Editorial Board

Dr. Karunakar Jha

Professor & Dean, School of Management
GRD Institute of Technology & Management, Dehradun
Dr. Indrajit Goswami
Professor, Alliance School of Business,
Alliance University, Bengaluru

Content Writers
Dr. Rishika Bhojwani, Dr. Rituraj Saroha,
Dr. Rahul Pratap Singh Kaurav, Saurabh Gupta,
Dr. Shruti Gulati, Mr. Tushar Marwaha
Academic Coordinator
Mr. Deekshant Awasthi

© Department of Distance and Continuing Education

ISBN: 978-81-19417-69-8
1st Edition: 2023
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management@col.du.ac.in

Published by:
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© Department of Distance & Continuing Education, Campus of Open Learning,

School of Open Learning, University of Delhi
 Contents

PAGE

Lesson 1 : Introduction to Service Sector and Economic Transformation

hi
1.1 Learning Objectives 1

el
1.2 Introduction to Service Sector 2
1.3 Contributory Factor
D 4

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1.4 Consumption Pattern Analysis 5

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1.5 Economic Transformation 9
1.6 Economic Transformation: Agricultural Economy

s i 10
1.7 Economic Transformation: Industrial Economy
e r 13

v
ni
1.8 Economic Transformation: Service Economy 17
1.9 Emergence of Experience Economy and its Prospects 18
1.10
, U
Answers to In-Text Questions 23
1.11
1.12
References
Suggested Readings
O L 24
25

/ S
L
Lesson 2 : Service as Marketing Entity

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C
2.1 Learning Objectives 26
2.2
E /
Introduction 27
2.3
2.4
D C
7KH &RQFHSW DQG 'H¿QLWLRQ RI 6HUYLFHV
Service as Marketing Entity

29

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2.5 Unique Characteristics of Services 30
2.6 Strategic Implications of Services Marketing 34
2.7 Service Dominant Logic 39
2.8 Types of Services 40
2.9 Summary 45
2.10 Answers to In-Text Questions 45
2.11 Self-Assessment Questions 46

PAGE i
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

PAGE

2.12 References 46
2.13 Suggested Readings 47

Lesson 3 : Marketing Mix and Relationship Marketing

3.1 Learning Objectives 49
3.2 Introduction 50

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3.3 Marketing Mix for Services 50
3.4
3.5
Relationship Building
Service Encounter
D el 54
61

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3.6 Service Innovation 67

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3.7 Summary 78
3.8 Answers to In-Text Questions
s i 78

er
3.9 Self-Assessment Questions 79

iv
3.10 Suggested Readings 79

U n
Lesson 4 : Service Marketing System
4.1 Learning Objectives
L , 82
4.2 Introduction

S O 82
4.3

L /
Servuction System 83

O
4.4 Consumer and Prosumer in Service Marketing 84
4.5
/ C
Service System Mapping 85
4.6
4.7
C E
Front Line
Line of Internal Interactions and Line of Visibility
86
86
D
©D
4.8 Service Blueprinting 89
4.9 Service System and Functional Orientations 89
4.10 Service Management Trinity 90
4.11 Interaction Between Production, Marketing and Human Resources 92
4.12 ,QWHU)XQFWLRQDO &RQÀLFW DQG +DUPRQLVDWLRQ 
4.13 Summary 95
4.14 Answers to In-Text Questions 96

ii PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 CONTENTS

PAGE

4.15 Self-Assessment Questions 97

4.16 References 97
4.17 Suggested Readings 98

Lesson 5 : Service Buying Behaviour, Innovation and Competition

5.1 Learning Objectives 100

hi
5.2 Introduction 101
5.3
5.4
Service Buying Behaviour
Service Marketing Strategy
D el 102
110

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5.5 Innovation and Competition 118

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5.6 Summary 121
5.7 Answers to In-Text Questions
s i 122

er
5.8 Self-Assessment Questions 122

iv
5.9 References 122

Un
5.10 Suggested Readings 123

L ,
Lesson 6 : Service Quality, Service Delivery, Service Culture
6.1 Learning Objectives

S O 124
6.2 Introduction
L / 125

O
6.3 Concept of Service Quality 126
6.4
/ C
Implementing Service Quality 135
6.5
6.6
C E
Managing Service Demand and Supply
Service Culture
149
155
D
©D
6.7 Service Recovery 162
6.8 Summary 167
6.9 Answers to In-Text Questions 173
6.10 Self-Assessment Questions 174
6.11 References 174
6.12 Suggested Readings 175
Glossary 177

PAGE iii
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
L E S S O N

1
Introduction to Service
Sector and Economic
Transformation
i
Dr. Rishika Bhojwani

l h
Assistant Professor

D e
NMIMS-SoBA, Mumbai
Email-Id: rishika.bhojwani@nmims.edu

STRUCTURE of
i ty
s
1.1 Learning Objectives
1.2 Introduction to Service Sector
e r
1.3 Contributory Factor
i v
1.4 Consumption Pattern Analysis
U n
,
1.5 Economic Transformation
1.6
O L
Economic Transformation: Agricultural Economy

S
1.7 Economic Transformation: Industrial Economy
1.8
L /
Economic Transformation: Service Economy
1.9
C O
Emergence of Experience Economy and its Prospects
1.10
E /
Answers to In-Text Questions

C
1.11 References
1.12
D
Suggested Readings

©D
1.1 Learning Objectives
‹ Identifying the factors contributing to the service sector and also consumption pattern
and changing aspirations of consumers for better engaging experiences and excitements.
‹ Developing an understanding economic transformation in terms of Agricultural,
Industrial and transition from service to experience economy.
‹ To familiarize with the service sector and service economy.

