SERVICES MARKETING

MODULE 1
 Module-1

 What are services

 Why services marketing
 Difference btw goods and services
 Myths about services
 Concept of service marketing triangle
 Service marketing mix
 GAP model of service quality
 Concept of Service

Service is, “an activity or series of activities rather than

things which has some element of intangibility associated
with it, which involves some interaction between the
customer and the service provider, and does not result in a
transfer of ownership.
Customer has a vital role to play in the production process
as the services are provided in response to the problems of
customers as solution. The production of the service may
or may not be closely associated with a physical product”.
A service is non – material equivalent of a good. A
service is an economic activity that does not result in
ownership but implying an exchange of value between
seller & buyer in the market place, & this is what
differentiates it from providing physical goods

SERVICE: Acc to Philip Kotler “A service is an act or

performance that one party can offer to another that is
essentially intangible & does not result in ownership.
Its production may or may not be tied to a physical
product”.
 Characteristics of Service

Services have a number of unique characteristics that

make them different from products.

Characteristics of Service

Intangibility Inseparability

Variability Perishability
(1) Intangibility:

The most basic and universally cited characteristic of

services is intangibility, because services are performances
or actions rather than objects, they cannot be seen, felt,
tasted, or touched in the manner that we can sense tangible
goods. For example, when we buy a bar of soap, we can see,
feel, smell and use to check its effectiveness in cleaning.
But,
when we pay fees for a semester in the university, we are
paying for the benefits of deriving knowledge, skills and
education which is delivered to us by teachers. Teaching is
an intangible service. When we travel by a plane, the benefit
which we are deriving is a service (transportation) but, it
has some tangible aspects.
(ii) Inseparability:
In most cases a service cannot be separated from the
person or firm providing it. A service is provided by a
person who possesses a particular skill (singer, doctor,
etc.), by using equipment to handle a tangible product
(dry cleaning) or by allowing access to or use of a
physical infrastructure (hotel, train, etc.). Services are
typically produced and consumed at the same time. The
telephone company produces telephone service while the
telephone user consumes it. A plumber has to be
physically present to provide the service. The service
provider and the client are often physically present when
consumption takes place.
(iii) Heterogeneity: (variability)
Since services are performances, frequently produced
by human beings, no two services will be precisely
alike. The human element is very much involved in
providing and rendering services and this makes
standardization a very difficult task to achieve. The
doctor who gives us complete attention in one visit
may behave a little differently in next visit. The new
bank clerk who encash our cheques may not be as
efficient as the previous one and we may have to spend
more time for the same activity.
(iv) Perishability:
Perishability refers to the fact that services cannot be
saved, stored, resold, or returned. Since services are
deeds, performances or acts whose production and
consumption takes place simultaneously, they tend to
perish in the absence of consumption. Goods can be
stored and sold at a later date in the absence of a
customer.
Services, on the other hand, go waste if they are not
consumed. A seat on an airplane or in a restaurant, an
hour of a professor’s time, or telephone line capacity not
used cannot be reclaimed and used or resold at a later
time.
v) No Transfer of Ownership:
When We buy a product, we become its owner-be it a
pen, book, shirt, TV or Car. In the case of a service, we
may pay for its use, but we never own it. By buying a
ticket one can see the evening film show in local cinema
theatre; by paying wages one can hire the services of a
chauffeur who will drive his car; by paying the required
charges We can have a marketing research firm survey
into the reasons for our product’s poor sales
performance, etc. In case of a service, the payment is
not for purchase, but only for the use or access to or for
hire of items or facilities; and transfer of ownership
does not take place.
 Reasons for the growth of Service sector
 Increasing affluence
 More leisure time
 Higher percentage of women in labor force
 Greater life expectancy
 Greater complexity of products
 Increasing complexity of life.
 Greater concern for resource scarcity & ecology
 Increased consciousness of healthcare
 Migration & export Potential
 Service Sector in India
 In India, the service sector has been emerging as the
dominant component of the economy.
 Certain types of services have been growing particularly
rapidly.
 Importance of the services sector for india can be gauged
by looking at its contributions to different aspects of the
economy:
1. Services GDP
2. Services employment in India
3. Better standard of living
4. FDI in Service sector
5. State wise comparison of services
6. India’s Service trade
 The major impact of the services sector has been in
its contribution to the nations wealth creation and
the provision for better employment opportunities all
over the globe.
 Service - Definitions

 Services are deeds, processes and performances.

