MARKETING MIX STRATEGY MANAGEMENT FOR
SERVICE COMPANIES
ARIZONA STATE UNIVERSITY
WPC 480 - STRATEGIC MANAGEMENT
SPRING 2024
Introduction:
Marketing activities are one of the m o s t important functions in the business
world. In other words, marketing strategy is the key to achieving the goals of a business
organization. Marketing goods or services does not mean just offering or selling but is
broader than that, a business is said to be successful can be seen from how its marketing
activities. A company will fail if it does not know the right strategy to market its products.
T h e r e f o r e , management is critically required to know the phenomena that occur around
the company, so that it can anticipate quickly and precisely. Importance
Marketing causes marketers to continue to try to manage marketing strategies that are right
for the company in meeting market needs and achieving company goals.
Likewise for companies engaged in services. The dynamics that occur in the service
sector can be seen from the development of various service industries such as banking,
insurance, aviation, and professional service companies such as consulting firms,
accountants and lawyers. An important implication of this phenomenon is the higher level of
competition, so that service marketing management is needed that is different from the
marketing of goods that has been known so far. For this reason, companies must be able to
think about what actions should be taken in an effort to maintain company stability.
Companies that run modern marketing need more than just developing products with good
quality, or providing attractive prices and affordable by target customers (target market).
Thus, there are many aspects that must be considered by the company in order to survive
and win the competition, for which the company is required to be able to determine the right
marketing strategy, especially with regard to marketing mix strategy management.
Organizations in this business environment no longer only think about how to
produce good services, but what must be done is how to create value and provide benefits
for consumer needs and know w h a t competitors have done. All activities must be
predicted precisely so that the strategy that will be implemented by the company can be in
accordance with the company's objectives and can meet consumer needs and be able to
compete with companies engaged in the same field.
In this case the company must have a strategy to market its products. The marketing
activities of a company must be able to provide solutions to consumers to meet their needs.
It can be said here that the purpose of marketing is to understand the wants and needs of
consumers so that the goods or services produced can sell themselves. So the activity or
exchange process must be managed properly by marketers with their organization in order to
generate income for themselves and satisfaction for others. Implementing the marketing
concept is not easy because the company will be faced with many target markets and
competitors. Therefore, the company must have a marketing plan, the right thoughts and
actions are expected to help the company solve this problem, because the activities carried
out by the company are not spontaneous but gradual. Marketing management best manages
and develops this task by conducting marketing research, marketing implementation, and
marketing supervision. These activities can result in new products and the development of
existing products, as well as create the possibility of product mix or product diversification,
in meeting market needs.
The importance of marketing in society is also reflected in every community life that
cannot be separated from existing marketing activities. In addition, marketing always
encourages research in an effort to meet the needs of society. Like manufacturing
companies, service companies also use marketing activities to position themselves in their
chosen target markets. However, because the characteristics of services are different from
goods products, marketing services requires an additional approach. T he r e f o r e , service
providers must interact effectively to create superior value and benefits when the service is
provided. This is due to the characteristics of services that are different from goods where
production operations to consumption are a series that cannot be separated and include
consumers and service providers directly, in other words, there is direct interaction between
the two. According to Kotler (2005: 12) the main characteristics of services that greatly
affect marketing design for these services are intangibility, inseparability, variability, and
perishability. Therefore, for marketing services there is a marketing mix which includes:
product (product), price (price), place (place), promotion (promotion), people (people),
process (process), customer service (customer service). Each of these elements of the
marketing mix interacts with each other and they must be developed by the company, so that
they support each other in achieving the possibility of a good match.
PT. BUMI PUTERA Joint Life Insurance as a business organization unit that is in
direct contact with consumers, marketing management is the party that has the most
important role to play must be able to translate the value desired by consumers. Marketing
management is also tasked with helping this business organization to achieve the goals of
the products the company produces. In addition, with various achievements obtained such as
Top Brand in the Life Insurance category by Frontier Consulting Group (from 2000-2007 in
a row), Golden Brand by Indonesia Best Brand Award (2006) and several other
achievements, Bumiputera must be able to maintain its position as the leading insurance in
Indonesia. This results in the company being required to be able to optimize its strengths and
opportunities and minimize weaknesses.
Therefore, in marketing its products Bumiputera needs a suitable marketing strategy.
Implementation of the service marketing mix strategy is not enough without being followed
by continuous supervision. Through the development and management of marketing
strategies, consumers are understood as central and not as objects. As a marketer, the
company must be able to deliver its products effectively, especially with regard to delivering
benefits or benefits of products or services clearly, on target and with the right intensity.
This should be the main focus of attention, considering that the benefits of the services
offered cannot be directly seen by potential customers. Understanding the position of a
particular service and the position of competitors is an alternative that can help find possible
sources of competitive advantage. The company must have clear goals in running its
business so that in the process of determining the strategy to be implemented it is able to fill
market needs.
Problem Formulation:
Based on the above background, the problem formulations in this study are: How to
manage the marketing mix strategy for AJB Bumiputera Insurance service companies?
