Teaching Note

Subject : Service Marketing

Subject code : 16IMN901A

Programme : IMBA

Semester : 9th Semester

Name of the Faculty : Nirajana Das, Asst. Professor

Srusti Academy of Management

1st B-School in Odisha with “A” Grade Accreditation by NAAC
Approved by AICTE, New Delhi Affliated to BPUT, Rourkela

38/1,
Chandaka Industrial Estate, Near Infocity, Bhubaneswar,Odisha-751024

www.srustiacademy.org

Syllabus
 2
Srusti Academy of Management
Introduction to Service Marketing

Services are deeds, acts or performance. Every day we interact with various economic activities like -
getting courier delivered at the requested address, making phone call to friend, relative, or client, having
coffee at coffee shop, or taking metro to commute office. Such activities are called services because they
involve deed or act and offered by one party to another for sale . Services differ from goods in many
ways. The way a product is produced, distributed, marketed, and consumed is not the way a service is.
Hence, a different marketing approach is necessary for the marketing of services.

There is a growing market for services and increasing dominance of services in economics worldwide.
Services are a dominant force in countries around the world as can be seen in the global feature. The
tremendous growth and economic contribution of the service sector have drawn increasing attention to
the issues and problems of service sector industries. There was a time when it was believe that the
industrial revolution was the only solution to the problems of poverty, unemployment and other ills of
society. Now, however, the service sector promises to fulfill the task. Services touch the lives of every
person everyday.

Definitions:
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 KotlerandBloom 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.”
Types of services

Professional Services

Which serve the business market segments in which advisory & problem solving provide by a qualified
professional known for their specialty... e.g. Financial services, advertising, business and management
consultancy, engineering, medical etc.
Service Marketing: Module I

Consumer oriented Services

3
Srusti Academy of Management
The ones, which the consumer is more acquainted with, such as holiday tour companies, entertainment,
travel, healthcare, social services etc.

Characteristics of Services
1. Intangibility– Services are cannot be touched or hold, they are intangible in nature.
For example – you can touch your Smartphone. But, you cannot hold or touch the services of your
telecom service provider.
2. Inseparability– In case of services the production, distribution, and consumption takes place
simultaneously. These three functions cannot be separated. Generally, most goods are produced first,
then sold and consumed. On the other hand, services are usually sold first and produced and consumed
simultaneously
3.Heterogeneity:.–As services are performances, created by human beings, no two services will be same.
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 CCD. 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 today. Hence, your experience of having coffee today is different as
compared to yesterday
4. Perish-ability– You can store goods, but it is not so in the case of services. Services get perished
immediately.
Example: When a customer book a session at Saloon and is not able avail the service due to some
urgency, then the service scheduled for time perish in time. He has to book the same service for a new
time slot with paying price for it.
5. 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 parlor for haircut, how it cannot be possible without your presence and
involvement.
6. No ownership– In the sale of services, transfer of ownership not take place. It means to say that
Service Marketing: Module I
consumer never own the services.

Difference between Services & Goods

4
Srusti Academy of Management
 Basis Services Goods

Tangibility Services are intangible in nature. Goods are tangible in nature.

They cannot be touched or hold. They can be touched and hold.

Ownership Services cannot be owned. They Goods can be owned.

can be hired for a specific
period.

Perish-ability Services get perished after a Goods can be stored for future
specific time period. It cannot be use.
stored for future use.

Heterogeneity Services are more heterogeneous. Goods are less heterogeneous. It is

It is very difficult to make each possible to make each goods
service identical. identical.

Heterogeneity Services are more heterogeneous. Goods are less heterogeneous. It is

It is very difficult to make each possible to make each goods
service identical identical.

Emergence of service Marketing

Services Sector: Services sector includes 'Financial, real estate & professional services, Public
Administration, defense and other services, trade, hotels, transport, communication and services related
to broadcasting. This sector is also known as the tertiary sector of the economy. Currently, this sector is
the backbone of the Indian economy and contributing around 54.3% of the Indian GDP in 2018-19.

