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Chapter 1
Introduction to Service Marketing

[A] Definition of Services
Definition of Services
1. AMA: Services are activities, benefits or satisfaction which are offered for sale or
provided in connection with the sale of goods.

2. Philip Kotler: Service is any activities or benefits that one party can offer to another
that is essentially intangible and does not result in ownership of anything its
production may or may not be tied to a physical product.

3. Christopher Lovelock:A Service is an act of performance offered by one party to
another. Although the process may be tied to physical product, the performance is
essentially intangible and does not normally result in ownership of any factors of
[B] Factors Responsible for Growth of SS
The factors can be classified as

Demographic Social Economic Political & Legal
Size of
Rise in Life
Rise in Literacy

Working Women
Smaller Families
Higher Mobility
Changing Tastes
Rising Income
Growth of IT
Changing business
New Rule under WTI
Merger and
Increased Demand for Services
Intense Competition
Service innovation
Increased focus on Service Marketing

[1] Size of population : The rapid rise in population in India from 360 million to 1120
million has resulted in increased demand for all services.
[2] Rise in Life Expectancy : It has Increased from 40 years to 64 years. It has created
higher demand for health care & medical services.
[3] Rise in Literacy : The Literacy rate has increased from 36% to 65% this has created
higher demand for educational services including higher education. [3] Rise in Literacy: The
literacy rate has increased from 36% to 65% this has created higher demand for educational
services including higher education.
[4] Working Women: There is rapid increase in the womens participation in conomic
activities as a result there is higher demand for babysitting, domestic help, recreation

[5] Smaller Families: As a result of smaller families there is increased demand for all types
of services.

[6] Higher Mobility: As a result of increase in income education there is higher mobility of
people both within the country as well as outside the country. This has created higher
demand for transport, communication and other services.

[7] Changing Tastes: As a result of higher income and economic affluence there has been
change in consumer taste and quality of life. For Example Travel, Entertainment, Club etc.

[8] Immigration: As a result of Urbanization there is rapid rise in the number of
immigration in urban areas resulting in higher demand for civic facilities, infrastructure and
other services.

[9] Rising income: As a result of rising PCI / GDP and disposable income there is rapid
increase in demand for services PCI is Rs. 55000/-

[10] Globalization: The globalization process has resulted in integration of economies,
market financial institutions. There is rapid rise in FDI and portfolio investment. Foreign
retailers are entering Indian market.

[11] Increased Specialization: As a result of increased specialization and complexity of
products there is higher demand for professional & Technical persons like tax consultants,
legal consultants.

[12] Growth of IT : India is one of the leading player in IT Services IT exports are an
important part of Indias export. India has the largest number of software skilled manpower
in the world.
There is faster transfer of information and services, there is rapid rise in the number of BPO
and KPO in the country.


[13]Privatization: The government is encouraging privatization and disinvestment.
Government has allowed 100% FDI in health care, housing, construction road. Govt.
encourages public private partnership in health care, higher education.

[14] Changing Business Environment: The global business environment has changed.
WTO is encouraging free trade and renewal of all restrictions. The economic system in
countries is also changing.
[15] New Rules under WTO: WTO has passed various agreements like TRIPs, TRIMs, and
GATS. This has benefited service sector to expand and improve the quality of services,
WTO has also removed quota which has benefited India to increase its exports.

[16] Merger & Acquisition: There is a trend towards internationalization. Many Indian
firms are merging with foreign firms and vice-versa. This has created demand for legal and
financial professional.

[C] Role of Services (World/ India)
Role of Services in World: The role of service can be seen from the point of:
[1] Contribution to Employment: SS contributes substantially to employment. In USA in
1950 employment in SS was 50% which increased to 83% further during recession this
sector is not much affected as compared to manufacturing. SS has created various job
opportunities in retail, IT, education, finance, operations, health care, insurance, travel and
tourism, etc.

[2] Contribution to GDP: SS also contributes significantly to GDP. This can be seen as
It can be seen that SS contributes more than 70% to GDP. In USA it is 80% besided there are
many countries in the world of which get more than 60% GDP from SS.

