externally (between 2 hospitals)
 Internally (within a hospital)
Externally:
Between two hospitals, even to provide the same treatment, the prices differ. Even though the
operation to be done might be the same, pricing differs due to the kind of service provided pre
and post operation. Cost is associated with the kind of service you provide, and so the hospital is
bound to charge the patient for it.
Internally:
There is a price differentiation even between the two wards of the same hospital. There is
difference between the general ward and special ward where the rooms are air-conditioned and
extra services are provided. Thus the pricing would be different. Even the doctors visiting
fees/consultation charges are different. Sometimes if the patient is very poor then the doctor may
halve his fees.
In a hospital the process is divided into the following phases:
 The joining phase,
 The intensive consumption phase, and
 The detachment phase and feedback.
Now we will be considering the process blueprint of an Emergency / Police Case
Patient brought in emergency to the hospital
Police Case
Inform the local police
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Non - Police Case
Patient rushed to the Emergency
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Police arrives
Inquiry by the police at
the hospital
Statement of the patient
Attended by the doctors
Patient stabilizes
Relatives/patients have to do the
paper work, pay the deposits and
complete all the formalities of the
hospital.
Price and quality
‘Price is the indicator of service quality’. It is an attraction as well as a repellent variable.
Customers use price as indicator of quality depends on many factors including other information
available to him.
When service cues to quality are readily accessible when brand names provide evidence of
reputation of hospital, customer may use their cues instead of price. Otherwise they think that the
price is the best indicator of quality. It should convey appropriate signal regarding quality.
Pricing too low can lead to inaccurate inferences about the quality, pricing too high can set
expectations that may be too difficult to match in the delivery. Price is used to judged quality
because of the experience and credence properties of services as opposed to goods. Excellent
hospitals like Mayo Clinic, Massachusetts General, TMH, and Sloan Kettering are a mega
brands. They have a great brand reputation and can charge a premium based on sheer perception
of quality because of socio-economic issues, poverty levels, government owned hospitals cannot
think of profit objectives. It is a social marketing process of enhancing the well being of
individuals.
Off late however the government has proposed to state government that those who are above
poverty line should pay the cost for treatment. In private hospitals, where the profit is most
important objective, premium can be charged. The price paid by customers depends on how he
perceives the quality of service. E.g. Bombay hospital, Breach Candy and Jaslok they have a
high reputation for quality services.
The services marketing triangle
HOSPITAL
DOCTOR
PATIENT
Company: Here, the hospital is the company that dreams up an idea of service offering
(treatment) which will satisfy the customer’s (patient’s) expectations (of getting cured).
Customer: The patient who seeks to get cured is the customer for the hospital as he is the one
who avails the service and pays for it.
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Provider: Doctor, the inseparable part of the hospital is the provider, as he is the one who comes
in direct contact with the patient. The reputation of the hospital is directly in the hands of the
doctor. A satisfied patient is a very important word of mouth promotion for the organization.
Thrust Areas For Medicare Services
A hospital is a center for tertiary medical care, & India is home to some of the largest hospitals in
Asia. The latest treatment options should always be available at these centers as a beacon to
guide the entire medical community while providing top-notch medical care to patients. Often a
country’s medical prowess is judged by the condition of its hospitals.
Here we will discuss in brief some of the latest developments in major hospitals in India.
 Aromatherapy at Apollo.
 Biventricular pacing.
 Bone bank at AIIMS.
 Hospital administration.
 Medical records management.
 Oxygen under pressure treatment at Apollo.
 Waste management.
 Telemedicine.
 Virtual Hospitals
The future is bright
Health care industry is booming all over the world. In the U.S. it is already the largest service
sector and worldwide it is started to be a $ 4 trillion market by 2005. The corporate hospitals will
play a positive role in the health care sector by taking the load off government hospitals, whose
performance hasn’t been up to the mark.
In the last 5 years, approximately 750 mergers acquisition have taken place in U.S.A hospitals
major advantages of merging is more toward more integrated health-care systems, that can
achieve economies of scale, by combining capacity& amalgamation of functions such as
information technology, consultants, emergency transport, database & research& development.
But health care is primarily a local market business & it very important to consider the following
factors before going in for mergers: 1.
2.
3.
4.
Relative sizes of the hospitals.
Their geographical proximity.
Strength of ties individual hospitals & physicians.
Degree of unity in leadership structures of separate in
The key to success appears to be a strong orientation to performance as well as standardization &
integration work processes, functions, suppliers & investment but not necessarily on a
centralized basis for example, Apollo in Chennai, Hyderabad & Delhi will be separated
hospitals, post merger, but function will be centralized.
More competition and therefore a more uniform pay structure there may be improvement in both
quality & quantity of healthcare available in India.
In India, telemedicine services are not very relevant as yet though with the increasing use of
Internet, information regarding health & medicines is being increasingly exchanged.
Thus, the most important modes of trade of healthcare services in the short run would be the
category of service providers.
Scope of health care services
Ø
gymnasiums
Ø
alternative medicine centers
Ø
spiritual cleansing centers. (like reiki, yoga etc)
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INSURANCE MARKETING
What is Insurance?
Insurance is a contract between two parties whereby one party called insurer undertakes in
exchange for a fixed sum called premiums, to pay the other party happening of a certain event.
Insurance is a protection against a financial loss arising on the happening of an unexpected event.
Insurance Companies collect premium to provide for this protection. A loss is paid out of this
premium collected from the insuring public. The insurance Company act as a trustee to the
amount collected through premium.
Insurance is generally classified in three main categories, (i) Life Insurance, (ii) Health insurance
and (iii) General Insurance
To get insurance an individual or an organisation can approach to an insurance Company
directly, through Insurance Agent of the concerned company or through Intermediaries.
Benefits of Insurance
1.
2.
3.
4.
5.
6.
7.
Safeguards oneself and one's family for future requirements
Peace of mind-in case of financial loss.
Encourage saving.
Tax rebate.
Protection from the claim made by creditors.
Security against a personal loan, housing loan or other types of loan.
Provide a protection cover to industries, agriculture, women and child.
Reasons for buying insurance
Insurance Buys Time and Money: People like to refer to insurance as time insurance, the
reason being that insurance proceeds are paid to the insured's beneficiaries in case of death or on
the maturity of the policy. The money proffered by insurance helps buy time to adjust to the
change of circumstances. Insurance provides large amounts of cash that will keep the lifestyle for
the survivors the way it was before the insured's death.
Insurance Offers Peace of Mind: For the person who buys an insurance policy, it offers
absolute and complete peace of mind. He or she knows that the decision made by him will
provide sound benefits in the future, whether or not the individual may live to see it. The life
insurance policy will subsequently prove this in the future if and when funds are needed. This is
the guarantee of the insurance contract.
Multiple Applications: The future is uncertain for each and every one. No one knows how long
he or she will live. The investment benefit is paid to the insured's beneficiaries after his death or
it can be used during the life as well. Life insurance policy owners can turn to the cash value of
the policy in case of a financial emergency when all avenues are either blocked or denied. They
know that they can avail of loans based on their insurance policies.
Insurance policy owners can use the cash value of their policies to meet their long-term financial
needs as well. They may have purposefully invested in insurance to use the cash in the policy for
their children's future marriage expenses or higher education fees.
Enduring Elasticity: Since life insurance is flexible enough to serve several needs, the insured
can keep several long-term goals in mind once he or she invests in the insurance plan. The cash
value of the policy can be allocated towards augmenting the monthly income during the
retirement years. Leisure years should be turned into pleasure years. Permanent life insurance is
designed on the concepts of long-term flexibility.
Financial Security: The insurance policy offers contractual guarantees to people looking for
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peace of mind when they buy life insurance. Life insurance offers complete financial security.
The purchase of life insurance demonstrates concern for a family's future financial well being.
Regard for Family: The purchase of life insurance clearly displays care and concern for the
people the policy owner loves.
Insurance is Safer: No financial institution can do what life insurance does. No industry can
back its products with reserves and surplus as sound as those of the insurance industry.
The proof of strength and safety that insurance companies have ensured even under the most
adverse of conditions is a matter of pride for the entire insurance industry. For generation after
generation, life insurance has been acclaimed as the very benchmark of security against which
the other industries are measured.
Insurance Market Segmentation
In insurance industry, profiling is very important in determining premium rates. Typically,
insurers collect every information available. However, analysing thoroughly is not feasible since
the number of variables is normally large.
The starting point is thus mass marketing. In mass marketing, the seller engages in the mass
production, mass distribution and mass promotion of one product/ service for all buyers.
A niche on other hand is a more narrowly defined group seeking a distinctive mix of benefits.
Marketers usually identify niches by dividing a segment into sub segments.
Also, in terms of product complexity, insurance products can be categorized into low complexity
and high complexity products.
Low complexity products: These are simple products with a standard set of covered risks,
perils and hazards.
High complexity products: They have a large number of riders and warranties and do not
indemnify certain causes of loss.
PRODUCT
COMPLEXITY
TARGET SEGMENT
Niche Market
Mass Market
LOW
HIGH
Fire Insurance (different risk profiles
1. Weather Insurance
for each), Marine Insurance
2. Product Liability
Householder’s
comprehensive Personal Accident Insurance
Policy , Medical Insurance
Pension Products
The distribution strategy should vary according to the type of policy. Insurance products with
low complexity can be sold through bank-assurance, but products with high complexity should
not be sold through the same channels, as it would be very difficult (in terms of time, effort and
cost) to train bank employees in understanding the finer details of the complex policies.
Products with high complexity need a certain amount of customer hand holding in terms of
explaining the terms, conditions, riders and warranties of the policy. In case of niche marketing,
direct marketing can be used in the form of e-mails and direct calls through agents to specific
customers belonging to the target segment. For high complexity niche products, spreading
awareness and selling through financial advisors, consultants and brokers would also be a good
strategy.
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PRODUCT
COMPLEXITY
TARGET SEGMENT
Niche Market
Mass Market
LOW
HIGH

