Unit V: Delivering, Pricing and Managing Service Promise

Delivering, Pricing, and Managing Service Promise

In the service industry, businesses must ensure that they deliver high-quality services, price them appropriately, and manage customer expectations effectively. Let’s explore each aspect in detail:

Delivering Services

Delivering services is different from delivering physical goods. It requires managing both employees and customers since services are intangible and depend on human interaction.

Role of Employees in Service Delivery

Employees play a crucial role in providing a high-quality service experience. They act as the face of the company and directly influence customer satisfaction.

Key Responsibilities of Employees in Service Delivery:

• Customer Interaction – Employees communicate with customers, understand their needs, and offer solutions. Example: A bank teller assisting customers in withdrawing cash or solving account-related issues.
• Service Execution – Employees ensure that services are delivered as promised. Example: A chef in a restaurant preparing food according to customer preferences.
• Problem Solving – Employees handle complaints and resolve issues quickly. Example: A hotel receptionist upgrading a customer’s room due to a booking error.
• Emotional Connection – Employees create positive relationships with customers. Example: A flight attendant offering a warm greeting and ensuring passenger comfort.

Role of Customers in Service Delivery

Customers are active participants in the service process, and their involvement affects the overall service experience.

Ways Customers Influence Service Delivery:

• Providing Information – Customers must clearly communicate their needs for better service. Example: A patient explaining symptoms to a doctor for an accurate diagnosis.
• Following Instructions – Customers need to follow guidelines for a smooth experience. Example: Passengers arriving on time for a flight.
• Self-Service Options – Many businesses offer self-service to improve efficiency. Example: Customers using self-checkout kiosks in supermarkets.
• Word of Mouth & Feedback – Customers influence other potential buyers by sharing their experiences. Example: Writing a positive or negative review on Google after visiting a restaurant.

Demand and Capacity Management

Service businesses must balance customer demand with service capacity to avoid overbooking, long wait times, or underutilization of resources.

Managing Demand in Services

Since services cannot be stored like products, businesses must use different strategies to manage fluctuating demand.

Key Strategies to Manage Demand:

• Dynamic Pricing – Adjusting prices based on demand levels. Example: Airlines increase ticket prices during holiday seasons.
• Promotions & Discounts – Encouraging demand during low-traffic periods. Example: Restaurants offering happy hour discounts to attract customers in the evening.
• Appointment Scheduling – Controlling demand by requiring pre-booking. Example: A doctor’s clinic requiring patients to book an appointment in advance.
• Queue Management – Using technology to manage waiting times. Example: Banks providing token numbers to serve customers efficiently.

Managing Capacity in Services

Capacity refers to the maximum service level a business can provide at any given time.

Key Strategies to Manage Capacity

• Flexible Workforce – Hiring part-time or temporary staff during peak demand. Example: E-commerce companies hiring additional delivery personnel during festive sales.
• Technology & Automation – Using self-service options to increase efficiency. Example: ATMs reducing customer dependency on bank employees.
• Customer Participation – Encouraging customers to perform tasks themselves. Example: Online check-in for flights reduces airport congestion.
• Reservations & Pre-Bookings – Limiting capacity by allowing only pre-booked services. Example: Hotels requiring advance booking to manage occupancy levels.

In Short, Delivering services effectively requires managing both employees and customers, while demand and capacity management ensures smooth service delivery. By using the right strategies, businesses can enhance customer satisfaction and maintain profitability.

Managing Service Promise

Managing a service promise means ensuring that customers receive the value and experience they expect from a service. Businesses must focus on pricing strategies, advertising, personal selling, sales promotion, publicity, and public relations to maintain trust and attract customers.

Pricing of Services

Pricing services is more complex than pricing physical goods because services are intangible, perishable, and variable in quality.