[3] Contribution to Exports: International trade in services increased by three times during
the last two decades. It has increased from 400 billion USD to 600 billion USD. Export of
services is dominated by developed countries accounting for 70 % share and developing
countries 30% share.

[4] Contribution to Higher Standard of Living: SS also contribute to higher standard of living
in many countries. This is due to higher employment, higher income and exports. For
example- USA has highest per capita income and in USA service sector contributes 80% to
Rank Country Percentage
1 USA 80
2 Japan 78
3 France 78
4 UK 73
5 Germany 72

[5] Contribution to better environment: SS also contribute to eco friendly environment as
compared to manufacturing sector. It is for this reason that many textile and chemical
industries are being shifted from developed countries.

The role of SS in Indian economy can be seen as below
[1] Contribution to Employment: There is rapid in employment in SS especially after 199.
For example in the retail sector alone the industry will create five years. Similarly there is
expansion of financial sector, It, hospital, health care.

[2] Contribution to GDP: In India at one time prime sector contributes maximum to GDP but
today service sector contributes maximum (59%)this can be seen as below:

Year Primary Secondary Service
1951 53 17 30
1991 30 28 42
2001 22 27 51
2012 14 27 59

It can be seen that the contribution of primary sector declined from 53% in 1951 to 14% in
2012 and the contribution of service sector has increased from 30% to 59%.

[3] Contribution to Exports: India is one of the leading service sector exporter. India achived
rank in service sector exports globally its rank in merchandise export is 20
in the world.
Indias service sector share in the world exports increased from 2.6% in 2009 to 3% in 2010.
Though India has surplus on capital account. It has helped India to overcome its BOP

[4] Higher Standard of Living: Because of higher GDI growth, higher employment, exports,
income the service sector has contribute to higher standard of living.

[5] Contribution to better environment: SS has also contributed to better environment. This
sector is more eco-friendly as compared to manufacturing sector.

The imp characteristics of services Are:-
[1] Intangible: Services are experiences that cannot be displayed like physical production
services are invisible entities that cannot be touched or inspected. The intangibility creation a
feeling of uncertainty about the outcome of a service .This creates marketing challenges as

according to Carman &Uhl a consumer feels that he has a right to see, touch, hear, smell or
taste the goods before he buys & this is not possible in services.

[2] Perishable: Services are perishable in the sense that services cannot be stored foe later
sale or use. If a particular work is not done in time that time is lost forever. Unused or
underused services are economic waste. For example vacant room in a five star hotel, few
audiences for a particular show such revenue is lost.

[3] Inseparable: services are inseparable means that services cannot be separated from their
providers whether the providers are people or machine. For eg, doctor has to be physically
present for an operation. If a service employee provides the service. Then the employee
becomes part of the service. According to Donald Cowell, Goods are produced, sold & then
consumed whereas the services are sold & then produced & then consumed.

[4]Heterogeneity / Variability: It means service quality cannot be standardized the quality of
service differs widely. It depends on who provide them as well as when, where and how.
For example: Service in Five star hotels is much better than ordinary hotel. The same of type
of service cannot be sold to all consumers even if they pay the same price.

[5] Ownership: The ownership of service is not transferable. The user has only access to the

[6]Simultaneously: Services cannot be delivered to the customer or users services do not
move through channels of distribution. Users are brought to services or providers go to the
users, services have limited geographical area.

[7] Quality Measurement: The quality of service cannot be exactly measures.
For example: we can measure the quality of food in a hotel but difficult to measure the
services i.e. hotel environment, service delivery, behavior of staff, ambience etc. we can only
determine the level of satisfaction.

[8] Nature of Demand: Services are of fluctuating nature. For example: In hotel there is
heavy rush during weekend and less customer during working days. Thus the important
challenge for service marketers to match demand to capacity.