Share of sectors in GVA at current prices (%)

Sector 2015-16 (2nd RE) 2016-17 (1st RE) 2017-18 (PE)

Agriculture, forestry &

17.7 17.9 17.1
fishing
Industry 29.8 29.3 29.1

(Of which) Manufacturing 16.8 16.8 16.7

Services 52.5 52.8 53.9

Source: Central Statistics Office;
Notes: 2nd RE: Second Revised Estimates

5
Srusti Academy of Management
Factors for Service Marketing growth:
Liberalization, Privatization, Globalization (LPG) has brought unprecedented changes in the economic,
trade and industrial scenarios. India is fast moving from a protected economy to an open market
economy and becoming integrated with the world economy.
1. Government Policies
 Changes in regulations
Traditionally, many service industries were highly regulated. Government agencies set
price levels, placed geographic constraints on distribution strategies and, in some
instances, even defined the product attributes. Since the late 1970s, there has been a trend
in the USA and Europe towards partial or complete deregulation in a number of major
service industries.
 Privatization
The term ‘privatization’ was coined in Great Britain to describe the policy of
transforming government organizations into investor-owned companies.
 New rules to protect customers, employees, and the environment
 New Agreements on Trade in services
2. Social changes
 Rising Customer expectations
 More Affluence
 More People short of time
 Increased desire for buying experiences vs. Things
 Rising ownership of computers and mobile phones
 Immigration
3. Business Trends
Service Marketing: Module I
 Manufactures add value through service and sell services\
More and more services are being delivered through national or even global chains.
respected brand names such as Burger King, Body Shop, Credit Suisse, Hertz, Ibis,
Lufthansa and Mandarin Oriental Hotels have spread far from their original roots.
 More strategic Alliance
 Marketing Emphasis by non profits
 Relaxation of professional association standard
6
Srusti Academy of Management
  Quality movement
 Emphasis on productivity and cost savings
 Innovating hiring practices.
4. Advances in Information Technology
 Convergence of computers and telecommunications
 Greater Bandwidth
 Miniaturization creates more compact mobile equipment
 Wireless networking
 Faster, more powerful software
 Digitization of texts, graphics, Audio and video
 Growth of the Internet
5. Internationalization
 Major companies operating oninternational platform.
 Airlines and airfreight companies that were formerly just domesticin scope today have
extensive foreign route networks. Numerous financial service firms,advertising agencies,
hotel chains, fast-food restaurants, car hire agencies and accounting firmsnow operate on
several continents. This strategy may reflect a desire to serve existing customersbetter, to
penetrate new markets, or both.
 International mergers and Alliances
Example: TATA AIG
Service Marketing Challenges
A service is an act or performance offered by one party to another.Although the process may be tied to
physical product, the performance is intangible in nature and does not normally result in ownership of
any of the factors of production. Marketing concepts and practices that have been developed in
Service Marketing: Module I

manufacturing companies cannot be applied directly on service organizations. Major challenges in

marketing service are
1. Customers do not obtain ownership of services
2. Service products are Ephemeral and cannot be inventoried
3. Intangible elements dominate value creation
7
Srusti Academy of Management
 4. Customers may be involved in the production process.
5. Other people are often part of the product
6. There is greater variability in operational inputs and Outputs
7. Many services are difficult for customers to evaluate.
8. The time factor assumes great importance.
9. Distribution channels take different forms.
Service Encounter
A service encounter is period of time during which customers interact directly with a service. As a
customer interact with service firm, (it’s employees, impersonal delivery system( website),physical
facilities,) he receives information and this information influence both their expectations and evaluations
Example: OLA & UBER ride, Stay at Hotel

Educating the Customer

Types of Service Encounter

1. Face Encounter: This group of services involves personal visits by and active participation of
customers to service facility. Examples- hair dressing, lodging, medical services.
2. Remote Encounter: This group of services involves low or little physical contacts between
customers and service providers. Example: home online shopping. Banking transactions by
telephone.

8
Srusti Academy of Management
 Service Marketing: Module I

Service Encounter as “Moments of truth”

Richard Normann defined “moment of truth” to show the importance of contact points with customers.
When the service provider and the service customer confront one another in, at that moment they are
very much on their own skills to interact with the customers. The successful interaction leads to the
creation of lifelong loyal customers or a dissatisfied customer. After pre- purchase stage, customers
experience service encounter stage. Example: After visiting website, booking holiday resort, placing an
order etc.

