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Re: sem 5 notes for ssm
Re: sem 5 notes for ssm - September 20th, 2007
It is India's vastness that challenges the imagination: the sub-continent, 3200km (2000 miles) from the mountain fastness of the Himalayas in the north to the tropical lushness of Kerala in the south, is home to one sixth of the world’s population, a diverse culture and an intoxicatingly richhistory.
The most frequently visited part of India is the Golden Triangle – Delhi and the magnificent monuments of Agra and Jaipur, a legacy of centuries of Muslim rule –but there is much besides. The unfairly maligned great cities of Mumbai and Kolkata (Calcutta) have a bustling, colourful charm, while the holy city of Varanasi or the awe-inspiring temples of Tamil Nadu are worthy objects of pilgrimage. For those who prefer more sybaritic pleasures, the palm-fringed beaches of Goa have a European charm all of their own.
Hinduism is practiced by 85 per cent of Indians, the religious rites and red-letter days woven into the fabric of everyday life – ritual washing in the Ganges and the ear-splitting celebrations of the festival of Ganesh – and the inequalities of the caste system are there for all to see.
One of the fascinations of India is the juxtaposition of old and new; centuries of history – from the pre-historic Indus civilization to the British Raj – rub shoulders with the computer age; and Bangalore's ‘Silicon Valley’ is as much a part of the world's largest democracy as the remotest village is.Richard Hopton.
India’s geographical location, a culmination of deserts, forests, mountains, and beaches.
A wealth of archeological sites and historical monuments.
Manpower costs in the Indian hotel industry are one of the lowest in the world. This provides better margins for the industry.
Lack of adequate infrastructure. The airlines in India, for example, are inefficient and do not provide basic facilities at airports. The road condition in India is very bad.
No proper marketing of India’s tourism abroad. Foreigners still think of India is one of poverty, superstition, and diseases. The case of plague in Surat in 1994 led to decrease of 36% in arrival of foreign tourists in India.
More proactive role from the government of India in terms of framing policies.
Allowing entry of more multinational companies into the country giving us a global perspective.
Growth of domestic tourism. The advantage here is that domestic tourism and international tourism can be segregated easily owing to the different in the period of holidays.
Political turbulence within India in Kashmir and Gujarat has also reduced tourist traffic.
Aggressive strategies adopted by other countries like Australia, Singapore in promoting tourism.
Basis of Segmentation.
1. Holiday: Mass market, Individual market, and Popular market.
2. Demand: Primary, Secondary, and Opportunity.
3. Geography: International, according to regions, etc.
4. Psychology: Lifestyle, Personal motive, and Knowledge.
5. Demography: Age, Sex, and religion.
6. Socioeconomic: Rich, poor, rural, urban, literate, illiterate.
7. Purpose: Business travel, Cultural Tourism, and common interest convention.
8. Age: Teens, kids, youth and senior citizen.
Another method of classifying users of tourism services is on the basis of the frequency of usage of services.
Non-users: They are not interested in using the services. They lack the willingness, desire and ability (income and leisure time).
Potential Users: They are also called the prospects or the prospective users. They have the willingness but the marketing resources have not been used optimally to influence their impulse. They bear the efficacy and the marketing professionals are supposed to capitalize on their potentials by using creative promotional measures.
Actual Users: They are already using the services generated by the tourist organizations.
Occasional Users: They have not formatted the habit of traveling.
Habitual Travelers: They have formed a habit of avail of the services regularly.
The variety of users makes it essential that professionals study and understand their changing behavioral profile. This would simplify the task of creating and stimulating demand. The marketing decisions cannot be creative and proactive unless an in-depth knowledge of the users is known.
The individual specific behavior in the marketplace is affected by internal factors such as needs, motivation, perception and attitudes as well as by external factors such as family, social groups, culture, and economic and business influences. While studying the behavioral profile the study of lifestyles is most important.
Thus it can be said that arriving at sound marketing decision cannot be possible unless a sound marketing plan and optimal marketing resources are developed.
Positioning the Product.
The world is literally full of travel products. Not only the travelers offer a huge variety of destinations, they also have many hotels, airlines, car rental companies attractions ad other travel products from which to choose.
The perception of the consumer for a particular product is a critical variable in the marketing process, one that has a great influence on purchasing decisions, especially decisions among similar products.
Service Marketing Triangle.
Company (MTDC, SOTC, ITDC, etc.)
Enabling Promises Making Promises
(Travel Agents,Hoteliers, etc.)
Service marketing is unique in many ways in the travel and tourism industry. There are 3 players in the transaction process:
Company: A travel and tourism company listens to the customers and evolves/develops the travel/tour package and it communicates the attractiveness and the utility of that very tour package directly to the customers. The company makes promises to the customers.
The company in the Tourism Sector can be the Central Government, the State Tourism Corporations, Tour Operators such as SOTC, ITDC, etc. the company carries out ‘External Marketing’ as well as ‘Internal Marketing.’
External Marketing: It makes promises to the customers, for e.g. the Malaysian government’s advertisement “Malaysia, Truly Asia” that promises a veritable cultural paradise to the customer.
Internal Marketing: The Company enables the providers to fulfill the promises made by it to the customers. For example, the Malaysian Government maintains the local transportation within the country, maintains the tourist spots such as KL Towers, etc.
Providers: They are a travel company’s internal customers constituting employees and agents. The company does internal marketing with the providers educating and motivating them about the idea of the particular tour package that they can offer to their customers. This is done to enable the providers to effectively carry out the survive transportation process. The providers make provisions for office space, accessibility and connectivity. The company enables promises to be kept by this infrastructure association.
The Providers include all the entities that finally fulfill the Company’s promise to the Customers. They undertake ‘Interactive Marketing’, because they are in touch with the final customer. Thus in the case of the Malaysian government, this would include the transportation providers (Malaysian Airlines, Air India, Local
Bus transportation, Local Trains in Kuala Lumpur, Car and two-wheeler rentals), the different hotels within Malaysia, souvenir outlets at tourist areas, tourist spots (KL Towers, Twin Towers, etc.), restaurants (KFC Joints, Mary Brown, Pizza Hut), etc.
Customer (Travelers): The customers are the reasons that the Travel Company exists and for whom the company has designed the traveling and touring package as well as setup the infrastructure facilities and spent money on employee developments programs. Here the providers are the only ones who interact with the customers, like the travel agents interact with the customers and not with the company. The agents perform interactive marketing that is ‘on time, all time, every-time. This is the most crucial of service marketing in the travel and tourism sectors. Those agents have the responsibility of ‘keeping promises’ made and enabled by the company. The providers (agents) are responsible for the perceived quality level of the service transaction. This underlines the uniqueness of service marketing.
• PRODUCT LEVELS
In planning its market offering, the marketer needs to think through five levels of product. Each level adds to the customer value, and the five constitute a customer value hierarchy.
The levels of the product that the travel and tourism industry offers to its customers are as follows:
1) Core product
The core product offered by Travel and Tourism industry is the destination. It is core because the main aim of the tourist is the destination where he has to reach or go.
2) Basic product
The basic products offered by Travel and Tourism industry are ticket booking, transport, sight seeing, hotel booking.
3) Expected product
These are the products that the customer expects the organization to offer. These are impeccable services, seat availability on needed time as it is critical to business travelers, accurate information, quick check in for the senior manger of the company, authentic information, information about various packages, different routes leading to a particular destination.
4) Augmented product
These are the products that are offered by the companies to distinguish itself from others. These products become expected products in the future. Those are 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.
5) Potential products
These are the future products that the companies will offer to its customers. These can be underwater tourism, hovercraft for traveling. Also Virgin Atlantic airlines are thinking of adding a casino and a shopping mall in the airline.
PRODUCT WIDTH AND PRODUCT LINE
Product width of the product mix refers to how many different product lines the company carries. The width of the product mix refers to how many variants are offered of each product in the product line.
The product length is the total number in the product lines.
The well-known concept of five-quality dimension RATER, we hereby relate them to 7’s of Travel and Tourism. So what do we mean by 7’s Travel and Tourism Industry and what is its significance in relation to RATER.
1) RELIABILITY - Suchna - Information
The way and the kind of information, which is provided, by any Travel and Tourism organization to its customers is the parameter of judging the Reliability of that organization. Why do we make such a statement? To explain that let us take an example of Travel agency. The various services provided by agency includes Planning Itinerates, Ticketing, Working out travel routes , Providing information on Destinations ,Arranging visas, Making stay reservations. Here information plays a very dynamic role. Let us assume that the customer comes for booking a ticket. It is very important on the part of the service provider (travel agency) to give accurate information on all types of flight available, their fairs, and new schemes going on which would in turn help customers to choose most suitable product for their traveling. Such repeated and accurate information creates of a reliable organization. I.e. in future the customer would trust the organization for any information.
2) ASSURANCE - Suraksha - Safety
It is one of the prime factors considered when talking about this sector. A safe travel is the top priority of any traveler. Thus it is very important for Travel and Tourism organization to consider the safety of the tour package. The safe travel will in turn ensure the customers traveler.
3) TANGIBLES - Swagat – Suvidha – Safai.
These are the backstage elements, which help in a great way for the customers to evaluate the service. When we talk about tangible product in Travel and Tourism the 1st would include
It means warm welcome. Everyone loves a warm welcome. It really gives a good start to the whole holiday. Thus keeping this tangible factor in mind the tourism agencies for example Thomas cook always keeps in mind the Swagat of their traveler. One good example of such is in this package of Thomas cook from Mumbai to Goa, wherein they give a welcome drink to travelers and provide them with a fruit platter and famous cashew nuts of Goa.
It means facility. Today if you talk top any business traveler they want to be pampered silly from flat beds in business class to Wi-Fi in hotels customize the needs. These are the kind of facilities they expect. Thus if a Travel and Tourism organization is able to provide all such demanding facilities then it adds value to its travel products and makes the product hike from standard quality level to superior quality level.
It means cleanliness. Hygiene is also an important factor of a travel package. Clean hotel rooms and lobby create a spik and span impression of the package and add to the quality level.
4) EMPHATY - Sahyog – Cooperation.
A famous quote from Stephen Cowe book goes like this –“Seek to understand and then to understood” is very important. Thus the‘s’ that we relate to empathy is sahyog i.e. co-operation i.e. listen to the customers understand them and co-operate with them to come down to a solution this factor creates a very positive impression in the minds of the customers and helps the service to get a tag of its excellent service quality.
5) RESPONSIVENESS-Sanrachna – Information.
This is the last element in the concept of RATER. It is related to the last‘s’ i.e. Sanrachna which means infrastructure. Why do we relate4 infrastructure to responsiveness is because how flexible is the infrastructure of Travel and Tourism organization affects the service responsiveness. For example if you plan and book a Qualis car to travel from place A to place B and if the car breaks down then how fast can you respond by replacing it with a new car shows the flexibility of the infrastructure i.e. the no of cars.
No matter how well prepared you are there is always the potential for something to go wrong. The way you and your personnel handle complaints can be the determining factor in turning a "disaster" into a "success." Tourism & More offers the following ideas on handling complaints:
1. Listen. When a visitor is angry or upset allows the person to know that he/she is being heard. Prepare your personnel to listen and to handle each complaint as if it were the most important part of their day.
2. Understand. Make sure personnel have a full understanding of the complaint. Prior to responding to the complaint they need to determine the exact nature of the complaint. Personnel should try to focus in on the main context of the complaint, and not be diverted by side issues.
3. Take Action. The visitor should see that he/she matters, and that you seriously consider their complaint. Make sure the upset visitor knows exactly what can or cannot be done, and what he/she may expect as a form of recompense. If the problem cannot be solved, immediately tell the visitor approximately how long it will take to find a solution. Often something as simple as an inexpensive complimentary gift or some special attention from the manager or boss can turn a negative situation into a positive one.
4. Learn. Every complaint and/or complainer provides a the tourist professional with a learning experience. Have your personnel share with colleagues what things went wrong, and the steps they took to correct the situation. Keep records of past complaints, not only for in-house training purposes, but also as a guide of future problems to prevent.
DEALING WITH DIFFICULT PEOPLE
Here are some suggestions to help your staff cope with the angry guest.
1 Do not fight to win every battle. Often it is easier to simply say, "Yes Sir/Mam you are right. Very few angry visitors are willing to listen to your side of the story.
2.Take the angry person out of a public area. Whenever an angry person decides to do battle in front of other "guests" you lose. Invite the person into a private room, offer him/her a drink and then listen.
3. Make sure that you know that the angry person knows that you will deal with the issue at that moment. Your credibility with an angry tourist is very low; telling him/her that you will get to the problem will only make the visitor even angrier. Start the repair process at that moment. Let the visitor see that you are doing something.
4. Use the person's right name and title. If the angry visitor introduces him/herself as "Dr. Smith" don't say Mr. or Ms. Smith and don't use a first name unless given permission. The misuse of names or titles only adds fuel to an already explosive situation.
5. Make sure that the person addressing the problem is competent to solve it. If a member of your staff cannot solve a problem, then turning to someone who can help, is doing something. Never just shrug one's shoulders and say "sorry!"
6. Rather than getting angry, try to think of something comical. For example, imagine what this person would look like angry in his/her underwear, and then laugh to yourself.
1 Don't be defensive. Try to understand that people on vacation are often a bit irrational. Instead of reacting in a negative way, coolly ask how you can make their situation better
2 In a like manner, never argue, but rather apologize. Once the apology is made the upset/difficult person is more willing to listen. Win by losing!
3 In a like manner, never argue, but rather apologize. Once the apology is made the upset/difficult person is more willing to listen. Win by losing!
1. Dress in a professional manner. It is amazing how much more respect a well dressed functionary receives. It is a lot easier to deal with a difficult person when dressed in a suit rather than in jeans.
In pricing decisions, the product or the service mix of the tourist organization is important. They have to set prices in line with the quality of services to be made available to the customers and the type of customers they are targeting. Pricing decisions are influenced by internal factors like pricing policy of the company, and external factors like the destination itself. They are required to think in favor of discounting price. These may include discounts for cash payments, seasonal discounts, trade discounts etc. But while offering the discounts, it is not to be forgotten that it may also create image problem since some of the value sensitive tourists may doubt the quality.
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 have remained untapped or partially tapped. The various dimensions of tourism promotion are as follows:
Advertising: Advertisement gives 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.
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. The publicity program include regular publicity stories and photographs to the newspapers, travel editors, contact with magazines on stories etc. advertising is a part of 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-aways to their clients, such as flight bags, wallets for tickets, Foreign Exchange (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.
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 help 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 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 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 behavior of sales personnel or travel staff.
Telemarketing: It is a method of selling in which a professionally sound telemarketer markets 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. Also recruiting a person considered to be professionally sound, personally-committed sales personnel having an in-built creativity, innovation and imagination is very important.
Exhibitions The participants include state and national tourism promotion boards, travel agents and tour operators, airlines, car rentals, cruise liners, holiday financiers, technology providers, hotels and resorts, education institutions in the field of hospitality and tourism. Over the years the participation of foreign tourism promotion boards like the Dubai Tourism and the Mauritius Tourism, etc has increased in order to aggressively promote their respective countries.
Most tour operators sell their services through travel agents, however some deal directly with the consumers and eliminate middlemen. For example, Thomas Cook has its own branches situated throughout the country so they are easily accessible. The customer, in the travel and tourism industry, has to go to the service provider. Hence strategic locations are very important for Thomas Cook. Other companies may also utilize more than one method of distribution.
Transport also plays a major role in the tourism industry. It makes the destinations accessible to people from around the world. Also, in the case of tangible products in tourism such as souvenirs and cuisine, transportation becomes a major logistical component.
EXTENDED 3 P’S OF MARKETING
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 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 humour, tact to transform the occasional tourists into habitual ones, thorough knowledge of the places, linguistic skills etc.
The Government plays an important role in providing the right kind of people for this industry. As such there are a lot of Govt. and Pvt. Institutes which offer training for the same.. The training courses run by the Institutes are designed to suit the needs of the various target groups.
PEOPLE - in service marketing includes
• OTHER CUSTOMERS
EMPLOYEES – They are the representatives of the company. Their performance can create a positive as well as negative impact of the service process and the image of the company. Keeping ‘people’ factor healthy is one of the prime concerns of the company. When we talk about people in travel and tourism industry, they are really crucial part as at every stage they play a role of the service provider on the stage of service encounter also known as moment of truth.
SERVICE ENCONTER –
The so-called stage service encounter or moment of truth is the element of interaction between those providing services and the customers. The instances of service encounter in travel and tourism industry are –
• In the ticket booking process when the customer calls the service provider that is the front line staff in order to book the tickets is the first service encounter incidence. It’s the moment of truth where, there is one to one interaction between the service provider who is booking the ticket and the customer who wants the ticket booked. This interaction takes place on the phone.
• In the itinerary planning process the service encounter takes place when the customer visits the travel and tourism agency to purchase a holiday package and meets the travel manager.
• When the customer is experiencing the holiday package there are numerous service encounters that he goes through and one of them is his constant interaction with the tourist guides.
These were some examples of service encounter.
This stage is a very crucial one where in the provider has to perform at the optimum level in order to avoid the customer from having the experience of credence quality.
Is the quality, which is difficult to evaluate, and when you ask the customer the question on how was the service? He usually gives vague answers like ‘it was ok’, ‘I don’t know’.
A very important concept in ‘people’ is the – service profit chain. In the service profit chain the first step is to keep the internal customers happy and satisfied the internal customer being the employees. To keep them following point have to be taken care of
• Work place design
• Job design
• Employee selection and development
• Employees rewards and recognition
• Tools for serving customers.
These aspects in turn lead to employee satisfaction, which would result in to employee retention and productivity, this would result in providing value services and that would yield customer satisfaction. Which would lead to customer loyalty and finally revenue growth and profitability through referral and repeat business.
It is the way of undertaking transaction supplying information and providing services on a way, which is acceptable to the consumer and the effective to the organization. Now to make this definition of process true, it is necessary for the organization which provides services to recognize the critical moments in the entire process which makes the service acceptable or not acceptable to the customer depending on the zone of tolerance and effective or not effective to the organization. Further to realize what are the critical moments in the considered process a concept of blue printing is introduced.
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 facitilities 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.
CHARACTERISTICS OF TOURISM INDUSTRY
The tourism industry is highly inflexible in terms of capacity. The number of beds in a hotel or seats on a flight is fixed so it is not possible to meet sudden upsurges in demand similarly restaurants tables, hotels beds and flights seats remain empty and unused in periods of low demand.