Classification of services is necessary for effective marketing and for marketing mix.
Each service may differ in its features, the factors which help in classification of services are:
1. Marketable and Unmarketable services.
2. Producer services and consumer services.
3. Product service continuum
4. Extent of consumer participation
5. Continuous supply and casual supply
6. Machine oriented and person oriented services can be classified as:


a) On the basis of end user: Services on the basis of end user can be classified as:
1 Individual Consumer
Services provided to individual consumer
It has mass market
Hair cutting
Personal loan
Business To
One Business unit provides services to
another unit
MTDC takes
services of TCS
3 Industrial User End User is plants and factories
ONGC requires
drilling services

b) On the basis of degree of Tangibility: Services can also be classified on the basis
of degree of tangibility involved such as:
People Oriented Things Oriented
1 Tangible
Health care
Beauty saloon
Dry cleaning
2 Intangible
Information service
Legal services

[3] On the basis of customer contact involved: Services can also be classified on the basis of
customer contact involved. Service provider may have high or low contact in providing
services. For example - teaching involves high contact and it is people based while insurance
involve low contact and it is things based.

[4] On the basis of degree of exercise of expertise : Services can also be classified on the
basis of degree of expertise needed for service transaction such as :
a) Highly professional services example Doctors, Lawyers, teachers.
b) Nonprofessional services Ex Cobbler, mason

[5] On the basis of Objectives: It can be classified as
a) For Profit: Private Schools, Airline
b) Not for Profit: NGO, School for blind, cancer hospitals, society

[6] On the basis of location: Services can be classified on the basis of place of service
1 Where Customer is Located Service provider go to the customer, E.g. House Repair
Where Service provider is
Customer go to service, E.g. hospital
3 Both Ambulance


[F] Service Marketing Environment

It refers to surrounding which affect business. It can be classified as
[1] Internal [2] External

[1] Internal Environment: Internal (Micro) environment consist of all the elements in the
companys immediate environment that affect the performance of the company. These
include employees (Internal marketing) direct sale agents, suppliers, competitors, customer,
public etc. The micro environment is most crucial in service sector because these elements
are directly involved in service marketing. Customers have direct inter-action and they get an
idea about the quality of services provided by firm. Therefore the management must provide
proper training and motivation to the internal marketing team.
Internal environment also include policies, mission, vision, objectives, brand equity, physical
assets, R & D, Human resources, Marketing capabilities.

External Environment (Macro Environment)
It includes Economic Environment, Demographic Environment, Social & Cultural
Environment, Technological Environment, Political Environment, & Global Environment.
These are outline as below:

1) Economic Environment: This is the most important element of macro environment
because it includes all govt. policies such as monetary policy, fiscal policy, trade
policy, investment policy, licensing policy etc. It also indicates the various
macroeconomic indicators like GDP, PCI, Inflation, Income distribution which
directly affect business. For Example: In India after 1991 there is liberalization govt.
policies which resulted in rapid expansion of service sector. Thus on the business
organization decides its business policies.

2) Demographic Environment: It includes size of population, age and sex composition,
education, occupation, language, race, birth rate, death rate, urbanization etc. Business
Organization can use such data for determining market segmentation, targeting and
positioning of their products and services. For example: Rising population will create
higher demand for services.

3) Political Environment: It consists of role of government, political system, government
stability, role of legislature, executive, judiciary, rights & duties. The Political
Environment creates business confidence and influence investment decisions. For
example: The govt. has not decided about 100% FDI in multi brand retailers. As a
result foreign retailers will not enter the market; this decision was not taken because of
differences among different political parties in central govt.

4) Social & Cultural Environment: It includes different social groups, objectives, goals,
business ethics, social culture, language, religion, customs, brief etc. Social
Environment is changing in India due to higher literacy, rising income, greater
awareness due to internet etc. For Example: Emergencies of Mall culture Today

customer look for convenience, enjoyment while shopping, service provider must
consider this while planning service marketing strategies.

5) Technological Environment: It includes the level of technology, type of technology,
methods of technology, reason and development, information technology etc.
Technology is most important in services as it can contribute to higher productivity,
efficiency and customer satisfaction. For Example: ATM has created 24 hour banking
services spread all over the country.

6) Legal Environment: It consist of rules regulations, laws which regulate business,
business has to operate within such laws. The various laws framed by the govt. are
Trade Mark Act 1969. Essential commodities Act 1955, Standards of Weights &
Measures Act 1969, Consumer Protection Act, Companies Act 1956, Factories Act
1948, Industrial Dispute Act 1972, Payment of Gratuity Act 1972, MRTP Act 1969
(Now competition Act 2012), FEMA 2000 etc. Service sector has to comply its
working as per legal norms.