 Services are defined as “a form of product that
consists of activities, benefits or satisfactions
offered for sale that are essentially intangible and
do not result in the ownership of anything” - Philip
Kotler
 All economic activity whose output is not a physical
product and is generally consumed at the time it is
produced is called services.
 A service is any act or performance that one party
offer to another that is essentially intangible & does
not result in the ownership of anything. It may or
many not be tied to a physical product.
 Goods vs. services
goods
 Physical objects
 Are solid & can be
touched
 Occupy space and
substance
 Ownership can be
transferred
 Goods can be stored for
future use
 Easy to evaluate
services
 Non physical objects
 Can be felt cerebrally
 Share to be experienced there
& then
 Cannot be stored or carried
away for future use nor it can
be resold
 Customers may be involved in
the production process
 Difficult to evaluate
 There is greater variability on
operational inputs & outputs.
 Service Marketing

Service Marketing : SM is specialised branch in

marketing . It is based on relationship & value. It may
be used to market a service or product also. Marketing
a service based business is different from marketing a
goods base business because of unique characteristic
of services namely intangibility, perishability,
variability & inseparability.
 Service Marketing Triangle
 It is said that services mktg is a game of “promises”
played amongst three entities engaged in the service
transition.
 The three entities in a service transaction are:
1. The Company
2. The Customer
3. The Provider
 Three different types of mktg take place during the
service transaction amongst the three entities:
1. External Marketing
2. Internal Marketing
3. Interactive Marketing
Service Marketing Triangle

Company

Internal marketing External Marketing

Enables Making
Promises Promises

Employees Costumers
Interactive Marketing
keeping Promises
 External Marketing : ‘ Making Promises’
• Marketing to end users
• Involves pricing strategy, promotional activities &
other communication with customers.
• Performed to capture the attention of the market &
interest in the service.
 Interactive Marketing : ‘keeping of promise’
• This refers to the decisive moment of interaction
between the employees & costumers.
• This step is of utmost important, because if the
employee falters at this level, all prior efforts made
towards establishing a relationship with the
customer, would be wasted.
 Internal Marketing : ‘Enabling Promises’
• Marketing to employees
• Involves training, motivational & teamwork
programs & all communication with employees.
• Performed to enable employees to perform the
service effectively & keeping up the promises made
to the customer.
“Viewing employees as internal customers, viewing
jobs as internal products & then endeavouring to offer
products that satisfy the needs & wants of these
internal customers while addressing the objectives of
the organisation.”
The Marketing Mix
 PRODUCT:

 The product in service marketing mix is intangible in

nature. Like physical products such as a soap or a
detergent, service products cannot be measured.
Tourism industry or the education industry can be an
excellent example.

 At the same time service products are heterogeneous,

perishable and cannot be owned. The service product
thus has to be designed with care.
 PLACE:

 The place part of the marketing mix is where the

customer receives the product or service. Place in
case of services determine where is the service
product going to be located.
OR
 The means by which products and services get from
producer to consumer and where they can be
accessed by the consumer
.

 Place plays an important role in tangibilizing

service offerings. Quality of service is perceived
by many customers in the form of place of
delivery- locational appeal, interiors, ambience,
etc..
 PRICE:

 Pricing in case of services is rather more difficult

than in case of products.

 The price of the product depends upon the services

provided by the company on the respective product
to the customers. Detailed pricing changes from time
to time.
PROMOTION

 Strategies
to make the
consumer aware of
the existence of a
product
or service.
Promotions have
become a critical
factor in the service
marketing.
 Visualization tangibilizes services through
hoardings, TV and print campaigns or
advertisements. Physical representation in services
has a good promotional appeal to customers like
use of colors to symbolize wealth and status.
Service providers use documentation in their
promotions in support of their claims for
dependability, popularity and responsiveness.
 PEOPLE

 People is one of the elements of service marketing

mix. People define a service. If you have an IT
company, your software engineers define you. If you
have a restaurant, your chef and service staff defines
you. If you are into banking, employees in your
branch and their behavior towards customers defines
you. In case of service marketing, people can make or
break an organization.
 Cont….

