SERVICES MARKETING

Definition of Services

According to Valarie Zeithaml & Mary Jo Bitner: “Services are deeds, processes, and
performances.”

According to American Marketing Association services are defined as “activities, benefits or

satisfactions which are offered for sale or provided in connection with the sale of goods.”

According to Philip Kotler and Armstrong, services is defined as “any activity or benefit that one
party can offer to another that is essentially intangible and does not result in the ownership of
anything. Its production may or may not be tied to a physical product.”

What constitute the service sector?

Services fall into three broad categories:
1. Pure service (stand alone)
Eg. Counselling, consultancy, physiotherapy
2. A combination of service & goods
Eg. Restaurants, retailing
3. Service as a component of goods in the total marketing mix (Customer service)
Eg. After sales service, repairs & maintenance

“setting the
promise”

 The service marketing triangle emphasizes three different coinciding elements. It

includes internal marketing, external marketing and interactive marketing. The premise is that
when companies take care of their employees, their employees are more likely to work
diligently to take care of customers who were attracted to the company by external marketing.
 The company, its employees and its customers form the three integral roles in the
service marketing triad.

 External marketing includes all promotional efforts aimed at customers to promote

the benefits of the company and its products and services. It uses external marketing, such as
advertising and public relations, to attract customers.

 Internal marketing refers to the way a company communicates with employees.

Employees interact with customers during sales and service processes. The more positively
employees view their roles within the company, the more effectively they will take care of the
company's customers.

 Interactive marketing includes direct exchanges between employees and customers

whom they share product or service information with to induce purchases.

Characteristics of Services

Intangibility –

 Services are cannot be touched or hold, they are intangible in nature.

  A distinguishing characteristic of services that makes them unable to be touched or sensed
in the same manner as physical goods.
 It is the primary source from which other three characteristics emerge.

For example – you can touch your Smartphone. But, you cannot hold or touch the services
of your telecom service provider.

Marketing problems caused by intangibility

• Lack of ability to be stored

 Doctor’s physical examination
 Vacant seats in a movie
• Lack of protection by patents
 Services are not patentable
 They can be easily copied
• Difficulty in displaying or communicating services
 Promotion of services become extremely difficult
 Insurance – task of explaining the merits is highly challenging
• Difficulty in pricing services
 Primary cost of producing service is labour.

Possible solutions to intangibility problems

Use of tangible clues or physical evidence

 Physical characteristics that surround a service to assist consumers in making service

evaluations.

2) Use of personal sources of information

 Firms use..
 Word-of-mouth advertising
 Stimulate personal commn. through customer testimonials in mass media.

3) Creation of a strong organizational/brand image

  Through image development & increased brand awareness Level of
perceived risk experienced by customers can be reduced

Inseparability –

 In case of services the production, distribution, and consumption takes place simultaneously.
These three functions cannot be separated.
 A characteristic that reflects the interconnection among the service provider, the customer
and other customers sharing the service experience.

Marketing problems caused by inseparability

 Physical connection of service personnel to the service

• Service personnel is a tangible clue which becomes part of customer’s evaluation

of the total service experience.
• Eg. Hospitality services, banking services
 Involvement of customer in the production process

o As customer contact increases, the efficiency of operation decreases.

o Customer plays a key role – he provides inputs to the service production process.

 Involvement of other customers in the production process

o The impact of other customers may be negative as well as positive.

o Negative – drunk customers, smokers
o Positive – happy crowd in a concert.

 Difficulty in mass production of service

 Difficult to sell services to a geographically widespread target market.

Possible solutions to inseparability problems

 1) Emphasis on selecting and training public contact personnel.

 Selection of service personnel with superior communication and public relations

skills
 Training personnel once they are on the job.

2) Consumer management

Examples…

 Separating smokers from non smokers

 Reservation systems
 Home delivery services etc.

3) Use of multisite locations

 It limit the distance the consumer must travel to purchase the service
 Each location is staffed by different service personnel, to serve their local market.

Eg. Dry cleaning services, LIC agents

Heterogeneity / Variability –

 A characteristic that reflects variation in the performance from one service personnel to
another.
 Service vary from firm to firm & among personnel within a single firm
 It becomes impossible for a service operation to achieve 100% perfect quality.
 It is impossible to provide similar service every time. You’ll experience some change every
time you buy a particular service from a particular service provider.

