E-Marketing and Service Marketing

E- Marketing and service marketing Module
E- marketing and service marketing Module

INTRODUCTION TO E-MARKETING
There is no doubt about it-the Internet has changed the world we live in. Never before has it been so easy to
access information, communicate with people all over the globe and share articles, videos, photos and all
manner of media.
The Internet has led to an increasingly connected environment, and the growth of Internet usage has resulted in
declining distribution of traditional media: television, radio, newspapers and magazines. Marketing in this
connected environment and using that connectivity to market is E-Marketing.
Internet has become an important medium for doing global business based on the state of the art technology.
What is e-business, e-marketing and e-commerce
E-business: overall automation or digitalizing of business functions. It focuses is not only on customers but
also on suppliers, employees and other business partners. E-Business is defined as the continuous optimization
of a firm‘s business through digital technology.
E-Marketing or electronic marketing: refers to the application of marketing principles and techniques via
electronic media and more specifically through internet. E-Marketing is also a part of e-Business that involves
electronic medium to achieve marketing objectives. E marketing does not necessarily have sales as the primary
goal.
E-commerce: an emerging concept that describes the process of buying and selling or exchanging of products,
services, and information via computer networks including the internet. Some people view the term commerce
as describing transactions conducted between business partners. Ecommerce is simply the buying and selling
of goods and services online.
Electronic Commerce (EC) is where business transactions take place via telecommunications networks,
especially the internet. Electronic commerce describes the buying and selling of products, services, and
information via communication networks including the Internet.There are different perspectives defining E-
Commerce,
a) Communication perspective:
E-Commerce is the delivery of goods, services, information, or payments over computer networks or by any
other electronic means.
b) Business process perspective: E-Commerce is the application of technology towards the automation of
business transactions and work flow.
c) Service perspective:
1 Compiled by Department of Marketing Management

E-Commerce is a tool that addresses the desire of firms, consumers, and management to cut service costs while
improving the quality of goods and increasing the speed of service delivery.
d) Online perspective:
E-Commerce provides the capability of buying and selling products and information on the internet and other
online services.
1.2. The difference between E-Commerce and E-Business
E-Commerce characteristically relates to the process of buying and selling products, services and information
through the use of the Internet and/or computer networks. E-business is overall automation or digitalizing of
business functions. It focuses not only on customers but also on suppliers, employees and other business
partners.
E-Commerce principally focuses on the organization customers (on their transactional relationship with the
seller) while E-Business expands the connectivity of the organization to include not only its customers but also
the organization suppliers, employees and business partners.
There is a debate among consultants and academics about the meaning and limitations of both e-commerce and
e-business. Some argue that e-commerce encompasses the entire world of electronically based organizational
activities that support a firm's market exchanges-including a firm's entire information system's infrastructure.
Others argue, on the other hand, that e-business encompasses the entire world of internal and external
electronically based activities, including e-commerce.
 Unique features of E-Commerce
i) Ubiquity: internet/web technology is available everywhere at work, at home, and elsewhere via mobile
devices any time. From a consumer point of view, ubiquity reduces transaction costs—the costs of
participating in a market.
ii) Global reach: permits commercial transactions to cross cultural and national boundaries.As a result, the
potential market size for e-commerce merchants is roughly equal to the size of the world‘s online population
iii) Universal standards: technical standards of conducting E-Commerce are shared by all nations around the
world.The universal technical standards of the Internet and e-commerce greatly lower market entry costs—the
cost merchants must pay just to bring their goods to market. At the same time, for consumers, universal
standards reduce search costs—the effort required to find suitable products.
iv) Richness: the complexity and content of a message. The Internet has the potential for offering considerably
more information richness than traditional media such as printing presses, radio, and television because it is
interactive and can adjust the message to individual users.

v) Interactivity: e-commerce is a technology that allows two-way communication between merchant and
consumer. Interactivity allows an online merchant to engage a consumer in ways similar to a face-to-face
experience.
VI) Information Density: the total amount and quality of information available to all market participants,
consumers, and merchants alike.E-commerce technologies reduce information collection, storage, processing,
and communication costs.
vii) Personalization/Customization: Personalization: merchants can target their marketing messages to
specific individuals by adjusting the message to a person's name, interest, and past purchases. Customization:
changing the delivered product or service based on a user's preference or prior behavior.
 Types of E-Commerce
E-commerce is the use of Internet and the web to transact business but when we focus on digitally enabled
commercial transactions between and among organizations and individuals involving information systems
under the control of the firm it takes the form of e-business. Nowadays, 'e' is gaining momentum and most of
the things if not everything is getting digitally enabled. Thus, it becomes very important to clearly draw the
line between different types of commerce or business integrated with the 'e' factor.
There are mainly five types of e-commerce models:
1. Business to Consumer (B2C) - As the name suggests, it is the model involving businesses and consumers.
This is the most common e-commerce segment. In this model, online businesses sell to individual consumers
via internet. When B2C started, it had a small share in the market but after 1995 its growth was exponential.
The basic concept behind this type is that the online retailers and marketers can sell their products to the online
consumer by using crystal clear data which is made available via various online marketing tools. E.g. an online
pharmacy giving free medical consultation and selling medicines to patients is following B2C model.
2. Business to Business (B2B) - It is the largest form of e-commerce involving business of trillions of dollars.
In this form, the buyers and sellers are both business entities and do not involve an individual consumer. It is
like the manufacturer supplying goods to the retailer or wholesaler. E.g. Dell sells computers and other related
accessories online but it is does not manufacture all those products. So, in order to sell those products, it first
purchases them from different businesses i.e. the manufacturers of those products.
3. Consumer to Consumer (C2C) - It facilitates the online transaction of goods or services between two
people. Though there is no visible intermediary involved but the parties cannot carry out the transactions
without the platform which is provided by the online market maker such as eBay.

4. Peer to Peer (P2P) - Though it is an e-commerce model but it is more than that. It is a technology in itself
which helps people to directly share computer files and computer resources without having to go through a
central web server. To use this, both sides need to install the required software so that they can communicate
on the common platform. This type of e-commerce has quite low revenue generation as from the beginning it
has been inclined to the free usage due to which it sometimes got entangled in cyber laws.
5. M-Commerce - It refers to the use of mobile devices for conducting the transactions. The mobile device
holders can contact each other and can conduct the business. Even the web design and development companies
optimize the websites to be viewed correctly on mobile devices.
There are other types of e-commerce business models too like Business to Employee (B2E), Government to
Business (G2B) and Government to Citizen (G2C) but in essence they are similar to the above mentioned
types. Moreover, it is not necessary that these models are dedicatedly followed in all the online business types.
It may be the case that a business is using all the models or only one of them or some of them as per its needs.
 Types of commerce
A.Traditional commerce: all dimensions are physical
E.g. Bricks-and-mortar firms—those traditional companies that are not yet involved in the WWW.
B. pure EC: All dimensions are digital
E.g. Clicks-only firms—those that conduct business only via the Internet and are considered to be innovators
in the field.
C. Partial EC: All other possibilities include a mix of digital and physical dimensions
E.g. Bricks-and-clicks firms—operate both in traditional and Internet setting
 Benefit of e-Commerce
A. To Organizations
•Expands a company‘s marketplace to national and international markets.
•Decrease the cost of creating, processing, distributing, storing, and retrieving paper-based information. It also
lowers telecommunications costs.
•Electronic commerce allows for high degree specialization that is not economically feasible in the physical
world. www.dogtoys.com.
•It reduces the time between the outlay of capital and the receipt of products and services.
•Electronic commerce enables companies to interact more closely with customers, even if through
intermediaries.
•Enables companies to procure material and services from other companies, rapidly and at less cost.

•Shortens or even eliminates marketing distribution channels, making products cheaper and vendors‘ profits
higher.
•Decreases (by as much as 90 percent) the cost of creating, processing, distributing, storing and retrieving
information by digitizing the process for business operation improvement.
•Reduce warehouse costs (maintaining a store, rent, insurance and utilities)
•Allows lower inventories by facilitating pull-type supply chain management. This allows product
customization and reduces inventory costs.
•Helps small businesses compete against large companies and Reduce delivery delay.
B. To customers
• 24/7/365 service of transaction and Provides more choices.
• Electronic commerce frequently provides less expensive products with quick comparison. Gives consumers
more choices than they could easily locate otherwise.
• Delivers relevant and detailed information in seconds.
• Enables consumers to get customized products, from PCs to cars, at competitive prices.
• Makes it possible for people to work and study at home.
• Makes possible electronic auctions.
• Reduce the problem of trafficking, and finding parking space and trek through stores to shop.
• Allows consumers to interact in electronic communities and to exchange ideas and compare experiences.
• Buying is private, interactive and immediate
• Buyers are free from pressurize selling
• Saves time i.e. no need to visit the store personally and contact the sales person
C. To society
• Enables individuals to work at home and to do less traveling, resulting in less road traffic and lower air
pollution.
• Allows some merchandise to be sold at lower prices, thereby increasing people‘s standard of living.
• Enables people in developing countries and rural areas to enjoy products and services that are otherwise not
available. This includes opportunities to learn professions and earn college degrees, or to receive better medical
care.
• Public services can be delivered at lower cost. Such as increasing the quality of social services, police work,
health care, and education.
 Limitations of E-commerce

I. Technical Limitations
• Lack of universally accepted standards for quality, security, and reliability (are still evolving).
• Insufficient telecommunications bandwidth.
• Still-evolving software development tools.
• Some EC software might not fit with some hardware or it may be incompatible with certain operating
systems or components.
II. Non-technical limitations
 The cost of developing Electronic commerce in-house can be very high and mistakes made due to lack
of experience may result in delays.
 Security and privacy issues.
 Customers do not trust an unknown, faceless seller, paperless transactions, and electronic money.
 Some customers like to touch items such as cloths, so they know exactly what they are buying.
 Perception that EC is expensive and unsecured.
 Slow internet connectivity
 Cost increases as per the attractiveness of website increases
 Credit/debit cards may be tracked
INTERNET MARKETING ENVIRONMENT AND E-BUSINESS MODEL
Environment consists of the actors and forces outside marketing that affect the marketing management‘s ability
to develop and maintain successful transactions with its target customers. The marketing environment offers
both threats and opportunities‘. All organizations operate within an environment that influences the way in
which they conduct business. Organizations that monitor, understand and respond appropriately to changes in
the environment have the greatest opportunities to compete effectively in the competitive marketplace. The
marketing environment consists of Microenvironment and macro environment.
 Microenvironment
Consists of forces close to the company that affect its ability to serve its customers .these are: the company,
suppliers, marketing channel firms, customer markets and competitors. Let us see one by one.
 The Company: Constitutes the internal environment, Marketing plans are influenced by top
management, finance, research and development (R & D), purchasing, manufacturing and accounting
and others. these functions must ‗think customer‘ and they should work together to provide superior

customer value and satisfaction. On online context the organization must be adaptable to new
technology changes.
 Customers: The company must study its customer markets closely i.e. Customers access level to
internet, interest to use and buy products or services online and online consumer behavior.
2.1.3. Supplier: Are an important link in the company's overall customer 'value delivery system. they
provide the resources or raw materials needed by the company to produce its goods and services. Suppliers
have effect on product price, availability and features. In the Internet contexts supplier Access level to internet,
interest to use and sell raw materials or resources online and integration with existing system.
2.1.4. Marketing Intermediaries: Marketing intermediaries are firms that help the company to promote,
distribute and sell its goods to final buyers. They include resellers, physical distribution firms, marketing
services agencies and financial intermediaries.
The best known online intermediaries are the most popular sites such as Google, MSN and Yahoo! Online
intermediary sites provide information about destination sites and provide a means of connecting Internet users
with product information. Consumer intermediaries such as kelkoo (www.kelkoo.com ) and Bizrate
(www.bizrate.com ) provide price comparison for products.
These are types of intermediaries online:
Search engines (Google, Yahoo! Search).
Malls (now replaced by comparison sites such as Kelkoo and Price runner).
Virtual resellers (own inventory and sells direct, e.g. Amazon, CDWOW).
Financial intermediaries: offers digital cash and payment services such as PayPal which is now part of eBay).
2.1.5. Competitors: A firm‘s competitive environment refers to the other companies selling similar
products and operating in the same market space.To be successful, a company must provide greater customer
value and satisfaction than its competitors do. To do so marketers must do more than simply adapt to the needs
of target consumers gain strategic advantage by positioning their offerings strongly against competitors'
offerings in the minds of consumers.
Unlike the case of traditional marketing, since it is difficult to easily know online competitors, companies need
to always review: Well-known local competitors; well-known international competitors; and new internet
companies local and worldwide (within sector and out of sector).
2.2. Macro environment

Macro environment consists of the larger societal forces that affect the whole microenvironment; these are
social, economic, and natural, technological, political, legal and cultural forces.
2.2.1. Social Factors (Socio-cultural): these include the influence of consumer perceptions in determining
usage of the Internet for different activities.
2.2.2. Legal and Ethical Factors – determine the method by which products can be promoted and sold online.
Governments, on behalf of society, seek to safeguard individuals‘ rights to privacy.
2.2.3. Economic Factors – variations in the economic performance in different countries and regions affect
spending patterns and international trade (it is not about internal, which is micro level)
2.2.4. Political: national governments and transnational organizations have an important role in determining
the future adoption and control of the Internet and the rules by which it is governed.
2.2.5. Technological Factor: changes in technology offer new opportunities to the way products can be
marketed.
2.3. E-commerce Business Models and Concepts
A business model describes the architecture for product, service, and information delivery and a description of
sources of revenues (revenue streams). A business model identifies the value chain elements of the business
such as inbound logistics, operations (or production), outbound logistics, marketing, service; and support
activities.
A business model doesn‘t exist in a vacuum. A firm might select one or more business models as strategies to
accomplish enterprise goals. For instance, if the firm‘s goal is to position itself as a high-tech, innovative
company, it might decide to use the internet to connect and communicate with its suppliers and customers.
The authors of internet business models and strategies suggest the following components as critical to
appraising the fit of a business model for the company and its environment.
 Customer value: - Does the model create value through its product offering that is differentiated in
some way from that of competitors?
 Scope: - Which markets does the firm serve, and are they growing? Are these markets currently served
by the firm, or will they be higher-risk new markets?
 Price:-Are the firm‘s products priced to appeal to markets and also achieve company share and profit
objective?
 Revenue source:-Where is the money coming from? Is it plentiful enough to sustain growth and profit
objectives over time? Many dot.com failures overlooked this element.

 Connected activities:-What activities will the firm need to perform to create the value described in the
model? Does the firm have these capabilities? For example, if 24/7 customer service is part of the
value, the firm must be prepared to deliver it.
 Implementation: - The Company must have the ability to actually make it happen, which involves the
firm‘s systems, people, and culture and so on.
 Capabilities:-Does the firm have the resource (financial, core competencies, etc) to make the selected
model functional?
 Sustainability:-The e-business model is particularly appropriate if it will create a competitive advantage
over time. Will it be difficult to imitate and will the environment be attractive for maintaining the
model over time?
 Eight Key Elements of a Business Model
If you hope to develop a successful business model in any arena, not just e-commerce, you must make sure that
the model effectively addresses the eight elements of business models. These elements are value proposition,
revenue model, market opportunity, competitive environment, competitive advantage, market strategy,
organizational development, and management team. Many writers focus on a firm‘s value proposition and
revenue model. While these may be the most important and most easily identifiable aspects of a company‘s
business model, the other elements are equally important when evaluating business models and plans, or when
attempting to understand why a particular company has succeeded or failed. In the following sections, we
describe each of the key business model elements more fully.
2.4.1. Value Proposition
A company‘s value proposition is at the very heart of its business model. A value proposition defines how a
company‘s product or service fulfills the needs of customers . To develop and/or analyze a firm‘s value
proposition, you need to understand why customers will choose to do business with the firm instead of another
company and what the firm provides that other firms do not and cannot. From the consumer point of view,
successful e-commerce value propositions include personalization and customization of product offerings,
reduction of product search costs, reduction of price discovery costs, and facilitation of transactions by
managing product delivery.
For instance, before Amazon existed, most customers personally traveled to book retailers to place an order. In
some cases, the desired book might not be available, and the customer would have to wait several days or
weeks, and then return to the bookstore to pick it up. Amazon makes it possible for book lovers to shop for
virtually any book in print from the comfort of their home or office, 24 hours a day, and to know immediately

whether a book is in stock. Amazon‘s Kindle takes this one step further by making e-books instantly available
with no shipping wait. Amazon‘s primary value propositions are unparalleled selection and convenience.
2.4.2. Revenue Model
A firm‘s revenue model describes how the firm will earn revenue, generate profits, and produce a superior
return on invested capital. We use the terms revenue model and financial model interchangeably. The function
of business organizations is both to generate profits and to produce returns on invested capital that exceed
alternative investments. Profits alone are not sufficient to make a company ―successful‖. In order to be
considered successful, a firm must produce returns greater than alternative investments. Firms that fail this test
go out of existence.
Although there are many different e-commerce revenue models that have been developed, most companies rely
on one, or some combination, of the following major revenue models: the advertising model, the subscription
model, the transaction fee model, the sales model, and the affiliate model.
1. Advertising revenue model: a company that offers content, services, and/ or products also provides a forum
for advertisements and receives fees from advertisers.Yahoo, for instance, derives a significant amount of
revenue from display and video advertising.
2. Subscription revenue model: a company that offers content or services charges a subscription fee for
access to some or all of its offerings.
3. Transaction fee revenue model: a company receives a fee for enabling or executing a transaction. For
example, eBay provides an auction marketplace and receives a small transaction fee from a seller if the seller is
successful in selling the item.
4. The sales revenue model: companies derive revenue by selling goods, content, or services to customers.
Companies such as Amazon (which sells books, music, and other products), LLBean.com, and Gap.com all
have sales revenue models.
5. The affiliate revenue model: companies that steer business to an ―affiliate‖ receive a referral fee or
percentage of the revenue from any resulting sales. For example, MyPoints makes money by connecting
companies with potential customers by offering special deals to its members.
2.4.3. Market Opportunity
The term market opportunity refers to the company‘s intended market space (i.e., an area of actual or potential
commercial value) and the overall potential financial opportunities available to the firm in that market
space.The market opportunity is usually divided into smaller market niches. The realistic market opportunity is
defined by the revenue potential in each of the market niches where you hope to compete.