7) Global Environment: It consists of policies framed by global organization like IMF,
WTO, World Bank, UNCTAD. For Example: WTO has passed various agreements
like TRIPs, TRIMs, and GATs and affects business throughout the world. For
Example: agreement on GATS aims at removing all restrictions on trade in services.
Similarly TRIMs aim at removing all barriers on foreign investment. Global
environment also include global changes in economic, political and other policies in
different countries.

1) Tangible
2) Homogenous
3) Production, distribution separated from
4) A Thing
5) Core value produced in factory
6) Customers do not participate in the
production process.
7) Can be Stored
8) Transfer of Ownership
1) Intangible
2) Heterogeneous
3) Productions, Distribution & Consumption
are Simultaneous process.
4) A process
5) Core value produced in buyer seller meet.
6) Customer participate in the production
7) Cannot be stored
8) No Transfer of Ownership.


It refers to intermingling of goods and services offering in an unprecedented manner and in
different proportions. Today consumers get a mix of goods and services. The dividing line
between goods and services is becoming thinner and thinner and marketing of goods is
increasingly dependent on services offered.
Product service continuum can be measured by placing goods and services on a scale from
tangible dominant to intangible dominant.
Kotler has proposed five categories of market offer viz.
1) Pure tangible goods
2) Tangible goods with services
3) Equal proportion of goods and services
4) Major Services and minor goods
5) Pure Service

1) It refers to marketing of tangible products.
2) Marketing task is relatively simple
3) It has limited consumer connectivity
4) It can be standardized
5) Only marketing dept. deals with consumer
6) Marketing mix consists of 4ps
7) It involves multiple distribution channels
8) Quality problem arises before goods are
9) Technical features are important.
10) Internal marketing is less practiced.

1) It refers to marketing of intangible
2) Marketing task is relatively difficult.
3) It has greater consumer connectivity.
4) It cannot be standardized.
5) Many dept. deal with consumer directly
6) Marketing mix consists of 7Ps (or ps)
7) It involves limited distribution channels.
8) Quality problem arises during service
9) Technical features & functional
performance are important.
10) Internal marketing is more

This can be seen from the following: CHART



Low Intangible High

[1] Pure Tangible Goods: Companies offer tangible products only, Example: soap,
toothpaste, salt with no services consumer buy these products on the basis of direct utility
they get.

[2] Tangible Goods with services: Companies offer tangible goods with some services,
Example: Air Condition, TV, Car, Computers, Water Cooler, Washing machine etc. It has
more of tangible goods and some services like guarantee, installation, training, after sales

[3] Goods & Services in Equal Proportion: Companies offer goods and services in equal
proportion, Example: Fast food outlet, food, menu card is tangible while ambience, dcor,
hospitability, efficient services are intangible.

[4] Major Services Minor Goods: Companies offer major services accompanied by minor
goods, Example: Airlines Tangible items include food, drink, ticket, boarding pass; while
intangible services include comfort, speed, travel.

[5] Pure Services: Companies offer pure services with no element of tangible products,
Example: Services provided by doctors, lawyers, teachers etc.

a) It helps the companies to determine whether to remain pure good or pure service or
b) It helps in determining marketing strategies
c) It determines the extent of buyer involvement
d) It helps firm to fulfill customer expectations
e) It is applicable to final consumer as well as organizational consumer.

Soft Drinks
Fast food outlet
Ad agency

[I] Consumer Behavior

Meaning: Acc to Walter & Paul Consumer behavior is the process whereby individuals
decide whether, what, when, where, how and from whom to purchase goods and services.

Consumer Buying Process:
It passes through 5 stages:

1) Problem Recognition: When the buyer feels the need of satisfying a particular
want. The need may arise due to some internal or external stimuli.
For Example: Bank promotion of car loan at low rate of internal can create desire and
need of buying a car.