Pricing Considerations in Services

Businesses must consider several factors when setting service prices:

• Cost of Service Delivery – Includes labor, equipment, and infrastructure costs. Example: A spa considers the cost of therapists, essential oils, and rent before setting service prices.
• Value Perception – Customers judge service pricing based on perceived benefits. Example: A luxury hotel charges higher rates due to premium amenities and personalized service.
• Demand & Supply – Prices fluctuate based on market demand. Example: Airlines increase ticket prices during the holiday season.
• Competitor Pricing – Businesses set prices based on competitors’ rates. Example: A telecom company pricing its plans competitively to attract more users.
• Time & Location – Service prices vary based on location and time. Example: A taxi service charges higher fares during peak hours.

Pricing Strategies in Services

• Cost-Based Pricing – Setting a price based on total costs plus a profit margin. Example: A law firm charging clients based on the number of hours spent on a case.
• Value-Based Pricing – Pricing according to the perceived value by customers. Example: A high-end salon charging more due to its brand reputation.
• Competition-Based Pricing – Setting prices based on competitors' rates. Example: A gym lowering membership fees to match a nearby competitor.
• Dynamic Pricing – Adjusting prices based on demand. Example: Uber charging surge pricing during high demand.
• Bundle Pricing – Offering multiple services at a discounted rate. Example: A hotel providing a "stay + breakfast + spa" package.

Role of Advertising in Service Marketing

Advertising is crucial for promoting services, creating awareness, and influencing customer decisions. Since services are intangible, effective advertising helps convey their benefits.

Types of Advertising in Services

• Television & Radio Ads – Used for mass reach. Example: Insurance companies using TV ads to build brand trust.
• Social Media Ads – Targeted promotions on Facebook, Instagram, etc. Example: Online coaching platforms using Facebook ads to attract students.
• Print Advertising – Newspapers, magazines, and billboards. Example: A hospital promoting its new facility in a local newspaper.
• Online & Search Engine Ads – Google Ads, banners, and pop-ups. Example: A digital marketing agency running Google Ads for lead generation.

Personal Selling in Services

Personal selling involves direct interaction between a sales representative and a potential customer. It helps in building relationships and handling customer concerns effectively.

Importance of Personal Selling in Services

• Customized Solutions – Tailoring services to customer needs. Example: A financial advisor suggesting an investment plan based on client goals.
• Building Trust – Personal interaction increases credibility. Example: A real estate agent explaining property details in person.
• High-Involvement Services – Necessary for complex services. Example: A travel agent discussing itinerary options for an international trip.

Sales Promotion in Services

Sales promotion refers to short-term incentives to encourage service purchases.

Types of Sales Promotion in Services

• Discounts & Coupons – Attract customers with special offers. Example: A gym offering a 10% discount on yearly memberships.
• Free Trials & Samples – Let customers experience the service before buying. Example: A streaming platform offering a 1-month free trial.
• Loyalty Programs – Rewarding repeat customers. Example: Airlines giving frequent flyer miles for every trip.
• Limited-Time Offers – Creating urgency. Example: A hotel giving early-bird discounts on vacation bookings.

Publicity in Service Marketing

Publicity is free media coverage that influences public perception. Unlike advertising, businesses don’t control publicity directly.

Examples of Publicity in Services:

• News Coverage – Positive or negative media reports. Example: A hospital receiving media attention for a successful complex surgery.
• Customer Reviews & Testimonials – Word-of-mouth marketing. Example: A hotel getting positive reviews on TripAdvisor, leading to more bookings.
• Social Media Virality – Services going viral due to customer experiences. Example: A restaurant trending on social media for a unique dining experience.

Public Relations (PR) in Services

Public relations (PR) involves maintaining a positive image through media, events, and corporate communication.

Key PR Strategies in Services:

• Press Releases – Official statements to the media. Example: A university announcing a new scholarship program.
• Corporate Social Responsibility (CSR) Initiatives – Enhancing brand reputation. Example: A hotel chain planting trees for every booking made.
• Influencer & Blogger Outreach – Partnering with social media influencers. Example: A spa collaborating with a beauty blogger to promote its services.
• Community Engagement – Sponsoring local events and charities. Example: A bank organizing financial literacy workshops.

In Short, Managing a service promise requires a strategic approach to pricing, advertising, personal selling, sales promotions, publicity, and PR. A well-planned strategy ensures customer trust, brand loyalty, and long-term success in the service industry.