 People are a common factor in every service. And

people tangibilize services. Good people (means
good performance) make good or successful services.
Bad performers deliver bad services.
 PROCESS

 The actual procedures, mechanisms and flow of

activities by which the services are delivered – i.e. the
service delivery and operating systems.
 Some services are very complex, requiring the
customer to follow a complicated and extensive series
of actions to complete the process.
 The way it is done can sometimes determine the
customer satisfaction with the entire service
experience.
 It is important to view the process in terms of a visual
map with various activities & stages listed preferably
from customer viewpoint.
 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.
 The appearance of buildings, landscaping, vehicles,
interior furnishing, equipment, staff members, signs,
printed materials, and other visible cues all provide
tangible evidence of a firm’s quality.
 Services need to manage physical evidence carefully, as
it can have a profound impact on customer’s
impressions.
 Contd…

 In many situations, customers may be attracted by

the looks of a restaurant, a retailers façade and may
decide to try it out.
 Physical evidence cues provide excellent
opportunities for the firm to send consistent and
strong messages regarding:
a) The org’s purpose,
b) The intended market segments, and
c) The nature of the service.
 Contd…

 If the service worker does not have the right attitude

towards his job, this situation of constant interaction
with customers can be very stressful.
 Therefore, it has become inevitable to look into
issues involved in recruitment, training & motivation
of employees, for the service sector jobs in a deeper
manner.
Façade
Façade
GAP MODEL Of Service Quality: Gap in service is the difference
between customer perceptions & expectations. Customer
perceptions are subjective assessment of actual service experience.
Customer perceptions & customer expectations play an important
role in service marketing. There are 4 types of GAP’s in the model
given by Zeithaml, Berry & Parasuraman…
 Gap 1 : Customer Expectations v/s Perceived Service gap.

 Gap 2 : Quality Standard gap

 Gap 3 : Service Performance gap

 Gap 4 : Promise v/s Performance gap

Contd…
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 Consumer Behavior in Service:

Consumer Behaviour: CB refers to the buying

behaviour of the final consumers – individuals &
households who buy goods & services for personal
consumption.

 From a marketing perspective, products and services

can be categorized into three useful classes:
a) Search products
b) Experience products and
c) Credence products.
 Continuum of Evaluation for Different
Types of Products

Most Most
Goods Services

Easy to evaluate
Difficult to evaluate

High in search High in experience High in credence

qualities qualities qualities
 Search Attributes

 Search products or services have attributes consumers

can determine before they purchase.
 Physical goods tend to emphasise those attributes that
allow customers to evaluate a product before purchasing
it. Style colour, texture, taste & sound are features that
allow prospective consumer to try out, taste test or test
drive the product before purchase.
 These tangible attributes help consumer in
understanding & evaluating what they will get in
exchange for their money & reduce the sense of
uncertainty or risk associated with the purchase.
 Search Attributes

 Price sensitivity is high with respect to products with

many substitutes, and since most buyers are aware of
their alternatives, prices are held within a competitive
band.
 Experience Attributes
 Attributes that consumer can determine & evaluate
only after purchase, such as:
a) Dinner in a new restaurant
b) A concert or theatre performance
c) A new movie, or a hairstyle.
 The customer cannot pass judgment on value until
after he or she has experienced the service.
 These types of products tend to be more
differentiated than search products, and buyers tend
to be less price sensitive, especially if it is their first
purchase of said product.
 Experience Attributes

 However, since they will form an opinion after the

experience, if it is not favourable, no amount of
differentiation will bring them back.
 Product brand and reputation play an important role
in experience products, due to consistency of quality
and loyalty.
 Credence Attributes

 Credence products or services have attributes which

buyers cannot confidently evaluate, even after one or
more purchases & consumption.
 Buyers tend to rely on the reputation of the brand
name, testimonials from someone they know or
respect, service quality, and price.
 Credence products and services include health care;
legal, accounting, advertising, consulting, and IT
services; baldness cures; pension, financial, and
funeral services; and even pet food (since you have to
infer if your pet likes it or not).
 Credence Attributes

 Credence services are more likely than other types to

be customized, making them difficult to compare to
other offerings.
 Because there are fewer substitutes to a customized
service and there is more risk in purchasing these
types of services, price sensitivity tends to be
relatively low .
 The majority of customers purchasing credence
services are relatively price insensitive compared to
search or credence goods.
 Consumer Expectations of Service

Consumer Expectations are the….