For example – Yesterday you had a coffee at Cafe Coffee Day. Today, you are again at
CCD to have a coffee, but you have got different place to sit today; the person served you
coffee is different today; other people having coffee are also different. Hence, your
experience of having coffee today is different as compared to yesterday.
Problems caused by heterogeneity

• Difficulty in standardization & quality control

 The real secret of success depends on the person behind the counter who interacts
with customers

Possible solutions to heterogeneity problems

• Standardization
 Develop service process & provide intensive training to personnel
 Replace human labour with machines

Eg. ATMs, vehicle parking

• Customization
 Developing services based on customer’s specific instructions.
 Eg. Beauty saloons

Perishability –

 A characteristic in that …
o they cannot be saved,
o their unused capacity cannot be reserved and
o they cannot be inventoried.
 You can store goods, but it is not so in the case of services. Services get perished
immediately. 

Problems caused by perishability

• Consumer demand for the service at a given time is unpredictable

• Matching demand and supply is a major challenge
 Higher demand than optimal supply
 Lower demand than optimal supply

Possible solutions to perishability problems

• Adjust demand and supply to achieve a balance
• Strategies to manage demand
• Strategies to manage supply

Demand management strategies

 Creative pricing – shift DD from peak to non peak hours

• ‘Early bird’ specials
• ‘Matinee’ prices
• Different rates for senior citizens, children, college students
 Reservation systems
• Help firms to prepare in advance for a known quantity of demand

Eg. Airlines, hotels, movie

 Development of complementary services

 Reading materials in doctor’s office
 Television in waiting areas
 Playing area for children

Supply management strategies

 Part-time employee utilization

 Capacity sharing
 Utilization of third parties (outsourcing)
 Increase customer participation (Self service)

Other Characteristics:

 Participation of customer – Customer is co-producer in production of services. For

delivery customer involvement is as important as is of the service provider. For example –
if you went to a parlour for haircut, how it cannot be possible without your presence and
involvement.
  No ownership – In the sale of services, transfer of ownership not take place. It means to say
that consumer never own the services.

Difference between Services and Goods

Basis Services Goods
Tangibility Services are intangible in Goods are tangible in nature.
nature. They cannot be They can be touched and hold.
touched or hold.
Inseparability Services are inseparable in Function of distribution and
nature. Production, consumption of goods can be
distribution, and consumption separated from the function of
of service take place production.
simultaneously.
Ownership Services cannot be owned. Goods can be owned.
They can be hired for a
specific time period.
Perishability Services get perished after a Goods can be stored for future
specific time period. It cannot use.
be stored for future use.
Heterogeneit Services are more Goods are less heterogeneous. It
y heterogeneous. It is very is possible to make each goods
difficult to make each service identical.
identical.

Service Marketing Mix

 Services Marketing Mix refers to the combination of marketing activities an organization

engages in to promote and sell intangible services, as opposed to tangible products.
 In addition to the four Ps of traditional product marketing--product, price, place and
promotion--the services marketing mix includes the three Ps of service marketing--people,
process and physical evidence.
 The Services Marketing Mix is also referred to as the Extended Marketing Mix.
Elements of Service Marketing Mix

1. Product – Unlike a product, a service is intangible and cannot be measured in terms of look,
feel and other qualities present in a commodity. However, it can be customized to suit the
user requirements and give a personal touch. However, the service product is heterogeneous
and perishable in nature just like a normal product and needs to be designed with the utmost
care to increase customer satisfaction.

Basic service package (BSP)

It includes:

• Core service
• Supplementary Services
– Facilitating services (& goods)
– Enhancing services (& goods)
 SUPPLEMENT
ARY
SERVICES

FLOWER OF
SERVICES
- Christopher Lovelock

2. Pricing –

 Price has single name in manufacturing sector, whereas it takes different names in service
sector.

For example:

1. Advertising – Commission
2. Lodging services – Tariff
3. Legal & Healthcare - Fees
 Pricing of goods is determined by market demand in most cases, unless regulated by
government.
 For services, price is controlled by different bodies.

For example:

1. Railways – Government
2. Banking, Power, Telephone, Insurance – Partially by Govt.
3. Hotels, Personal care – Market demand
4. Hospitals, Lawyers – Service provider
 The pricing strategy for services is difficult to achieve unlike in products, wherein the final
price depends on the raw materials, cost of production and distribution etc. However, in
service pricing, you cannot measure the cost of the services you offer that easily.

For example, in the education industry, how would you set the price of the quality of
education imparted? Or if you are in the food and hospitality industry, how would you
charge the customers for the care shown by the host or hostess, the ambience in the
restaurant or the fine taste of your delicacies? Therefore, pricing plays a crucial role in the
services marketing mix for your business.

Demand-based Pricing

Market Skimming
Market Penetration
Price Discrimination
3. Place –

 It deals with distribution strategies.

 The decisions include geographical coverage, location of service outlets, channels of
distribution and transportation.
 The place where you choose to conduct your service business can make or break your
organizational growth. You need to understand how visible your setup would be to potential
customers and how frequently it would be visited by consumers. For example, would you
 set up a fast-food centre near a college or office hub, where students and professionals can
quickly grab a bite or next to a big restaurant in a classy neighbourhood?