PAGE 1
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes 1.2 Introduction to Service Sector

The need for IT-related services has significantly increased in recent
years. The tertiary sector includes all of those services. In reality, the
service sector encompasses all intangible goods, which included goods
that cannot be touched but inherently carry some values. This industry
includes sectors like personal and healthcare, travel and tourism, leisure and
recreation, finance, consultancy, media, hospitality, education, IT-enabled
services etc. The contemporary service sectors are is very organized and
h i
demands a high level of knowledge, skills and competencies.
e l
D
Both the primary and secondary sectors benefit from its development.

of
For instance, technology is now leveraged to improve and increase the
efficiency of agriculture. Similarly, the service sectors play an instrumental

ty
role in promotion and advancement of other industry sectors. For example,

s i
the transport systems create the life-line of logistics and supply chain

r
services which directly and indirectly connect the core industries to their
e
v
suppliers and consumer markets.

n i
U
1.2.1 The Significance of the Services Sector
,
L
As previously said, the service sector’s contribution to the Indian economy
O
S
is unprecedented. The GVA (Gross Value Added) is more than 50%

/
of what it represents. Additionally, the tertiary sector accounts for the
L
O
highest proportion of India’s net national product. The following examples

C
illustrate the significance of the service sector:

E
‹
/ Industrial Promotion : The tertiary sector is very important for the

D C growth of core industrial sectors. For instance, moving raw materials

from one location to another is necessary to run an industry. The

©D
distribution of raw material and the final goods to markets require
an integrated transportation system. Likewise, the healthcare sector
contributes to the quality of life of industry workers and other job
performers.
The industry’s finances are handled by some financial institutions, which
again comes under the service sector:
‹ Productivity Growth: A person’s productivity is more likely to grow
when they receive a decent education and have access to quality

2 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 INTRODUCTION TO SERVICE SECTOR AND ECONOMIC TRANSFORMATION

healthcare than if they have neither. Consequently, the service sector Notes
strengthens the economy as a whole by raising worker productivity.
‹ Good Quality of Life: In general, workers in the tertiary sector
have a higher standard of living. They work in less dangerous
environments and create more wealth.
‹ Market Growth: The tertiary sector raises the standard of completed
goods produced or manufactured by industries. The service industry

i
has helped to improve the manufacturing process as well.

l h
1.2.2 Meaning of Service Economy
D e
of
Almost every nation in the globe is witnessing an increase in the size
of its service industry. In emerging economies, the output of services is

i ty
expanding consistently which accounts for at least half of the GDP. The

r s
service economy is expanding. The proportion of employment that is

e
divided between agriculture and industry (including manufacturing and

i v
mining) changes as a country’s economy matures. In emerging nations

health, and educational sectors.

U n
like India, the service economy is primarily focused on the financial,

L ,
The vast range of economic activities known as services are unrelated to

O
the production of products, mining, or agriculture. Usually, they involve

S
L /
adding human value through labour, counsel, management of talent,
amusement, training, intermediary work, and similar activities. They differ

O
in several ways from other kinds of economic activity. Many, for instance
C
/
are lost at the time of production because they cannot be inventorised.

E
C
On the other hand, the manufactured goods, whose tangible nature enables

D
them to be stored, widely dispersed, and consumed without having to

©D
deal directly with the entity that made the thing. However, as technology
develops, the gaps between services and other economic activities are
getting reduced. Information and Communication Technology (ICT) now
allows people to participate in an increasing number of service-related
activities in real or deferred time without being physically present there,
and even they can feel the ambiance virtually. Like any physical inventory
of goods, movies and memorable performances or moments can be saved
and archived for future use.

PAGE 3
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes 1.3 Contributory Factor

1.3.1 Factors Contributing to the Growth of Service Sector

1. Government Policies: It is the government that mandates price
points, distribution plans, and procedural qualities. The government’s
“privatization” strategy, which entails the transformation of businesses,
represents another significant measure. The innovations in industries

h i
l
like telecom and e-commerce has not only resulted in cost-cutting and
restructuring but has transformed them more user oriented.

D e
of
2. Shifts in Consumer Preferences: As society has developed, consumers
have spent more money on services like entertainment, travel, and health

ty
care. In addition, as the population has aged, there has been a rise in

i
demand for services like nursing homes, serviced apartments and retirement

s
r
communities.

v e
3. Globalization: As worldwide trade and investment have expanded, so has

n i
demand for services like telecommunications, finance, and transportation.

U
Additionally, the expansion of service industries in developing nations

customer service.
L ,
is a result of the outsourcing of back-office tasks like accounting and

S O
4. Changes in the Nature of the Workforce: As manufacturing and

L /
other traditional industries have suffered, many workers have shifted to

O
service sectors including hospitality, education, and health care.