2.4.4. Competitive Environment

A firm‘s competitive environment refers to the other companies selling similar products and operating in the
same market space. It also refers to the presence of substitute products and potential new entrants to the
market, as well as the power of customers and suppliers over your business. The competitive environment for a
company is influenced by several factors: how many competitors are active, how large their operations are,
what the market share of each competitor is, how profitable these firms are, and how they price their products.
Firms typically have both direct and indirect competitors. Direct competitors are companies that sell products
and services that are very similar and into the same market segment.For example, Priceline and Travelocity,
both of whom sell discount airline tickets online, are direct competitors because both companies sell identical
products—cheap tickets.
Indirect competitors are companies that may be in different industries but still compete indirectly because their
products can substitute for one another.For instance, automobile manufacturers and airline companies operate
in different industries, but they still compete indirectly because they offer consumers alternative means of
transportation.
 Competitive Advantage
Firms achieve a competitive advantage when they can produce a superior product and/or bring the product to
market at a lower price than most, or all, of their competitors. Firms also compete on scope. Some firms can
develop global markets, while other firms can develop only a national or regional market. Firms that can
provide superior products at the lowest cost on a global basis are truly advantaged. There are four types
competitive advantages:
1. Asymmetry: exists whenever one company in a market has more resources than other companies.
Theresources may be financial backing, knowledge, information, and/or power than other companies.
2. first-mover advantage: a competitive market advantage for a firm that results from being the first into a
marketplace with a serviceable product or service. If first movers develop a loyal following or a unique
interface that is difficult to imitate, they can sustain their first-mover advantage for long periods.
3. Complementary resources: resources and assets not directly involved in the production of the product but
required for success, such as marketing, management, financial assets, and reputation.
4. Unfair competitive advantage: occurs when one firm develops an advantage based on a factor that other
firms cannot purchase. For instance Brands are built upon loyalty, trust, reliability, and quality. Once obtained,
they are difficult to copy or imitate, and they permit firms to charge premium prices for their products.
 Market Strategy

No matter how tremendous a firm‘s qualities, its marketing strategy and execution are often just as important.
The best business concept, or idea, will fail if it is not properly marketed to potential customers. Market
strategy is the plan you put together that details exactly how you intend to enter a new market and attract new
customers. For instance, Twitter, YouTube, and Pinterest have a social network marketing strategy that
encourages users to post their content on the sites for free, build personal profile pages, contact their friends,
and build a community. In these cases, the customer becomes part of the marketing staff.
 Organizational development
Organizational Development is plan describes how the company will organize the work that needs to be
accomplished. Typically, work is divided into functional departments, such as production, shipping, marketing,
customer support, and finance. Jobs within these functional areas are defined, and then recruitment begins for
specific job titles and responsibilities.
For instance, eBay founder Pierre Omidyar started an online auction site, according to some sources, to help
his girlfriend trade Pez dispensers with other collectors, but within a few months the volume of business had
far exceeded what he alone could handle. So he began hiring people with more business experience to help out.
Soon the company had many employees, departments, and managers who were responsible for overseeing the
various aspects of the organization.
 Management Team
Management team is describes as employees of the company responsible for making the business model work.
A strong management team gives a model instant credibility to outside investors, immediate market-specific
knowledge, and experience in implementing business plans. Eventually, most companies get to the point of
having several senior executives or managers. How skilled managers are, however, can be a source of
competitive advantage or disadvantage. The challenge is to find people who have both the experience and the
ability to apply that experience to new situations.
 Summary of the eight key elements of a business model
Value proposition: Why should the customer buy from you?
Revenue model: How will you earn money?
Market opportunity: What market space do you intend to serve, and what is its size?
Competitive environment: Who else occupies your intended market space?
Competitive advantage: What special advantages does your firm bring to the market space?
Market strategy: How do you plan to promote your products or services to attract your target audience?

Organizational development: What types of organizational structures within the firm are necessary to carry
out the business plan?
Management team: What kinds of experiences and background are important for the company‘s leaders to
have?
 Categorizing E-commerce Business Models
Our approach is to categorize business models according to the different major e-commerce sectors—B2C and
B2B—in which they are utilized. You will note, however, that fundamentally similar business models may
appear in more than one sector. For example, the business models of online retailers (often called e-tailers) and
e-distributors are quite similar. However, they are distinguished by the market focus of the sector in which they
are used. In the case of e-tailers in the B2C sector, the business model focuses on sales to the individual
consumer, while in the case of the e-distributor, the business model focuses on sales to another business. Many
companies use a variety of different business models as they attempt to extend into as many areas of e-
commerce as possible. We look at B2C business models and B2B business models.
 Major business-to-consumer (B2c) e-commerce business models
1. E-tailer: Online retail stores, often called e-tailers come in all sizes, from giant Amazon to tiny local stores
that have Web sites. Online version of retail store where customers can shop at any hour of the day or night
without leaving their home or office.Eg.Amazon, iTunes and Bluefly.
2. Community Provider: Sites where individuals with particular interests, hobbies, common experiences, or
social networks can come together and ―meet‖ online.eg. Social Medias (Facebook, Twitter, viber).
3. Content Provider: these are Information and entertainment providers such as newspapers, sports sites, and
other online sources that offer customers up-to date news and special interest how-to guidance and tips and/or
information sales.eg. WSJ.com, CBSSports.com, CNN.com, ESPN.com
4. Portal: offers users powerful search tools as well as an integrated package of content and services all in one
place: news, e-mail, chat, music downloads, video streaming, calendars, etc. Seeks to be a user‘s home
base.Eg. Yahoo, AOL, MSN and Facebook
5. Transaction Broker: Processors of online sales transactions, such as stockbrokers and travel agents that
increase customers‘ productivity by helping them get things done faster and more cheaply. Eg.E*Trade,
Expedia, Monster, Travelocity, Hotels.com and Orbitz.
6. Market Creator: Businesses that use Internet technology to create markets that bring buyers and sellers
together and display products, search for products, and establish a price for products.eg. EBay, Etsy, Amazon
and Priceline.

7. Service Provider: Companies that make money by selling service to users online, rather than a product. Eg.
VisaNow.com, Carbonite and Rocket Lawyer.
 Major business-to-business (B2B) e-commerce business models
1. E-distributor: Companies that supply products and services directly to individual businesses. These are
Single-firm online version of retail and wholesale store; supply maintenance, repair, operation goods; indirect
inputs. Eg. Grainger.com, Partstore.com
2. E-procurement: e-procurement firms create and sell access to digital electronic markets. Firms such as
Ariba, for instance, have created software that helps large firms organize their procurement process by creating
mini-digital markets for a single firm. E.g. Ariba and Perfect Commerce.
3. Exchange: an independent digital electronic marketplace where suppliers and commercial purchasers can
conduct transactions. Exchanges are owned by independent, usually entrepreneurial start-up firms whose
business is making a market, and they generate revenue by charging a commission or fee based on the size of
the transactions conducted among trading parties.
4. Industry Consortia: Industry consortia are industry-owned vertical marketplaces that serve specific
industries, such as the automobile, aerospace, chemical, floral, or logging industries.In contrast, horizontal
marketplaces sell specific products and services to a wide range of companies.
2.8. Value and Revenue in E- commerce
As part of its e-business model, an organization describes the ways in which it creates value for customers and
partners. This description is in line with the marketing concept, which suggests that the social and economic
justification for an organizational existence is the satisfaction of customer wants and needs while meeting
organizational objectives. Business partners might include supply chain members such as suppliers,
wholesalers and retailers or firms with which the company joins forces to create new brands. Firms deliver
stakeholder value through e-business models by using digital products and processes. Whether online or
offline, the value proposition involves knowing what is important to the customer or partner and delivering it
better than other firms.
Value: It encompasses the customer‘s perceptions of the product‘s benefits, specifically its attributes, brand
name, and support services. Subtracted from benefits are the costs involved in acquiring the product, such as
monetary, time, energy, and psychic costs.
Like customers, partners evaluate value by determining whether the partnership provides more benefits than
costs. This concept is shown as follows:
Value= benefit-cost

Information technology usually but not always increase benefits and lowers costs to stakeholders. E-marketing
strategies capitalize on the internet‘s properties to add many general benefits, thus increasing stakeholder
value. Conversely, they can decrease value when websites are complex, information is hard to locate, and
technical difficulties interrupt data access or shopping transactions.
 Business process level in E-business models
These are the business processes levels to increase the firm‘s effectiveness.
A. Customer relationship management (CRM): This involves retaining and growing business and individual
customers through strategies that ensure their satisfaction with the firm and its products. CRM seeks to keep
customers for the long term and to increase the number and frequency of their transactions with the firm. In the
context of e-business, CRM uses digital processes and integrates customer information collected at every
customer ―touch point.‖ Customers interact with firms in person at retail stores or company offices, by mail,
via telephone, or over the internet. The results of the interactions at all these touch points are integrated to build
a complete picture of customer characteristics, behavior, and preferences.
B. knowledge management (KM): Is a combination of a firm‘s database contents, the technology used to
create the system, and the transformation of data into useful information and knowledge. KM systems create a
storehouse of reports, customer account information, product sales, and other valuable information managers
can use to make decisions.
C. Supply chainmanagement (SCM): Involves coordination of the distribution channel to deliver products
more effectively to customers. For example, a user orders from certain web sites, FedEx‘s computers receive
the instruction to pick up product from a warehouse and delivery it quickly to the customer. Similarly, when
consumers buy a product at the grocery store, the bar code scanner at the checkout tells the store‘s computer to
reduce the inventory count by one and then automatically orders more cases of the product from warehouses or
suppliers if inventory in the back room is low.
D. Community building: With community building, firms build websites to draw groups of special interest
users. In this model, firms invite users to chat and post e-mail on their websites with the purpose of attracting
potential customers to the site. Firms often gather e-mail lists of like-minded users from these communities for
future e-mail marketing campaigns. Through community building, marketers can create social bonds that
enhance customer relationships.
E. Affiliate programs: Occur when firms put a link to someone else‘s retail website and earn a commission on
all purchases by referred customers. Amazon.com pioneered this e-business model. When viewed from an
Amazon affiliate‘s perspective, it is operating as a selling agent for Amazon‘s products.

F. Database marketing: Involves collecting, analyzing, and disseminating electronic information about
customers, prospects, and products to increase profits. It is one of the fastest growing strategies for e-
marketers. Database marketing systems can be a part of the firm‘s overall knowledge management system.
G. Enterprise resource planning (ERP): Refers to a back-office system for order entry, purchasing,
invoicing, and inventory control. ERP systems allow organizations to optimize business processes while
lowering costs. ERP does not fall under the marketing function, but it is so important that it must be included
in this list.
H. Mass customization: Refers to the internet‘s unique ability to customize marketing mixes electronically
and automatically to the individual level. Firms use this practice when they collect information from customers
and prospects, and use it to customize products and communication on an individual basis for a large number
of people.
Electronic-marketing planning
Introduction to e-Marketing plan
E-Marketing plan is a strategic document developed through analysis and research and is aimed at achieving
marketing objectives via electronic medium. E-Marketing plan represents a sub-set of organization‘s overall
marketing plan which supports the general business strategy. Every good e-Marketing plan must be developed
in line with the organization‘s overall marketing plan.
The e-marketing plan serves as a road map to guide the direction of the firms, allocate resources and make
tough decisions at critical junctures.
In a broad sense, e-Marketers generally start by analyzing the current micro- and macro-economic situation of
the organization. E-Marketers must observe both internal and external factors when developing an e-Marketing
plan as trends in both micro and macro environment affect the organization‘s ability to perform business.
Examples of micro environment elements are: pricing, suppliers, customers. Macro environment also consist
socioeconomic, political, demographic and legal factors. In order to produce a viable e-Marketing solution, e-
Marketers must first understand the current situation of the company and its environment, profile, segment the
target in to the right market and then strategically position the products as to achieve optimal response with the
target market. This is generally achieved through SWOT analysis. By assessing organization‘s strengths and
weaknesses and looking at current opportunities and threats one can devise an e-Marketing strategy that can
improve the organization‘s bottom line.
How can information technologies assist marketers in building revenues and market share or lowering costs?
How many firms identify a sustainable competitive advantage with the internet when the landscape is

constantly changing? The answer lies in determining how to apply digital data and information technologies
both effectively and efficiently.
The best firms have clear visions that they translate, through the marketing process, from e-business objectives
and strategies into e-marketing goals and well executed strategies and tactics for achieving those goals. This
marketing process entails three steps: marketing plan creation, plan implementation, and plan
evaluation/corrective action. This chapter examines the first of these steps i.e. the e-marketing plan.
Creating an E-marketing plan
The e-marketing plan is a blueprint for e-marketing strategy formulation and implementation. It is a guiding,
dynamic document that links the firm‘s e-business strategy (e-business model) with technology driven
marketing strategies and lays out details for plan implementation through marketing management. The intent
of the marketing plan is to guide delivery of the desired results measured by a performance metrics according
to the specifications of the e-business model imbedded in the firm‘s e-business strategy.
It presents a generic plan that includes a menu of tasks from which marketers can select activities relevant to
their firm, industry, brands, and internal processes. It assumes that a higher level corporate plan is already in
place, outlining the firm‘s goals, e-business strategies and selected enterprise level e-business models. If such
plan has not already been formulated, marketers must go through the environmental scan and SWOT analyses
prior to creating the plan.
A Seven step E-marketing plan
Step 1- Situational analysis
This is the first step in which the marketers will conduct the situation analysis by reviewing environmental and
SWOT analysis. The marketing environment is ever changing, providing plenty of opportunities to develop
new products, new markets, and new media to communicate with customers, plus new channels to reach
business partners. At the same time, the environment poses competitive, economic, and other threats. Three
key environmental factors that affect e-marketing and are part of any situation analysis include legal,
technological, and market related factors.
The SWOT analysis (strength, weaknesses, opportunities, and threats) flows from a situation analysis that
examines the company‘s internal strengths and weaknesses with respect to the environment and the
competition, and looks at external opportunities and threats.
Opportunities may help to define a target market or identify new product opportunities, while threats are areas
of exposure.
Step 2- E-marketing strategic planning