Critical Incidents in Service Encounter

 Critical incidents are important in the field of services marketing as they provide an insight into
the types of service encounters that trigger an existing loyal customer to decide to switch service
providers.
 “Critical incident” refers to a service encounter where the customer is extremely dissatisfied with
the service firm and/or its staff.
 A critical incident is where the consumer believes that the service provider has “cross the line”
and the level of service is simply unacceptable.
 In these situations, some consumers will choose to switch service providers, whereas will
complain directly to the firm, or post messages on social media regarding the situation.
Critical incidents for a customer of a BANK:
 Rejected for a loan
 Bounced payment

9
Srusti Academy of Management
 Service Marketing: Module I

 Closed local branch

 Charge extra fee
 Rude service encounter
Service Blueprint:
1. A service blueprint is a diagram that visualizes the relationships between different service
components
 people
 props (physical or digital evidence)
 Processes
2. A service blueprint corresponds to a specific customer journey and the specific user goals
associated to that journey.
3. It is not an easy task to design a service, especially one that must be delivered in real time with
customers present in the service factory.
4. To design services that are both satisfying for customers and operationally efficient, marketers
and operations specialists need to work together.
5. The benefit of blue printing service is that it distinguishes between what customers experience
“front stage” and the activities of employees and support processes “black stage”, where
customers can’t see them.
6. Between the two lies what is called the line of visibility. Service blueprinting clarify the
interactions between customers and employees.
Building Service Blueprint
The development of the blueprint needs to involve a variety of functional representatives as well as
information from the customer. Following points should be considered.
Step 1- Identify the service process to be blueprinted–
 One should break down the complex process into small steps and identify those parts of services
which are not visible to the clients.
 Example: Purchasing of supplies.
Step 2- Identify the customer or the customer segment experiencing the service
 The needs of the each customer segment is different and requires the variation in the service
design. Blueprints are useful when developed for customer or the customer segment assuming
that the service processes varies across the service segment.

10
Srusti Academy of Management
 Service Marketing: Module I

 Separate blueprint should be developed to avoid confusion and maximize their usefulness.
Step 3 - Map the service process from the customer’s point of view–
 This step involves caring the choices and actions of the customers in purchasing, consuming, and
evaluating the service.
 Who the customer is and involves the considerable research and observation to determine exactly
how the customer experiences the service.
Step 4- Map contact employee actions –
 First the lines of interaction and visibility are drawn.
 The process from the customer contact person’s point of view is mapped, distinguishing visible
onstage activities from the invisible backstage activities.
 For the existing services this step involves preparing frontline operation employee to learn what
theyneed to do and which activities they are expected to perform in full view of customers versus
which activities are carried out in back-office.
Step 5- Link contact activities to needed support functions –
 The line of internal interaction can be drawn and linkages from contact activities to internal
support functions can be identified.
 In this process, the direct and indirect impact of internal actions on the customer becomes
apparent. Internal service processes take on added importance viewed in connection with their
link to the customer.
 Alternatively, certain steps in the process may be viewed as unnecessary if there is no clear link
to essential internal support service.
Step 6 - Add evidence of service at each customer action step –
 The evidence of the service can be added to blueprint to demonstrate what the customer see and
experience as tangible evidence of the service at each step in the process.
 A photographic blueprint, including photos, slides or the video of the process can be very useful
at this stage to aid in analyzing the impact of the tangible evidence and its consistency with the
overall strategy and service positioning.
Step 7 - Isolate fails points –
 In this step the expert should build failure-safe sub process in order to correct possible errors
Step 8- Establish time frame –

11
Srusti Academy of Management
 Service Marketing: Module I

 The execution time frame of services is a major cost determinant factor for calculating maximum
of deviation.
Step 9- Analyze profitability –
 The expert must quantify the cost of delay and establish the time of service execution standard in
order to analyze the profitability from the distribution of service. (Valarie A Zeithaml)
Benefits of Service Blueprinting
1. Provides an overview so employees can relate “what I do” to the service viewed as an integrated
whole, thus reinforcing a customer-oriented focus among employees.
2. Identifies fail points, that is, weak links of the chain of service activities, which points can be the
target of continuous quality improvement.

3. Line of interaction between external customers and employees illuminates the customer’s role
and demonstrates where the customer experiences quality, thus contributing to informed service
design.
4. Line of visibility promotes a conscious decision on what customers should see and which
employees will be in contact with customers, thus facilitating rational service design.
5. Line of internal interaction clarifies interfaces across departmental lines, with their inherent
interdependencies, thus strengthening continuous quality improvement.
6. Stimulates strategic discussions by illuminating the elements and connections that constitute the
service.