 Beliefs about service delivery serve as standards or
reference points against which performance is
judged.
 Customers compare their perceptions of
performance with these reference points when
evaluating service quality.
 Through knowledge about customer expectations is
critical to services marketers.
 Being wrong about what a costumer want mean
losing the customer.
Expected Service: Levels of Expectations

Possible Levels of Customer Expectation

Ideal Expectations or Desires

Normative “Should” Expectations

Experience Based Norms

Acceptable Expectations

Minimum Tolerance Expectations

Possible Levels of Customer Expectations
 Customer Expectation Levels

Desired Service:
Level of service that
customer hopes to
receive

Adequate service:
Level of service the
customer will accept
The Zone of Tolerance

Range or window in which customers do

not notice service performance
When service falls outside this
range(either very high or very low), the
service gets the customer’s attention in
either a positive or negative way
 Different customers possess different Zone
of tolerance

 Some customers have narrow zones of tolerance

 They require tighter range of service from providers
 Others allow a greater range of service
 An individual customer’s zone of tolerance vary for
a number of factors e.g. price, personal needs,
behavior etc.
 Customer delight
 Customer satisfaction
 Customer dissatisfaction
 The Zone of Tolerance

 customer delight
Desired Service

Zone of
Tolerance  customer satisfaction

Adequate Service
 customer dissatisfaction
 Factors influencing customer expectation of
services

 Factors influencing customer expectation of services

a) Sources of desired service expectations
b) Sources of adequate service expectations
 Factors That Influence Desired Service
Expectations

 Perso na l needs : states o r co nditio ns essen tial to th e p h ysical o r psycho logical

well being --- physical, social, psychological, and functional .
 Enduring serv ice intensifiers : ind iv idu al s tab le f acto rs th at lead th e cu sto mer
to a heightened sensitiv ity to service .
 Deriv ed serv ice expecta tio ns : th is o ccu r wh en cu sto mer ex pectatio n s are
driven by another person or group of ppl.
 Ex : a n iece fo r m a b ig f a mi ly who is p lannin g a 90 t h b irth day p arty f or a
favo rite aun t is rep resen ting th e en tire f ami ly in selecting a restau ran t fo r
successfu l celebration .
 Her needs are driven fro m the other family memb ers.
 Ex : a paren t ch oosing a v acation f o r th e f a mi ly, an e mp lo yee choo sing an office
for the firm.
 Perso na l serv ice philosophy : th e cu sto me rs underlying g en eric attitud e ab t th e
meaning of service and the proper conduct of the service providers .
 Peo p le who h av e exp erien ce in th e p rev io us f ield will hav e strong serv ice
philosophies .
Factors That Influence Desired Service
 Factors That Influence Adequate Service
Expectations

 These influences are short term and tend to

fluctuate more than the factors that influence desired
service.
 In this section we explain the five factors that
influence adequate service:
 (1) temporary service intensifiers
(short-term, individual factors that make a consumer more
aware of the need of service)
 (2) perceived service alternatives

(As the number of alternatives increases, the level of adequate

service increases and the zone of tolerance narrows)
 Contd…

 (3) customer self-perceived service role

(how well the customer perceives they are performing
their own role in service delivery)
 (4) situational factors

(Temporary changes in the normal state of things ----

tends to lower the level of adequate service expected and
widen the zone of tolerance)
Example: Reason for purchase, Consumer mood,
Weather, Time constraints , Emergency
Factors That Influence Adequate Service
 Customer perception of services

 Perception is the process through which the info

from outside environment is selected, received,
organized and interpreted to make it meaningful.
 Perception is the process by which individuals
organize and interpret their sensory impressions in
order to give meaning to their environment.
 Perception includes all those processes by which an
individual received information about his
environment- seeing, hearing, feeling, tasting and
smelling.
factors Influencing customer perceptions
of services

a) Service encounter
b) Service evidence
 People/ service personnel
 Process of service delivery
 Physical environment
c) Organizational image
d) Price
 Contd…
a) Service encounter (customer’s interaction throughout the
service, from the beginning till the end)
b) Service evidence (services are intangible hence customers
search for evidence)
 People/ service personnel: :- contact employees, customer
himself, other customers.
 Process of service delivery: operational flow, steps in process,
flexibility, technology.
 Physical environment: consists of the ambience offered by a
service provider & the design of the interiors-exteriors of the
service facility.
c) Organizational image (positive or negative image will have a
profound effect on customers)
d) Price (low price may be regarded as low quality service or vice
versa)
 Strategies for influencing customer perception

1. Measure and manage customer satisfaction and

service quality
2. Aim for customer quality and satisfaction in every
service encounter
 Plan for effective recovery
 Facilitate adaptability and flexibility
 Encourage spontaneity
 Help employees cope with problem customers
 Contd…

 Manage the dimensions of quality at the encounter

level
3. Reflect evidence of service
4. Communicate and create a realistic image
5. Enhance customer perception of quality and value
through pricing
 Strategies for influencing customer perception

 Measure and manage customer satisfaction and

service quality: monitor CS & SQ, like tracking trends,
diagnosing problems and link it with other strategies like
employee training, reward systems, internal process
metrics, orgn’l structure, leadership goals.
 Aim for customer quality and satisfaction in
every service encounter: every encounter is imp in
retention, zero defect or 100% focus on every encounter,
documentation of all points of possible contact, should
focus on recovery, adaptability, spontaneity, coping.
 Contd…

