Marketing of Services

Syllabus : Introduction to services marketing,

Difference between goods and services, Chararcteristics of services, Services marketing
Mix, The Gaps Model of Services Quality, Customer gaps and Provider gaps.

INTRODUCTION
Stated simply, Services Marketing refers to the marketing of services as against tangible products.

As already discussed, services are inherently intangible, are consumed simultaneously at the time of
their production, cannot be stored, saved or resold once they have been used and service offerings
are unique and cannot be exactly repeated even by the same service provider.

Marketing of services is a relatively new phenomenon in the domain of marketing, having gained in
importance as a discipline only towards the end of the 20th century.

Services marketing first came to the fore in the 1980’s when the debate started on whether
marketing of services was significantly different from that of products so as to be classified as
a separate discipline. Prior to this, services were considered just an aid to the production and
marketing of goods and hence were not deemed as having separate relevance of their own.

The 1980’s however saw a shift in this thinking. As the service sector started to grow in importance
and emerged as a significant employer and contributor to the GDP, academics and marketing
practitioners began to look at the marketing of services in a new light. Empirical research was
conducted which brought to light the specific distinguishing characteristics of services.

By the mid 1990’s, Services Marketing was firmly entrenched as a significant sub discipline of
marketing with its own empirical research and data and growing significance in the increasingly
service sector dominated economies of the new millennium. New areas of study opened up in the
field and were the subject of extensive empirical research giving rise to concepts such as - the
product-service spectrum, relationship marketing, franchising of services, customer retention etc.

Importance of Marketing of Services

Given the intangibility of services, marketing them becomes a particularly challenging and yet
extremely important task.

 A key differentiator: Due to the increasing homogeneity in product offerings, the attendant
services provided are emerging as a key differentiator in the mind of the consumers. Eg: In
case of two fast food chains serving a similar product (Pizza Hut and Domino’s), more than
the product it is the service quality that distinguishes the two brands from each other. Hence,
marketers can leverage on the service offering to differentiate themselves from the
competition and attract consumers.
 Importance of relationships: Relationships are a key factor when it comes to the marketing
of services. Since the product is intangible, a large part of the customers’ buying decision will
depend on the degree to which he trusts the seller. Hence, the need to listen to the needs of
the customer and fulfill them through the appropriate service offering and build a long lasting
relationship which would lead to repeat sales and positive word of mouth.
 Customer Retention: Given today’s highly competitive scenario where multiple providers are
vying for a limited pool of customers, retaining customers is even more important than
attracting new ones. Since services are usually generated and consumed at the same time,
they actually involve the customer in service delivery process by taking into consideration his
requirements and feedback. Thus they offer greater scope for customization according to
 customer requirements thus offering increased satisfaction leading to higher customer
retention.

Services marketing is a specialised branch of marketing. Services marketing emerged as a

separate field of study in the early 1980s, following the recognition that the unique
characteristics of services required different strategies compared with the marketing of
physical goods.
Services marketing typically refers to both business to consumer (B2C) and business-to-
business (B2B) services, and includes marketing of services such as telecommunications
services, financial services, all types of hospitality, tourism leisure and entertainment
services, car rental services, health care services and professional services and trade services.
Service marketers often use an expanded marketing mix which consists of the seven Ps:
product, price, place, promotion, people, physical evidence and process. A contemporary
approach, known as service-dominant logic, argues that the demarcation between products
and services that persisted throughout the 20th century was artificial and has obscured that
everyone sells service. The S-D logic approach is changing the way that marketers
understand value-creation and is changing concepts of the consumer's role in service delivery
processes.

Definition of Services and Characteristics of services

Introduction
The world economy nowadays is increasingly characterized as a service economy. This is primarily
due to the increasing importance and share of the service sector in the economies of most developed
and developing countries. In fact, the growth of the service sector has long been considered as
indicative of a country’s economic progress.

Economic history tells us that all developing nations have invariably experienced a shift from
agriculture to industry and then to the service sector as the main stay of the economy.

This shift has also brought about a change in the definition of goods and services themselves. No
longer are goods considered separate from services. Rather, services now increasingly represent an
integral part of the product and this interconnectedness of goods and services is represented on a
goods-services continuum.

Definition and characteristics of Services

The American Marketing Association defines services as - “Activities, benefits and satisfactions which
are offered for sale or are provided in connection with the sale of goods.”

The defining characteristics of a service are:

Intangibility: Services are intangible and do not have a physical existence. Hence services cannot be
touched, held, tasted or smelt. This is most defining feature of a service and that which primarily
differentiates it from a product. Also, it poses a unique challenge to those engaged in marketing a
service as they need to attach tangible attributes to an otherwise intangible offering.
 1. Heterogeneity/Variability: Given the very nature of services, each service offering is unique
and cannot be exactly repeated even by the same service provider. While products can be
mass produced and be homogenous the same is not true of services. eg: All burgers of a
particular flavor at McDonalds are almost identical. However, the same is not true of the
service rendered by the same counter staff consecutively to two customers.
2. Perishability: Services cannot be stored, saved, returned or resold once they have been
used. Once rendered to a customer the service is completely consumed and cannot be
delivered to another customer. eg: A customer dissatisfied with the services of a barber
cannot return the service of the haircut that was rendered to him. At the most he may decide
not to visit that particular barber in the future.
3. Inseparability/Simultaneity of production and consumption: This refers to the fact that
services are generated and consumed within the same time frame. Eg: a haircut is delivered
to and consumed by a customer simultaneously unlike, say, a takeaway burger which the
customer may consume even after a few hours of purchase. Moreover, it is very difficult to
separate a service from the service provider. Eg: the barber is necessarily a part of the
service of a haircut that he is delivering to his customer.

