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RANJAN PAL, 511110942 Page 2

The variables that are used in demographic segmentation are: age, gender, number of family members,generation, income, occupation, education, traditions, nationality, religion, and social class.

Psychographic segmentation:Psychographic segmentation divides customers based on their lifestyle. Usually marketers gauge thelifestyle of customers by surveying the activities, interests, and opinions of the customers. The variablesused in this segmentation are:

Activities.

Interests.

Views.

Attitudes.

Values.

Behaviouristic segmentation:Service markets can also be segmented based on the actual behaviour of customers towards services.

The variables used in this segmentation are:

Benefits sought by offering these benefits.

Usage rate depending on the rate at which the users seek the service.

Brand loyalty depending on the customers who select it. This is considered by regular customerfor a particular service.

User status depends on whether the customer is financially potential to seek the service offeredthe first-time. This is also considered for regular customer.

Readiness to buy depends on the customers. If the customers are convinced with the quality andrate of the services offered they will be ready to seek the service.

Occasions depends on holidays and events that stimulate the customers to go for a particularservice.

"Benefit segmentation is the ultimate base for segmentation". Consider all industries that provideconsumer good. It is very difficult to satisfy all the needs of all consumers knowing that no two individualstend to share the same like and dislikes. For (an industry that would want to satisfy the desire of eachand every one of it consumers, who would like to entail in making customized products, would basicallythink the method to be a waste of resources. This situation arises because we are in a heterogeneousmarket and the only way to satisfy everyone is by offering tailor made or bespoke products. Though two

separate individuals may purchase the same branded products, but their reasons for purchasing it varies.For this reason market segmentation is needed. Market segmentation is used to divide customers' in-groups under similar needs and wants, purchasing power, buying habits, and buying attitudes, trying toincrease their satisfaction.

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Bases for segmentation in industrial markets

When compared to ordinary customers, industrial customers are likely to be fewer in number and buy

larger quantities. They appreciate the offerings in more detail, and the decision process usually involvesmore than one person. These characteristics apply not only to service providers but also tomanufacturers. The variables, which are used for service segmentation, can also be applied to industrialmarkets. Industrial markets might be segmented on characteristics such as:

Location. Type of company. Behavioural characteristics.

Let us get a brief description about the same.

LocationCustomer location is critical for industrial markets. If a client company is located far away, then it costs

more to provide those services they desire. In this case, the service provider has to bear thetransportation cost also. For example, if a client company has purchased thousands of chairs and if it islocated far away from the chair manufacturing company, then the manufacturer has to spend money fortransporting those chairs to client's place.

Type of company

Business customers can be grouped according to type as follows:

Company size. Industry. Decision making unit.

Purchase criteria.

Behavioural characteristics

The industrial markets can also behavioural characteristics such as:

Usage rate of particular service.

Buying status.

Purchase procedure: How the companies purchase the s,ervices it may be in form of sealedbids, negotiations and so forth.

Q.2

Ans. Service marketing is applied in various ways by the marketing experts in various organisations.The concepts of services marketing include service quality, servicescape, internal marketing andaugmented service offering. Now, let us get a study and interpret each of these concepts in detail:

Service quality: This is the most important concept of services marketing and is regarded as vague anddifficult to measure. It can be referred to as external quality and is a client-oriented concept. It indicates

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the customer satisfaction, which is again associated with success, productivity, and efficiency of theorganisation. Thus, providing service quality is regarded as an important tool. As per studies conductedby experts like Gronroos, there is technical quality and functional quality. Technical quality is the result of

an interaction within an organisation. For example, it can be the result of having a meal. Functionalquality includes characteristics such as accessibility, reliability, empathy and responsiveness. It is basedon the achievement or excellence of the service processes. Service quality also includes perceivedservice quality, which is not only based on the actual experiences, but also as one that makes an impacton the perception of quality.

Servicecape: The second concept of service quality is the servicecape. This is the environment wherethe services take place. It also includes the characteristics, which are present during the entire serviceprocess. The studies have shown that the retail environment influences the customers in a substantialmanner. Physical environment is an indication for the customers to assess the quality of service. Thisindicates the role of the environment in assessing the service quality of the customers. Certain features ofservices cape such as internal layout create a sense of spaciousness in the customer, which in turn leads

to a positive impression.

Internal marketing:As per the experts, one of the pre-conditions to provide external quality is internalquality, which leads to the third concept, internal, marketing. According to Gronroos, internal marketingmeans considering the employees as if they are customers and the tasks as services to improve externalservice quality. We can say that welfare, satisfaction, motivation, and efficiency ofthe staff are the centralconcepts of internal marketing. This involves processes such as rewarding the staff to create client-oriented support in the organisation. As per this, employees must be regarded as the part of anorganisations' strategy. Theorganisations make their investment in the employees and consider themand their knowledge as the most essential resource. Thus, internal marketing is regarded as a pre-requisite to achieve external quality andfinancial success.

