MODULE 1

Introduction To Services
What are Services?
Why Service Marketing?
Service & Technology
Difference between Goods & services
The Services Marketing Mix
The Gap Model of Service Quality
 What are services?
• A service is any activity or benefit that one
party offers to another that is essentially
intangible and does not result in the
ownership of anything.
• Services are deeds, processes and
performances.
• They are integrated to the offerings of many
manufactured goods
• A service may be accompanied by a product
or it may be pure service.
• Service components may tangible or
intangible.
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General Classification of Services
(Types of Services)
• Business services
• Trade services
• Infrastructure services
• Personal services
• Entertainment services
• Public services
• Government services
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 Examples of Service Industries
• Health Care
– hospital, medical practice, dentistry, eye care
• Professional Services
– accounting, legal, architectural
• Financial Services
– banking, investment advising, insurance
• Hospitality
– restaurant, hotel/motel, bed & breakfast
– ski resort, rafting
• Travel
– airline, travel agency, theme park
• Others
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hair styling, pest control, plumbing, lawn maintenance, 4

counseling services, health club, interior design

Reasons for the growing emphasis on
services
• The structure of developed economies in the 20th C has been the
transformation from emphasis on manufacturing physical goods to
production of intangible services.
• The quality of goods produced is no longer a source of differential
advantage.
• The transfer of manufacturing operation from developed nations
with higher labour rates to 3rd world nations with lower rates.
• New technologies such as information processing & industries
have created enormous new industries.
• The growth of leasing has help discover the advantages of leasing
over purchasing.
• Growth of specialization in support services has made it cost
effective for firms to outsource.
• The growing acceptance of marketing by various professional
groups such as lawyers, doctors etc.
• Manufacturing firms have discovered that many support services
skills have increase the in-house value of the firm.
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Characteristics of Services

 Intangibility
 Perishability
 Inseparability
 Heterogeneity
 Ownership
 Simultaneity
 Quality Measurement
 Nature of Demand
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 Goods versus Services

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 Tangibility Spectrum

Salt
 Soft Drinks
 Detergents
 Automobiles
 CosmeticsFast-food
 Outlets
 Intangible
Dominant

Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies

Airlines 
Investment
Management
Consulting
Teaching

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Characteristics of Services
Compared to Goods

Intangibility Heterogeneity

Simultaneous
Production
and Perishability
Consumption

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Implications of Intangibility
• Services cannot be inventoried

• Services cannot be easily patented

• Services cannot be readily displayed or

communicated

• Pricing is difficult
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Implications of Heterogeneity
• Service delivery and customer satisfaction
depend on employee and customer actions

• Service quality depends on many

uncontrollable factors

• There is no sure knowledge that the

service delivered matches what was
planned and promoted
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Implications of Simultaneous
Production and Consumption
• Customers participate in and affect the
transaction

• Customers affect each other

• Employees affect the service outcome

• Decentralization may be essential

• Mass production is difficult

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Implications of Perishability
• It is difficult to synchronize supply and
demand with services

• Services cannot be returned or resold

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 What makes them special
Services Goods

 An activity or process  A physical object

 Intangible  Tangible

 Simultaneous production and  Separation of production and consumption:

consumption: customers participate in production production

 Heterogeneous  Homogeneous

 Perishable: cannot be kept in stock  Can be kept in stock

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SERVICE MARKETING MIX
• PRODUCT
• PLACE
• PROMOTION
• PRICE
• PEOPLE
• PHYSICAL EVIDENCE
• PROCESS
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Expanded Marketing Mix for Services

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Distinctive Characteristics of Services

Intangibility Level of customer

involvement
Inseparability

Perishability Heterogeneity
Variability -
consistency
Service
capacity Client based relationships
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Gap Model of Service Delivery

Expected
Customer Service
GAP Perceived
CUSTOMER
Service

GAP 4
COMPANY
Service Delivery External
GAP 3 Communications
Customer-Driven to Customers
GAP 1
Service Designs and
Standards
GAP 2
Company Perceptions of
Consumer Expectations
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“Service Marketing”, Valarie A. Zeithaml & Mary Jo Bitner
GAP Model

