Assignment On

Services Management Mix, Induced demand and Synchro Pricing

Submitted by

Md. Bashir hasan

ID: 201901091

Weekend MBA Program

th
Spring 2019, 20To
Submitted batch
Lecture
Prof.
r S.M. Ikhtiar Alam
Course Faculty

Service Marketing

Institute of Business Administration (IBA-JU)

24 December 2020
Services Management Mix

Service marketing mix is a combination of different elements that marketers use to

communicate their message to the customers.

In case of marketing physical goods or manufactured goods, marketers focus on 4Ps: Product,
Price, Promotions, and Marketing Channel’s Service Outputs. In service marketing we consider
additional 3Ps i.e. people, process and physical evidence.

Instead of the traditional idea of services marketing mix, I will discuss 12Ps of service
management. Which is based on Prof. Dr. S.M. Ikhtiar Alam’s proposed services marketing
mix.

The 12Ps of services marketing are as follows,

1. Product Elements’ Multiplicity, bundling, and inseparability

2. Place of Delivery, (Geo-Prizm Effect), Time of Delivery, and Waiting Time
3. Push/Pull Policy or Service Demand Inducement
4. Production of clients and promotion & education required for clients
5. Physical Environment/Tangibles
6. Price and other user costs
7. Process
8. Period
9. People
10. Primary inputs
11. Productivity-Quality Trade-Off
12. Price-Quality Paradox

I will now discuss each of them briefly,

• Product Elements’ Multiplicity, bundling, and inseparability: When producers try

to establish a service they generally end up producing a core service such as haircut
saloon, car repair or a doctors personal chamber. When a seller sells a watch he sells a
watch. But if a service provider wants he can offer something more than the ‘BASIS’
service. For example, Haircut saloon may offer beautification package, spa or massage.
A doctor may tell you many other things about many other health care issues. But in
most cases, these additional things have costs and clients may not want to pay for it.
 Therefore, One service provider must decide what should be his core or basis service
and what are his supplementary services. In addition, since service is a credence
product, Service provider have to decide what should be the level of his service quality.
A > B > C categorization can be done. Some service providers do not like such
categorization. You have to make the appropriate decision. To avoid the “Price-Quality
Paradox” problem service provider should avoid multiple services from a single service
station.
• Place of Delivery, (Geo-Prizm Effect), Time of Delivery, and Waiting Time: Since
most of the services can not be ‘home delivered’ or transferred, distributed through
sellers, retailers or a distribution channel. A service provider must choose a right place
to set up his station from where he can cover up most area and reach his consumers.
This is called ‘ACCESS’. Customers don’t like to wait long for their service. One
service provider must not compromise with the quality of service, He should also
skillfully handle renege or balk issues. Customers must not be dissatisfied.
• Push/Pull Policy or Service Demand Inducement: Demand for many services is
induced by service providers. Sometime clients are forced to take services because of
the situational demand. If a doctor tells you to come three times instead of one time,
you have to. Doctor makes money. Consumers don’t always spend willingly; sometime
service providers make them unable to say no. One service provider must maintain a
balance and a clear policy to what extent solicited and unsolicited inducement he will
follow.
• Production of clients and promotion & education required for clients: Service
provider must solicit service options and the offerings to the customers. They must train
the minds of the possible customers so they avail them. For example, A doctor can
prescribe only NAPA for fever but he must test to be sure that it is only that is the reason
of illness. A customer then do some tests or even a surgery. But it is the duty of service
provider to make a consumer understand the benefit and the cost and why it is best to
get these services from him. Sometimes, consumers are not in a position to understand
that they need these services urgently. Make your customer aware about the need for
such services and educate them how to receive best service from you. Remember that
clients are co-producers of services and they are the primary inputs.
• Physical Environment/Tangibles: A seller can sell a iPhone at Dhaka which was
produced in china, No one will ask about the production facility or work environment
 there. But in a service station a consumer remains present while taking service. So, a
service station must be clean, comfortable, well ventilated and decorated for the
convenience of the consumers.
• Price and other user costs: In a service scenario, Cost is not always the deciding factor
but the sensory and psychological pressure a consumer goes through. In case of
mismanagement or fault in service can cause major blunders. A fault by a doctor can
permanently blind a person. A fault by beautician can burn a face. These must be kept
in mind.
• Process: Service is the outcome of human efforts and the efforts must be passed through
a predetermined process. Clients also go through that process. Service provider must
design the process smooth and defect free, less time consuming, comfortable, etc.
• Period: Service provider need to take care of peak period and off-peak period. Since
service cannot be bought in advance to consume later. Service provider can very
carefully follow a synchro-management. Use off-peak time as well as peak time through
price discrimination or better utilize by delivering different types of services in different
times.
• People: Service production requires involvement of people. Behavior, manner,
courtesy, etc. are important. In case of People processing, Service providers are dealing
with the body of their customer, not with any raw materials. Therefore, they have to be
careful not to handle them as raw materials.
• Primary inputs: Clients are primary inputs. Service provider alone cannot produce and
deliver service unless customers receive them.
• Productivity-Quality Trade-Off: If the service provider wants to increase quality,
productivity will fall down and vice versa. It is a challenge for a manager to strike a
balance between this trade-off.
• Price-Quality Paradox: High quality service will cost more than low quality service.
There are customers who prefer “C” category and there are others who are ready to pay
for “A” category service. When you deliver “C” category for those who want to pay
less, they do not understand that “A” category service requires higher price. They want
so-called fair treatment. Over time consumer expectation about service quality is also
increasing but their willingness to pay is decreasing. This is due to many reasons. A
manager needs to carefully manage this price-quality paradox
 Optimizing Productivity-Quality Tradeoff