Inventory / Perishability
It is related to the fact that travel products are intended to be consumed as they are produced. For example, an airline has seats to sell on each flight; a hotel has rooms to sell for each night. If the airline is not able to sell all its seats on its flight, or a hotel is not able to sell its rooms for the night then the opportunity to sell the product is lost forever. Service sector cannot keep inventory like products. To overcome this problem, the travel industry has come up with various marketing strategies. One is to overbook. An airline overbooks its seats to a certain extent in anticipation that even though certain customers do not turn up but the flight will be fully seated. Another strategy is multiple distributions. For example a customer can buy an airline ticket from an airline, tour operator or from a travel agent. The chances of perishability are reduced. If the tourist cannot visit the place, the opportunity is lost. Hence, this becomes one of its important characteristics.
A general norm is that in Travel and Tourism industry the product or the package of the tourism can be standardized i.e. for example of 2 days 3 night in so and so hotel, but the actual experience of consuming this package is highly inconsistent. We hear a lot of travel stories which becomes a portrayal of a lot of bad experiences for example the tourist guide may not be good, the hotels lodging and boarding was bad etc. Therefore there is high level of inconsistency prevailing.
Travel products cannot be touched as they include flight experience on an airplane, cruise on an ocean liner, a night’s rest in a hotel, view of the mountains, a visit to a museum, a good time in a night club and much more. These products are experiences. Once they have taken place they can only be recalled and relished. The tangible products on an airplane, a bed in a hotel, food in a restaurant are used to create the experience but these are not what the customer is seeking. The customer wants intangible experience like pleasure, excitement, relaxation, etc. The tangible products that are purchased provide the access to intangibles.
Most travel products are produced and consumed at the same place and at the same time. This is the opposite of the tangible products, which are produced at a different place and time and consumed at a different place and time. In contrast, most travel products are sold first and then, then simultaneously produced and consumed. For example, an airline passenger consumes the flight as it is being produced, and a hotel guest uses a hotel room as it is being made available for the night’s sleep. Thus there is simultaneous consumption and production. This creates certain interdependence between suppliers and customers as the interaction between the supplier and customer takes place on the supplier’s premises. The interaction shapes the travel experience. For example, the customers could not take the cruise home with them; in fact they have to leave their home.
Tourism destinations are fixed locations so effort must be taken in communicating the facility to the potential consumer.
Relatively large financial Investments
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.
HOUSING SECTOR ( CONSTRUCTION )
PEST Analysis of Construction Industry
PEST refers to all political, economic, social and technological factors affecting any industry. The objective of PEST analysis is to objectively study the environmental factors facing a firm, company or an industry. The external environment affects the company in many different manner and unlike internal environment it cannot be influenced much.
The political factors affecting the construction and housing industry mostly consists of documentation’s and permits that has to be obtained during the various phases of construction of a structure and its sale.
Building Commencement Certificate: Construction of a building or any such structure cannot take place unless and until the builder or the company secures a commencement certificate from the authority, in case of Mumbai it is the BMC who gives IOD&CC- Intimation of Disapproval & Commencement Certificate.
Floor Space Index (FSI): FSI is basically a ratio, which determines how tall can buildings or a structure can be constructed on a particular plot. The local authority issues it.
Occupation Certificate: After the completion of construction work of a building, the builder or the company has to secure an Occupation Certificate without which the flats in the building cannot be occupied for residential or commercial purposes.
Brihan Mumbai Corporation [BMC] Developing Plans: BMC’s developing plans form the most basic criteria in selecting a site. These developing plans chart out pre-defined areas, which the BMC has already allocated for certain purposes.
E.g. In a given area, some land is reserved for plantation/farming, some piece is kept for industrial establishments like the MIDC area and the other one reserved for residential purposes. So the Builder finds out the type of land, which is suitable for his purpose, i.e.; if he wants to build up a residential complex, then he has to do so in the area reserved for residential purposes; as per the BMC’s developing plans.
• CRZ (Coastal Recovery Zone): According to this rule a builder cannot carry out any construction within the radius of half kilometer from sea.
TDR (Transfer of Development Right): This right is available to a builder for utilizing the additional FSI. Normally TDR is given by the local Municipal Authority who acquires the portion of land of builders either for the purpose of constructing road or for making gardens.
Others: Apart from the above mentioned points there is also tax exemption that is given for the construction of building on the land having area of more than 1 acre.
Fluctuations in prices of inputs: Many builders tend to stop work when the prices of inputs like cement, iron etc goes up so as to wait for the time when they expect the prices will come down. This result in unnecessary delay in the work and the cost of wasting time would actually be more than the increase in price.
Changes in demand: Changes in demand due to factors like changes in disposable income of prospective buyers and inflation. Also with the easy availability of housing loans and tax exemption on loans the demand for houses is rising.
Future Growth & Resale Value: Any project must be located in an area that if not fully developed must at least be on the way. This is because people prefer those areas having high resale value and will fetch them a good amount of gain.
Stamp Duty & Registration: Payments of Stamp duty followed by the registration of the agreement are two important acts when one enters into an agreement with a developer/seller. With the decrease in the stamp duty by 50% it is considered as a good sign for Construction Sector.
Credibility of the company/firm: People don’t know what kind of materials has been used in the construction of a building or a structure. Credibility of a builder or the company plays an important role in convincing the buyer to buy the house and be sure of the quality of construction work done. A low credibility or image can lead to poor financial performance. A good image is not just built in a day, it takes years of servicing the society through following high standards of work in the process of construction and sale.
Perceived Image of the property developed: A flat in a so-called “posh” area may cost much more than a one in a “not so posh” area. This factor can also determine the success of failure of a project. A flat is selected on the basis of infrastructure facilities like water availability, transport facilities, nearness to schools, colleges, hospitals, shopping complexes, leisure centers, etc.
Building Facilities: The builders may offer buildings that have swimming pools, health-clubs, gyms & parks.
Due to technical nature of the construction process, the technical environment keeps on changing everyday. There are developments in techniques used, materials used and various other such aspects of the construction business. A few of such developments are as follows
Pre-structured Concrete Blocks: These are blocks of concrete, which are made in the factories according to the dimensions of the building or structure to be built. It is just like a jigsaw puzzle where these blocks are put together using a huge crane and joined together using mortar by workers. This enables quick completion of work and also economies of scale.
Mixture of Cement and Sand: nowadays in order to save time the constructor can order the mixture of sand and cement directly from the suppliers as against the traditional way of ordering cement and sand separately and then filtering them and then mixing it.
Other Equipments: other modern machines that are used in construction are the use of huge drilling type of machines to dig the ground, which was before done by workers.
7 P’s of marketing mix:
In marketing product refers to the totality of the offering.
In Construction industry the total product includes services offered by the contractor in the support of the core product i.e. physical product.
For the construction industry products are :
Physical: houses, public and commercial facilities infrastructure & building products.
Service: expertise consultancy & design
Persons and reputation: eg hafeez contractor
Ideas and proposals: urban regeneration, regional development and competitions
Essentials: water gas electricity telecommunication, transport facilities
Highly desirable: schools, hospitals, shopping complexes, leisure centers
Desirables: environmentally secure, adaptable.
Product offerings can be explained through the total product concept which consists of core product, formal product and augmented product.
In the Housing industry:
The core product consists of : permanent accommodation / living space. The format product consists of : locations, utilities, electricity, brand name, availability of schools and hospitals nearby.
The augmented product consists of : security available clean environment, amenities.
Product has to reach the ultimate buyer so the company works with its intermediaries to bring to bring their product to the market. Marketing channels perform work of moving goods from the producer to the consumer.
In the housing and the construction industry construction cannot be transferred but here intermediaries transfer information of distinct places about the availability of accommodation so that not having any idea about these constructions get to know about it. In this industry distribution is done through real estate agents, who acts as connecting tool between the consumer and the provider.
Agreeing the price for a piece of work seals the relationship between contractor and the client. It is the central feature, and reflects the value placed on the relationship.
Prices is based on the combination of:
What the market expects
What the client can afford
The nature of competition in the sector
What the contractor can afford to work for
Any specific factors concerning the particular job e.g. location material used
What is being agreed and paid for- whether completion of a bldg or wider process offered supported by maintenance, pre sale and after care agreements?
For housing an construction industry there are many considerations:
Capital projects & bldg activities are priced so that variable costs- the costs incurred as a result of gaining the work-are covered. Ideally the price also makes a contribution to the fixed costs of the contracted org. It is also necessary to consider charges incurred by the contractors as the result of having to underwrite the project from inception to delivery & from the need to acquire any specialists equipment and expertise necessary.
Building products are priced so that an individual perception of quality value and service are at a level that the size and nature of the can sustain. it is also increasingly common to find differentiate pricing approaches as competitors seek real and perceived price advantages.
The people in housing and construction industry can be divided into groups:
Those who develop the product
They consists of location hunters architect builders. They are required to have technical skills of geological mapping soil testing building designs and so on. The possessions of this skills is of utmost importance because building cannot be constructed on all types of land. Also materials use to build houses in different regions because of climatic differences. E.g. in England most houses are builds of woods whereas wood is not a viable portion in the tropical area. Builders who do the final construction consists of civil engineers skilled and unskilled labor
Those who market the product
These consists of marketing people who may or may not have civil engineering background but certainly have the skills of understanding the customer as a well as the product. The marketer uses all the tools that help to overcome the unique characteristics the service industry. It includes the construction of a sample flat, which will break the tangibility factor intensive advertising to overcome the perishability factor and so on.
Service Company can design a superior delivery process. Because of heavy initial, capital investment, long gestation period and a speculative tendency (irregular demand) housing and construction industry works other peoples money i.e. construction begins with advance booking and then customers are suppose to pay installments most of the payment is made after the product has been handed over this strongly experiences intangibility aspect of this industry.
In this industry tangible industry is supported by services in which the services offered enhance the client appeal for the product this relates to all aspects of the building and civil engineering where the creation of [particular facility is supported by the project and environment management, client liaison and specialist consultancy services and sometimes through maintain refurbishment upgrading and facilities management services and for public project sometimes also for general services to wider community.
A service industry can develop a more attractive service environment where a service can be delivered. In the housing and the construction, sample houses photographs and posters of previous achievement can be displayed in construction offices or those can be shown to the customers when they come foe enquiry gets attracted to it.
The need to place the client need rather than the contractor expertise at the core of all activities
Attention to all aspects of project design and inception, and the development of presales services and activities the service aspects of work in progress and after sales activities. Attention to quality and durability of the project when complete.
Acknowledgement that presentation is as important as technological expertise.
Continuous attention to service, service extension and service development
Taking the truly enlightened view of the needs wants and demands of the clients and commissioner of work the pressure on contractors and consultants and understanding them
Total enduring impact of activities on the particular environment and location in which it takes place.
The construction industry is concerned with following forms of production:
The promotion of its capabilities and expertise to client and potential client
The promotion of its finished products to the community and society at large
The promotion of professionals within the industry to each other promoting specific general and continuing inter relationships and confidence between architecture, contractor quality surveyor planner other consultant civil engineers and sub contractors.
The promotion of general confidence, public sympathy and support for activities.
The overall purpose of promotion is:
Promotion activities of the construction industry can be divided in following:
This is targeted at client’s potential clients and other capable of using the distinct expertise on offer. It involves opening up client face to face contact with those commission work and inviting tenders and presenting the distinct expertise on offer in the client’s best interest.
Targeted direct market:
If this is to be effective it requires knowing who the people with influence are promotional material, brochures, and achievements can then be arranged and presented and if necessary specially prepare on client or sector specific basis.
General advertising especially in the trade press to ensure continuing general awareness. From time to time some construction companies have engaged in television and radio ads.
Logo design and reinforcement:
Billboards, hoardings and perimeter fences.
Attendance at trade, professional and regional fairs and exhibit
Other efforts include:
Speculative designs and proposals
Positive media coverage
it is in various forms e.g. Contractor’s places the hoardings at side of the finished bldg stating completed six months ahead of schedule
General positive pubic relations:
the current activity that comes under this hading at present includes general support for schools, colleges and universities and contribution to the general amenities to communities
Marketing the Construction industry forms a very crucial part. A good awareness level is required for your product to be successful. Marketing under this sector is done through various mediums such as:
• Advertisements in newspapers and magazines, television and radio and also through e-mails and websites
• Sole selling agencies: These are agencies that are given the contract of marketing the product who are responsible for the sale of the product.
• Hoardings: These hoardings are put up at the site and contact numbers are given. Hoardings are also put up at railways, roadways and on BST buses, etc.
• Marketing through Estate agents: These estate agents also called as consultants act as middlemen between the customer and the builder. They are provided with brochures and site maps.
The target market i.e. determining the customer are based on the following considerations:
1. Locality: The region where the building is constructed and the type of crowd it will attract will have varied expectations. E.g. whether its in the suburbs or south Mumbai
2. Income group and family size: Depending on the budget of the customer, a particular income group people will be given specific type of amenities. In a country like India, every product is formed after taking into consideration the family size. E.g. carsOccupation: There are colonies and societies set up for people from the same occupation also employed by the same company e.g. Indian oil nagar at Andheri (west) and Railway quarters for the railway-employed people.
3. Religion, races and social class: There are societies for people from a particular caste e.g. Parsi colony at andheri (west)
The total number of interactions between the service provider and the customer is known as the service encounter. These interactions are called as the moments of truth.
Construction is a secondary service sector unit but is gaining much importance now. In this way, people (customer) coming directly in contact with service provider are very low.
The moments of truth here are during:
1. When the estate agent, who acts as a middleman, fixes a meeting between the service provider (builder) and the customer (buyer). This is the first meeting/ interaction where negotiation takes place.
2. The final meeting when the deal is finalized between the builder and the buyer to fulfill all the formalities.
This falls under low direct contact service.
Service quality: RATER
The 5 dimensions of quality can be explained as follows:
Reliability under construction would mean if the builder gives timely possession to the buyer’s and fulfills all his commitments.
Credibility: This is the trust developed by the builder, the goodwill that he has attained since so many years. E.g. Raheja builders , people know that if they go to Raheja’s they wont be cheated. The trustworthiness is maintained since years.
Security: Strong foundation of building earthing, proper indicators on towers as a safety measure, the building exterior paint to be stain resistant.
Courtesy: Respect your customers and their suggestions. Be friendly and understand their complains.
Competence: the personnel have to be knowledgeable in their concerned fields so that any issue raised on them will sort out as soon as possible.
In construction, major quality dimension is the tangibility. Facilities provided are the tangible factors such as e.g. a builder shows a furnished flat he gives good fittings & fixtures, furniture, aqua-guard, intercom facility, elevators, etc. the most important tangible factor is the locality of the building.
Access: The customer should be able to easily access any information regarding our product. The ways to access can be the site office present at the site itself, websites, some organizations also have the facility of call centers, etc.
Communication: Listening to the customer’s needs and communicating in an easy language.
Understanding: To understand their needs and make changes according to their necessity.
Willingness to provide prompt service. There are people appointed in large organizations for handling queries of the customer.
In Construction, there is a standard way of handling complains, the customer has to give his complain in writing to the builder that can be before possession or after possession and within 7 days action is taken. This also shows after sales service given by the constructors.
The procedure to lodge these complains can be explained as follows:
Screening and logging:
The date the problem occurred; a description of the problem, and any other information should be formally being given in writing to the builder
After the builder receives the complain, he gathers facts about the problem and investigates on the issue.
Let the customer know that the matter is receiving attention and how long it will take to resolve the issue.
Formulating a solution:
While formulating a solution, the important criteria to consider include the warranty obligations, customer’s expectation, and the cost versus benefit of alternative solution. Here, within 7 days appropriate action is taken after considering these important criteria’s.
On person within the organization has the ultimate authority and responsibility for customer relations.
When a customer complains they expect 3 things:
1. Outcome fairness: In construction, if the builder fails to construct the building within the mentioned period, then he has to give his customers a compensation in the form of providing housing facility to them for the remaining period. e.g. if the construction of the building is delayed by 6 months then he has to provide the buyer’s with housing facility for 6 months.
2. Procedural fairness: Here, the builder takes the responsibility to solve the complain within 7 days of receiving it in writing.
3. Interactional fairness: The builder listens to the problem of the buyer and tries to resolve it. Listening plays a very important role in communication. It is always considered here that the “Customer is always RIGHT”
India occupies an eminent position in the civil aviation sector with a large fleet of aircrafts. In all, 56 airlines are operating scheduled air services to and through India and 22 foreign airlines are flying over Indian Territory. There are over 450 airports and 1091 registered aircraft in the country. In addition to the three public sector airlines Air India, Indian Airlines, Alliance Air - there are three private operators -Jet Airways, Sahara India Airlines & Air Deccan. There are also 41 non-scheduled air transport operators. Additionally 34 applicants have been granted NOC by the Ministry of Civil Aviation for setting up non-scheduled air transport operation.
Estimates show that the domestic and international passenger traffic in India is projected to grow annually at 12.5% and 7% respectively over the next decade. By the year 2005, Indian airports are likely to handle 60mn international passengers and 300,000 tons of domestic and 1.2mn tons of international cargo.
PEST Analysis: The Indian Airline Industry
In India, one can never over-look the political factors which influence each and every industry existing in the country. Like it or not, the political interference has to be present everywhere. Given below are a few of the political factors with respect to the airline industry:
o The airline industry is very susceptible to changes in the political environment as it has a great bearing on the travel habits of its customers. An unstable political environment causes uncertainty in the minds of the air travellers, regarding travelling to a particular country.
o Overall India’s recent political environment has been largely unstable due to international events & continued tension with Pakistan.
o The recent Gujarat riots & the government’s inability to control the situation have also led to an increase in the instability of the political arena.
o The most significant political event however has been September 11. The events occurring on September had special significance for the airline industry since airplanes were involved. The immediate results were a huge drop in air traffic due to safety & security concerns of the people.
o International airlines are greatly affected by trade relations that their country has with others. Unless governments of the two countries trade with each other, there could be restrictions of flying into particular area leading to a loss of potential air traffic (e.g. Pakistan & India)
o Another aspect is that in countries with high corruption levels like India, bribes have to be paid for every permit & license required. Therefore constant liasoning with the minister & other government official is necessary.
Business cycles have a wide reaching impact on the airline industry. During recession, airline is considered a luxury & therefore spending on air travel is cut which leads to reduce prices. During prosperity phase people indulge themselves in travel & prices increase.
The loss of income for airlines led to higher operational costs not only due to low demand but also due to higher insurance costs, which increased after the WTC bombing. This prompted the industry to lay off employees, which further fuelled the recession as spending decreased due to the rise in unemployment.
The changing travel habits of people have very wide implications for the airline industry. In a country like India, there are people from varied income groups. The airlines have to recognize these individuals and should serve them accordingly. Air India needs to focus on their clientele which are mostly low income clients & their habits in order to keep them satisfied. The destination, kind of food etc all has to be chosen carefully in accordance with the tastes of their major clientele.