Direct marketing through
personalized e-mails
 Advertise in area specific
journal with toll free numbers
to set up appointments
 Agents
1. Bancassurance
2. Postal department
3. Agents
1. Well trained agents
2. Financial
advisors/consultants
3. Brokers
1. Well trained agents
2. Advertise in newspapers
with toll free numbers to
set up appointments
Market Segmentation in Insurance
Households
Industrial Sector
Trade Sector
Segment
Sub Segment
Institutional Sector
Regional Wise
Rural Sector
Flower of Services
Flower of services refer to a well-formed package of total services with all the supplementary
services being well formulated along with the core services. The various petals of the flower are:
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 Information:
A marketer needs to provide adequate information to his employees and his customers. This
information is general information provided through various communication channels.
In the insurance industry information is provided to the customers with the help of:
o
o
o
o
o
o
Agents
Seminars
Web sites
Print media
Radio
Television, etc.
 Consultancy:
This is additional customized information provided to the potential customers by the service
provider. In the insurance industry it is provided by company’s staff and agents.
Example: In LIC when a customer enters asking of information about the policy, he is directed
towards the assistant sales manager. Assistant sales manager will listen to the customer’s
requirement and as per his requirement list the number of policies that are available. He will also
ask the customer about the price and limit the number of options for the customer, so that he can
easily choose the policy without confusion.
 Order taking:
Order taking should be done without mistakes. In LIC order taking is generally done by:
o By Agents
o On Website
o By Assistant sales manager directly in the office.
 Hospitality:
Hospitality is a very pretty petal, reflecting pleasure at meeting new customers and greeting old
ones when they return. Hospitality finds its full expression in face-to-face encounters.
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In LIC customers directly come in contact with the sales manager. The customers are treated as
guests. The sales managers of LIC are given special training of how to sell the policies to the
clients. It is only in LIC that a customer can meet the chairman directly without any appointment.
 Safe keeping:
It is in the process and procedures used by marketers to safe guard and to maintain secrecy.
In LIC the data of the customers is very important. They feed the data of the customers in their
Front and Application Program Software that is connected with all the branches of LIC. The
data is only available with the sales people and not shown to any person.
 Exceptional:
Exceptional service means service over and above customer’s expectations.
LIC has the fastest claim settlement in the world thereby providing exceptional service. LIC
also solves complains of the customers within 7days.
 Payment:
The payment of premium is normally through cheques. Customer can make payment in LIC
through:
o Agents
o Loans
o Web sites
o Standing instruction to banks:
In this the account holder will give standing instruction to his bank to pay the amount of
premium every month without his consent on the given date directly to LIC.
 Billing:
The billing should be done in such a way that there are no mistakes and if there are any they
must be immediately rectified. The billing should provide break-ups of premium charged, service
charges, etc.
Product Mix
 The Width of a product mix:
It refers to how many different product lines are available. In case of insurance sector, there are
generally three different product lines i.e. Life Insurance, Marine Insurance and Fire Insurance.
 The length of a product mix:
It refers to the total number of items in the mix. In case of insurance sector, the following is the
length of product mix:
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 The depth of a product mix:
The various products and various types of the products with distinct features. In the insurance
sector, one policy can be made available in different variations. Some of the examples are as
follows:
Life Insurance:
These product mix dimensions permit the company to expand its business.
E.g.: It can add new product lines thus widening its product mix.
General Insurance:
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Product levels:
In this figure there is a nucleus or core in the center, which is supported by series of tangible and
intangible features and benefits and these form a cluster around the core product.
Level
1
2
3
4
Type
of Contents
service
Core service
Basic service product
Expected
service
Augmented
service
Basic product and minimum purchase
conditions that must be met.
Something different, which enables
one product to be differentiated from
other
Potential
service
Features that attract the customers and
are useful to them.
Insurance sector
 Life
 Non-life insurance policy
 After sales service
 Low claim settling period.
 Technology
 Online premium payment
 Payment through credit cards
 Standing instruction to bank
 Maturity claims settled on or
before the maturity date.
 Loans
Price Mix
In the insurance business, the pricing decisions are concerned with the premium charged against
the policies, interest charged for defaulting the payment of premiums & credit facilities,
commission charged for underwriting & consultancy services
Premium:
Premiums are the periodic payments usually monthly or quarterly that the policy holder pays to
the insurance company to purchase and keep a policy in force.
For example in case of life insurance according to the policy it may be the amount payable
during the endowment term of the policy or until the death of the life assured whichever is
earlier.
The basis on which the insurance company decides the amount of premium to be paid by each
person is determined mainly by 3 factors:
 Mortality Tables:
All insurance companies refer to different mortality tables. These tables differ from country to
country. The mortality table indicates the probability of a person dying in a particular age group.
For e.g. in an age group of 25-30 years, the probability might be just two, but this probability
would increase for a higher age group of 45-50 years.
Life Insurance Company (LIC) with its long-standing presence has a mortality table, which is
grossly outdated. Some other insurance companies have got their own tables but they are more or
less in line with that of LIC.
 Expected Surplus:
The premiums collected by the insurer are invested in capital markets. There is a fixed
investment pattern for the insurer. Out of the surplus earned on the premiums invested, 95% is
distributed to the policyholders and the insurance company retains the balance 5%.
 Expenses:
An insurance company has to incur expenses in the form of commission to agents, office
expense, advertising expense, salaries to employees. These expenses are to be managed by the
company in the 5% surplus earning which they earn as mentioned above.
Now the criteria’s on which the premium amounts are fixed are different from different types of
Insurance’s.
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Life Insurance Pricing:
The pricing in case of life insurance is done on the basis of:
 Life Expectancy:
In case of life insurance, the premium amount tends to be different for different customers. This
differentiation is on the basis of age, medical history of a person.
Age E.g.: Low premium is charged for children and youngsters as it is assumed that they are at a
lesser risk of death as compared to the aged people.
Medical History The medical history should be revealed to the insurance company by the customer in Utmost
Good Faith i.e. the insured must provide to the insurer complete, correct and clear information
of the subject matter of insurance.
Motor Vehicle Insurance:
Car insurance companies take many factors into account when determining what premiums the
insured will pay. Everybody does not pay the same premium. You pay a premium based on what
the company assesses as the possible risk you pose. The major factor is the age and condition of
the car. The other factors are as follows:  Multiple cars or policies:
When you have more than one car on an insurance policy, most companies will give you what is
known as a multiple line discount. Because you use the company for all of your auto insurance
needs, they reward you.
Distance and amount of driving you do:
Most car insurance companies ask prospective clients how far, and to where, they do most of
their driving in a day. The thinking is that further you have to drive, and the more often you do it,
the more likely you are to have an accident. The person who commutes 45 minutes to work every
day is going to pay more than the person who drives 10 minutes to work. Likewise, a college
student who walks to class, and drives home three or four times a year will cost less than the
college student who spends 30 minutes commuting to and from campus each day.
 Location of your car:
Car insurance companies rate areas according to the number of accidents or thefts that occur in a
specified amount of time in that area. Sometimes, the company can even pinpoint a
neighbourhood. If you live in a large city, your rates will be higher than if you live in a town.
Fire and Marine Insurance Pricing:
The principle of utmost good faith is applicable even for fire and marine insurance.
E.g.: If a trader while taking a fire insurance policy does not disclose the previous occurrence of
fire in the factory, and subsequently after taking policy, there is another fire, the insurance
company may refuse to pay the compensation if it learns about the previous occurrence of fire
which was not disclosed at the time of taking the policy.
The pricing in case of fire and marine insurance is done on the basis of:
 Type of Building:
In case of a building the rate of premium also depends on the type of construction. If it is wood
construction the insurance premium is low as the cost in constructing a wood building is low in
comparison to a concrete building that has higher premium amount
 Past Experience:
If a fire or marine insurance company has a past experience of settling a claim successfully then,
the credibility of the company increases and it charges higher premium for similar policies. The
customers are assured that the company will be able to handle the claim well as it was done in
past and hence they are ready to pay higher premium.
Discount Pricing:
In insurance sector, discount is offered if group insurance is opted for. Group Insurance Scheme
is meant to provide life insurance protection to groups of people. Administration of the scheme is
on group basis and cost is very low.
Discount is given on group insurance scheme because the insurance company gets a large
number of customers at a time and hence it saves expenses on promotion and advertisement,
which are to be incurred to attract new customers.
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Thus, discount is given in order to attract more customers at a time by this group insurance
scheme. The cost incurred on giving discount is much less as compared to the cost spend and
advertising and promotion. Hence discounting is much more profitable for the company.
However, 65 per cent of the pricing is still determined by the government that is the Tariff
Advisory Committee. So the rates of premium are more or less the same. It is going to change
over the next few years. In non-tariff products like personal accident etc there is a lot of pressure
on pricing. Companies will have to be reasonable while determining a pricing structure because,
across the globe, there are instances of companies going bust while playing the game of
undercutting state-run companies.
Place Mix
Channels:
In case of insurance sector, the following channel of distribution is followed according to the
target market:
CHANNELS
Direct Selling
Partner Selling
 Agents
 Financial Advisors
 Call Centers
 Bancassurance
 Postal Department
 Selling through Corporates
Direct Selling:
 Agents:
The agents are selected and recruited by the development officer of the insurance company.
These agents inform the customers about the various insurance policies offered by the company
and convince them to buy these policies.
 Financial Advisors:
The financial advisors are also consulted by the customers regarding their financial matters.
These advisors suggest their clients to get their goods insured against any calamity or risk.
 Call centers:
The people who require insurance call up the call centers. These call centers send their direct
marketing agents who go to the customer’s place and sell the insurance policy.
Partner Selling:
 Bancassurance:
In bancassurance, the insurance products are sold through the banks network of branches. Om
Kotak Mahindra has tie-up with Dena bank, by which former doesn't entertain bancassurance
with any other bank and the latter also doesn't distribute policies of any other insurance company
 Postal Department:
. Insurance companies can tie up with the postal department to sell and distribute various
insurance covers. This would certainly require upfront training costs, as the postal employees in
turn need to educate and sell the concept and benefits of insurance to the people in rural areas.
Selling Through Corporates:
Insurance can be sold through corporates too.
E.g.: When a customer purchases a Maruti car, he gets the insurance of the car free from the
Maruti Company itself. Thus this is termed as selling insurance through corporates.
Electronic Channels:
In the last decade, numbers of technological advances have taken place due to immense use of
EDI (Electronic Data Interchange)
CHANNEL
Electronic channels