Augmented service offering:This discusses service quality from the perspective ofan employee.This concept defines the practises and processes that should be taken by an organisation, to improve theoffering in such a way that it adds' to the value for the external customers. The augmented serviceoffering include several features such as convenience ofthe service, quality ofthe client's communicationwith the organisation and its employees, and the client's contribution in the service process. In addition tothe various features that constitute the augmented services, you need to meet certain requirements.These requirements and management practises will make an impact on the way customers perceive theservice.

Evolution of services marketing:The evolution ofservices marketing from its initial period to thepresent phase witnessed plenty of changes. Indian economy is advancing fast from the productdominated economy to the services concentrated economy, The share ofservices in the Gross Domestic

Product has been very quick in the last seven years. Now let us go through a brief explanation of theevolution ofservices marketing, which can be traced back to the late 70s. It was only after the strongemergence ofinterest in customer behaviour in 1960's that a specific marketing discipline emerged with agrowing passion and determination for services marketing.

The evolution ofservices marketing occurred in two different eras. The first era covered three stagesnamely crawling out, Scurrying about and Walking erect. The second era observed the speedydevelopment ofservices beyond its origins in services marketing.

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Now let us see each ofthese eras in the following section.

First era: services marketing

According to Brown and Bitner, the materialisation of services marketing in the first included threeevolutionary stages namely Crawling out, Scurrying about, and Walking erect.

The crawling out stage happened in the pre 1980's, when experts and service scholars defended theservice marketing. The next stage is scurrying about occurred from a time from 1980 to 1985, when someenthusiastic scholars built the basic structure ofservices marketing, The walking erect stage occurredfrom 1986 to 1992, when the services marketing sector attained a measure of respect and legitimacywithin the marketing industry. Figure shows the different phases in the first era ofservices marketing.

Figure : Evolution ofServices Marketing

Second era: the emergence of multidisciplinary fieldThe second era witnessed remarkable changes in the service marketing industry. After servicesmarketing earned a respectable place in the marketing sector, the next stage was the creation andsharing ofmemes. Memes include cultural information, which is learnt and sent out through generations.The changes that occurred in memes in the second era influenced the marketing discipline too. As perexperts, the evolution ofservices in the second era can be explained in three different stages, They aremaking tools, creating language, and building community.

In the making tools phase, services marketing sector produced several tools that helped in theadvancement of technical sophistication of the field. The advent of internet and the other web basedservices are some of the examples. The phase also marked the advancement of new methodologicalresearch tools such as measurement scales and data analysis techniques.In the creating language phase, the technical phrases related to services marketing began spreading ona large basis. These words include service encounters, service quality, service theatre, serviceexperience, service recovery, and servicescapes.

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In the building community phase, social structures began to emerge to support the work of servicescholars. The academic study of service phenomena widened the reach of the services marketing. Thereis a rapid increase in the number of people involved in the services sector, which will only lead to it being

one of the most popular marketing disciplines.

Figure explains the various stages of evolution of services in the recent second era.

Figure : Evolution of Services in the Recent Era 2

The figure explains the various stages of the evolution of services such as making tools stage from 1992to 2000, creating language stage that started in the year of 2000 to the present stage and buildingcommunity that explains the bright future of services.

Growth in Services Marketing

As you all know, in services marketing, services are described by features such as intangibility,heterogeneity and inseparability. It is impossible to separate it from the production and consumption andstock it for future usage. Though critics of services marketing have argued that marketing of goods andservices are not different, people who do research on services marketing have defended its existencewith its argument regarding the uniqueness of services. Services marketing have also carved a place foritself as sub field of marketing. It is also said that services marketing has played a prominent role in the

development of marketing and have left some concepts that can be implemented in the conventionalmarketing. The differences between the goods and services are getting vanished and theperspective of services is becoming dominant. As a result, services are becoming the main focus ofmainstream marketing.

The focus on services introduces a new viewpoint that changes the fundamental rules of marketing. Theprocess nature of services is the most important characteristics in services marketing. They aredeveloped in a process where the consumers cooperate with the production resources of the service firm.

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As the basis for the production and consumption of the physical products are changing rapidly, thefundamental rules for services marketing is also changing. The entire production process is done in the

presence of the customers with the advent of mass customisation and modular production. Theconsumption process changes into process consumption and the focal area of marketing becomesbalancing the gap between consumption and production process.