2) Information Search: The next step is to collect information from different sources
about the need or problem. The various sources of information are Personal (friends,
family, and neighbors) Commercial (advertising, sales persons, dealers, displays) and
Public sources (mass media, consumer rating) consumer generally depends on
personal sources while making purchase decisions.

3) Evaluation of Alternatives: With the help of available information consumer
evaluate the various alternatives in terms of features, quality, prices etc. Then rank
these alternatives. For example: while choosing a hotel for birthday celebration a
person may consider factors like food, quality, variety, price, ambience, convenience.

4) Purchase Decision: After Evaluating the various alternatives consumer finally takes
a decision regarding the purchase of services which are most preferred such decisions
are also affected by attitude of others and unexpected situational factors.

5) Post Purchase Behavior: After consuming the services consumer will evaluate the
quality of services in terms of consumer expectations and services perceived
performance. If the services fall short of expectations consumer is disappointed and if
meets expectation, the consumer is satisfied if exceeds expectations the consumer is
delighted. Thus the post purchase behavior of consumers is most important to
marketers. A good word of mouth travels fast. However in services as consumer also
take part in the process of services delivery he is also responsible for the service



Consumer Behavior

Factors influencing consumer behavior

The various factors influencing consumer behavior can be classified
into four groups namely:
a. Social factors
b. Personal factors
c. Psychological factors
d. Cultural factors

1. Social factors: Social factors include family influence, reference
group, roles and status. Family consumption behavior mostly
influenced by family life cycle i.e., bachelorhood, newly married,
parenthood and post parenthood. Often family members play a
significant role in purchase decision. Reference group also influence
the buying behavior. For example, a student buying a laptop will
consult a friend in the IT field before buying. Peer groups and peer
pressure also play important role in purchasing decisions
Role and status also influence buying behavior. For example, a white
collar executive will consume different services than a blue collar
worker. A club holiday company will target only the executives in the
higher salary range.
2. Personal factors: Personal factors include age, lifestyle, occupation,
economic circumstances, personality, etc. Needs and wants of people
are different at different age group. For example, young generation

may spend more money on travel and food while old generation may
invest in insurance an old age security. People consume services on
the basis of their occupation. For example, a CEO of a company
prefers business class while his executive may travel by economy
class. Economic circumstances also influence buying pattern. For
example, higher income group consumer may buy branded services
while lower income group prefer unbranded services. Life style
includes work hobbies, shopping, recreation, fashion, food habits
which are responsible for consumer preferences and choice of
services. Personality refers to traits of a person in terms of self
confidence, dominance, sociability, autonomy, defensiveness,
adoptability and aggressiveness. Marketers use the concept of brand
personality to influence consumers.
3. Psychological factors: It includes the various psychological factors
like motivation, perception, learning, beliefs and attitudes. Motive
(drive) is a need that pressing for directs satisfaction. A person tries to
satisfy the most important need first. How a motivated person act
depends on perception. Perception is the process by which people
select, organize, and interpret information to form a meaningful
picture of the world. Learning describes charges in individual
behavior when people act they learn. Through learning people acquire
belief and such belief and attitude (peoples consistent evaluation,
feeling towards an object) also influence consumer behavior.
4. Cultural factors: Cultural factors exert a deep influence on consumer
behavior. This includes culture, sub culture, and social class. Culture
is the most basic cause of a persons wants and behavior. Human
behavior is largely learned. Culture differs from group to group in a
society. For example, a cultural shift towards more concern about
health and fitness has created huge market for health services. Each
culture includes sub culture. Sub culture share common interest,
values and behavior. It is measured in term of occupation, income,
education, wealth. Social class show distinct brand preferences for
goods and services.


DIFFERENT BUYING BEHAVIOR: There are four types of buying
behavior based on two conditions namely:
i. Involvement of customer
ii. Brand differences. This can be seen as below

Complex buying
Variety seeking
buying behavior
Dissonance reducing
Buying behavior
Habitual buying

1. Complex Buying behavior: It is a situation in which
Consumers are highly involved
See significant difference in brands
Product is expensive
Purchase less frequently
Example, buying a personal computer.

2. Dissonance reducing buying behavior: It is a situation in which,
Consumers are highly involved,
See little difference in brands,

Expensive product,
Less frequently purchased,
Post purchase discomfort due to few disadvantage of product or
advantage of other product.
Example, buying a carpet.