 LIC on internet
 Information Kiosks
 SMS
Information kiosks:
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LIC have set up 150 interactive Touch screen multimedia KIOSKS in prime locations in metros
and some major cities for dissemination information to general public on our products and
services.
 SMS:
SMS through mobile phone is recently new technology introduced by the LIC to promote their
product.
Place
In insurance, location, the place where office situated is not as important as mostly the agents of
the insurance company goes to the place of the customers for doing most of that customers work.
Physical Evidence
Physical evidence is the environment in which the service is delivered and where the company
and the customers interact and any tangible goods that facilitate the performance and
communication of the service.
Services are intangible and heterogeneous. Intangibility means that services cannot be displayed,
physically demonstrated or illustrated; heterogeneity means that consumers cannot be certain
about performance on any given day. It plays a major role in enhancing customers’ perception of
the service quality.
However, in case of insurance sector, the customer rarely visits the insurance company. The
customer comes mostly only in contact with the service provider.
Insurance Service
Tangibles as Physical Evidences
1
Policy Documents
2
Brochures
3
Periodic Statements
4
Renewal Notices
5
Business Cards
6
Stationary
7
Calendar, Diaries
8
Letters/Cards
9
Website
People Mix.
Employees:
Employees are very crucial because:
 They are the service
 They are the brand
 They are the marketers
 They are the organization in the eyes of the customers.
The various employees involved in providing service to the customer in insurance sector are:
 Customer service representatives:
They, process insurance policy applications, changes, and cancellations. They review
applications for completeness, compile data on policy changes, and verify the accuracy of
insurance company records. They may also process claims and sell new policies to existing
clients.
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 Marketing and sales managers:
These constitute the majority of managers in carriers’ local sales offices and in the insurance
sales agents segment. These employees sell insurance products, work with clients, and supervise
staff.
 Claims adjusters, appraisers, examiners, and investigators:
These decide whether claims are covered by the customer’s policy, confirm payment, and, when
necessary, investigate the circumstances surrounding a claim. Claims adjusters work for property
and liability insurance carriers or for independent adjusting firms. They inspect property damage,
estimate how much it will cost to repair, and determine the extent of the insurance company’s
liability; in some cases, they may help the claimant receive assistance quickly in order to prevent
further damage and begin repairs.
 Underwriters:
Underwriting is another important management and business and financial occupation in
insurance. Underwriters evaluate insurance applications to determine the risk involved in issuing
a policy. They decide whether to accept or reject an application, and they determine the
appropriate premium for each policy.
 Insurance sales agents:
About 15 percent of wage and salary employees in the industry are sales workers, selling policies
to individuals and businesses. Insurance sales agents, also referred to as producers, may work as
exclusive agents, or captive agents, selling for one company, or as independent agents selling for
several companies. Through regular contact with clients, agents are able to update coverage,
assist with claims, ensure customer satisfaction, and obtain referrals.
Lawyers:
The insurance industry employs relatively few people in professional or related occupations, but
those who are so employed are essential to company operations. For example, insurance
companies’ lawyers defend clients who are sued, especially when large claims may be involved.
These lawyers also review regulations and policy contracts. Nurses and other medical
professionals advise clients on wellness issues and on medical procedures covered by the
company’s managed-care plan.
 Computer systems analysts, computer programmers, and computer support specialists:
These are needed to analyse, design, develop, and program the systems that support the day-today operations of the insurance company.
 Actuaries:
These represent a relatively small proportion of employment in the insurance industry, but they
are vital to the industry’s profitability. Actuaries study the probability of an insured loss and
determine premium rates.
Customers:
People mix not only includes employees but also customers. The customers are to be treated with
respect and courtesy.
Process Mix
In case of insurance sector, the process mix includes the various interactions that take place
between the insurance agent and the customer in the process of selling the policy to the customer
till the settlement of claims.
The following process mix is followed by insurance companies in case of life insurance:
1. The insurance agent calls up the customer and informs him about the different policies
offered by the company and the price mix of all the policies. If, the customer seems
interested in taking the policy then, he fixes an appointment with the customer.
2. The insurance agent meets the customer and gives him some information about the
insurance company and also about the benefits of the policy.
3. The customer is then asked to fill a financial review form (FRF) and the agent is asked to
find out the standard of living of the customer so that the insurance company gets a clear
picture about the financial condition of the customer and what kind of policy he can afford.
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4. The insurance company offers various policies but they might not be suitable for the
customer hence, on the basis of his requirements and financial status, the insurance agent
suggests two or three policies to the customer, which will be suitable for him.
5. The insurance agent explains the different policy plans in detail to the customer i.e. the
amount of premium to be paid, the time interval at which the premium is to be paid, the
benefits of each of the policy etc. A brochure is also provided to the customer wherein the
entire description of all the policies is given.
6. Then, the insurance agent provides a feedback form to the customer and asks him to give his
feedback regarding the policies that he has been informed about. This feedback is taken in
order to find out whether the customer is satisfied with the plans of the policy or whether the
company needs to make the policy plans more attractive so that it may appeal to its future
customers.
7. Then, the next appointment is fixed by the insurance agent with the customer and in this
meeting; the customer selects the policy plan, which appeals to him. The customer is then
asked to fill up the proposal form which contains various details of the payment and he is
asked to make the first premium payment.
8. Then, the insurance agent submits the duly filled and signed form in the insurance office
along with the other necessary documents. E.g.: Medical Reports in case of Life Insurance.
Submission of Age Proof is essential as the rate of premium payable on a life insurance
policy generally varies with age, and therefore age is one of the most important factors in
determining the rate of premium payable in an individual case. The following is accepted as
age proof:
o Certified extract from municipal or local body’s records made at the time of birth.
o Certificate of Baptism if it contains date of birth
o Passport issued by passport authorities in India.
o Certified Extract from school or college records, if date of birth is mentioned.
The customer must get himself examined from the approved doctor of LIC. The medical
examination is necessary to determine the physical fitness of the customer. If the medical
report is favourable, then only LIC will issue the policy.
9. An average twelve days time is taken by the company to verify the submitted documents.
After the twelve days period, the insurance agent meets the customer to provide him a policy
document, which consists of the terms and conditions of the policy. This is because terms
and conditions of the policy differ for different customers due to differences in medical
conditions of customers in case of life insurance and due to differences in nature of goods
and mode of transportation in case of marine and fire insurance.
10. Then, a reconfirmation is taken by the agent from the customer that he agrees with the terms
and conditions of the policy.
11. The insurance agent then regularly collects the premium from the customer whenever the
premium becomes due.
Promotion Mix
 Advertising:
It is a paid form of non-personal communication. It is used to create awareness and transmit
information in order to gain a response from the target market. Forms of advertising are as
follows:
o News Papers and Magazines:
LIC give ads in the newspapers and magazines round the year to continue its brand image
and also when new products are introduced. Normally its ads are published in Times of India.
o Electronic media:
Insurance companies also advertise its services in the Electronic media like:
 Internet (Websites):
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Companies like LIC, ICICI Prudential all have websites from which people can get the
information about their products, prices, various schemes, and lots of other information.
People can also purchase the product through this website.
 Television:
Companies like LIC, Met Life India, advertise on television to make people aware of
their products and services.
 Radio:
ICICI Prudential advertises on 92.5 red Fm.
o Hoardings:
LIC put its hoardings where there is a mass flow of people, especially outside the railway
station or at the backside of the bus.
When Met Life was introduced it has put his hoardings on the side of the train, to target huge
number of people.
o Brochures:
Companies provide brochures to the customers so that they can have a look on various
schemes and their prices.
Public relations:
Public relations are helpful for the companies to build their brand image, to maintain good
relationship with customers, to make the people aware of its recent happenings, etc. Mediums of
Public relations are:
o Press releases:
This helps the company to convey its message to its customers and other people.
o Seminars:
These are held to provide information about the new product launched, position of the
company in the market, etc.
 Sales Promotion:
Gifts:
LIC provides diaries, pens, booklets, etc to its customers.
o Sponsoring Events:
Eg: Max New York Life Insurance Company has sponsored the recent India-Zimbabwe-New
Zealand tri series.
 Personal selling:
o Agents:
It is the most widely used method of promotion by all insurance companies. They recruit,
train and motivate the insurance agents to convince the customers to buy insurance policies
of that particular company. The agent also collects the monthly premium and settles the
claims of the customers.
 Word of Mouth:
Word of Mouth promotion plays the role of hidden sales force. The word of mouth promotion is
normally carried out by customers, agents and employees. It can be positive or negative
depending upon the service or experience they receive.
o Customers:
It is important for the organization to provide customers with quality service so that he is
satisfied and spread the good word of mouth. On the contrary if the customer is not satisfied
with the service or experience he spreads bad word of mouth.
The Insurance Regulatory and Development Authority (IRDA)
Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in
December 1999. The IRDA since its incorporation as a statutory body in April 2000 has
fastidiously stuck to its schedule of framing regulations and registering the private sector
insurance companies.
The other decisions taken simultaneously to provide the supporting systems to the insurance
sector and in particular the life insurance companies was the launch of the IRDA’s online service
for issue and renewal of licenses to agents.
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The approval of institutions for imparting training to agents has also ensured that the insurance
companies would have a trained workforce of insurance agents in place to sell their products,
which are expected to be introduced by early next year.
Since being set up as an independent statutory body the IRDA has put in a framework of globally
compatible regulations. In the private sector 12 life insurance and 6 general insurance companies
have been registered.
The Government of India liberalised the insurance sector in March 2000 with the passage of the
Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for
private players and allowing foreign players to enter the market with some limits on direct
foreign ownership. Under the current guidelines, there is a 26 percent equity cap for foreign
partners in an insurance company. There is a proposal to increase this limit to 49 percent.
Premium rates of most general insurance policies come under the purview of the government
appointed Tariff Advisory Commitee.
The opening up of the sector is likely to lead to greater spread and deepening of insurance in
India and this may also include restructuring and revitalizing of the public sector companies. A
host of private Insurance companies operating in both life and non-life segments have started
selling their insurance policies since 2001.
Career as an Insurance agent
An insurance agent is a person who takes up agency from the insurance company to sell their
policy on a commission basis. He acts as an intermediary between the insurance company and
the policy holder. But before doing so, he has to undergo training and get a certificate of
proficiency from the insurance company.
Mostly insurance policies are bought through agents. Agents help individuals and companies in
selecting the right policy for their needs. They plan for the financial security of individuals,
families and businesses and advise them about insurance protection. They also help the policy
holders at the time of settlement of the claim. The job of agents is quite challenging as selling a
product like insurance policy is not easy. For being successful, agents should be outgoing and
social. They should have a knack of convincing people.
Agents are not on the payrolls of the insurance company. The insurance agents get a fixed
commission on each policy they (insurance-agent) manage to sell
Eligibility and Process - People who wish to become insurance agents are required to undergo
100 hours of training by the respective insurance company. Once the training is complete, the
candidate is eligible to appear for an online examination conducted by the Insurance Regulatory
Development Authority (IRDA) with at least 50 per cent marks set for qualifying.
Composite Agent - is the one who sells both life and general insurance policies. One has to put
in 100 hours promoting life insurance products assuming that you are a general insurance agent.
A life insurance agent, before appearing for another exam, has to dedicate 50 hours towards
promoting general insurance products. A composite agent has to appear for another test also
(conducted by the IRDA.)The agent is supposed to renew his license after three years, by putting
in another 25 hours (and 50 hours for composite insurance agent) of training. An agent can
register under a development officer in any insurance company. The training institutes are
accredited by the IRDA. and the insurance Company merely sponsors its agent(s). An agent
works with the Development Officer in the insurance Company and the credit for the policy of
the insurance agents goes to the Development Officers within the organization. Nevertheless, this
job is as good as freelancing. Secondly, the insurance companies also provide incentive schemes
for the insurance agents from time to time.
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MUTUAL FUND MARKETING
A mutual fund is simply a financial intermediary that allows a group of investors to pool their
money together with a predetermined investment objective. The mutual fund will have a fund
manager who is responsible for investing the pooled money into specific securities (usually
stocks or bonds). When you invest in a mutual fund, you are buying shares (or portions) of the
mutual fund and become a shareholder of the fund.
Mutual funds are one of the best investments ever created because they are very cost efficient
and very easy to invest in (you don't have to figure out which stocks or bonds to buy). By
pooling money together in a mutual fund, investors can purchase stocks or bonds with much
lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual
funds is diversification.
A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is then invested in capital market instruments such as
shares, debentures and other securities. The income earned through these investments and the
capital appreciation realized are shared by its unit holders in proportion to the number of units
owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it
offers an opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost. The flow chart below describes broadly the working of a mutual fund:
Mutual Fund Operation Flow Chart
Mutual fund advantage
Mutual Fund Investing vs. Stock Investing
It seems strange to compare mutual funds to stocks since mutual funds are primarily composed
of stocks, but it is important to distinguish the two because there are some notable advantages to
using mutual funds.
Get Focused
Investing in individual stocks can be fun because each company has a unique story. However, it
is important for people to focus on making money. Investing isn't a game. Your financial future
depends on where you put you hard earned dollars and it shouldn't be taken lightly.
Diversification
There is no greater advantage to using mutual funds than diversification. Do you honestly
believe wealthy investors purchase just a couple of stocks? Of course not! If they are not using
mutual funds (many do), than they are purchasing a large number of stocks. Smart investors
diversify because it greatly reduces risk without sacrificing returns.
Professional Management
By purchasing mutual funds, you are essentially hiring a professional manager at an especially
inexpensive price. It would be a bit cocky to think that you know more than mutual fund
manager. These managers have been around the industry for a long time and have the academic
credentials to back it up. Saying you could outperform a mutual fund manager is similar to a
football fan sitting on their couch saying "I could have made that catch" -possible, but not likely.
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Even if some of us are better at picking stocks than a professional and their support staff, most of
us would not want to spend the amount of time it takes to watch, research and trade the market
on a daily basis.
Efficiency
By pooling investors' monies together, mutual fund companies can take advantage of economies
of scale. With large sums of money to invest, they often trade commission-free and have
personal contacts at the brokerage firms.
Ease of Use
Can you imagine keeping track of a portfolio consisting of hundreds of stocks? The bookkeeping
duties involved with stocks are much more complicated than owning a mutual fund. If you are
doing your own taxes, or are short on time, this can be a big deal.
Liquidity
If you find yourself in need of money in a short amount of time, mutual funds are highly liquid.
Simply put in your order during the day and when the market closes a check will be sent to you
or you can have it wired to a bank account. Stocks can be much more difficult depending on
what kinds of stocks you are invested in. CD's offer no liquidity (not without a hefty fee) and
bonds can be difficult, too. Some mutual funds also carry check writing privileges, which means
you can actually write checks from the account, similar to your checking account at the bank.
Cost
Mutual funds are excellent for the new investors because you can invest small amounts of money
and you can invest at regular intervals with no trading costs. Stock investing, however, carries
high transaction fees making it difficult for the small investor to make money. If an investor
wanted to put in $100 a month into stocks and the broker charged $15 per transaction, their
investment is automatically down 15 percent every time they invest. That is not a good way to
start off!
Wealthy stock investors get special treatment from brokers and wealthy bank account holders get
special treatment from the banks, but mutual funds are non-discriminatory. It doesn't matter
whether you have $50 or $500,000, you are getting the exact same manager, the same account
access and the same investment.
Risk
In general, mutual funds carry much lower risk than stocks. This is primarily due to
diversification (as mentioned above). Certain mutual funds can be riskier than individual stocks,
but you have to go out of your way to find them.
With stocks, one worry is that the company you are investing in goes bankrupt. With mutual
funds, that chance is next to nil. Since mutual funds typically hold anywhere from 25-5000
companies, all of the companies that it holds would have to go bankrupt.
I won't argue that you shouldn't ever invest in individual stocks, but I do hope you see the
advantages of using mutual funds and make the right choice for the money that you really care
about.
Mutual Funds Industry in India
The origin of mutual fund industry in India is with the introduction of the concept of mutual fund
by UTI in the year 1963. Though the growth was slow, but it accelerated from the year 1987
when non-UTI players entered the industry.
In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality
wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the
Assets Under Management (AUM) was Rs. 67bn. The private sector entry to the fund familym
rose the AUM to Rs. 470 bn in March 1993 and till April 2004, it reached the height of 1,540 bn.
Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than
the deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian
banking industry.
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The main reason of its poor growth is that the mutual fund industry in India is new in the
country. Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it
is the prime responsibility of all mutual fund companies, to market the product correctly abreast
of selling.
The mutual fund industry can be broadly put into four phases according to the development of
the sector. Each phase is briefly described as under.
First Phase - 1964-87: Unit Trust of India (UTI) was established on 1963 by an Act of
Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI
and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative
control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of
1988 UTI had Rs.6, 700 crores of assets under management.
Second Phase - 1987-1993 (Entry of Public Sector Funds): Entry of non-UTI mutual funds.
SBI Mutual Fund was the first followed by Can bank Mutual Fund (Dec 87), Punjab National
Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank
of Baroda Mutual Fund (Oct 92). LIC in 1989 and GIC in 1990. The end of 1993 marked Rs.47,
004 as assets under management.
Third Phase - 1993-2003 (Entry of Private Sector Funds): With the entry of private sector
funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a
wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, except UTI were to be registered and
governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first
private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.The number of mutual fund houses went on increasing, with many
foreign mutual funds setting up funds in India and also the industry has witnessed several
mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total
assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under
management was way ahead of other mutual funds.
Fourth Phase - since February 2003:
This phase had bitter experience for UTI. It was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India
with AUM of Rs.29, 835 crores (as on January 2003). The Specified Undertaking of Unit Trust
of India, functioning under an administrator and under the rules framed by Government of India
and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered
with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the
erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of AUM and with the
setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with
recent mergers taking place among different private sector funds, the mutual fund industry has
entered its current phase of consolidation and growth. As at the end of March 2006, there were
29 funds.
Types of Mutual Funds Schemes in India
Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk
tolerance and return expectations etc. The table below gives an overview into the existing types
of schemes in the Industry.
TYPES OF MUTUAL FUND SCHEMES
 By Structure
o Open - Ended Schemes
o Close - Ended Schemes
o Interval Schemes
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
By Investment Objective
o Growth Schemes
o Income Schemes
o Balanced Schemes
o Money Market Schemes

Other Schemes
o Tax Saving Schemes
o Special Schemes
 Index Schemes
Marketing Mix for Mutual Fund
1. Product Design and Range
Mutual fund products (schemes) are basically investments-oriented and the savings
mobilized by them are invariably invested in the instruments (shares, debentures) projected in the
schemes. There is little scope for flexibility. Therefore, due care needs to be taken while
designing particular products taking into account expected changes in capital/ stock market in
view of future investments return. The changing profile of customers (investors) must be taken
into account in identifying the savings market.
Different segments of the potential savings market have different expectations—longterm growth, regular income tax benefits, and so on. New products must be aimed at satisfying
one or more objectives. Tax laws and other related regulations also play an important role in
designing new products because benefits can be offered to investors within the existing
framework of tax regulations.
India lags behind countries like the USA, the UK and Japan in terms of innovative
products. Most of the products launched in India are either income or income-cum-growth
schemes; few are pure growth schemes. Investor options have been restricted due to limited
product range.
Like product planning, product launching is a crucial element in marketing. Many Indian
mutual funds have performed poorly due to wrong timing of launch. Market research can help to
assess the needs of potential customers, availability of existing products and future growth in
demand.
Kinds of Mutual Funds
Mutual Funds have specific investment objectives such as growth of capital, safety of principal
current income or tax exempt income, one can select one fund or any number of different funds
to help one meets ones specific goals. In general mutual fund fall under 3 general categories: 