The significance of services marketing has gone far beyond the traditional service sector or serviceindustries. The relationship marketing has also developed emphasising the role of services,manufacturers and service firms alike.

Q.3

Ans. Factors that influence the level of adequate service:

The expectation levels of the customers vary based on the reference point the customer holds. Althougheveryone in the organisation will have an idea of what the expectations are, service marketers must havea clear and thorough definition of the expectations.

There are two types of or levels of expectations. One type is the desired service, which is the highestlevel of service the customer hope to receive. This level is a perfect blend of "can be" and "should be" asper the belief of the customer. For example, those people who sign up for a computer dating service haveseveral expectations of finding attractive and compatible people whom they want to date and marry.

These expectations reflect the hopes and perceptions of the consumers. The other level is the adequate Ilevel of service. This is the service level that is accepted by the customer. This stand for the minimumtolerable expectation or the bottom level of expectation that is acceptable to the customer.

Customers will have similar expectations for various categories of services, but it will be dissimilar to theindustries. For example, the desired expectation of a customer for a fast food restaurant will be quick,convenient, and tasty food in a cleanly setting. But, the desired expectation for an expensive restaurant isgraceful surroundings, elegant employees, candle light, and excellent food.

The adequate service expectation level will differ based on the category or sub category of the service. Acustomer will have higher consideration within the various fast food restaurants. For example, a customerwill have higher regard for McDonalds than for some other fast food restaurants. As a result, he gets

more disappointed if the level of service is not as high as he expected from McDonalds as for the otherRestaurant.

Factors that influence customer expectations

Now, let us go through the various factors that influence customer expectations. As client expectationsplay a bigger role in the assessment of services, services marketers need to realise the factors thatshape them. Marketers will also want to have a control over these factors. So, let us try to understand thefactors that influence the customer expectations.

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The factors that influence the desired level are personal requirements and philosophies regardingservice. Personal requirements are the state or a condition that is necessary for the psychological well-

being of the customer. It has several categories such as physical, social, psychological, and functional.There are other stable factors such as lasting service intensifiers that lead the customers to a heightenedsensitivity of service. They occur when an individual or a group drives the customer expectations. Theexamples for this are a parent choosing a vacation spot for the family and a staffchoosing an office forthe organisation. All these clients' individual expectations get intensified as they represent a group andare answerable to those parties who receive the service.

There are five factors that influence adequate service. They are:

Temporary service intensifiers. Perceived service alternatives. Customer self perceived service role.

Situational factors. Predicted service.

Temporary service intensifiers are individual factors that create awareness in the customer regarding theneed for service. Emergency situations in which there is an urgent need for service raise the adequatelevel of expectation. For example, 'a mail order company that depends more on toll free lines to receivethe customer orders will be more demanding during the peak periods of the month and the year.

Perceived services alternatives are providers from whom the customers obtain the service. If the clientshave multiple customers to choose from or are capable of providing services to themselves, theiradequate service level will be higher than those customers who have lesser options. For example, anairline customer who lives in a small town with a small airport has very less options. He will be tolerant tothe performance of the carriers as he has very few options. If the customer realises that servicealternatives exist, then they raise the adequate service level and narrow the zone of tolerance.

The third factor that influences the level of adequate service is the self perceived service role of thecustomer. To an extent, this can be described as customer perceptions, to which clients exercise aninfluence on the service which they receive. Here, the customer too has a responsibility to specify theservice level, which he expects. The active participation of the customer plays an important role indelivering the service successfully. If the customer realises that they have specified their role well, but theservices personal are not playing their part, level of adequate service will get heightened and narrows thezone of tolerance.

Level of adequate service is also influenced by situational factors. They are conditions, which thecustomer view the performance or service quality as beyond the control of the service provider. Forexample, tragic incidents such as automobile accidents will increase the customer' expectationsregarding insurance companies. The tragic incidents that affect a large number of people might lower theclient expectations as they realise that insurers will have greater demand for their services.

Another factor that influences the level of adequate service is the predicted service. This is the predictionmade by the customers about the things that are likely to happen during a transaction or a service. If thecustomers predict good service, their level of adequate service will be higher than when they predict badservice. For example, the residents in a college predict restaurant service during the months of summer

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when the number of students will be less. This leads to higher level of adequate service during summer.As predictions are mostly about individual service encounters, they will be concrete and specific than theother types of expectation levels for desired service and adequate service.

Q.4

Ans. Service Quality Measurement and Service Mapping

Service quality is evaluated by customers based on the five service dimensions as mentioned in theprevious section. In this section we will study how SERVQUAL is used to measure service quality and the

benefits of service mapping.