After reviewing the situation analysis and currently used marketing plans, marketers engage in strategic
planning. The strategic planning process involves determining the fit between the organization‘s objectives,
skills, and resources and its changing opportunities.
We present tasks as tier 1 strategies, including segmentation, targeting, differentiation, and positioning. During
this phase, marketers uncover opportunities that help to formulate the e-marketing objectives.
Marketers conduct a market opportunity analysis (MOA), including both demand and supply analysis, for
segmenting and targeting. The demand analysis portion includes market segmentation analysis to describe and
evaluate the potential profitability, sustainability, accessibility, and size of various potential segments. Segment
analysis in the B2C market uses descriptor such as demographic characteristics, geographic location, selected
psychographic characteristics (such as attitude towards technology and wireless communication device
ownership), and past behavior towards the product (such as purchasing patterns online and offline). B2B
descriptor includes firm location, size, industry, type of need, and more.
These descriptors help firms to identify potentially attractive markets. Firms must also understand segment
trends- are they growing or declining in absolute size and product use?
Firms use traditional segmentation analysis when they enter new markets through the online channel; however,
if the firm plans to serve current markets online, it will explore more deeply into these customers‘ needs to
answer the questions like; which of the firm‘s customers will want to use the internet? & how do the needs of
customers using the firm‘s web site differ from those of other customers? For example, most internet users
expect e-mail to be answered within 24 hours but will be satisfied if a postal letter is answered within weeks.
In addition, firms often discover new markets as these customers find their way to the web site. Marketers can
use database analysis and other techniques to discover how best to serve these new markets.
Another tier 1 step in e-marketing strategic planning includes identifying brand differentiation variables and
positioning strategies.
Based on an understanding of both the competition and the target(s), marketers must decide how to
differentiate their products from competitors‘ products in a way that provides benefits perceived as important
by the target. Following from the differentiation is the positioning statement: the desired image for the brand
relative to the competition. If this positioning strategy was already decided upon in the traditional marketing
plan, e-marketing must decide whether it will be effective online as well.
Step 3 - Objectives
In general, an objective in an e-marketing plan takes a form that includes the following aspects:
 Task (what is to be accomplished)

 Measurable quantity (how much )

 Time frame (by when)
Assume that Amazon wants to increase the number of associates in its affiliate program from 800,000 to
900,000 in one year. This type of objective is easy to evaluate and a critical part of the e-marketing plan. The
plan will often include the rationale for setting each objective –why each is desirable and achievable given the
situation analysis findings, e-marketing, and e-business strategy.
Even though e-commerce transactions are an exciting dimension of an e-business presence, other objectives are
also worthwhile, especially when the firm is using technology only to create internal efficiencies such as target
market communication. In fact, most e-marketing plans aim to accomplish multiple objectives such as the
following:
 increase market share
 increase sales revenue (measured in dollar or units)
 reduce cost ( such as distribution and promotion costs)
 achieve branding goals ( such as increasing brand awareness)
 improve databases
 achieve customer relationship management goals ( such as increasing customer satisfaction, frequency
of purchases, or customer retention rates)
 improve supply chain management ( such as by enhancing member coordination, adding partners, or
optimizing inventory levels)
Step 4 - Marketing strategies
Next, marketers craft strategies regarding the 4 Ps and relationship management to achieve plan objectives
regarding the offer (product), value (pricing), distribution (placing), and communication (promotion). Further,
marketers design customer and partner relationship strategies (CRM/PRM). For clarification we call these tier
2 strategies. In practice, tier 1 and tier 2 strategies are interrelated; for example, marketers select the best target
market and identify a competitive product position, which dictates the ideal type of advertising, pricing, and so
forth.
Steps 2, 3, and 4 are an iterative process because it is difficult to know what the brand position should be
without understanding the offer that comprises the brand promise (i.e. the benefits the firm promises to
customers). Let us see the details of tier 2 strategies one by one.
I. The offer: Product strategies

The organization can sell merchandise, services, or advertising on the web site. It can adopt one of the e-
business models discussed so far such as online auctions, to generate a revenue stream. The firm can create
new brands for the online market or simply sell selected current or enhanced products in that channel.
Obviously, the previous analysis will reveal many options. If the firm offers current brands online, it will need
to solve many different problems, such as the way colors appear differently on a computer screen than in print.
The brightest firms take advantage of information technology capabilities to alter their online offerings. For
example, Dell computer allows product customization in an instant: customers configure the computer they
want to buy using an online form, and the database returns a page that includes current information about the
computer and its price.
II. The value: Pricing strategies
A firm must decide how online product prices will compared with offline equivalents. To make these
decisions, firms consider the differing costs of sorting and delivering products to individuals through the online
channel as well as competitive and market concerns. Two particularly important online pricing trends include
the following:
 Dynamic pricing. The strategy applies different price levels for different customers or situations. For
example, a first time buyer or someone who hasn‘t purchased for many months may receive lower
prices than a heavy user, or prices may drop during low demand periods. The internet allows firms to
price items automatically and ―on the fly‖ while users view pages.
 Online bidding. This approach presents a way to optimize inventory management. For instance, a few
Seattle hotels allow guests to bid for hotel rooms on slow days, instructing its reservation agents to
accept various minimum bid levels depending on occupancy rates for any given day. Priceline.com,
eBay.com, and many B2B exchanges operate exclusively using this strategy.
III. Distribution strategies
Many firms use the internet to distribute products or create efficiencies among supply chain members in the
distribution channel. Consider these examples:
 Direct marketing. Many firms sell directly to customers, bypassing intermediaries in the traditional
channel for some sales. In B2B markets, many firms realize tremendous cost reductions by using the
internet to facilitate sales.
 Agent e-business models. Firms such as eBay and E*TRADE bring buyers and sellers together and
earn a fee for the transaction.
IV. Marketing communication strategies

The internet generates a multitude of new marketing communication strategies, both to draw customers to a
web site and to interact with brick- and- mortar customers. Firms use web page and e-mail to communicate
with their target markets and business partners. Companies build brand images, create awareness of new
products, and position products using the web and e-mail. Database marketing is a key to maintaining records
about the needs, preferences, and behavior of individual customers so companies can send relevant and
personalized information and persuasive communication at strategic times.
V. Relationship management strategies
Many e-marketing communication strategies also help build relationships with a firm‘s partners, supply chain
members, or customers. However, some firms aware the gamble by using customer relationship management
(CRM) or partnership management (PRM) software to integrate customer communication and purchase
behavior into a comprehensive database. They use CRM software to retain customers and increase average
order values and lifetime value. Other firms build extranets- two or more proprietary networks linked for better
communication and more efficient transactions among firms as in PRM.
One simple way to present the firm‘s goals and accompanying e-marketing strategies is through an objective-
strategy matrix.
This graphical device helps marketers to better understand their implementation requirements.
Step 5 Implementation plan
This is the stage at which decision has to be made concerning how to accomplish the objectives through
creative and effective tactics.
Marketers select the marketing mix (4Ps), relationship management tactics, and other tactics to achieve the
plan‘s objectives and then devise detailed plans for implementation (the action plans). Marketers also check to
make sure that, the right marketing organization is in place for implementation (i.e. staff, department structure,
application service providers, and other outside firms). The right combination of tactics will help the firm meet
its objectives effectively and efficiently.
E-marketers pay special attention to information gathering tactics because information technologies are
especially practiced at automating these processes. Web site forms, e-mail feedback, and online surveys are
just some of the tactics firms use to collect information about customers, prospects, and other stakeholders.
Other important tactics include the following:
 Web site log analysis software helps firms review under behavior at the site and make changes to better
meet the needs of users.

 Business intelligence uses the internet for secondary research, assisting firms in understanding
competitors and other market forces.
Step 6- Budget
A key part of any strategic plan is to identify the expected returns from an investment. These returns can then
be matched against costs to develop a cost/benefit analysis, ROI calculation, or internal rate of return (IRR),
which management uses to determine whether the effort is worthwhile.
Marketers today are especially concerned with adequate return on marketing investment (ROMI). During plan
implementation, marketers will closely monitor actual revenues and costs to see that results are on track for
accomplishing the objectives. The following sections describe some of the revenues and costs associated with
e-marketing initiatives.
I. Revenue forecast
In this budget section, the firm uses an established sales forecasting method for estimating the sales revenues in
the short, intermediate, and long term. The firm‘s historical data, industry report, and competitive actions are
all inputs to this process.
An important part of forecasting is to estimate the level of web site traffic over time, because this number
affects the amount of revenue a firm can expect to generate from its site.
Revenue streams that produce internet profits come mainly from web site direct sales, advertising sales,
subscription fees, affiliate referrals, sales at partner sites, commissions, and other fees. Companies usually
summarize this analysis in a spreadsheet showing expected revenues over time and accompanying rationale.
II. Intangible Benefits
The intangible benefits of e-marketing strategies are much more difficult to establish, as are intangible benefits
in the brick-and-mortar world. For example, can we easily respond the question how much brand equity is
created? It is something difficult to measure. An American Airlines provides its customers periodic e-mail
message about their frequent-flyer account balances. So, what is the value of increased brand awareness from a
web site? Putting a financial figure on such benefits is challenging but essential for e-marketers.
III. Cost savings
Money saved through internet efficiencies is considered soft revenue for a firm. For example, if the distribution
channel linking a producer with its customers contains a wholesaler, distributor, and retailer, each intermediary
will take a profit. A typical markup scheme is 10 percent from manufacturer to the wholesaler, 100 percent
from wholesaler to the retailer, and 50 percent to the consumer. Thus, if a producer sells the product to a
wholesaler for $50; the consumer ultimately pays $ 165. If the producer cuts out the intermediaries

(disintermediation) and sells its product online directly to the consumer, it can price the product at $85 and
increase revenue by $30. Whether this approach translates into profits depends on the cost of getting the
product to the consumer. Other examples include the $5,000 a marketer might save in printing and postage for
a direct mail piece costing $1.00 per piece to 5000 consumers, or the $270 million Cisco actually saved in one
year on handling costs for its online computer system sales.
IV. E-marketing costs
E-marketing entails many costs, including costs for employees, hardware, software, programming, and more.
In addition, some traditional marketing costs may creep into the e-marketing budget- for example, the cost of
offline advertising to draw traffic to the web site. For simplicity, this section will discuss technology-related
cost items only. See the ―Let‘s Get Technical‖ box for the steps required to build a web site. Consider that the
cost of web site (except the most basic) can range from $5,000 to $50 million. Following are just a few of the
costs site developers incur:
 Technology cost. These costs include software, hardware, internet access or hosting services,
educational materials and training, and other site operation and maintenance costs.
 Site design. Web sites need graphic designers to create appealing page layouts, graphics, and photos.
 Salaries. All personnel who work on web site development and maintenance are budget items.
 Other site development expenses. If not included in the technology or salary categories, any other
expenses will be here-things such as registering multiple domain names and hiring consultants to write
content or perform other development and design activities.
 Marketing communication. All advertising, public relations, and promotions activities, both online and
offline that directly relate to drawing site traffic and enticing them to return and purchase are begged
here. Other costs include search engine registration, online directory costs, e-mail list rental, prizes for
contests, and more
 Miscellaneous. Other typical project costs might fall here –expenses such as travel, telephone,
stationery printing to add the new URL, and more.
Step 7- Evaluation of plan
Once the e-marketing plan is implemented, its success depends on continuous evaluation. This type of
evaluation means e-marketers must have tracking systems in place before the electronic doors open. What
should be measured? The answer depends on plan objectives. Review the balanced scorecard (BSC) for e-
business to see how various metrics relate to specific plan goals.

In general, today‘s firms are quite ROI driven. As a result, e-marketers must show how their intangible goals,
such as brand building or CRM, will lead to higher revenue down the road. Also, they must present accurate
and timely metrics to justify their initial and ongoing e-marketing expenditures throughout the period covered
by the plan.
To sum up, situation assessment is often the analysis of the current e-Business tools and activities within the
organization. One of them is a website audit aimed at analyzing and detecting any inefficiencies and setting the
direction for strategic improvement.
Once the organization‘s environment is well understood, e-marketers then have an opportunity to present
realistic objectives and provide a path for implementation and evaluation of the implementation process.
A good e-Marketing plan will have a clear executive summary and unambiguous set of recommendations
which can be understood by management and further implemented by technical staff. For this reason, it is
essential that e-Marketers are familiar with basic principles of the technology and tools that drive e-Marketing
activities.
As we move into the future the age of technology is only surpassed by the quest for knowledge. Whether you
have a large corporation or you operate a small business out of your home, an internet presence will be the key
to continued success. When it comes to websites, only those that are search engine optimized will rank well
enough to achieve the momentum needed to compete.
Search engine optimization consulting can provide the secrets to gaining and keeping that momentum – the
momentum that will not only allow a company to compete within a niche, but it will allow it to conquer and
control a niche. This will insure search engine rankings that will translate into profits.
It is vital for businesses to have a web presence that allows prospective customers to find their website easily
in order to purchase their products and services. Think Big Sites is an online search engine optimization (SEO)
business that specializes in organic search engine optimization.
Organic search engine optimization is an approach to business marketing that carefully selects strategies and
tactics for a target site in order to obtain business objectives. Think Big Sites deploys many different strategies,
such as increasing a site‘s ability to be searched and indexed by search engines, which help online businesses
to reach their business goals.
INTERNET MARKETING STRATEGIES
An overview of marketing strategies
No matter how tremendous a firm‘s qualities are high, its marketing strategy and execution are often just as
important. The best business concept, or idea, will fail if it is not properly marketed to potential customers.

Market strategy is the plan you put together that details exactly how you intend to enter a new market and
attract new customers or Market strategy is How the firm plan to promote about firms products or services to
attract its target audience. For instance, Twitter, YouTube, and Pinterest have a social network marketing
strategy that encourages users to post their content on the sites for free, build personal profile pages, contact
their friends, and build a community. In these cases, the customer becomes part of the marketing staff.
Product strategies over the internet
A product is a bundle of benefit that satisfies the needs of organizations or consumers and for which they are
willing to exchange money or other items of values. The term product includes; tangible goods, services, ideas,
people and places. The success of Google demonstrates how a new and purely online product can use the
internet‘s properties to build a successful brand. All these can be marketed on the internet, as the Google.com
example shows. Products may also be classified by the purpose for which they are purchased. Consumer
products are those purchased by an individual for personal consumption. Businesses sell products to consumers
in the business-to-consumer (B2C) market, and Consumers sell products to another consumer in the consumer-
to-consumer (C2C) market. Industrial products are used in the operation of an organization, as components for
manufacture into final product, or for sale (B2B market), that is businesses sell products to businesses.
Some new products such as search engines are unique to the internet while other products such as books
simply use the internet as a new distribution channel, often adding unique technology –enabled services. With
the internet‘s unique properties, customer control, and other e-marketing trends, product developers face many
challenges and enjoy a plethora of new opportunities while trying to create customers value using electronic
marketing tools.
Creating customer value online
To succeed, firms must employ strategies that result in customer value.
Value = Benefit - costs. But what is exactly is value?
First, it is the entire product experience. It starts with a customer‘s awareness of a product, continues at all
customer touch point (including the web site experience and e-mail from a firm) and ends with actual product
usage and post purchase customer service.
Second, value is defined by the customer (by the mental beliefs and attitude held by customers). Regardless of
how favorably the firm views its own products, it is the customers‘ perceptions that count.
Third, value involves customer expectation; if the actual product experience falls short of their expectation,
customers will be disappointed.