1. Definition of Strategy
Strategy comes from the Greek "strategos" which means general. In its development, the
concept of strategy continues to grow. Here is the definition of strategy: Strategy according
to Jatmiko (2003: 4) is a way in which the organization will achieve its goals in accordance
with opportunities and threats in the external environment and the company's internal
resources and capabilities. According to Umar (2001: 31) Strategy is an action that is
incremental (always increasing) and continuous, and is carried out based on the perspective
of what customers expect in the future. Thus, strategy almost always starts from what can
happen and not from what happens. The speed of new market innovations and changing
consumer patterns require core competencies. Companies need to look for core
competencies in the business they do.
From the above definition, it can be concluded that strategy is an organizational tool
used to achieve its goals, which can be interpreted as a general program of action and
commitment to understanding and placing products towards achieving overall goals based
on internal strengths and existing opportunities.
2. Definition of Strategy Management:
Strategic management is a process by which top management determines the long-term
direction and performance or achievement of the organization through careful formulation,
proper implementation, and continuous evaluation of the strategies that have been set,
Jatmiko (2003: 4).
According to Hunger and Wheelen (2003:4) "strategic management is a series of
managerial decisions and actions that determine the company's performance in the long
term".
According to Muhammad (2002: 6) Strategic management can be interpreted as a
managerial effort to develop the company's strengths to exploit business opportunities that
arise in order to achieve the company's goals that have been set in accordance with the
predetermined mission.
So strategic management is a collection of actions taken by an organization to achieve
goals based on existing strategies.
3. Strategy Hierarchy
There are three levels of strategy according to David Hunger and Thomas L. Wheelen
(2003: 24), namely:
a. Corporate Strategy that describes the overall direction of the company regarding the
company's general attitude towards the direction of growth and management of
various businesses and product lines to achieve a balanced portfolio of products and
services.
b. Business strategy, usually developed at the division level, emphasizes improving the
competitive position of the company's goods or services in the specific industry or
market segment served by the division. Business (competitive) strategy is one of
overall cost leadership, or differentiation.
c. Functional strategy emphasizes primarily on maximizing the company's resources.
Within the boundaries of the company and the business strategies around them,
functional departments develop strategies to pool together their various activities and
competencies to improve performance.
4. Benefits of Strategic Management:
There are several benefits in strategic management according to Kusnadi (2000: 38),
namely as follows:
a. Strategy formulation activities will affect the company's ability to solve the problems
faced by the company.
b. Strategic decisions are based on the best possible group of alternatives.
c. Employee involvement in strategy formulation will increase productivity.
d. Gaps and overlaps in activities between individuals and groups
will be anticipated because there is an explanation of the differences in roles.
e. The active participation of all members will be maintained and the working atmosphere
will improve.
f. Decision making will be more effective with management
strategy.
g. The implementation of strategic management makes the management of the company
more aware of the threats coming from outside the company.
5. Strategic Management Model:
Strategic management is not something that can be formulated directly. Strategic
management is organized on the basis of systematic steps. The following are the steps in
discussing a strategy called the strategic management model according to Fred R. David in
Umar (2001: 23), namely:
a. Vision, mission and philosophy
The vision owned by a company is an ideal about the future state that is desired to be
realized by the entire company, starting from the highest level to the lowest. The future
ideals that exist in the minds of the founders who roughly represent all members of the
company are called vision. The next step is to create a mission. The mission is a written
description of the vision so that the vision becomes easily understandable or clear to the
entire company. Philosophy is also often called Credo. The values contained in the
philosophy must be embedded or reflected in the behavior of all members of the
organization.
b. External and internal environment analysis
The realization of the company's mission will be difficult if the company does not
interact with its external environment. Therefore, the act of knowing and analyzing the
external environment is very important because in essence the conditions of the external
environment are beyond the control of the organization. In addition to understanding
external conditions, a broad and in-depth understanding of the company's internal
environment also needs to be done. Based on this understanding of the internal
environment, the weaknesses and strengths of the company should be known. In
addition to knowing the strengths and weaknesses, the company needs to look at the
opportunities that exist and take advantage of them so that the company has a
competitive advantage.
c. Analysis of strategy options
The form of strategy varies between industries, between companies, and even between
situations. However, there are a number of well-known strategies, which can be applied
to a wide range of industries and company sizes. These strategies are categorized as
generic strategies. From the various strategies in this generic strategy group, one or a
combination of grand strategies will be selected using certain methods.
d. Long-term goals
Achieving company goals is a continuous process that requires phasing. The creation of
long-term goals refers to the master strategy that has been set previously.
e. Functional strategy
An important step in the implementation of the master strategy is to divide it into
various short-term goals on an ongoing basis by taking into account the priority scale
and can be measured. These short-term goals should refer to functional strategies that
are operational in nature. Functional strategies guide activities to be consistent not only
with the main strategy, but also with strategies in other functional areas. In a
conventional corporate organization, the main functional areas are finance, human
resources, production and operations, and marketing.
f. Program, implementation, control, and evaluation
In order for the goals to be achieved to be realized with the strategy that has been set,
the strategy needs to be followed up with implementation (action). Implementation will
not be effective if it is not preceded by planning. Good planning at least contains the
principles of achieving goals, is realistic and reasonable, efficient and is a reflection of
company strategy and policy. Control and supervision are intended to further ensure that
all activities carried out by the company should be based on an agreed plan, so that the
target does not deviate. If the results of job evaluation show that there is an X factor that
causes deviations and is indeed caused by wrong assumptions or by other things that are
uncontrollable, the plan needs to be revised.
