UNIT I : INTRODUCTION TO SERVICES

• UNDERSTANDING SERVICES
• GROWTH OF SERVICE SECTOR
• SERVICE SECTOR IN INDIA
• CHARACTERISTICS OF SERVICES
• GOODS AND SERVICES DIFFERENTIATION
INTRODUCTION TO SERVICES
• ANY ACTIVITY OR BENEFIT THAT ONE PARTY CAN OFFER 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 - Kotler and Bloom 1990
UNDERSTANDING SERVICES
• SERVICES IS THE FASTEST GROWING SECTOR OF THE WORLD ECONOMY.
• PEOPLE TEND TO CONSUME MORE SERVICES, AS THEIR STANDARD OF
LIVING IMPROVES.
• SERVICES INVOLVE ACTIVE PARTICIPATION OF THE CUSTOMER.
• CUSTOMER EVALUATE SERVICES BASED ON THEIR PERSONAL EXPERIENCE.
• NEW TYPES OF SERVICES KEEP DEVELOPING ALL THE TIME.
o We use services in some form or other on a daily basis, like using the phone,
taking a bus or train to travel, getting a hair cut, eating in restaurant etc. Services
form a major part of any economy, much more than agriculture or
manufacturing.
o Once people’s basic needs for food, shelter are satisfied, they tend to consume
more services, specially as their standard of living goes up. They tend use more
of services like beauty, fitness, tourism, higher education etc.
o Consumers play an active role in getting services. They have to communicate
their requirements clearly - when you go to have an hair cut. They have to
participate actively – in attending a gym or a health club to get the best results.
They have to follow the instructions given by the doctor properly if they want to
get well soon.
o Each persons experience of a service is unique – Another customer may not get
the same satisfaction even with the same service provider. You may get a nice
relaxed beauty treatment on a week day, but the same beautician may not be
able give you that much attention on a Sunday when there are lot of customers
waiting. Or the treatment may vary in the evening when the service provider is
tired from attending to customers all day. But you remember the last experience
and judge the service based on that.
Examples of Goods
• Soaps
• Clothes
• Shoes

1
 • Television
• Air conditioners
• Automobiles
Note.
Some products will also need servicing to repair or maintain them like automobiles,
air conditioners.
Examples of Services
• Advertisements
• Beauty Parlors, Saloons
• Health Services, Hospitals
• Hotels, Restaurants
• Travel & Tourism
• Educational Institutes
• Legal Services
• Event Management
• Security Service
GROWTH OF SERVICE SECTOR
SERVICE SECTOR GROWTH IS BECAUSE OF THE FOLLOWING REASONS:
• Increased productivity and automation in agriculture and industry.
• Growing economic affluence
• Growth of technology (internet, web services, mobile phones, satellite
television etc.)
• Increase in travel and tourism, entertainment, health awareness, leisure
activities etc.
Reasons for growth of service sector in India
• Economic Affluence
• Cultural Changes
• Changing Role of Women
• Increased Health awareness
• I.T Revolution
• Retail Revolution
• Mobile and Internet revolution
• Travel and tourism
• Insurance, Banking and other financial services
CHARACTERISTICS OF SERVICES
• INTANGIBILITY – Cannot be felt or seen, can be only experienced.
• INSEPARABILITY – Services are produced and consumed at the same time
• HETEROGENEITY – Service is always unique, cannot be repeated.
• PERISHABILITY – Cannot be stored
o Intangibility – Cannot be Stored or displayed.
Pricing is difficult.
No Patents can be copied easily.
2
o Inseparability –Cannot be produced in mass
Customer involved in production process
Difficult to match supply and demand
o Heterogeneity –Difficult to Standerdise
Quality control is difficult
o Perishablity – Not possible to produce and store.
Has to be produced fresh each time.
CLASSIFICATION OF SERVICES
• End User – Consumer, Business to Business, Industrial
• Tangibility – Highly tangible, linked to tangible goods, Highly intangible
• People based – Equipment based
• Expertise – Professional, non professional
• Profit orientation – Commercial, Non Profit Private, Public Sector.
o End User - Individual. A service can be consumed by an individual, like
getting a hair cut or eating in a restaurant or fast food.
o Business to Business – A service can be provided by running a canteen to an
office, or by giving training to the staff, maintaining the air conditioners in a
office.
o Industrial – Security service for industry, Health services for workers.
o Tangibility – Services can be classifies based on their tangibility from soaps
(highly tangible) , Automobile servicing (has tangible components like
spares) and Education (highly intangible)
o People based – High contact services like Doctors, Beauticians
o Equipment based – Low contact services like ATMs, Coffee machines
o Professional Services – Beauticians, Nurses, Lawyers
o Non professionals – maid servants, baby sitters.
o Commercial – The service providers who run it as a business like restaurant,
gym, dentist are commercial. They have to make profit as in any other
business.
o Non Profit – Charities, Foundations who try to provide child care, old age
homes like CRY, UNESCO, Prem Samaj.
o Private – All services provided by private individuals or business like Airtel,
Reliance ICICI Prudential.
o Public Sector – Services provided by public sector companies like, BSNL, LIC.

