Services Marketing Part 1

MK103x – Services Marketing: Concepts &
Applications
Prof. Shainesh G
Week 1
Understanding services. So, what is a service? If you think about our daily life, we are surrounded by
services. Services like telecoms services, healthcare, retail, education, or any advice that we get from
a professional, like a doctor, or charted accountant, or a lawyer. So, how do we combine the
characteristics of all of them and use a simple definition.
Now, think about the service as a process, a deed or a performance because there is someone who
is providing a service provider who is performing something for our benefit if we are the consumer.
So, services can be broadly very simply defined as deeds, processes, and performances but that's not
good enough sometimes. And we want a slightly broader definition so that we sort of differentiate
them from goods, which we are familiar with and also encumbers most of the services that we
encounter on a daily basis. So, services are usually defined as an intangible act that's usually
performed by a service provider and doesn't result in the ownership of anything.
Services are deeds, processes, and performances. Even in a context like a B2B context, the business
market context. So, lots of businesses provide services to other organizations. For example, a
company like Microsoft provides software services to educational institutions, to manufacturing
companies, airlines, telecom, and banks and financial services organizations.
All of them are actually consuming services and there's a service provider. In this case, it's Microsoft.
So, services actually are prevalent everywhere in the consumer context as well as in the business
context and it's important for us to understand how services are marketed.
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Marketing: Concepts & Applications" delivered in the online course format by IIM Bangalore. No part of this document, including any logo,
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Nature and characteristics of services. Normally, we use four characteristics of services to

differentiate them from goods or products. Intangibility, heterogeneity, inseparability, and
perishability. So, let's call us I. H. I. P. that is Intangibility, heterogeneity, inseparability, and
perishability. So, let's look at each of these characteristics in some detail and try to understand what
is the impact of these characteristics especially on managers as well as the customers.
So, what is intangibility? Let's start with the first one. That's intangibility. Simpler way to understand
intangibility is by contrasting it with tangibility. If anything is tangible, we can touch it. We can hold
it. We can feel it. And, we can drop it on our feet. So, if you can drop it on your feet, it's intangible
services inherently are intangible. Now, from a consumer perspective, intangibility poses certain
challenges. We can't use our senses to understand them. We can't use our senses to assess them
easily. And it becomes a challenge for managers because intangibility makes it more difficult to
communicate the benefits of the service to the customers. So, intangibility has an impact on both
customers as well as managers.
Now let's move to the next characteristics. That is heterogeneity. So, from a customer perspective,
heterogeneity poses a challenge of a risk of variation, which means that customers are not very sure
what they're going to get when they're signing up for a service, when they're going to consume or
buy a service. On the other hand, from a manager's perspective, quality control is much more
difficult in the context of services. Think about banking services, which is delivered by people or
healthcare services where you interact with doctors and the paramedics, and in a retailing context
where you interact with a sales person in a shop, or when you go for hospitality service, when you
go for a vacation, and you interact with several people who are providing that service. So, all of them
are much more amenable to a lot of variation, and hence it poses challenges for the managers in the
form of quality control.
Now, let's move to that third characteristic called as inseparability. And I'll contrast this with the
goods. In a factory, you produce the goods, check the quality, and then you send it to the
marketplace. So, production is separate from consumption. Customers go to the retail outlets or
they order it online, buy it, and then use it. So, the consumption is separate from production. In
many services, lots of services, production and consumption are simultaneous. So, inseparability is
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also called as simultaneity production and consumption is simultaneous. Now, what are some of the
challenges when you have simultaneous production and consumption from a customer perspective?
Well, you are involved in the production process and from the manager's perspective when your
customers involved in the production process, you may have challenges in meeting the quality
expectations and they can actually interfere in the service. So, how do you manage in the context of
inseparability being an inherent characteristics of most services?
The fourth characteristics is perishability. What does perishability mean? In a goods context, we
know that vegetables and fresh produce have a very short shelf life. They perish, if you don't use
them during that shelf life period, then they cannot be used, which means they are not usable. In
the context of services several services have is fixed capacity or which require people to be involved
in delivering the services we face a similar situation that's perishability. Perishability is a bigger
challenge for managers because you need to create demand for the supply that's available. You have
certain capacity, you have people, you have facilities which have to be used. And hence, you need to
manage the demand in such a way that your capacity, which is perishable gets utilized. So, marketing
challenges are much more higher in a context of a service where perishability is very, very common.
So, if you think about services. Because of these four characteristics intangibility, heterogeneity,
inseparability, and perishability. We have challenges in managing them.
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The plethora of services actually makes it challenging for us to classify them. And every time we
think about services, there is a natural tendency to really think of a service being unique. For
example, it's natural for bankers to think that banking is a very unique service and it's very different
from hospitality and managers in hospitality would think that their service is very unique and it's
different from retailing. And similarly, if you think about someone who's running eCommerce
platform would think that you know my service is extremely unique, but that's not true. Inherently
there are ways to classify services as that we can learn from common aspects and then understand
them and use that to market the services.
So, there's a very nice classification of services proposed by Christopher Lovelock and the focus is a
service as a process. If you think about a service as a process, there are two dimensions to this whole
service as a process. Who or what is the direct recipient of the service? So, a recipient could be
people, customers like you and me or oppositions.
So, people and possessions are two parts or two types of recipients for the service. The other aspect
is the nature of the service act. So, what do I mean by that? It is the action intangible or is it tangible
action? So, think about it as matrix, a two-by-two matrix who or what is the direct recipient of the
service and what is the nature of the service act. And within that, people are possessions and
intangible or tangible actions. So, think about services which are directed at people. And actions are
intangible, a music concerts of psychotherapy or education or consulting, arts and entertainment.