6. Business Environment Model
According to Umar (2001: 76) the business environment can be divided into two
environments, namely:
a. External environment
The external environment is divided into two categories, namely:
1) The remote environment consists of factors that are essentially outside and independent
of the company. The main factors commonly considered are: Political, Economic, Social,
Technological factors; often abbreviated as (PEST). This distant environment provides a
great opportunity for the company to progress, while at the same time it can be an
obstacle and threat to progress.
2) The industrial environment is more about the competitive aspect in which the company's
business is located. As a result, money factors affecting the competitive conditions, such
as threats and strengths possessed by the company need to be analyzed. These aspects
are:
a) The threat of new entrants.
b) Competition among companies in the industry.
c) Threats from substitute products.
d) Buyers' bargaining power.
e) Bargaining power of suppliers.
f) Influence of other stakeholders' power.
b. Internal environment
The internal environment is the aspects that exist within the company. These aspects
include:
1) Market and marketing aspects
2) Finance and accounting aspects
3) Production-operation aspects
4) HR Aspects
5) Aspects of management information systems
7. Strategy Alternative
There are several alternative strategies in determining the right strategy according t o t h e
consideration of the results of the analysis that has been carried out.
According to Fred R. David in Umar (2001: 43) there are four types of generic strategies,
namely:
a. Vertical integration strategies
Forward Integration, Backward Integration, and Horizontal Integration, are three
kinds of strategies included in the Integration Strategy group. This strategy calls for the
company to exercise more control over distributors, suppliers, and/or competitors either
through mergers, acquisitions, or creating its own company. An explanation of the three
strategies is provided below:
1) Forward Integration Strategy.
This strategy requires the company to have a great ability to control their distributors
or retailers, if necessary by owning them. This can be done if the company has a lot of
problems with the distribution of their goods/services, thus disrupting the stability of
production, even though the company is able to manage the distribution with its own
resources. Another reason is that the business in question, for example, has good prospects
for entry.
2) Backward Integration Strategy.
It is the company's strategy to increase control over raw materials, especially since
the suppliers are no longer considered profitable for the company. The purpose of this
strategy is to gain ownership and/or increase control over suppliers.
3) Horizontal Integration Strategy.
This strategy is intended for the company to increase control over the company's
competitors even if it has to own them. The goal of this strategy is to gain ownership and/or
increase control of competitors.
b. Intensive strategies
Market penetration, market development, and product development are three
strategies that are grouped into intensive strategies. They are so called because their
implementation requires intensive efforts to improve the competitive position through
existing products. These three intensive strategies are described below:
1) Market Penetration Strategy.
This strategy seeks to increase the market share of a product or service through greater
marketing efforts. The goal of this strategy
is to increase market share with maximum marketing efforts.
2) Market Development strategy.
This strategy aims to introduce existing products or services into geographically new
areas. The aim of this strategy is to increase market share.
3) Product Development Strategy.
This strategy is a strategy that aims to increase sales by improving or modifying existing
products or services. This strategy usually requires extensive and sharp research and
requires considerable costs. The purpose of this strategy is to improve or develop existing
products.
c. Diversification strategies
There are three general types of diversification strategies that have been widely recognized
and implemented, namely:
1) Concentric Diversification Strategy.
This strategy can be implemented by adding new products or services but are still
interconnected. The purpose of this strategy is to create new related products for the same
market. This can be done if competing in an industry with slow growth or decline.
2) Horizontal Diversification Strategy.
This strategy is carried out by adding new, but unrelated products and services to
offer to existing customers. The purpose of this strategy is to add new unrelated products
with the aim of satisfying the same customers. This can be done if the new product can
support the old product, the competition in the old product is fierce and in the mature stage,
the distribution of the new product to customers is smooth, and at a deeper level is that the
sales seasons of the two products are relatively different.
3) Conglomerate Dicersification Strategy.
The strategy of adding unrelated products is called Conglomerate Differentiation.
The purpose of this strategy is to add new unrelated products for different markets. This can
be done if the industry in the sector is saturated, there is an opportunity to own an unrelated
business that is still growing well, and has the resources to enter the new industry.
d. Devensive strategies consist of four strategies, namely:
1) Joint Venture Strategy.
This is a popular strategy, whic h occurs when two or more companies form a
temporary company or consortium for c a p i t a l i z a t i o n purposes. This strategy can It
is considered in the event that a company persists in not wanting to carry the burdens of its
business alone. The aim of this strategy is to merge several companies in the form of a new
company separate from its parent.
2) Retrenchment Strategy.
This strategy can be implemented through the reduction of company costs and assets.
Retrenchment, sometimes referred to as turnaround, is designed to enable the company to
survive in its competitive market. The goal of this strategy is to save costs so that sales or
profits can be maintained by selling some of the company's assets.
3) Divestiture Strategy.
Selling a division or part of the company is called divestiture. A divestiture strategy
is often used in order to raise capital from an investment plan or to follow up on an
acquisition strategy that has been decided for the next process.
4) Liquidation Strategy.
Selling all of the company's assets that can be valued is called liquidation. The
liquidation strategy is an admission of failure. This strategy aims to close the company. This
can be done if the company is no longer viable.