Channel options
for service
providers

Types of Service
Intermediaries

4. Promotion – The service industry usually has stiff competition across different verticals and
your business would need a lot of promotions to pass on the right message to potential
customers. While advertising, online and direct marketing are the best ways to promote your
service you need to have a good mix of communication channels to address a larger
audience.
 5. People – Your business is not just built on your goals, company vision and principles but
also depends heavily on your employees. It is the people who work for you who are
responsible in creating happy and returning customers. Unlike products, which are
consumed independently from the individuals responsible for creating them, people play an
integral role in the consumption of services. Customer satisfaction for services consumption
is based upon the quality of interactions with the personnel who provide the service. People
in your organization are the epicentre of the quality of your services and need to have the
best of talents to gain customer loyalty and trust.

Classification of Service Personnel

• Based on type of service & kind of skills required,

1. Consumer service employees

2. Professional service employees

• Based on frequency & length of customer interaction,

1. Contact personnel
2. Moderate contact personnel
3. Back office staff
4. Support staff
5. Management
 6. Process –

 A process outlines the procedures and methods to be followed to produce and deliver a
service.
 It explains the series of activities, their sequence and the role played by the service provider,
intermediaries and the customer.
 Efficient and effective processes allow service delivery personnel to anticipate customer
needs, identify and implement appropriate solutions, and respond to customer feedback in
order to improve service delivery. How efficiently your services are delivered to the
customer is an important aspect of your service blueprint and you need to emphasize on
setting up a process for doing so.

1. The Joining Phase

The arrival of the
patient.
Registration
2. The Intensive
consumption
Service Blueprinting
Phase
Diagnosis
 Blueprinting breaks up the service delivery process into a series of logical steps.
 A service Treatment
blueprint depicts the entire service process on a map and shows the various stages
of customer interaction with the service provider and provides minute details of the service
deliveryInformation about
processes, the tangible evidence of service and the people involved in carrying it

further
out. actions
3. The detachment Phase
Discharge of the
patient
Payment
4. Feedback
 know the level of
satisfaction

7. Physical Evidence –.

 Physical evidence is the material part of a service (servicescape).

 Servicescape includes the exterior (landscape, signages, parking) and interior (interior
design & décor, equipment, layout, temperature, ambiance).
 Physical evidence refers to the tangible and intangible elements that comprise the
environment in which services are delivered. Tangible aspects of service delivery are the
physical elements of the service environment that influence customer opinions about the
overall service. For example, a clean and comfortable restaurant interior can improve
customers' perceptions of the dining experience. Intangible aspects of service delivery--such
as reputation and the opinion's of other customers--are the immaterial elements of the
service environment that influence customer perceptions.

Physical Evidence – Types

1. Essential Evidence
2. Peripheral Evidence
 SERVICE QUALITY

“Quality is conformance to requirements.”

- Philip B Crosby

“Quality is exceeding what customers expect from the service.”

- Parasuraman & Berry

Managing service quality

The process of managing the quality of services delivered to a customer according to his
expectations is called Service Quality Management. It basically assesses how well a service has
been given, so as to improve its quality in the future, identify problems and correct them to increase
customer satisfaction. Service quality management encompasses the monitoring and maintenance of
the varied services that are offered to customers by an organization.

Whether you are in the software business offering services to clients or operate in the food,
hospitality or travel industry, service quality management is integral to managing customer
expectations and business growth. The service quality can either relate to the service potential
(qualifications of the persons offering service), service process (quickness, reliability etc.) or the
service result (meeting customer expectations). 

Dimensions of Service Quality

Measuring of service quality relies on the customer’s perception and this could be different from the
expected service. To determine the gap between services expected and perceived service, several
models are used like the SERVQUAL model, RATER model, e-SERVICE QUALITY etc.

SERVQUAL

 An instrument to measure service quality

 Created by Parasuraman, Zeithaml, and Berry
  Introduced in 1985, modified in 1988
 According to Berry & Parasuraman, SQ can be determined on the basis of 5
dimensions:

ASSURANCE

 Reliability – This is the ability to perform the service dependably and accurately, as
promised. In software service, it would be the correct technical functioning of the
application and various features such as GUI features, billing, product information etc.
 Responsiveness – How quickly the services are rendered to the customer and the
promptness of service delivery. With respect to software services, it would be the ability to
respond to customer problems or give solutions.
 Assurance – This is a measure of the ability to convey trust to the customers and how well
they extend the courtesy. Software assurance involves the amount of confidence the
customer has in handling the software application or navigating a site, the belief he has on
the information provided and its clarity, reputation etc.
 Empathy – Giving personalized attention, understanding the requirements and caring for
the customers. The software service would include customized applications, one-to-one
customer attention, security privacy and understanding customer preferences.
 Tangibles – The physical attributes like appearance, equipment, facilities etc. When we
speak of software services, the tangibles would be aesthetics of the software application or
website, navigation features, accessibility, flexibility etc.