3
 GOODS Vs SERVICES
PHYSICAL GOODS SERVICES
Tangible Intangible
Separable Inseparable
Homogeneous Heterogeneous
A Product Activity, Process
Can be Stocked Perishable, Cannot be Stocked
Produced in works Customer participates in production
Transfer of ownership No Transfer of ownership
o Physical goods, or products like soap, shoe, shirt can be seen and felt by you. You
can carry it with you, store it in your home and consume it later. You are not
involved in the manufacture of the product like soap. It was already produced in
some factory, packed and shipped to the store, by the time you come in contact
with it. Now you can see it, feel it and decide to buy it. It becomes your property
once you purchase it.
o Services are normally intangible, you cannot actually see or feel the service,
before deciding to use the service. You are actually involved in the service
“production” or process. Like in getting a haircut, you do not really know the
outcome till you use the service. You are a participant of the hair cutting process.
You cannot claim ownership to the process, and you may not get the same
experience the next time. Every hair cut is unique, you cannot buy it and store it.

4
 UNIT-II
STRATEGIC APPROACH TO SERVICE MARKETING
• ROLE OF MARKETING IN SERVICES
• MARKET RESEARCH AND ANALYSIS
• PLANNING AND POSITIONING
• INTERNAL MARKETING
• RELATIONSHIP MARKETING
ROLE OF MARKETING IN SERVICES
• Earlier individual Specialised services did not need separate marketing staff.
• Larger Organisations, and development of new services created a need for
dedicated marketing staff.
• Technological developments like internet, web pages also helped the
development of new services and marketing.
Note:
1. Early services like plumbers, carpenters did not need separate marketing. There
were also some regulatory restrictions on marketing of certain services like
lawyers, doctors. Word of mouth was sufficient for them as demand was usually
greater than the supply. As organised sector entered into the services field, they
needed to develop Specialised marketing people and methods to create
sufficient demand and keep ahead of competitions.
2. The marketing approach helped the service industry to understand customer
needs better, and modify their services.
3. It also helped them to develop new services, like theme parks, adventure
tourism, fund management, mutual funds etc.
MARKET RESEARCH AND ANALYSIS
• Identify target market segment
• Study the potential in the proposed segment
• Understand the existing competition
• Try to anticipate competitors response
• Estimate the costs of setting up the service and projected income levels
• Availability of skilled personnel and training required
Notes.
1. The most important decisions to be taken are:
a) what type of service b) where to set it up c) who is the target customer
2. Does the company need a tie up or alliance with known (Branded) service
provider?
3. Projecting the expected level of business, and the time required to break
even. Can the company provide the required financial resources.
4. Does the activity require any statutory clearances from local bodies
5. Are there any competitors already operating in the same area. Is there scope
for more service providers?