Service Marketing: Module I

Service Triangle

12
Srusti Academy of Management
The services marketing triangle was created to handle the complexity that service marketers face when
dealing with intangible products. The service marketing triangle highlights three key players, these are;
 Company: The management of a company, including full-time marketers and sales personnel.
This is enabled through continuous development and internal marketing with their employees.
 Employees: This includes everyone who works within close contact of the consumer. They play
an integral role within the interactive marketing of service marketing.
 Customers: Anyone that purchases the service of a company. They are also heavily exposed to
the external marketing of a firm.
To have successful marketing policies, a marketer should ensure that there is positive interaction
between these three players. Service trainable also includes three types of marketing processes.

External Marketing — Making Promises:

 Involves communication by a company towards their consumer.
 This form of communication allows the company to offer their services, and set the expectation
of service quality that the client can expect.
 In service marketing this pays particular attention to physical evidence, such as the appearance of
the place of business or appearance of staff.
Interactive Marketing— Keeping Promises:
 Interactive marketing is revolved around the communication that occurs Marketing:
between the Module
client and
Service I
the service delivery personnel.

 This is one of the most important parts of successfully utilizing the services marketing triangle

13
Srusti Academy of Management
  It is the only time that the client will have face-to-face experience with the company, via the
providers.

Internal Marketing — Enabling Promises:

 A more modern addition to the services marketing triangle,
 Internal marketing centers on training employees to the highest standards so they can deliver
exceptional service.
 Without internal marketing, there is a high chance that the client will receive sub-standard
service.

ServiceScape
Servicescape’ refers to the environments in which services are delivered and where the firm and
customer interact. Servicescape is a model that puts its onus on explaining the behavior of customers
and clients within the service environment. It is a popular concept from Booms and Bitner that
categorically states that ambiance has a direct impact on the customers.The service is often produced
and consumed simultaneously therefore, the surroundings might have a strong impact on customer
perception and on customer experience of the service.
Service providers should build environments that achieve a balance between two primary objectives:
o Develop environments that appeal to consumer pleasure and arousal states while avoiding
atmospheres that create submissiveness
o Construct environments that facilitate the operational ease and efficiency of the firm.

Three important aspects of servicescape

(1) Spatial Layout and Functionality: Spatial layout refers to the ways in which machinery,
equipment, and furnishings are arranged, the size and shape of those items, and the spatial
relationships among them. Functionality refers to the ability of the same items to facilitate the
accomplishment of customer and employee goals.
Example: Spatial layout in Big Bazar is the display & setting of items.
Functionality: The degree of easy access to find a product describes it’s functionality.
(2) Signs, Symbols, and Artifacts:
Service Marketing: Module I

14
Srusti Academy of Management
Signs displayed on the exterior and interior of a service provider can be classified as explicit & implicit
communicators. These may be labels as follows
 Name of company
 Name of department
 Directional purposes (entrances, exits),
 No smoking, children must be accompanied by an adult

Environmental symbols and artifacts may communicate less directly than sign, giving implicit cues to
users about the meaning of the place and norms and expectations for behavior in the place.
Example:
 presence of certificates and photographs on walls
 Floor-coverings, personal objects displayed in the environment

Service Marketing: Module I

15
Srusti Academy of Management
(3) Ambient Conditions:
Ambient conditions include background characteristics of the environment such as temperature, lighting,
noise, music, scent, and color. All of these factors can profoundly affect how people feel think, and
respond to a particular service establishment.
For example – a number of studies have documented the effects of music ort consumers’ perceptions of
products, their perceptions of how long they have waited for service, and the amount of money they
spend.
Behavior in servicescape
Individual Behaviors in servicescape includes
(i) Approach behaviors include all positive behaviours that might be directed at a particular
place, such as desire to stay, explore, work, and affiliate.
(ii) Avoidance behaviours reflects the opposite — a desire not to stay, to explore, to work, or to
affiliate
Boundary Spanning
Boundary Spanning is an effort within an organization that involves activity aimed at bridging one or
more recognized organizational boundaries to facilitate the flow of information across such boundaries.