Especially, since India is a land of extremes there are people from various religions and castes and every individual travelling by the airline would expect customization to the greatest possible extent. For e.g. A Jain would be satisfied with the service only if he is served jain food and it should be kept in mind that the customers next to him are also jain or at least vegetarian.
Another good example would be the case of South West Airlines which occupies a solid position in the minds of the US air travelers as a reliable and convenient, fun, low fare, and no frills airline. The major element of its success was the augmented marketing mix which it used very effectively. What South West did was it made the environment inside the plane very consumer friendly. The crew neither has any uniform nor does it serve any lavish foods, which indirectly reduces the costs and makes the consumers feel comfortable.
The increasing use of the Internet has provided many opportunities to airlines. For e.g. Air Sahara has introduced a service through the internet, wherein the unoccupied seats are auctioned one week prior to the departure.
Air India also provides many internet based services to its customer such as online ticket booking, updated flight information & handling of customer complaints.
USTDA (US trade & development association) is funding a feasibility study and workshops for the Airports Authority of India as part of a long-term effort to promote Indian aviation infrastructure. The Authority is developing modern communication, navigation, surveillance, and air traffic management systems for India's aviation sector that will help the country meet the expected growth and demand for air passenger and cargo service over the next decade.
A proposal for restructuring the existing airports at Delhi, Mumbai, Chennai and Kolkata through long-term lease to make them world class is under consideration. This will help in attracting investments in improving the infrastructure and services at these airports. Setting up of new international airports at Bangalore, Hyderabad and Goa with private sector participation is also envisaged.
A good example of the impact of technology would be that of AAI, wherein with the help of technology it has converted its obsolete and unused hangars into profit centers. AAI is now leasing these hangars to international airlines and is earning huge profits out of it. AAI has also tried to utilize space that was previously wasted installing a lamination machine to laminate the luggage of travelers. This activity earns AAI a lot of revenue.
Segmentation: The Airline Industry
Most airlines use a very traditional segmentation strategy, dividing passengers into business travelers and economy travelers (mostly leisure travelers). The common strategy is to squeeze as much profit as possible from business class passengers who are attracted by superior services and corresponding high prices and, at the same time, to try and fill the rest of the seats and ensure growth by attracting economy class passengers with lower fares.
Business passengers They are crucial for airlines' profitability. With less spare time and more cash in their pockets, they agree to pay a premium price for a premium servce. Today business passengers account for approximately 48% of passengers, and these 48% contribute 66% of airlines' revenue. The premium prices they pay provide wider and more comfortable seats, better choice of meals and seats, luxurious lounges. Airlines can choose from a multitude of premium services to offer to business travelers. Some of these extras range from seats equipped with faxes and telephones, to gambling machines, showers, massage services and suit ironing services in the recently introduced arrival lounges. Business passengers believe it is worth extra money if they can save time and arrive looking fresh for an important meeting. Business passengers will avoid transit flights even if a longer flight could save them money. But amongst other perks, flexible reservation services are probably the most important to them. Reservations for business trips are often made just a couple of days in advance. A no penalty cancellation policy is also very important to business passengers.The best way to reach business travelers is through printed advertising. Business news media, such as "The Economist" or "The Wall Street Journal" are some of the best publications through which airlines can reach business travelers. Many airlines design special promotional programs that target corporate bookers and meeting planners, who are responsible for business trips reservations. Frequent flyer programs are an added bonus for business passengers.
Leisure Travelers They represent a totally different market. The most important consideration for most of them is the price. The lower the airfare, the more people will fly the respective airline. By and large, with the exception of wealthy travelers, this segment will not pay extra for premium services and will agree to change several planes during their trip if this option costs less than a direct flight. Despite lower margins provided by this segment, leisure travelers are very important to an airline's bottom line. Part of the reason is that technological progress in the area of tele-conferencing and increased use of the internet for business communications is expected to reduce the number of business travelers. Thus, airlines are counting on the leisure segment to provide further growth. By improving services and reducing prices for economy class passengers, airlines risk that some business passengers will switch to economy class. On the other hand, if an airline focuses on business class passengers, it risks losing its economy class passengers to another airline. Since business class passengers are not many, a company relying mostly on business travelers will often end up flying half-empty planes, losing the potential revenue generated by lower priced economy seats. On the other hand, few airlines catering solely to economy class passengers can be successful because a low fare carrier must fill the entire plane if it is to generate revenue from its low-margin operations.This kind of segmentation serves airlines well enough when implemented within one company. It would be very difficult for any single airline to target just one of these two segments - business or leisure - successfully.
Intangible services are difficult to sell because they cannot be produced and displayed ahead of time. They are therefore harder to communicate to prospective customers. It means that services are high in credence qualities whereas goods are high in search qualities.
Marketers of services can reduce these risks by stressing tangible cues that will convey reassurance and quality to the prospective customers. These tangible cues range from the firm's physical facilities to the appearance and demeanor of its staff to the letterhead on its stationery to its logo.
In the airline industry transportation is the core product. Since it is intangible in nature a service company can distinguish itself from its competitors by providing several tangible clues like:
o Food / Beverages
o Staff uniforms- Air India’s staffs always wears a printed blue sari.
o Logos - Air India's centaur is the logo and maharaja is the mascot.
o Colour and design - Jet airways have blue colour tickets.
o Seats and cushions
o Audio / Video facilities for work or pleasure
o Fax, laptops, etc.
o Baggage retrieval
o Flight bookings
Many services require customers to participate in creating the service product. In the airline industry, it is very important for the company to consider the customers as a part of the company in order to serve them better. The inseparability of services leads to:
o Customer being co-producer;
o Often customer being co-consumers with other customers and;
o Customer travelling to the point of service production.
All the above three problems are face by the service marketer in the airline industry. So the service marketer has to think of ways in which he can satisfy his consumers in an efficient manner.
In the airline industry, the customer has to be physically present in the service factory. Hence, he is coming in direct contact with the service provider as well as other customers of the airline.
Different front-line personnel have different abilities. Even the same service provider has good days and bad days or may be less focused at different times of day. Services are performances, often involving the cooperation and skill of several individuals, and are therefore unlikely to be same every time. This potential variability of service quality raises the risk faced by the consumer. The service provider must find ways to reduce the perceived risk due to variability. One method is to design services to be as uniform as possible - by training personnel to follow closely defined procedures, or by automating as many aspects of the services as possible.
E.g.: most airlines include online booking resulting in a standardized procedure & fewer mistakes due to human errors. A second way to deal with perceived risk from variability is to provide satisfaction guarantees or other assurances that the customer will not be stuck with a bad result.Another way of reducing inconsistency in airlines is the standardization of in-flight procedures for example the security instructions given at the beginning of the flight.
Service businesses cannot normally stockpile their output, because the time bound nature of service delivery makes it impossible to inventory the finished goods. For example, the potential income from an empty seat of an airline flight is lost forever once the flight takes off.
Conversely, when demand for service exceeds supply, the excess business may be lost. If someone cannot get a seat on one flight another carrier gets the business or the trip is cancelled or postponed. The inventory for airline industry is mainly the food and the aircrafts spares and parts. Airlines face the problem of inventory mainly due to irregular demand patterns.
The Services Marketing Triangle
The services marketing triangle shows the three interlinked groups that work together to develop, promote and deliver services. These key players are labeled on the vertex of the triangle shown below.
Internal marketing External marketing “making promises”
Services marketing can be explained with the help of the Service Industry Triangle. There are three entities in the whole transaction process.
Customers refer to the persons who have certain needs, wants and desires. The company makes promises to its customers. In the Airline industry, the customers refer to those persons who feel the need of travelling from one destination to another. The customers are further classified as Individual and Institutional. Institutional customers are those corporates who need their employees and executives to fly very often. Hence they have block bookings (reserved bookings) with the airliners.
The company is the dreamer and the offeror. The company dreams up an idea of service offering which will satisfy the customers’ expectation. The company is established with the basic objective of providing the specific transport service. Thus the airline industry with players like Indian airlines, jet airways, Sahara airways etc came into being.
These are finally the persons (staff) who interact with the customer. They are the ones who carry out the final transaction. This interface of the customer with the company is through the customer’s interaction with the employees of the company. In order to keep its promises, the company enables its employees to through setting up facilities to deliver the promises that is by setting up ticket and enquiry counters. Hence the company aims at offering its providers with the required infrastructure and training to optimize the quality of the transaction. For eg: Yearly employee training programs and performance appraisals done by Sahara airlines.
The strategic points where the provider and the customer interact are:
Enquiry of the services, flight timings, routes etc.;
Purchasing tickets, either from the airlines or from the travel agencies;
On board crew;
In a triangle, all three sides are essential to complete the whole. For services all three marketing activities represented by the sides of the triangle are critical to success; without one of the sides in place, the triangle or the total marketing effort cannot be optimally supported.
The 7 P’s of Marketing Mix
Getting the product right is the single most important activity of marketing. If the product isn't what the market wants, no amount of price adjustment or brilliant promotion will encourage consumers to buy it. The airline product is quite a complex one since it comprises of a service of incorporating the temporary user of airline seat and certain tangible products such as free flight bags or a free bottle of duty free spirit to encourage booking.
The airline product includes of two types of services:
1. on the ground services,
2. In-flight services.
The on-the-ground services include a convenient airport with car parking facilities, duty free' ¬shopping quick and efficient checking of baggage, efficient service at reservation counter, transport to the airport, etc.
The service provided inside is intangible and is highly variable. The airhostesses are trained to provide polite, warm and courteous service. The courteous service that the representatives at the baggage counter, reservation counter provide goes a long way in developing customer loyalty. The travel agents of the airlines also need to be efficient and polite.
Differentiating the Product
It is important to recognize that what the consumers are demanding are not products, or features of products but the benefits they offer. Producing added benefits thus helps the marketer to distinguish one product from another. Good design or style of service can form the basis of differentiation. This enables the company to create a personality for its service. The design and decor of the aircraft provides opportunities to personalize their product as well as periodically to update them when differentiation under IATA regulations was virtually excluded, nonetheless, certain airlines were able to develop distinct personalities. Eagle Airlines created an entirely new market between New I York and Bermuda, for e.g. by developing an image of a friendly airline distinctive from other airline serving the route. A similar style was evident in Richard Branson's Virgin Airways.
Price plays as much a tool of marketing as promotion plays a critical role in the marketing mix. The concept of 'fair price' is paramount. Buyers judge whether a product is fairly priced by seeing whether it represents value for money.
The airlines may set prices above the market price either to reflect the image of quality or the unique status of the product. The product features are not shared by its competitors or the company itself may enjoy a strong reputation that the 'brand image' alone is sufficient to merit a premium price.¬
Value for Money Pricing:
The intention here is to charge the average price for the product and emphasize that it represents excellent value for money at this price. This enables the airline to achieve good levels of profit on the basis of established reputation.
Cheap Value Pricing:
The objective here is to undercut the competition and price is used to trigger the purchase immediately. Unit profits are low, but overall profits are achieved. Air India and Indian Airlines have slashed their prices to meet the competition of private airlines so that they can consolidate their position in the market.
Airlines usually practice differential pricing. There are three classes: The First Class, The Executive or Business Class and The Economy Class. Fares for each class are different since the facilities provided and the comfort and luxury level is different in each class. Seasonal fares are also fixed, fares rise during the peak holiday times.
With the advent of the low-cost airlines in the Indian aviation industry, a different low-cost flying concept has come up. Since these low-cost airlines are trying to woo the customers by providing air travel in exceptionally low prices, a price-band kind of pricing has to be designed.
In low-pricing strategies, the airlines provide very low prices for the flight tickets. Also, they prices are made cheaper by booking the tickets long before the flight date.
In this scheme, people are given very cheap rates only if tickets are booked atleast before the specified time period. But the draw-back here is that if the booking is cancelled, a substantial amount of money is not returned.
Understanding what, where, why, when, and how the target market buy, is the first step in designing the marketing channel. The marketer must understand the service output levels desired by the target market and types and levels of services that the people want and expect when they purchase the service.
The airline industry has adopted different distribution channels for marketing their services to their target audience. On the ground there are many ticket counters with computerized 24-hour reservation systems. They have many specially designed check-in counters for club and premiere passengers.
There are two principal methods of booking seats on an airline.
• The first is the group of traditional method such as the phone, fax, and email. Corporates or vacationers generally approach travel agents who book the tickets form the airline & take the commission from them.
• The second & increasingly popular method of reservation is the online booking method. Here the customer fills in his details online & he receives an instant booking of his ticket. His payment is generally through credit card. Although not as popular in India, this booking system has achieved much success in the developed countries that travel agents are losing their jobs.
An example of how distribution is carried out:
The place mix of airlines consists of mainly the distribution channels. The number of destinations that an airline flies to can also contribute to its place mix.
The Four methods of distribution are as following:
A] Consolidation: The direct sale of tickets from airport to the passenger on the airline desk.
B] Tour Operator/ Travel Agent: Customers approach travel agents or tour operators who book the tickets from the airline and take commission. E.g. SOTC
C] Affiliated with companies: As the name defines, airlines gets affiliated with companies who carry all its trips with a same airline who in turn gives special discounts or offers in return.
D] Direct through home leased system, e.g. phone, fax, email and also online e-booking.
The formulation of an ideal promotion mix is essential to inform sense and persuade the users. In the Indian perspective, we need more creative efforts because the potential users in a majority of the cases don’t prefer to use air services. The business magnets, executives, politicians, actors, high spending tourists etc are some of the users of the air services. The users appears to be more conscious, aware of their rights and in a majority of the cases are found to be sophisticated and therefore the promotional efforts have to be creative. Many airlines are facing financial crunch, it is pertinent that they make optimum use of different components of promotions
Airlines need creative advertisements to promote their business. In the view of rising cost of inputs and the increasing impact of worldwide economic depression on the airlines, advertisements should be budget optimistic vis-à-vis optimal. The telecast media and print media are important for promoting the air business.
The airlines have to make sure that whatever strategic decision they make to promote the businesses are in a position to establish an edge over competitor’s promotional measures. Also the airlines should keep in mind the quality and the nature of the target markets and the level of expectations.
It is also essential that while advertising airlines should also keep in mind the image of our country, the scenic beauty, tourist attractions, rich cultural heritages or which would attract number of tourists. While advertising it is impact generating that one should select an opportune moment of flight is an attractive scene of take off, and so on. Airlines can also use broadcast media. The domestic flights should use radios because due to increasing access to FM.
Publicity is an important component of promotion mix. It is a process of persuasive communication. It is very instrumental in sensitizing the persuasion process provided the media people, public relations officers provide their help. Strengthening the PR activities is essential to promote airlines business. The PRO, Receptionist, Travel agents, Media people are very important people in publicizing the business. The marketing professionals can seek the cooperation of media people by organizing dinners, meetings, get together, press conference etc, also giving them small gifts and motivating them to publish news items which are in favour of airlines.
• Sales promotion:
The sales promotion measures are meant for both the related sources channelising and using the business, such as the travel agents, tour operators and all of them who process the services and the passengers and business houses who use the services.
The travel agents contribute a lot to the promotion of airlines business and therefore the need to think of them in their favour on their priority basis. In addition the tour operators, the frontline staff also must be given priority. Hence they should be offer some incentives this will motivate them to promote the product. The user also deserves incentives.
The incentives may be in the form of concessional services, a small gift etc.
E.g. EMIs, which allows customers to pay in installments.
• Word of mouth
‘Customer Loyalty Ladder’
This happens to be an important constituent of the promotion mix in which the promoters act as a hidden sales force. The satisfied groups of users, opinion leaders narrate outstanding merits or salient features of services used by them.
If you travel by Air India and are satisfied with the services offered by them then it is natural that you will share your experiences with your friend’s relatives, they trust in you and therefore the stimulation process is on. The moment your friends and relatives get an opportunity to travel they find Air India their first choice.
Ads may be ineffective, publicity may also be ineffective but word of mouth can never be ineffective
In the service industry, service personnel come in direct contact with their customers in the course of production and consumption of the services.
Because people provide most services, the selection, training, and motivation of employees can make a huge difference in attaining customer satisfaction. Ideally, employees should exhibit competence, caring attitude, responsiveness, initiative, problem solving ability, and goodwill. Many service organizations trust their people enough to empower their front-line personnel to resolve customer problems.
The airhostess in any airline come in contact with the customers in the process of providing the service, while the cock-pit crew are employees who contribute to the service product but do not come in direct contact with the customers.
The physical presence and the percentage of time the customer is present reflect the customer contact and extent of contact respectively. Services with high contact are more difficult to control and manage because of the degree of variability in the quality, demand and nature of service.
The service contact personnel in the airline industry is an airhostess who is expected to possess a pleasing personality with polite service handling. While on the other hand the cock pit crew, being categorized as a low contact personnel, require to possess high analytical and technical attributes. In the airline industry, there is also the ancillary service personnel, the travel agent who helps to create the service exchange but is not a part of the service.
While delivering services, airlines ensure that the service is delivered as promised and this is often totally with in the control of the front-line staff. This ensures some amount of reliability. This in turn affects the degree of responsiveness sought from customers. The quality of service that the front-lone staff provides is highly depended on his/her ability to communicate their credibility. Airlines deliver caring and individualized attention to customers through their airhostesses. Empathy implies that these personnel will listen, adapt, and be flexible in delivering what individual customers need. Also the appearance of an employee are important aspects as it forms the tangible dimensions of quality along with other factors like service quality, decor etc.
To start off, airlines hire the right personnel with essential requirements. They recruit the right people and develop, and train them to deliver quality service. These employees are provided with effective and sufficient support systems and are motivated in a manner, they stick to the organization. They are more treated as customers, rather than employees.
The process of airline service lays emphasis on the involvement of channels, front line staff, travel agency offices, offices of the tour operators or so form where the services flow & reach to the ultimate users.
The process begins at the time of reservation goes on to the confirmation of seats. For e.g.: Computer reservation system of Indian Airlines enables any reservation request from anywhere in the world to be auctioned in minutes. The reservation facility is accessible through all-major computerized reservation system of the world.
By giving details of where to book and how to book airlines help in providing quality services to the customers. They also offer concession, by not charging any cancellation charges and also giving them the option to make a change in the reservation status if he requests so on the presentation of ticket, all these facilities go a long way in increasing passenger convenience.
Then facilities at the airport, the baggage handling, flight information, etc. also helps in delivering quality service and making travel a pleasure.
In the aircraft the meal service, in-flight entertainment, reading material, in-flight amenities, etc. help the customers, the travelers to have an enjoyable and convenient travel.
All these procedures form a part of the total process designed to deliver quality service. Airlines are making every effort to constantly redefine service procedures to enhance service satisfaction levels.