8. Strategy Selection
According to Fred R. David in Umar (2001: 51), the way to determine the main
strategy is to carry out a three-stage framework with a matrix as the analysis model. The
tool or tool in the form of matrices is suitable for all sizes and types of company
organizations, so that the tool can be used to identify, evaluate, and select the most
appropriate strategies. The following are the stages of implementation of the matrices:
a. Stage 1 of the strategy formulation framework consists of three matrices, namely the EFE
Matrix, IFE Matrix, and CP Matrix. These three matrices are also referred to as the Input
Stage, as they are responsible for summarizing the basic information needed to formulate
strategies.
b. Stage 2, referred to as the Matching Stage, focuses on generating alternative strategies
that can be implemented through combining key external and internal factors. The
techniques in stage 2 include TOWS/SWOT Matrix, SPACE Matrix, BCG Matrix, IE
Matrix, and Grand Strategy Matrix.
c. Stage 3, referred to as the Decision Stage, consists of only one technique, the
Quantitative Strategic Planning Matrix. This QSPM uses the input information from
stage 1 to objectively evaluate the alternative strategies from stage 2 that can be
implemented, so that it provides an objective basis for selecting the most appropriate
strategies.
9. Analytical Tools Used
According to Umar (2001: 220) there are several analytical tools used to analyze the
determination of strategies to be clear, among others:
a. External Factor Evaluation (EFE) Matrix
The EFE matrix is used to evaluate the company's external factors. External data is collected
to analyze matters concerning economic, social, cultural, demographic, environmental,
governmental, legal, technological, competition in the industry market in which the
company is located, as well as other relevant external data.
b. Internal Factor Evaluation Matrix (IFE)
The IFE matrix is used to determine the company's internal factors related to strengths and
weaknesses that are considered important. Data and information on the internal aspects of
the company can be extracted from several functional companies, for example from the
aspects of management, finance, human resources, marketing, information systems, and
products / operations.
c. Strategic Position and Action Evaluations (SPACE) Matrix
SPACE Matrix is used to map the company's condition with a model presented using a
cartesian diagram consisting of four quadrants with the same size scale. The framework of
the four quadrants is to show whether the results of the analysis will be indicates the use of
aggressive, conservative, defensive, or competitive strategies for the company. Each of the
axes of the SPACE matrix expresses two dimensions, namely:
1. The internal dimension which consists of financial strength (FS) and
competitive advantage (CA)
2. The external dimension which consists of environmental stability (ES) and
industry strength (IS)
d. TOWS/SWOT Analysis
According to Umar (2003:224) the Threats-Opportunities-Weaknesses- Strengths (TOWS)
matrix is an important matching tool to help managers develop four types of strategies. The
four types of strategies in question are:
1) SO (Strength-Opportunity) Strategy
2) WO (Weakness-Opportunity) Strategy
3) ST (Strength-Threat) Strategy
4) WT (Weakness-Threat) Strategy
e. Quantitative Strategies Planning (QSP) Matrix Analysis
In Umar (2001: 245) conceptually the purpose of QSPM is to determine the relative
attractiveness of the various strategies that have been selected, to determine which strategy
is considered the best to implement.
Marketing
1. Definition of Marketing
It has been explained that marketing is one of the core activities of a company in running
its business. Some experts explain the meaning of marketing as follows:
Kotler (2000: 9) states that Marketing is a social process in which individuals and groups
get what they need and want by creating, offering, and freely exchanging products of value
with other parties.
Marketing is a process of perceiving, understanding, stimulating and satisfying the needs of
specially selected target markets by channeling the resources of an organization for
fulfill these needs. Thus, marketing is the process of aligning the resources of an
organization to the needs of the market, Adrian Payne (2000: 27)
Chandra (2002: 1) Marketing is the process of planning and implementing the
conception, pricing promotion and distribution of ideas, goods and services in order to
satisfy individuals and organizations.
Sofjan Assauri (2004) Marketing as a human activity directed at meeting and
satisfying needs and desires through the exchange process.
Based on the explanation above, it can be concluded that marketing is an activity that
is used as a tool to get the needs and desires of consumers and try to fulfill these needs and
desires.
2. Marketing Strategy
Some definitions of marketing strategy can be explained as follows, namely:
Marketing strategy according to Chandra (2002) Marketing Strategy is a plan that
describes the company's expectations of the impact of various marketing activities or
programs on the demand for its products or product lines in certain target markets.
According to Kotler and Armstrong (2004: 81) Marketing Strategy is a marketing mindset
that will be used by business units to achieve their marketing objectives. The strategy
contains specific strategies for target markets, positioning, marketing mix, and the amount of
marketing expenditure. It can be concluded that marketing strategy is a tool used by
companies in planning the delivery of their products to target markets.
G. Services
1. Definition of Services
Services are any action or performance that one party can offer to another party, which
is basically intangible and does not result in a loss ownership of something. Its production
may or may not be related to physical products, Kotler (2005: 111) Adrian Payne (2000: 8)
Service is an activity that has several elements of intangibility associated with it which
involves several interactions with consumers or with property in their possession, and does
not result in a transfer of ownership. Changes in conditions may occur and service
production may or may not be related to physical products.
From the above understanding, it can be concluded that services are all activities that are
intangible and can satisfy the needs or desires of a person or organization whose production
process involves both parties, namely consumers and service providers directly, in other
words, there is direct interaction between the two.
2. Classification of Services
There are no service products that are completely similar to each other.