3. Habitual Buying Behavior: It is a situation in which,
Low consumer involvement
Little brand difference
Less expensive product
Purchase frequently
Example: Salt

4. Variety seeking buying behavior: It is a situation in which,
Low consumer involvement
Significant brand difference
A lot of brand switching for variety and not dissatisfaction
Example, Purchase of cookies, toothpastes.


In order to be successful service organization must undertake three types of
marketing and all three relate to keeping promise to customer.
This can be seen as below:


Thus there are three types of marketing viz.,
Internal marketing
External marketing
Interactive marketing

i. Internal Marketing: The Company does internal marketing to its employees.
The company has to provide space, facilities, and equipments. The
company has to recruit staff, train and motivate them. The internal
marketing enables the promise. Employee satisfaction is the key factor in
internal marketing. The company will not be successful unless employees
are willing to deliver on the promise.
ii. External Marketing: The company does external marketing on its customer.
It promises benefits, explains features and assures satisfaction by way of
advertisement and other means of communication. It is nothing but
marketing function of the organization. It is anything that is communicated
to the customer before service delivery.
iii. Interactive Marketing: The service provider does interactive marketing with
the customer. The provider is one who interacts with the customer. The
provider is the face of the company and represents the company. It is at this

point the service is delivered. The provider keeps the promise made by the
company to the customer.


One way of improving the image of the service organization and to improve
the quality of services is to provide service guarantee to customers. Service
guarantee is as much financial consequences as it means refunding the amount to
the customers. Service guarantee will help organization to deliver superior
service quality.

REASONS: The reasons for service guarantee are:

Focus on customer: It makes organization to focus on customer i.e., what
customer really wants from the service provider.
Sets clear standards: It makes organization to set clear quality or service
standards. For example, Dominos promises delivery within 30 minutes, late
delivery implies high discounts.
Provide feedback: It provides customer feedback as they complain due to
service failure. They complain because they had an idea about the promise
or service standards.
Reasons for failure: Customer feedback helps in finding out the possible
reasons for failure. Finding out the causes and removing them is best way
of improving quality.
Builds strong marketing: It provides organization an opportunity to
improve its marketing due to spread of word of mouth.

CRITERIA: However the criteria of good service guarantees are:

{I} Must be unconditional: Service guarantee should be without any conditions
or hidden costs.
Thus the key to achieving sustainable competitive advantage in todays
market is serving customers in excellent fashion (i.e., internal and interactive
marketing) rather than merely selling to them (i.e., external marketing)

{II} Easy to understand and communicate: Guarantee should be well defined
and communicated to customer. Our services are prompt. This is not clear
to customers.
{III} Meaningful: Service guarantee should be meaningful. It should be in
proportion to the cost of service.
{IV} Easy to invoke: It should be easier for a customer to make claims to the
authority regarding the service guarantee.
{V} Easy to collect: There should not be long and lengthy procedure for claims.
It should be one window scheme for refund and claims.

BENEFITS OF SERVCE GUARANTEES: The various benefits of service
guarantees are

{I} It generates higher sales.
{II} It provides customer feedback.
{III} It improves delivery system.
{IV} It provides customer satisfaction.
{V} It creates service oriented culture.
{VI} It improves brand image of the company.
{VII} It improves competitiveness of the firm.


It is defined as any episode in which the customer comes into contact with
any aspect of the organization and gets the impression of the quality of
services. It takes place any time and at any place. It can take the form of

Withdrawing money from
Enquiry on phone Direct contact between
customer and service
Physical evidence is
Efficiency of service
provider is important
Verbal/ Non verbal/
Physical evidence is

The elements of service encounter are:
{I} The Customer: It is for him that the service offer has been designed.
{II} The Service Provider: It includes internal marketing and external
marketing people. If employees are happy they will take care of the

{III} The Delivery System: It includes the process and steps involved in
service delivery system.
{IV} The Physical Evidence: These are the elements of service design which
provides some tangible clues of the service offer.

service encounter are;

i. It is purposeful: There is always a definite goal and purpose in all service
ii. Exchange of information: There is exchange of information so that the
service transaction takes place successfully.
iii. Service providers are not altruistic: Service providers are not someone else.
They are very much part of the encounter and they consider as their duties
for which they are paid.
iv. Limited scope: It has limited scope. It is related to specific task or
v. Prior acquaintance not necessary: Service provider and customer are
stranger to each other. There is no need of prior acquaintance.