/ C
5. Privatization Benefits: For (a) improving effectiveness, and (b) growth

C Ein revenue, service-companies need to adapt their HR rules, operational

procedures, and marketing strategy in response to the new development.
D
©D
6. Changes in Society: There has been a significant change in recent
years. If two members in a family are employed, it is necessary to pay
someone to carry out duties that previously belonged to a household
member, such as child care, laundry, shopping etc.
7. Business Trends: The government has compelled many professional
organisations to lift long-standing restrictions on advertising and marketing
efforts. The use of franchising has expanded across numerous service
sectors.

4 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 INTRODUCTION TO SERVICE SECTOR AND ECONOMIC TRANSFORMATION

Independent business owners must obtain licenses to create and market Notes
branded services in accordance with strict guidelines.
8. Advances in it: Changes come from the integration of computers and
tele-communication. With the use of more potent software, businesses can
now develop databases that combine consumer information with specifics
of every transaction they’ve ever had. Those databases can then be used
to forecast new trends, segment the market, and discover new marketing

i
opportunities.
The development of wireless networks and the migration of electronic
l h
devices from cell phones to laptops and scanners to enable faster
communication between sales and customer care staff.
D e
9. Internationalisation and Globalization: An industry seeking new
of
ty
markets or a company needing to cater to existing clients, who are

i
traveling overseas more frequently, may be the driving forces behind

s
r
an international development plan. When businesses establish operations

e
abroad, they frequently choose to work with a select group of foreign
v
i
suppliers rather than many local businesses. The overall result is a rise in
n
U
competition and a promotion of cross-border innovation in both products

,
and processes.

L
Overall, the development of the service sector has been influenced by

O
S
many technological, economic, social, and political variables and has had

/
a significant impact on the structure and functioning of contemporary
L
O
economies.

/ C
E
1.4 Consumption Pattern Analysis

D C
The economic notions of consumption patterns refer to expenditure patterns

©D
of income groups across or within different categories of products, such
as food, clothing, and discretionary items. Sociocultural and political
extensions of the consumption pattern idea probe the class, cultural, and
symbolic dimensions of organization of consumption.

1.4.1 Definition of Consumption

Consumption is generally defined as the use of goods and services to
give satisfaction to the consumer.

PAGE 5
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes Consumption involves a certain amount of choice, specifically the choice

of a particular range of goods and services. Consumption includes the
usage of many items and services required for daily living. Additionally,
there is a component of obtaining something through consumption; we
refer to this result as utility or satisfaction. In order to provide the
customer with happiness and memorable experience, certain commodities
and services are consumed.

1.4.2 The Areas of Consumption

h i
e l
D
Despite the fact that each category of consumer may further be divided

of
into different groups based on factors like the type and price of the
purchase. They could be as follow: (i) the family or home, (ii) federal,

ty
state, and local government departments and agencies, (iii) manufacturing

i
and commercial establishments, and (iv) a wide range of non-profit
s
r
organizations, including clubs, hospitals, private schools, and religious

e
v
and humanitarian organizations.

n i
The list of goods and services purchased on in the market and the

, U
circumstances under which they were actually consumed describe the
plane of consumption. The enumeration of all products, services, and

O L
circumstances that were actually consumed or experienced serve as a

S
description of the plane of existence. It is an all-encompassing idea

L /
since it covers everything that is consumed or experienced in daily life,

O
including both marketable goods, services, and circumstances, as well

/ C
as non-marketable things like using public amenities like parks, schools,

E
and living space.

C
D 1.4.3 The Level of Consumption
©D A composite or aggregated of products and services sold in the market
and consumed, describes the level of consumption. It is stated as a
single number, making it simple to organize various consumption tiers. A
composite or aggregation of all the elements that make up the plane of
life is used to characterize the level of living. It represents the plane of
existence as a single number or value. The list of products and services
that can be sold in the market that people believe they should consume
describes the standard of consumption. It is a normative concept since,

6 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 INTRODUCTION TO SERVICE SECTOR AND ECONOMIC TRANSFORMATION

unlike with plane or level, it relates to what should it be rather than Notes
what it is.

1.4.4 Consumption in Industrial Societies

Many of the items that modern consumers in industrial cultures consume
are no longer made at home, and family members now concentrate their
energies on finding work. In order to ensure citizens a standard of health,
possession of wealth and happiness, the diverse product of industries must

h i
l
somehow undergo the buying process. What we refer to as the difficulties
of consuming are revealed during the tiresome negotiation of this money
exchange for goods and services. We make an effort to strike a balance
D e
of
between the extra comforts and necessities we need in life. These include

ty
new health standards, child rearing practices, comfort, convenience,

i
cleanliness, travel, and a wider range of living arrangements. Along with

r s
these, most civilizations also practice some form of one-upmanship, in

e
which people try to imitate those who are wealthier and higher up the

v
social ladder than themselves.

n i
, U
1.4.5 Factors Affecting Consumption in Industrial Societies
(i) Availability of Choice
O L
/ S
Today’s consumers have a challenge with choice on a previously

O L
unheard-of scale. The manufacturing units, on the other hand, are
forced to compete not just for a piece of the consumer’s earnings

/ C
but also against the full stock of alternative goods and services in

E
the ever-expanding arena of competition.