Fourth, value is applied at all price levels. The internet can increase benefits and lowers costs, but it can also
work in reverse.
Product Benefits
The benefits customers seek online are:
• Effective online navigation • Quick download speed
• Clear site organization • Attractive and useful site design
• Secure transaction • Privacy
• Free information or service & • User-friendly web browsing and e-mail
reading
To capitalize on these opportunities, marketers must make five general product decisions that comprise its
bundle of benefits to meet customer needs: These are
1. Attributes
Product attributes include overall quality and specific features. With quality, most customers know ―you get
what you pay for‖. Higher and consistent quality means higher prices, thus, maintaining the value proposition.
Product features include; color, taste, style, size and speed of service. For example, Yahoo! provides list of
website categories (attribute), which helps users to find things quickly online (benefit). Product benefits are
key components in the value proposition.
The internet increases customer benefits in many remarkable ways that have revolutionized marketing
practice. The most basic is the move from atoms to bits, one of the internet‘s key properties. This capability
opened the door for media, music, software, and other digital products to be presented on the web. Perhaps the
most important benefit is mass customization. Tangible products such as laptop computers can be sold alone at
rock-bottom price online or bundled with many additional hardware, software items or services to provide
additional benefits at a higher price.
2. Branding
A brand includes a name, a symbol, or other identifying information. When a firm registers that information it
becomes a trademark. A trade mark is a word, phrase, symbol or design, or combination of these, that
identifies and distinguishes the source of the goods or services of one party from those of others. A brand is
much more than its graphic and verbal representation in marketing materials, however. It is an individual‘s
perception of an integrated bundle of information and experiences that distinguishes a company and/or its
product offerings from the competition.
Brand Decision for web products

A) Using existing brand name on the web

Firms can use exiting brand names for their new products. An existing brand name can be used for any new
product and it makes sense when the brand is well known and has strong brand equity. For example, Amazon
added music CDs, videos, software, electronics, and more to its product mix. It is beneficial for Amazon to use
its well established web brand name for these additional offerings rather than launch a new electronic
storefront with another name.
B) Creating new brand names for the internet marketing
If an organization wants to create a new internet brand, a good name is important. Good brand names should
suggest something about the product (e.g. webpromote.com and Google.com), should differentiate the product
from the competitors (e.g. gurl.com), and should be capable of legal protection. On the internet, a brand name
should be short, memorable, easy to spell, and capable of translating well into other language. For example,
Dell computer at www.dell.com is much easier than HammacherSchlemmer (www.hammacher.com), the gift
retailer. As another example, consider the appropriateness of these search tool names: Yahoo!, Excite, Lycos,
Alta Vista, InfoSeek, HotBot, WebCrawler, GoTo, Google, and LookSmart. Which ones fit the preceding
criteria?
C) Co-Branding
It occurs when two different companies put their brand names on the same product. This practice is quite
common on the internet and is a good way for firms to build synergy through expertise and brand recognition,
as long as their target markets are similar. For example, sports illustrated now co-brands with CNN as CNNSI.
Even the website address displays the co-brand: sportsillustrated.ccn.com. Yahoo! is a good place to look for
co-branded services.
D) Internet Domain Names
Organizations spend a lot of time and money developing powerful, unique brand names for strong brand
equity. Using the company trademark or one of its brand names in the web address helps consumers quickly
find the site. For example, coca-cola.com adds power to Coca-cola brands. This parallel usage is not always
possible, however. Many factors must be considered when it comes to domain names.
3. Support Service
Customer support during and after purchase-is a critical component in the value proposition. Customer service
representatives should be knowledgeable and concerned about customer experiences. Site that care about
developing relationships with their customers, such as Amazon.com; place some of their best people in

customer support. Some products need extra customer support, for example when user purchases software such
as Survey Solutions to design online questionnaires, technical support becomes important.
Customer service representatives help customers with installation, maintenance problems, product guarantees,
and service warranties, and in general work to increase customer satisfaction with the firm‘s product. Customer
service as a product benefit is an important part of customer relationship management; however, it has now
become more of a necessity than competitive edge.
4. Packaging
Packaging decisions are the fourth set of decisions that must be made about individual products. Packaging is
the activity of designing and producing the container or wrapper for a product. Protection of the product and
promotion are the two major purposes of packaging. The package may include:
 The primary package (what the product is in it – a tube full of toothpaste);
 The secondary package (the box the tube came in);
 the shipping package (a card box case)
5. Labeling
Product labels identify brand name, sponsoring firms, product ingredients, and often provides instructions for
use and promotional materials. Labels on tangible products create product recognition and influence decision
behavior at the point to purchase. Labeling has digital equivalents in the online world. For online services,
terms of product usage, product features, and other information comprise online labeling at web sites. For
example, when user downloads RealAudio software for listening to online broadcasts, they can first read the
‗label‘ to discover how to install and use the software.
Pricing Strategy as Part of Internet Marketing Plan
In the narrowest sense, price is the amount of money charged for a product or service. More broadly, price is
the sum of all the values (such as money, time, energy and psychic cost) that buyers exchange for the benefits
of having or using a good or service. Throughout most of history, prices were set by negotiation between
buyers and sellers, and that remains the dominant model in many emerging economies.
One of the first questions you need to answer is what your site visitors like? Are they bargain hunters? Or do
they look for excellence in customer service? Or shop for products based on their prestige value? Another
important question is what does it cost you to purchase (or produce) and market this product or service? Your
price will have to be above your costs-most of the time.
Fixed price policies Refers to setting one price for all buyers- is a relatively modern idea that arose with the
development of large-scale retailing and mass production at the end of the 19th century. Now, one hundred

years later, the internet is taking us back to an era of dynamic pricing-varying prices for individual customer or
different price for different customers.
Buyer and seller perspectives of price
The meaning of price depends on the viewpoint of the buyer and the seller. Each party brings different needs
and objectives that help to describe a fair price.
I. Buyer view
Buyers define value as benefits minus costs. Internet creates many benefits important to consumers and
business buyers alike. Here we explore the cost side of the formula: money, time, energy, and psychic costs.
II. Seller view
Sellers view price as the amount of money they receive from buyers. Both internal and external factors affect
pricing levels. Internal factors are the firm‘s strength and weaknesses from its SWOT analysis, its overall
pricing objectives, its marketing mix strategy, and the cost involved in producing and marketing the product.
External factors that affect online pricing in a particular include the market structure and the buyer‘s
perspective, as discussed earlier.
Here are the various pricing objectives you‘ll want to consider.
• To maximize short-term profits
Here you try to squeeze as much money out of sales of the product as possible, even though fewer customers
may make a purchase. Your strategy may be to charge premium prices for website design services. You end up
with fewer customers, but then dealing with a lot of customers multiplies your problems. And you can make
more profit off each customer. Or you may need to maximize profits in order to satisfy an impatient boss or
investor.
• To gain market share
The other main strategy is to price your service lower to gain market share. You may want to maximize the
number of subscribers to your online Internet access business, even though you don‘t make as much on each
customer. But you know that later you‘ll be able to sell these subscribers other services such as web hosting, e-
commerce, website design, DSL, and a host of others once they get comfortable with you. You don‘t make as
much early, but you plan to make money later with ―back end‖ sales.
• To survive
Survival is a worthy goal. Sometimes companies lower prices so they can generate enough revenue to survive
short term. But this isn‘t a very good long-term strategy. There‘s an old joke about the businessman who said
he was losing money on every sale, but he expected to make it up in volume.

• To help society
You might keep the price lower than ―what the market will bear‖ in order to make essential products available
to the consumers who would otherwise be priced out of the market. Altruism has its place. You don‘t have to
make as much money as possible, unless making money is your only goal. For example, I really want to keep
my consulting services priced within reach of small businesses. I long to see small businesses thrive; that‘s part
of what makes me tick. But I also want to charge better-funded companies a more appropriate fee for the more
extensive services I render them. The way I do this is to offer a standard product or service, and an economy
service at a lower price, but with clear limitations.
Pricing Approaches
Of course, pricing isn‘t just scientific. It has a lot to do with your particular niche on the Internet, and how
you‘ve determined you can best succeed. Here are some demand-oriented approaches to pricing:
• Skimming pricing: When you are offering a new or innovative product you can initially charge a high price,
since the ―early adopters‖ aren‘t very price sensitive. Then you lower prices to ―skim‖ off the next layer of
buyers, etc. Eventually, the price will drop as the product matures and competitors offer lower prices.
• Penetration pricing: You set a low initial price in order to penetrate quickly into the mass market. A low
initial price discourages competitors from entering the market, and is the best approach when many segments
of the market are price sensitive. Amazon.com, for example, offers a discount price and may lose money on the
first sale, but this way they gain more customers who will purchase products later at a lower marketing cost
(since it costs much less to attract them back for the second or third sale if they are happy with their first
purchase experience).
• Prestige pricing. Cheap products are not taken seriously by some buyers unless they are priced at a particular
level. For example, you can sometimes find clothing of the same quality brand at Nordstrom as you do at the
Men‘s Warehouse. But because it is priced higher, Nordstrom‘s clientele believes it to be of higher quality.
• Odd-even pricing takes advantage of human psychology that feels like $499.95 is less than $500. Studies of
price points by direct marketers have found that products sell best at certain price points, such as $197, $297,
$397, compared to other prices slightly higher or lower. Strange, we humans!
• Demand-backward pricing is sometimes used by manufacturers. First, they determine the price consumers
are willing to pay for a product. Then they work backward through the standard markups taken by retailers and
wholesalers to come up with the price they can charge wholesalers for the product.
• Bundle pricing is offering two or more products together in a single package price. This can offer savings to
both the buyer and to the seller, who saves the cost of marketing both products separately. And the customer is

willing to pay more because he perceives that he is getting a lot more, even though the cost to the seller may
not really be that much more.
Here are some cost-oriented approaches to pricing that I‘m sure you are familiar with:
• Standard mark-up pricing: Typically a manufacturer marks his price up 15% over his costs, a wholesaler
20% over his costs, and a retailer 40% over his costs. The retailer gets a larger markup based on the idea that,
since he is closest to the end user, he is required to spend more services and individual attention meeting the
buyer‘s needs.
Then there are competition-oriented approaches to pricing that you‘ll recognize:
Customary pricing is where the product ―traditionally‖ sells for a certain price. Candy bars of a certain weight
all cost a predictable amount—unless you purchase them in an airport shop.
• Loss-leader pricing works on the basis of losing money on certain very low priced advertised products to get
customers in the door who will buy other products at the same time.
• Flexible-price policies offer the same product to customers at different negotiated prices. Cars, for example,
are typically sold at negotiated prices. Many B2B sales depend on negotiated contracts.
Once you have determined list or quoted price you can make some special adjustments still.
• Quantity discounts encourage customers to buy larger quantities, and thus cut marketing costs.
• Seasonal discounts encourage buyers to stock inventory earlier than their normal demand would require.
This enables the manufacturer to smooth out manufacturing peaks and troughs for more efficient production.
• Rebates, such as $40 off Microsoft FrontPage 2000, are usually offered by the manufacturer, but sometimes
a retail store will offer its own rebate. Rebates make marketing sense, since they strongly motivate sales, but
often less than 50% of the buyers will remember to collect the receipt, proof-of-purchase, and rebate form, fill
it out, and mail it prior to the expiration date. And, of course, the rebate is often subtracted from the list price
of the item, which still has considerable profit built in. Rebate marketing is less than half as expensive to the
marketer as the price cut would seem to indicate.
• Trade discounts are offered by manufacturers to distributors or resellers in their distribution chain. For
example, a manufacturer may quote list price of $1000 less 30/10/5, meaning 30% off the list price to the
retailer, an additional 10% off the $1000 to the wholesaler, and an additional 5% off the $1000 to the jobber.
This pricing will be expected if you have an online B2B store.
• Cash discounts are sometimes offered for the costs saved from not having to extend credit and bill the buyer
on an open account. This mainly affects B2B sales rather than retail.

• Allowances may be permitted for trade-ins (not too many trade-in cars shipped by modem though) or by a
manufacturer for promotional advertising that a retailer undertakes.
Online Distribution Strategies
Marketing intermediaries are firms which help the company to promote, sell, and distribute its goods to final
buyers. They include: resellers, physical distribution firms, marketing service agencies, and financial
intermediaries. Resellers are distribution channel firms that help the company find customers or make sales to
them. These include wholesalers and retailers, who buy and resell merchandise.
Physical distribution firms help the company to stock and move goods from their points of origin to their
destinations. Marketing services agencies are the marketing research firms, advertising agencies, media firms,
and marketing consulting firms that help the company target and promote its products to the right markets.
Financial intermediaries include banks, credit companies, insurance companies, and other businesses that help
finance transactions or insure against the risks associated with the buying and selling of goods. Most firms and
customers depend on financial intermediaries to finance their transactions.
New types of intermediaries
New technologies have led thousands of enterprises to launch internet companies. The amazing success of
early internet only companies such as amazon.com, Expedia, Priceline, eBay and dozens of others struck terror
in the hearts of many established manufacturers and retailers. Established store-based retailers of all kinds- fear
being cutout by these new types of intermediaries. The new intermediaries and new forms of channel
relationships caused existing firms to re-examine how they served their markets.
Brick & mortar, click and mortar and click only marketers
a. Brick and mortar marketers
A ―brick and mortar business‖ is a term used mainly on the Internet to differentiate between companies that are
based solely online, and those that have a real-world counterpart. Such a business has a commercial address
―made of brick and mortar‖ where customers can transact face-to-face. When e-commerce was new, however,
some consumers were wary of doing business with companies that did not have a commercial address. This
brings us to one of the main advantages of a brick and mortar business: customer security.
b. Click only companies
The click-only dot.comsoperate only online without any brick and mortar market presence. They directly sell
products and services to final consumers via the internet. Familiar e-tailers include amazon.com, Expedia and
wine.com. The click only group also includes search engines and portals such as such as Google, Yahoo and

Excite, which started as search engines and later added services such as news, weather, stock reports,
entertainment, etc.
Internet service providers such as AOL and Earth link are click only companies that provide internet and email
connections for a fee. Transaction sites such as auction site eBay, take commissions for transactions conducted
on their site.
Various content sites, such as New York Times on the web (www.nytimes.com), ESPN.com and Encyclopedia
Britannica Online, provide financial, research and other information. Finally enabler sites provide the hardware
and the software that enable internet communication and commerce.
C. click and mortar companies
Click and mortar companies are traditional brick and mortar companies that have added e-marketing to their
operations. However most resisted adding ecommerce to their sites they worried that this would produce
channel conflict- that selling their products or services online would be competing with their offline retailers
and agents. For example Hewlett-Packard feared that its retailers would drop HP‘S computers if the company
sold its computers directly online. Merrill lynch hesitated to introduce online stock trading fearing that its own
brokers would rebel. Even store based bookseller Barnes & Noble delayed opening its online site to challenge
Amazon.com. These companies struggled with the question of how to conduct online sales without
cannibalizing the sales of their own stores, resellers or agents. However, they soon realized that the risks of
losing business to online competitors were even greater than the risks of angering channel partners. If they
don‘t cannibalize these sales, online competitors soon would.
Online Promotion strategies
Simply put, online promotion is promoting or communicating the product or service to customers digitally.
Online advertising encompasses adverts on search engine results pages, adverts placed in emails and other
ways in which advertisers use the Internet.
One of the greatest benefits of online display advertising is that the messages are not restricted by geography or
time and are more interactive than offline advertising.
Internet ads can be updated any time at minimal cost, and therefore can always be timely. They can reach a
very large number of potential buyers all over the world. Online ads are sometimes cheaper in comparison to
print (newspaper and magazine), radio, or television ads. Ads in these other media are expensive because they
are determined by space occupied by how many days (times) they are run, and by the number of local and
national stations and print media that run them. Internet ads can be interactive and targeted to specific interest
groups and/or to individuals. Finally, the use of the Internet itself is growing very rapidly, and it makes sense

to move advertising to the Internet, where the number of viewers is growing. Nevertheless, the Internet as an
advertising medium does have some shortcomings, most of which relate to measurement of effectiveness.
Types of display advertising
There are different ways to display messages online, some of which are mentioned below.
1. Interstitial banners
These are banners that are shown between pages on a web site. As you click from one page to another, you are
shown this advert before the next page is shown. Sometimes, you are able to close the advert.
2. Pop-ups and pop-under
As the name suggests, these are adverts that pop up or under the web page being viewed. They open in a new,
smaller window.
3. Map advert
This is advertising placed within the online mapping solutions available, such as Google Maps. Pricing is a
function of coverage area, content and design requirements, final size.
4. Floating advert
This advert appears in a layer over the content, but is not in a separate window. Usually, the user can close this
advert. It looks very much similar to pop ups ads, but definitely more infuriating. It "fly" anywhere around the
page for 5-30 seconds, obscure view of the page you are trying to read, and often block mouse input. Often, the
animation ends by disappearing into a banner ad on the page.
5. Wallpaper advert
This advert changes the background of the web page being viewed. Usually, it is not possible to click through
this advert.
6. Banner advert
A graphic image or animation displayed on a web site for advertising purposes. They may be static banners
rich media such as Flash, video, JavaScript and other interactive technologies. Banners are not limited to the
space that they occupy; some banners expand on mouse over or when clicked on. There are two types of
banners:
Keyword banners appear when a predetermined word is queried from the search engine. It is effective for
companies who want to narrow their target to consumers interested in particular topics. Random banners
appear randomly and might be used to introduce new products to the widest possible audience, or to keep a
well-known brand, such as Amazon.com or IBM, in the public eye.