Equity fund invest in shares of common stocks.
Fixed income funds invest in government or corporate securities, which offer fixed rate of
returns.
Balanced fund invest in a combination of both stocks and bonds
OPEN ENDED SCHEMES: - Open-ended schemes do not have a fixed maturity period.
Investors can buy or sell units at NAV- related prices from and to the mutual fund on any business
day. These schemes have unlimited capitalization, open-ended schemes do not have a fixed
maturity, there is no cap on the amount you can buy from the fund and the unit capital keep
growing. These funds are not generally listed on any exchange.
Open-ended schemes are preferred for their liquidity. Such funds can issue and redeem
units any time during the life of schemes. Hence unit capital of open-ended funds can fluctuate
on a daily basis. The advantages of open-ended schemes are: 1.
2.
Any time exit option
Any time enter option.
CLOSED ENDED SCHEMES: Close-ended schemes have fixed maturity periods. Investors
can buy into these funds during the period when these funds are open in the initial issue. After that
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such scheme cannot issue new units except in case of bonus or right issue. However after the initial
issue you can buy or sell units
of the schemes on the stock exchange where they are listed. The market price of the unit could
vary from the NAV of the schemes due to demand and supply factor
AGGRESSIVE GROWTH FUNDS: - These funds seek to provide maximum growth of capital
with secondary emphasis on dividend or interest income. They invest in common stocks with a
high potential for rapid growth and capital appreciation. Aggressive growth funds are suitable for
those investors who can afford to assume the risk of potential loss in value of their investment in
the hope of achieving substantial and rapid gains. They are not suitable for investors who must
conserve their principal or who must maximize their current income.
GROWTH FUNDS:- Like aggressive growth funds, growth fund generally invests in stocks for
growth rather than income. They are considered more conservative in their approach because they
usually invest in established companies to achieve long-term growth. Growth fund provides low
current income but the investor principal is more stable then it would be in an aggressive growth
fund. While the growth potential may be less over the short term, many growth funds have superior
long-term performance records.
These funds are suitable for growth oriented investors but not investors who are unable to
assume risk or who are dependent on maximizing current income from there investments.
GROWTH AND INCOME FUNDS:- Growth and income funds seek long-term growth of
capital as well as current income. The investments strategies use to reach these goals vary among
funds. Growth and income funds have low to moderate stability of principal and moderate potential
for current income and growth. They are suitable for investors who can assume some risk to
achieve growth of capital but want to maintain a moderate level of current income.
FIXED INCOME FUNDS:- The goal of fixed income fund is to provide high current income
consistent with the level of capital. Growth of capital is of secondary importance. Fixed income
funds offer a higher level of current income than money market funds, but a lower stability of
principal. Fixed income funds are suitable for investors who want to maximize current income
and who can assume a degree of capital risk in order to do so.
EQUITY FUNDS:- Funds that invest in stocks represent the largest category of mutual fund.
Generally the investment objective of this class of fund is long-term capital growth with some
income. There are however many type of equity funds.
BALANCED FUNDS:- The Balanced funds aims to provide both growth and income. These
funds invest in both shares and fixed income securities in the proportion indicated in their offer
documents. It is an idea for investors who are looking for the combinations of income and
moderate growth.
MONEY MARKET FUNDS/ LIQUID FUNDS: - For the cautious investors these funds
provide a very high stability of principal while seeking a moderate to high current income. They
invest in highly liquid; virtually risk free, short-term debt securities of agencies of the Indian
government, banks and corporation and treasury bills. Because of their short-term investments,
money market mutual funds are able to keep a virtually constant unit price; only the yield
fluctuates. Money market funds are suitable for those investors who want high stability of principal
and current income with immediate liquidity.
SPECIALITY / SECTOR FUNDS: - These funds invest in securities of a specific industry or
sector of the economy such as health care, technology, leisure, utilities or precious metals. The
funds enable investor to diversify holding among many companies within an industry, a more
conservative approach than investing directly in one particular company.
Sector funds offer a opportunity for sharp capital gains in cases where the fund’s industry is
“in favor” but also entail the risk of capital losses when the industry is out of favor. While
sectors funds restrict holdings to a particular industry, other specialty funds such as index funds
gives investors a broadly diversified portfolio and attempt to mirror the performance of various
market averages.
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2. Pricing Policy
The price of mutual fund products is inextricably linked with returns. Indian mutual funds
follow the historic pricing structure. SEBI (Mutual Funds) Regulations, 1996, contain guidelines
about the pricing of units. As per these guidelines, the schemes may also provide for the price at
which the units may be subscribed or sold to the independent participants in the scheme and the
price at which such units may at any time be repurchased by the mutual funds. Mutual funds are
also to publish the sale and repurchase prices at least once in a week. Mutual funds are also to
ensure that the difference between the sale and repurchase prices does not exceed 7 per cent of
the sale price.
In India the face value of the units of most of the mutual funds is Rs 10. However, while
deciding on the price, incentives, brokerage charges and commissions are also to be decided in
advance because the expenses towards these items will effect the ultimate returns to investors.
3. Distribution and Promotion of Product
A new mutual fund product may have all the desired qualities but that does not ensure its
spontaneous acceptance by customers. Success would greatly depend on appropriate distribution
and promotion. The identification of appropriate market segments for the product, selection of
appropriate distribution channels and promotional aids are essential.
Till the advent of public sector mutual funds in 1987 and private sector mutual funds in
1993, the marketing strategy followed by UTI was largely passive.
UTI units have been mainly sold through LIC agents whose job is really marketing insurance.
Marketing intermediaries like agents/brokers in India, moreover, are under no obligation to
follow any norms unlike the USA, UK and Japan.
While Indian mutual funds still depends mostly on retailing, a distinct change has been
noted in marketing strategy after 1993.
The major market intermediaries are: agents appointed by respective mutual funds,
stockbrokers who are members of stock exchange and are registered with the mutual fund,
institutional and corporate agents.
Public sector mutual funds like LIC MF and UTI have an edge over others due to their
well-established agency network. Though the corporate offices formulate the overall marketing
strategy and co-ordinate the activities relating to publicity and product distribution, local level
activities are supervised and coordinated by the zonal and branch offices. For example, UTI has
four zonal offices and 44 branches; LIC MF has seven area offices. Other mutual funds also have
regional offices, which promote sales at the local level.
Recent innovations in marketing aim to reach particular target groups. For example:





To market its income-cum-growth scheme in 1993 a bank-sponsored public sector mutual
fund sent application forms to all the credit cardholders of the sponsoring bank. It is reported
that about 10 per cent of the total collections came from the cardholders.
A public sector mutual fund, which launched a growth scheme in 1994 tied up with a foreign
bank and the holders of credit cards of this bank, could pay for the initial subscription
through credit cards.
Many mutual funds offer incentives for early subscriptions; some mutual funds also offer
insurance benefits to attract investors.
An emerging trend is the distribution of schemes through merchant bankers. A number of
funds have appointed lead managers to their schemes. The merchant bankers distribute the
scheme through their booking wings that usually have wide network of sub-brokers.
Distribution of application forms through a tie-up with newspapers is also now a common
practice.
Product promotion in India has taken the usual routes of advertisement and publicity.
Mutual funds advertisements are regulated by SEBI, which prohibits materials and contents of
publicity that may mislead the investing public.
Communication is important for effective marketing and communication through
advertisement is the most important promotional aid for a mutual fund. Once the target group
and its requirements are identified, an appropriate advertisement strategy is devised in order to
reach the maximum number of potential customers. Advertising campaigns must aim at creating
awareness of the product, its comparative advantages and future potential, past performance of
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similar products and superiority of the fund in relation to others in terms of assets, management
and performance.
4. Customer Service
The marketing of service is significantly influenced by the quality of service and the
interpersonal relationship between customers and the service organization. Servicing has great
significance in mutual funds, as in any other financial service industry. Prompt and timely
service as in issuing certificates/cheques and in attending to any customer problem would make a
distinct difference. Expected rates of return being more or less same for all schemes, it is the
quality of service that becomes the deciding factor. Services can be provided through external
agencies, or internally through the service department. In India most mutual funds provide aftersales service through both external agencies and internal service department, although they
largely rely on external agencies like registrars and transfer agents who are specialized in the job.
Sometimes there are complaints that after-sales servicing are not up to the expectation level. This
is probably due to absence of sufficient staff. However, mutual funds do need to develop inhouse expertise to render after-sales services more promptly and cost effectively.
In order to ensure quality service to customers, service audit would be great help to
monitor the range of services usually rendered by mutual funds. These are sales-related,
complaint-related and suggestions-related services. Service standards can be fixed on the basis of
expectations levels of customers, which can be found through market surveys.
Association of Mutual Funds in India (AMFI)
With the increase in mutual fund players in India, a need for mutual fund association in India
was generated to function as a non-profit organisation. Association of Mutual Funds in India
(AMFI) was incorporated on 22nd August, 1995.
AMFI is an apex body of all Asset Management Companies (AMC) that has been registered with
SEBI. Till date all the AMCs are that have launched mutual fund schemes are its members. It
functions under the supervision and guidelines of its Board of Directors.
Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a
professional and healthy market with ethical lines enhancing and maintaining standards. It
follows the principle of both protecting and promoting the interests of mutual funds as well as
their unit holders.
The objectives of Association of Mutual Funds in India
The Association of Mutual Funds of India has certain defined objectives, which juxtaposes the
guidelines of its Board of Directors. The objectives are as follows:

This mutual fund association of India maintains high professional and ethical standards in
all areas of operation of the industry.

It also recommends and promotes the top class business practices and code of conduct
which is followed by members and related people engaged in the activities of mutual
fund and asset management. The agencies who are by any means connected or involved
in the field of capital markets and financial services also involved in this code of conduct
of the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund
industry.

Association of Mutual Fund of India do represent the Government of India, the Reserve
Bank of India and other related bodies on matters relating to the Mutual Fund Industry.

·It develops a team of well-qualified and trained Agent distributors. It implements a
programme of training and certification for all intermediaries and other engaged in the
mutual fund industry.