C
D
(ii) Amount of Income

©D
The consumer’s financial situation determines his ability to purchase
things. Consumer credit is readily available, expanding their options
and purchasing power. A regular consumer can purchase pricey
goods due to instalment payment and minor credit options.
(iii) Family Size
One of the key elements influencing the distribution of expenses is
the size of the family. Studies on families have consistently shown
that families are becoming smaller, especially in metropolitan

PAGE 7
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes areas, which encourages higher spending levels than an average

rural family. Our modern culture tends to view raising children
as a significant financial expense rather than an economic asset.
In other words, parents today view their kids more as financial
obligations than as assets. Children now compete head-to-head with
other consumer items. People choose smaller housing units as the
amount of money available for home construction declines. Improved
living conditions and parental and child equality make it possible

h
to distribute incomes more fairly. The modern family has a wider
i
e l
range of leisure time alternatives . Different age and sex groups

D
are catered to with such leisure activities. They have an impact on

of
how many different types of goods and services are consumed in
contemporary society, including those offered by theatres, clubs,

ty
restaurants, and similar businesses.
(iv) Availability of Goods
s i
e r
Along with different family needs and income levels, different

i v
localities or geographic areas also place varied pressures on people

U n
to consume. Climate has an impact on our consumption pattern areas
like clothing, gasoline, housing, and transportation. Since consumption

L ,
norms tend to be more social than private, the availability of goods

O
and the level of wealth in a particular community have a significant

/ S
impact on the consumer. A family that is closely surrounded by

O L
numerous trading centres with extended shop networks and high
standards of competitive spending, on the other hand, is likely to

/ C
be under more pressure to purchase a variety of commodities than

C E a family, served by a single, underdeveloped trading centre. For

instance, a farmer is less pressured to wear a dress of high standard

D than a businessman in a large city. As a result, the availability of

©D
goods to various segments of the population varies, either expanding
or contracting the range of options available to customers.
(v) Merchandising Practices
The pressure to sell more goods, necessitates the development of
merchandising practices such as advertising and branding. Advertising
goes hand in hand with volume of production and retail distribution.
The general aims of advertising are:

8 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 INTRODUCTION TO SERVICE SECTOR AND ECONOMIC TRANSFORMATION

(i) to create awareness among consumers, Notes

(ii) to break down consumer resistance,
(iii) to facilitate consumer acceptance, and
(iv) to create consumer demand.
Additionally, the proliferation of packaged and branded goods was
made possible by the specialization of commodities and the increased
competition among manufacturers in their quest to establish national
markets. As a result, the value of a brand name has progressively
h i
increased, and there are now more names available for certain
e l
D
commodities. For instance, the Nirma brand of washing powder

of
is sold in most of the markets in India, accounting for roughly
700,000 tonnes of the country’s total detergent sales, according to

ty
a report by NCAER N. Delhi (1993). Retailers are bemoaning the

s i
fact that client loyalty is no longer what it once was as consumers

r
are reportedly switching brands at an accelerated rate. As millions
e
v
of people shop every day, the styles, cost, quality, and convenience
come and go.
n i
(vi) Consumer Literacy

, U
L
The above phenomena exist due to emergence of new categories

O
of products and services, the erosion of domestic handicraft skills,

/ S
the complexity of mechanical gadgets and manufactured goods, and
new pressures.

O L
/ C
1.5 Economic Transformation

C E
Economic transformation, according to the field of economics, is the

D
ongoing process of (1) shifting labor and other resources from lower to

©D
higher productivity sectors (structural change) and (2) increase in sector
specific productivity.
Therefore, economic transformation places a strong emphasis on the
transition within and across all sectors (which can include jobs or activities
that combine aspects of manufacturing, services, and agriculture).
Economic growth is largely fueled by this transfer of resources from
lower to higher-productivity activities.

PAGE 9
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes Growth in intra-sector productivity, often known as “sector transformation,”

requires the adoption of cutting-edge technologies and production-enhancing
management techniques. It can happen as a result of current enterprises
becoming more efficient or as a result of resources being moved from
the least productive firms to the most productive ones.

1.5.1 Measures of Economic Transformation

h
Economic transformation can be measured through production/value-added
i
e l
measures and trade-based measures. Production-based measures include: (1)

D
firm-level productivity measures, which look at the average productivity

of
levels of businesses within one sector; and (2) sector value added and
employment data, which highlight productivity differences within sectors.

ty
There are two types of trade-based indicators: (1) measures of disclosed

i
comparative advantage, which reflect how specialized a nation is in a
s
r
particular export, and (2) export diversification measures, such those

e
v
created by the International Monetary Fund.

n i
U
1.6 Economic Transformation: Agricultural Economy

,
O L
By boosting productivity, employment, and income, a robust agricultural
economy facilitates social development.

/ S
L
In most rural areas, agriculture is the primary engine of development. In

O
the emerging nations, there is a rising need for basic foods, agricultural

C
commodities, and to a greater extent processed foods. The agriculture and

E /
food industries must be updated in order to meet such demands.

D C Through the creation of jobs and income, as well as the inclusion of

poverty groups, young people, and the unemployed, sustainable economic

©D
development leads to social progress. Markets require government assistance
and oversight. Because the products and the markets on which they are
sold serve as the focal point for all economic activity, the economy is
structured along value chains.
Value chains (WSK) are systems in which companies cooperate to
produce products in demand and serve markets. Access to the market
for economically weaker micro-enterprises is through their integration
into WSK.