 Plan for effective recovery: service failures and

subsequent recovery has a great impact, doing it very
right in the second time creates loyalty,
 root cause analysis has to be done through analysing
service process, redesign, better preparation for
failure and immediate recovery plan.
 Facilitate adaptability and flexibility: customers
perception towards company’s ability to be adaptive and
flexible creates positive image,
 Companies must have encounter theme to know
flexibalization, knowledge of service concept, service
delivery & service operation,
 Better service standards enables employees to respond
better, a better handling of such issues give positive
impression.
 Encourage spontaneity: encourage +ve spontaneous
behaviour and reduce –ve spontaneous behaviour which
may occur even by having everything in place.
 Help employees cope with problem customers:
 Contd…

 Manage the dimensions of quality at the

encounter level: reliability responsiveness, assurance,
empathy and tangibles must be added or attached to each
encounter.
 Reflect evidence of service: gives a better assessment
to customers and helps in positive perception.
 Communicate and create a realistic image:
promises to be kept, will create +ve WoM, publicity.
 Enhance customer perception of quality and
value through pricing: having a right and worthy
price to support the service delivery
 Service Encounters- Moment of Truth

 It is the interaction b/w the customer and service

provider in service industry.
 The employee often represents the company to the
customer.
 It is concerned with the issue of staff presentation,
customer interaction and levels of satisfaction.
 This interaction is also called as “the moment of
truth”.
 Range of mental states a customer goes through
during service encounter:
a) Experiencing the need
b) Anxiety about how to fulfil the need
c) Sensitivity about the choice
d) Happiness or unhappiness about the service
encounter
 Types of service encounters

 Remote Encounter
 Phone Encounter
 Fact to Face Encounter
 Remote Encounter

 It occurs without any direct human contact, such as when a

customer interacts with a bank through the ATM.
 A company interacts with customers through its website.
 A company interacts like taking orders, passing information
through mail orders.
 A company sending billing statements or other
communications through mail etc.
 Each encounter represents an opportunity for the firm to
reinforce or establish quality perception in the customer.
 In RE a level of tangible evidence and quality of technical
processes and systems become primary for judging quality.
 Phone Encounter

 Companies such as insurance, utilities, telecommunications

etc use telephone as medium for encountering with
customers.
 Almost all firms rely on phone encounters to some extents
for customer service, general inquiry, order taking
functions.
 The judgement of quality in phone encounter is diff from
RE because there is greater potential variability in the
interaction.
 Tone of voice, employee knowledge, effectiveness/efficiency
in handling customer issues become important criteria for
judging quality.
 Face to Face Encounter

 It occurs between an employe and a customer in

direct contact.
 Ex: In Disney theme parks, F2F encounters occur
between:
 Customers and ticket takers
 Customers and maintenance personnel
 Customers and actors in Disney character
 Customers and ride personnel
 Customers and food & beverage servers etc
 Contd…

 In IBM, in B2B setting direct encounters occur b/w the

business customer and sales people, delivery personnel
maintenance representatives and professional
consultants.
 Determining and understanding the service quality
issues is most complex in this method.
 Both verbal and non verbal behaviours are important
determinants of quality.
 The tangible cues such as dress, equipment,
informational brochures physical setting are important.
 In F2F, even customers also play an important role
through their behaviour.
 Customer Satisfaction

 It is a business term used to measure how products

and services supplied by a company meet or surpass
customer expectations.
 It is one a key performance indicator within
business.
 It is one of the major competitive tool.
 It is a key differentiator.
 It is a key element in business strategy.
 It simply means how happy a customer is with the
company’s pdts and services and other acts.
 CS= Delivery – Expectations.
 Delivery refers to the customer’s perception of the
actual delivery of the product or service.
 Expectation refer to the customer’s expectations
about that product or service.
 Thus customer satisfaction is the difference or gap
between what the customers expected and what he
or she received.
 Factors influencing customer satisfaction

 Quality
 Reliability
 Value for money
 Responsiveness (before & after sale)
 Access
 Courtesy
 Communication
 Credibility
 Benefits of CS

 Loyalty: more loyal towards the company.

 Repeated purchase: happy to come back again
 Referrals: positive word of mouth
 Retention: less likely to switch brands
 Reduced costs: costs less to serve highly satisfied
customer
 Premium price: a customer is ready to pay high price