Therefore, there are several ways to classify this service product. In Lupiyoadi (2006: 7)
services are classified into two:
a. Based on the level of consumer contact with the service provider is divided into two:
1) High Contact System, which is to receive services consumers must become
part of the system.
2) Low Contact Sytem is that consumers do not need to be part of the system to receive
services.
b. Based on their similarity to manufacturing operations, they are divided into three:
1) Pure Service is a service that is classified as high contact without inventory, or in other
words, very different from manufacturing.
2) Quasimanufacturing Service is a service that is classified as low contact
With consumers, have similarities with manufacturing, and the consumer does not
have to be part of the service production process.
3) Mixed Service is a group of services that are classified as a level of contact
moderate contact that combines some of the properties of pure service and
quasimanufacturing service.
3. Service Characteristics
The extent to which services and goods differ is often argued that services have unique
characteristics that distinguish them from goods or products manufacturing. Here are four
characteristics of services that greatly influence the design of marketing programs according
to Kotler (2005: 112):
a. Intangible: Services are abstract and intangible. Services cannot be seen, felt, heard or
smelled before purchase. To seek reassurance, buyers will look for evidence of the quality of
the service. They will draw conclusions about quality from the places, people, equipment,
communication materials, symbols and prices they see. Therefore, the task of the service
provider is to "manage this evidence" to "realize something intangible".
b. Inseparable: Services are produced and consumed simultaneously. If someone delivers the
service, the provider is part of the service. Since the client is also present when the service is
produced, provider-client interaction is a special feature of service marketing.
c. Varies: Because they depend on who provides them and when and where they are provided,
services vary widely. Service buyers are aware of this variety and often talk to others before
choosing a service provider. Service companies can take three steps in order to control
quality viz:
1) Invest in good employee recruitment and training procedures.
2) Establish the process of service delivery throughout the organization.
3) Monitor customer satisfaction through suggestion and complaint systems, customer
surveys, and comparison shopping.
d. No n-Dura ble : Services cannot be stored. Perishable nature of services
(Such perishability will not be a problem if demand remains smooth. But if demand
fluctuates, service companies face complicated problems.
H. Marketing Mix Strategy for Services
The marketing mix consists of several elements of a marketing program that need to be
considered so that the marketing strategy set can run in accordance with the company's
objectives. The following is the definition of the marketing mix:
According to Rambat Lupiyoadi and A. Hamdani (2006: 70) Marketing Mix is a tool for
marketers consisting of various elements of a marketing program that need to be considered
so that the implementation of marketing and positioning strategies that are determined can
be successful.
According to Kotler (2000: 18) Marketing Mix is a set of marketing tools that
companies use to continuously achieve their marketing objectives in target markets. The
traditional 4P marketing approach works well for goods, but additional elements need to be
considered in service businesses. Booms and Bitner in Kotler (2005:116) propose an
additional 3Ps for service marketing: people, physical evidence, and process.
Meanwhile, in Adrian Payne (2000: 32) Simon Majaro argues that three factors that
determine whether a particular element is included or not in the marketing mix of a service
company are concerned:
1. The level of expenditure on a particular element in the marketing mix, i.e., how
important that element is in the company's overall expenditure.
2. The perceived degree of elasticity in customer responsiveness; for example, in the case
of a monopoly or government agency, prices may be set externally and thus need not be
included in the marketing mix.
3. Responsibility allocation is based on the belief that a well-defined and well-organized
marketing mix requires a clear allocation of responsibilities.
According to Simon, the 4P model is not so strict; an expanded marketing mix is more
appropriate, given the diversity of the service economy which includes service companies as
well as manufacturing companies for whom services are important. This expanded
marketing mix reflects the traditional elements of the marketing mix-product, price,
promotion and place, plus three additional elements namely; people, process, and customer
service. The three additional elements are considered important because:
1. Customer service: There are several reasons for including customer service as an
element of the services marketing mix. These include consumers being more demanding
and requiring higher levels of service, the growing importance of customer service
(partly because competitors view service as a competitive weapon that differentiates
themselves); and the need to build closer and more lasting relationships with customers.
2. People: People are an important element in both the production and delivery of most
services. People are gradually becoming a part of the differentiation by which service
companies try to create additional value and gain a competitive advantage.
3. Process: Process is all the procedures, mechanisms and habits by which a service is
created and delivered to customers, including policy decisions about some customer
involvement and employee discretion issues.
It is also explained in Lupiyoadi and Hamdani (2006: 70) that the marketing mix for
goods products consisting of 4P is different from the service marketing mix, so three more
elements are added: people, process, and customer service. These three things are related to
the nature of services that are different from goods, where the stages of operation to
consumption are a series that cannot be separated and include consumers and service buyers
directly.
Thus the marketing mix strategy for services consists of seven elements, namely:
1. Product
2. Price.
3. Promotion
4. Place
5. People
6. Process
7. Customer service
However, still in Lupiyoadi and Hamdani (2006: 70) in the next explanation the seven
elements above are summarized into five parts, namely:
1. Products
A product is an overall concept of an object or process that provides some value to
consumers. What needs to be considered is that consumers not only buy the physical product
but buy the benefits and value of the product called "the offer". Service organizations
generally offer a series of services. Decisions about the range of products to be offered need
to consider context: First, the positioning strategy (company positioning). Second, the
services offered by competitors.
a. Product Tiers
In Rambat Lupiyoadi and A. Hamdani (2006: 85) propose the concept of Total Product
where a service can be offered consisting of several elements:
1) Core product, is the core function of the product which consists of basic services.