AMFI undertakes all India awareness programme for investors in order to promote proper
understanding of the concept and working of mutual funds.
Service Sector Management: BBA-III.
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
At last but not the least association of mutual fund of India also disseminate
information’s on Mutual Fund Industry and undertakes studies and research either
directly or in association with other bodies.
Career as a Mutual Funds Advisor
The Association of Mutual Funds in India (AMFI) is an apex body of all Asset Management
Companies (AMC) that are registered with the SHBI. AMFI develops a team of well-qualified
and trained Agent Distributors. It implements a program of training and certification for all
intermediaries and others engaged in the mutual fund industry including employees of mutual
funds.
AMFI Mutual Fund Certification is based on a testing programme. There are two Modules of the
test. The first is the AMFI Mutual Fund (Basic) Module. This is a general test covering the
concept, structure and other essential general topics. This is meant for all employees of Mutual
Funds (other than those who are engaged in selling and marketing activities), general public and
for those who would like to have a basic knowledge of concept and working of Mutual Funds.
Any one who desires to acquire knowledge of the functioning of the mutual fund without seeking
to become a fund distributor can take part one test independently. A certificate will be issued
separately for Basic Module test to the successful candidates. There is no validity period for the
AMFI-Mutual Fund (Basic) Module certification.
The second is the AMFI Mutual Fund (Advisors) Module and it covers subjects such as financial
planning, risks in fund investing, model portfolio selection in addition to the subjects covered
under the Basic Module and constitute a single certification programme which is designed for
certification of fund distributors or intermediaries engaged in selling mutual fund schemes,
employees of corporate intermediaries and employees of mutual funds who are engaged in
selling and marketing activities. The validity period for the AMFI-Mutual Fund (Advisors)
module certification is for five years.
The Securities and Exchange Board of India (SEBI) has made mandatory for any entity / person
engaged in marketing and selling of mutual fund products to pass AMFI certification test
(Advisors Module) and obtain registration number from AMFI. Firms and corporates will have
to obtain certification of registration from AMFI and all employees of corporate distributors
engaged in selling and marketing of mutual fund products have to pass the AMFI certification
test (Advisors Module) and obtain registration with AMFI before canvassing business of mutual
funds.
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TELECOMMUNICATIONS SERVICES
Introduction
Telecommunication is one of the prime support services needed for rapid growth and
modernization of various sectors of the economy, the sector has grown rapidly in recent years, its
growth needs to be accelerated further. It is also one of the fastest growing sectors in India and
has immense potential for growth. The Telecommunication activity is commercial in nature and
people are willing to pay for it. Of all infrastructure sectors, it is perhaps best suited for private
sector participation which would help to create competitive environment and improve quality of
services to consumers.
Private investment is expected to play a major role supplementing the efforts of the public sector
in expanding capacity and also providing competition with the system. In the area of value-added
services, the private sector would continue to play a dominant role. The quantum of investment
by the private operators would basically be determined by the rate of return on such investments
– both basic as well as value-added services.
The Telecom sector has witnessed some fundamental structural and institutional reforms in past
decades. Telecom equipment manufacturing was completely deregulated in 1991. Value-added
services (including cellular services) were thrown open to private sector participation in 1992.
Basic Services were opened to private participation in 1994 by dividing country into 21 Telecom
Circles and allowing one private operator per Circle to compete with DOT (DEPARTMENT OF
TELECOMMUNICATION). An Independent Telecom Regulatory Authority of India was setup
in 1997. A new policy for Internet Service Providers (ISPs) was announced in 1998 allowing
independent services providers to enter the sector ending the earlier monopoly of VSNL.
Characteristics of the Telecom Sector
Supply
Intense competition has resulted in prompt service to the subscribers. However, smaller towns
and villages continue to have waiting periods on account of non-availability of adequate
infrastructure.
Demand
Given the low penetration levels in the country and continuously falling tariffs, demand will
continue to remain higher in the foreseeable future across all the segments.
Entry and Exit Barriers
Telecom industry is characterized by high entry and exit barriers. Service providers need to
invest huge capital to build or hire the necessary infrastructure for providing services to
customers. For e.g. Tata Teleservices in India invested an amount of Rs.7, 533 crores for setting
up the required infrastructure. Because of the high cost of capital involved, in most countries, the
government owned telecom service organization enjoys a monopoly. Thus, the telecom industry
is heavily-regulated by the government. Even in an open industry where the private players are
allowed to operate, if a player finds it difficult to compete and wants to quit the industry, finding
a right buyer is a formidable task. The buyer should be willing to pay the huge amount, enter the
market and face the challenges.
Bargaining power of suppliers
Improved competitive scenario and commoditization of telecom services has led to reduced
bargaining power for services providers.
Bargaining power of customers
A wide variety of choices available to customers both in fixed as well as mobile telephony has
resulted in increased bargaining power for the customers.
Competition
The entry of fourth cellular player and commencement of WLL services has resulted in intense
competition in the bigger cities. Reducing tariffs will hurt the new entrants, as they will be
unable to recover their high capital investments.
Service Sector Management: BBA-III.
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Market segmentation
Market segmentation is the basic step for any service provider before deciding on the segment to
be served and the marketing strategy required to serve it. The market for telecom industry can be
divided into following segments based on the consumerIndividual
The most important segment is that of individual customers or households. Because
of the monopoly of government owned telecommunications sector in India people earlier paid
very high prices. After the basic telephone services were opened for private players in 1994,
many players entered the market and the prices came down owing to competition. The number of
individual users for telephones increased significantly, as the reach improved and service
efficiency increased. India however lags behind many other developing countries in telephone
line density.
Following table gives the brief idea of the teledensity in some developed or developing countries
of the world:COUNTRY
UK
Australia
USA
Brazil
China
India
Sri Lanka
Indonesia
Pakistan
Nepal
Bangladesh
TELEDENSITY
143.13
126.18
116.43
42.38
42.32
10.38
9.57
9.17
4.42
1.70
1.56
Corporate
Corporate
communication
includes
the
communication
of
information
between two units in two different locations of a city, of a country or in two different. countries.
Business communication can take any form, telephonic conversation letter, e-mail, and fax etc. It
is important that the message be conveyed clear and fast, without any distortions for the business
to function effectively and efficiently. Telecom industry' relics heavily on the corporate sector
for it's business. The corporate sector contributes to the heavy traffic on telephone lines during
the daytime. This has led the telecom companies to offer lower tariffs in the early mornings and
late evenings to shift the demand when most businesses arc closed.
Rural
During the monopoly of the government owned service providers, the worst affected customer
was the rural customer. The reach was bad and the quality of service provided was even worse.
The telecom revolution of the late '80s and early '90s saw a change in the rural telecom scene.
Because of the government's initiative to lay down cables in rural areas and provide basic
telephone services at subsidized prices, the reach of telecom services to remote areas has
improved. The efficiency of the services has also improved.
Urban
In urban areas, the number of telephone subscribers is significantly higher than rural areas. This
is because of not only the available infrastructure but also the presence of educated masses,
which arc comfortable using technology and therefore use it more frequently. In fact, Urban
India has grown to become dependent on telecom services. This is one of the reasons why most
cellular service providers start their business in the cities first and then proceed to capture the
rural areas.
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On the basis of the product/service offered, telecom industry can be divided into
following segments 1.
2.
3.
4.
Fixed wire line/wireless services
Mobile services
Internet services
Video telecom services
Marketing strategy
Telecom service providers need to design an appropriate marketing strategy to face the
competition and survive in the market. Following are some of the important steps required by
the management to design an effective marketing strategy.
SWOT Analysis
Telecom players should analyze their own strengths and weaknesses vis-a-vis the opportunities
and threats in the market. Suppose a telecom player has an innovative service offer and efficient
service personnel to market them. These are his strengths. However, say he lacks the resources to
adopt advanced technology and promote the services aggressively. To overcome these
weaknesses, it can always tie up with strong players in the telecom market or other related
industries. For example. Birla tied up with AT&T to gain from the reputation of latter in the
telecom industry. Telecom players should also carefully analyze the threats and opportunities
posed by technology, competitors and the external environment, and formulate suitable strategies
to overcome threats and exploit opportunities.
Demand Forecasting
Telecom players should conduct a market survey to analyze the demand for various services
among the target customers. For example, when telecom companies saw the need for written
message transfer from the sender to the receiver, they introduced the concept of SMS (Short
Messaging System).
Service Strategy: Telecom players should constantly upgrade their services to meet changing
customers' needs. For example, cellular service providers initially offered only the basic
communication services. However, customers now expect and demand subsidiary services like
call waiting, call holding, automatic alerts, sports information etc.
Pricing Strategy
Telecom players need to determine the price of their services carefully. If they price their
services too high, above the perceived value by customers, customers might switch over to
competitors offering those services for lesser prices. On the other hand, if they price their
services too low, they would not be able to recover the cost and thus get into losses. Normally,
service providers in this industry use pricing methods like cost-plus pricing, target profit pricing,
break-even analysis and prevailing value pricing. If all the players in a market are offering
similar service and similar supplementary services and other benefits as well, a telecom player
aiming to penetrate the market has to price its service lower than others. Sometimes, government
policies and regulations prevent telecom players from having control on price factor. For
example, in India. TRA1 (Telecom Regulatory Authority of India) wields control over the
telecom industry.
Positioning Strategy
Telecom players need to identify the different segments that need different services and position
their services for die targeted segments. When there were only a few players in the mobile
communication services segment, the tariffs were very high. Airtel positioned its services
exclusively for the higher-income segment. At that time. Airtel charged Rs. 16 per minute. When
the tariffs were reduced after many private and government players entered cellular services
market, pulse rates came down. Airtel then repositioned its services for the common man.
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Promotion Strategy
Telecom players should choose the promotion medium depending on the kind of services they
offer. For example, in India, if a telecom player wants to target young people belonging to the
middle and upper class families, they can choose a medium like the Internet or billboards near
colleges, parks, restaurants, movie theaters, etc. Moreover, telecom players need to allocate
budget for advertising across different media wisely. Thev have to determine the money to be
spent for advertisements on TV, radio, newspapers, magazines, billboards, and other media.
When Airtel introduced pre-paid cards that customers could choose depending on their
monthly budget for communication services, it advertised in all kinds of media with special
emphasis on TV.
Such events enable organizations to generate awareness about their services among target
customers. Telecom players can also advertise their services by setting up attractive service
outlets. In addition, they distribute signboards to retail stores marketing their services. For
example. Hutch gives signboards to retail stores that sell its prepaid phone cards.
Implementation
Framing the marketing strategy will serve only half the purpose of the organization. It is only
when the strategy is implemented successfully that the organization realizes its goals and
objectives. However, management often faces many challenges in implementation. Strategies are
based on certain assumptions regarding the market potential, demand, and competitive
environment. Telecom industry, where technology and customer expectations change fast, all
these variables also change rapidly. Therefore, the management has to continuously monitor the
telecom environment, revisit their strategies from time, and revise their plans and targets
accordingly.
Marketing mix
Unlike manufacturing organizations that focus on the four P's of the marketing mix, service
organizations need to concentrate on seven P's. i.e. product, price, place, promotion, people,
physical evidence and process. Let us discuss how telecom service providers attempt to design
these seven P's to constitute appropriate marketing mix and face the challenges in the telecom
industry:
PRODUCT/SERVICE
Technology and the changing needs of customers have prompted the telecom industry to
introduce different products, services and their variations to the customer. This has also helped
some of the players create a market for their services, instead of competing with other players in
the cluttered market. However, telecom players are forced to continuously introduce innovative
services to sustain and thrive in the highly competitive market. The various products and services
offered by telecom industry are discussed below.
Fixed land line/wireless services
Fixed landline service allows customers to communicate only from a particular place. The
common landline connection offered by BSNL and other players is the basic service. Fixed
wireless service offers more mobility than the fixed landline but that also has its own limits.
Fixed land line/wireless services offer following services to customers:
è
Short distance services: These services allow users to communicate with people within a
given region.
è
Long Distance services: Long distance services can be further divided into NLD and ILD
services. NLD (National Long Distance) services allow a customer to communicate with people
residing anywhere in the country. ILD (International Long Distance) services allow the customer
to communicate with people residing anywhere in the world.
Mobile services
Mobile services allow customers to communicate while on the move. Mobile service providers
divide a region into cells and establish a radio base station (RBS) in each cell. All RPSs are
connected to a central switching center from where the entire system is monitored. Mobile
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service providers offer limited mobility and roaming facilities. Limited mobility allows users to
communicate within a given area. Roaming facility allows users to communicate over the
mobile, wherever they are in the country (international roaming is also offered by some service
providers). For example, a customer from Mumbai can use his mobile effectively even when
visiting Hyderabad using the roaming facility. Mobile services can be categorized as follows:

Cellular phone service: It includes satellite mobile communications service, in-flight
telephone service, packet communication service and cellular services.

Personal Handyphone System (PHS) service: Personal Handyphone system
(PHS)
works as a cordless phone at home and as a mobile phone outside. PHS services are
offered on personal digital assistants (PDA) and notebook PCs.