5
 6. What will be the expected response from existing and potential competitors.
PLANNING AND POSITIONING
• MARKET ANALYSIS - SIZE, COMPOSITION, LOCATION.
• INTERNAL ANALYSIS – RESOURCES, REPUTATION, CONSTRAINTS,
VALUES
• COMPETITOR ANALYSIS – STRENGTHS, WEAKNESSES, ANTICIPATED
RESPONSE.
INTERNAL MARKETING
• Treat employees as internal customers
• Involve staff at all levels
• Improve their knowledge of the service offered
• Make them understand their roles
• Pride in their firm
• Motivate the employees
• Understand how to handle customers.
Notes:
 Customer service depends on the quality of interaction between employees and
customers.
 Managers should set high standards of customer relationship by their own
behavior.
 Human Resources Management – Getting things done through people
 Internal Marketing – Organization goals can be achieved through satisfaction of
individual goals.
 Make customer service as philosophy of the organization
 Cycle of Failure – Hiring low skilled employees, not providing training, high staff
turnover.
 Cycle of Mediocrity – Governed by Rules, boring jobs, no incentive to perform,
job security.
 Cycle of Success – Hiring right people, training, motivating, employee
satisfaction.
TRAINING SHOULD BE DESIGNED TO:
• IMPROVING STAFF KNOWLEDGE OF FIRM’S PRODUCT / SERVICE
• GIVE THEM PRIDE IN THEIR FIRM/ROLE
• TEACH THEM HOW TO HANDLE CUSTOMERS
• MOTIVATE THE EMPLOYEES
Notes.
1. Managers should set high standards of customer relationship by their own
behavior. They should “Walk the Talk.”
2. Organizational goals can be achieved through satisfaction of individual goals.
3. Skilled people are the most important assets of any service organization, and
most difficult to duplicate.

6
SOURCES OF CONFLICT
• Person / Role conflict – Low self esteem
• Organization / Client conflict – Company rules Vs Client demand conflict.
• Inter Client conflict – Example smoking, loud talking etc.
Notes.
 Front line employees are supposed to be warm, friendly and confident to
customers. But many employees have low self esteem, as they may be less
educated, and lowly paid, and hence may not be able to project the right image
to customers.
 Many times customers demands may clash with organization rules, and staff
have a difficult time in handling customers who insist on such services, like late
check out from a hotel, or extra helpings in a restaurant where the rules do not
permit.
 Some customers may inconvenience others by their behavior, like loud talking in
a restaurant, movie affecting other customers. It is difficult many times to handle
it without annoying one of the parties.
RELATIONSHIP MARKETING
• CUSTOMER RELATIONSHIP - IT IS EASIER TO RETAIN EXISTING CUSTOMERS
THAN DEVELOP NEW CUSTOMERS.
• BUILDING RELATIONSHIP – WITH SUPPLIERS, CHANNELS, COMMUNITY,
STAFF, BANKS, GOVERNMENT AGENCIES.
Notes.
1. Maintain Customer contact even after the sale is completed.
2. Try to develop a continued relationship at a personal level with customer.
3. Develop relationship with potential cistomers.
TARGETING, ACQUIRING AND RETAINING THE “RIGHT” CUSTOMERS.
Importance of retaining customer loyalty to service providers:
1. Increased purchases
2. Reduced operating costs
3. Referrals to other customers
4. Price premium.
Notes.
Right customers are those who will give the best returns to the firm on a long time
basis.
Target customers whose needs can be met better by you, than your customers.
Look for “value” not just numbers.
CUSTOMER BENEFITS FROM LONG TERM RELATIONSHIP.
1. Confidence in the quality of service
2. Social – Recognition by the staff
3. Priority/special treatment
CUSTOMER COMPLAINTS
7
Only 5% customers complain about unsatisfactory service.
Why customers do not complain.
1. Do not want take the effort
2. Feel it may be unpleasant
3. Will not serve any purpose
4. Will affect future service.
Notes
Seek customer feedback regularly, by feedback forms, face to face discussions.
Customers tend to complain directly to the service provider, mangers may be
unaware of the complaints.
CUSTOMER COMPLAINTS
WHY CUSTOMERS COMPLAIN
1. Seek compensation
2. Out of anger
3. To improve the service
4. To ensure that others do not face the same difficulty
Handling Customers complaints
1. Act quickly
2. Admit mistakes
3. Show understanding
4. Don’t Argue
5. Acknowledge the Customer’s feeling
6. Believe the customer ( Give him the benefit of doubt)
7. Clarify the steps needed to solve the problem
8. Keep customers informed of the progress
9. Consider compensation
10. Persevere to regain customer good will.
Services Marketing – Christopher Lovelock, Chapter 13, Customer Feedback and
Service Recovery
SERVICE FAILURE
• When customers are not happy with the service or face problems related to
service – it is called as SERVICE FAILURE.
Service failure can take place because of the basic nature of services:
1. Services are heterogeneous
2. Customers participation in service activity.
3. Service employees not well trained or motivated.
4. Some factors are beyond the control of the service firm.