Productivity

Common Slope

P* Equilibrium

ISO-Profit Curve
E*
P-Q Relationship
(Decreasing & Negative)

Quality
0 Q*

At point E*, the service provider achieves equilibrium. At this point, maximum possible profit
is achieved; and at the same time, the optimum point on productivity-quality tradeoff curve is
achieved.

The Green Concave curve is the iso-profit curve. Each and every point on the iso-profit curve
represents equal profit.
If we increase the productivity our quality may fall, If we increase our quality our productivity
will decrease. We must choose a equilibrium service point where we can achieve maximum
profitability.

Inducement of Demand

Since services come in a bundle. It becomes easier for the service providers to sell more by
increasing an element already in the bundle or by adding new supplementary services in the
bundle. Providers can do it easily mainly due to lack of knowledge of the consumers about the
service bundle. In this regard we can cite healthcare services, beauty parlor services, and,
repairing services. A doctor can easily prescribe new tests where a patient is unaware of what
that really means he is bound to do tests. On the other hand, for example, if the physician
increases the number of visits unnecessarily, it amounts to an increase of an element already in
the service bundle. Now let us show graphically how much inducement is possible.

Graph: Induced Demand

Customer
Switching
Demand
Bundle
Price Induced Supply Curve

P
A B
Induced Demand Curve

0 Bundle
Required Induced Amount
Service Service
Amount Amount

Here X axis denotes the bundle amount and Y axis denotes the bundle price. Inducement of
demand may occur mainly due to the lack of knowledge of the consumers about the service
bundle. The supplier can use superior information to encourage a potential consumer to create
new demands for service. The blue straight line represents the supply and the gold straight line
represents the demand. The customer switching demand is represented by the purple curve,
which means further this point, customer will switch, further inducement is not possible as the
optimum point has been shifted from A to the max. Due to the induced demand both supply
and demand curves shift to the right and cross on point B which is our new equilibrium point.
Line from point B cross the X axis that part is our induced service amount. We can see the
induced demand curve in green and induced supply curve in orange dotted lines.
Synchro Pricing

Synchro pricing is the use of price to manage demand for a service by capitalizing on customers
sensitivity to prices.

Graph: Synchro Pricing

Fixed Supply Capacity

Rectangular
Hyperbola

𝑎
𝑃𝐾 B

C Not Feasible
Synchro Pricing
Peak Demand

𝑃0 A Iso-Profit Curve
Off-Peak Demand

0 Q
𝑎
𝑆𝑃 𝑆0
𝑏

Here X axis denote the quantity of services according to time and Y is the price. Off peak
demand curve and fixed supply capacity curve intersects at point A. That is our first equilibrium
point. In peak demand the demand curve intersects at point B, here profit and price both are
high. When demand is low price is P0 and revised price is Pk. This revising strategy of price
within a fixed capacity of supply is called ‘Synchro Pricing’. If we want to keep the price at P0
we need to increase the supply then supply curve will shift to the right. The rectangular
hyperbola represents Iso-profit curve on which every point the profit will be same.