Introduction to

Services Marketing
 “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-
 It is the part of the product or the full product
for which the customer is willing to see value
and pay for it.
 The services sector has been growing at a
rate of 8% per annum in recent years
 More than half of our GDP is accounted for
from the services sector
 This sector dominates with the best jobs, best
talent and best incomes
What is a Service
 A Service is a type of a product.

“… a deed performed by one party for

another…”
 Discussions about the marketing of goods
apply to services as well.
 Services have special characteristics that
make them different than products.
Importance of services
 In all parts of the world, the service sector is
on an all time boom.
 It has a contribution of 54% in India’s GDP,
and this is excepted to grow in the future.
 All businesses today offer services bundled
with the marketing of goods to derive a
competitive edge in the market over similar
and competing products.
Phenomenal Growth attributes to

 Rapid increase in per capita income

 Double income families
 Increase in leisure
 Changed life style
 Increased Life expectancy
 Increased complexity in life
 Specialization in Profession & Business
Important features

 Lack of Physical output or construction.

 Benefit to the receiver from the service rather
than the product offered.
 The intangible nature of services.
 The possible combination of services with the
production of goods.
 Marketing of an idea or a concept.
Contribution of Services to GDP

-- Generally contribution of Service to Gross Domestic Product of a

nation increases as its economy develops

Country Service contributes

China 40.0% of GDP
Brazil 54.0
India 60.7
Canada 68.5
Japan 73.1
U.K. 73.4
U.S. 78.6
 Tangible / Intangible Attributes

 Tangible  Intangible
 touch  can’t see

 see  can’t touch

 taste  can’t smell

 smell  can’t taste

Goods and Services: Scale of
Elemental Dominance
The goods and service continuum
 Tangible Goods : Do not offer any amount of
services. Toothpaste, salt, soaps etc are examples.
Customers purchase these products on the merit of
the advantages of the tangible parts.
 Tangible goods with some services : In some cases,
customers require some knowledge about
installation, training about the use of products, after
sales service. The spread of the word of mouth
depend upon these attributes. Examples are
consumer durables, computers, cars etc.
 Goods and services in near equal measures :
People have different reasons for choosing a
bar or a restaurant. For some, the equality of
food and cocktails is the key, for some others
the ambiance is the key. Here, to satisfy a
customer, a hotel should provide excellent
food (tangible ) and service ( atmosphere,
hospitality ).
 Service accompanied by minor goods:
 Some industries provide services (airlines )
accompanied by some amount of products
(food, soft drinks etc )
 ISP’s provide the service of internet. In
association they also give CD of games,
utilities etc.
 Pure services, not accompanied by goods :
Some companies deliver a pure service like
consultation, gym etc. Here, there is no other
consideration by buyers but the purchase
depends purely on the service quality.
 Service Classifications
Service

Equipment-based People-based

Monitored by
Operated by
relatively Unskilled Skilled Professionals
Automated skilled
unskilled labor labor
operators
operators

•Vending •Motion •Electric •Lawn care

utilities •Appliance •Lawyers
machines picture •Security
•Automated •Airlines repair •Managing
theaters guards
•Computer •Plumbing consultants
car washes •Dry cleaning •Janitorial
•ATM network •Catering •Accountants
•Taxis services
installation
Special Characteristics of
Services

Intangibility Inconsistency
(Heterogeneous)

Inseparable Inventory
Simultaneous
Production (Perishability)
and
Consumption
 Difference between physical goods
and services
Physical goods Services
tangible intangible
homogeneous heterogeneous
Production and distribution are separated Production, distribution and consumption are
from consumption simultaneous processes

A thing An activity or process

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
INTANGIBILITY

 Pure services cannot be assessed by sight,

feel, smell, taste etc.
 Emphasis on processes rather than
outcomes
 Can only assess a service after it has been
consumed
 Services purchases may be perceived as
more risky than goods
Implications of Intangibility
 Services cannot be inventoried
 Services cannot be patented
 Services cannot be readily displayed or
communicated
 Pricing is difficult
VARIABILITY ( Inconsistent )

 Each producer-consumer encounter may be

unique
 May be little opportunity for quality control to
maintain consistency
 It is often easy to adapt services to the
specific needs of individual consumers
Implications of Heterogeneity
 Service delivery and customer satisfaction
depend on employee actions
 Service quality depends on many
uncontrollable factors
 There is no sure knowledge that the service
delivered matches what was planned and
promoted
INSEPARABILITY