GAP MODEL

 The measurement of service quality using SERVQUAL leads to the identification of

… Service quality gaps ie., Perceived Service < Expected Service
  It is a conceptual tool to identify and manage Service Quality Problems developed
by Zeithaml, Parasuraman & Berry

Strategies for improving service quality

 Better Internal Communication that enhances co-operation & co-ordination

 Test the service prior to launching in the market place
  Train employees in recovery techniques & reward employees who solve problem quickly
 Provide necessary infrastructure and information system that facilitates error-free service
 Total Quality Management (TQM)
 Benchmarking

Methods to Monitor service quality

 Conduct customer surveys

 Monitor customer feedback

 Review service blueprints & problem tracking system

MANAGING PRODUCTIVITY

 The productivity is related to how effectively input resources are transformed into
value for customers.
 Productivity shows whether the activity of an organzation is efficient and effective.

Productivity improvements in the service sector are possible and a number of ways of improving
service productivity are:

1. Improving Staff:

One way is through improving the knowledge, skills, attitudes and behaviour of existing and new
staff involved in service delivery and performance through better systems of recruitment, training,
development and motivation.

2. Introducing Systems and Technology:

Service organisations can reap productivity improvements if they become more systems and
technology oriented. The systems approach looks at the task as a whole. It attempts to identify key
operations to be undertaken, examines alternative ways of performing them, devises alternative
methods, removes wasteful practices and improves co-ordination within the system as a whole.

3. Reducing Service Levels:

Productivity can also be improved by reducing the quantity of service and/or the quality of service
(e.g. doctors could give less time to each patient). There are dangers in these approaches
particularly where a service organization has promised to deliver a higher level of service in the
past. Also competitors can differentiate their services by broadening and upgrading their service
quantity and quality.

4. Substituting Products for Services:

Productivity can be improved by providing a product substitute for the service (e.g. new data
transfer technology has removed the need for the telegram service).

5. Introducing New Services:

It is possible to design a more effective service that eliminates or reduces the need for the less
effective service. For example, transatlantic travel by air has largely replaced transatlantic travel by
sea; the credit card has replaced the former system for obtaining overdrafts.

6. Customer interaction:

It is possible to change the way in which customers interact with service providers. This is
particularly possible with ‘high contact’ services. Using the consumers more in the production
process demands greater understanding of consumer behaviour and its underlying causes.
Consumers are involved in service delivery anyway, whether actively or passively. In other words
more consumer- intensive designs have to be developed to maximize the contribution of the
customer to service performance and delivery.

7. Reduce the Mismatch between Supply and Demand:

A significant feature of many service organizations is the mismatch that often exists between supply
of the service and demand for it. A major goal in marketing services is to get greater control over
supply and demand and to obtain a better balance between the two. If more people want to use an
airplane than there are seats available then business may be lost to competitors; unsold seats for
theatrical performance mean revenue lost forever.

Service marketer may therefore face problems of:

Increasing demand (e.g. using up spare capacity);

Decreasing demand (e.g. where demand is excessive);

Obtaining a better balanced service supply (e.g. to meet fluctuating demand patterns). Kotler has
used the term ‘demarketing’ to describe the strategy which an organization may actively adopt to
discourage additional customers on a temporary or a permanent basis. He uses the terms
‘syncromarketing’ to describe the strategy which an organization may actively adopt to bring
supply and demand into better balance.

MANAGING PRODUCT SUPPORT SERVICES

To provide the best support to the product a manufacturer identify and prioritize the services that
customers value the most. These types of services are known as Product Support Services.

Eg: Assembling of Computer System

Installation of new software's like antivirus system

Installation of new processing technologies like Dual Core, Core2duo,Windows Xp, Windows 7.

Installation of Management Software's such as ERP Systems.

Types of Product Support Services.

Ordering Ease: easiness for customer to place an order with the company.

Delivery: refers to how well the product as service is brought to the customers. It includes speed,
accuracy and care throughout the process.
Installation: refers to the work done to make a product operational in its planned location. This
service is important for companies offering complex products such as Integrated Circuits related to
Digital Electronics Ex: IC 7400 etc.

CustomerTraining: refers to the training of customers/his employees to use the equipment

properly and efficiently.

Customer consulting: refers to the data, information systems and advice services that the seller
offers to the buyers.

Maintenance & Repair:

1. Pre-Sale Services: Facilitating the value augmented services.

2. Post-Sale Services: Repair and Maintenance.