2) Expected product, core product along with purchase decision considerations
minimum purchase that must be fulfilled. Augmented product, area that allows a product
to be differentiated against others. For example: IBM offers "excelent customer
service".
3) Potential products, features and additional benefits that are useful for consumers or may
increase consumer satisfaction. This section can provide advantages to increase
switching costs so that consumers rethink or find it difficult to switch to other service
products.
Three elements other than the core product are potential elements to be used as added
value for consumers so that the product is different from other products.
The discussion about products means that the main focus is quality. For services, quality
is highly dependent on reliability, responsiveness, assurance and capability. Marketers must
be able to develop additional value from their products in addition to their basic features, so
that they can be differentiated and compete with other products, in other words, have their
own image.
b. Brand and Product Differentiation
The three levels beyond the core product of the total product concept indicate the
opportunity to provide added value to consumers. In relation to brands, the problem that
arises is the tendency of consumers to see a well-known brand rather than the main function
of the product. Seeing a situation like this, marketers must be able to popularize their brands
in order to compete in the market. Therefore, branding strategies have an important role in
helping consumers get consistent or uniform service quality. According to Lehmann and
Winer, cited by Lupiyaodi (2001: 75) consumer assessment of the brand (consumer value of
brand) consists of three basic elements, namely: First, the importance of the usage situation.
Second, the effectiveness of the product category in that situation. Third, the relative
effectiveness of the brand in that situation. So, customer value consists of two basic ideas of
value, namely: absolute value, which assumes there are no other competing brands (points 1
and 2) and relative value which includes comparisons with other brands. According to Avijit
Ghosh in Lupiyoadi and Hamdani (2006: 87) there are three types of brands, namely:
1) Manufactured Brands
Created and distributed by the company that makes the product.
2) House Brands
The brand developed by the store where the product is sold.
3) Generic Brands
Products without a specific brand, such as the commodity rice.
The company brand or brand developed by the company that makes the product is the
main type of brand in services. Meanwhile, to become a service that is unique / different
from competitors (differentiated), marketers must be able to develop product surround
brands, namely expected, augmented, and potential products. With this development, it
means that the difference between one product and another can be seen. Perceived service
quality depends more on aspects of reliability, responsiveness, assurance and empathy than
on tangible things. This means that service marketers need to pay increased attention to how
they can differentiate the product scope and enlarge it.
c. Physical Evidence
Is the physical environment where services are created and directly interact with consumers.
There are two types of physical evidence, namely:
1) Essential evidence is the decisions made by service providers regarding the design and
layout of buildings, spaces and others.
2) Peripheral evidence is added value that when standing alone will not mean anything. So
it only functions as a complement, even so its role is very important in the service
production process.
d. Managing the Growth of Service Products (Growth)
A service organization has a range of growth strategy options when making service
production decisions. These growth strategies can be described by a product/market matrix
or Ansoff Matrix.
The product/market matrix contains the service provider's fundamental growth options,
namely:
1) Market Penetration: The market penetration strategy describes how to better improve the
current position in the market. This can be achieved by:
a) More focused segmentation.
b) A clearly defined positioning strategy.
c) Through better application of marketing mix elements.
Market penetration seeks to increase the productivity of marketing mix elements and
increase market share over competitors. Two important aspects of this strategy are:
a) Retaining Customers (customer retention): Aims to retain consumers who already use the
company's services rather than recruiting new customers outside the existing segment.
b) Increase Frequency of Use: Influence consumers to increase the frequency of use.
2) New Product or Service Development: In Lupiyoadi and Hamdani (2006: 90) proposed six
categories of service innovation, namely:
a) Key Innovation: Product development aimed at new markets. This category is very
risky but if successful can be very profitable.
b) Business Start-Up: New and innovative ways to capture the current needs of consumers
to increase the range of options available. Some innovations may span both categories.
c) New Products for the market being served: Allows service providers to make the most
of their customer base and cross-sell other products. Technological changes have
increased opportunities for innovation and creativity. New technology can also create a
market for new services that consumers have never thought would be useful to them.
d) Product line extension: Offering services to consumers with a wider variety of options
within an existing service line. This is a typical innovation for businesses that have
reached the phase of
maturity, which already has a core market segment that it wants to retain.
e) Product Improvement: Improving the appearance (features) of an existing product.
f) Style changes: Development of tangible elements of the service product. For example:
new company image, new cashier uniforms, etc.
3) Market Development:
This is looking for new groups or segments of buyers with existing service offerings. Market
development can be safer when offered to the same consumers in different places. This
strategy has a higher risk than the previous two strategies and requires in-depth research of
the market to be fulfilled appropriately.
4) Diversification (new services for new markets):
Is the r i s k i e s t strategy because the company is not building something new based on the
strengths it already has. Generally practiced by companies that have reached the maturity
phase as the only way to expand. The special feature of services is the role of consumers and
service providers in developing new products.