10 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 INTRODUCTION TO SERVICE SECTOR AND ECONOMIC TRANSFORMATION

The objective is to build economic infrastructure and boost value creation Notes
in the partner nations. The growth must benefit everyone, resources must
be managed wisely, and local ecosystems must be conserved for this
development and must be ecologically sound and socially equitable.
GIZ is collaborating with all parties on behalf of the German Federal
Government to create plans for agrarian-based economic growth. The
Sustainable Development Goals (SDGs) serve as the GIZ’s guiding principles

i
and are applied through the ESC approach. The economic viability of
every solution is a crucial factor. GIZ ensures economic viability using
l h
e
the openly available “Value Links 2.0” methodology. This is a doable
strategy for enhancing value chains.
D
of
The objective is to build economic infrastructure and boost value creation
in the partner nations. For economic development to be socially just and

i ty
environmentally sustainable, it is crucial that it benefits every person, that

r s
resources are used wisely, and that the preservation of regional ecosystems

e
is given first priority. GIZ is collaborating with all parties on behalf

v
n i
of the German Federal Government to create plans for agrarian-based
economic growth. The Sustainable Development Goals (SDGs) serve as

U
the GIZ’s guiding principles and are applied through the ESC approach.
,
O L
India’s agricultural successes have fallen short of its potential, despite
being excellent in some regions and states. The primary cause of this

/ S
is the leaders’ complacency with our accomplishments, particularly the

O L
leaders in research and policy making. We frequently gain consolation
from the fact that we are not experiencing food scarcity by comparing our

/ C
current food situation to the food shortage that existed in the middle of

E
the 1960s. Our attitude is centred on contrasting today’s agriculture with
C
D
that of 1965-1967 rather than contrasting agriculture’s accomplishments

©D
with those of other nations and sectors in India. Agriculture has not
advanced to the level of space, IT, communication, services, medical
science, transportation, etc.
In all departments and sectors of life, we are far more different today
than we were in 1965-1967, yet we do not measure agriculture’s success
against the difficult benchmarks. Agriculture has made great strides since
the middle of the 1960s, but by other standards, they pale in comparison.
The current administration has established a “Sabka Saath Sabka Vikas
and Sabka Vishwas” vision for the New India. To realize this objective,

PAGE 11
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes the agriculture sector must be transformed because, according to the NSO
2019, 44.2% of the country’s workforce is employed in agriculture and
depends on it for a living. The majority of the country’s agricultural labour
force as well as small and marginal farmers are poor or undernourished.
Concerns about rural suffering are widespread. There won’t be much
progress in closing the income gap between agriculture and non-agriculture
income and easing rural hardship if current agricultural trends are not
reversed. Growth in agriculture has been empirically shown to have a

h
major positive impact on lowering poverty and raising per capita income
i
e l
(Virmani 2008). In addition to promoting inclusive growth, agriculture is

D
important for the nation’s quality of life, sustainability, climate change,

of
and health and nutrition. All such variables highlight the need for a fresh
approach to agriculture as we progress through the twenty-first century.

ty
Agricultural Transformation

s i
r
The process of agricultural transformation raises farm productivity, makes

e
farming commercially viable, and strengthens connections with other

v
n i
economic sectors. There are several areas that demand attention in the
transformation of agriculture. One of India’s biggest problems is the lack

U
of financial resources for farmers. Even though the sector has become
,
L
more mechanized as a result of an increase in tractor sales across India,

O
it is crucial to make mechanized equipment available to all farmers,

/ S
including those with small and dispersed landholdings. Agriculture must

O L
be mechanized if farmers are to become more productive, but it must be
done in a way that is environmentally friendly. In the agricultural sector,

/ C
mechanization refers to the use of machines, tools, and equipment to

C Eimprove product quality, decrease post-harvest losses, and raise the price
of farm output. It aids in boosting the financial gains for farmers who

D can employ their labour more effectively, lower input costs, increase the

©D
value of their produce, adopt crop diversity, and ultimately improve their
welfare. Mechanization in agriculture is aimed at assisting farmers by
boosting their productivity per hectare and substituting mechanical power
for animal or physical labour. Mechanization can happen in two different
ways: “completely,” where machinery completely replaces both animal
and human labour, or “partially,” where machines only replace a small
portion of farming activities. There are regional variations in India’s degree
of mechanization. A high level of mechanization occurs in the northern

12 PAGE
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 INTRODUCTION TO SERVICE SECTOR AND ECONOMIC TRANSFORMATION

Indian states of Uttar Pradesh, Punjab, and Haryana as a result of the Notes
presence of extremely fertile fields and state-specific laws. Due to the
steep terrain and high cost of transportation, the level of mechanization
is low in the southern and eastern states of India.
An agricultural economy is one in which farming, including the cultivation
of crops and the raising of livestock, accounts for the bulk of economic
activity. A major section of the people in such an economy relies heavily

i
on agriculture for work and income, and agricultural products serve
as the principal export good. Different factors, including technological
l h
e
development, modifications in land use practices, and governmental
policies, can contribute to economic transformation toward an agricultural
D
of
economy. For instance, agricultural technology developments, including
the creation of better seeds and fertilizers, can boost crop yields and

ty
boost the effectiveness of agricultural output. Economic transformation

s i
towards an agricultural economy can also be fuelled by changes in land

e r
use patterns, such as the growth of agricultural land and the conversion

i v
of natural ecosystems to agricultural usage. Government initiatives like

investments in new technologies.