Service quality measurement

The service quality and customer satisfaction is measured by comparing expectations and perceptions.Service quality is the comparison of perception with the expectations of customers from an organisationthat delivers high quality services. The SERVQUAL scale is used to measure service quality. TheSERVQUAL is a diagnostic tool, and this is based on the five service quality dimensions. The fivedimensions are tangibles, reliability, responsiveness, assurance and empathy. The SERVQUAL is a44 item scale that measures customer expectations and perceptions regarding five service qualitydimensions.

The SERVQUAL instrument consists of two sections, a 22 item section that records customerexpectations of excellent firms and a second 22 item section that measures customer perception of aparticular company in that service industry. Results from the two sections are compared to arrive at thegap scores for each of the five dimensions. The larger the gap, the further consumer perceptions arefrom expectations and lower the service quality evaluation. Customer perceptions are measured on aseven point scale with anchor labels of "strongly agree" and "strongly disagree". Hence SERVQUAL is a44 item scale that measures customer expectations and perceptions regarding the five service qualitydimensions.

Service mapping

A service map links services providers to the types of service they deliver. Once the mapping process is

completed, workflows need to be created for the mapped services. The maps need to be discussed, toidentify any key steps that are missing or if there are differences of opinion about how the workflowoccurs. The process of service mapping will involve the listing of the problems in the workflow. Theseproblems can be grouped together and discussed.

Service mapping employed by IT is designed to help their business unit groups to define and evaluate ITservices for their organisation. The main benefit of service mapping is that it covers to capture alldependencies and cross functional areas such that accountability is identified.

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The key roles and responsibilities in the IT infrastructure environment is defined by Service Mapprocesses and tools. On-going improvements are developed and supported by this continual feedbackloop.

Let us consider a service map that links service providers with the type of service that they provide. Theservice map shown in figure is for healthcare services. The service map clearly indicates that the sick,aged, and disabled are treated by onsite health workers and nurses with the support of generalpractitioners and visiting specialists. The map indicates that to receive specialist's care, the patientshould belong to a hospital in that region.

KeyService delivered on site ----Refer to on site services ----Limited frame to deliver Services ----

Figure: Service Map for Healthcare Services

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Beneficial elements of service maps

Let us now discuss some of the beneficial elements of service maps. They are:

Service relationships and dependencies: this helps to fully understand the supportingservices needed to keep key services running and available for customers.

Service Level Agreement (SLA) planning: this defined service requirements with keybusiness units.

Operating level Agreement (OlA) planning: this defines service requirements anddependencies between key IT groups.

Service mapping tools: The Service Map Designer enables an end-to-end mapping of services

to help identify critical dependencies to enable better decision making around ServiceManagement areas such as change management and availability management. Service mappingtools enable organisations to create outstanding customer experiences.

Communication: this provides structured guidance to support effective service review meetingsand define key service level management roles.

Q.5

Ans. Customer Defined Service Standards - Hard and Soft:

We shall first start out learning by understanding the meaning of service standards and then learn aboutcustomer defined services.

"Standards of service" are shortened to form service standards. Service standards are not onlyconcerned with service delivery and waiting times. It is also associated with customer expectations ofservice, cost of service, and remedial action when the service is not up to the mark. The five essentialelements of service standards that service providers must follow are:

Describe the service and the benefits that the customers are entitled to.

Explain the quality of service based on the principles of the company.

Set delivery targets that help in maintaining timelines.

Calculate costs involved in service delivery.

Form complaints and service recovery mechanisms that the company can use when the servicedelivered is not up to the standards.

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Service standards can be of two types, company defined service standards and customer defined servicestandards. Productivity implication, cost implication, company process blueprint and company view ofquality are the basis for company defined service standards.

Customer defined service standards are the ones that are based on customer expectation and reflect theview point of customers. The sources of customer service defined standards are customer expectations,customer process blueprint, customer experience and observations. Customer defined standards are thestandards that close the provider gap.

Company defined service standards are internal and based on productivity, efficiency, costs, andtechnical quality. Customer defined service standards are based on the requirements that are assessedand measured by customers. There are two types of customer defined standards namely hard and soft.These two types will be discussed in the next two sections.

Hard customer defined standard

The services that can be counted, timed or observed through audits are known as hard customer definedstandards. Customers emphasise on reliability and fulfilment of promises. In order to provide reliableservice, the firms adopt the policy of do it right the first time and honour your promises. An example for doit right the first time would be that a customer receives exactly what he ordered for without any damage.Right on time would refer to a delivery that would take place on time.