 Production of a service cannot be separated

from its consumption
 Consumers are co-producers of a service
 Makes quality control more difficult
 Has implications for accessibility to services
Implications of Simultaneous Production
and Consumption
 Customers participate in and affect the
transaction
 Employees affect the service outcome
 Decentralization may be essential
 Mass production is difficult
PERISHABILITY

 Services cannot be stored

 If capacity is not used, the opportunity to sell
it is lost forever
 Supply and demand must be carefully
matched
 Mismatch between supply and demand can
impact directly on consumers
Implications of Perishability
 It is difficult to synchronize supply and
demand with services
 Services cannot be returned or resold
Service Marketing Triangle
-- Service marketing is all about promises – promises made
and promises kept to satisfaction of customers.

-- So framework of service may be split into three arms viz.

* making the promise
* enabling the promise &
* delivering the promise
Management

Internal Marketing External Marketing

(enabling the promise) ( making the promise)

Contact employee Customers

Interactive Marketing
(delivering the promise)
External Marketing of Services
Comprises of activities through which company makes
promises to customers about ‘service’ like Advertising, Sales
Promotion, Pricing, Availability etc.

In addition, promises are made by

• Contact employees during interactions
• Proper design and décor of service area (ambience)
• Development of service process ( blueprint)

Effective external marketing involves consistent and

realistic promises which the company can keep.
And not overpromises that raise customers’ expectation
thereby leads to dissatisfaction and poor customer
relationship.
Internal Marketing
Company has to develop a ‘service blueprint’ depicting step

by step progress of service process.

Company should impart on- and off-the-job training to

contact employees who will actually deliver the service.
Company should equip contact employees with suitable
tools, requisite knowledge and skills so as to provide
service satisfactorily.
Company should ensure proper motivation and control of
contact employees so that they remain in ship-shape to
provide satisfactory service.
 Interactive Marketing
It is unique of Service Marketing that the customer interacts with
‘contact employee’ (i.e. service provider) in delivering the promised
service, unlike products where customers only consume or use the
product without interacting during its manufacture.
Hence it is essential that contact employee is equipped with skills,
knowledge, tools and motivated to do his best in service delivery.

For same reasons ‘Ambience’ i.e. arena where service is delivered

should be congenial for both players.

Technology is fast emerging as the fourth apex of ‘Service Triangle’

for customer satisfaction, giving it the shape of a ‘Pyramid’.
Strategy for Customer Satisfaction through Quality
Service Delivery
Key aspect of this strategy is that the contact employees
should be willing and also able to deliver quality service.

So successful service-providing companies endeavor to build

teams of customer-oriented, service-minded contact
employees in ‘Internal Marketing’ process through :

* hiring right persons

* developing them to deliver quality service
* provide them with needed tangibles including motivation
&
* retaining best people.
Extended Marketing Mix
 Marketing mix are elements that marketer uses to
satisfy or communicate with customers.
 Traditionally, marketing mix composes of 4 P’s viz.
 Product, Price, Place (distribution) and Promotion.
 These elements are interrelated and collectively
help in delivering satisfaction to customers in
selected segments at profit to organization.
 Services are intangible, quite often, customers use
the ambience i.e. building, lawns or accompanying
tangibles - equipments in operation theatre of
hospital to gauge the level of service experience.
Extended Marketing Mix
 Realizing importance of these additional variables in
service marketing , marketers have taken three additional
elements as ‘Service Marketing Mix’ elements viz.:
 People – Human actors who play role in service delivery
to influence customers’ service experience and perception
like employees, customers etc.
 Physical Evidence – Environment where service is
delivered or service-provider and customer interact, the
ambience, facility design, equipments, employee -dress,
logo, business card and other tangibles.
 Process – Actual procedures, mechanism, flow of
activities and equipments by which service is delivered.
Major Challenges in Service Marketing

1. Delivery of service consistently at same level of quality

-- Because services produced by providers are not consistent
-- And services cannot be mass-produced
-- So delivery of high quality service becomes costlier.

2. Wide fluctuation in demand of service

--Demand for hotel accommodation, tables at restaurant, public
transport etc vary greatly with time.

3. Designing of new services is a challenge to marketers

--Identifying precisely what is wanted by customers is
complex so requires intensive market research.
4. Role of Service-providers
-- Most of services are produced and delivered when in close proximity of
customer so right selection, training and motivation of service-providers
is essential.

5. Wider Competition
-- Today’s employee / franchisee may become tomorrow’s competitor. --
Attrition rate is high in service industry particularly among skilled
service-providers.