U n
agricultural subsidies might encourage farmers to boost output and make

L ,
Both favourable and unfavourable outcomes may result from the transition

O
to an agrarian economy. On the plus side, agricultural development may

/ S
boost economic development, create job opportunities, and improve food

O L
security. On the downside, if small-scale farmers are ignored in favour
of big agribusinesses, it can also result in environmental deterioration,

/ C
such as deforestation and soil erosion, and may worsen income disparity.

E
Overall, pursuing the shift to an agricultural economy should strike a
C
D
balance between economic growth, environmental sustainability, and social

©D
equity. This can be accomplished by taking steps like adopting sustainable
land-use techniques, providing assistance to small-scale farmers, and
making investments in rural infrastructure and services.

1.7 Economic Transformation: Industrial Economy

Industrial Revolution, in modern history, is the process of change from
an agrarian and handicraft economy to one dominated by industry and

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School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes machine manufacturing. These technological changes introduced novel

ways of working and living and fundamentally transformed society.

1.7.1 Features of the Industrial Revolution

The Industrial Revolution was primarily characterized by technological,
economical, and cultural developments.

i
The following were among the technological developments: (1) the use of

h
new basic materials, primarily iron and steel, (2) the use of new energy

e l
sources, including both fuels and motive power, such as coal, the steam

D
engine, electricity, petroleum, and the internal-combustion engine, (3) the

of
invention of new machines, like the spinning jenny and the power loom
that allowed increased production with a smaller expenditure of human

ty
energy, and (4) a new system of work known as the factory system, which

s i
involved expanded division of labour and function specialization, (5)

e r
significant advancements in transportation and communication, including

i v
the steam locomotive, steamship, vehicle, airplane, telegraph, and radio.

U n
1.7.2 What is Industrialisation?

L ,
The process of industrialization causes the economy’s economic focus

S O
to move from agricultural to industry. Two things are involved in

L /
industrialization: (i) the use of more advanced production methods that

O
assist in converting raw resources and intermediate products into finished

C
goods, and (ii) using contemporary management and organizational tools,

E /
such as accounting, management, and economic computations.

D C 1.7.3 Factors Hindering Industrialisation in Developing

© D Countries
The process of industrialisation in a Developing Economy gets confronted
with several barriers which must be systematically removed and tackled.
A. Economic Factors
(i) The developing economy faces a capital shortage. Low per capita
income and low productivity are the causes of capital scarcity.

14 PAGE
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School of Open Learning, University of Delhi
 INTRODUCTION TO SERVICE SECTOR AND ECONOMIC TRANSFORMATION

(ii) Investment in the industrial and infrastructure sectors is negatively Notes

impacted by capital shortage. Developing economies lack the
necessary transportation and communications, water, power, and
other infrastructure.
(iii) Waste and a poor economy result from the lack of industries that
can utilise the by products.
(iv) In a developing economy, there aren’t any legitimate institutions that

i
can provide workers with the education and training they need to
advance their skills.
l h
(v) The correct use of machinery is also hampered by a lack of repair
D e
of
facilities.
(vi) Industrial investment and activity are discouraged by the lack of

ty
specialized institutions that can offer appropriate credit facilities,
good banking, insurance coverage, etc.
s i
e r
(vii) Inadequate technology may also prevent industrialization from

i v
progressing. Most emerging economies copy the technological

U n
advancements made in more industrialized nations. Such technologies
support the capitalist replacement of labour. Such advanced technologies

,
are said to be appropriate on the grounds and their high productivity
L
O
may result in lower unit-production costs than would otherwise be

S
the case.

L /
An industrial economy is one in which the creation of manufactured

O
goods accounts for the bulk of economic activity. Manufacturing provides

C
/
most of the people with jobs and money, and manufactured goods are

C E
the main export good in such an economy. Technological breakthroughs,
changes in trade patterns, and governmental policies are just a few of
D
the ways that the economy might convert into an industrial one. For

©D
instance, technological developments in the manufacturing industry, such
the introduction of assembly lines and automation, can boost productivity
and efficiency, which raises output levels and creates more jobs. The
transition to an industrial economy can also be sped up by changes in trade
patterns, such as rising demand for manufactured goods on international
markets. Government initiatives, such spending on infrastructure and
education, can help to foster an environment that is favourable to the
growth of the industrial sector.

PAGE 15
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes Both positive and bad outcomes may result from the transition to an
industrial economy. On the plus side, industrial expansion can promote
innovation and technical advancement, nurture high levels of employment
and income, and support economic growth. On the downside, if workers’
rights and social protections are not effectively ensured, it can also result
in environmental damage, resource depletion, and aggravation of wealth
disparity.

i
In general, pursuing the transition to an industrial economy should be done

l h
in a way that strikes a balance between economic growth, environmental

e
sustainability, and social equality. This can be accomplished by taking

D
steps like adopting legislation to reduce environmental consequences,

of
making investments in renewable energy and resource efficiency, and
enacting laws to maintain social safety nets and defend workers’ rights.
B. Socio-Demographic Factors
i ty
r s
The population is rapidly increasing, which is one of the demographic

e
variables that impede industrialization. It has two effects: (i) a population
v
i
that is rapidly expanding suggests a sharp increase in the level of spending
n
U
in the economy. A rising consumption level helps in reducing surplus in

,
the form of saving due to the poor productivity and slow growth of these

O L
countries. Poor saving practices prevent investment. (ii) The labour force
expands together with population growth. A substantial portion of the

/ S
larger labour force seeks work in agriculture because there aren’t many

O L
other options, which tends to have a negative impact on this industry’s
productivity. A reduced productivity in agriculture has two effects on

/ C
the sector: — A significant amount of savings may come from the rural

C Esector since it employs a bigger share of the overall population. But when

D
agricultural productivity is low, this does not take place. Agriculture,

©D
the main source of industrial product demand, is dependent on industry.
Low productivity and the resulting low purchasing power in this industry,
however, simply serve to discourage further industrialization because it’s
possible that the domestic market is insufficient to support the industrial
activity. In a developing economy, the social structure and attitudes are
such that they impede the expansion of industrial production. These have
an effect by influencing the availability of different productive factors,
such as labour, capital, and entrepreneurial skill.