Pager service: It enables users to receive text messages. The person who sends the
message bears the cost while the person owning the pager pays subscription. This service
is now also available on mobile phones in the form of SMS service. SMS service has
become a great marketing tool and is being used by many companies to promote their
products/services. Companies conduct contests where the audience/customers are
required to respond through an SMS.
Internet
It allows people to access information including text, voice and images from anywhere in the
world and in real time. For example, a person in India can send written messages to his friend in
the US. talk to him and even view the image of his friend on the computer monitor.
Video telecom services
They include video conferencing, videophone, videotext, etc. They are used by various sen ice
providers including road transportation, railways, airways, corporates, banks, hotels, educational
institutes and government departments.
PRICE
Service providers can use cost-based, competition based or demand-based pricing. Most service
providers in the telecom industry today are resorting to competition based pricing, which has led
to low prices of the services. This has proved to be quite beneficial for the customers, but the
telecom companies are struggling to make profits.
In the fixed line industry, customers have only one option of payment, that of post-paid. That is,
customers pay a fixed amount as rent and the usage charges at the end of the billing period, in
cellular industry, service providers offer two options to customers, pre-paid and post-paid. In
case of prepaid service, customers buy a card available from retail outlets to activate or recharge
their service. The price of the card covers the rent fixed by the service provider plus the cost of
certain amount of airtime. For example, Airtel offers different cards with different amounts of
airtime and allows its customers to choose from them depending on their need. Though initially,
prepaid service was available only for mobile phone users. BSNL is now making prepaid service
available for landline users also. In case of postpaid service, depending on the number of calls
made by the customer and other services used by him, a detailed bill is prepared and sent to the
customer. The total amount to be paid by a customer per month depends on the rent and the
services used by him. The customer can make the payment by cash/cheque/credit card at one of
the service provider's outlets. Some service providers also allow online payment through
Internet. BSNL and MTNL for example allow their customers to make online payment.
PLACE
When DOT/BSNL was the only service provider, customers had to go to different locations for
different services. Applications for new telephone connections or for transferring a connection
from one place to another were accepted only in one major telephone exchange located in the
city. Bill payments were accepted in local telephone exchange office located in certain areas.
One had to personally go to the office, stand in the queue and make the payments. There was
another department for receiving complaints. It took a long time, even a year, to obtain a
telephone connection. Complaints remained unattended for several days after a customer
registered his complaint with the local telephone exchange.
Service Sector Management: BBA-III.
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After the entry of private players like Tata and Bharti, things have improved. Most private
players have offices at various locations and provide multiple services through them. They are
also accessible through the internet. BSNL too set up offices at multiple locations to accept
applications for new connections, transfers and payments. For example, Mobile service providers
like Airtel. Hutch and Reliance Infocomm have one-stop shops where customers can purchase
handsets, get new connections, subscribe to various value-added services and pay their bills.
PROMOTION
Telecom service providers use direct marketing, advertisements in newspapers, T.V., Radio,
billboards in public places, etc. to promote their services. In 2002, Airtel used a TV commercial
endorsed not by film stars or sports stars but by a successful music composer, A.R. Rahman to
promote its brand. Rahman also composed five exclusive symphonies downloadable as ring
tones for Airtel users. Telecom services also sponsor some contests or events to attract public
attention and gain wide publicity. For example, in 2003. Reliance Info sponsored a contest for a
successful Bollywood film, Kal Ho Na Ho.
Owing to the intense competition in the cellular service sector, the promotion campaigns are
quite innovative. Hutch for example launched an advertising campaign using a small boy and his
pug, which caught the attention of customers. Hutch also offers discount coupons to its
customers, to be availed at various restaurants and lifestyle stores across the city. This helps the
company retain its customers and also attract new ones.
PEOPLE
Customer orientation is crucial to telecom service providers in winning new customers t and
retaining the existing customers, when customers report any problem with the service, service
provider should send people immediately to get the problem rectified. However, when
BSNL/DOT enjoyed monopoly, service personnel did not turn up for days together even after
customers reported a problem. The fact that it was the only service provider resulted in excessive
load as well as complacency. However, with the entry of private players like Tata Teleservices
into the industry, things changed. The new private players emphasized customer satisfaction.
They ensured that their service personnel answer customer queries promptly and professionally
and attend to their problems immediately. This has brought a change in the working of the
telecom industry as a whole.
PHYSICAL EVIDENCE
Telecom service is intangible. A user cannot judge the quality of the service offered by a service
provider unless he uses it. Telecom service providers however offer some tangible products to
customers to service as physical evidence. They provide customers with a telephone directory
that includes names and addresses of all their subscribers. Every year, an updated directory is
provided to all subscribers free of cost. However, mobile service providers do not provide such
directory because mobile phones are considered personal devices. Reliance Infocomm. However,
makes the information about mobile numbers and names and addresses of its subscribers
available on reliance network. Telecom service providers also focus on the voice instrument
given to customer. When Tata Teleservices entered telecom sector, it gave sleek and attractive
looking phone instruments to its subscribers to compete with the phone instruments supplied by
BSNL at that time. Later, BSNL also began to focus on the looks of phone instruments given to
customers. Telecom service providers also focus on ambience of their service outlets. Reliance
Info invests about Rs. 30 lakhs to one crore on building its service outlets.
PROCESS
Telecom service providers should offer reliable, continuous, quality service to customers. When
Tata Teleservices entered the telecom industry, its sales executives visited individual homes,
shops and organizations identifying people in need of a phone connection and quality service. If
a customer asked for a phone connection, he got it within three days. Now BSNL has also
improved its service processes. It has a computerized system that receives complaints from
customers round the clock and service personnel attend the customer within 24 hours. One can
also obtain the bill information by contacting the number provided for the purpose. Telecom
service providers also send detailed bills on request, describing the number called, amount of
time spent on the call and the charges incurred. They should however ensure that errors are not
committed in billing. This can be a major source of dissatisfaction for customers. In the past,
many customers had complaints against BSNL of overcharging them. Some customers who
could not settle the issue with BSNL got their phone disconnected and switched to other players.
Service Sector Management: BBA-III.
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Therefore, telecom players should strive to send error free bills to customers. They should
continuously strive to improve their service processes. However, telecom service providers
should try to achieve improvement in service process without incurring additional costs in doing
so. This is especially important because of increasing competition in the telecom sector.
Service Sector Management: BBA-III.
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COURIER SERVICES
The concept
In today's business environment, the value of time is immensely important. The changing macro
economic factors such as globalization of markets, removal of barriers on trade and business and
increased competition have enhanced the need of delivering goods and services in timely and
reliable manner. The development of Indian express industry can be dated back much earlier;
however the decade of eighties saw the real entry of professional players into this market. Since
then the industry has been growing at a steady rate and providing services to the customers at
large.
In this report the term “Express industry” comprises courier companies providing express and
door-to-door pick up and delivery services for documents and non-documents shipments other
than freight to various domestic and international destinations. Domestic services would include
express and door-to-door pick up and delivery services to the various destinations in India
through air and surface mode. The international services would include pick up and delivery of
inbound and outbound shipments to India mainly through air.
The consignments handled by express companies can broadly be classified into two types’ viz.
documents and non-documents. Any material comprising of paper such as correspondence,
bill/invoices, brochures, catalogues, manuals, annual reports, account details, books, files etc. are
categorized as documents. The non documents consignment would include items that may/may
not have commercial value such as samples, CKD units, small machineries, electronic parts and
goods, spare parts.
The Express industry in India is sustained the growth with emerging business opportunities in
various user sector. Liberalization of Indian economy and integration of international trade has
attributed to the sustained growth in Express industry. The growing customer requirement and
scaling up of operation has led to the heavy investment by the express industry in infrastructure
set up, hub and new technology. The Express industry has witnessed fundamental changes in its
composition over the past few years, owing to fierce competition in the business. The
international sector now constitutes to 41% of the total revenue, as compared to over 50% market
in 1990s. During past 4-5 years new association and strategic sales arrangement have been made
between companies.
Indian Express industry comprises large organised service providers, EMS Speed Post (Product
of universal postal union), regional semi-organised service providers and local un-organised
service providers. There are over 2000 express companies operating in this space. The Indian
Express industry encompasses service providers, rendering time bound pick-up and delivery
services of documents and non-documents (commercial parcels, excluding freight). Growing
business requirement for time bound reliable delivery has fuelled the growth of the industry and
many new companies have entered into business to harness the emerging opportunities.
The industry has sustained the growth during subsequent period. Opening up of Indian economy
coupled with integration of international trade and business requirement for focusing on core
competence have opened up new vistas of opportunity for express companies as express service
providers in finance and service segment and 3rd party logistics service providers.
The express market in India can be characterized by the existence of organised, semi organised
and unorganised players.
There are over 2,000 express companies operating in India. About 20 companies are in the
organised sector, 25 in semi-organised sector and others in unorganised sector.
Organised Sector: These service providers operate in domestic and international markets. This
sector also includes service providers in international niche markets.
Semi-organised Sector: Operate by and large in the domestic sectors, and has a reach within
limited geographical area. This also includes operators catering to centre-specific niche markets
(inter-city).
Unorganised Sector: Operate in local (intra-city) markets.
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The organised sector dominates the express industry in India, accounting for 60% of the market
in terms of revenues. The semi-organised sector accounts for 30% of the express industry
market size. The share of EMS Speed Post is estimated at about 10% in FY’ 2003.
The present market is estimated at Rs. 2,493 crore. The domestic market constitutes to about
59%, valued at Rs.1,468 crore. The international market constitute of 41% of the total industry,
valued at Rs. 1,025 crore.
In the past, people had to depend on government's postal service and transportation
service for moving their freight. The delivery took lot of time and people had to go to
the post office, railway, or shipyard to receive or trace their packages. Some private
individuals operated their own vehicles to offer speed and convenience to customers.
People who had to deliver packages urgently handed them directly to airlines to be
carried as cargo on passenger airlines. Passenger planes traveled to limited
destinations, which limited their scope. Fredrick Smith, an entrepreneur identified the
opportunity and established Federal Express (FedEx) in 1973. Smith operated flights
exclusively for cargo and offered home delivery and pick-up services. The business
model was a big hit and there was no looking back for the company. Many other
companies imitated the model with their own fleet and value-added services, and led
to the growth of courier industry. In this chapter, we will discuss the characteristics of
courier industry, marketing segmentation, marketing strategy, marketing mix, recent
trends in global courier industry and Indian courier industry.
The major domestic and international service providers are:

Airborne Express (I) Pvt. Ltd.

GR International Couriers

AFL Pvt. Ltd.

Grand Slam Express Pvt. Ltd.

Aramex India Pvt. Ltd.

ICC Worldwide

Add Quality Solutions

Jeena & Company

Blue Dart Express Ltd.

Network Express Service Pvt. Ltd.

Continental Air Express Pvt. Ltd.

Overnite Express Ltd.

DHL Worldwide Express (I) P. Ltd.

Overseas Courier Service

DTDC Worldwide Express Ltd.

Prakash Air Freight Pvt. Ltd.

Esquire Express (I) Pvt. Ltd.

Skynet Worldwide Express Pvt. Ltd.

Expressit Logistics Worldwide Ltd.

Skypack Service Specialists Ltd.

Federal Express Corporation

Suntika Couriers Pvt. Ltd.

First Flight Couriers Ltd

TNT India Pvt. Ltd.

UPS Jetair Express Pvt. Ltd.
Service Sector Management: BBA-III.
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Characteristics of courier industry
Before entering the courier industry, a player should know the characteristics of the
industry and then evaluate his own ability to survive in the industry while competing
with other players for a market share. Courier industry has the following characteristics:
Entry and Exit Barriers
The courier industry is not heavily regulated by government. The state-owned package
transportation service providers fail to give tough competition to private players unlike the
telecom industry where the stale-owned service provider is a major competitor. However, the
service provider has to be prepared to invest heavily in infrastructure, distribution network,
technology and manpower training. In addition, a courier service organization that wants to serve
customers with overseas transportation requirements needs to spend on brand building and
develop tie-ups with international carriers like UPS, FedEx and DHL. This is because it might be
practically impossible for the company to set up a strong global network on its own. Though
there are no barriers set up by the government to exit the industry, the players may face some
difficulties if they decide to exit. This is because courier service organizations tend to invest
heavily in infrastructure, logistics and brand building. They may find it difficult to get the right
price when they want to wind up. However, local players who do not make huge investments in
infrastructure and assets, but rely on the local network, can quit the industry with ease.
Dependence
The growth of courier industry is highly dependent on the growth of other industries, rate of
growth of economy, growth in imports and exports business, etc. If there is decline in any of
these, there will be a decline in growth of courier industry as well. This is because, apart from
individual customers, the service provider mostly serves other marketers. Therefore, their
business is dependent on other businesses and their growth.
Customers
Customers demand quality service. They want the service provider to deliver their packages
within the promised time and in perfect condition. In addition, they want the service at
competitive price. They also expect the service provider to provide the latest status of their
shipping whenever they contact the customer service representative for information. They expect
the service provider to provide a pick-up and drop point within their reach Apart from these
expectations, courier service providers also need to face intense competition from both organized
and unorganized players in the industry.
Market segmentation
In order to be able to serve customers effectively, courier service providers need to segment their
market and understand the needs of customers in each segment. Based on this understanding,
they can decide which segment to serve and how to position the service in the customer's mind
using the seven P's. The market for courier industry can be divided into following segments:
Individual
This segment consists of personal letters, envelopes, packets and cartons that need to be
delivered to various destinations within the service limits of the service provider. Sometimes
these deliveries may also need to be made to other countries in the world. For example,
customers can send Alphonso mangoes to their dear ones abroad, using the special services of
DHL; called the DHL Mango Express.
Corporate
This segment consists of official letters, documents, product samples, products etc. to be
delivered to destinations within the country or outside the country. For example, a chemical
company may send samples of material prepared by it to a client iii the same country and an
equipment manufacturer may send a machine to overseas client on order. Corporate also send
special gift to their clients when it is festival time.
Small and Medium enterprises
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This is also an important segment for players in the courier industry. Though leading players in
the courier industry like DHL ignored this segment initially, they are now concentrating on this
segment as well in a bid to expand their business.
Based on the type of delivery, courier industry can be divided into the following segments:
Same day delivery: In this segment, goods are delivered to the destination the day they are
collected from the customer. However, the same day service is offered only to destinations
within the country.
Overnight delivery: In this service, shipments arc delivered the next day or later depending on
the distance to be covered.
Marketing strategy
People opine that courier service is simple and one can just start earning profits by buying a few
vans and delivering letters and parcels using them. However, to compete and survive in courier
industry, service providers need to be professional, customer oriented, and capable of delivering
shipments to various destinations safely and quickly. At the same time, they need to ensure that
they maintain their profitability. This needs a well-formulated marketing strategy. The strategy
should include the following elements:
In order to come up with possible solutions to counter the challenges by courier service provider
it is necessary to understand the environment under which Speed Post is operating. This can be
done by understanding what are the Strengths, Weaknesses, Opportunities and Threats faced by
it.
Strengths
Weakness



 Yet another government organization
 Levels of service not at par with
competition
 Positive consumer perceptions need
reinforcement
Threats
Good network especially domestic
Price – a definitive advantage
Minimum weight – a unique feature
Opportunities
 Domestic market (Primary) – Good
scope for growth
 Can use rates and minimum weight to
advantage
 Can capture potential markets more
easily
 Competitors more market customer
driven
 Faster response by competition to
market needs
 Customer expectations going up
 Perceived as less customer driven
 Fluctuating air tariff rates
If courier service provider has to achieve the above objective, it will have to do the following
from the above Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis,