These are different services which are directed at people because they provide mental stimulus and
they're directed at people's minds and at the same time, the intangible actions.
What about intangible actions directed at our possessions? For example, accounting, banking, data
processing, or legal services or research, or investment advisors. These are directed at our
possessions, and many of them are directed to our financial possessions and their intangible actions.
So, we have several services which can be classified under possessions and intangible actions, and
likewise services, which can be classified as directed at people and the intangible actions.
Now let's move to the next set of services. There are services which are tangible in terms of the
actions, and they're directed at people or people's bodies. So, think about transportation. If I had to
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move from place point A to point B, and I use a public transport or a cab service, there is a physical
action, tangible action directed at my body. Similarly, health care services or hospitality services or
salons or physical therapy or fitness centers. These are services which are directed at people and
they're tangible actions. What about tangible actions directed at possessions? So, these are services
directed at physical possessions, transportation of goods, repair and maintenance of cars, bikes,
automobiles, or your durables, office cleaning services or distribution. These are tangible actions,
directed at possessions.
So, we have a way of classifying a lot of services into four neat boxes, in a two by two matrix, and
that's useful to think about such a classification and identify characteristics which are common to
services, while they apparently seem to be very different because they're categorized as different
services.
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So, many of the examples that I referred to are traditional services. What about the new-age
services like Netflix or Facebook or Amazon or Airbnb? Now think about applying this framework and
trying to sort of fit them into one of these boxes.
Where would you classify Netflix. Is it part of information services or broadcasting cable services?
Netflix provides streaming service. So, it's an intangible action directed at people.
If you think about Airbnb, it facilitates a hospitality service. So, there's a provider who provides a
service, who provides his home or a room for someone who's looking to stay in unconventional kind
of a service. And hence the platform that's Airbnb basically is classified as tangible actions directed
at people.
And you can think about Amazon's e-commerce services, which links helps people buy what they
want instead of going to the retail outlet. So, it's like a retail distribution service, which is directed at
possessions which helps us acquire those possessions, products. And so, it's classified under tangible
actions, directed at possessions.
So, the new-age services basically facilitate using technology, some of those traditional services
offered by conventional service providers. And we can use them to this framework to basically
classify even the most modern services which have come up in the recent years.
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As services involve the customers in the production, it's important to understand the concept of
service encounters because managers can then manage these encounters. So, what are service
encounters? Service encounter is a period of time that the customer interacts with the service and
that may mean a customer visiting a service premise or the customer availing of the service from
home through the internet or through any other technology channels like phone or other channels.
So, the service encounters can be long, can be short, and can be high contact or low contact, or it
can be interaction with an equipment or a device or interaction with people. So, we can classify the
service encounters on the basis of the time period that spent as well as whether they are interacting
with people or possessions or devices or equipment.
So, high contact services like the hospital services, healthcare service, where customer goes and
spends a lot of time meeting with the doctor and going through a whole process of treatment is a
typical example of a high contact service. A low contact service, on the other hand, could be using an
app to order for food from a restaurant, where you are using an app and you don't have too much of
interaction with the employees and the food gets delivered at home? If you think about high contact
and low contact services, both poses challenges for managers and opportunities for enhancing the
service experience of the customers. So, one of the concepts that we use to understand service
encounters is from the customer's perspective.
So, the concept of moments of truth is it useful Metaphor to understand the service encounters
from a customer's perspective. So, what are moments of truth? Moments of truth are those
moments or those instances when you judge the quality of a service? So, think about a service like
an airline, and assume that you're traveling from London to New York. There will be many
interactions with the service provider and different aspects of the service, but you really assess the
quality of the flight maybe four times or five times based on the boarding experience, based on the
check-in counter interaction, and a few interactions inside the flight. And those moments of truth
are very critical in terms of assessing the quality of the service.
And when you think about them later, you would say whether the trip was pleasant, unpleasant,
would be determined by these moments of truth. And it's important to manage those moments of
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truth. So, every customer would assess the service based on these critical aspects of a service when
they interacted with people or the process or the system, and whether they were good or bad,
would determine whether it was a satisfactory service or a dissatisfactory service experience.
So, the assessment of quality of the service experience depends upon these moments of truth. And
when customers look back to that experience, these moments of truth will determine whether it
was a satisfactory or a dissatisfactory experience for the customer.
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Consumer behavior in service encounters. To understand consumer behavior, we have to really think
about the process that customers adopt to buy or consume a service. So, it's a multistage process.
Typically, we classify them into three stages. A pre-purchase stage. A service encounter stage. And
post-purchase evaluation stage. And each of these stages have multiple steps. So, let me just put
them all together.
In the first stage, there is a concept of need recognition. Customers feel that they need a particular
service, or they are looking for a certain service. So that's called as a need recognition stage.
The second step is typically information search. So, for example, if you want to travel from point A to
B, what are the options for you? It could be a public service, it could be a shared cab service, or you
may use your personal transportation, and you may use your bike or a car, in which case it's self-
service. So, from need recognition, you typically go to information search. During information search
process, you are really looking for information about alternatives and comparing them and that's
called as evaluation of alternatives. So, you collect information and then you evaluate options.
And evaluation of alternatives in in a service context would also require the customer to know the
criteria. And also, be able to assess their importance. For example, a customer may want to go to a
hospital to meet a doctor, in which case the information is not so easily available. You may not be
able to assess the differences between the hospitals very easily and hence in a service context it has
become slightly more challenging. And a simple regular services like a retailing services, you may be
aware of all the retail options available in the neighborhood or you may choose an online option. So,
the evaluation of alternative is slightly more elaborate, especially for high risk services and the
services which are not very frequently used. Once you evaluate them, the next step is what we call
as purchase and consumption, which may require multiple steps because you may need a
reservation, or you may need to actually call up and fix an appointment. And then you have a service
encounter stage where you meet with a service provider or you use a service and so that's called the
purchase and consumption stage.