Physical Evidence refers to the environment in which the service is delivered and where the service industry and customer interact. The aircraft by itself, the seating configuration meant to be comfortable and spacious, and the in-flight food provide physical evidence to the airline service.
The Boeing Company and The Airbus Industry are the best commercial aircraft makers and almost all airline industries make use of one of these airlines. The seating is such that it is comfortable and there is enough leg space
The in-flight food is another, important aspect, a wide selection of meals is offered to the passengers. Passengers are requested to indicate their reference at the time of reservation itself. Delta Airlines has introduced new sleeper seats with electric controls for reclining lumbar support, leg rest extension, expanded seat back height for a more insulated environment etc. thus providing highly comfortable seating.
Booking offices, ticket counters, etc. must be spacious and well designed with good looks. Further the air crafts must be given good exteriors and must be maintained wel1.
The aircraft must have elegant interiors and must be incorporated with all basic facilities. The aircrafts must have well designed seats with more leg room especially in the business class.
Domestic lounges are enhanced with good interiors and basic amenities which will make it an ideal place to conduct business, entertain or relax.
The jet logo prominently displayed on each of its aircrafts, is used a cue to trigger of a reminder of the customer’s experience at Jet & also of all the values that jet airways stands for.
The physical evidence would also include the other facilities in the aircraft. Some of the bigger aircrafts have more than the usual facilities on board. These sort of tangible clues act as identification marks for the airline & help the customer to evaluate on airline from another.
Quality Dimensions: RATER Analysis
Customers don’t assess the quality of service on one dimension only, they use multiple parameters to judge the quality of the service that they are being offered. These characteristics which people consider vary from person to person, industry to industry. Even depend upon the product on offer.
Because of the intangibility and multifaceted nature of many services, it may be harder to evaluate the quality of a service than a good. Because the customers are often involved in the service production a distinction needs to be drawn between the process of service delivery and the actual output of the service. The most extensive research into service quality is strongly user oriented.
Services are broadly classified into 10 dimensions namely:
Understanding the customer
Since most of these dimensions are overlapping they were pooled down to five dimensions as given below:
When we look at these dimensions with respect to the airline industry we find that the following service qualities are expected by the customer.
• Reliability – flights to promised destinations depart and Arrive on schedule
• Assurance – trusted name, good safety record, Competent employees
• Tangibles – aircraft, ticketing counters, baggage area, uniforms
• Empathy – understanding of special individual needs, anticipates customer needs
• Responsiveness - prompt and speedy system for ticketing, in- flight, baggage handling
Ability to perform the promised service dependably and accurately.
This would basically be that company delivers to the customer what is promised & the customers basically like to deal with companies that can fulfill their promises.
When we look at the airline industry we can see the following things the customer would expect certain basic facilities like: some functional infrastructure provided to him, the flight leaving & taking off on time, the luggage reaching safely.
Employees’ knowledge and courtesy and their ability to inspire trust and confidence
Assurance relates to knowledge and accuracy of employees and their ability to convey trust and confidence. This dimension is of great significance for services where a customer perceives high risk and is not sure of the outcomes. The employees should have a positive morale & should be motivated if they have to promote the firm & create a sense of assurance in the flyer’s mind.
Jet Airways is generally considered the more customer friendly of the domestic airlines. The staff there is nicer to old people or little kids who might be travelling. Though Jet has a very young staff, so some of the members could possibly not match the kind of experience the Indian Airlines crew has. Suppose some senior citizen is travelling alone in an aircraft for the first time the crew should see to it that he is given proper instructions & is comfortably settled in his seat.
Besides this, after the September 11 crisis, there was a lot of scepticism in the fliers & to instill a little confidence in the consumer’s mind, the government paid greater emphasis on security in the aviation policy. This was all so that people would feel safe next time they traveled by air. `They would appoint a committee and look into the recommendations provided by them to better the security arrangements in the airplanes & airports.
Appearance of physical facilities, equipment, personnel and written materials
Tangible features would be those physical features, which can be seen by the customer. These would be the physical proofs, which would help the customer to judge the quality of service. The customers evaluate the quality of these services on the basis of the tangibles provided by the service providers. The marketers of services emphasize on tangiblising the intangibles.
Incase of the airline it’d be the aircraft that the airline uses, how old they are, and the kind of facilities that are provided inside the aircraft or in the waiting area. The technology used for baggage handling. The coaches used to transport the customer to the aircraft, all of these speak leaps & bounds about the service provider. The kind of skilled staff that they have the uniform that the staff wears.The tangibles would also include the infrastructural facilities present at the airports. This is where we find most of the Indian airports lacking. They have no proper arrangements to handle the customers.
When we look at the aircraft fleet that is a very important tangible feature, and we find that Indian Airlines has a really ancient fleet of aircraft’s which doesn’t make it extremely safe as older planes are more prone to damage. Whereas, Jet Airways has the youngest fleet in the business.
Caring, Individualized attention given to customers
Empathy basically is when the employees of the organisation make the customer feel at home, at ease, making him feel wanted. The customers are mostly offered the same service from most of the airlines. The easiest way for an airline the maintain and grow it’s client base is to be empathetic towards their customers, to understand their specific needs and to cater to them & they should make each customer feel like he is a unique asset to the company & like their single most important client. Addressing the clients by their first names, keeping a track of their usual flying routes, their preferences in flight & catering to all of those, maybe giving him his favorite seat each time he travels.
Willingness to help customers and provide prompt service.
Responsiveness is willingness to help the customers and provide prompt service The degree of responsiveness shows the level of commitment that the people of the company have towards their work. It is very necessary for the company to concentrate on prompt & the right kind of responsiveness to the needs of the customer.
Incase, a certain passenger doesn’t like a certain meal served on the plane, the cabin crew should be in a position to offer him an alternative meal in little time, as his perception or opinion of the airline company would mainly depend upon whether he goes satisfied on this complaint or not. Care should be taken that prompt response and top quality service is provided to satisfy all of the customer’s needs.
The interaction between the customer and service provider in the airline industry means that the employee often represents the company to the airline travelers (customers). Especially in the airline industry the service encounter plays a significant role because here the customer comes in direct contact with the employees of the airline company and spends a lot of time in the service factory (the aircraft). Hence the issue of staff presentation is a major tangible factor in the airline industry. This in turn influences the satisfaction level of the customer.
The airline company’s organizational structure and culture dictates the extent to which responsibility for staff recruitment, training and motivation is shared between marketing operations and human resources. For service marketers in this industry, the core of service element is the interaction between those providing services and the customer is known as service encounter.
Critical incidents are specific encounters between customers and service employees that are especially satisfying or dissatisfying for one or both parties. In the airline industry critical incidents are very important as they help the company evaluate and measure satisfaction level of the customers. The critical incident technique is a methodology for collecting and categorizing such incidents in service encounters.
A service firm may win by delivering consistently higher quality service than competitors and exceeding customer’s expectations. These expectations are formed by their past experiences, word of mouth and advertisement. After receiving the service customers compare the perceived service with the expected service. If the perceived service falls below the expected service customers lose interest in the provider. If the perceived service meets or exceeds the expectations they are apt to use the provider again. The model shown identifies 5 gaps that cause unsuccessful delivery in the airline industry.
a. Gap between consumer expectation and management perception: Management does not always perceive correctly what customers want. In the airline industry, the company might perceive its target customers to be ambience driven and not price driven but in reality it might turn out to be the other way.
b. Gap between management perception and service quality specification: Management might correctly perceive the customers wants but not set a specified performance standards. A company like Air India who thoroughly understands what its customers want but due to external factors like lack of resources and the fact that it is a government run organization due to which there is a lot of political interference restricting the company from performing at its best.
c. Gap between service-quality specifications and service delivery: The personnel might be poorly trained or incapable or unwilling to meet the standards. Or they may be held to conflicting standards such as taking time to listen to customers and serving them fast. This had happened in the case of Air India during the SARS outbreak where the pilots refused to fly on the last moment after the flights had been declared scheduled.
d. Gap between service delivery and external communications: Consumer expectations are affected by statements made by company representatives and ads. Air India boasts in its hoarding advertisements about the companion of the customer flying free i.e. buy 1 and get 1 free but it is only applicable for 1st class passengers which is no where mentioned and there are many such examples or campaigns that can be mentioned about.
e. Gap between perceived service and expected service: This gap occurs when the consumer misperceives the service quality. This is a combination of one or more of the previous gaps and provides a clear indication of the degree of which service quality exists in the service organizations.
When the company fails to stand for its promises made to the customer on the basis they build expectation, it’s to be said that there is service failure. When the service failure occurs, there can be again severe ramification. Customer is considered to be the bread and butter, hence retaining them is the biggest challenge, and however service failure acts as an obstacle to it. In such failures,
1) The customer wants what they were promised.
2) Customer wants personal attention
3) Customer wants a decent apology
4) Customers want that they should not be made to feel that they are the cause of the problem. (Though in many cases they are responsible for nuisance)
There are again five steps involved in order to deal with service failure. They are mentioned as below
1st step: acknowledgement and apology for the fact.
2nd step: listening to the customers.
3rd step: avoid defending the company and offer a rational explanation.
4th step: offer some extra benefits
5th step: have a proper follow up and make sure no mistakes this time, so that he can easily forget about the service failure and is retained.
(Example covered while presentation)
A customer expects 3 shorts of fairness in case of service recovery. They are mentioned as below.
1. Interaction fairness: - when there is service failure, first the company is supposed to acknowledge the customer. Due to this the customer might turn erate, but he still expects fairness and courtesy in the language and tone used by the addresser
2. Procedure fairness: - to know in detail about the incidence of service failure or to avail the compensation. There should be simplicity in procedure, which is involved. Service failure and complexity in procedure both together might result in a disaster as far as customer is concern.
3. Outcome fairness: - now when the company realizes that there is service failure they should end up compensating, arranging for some alternative mode of transporting or complies with the customer condition. The outcome should be taken by considering the customer, his needs and the company’s policy.
Handling complaints is a big challenge for every company today. Before understanding how to handle, let us see what are the factors, which can result in customer’s complaints
The Fish-Bone diagram for the Airline Industry
There are ten steps involved in handling complaints effectively. They are mentioned below.
1) The frontline employee handling complaints should stay calm under any circumstances.
2) Let the customer get the story off their chest- do not interrupt, this will only cause irritation. In this case listening skills comes into picture.
3) Avoid admitting any liability at this stage. The officer just need to show concern like, “I’m sorry for the inconvenience, let me see what I can do”. Give attention to the customer, make him feel important.
4) Get facts by using question and try to find out the real and whole story behind it.
5) After listening and collecting data, just identify appropriate action considering company’s policy and customer’s expectation.
6) Take action if you have authority or involve manager or concerned person.
7) If corrective action cannot be taken immediately, tell the customer. It’s better to give bad news rather giving false news.
8) Record the action to be taken and inform anyone else in the organization involved.
9) Look into the matter, provide a proper follow-up.
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 latest development in technological in computer and telecommunication have encouraged the bankers to changes the concept of branch banking to anywhere to anywhere banking. The use of ATM and internet banking have allowed anytime anywhere banking facilities. Simple quires are now answered by automatic voice recorders, currency accounting machines; self service counters are now encouraged. Credit card facility has encouraged an era of cashless society. Today master card and visa card are the two most popular cards used world over. The banks have now started issuing smartcards or debit cards to be used for making payments. These are also called as electronic purse. Some of the banks have also started home banking through telecommunication facilities and computer technology by using terminals installed at customers home and they can make the balance inquiry, get the statement of accounts, give instructions for fund transfers, etc…through ECS we can receive the dividends and interest directly to our account avoiding the delay or chance of loosing the post.
Banking is as old as authentic history and the modern commercial banking are traceable to ancient times. In India banking has been existed in one form or the other from time to time. The present era in banking may be taken to have commenced with establishment of bank of Bengal in 18089 under the government charter and with government participation in share capital. Allah bad bank was started in the year 1865 and Punjab national bank in 1895, etc…
Every year RBI declares its 6 monthly policy and accordingly the various measures and rates are implemented which has impact on the banking. Also the union budget affects the banking sector to boost the economy by giving certain concessions or facilities. If in budget savings are encouraged more deposits will attract the banks and in turn they can lend more money to the agricultural sector and industrial sector, therefore booming the economy. If the FDI limits are relaxed then more FDI are brought in India through banking channels.
POLITICAL/ LEGAL ENVIROMENT
Government and RBI policies affects the banking sector sometimes looking into the political advantage in a particular party the govt. declares some measures to their benefits like waver of short term agricultural loans, to attract the farmers votes. By doing so the profits of the bank get lower down. Various banks in the cooperative sector are open and run by the politicians. They exploit these banks for their benefits. Various chairmen’s of the bank are appointed by the government.Various policies are framed by the RBI looking at the present situation of the country for better control over the banks.
Before nationalization of the banks the control of banks were in the hands of the private parties and only big business houses and the effluent sections of the society were getting benefits of banking in India. In 1969 government nationalized 14 banks. To adopt the social development in the banking sector it was necessary for speedy economic progress consistent with social justice in democratic political; system which is free from domination of law and in which opportunities are open to all. Accordingly with national and social objective bankers were given direction to help economically weaker section of the society and also provide need based finance to all the sectors of the economy with flexible and liberal attitude. Now the banks provide various types of loan to farmers, working women, professionals, and traders. Also on apart from the recently education loan to the students and housing loans, consumer loans, etc...
Banks having big client or big companies say reliance etc…have to provide something like personalized banking to their clients because these customers do not believe in running about and waiting in queues and getting their work done. The bankers have to provide these customers with special provisions and also at times benefits like food and organize parties for them. But the banks do not mind incurring these costs because of the kind of business these clients bring for the bank.
7 P’S of BANKING SECTOR
It is very important for any bank to identify the 7 P’s of services so was understands their customers better and provide them with best of service. The 7 P’s are:
Savings, Current, Fixed etc.
(1) Fund Oriented:
a) Term Loan,
b) Clean Loan,
c) Bills Discounting,
e) Pre-shipment Finance,
f) Post-shipment finance,
g) Secured and Unsecured lines of credit.
(2) Non-fund oriented:
a) Guarantees, and
b) Letter of Credit.
(C) INTERNATIONAL BANKING:
a) Letter of Credit, and
b) Foreign Currency.
a) Investment Counselling,
b) Project Counselling,
c) Merchant Banking, and
d) Tax Consultancy.
a) Traveller Cheques,
b) Credit card,
e) Sale of Drafts,
f) Standing instructions, and
The price mix in the banking sector is nothing but the interest rates charged by the different banks. In today’s competitive scenario where customer is the king the banks have to charge them interest at the rate in force on accordance with the RBI directives.
Banks also compete in terms of annual fees for services lie credit cards, DMAT etc. another important part of the banks pricing policy today is the interest charged on the Home Loans and Car Loans. With India’s economy progressing there are more and more buyers seeking these loans but at a very competitive interest rate.
Let’s understand this with an example. A particular buyer approaches for a car loan say for a period of 3 years. He is charged Rs. 20,000 as interest. however if a sales representative of another bank comes to know of this deal he will try to attract the customer by giving him a better deal that is a loan at a lower rate on interest. In this way due to the high level of competition the customer benefits.
This type of pricing is mainly done by banks having unique or different products or schemes. They usually charge a combination of high and low prices depending on the customer loyalty as well as the products. This type of pricing strategy is usually coupled with promotion programmes.
Going rate pricing:
The most pricing technique is going rate pricing. In going rate pricing the banks bases its price largely depending on the competitor’s prices. The banks however have to stay within the RBI directives and compete. The banks may charge higher or lower than their competitors. After 1991 when the foreign banks entered the Indian market this method of pricing has gained increasing importance.
Mark up pricing:
This is a pricing technique wherein the cost of the service is determined and a small margin is added to it and then the final price is offered to the customers. This type of pricing is the not very popular since in the banking sector it is not very easy to arrive at the cost of the service. Thus most banks use a combination of mark – up pricing and going rate pricing.
THE MOST FAVORABLE PRICING STRATEGY
This model shows a pricing strategy which should be adopted in order to ensure maximum satisfaction to both the bank as well as the customers.
Place mix is the location analysis for banks branches. There are number a factors affecting the determination of the location of the branch of bank. It is very necessary a bank to situated at a location where most of its target population is located.
Some of the important factors affecting the location analysis of a bank are:
1. The Trade Area:The trade area is a very important factor determining the place where a bank branch should be set up. For example a particular location maybe a huge trading place for textiles, diamonds or for that case even the stock market. Such locations are ideal for setting up of bank branches.
2. Population Characteristics: The demography of a place is a very important factor. This includes:
The income level of the population
The average age
The average male female population
The caste, religion, culture and customs
The average spending and saving habit of the people.
These factors are very important for a bank as the help them decide the kind of business the branch will get.
3. Commercial Structure:The commercial structure refers to the level of commercial i.e. business activities taking place at a particular location. The higher the level of business activities taking place in a particular location the more preferable it is for setting up a bank branch.
4. Industrial Structure: This is nothing but a combination of the trade area analysis and the commercial structure. However the industrial structure focuses more on the kind of industries operating in a particular location. For example an area like seeps is marked with a lot of electronic manufacturing units. Thus the industrial stricture determines the kind of financial transactions that could take place in a particular location
5. Banking Structure:The Banking structure refers to the existence of other banks in the area. Whether there is already an efficient network of other bank branches operating at that particular area. Thus the overall infrastructure needed for the working of a bank.
6. Proximity of other convenient outlets:This refers to the other branches of the same bank as well other commercial, entertainment and industrial outlets.
7. Real Estate Rates:This is mainly dealing with the cost factor involved in opening up a bank branch at a particular location. The real estate rate is very strong factor influencing the location decision for a bank branch.
8. Proximity to public transportation:The location should be proximate to public transportation facilities. This means it should have bus stops close by as well as it should be proximate to railway stations so to make it convenient for the common man.
9. Drawing Timerawing time refers to the time period in which a bank can draw a huge amount either from other banks o from the RBI in case of any kind of emergency requirement. No bank has more than a certain amount with them and in case a customer wants to withdraw an amount more than that available with the bank, the bank needs to draw that amount from other banks. Hence a location must be such that it facilitates minimum drawing time.
10. Location of Competition:The existence of other banks also means competition. If the level of competition is very high in a particular location it is necessary that a bank does a lot of market research before opening a branch so as to estimate the kind of business it would get.
11. Visibility:The location of a branch should be such that is visible and easily noticed by the customers as well other people.
12. Access:The bank branch should be very easily accessible to the customers. If this is not the case the customer might switch to some other bank which is more convenient to him and very easily accessible. The location should be such that it is very convenient for the customer to reach.