Strengthen its Strengths

Neutralise its Weaknesses

Convert Opportunities into Strengths

Tackle the threats efficiently and effectively
Strengthening the Strengths
To further strengthen its strengths courier service providers will have to promote them efficiently
and effectively to keep the target audience aware of its unique characteristics. For this purpose it
will have to design its promotional campaign on the following basis,
The campaign should be focused on the audience to,
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o
o
o
Inform
Persuade
Reinforce
To facilitate the smooth implementation of this goal, the following steps will be necessary,
o
Clear definition of marketing and advertising goals
o
Themes and schemes which customers want and not Speed post wants to sell
o
Proper distribution and communication of the promotion
o
Experimentation with new approaches
This will help courier service providers to have a better brand recall rate subsequently resulting
into sustainable increase in growth rate in business for the long term.
Neutralizing the Weaknesses
The areas for improvement or weaknesses of courier service provider are primarily related to its
staff and the bureaucratic chain involved in business. Because of this the customers are though
assured but yet not willing to treat Speed Post as a long term, productive, effective and efficient
business partner.
For this purpose, it is primarily important that the Internal Environment of Speed Post be made
as competent, determined and performance oriented as the workforce of any other competitor
companies in the industry like, FedEx, DHL, First Flight etc.
So HR policies and practices have a major role to play in this field. The HR department can,

Hire the best people for the job

Develop people to develop service quality

Motivate them for personal and performance development

Empower them to take decisions

Retain them to increase skill set competency

Develop Internal Support System to facilitate their working

Promote and encourage team work

Develop a transparent organization culture

Measure and suitably reward performance of each employee

Treat employees as the biggest customer.
Motivated and happy employees will lead to higher profits as the Cycle of Success will develop
in the organization leading to higher level of business from higher level of retained and new
customers. It is difficult to remove the problems arising due to the hierarchal chain, but proper
empowerment and motivation will enable employees to be more competent and result oriented in
the job.
This will help courier service providers in neutralising the effect of its weaknesses in its overall
performance in the industry.
Converting opportunities to strength - Service quality GAP model
Courier services will have to take the help of People and Promotion to help itself achieve the
huge potential in the market. This would be effectively done by closing all the service gaps in the
service delivery, i.e.
 Management Gap:
Gap between Management Perception and Customer Expectation
 Quality Specification Gap:
Gap between Management Perception and Service Quality Specification
 Service Delivery Gap:
Gap between Service Quality specification and Service Delivery
 Market Communication Gap:
Gap between Service Quality Specification and Service Delivery
 Perceived Quality Gap:
Gap between Expected Quality and Experienced Quality
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When there are no service gaps in the organization, it will be able to tap the underlying potential
and growth prospects in the market.
Tackling Threats
To tackle threats it will be necessary to focus on maintaining the quality of the products, services
and process of the business.
These dimensions would be,

Reliability of the service

Responsiveness of the Service to customer needs

Assurance of timely delivery under specified norms

Empathy towards the customers problems

Use of tangibility spectrum in service delivery
Courier service providers can achieve this by,











Ensuring Top Management Support
Proper benchmarking standards
Induction of Self Service technology wherever possible
Proper complaint handling system
Promoting itself as such, that quality is perceived by the customer
Working so as to reflect Quality in every activity
Empowering employees to monitor quality standards
Quality aimed at customer retention
Relationship surveys
Post transaction surveys
Developing quality system with adequate human support, system support and proper
feedback norms
These strategies will help courier service providers to get a better market share in the industry.
Marketing mix
Customers in courier industry value speed and safety. Now-a-days corporate
customers look at courier companies to provide them complete logistics solutions. In
order to serve both individual and corporate customers efficiently, courier companies
need to give special attention to all the elements of marketing mix. Let us discuss
these elements in detail now.
Product/Service
The core service offered by courier companies is moving of documents and goods from one
place to another. This service is packaged in different ways by different courier service providers
to differentiate themselves from competitors. For example, Blue Dart offers door-to-door
delivery of all documents and packages weighing below 32 kg to destinations in India,
Bangladesh, Bhutan and Nepal. Some goods are perishable or their delivery needs to be made
immediately because of commercial reasons. For such needs, most courier companies offer same
day delivery service. Courier companies should also focus on branding their services. Some
domestic companies enter into partnership with global companies to strengthen their brand and
the perceived value. All courier companies have their own logos and attractive slogans that help
customers recall the service associated with them quickly. For example, Blue Dart says.
"Solutions for peace of mind."
Price
The type of product being delivered, its weight, the place of deliver., the urgency of delivery, the
mode of shipment used, regulatory clearances required and tariffs charged for them, etc.
determine the price of courier service. Most corporate clients have a special arrangement with
courier service providers. The client gives certain minimum amount of business even month to
the service provider and enjoys a special discount on the shipping charges. The service provider
in turn enjoys assured and repeated business.
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Competition can pull down the prices in courier industry. However, the market
players should ensure that the minimum costs that they incur on the delivery of
shipment arc recovered If the players reduce prices below this level, it will lead to
unhealthy competition and hits the bottom line of most players in the industry, in
India, Elbee Services, one of the top players in the courier industry, recorded huge
losses and took considerable time to recover.
Place
Place plays a prominent role in courier industry. Customers prefer their products and packages to
be picked up and delivered at their doorsteps. Therefore, courier companies need to develop an
extensive distribution network in order to facilitate transportation of shipments to and from
various destinations. For example, FedEx has 1250 service centres worldwide. Further, it has
partnerships with domestic courier companies in various countries to be able to deliver
shipments to various locations in those countries. Blue Dart has franchises and regional service
participants (RSPs) to reach remote areas in India. Franchises collect documents and packages
from customers and drop them at the central hub. In areas where franchises could not be
established because of lack of enough demand for services. RSPs collect packages for Blue Dart.
Promotion
Courier companies generally emphasis on speed, safety, reliability and efficiency of their
services. They release advertisements in newspapers, magazines, TV, Radio and Internet. Blue
Dart emphasis on its ability to deliver faster because of its own fleet and airfreight, and multiple
service centres. The company also advertises the latest technology used by it and the advantages
offered by ii DHL mentions the list of offices it has in different countries in advertisements,
which is a way of communicating to customers about its extensive network and scale of
operations.
Courier companies also advertise and publicize their international tie-ups to promote the
companies and their services. They also launch special promotional campaigns like the DHL's
mango express. If the company delivers "ripe-in-time" Alphonso as promised and satisfies the
customers, it can successfully add new clients to its existing customer base.
Physical Evidence
Courier companies primarily offer a service that is intangible. Therefore, they attempt to bring
tangibility through other aspects. For example, some courier companies make sure that their
offices arc located in areas that are easily accessible to individuals and corporate customers.
They also keep their offices neat and well furnished to create a positive impression in customers'
minds. For example, Blue Dart maintains well furnished and centrally air-conditioned offices. It
even offers free pick-up services to customers.
Courier companies also focus on packaging. The products to be delivered are packed carefully
and neatly to prevent any damage to the contents. Most courier companies also have their own
web sites, which enable people to track the status of their shipping. This is one of the best
tangibles that can be offered to the customer. Blue Dart even allows customers to view the proof
of delivery on its web site - a document confirming the date and time of delivers' and signed by
the receiver. The documents are also delivered physically to the customer. For some corporate
customers, courier companies allow payment after delivery of the package.
;
People
In the courier industry, service personnel interact with customers. Therefore, courier companies
need to give special attention to people training. People at the help desk and the marketing
executives need to be trained in communication and interpersonal skills. People handling
operations need to be trained to use the advanced equipment and provide logistics solutions to
corporate customers. The most important element of training is to be customer oriented. In its
absence, the courier company would fail to satisfy the customer and lose its business eventually.
Courier companies need to strive to retain people by implementing proper compensation and
incentive systems.
Process
The different steps that constitute the process in a courier company arc picking up
documents/packages from individual customers, sorting them according to their destination,
placing them in appropriate modes of transportation, taking clearance from regulatory
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authorities, keeping the customer updated of the status of shipping, delivering the shipment to the
right destination and mailing confirmation to the sender.
Indian courier industry
In India, DHL, Blue Dart, Elbee. Sky Pak and AFL are major players in the courier industry with
Blue Dart in the lead position. AFL has recently withdrawn from international operations and
decided to restrict its operations to freight transportation within India. Though there arc more
than 2000 unorganized players competing with these players at local and national level, the
unorganized sector contributes only 36% of total revenues of the industry. Among the major
players, Blue Dart owns three Boeing 737s. This enables the company to carry large volumes of
packages and make overnight deliveries It can deliver a package submitted at its office by a
customer in the evening to any destination (except the very remote and isolated areas) in the
country the next day before noon. It also has strategic alliances with various airlines and courier
companies of various countries to serve international traffic. It also offers logistics and ecommerce solutions for corporate customers. Elbee has its own fleet of vehicles but not flights. It
depends on Indian airlines and Jet Airway to carry its freight. Both Blue Dart and Elbee serve
more than 1200 destinations in the country and have international tie-ups. Blue Dart tied up with
DHL while Elbee tied up with TNT for international traffic. Elbee, which performed poorly and
went into losses in 1999, is recovering slowly with the improvement in the Indian economy and
commerce. Blue Dart has registered an impressive .growth rate. It made profits of Rs.41 crore
during the period 2003-2004 and its profitability increased by 26% from the previous year.
Skypak and Gati are also picking up with economy still improving, it remains to be seen whether
the smaller players can outperform the industry leaders.
Recent trends in courier industry
Courier industry is undergoing drastic changes because of the changes in economy
and advances in information technology. Let us discuss some of the recent trends in
the courier industry and their drivers:
Technology
Advances in technology have transformed the way courier companies operate. Courier
companies are able to offer value added services to customers with the help of technology. Apart
from ensuring a faster and safer delivery of shipments, they are able to conduct transactions and
other business processes electronically. By doing so, courier companies arc able to cut time and
costs. They can also avoid the need to hire hundreds of additional employees by using IT
intelligently.
Some advanced information systems used by courier companies include COSMOS (Customer
Operations Service Master Online System), DADS (Digitally Assisted Dispatch System) and
ASTRA (Automated Sorting Tracking Routing Aid System). FedEx uses COSMOS to track
packages from the place of pick-up to destination. ASTRA is used to provide accurate and
reliable package delivery information to customers. DADS allows couriers to determine the right
route they should use to minimize the time taken for delivery. Software companies are coming
up with more solutions for courier companies to serve customers effectively. Some global
courier companies in fact have their own IT department to find innovative solutions for their
problems.
Globalization
With most countries opening up their economy, courier industry is one industry that has gained
immensely. In courier industry, about 90% of the costs are fixed costs. As the volume of
business goes up the revenues earned, directly contribute to the bottom-line of companies.
Hence, courier companies can earn huge profits by expanding their business globally. They can
get into strategic tie-ups with local companies in different countries to expand the network. This
results in marginal or no increase in costs, but good returns. Some of the companies that have
global operations are FedEx, UPS, DHL and TNT. DHL, which started with a small temporary
office in the US, gradually rose to the level of national player and then to international player.
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In India, courier companies have limited their expansion to countries like Bangladesh, Bhutan
and Nepal. Very few players compete with the existing global giants in courier industry. Most
large players operate through strategic alliances or joint ventures to limit their investment costs.
For example, Blue Dart has a tie-up with DHL and Elbee has a tie-up with TNT. Hence, the
global courier industry is consolidated with a few companies dominating the industry. Global
courier companies offer not only the core services of moving freight from one place to another,
but also higher-end services like logistics solutions for corporate customers. Many corporate
firms, which have recognized the potential of these companies, have outsourced their supply
chain management operations to them. However, some countries try to protect their courier
industry from global competition. For example, South African government prevents foreign
players from operating in the under-1kg letter and parcel market
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AUTOMOBILE SERVICES
With increasing sophistication in transportation, automobile servicing is emerging as an
important service-generating sector of the economy. A number of skilled, semi-skilled and
manual workers are found getting employment opportunities. Automobile manufacturers and
dealerships offer after-sales service and therefore one category of service centers in sponsored by
the concerned company. The development processes here are systematic and these service
centers develop as a formal sector. On the other hand, there is a second category that has
developed independently and in an unorganized way – which could be termed as the informal
sector.
Automobile servicing in India
The automobile servicing business in India undergoing a transformation. Steps towards creation
of national chain of organized workshops are underway that is likely to change the nature of the
vehicle servicing market. Most of the changes in the Indian market is attributed to the economic
liberalization and opening up of the automotive market. Moreover, the vehicle servicing market
is no different to this trend. The changes are taking root now and setting the trend for the future.
Prior to the entry of global automobile manufacturers, the Indian automobile market was
dominated by home grown companies like Hindustan Motors (HM), Premier Automobiles
Limited (PAL) and the people's car manufacturer Maruti Udyog Limited (MUL) for passenger
cars and Ashok Leyland and Tata Engineering in the commercial vehicle segment. Bajaj Auto,
Hero Honda, Escorts Yamaha, TVS Suzuki, and LML were the companies active in the scooter
and motorcycle market.
The servicing needs of these vehicles were undertaken mostly by roadside mechanics and a few
organized workshops. MUL set up a huge chain of authorized service centers covering the entire
country to service its vehicles. However, as the competition in the new car market intensified and
profits margins were squeezed MUL viewed servicing as a money-spinner for the entire
operation.
The vehicle servicing market is highly unorganized. The participants in the vehicle servicing
market are new vehicle dealer's workshops, authorized service centers of vehicle manufacturers,
some organized service centers, and roadside mechanics. Vehicle servicing habits differ based on
the socio-economic profile of each individual customer. Commercial vehicle owners are highly
price sensitive and extensively use roadside mechanics for servicing needs. The number of
organized service centers also remains low along national highways and the hinterland. This has
lead to the creation of the unorganized segment to fill the gap with quick, flexible and lower
priced servicing.
Two-wheeler owners historically have used roadside mechanics for servicing as manufacturers
of these vehicles focused on their core business, which are vehicle sales. As the market turned
competitive, vehicle manufacturers used servicing infrastructure and cost of service as a key
differentiator in their overall sales strategy. Currently only 10-15 percent of two wheelers return
to the authorized service center for their servicing needs post warranty. It is fair to mention that
roadside mechanics are the dominant competitor in the market for vehicle servicing.
Vehicles introduced by new entrants like GM, Ford, Hyundai, Honda, Toyota and Volvo were
serviced exclusively through the company service centers. This was the first step towards
organizing the servicing market. The absence of a national chain of service centers was the
missing piece and the entry of TVS Xpress and Cummins Suraksha fills the gap in the market
place.
Vehicle owners have had two options - one is to use the authorized service centers (ASC's) of
vehicle manufacturers or the roadside mechanics for their repairs. ASC's offered customers
standardized service at costs predetermined by vehicle manufacturers that ensured transparent
operations. ASC's were equipped with a good infrastructure like customer waiting areas, well lit
work shops, trained mechanics, proper tools and equipment needed to perform repairs, genuine
parts and transparent billing. ASC's fulfilled all customer needs except that all this came at a
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price. The huge premium charged by vehicle manufactures for their genuine parts and the cost of
labor meant that customer had to settle for a higher bill.
On the other hand, the roadside mechanic used spare parts openly available in the aftermarket
that was cheaper compared to genuine spare parts. Most component manufacturers that supplied
to vehicle manufacturers for their aftermarket operations sold the same component in the
aftermarket. Availability of quality spare parts was not an issue. The roadside mechanics charged
a lower labor rate for repairs and servicing and provided flexible delivery options. The
relationship between the mechanic and the customer was based on trust. The problem with
roadside mechanics was the lack of transparency in operations as customers were short charged
in components used. Roadside mechanics often interchange components from one vehicle to
another and also use alternate brands but charge the customer for original equipment quality
brands.
The structure of the market created a gap in terms of customer's needs and expectations and the
current fulfillment of these needs. Companies like TVS Xpress, Cummins have positioned
themselves to fulfill these unmet needs, - quality service using genuine, and OE quality spare
parts at an affordable price. Need less to say, TVS and Cummins are the some of the best-known
brands in India.
The factors that are driving this transformation are increasing vehicle population, dominance of
the unorganized segment and the ever-increasing gap between customer expectation and
fulfillment. TVS Xpress was the first company to enter the car servicing market. Currently, the
roll out has covered three states with a total of 55 service centers. Companies like MICO-Bosch
and ACDelco have entered this market sensing good opportunity. TVS and MICO have a large
aftermarket operation in India and vehicle-servicing business is a logical extension to their
business model. TVS group companies also operate dealership for FIAT and Honda and bring in
years of experience in automotive aftermarket distribution, component manufacturing, and
servicing.
Cummins has created a chain of five service centers spread across the country to provide repair
and service for truck operators. The aim of Cummins is to provide one stop solution to the needs
of truck operators. The plan is to increase the numbers of service centers to about 50 in a few
years time to cover all the transit points along national highways.
The two-wheeler market that has seen an explosive rise in sales over the last few years also has
its share of market consolidation. Castrol, a company well known for its lubricants, has entered
into the motorcycle servicing business with the roll out of its first workshop 'Castrol PrimaZona'
this year. In the future, Castrol expects to have a presence all over India.
Is the market rosy for these companies? There are issues that these companies face that can be
attributed to growth pains. By following a gradual roll out process, these companies are learning
from experience. Vehicle manufacturers' policies can also affect this market. Longer warranty on
vehicles will restrict the potential market available. Vehicle manufacturers could also restrict the
supply of components to the aftermarket thereby preempting the entry of competitors.
The Shape Of Things To Come
The servicing market in India will have to consolidate and organize. The national chain of
service centers provides good quality service at an affordable price. As average vehicle age
increases, vehicle manufacturers will find it hard to retain customers at their ASC's. Organized
workshops can provide the required service level at lower costs. A collaborative effort between
vehicle manufacturers and organized chains may be required as this may lead to reduced usage
of spurious and counterfeit components leading to mutual gains. The success of these chains is
sure to attract new entrants in this market.
Need for marketing automobile services