And finally, in the post purchase evaluation stage, the customers are really comparing their
expectations from the service with their experience. And if they feel that the experience was very
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good or satisfactory, they are likely to come back and be retained by the service organization or the
service provider. So, the post-purchase evaluation is much more intrinsic to the customer, but it's
important for the service provider because that determines whether the customer is going to return
back to the organization or not.
So, that's the five stages that are involved or steps that are involved in consumer behavior includes
need recognition, information search, evaluation of alternatives, purchase and consumption, and
post-purchase.
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To understand the behavior of consumers we need to follow the steps that they undertake to buy,
purchase, or consume a service. And that's the best way to understand the customer needs. And
what is the way, what are the processes that you would use to understand customer needs?
Typically, organizations bank on research, and we classify them as marketing research. It would
involve, for example, asking customers directly in the form of a survey or an interview or a focus
group discussion. It also includes observations research, for example, when a customer's undergoing
a service experience, he would like to observe how the customers behave and based on that, modify
the process. How they interact with the employees? What are the questions that they ask? These
are all part of the observation research.
In several contexts, you would have mystery shoppers, for example, retail outlets and hospitals
typically would send someone a researcher who is playing the role of a customer and that person
documents entire experience, and he would help you to understand customer's experience and
identify opportunities for improvements or modifications. This is very common in the case of
hospitality industry. So, there are many ways of understanding customer needs. Today with online
review sites that's a very useful source to understand what customers expect and what they're
asking for, what they're seeking for based on what they comment upon services that they've
experienced recently.
So, there are multiple sources to understand customer needs, and as, as a marketer, one needs to
be really using all those sources to be able to anticipate the customer needs and modify or improve
the service experience for the customers. A very important element of service encounter is
customers' expectations. What expectations? Typically, even before you consume a service, you
have certain expectations.
So, a very simple way of defining customer expectations is when customers say, I should experience,
I should get this, that's what it's called as an expectation. And it is not specific to a service provider.
It's usually at a broader level. A good bank should be very prompt. Is the customer expectation. A
courier should be reliable, irrespective of what courier service that you're using. These are all
expectations. So, there are certain global, broad expectations and one needs to understand
customer expectations to be able to design the service such that there's very little gap between
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what customers expect and what to deliver. And if an organization is able to deliver that, meet the
expectations, match the expectations, and in some cases exceed the expectations that customers
are really have very good experience with the service.
So, understanding customer expectation again comes through research. You have to understand
customers by talking to them, anticipate their needs, and observe how they interact with the
service. And then read the comments on review sites. Go through comments that they give on your
survey forms, and when they talk about your service with the others. So, all of these methods can be
useful to understand customer expectations and be able to design your services that there's not
much of a gap between what customers expect and what your service system actually delivers to the
customers.
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So, what are customer expectations and how are they formed? So, customer expectations are what
customers believe they should get it, or they would get. So, would get is usually with the service
provider, they should get is with the category? So, they expect all hospitals to treat them very well,
cure them of ailments, and that's irrespective of any hospital that they choose, but for a specific
hospital, they would expect that they will have a great service experience, the treatment will be very
good, and they were very specific elements of expectations in terms of reliability, the assurance, and
responsiveness and all those elements that comprises customer's expectations.
How are customer expectations formed? There are multiple sources. If I've experienced a service,
my expectations are much more close to what I'm going to receive. So, my expectation will be
influenced largely by my past experience. Another source of customer expectation is the information
that is provided but the service provider. Now, think about services when they promote themselves,
they always say that we are the best. Normally, we set the expectation very high when we promise
that we are the number one or we are the best, and so promotion or the information provided by
the service provider is the second source of customer expectations.
The third source of customer expectations is really the word of mouth, what they hear from others.
So, I may not have experienced a particular service organization, but I have heard about it from
others and that sort of moderates or sets my expectations. And the final source or what we call as a
contingent factor is the customer needs. If there is an emergency, my expectations are different
from when it's a planned service encounter or planned service purchase.
So, there are typically four different sources of customer expectations. The customer's past
experience, word of mouth, what's promoted by the organization, and finally the customer needs.
And based on these factors, customers have certain expectations and when they encounter when
they purchase and consume the service, they compare it with those expectations.
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So, the marketing activities in a service context can be divided broadly into two parts. There's a
strategic aspect and there's a tactical aspect. The strategic aspect really focuses on understanding
the value and that involves typically segmentation, targeting and positioning, or what we call it, the
STP, and that's the analytical part of marketing.
So, you do a lot of analysis, you analyze the market, you analyze externally, external analysis and
internal analysis. In the external analysis, you typically analyze the market, the opportunities, the
growth opportunities, the threats as well as the competitors. Internal analysis is a lot to do with the
organization itself, the financial aspects, the people aspects, the operational aspects, your strengths
and weaknesses.
The outcome of these two analysis, that's external analysis leads towards classify as opportunities
and threats, and the internal analysis leads to identification of strengths and weaknesses. So
typically, we combine them together as SWOT analysis, strengths, weaknesses, which emerges from
your analysis of internal organizational strengths and weaknesses, and opportunities and threats,
which emerged from your analysis of the external aspects of the organization.