Promotion is nothing but making the customer more and more aware of the services and benefits provided by the bank. The banks today can use a lot of new technology to communicate to their customers. Two of the fastest growing modern tools of communicating with the customers are:
1. Internet Banking
2. Mobile Banking
Different ways of Promotion
Public Relations:In today’s competitive scenario developing strong public relations is very important for any bank to be successful. Most banks today have a separate Public Relations department. However primarily it is considered as a responsibility of the various bank managers to develop a steady and strong relationship with their present customers as well as potential customers. This can be done by a constant follow – up and also some small programmes etc.
Personal Selling:Personal selling is found to be one of the most effective and popular form of promoting bank business. The main reason for this is that banking is a service in which trust plays a very important role. In personal selling a bank representative goes to the customers and explains the scheme to the customers. Also he gives the customers any kind consultation he might need. He provides the customers all the information seeked by him. Representative tries to persuade the customers to go for the scheme provided by the bank by telling him all the benefits. Here are some of the important features of personal selling
it is a direct relation between the buyers and the seller
it is oral presentation in conversation
it is personal and social behavior
it is found to be more effective in service oriented organizations
it is based on the professional excellence or expertise of an individual
Sales Promotion:Sales promotions are basically giving the customers some additional benefits maybe at times just some small gifts in order to promote the schemes. The more innovative the sales promotions the more positive are the results. Some of the most popular sales promotions techniques are gifts. Contests, fairs and shows. Discounts and commission, entertainment and traveling plans for bankers, additional allowance, low interest financing etc. it is very important that the sales promotions benefits are designed in such a manner that they are better than those of the competitors.
Word – of – mouth Promotion: This form of promotions is not only very effective in banking services but in any kind of service. However it is more important in banking for the only reason that this is a service where trust plays a very important role. If a particular bank’s services are recommended by one’s friends, relatives, or other well – wishers the person is more influences and inclined towards that bank. It is very important to note that the internal employees of the bank play a very important role in word – of – mouth promotion technique. This is because they can start the process by recommending the bank to their friends and relatives and after that it is like chain which spreads like wild fire.
Telemarketing:In recent times telemarketing has gained increasing importance as an effective tool for promotion. The telemarketing is a process of making use of sophisticated communication network for promoting the banks. This includes promoting through television, telephone, radio and nowadays very largely through cell phones. This is the most popular form of promotion. Banks today have started using ‘SMS’ and many other services supported by cell phones to provide benefits to their customers and thus have tried to increase their sales. In today’s competitive and modern scenario it very important that banks makes use of telemarketing techniques very efficiently to have desirable results.
Internet:The use of internet as a promotion tool is increasing very fast today. More and more banks are using internet to promote their services. The online banking has made it even easier for the customers to avail the bank’s services. No longer do people have to go to their bank branches for small petty matters like checking their balance etc. all this can done with just the help of a few clicks. Thus these were the numerous ways in which a bank can promote its services and create more awareness amongst the people.
PeoplePeople are the employees that are the service providers. In a banking sector the service provider plays a very important and determinant role in rendering the customers a satisfactory and a good service. It is extremely essential that the service provider understands what his customers expects from him. In a banking sector the customer needs to be guided in a lot of matters which is possible only with the help of the service provider.The position in the eyes of the customer will be perceived by appearance, attitude and behavior of the customer contact employees. Not only the customers contact employee influence the customers but also the customer base of the organization does so.
The process mix constitutes the overall procedure involved in using the services offered by the bank. It is very necessary that the process is very customer friendly. In other words a process should be such that the customer is easily able to understand and easy to follow. Today if particular banks formalities are long and the procedure very complicated the overall process fails and the customer may not be inclined towards using that banks services.
Let’s take for example the process for application for a car loan.
Now this mainly involves 3 things.
1. Producing of proper documents
2. Filling up of application form
3. Paying for the initial down payment.
Here the process may fail in the following cases:
1. If the customer is asked to produce a number of forms out of which some may not be necessary at all. Thus it is very necessary that the customer is asked for the minimum but most necessary document and not other unnecessary documents.
2. In case of application form, the application form must in a language best understood by the customers and it should not be very lengthy one demanding a lot on unnecessary information.
3. Finally the payment of initial amount. The customer should be given options as to how he would like to pay by Cheques or by credit card. Once again the amount should be very competitive not very high above the regular rates prevailing in the markets.
The smaller and simpler the procedures the better the process and the customer will be more satisfied.
Physical evidence is the overall layout of the place. How the entire bank has been designed. Physical evidence refers to all those factors that helps make the process much easier and smoother. For example in case of a bank the physical evidence would be the placement of the customer service executive’s desk, or the location of the place for depositing Cheques. It is very necessary the place is designed in such a manner so as to ensure maximum convenience to the customer and cause no confusion to him.
THE 4 I’S OF BANK MARKETING
There are four distinctive characteristics of service, which create challenges and opportunities. They are commonly known as the four I’s namely:
It is that characteristics of a service indicating that is not a physical attribute that a person may feel, hear, taste before they buy it.
Like for example of the bank that I visited, a person who is new to this bank and wanted to open up a account in the bank can not feel it that or taste it that it could be good before opening an account. He has to experience it how is the service, how humbly do people or the staff members behave with him, is his money invested or put in an account safe or not, he would come to know from the services. This could be done only from the trust that that he would build up as these things cannot be inspected before the use that is in this case they cannot be told how the service is before having some actual work in the bank. It is used that the service has been performed and delivered at a certain particular quality.
This refers to variability that a company or an organization may depend on Inconsistency. For a bank, a new customer or a rare going customer may not get the same type of service as much as a regular customer may get. This may be the case because the staff members know the person well as he comes often but they don’t know that person who does not come in again and again.
Also another point for inconsistency is that the service delivery by different people that is service is delivered differently from different types of people. Like in case of a bank, different staff members would provide different services. In the bank a person may have lot of work and may not attend a customer as may be a person with the same work may attend him with great enthusiasm.
In one of the book, I read the bank “PANJAB NATIONAL BANK” that promotes itself as “crown of quality for customer who is the king” and is an ISO 9002 certified bank. Thus it has to have consistency and quality to serve its customers.
3.) Inseparability :
Inseparability is that characteristics of a product that cannot be separated from creater-seller of a products. This means that whenever a product is sold a service is also attached with it. Like for e.g. if you buy a room in a hotel to stay for 2 days then the receptionist, the waiters all have their service attached with it. But this is only possible when the hotels have customers to stay inn and the hotel owner has mangers, waiters etc. to provide them services. Thus, services when provided should have both the accepter as well as seller. Then it is known as inseparable.
There are basically 3 types of services.
(i) Co- production: where the service provider and the customer work together to produce services. Bank service where if a customer wants to withdraw cash then both need to be present.
(ii) Isolated production: the part of service that is done outside to an organization. Services of TELE-BANKING.
(iii) Self Service production: uses the equipments of the service providers and self serve it. Services of ATM.
By this one means that the perishable characteristics of the service marketing. In a bank if a customer starts with his day in the morning eight and ending in the day at four where as in bank is open in morning at 9:00 a.m. and closes at 1:00 p.m. in the afternoon, then one might not be able to attend it but nothing can be done in this case because for such a person the bank cannot be on till end. Also there may be is less work in the middle of the month where as in end and starting of a month there could be more work like people come to put in money as they get there salary, there would be withdrawals, pass book checking etc. which cannot be transferred in the between of the month as it depend on the people when they come as well one would come to put his money of salary only when he gets it and that’s at the end of month. So service faces a lot of problem from inventory as it cannot be stored, saved and then used later.
An organization is supposed to enter to the changing needs of customers; it is natural that all customers have their own likes and dislikes. They have some uniqueness which throws a big imprint on their lifestyles. This makes the task of understanding a bit difficult. It has the context that we go through the problem of market segmentation in the banking service.
In the banking services, the banking organizations are supposed to satisfy different types of customers living in different segments. The segmentation of market makes the task of bank professionals easier. If the market segmentation is done in a right fashion, the task of satisfying the customers is simplified considerably. The modern marketing theories advocate the formulation of marketing policies and strategies for each segment which an organization plans to solicit.
CRITERIA FOR SEGMENTATION
Segmentation in a right fashion makes the way for profitable marketing. This helps policy planners in formulating and innovating the policies and at the same time also simplifies the task of banking professionals while formulating and innovating the strategic decision. The following criterion makes the segmentation right.
1. ECONOMIC SYSTEM:
An important criterion for market segmentation is the economic system in which we find agricultural sector, industrial sector, services sector, household sector, and rural sector requiring the weight age while segmenting.
A). AGRICULTURAL SECTOR: In the agricultural sector, there are four categories since the needs of all categories can’t be identical.
The mechanization of agriculture, the improved or scientific system of cultivation, the help of nature , the magnitude of risk, the availability of infrastructural facilities influence the level of expectations vis-à-vis the needs and requirements. The banking organizations are supposed to know and understand the changing requirements of different categories of farmers.
B). INDUSTRIAL SECTOR: The banking organizations are supposed to have an in-depth knowledge of the changing needs and requirements of the industrial sector. The large –sized, small- sized co-operative and tiny industries use the services of the banks. The expectation of all the categories can’t be uniform.
The banking organizations are supposed to have an in-depth knowledge of the changing needs and requirements of the industrial segment. The emerging tends in competition, the pressure of inflation, the use of sophisticated technologies, and the business regulations are some of the important aspects influencing the hierarchy of needs.
C). SERVICES SECTOR: It is an important sector to the economy where the banking organizations get profitable business. The two categories of organizations such as profit-making and non- profit making are found important in the very context.
The banking organizations need to identify the changing needs and requirements of the services sector with the frequent use of IT and with the mounting pressure of inflation and competition, we find a change in the hierarchy of needs.
2). HOUSEHOLD SEGMENT:
This also constitutes an important sector where different income groups have different needs and requirements. In the below figure we can see the different segments of household sector.
A). HOUSEHOLD SEGMENT: The high income group, middle income group, subsistence level group and marginal income group have different hierarchy of needs which influence the level of their expectations.
B). GENDER SEGMENT: In the gender segment we find male and female having different needs and requirements. The banking organizations are supposed to identify the level of expectations of both sexes as shown in the below figure.
Some of the women are housewives and therefore they have different needs and requirements whereas some of them are working ladies having different needs and requirements.
C). PROFESSION SEGMENT: In the profession segment, we find different categories of professions and therefore we find a change in their needs and requirements. As shown in the below figure.
White - Collar
Blue – Collar
Profession Segment Public/ Private Formal/Informal
The technocrats, bureaucrats, corporate executives, intellects, white-collar and blue collar employees have different needs and requirements and therefore the banking organizations should know their expectations.
In this sector we find different categories of organizations. Some of the organizations are known as charitable organizations, some of them are cultural/ social organizations, some of them are industrial and many of them are profit making and many are philanthropic and many of them are related to trade and commerce. It is natural that the needs and requirements vis-à-vis the level of expectations cant be identical in all cases. To satisfy and to increase the market share it is imperative that the banking organizations are familiar with changing needs and requirements. The emerging trends in the social transformation process determine the hierarchy of needs.
Chamber of Commerce
Trade and Commerce
InstitutionalSegment Sub- Segment
INFORMATION TECHNOLOGY SECTOR
IT is a term referring to both telephony and computer technology. IT includes all forms of technology used to create, store, exchange and use information in its various forms.
The term IT includes:
• Internet service
• Cables and wires etc.
The definition of IT is very dynamic. It has been defined as simple automation of manual processes using microprocessors to computers to network and so on.
THE INDIAN SCENARIO
IT has been prevalent in India for a long time but the real importance and the global recognition is has been a very recent phenomenon. India has a vast number of IT professional with a very knowledge and also they are cheap as compared to lobar from other country.
IT in India has been continuously growing after liberalization in 1991. A large number of multinationals started setting up their software development centers in India due to availability of good labor at a good price.
Seeing this opportunity the Indian software firms started offering their service from India dedicated to specific US clients. By this time India was only preferred due low cost but now when most IT companies like TCS, WIPRO, INFOSYS have been ISO 9000 CERTIFIED, no one can doubt the quality.
YEAR 2000 an important year for the India IT firms. Remember the Y2K virus. US faced a big problem called the Y2K and due to shortage of good labor they had to outsource the solution from India. Once again Indian firms proved that they were indeed the best.
Since then there is no looking back and India is today known as the king of IT.
IMPORTANCE OF IT
World without IT? So difficult to imagine. There is no sector that does not understand the importance of IT. Just think what will happen to the mobile sector without IT. It would crash. IT has brought the world together with the help of Internet service.
Let it be the airline sector or housing sector or let it be any other sector, IT has helped all of them to become much more efficient.
IT enables you to book a ticket online. It makes things so accessible. You can buy and sell shares online. Internet banking is one more example. In that case even ATMs run with the help of IT.
Apart from this IT has made it possible to outsource the support service beyond the geographical barriers. This has created a new sector in itself called the ITES or IT enabled services. Call centers are the best example over here. Some more examples would be:
• ANIMATION COMPANIES
• WEB SITE SERVICE
• HR SEVICES LIKE OUTSOURCED PAYROLL PREPARATION
• ACCOUNTING SERVICE SUCH AS BACK OFFICE DATA PROCESSING
Political (incl. Legal):
• Environmental regulations and protection-the country is open to firms that are set up for the IT industry. It provides protection from foreign competitors by not allowing a complete 100% stake in the Indian subsidiary.
• Tax policies-IT firms initially had tax discounts. Even now It firms enjoy lower tax rates than other service industries.
• International trade regulations and restrictions.
• Contract enforcement law
• Consumer protection
• Employment laws
• Government organization / attitude
• Competition regulation
• Economic growth-India has grown a lot more in the last 20 years than it id in the previous 20. This it self shows that the growth has been due to newer technologies coming into the country. Hence IT is the key-driving factor in this.
• Interest rates & monetary policies.
• Government spending.
• Unemployment policy-unemployment in the IT sector is just as high as the employment rate is. The personnel turnover in It sector is amongst the highest among all service industries.
• Exchange rates
• Inflation rates
• Stage of the business cycle
• Consumer confidence
• Income distribution-The e income distribution in the country is very biased. By the entry of IT in a major way a lot of people who were struggling to make 2 ends meet were given employment opportunities.
• Demographics, Population growth rates, Age distribution
• Labor / social mobility-Thanks to the It era the mobility of human resources is massive. People from allover the country work together. Employees are picked up from all over the globe to work at certain research or management center.
• Lifestyle changes-The entry of IT into the lives has people has bought about huge changes in their lives. IT firms pay better than the average salary rates in industries. Due to this employees are buying more, earning more, spending more. Hence there is an improvement in their lifestyle.
• Work/career and leisure attitudes
• Government research spending-the government itself has set up research centers and promotes firms that go into research of technology.
• Industry focus on technological effort
• New inventions and development-everyday a new technology or a certain deviation is being invented. The IT industry is a very fast paced and ever changing
• Rate of technology transfer-The rate of technology transfer is very fast in the IT sector. Usually companies import the technology to enhance their position in the global market.
• Life cycle and speed of technological obsolescence-Technological obsolescence is very fast in the IT sector. Usually the life cycle of an employee is just as much as the technology that he specializes in.
• Energy use and costs
Completing a PEST analysis is relatively simple, and can be done via workshops using brainstorming techniques. Usage of PEST analysis can vary from business and strategic planning, marketing planning, business and product development to research reports.
The 7 P’s of IT services
The products and services which make up the IT industry are many and varied, being used by all manner of organizations in business, government, administrative, technical, scientific, educational and manufacturing processes.
Components of IT:
• Computer technologies
• Communication technologies
• Computer technologies
This has two major parts:
1. computer hardware
2. computer software
Product line: the various products offered by the industry.
Product width: the various products and various types of the products with distinct features.
Computer hardware: all mechanical, electrical and components of a computer system are known as computer hardware. The monitor, central processing unit and the keyboard.
Computer software: computer software is the set of computer programmes, which would carry out particular computer based applications. Computer programme is a series of instructions given to a computer to perform a particular task. A fully documented programme or a set of programmes, designed to perform a particular task is called a software package.
• Communication technologies: The technology that helps to communicate data or information in analog as well as digital mode is called communications technologies. It includes telecommunications, satellite technologies; Internet based technologies and computer networking.
Pricing is one of the important aspects amongst the rest of the marketing mix. However pricing is obviously affected by various environmental factors like especially economical.
To elaborate on it pricing in IT is something very much premium. However now a days it is been deeply affected by competition due to which prices are going down for example previously these home personal computers were available at approx Rs. 60000 and now one may get it at 30000 also this is because there was only one company before making it now there has been tremendous competition in it. Like it was only IBM now it is also HP, SUN and so on also the monitors are of different companies example Samsung, Microtech and so on. The next point is that now it is available in assembly pieces also hence it is going cheaper however this is related to hardware.
Pricing in IT is decided taking into consideration the following factors:
Important characteristics of information, which have influence on pricing, are accuracy, timeliness and fittingness with easy use and reproduction ability. More accurate, timely, and fitting the information, higher would it be the user and higher it would also cost to collect and provide to the buyer by the marketer.
As such we see that companies such as Infosys Wipro charge very high price and as a result their gross margin is as high as 60% to 70% of their sales.
Type of the product
Information can be into three broad categories:
• Services and
• Value added services/product.
Pricing a product is very different from pricing a service or value added information. Better packaging, faster delivery or making it user friendly may add value of a physical product say an issue of current content. However in case of a service none of the above attributes is visible to the buyer before the service is bought. Services are primarily retailing activities with the seller/provider dealing directly with the intended user.
The Customer: who is buying
It is essential to study and know yours users before you become involved with the pricing frame. Everyone needs information. However, what prices will a customer pay for the information depend on answers to some key questions like:
• How important it is?
• How much they can pay?
• How much do they expect to pay?
Ability to pay
Even if the value of the information tho the customer can be ascertained, the ability to pay for the information differs across customers. The differences arise because of variations in the types of customers.
In general these are:
• Whether the customer is located in developed or developing countries?
• Whether the customer is an individual or an organization ?
• The type of customer within each class
Due to competition it is found that companies are reducing price and as a result there profits are adversely affected. In discussing the P’s of services it is important to note that IT industry plays a very important Role of supplementary to all other industries be it banking hotel etc.
TOTAL PRODUCT CONCEPT:
Place mix deals with location, channels of distribution, managing these channels, etc., in IT the issue of location doesn’t come into the picture as the entire IT industry is based on distribution networks. Hence here the important aspect is a distribution network. Hence here the important aspect is distribution of the networking. Rest all aspects of place do not have relevance in IT industry.