The inherent nature of services makes consistent service delivery difficult
for all employees in the same company and even for the same employee
from one day to another. The extent to which customers are willing to
accept this variation is called Zone of Tolerance. It falls between desired
service and adequate service. This can be seen as below:

Examples of service encounters:
Seeing an advertisement of the firm
Having telephone enquiry
Impression while waiting in queue
The experience of the service.

Desired service: It is the type of service customer hopes to receive. It is an ideal
level what customer thinks to be delivered to them in the context of their need.
However most customers are realistic and understand that companies cannot
deliver desired services and hence they expect some level of service as adequate

Adequate service: It is the minimum level of service which customer will accept
without being dissatisfied. This depends on situational factors and perceived
service alterations.
A performance that falls below the adequate service will cause frustration and
dissatisfaction and the performance that exceeds adequate service will surprise
customer (customer delight).
ZOT may increase or decrease for individual consumer depending upon the
factors such as competition, price and importance of service attributes. The
desired level and adequate level may also expand or contract for a customer. For
example, an airline passenger who is running late will have narrow ZOT and
another passenger who has reached airport much earlier may have high ZOT. For
passenger who is running late a minute seems much longer and his adequate
service level increases.

Personal needs
Belief about
what is possible
Desired service
Explicit and Implicit service
Word of Mouth
Past Experience
Perceived service
Situational factors
Adequate service
Predicted services

[N] Core And Supplementary Services

Services can be classified as core services and supplementary services.
Core service is that service which satisfies the basic and important needs of
the customer. Supplementary services are services which are provide
additional benefits to customer. Supplementary services enhance the
benefits of core services. This can be seen as below:

A bed in the hotel
(Core service)

Reservation Room Service Entertainment Restaurant Cashier

A bed in the hotel is core service and other facilities like Reservation, Room
service; Entertainment, Restaurant and Cashier are supplementary services.

Christopher Lovelock has identified eight clusters of supplementary services.
These are:
{I} Information: Customer needs information about the services and other
details like price, instructions, payment options, etc.
{II} Consultation: Service provider must advice customer in a customized way
after finding out customers needs and requirements.
{III} Order taking: It covers recording details from consumers and confirming,
making reservation, giving proper schedule, etc.
{IV} Safe keeping: It includes safekeeping of all valuables of customers.
Example, safe transporting luggage of customer.
{V} Exceptions: It means satisfying the special needs of customers. Example,
serving a low salt meal on a flight.
{VI} Hospitality: It means taking care of the customer, providing friendly
{VII} Billing: A service company must provide proper billing system to the

{VIII} Payment: Bill payment system should be easy and convenient to all
However, the focus should be first on core services and then supplementary
services. Organizations can create more value by increasing the variety of
supplementary services.


In the buying decision process different people play different role. It is also
possible that one person may play all the roles. There are six different roles in
the purchase of any particular service. These are:

[1] Initiator: He is the person who has a specific need and he decides to
start the buying process.
[2] Influencer: He is the person who influences or advises the initiator. It
can be some reference group also.
[3] Decider: He is the person who decides what to buy, when to buy, from
where to buy. He makes decisions but he may or may not actually
execute the decision. He may delegate this to some other persons.
[4] Buyer: He is the person who actually makes purchases. For example,
booking of airline ticket.
[5] User: He is the person who actually uses the product. He may not be the
buyer of the product. For example, the administrative office books air
ticket for the manager who wants to attend a seminar in USA. In this
case the office is the buyer and the manager is the user of the services.
[6] Gate keeper: He is the person who filters the information. He can
influence the buyer or user of services. Example, a CEO of a company
deputes his assistant to visit their branch office. In this case the CEO is
the initiator. The travel agent who handles booking is the Gatekeeper.
The account department who decides the budget is the influencer. The
office acts as buyer and the assistant is the user. Thus there are different
people involved in the buying decision roles.