Once you have this analysis, you can decide where you want to play and where you want to win. So,
the analysis should help you identify where you want to play. That is segmentation and targeting.
You have an offering and you want to identify a set of customers who will find most value in that
offering. And that's called as targeting. So, you may have millions of customers who can benefit from
your service, but you know that based on your capabilities, you can target only a subset of them,
maybe 10,000 maybe a 100,000 customers. So, that's a target. And you may define their target
based on many variables, it can be demographic variables, it can be psychographic variables, it can
be geographic, multiple variables.
Once you've decided to target, the next activity that you have to do is really positioning. So, what is
positioning? Positioning involves three different elements. There's a company that's you, your
service. There's a set of customers who can actually use the service and there's competitors. So,
positioning brings all three elements together, the company, the customers, and the competitors,
because the customers have a choice, they can buy from you or they can go to competing offers
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available in the marketplace. So, what is positioning? Positioning starts with the product or service,
but it's not what you do to the product. It's what you do to the mind of the consumer. So,
positioning starts with the offering, the product or service, but positioning is not what you do to the
product, positioning is what you do to the mind of the consumer. And so, it's very useful to think
about combining these three elements, namely the company, the customers, and the competitors in
a positioning framework.
And I use a simple formula. Positioning is equal to targeting plus differentiation. Which means that
the chosen target that you've selected for your offering, what is different about your offering? How
do they perceive it to be different from the competing offering? What are the benefits that they get,
which are different from the competitive offerings and the reasons for them to choose you as
against the multiple choices available for them?
So, positioning really brings together your own offering and its differentiation. The benefits that the
customer will get. Brings the target customer and gives them a reason to compare with competing
offers and selective.
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So, let me try to define positioning and help you understand this concept. Positioning is the space in
your mind about a particular brand. It is a spot occupied by a brand in your mind. So, Ries and Trout
have defined positioning as something that starts with the product, but it's not what you do to the
product. So, positioning starts with the product, but it's not what you do to the product, it's what
you do to the mind of the consumer. And that's a very nice definition to understand this concept.
So, think about a perceptual map. A map with two dimensions, quality and price. Low quality, high
quality in the airline context would be a full-service airline, like a Singapore airlines, which is high
quality. And on the second dimension would be price, low price versus high price. So, a budget
airline, typically a low-cost airline and the low price. So, if you plays as a consumer, if you think
about a trip that you had to make and your perception about the different brands in the market,
Singapore airlines will be typically classified as high price, high quality. And a budget airline in the
same segment or in the same sector of travel between, say Singapore and Kuala Lumpur, would be
classified or positioned as a low price, low quality service. So, in any market, in any segment, if
customers classify you based on certain dimensions. I chose price and quality, but usually customers
use multiple dimensions to assess any brand and the spot occupied in their mind, the place occupied
in their mind by different brands is the position of that brand or in the perceptual map, you have
different brands occupying different sports and that reflects the positioning of these competing
offers in the marketplace. If you are a new entrant, if you're creating a new service, you have really
think about what are the alternatives that your target customer considers? That's a choice, options
that the customers have. And you find out from customers through your research how they perceive
these competitive offerings. So that's called less competitor analysis.
In the minds of the consumers, how did they perceive these offerings? And if there is a gap which is
not filled by any of these competitors, that's a good place to start with. And if you can position your
service there, you don't have very close competition, which means customers consider you to be
different from others, but in many cases, you may not have the luxury of identifying gap, which
others are not fulfilling, and especially in a mature category, in which case you have to really think
about which are those needs, which are not being filled properly, fulfilled properly, which are those
needs where you can find significant improvement and you can differentiate your service. For
example, can I improve the spirit of a service delivery in the context of a fast food service? Or can I
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improve the experience of customers in a healthcare service? Or can I improve the checkout
experience in hospitality context? Or can I improve the reliability of delivering e-commerce service?
So, there are lots of services which are competing for customers attention, but there are criteria
which are important for customers, and they're finding that they're not getting fulfilled by any of
these players. That's a good place to begin your differentiation. I should be faster, I should be better,
I should be maybe cheaper than competing offerings on attributes, which are very important for
customers, but are not being currently fulfilled by competitors. Now, that's the starting point. You
position your service by saying I'm faster, I'm better, or maybe I'm cheaper, but then you have to
manage it through on an ongoing basis and how do you do that? First is through promotion. You
need to communicate to customers that you're better on certain elements.
The second part is really the customer experience, which means that promotion is followed by actual
delivery when customers experience a service, they should feel that they're getting a faster service
or a better service. And so, you need continuous process of monitoring this service delivery
experience, get feedback from customers, look at your systems and see how often they fail. And so,
you have a combination of internal and external sources to inform you about your performance. And
so, perception management through promotion and through actual experience will reinforce the
positioning that you have started with.
And you typically, the positioning sometimes changes. Why would that happen? Entry of new
competition or sometimes the existing players reposition themselves. And they improve on certain
aspects, in which case the customer start perceiving them differently. And hence, it affects their
perceptual map and your own position. So, it's a continuous task to monitor the positioning. So, how
do you influence this positioning? It's largely influenced by the elements of service that you have
chosen to differentiate yourself. If you have perceived to be very reliable, if you're perceived to be
very on time, then you are high quality. If the flights are very comfortable, the airline is seen as very
comfortable. It's seen as very high-quality service and a full-service airline tries to compete on
quality and not so much on a price.
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So, if I put them together, the analysis part of marketing is usually the strategic part, which is
analysis of the external market and the internal organization aspects, which leads to this whole sort
of analysis of the strengths, weaknesses, opportunities, and threats. Once you're completed the
analysis and chosen the segment to focus on and you have decided the positioning, which you don't
change on a regular basis you get down to the action part. The action part focuses on the seven P's
of services, marketing mix.