A major advantage of using banners is the ability to customize them to the target audience. Keyword banners
can be customized to a market segment or even to an individual. If the computer system knows who you are, or
what your profile is, you may be sent a banner that is supposed to match your interests. However, one of the
major drawbacks of using banners is that limited information is allowed. Hence advertisers need to think of
creative but short messages to attract viewers.
Web site development and design
A website is a connected group of pages on the World Wide Web regarded as a single entity, usually
maintained by one person or organization and devoted to a single topic or several closely related
topics/subjects.
Web development and design are at the heart of successful e-Marketing. Developing a web site involves more
than choosing colors and header images.
While it is tempting to focus on the design aesthetics of web sites, and eye-catching web sites can be
converting web sites, it is important to remember that a web site is a marketing tool which should be increasing
revenue for the company.
Types of websites
Marketers beyond simply creating a website must design an attractive site and find ways to get consumers to
visit the site, stay around and come back often.
Websites vary greatly in purpose and content. The most basic type is
1. Corporate website: These sites are designed to build customer goodwill and to supplement other sales
channels, rather than to sell the company‘s products directly. For example, you can‘t buy ice cream at
benjerrys.com, but you can learn all about Ben & Jerry‘s company philosophy, mission, current events,
financial performance, company personnel, employment opportunities, products and locations.
Corporate websites typically offer a rich variety of information and other features in an effort to answer
customer questions, build closer customer relationships and generate excitement about the company.
Most corporate websites also provide entertainment features to attract and hold visitors. Finally, the site might
also provide opportunities for customers to ask questions or make comments through e-mail before leaving the
site.
2. Marketing website: A website that engages consumers in interactions that will move them closer to a direct
purchase or other marketing outcomes. Such sites might include catalog, shopping tips and promotional
features such as coupons, sales events or contests. For example, visitors to Sonystyle.com can search through
dozens of categories of Sony products, review detailed features and specifications lists for specific items, read

expert product reviews. They can place an order for the desired Sony products online and pay by credit card,
all with a few mouse clicks.
Companies aggressively promote their marketing websites in offline print and broadcast advertising and
through banner-to-site advertisements that pop up on others‘ websites.
Toyota operates a marketing website at www.toyota.com. Once a potential customer clicks in, the carmaker
wastes no time trying to turn the inquiry into a sale. The site offers plenty of information and a garage full of
interactive selling features, such as detailed descriptions of current Toyota models information on dealer
locations and services, complete with maps and dealer web links.
How to create an effective website?
Creating a website is one thing; getting people to visit the site is another. The key is to create enough value and
excitement. Today‘s website users are quick to abandon any website that doesn‘t measure up. ―Whether people
are online for work reasons or for personal reasons‖, says a website design expert, ―if a website doesn‘t meet
their expectations, two/thirds say they don‘t return-now or ever. We call it the internet death penalty. This
means that companies must constantly update their sites to keep them current, fresh and useful. Doing so
involves time and expense, but the expense is necessary if the e-marketer wishes to cut through the increasing
online clutter.
For some types of products, attracting visitors is easy. Consumers buying new cars, computers, or financial
services will be open to information and marketing initiatives from sellers. Marketers of low involvement
products, however, may face a difficult challenge in attracting website visitors. For low interest products the
company can create a corporate website to answer customer questions, build goodwill and excitement,
supplement selling efforts through other channels and collect customer feedback.
The early text based websites have largely been replaced in recent years by graphically sophisticated websites
that provide text, sound, and animation to attract first view and to encourage repeat visits.
To attract new visitors and to encourage revisits, suggests one expert, e-marketers should pay close attention to
the seven Cs.
• Context: The site‘s layout and design
• Content: The text, pictures, sound and video that the website contains.
• Community: The ways that the site enables user-to-user communication
• Customization: The site‘s ability to tailor itself to different users or to allow users to personalize the site.
• Communication: The ways the site enables site-to-user, user-to-site or two way communication.
• Connection: The degree that the site is linked to other sites.

• Commerce: The site‘s capabilities to enable commercial transactions.

4.7. Consumers’ Behavior and e-market research
To successfully conduct B2C, it is important to find out who are the actual and potential customers. Several
research institutions collect Internet usage statistics, look at factors that inhibit shopping, then enable to
reshuffle marketing ad strategies.
Shopping habits keep changing as a result of innovative marketing strategies. Finding out what specific groups
of consumers (such as teenagers or residents of certain geographical zones) want is a major role of market
research. Some like classical music while others like jazz. Some like brand names, while price is more
important to many others.
E-mail Marketing
At its core, email marketing is a tool for customer relationship management (CRM). Used effectively, this
extension of permission based marketing can deliver one of the highest returns on investment (ROI) of any e-
Marketing activity.
Simply put, email marketing is a form of direct marketing which utilizes electronic means to deliver
commercial messages to an audience. It is one of the oldest and yet still one of the most powerful of all e-
Marketing tactics. The power comes from the fact that it is:
• Extremely cost effective due to a low cost per contact
• Highly targeted
• Customizable on a mass scale
• Completely measurable
How e-mail works
If you consider marketing as communicating with current and potential customers, you will see that every
email that is sent from your organization should be considered as part of your email marketing plan.
Transaction emails: when you place an order, there will be a number of emails that you receive, from
confirmation of your order, to notice of shipping. Should you need to return an item, you will no doubt
communicate with Zappos via email. These kinds of messages are transactional.
Newsletters: these are emails which are sent to provide information and keep customers informed. They do not
necessarily carry an overt promotion, but instead ensure that a customer is in regular contact with the brand.
Promotion emails: should the firm has a summer sale, it will send an email relating directly to that promotion.
Every touch point will market an organization. However, here we will focus on commercial emails. Email
marketing may be highly cost effective, but the cost of getting it wrong can be very high indeed.

4.9. Search engine Marketing

Portals such as Yahoo, Google, MSN/Windows Live, and AOL offer users powerful Web search tools as well
as an integrated package of content and services, such as news, e-mail, instant messaging, calendars, shopping,
music downloads, video streaming and more, all in one place. They are marketed as places where consumers
will want to start their Web searching and hopefully stay a long time to read news, find entertainment, and
meet other people (think of destination resorts). Portals (search engines) do not sell anything directly. Portals
generate revenue primarily by charging advertisers for ad placement, collecting referral fees for steering
customers to other sites, and charging for premium services.
Although there are numerous portal/search engine sites, some are ranked as follows based on number of
monthly visitors in 2014 (Google, Bing, Yahoo, Ask.com, AOL, WOW, WEBCRAWLER, etc). These portals
possess the highest traffic because of their superior brand recognition. Being first confers advantage because
customers come to trust a reliable provider and experience switching costs if they change to late arrivals in the
market. By garnering a large chunk of the marketplace, first-movers just like a single telephone network can
offer customers access to commonly shared ideas, standards, and experiences.
Google, Yahoo, AOL, MSN/Windows Live, and others like them are considered to be horizontal portals
because they define their market space to include all users of the Internet. Vertical portals (sometimes called
vortals) attempt to provide similar services as horizontal portals, but are focused around a particular subject
matter or market segment. For instance, Sailnet specializes in the consumer sailboat market that contains about
8 million Americans who own or rent sailboats. Although the total number of vortal users may be much lower
than the number of portal users, if the market segment is attractive enough, advertisers are willing to pay a
premium in order to reach a targeted audience. Also, visitors to specialized niche vortals spend more money
than the average Yahoo visitor.
Search marketing is often to refer to the industry that has built up around search engines.
Google is by far the leading player in the market over 45% of the global search engine market share. In
Europe, close to 80% of searches are on Google.
MOBILE ELECTRONIC COMMERCE
Introduction
M-commerce is short for mobile-commerce. - It refers to the use of mobile devices for conducting the
transactions or it refers to the use of a mobile device for buying and selling of products and services. The
mobile device holders can contact each other and can conduct the business. Even the web design and
development companies optimize the websites to be viewed correctly on mobile devices.

The major advantage of m-commerce is that it provides internet access to anyone, anytime, and anywhere,
using wireless devices. The key technologies here are cell phone-based 3G (third-generation wireless), Wi-Fi
(wireless local area networks), and Bluetooth (that enables devices such as portable computers, cell phones,
and portable handheld devices to connect to each other and to the Internet).
Cell phone usage is still considerably higher in Asia and Europe than it is in the United States. However, in the
United States, the introduction of iPhone in June 2007 and the 3G version in July 2008 has brought about a
resurgence of interest in 3G technologies and their potential role in e-commerce.
The Internet transformed our world in two fundamental ways: it has given people access to the internet i.e. the
opportunity to interact easily with others (as well as with companies & brands) & through search, it has made
information easily available. Content & information have become readily available and importantly available
for free on the Internet.
 features of mobile phone
The mobile phone is a sophisticated device. Today‘s phones can act as alarm clocks, cameras, video recorders,
MP3 players, calendars, notebooks, messaging devices, and they can make voice calls. However, it is not the
aforementioned plethora of features that makes the mobile phone such an attractive device. The following six
features are what turn mobile phones into something truly remarkable for marketers:
1. The mobile phone is personal
Mobile phone is a very personal device for all the customers in the world and most of the peoples do not want
to share it with other. A 2014 survey found that and 90% of those surveyed in Japan would not share their
phone. While laptops do present a personal connection to the Internet, they are not as personal devices as the
mobile phone.
The implication for marketers: Respect for privacy and permission is exceptionally important in all aspects of
marketing, and particularly so when it comes to mobile phones.
2. The mobile phone is always carried
People have or carry their phones with them everywhere they go and at all times of the day, even in the
bathroom. What do you take with you when you leave your house? Wallet, keys and mobile phone?
According to 2013 research by Morgan Stanley, 91% of mobile phone owners keep their phone within one
meter, 24 hours a day.
The implication for marketers: Messages sent to customers can be read and reacted on immediately. Unlike, for
example, email which requires that the recipients be in front of their computer and connected to the Internet,
messages sent to mobile phones will most likely be accessed within minutes of being received.

3. The mobile phone is always on

In order to fulfill its primary function–as a telephone–the mobile phone is always on. Messages and services
can be sent and acted on at all times of the day.
The implication for marketers: Similar to the previous feature of the phone, the fact that the phone is always on
provides organization a 24\7 communication with their customers. It also means that marketers need to be
perhaps even more sensitive with their marketing communications.
4. The mobile phone has a built-in payment system
This is perhaps the key feature of the mobile phone, and one reason why content for mobile phones in many
areas generates as much or more revenue than content for the Internet. Every mobile phone has a built in
payment mechanism–the SIM card.
Billing is easily handled through the user‘s mobile network. paying for content and downloads has been built
into the way that consumers use their phones. There are also a number of services that turn the mobile into a
virtual wallet or bankcard, bringing banking and payment services to people all around the world.
The implication for marketers: Consumers are willing to pay for services and content on their mobile.
Advertising is not the only way to generate revenue for content.
5. The mobile phone is available at the point of creative inspiration
As the mobile phone is always carried and always on, it is always available as a creative tool. Phones today
feature a number of tools that let users act on creative impulse, from taking photos and videos to becoming a
scribbling pad on which to jot down ideas.
The implication for marketers: The feature can be used to encourage interactivity with campaigns created for
mobile. It presents the mobile as a useful tool in viral campaigns based on consumer generated content.
6. The mobile phone presents accurate audience measurement
While the Internet is vastly superior to other media in its ability to track and measure advertising and
marketing campaigns, it is eclipsed by the mobile phone. Every transaction made on a mobile phone can be
uniquely tracked to that mobile phone number, whether the transaction is a voice call, an SMS message or
accessing the Internet.
The implication for marketers: Aggregated data provides extensive profiling and segmenting opportunities for
targeting the right audience. Campaigns can also be accurately measured and tracked for ROI.
 Limitations of the mobile phone
The mobile phone is a feature packed gadget used all around the world by almost half the world‘s population.
However, as much as the mobile phone has a number of unique benefits, it does come with its own challenges.

 The mobile phone is small. This means that it has a small screen and a small keypad.
 While some phones have a full QWERTY keypad, many have the standard numeric keypad.
 When it comes to the mobile web, consider that phones do not have a mouse.
 There are a few models that have touch screens, but for the most part, navigation of the mobile web is
through the keypad or scroll buttons on the phone.
 Mobile phones are also even less standard than PCs. Not only do phone models present a myriad of
screen sizes, there are also several operating systems and browsers that are used by mobile phones.
 Use of more advanced features of phones can require an extensive education process.
 While mobile phones have a lot of features, these devices are for the most part under-used.
 categories of mobile phones
There are three categories of mobile phones.
Basic phones: can make voice calls, send and receive SMS messages and make use of USSD services
(Unstructured Supplementary Service Data).
Feature phones: offer features additional to a basic phone, including cameras and increased storage, as well as
the ability to access the Internet. Feature phones usually have a standard numeric keypad.
Smart phones: offers advanced capabilities and features over feature phones, notably allowing users to add
applications to their phones. These phones run a full featured operating system, most have 3G as well as WiFi
capabilities and generally have a QWERTY keypad.
Note that there is not yet an industry standard definition of a smart phone, and many feature phones are now
being developed with technology similar to smart phones. Smart phones tend to have bigger screens than
feature phones.
 Technologies available to reach a mobile audience
There are a number of technologies available to reach a mobile audience. Some of the most prevalent are
detailed further.
Before we look at mobile phones as devices used to access the World Wide Web, to take photographs or as a
device to make payments, we need to address its primary function (communication). The primary use of a
mobile phone is to enable communication, either through voice calls or through messages.
 Messaging services
On a mobile phone we will use either Short Message Service (SMS), to send text messages, or Multimedia
Message Service (MMS), which supports graphics, audio, photos and video as well as text. Messages can, of
course, also be sent via email depending on the phone‘s features.

a. SMS
SMS supports messages of about 160 characters in length, though it is possible to string several messages
together to send longer messages. Messages can be sent from one phone to another or from a PC to a phone
and vice versa. SMS also supports a service known as common short codes (CSC). Short codes are phone
numbers (short ones, as the name implies) to which users can send a text message from a mobile phone,
usually to get something in return.
Short codes can be used to sign up for services, to enter competitions or to indicate permission (or to end
permission) to receive marketing messages. Messages sent to short codes can also be used to make a payment
or a donation, with a set amount being deducted from a user‘s prepaid airtime or monthly airtime bill.
SMS and marketing
With twice as many SMS users worldwide than email, SMS should be a no-brainer for marketers. However,
mobile phone users have proved reluctant to hand over their phone number for marketing messages, perhaps
fearing a similar flood of spam for which email has such a poor reputation.
This is changing to some extent, with the prevalence of short codes being used in marketing and advertising
campaigns. As consumers are so comfortable with using text messages for their communication, no extensive
education process is required to have consumers access marketing campaigns based on short codes. Short
codes can be used to receive messages from consumers, and to send messages to consumers. When short
codes are shared, keywords in the text message are used to separate the messages.
Sending messages
Once prospects have given you their permission to communicate with them & their mobile number, timely
messages can be sent to their mobile phone. These can be promotional or sales messages, such as special offers
in stores or information about upcoming events. There are several ways that SMS messages can be utilized to
complement an existing marketing strategy.
• CRM
SMS updates can be an exceptionally useful tool for CRM (customer relationship management). In the travel
industry, hotel and airplane reservations can be sent by mobile phone, with updates being sent close to the time
of travel. These short messages can include directions, or details of a flight‘s status.
When it comes to insurance claims or order processing, SMS updates as to the progress of a claim or order can
reduce call center volume, and go a long way to ensure that a client feels valued and cared for.
• Promotions

SMS messages present a way to send timely sales promotion information to a large database for a relatively
low cost. These can be targeted to a particular time of day when prospects are most likely to be out shopping.
Despite their pithy nature – these messages have a limit of 160 characters – they can carry a strong call to
action.
• Receiving messages
Short codes are often used to receive messages from prospects or customers. They provide a fast, instant and
track able means for the public to enter competitions, voice opinions or make requests. And even better for a
company, the costs can often be passed on to the consumer, meaning that it can be a cost effective way to
receive marketing messages.
As short codes can be shared, keywords can be used to separate communications and campaigns. For example,
a user might be asked to text the word LUXURY to a number in order to enter a competition.
b. MMS
MMS messages are messages that contain graphics, audio, video or images as well as text. These messages do
allow for richer information to be sent to prospects, but the costs are considerably higher. They use WAP
(Wireless Access Protocol) to download rich content onto mobile phones.
MMS messages are particularly useful in viral campaigns, whether encouraging participants to use their
phones to create content (photographic, audio or video) or encouraging users to pass on content. Because there
is no standard screen size across all mobile devices, MMS messages may display differently on different phone
models.
C. Bluetooth and other means
Most modern mobile phones present an array of means for connecting. As well as using the cellular network,
many phones have the ability to connect via Bluetooth or other means.
If users set their Bluetooth enabled mobile phone to be ―discoverable‖, Bluetooth devices within range of the
phone can request to connect to the phone and exchange messages and data. This can be used to send location
specific marketing messages, such discount codes in a shopping mall.
d. USSD
USSD (Unstructured Supplementary Service Data) is an alternative messaging system to SMS and is available
on most GSM networks. USSD is a protocol that allows for a query and response type of action between the
customer and a service center, where these transactions can be seen to be similar to a session on a website.
USSD services are usually initiated by the user who enters a code on his phone and then sends that as a request
to the network. The code differs from the number an SMS is sent to because it includes the symbols # and *.

