Services Management

―There are no such thing as service industries.

There are only industries whose service
components are greater or less than those of other
industries. Everybody is in service.‖
-Theodore Levitt-
Services – present in all industries
 regardless of the ―product‖, there is a services component
to the offerings of all firms
 in some cases, a service is the principal purpose of the
transaction, as in the services of a doctor, a haircut, or
legal services -- we refer to this as the core service
 in others, service is performed in support of the sale of a
tangible product -- these are referred to as supplementary
services
 Supplementary services are growing in importance.
Why study services management
 Services are becoming the dominant economic driver in
the Indian economy
 Superior service drives the competitive advantage of
leading companies. Even for companies not considered as
traditional service companies, services represent their
primary growth and profitability strategies
 Services marketing is different and therefore challenging
 Deregulated industries and growing professional service
needs
What is services?

Kotler – A service is 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
 Tangibility Spectrum
Salt

Detergents

Automobiles
Cosmetics
Fast-food outlets

Intangible
dominant
Tangible
dominant

Fast-food
outlets
Advertising
agencies
Airlines
Investment
management
Consulting
Teaching
 The Goods-Services
Continuum

Canned Ready- Auto- Cosmetics Rest- Repairs: Air Insurance,

foods made mobiles aurant auto, house, travel Consulting,
clothes meals landscaping Teaching

MOSTLY GOODS MOSTLY SERVICES

Difference between physical
goods and services
Physical goods Services

tangible Intangible

homogeneous heterogeneous

Production and distribution are Production, distribution and

separated from consumption consumption are simultaneous
processes
A thing A deed or process or performance

Core value processed in factory Core value produced in the buyer-seller

interaction
Customers do not participate in the Customers participate in production
production process
Can be kept in stock Cannot be kept in stock

Transfer of ownership No transfer of ownership

Service Sector - diverse
 Services have globally become a dominant factor
in modern economy.
 The services sector is remarkably diverse. At one
end of the scale are large industries like airlines,
banking, insurance, telecommunication,
hospitality, road and rail transport etc.
At the other end are small businesses like
restaurant, healthcare, fitness centers, event
management and other B2B services.
Industries classified under the service sector
 Transportation – Airline, water, rail and road transportation, freight
 Education – Schools, colleges, tutorials, self improvement courses
 Health services – Hospitals, Consultations, labs
 Legal services
 Banking, investment services, insurance, accounting and tax services
 Communication – Telephone, mobile, post and telegraph
 Food and lodging – Hotels, restaurants, resorts
 Consultancy, Market research, Advertising
 Media – Radio and Television broadcasting, Advertising
 Maintenance and repair of equipment, Household services, courier
 Entertainment – Theatres, motion pictures, theme parks
 IT – Internet, software and IT enabled services
 Beauty – Salons, spas
 Public Utilities – Electricity, water, sanitation
 Military, police services
 Real Estate
Characteristics of Services
1. Intangible
Cannot be seen, felt, tasted, touched in the same
manner as with tangible goods
Implications: customers may find it difficult to understand the
service offer before or even after the receipt of service, cannot
be patented, cannot be displayed or communicated, cannot be
tested, pricing is difficult, judging quality in advance is not
possible
Many services such as medical diagnosis / surgery cannot be
understood by the patient even after it has been
performed!!
 Intangibility

1. Difficulty in evaluating competing service

2. High levels of risk perceived
3. Price may be used as basis for assessing quality

1. Focus on service quality / benefits

2. Stressing tangible cues / brand names
3. Facilitating word of mouth recommendation
4. Reducing service complexity / personalize service
Characteristics of Services..
2. Perishable
Cannot be saved, stored, resold or returned
Implications: A loss of business on a certain day
cannot be compensated on another day.
Inability to inventory, creative planning for capacity
utilization is not possible.
Services are more perishable than vegetables, milk
and fish!!
 Perishability

Highly affected by seasonality / demand fluctuation

Pricing and promotion are two tools adopted to tackle

this problem
Programs to compensate for uneven demand
Airlines Night rates, group and tour fares, family discounts,
advance purchase super savers, 24 – hour round trip
discounts, and low season fares
Hotels Off season and group rates, theme weekends (valentine
getaways), week end packages, senior citizen discounts
Telephone Evening, night and weekend rates
Salons Evening appointments and family rates
Automobile Specials (tyre balancing, tuneups) and repair
Dentists family discounts
Education Weekend classes, distance education
Entertainment Matinee specials, midnight showtime special rates
Characteristics of Services..
3. Heterogeneous / Variable / Inconsistent
Services are performances by humans - No two services will
be precisely alike. Heterogeneity results as people differ in
performances from day to day, hour to hour and also because
human interaction (between employees and customers) and
all of the vagaries associated with it.
Implications: Standardization and Total quality control is
difficult. Pricing is difficult.
Variability also exists among service customer’s
expectations!!
 Variability

Difficult to standardize quality

Careful selection and training of personal, Define

Service rules and process.
Characteristics of Services…
4. Simultaneous production and consumption / Inseparable
Where as most goods are produced first, then sold and
consumed, most services are sold first and then produced and
consumed simultaneously. The service provider and service
are inseparable.
Implications – The quality of service and customer
satisfaction will greatly depend on what happens during the
real time. No second chance. Operations need to be
decentralized. Mass production is difficult if not impossible.
 Inseparability

Requires presence of performer, Geographically

Limited market,

Train more service providers, Use technology to reach

To customers
Characteristics of Services…
5. Ownership
When you buy a product you become its owner, in
case of services you may pay for its use but never
own it. Services cannot be sold to a third
party.
In case of a tour to Europe or U.S a passenger ends
with paying about 5-10 lakhs and all he has is a
few photos for keeps !!
 Lack of ownership

Customer hesitates in spending a huge amount

Stress on the advantages like easier payment scheme

The Services Marketing Triangle

Company

Internal Marketing External Marketing

Enabling Making
promises promises

Providers Interactive Marketing Customers

Keeping promises
 The Services Marketing Triangle

 The company, customers and the providers.

 Company-( can be also SBU ,or Dept or management)
 Providers –( can be firm’s employees, subcontractors, or
outsourced entities who actually deliver the company’s services)

 External marketing efforts

 Efforts the firm engages in to setup its customer’s expectation and
makes promises to customers regarding what is to be delivered.
 Interactive marketing
 Keeping promises. Here is where the promises are kept or broken
by the firms employees , subcontractors, or agents.

 Internal marketing
 Activities firm engages in to aid the providers in their ability to
deliver on the service: recruiting, training, motivating, rewarding
and providing equipment and technology.
Expanded Mix for Services --
The 7 Ps
 Product
 Price
 Place
 Promotion
 People
 All human actors who play a part in service delivery and thus
influence the buyer’s perceptions: namely, the firm’s personnel, the
customer, and other customers in the service environment.
 Physical Evidence
 The environment in which the service is delivered and where the
firm and customer interact, and any tangible components that
facilitate performance or communication of the service.
 Process
 The actual procedures, mechanisms, and flow of activities by which
the service is delivered—the service delivery and operating systems.
Expanded Marketing Mix for
Services
Contribution of Service industries to US GDP

Source: Inside Sam’s $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86.