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In marketing, we typically talk about the marketing mix, and that's very useful to, sort of understand
the elements of marketing activities that an organization performs, or a marketer performs. So
typically for goods, we talk about 4 P's of marketing, and that includes product, price, place, and
promotion. In the services context, we have 3 more Ps, and so we call the services marketing mix as
comprising of 7 Ps, and the additional 3 Ps include physical evidence, process, and people. The seven
P's of services marketing.
Let's start with product. What's the service product? Service product can be conceptualized as
comprising of two broad elements, a core element, a supplementary element. So, think about
hospitality. If you want to stay in a hotel, you'll have to make the reservations and then land up at
the hotel, check-in, and then stay in a room or enjoy the services offered by the hotel. So, while the
core element is the stay in the hotel, there's a lot of elements which enable the customer to enjoy
the service, which includes the booking, the checkout, the stay, and all of those. So, those are
supplemented elements, which makes the service complete whole.
Pricing. Think about the price as something that the organization sets, the service provider sets, and
the customer has to pay. But usually, when we think about pricing, we also think about all those
elements which come into the picture because the customer takes some time, need some effort,
and also has some risk element involved in the pricing. So, the total cost that the customer incurs is
the price for the customer. And that's not just a monetary prize, that is decided with the service
provider.
Place as an element of the services marketing mix. Conventional sense, we have a place where we
buy the products and services. So, a retail outlet is a place where you get a product, but a retail
outlet's also providing a service, and a healthcare context, you may go to meet a doctor in a clinic, or
you may visit a hospital. So, these are all place elements of a services marketing mix.
Promotion is similar to the goods context. Promotion is required to inform the customers, to
influence their attitudes, and finally persuade them to buy any product or service. So, the four P's
are largely common, but there are nuances which we'll discuss later.
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Let's look at the three additional 3 Ps, which come into the picture when we think about services
marketing. The physical evidence is usually the place where the service is provided. Now in many
services, the customer has to visit a premise or the service provider, for example, a hotel, a
restaurant, or a hospital, or a bank. So, the physical evidence is largely the place where the customer
receives the service. But why is it separate from the place element as in a goods context? The
physical evidence here also includes other things. For example, how people look like? The
appearance of employees, the appearance of physical facilities and for example, if it is provided
online, how functional the website is? So, all of them are elements of the physical evidence. And as a
service provider you need to make sure that customers have a very good experience using the
physical evidence.
The next element of services marketing mix is the process. What's a process? Process is the way as
service is offered to the customer. So, there are steps to the process. There is a sequence and the
service provider has to design a process as that it's simple for the customer to avail of the service
and at the same time it's easy for the front-line employees to offer the service. A good process
makes sure that the customers are left with the satisfactory experience.
The final element of the services marketing mix is people. The people element focuses on both the
employees as well as the customers. And why do we worry about them? Because people include
employees as well as customers because they interact in most service contexts, especially in people
intensive services. So, in traditionally, in organizations, we think about people as only focusing on as
the role of HR in services marketing mix, we think about people as something that's inherent or core
to a service provision, especially people intensive services.
So, the three additional services elements or services marketing mix elements, namely physical
evidence, the process, and the people, you will quickly see that marketing doesn't have a very big
role. So, if I put them all together, the seven services marketing mix elements, you also notice that
there's a lot of interaction between the functions like operations and HR when we think about
physical evidence and the process, where operation plays a much bigger role, and when we think
about people, it's HR, which plays a big role, but why do we bring them under services marketing
mix? The reason is very simple. If you have positioned your service as a high-end service, you need
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to worry about how the physical evidence is presented to the customers, which means that as a
marketer you need to work with operations team. And if you want the process to be simpler, you
need to make sure that you work with the operations team, and you have the right people to
provide the service, especially the front line. So, you need to align all of them together. And as an
organization, there's a closer interaction and service context between marketing, operations, and
HR.
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Professor: Good morning. It is my pleasure to introduce and welcome Mahadevan. Mahadevan Iyer,
he is a group head of CRM for the Landmark Group in India and he has been in this industry several in
different companies, almost two decades of experience. And for the last several years, he has been
working with Landmark Group. Now, very quickly I will request him to introduce the Group, it is a big
retailer with multiple formats and welcome.
Mahadevan Iyer: Thanks. Thanks Professor Shainesh. The Landmark Group is actually Dubai Based
Group started in 1973 has got a legion of 45 years. In India, we started in 1999. We have close to
around 560 odd stores over 130 odd cities, 9 million square feet of space, the key formats are Lifestyle,
which is actually a multi-brand fashion department store. Max, which is a mono brand value fashion
store. We have Easybuy, which is actually value apparel, entry-level value apparel. Homecenter, which
is actually into home furnishings and furniture. SPAR, which is a hypermarket and FUNCITY which is a
game center. So, you see that, almost all aspects of retailer covered by the Landmark Group in India.
Professor: Okay, wonderful. So, I would just like to ask you by focusing on one aspect, which is how
does the group with different formats understand value of the target customer. So, if you could also
describe for one of the formats, the target customer and how you are positioned in that segment.
Mahadevan Iyer: Sure. So, have something called Landmark Rewards, which is actually a group loyalty
program, and that actually enables us to understand our customers better. So, as we speak, we have
close to around 38 million odd customers who are enrolled into the program. And close to around 95
to 97% of customers who visit our stores and transact with us are happy to share the mobile numbers.