For example, *804# can be used to check the balance of a prepaid service on some networks. These services
are often used by networks to provide a service to a customer, such as balance requests, adding credit to a
prepaid contract or to pass on credit to another mobile phone user. A popular service is a ―call me back‖
functionality, where a mobile phone user sends a request by USSD for another user to phone him. The
requested number receives an SMS informing her of the request. Often, this SMS message also includes an
advertising message.
USSD and marketing
 USSD is being used as a payment application, turning the mobile phone into a virtual wallet.
 USSD is exceptionally useful as customer self-service and is attractive to customers when it is offered
for free. Advertising can easily be displayed in the messages returned when using this service.
 USSD services allow greater flexibility than SMS services as they allow a query and response type of
interaction as opposed to a single message to perform these tasks. This allows the marketer to request
additional information from consumers using these services.
 USSD can be used to provide information to customers and collect information from current and
potential customers. While USSD services are more cost effective than SMS services and can allow for
more detailed data to be collected, SMS services are often preferred by the customer. SMS short codes
are easier to remember than USSD codes, and the concept of sending a text message is more familiar to
the customer.
 Mobile web
As much as web sites need to cater for a number of browsers, they now need to cater for a number of devices
as more and more people are using their mobile phones, PDAs and other mobile devices to connect to the
Internet. However, visits from mobile devices are likely to be quite different to visits from PCs. Visits from
mobile phone users are likely to be more purpose driven or task specific, as opposed to leisurely browsing
from PCs.
Tailoring web sites for mobile
As with all good web design, the first step understands users‘ needs. When accessing a web site from a mobile
phone users are generally very task driven, time sensitive and is also likely to be location aware.
Task driven: means that the user has a very specific purpose for visiting a web site, and the web site needs to
help the users achieve their objective with minimum fees and time.

Time sensitive: means that the user is even less likely to be able to spend time hunting for a solution to their
problem, but instead expects to achieve tasks quickly. For example, a user en route to the airport may want to
check to see if her flight is on time.
Location aware: means that the location of the user often plays a large role in determining their objectives.
For example, a user might be looking for restaurant suggestions in a town she is holidaying in.
As with any marketing activity, planning and setting goals is a key. What do you want your campaign to
achieve? You need to consider your audience. Whom do you need to reach? What sort of phones and features
of phones do they have and importantly use? I-Phone applications may be more fun to develop than a
campaign based on SMS, but i-Phone applications can only reach i-Phone users, while SMS can reach almost
everyone who has a mobile phone.
How will users actually access your campaign? Do you need permission first to send them messages or will
you be advertising or marketing the campaign to get them to access it?
Lastly, you need to determine how mobile fits into your overall marketing strategy. Will mobile be
complementing existing services and campaigns, or will you be developing campaigns, goods and services
specifically for the mobile environment?
MARKETING OF SERVICES CONCEPTUAL FRAMEWORK
As consumers, we use services every day. Turning on a light, watching TV, talking on the telephone, riding a
bus, visiting the dentist, mailing a letter, getting a haircut, refueling a car, writing a check, or sending clothes to
the cleaners are all examples of service consumption at the individual level. The institution at which you are
studying is itself a complex service organization. In addition to educational services, today's college facilities
usually include libraries and cafeterias, counseling, a bookstore, placement offices, copy services,
telecommunications, and even a bank. If you are enrolled at a residential university, campus services are also
likely to include dormitories, health care, indoor and outdoor athletic facilities, a theater, and perhaps a post
office.
Customers are not always happy with the quality and value of the services they receive. People complain about
late deliveries, rude or incompetent personnel, inconvenient service hours, poor performance, and needlessly
complicated procedures. They grumble about the difficulty of finding sales clerks to help them in retail stores,
express frustration about mistakes on their credit card bills or bank statements, shake their heads over the

complexity of new self-service equipment, mutter about poor value, and sigh as they are forced to wait in line
almost everywhere they go.
Suppliers of services often seem to have a very different set of concerns than the consumer. Many suppliers
complain about how difficult it is to make a profit, how hard it is to find skilled and motivated employees, or
how difficult it has become to please customers. Some firms seem to believe that the surest route to financial
success lies in cutting costs and eliminating "unnecessary" frills. A few even give the impression that they
could run a much more efficient operation if it were not for all the stupid customers who keep making
unreasonable demands and messing things up.
Fortunately, in almost every industry there are service suppliers who know how to please their customers while
also running a productive, profitable operation staffed by pleasant and competent employees.
 THE CONCEPT OF SERVICE
Because of their diversity, services have traditionally been difficult to define. The way in which services are
created and delivered to customers is often hard to grasp since many inputs and outputs are intangible. Most
people have little difficulty defining manufacturing or agriculture, but defining service can elude them. Here
are two approaches that capture the essence of the word.
 A service is an act, deed or performance offered by one party to another. Although the process may
be tied to a physical product, the performance is essentially intangible and does not normally result
in ownership of any of the factors of production.
 Services are economic activities that create value and provide benefits for customers at specific
times and places, as a result of bringing about a desired change in or on behalf of the recipient of
the service.
More humorously, service has also been described as "something that may be bought and sold, but which
cannot be dropped on your foot."
 WHY SERVICES MARKETING?
Many forces led to the growth of services marketing.
1. A service based economy
 Economic importance of services:
The service sector represents major share of GDP
 The service sector has become a major employer

 Trade in services is growing world wide

1. Services as a business imperative in Manufacturing and IT
 Manufacturing and technology industries revenues and profit are coming from services
 Customers not only expect excellent, high-quality goods; they also expect high levels of services all
with them.
 As manufacturers and IT companies become more and more service-focused, the need for special
concepts and approaches for managing and marketing services becomes even more apparent.
2. Services marketing is different
 More variable exist in the marketing mix of services than for consumers goods.
 Customer/employee interface is a major difference between goods marketing and services marketing
 Pricing of services is difficult because determining the costs associated with service production and
delivery is very difficult.
 CHARACTERISTICS OF SERVICES
Services have a number of unique characteristics that make them so different from products. Some of the most
commonly accepted characteristics are:
A. Intangibility C. Heterogeneity
B. Inseparability D. Perishability
A. Intangibility
When you buy a cake of soap, you can see, feel, touch, smell and use it to check its effectiveness in cleaning.
But when you pay fees for a term in college, you are paying for the benefit of deriving knowledge and
education which is delivered to you by teachers. In contrast to the soap where you can immediately check its
benefits, there is no way you can do so in case of the teachers who are providing you the benefits. Teaching is
an intangible service. When you travel by an airplane, the benefit which you are deriving is a service but it has
some tangible aspects such as the particular plane in which you fly (and the food and drink which is served). In
this case, the service has both a tangible and intangible aspect as compared to teaching which has hardly any
tangible aspect.
B. Inseparability
One of the most intriguing characteristics of the service experience involves the concept of inseparability.
Inseparability reflects the interconnection among the service provider, the customer involved in receiving the
service, and other customers sharing the same service experience. Unlike the goods manufacturer, who may
seldom see an actual customer while producing the good in a secluded factory, service providers are often in

constant contact with their customers and must construct their service operations with the customer‘s physical
presence in mind. This interaction between customer and service provider defines a critical incident and
represents the greatest opportunity for both gains and losses in regard to customer satisfaction and retention. In
most cases, a service cannot be separated from the person or firm providing it.
C. Heterogeneity
One of the most frequently stressed differences between goods and services is heterogeneity, the variation in
consistency from one service transaction to the next. Service encounters occur in real time, and consumers are
often physically present in the service factory, so if something goes wrong during the service process, it is too
late to institute quality control measures before the service reaches the customer. Indeed, the customer (or other
customers who share the service experience with the primary customer) may be part of the quality problem. If,
in a hotel, something goes wrong during the night‘s stay, that lodging experience for a customer is bound to be
affected; the manager cannot logically ask the customer to leave the hotel, re-enter, and start the experience
from the beginning.
Many errors in service operations are one-time events; the waiter who drops a plate of food in a customer‘s lap
creates a service failure that can be neither foreseen nor corrected ahead of time. Manufacturing operations
may also have problems achieving this sort of target, but they can isolate mistakes and correct them over time,
since mistakes tend to reoccur at the same points in the process.
Another challenge heterogeneity presents is that not only does the consistency of service vary from firm to
firm and among personnel within a single firm, but it also varies when interacting with the same service
provider on a daily basis.
D. Perishability
Services cannot be stored and are perishable. A car mechanic who has no cars to repair today, spare berths on a
train or unsold seats in a cinema hall represent a service capacity that is lost forever. Apart from the fact that a
service not fully utilized represents a total loss, the other dimension of this perishability aspect is that most
services may face a fluctuating demand. There is a peak demand time for buses in the morning and evening
(office hours). Certain train routes are always more heavily booked than others are. This fluctuating demand
pattern aggravates the perishability characteristic of services.
 SERVICES CLASSIFIED
A larger number of classification schemes for services have been developed to provide strategic insights in
managing them. Utilizing different bases, these schemes allow us to understand the nature of the service act,

the relationship between service organization and its customers, the nature of service demand and the attributes
of a service product. Let us discuss the schemes briefly.
1. Proportion of Tangibility and Intangibility
Using the characteristic of intangibility of services, all goods and services can be placed on a tangibility
intangibility continuum, with services clustering towards low to high intangibility. Figure 1.1 presents the
tangible-intangible dominant aspect on a goods-service continuum. This continuum highlights the fact that
most services are in reality a combination of products and services having both tangible and intangible aspects.
There are only a few truly pure tangible products or pure intangible services.
Figure 1.1: Goods Services Continuum
2. The Nature of the Service Act

Using two dimension of tangibility of the service act and to whom services are directed at, Christopher
Lovelock has classified services according to whether services are directed at people, at minds, physical
possessions or assets. Table 1.4 will help you understand this classification scheme.
Table 1.4. A four-way classification scheme based on nature of the service act
Nature of the Service Act Services Directed At

Tangible Action People Possession

Services directed at people’s Directed at goods, Physical

bodies possessions
 Health care
 Freight transportation
 Passenger transportation
 Repair and maintenance
 Beauty Salons
 Warehousing/storage
 Restaurants/ bars
 Janitorial services
Intangible Action Services directed at people’s Services directed at intangible
minds assets
 Advertising  Accounting
 Arts and entertainment  Banking
 Broadcasting  Insurance
 Education  Legal services
 Music concerts
3. Relationship between Service Organization and Customers

In the service sector both institutional and individual customers may enter into continuing relationships with
service providers and opt for receiving services continually. Services can therefore be classified on the basis of
whether a consumer needs to get into a membership relationship with the service organization to access and
utilize the service.
4. Contact between the Consumer and the Service Provider
Services also differ in the extent of contact that needs to be maintained between the user and provider, the
marketing implication in this case being the necessity of physical presence of the provider as well as need to
manage desired quality of personnel in case of high contact services. On this basis, all services can be
classified as high contact or low contact services, depending upon the time a user needs to spend with the
service provider in order to acquire the service. Examples of low contact services are telecommunications,
broadcasting while high contact services are education, hospitality, theatre performance.
5. Place and Time of Service Delivery
When designing delivery systems, service marketers must ask themselves whether customers need to visit the
service organization at its own sites or whether service should come to the customer. Or perhaps the interaction

can occur through physical channels like mail or electronic channels. These managerial decisions involve
consideration of the nature of the service itself, where customers are located, their preferences relating to time
of purchase and use, the relative costs of different alternatives, and in some instances seasonal factors.
6. Customization versus Standardization
Services can be classified according to the degree of customization or standardization involved in service
delivery. An important marketing decision is whether all customers should receive the same service or whether
service features (and the underlying processes) should be adapted to meet individual requirements.
7. Extent to which Demand and Supply Are in Balance
Some service industries face steady demand for their services, whereas others encounter significant
fluctuations. When the demand for service fluctuates widely over time, capacity must be adjusted to
accommodate the level of demand or marketing strategies must be implemented to predict, manage, and
smooth demand levels to bring them into balance with capacity. Some demand fluctuations are tied to events
that marketers cannot control.
8. Extent to which Facilities, Equipment, and People Are Part of the Service Experience
Customers' service experiences are shaped, in part, by the extent to which they are exposed to tangible
elements in the service delivery system. Services based on this criterion have been classified as primarily
equipment based or primarily people based service depending upon which input is primary applied to get
service outputs. The equipment based services can be further classified according to whether they are fully
automated, or consist of equipment monitored by unskilled persons (lift operators) or need the presence of
skilled personnel to man the equipment (quality control, diagnostics services).
9. Nature of the Organization
Service can also be classified on the basis of whether they are primarily directed at public at large or primarily
at individuals. The public services include utilities and infrastructural services like transport and
communication. They also include services provided by the state for welfare like hospitals, educational and
vocational institution, parks and museums etc. The private services on the other hand include the whole gamut
of service designed for and consumed by customers as individuals for e.g., restaurants, beauty care and medical
advice. The implications underlined by this classification manifest themselves in issues regarding planning and
design of service for public vs. private consumption. Involved here are issues of process, volume and
distribution of services when they are designed as public services. Kotler has also classified services as
services designed for profit and nonprofit services, depending upon the marketing objectives to be pursued in
the exchange of services.

 THE SERVICES MARKETING MIX

The unique characteristics of services make the traditional 4 P marketing mix seem inadequate. Careful
management of these 4 Ps - Product, Price, Place and Promotion though essential, are not sufficient for
successful marketing of services. Further the strategies for the four Ps require some modification while
applying to services.
Since services are produced and consumed simultaneously, the contact personnel or the service delivery
personnel become extremely important. It is during these encounters of service providers and customers i.e. the
process on which a lot depends with regards to the final outcome as well as the overall perception of the
service by the customer. The actual physical surroundings during these encounters have also a substantial
bearing on the service delivery. All these facts lead to the development of an expanded marketing mix with
three new P‘s added to the traditional mix. These are:
 People
All human actors who play a part in service delivery and thus influence the buyer's perceptions; namely, the
firm's personnel, the customer, and other customers in the service environment.
 Physical evidence
The environment in which the service is delivered and where the firm and customer interact, and any tangible
components that facilitate performance or communication of the service.
 Process
The actual procedures, mechanisms and flow of activities by which the service is delivered and operating
systems.
Figure 1.2: The Marketing Mix for Services
CONSUMER BEHAVIOR IN SERVICE ENVIRONMENTS

To market services effectively, marketing managers need to understand the thought processes used by
consumers during each of the three stages of the consumer decision process: the pre purchase choice among
alternatives, the consumer‘s reaction during consumption, and the post purchase evaluation of satisfaction (see
Figure 3.1). Although we can never truly know the thought process used by the individual when making that
choice, the consumer decision process helps to structure our thinking and to guide our understanding regarding
consumer behavior. Let‘s begin this discussion by focusing on the pre purchase stage of the consumer decision
process model which includes the phases of stimulus, problem awareness, information search, and evaluation
of alternatives.
 SPECIAL CONSIDERATIONS PERTAINING TO SERVICES
Although the consumer decision process model applies to both goods and services, unique considerations arise
with respect to service purchases. Many of these special considerations can be directly attributed some of the
unique service characteristics. The considerations addressed in this part of the chapter help in developing a
deeper understanding of consumer behavior as it relates to the purchase of services.
Perceived Risk
In contrast to consumers when purchasing goods, consumers of services tend to perceive a higher level of risk
during the pre purchase decision stage. The central theory is that consumer behavior involves risk in the sense
that any action taken by a consumer will produce consequences that he or she cannot anticipate with any
certainty, and some of which are likely to be unpleasant. Consequently, perceived risk is proposed to consist of
two dimensions:
 Consequence, the degree of importance and/or danger of the outcomes derived from any consumer
decision.
 Uncertainty, the subjective possibility of the occurrence of these outcomes.
Medical surgery provides an excellent example of how consequence and uncertainty play a major role in
service purchases. With respect to uncertainty, the consumer may have never undergone surgery before and
therefore has no idea what to expect. Moreover, even though the surgeon has performed the operation
successfully hundreds of times in the past, the patient is not guaranteed that this particular surgery will end
with the same successful outcome. Furthermore, uncertainty is likely to increase if the patient lacks sufficient
knowledge prior to the operation concerning specific details of the surgery and its after effects. As for
consequences, the consequences of a poor decision regarding surgery could be life threatening.
Types of Risk
As the idea of consumer perceived risk developed, seven types of perceived risk were identified that were
common in many purchase situations, based on seven different kinds of outcomes.
1. Performance risk - the chance that the service will not perform or provide the benefit for which it was
purchased.
2. Financial risk - the amount of monetary loss incurred by the consumer if the service fails.
3. Time loss risk - the amount of time lost by the consumer as a result of the failure of the service.
4. Opportunity risk - the risk involved when consumers must choose one service over another.
5. Psychological risk - the chance that the purchase of a service will not fit the individual‘s self-concept.
6. Social risk - the probability that a service will not meet the approval of others who are significant to
the consumer making the purchase.
7. Physical risk - the chance that a service will actually cause physical harm to the customer.
Risk and Standardization
Much of the heightened level of perceived risk can be attributed to the difficulty in producing a standardized
service product. In Chapter 1, we introduced the concept of heterogeneity. Because a service is an experience
involving highly complex interactions, it is, not surprisingly, very difficult to replicate the experience from
customer to customer or from day to day. As a result, the customer may find it difficult to predict precisely the
quality of service he or she will buy. Perceived risk, therefore, tends to be higher for purchasing services in
contrast to the purchase of goods.
Risk and Information
Others have argued that the higher levels of risk associated with service purchases is due to the limited
information that is readily available before the consumer makes the purchase decision. For example, the
marketing literature suggests that goods and services possess three different types of attributes.
 Search attributes—attributes that can be determined prior to purchase.
 Experience attributes—attributes that can be evaluated only during and after the production process.
 Credence attributes—attributes that cannot be evaluated confidently, even immediately after receipt of
the good or service.
Search attributes typically consist of tangibles that can be evaluated prior to purchases. For example, when
purchasing an automobile, the buyer can see the automobile, sit in it and fiddle with all of gadgets new
automobiles frequently offer, and take the vehicle for a test drive. The same cannot be said for most services.
Because of the intangible nature of services, it is often extremely difficult for consumers to objectively
evaluate a service prior to its purchase. Services thus have very few search attributes.