Service marketing is more challenging than product marketing because of the
inherent nature of services. This can be seen as below:
[1] Intangibility: The intangibility of services create following implications
Customer cannot see, touch or feel
No possibility of impulse purchase
No measurement of quality
No transfer of ownership
Cannot be patented
Pricing is difficult
Cannot be stored
The solution is (ways to overcome)
Focus on benefits and visualization
Use brand name and association
Physical representation (increased tangibility)
Presenting facts and figures

[2] Perishable: The perishable nature of services create following
Cannot be stored, packed, or transferred.
Demand fluctuates from time to time
No possibility of delayed sales
Simultaneous production and consumption
The solution of this problem is:
Over marketing (example, tele marketing)
Managing demand
Managing supply

[3] Inseparable: The inseparable nature of services create following
Need presence of both consumer and producer

Only direct sales are possible
Limited scale of operations
Limited market geographically
Solution to this problem is
Giving proper training to internal customers
Video conferencing/ satellite conferencing.
Making operations fully automatic

[4] Heterogeneous/ variability: The heterogeneous feature of service results
in the following implications
Difficult to standardize
Inconsistency in service offer.
Cultural differences between staff and customer.
The solution to this problem is;
Training of internal customers
Proper recruitment and selection of internal customers
Training of external customers

[5] Ownership: This feature of service create the following implications/
Customer cannot return back the service
Ownership cannot be transferred
Focus on advantages of non ownership
Membership scheme

Thus service marketing is more challenging and complex. It requires different
marketing strategies and different marketing mix. It is much broader than product
marketing. Service marketing environment is much dynamic than product
marketing environment. The management function of a manufacturing
organization cannot directly be transferrable to service organization. The service
organization cannot get customer if it adopts traditional channels of distribution.
The new features that can be identified for marketing of services are:


{I} People are important: For the marketing of services it is the frontline
employee that holds a complete responsibility of either success or failure in
service delivery. Therefore companies must train the frontline staff in
customer handling and customer relationship.
{II} Needs different skills: The service provider must deliver satisfaction the
way his customer wants it. Therefore service marketing needs different
skills into the art of handling the customer. Train people in skills to
understand customer expectations
{III} Different organization structure: Service marketing need different
organizational structure than product marketing. In product organizational
structure the top level is narrow because the top management does not get
into regular contact with customer but in service organization customer
comes in direct contact with service provider. The necessity of physical
evidence requires that the customer is present at the time and place of
delivery. The customer is the king here and all decisions need to be taken
keeping his convenience in mind. The new approach to service marketing
rotates the pyramid by 360 degree to bring it virtually upside down. It
identifies another very important element that does not exist in the original
pyramid- the service customer.
{IV} Need different approach to pricing: Pricing of services is very difficult
task due to intangible nature of services. It becomes difficult to educate the
customer on the cost factor involved in price component. Even it is difficult
for customers to compare price of different services. It is subjective.
{V} Needs different marketing mix: Services need different marketing mix.
Service involves customer involvement, service provider, physical
evidence, delivery system. Thus due to the inherent nature of services the
marketing mix (4 Ps) is not sufficient and there is need of additional
marketing mix.
{VI} Need interactive marketing: Service marketing is interactive marketing. It
involves all the elements of marketing trinity that is management,
employees and customers. It involves internal marketing, external
marketing and interactive marketing.



i. Services
ii. Intangibility of services
iii. Consumer behavior
iv. Service marketing trinity
v. Service encounter
vi. Zone of tolerance
vii. Buying roles
viii. Perishability of services
ix. Inseparability of services
x. Product service continuum

i. Explain the features of services
ii. Explain the role of services in an economy with reference to India
iii. Explain factors responsible for the development of services
iv. Explain how services can be classified. How this is useful in marketing
v. Describe service marketing environment.
vi. Describe consumer behavior
vii. Explain the service marketing trinity
viii. Describe core and supplementary services
ix. Describe buying roles
x. Service marketing is more complex and challenging. How marketers
can overcome this challenge.