And landmark rewards is a card less program, it is a mobile number-based program. So, what we do
is we try and understand customers at multiple levels, at an overall group level we get to understand
the demographics based on their age, their location, which is their pin code or catchment. We also get
some sort of a derived understanding of customers based on what they shop across multiple formats
and understand their life stage are they single men, single woman, family, couple, and so on. So, that
is broadly at the overall level. We also look at their behavioral pattern in terms of what they buy with
us, their shopping behavior and that helps us understand a few things that we do more at a format
level. So, for example, a customer is shopping in Lifestyle, we try and understand using techniques like
RFM, which is, recency and frequency and monetary value. We try and know how engaged they are
with the brand in terms of the shopping. We also look at what they buy in their baskets, which gets us
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an insight into the type of categories they are very comfortable with, right? So, that is one part of it.
Then, we overlay that on their life stage, and we understand what is the type of headroom that is
available.
So that tells us actually what, which is in terms of what they are buying and what they are not buying
with us. It also tells us where, because we know either they are shopping in store or online, because
of the integrated thing we know customer behavior across both in store and online. What we also do
is we have something called a net promoter score, which is where we try and understand the why part
of it. So, if a customer is not shopping frequently enough or shopping frequently enough, then we
have the promoters and the detractor’s customers will either willing to recommend us or not. And
then, we probe a little deeper to understand why is it that they are willing to shop with us or not
shopping with us, or down-trading with us or up-trading with this. And then that is something that we
use to understand the customer behavior.
Professor: Wonderful
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Professor: It is a pleasure to introduce and welcome Shantanu. Shantanu Rege is the Chief Operating
Officer of Mahindra Rural Finance. I am going to request him to first briefly introduce the company
and then talk about the customers because the company operates in a fairly unique space, which is
ignored by most of the large mainstream banks and financial services companies.
Shantanu: Thank you so much, professor. Pleasure to be here. So, Mahindra Rural Housing Finance or
Mahindra Home Finance as we call it is a subsidiary of Mahindra Finance. Started in 2007 with the aim
of providing home loans to people in rural India. These are people living in villages who otherwise
have no other access to credit. Certainly not to home loans. These are customers who have faced a
lot of rejection with banks because banks do not want to service this category of customers and the
only alternative to them for housing finance is the local money lender. So, since 2007, till now it has
been a great journey. We now have about 8,00,000 customers across 13 states 80,000 villages and the
real joy is seeing the satisfaction on the faces of these customers who otherwise wait for harvest
money to add three walls and try to complete the house, their ability to do it at one go and the pride
that they enjoy in society as a result is the real satisfaction that we derive.
Professor: Okay. So, I have seen some videos of your customers, would you like to describe, especially,
the profile in terms of income profile and also the work that they do in short?
Shantanu: So, the typical rural customer would be a farmer, an Agri laborer, maybe someone who has
two or three acres of land, he could be running a small village Kirana shop, but frankly, someone who
doesn't have a regular source of income, he's not salaried, getting money every month into his bank
account. He is really, working his way towards making ends meet. Typically, the mindset is everything
in rural India revolves around the harvest. So, when the harvest is good there's surplus cash in the
rural economy. And that was when if he wants to do any home construction, improvement,
renovation, son is getting married, needs a new room in the house to welcome the new bride, those
kinds of things get postponed to the time when harvest money is a plenty, but for whatever reason if
the money is not sufficient, it will lead to a half completed house. So, this customer is not un-served,
or it is not that this customer is not credit worthy, but he might not have all the credit or all the finances
available at one go. His income would typically be, let us say anywhere between annual income would
be one and a half to two and a half lakhs, but as I said, revolves around the harvest and hence there
are periods of erratic cash-flows, which creates a problem for most traditional finance companies to
serve them.
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Professor: How do you assess the risk of these kinds of customers who have erratic class flows? Who
also have, may not have so many documents to show that they have actually a cash-flow?
Shantanu: Correct. So, our business model, and we believe that in rural India, even the documentation
is not really given the kind of importance it is an urban, we have innovated in a sense the field
investigation model of assessing customers. Field investigation means that you go meet the customer,
have a conversation with them, get data points, proxies by which you can assess his income. So, for
example, as we were talking, you have a farmer, he will have some proof of agricultural land hold. He
has two acres of agricultural land. He says, I grow Soybean or Cotton or Paddy on it. I have two harvests
in a year. Now, that is valuable information, because a lot of other things are available in public
domain. What the yield of a certain crop is? What market prices, selling prices are available? What the
cost of inputs are? And therefore, you can on average for a certain district, if you have local knowledge
about that district, compute on average what the disposable income of this customer would be. Now,
we have done that exercise for all districts, for all crops, not just for farmers, but for all professions.
And this database allows us to say that an average carpenter in Trichy district of Tamil Nadu, what his
income would be, even though he doesn't have proof that, that is the money he makes as long as we
verify that he's a carpenter and he goes to work and the community says, yes, he's working. We say,
okay, he must be having this much income and on the basis of that we sanction a loan to him.
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Professor: It is pleasure to welcome Roger Moser. Roger is a Professor at Macquarie University

currently. He is also associated with St. Gannon University because he heads the Asia Connect centers
them and he has been a long-time faculty at several universities, strong association with Indian
Institutes like IIM Bangalore and IIM Udaipur. So, it is truly someone who is international. But what I
am going to do today is really ask him about his one of his ventures that he really chairs as chairman
a company called Satsure. So, I am first going to request Roger to sort of briefly explain what this
organization does?
