Marketing in Public Utility Services

It is significant to improve the responsiveness and efficiency of the public services since then only their development can be justified.

This will, in turn, results in increasing the satisfaction level of both the people and the employees.

A market-oriented approach is, therefore, needed to be adopted by the government agencies and departments for achieving the objectives related to accountability and transparency translates to a successful application of marketing concept.

An increase in performance has been observed in the public organizations which have adopted a market-oriented approach positive relationship that exists between the performance and market-oriented approach has been confirmed by several studies.

The public sector organizations can use marketing not only to acquire new customers or retain the existing ones but also to position themselves in the target market.

The role of marketing becomes more important particularly when the interests of partners and internal clients are involved along with the pricing policy and the range of services offered by the organizations.

Furthermore, a modified form of marketing can be considered suitable for public utility service providers. In fact, marketing is gaining importance among various government and local administration bodies.

Marketing campaigns are now being developed by such bodies which are proving to be helpful in attracting investors, encouraging conservation of energy and protection of the environment, fighting against causes like smoking and drinking, etc.

Market Segmentation of Public Utility Services

Following are the basis of market segmentation of public utility services:

1. Geographic Segmentation: Geographic segmentation refers to segmenting the customers on the basis of their country, state, town, or city. An organization may not choose to market its products everywhere.

For example, electricity and water services are useful depending upon the region which could be industrial or metropolitan, and so on.

2. Demographic Segmentation: Cumulative study of people refers to demography. This involves the study of aspects like age, gender, profession, income, etc.

Therefore, segmenting customers on the basis of these aspects refers to demographic segmentation.

For example, the tourism and banking industry uses demographic segmentation extensively.

3. Psychographic Segmentation: Grouping customers on the basis of their social class, style, or personality is referred to as psychological segmentation.

For example, the hospitality industry may segment customers on the basis of their social class. Hotels can provide additional services and facilities to their upper social class customers.

i. Lifestyle: This refers to segmenting customers on the basis of their lifestyle. Customers in this segment share certain opinions, interests, and activities.

For example, the Sahara States, a real estate firm, provides services to only those who seek a lavish lifestyle.

ii. Social Class: The hierarchy in the society whereby people are distinguished on the basis of their status and reputation referred to as a social class.

For example, various telecom companies segment customers on the basis of social class and offer recharge top-ups accordingly.

4. Benefit Segmentation: Different consumers seek different benefits from a product. Service providers often segment the market based on such benefits and utilities that customers seek. This is called benefit segmentation.

For example, services like halls and catering are provided by hotels for marriage purposes. They also rent halls for meetings and conference purposes.

Marketing Mix of Public Utility Services

Given below is the marketing mix of public utility services:

1. Product: Organisations that have successfully implemented the concept of marketing into their tasks and activities offer better public services that are meant to benefit society.

However, there is more to this. The point of focus of government organizations remains either on the quality of the services or the various supporting services offered by them.

The central administration is however responsible for introducing essential and new public services.

Hence, the organizations at the Central Government level formulate the product policy regarding public services.

This policy is then adopted at the local government level which comes next in the hierarchy. The local government is responsible to take decisions that particularly relate to middle-level marketing.

Decisions regarding taxes, bills, and the various kinds of public service management are taken by the local government.

2. Price: There are certain factors that influence the price of public services. These factors could be the method of developing the public services, the extent of freedom given to providers regarding its value determination, and several other external and internal factors.

Therefore, the government may be fully or partly involved in setting the price of public services. However, the forces of demand and supply in the market can also determine the price.

For example, the price of railway transportation is a form of partial imposed price. The costs incurred by the company must be covered in the price. However, there is a restriction in the growth rate of price.

Following are the two criteria that form the basis for the price of the public sector:

  1. Payment Method: A customer can pay the price for the public services directly once it is offered or in an indirect manner to the government in the form of taxes.
    For example, customers pay directly for cultural services and indirectly for the services like street lighting, etc.
  2. Time of Payment: Either advance payment can be done for the public services or after receiving the benefits.

3. Place: Decisions relating to the actual delivery, location, duration, and the means through which customers can get access to the services to constitute the distribution policy of public services.

For example, the location of public services offered can be the headquarters of the organization just like in the case of higher education which are provided in the campus of universities and colleges or it can be the residence of customers just like in the case of cultural services like concerts, plays, movies, etc.

There are two aspects regarding the means of providing public services. These are:

  1. The extent of interaction between the front-line staff and the customer (there can be a low or high degree of interaction).
  2. The type of offering (this can be optional or compulsory).