8
SERVICE RECOVERY
• Service recovery - A systematic efforts by the firm to correct a problem due to a
service failure and retain a customers good will.
• Customers who experience a service failure and then have it resolved to their full
satisfaction are likely remain more loyal customers.
• Service Recovery requires commitment, planning, training and clear guidelines.
• Service Recovery should be PROACTIVE - Service personal should be alert to any
dissatisfaction in customer, and initiate action to solve it, even before the
customer complains.
• Service Recovery process should be PLANNED - Contingency plans have to
planned for solving service failures, especially that can happen regularly, due to
the nature of service – like delays in flights due to poor weather conditions in
winter.
• Service Personnel should be TRAINED – Front line staff should be trained to give
them the confidence to competence to turn customer distress into delight.
• Service Recovery requires EMPOWERING employees – Service Recovery efforts
should be flexible and employees should be encouraged and empowered to use
their judgment and communication skills to solve customer problems.
Employees have to be given the authority to spend money in order to retain
customer good will.
BENEFITS OF A GOOD SERVICE RECOVERY STRATEGY:
1. Increases Customer Satisfaction
2. Increases Customer Loyalty
3. Promotes positive Word of Mouth publicity
4. It Reduces the cost of Failure
5. It improves employee satisfaction and morale
6. It reduces employee turnover.
7. It enhances the firms image and reputation.
CRM - CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS
• Firms with limited customers generally have a good idea of their customers
preferences, likes and are able to take care of them. But as firms become
large, with multi locations and have large customer base, it becomes difficult
to keep track of customers.
• CRM - Computer based software systems, enable firms with large number of
customers to capture and maintain customer information. This helps the
firm in serving their customers better.
• SAP, ORACLE, PEOPLE SOFT are some of the vendors for CRM systems.
9
CRM – APPLICATIONS
1. DATA COLLECTION – Contact details, Purchase history, Service preferences
etc.
2. DATA ANALYSIS – The data is analysed to categorize customers according to
the firms criteria.
3. SALES FORCE AUTOMATION – The entire sales cycle from enquiry to order
processing is tracked.
4. MARKETING AUTOMATION – Helps in target market identification, save on
marketing costs etc.
5. CALL CENTER AUTOMATION – Improves call center to identify customers,
view their history and service them better.
CRM – BENEFITS
1. Creates analytical customer base.
2. Helps to identify the most profitable customers.
3. Promotes better understanding of customers, and increases customer
satisfaction
4. Reduces costs by improving channel efficiency and using internet services.
5. Increases market Revenue by cross selling , greater penetration and market
development.
6. Reduces the cost of introducing new offerings.
7. Promotes Customer Loyalty and Responsiveness.

10
 UNIT-III
 MARKETING MIX OF SERVICES
 PACKAGING – PRICING – PROMOTION –
 PLACE (DISTRIBUTION) – PEOPLE – PROCESS - PHYSICAL EVIDENCE
 SERVICE BRANDING
4 P’s of Marketing
• PRODUCT
• PRICE
• PROMOTION
• PLACE (DISTRIBUTION)
SEVEN P’S OF SERVICE MARKETING
• PRODUCT
• PRICE
• PROMOTION
• PLACE (DISTRIBUTION)
• PEOPLE
• PHYSICAL EVIDENCE
• PROCESS
PRODUCT
IN GOODS IT TYPICALLY INCLUDES
• QUALITY
• STYLING
• COLOUR
• DESIGN
• BRANDING
• PACKAGING, SIZE
• GUARANTEE
A SERVICE IS AN ACTIVITY, IT CONSISTS OF:
• CORE SERVICE
• FACILITATING SERVICE
• SUPPLEMENTARY SERVICE