5). Distribution of Services
The location and distribution channels for delivering services to the target market are two
key decision areas. This has great relevance because services cannot be stored and are
produced and consumed in the same place. Service distribution consists of:
a) Location
According to Lupiyoadi and Hamdani (2006: 92) Location means relating to where
the company should be headquartered and carry out its operations or activities. In this case
there are three types of interactions that affect location, namely:
(1) Consumers come to the service provider (company): If this is the case, location
becomes very important. The company should choose a place close to consumers so that it is
easy to reach, in other words, it must be strategic.
(2) Service providers come to consumers: In this case, location is not very important, but
what must be required is the delivery of services must remain of high quality.
(3) Service providers and consumers do not meet in person: This means that the service
provider and consumer interact through certain means such as telephone, computer, or mail.
In this case, location is not very important as long as the communication between the two
parties is good.
b) Distribution Channels
And their opinion about the distribution channel is that service delivery can also be through
organizations and other people. In the delivery of services, there are three parties involved,
namely:
(1) Service provider
(2) Intermediary
(3) Consumer
Traditionally direct selling is the most suitable distribution method. But companies are
actively looking for other channels that enhance growth and to fill unused capacity.
Distribution channels that can be chosen include:
a) Direct sales
b) Agents or brokers
c) Seller's or buyer's agent/broker
d) Franchises and contracted service delivers
In Lupiyoadi and Hamdani (2006: 94) the approach to channels and how to compare a
company's channels with those of competitors is:
a) Channel participants and their relationships
b) Varied functions that participants perform in using materials and technology
c) The services they create.
In Lupiyoadi and Hamdani (2006: 94) reveal the application of service characteristics to
distribution management as follows:
a) Implications of intangibility on service distribution management: Services are intangible
and therefore more difficult to differentiate. Service providers can use several product
strategies to incorporate tangibility in services. The way the service is offered to
consumers, i.e. the marketing channels through which the service is sold, can provide a
direct and potential basis for making the service tangible. With this, a stronger basis of
differentiation can be created, as consumers are more likely to recognize the service
directly face and directly experience the services provided by the distribution channel.
b) The implications of inseparability on service distribution management: Services do not
exist separately from the service provider, so services and distribution channels become
inseparable. All aspects of distribution that come into contact with consumers are a
reflection of the quality of that service. More important than physical evidence are the
personnel who have direct contact with customers. Contact between customers and
service providers and distribution channels is the same from the consumer's perception.
c) Implications of heterogeneity on service distribution management: Although difficult
standardization of services, the organization tries to achieve quality consistency as much
as possible. Multi-location/multiunit organizations with a franchise system must
streamline management in addition to distribution in order to achieve service
standardization.
d) Non-durable implications for service management: the main implication is that
distribution channels should be designed to maximize service sales during the limited
interaction time with customers. Channels should be designed so that these interactions
can take place as efficiently as possible, even if they have some impact.
2. Price
Price is the amount of money that customers pay for a particular product or service.
Price is also related to revenue and affects supply or marketing channels. However, the most
important thing is that pricing decisions must be consistent with the overall marketing
strategy.
In Kotler (2005: 39) Price is one of the elements of the marketing mix that generates
revenue.
In Tjiptono (2004: 178) Price in the context of service marketing can be defined as the
amount of money (monetary units) and / or other aspects (non-monetary) that contain certain
utilities or uses needed to obtain a service.
Price is the most easily adjustable element of the marketing mix. Pricing in service
companies is a very important aspect, especially providing value to customers. Pricing
activities play an important role in the marketing mix process because pricing is directly
related to the revenue received by the company. Pricing decisions are also so important in
determining how far a service is valued by consumers and also in the process of building an
image.
a) Pricing Objectives
According to Adrian Payne in Lupiyoadi and Hamdani (2006: 100) there are five pricing
objectives, namely:
1) Survive
It is an attempt not to take actions that increase profits when the company is experiencing
unfavorable conditions. This effort is for the sake of the company's survival.
2) Profit Maximization
Pricing to ensure profitability maximization in a given period.
3) Sales Maximization
Pricing to build market share. By selling at a loss initially in an effort to capture a high
market share.
4) Prestige
The purpose of pricing here is to position the company's services as exclusive.
5) ROI
Pricing objectives may be based on achieving desired return on investment (ROI).
b) Factors Affecting Service Pricing
The factors that influence pricing according to Lupiyoadi and Hamdani (2006: 100) are:
1) Elasticity of demand
2) Cost structure
3) Competition
4) Positioning of the services offered
5) Goals that the company wants to achieve
6) Service life cycle
7) Resources used
8) Economic conditions
c) Pricing Strategies and Tactics
1) Pricing Strategy
There are several strategies and tactics in service pricing:
(a) Cost-based strategy
(b) Mark-up pricing or cost-plus pricing
(c) Target return pricing
2) Market-based strategy
(a) Floor pricing
(b) Penetration pricing planning
(c) parity pricing (going rate)
(d) premium pricing (Premium pricing [skimming])
(e) Price leadership pricing
(f) Stay out pricing
(g) Bundle pricing
(h) Determination pricing based on value [differential] (Value-vased
[differential] pricing)
(i) Gross-benefit pricing
3) Pricing Tactics
There are various tactics used by service companies to set prices for services to consumers,
which consist of:
(a) Cost-plus pricing is done by marking up the price by a certain percentage of the total
cost.
(b) Pricing based on rate of return
pricing), determined to achieve a targeted return on investment (ROI) or return on
assets (ROA).
