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Unit 2: Service Marketing Environment

2.2 Internal or Micro Environment Notes

The internal or the micro-environment factors of a service firm consist of the following:

External customers/consumers

Internal customers/channel partners/providers

Competitors

Suppliers

Regulators

Internal customers are an intrinsic part of a service firm’s environment consisting of employees,
channel partners, providers, Direct Sales Agents, etc. They are controllable, and directly affect
the service firm in its business endeavour. All service firms accomplish their objectives through
the action of their employees. The employees work to further their personal, social and economic
agenda. They are so important and crucial a variable that they have become an important
marketing mix variable for the service firm. The main challenge in the employee-employer
relations is to create situations wherein both achieve their goals. Therefore, this environment
factor is either strength or a weakness to the service firm.

Example: ICICI and HDFC bank always consider their employees to be one of their
main strengths, and place them prominently in their public relations, publicity and promotions
initiatives.
The employees are de-motivated, under-trained and always give ‘a government enterprise’
impression to the customers, unlike private courier companies such as Blue Dart and Blaze flash.
It soon becomes clear to the customer which of the two has better customer service, a fact that is
also clearly reflected in their profits disparity.
Consumers, Suppliers, Competitors and Regulators are all external to a service firm’s marketing
context. Therefore they are either a threat or are considered to be an opportunity for the service
firm.
Thus, Citibank, like Birla Sunlife, might consider its customers to be an opportunity; they will
try to make accurate need-analysis and repeatedly deliver quality service offers to them.
Customers can also transform into threats, if they are in a litigious mood and insist on taking a
service firm to court on some consumer grievances.

Task Prepare a list of the suppliers of any Airlines in India.

Suppliers for ICICI Bank could be National Cash Register (NCR), which delivers and maintains
its Automated Teller Machines (ATMs). Its ‘tropicalised’ high technology would be perceived as
an opportunity by ICICI Bank. It could be perceived to be a threat if it becomes a monopoly in
its area and starts dictating tough terms to ICICI Bank. ICICI Bank should then realize
(hypothetically) that it was high time to develop other suppliers.
Competitors: To gain competitive advantage, a service firm must do either of the following:

Provide equal product value but operate more efficiently than its rivals (lower cost), or

Operate in a unique way that creates greater product value and commands a premium

price (differentiation)

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