To improve quality of services: Qualitative improvements in the service mix of the
service centers are necessary. Generally these centers provide maintenance, repairing,
denting, painting and cleaning services. The application of marketing principles would
help them in improving the quality of services.
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


User satisfaction: Servicing centers need to satisfy users and this is possible when they
make quality services available.
Increasing marketshare: The centers offering quality services coupled with competitive
pricing succeed in increasing business which make it easier to increase market share.
Maximising profitability: The important thing in marketing of automobile services is to
pave avenues for generating profits.
Marketing Mix
While formulating the marketing mix, the automobile servicing centers need to go through
different submixes.
Product Mix:
The product mix of automobile serving would include:
Repair and replacement of spares
Maintenance checkups – oil change etc.
Warranty checkups
Washing and cleaning services
Air filling, checking, tubes repair and replacement
Accident repairs – denting
Painting
Tyre alignment and balancing
Greasing
Modification services
Heating and Air-conditioning system
Electronics and electrical maintenance
Battery Maintenance
Pollution control
Truck/Bus Body building services
Teflon Coating
Classification of Automobile service stations
Depending on vehicle type:
 Two-wheelers
 Three-wheelers
 Four wheelers (Cars, vans, jeeps etc)
 Commercial vehicles (Trucks, buses mini-trucks etc.)
Depending on authorisation:
 Service centers run by dealerships
 Authorised service centers (Franchisees)
 Roadside Garages/mechanics
 Express Service Centers: These help many stranded vehicles on the highways by sending
across their repair man to the vehicle
Depending on exclusivity
 Centres meant only for one brand of vehicles
 Centres that take up a wide range of brands
 Centres that service only one kind of vehicle (e.g. Only two-wheelers)
 Centres that service more than one kind of vehicles
Depending on function:
 Washing and cleaning services
 Maintenance services
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







Repairs/Garages
Accident repairs/Denting
Paint Shops
Tyres – alignment and balancing services
Tyres – repair and puncture shops
Air conditioning maintenance
PUC centers
Car washing – home service
Price
With the core product – sales of vehicles getting extremely competitive, most dealers and
manufacturers have decided to go to the “servicing” route, thus opening up avenues for profits.
However, automobile servicing remains a highly price sensitive sector. Most of the vehicle
owners prefer to get their free servicing done during the warranty period at authorized service
centers. But once the free servicing period is over, they abandon the authorized service centers
and shift to roadside mechanics or independent garages. Only about 15% of vehicle owners
prefer to get their vehicles serviced at authorized centers post the free period, due to high pricing.
The authorized service centers are, naturally priced higher, due to the wide variety of services
and conveniences offered at their centers. Authorised service centers (ASC) deal in volumes and
their charges are significantly higher than roadside garages. Moreover, it is the high cost of
spares that deter customers at these centers. ASCs use original spares that are exorbitantly priced.
The same spares, available in the open market are relatively a lot cheaper. Garages, on the other
hand, use these spares and save costs for the customer.
However, competition between ASCs themselves are hotting up. In bigger cities, a single
manufacturer has a number of ASCs. For example, Tata Motors has three ASCs in Nagpur.
Though pricing is fixed for a number of routine jobs, they are under severe pressure from
roadside garages to cut down on labour costs.
Place
Place plays a prominent role in the automobile servicing industry. Service centers run by
dealerships are usually high-tech units with state-of-the-art infrastructure. They are automated to
a fair degree. Customers prefer to take their vehicles closest to their homes and service, so
companies prefer to appoint ASCs in various parts of cities. Maruti is one of the companies in
India which has unparalleled service network. To ensure the vehicles sold by them are serviced
properly Maruti had 1545 listed Authorized service stations and 30 Express Service Stations on
30 highways across India. Other automobile companies have not been able to match this
benchmark set by Maruti. In fact, it is the vast network built by Maruti that has been helping it to
maintain a stranglehold on the market share. People in smaller towns and villages prefer to buy
vehicles that can be serviced easily.
On the other hand, the unorganized sector works through garages or shops on the roadside.
These, though not as well equipped as ASCs, charge less and offer flexibility to the customer.
These units may even outsource certain tasks to other units – for example tasks like washing or
welding may be done at other shops.
Promotion
Promotion forms an important part of automobile servicing – mainly due to increasing
competition. Roadside garages do little promotional activity. Their promotion is mostly based on
word-of-mouth publicity from existing customers. Their activity is based a lot on accessibility
and nearness to the customer.
Advertising: Advertising, though low key, is still an important part for ASCs. Most advertising
is done by manufacturers themselves, with the franchisees sharing costs. In case of Bajaj Auto,
advertising is handled locally by individual dealers, but the costs are compensated in part by the
parent company. ASCs also use the Cable TV route as it is a lot more cost effective for them.
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Direct Marketing: A few companies have adopted the direct marketing route too. Marketing
personnel scout for vehicle owners and talk to them offering special membership schemes or
discounts.
Extended warranty: Dealerships offer an extended warranty scheme at a the time of purchase
so that they are guaranteed that vehicles return to the service centers for an extended period of
time beyond the usual warranty period.
Organizing special camps: Most ASCs organize “free” camps like monsoon checkup etc. so
that customers can avail thee benefits.
Brochures and leaflets: ASCs from time to time can distribute leaflets and promotional material
to potential customers.
Membership clubs: Most manufacturers offer club memberships – so that they build in loyalty
from their existing customers. In case of the Hero Honda Passport programme, members are
offered points on every rupee spent on service centers. These points in turn offer them a number
of privileges like discounts on spares and service, accident insurance etc.
Promotional events: Many dealers organize events like musical night, cultural programmes etc.
and offer their customers free passes. Tata Motors for instance organizes cultural programmes,
where entertainment is mixed with information on their products. The Hero Honda passport
programme too offers such benefits.
Use of stickers: As a reminder tool, almost all garages and ASCs use bumper stickers once the
vehicles are serviced. This helps immensely in brand retention. A few ASCs also put in stickers
with their help line numbers so that customers can call them if they are stranded on the road.
Telemarketing: As telephone numbers are already on records of dealers, they use them to call
up vehicle owners explaining their services and special offers.
SMS reminders: ASCs keep sending their customers timely reminders through SMS on their
cell phones, letting them know that time is due to get their vehicles serviced.
People
In the automobile service sector, service personnel interact with customers. The business is
mostly based on trust and the quality of service received. Thus people form an important part of
the business.
In case of roadside garages, the chief mechanic, usually the owner interacts with the customers.
This relationship is usually built on trust so that he gets repeat customers. The quality of work
here depends on the skills of his mechanic staff.
With ASCs, the organisation is a lot more structured. An ASC is usually headed by a General
Manager, who overlooks the operations of the unit. They are staffed with reception personnel
who help customers with their doubts. A service engineer, is the one who interacts with
customers, understanding and explaining technical aspects to the customers. He is the one, who
prepares the job cards, provides cost estimates and overlooks the servicing of the vehicle.
The auto-mechanics, who usually do not interact with the customers, are the ones who actually
work on the servicing of the vehicles. These people are specially trained by parent companies
about various technicalities. Their performance ultimately decides the quality of service received
by the customer.
Process
The process in the automobile service industry varies from the informal to a completely
structured one.
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While roadside garages would have an informal procedure where the mechanics note down
complaints and tasks to be done and provide cost estimates. They would then perform the tasks,
do a quality check and hand over the vehicles.
With ASCs, there is a formalised procedure to handle servicing. A typical process would be
something like the below:
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The customer arrives at the ASC with his vehicle.
A Service engineer inspects the vehicle, and prepares a job card. The job card would
include details like free or paid servicing, tasks to be done, complaints etc. The service
engineer will explain technicalities to the customer and provide him a cost estimate.
The job card will also include details like existing fuel level in the vehicle, mileage, and
accessories fitted (Car stereos etc.)
The service engineer also provides a time when the vehicle will be ready for delivery.
The vehicle now moves into the workshop where under the supervision of the service
engineer, mechanics handle the servicing and repair procedures.
A list of spares used is prepared and replaced parts are returned to the customer
Once the servicing is complete, the service engineer inspects the complete list of work
done and also takes a test drive.
Once satisfied, the service engineer approves the tasks performed and prepares a bill for
the entire service.
The customer is then given “work performed” list on the car along with the bill.
The customer is also asked to fill up a feedback form so that the quality of service can be
gauged.
Once the customer pays the bill, he is given a “gate pass” so that he can drive out the
vehicle from the ASC premises.
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