Three ways that boundary spanning

 Within the department
 Within business units
 With other businesses
Service Marketing: Module I
Roles of Boundary Spanner

16
Srusti Academy of Management
  To interact with individuals and groups outside the organization to obtain valuable information
 To help the innovation process for the organization by collecting information from orther
organizations.
Service Marketing Mix :
The traditional 4Ps of (Marketing Mix )product, promotion, prices and place remain but three additional
variables— people, physical evidence and process are included to produce a 7Ps framework.
The need for extension is due to
 High degree of direct contact between the firm and the customer,
 The highly visible nature of the service production process,
 Simultaneous production and consumption of services.

The service:Physical products can be inspected and tried before buying but pure services are intangible.
A customer cannot go to a showroom to see a medical operation that he is considering. This means that
customers of services suffer higher perceived risk in their decision-making process.
Examples:
 Brand name of a service can influence the perception of a service.
 A provider should provide high quality of services consistently so that customers talk about it
favorably.
 Positive word-of-mouth publicity has a positive impact on service selling.
Promotion: The intangible elements of service are difficult to communicate, difficult to represent
courtesy, hard work and customer care in an advertisement. The attachment of tangible cues helps
customers to understand and judge the service.
Examples:
 A hotel can show the building, swimming pool, friendly staffService
and happy customers. Module I
Marketing:


17
Srusti Academy of Management
  A salesperson can explain details of a personal health plan can answer questions and provide
reassurance.
Price: Price is an important factor and considered as a valuable tool in marketing of service. It is difficult
to evaluate a service before purchase where the price acts as an indicator of perceived quality.
For example:
 A patient expects a surgeon to charge high fees and he considers the high price as his scale of
efficiency.
 Low price can attract new customers, like watching movie in theater in weak days
Place: Distribution channels for services are more direct. There is no storage of services. Production and
consumption is simultaneous, hence direct contact between customer and service provider is essential
for most services. Growth for many service companies means opening new facilities in new locations,
due to simultaneous production and consumption. The evaluation of locations is a critical skill for such
services.
Example: Lakme saloons in different location of same city to provide service to customers at their
nearest location.
People: Service quality is inseparable from quality of service providers. The Service Organization has to
set standards of service delivery by its’ people.Continuous training, monitoring, improving employees
performance is the key to success in service market. Training is crucial so that employees understand the
appropriate norms of behavior.
Example: Same way welcoming guests of Taj Hotel staff across the country ( India)
Physical evidence:
Physical evidence is about the environment in which the service is delivered and it includes any tangible
goods that facilitate the performance and communication of the service. Customers look for cues to have
an idea about the likely quality of a service by inspecting the tangible evidence.
Example: Neat and clean ambiance of Hospital
Process:
These are the procedures, mechanisms and flow of activities through which a service is delivered to
customers. The need of the customers varies frequently and processes cannot be standardized.
Example: Bank employees deal differently while delivering same the product.
Service Marketing: Module I

18
Srusti Academy of Management
Questions
Objective Type Questions ( 2×12)
1. What are the additional “P”s in service marketing? How do they differentiate products and services?
2. What do you mean by “ Moment of truth”
3. What is the basis of service package ?
4. Can service be packaged? Justify your answer.
5. How remote encounter is different from face encounter?
6. What is service blueprint?
7. How many stages are there in Service blue print.
8. Give an example of service perishability.
9. Justify service and service provider are inseparable
10. Is it required to consume service to at its time of production?
11. Service is intangible. Justify it ?
12. What is the impact of internationalization on service sector.
Short Questions (8×6)

19
Srusti Academy of Management
 1. The process of service delivery can be mapped in a flow chart or a service blue print ?justify this
statement while taking the example of preparing a demand draft in a bank.
2. The service scape creates mood, a longing an attraction, a desire to visit the service provider.
Explain this with an example?
3. Pricing of service is difficult than pricing of goods. Explain various approaches of pricing
service.
4. What is the role of visibility in service design?
5. Define the role of training in service process with an example?
6. What is the physical evidence of services in service marketing?
7. Write the stages of restaurant service blueprint?
8. Define the role of artifacts in servicescape.
Long Questions (16×2)
1.Develop a service blueprint for Bank, which does not have branches.
2.Discuss the importance of servicescape and develop a servicescape for a retail outlet.

20
Srusti Academy of Management
 21
Srusti Academy of Management