Roger: Well, in a nutshell, Satsure is providing Decision Intelligence from Space. Now, what is decision
intelligence is often the question that we get asked first. Well, simply put its effect between what kind
of information requirements companies have today and how with today's advanced technologies you
can actually get that in process, the required intelligence. So, this is where we work, obviously, on
both sides on the social, you know, engineering, natural sciences on what are the questions. And at
the same time, we take a data science approach and understand how do we actually get all the
information required to nowadays make finally better decisions?
Professor: Okay. This is still very abstract. So, I would request you really to focus on a use case, in
organization which says this is a particular way we use to take a decision now with technologies,
including imaging from space. We can take slightly better.
Roger: I understand for us, again, decision intelligence is rather the philosophy our mission, when it
comes to actual offerings, for example, think of a bank, in India and they have to deal with small hold
farmers, they have to give out loans, and but they need to understand what kind of credit situation is
that farmer in? Now, in today's situation, that bank has to send the loan officer going out, go to the
farmer check what is the land, try to assess what is he potentially sowing and then harvesting, the loan
officer has to go back, think about it, what is the credit we can give it to him and so on, and what we
do is we actually can automate most of that kind of analysis via satellite data. So again, we create the
fit with new technologies on what the bank needs to know to give out the loan to farmer in a
sustainable way.
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Professor: So, can you just illustrate it with how the satellite imagery comes into the picture here and
then throughout the loan process, including decision to whether they should actually give the loan
and what is the amount that should be given? How does this intelligence help?
Roger: Every client we see, we see our client from a decision-making challenge perspective. So, we
would really interact with our clients and say, look, what are the specific decision-making challenge
that you have to actually perform? So, and the first one in our process is, okay, do I give out the loan
or not? Second one, how high should that loan be? What is the collateral behind it? Third one is then,
Oh, I need to make sure do I need to take action? Do I need to control him? So, I need to understand
whether he actually has been sowing something and there is something growing, and the farm is not
using the money elsewhere. Then, I also need to send when do I need to collect the money, given that
the farmer has actually harvested, then hopefully, so sold it to somebody. And what we do is we take
satellite data today to answer all those questions without the officer of the bank being required to
actually go to the farmer and double check on these kinds of things. So, finally we reduced transaction
costs, and therefore, improve financial inclusion because all we do is reducing the cost of finance.
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Professor: So, I am just thinking that every business exists because it creates some value. And the
second part is once you have created value and need to appropriate some of it, obviously some of it
goes to the customers and other stakeholders in the system. So, what is really the value creation?
One, with this case you are actually illustrating the fact that you can reduce the cost and transaction
cost. What about opportunities where you actually reduce the risks for the organization? What about
other opportunities where you can actually increase the value that the customer can get client
organization can get?
Roger: See, well, in the case of banks, we are primarily looking at reducing risks and reducing
transaction costs, but we also serve governments directly or insurance companies where we actually
help the insurance companies to again assess the risks better when we see that in some areas, the
harvest is not as planned, we can signal like an alarm to the insurance company or not only insurance
company, but also the local organizations on the ground to say, here let's do more irrigation, even we
have a two or three or five weeks weather forecast and we have soil moisture on the ground as well
where we collect data, given the same or combined with the satellite data we have, we again, define
decision models for different groups. So, from the insurance company to the government to let us say
on the ground supporting organizations, NGOs, and helping each of these organizations making better
decisions. But basically, using the same set of data several times. So, we really add value to data that
we put it into context into a specific decision context and help each individual decision maker just to
see what he or she needs to actually see and understand to make a better decision for whatever she
or he prefer and paid for.
Professor: So, wonderful. This is basically the solution or the offering for the customer, the client
organization. And this is typically the context is B2B, a bank or insurance company, could be
infrastructure company or the government.
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Professor: It is pleasure to introduce and welcome Manoj. Manoj heads a very unique organization
Nandi Foundation and we are going to discuss Services Marketing in the context of a foundation, which
works for really a very unique group of, sort of, beneficiaries or people who would not be normally
addressed by either sometimes the government, sometimes even the most of the large commercial
organizations.
So, I am requesting Manoj to basically introduce the kind of services Nandi Foundation gets involved
in.
Manoj: Thank you Professor Shainesh. It is absolute pleasure and privilege to come to IIM Bangalore
and I want to commend you for this fascinating MOOC the initiative that you have done, which has
caught up very well. I am someone who believes at one-point education should be offered as much as
possible free of cost. And this itself is an interesting case of Service Marketing done.
Professor: Absolutely, yeah.
Manoj: So, congratulations and happy to know about it. So, Nandi Foundation, as you said, we had
not only a unique existence where the Chief Minister asked business leaders to set up Nandi and run
it as a public charitable trust. What was also interesting is the focus was can a nonprofit carry out
service delivery of very large and important programs like basic services, which the government failed
to do, that was the objective. And over the last 20 years that I have been running it, I have been from
the beginning managing this entity and incredibly lucky and blessed. I should tell you that we have
looked at three areas of marketing, services marketing.
One, for the absolute poor. Absolute poor includes very poor children who are likely to drop out of
school or unemployed youth, such categories of population we offer services free of cost. There is a
whole challenge somebody has to pay the bill. So, in our model, it is the government who typically
pays the bill, or it could be corporate's or donors. The second category is where people are already
used to paying for the service like drinking water. But it is not efficient, it is not good quality, and it is
not reliable. So, we come in and offer that as a social business that is challenge of how do you price,
how do you communicate it, and that becomes the second category. I call it essential services for low
income, middle income families. The third area that we enter in is the produce is by poor people like
small farmers, but the marketing is done for niche premium customers in cities including India and
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abroad. I do the famous, now famous araku coffee, which we sell in Paris, which has done this way,
what we do not do and probably don't intended to do is the marketing, which is in the grocery stores,
Kirana stores, supermarkets, what I call is general consumer good. So, all of these three out of four,
we have few lessons to share and we have learned the hard way, and we are glad because we now
touch close to 7 million customers...