Some of the relevant promotional activities under direct marketing, public relations and advertising are as follows:
Direct marketing Public relations Advertising
Free samples Speeches
Public interest articles in media Print and broadcast ads
Brochures and booklets
Posters and leaflets
Symbols and logos
These are used to inform the customers about the salient features offered and the corresponding prices.Eg. Internet Service Providers Like VSNL, Sify, etc.,
Dotcom companies to inform the customers about their products and services mostly use these methodsEg. Rediff, Bazee.com, indiatimes
The companies to attract customers by providing them information through telephone services use this.Eg: ICICI Direct.com
In India this type of promotion is famous through by some companies like Bazee.com, indiatimes.com. Not many IT companies use these promotion techniques.
All IT companies through before and after the sales follows it.E.g. Infosys, Satyam, etc.,
All companies use these, as they are one of the best promotional methods for the IT COMPANIES. Companies use this medium to display their products and services and also any grievances or information about services are taken from customers. E.g. Wipro, Infosys, IBM, etc.
Most of the IT companies use less of this method to promote their products. Although advertisements in the local and regional newspapers help reaching the customers more effectively.
In HP company, which provides hardware products all over India, surveys 100 regular customers about their experience with products and what modifications they have to make in the products, accordingly changes are to be made.
In HP company, they conduct seminars on a frequent basis. Here they call their corporate customers and tell them about their seminars, provide free traveling expenses and accommodations of the customers are given to them by the company. Seminars are always launched before a new product is launched or any new innovations have to be made in the products or new technology being introduced by the company. Thus the seminars help the company to provide the best of information and updates of their products to the customers.
Process includes the actual procedures, mechanisms and flow of activities by which the service is delivered – the service delivery and operating system. In the service industry for the company to survive the process of service delivery should be quick and easy whether the process is customized or standardized. The same applies to the IT industry too. In this industry, it is the process which is the most important differentiating aspect between different companies, and which also forms the basis of competition. The company having the easiest and quickest service delivery survives.
1) Employees – The service provider always has to do a perfect job analysis of each and every job and accordingly select a person whose personality best suits the job. The service quality totally depends upon the employee giving the service. That is the reason why job analysis and selection is very important in the service industry. Also the employee should have job satisfaction and he should be made to feel as a part of the organization. It is only when the employee is happy with the company, that the employee can sell the service of the company. Motivation and rewards are factors, which should not be forgotten. Another aspect is that the employees should be well trained. For e.g. even a simple “Smile” given by the employee can do wonders for the image of the company.
2) Customers – They have been referred to as “partial employees”, human resources who contribute to the organization productive capacity. Customers are also producers of service as it is they who decide the quality of the service and not the company. For e.g. if I say that a particular company’s service is bad, it means that the quality of service of the company is not good even though the company feels that it provides the best service. Hence here the decision makers are the customers. Good quality would obviously result in good productivity. In IT the customers on the basis of ease of receiving the service rate industry the service quality. That is the reason why ATM cards, Internet banking, online shopping etc are sectors, which are in boom in the market now. These technologies are called self-service technologies. The striking feature of these services is there is minimum human intervention, which in this industry is an advantage to the company, as the customer wants to receive a good service quickly without actually having to have any interaction with the employees.
It is often said that he consumer judge the quality of the service before they actually purchase it. The question that arises over here is that how does a person judge something that is intangible? If it were good then we can at least touch it feel it but over here it is service. Well simple. In this case the consumer starts looking out for the tangible cues or the PHYSICAL EVIDENCE.
So we can say that the physical evidence is the environment in which the service is delivered to the consumer or the environment in which the consumer and the firm interact. The evidence can basically change the perception of the people completely.
In the software industry there are 3 aspects to this ‘P’ of service:
These interfaces are the websites of the companies. The websites are the medium between the company and the customer. It is through the websites that the company interacts with its customers. The look the feel the color of the website matters a lot over here which acts to be the tangible cue.
For Example: India Infiline it totally deals with information regarding any company’s working share price, financials etc. it has a total corporate feel to it.
2.Companies going to software development:
For in example INFOSYS when a client wants to develop a software for its information transfer or any other purpose it will personally go to Infosys with its requirements and Specifications. Now when a custom goes to developer it is the ambience of the office etc. that will pay a vital role in identifying the worthiness of the company.
3. Developers comes to the Customer:
This could be very well explained with the HP example itself. HP does not actually believe in encounters with the customers. However at its retail outlets it does.
But mostly they are the ones who approach the customers where at that point of time their dressing and their language and their voice quality is an important cue through which the customers might judge the company as a whole.
Hence the representative of the company also have to absolutely formal in their behavior with the customer and HP follows this rule.
Major segments of IT
Following is a fairly detailed generic classification of IT Enabled Services which are already existing or which have potential for evolving into areas of entry:
• Customer Interaction Services such as Call Centres
• Finance and Accounting Services such as back office data processing for Airlines, etc.
• Engineering and Design Services such as outsourced design activities
• Human Resources Services such as outsourced payroll preparations, etc.
• Animation for movies and TV serials, cartoon strips, etc.
• Translation, Transcription and Localization such as Medical Transcription Services.
• Network Consulting and Management covering outsourced network designing and maintenance.
• Data Search, Integration and Analysis covering areas such as preparation of legal data bases, research & preparation of reports based on data bases on past records, etc.
• Marketing Services such as bureaus for marketing products or services based on Call Centres or local market data bases, etc.
• Web Site Services for creating site contents, advertising, etc.
• Remote Education for utilizing IT infrastructure to strengthen formal education system for remote and expertise starved areas.
• Medical Consultancy by providing expert advice based on data or making available data bases.
• Secretarial Services through bureaus which utilize information technology for offering secretarial help.
• IT may also contribute to increase in productivity, revenue and profits compared to their competitors. There is some evidence in the IT management literature that links improvements in operations, service and quality directly to IT.
• Government incentives for software export sector-tax incentives, setting up of STPs, etc.
• On-time, on schedule delivery of projects. High reliability factor of Indian software
• IT costs are relatively low.
• Support from successful Indians in Silicon Valley, USA
• Vast base of Fortune 500 customers who are increasing outsourcing to India
• For many organizations, measuring the outcomes of the technology investments is a frustrating exercise because of the confusion over what should be measured and how to define the value of IT. Business investments are judged to have value only if their contribution to the output of the business could be distinctly quantified. The ability to assign value to IT business outputs is far more difficult than a simple cost/benefit analysis. Most IT investment decisions based on standard ROI (return on investment) and NPV (net present value) assume a static business scenario.
• Low telephone, PC and Internet penetration
• Inadequate utilization of IT budgets by Government departments/PSUs leading to low domestic computerization. Due to such a hype in the tech boom the govt had planned to invest crores of rupees in its development. But later on it was seen that some pub companies had the comp but not the staff to work on it and in some places they had already sent their staff for learning but the comps were not ready or were very few. No proper implementation.
• Lack of localization of software-low availability of regional language software
• Inadequate IT skills base, worsened by the “brain drain”.
These traditional measures of value often lead to inadequate or outdated IT system.
• Inequitable access.
• Lack of a national IT strategy.
• Low level of literacy and education.
• Inadequate IT skills base, worsened by the “brain drain”.
• IT “phobia” and elitism.
• Poor government services hamper IIT rollout.
• Industrial age management is still being used in the IT age.
• Small local IT market.
• Poor technology transfer.
• Organizations can use interactive media on the web to provide information about themselves, their products and services and specific information that addresses the concern of a customer that translates to customer service activity. UPS and Federal Express are excellent examples of how customer service can be effectively provided through up-to-date information on the status of package shipped. These sites provide timely and easy-to-use package tracking, pricing and delivery time
• Organizations can leverage the web to identify users and prospects, enhance loyalty by providing value-added services, and use what they learn about their customized existing services or cross-sell new products and services. Companies like Citibank, Volvo, Hyatt and many others have used the web to learn more about their customers
• The web can be used as another channel. To a large extent, it has already succeeded in eliminating intermediaries like service agents. Now it is beginning to emerge as a channel itself, a channel that is more directly linked to the end customer.
• Opportunities to increase offshoring. Existing customers are enhancing their offshoring component to India. Number of global customers expected to offshore projects to India expected to increase rapidly
• Whereas for some companies on-line commerce is a natural outgrowth of their business, for others moving into cyberspace is a difficult endeavour. The problem these companies face have little to do with lack of technology or imagination. They stem instead from the lack if rules. At this moment there are few rules in cyberspace. The legal status of electronic copyright is still vague, as are the legal and practical issues surrounding on-line exchange.
• Another reason why companies hesitate to use the internet as medium to do business is that it is risky to pay for your products on the net. Hackers may get access to confidential information such as Credit card numbers
• More high quality manpower is required. Focus should move from "quantity" to "quality"
• Increasing cost of human capital
• Slowdown in the US economy.
Figure: The Conceptual Model of IT Service Quality
The new conceptual model of IT service quality identifies that there are 7 gaps between suppliers and customers of IT service. These are defined as:
Between Suppliers and Customers of IT service
Gap 1: the difference between IT suppliers’ and customers’ perceptions of Ideal level of IT service;
Gap 2: the difference between IT suppliers’ and customers’ perceptions of Acceptable level of IT service;
Gap 3: the difference between IT suppliers’ and customers’ perceptions of Actual level of IT service;
For Customers of IT service
Gap 4: the difference between IT service level customers would like to receive, and what they would accept, given the limitations due to personnel, technology and other organizational factors;
Gap 5: the difference between IT service level acceptable to customers, and the actual level of IT service perceived by customers;
For Suppliers of IT service
Gap 6: the difference between IT suppliers’ perception of what customers require, and the level of IT service they can provide given the constraints due to personnel, technology and other organizational factors; and
Gap 7: the difference between IT service level IT suppliers can provide, and the actual level of IT service being provided.
Premium Segment or Luxury Segment
Beach Resort Hotels
Chain of Hotels
Localized hotel Companies
I. CLASSIFICATION OF HOTEL ON BASIS OF NATURE
1) RESIDENTIAL HOTELS - They are also referred as apartment hotels as they serve as apartments. These hotels charge rent to their customers on a monthly, half yearly or yearly basis. They are generally located in big cities & towns. No meals are provided to the customer. Initially, these hotels were set up in USA.
2) COMMERCIAL HOTELS -Commercial hotels are meant for people who visit places of trade & commerce or for business purposes, thus these hotels are located at commercial & industrial centers. These hotels focus their attention on individual business travelers. They also provide added facilities like computer access, Internet facility, fax, conference rooms, etc.
3) BEACH RESORTS - Resort hotels are meant for holidaymakers, tourists & those who seek a change in environment & atmosphere mainly on healthy grounds. These hotels are located near the sea, mountains or other areas having an attractive landscape & a healthy climatic condition. Peninsular India bounded by the Arabian Sea, Bay of Bengal, Indian Ocean
4)INTERNATIONAL HOTELS-These hotels are modern luxurious hotels classified as on basis of various international guidelines. These hotels are further classified into various star categories.
5) FLOATING HOTELS - These hotels are located on water surfaces – sea, river or lake. These hotels provide all facilities and services that are made available in good luxurious hotels. In India, the houseboats in Kashmir’s lake are an example of floating hotels.
6) HERITAGE HOTELS - In the past four decades, certain architecturally distinctive properties such as palaces and forts, built prior to 1950, have been converted into hotels. The government classifies such hotels as heritage hotels
II. CLASSIFICATION ON THE BASIS OF STAR
1) PREMIUM OR LUXURY SEGMENT - This segment comprises of the high-end 5 star deluxe and 5 star hotels, which mainly cater to the business and up market foreign leisure travelers and offers a high quality and range of services to cater to the target segment. Over 80% of the clientele of the premium segment comprises of business guests. This segment has been the fastest growing segment in India.
2) BUDGET SEGMENT -This segment comprises of the 3 and 4 star hotels, which are generally located in smaller towns and tourist destinations and cater to the average foreign and domestic leisure traveller. This segment also caters to the middle level business travellers since it offers most of the essential services of luxury hotels without the high costs as this segment is not as heavily taxed as the premium segment and enjoys a lot of incentives from the government.
III. ON BASIS OF NUMBER OF HOLDINGS:
1) CHAIN OF HOTELS - These are groups of hotel owning a chain of hotels throughout the country. Following are the 4 major players in India holding a chain of hotels & falling in the premium category of hotels. These hotels had an established presence in one or more metro cities prior to the tourism boom in the eighties. (THE TAJ GROUP, THE OBEROI GROUP OF HOTELS, WELCOME GROUP, THE ASHOKA CHAIN OF HOTELS)
2) STAND ALONE HOTELS -Stand-alone hotels have come up after the tourism boom of the eighties and nineties. Due to the lack of prior experience in the hotel industry, these players have preferred to opt for operating/ management arrangements with international players. Some of the companies in this category are Hotel Leelaventure (with Kempinski), Asian Hotels (Hyatt International Corporation)
3) LOCALIZED HOTEL COMPANIES -They comprise of mainly early entrants like the Surya, Ritz who have not preferred to expand during the tourism boom and have instead focused on building and catering to a loyal customer base. The private players among the hotel chains are industry leaders. The public sector ITDC and HCI, though currently profitable, are not as efficiently run and are relative under performers.
The Indian hotel industry is an oligopoly with few key players grappling for control.
Name of Hotel Market share
The Indian Hotels Company, Ltd.
(The Taj Group) Largest hotel operator – 20%
ITDC Group (Ashoka group of hotels) Closest rival – 15%
East India Hotels 12%
Followed by, Hotel Leelaventure, Asian Hotels and Jaypee Hotels
KEY CONSUMER SEGMENTS
The business traveler-He is the businessman or a corporate executive. This segment includes corporates, who open offices in the hotel premises during start-ups; corporate executives who make extended stay either for long duration projects or while waiting for permanent accommodation (primarily expatriates) and convention arrivals. While the senior executives usually stay in 5 star hotels, the middle level executives, who are much larger in number, stay in the budget hotels. This segment offers better realizations as they demand relatively smaller discounts on room rents (about 10-15%), use more of facilities such as PCs, fax multi-media, conference halls and also the F&B revenues are better as they usually eat in the hotel itself due to their busy schedules. This segment is highly dependent upon the general economic scenario in the country.
The leisure traveler-He could either be a foreigner or a domestic traveller. Usually leisure travellers are part of a package run by a tour operator. The margins offered by leisure travellers tend to be lower because of two reasons. Firstly, they seek higher discounts (about 25%) and also provide less F&B revenues as they usually eat out. The leisure travellers (especially the domestic vacationers) generally stay in budget hotels rather than in 5 star hotels. The business offered by this segment is highly seasonal and tends to peak in the September to March period.
Airline Cabin Crews-They form another important segment because of the repetitive and guaranteed nature of the business that they provide. Usually these are a part of an annual contract, whereby in return for a fixed rate, a certain number of rooms are provided on demand for cabin crews. The usual discount rates are 40-50%.
Luxury travelers - According to senior officials in an international hotel chain, luxury travellers have particular requirements and are people with time and money for their holidays. They are not group travellers, seek qualitative experiences and demand personal and confidential service.
FOUR I’s OF HOTELS
INVENTORY -In the hotel industry, if the rooms and restaurants are not utilised to the greatest of its capacity, the service becomes perishable. If a hotel having an accommodation facility of 100 rooms is able to lease out only 70 rooms on a particular day, then the remaining 30 rooms or 30% capacity gets perished and can never be reused.
INCONSISTENCY-The services performed in the hotel industry are largely dominated by relationship management- that is performed by individuals. Since no human is perfect, it is difficult to standardize the quality of the human effort in this industry. The fact that service quality is difficult to control compounds the marketer's task. Services are performances, often involving the cooperation and skill of several individuals, and are therefore unlikely to be same every time. The only solution to this problem is to design services to be as uniform as possible. Mc Donald’s- the worlds largest fast food chain is renowned to standardize the quality of its service by making the whole process as standardized as possible. This is supplemented by training personnel to follow closely defined procedures, or by automating as many aspects of the services as possible. The appeal of some service personnel - particularly, the hotel industry- lies in their spontaneity and flexibility to address individual customer needs.
INSEPARABILITY - In the manufacturing department, the production goods takes place at a separate location and the final consumer buys the product at another location. The presence of the customer is not required during the manufacture of the product. But in the case of the hotel industry, which is a service, customer plays an important role in the production process as his presence and active participation is vital to the service encounter. Depending upon the skill, attitude, and cooperation and so on that customers bring to the service encounter, the results can be good or bad, but in any event are hard to standardize.
INTANGIBILITY-Intangible services are difficult to sell, as their benefits are harder to communicate to prospective customers. Marketers of services can reduce these risks by stressing tangible cues that will convey reassurance and quality to the prospective customers. These tangible cues range from the firm's physical facilities to the appearance and demeanor of its staff to the letterhead on its stationery to its logo. In case of hotel industry, the ambience, the moods created through various factors like lighting, music, aroma, etc create the intangible factors. But, by and large, the hotel industry is tangible
1. External marketing: External marketing fuctions means anything that is communicated to the customer before the service is delivered. In case of the Hotels, external marketing means the promotional activities and advertisements done by the hotel in newspapers, travel magazines, television etc. since there is direct customer contact in an Hotel, their advertisements are centered around their employees whereby they try to reflect customer care, attitude and other aspects of the employees and their hospitality.
2. Internal Marketing: In the hotel industry, the employees, who are the internal customers of the company have different positions ranging from the doormen, the bellboy, the receptionist to the chef, the waiter, etc. the basic principle of internal marketing is ‘ every individual in a service organization should recognize that they have customers to serve’. The main thrust in this is that it is not just the customer contact employee who need to concerned about satisfying customer but also all the service employees. In order to ensure that the final consumer receives quality service, every individual employee and every department within the organization must receive and provide a quality service. In fact each functional department should be treated as the customer of another functional department. Further, all employees must be convinced about the quality o the service being provided.
For example, the quality received by an ultimate customer of restaurant will depend upon the quality of the service provided b each individual in the supply chain. The chef needs quality ingredient from the stores and well-trained waiter to give a quality service to the ultimate customer. The following model explains the impact of functional departments quality delivery on the overall quality received by the final customer.
Service 100% 100% 100% 100%
91% 81% 73%
The above model shows that every employee connected with service organization need to recognize that there is someone whom he or she must serve.
3. Interactive Marketing: Interactive marketing takes place between the Customer and the front line managers, receptionists, employees etc. all the individuals must successfully complete all interactions that add value to the service encounter. The employee- customer encounter plays a major role in the hotel industry, where relationship management is a vital factor so that the customer loyalty is maintained.
Relationship marketing aims at developing and maintaining relationships with the customers, the employees, the suppliers, distributors (the tour operators and travel agents in case of the hotel industry) and other parties in the marketing environment.