A large proportion of the properties possessed by services (e.g., the friendliness of the flight attendants of a
particular airline or the skill level of a hairstylist) can be discovered by consumers only during and after the
consumption of the service; these are referred to as experience attributes. Moreover, some of the properties of
many services cannot be assessed even after the service is completed; these are called credence attributes. For
example, how do you know whether your psychologist or tax accountant is really any good or not? In cases
such as these, the customer often lacks the specialized or technical knowledge to make an informed evaluation.
Figure. Continuum of Evaluation for Different Types of Products
Overall, more risk is involved in the purchase of services than in the purchase of goods because services are
intangible, non-standardized, sold without guarantees, high in experience and credence qualities.
Risk Reduction Strategies Used by Consumers
When customers feel uncomfortable with risks, they can use a variety of methods to reduce them during the
prepurchase stage. In fact, you have probably tried some of the following risk-reduction strategies yourself
before deciding to purchase a service:
 Seeking information from respected personal sources (family, friends, peers)
 Relying on a firm with a good reputation
 Looking for guarantees and warranties
 Visiting service facilities or trying aspects of the service before purchasing
 Asking knowledgeable employees about competing services
 Examining tangible cues or other physical evidence
 Using the Web to compare service offerings
Risk Reduction Strategies Used by Service Firms
 Performance risk can be reduced by offering trial purchases.
 To reduce the consequences of financial risk, service firms can offer money back guarantees.
 The uncertainty of time loss risk and opportunity risk can be reduced by branding.

 To reduce the consequences of time loss risk, service firms can offer compensation (financial
reimbursement) in the case of service failure.
 The uncertainty of psychological and social risk can be reduced by branding and communication.
Testimonials are especially effective to reduce psychological and social risks because they tend to be
more believable.
 Physical risk can be reduced by adhering to strict safety and quality control standards, instruction,
and communication.
 CUSTOMERS EXPECTATIONS OF SERVICE
Expectations are internal standards that customers use to judge the quality of a service experience. Customers'
expectations about what constitutes good service vary from one business to another. For example, although
accounting and veterinary surgery are both professional services, the experience of meeting an accountant to
talk about your tax returns tends to be very different from visiting a vet to get treatment for your sick pet.
Expectations are also likely to vary in relation to differently positioned service providers in the same industry.
Customer expectations may also vary from one industry to another, reflecting industry reputations and past
experience. In many countries, people have lower expectations of government service providers than they do of
private companies. Expectations may even vary within different demographic groups (e.g., between men and
women, older and younger consumers, or blue- versus white-collar workers).To make things more
complicated, expectations also differ from country to country. For instance, while it may be acceptable and
unsurprising for a train to arrive several hours late in some countries, rail schedules are so precise in some
nations that the margin for error is measured in seconds.
Types of Service Expectations
Customer expectations embrace several different elements, including desired service, adequate service,
predicted service, and a zone of tolerance that falls between the desired and adequate service levels. The model
shown in Figure 3.2 shows how expectations for desired service and adequate service are formed.
Desired and Adequate Service Levels The type of service customers hope to receive is termed desired
service. It is a "wished for" level—a combination of what customers believe can and should be delivered in the
context of their personal needs. However, most customers are realistic and understand that companies can't
always deliver the level of service they would prefer; hence, they also have a threshold level of expectations,
termed adequate service, which is defined as the minimum level of service customers will accept without being
dissatisfied. Among the factors that set this expectation are situational factors affecting service performance
and the level of service that might be anticipated from alternative suppliers. The levels of both desired and

adequate service expectations may reflect explicit and implicit promises by the provider, word-of-mouth
comments, and the customer's past experience (if any) with this organization.
Predicted Service Level The level of service that customers actually anticipate receiving is known as
predicted service, which directly affects how they define "adequate service" on that occasion. Customer
predictions of service may be situation specific. For example, from past experience, customers visiting a
museum on a summer day may expect to see larger crowds if the weather is poor than if the sun is shining. So
a 10-minute "wait to buy tickets on a cool, rainy day in summer might not fall below their adequate service
level.
Zone of Tolerance The inherent nature of services makes consistent service delivery difficult across
employees in the same company and even by the same service employee from one day to another. The extent
to which customers are willing to accept this variation is called the zone of tolerance (shown in Figure 3.2). A
performance that falls below the adequate service level will cause frustration and dissatisfaction, whereas one
that exceeds the desired service level will both please and surprise customers, creating the "customer delight‖.
Another way of looking at the zone of tolerance is to think of it as the range of service within which customers
do not pay explicit attention to service performance. When service falls outside this range, customers will react
either positively or negatively.
The zone of tolerance can increase or decrease for individual customers depending on factors like competition,
price, or importance of specific service attributes. These factors most often affect adequate service levels
(which may move up or down in response to situational factors), while desired service levels tend to move up
very slowly in response to accumulated customer experiences. Consider a small-business owner who needs
some advice from her accountant. Her ideal level of professional service may be a thoughtful response by the
next business day. But if she makes the request at the time of year when all accountants are busy preparing
corporate and individual tax returns, she will probably know from experience not to expect a fast response.
Although her ideal service level probably won't change, her zone of tolerance for response time may be much
broader because she has a lower adequate service threshold.
Managing Consumer Expectations
Consumer buying decisions and patronage are based on consumer expectations. The higher the expectations,
the greater the probability of purchase. The lower the expectations, the lower the probability of purchase.
Service Marketers Dilemma
Promoting high expectations will increase patronage but also increase the chances of producing dissatisfied
customers. Promoting lower expectations will ensure satisfied customers, but the chances of getting customers

to buy the service are greatly reduced. The ideal goal is to promote the exact service customers will receive
and to provide the exact service customers expect. If firms can match expectations and service, customers are
satisfied.
During the Pre-Purchase Phase
 Learn what customers expect
 Tell customers what they can expect.
During the Service Encounter
 The goal during this phase is to ensure the service being provided matches the consumer‘s
expectations.
 Service personnel must communicate with the customer during the service encounter.
 If possible, service providers should modify the service to meet the customer‘s expectations.
 If the service cannot be modified, the service personnel should explain why the customer‘s
expectations cannot be met.
During the Post-Purchase Phase
Managing consumer expectations does not stop after the service is performed.
 Companies should communicate with customers immediately after the service is completed to
see if expectations were met.
 Forms can be used for a follow-up program, such as an evaluation survey sent to the customer
through the mail or a phone call.
 Companies should have a procedure for dealing with dissatisfied customers that will assist in
managing future expectations.
The goal during this phase is twofold. The primary goal is to communicate with customer to see if expectations
were met. The secondary goal is to modify future expectations to increase the chances of repeat purcha
SERVICE QUALITY
 APPROACHES TO DEFINING QUALITY
Quality has been the subject of many and varied definitions leading to the view that no one definition (of
quality) is ―best‖ in every situation because each definition has both strengths and weaknesses in relation to
criteria such as measurement and generalizability, managerial usefulness and consumer relevance.
David Garvin is noteworthy for analyzing the range of quality definitions, classifying them into five groups.
The Transcendent Approach

According to this view Quality can only be determined by empirical experiences, e.g. we can only judge the
work of a fine artist (the work quality) if we look at his work.
The Product-Based Approach
The emphasis here is on quality as a precise and measurable variable. Any differences (in quality) that do occur
reflect differences in the quantity of some ingredient or attribute possessed by a product. This approach leads
to a vertical or hierarchical ordering of quality. Products are raised according to the amount of
ingredients/attributes that each possesses. However, an unambiguous ranking is possible only if all buyers
consider the ingredients/attributes in question preferable. For services, on the other hand, precision and
measurability represent an ongoing challenge.
The User-Based Approach
Quality is determined by the user. Meeting the costumer`s expectations is the central criteria of the concept of
quality. This approach is parallel to the ―marketing concept‖ of Kotler (1998), which states that the primary
objective of an organization is to fully satisfy the customer.
The Manufacturing Based Approach
Quality means that the product or the service in the course of manufacturing conforms to the predetermined
expectations and specifications. If the specifications are not met, the quality is poor. This approach presumes
that the product or service specifications are closely connected to the buyers` expectations, and compliance
with those will determine customer satisfaction.
Value Based Approach
Quality is determined by the rate of the efforts, the customer must exercise to receive the service or to possess
the product (e.g. money, searching) and the gain (value) derived from using the service or acquiring the
product. Acquiring a certain product at a reasonable price will make the customer perceive that quality is
higher (feeling that it is worth it), than purchasing the same product at a high price.
 SERVICE QUALITY MODELS
Considering the complex nature of how customers judge service quality, number of researches have been done
in the area and models have been developed to explain the nature of service quality evaluation. However, two
major works have received widespread attention and acceptance.
Technical and Functional Quality Model (Gronroos, 1984)
A firm in order to compete successfully must have an understanding of consumer perception of the quality and
the way service quality is influenced. Managing perceived service quality means that the firm has to match the

expected service and perceived service to each other so that consumer satisfaction is achieved. The author
identified three components of service quality, namely: technical quality; functional quality; and image.
 Technical quality is the quality of what consumer actually receives as a result of his/her interaction with
the service firm and is important to him/her and to his/her evaluation of the quality of service.
 Functional quality is how he/she gets the technical outcome. This is important to him and to his /her
views of service, he/she has received.
 Image is very important to service firms and this can be expected to built up mainly by technical and
functional quality of service including the other factors (word of mouth, pricing and public relations).
Gaps Model (Parasuraman, Zeithaml and Berry, 1985)
Parasuraman et al. (1985) proposed that service quality is a function of the differences between expectation and
performance along the quality dimensions. They developed a service quality model (Figure 4.2) based on gap
analysis. The various gaps visualized in the model are:
Provider Gap 1: Not knowing what customers expect

Provider Gap 2: Not selecting the right service designs and standards
Provider Gap 3: Not delivering the service standards
Provider Gap 4: Not matching performance to promises
 MEASURING SERVICE QUALITY
Different researchers have different views on the measurement of service quality. Several methods of
measuring service quality have been developed and discussed over the last few years. Most of the studies use
SERVQUAL, SERVPERF and Importance-Performance Analysis.
SERVQUAL
A frequently used and highly debated measure of service quality is the SERVQUAL scale. According to its
developers, Parasuraman, Zeithaml and Berry (1988), SERVQUAL is a diagnostic tool that uncovers a firm‘s
broad weaknesses and strengths in the area of service quality. The SERVQUAL measurement scale is based on
five service quality dimensions that were obtained through extensive focus group interviews with consumers.
The five dimensions include tangibles, reliability, responsiveness, assurance, and empathy, and they provide
the basic ―skeleton‖ underlying service quality.
SERVPERF
An alternative instrument to measure service quality was introduced by one of the SERVQUAL's
critics - Cronin and Taylor (1992). Instead of SERVQUAL, Cronin and Taylor (1992) introduced

the performance-based measure of service quality, SERVPERF.

SERVPERF is composed of the 22 perception items defined in SERVQUAL scale, and excludes any
consideration of expectations. In other word, SERVPERF differs from SERVQUAL in that SERVPERF does
not assess gap scores because the expectations portion of the pairings is not included.
Important-Performance Analysis (IPA)
Important-Performance Analysis maintains that quality is a function of customer perceptions of performance
and the importance of the attribute. Customer expectations are not included in importance-performance
analysis. According to the developers Martilla J. and James J. (1977), therefore, the importance a customer
places on any given service attribute is a principle dimension of importance-performance analysis rather than
expectations.
COMPLAINT AND SERVICE RECOVERY MANAGEMENT
Despite a service firm‘s best efforts, unhappy customers are inevitable. Planes are sometimes late, restaurant
meals are not always cooked to perfection, and hotel employees are occasionally inattentive. On the flip side,
some customers are just plain unreasonable and will never be pleased. Don‘t give up! Developing an
indifferent attitude or accepting unhappy customers as a part of everyday business can be ―the kiss of death.‖
Customers are quick to reward their loyalty to companies that genuinely care about their concerns; and they are
equally quick to punish unresponsive companies.
If you are among those who do not complain about poor service, you are not alone. Research around the globe
has shown that most people will not complain, especially if they think it will do no good. Figure 5.1 depicts the
courses of action a customer may take in response to a service failure. This model suggests at least three major
courses of action:
1. Take some form of public action (including complaining to the firm or to a third party, such as a
customer advocacy group, a consumer affairs or regulatory agency, or even civil or criminal court).
2. Take some form of private action (including abandoning the supplier).
3. Take no action.
Types of Complainers
Passives: These groups of customers are least likely to take any action. They are unlikely to say anything to the
provider, less likely than others to spread negative word of mouth and unlikely to complain to a third party.

Voicers: These customers actively complain to the service provider, but they are less likely to spread negative
word of mouth, to switch patronage, or go to third parties with their complaints. These customers should be
viewed as the service provider‘s best friends! They actively complain and thus give the company a second
chance.
Irates: These customers are more likely to engage in negative word of mouth to friends and relatives and to
switch providers than others. They are about average in their propensity to complain to the provider. They are
unlikely to complain to third parties. These folks tend to feel somewhat alienated from the market place.
Activists: These consumers are characterized by above average propensity to complain on all dimensions. They
will complain to the provider, they will tell others and they are more likely than any other group to complain
to third parties. Complaining fit with their personal norms.
What Do Customer Expect Once They Have Made a Complaint?
Whenever a service failure occurs, consumers expect to be adequately compensated in a fair manner. However,
recent studies show that many customers feel they have not been treated fairly nor received adequate
recompense. When this happens, their reactions tend to be immediate, emotional, and enduring.
Based on a study of consumers' experiences with complaint resolution, Tax and Brown identified three types of
fairness.
 Procedural justice concerns policies and rules that any customer has to go through to seek fairness.
Customers expect the firm to assume responsibility, which is the key to the start of a fair procedure,
followed by a convenient and responsive recovery process. That includes flexibility of the system and
consideration of customer inputs into the recovery process.
 Interactional justice involves employees of the firm who provide the service recovery and their
behavior toward the customer. Giving an explanation for the failure and making an effort to resolve the
problem are very important. However, the recovery effort must be perceived as genuine, honest, and
polite.
 Outcome justice concerns compensation a customer receives as a result of the losses and
inconveniences incurred because of a service failure. This includes compensation for not only the
failure but also time, effort, and energy spent during the process of service recovery.
 SERVICE RECOVERY
Service recovery ―as a process that identifies service failures, effectively resolves customer problems, classify
their root cause(s), and yields data that can be integrated with other measures of performance to assess and
improve the service system.‖ A good recovery can turn angry, frustrated customers into loyal ones.