16 PAGE
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 INTRODUCTION TO SERVICE SECTOR AND ECONOMIC TRANSFORMATION

C. Administrative Factors Notes

(i) Poor public administration typically results in mismanagement and loss
in public sector undertakings; (ii) Constant changes in tax policy, foreign
exchange rates, customs and excise, trade controls, and licensing policies,
among other things, sow doubt in the minds of investors and make them
hesitant to make new investments; and (iii) Ineffective and flawed labour
legislation, which is another aspect of poor public administration and a

i
source of conflict in these nations.
D. International Factors
l h
(i) The competition from imported goods; (ii) the developed countries’
D e
of
enactment of customs barriers; (iii) the high costs of importing rare raw
resources, technical know-how, machinery, and equipment, among other

ty
things. It would be clear that these challenges can be overcome. They

i
may occasionally just demand simple fixes, but other times the State may

s
r
need to make some deliberate efforts. Often, a successful industrialization

e
program in a developing economy cannot be achieved without the State
v
i
taking a proactive role in such an activity.
n
, U
1.8 Economic Transformation: Service Economy

O L
The services industry not only makes up the majority of India’s GDP, but

/ S
it has also drawn substantial foreign investment, made a big contribution to

O L
exports, and created a significant amount of jobs. The services industry in
India encompasses a broad range of activities including trade, lodging and

/ C
dining, transportation, storage, and communication, financing, insurance,

E
real estate, commercial services, community, social, and personal services,
C
D
as well as services related to construction. The government is also making

©D
substantial efforts in this regard to increase India’s commercial services
exports share from 3.3% in the global services market and enable a
multi-fold expansion of the GDP.
Due to its distinctive talents and competitive advantage produced by
knowledge-based services, India is a special emerging market in the world.
The Indian services sector, which is bolstered by several government
efforts including smart cities, clean India, and digital India, is growing
due to the favourable environment such initiatives are creating. The
industry might create a multi-trillion-dollar opportunity, which could lead

PAGE 17
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes to symbiotic growth among all countries. Economic transformation is the

process by which an economy over time experiences significant changes
in its composition, structure, and performance. The transition to a service
economy is an important aspect of economic change.
In a service economy, the provision of services rather than the manufacture
of commodities drives most economic activities. Services like healthcare,
education, banking, and tourism become more significant in such an

i
economy, while industry and agriculture lose importance.

l h
Several causes, including as technical improvements, changes in consumer

D e
preferences, and globalization, have contributed to the transition to a
service economy. New and inventive services have been made possible by

of
technological developments, while the demand for services like entertainment
and healthcare has expanded as a result of shifting consumer preferences.

i ty
The expansion of international trade and investment has boosted demand

r s
for services like transportation, finance, and telecommunications, and this
has contributed to globalization.

v e
i
While the transition to a service economy has many advantages, including
n
U
increased productivity and efficiency, it has also raised issues, including

,
income inequality and job displacement. It is crucial that decision-makers

O L
address these issues by implementing programs for education and training,
social safety nets, and laws that support entrepreneurship and innovation.

/ S
L
1.9 Emergence of Experience Economy and its Prospects
O
/ C
The transition from a service economy to an experience economy marks a

C Esignificant shift in the way businesses and consumers interact. In a service

D
economy, businesses primarily offer intangible services to their customers,

©D
such as banking, healthcare, or consulting. However, in an experience
economy, businesses aim to create memorable and immersive experiences
for their customers, going beyond the mere provision of services.
This shift is driven by several factors. Firstly, as basic services become
increasingly commoditized, businesses are seeking ways to differentiate
themselves and create unique value propositions. By focusing on creating
memorable experiences, companies can engage customers on a deeper
emotional level, fostering loyalty and driving long-term success (Verma
and Goswami, 2003).

18 PAGE
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 INTRODUCTION TO SERVICE SECTOR AND ECONOMIC TRANSFORMATION

Secondly, advancements in technology and changing consumer preferences Notes

have contributed to the rise of the experience economy. With the advent of
social media and digital platforms, consumers now have a heightened desire
for personalized, shareable experiences. They seek to actively participate,
co-create, and engage in experiences that are not only enjoyable but also
shareworthy, generating positive word-of-mouth and social media buzz.
Furthermore, the experience economy aligns with the growing emphasis
on holistic well-being and personal fulfilment. Consumers are increasingly
willing to spend their disposable income on experiences that enrich their
h i
lives, create lasting memories, and contribute to their sense of self-identity.
e l
Businesses that successfully navigate this transition can unlock numerous
D
of
benefits. They can command higher prices for their offerings, as experiences
are often perceived as more valuable than traditional services. Moreover,

ty
they can foster stronger customer relationships and brand loyalty, as

s i
memorable experiences leave a lasting impression and generate positive
associations.
e r
i v
The prospects of the experience economy are highly promising, offering