Types of Services

1. Core Services: A service that is the primary purpose of the transaction. Eg: a haircut or the
services of lawyer or teacher.
2. Supplementary Services: Services that are rendered as a corollary to the sale of a tangible
product. Eg: Home delivery options offered by restaurants above a minimum bill value.

Difference between Goods and Services

Given below are the fundamental differences between physical goods and services:

Goods Services

A physical commodity A process or activity

Tangible Intangible

Homogenous Heterogeneous

Production and distribution are separation from Production, distribution and consumption are
their consumption simultaneous processes

Can be stored Cannot be stored

Transfer of ownership is possible Transfer of ownership is not possible

The 7 P’s of Services Marketing
The first four elements in the services marketing mix are the same as those in the traditional
marketing mix. However, given the unique nature of services, the implications of these are slightly
different in case of services.

1. Product: In case of services, the ‘product’ is intangible, heterogeneous and perishable.

Moreover, its production and consumption are inseparable. Hence, there is scope for
customizing the offering as per customer requirements and the actual customer encounter
therefore assumes particular significance. However, too much customization would
compromise the standard delivery of the service and adversely affect its quality. Hence
particular care has to be taken in designing the service offering.
2. Pricing: Pricing of services is tougher than pricing of goods. While the latter can be priced
easily by taking into account the raw material costs, in case of services attendant costs - such
as labor and overhead costs - also need to be factored in. Thus a restaurant not only has to
charge for the cost of the food served but also has to calculate a price for the ambience
provided. The final price for the service is then arrived at by including a mark up for an
adequate profit margin.
3. Place: Since service delivery is concurrent with its production and cannot be stored or
transported, the location of the service product assumes importance. Service providers have
to give special thought to where the service would be provided. Thus, a fine dine restaurant is
better located in a busy, upscale market as against on the outskirts of a city. Similarly, a
holiday resort is better situated in the countryside away from the rush and noise of a city.
4. Promotion: Since a service offering can be easily replicated promotion becomes crucial in
differentiating a service offering in the mind of the consumer. Thus, service providers offering
identical services such as airlines or banks and insurance companies invest heavily in
advertising their services. This is crucial in attracting customers in a segment where the
services providers have nearly identical offerings.

We now look at the 3 new elements of the services marketing mix - people, process and physical
evidence - which are unique to the marketing of services.

5. People: People are a defining factor in a service delivery process, since a service is
inseparable from the person providing it. Thus, a restaurant is known as much for its food as
for the service provided by its staff. The same is true of banks and department stores.
Consequently, customer service training for staff has become a top priority for many
organizations today.
6. Process: The process of service delivery is crucial since it ensures that the same standard of
service is repeatedly delivered to the customers. Therefore, most companies have a service
blue print which provides the details of the service delivery process, often going down to even
defining the service script and the greeting phrases to be used by the service staff.
7. Physical Evidence: Since services are intangible in nature most service providers strive to
incorporate certain tangible elements into their offering to enhance customer experience.
Thus, there are hair salons that have well designed waiting areas often with magazines and
plush sofas for patrons to read and relax while they await their turn. Similarly, restaurants
invest heavily in their interior design and decorations to offer a tangible and unique
experience to their guests.
 The Gaps model of servicing Quality

The gap model (also known as the "5 gaps model") of service
quality is an important customer-satisfaction framework. In "A
conceptual model of service quality and its implications for future
research" (The Journal of Marketing, 1985), A. Parasuraman, VA
Zeitham and LL Berry identify five major gaps that face
organizations seeking to meet customer's expectations of the
customer experience.

The five gaps that organizations should measure, manage and

minimize:

 Gap 1 is the distance between what customers expect and what

managers think they expect - Clearly survey research is a key way
to narrow this gap.
 Gap 2 is between management perception and the actual
specification of the customer experience - Managers need to make
 sure the organization is defining the level of service they believe is
needed.
 Gap 3 is from the experience specification to the delivery of the
experience - Managers need to audit the customer experience that
their organization currently delivers in order to make sure it lives up
to the spec.
 Gap 4 is the gap between the delivery of the customer experience
and what is communicated to customers - All too often
organizations exaggerate what will be provided to customers, or
discuss the best case rather than the likely case, raising customer
expectations and harming customer perceptions.
 Finally, Gap 5 is the gap between a customer's perception of the
experience and the customer's expectation of the service -
Customers' expectations have been shaped by word of mouth, their
personal needs and their own past experiences.
Routine transactional surveys after delivering the customer
experience are important for an organization to measure customer
perceptions of service.

Each gap in the customer experience can be closed through diligent

attention from management. Survey software can be key to
assisting management with this crucial task.

Service quality gap model should be in keep of the minds of the workers.
For this reason we should be active in our work along with edusson.com
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