Hard customer defined standards need to be adapted according to the different countries. This isbecause what is considered a prompt service in one country may not be the same in another country.For hard customer defined standards, let us consider the example of a service station for vehicles. Thefollowing can be considered as hard customer defined services:

Appointment for servicing available within a single day of customer placing request.

Within a minute of inquiry service status is provided.

The vehicle is serviced at the first visit.

The serviced vehicle is delivered exactly on the mentioned delivery date.

Soft customer defined standard

Opinion based measures that cannot be observed and must be collected by talking to customer. This ispurely based on the input obtained from customers. Soft customer defined standards are known assecond category of customer defined standards. These standards are opinion based and cannot bemeasured. 'Soft standards are established by talking to customer, employees and so on. Directionguidance and feedback are obtained by soft customer defined standards. Customer perceptions andbeliefs are measured in defining soft standards. Soft standards are important for person to person sellingof processes.

For soft customer defined standards let us consider the example of a service station for vehicles. Thefollowing can be considered as soft customer defined services.

Customers are asked about the service requirements and they are recorded on a repair form.

Explaining clearly to customers about the work done and the costs involved.

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Service Flexibility Versus Standards

As we have seen how we can meet the customer defined service standards in the previous section, now

we shall understand the difference between service flexibility and service standards.

Services need to be flexible to meet the needs of a heterogeneous market. Service providing firmscannot have a standard service process or procedures for all customers as the requirements ofcustomers are varied. Heterogeneous markets are the ones which have different market maturity levels,demand patterns, local skills available, and differences in human attitudes.

In simple terms we can say that one size does not fit all and this can be applied in the context of servicesalso. A standard model for delivering services is not practical. Firms prefer to have some form ofstandardization in order to achieve some form of consistency and profitability. Highly individualisedservices are not cost effective for the service companies to provide flexibility and standardisation needsto be maintained at optimum levels. The level of flexibility of service must be determined by the firm that

provides the services. For example, consider the case of a beauty salon; here, it is important for theservice provider to provide unique and individualized attention to each of the customers.

Q.6

Ans. Overview of Different Service Sectors:

Services sector is constantly growing and it accounts for more than 60 percent of world Gross DomesticProduct (GDP). Growth in economy results in the growth of public income. In an underdevelopedeconomy, expenses are more on agricultural sector in order to satisfy the primary needs of people. Asthe economy starts growing, expenditure starts shifting to the industry. The shift from agriculturaleconomy to industrial economy has increased incomes, which has eventually increased the standard ofliving of people. When income increases and people are able to meet their basic needs and expenses onthe services start to grow. This marks the transaction of the economy from developing economy todeveloped economy. The analysis of developed economies show that the expense on services witnessmore growth as economy turns from developing to developed. This breakage refers to the activity wherefirms start focusing on core functions and subcontract non-core functions to the services sector.

Growth of the service sector marks the importance of the Indian economy in the world economy. Let usnow see the classifications of service sector.

Service sector classificationService sector consists of many verticals. All the sectors, which provide the support service in a way orother, belong to service sector. It could be the service provided by banking institutions or the serviceprovided to you by your local retailer. They all form a part of the service sector. The figure shows differentsectors of the service sector domain.

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Figure : Service Economy

The service sector constitutes various sectors that provide different services and each sector may haveits own set of allied services. Let us outline major sectors:

Education and health service sectors provide services like education for students and healthcareservices for sick people in the economy. For example, university and colleges, hospitals, medicaldiagnostic centre, research labs, and medical shops.

Financial services sector deal with financial aspects and provide services related to finance. Forexample banks, insurance agencies and so on.

Government service sector provide services like transportation services, post office services,ration card and free education for poor and underdeveloped people, and various other servicesoffered by the government for the economy or for public interest.

Information service sectors provide you with some information like newspapers, news channels,radio, magazines, and so on.

Leisure and hospitality service sector provide services related to tourism. It constitutes of all thoseresorts, restaurants, hotels and so on which provide you food and lodging services.

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Professional and business service sector provide support services to various industries. It couldbe either the services from an IT company or the services from a charted accountant, lawyers,architect, and so on.

Transportation and utilities sector provide the transportation facilities. Airlines, railways and travelagencies, belong to this service sectors. This includes services like packers and movers services,goods transportation or the transportation service for public.

Wholesale and retail trade sector provide services that are concerned with the selling ofcommodities that could be sold loose. It could be either in organised way like the big retails brandchain or an unorganised way like those general merchant shops.

Other service sectors my include customers in their activities like entertainment services, Hairstyling, pest control, plumbing, lawn maintenance, counselling services, health club, child careservices, and so on.

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