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MM05

Marketing of Services

(For CNM Cases)

Assignment – I

Assignment Code: 2016MM05A1                                                                Last Date of Submission: 30^th April 2016

                                                                                                                                  Maximum Marks: 100

Attempt all the questions.  All the questions are compulsory and carry equal marks.

Section-A       

1.                  Customers today have greater expectations from services, making the job of service marketers even more challenging.  Comment on the statement.

2.                  What is the basis of classifying service on the basis of consumer purchase effort?

3.                  What are different ways in which services are classified?

4.                                          a.         Quality of service is a fluid. What measures should a marketer take to consistently                       Offer good quality service?

b.                              What is the Gaps model of service Quality?                                                                     (10+10)

Section-B

Case Study: Too Much, Too Little ?

Maharshi Dayanand Saraswati University at Ajmer is the first university in the country to have a Centre for Entrepreneurship and Small Business Management to further entrepreneurial climate and support Small business. Management to further entrepreneurial climate and support, small business, especially in its vicinity. Identitying with the needs of the immediate community and local industry is a top priority for the university. The centre is created especially for this purpose.

Apart from curriculum interventions, instructions and research, the centre will organize short-term programmes of one day to one week in duration, along with medium (one week to six weeks) and long-term (more than six weeks) management training programmes for the benefit of the small, medium and micro industry. Such programmes, organized throughout the year, would be the main products of the centre.

To begin with Dr. Chowdhary, the Deputy Director of the centre is planning to launch three 72 hour training programmes, spread over two weeks. These are Certified Quality Manager (CQM) programme, Certified Quality Engineer (CQE), and Certified Computer Accountant (CCA) programmes. The first two are also conducted at a premier training institute in the neighbouring capital city of Jaipur.

Dr. Chowdhary himself had been invited faculty for these programmes. Of late, the institute has ceased to offer the CQE programme among the small and medium enterprises in the interiors of the state of Rajasthan and elsewhere.  Whereas, the training institute at Jaipur had always targeted large industry employees for its programmes.

The centre is contemplating launching these programmes in the latter quarter of the year and first quarter of the next year. Dr. Chowdhary’s problem is the pricing of his products. He understands that, one, his targetted audience is small, medium and micro industry, whose paying capacity is less and, two, the centre is part of a public university whose objective is to further learning at an affordable cost. On the other hand, the centre is created with a clear dictum that there will be no funding for recurring expenditures by the state and the university will have to generate its own resources to fund such expenditures. Experience has also suggested that subsidized programmes conducted for social good are not taken seriously. The experts at the Ministry of small scale Industry of the Central government, which has funded the capital budget of the centre, insist that the centre should charge a fee for such programmes and that the same should be driven by market forces of supply and demand. They believe that revenue will depend on the demand of such a programme, and to have a consistent demand, to sustain the operations of the centre it will have to offer quality training products.

The training institute, targeting the employees and sponsored participants from larger industry, priced its products CQM and CQE at Rs. 10,000 and Rs.8000 each. The participants were expected to reside on the campus for the two-week duration and there was an extra charge of Rs. 4000 for residential facilities. This included air-conditioned lodging on a twin sharing basis, and meals in the institute mess.

Dr. Chowdhary knows that his brand, being a public university, is stronger than that of the institute. Also that he has a lot of university infrastructure at his disposal, viz., the training rooms, the university guest house, computers and other equipment. He understands that he can save on the participants’ living costs. The university guest house has air-cooled rooms, and only a few air-conditioned accommodations, both of which are priced extremely competitively as compared to the market rates. The university guest house is good and the occupancy is generally low. Thus a better capacity untilisation is possible with launch of such programmes and the cost of residence charged to the participant is low. The guest house is currently charging its guests a subsidized rate, but the centre would like to charge its participants at least the actual cost of stay, plus a modicum of mark-up – ‘market-driven and self sustenance’ being the key driving forces . He can also reduce costs by using local experts. The university also has a lot of experts, Dr. Chowdhary himself being a key faculty for these programmes. And, this at least would help save on faculty costs, as outside faculty would require travelling and hospitality allowances. University support staff would be available at no, or very little, extra cost.

The financial policy of the centre suggests that at least 30 % of the revenues must flow back to the centre to cover the cost of infrastructure created for the purpose and the overhead costs. The operating costs of programmes shall have to be restricted to around 50 to 65 % of the revenues. It also understood that not all products would return the same margin. Some other programmes will have to be subsidized to benefit the low paying capacity audiences. Some programmes of education for school and college students will also be partially funded from revenues from these programmes.

Dr. Chowdhary understands that he may have to keep his prices low. This is also supported by the logic of penetrating into a low-paying capacity segment. But this means smaller margins per product. It may also be difficult to hike the prices later, as many of the Board of Management would resist, due to public nature of the university and centre. The demand is high and one is tempted to keep price of product on the higher side. But then what about the beneficiaries? Many argue that university is not for making profits ….some surplus, however, is certainly desirable!

5.                  Case Questions:

a.                  What are the key considerations in pricing of training programmes?

b.                  What pricing strategy is more suitable for these? Discuss.

c.                   How should the products of centre for Entrepreneurship and Small Business Management be priced?                                                                                                 (6+7+7)