(c) Competitive parity pricing, determined based on the price set by the market leader.
Similar to this tactic is parity pricing (going rate), where the price is set equal to the
average price set by the market.
(d) Loss leading pricing, where the initial price is set at a low price - sometimes even at a
loss - with the short-term goal of market position or increasing market share. Similar to
this tactic is stay out pricing, which is low pricing (below BEP) with the aim of
reducing the entry rate of new competitors.
(e) Value-based pricing, determined on the basis of the value of services perceived by the
consumer segment certain. This pricing is called a market-driven approach, where
actions are taken to strengthen the positioning of services and benefits that consumers
receive from these services.
(f) Relationship pricing, based on considerations of all money services provided to
consumers and on the potential for future profits over a period of time, is a market-
oriented approach to value-based pricing.
(g) Flexible pricing, service pricing is flexible, influenced by the service business that is
engaged in.
(h) Discount pricing, a pricing tactic below the base price. Therefore, service companies
need the services of an agent, or broker where they need to earn a commission.
(i) Diversionary pricing, a differentiating technique in setting a low price on core services,
while other services that coincide with the consumption of these services are made
standard or higher.
(j) Guarantee pricing, the service provider provides a guarantee of its product but at a
relatively h i g h e r price.
(k) Pricing by maintaining high prices (High price maintenance pricing), service
providers dare to give high prices, because if prices fall, then reputation will fall.
(l) Peak load pricing, where the service provider charges more during peak times due to
the higher costs incurred by the producer during peak times compared to off-peak times.
(m) Offset pricing, pricing where some components of the price are "hidden". T h e price
listed is not the final price to be paid by the consumer.
(n) First-degree price discrimination, the technique of selling each unit of a service
product separately and charging the highest possible price for each service offered.
(o) Second-degree price discrimination, charging a uniform price for a service measured in
a certain unit quantity and a lower (or higher) price for each additional unit quantity
within the same consumption period and so on.
(p) Third-degree price discrimination, charging different prices for the same service in
different markets until the marginal revenue of the last service sold in each different
market equals the marginal cost of that service.
(q) Two-part tariff, a pricing practice in which the consumer pays an initial fee for the right
to consume the service and also pays a usage fee or price for each service.
(r) Bundling pricing, a pricing strategy in which one or more service products are
sold as a package.
In addition to the above strategies and tactics, several other pricing strategies have also been
recognized in marketing:
(a) Market skimming: in market skimming a new product is initially offered at a premium
price. The aim is to cover investment costs as soon as possible. This strategy is
appropriate if: First, the new brand has advantages over existing brands. Second, the
brand is protected by patents. Third, the market is inelastic.
(b) Penetration pricing: setting a new, relatively low price with the aim of expanding
market share. This approach is suitable when the market is elastic.
(c) Prestige and economic pricing: Prestige pricing is a strategy that raises the price of
services above the average and economic pricing is t o lower the price of services
below the average.
(d) Multiple pricing: this strategy is a quantity discount. A lower price is charged the higher
the quantity of products/services purchased.
(e) Odd pricing: based on the principle of physics where Rp. 999 is perceived
psychologically, very less or lower than Rp. 1000.
d) Guidelines for Choosing the Right Pricing Method Which method or tactic a company
will choose in pricing services depends on many things. These are:
1) The amount of advertising/promotion budget desired: If the promotion budget is
low, it may be because the price of the goods/services is low. To increase
promotion, the price must be increased.
2) Product Type: Product price should be competitive.
3) Target Market Share: Market share and price are usually inversely proportional. If
you want a high market share then the price should be low, and vice versa.
4) Target Marketing (Distribution): The more levels of marketing channels, the
higher the price.
5) A view on profit: If the company wants to recoup costs, the initial price is high,
while to maintain long-term sales, the price is set low.
6) Product Diversity or Uniqueness: Products that have multiple functions can be
priced higher than those that have one use.
7) Additional Services: In products, there are times when we find additional services.
For example, installation and training.
8) Product Usage Life Cycle: Long-lasting products may be priced higher than
disposable products.
9) Investment Amortization: Closing an investment can be done quickly by setting a
higher price rather than a lower price.
10) Threat of New Competitors: If there is a threat of competition, it's best to set a low
price. If there is no threat, use skimming pricing.
CONCLUSIONS:
Based on research that has been conducted at AJB Bumiputera 1912 Malang, it can be
concluded as follows:
1. Products
The products issued by Bumiputera are diverse according to the age and occupation of
the insured, providing value and benefits that suit the needs of prospective
policyholders.
2. Price
The price given to Policyholders varies according to the ability of the Policyholders.
However, when compared to the same type of business, the price set by AJB
Bumiputera is quite high, this is related to the benefits that will be obtained by
Policyholders.
3. Promotion
Promotional activities carried out by AJB Bumiputera are more reliant on promotional
activities that are face to face. This is done with the consideration that it is cheaper and
more efficient.
4. People
AJB Bumiputera always tries to improve employee performance by holding monthly
evaluations of its employees. In addition, there are trainings specifically designed to
improve employee performance which are held every three months, as well as
including employees in certain seminars related to the interests of the company in
order to increase employee knowledge in their respective fields.
5. Process
With the ease of administration, Bumiputera strives to provide maximum service to
the insured.