Offer type can be mandatory or optional.

For example, elementary education is compulsory but higher education can be pursued by only those who have successfully finished their intermediate level of education.

At the same time, the customers can request to pause or stop the public utilities being offered to them. However, the civil protection services cannot be paused or stopped.

Considering the interaction between the staff and customers, there is high interaction between the patients and medical staff of hospitals.

The medical team diagnoses the problem, prescribes the treatment and medicines, and regularly does health check-ups.

On the other hand, there is less interaction between passengers and employees (drivers or conductors) of public transport services. They interact only during purchasing tickets or when passengers need direction regarding routes, etc.

4. Promotion: Outdoor advertising, print advertising, and internet advertising are the common techniques of promotion employed by public service providers, particularly health and education service providers.

Media publicity can even be used by some public organizations that come under the central government. In the same way, the promotion of educational institutions can be done by the alumni of those institutions.

The staff and employees of a public organization, their professionalism, courtesy, work ethics and skin play a major role in building the image and brand of that organization in the eyes of the public. This in turn is helpful promoting the organization.

5. People: The nature of demand of the public utility services needs to be analyzed in order to have a better understanding of the concept of marketing in public utility services.

On the basis of the type of utility used at the retail level, the customers can be categorized as industrial, commercial, and residential.

Each category has different demand elasticity and a different pattern of load within the service load of utility. Elasticity may be described as the degree to which the consumption pattern of consumers changes due to any change in the price.

For example, low elasticity is exhibited by the residential customers. This means that there is not much effect of price on their consumption of services.

There are three types of markets when it comes to the sale of utility services at the wholesale level. They are the spot market, the regulated market, and the unregulated market.

Retail sale (or retail marketing) is the name given to the process of providing water, gas, or electricity to the end customers.

However, this is not always included in the distribution policy of public utility services. All the marketing activities were applied only in this process before the industry of public utility services got deregulated and reorganized.

However, a completely different role of marketing has emerged after the deregulation and fragmentation of this industry. Consequently, marketing is regarded as a separate function due to the rise in retail competition.

6. Process: The public management and control of water resources should be strengthened for the promotion of sustainable use of water.

This also requires spreading awareness among the common public. Much responsibility regarding this rests upon the workers and the trade unions of the public service providing organization.

Their role and involvement in the decision-making process have also been emphasized in the Recommendations for Action of the Bon Conference on Water held in 2011.

The application of core labor standards especially regarding the association’s freedom was also necessitated in the conference.

The poor people residing in the rural and urban areas pose challenges in terms of logistics and technology. Therefore, it would not be a judicious decision on the part of the public sector to provide services in such areas as it is very costly and expensive.

On the other hand, a sufficient ROI cannot be gained by the private sector if it was to provide services in such areas. This is because the high connection fees cannot be paid by the poor people and hence they are not able to enjoy the benefits.

There are several other challenges that the private sector has to face such as social unrest, social systems, suitable profits, and the shortage of skilled workers.

Another factor that inhibits the private sector to get involved with poor people is its inability to work participate with the poor.

However, if subsidies are provided to the private sector, then they could deliver services in the poor and impoverished areas. This was advised to the World Bank Water Division by the CEO of SAUR International in 2002.

7. Physical Evidence

i. Remote Services: In remote services, there is a distance that exists between the customer and the service provider. Actions are performed by the employees who are physically present in the service environment.

In this regard, the needs and requirements of the employees need to be taken care of. However, the customer acts and gets involved from a distance. Insurance, telephone, mail order are some industries that offer remote services.

ii. Interpersonal Services: Unlike remote services, both the employees and customers in interpersonal services are physically present in the service setting.

Banks, health clinics, hotels, and restaurants are some industries that offer interpersonal services. In this regard, the needs and requirements of both the customers and employees must be taken care of.

Also, the physical environment of the service setting should be such that it facilitates the interaction between the employees and the customers.

The reason for using the service and the duration for which it is used can be two dimensions on the basis of which services can be further classified.

The importance of the physical environment of the services is highlighted by these two dimensions. The purpose of availing of the services can be either hedonistic (emotion-based) or utilitarian (reason-based).

For example, reason-based purposes can be using the services of banks or dry cleaners, whereas emotion-based purposes can be availing the services of coffee parlors and beauty salons.

Also, consumers are likely to spend less time availing themselves of banking and dry cleaning services and more time while staying in hospitals and resorts.

Therefore, the physical environment of the services becomes very critical when longer time is spent by the customers in the service facility and when their purpose of using services is emotion-based.

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