Marketing mix decisions of

services
 Marketing Mix of Services

Product
Price
Place
Promotion
People
Process
Physical evidence
 Pricing of services

Most service organisations use a nave and

unsophisticated approach to pricing without regard to
underlying shifts in demand, rate of supply expansion,
price of available substitutes, consideration of price-
volume relationship etc.

The key differences which have a profound impact on

the strategies companies used for setting and
administering price are
o Customers often have inaccurate or limited reference
prices for services
o Price is key signal to quality in service
o Monetary price is not the only relevant price to service
customers
 Three key ways service prices are different for
customers
A) Customer knowledge of service prices (inaccurate or limited
knowledge on reference prices)
oService heterogeneity limits knowledge
oProvider unwillingness to estimate prices
oIndividual customer needs vary
oPrice information is overwhelming in service
oPrices are not visible
B) Monetary price is not the only relevant price ( Non monetary costs
represent other sources of sacrifice perceived by consumers when
buying and using a service). They are
oTime cost
oSearch cost
oPsychic cost
oConvenience cost
C) Price as an indicator of service quality
Approaches to Pricing
Services
Cost- based pricing
Competition based pricing
Demand based pricing
 Cost Based Pricing
A company determines expenses from raw materials
and labor, adds amounts for overhead and profit and
thereby arrives at the price. This method is widely
used by industries such as utilities, contracting,
wholesaling, and advertising.
Price= direct costs + overhead costs + Profit margin
The major difficulty in cost based pricing involves
defining the inputs in which a service is purchased.
( many services are sold in terms of input units
rather than output units).
Examples of Cost based pricing strategies are Cost
plus pricing example construction , fee for service
used by professionals.
 Competition based pricing

This approach focuses on the prices charged by

other firms in the same industry or market. It
does not mean charging the same price but
using others prices as an anchor for the firms
price.
Price signaling any price offered by one seller
is matched by other players in the market to
avoid a low cost seller a distinctive advantage
( example pricing adopted by airlines)
Going rate prices charging the most prevalent
price in the market ( call taxis)
 Demand based Pricing

Cost based and competition based pricing approach is based on

the company and its competitors and not on the customers. Neither
approach takes into consideration that customers may lack reference
price, may be sensitive to non monetary cost, may judge quality on
the basis of price. Demand based pricing involves setting prices
consistent with customer perception of values.

One of the major ways that the pricing of services differs from
goods in demand pricing is that non monetary costs and benefits are
factored into the calculation of perceived value to the customer.
How do customers perceive value
Value is low price
Value is whatever I want in a product or service
Value is the quality I get for the price I pay
Value is what I get for what I give
Value is low price Value is everything I want in
Discounting service
Odd pricing Prestige pricing
Penetration pricing Skimming pricing

Value is the quality I get for Value is all that I get for
the price I pay what I give
Value pricing Price bundling
Market segmentation Complementary pricing
pricing
 Service Promotion

A consumer while buying a service buys a

combination of product, price and
place but having been convinced of the availability
of all these factors to his
satisfaction then he buys an Image. This image of
his own self and that of the
service is build through the creation of perception
building exercises and
activities. These perception building exercises and
activities are generally
termed under a heading Promotional mix.
 Objective of service promotion

Service promotion is a part of marketing mix and it cannot be separated

from
other elements of marketing mix. When an organisation speaks of service
promotion, the act will involve Promoting the intangible and tangible
essentials
of a service, the price, service delivery place, the physical evidence and
the
people involved in service deliver and the perception about the service
which the
service provider wants to create. To achieve the same the service provider
needs
to focus on objective like
Increasing awareness of new service
Motivating intermediaries
Competitive sales strategy
Elements of Promotion

Sales
Personal
Promotio
Selling
n

Public
Advertisin Customer Relations
g

Packaging
Publicity
Personal Selling: personal selling involves the Completion of an
activity that involves
The consumer who has a specific need
A service that fulfills the need
A sales person who can provide knowledge on how the
service
offered by him will address the Need ( buyer benefit)
The consumer must be satisfied on the benefits and the
buyer
benefits must be converted to seller benefits by fixing a
price
The buyer must be willing to pay the price at the specified
time and place
Advertising: Advertising is a non personal tool of
promoting and selling services
or products to the masses. The service provider makes
use of advertising to
influence human behaviour of the Target customer.

Public Relations: Public relations is also a

communication strategy adopted by
organisations to form a favourable opinion about the
services offered by the
company.

Publicity:

Public Services : CSR

Sales Promotion: The activities that are directed at
inducing, stimulating and
motivating the customer to purchase more of the
services, at the service firm
staffs to sell more and at the Intermediaries and
their sales force to sell more.

Any sales promotion activity takes into account the

Characteristics of the service
Promotion objective
Target service customers characteristics
Intermediaries characteristics
Service Firms own sales force
level:
Training, Sales contest, incentives ,
sales meetings
Intermediaries level: Direct mailers,
POPs, Management Counseling
Customer Level: Consumer contest,
premium, free trial, prize offer,
discounts
etc
 Designing a Service Promotion
Campaign
Have we chosen the right campaign
Who are our target customers?
Have we identified the value addition to the service?
Have we finalised the time and duration of the
campaign?
Have we identified the beneficiary of the campaign?
How is the campaign different from competitors?
Service Communication
Internal communication/External Communication
 Effective utilisation of promotional
tools
Effective planning of the promotion
Identification of objectives
Involvement of all stake holders
Managing differentiation
Mid way appraisal
 Service distribution
What is distribution?

Organized network of agencies and institutions which in combination perform

all
the activities required to link the producers with users to accomplish the
marketing task (AMA).
Distribution is the activity by which service firms make their service available to
the targeted customers with the least discomfort.

Service Distribution channels

Franchisee
Distributor
Licensee
Agent
Brokers
Business Partners
Direct
Electronic
 Distribution Channels

CUSTOMER

D
ELEC I
FRAN
T R
CHIS AGENT/BROKER
RONI E
EE DISTRIBUTOR
C C
T

SERVICE PROVIDER
 Distribution Strategies
Intensive Distribution
Making service available at maximum service
outlets (banking, mobile service, cyber cafes etc)
Exclusive Distribution
Service of the firm gets distributed through
exclusive and limited network of services.
Selective Distribution
Operating a mix of both the systems