Furthermore, customers who have been successfully recovered not only remain loyal but also can become
advocates for the organization spreading a positive word-of-mouth.
The Service Recovery Paradox
The service recovery paradox refers to situations where satisfaction of recovered customers actually exceeds
that of customers who have not encountered any problems. Research has shown that the service recovery
paradox is far from universal. For example, a study of repeated service failures in banking context showed that
the service recovery paradox held for the first service failure that was recovered to customers‘ full satisfaction.
However, if a second service failure occurred, the paradox disappeared. It seems that customers may forgive a
firm once, but become disillusioned if failures recur. Furthermore, the study also showed that customers‘
expectations were raised after they experienced a very good recovery; thus, excellent recovery becomes the
standard they expect for dealing with future failures.
Service Recovery Strategies
Effective service recovery requires thoughtful procedures for resolving problems and handling disgruntled
customers. It is critical for firms to have effective recovery strategies, because even a single service problem
under the following conditions can destroy a customer‘s confidence in a firm:
 The failure is totally outrageous (e.g., blatant dishonesty on the part of the supplier).
 The problem fits a pattern of failure rather than an isolated incident.
 The recovery efforts are weak, serving to compound the original problem rather than correct it.
Thankfully, not all companies are doing poorly at service recovery. There are many who have learned the
importance of providing excellent recovery for disappointed customers. It is clear that excellent service
recovery is really a combination of a variety of strategies that need to work. The major service recovery
strategies are:
 Do it right the first time
 Welcome and encourage complaints
 Act quickly
 Treat customers fairly
 Learn from recovery experiences and
 Learn from lost customers
SERVICE GUARANTEES
Backed by guarantees services become more authentic taking away to a large extent the elements of
apprehensions on part of the customers about the quality of service(s) they consider buying. A guarantee is an

assurance of quality or length of use of a product, often with a promise of reimbursement. Once popular among
manufactured goods, they are now gaining ground among service products as effective tools of marketing and
product quality and authenticity. Effective guarantees complement company‘s recovery strategies and go a
long way in repairing the damage that otherwise could be caused.
Why offer a Service Guarantee?
More and more service firms have started to realize that a good guarantee can act as a marketing tool for
attracting customers as well as help in retaining customers. It also helps in cultivating and maintaining quality
throughout an organization. Some of the benefits of an effective service guarantee are highlighted below.
 Implementing a guarantee forces a company to focus on customers.
 Offering a guarantee provides employees with a service related goal and facilitates goal alignment
between employees and the organization. It can also increase employee morale and loyalty.
 It encourages customers to complain and provides the opportunity to the organization to make
amends, thereby retaining the customers.
 Invoking of guarantee by the customer guarantees important and immediate customer feedback. In
the long run, analyzing information collected about why guarantees were invoked by customers can
provide meaningful information for making improvements in service design and delivery.
 A well designed service guarantee can lead to increased service quality expectations, lower
perceived risk and increased purchase intent.
 Service companies have a greater opportunity than manufacturers to differentiate themselves
through a guarantee.
Features of a Good Service Guarantee
A service guarantee can take the form of an unconditional guarantee of satisfaction or specific outcome
guarantees allowing a company to spell out exactly which elements of the service it wants to stand behind.
Unconditional guarantees are powerful and a company‘s promise to meet all of its customer‘s expectations. For
example, a hotel guarantee states ‗if you are not completely satisfied, we don‘t expect you to pay‘. Specific
guarantees, on the other hand , though smaller in scope, can still be quite powerful. For example a courier
company offering a guaranteed delivery within 24 hours. Whatever may be the type of guarantee, there are
certain features which make the guarantee effective. Hart summarizes them into following main characteristics.
I. Unconditional: A guarantee should not have ―ifs‖, ―and‖, or ―buts‖. It should make the promise
unconditionally.

II. Easy to Understand and Communicate: It should be easy to understand for the customers as to what
to expect as well as for the employees as to what to do. The message should be short and memorable
and the standard clear.
III. Meaningful: The guarantee should be meaningful in terms of what is being promised (things that
customers care about) as well as in terms of the payout.
IV. Easy to Invoke and Collect: A good guarantee should be easy to invoke. Service marketers should
understand that once poor service has been delivered, easy and quick settlement should be ensured.
MANAGING SUPPLY AND DEMAND IN THE SERVCE INDUSTRIES
In service industries the matching of capacity and demand is particularly difficult. There is either too much
demand for the capacity, putting a strain on resources, or too little demand, giving rise to unused capacity and a
loss in revenue. This is known as the perishability factor.
 UNDERSTANDING DEMAND PATTERNS
Where service capacity is largely fixed and demand is subject to variation, organizations can experience any of
the following situations
1. Excess demand: The demand exceeds the maximum available capacity. This results in some
customers being turned away. Also, even for the customers receiving the service, the quality of
service may get affected. This may happen because of overcrowding and/or overstretching of
resources.
2. Demand exceeds the optimum capacity level: Optimum capacity refers to the best use of capacity
from the perspective of both, customers and the company. In most of the cases it is less than the
maximum capacity. For example, in the counseling session at your study centre, while the
maximum capacity of the rooms may be 60-70, the optimum capacity for conducting the session
may be 30-40 only for ensuring proper interaction. In the situation when demand exceeds optimum
capacity, while no one is turned away, customers may perceive deterioration in the quality of
service delivered.
3. Demand and supply are balanced at the optimum capacity: This is the ideal situation. No one is
turned away, no one is overworked in the staff and customers receive quality service.
4. Excess capacity: Demand is less than optimum capacity and therefore resources are underutilized.
In certain cases, this may also pose the risk that customers may have doubts about the service
provider.
 STRATEGIES FOR MATCHING CAPACITY AND DEMAND

Managers can use a wide variety of strategies for matching capacity and demand. This requires a clear
understanding of demand patterns as well as the organization‘s capacity constraints. The strategies to be
adopted can be broadly divided into two categories :
1. Changing demand to fit supply (capacity) – marketing mix strategies
2. Changing supply (capacity) to fit demand – input scheduling strategies
Let us discuss the above two strategies in detail.
1. Strategies for Managing Demand
The organization should determine the optimum level of demand for its given capacity. Once this has been
determined, it can vary its marketing mix elements of product, price, place and promotion to change demand in
line with the capacity.
a. Product: As a service provider, you can alter the service offering to even the demand. The changes in
service offering may be seasonal or based on days of the week or time of the day depending on the
nature of demand fluctuations. A hotel for example may focus on weekend family entertainment and
recreation package to cope up with low demand from business executives during weekends. A
management institute may offer more management development programmes during the vacation
period of its regular management programme students. However, as marketers, you must ensure that by
offering different types of services the image or positioning of the service firm is not diluted or
confused. Increasing demand during slack period does not mean that you should take business from any
segment that is available.
b. Pricing: The demand curve suggests that quantity of product demanded varies with the price. Many
service marketers reduce price during the periods of low demand to increase the demand. Airlines offer
low fares during odd hours like late night flights, movie theaters offer a lower price ticket for the
morning show, hotels offer large discounts during off seasons and also higher than normal prices during
say Christmas or New year, restaurants and many retail outlets offer happy hours wherein discounts are
offered. Using price as an effective tool for managing demand would require a proper understanding of
the demand curve – its shape, slope etc.
In addition, you should appreciate the existence of different demand curves for different segments
during the same time period. As marketers, you may also face an additional challenge when multiple
segments are served at the same time and these segments have paid different prices. This requires
putting in certain usage conditions (for example for availing low priced fares in airlines customers have

to book in advance and there are higher cancellation charges) and/or providing value enhancement to
higher paying customers.
c. Place (Distribution): Many service firms modify their time and place of delivery as a strategy to match
demand and capacity. Bank may change its timings on specific days or during specific period, finance
companies use mobile vans for distribution and collection of forms, hospitals have created satellite
clinics to deal with routine consultations, tests and medical services.
d. Promotion: You can also shift the demand by properly communicating with your customers. The
customers should be made aware of the peak timings of the demand and the benefits they can get in
availing the service during non-peak timings. They should also be properly informed about changes in
product, pricing and distribution. This can be done by putting signage at the service outlets (like banks)
or advertising. Service firms can also use sales promotion to manage demand. Many airlines offer free
ticket for companion in the business class, some business hotels offer free stay for spouse during the
weekend stay. Proper promotional strategy can help the service organization in shifting demand from
high to low period as well as stimulating demand during low periods.
2. Strategies for Managing Capacity
Managing capacity involves changes in different components of the resources of a firm like people, facilities,
equipments, time etc. By making changes in these components you can achieve a better match between
demand and capacity.
a. Using Part-time Employees: During periods of peak demand, service firm may hire additional part-
time employees. This helps in increasing capacity as well as reducing costs. However, issues like
attitude of part time employees, training concerns, higher turnover etc have to be properly addressed.
b. Employees Working Overtime: Some of the concerns raised above regarding part time employees can
be eliminated by having employees work over time. However, working for longer hours may have
adverse impact on service quality and also involves higher costs as overtime charges are generally at
higher rates.
c. Cross Training Employees: Cross training of employees results in a flexible capacity, wherein
employees can perform several different jobs. The same employee may move from ticketing to gate
counters. This helps in avoiding underutilization of resources and also increasing the efficiency of the
employees.
d. Scheduling: During peak demand periods people, facilities, and equipments are used at full capacity.
However, facilities and equipments also require proper maintenance. This can be scheduled during

periods of low demand. Similarly, for human resources, off-peak periods can be used for training
purposes as well as for granting vacations.
In addition to the above, service firms can also meaningfully manage its capacity by increasing customer
participation (customers can be used as productive resources e.g. self-service in restaurants), outsourcing,
modifying the capacity (e.g. reconfiguring hotel rooms), renting facilities or equipments, and taking a
subcontract work.
 MANAGING CUSTOMER WAITING LINES
In the previous sections you have learnt about demand patterns and strategies to match demand and capacity.
However sometimes it is not possible to match demand and capacity and waiting by customers become
inevitable. Waiting is a common phenomenon at hospitals, restaurants, banks, hair cutting saloons etc. In such
situations, waiting time becomes one of the key factors in consumer‘s evaluation of service. While reducing
waiting time is important for marketers, it is equally if not more, important to reduce the customer‘s perceived
waiting time. If a customer‘s perceived waiting time is less, he will be more satisfied with the service. Thus
service waits can be controlled by two broad techniques viz. Operations Management and Perception
Management.
1. Operations Management
It involves reducing the amount of time customers have to wait. This can be done in a number of ways. Firstly,
the firm should analyze its operational processes in order to identify and remove inefficiencies or bottlenecks,
if any. Secondly, in case waiting cannot be avoided, a reservation system can be used. This will help in getting
the customer out of a queue. Thirdly, customers can be encouraged to use the facilities during non-peak hours.
Fourthly, greater use of information technology can be made wherein customers can use telephone, computers,
etc to conduct business. Lastly, as marketers you can also differentiate waiting customers wherein some
customers may wait for more time while others receive a quicker service. The differentiation can be done on
the basis of a number of factors like importance of the customer, urgency of the job, duration of the service
transaction and payment of a premium price. In case queues cannot be avoided, the organization has to decide
on the type of queuing system to be adopted.
There are number of possibilities in this regard. Take for example the computerized railway reservation centers
wherein there are multiple queues and the customer has the option to join whichever queue he wants to and can
also switch over to other queue if the wait appears to be shorter in that. Another option is to have a single

queue system wherein first come first served rule applies to everyone. A slight variation of single queue system
can be that each customer on arrival is given a number and waits at the reception area enabling the customer to
sit, relax and mix up with other customers.
2. Perception Management
Limited success of operations management in waiting line management has led to increased interest in
managing the perceptions of wait experience. If you cannot control the actual wait duration, then control the
customer‘s perception of it. Maister has proposed following ten principles that you can use as service
marketers to influence customer‘s perception of waits and their satisfaction with waiting lines.
 Pre-process and post-process waits feel longer than in-process waits.
 Anxiety makes waits seem longer.
 Uncertain waits are longer than known, finite waits.
 Unfair waits are longer than equitable waits.
 The more valuable the service, the longer people will wait.
 Solo waits feel longer than group waits.
 Physically uncomfortable waits feel longer than comfortable waits.
 Waits seem longer to new or occasional users than to frequent users.
Therefore, you should appreciate that though operations management techniques are important, however, while
developing strategies for waiting lines you should never overlook the effects of perceptions management. The
following suggestions can be used in order to make waiting fun or at least tolerable.
 Determine the acceptable waiting time for your customers.

 Since unoccupied time feels longer than occupied time, keep customers occupied by installing
distractions that entertain and physically involve them. For example, television sets can be installed in
the waiting areas, magazines or reading materials related to the service can be provided.
 Provide ‗waiting duration information‘ i.e. information about the expected length of a wait and/or
‗queuing information‘ i.e. a consumer‘s position in the queue, with continuous updates.
 If unexpected delays occur, explanation should be given to the customers. This helps in reducing
uncertainty and customer irritation. The key is to impress upon the customer that he has not been
forgotten. Simple things like providing a glass of water or a cup of tea to the waiting customer can help.
 Try to modify customer arrival behavior.

 Keep resources not serving customers out of sight. This can be done by keeping idle employees out of
view and conducting activities that do not involve customer interactions out of the customer‘s sight.
 Try to reduce pre and post-service waiting by transferring some of the pre-service waiting to the service
encounter phase. For example, menu cards may be provided to the customers while waiting, to decide
on their orders, medical information may be collected from the patient prior to actually meeting the
doctor.
 A smiling service person who knows his job well can be very helpful in overcoming many negative
effects of waiting. Therefore, training and incentives / rewards for providing good service should be
made.

E-Marketing and Service Marketing

Uploaded by

Copyright:

Available Formats

You might also like

E-Marketing and Service Marketing

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

E-Marketing and Service Marketing

Uploaded by

Copyright:

Available Formats

E- Marketing and service marketing Module

E- marketing and service marketing Module

1 Compiled by Department of Marketing Management

2 Compiled by Department of Marketing Management

3 Compiled by Department of Marketing Management

4 Compiled by Department of Marketing Management

5 Compiled by Department of Marketing Management

6 Compiled by Department of Marketing Management

7 Compiled by Department of Marketing Management

8 Compiled by Department of Marketing Management

9 Compiled by Department of Marketing Management

10 Compiled by Department of Marketing Management

2.4.4. Competitive Environment

11 Compiled by Department of Marketing Management

12 Compiled by Department of Marketing Management

13 Compiled by Department of Marketing Management

14 Compiled by Department of Marketing Management

15 Compiled by Department of Marketing Management

16 Compiled by Department of Marketing Management

17 Compiled by Department of Marketing Management

18 Compiled by Department of Marketing Management

 Measurable quantity (how much )

19 Compiled by Department of Marketing Management

20 Compiled by Department of Marketing Management

21 Compiled by Department of Marketing Management

22 Compiled by Department of Marketing Management

23 Compiled by Department of Marketing Management

24 Compiled by Department of Marketing Management

25 Compiled by Department of Marketing Management

26 Compiled by Department of Marketing Management

A) Using existing brand name on the web

27 Compiled by Department of Marketing Management

28 Compiled by Department of Marketing Management

29 Compiled by Department of Marketing Management

30 Compiled by Department of Marketing Management

31 Compiled by Department of Marketing Management

32 Compiled by Department of Marketing Management

33 Compiled by Department of Marketing Management

34 Compiled by Department of Marketing Management

35 Compiled by Department of Marketing Management

36 Compiled by Department of Marketing Management

• Commerce: The site‘s capabilities to enable commercial transactions.

37 Compiled by Department of Marketing Management

4.9. Search engine Marketing

38 Compiled by Department of Marketing Management

39 Compiled by Department of Marketing Management

3. The mobile phone is always on

40 Compiled by Department of Marketing Management

41 Compiled by Department of Marketing Management

42 Compiled by Department of Marketing Management

43 Compiled by Department of Marketing Management

44 Compiled by Department of Marketing Management

MARKETING OF SERVICES CONCEPTUAL FRAMEWORK

45 Compiled by Department of Marketing Management

 THE CONCEPT OF SERVICE

46 Compiled by Department of Marketing Management

 Trade in services is growing world wide

47 Compiled by Department of Marketing Management