11
HOTELS - CORE SERVICE IS ROOMS, ROOM SERVICE; FACILITATING SERVICES
ARE RECEPTION, BILLING, PAYMENT COLLECTION; SUPPLEMENTARY SERVICES
MAYBE TRAVEL, SPA.
PRICE-GOODS
• LIST PRICE
• DISCOUNT
• CREDIT
• PAYMENT TERMS
PRICING OF SERVICES
• COST OF SERVICES
• BREAK EVEN ANALYSIS
• COMPETITOR PRICING
• DEMAND LEVELS
• REGULATORY FACTORS
• MARKETING MIX
• POSITIONING (CHAPTER 12, WOODRUFFE)
PRICING OF SERVICES
• PRICE SKIMMING – HIGH PRICE, LOW VOLUME
• PENETRATION PRICING – LOW PRICE, HIGH VOLUME
• MIXED PRICING – MIXTURE OF BOTH
• COST PLUS PRICING – ADD MARGIN TO COST
• MARGINAL PRICING – COST OF LAST UNIT OF OUTPUT
• PROMOTIONAL PRICING – SALES TACTIC
• DIFFERENTIAL PRICING – SEASONAL (CHAPTER 12, WOODRUFFE)
PROMOTION
• ADVERTISING
• PUBLICITY
• PUBLIC RELATIONS
• SALES PROMOTION
• SPONSORSHIP OF EVENTS CHAPTER 13, WOODRUFFE

12
PROMOTION OF SERVICES
• TARGET AUDIENCE
• COVERAGE REQUIRED
• EXPOSURE
• FREQUENCY
• COST EFFECTIVENESS
• BUDGET
• DESIRED IMPACT CHAPTER 13, WOODRUFFE
COMMUNICATION
SOME TIMES FIRMS WOULD LIKE TO COMMUNICATE:
• NEW SERVICE OFFERINGS, BENEFITS
• EDUCATE CUSTOMERS
• POLICY DECISIONS
• PUBLIC ANNOUNCEMENTS CHAPTER 13, WOODRUFFE
PLACE (DISTRIBUTION)
• ACCESSIBILITY
• AVAILABILITY
• CUSTOMER NEEDS
• TARGET MARKET
• GEOGRAPHICAL LOCATION CHAPTER 14, WOORUFFE
PLACE (DISTRIBUTION)
DIRECT DISTRIBUTION
• COMPANY RESOURCES
• GEOGRAPHICAL SPREAD
• SKILLS REQUIRED
• CUSTOMER PERCEPTION CHAPTER 14, WOODRUFFE
PLACE (DISTRIBUTION)
CHANNELS FOR SERVICES:
• AGENTS, BROKERS
• FRANCHISE OPERATORS
1. LOW COST EXPANSION
2. RAPID GROWTH
3. LOCAL EXPERTISE CHAPTER 14, WOODRUFFE

13
PEOPLE
THE MOST IMPORTANT “P” IN SERVICE
• HIGH CONTACT
• LOW CONTACT
• PROFESSIONAL
• NON PROFESSIONAL CHAPTER 15, WOODRUFFE
PEOPLE MAYBE IN PRIMARY, FACILITATING OR AUXILIARY SERVICES.
PEOPLE
• IDENTIFYING THE JOB PROFILE
• NUMBERS REQUIRED
• SELECTION & RECRUITMENT
• TRAINING AND DEVELOPMENT
• EMOLUMENTS
• APPRAISALS
• MOTIVATING AND RETAINING CHAPTER 15, WOODRUFFE
PROCESS
THE WAY SERVICES ARE CARRIED OUT .
• LEVEL OF CUSTOMER PARTICIPATION
• LOCATION OF SERVICE DELIVERY
• THE ACTUAL SERVICE
• HIGH CONTACT AND LOW CONTACT
• DEGREE OF STANDARDIZATION
• COMPLEXITY OF SERVICE CHAPTER 16, WOODRUFFE
PROCESS
• ENSURE SERVICE IS CARRIED OUT EFFICIENTLY, ECONOMICALLY AND
QUICKLY
• MONITOR SERVICE QUALITY AND PRODUCTIVITY
• FACILITATE STAFF TRAINING AND DEVELOPMENT
• REDUCE AMOUNT OF DIVERGENCE CHAPTER 16, WOODRUFFE
PHYSICAL EVIDENCE
• OVERALL APPEARANCE
• AMBIANCE
• SEATING
• ACCESSIBILITY
14
 • ATMOSPHERE
• CORPORATE IMAGE, BRAND CHAPTER 16, WOODRUFFE
PHYSICAL EVIDENCE
• SERVICE DELIVERY – PROMPT, EFFICIENT
• PACKAGING – STYLE, COLOUR, CONVENIENCE
• ACTUAL SERVICE – PRESENTATION CHAPTER 16, WOODRUFFE

15