Towards Customers: In case of hotels the receptionists and in case of Restaurants, the Supervisor of the dining areas should always try to recognize their regular customers and maintain healthy relationship with them. They can do so by providing such customers with discounts, membership cards, etc so that the customer gets easy recognition from the employees of the Hotel/ Restaurant.
Towards Intermediaries: the hotel must try and maintain good relationships with intermediaries like tour operators, travel agents, etc as they are the one who escort travelers to the hotels by advertising and recommending our hotels. Hence they must be given fair and timely compensation to maintain the good relationships.
Towards Employees: Hotels also have to maintain healthy relationships with employees as its HR department spend a lot on training and development of the employees. It has to train the employees in various aspects like table communication, order taking, food service techniques, hospitality, etiquettes, etc. hence the hotel cannot afford to have a high amount of employee turnover as hotel will not just loose a precious trained employee but it will have to incur additional cost on selection, recruitment and training the new employees.
PEST Analysis Of Hotel Industry
An unstable political situation in India made the foreign investor cautious leading to both a slowdown in foreign investment and business travel. However, government is trying its best to boost tourism in India which will further boost hotel industry.
The hotel industry is at present going through one the toughest periods. Weak economic conditions have lead to a steep decline in foreign as well as Indian business arrivals. Tourist arrivals have also seen a major decline following 9/11 and because of increasing terrorism.
The US government’s appeal to its citizens not to travel to Asian & African countries affected the tourism & hotel industry as the occupancy crisis hit the industry.
Crumbing to WTO pressure Government of India has reduced the tariffs & duties on various items which proved attractive for foreign traders to invest & perform business in India. With improved relations & trade affairs with other countries encouraged trade & travel which proved to be a boon for the Indian Hotel industry.
The FDI policy on 100% investment through the direct route is still offshore this has created a confusion in the minds of foreign venture capitalists as the laws in Joint Venture investment reveal a different story.
With the limitations on granting of visas by the External Affairs Ministries & policies of the embassy’s in granting visas & maintaining relations has affected the growth of hospitality industry over the years.
The Central Government and the State Governments are expected to be taking various opportune steps in the hotel sector like divesting its stake in the Indian Tourism Development Corporation (ITDC) and the Hotel Corporation of India, both organizations own a large number of hotels in prime locations.
The economic liberalization of the early 90s led to a boom in the hotel industry, especially in 1994:
When the economic conditions are favorable, hotels enjoy high occupancy rates. This gives them the flexibility of increasing their room rates. During the boom phase most hotel companies operated at very high occupancy rates, which gave them the leeway of increasing their room rates.
Foreign Direct Investment (FDI) is entering Indian shores and foreign institutional investors (FIIs) are increasing their exposure to India. All these positive signals spell more business travelers and better times for the hotel industry.
The hotel industry is heavily taxed. Expenditure tax, luxury tax and sales tax inflate the hotel bill by over 30%. Effective tax in the South East Asian countries works out to only 4-5%. As these taxes are the domain of the state government, the rates vary accordingly.
These units will be allowed to import capital goods under the EPCG scheme at zero duty, the minimum amount of imports being capped at Rs10mn.
The infrastructure facilities like the Airports, Communication facilities & commuting facilities not being at par with oriental countries affects the attractions of the tourists.
Generally 50% of the hotel’s revenue is dependant on the tourism industry. The Average Room Revenue (ARR) has increased from 3.47 USD in 1947 to 347 USD in 2002 (AH&LA report).
Social Environment Analysis:
Globally, leisure and entertainment are seen to be growing industries. Hence stable socio-political and economic conditions coupled with an improvement in infrastructure facilities (roads, airports etc) will improvement the sentiments of the tourists towards India.
The hotel markets its business with the help of the local festivals and long trusted & cherished Indian culture like Ayurveda in Kerala, Beaches in Goa and traditional melas.
Consuming beef is considered as a taboo for Hindus. Similarly, India being the place of domicile for 24 crore Muslims ranking 2nd only to Indonesia in the world is highly influenced by the ‘Islamic’ culture and Poke is considered as a taboo for Muslims. But, Beef is a part of the daily food for the foreign tourists. Hence, the hotelier has to cater the needs of various people from both Occidental and Oriental culture.
Indian customers are highly price sensitive. Many of them compare service offered with price. There is always a limitation on the part of the hotelier to design the service within the price constraints.
Technological Environment Analysis:
Technology has influenced not only the basic product in the hotel industry, but also the supplementary services to a great extent. Right from order taking to billing to payment has been computerized nowadays.
Technology has revolutionalised the booking system in hotels. One of the major source of booking is Global Distribution System (GDS) where the travel operator can book for various hotels though it. Also, hotels provide online booking systems where the hotelier tries to personalize the booking and minimize the customer interaction.
The hotel is now equipped with all the modern facilities which adds to the service offering. System allocation is the key to any hotels success. The frontline service provider should be able to satisfy customers demands.
Eg:- Hotels provide LCD, Laptop & conference facilities.
The Oberoi’s intranet facility helps to gain access to every information required by the customer, or by the provider to satisfy the customer’s needs.
The availability of sufficient parking is the basic requirement for accrediting with the STAR category. But the cost of property is soaring like the rising sea. The introduction of elevated parking is a blessing as its more convenient & cost effective to the hotelier.
At the very center is the core product which satisfies the basic need of the consumer. The core product in the hotel industry is ACCOMODATION. The role of Hotel International is to provide basic accommodation facilities. Like a bed for the night and a room with a bathroom.
When consumer’s expectations grows synchronized with increased competition, the marketer offers some tangibility to the existing core product, that is, some more features. Consumers prefer to pay more for these additions and the marketers have more to offer than the competition.
Hotel International has to provide some additional features like:
Hygiene: It comes next to the basic function of accommodation. Hygiene plays a very important role in the status of a hotel. An unhygienic hotel will never be able to attract lot of people, especially if it has to attract a lot of people from foreign countries where the hygiene conditions are top notch.
Room Service: When people go to hotels, they would expect good and prompt room service. This means, when they order food or ask for any service, a hotel that provides it promptly will have a great edge over the other hotels.
Price: The price of the rooms should be such that both the rich and the middle class people can afford them. Not everyone can afford a very expensive room and also not everyone will like to stay in a room that does not have some luxurious facilities.
Etiquettes: The people who come in contact with the customers, that is, the reception people, room service people, and waiters, all have to be trained well to behave in a manner that pleases the customer. They should be civilized, cultured and polite.
Food and Wine:The food should be of good quality and should be prepared in hygienic conditions.
With further higher expectations of the customer- again synchronized with intense competition- marketers offer more and more intangible features. All the extra things provided are service oriented. In the case of Hotels the augmented products include:
Facilities In Room :
Ø CTV Satellite channels
Ø International direct dial
Ø Refrigerator (deluxe rooms and suites)
Ø Bathtub (executive rooms and above)
Ø Running hot and cold water.
Services Provided :
Ø Ayurvedic Massage Center and steam bath
Ø Beauty Parlor
Ø 24 HRS Room Service
Ø 24 HRS Coffee Shop
Ø Airport Transfer
Ø Ample Car Park
Ø Safe Deposit Lockers
Ø Travel Assistance
Ø Currency Exchange
Ø Same Day Laundry
Ø Direct Dialing
Ø Cable TV
Ø Health Club
Ø Banquet Halls
Ø Back Water Cruises and Package Tours
Ø 24 hrs Check Out
1. Variety Restaurant (Indian, Tandoor, Kerala, Continental and Chinese dishes.)
2. 24 hour Specialty Coffee Shop.
3. Family Bar (daily happy hours.)
The pricing decision is monitored by a number of factors. The magnitude of competition is the most important element in governing the pricing decision. If the intensity of competition moves upwards the hotel tariff may not increase. On the other hand when the intensity of competition moves downwards the hotel tariff may be raised. Also if a domestic big business executives or foreign tourists consider the tariff structure as a status symbol and prefer to stay in costly hotel, then the tariff structure must be followed carefully. Firstly the prices for accommodation is directly related to the following factors:
• Room space
• Quality of furniture
• Bath, toilet, shower, hair dryer and trouser pressing equipment
• Telephone, Colour tv, radio
• Fridge, tea and coffee making equipments
• Personal computer, office facilities and others
Normally whenever hotels upgrade or renovate, the upgradation rates are reflected in their costs.
Secondly the room rate is related to the market. If the market is in a posh and fashionable area with ample parking and garage facilities, and frequented by high-class people including businessmen and other groups, the prices will accordingly vary.
Thirdly the room rates also reflect the availability of personal comfort facilities like lounge, bar, restaurants, shopping arcade, banks, and standard of cuisine, hairdressing, swimming pool and health club. In short the room rates also incorporates the augmented services costs.
Location: Location involves considering where to deliver the services to the customers. As far as the service location is concerned, we normally encounter three situations:
1) Customer goes to the service provider
2) Service provider goes to customer
3) Service provider and consumer transact at an arm’s length
In the Hotel Industry, it is the customer who goes to the service provider. In case of Restaurants, the customer s goes to the service providers to satisfy their hunger.In case of hotels, the customers go to the hotel both to satisfy his hunger and for the purpose of accommodation. Hence in order to receive the benefits of hotel services, the customer must physically enter the service system, i.e. the service factory. However in case of free home delivery, it is the service provider that goes to the customer.Since in most of the cases it is the customer that goes to the hotel, the location assumes a very import role. A well-located hotel/restaurant can pick up demand, as the customers will locate these hotels easily, quickly and comfortably. The customer today has become convenience oriented. Hence it is very important to locate the hotels at a convenient place. Hotels should be easily accessible. Accessibility can be measured in terms of visibility and proximity to different modes of transport. Similarly it makes more sense in locating a five star hotel in a sophisticated area.
It’s the front of the hotel that the guest sees; so must be designed in such a manner that it - sells the hotel to the potential customer. This includes the space, colour, light & such other element; as these affect guest impression about the hotel. Lobby- It being the first & the last part of the hotel that the guest sees; its designing plays a very important role. It must be designed with fine art, elegant finishing & comfortable furnishing. And also the lobby must be functional with receptionist area apparent to the incoming guests. Though, the architect of the lobby grabs the customers interest but it’s the guest room that keeps them coming back. Guest room with conformable furnishing, space, colour is a must.
Strategies to deal with Inventory:
The nature of demand for hotel services is more – less seasonal. In case of peak seasons, the demand is much greater than the supply capacity. However in case of off seasons the demand is very less as compared to the potential supply. This is more relevant in case of hotels located at places of tourist attraction like Matheran and Mahabaleshwar.
During off-season; hotels can tie-up with some agencies like travel and tourism agencies. These agents play a key role in recommending services to the customers and can form an important distribution channel. Also hotels can design attractive packages and schemes to attract customers. The best example of this is the Taj.
Strategies to deal with intangibility
The intangible nature of services makes consumers more concerned about the service providers. In order to create trust, marketers have to provide tangible evidence. The less tangible a service, the less the service marketing resembles goods marketing. Performance here can be judged only after the service is completed and consistent service level is difficult to maintain.
A hotels promotional effort must show the benefits to be derived from the service, rather than emphasizing on the service itself. The promotional strategies usually used to portray the strength of the service are (from RAMPAL GUPTA, applicable for all services)
1) Visualization – it promotes the tangible element of a service. For example, a hotel depicts the benefits of dining at its restaurant with its ads, which shows beautiful interiors, well laid facilities, etc.
2) Association- while promoting the hotel, the service is associated with a tangible person, object or place. For example: Mc Donald’s has associated itself with Ronald, the clown in order to appeal to children.
3) Physical representation – services when represented by some physical representation help in building the trust of the customers for example: restaurants dress their service providers in uniforms to emphasize visibility, reliability and cleanliness, attractive menu cards also help.
4) Documentation- documentation is sued by service providers to tangibilise their intangibles. Hotel orchid advertises the awards received by it in the recent past and emphasis its hotel as an environmentally sensitive hotel.
5) Branding- also adds tangibility to intangibles. Brand help in differentiating the service from that of its competitors in terms of name, logo, mascot and other identifying features and forms an important component of the communication mix
Strategies to deal with inconsistency
Services are highly inconsistent in nature. Due to this characteristic, marketers face the problem of standardizing their services. The strategies used to reduce inconsistency are:
1) Hard technology- it means substituting machinery for people. Mc Donald’s has been able to provide consistent service by using this industrialization concept. Infact, Mc Donald’s is built on the foundation of consistency. Mr. Ray Kroc insisted that a great brand is one that commands trust because it eliminates uncertainty from the consumer’s life. Mc Donald’s has every little detail of its operations laid down- from how to set up a unit to the quality of the ketchup 9 to be squeezed from a pre calibrated dispenser).
2) Soft technology- it is a way to industrialize services by substituting preplanned systems for individual services, Oberoi hotels and resorts have standardized their service by using soft technology in the form of pre- packaged offers.
3) Hybrid technology – is a technology for industrializing service by combining both hard and soft technology.
4) Establish set rules and procedures routine- the use of pre planned systems with a specific setoff rules and routines can be used to manage performance effectively in service delivery. Limited menu restaurants like pizza hut ensures high consistency from one visit to the next because they have standardized preparation procedures.
Promotion mix of hotel industry like any other service encompasses of following communication mix. These are
Advertising, Personal Selling, Sales Promotions, Direct Mail. The promotional strategies are required to be innovative and creative so that the marketers find it easy to increase the occupancy ratio. Attractive and natural photography of different types of available accommodation must be kept at the reception desk. The reception office must maintain a file of furnishing details, giving additional information on each room like location size, décor, facilities, etc.
Advertising: The media used by medium is:
Business Publications to attract business class people.
Tourist Publications to attract tour travelers.
Directories like Yellow Pages esp. by small hotels.
Direct mail to tour operators.
On the other hand, media like T.V., radio, etc. are rarely used by Hotel industry. Many hotels have cars with the hotel name and logo printed on the car, which serves as indirect medium of advertisement.
Personal Selling: “ While the advertisement helps in creating the knowledge of the hotel, Personal selling brings in revenue.” A hotel industry plays a role of salesman for selling the accommodation. It is rightly said that ‘Receptionist is the nerve of the hotel’. An effective receptionist must possess an impressive personality, should have high degree of knowledge about his hotel - variety of room. Receptionist should also be provided with facility like computer containing up to date information about room availability and other information about hotel so that he can answer any unique query of the customer. Also attractive photograph of different types of rooms available should be displayed at the receptionist desk.
Sales Promotions: These are paid form of marketing communication activity (other than advertisements) to stimulate the customer to come to the hotel.
1) Gifts: Giving attractive gifts to the customer accommodating in the hotel or customer who is served meal in the restaurant, attracts the customer towards such hotel or restaurant.
Eg. Mc Donald’s – with every purchase of “Happy Meal” gives gifts targeting kids.
2) Packages: Like Hotel Taj introduces different kinds of packages like 2 day – 3 nights package which includes Welcome drink, sight seeing, discounted shopping, etc. Such schemes are especially introduced during off seasons.
3) Bonus Packs: Like, If a customer stays for 4 nights within 3 months, he will get a night stay free for next month. These are especially targeted to increase the loyalty of the customer towards the hotel.
5) Contests: marketing dept holds various contests. And the person who wins the contents is given a car.
Public Relations: Hotels keep the data base of their past customer and send them ‘good wishes’ card on their Birthdays, Anniversary. This creates good image of hotel in the mind of old customers.
1) Hotel sponsor various TV quiz shows & contests, and the person winning this contents will get some nights free day stay at that hotel. This creates indirect publicity of the hotel.
2) Hotel also give free or low priced rent to travel shows like ‘Musafir Hoon Yarro’ and other TV serials, which also creates indirect publicity of the hotel.
3) Hotels also maintain good relation with travel agents & tour operators as they form a link between customer & the hotel. So, to keep them happy & satisfied hotel gives these tour operator & agent – high commission, Gifts like bags and also informing about various scheme hotels introduces. Now, according to a survey by FHRAI,
-5 star hotels spend around 6% of their total revenue in marketing
-While 3 star hotels spend around 23% of their total revenue.
The reason for this difference is -5 star hotels have already an image, a position. But its 3 star hotel who need to create awareness about their existence, and further create good image so to influence the customer to come to their hotel.
It’s the manner in which service is delivered. Since, in hotel industry service are rendered by hotel & experience by the customer simultaneously, because of the inseparability nature, the process in which these services are delivered becomes very important. This is because every process is carefully by the customer & the customer is judging the quality of the service on this basis.
Service Encounter: Acc. to FHRAI report, there are around 250 moments of truth in a hotel industry where the customer comes in direct contact with the service provider, equipment, and physical asset.
Critical incidents: Out of these 250 service encounters, there are certain encounters which makes the customer extremely delighted or extremely disappointed. These are:
1) Check-in -if the customer who had booked the hotel in the room arrives & to his surprise finds that no room are vacant or him. Another hand, If in an festival season when there no hotel rooms available in the city, a hotel makes arrangement for accommodation for a customer who has not booked his room in any hotel.
2) Bell person carrying the luggage to the room- when the bag arrives in the room, its in extremely bad condition. This leaves negative impression in the mind of the customer.
3) Food - Quality of food, time taken for food to arrive
4) Wake up call- As wake call not made by the receptionist, the customer misses his flight)
5) Check out- too much time taken, procedural failure.
FISH BONE ANALYSIS
Customer: Failure in delivering service may occur b’coz of the careless of the customer. Like, to board the flight at 3:00 pm he checks out of his room at 1:30 and then expects billing procedures to be completed within few minutes, which is not possible. Because of this the customer misses his flight
Equipments: Like if the tea making machine at hotel or softy machine at McDonalds does not work and these machines denote have any back up; then such hotels & McDonalds will fail to deliver such food when ordered by customer.
Front stage personnel: Because of high employee turnover, the receptionist at counter fails to recognize regular customer, his needs, at fail to give him discounts for his loyalty towards the hotel. In such case, such customer will no more be loyal to hotel.
Procedure: Say, when the procedure for preparing the bill are quite length wherein the customer have to wait for more than half an hour for their bill to arrive because of the long billing procedure of billing were the hotelier first finds the utilities used by the customer only after he checks out of the room, then find the unit cost of each of them, and then finally arrive at the final cost. This especially disappoints business class people who desire quick service.
Material Supplied: Say, if the customer in the restaurant orders for kiwi juice & kiwi is out of stock.
Information: if the receptionist doesn’t have any information on the number of rooms vacant on a particular day and makes registration of all who calls up and when these customers arrive they see that no room is vacant. This is service failure on the part of receptionist b’coz of lack of information, which dissatisfies the customer.
Other causes: Say like there is Transportation strike or prices of Onions hike most of hotels won’t be able to provide them food, which the customer desires.
Gap1: Management didn’t correctly perceive what exactly customer wants.