Professor: Customers.
Manoj: All over India. And we are in around 15 States. So, it is good.
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Professor: I think drawing up on your experience of the last two decades across these three services,
how do you conceive them? How do you develop these services? And the second part is once you
have created those services, how do you make sure that delivered, they are executed? And there is
sort of a quality control across the centers that you offer these services?
Manoj: So, fundamentally we have what I call three principles of figuring out what services to conceive
in the first place, how to conceive? One is what we call really relying on primary data. So, we even
carry out large scale surveys. Yes. So, we did a very large-scale survey on the status of teenage girls in
India. What does it mean to be a girl in India? We just launched it. It is called the teenage girls survey.
We call it the tag survey. Tagging girls. We did one on hunger and malnutrition. We call it the Hungama.
So, different primary data collection gives us very extensive ones, gives us insight into what is not yet
captured in the market in secondary research. So, that gives an idea then we revisit it, meet experts,
analyze the data, I should tell you that the Hungama report entire data, which was a tome of work
because it was the largest survey, which ever done interviewing mothers across India, you know, more
than a 100,000 mothers were interviewed at length. That entire raw data was analyzed and made
sense by a certain professor Abhijit Banerjee whom I am very happy to say won the Nobel Prize for
Economics, yesterday. So, he spent time on it. So, it is that level of caliber people that we involve
making sense to us that what does this raw data tell and then we conceive produced, that is one, our
products or services.
The second is we tell people that, let us go to governments and politicians. I talk to them. Trust me,
however, we like to abuse politicians. I am someone who immensely respects anybody who has won
elections in India because they have to have an extraordinary ear to the ground. They have to be
constantly listening to constituencies. So, we engage in conversations with them. And that gives
tremendous insight on what are the gaps in the market.
Third, of course, along with that, like government and politicians, we also have, we have 6,000
employees all over India and they are all on the ground. They are constantly encouraged to give us
intelligence, what is going on. I will not be exaggerating, if I say that very often, my teams can tell you
who wins the next election because they're so close in touch at everyday proximity that they have so
much data to mine and tell us.
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So, a combination of all this allows us to figure out, okay, this is a need, which nobody is able to meet
then, we put together a team and say can we find a solution and we then search world over, find the
solution, conceive it in to a program or a service or a produced product, and then we offer it. So, that
is broadly the DNA of how we arrive at this.
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Professor: It is my pleasure to welcome and introduce Rakesh. Rakesh Rajora is the head of
transformation at HSBC, and he is a veteran from the industry, started his career after graduating from
IIM Bangalore in 1995. So, almost 25 years of industry experience. First started with Suzuki, Maruti
Suzuki, then worked with Accenture, GE, JP Morgan, Deutsche bank. And now, he is currently heading
this role on transformation at HSBC. So, what I am going to do is really ask him a few questions, which
are very broad in terms of financial services and starting with what are some of the opportunities in
the whole transformation that is happening in the financial services sector?
Rakesh: Yeah, very thanks Shainesh. So, I think some of the patterns and some of the opportunities
include one, access to capital. As you know that what has happened is, we heard about, what do you
call bottom of the pyramid construct? So today, the capital is accessible to people and banks are one
of the key vehicles, but the other vehicles, you talk about microfinance, you talk about multiple
vehicles and as an economy, every economy is getting access to capital across the range of the
pyramids. And most of the bottom of the that is one.
Second, I think while banks may not be the early adopters of technology, as you say, as you realize
that we deal with people's money and they are regulators, it is a heavily regulated industry. However,
banks have caught up on the FinTech bit. So, if you look at the Blockchain, if you look at Machine
Learning, Artificial Intelligence, RPA, banks are the first one to take up, that second headwind.
Third opportunity is in terms of positioning. I think banks are looking at making sure that the position
on a specific market segment unlike before where you can be just a world's local bank, but I think the
definitions are changing, you need to pick a product, market, and be very good at it. So, I think these
are three, four key opportunities in the banking which I see.
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Professor: It is good for the banks. It's good for the financial services sector, but you're also
saying it's good for the consumers because consumers have a lot more choice, there is a lot
of convenience today when we think about banking, we really don't talk about going to the
branch. So, how has that impacted really from a financial service providers perspective, the
attracting, the experience of the customer.
Rakesh: And I am glad you said that. And as you are talking, I was thinking because Shainesh
we used to call front office and back office in a bank. And now, somebody told me yesterday
over dinner, there's no a front office in a bank. The only front office is where the receptionist
sits, everything else is a bank, everything is virtual. How often do you go to a bank, when was
he went to a bank, I mean never been a bank for last 25 years. So, one is, in terms of consumer
one, consumers are into big time into what is called experience economy, and you are as good
as your last experience. So, consumers have a lot more choice as you said. Second is, thanks
to the new patterns of ALI-PAY or PAYTM, there are multiple flood gates so which people can
access the capital, and I think what also is changing is that consumers are not only having
choices, they have also social media. So, your experience gets on the front page in couple of
hours. So, if you have a bad transaction, if you do something messy, it is out there in terms of
reputational risk of an institution. So yes, consumers are increasingly defining the way we
operate as an institution.

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MK103x – Services Marketing: Concepts &

Nature and characteristics of services. Normally, we use four characteristics of services to

Professor: It is pleasure to welcome Roger Moser. Roger is a Professor at Macquarie University

Professor: Absolutely, yeah.

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