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13-19
 The Five Service Gaps:
1. Gap between consumer expectations and
management perception.
2. Gap between management perception and
service-quality specification.
3. Gap between service-quality specifications and
service delivery.
4. Gap between service delivery and external
communications.
5. Gap between perceived service and expected
service.
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 Provider Gap 1
• Not Knowing What Customers Expect

Expected
CUSTOMER Service

GAP 1

Company
Perceptions of
COMPANY Customer
Expectations
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Provider Gap 2
• Not Selecting the Right Service Designs &
Standards

CUSTOMER

Customer-Driven
COMPANY Service Designs &
Standards
GAP 2
Company
Perceptions of
Consumer
Expectations
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Provider Gap 3
• Not Delivering to Service Standards

CUSTOMER

Service Delivery
COMPANY GAP 3
Customer-Driven
Service Designs &
Standards

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Provider Gap 4
• Not Matching Performance to Promises

CUSTOMER

GAP 4 External
Service Delivery Communications
COMPANY to Customers

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Key Factors Leading to
Customer Gap

Customer Expectations
Customer
GAP

• Provider Gap 1: Not knowing what customers expect

• Provider Gap 2: Not selecting the right service designs & standards
• Provider Gap 3: Not delivering to service standards
• Provider Gap 4: Not matching performance to promises

Customer Perceptions
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Key Factors Leading to
Provider Gap 1

Customer Expectations
Provider
GAP 1 • Inadequate Marketing Research Orientation
Insufficient marketing research
Research not focused on service quality
Inadequate use of market research
• Lack of Upward Communication
Lack of interaction between management & customers
Insufficient communication between contact employees & managers
Too many layers between contact personnel & top management

Company Perceptions of
Customer Expectations
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Key Factors Leading to
Provider Gap 1

Provider Customer Expectations

GAP 1
• Insufficient Relationship Focus
Lack of market segmentation
Focus on transactions rather than relationships
Focus on new customers rather than relationship customers
• Inadequate Service Recovery

Company Perceptions of
Customer Expectations

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Key Factors Leading to
Provider Gap 2

Customer-Driven
Provider Service Designs & Standards
GAP 2
• Poor Service Design
Unsystematic new-service development process
Vague, undefined service designs
Failure to connect service design to service positioning
• Absence of Customer-Defined Standards
Lack of customer-defined service standards
Absence of process management to focus on customer requirements
Absence of formal process for setting service quality goals

Management Perceptions
of Customer Expectations
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Key Factors Leading to
Provider Gap 2

Provider
Customer-Driven
GAP 2
Service Designs & Standards

• Inappropriate Physical Evidence & Servicescape

Management Perceptions
of Customer Expectations

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Key Factors Leading to
Provider Gap 3

Service Delivery
Provider
GAP 3 • Deficiencies in Human Resource Policies
Ineffective recruitment
Role ambiguity and role conflict
Poor employee-technology job fit
Inappropriate evaluation and compensation systems
Lack of empowerment, perceived control and teamwork
• Failure to Match Supply & Demand
Failure to smooth peaks and valleys of demand
Inappropriate customer mix
Over-reliance on price to smooth demand

Customer-Driven
Service Designs & Standards
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Key Factors Leading to
Provider Gap 3

Service Delivery
Provider
GAP 3 • Customers Not Fulfilling Roles
Customers lack knowledge of their roles and responsibilities
Customers negatively affect each other
• Problems with Service Intermediaries
Channel conflict over objectives and performance
Channel conflict over costs and rewards
Difficulty controlling quality and consistency
Tension between empowerment and control

Customer-Driven
Service Designs & Standards
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Key Factors Leading to
Provider Gap 4

Service Delivery
Provider
GAP 4
• Lack of Integrated Services Marketing Communications
Tendency to view each external communication as independent
Not including interactive marketing in communications plan
Absence of strong internal marketing program
• Ineffective Management of Customer Expectations
Not managing customer expectations through all forms of communication
Not adequately educating customers

External Communications
to Customers
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Key Factors Leading to
Provider Gap 4

Service Delivery
Provider
GAP 4 • Overpromising
Overpromising in advertising
Overpromising in personal selling
Overpromising through physical evidence cues
• Inadequate Horizontal Communications
Insufficient communication between sales and operations
Insufficient communication between advertising and operations
Differences in policies and procedures across branches or units

External Communications
to Customers
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