Eg. Manger of the restaurant perceives that customer wants good ambiance & quality service. But he fails to recognize that customer actually wants good food; and good ambiance & quality service are of secondary importance.
Gap2: Management knows what a customer wants but can’t deliver it.
Eg. Management knows that business call people wants quick service. If they order tea or order a meal they want within few minutes. However, this is practically possible b’coz the limitation on the part of chef who needs at least 2 min. to prepare a tea and 12 min. to prepare a meal.
Gap3: Management knows the customer wants, sets standard to deliver them; but still fails.
For e.g. Mgmt. Knows that front stage personnel are very important and they represent the hotel so they must behave well and provide proper service willingly. So, to ensure this hotel also provides them training. But in spite hotel fails b’coz of attitude of the front stage employee & unwillingness to work.
Gap 4: Customer expectation arises from company’s advertisement but is not met.
For e.g. Orchid Hotel in its print ad show a very good ambience but customer actually goes there he doesn’t find so.
Gap 5: The customer misperceives the service.
For e.g. By hearing the name Hill view, the customer perceives it to be a 5-star hotel but it turns out to be a 2-star hotel.
Insurance Market Segmentation:
In insurance industry, profiling is very important in determining premium rates. Typically, insurers collect every information available. However, analyzing 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 LOW HIGH
Niche Market Fire Insurance (different risk profiles for each), Marine Insurance 1. Weather Insurance
2. Product Liability
Mass Market Householder’s comprehensive Policy , Medical Insurance Personal Accident Insurance
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.
PRODUCT COMPLEXITY LOW HIGH
Niche Market • Direct marketing through personalized e-mails
• Advertise in area specific journal with toll free numbers to set up appointments
• Agents 1. Well trained agents
2. Financial advisors/consultants
Mass Market 1. Bancassurance
2. Postal department
3. Agents 1. Well trained agents
2. Advertise in newspapers with toll free numbers to set up appointments
Market Segmentation in Insurance
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:
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 Web sites
o Print media
o Television, etc.
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 Web site (www.licindia.com)
o By Assistant sales manager directly in the office.
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.
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 which is connected with all the branches of LIC. The data is only available with the sales people and not shown to any person.
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.
The payment of premium is normally through cheques. Customer can make payment in LIC through:
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.
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.
• 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:
• 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:
These product mix dimensions permit the company to expand its business.
E.g.: It can add new product lines thus widening its product mix.
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 Type of service Contents Insurance sector
1 Core service Basic service product • Life
• Non-life insurance policy
2 Expected service Basic product and minimum purchase conditions that must be met. • After sales service
• Low claim settling period.
3 Augmented service Something different, which enables one product to be differentiated from other • Technology
• Online premium payment
• Payment through credit cards
• Standing instruction to bank
4 Potential service Features that attract the customers and are useful to them. • Maturity claims settled on or before the maturity date.
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
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%.
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.
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.
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 neighborhood. 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 which 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.
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.
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.
In case of insurance sector, the following channel of distribution is followed according to the target market:
Direct Selling Agents
Partner Selling Bancassurance
Selling through Corporates
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.
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.
In the last decade, numbers of technological advances have taken place due to immense use of EDI (Electronic Data Interchange)
Electronic channels LIC on internet
• Information kiosks:
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 through mobile phone is recently new technology introduced by the LIC to promote their product.
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 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
3 Periodic Statements
4 Renewal Notices
5 Business Cards
7 Calendar, Diaries
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.
• 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.
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.
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 analyze, design, develop, and program the systems that support the day-to-day operations of the insurance company.
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.
People mix not only includes employees but also customers. The customers are to be treated with respect and courtesy.
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.
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.
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 news papers 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:
Companies like LIC (www.licindia.com), ICICI (www.iciciprudential.com) 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.
Companies like LIC, Met Life India, advertise on television to make people aware of their products and services.
ICICI Prudential advertises on 92.5 red Fm.
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.
Companies provide brochures to the customers so that they can have a look on various schemes and their prices.
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.
These are held to provide information about the new product launched, position of the company in the market, etc.
• Sales Promotion:
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:
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.
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.
USERS OF CONSULTANCY SERVICES
The consultants in addition to other aspects also need to assign due weightage to the nature and types of users of the services. This makes it essential that they are well aware of the changing attitudes and behavioural profile. This simplifies the task of understanding the expectations, developing the marketing resources in tune with their needs and requirements and making the marketing decisions proactive. Users may be an individual or an institution. The motives may be personal and commercial. The providers are supposed to make sure that customers and clients remain satisfied. At the same time, they have also to be careful that the services prove to be remunerative and very much instrumental in maintaining the commercial viability. They are supposed to think for the clients, move with the clients, work for the clients and go with the clients. The consultants are not supposed to lag behind their clients since they bear the responsibility of supporting them vis-a-vis to remove the psychofobia as and when the circumstances necessitate so. They need to subserve the interests of their clients. An individual or an institution seeking legal advice, technical or managerial suggestions or medical prescriptions needs support of consultants at different stages. If the consultants move with the clients, we find development of a sense of confidence among them which keep on moving the process of retaining the business. The clients in a majority of the cases feel that their goals would remain unfulfilled, if consultants are not with them physically, professionally and morally. This in a natural way increases the instrumentality of consultants.
. In the figure we find different categories of users using the services of different types of consultants:
The marketing strategies formulated on the basis of segment are found to be customer-oriented. In the consultancy services an organization needs to segment the market on the basis of region, sector and geographical conditions. In Figure 1.2, we find region wise segmentation.
1.2 Regionwise Segmentation
The Central Zone, Eastern Zone, Northern Zone, Southern Zone and Western Zone are the different market segments classified into different zones as per the requirements. Such segmentation helps consultancy organisations in studying the needs and requirements of different zones and the development of marketing resources are thus made optimal to the users representing a particular zone.
In the figure 1.3, we find segmentation on the basis of sector. Such a sector wise segmentation is divided in to five parts, such as Legal sector, Technical sector, Financial sector, Management sector and Medical sector.
1.3 Sectorwise Segmentation
It is quite natural that segmentation on the basis of sector helps the consultants and the consultancy organisations in understanding the expectations of different categories of users in a different way. The sectorwise segmentation presented in Figure 1.3 clarifies that in the consultancy services, a consultancy organization needs to identify the needs and requirements of a client related to that segment. In some of the organisations, the legal advice is to be given and like this in some other organisations, the financial and technical suggestions are needed.
In Figure 1.4, we find segmentation on the basis of geographical considerations. In this respect, we find important categories as Rural, Urban, Individual and Organizational.
1.4 Geographical Segmentation
The aforesaid segment shown in Figure 1.4 clarifies that in the rural segment, the technological requirements would not be so advanced as found in the urban sector. Like this, the individuals have different expectations from the consultancy organisations.
1. The Product Mix
In the consultancy services, the important products are technical services,
legal services, medical services and the managerial services. The providers and the clients may be an individual or even an institution. Customer orientation is considered to be an integral part of product development strategies.
The formulation of a sound product mix makes it essential that the consultancy organisations make efforts to design a sound product portfolio in
which different types of services are included. The medical consultants need to
be aware of the latest devices of treatment and to offer to the patients the world class medical aids. The technical consultants also need to innovate their product mix in the face of technological sophistication and to eliminate the traditional services from the product mix. The legal consultants need to be aware of the latest developments, such as amendments in laws, rules and regulations and to formulate the service mix accordingly. Thus the elimination and inclusion processes need to be adopted even in the consultancy services. The management experts not aware of the latest developments in the business world would hardly be successful in serving the interest of their clients. These facts make it clear that' like other organisations, the consultancy organisations also need to make possible innovation in the face of multi-dimensional developments in the business environment.
Advertising: We find advertising a paid form of persuasive communication. The latest developments in the field of marketing communication technologies have made advertising a sharp-edged weapon in the hands of consultant and the consultancy organisations. The sensitivity in advertising is found increased when the advertising slogans and messages prove to be creative. The advertising professionals having a world class excellence can make it possible.
The marketing experts feel that creativity paves avenues for sensitivity and sensitivity reserves elbow room for acceptability of the messages, slogans, appeals and themes. This makes it essential that messages have high degree of creativity.
Publicity: We find publicity instrumental in activating the process of persuasion for which the advertisers are not supposed to pay anything. The public relations activities are found important while publicising. Like other organizations even the consultancy organisations are required to use this component of promotion. The ultimate object of publicity is to transmit to the masses the news and information related to the effectiveness of the appeal. In the consultancy services, the publicity measures are required to be innovated. This requires support of academics and professionals in the field of creating creative literature and getting them published in the important newspapers, magazines and journals preferred by the target clients. The publicity measures simplify the task of consultative sales people, as the creative literature would be instrumental in raising the effectiveness. The services to be offered by a consultancy organization would be published in a reputed media having wider circulation. The technical, medical, legal's management journal, and the important newspapers and magazines preferred by the prospects require due attention of marketing professionals.
Sales Promotion: This component of promotion bears the efficacy of touching the target with the help of incentives offered to the middlemen and the clients or consumers. It is a temporary incentive with a certain motive found instrumental in promoting the consultancy business. We need to mention that in the consultancy business the middlemen are also used to offer the services to the clients. The leading consultancy organisations have branch and site offices where a number of personnel are found engaged in offering the services to the clients. The services are offered directly to the users when we find an individual acting as a consultant. The marketing professionals are supposed to take decisions related to incentives to be offered to the middlemen as well as to the users. The branch personnel, site-personnel play an incremental role in selling the consultancy services. We go through incentive measures to be offered to both.
Personal Selling: Personal selling needs personal excellence to influence the prospects. It has proved to be an important component of the promotion mix.
The consultancy organisations find this constituent of the promotion mix effective in promoting the business. How to build confidence is an important aspect of personal selling in which the consultative sales people are required to perceive the changing expectations of clients or users in a right fashion. They are supposed to perceive power, value and decision making system in the client's organisations. It is also essential that they develop personal relationship with the personnel engaged in the organisations of clients. In a true sense, they are required to move with the client. The success of personal selling substantially depends on the personality and excellence of an individual.
Word-of-mouth Promotion: Quality of services is the main thing in promotion. If the services are of world class, the customers/users start promoting your product. Contrary to it, if your services are of poor quality even the most sophisticated promotional measures fail in sensitising the users. It is against this background that we talk about this constituent of promotion mix. By word-of-mouth communication our emphasis is on promoting the services by the hidden salesforce. It is pertinent to mention that the satisfied groups of customers communicate to their close friends and relatives the outstanding properties of the services availed by them. Since we trust on our friends and relatives, the process of stimulation is found activated. If you are satisfied with the services of a medical consultant since he/she has successfully cured you on the basis of his/ her expertise and in addition, his/her behaviour has also been decent; you talk to your friends and relatives regarding the same.
Telemarketing: Of late, we find telemarketing very much instrumental in promoting almost all types of good and services. We are aware of the fact that telemarketing is based on the contribution of telephonic services and therefore, we can also call it marketing with the support of telephones. It is important to
mention that with the satellite communication facilities, the telemarketing has,
proved to be an effective as well as an economic component of promotion. In some of the areas, we find a combination of telephones and televisions for promoting the services. The main thing in telemarketing is the instrumentality of telemarketers. He should have a high communicative ability in addition to the art of telephonic talk. The consultancy organisations can use telemarketing for promoting the business. An individual consultant or the consultancy organisations need to recruit efficient personnel to act as telemarketers The personnel acting as telemarketers need an ongoing training. An in depth knowledge of the related services is found essential to the telemarketers. He bears the responsibility of answering to the questions and queries of clients, transmitting to them the required information, removing their confusion and misunderstanding on the basis of his communicative ability. It is natural that for discharging his/her functional responsibilities in a right way, the consultancy organisations need to make it sure that the personnel working as telemarketers are professionally sound.
2. The Price Mix
In the consultancy services when we talk about the price mix our emphasis is on fee or commission charged by the consultants or the consultancy organizations for making available to the clients the services as per the promises or agreement. We agree with this view that a decision related to fee or commission plays a significant role. In this context, it is essential that the consultants are aware of the pricing objectives, which may be either price-competitor or non-price-competitor. In the price-competitor objective, the consultancy organisations offer lower price since the pricing decisions are required to be motivational. In the non-price competitor objective, we find stable price for individual services and for multi-service situation, a balance or an optimal point is searched in the high, medium and low price lines.
Price Lining Strategy: In this strategy, the consultants and the consultancy organisations charge different fee-structure since the services vary. This is possible in the retail business. As for example, we find different price structure for shirts of different categories. Here it is essential that the consult- ants are in a position to support price differentiation on the basis of service differentiation. The consultants serve in a different way such as they prepare feasibility report, daily project report, technical specification and so on. This strategy helps both the consultants as well as the clients in making cost analysis and revenue forecasting. The adjustment of fee is found difficult and therefore the consultancy organisations may face numerous problems in the long run.
3. Leader Pricing Strategy: This pricing strategy helps in building volume and introducing as many clients as possible. It involves substantial reduction in price charged for goods or services having frequent demand. Here the objective is to market additional services as full price, especially to the clients
responding favourably to the leader priced services. In this strategy the clients
prefer to purchase exclusively the leader service. A number of clients like to negotiate which raises the possibility of shifting to other competitors. A dangerous stage like price war is expected which is not suitable to the development of an organization. A stage like price war is to jeopardize everything.
4. Prestige Pricing Strategy: In this strategy, the consultants charge fee higher than the market. This is supported by the logic that they offer quality
services and therefore charge high for the superior quality and less for the inferior quality. We find fee representing the status and this limits the number of clients having fee and status consciousness. If you offer world class services, the high fee structure is found judicious.
5. Competition-based strategy: Such a strategy is based on competition.
Here the consultants have three options, the first "to beat", second" to meet" and the third "to lead". In other words, in the "to beat" strategy, we find emphasis on lower price structure so that the price is used as a motivational tool and the clients are motivated. In the "to meet" strategy, we find focus on similar price structure whereas in the "to lead" strategy, we find emphasis on charging higher than the competitors. But this strategy is not suitable when the intensity of competition is high.
6. Skimming strategy: In this strategy, the consultants recover their services and development costs. Here the consultants get the maximum fee but the intensity of competition influences the pricing decisions. This strategy help in the formation of a negative attitude where clients feel that fee has been reduced as the services are of sub-standard quality.
7. Penetration strategy: The penetration strategy focuses on break-even point. Here the fee structure is found a bit higher than the average. Here the
motto is to create trial, rapid acceptance and high volume of services for the consultants. In this strategy, the consultants and the consultancy organisations are required to increase the fee sooner or later which may act as a demotivational tool and the clients may be discouraged. Here it is pertinent that the consultants show their excellence by justifying a change and this focuses our attention on modifying or improving the services so that the clients don't develop a negative attitude.
8. Discount Allowance strategy: Of course, we don't find discount allowance strategy suitable for the consultancy organisations, however the consultants may offer discount or allowance when they act as sub-contractors to another
consultant. In this context, we find reduction in fee due to a reduction in the overhead costs.
The Place Mix
In the consultancy services, the distribution mix also occupies a place of
outstanding significance. The place mix on making available promises our emphasis promised services to the clients on time
Branch Offices: If the consultancy organisations find that the relationship with the clients is of permanent nature or it is not possible to have a direct contact with the clients due to their unmanageable number, cost ineffectiveness or constraints in transmitting the information; the providers need to think in favour of a full-fledged branch.
Site Offices: To be more specific when there is a job contract, the opening
of site office is found essential. This brings momentum in the process of offering the services.
Through A Representative: It is important to mention that while distributing the consultancy services, we make an advocacy in favour of a representative where the establishment or opening of site office is not found to be a commercially viable proposition.
What do mutual funds sell? Really speaking, they do not sell anything, tangible or intangible. This does seem confusing. Banks sell their products on the basis of certain assured returns; insurance companies sell contracts. Not so mutual funds. They mobilize funds from the investing public to manage those funds efficiently, i.e., they create an expectation of good returns in the minds of investors and generate a desire in them to put their money with a particular fund.
There is a clear distinction between company shares and mutual fund units. When a company issues capital, investors expect that the company will be able to return the worth of their investments through manufacturing or servicing activities, but in the case of mutual funds managerial efficiency and investment skills would determine returns. Successful mutual fund marketing therefore must create confidence among potential investors and strengthen their desire to put their money with a particular fund. It is not only publicity, talking skills and public relations, which will strengthen confidence, but also evidence of good performance. Additionally, organizational image, visibility of operational policies and quality of management form an indirect part of mutual fund marketing.
Marketing Plan 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—long-term 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.
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 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 after-sales 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 in-house 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.
Major inputs of health care industry
The major inputs of health care industries are as listed below:
II Medical insurance
III. Medical software
IV. Health equipments
Overview of health care sector in India:
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.
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.
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.
1. Certain percentages of beds have to be kept for poor people. E.g. in Bombay 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.
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.
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.
CLASSIFICATION 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.
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 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 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.
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 means that the service can not be separated from the creator-seller of the service. Infact there are many services which are created, delivered and consumed simultaneously through interaction between customer and service producers.
Here too the customer, i.e. the patient has to come upto the hospital to get the treatment. The customer has to be present when the service is performed. Infact in case of hospitals the service is created and delivered simultaneously. The type of service to be provided depends on the customer.
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 can not 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.
7.1 - 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.
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.
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.
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 government hospitals in spite of government grants do not provide quality service. Hence it is perceived as of low quality.
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.
7.2 - 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 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.
7.3 - 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.
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.
They have pleasing manners and behave softly with the patients. They provide timely care and are present always in times of need.
7.4 - 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.
There is lot of paper work involved in the whole process. Hence the whole process from admission to discharge is tedious.
With the advent of information Systems in hospitals all the paper work is reduced and the process is smooth and fast.
7.5 - 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.
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 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 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.
7.6 - 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.
They do not undertake major promotion programmes and hence are not very popular among the masses.
They undertake extensive promotion. Along with this they undertake massive complex operations which if successful create a good brand value of the hospitals.
7.7 - 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 ex-checker 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 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.
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.
What customer perceive about value Service offered accordingly
Value is low price Could be offered on weekends
Health spas in off season
Differentiated as incentives
Free consultation by dentist/doctors
Value is everything I want in service Prestige pricing-health club
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 Bombay 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)
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.
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
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 SERVICE MARKETING TRIANGLE
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.
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.
Last edited by bhautik.kawa; April 12th, 2015 at 08:43 PM..
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Re: SSM project
Re: SSM project - October 27th, 2007
AWESUM!!!!! HATS OFFF KEEP UP THE WORK
could u help me out with something i have a projrct to be made on that the 4p's of the marketing mix are not sufficient in service sector...could u give me industry examples and some info on inadequacy of the 4 p's n stuff if poss for u thanx..
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