U n
a plethora of opportunities for businesses and consumers alike. In today’s
fast-paced world, people increasingly value experiences over material

,
possessions. The experience economy encompasses various sectors
L
O
such as travel, entertainment, dining, and events, where businesses can

S
create memorable and immersive experiences for their customers. This

L /
shift in consumer preferences opens doors for innovative concepts like

O
pop-up stores, interactive exhibitions, themed restaurants, and adventure

/ C
tourism. Moreover, advancements in technology, such as virtual reality

E
and augmented reality, further enhance the potential of the experience

C
economy by enabling even more immersive and personalized experiences.

D
With its ability to foster emotional connections, create lasting memories,

©D
and cater to the growing desire for unique and meaningful experiences,
the experience economy is set to thrive and shape the future of consumer
engagement.
In conclusion, the transition from a service economy to an experience
economy represents a paradigm shift in the way businesses create value
for their customers. By focusing on delivering immersive, memorable
experiences, companies can differentiate themselves, foster customer
loyalty, and capitalize on the evolving consumer preferences in today’s
dynamic marketplace.

PAGE 19
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes CASE STUDY

Case Study 1
These days, we modify our routines at the same rate as technology
does. There may have been TVs broadcast around the town discussing
television. Previously, everyone would gather and watch it all at
once. Every individual in today’s OTT era has a mobile phone with
which they may handle some stuff at any time. In the midst of all of

i
this, seeing movies in a theatre has taken precedence. However, it is
h
l
currently alleged to have such superiority. But now time has changed
e
D
completely as today begins an extended period of lockdown that the

of
people of India have never experienced before. In such a situation,
one desires to spend their free time in the era of technology in front

ty
of a digital screen. Further, they also have a lot of options on the

i
Internet, which is supported by the rising popularity of OTT video
s
r
streaming platforms and the preference of the biggest stars for this

e
v
network. Nowadays, we spend a staggering amount of time staring at

i
our computers. This technological advancement via the Internet has
n
U
produced a new type of viewing environment where movie theatres

,
close and film release is suspended in the global centre. It might

O L
change how people watch movies together in the theater, which might
increase foot traffic when the screen opens up again.

/ S
L
Questions: 1. Describe the scene of before and after pandemic with

O
respect to consumption of OTT Platform.

/ C
2. How is internet service provider affected in because of rise in

E
OTT platform?

D C Case Study 2

©D
The success of a single company can serve as an example of the lessons
to be learnt from economic studies on how corporate strategy and
public policy affects the growth of the service sector. Three elements
are common to the success of large international service firms i.e. (1)
The expansion of markets allowed the newcomer to make invention,
another step toward success. Such innovation, whether in terms of
business procedures or product quality, enables a company to set
itself apart from competing, frequently more traditional, businesses.
The importance of venture or risk capital is frequently linked to

20 PAGE
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School of Open Learning, University of Delhi
INTRODUCTION TO SERVICE SECTOR AND ECONOMIC TRANSFORMATION

the strong emphasis on innovation. Successful service companies Notes

frequently pioneered the introduction of information and communication
technology (ICT) and the development of other important technology
applications. (2) A number of prosperous service companies looked
into the presence and success of markets being opened up. (3) It has
also been emphasized a motivating work environment. The significance
of internal company elements, particularly how work is organized and

i
managed by entrepreneurs. Therefore, Public policies pertaining to
innovation, ICT, or work organization are therefore frequently crucial
l h
for a company’s success, although nearly always in a struggle of free
and disputable marketplaces.
D e
of
Questions: 1. What are the common element for the success of

ty
service firms?
2. Comment on how public policy affects the economic growth?
s i
IN-TEXT QUESTIONS
e r
i v
1. A Service Economy is primarily focuses on the Financial, Health
and _____ sector.
U n
(a) Educational

L , (b) Marketing

O
(c) Technology (d) Human Resource

/ S
2. ______, in modern history, the process of change from an

O L
agrarian and handicraft economy to one dominated by industry
and machine manufacturing.

/ C
(a) Industrial Revolution (b) Green Revolution

CE
(c) White Revolution (d) Yellow Revolution

D
3. What is the full form of GVA:

D
©
(a) Goods VAT Added (b) Great Annual Value
(c) Gross Valid Addition (d) Gross Value Added
4. ______ and political extensions of the consumption pattern idea
probe the class and symbolic dimensions of organization of
consumption.
(a) Legal (b) Sociocultural
(c) Technology (d) Ecological

PAGE 21
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes 5. In most rural areas, ______ is the primary engine of development.

(a) Industries (b) Infrastructure
(c) Agriculture (d) Telecom
6. The process of ______ raises farm productivity makes farming
commercially viable and strengthens connection with other
economic sectors.

i
(a) Finance transformation (b) Industries transformation
(c) Marketing transformation
l h
(d) Agricultural transformation

D e
7. The services industry not only makes up the majority of India’s

of
____, but it has also drawn substantial foreign investment.
(a) GDP (b) NNP
(c) GNP
i ty
(d) FDI

r s
8. ____ is collaborating with all parties on behalf of the German

e
Federal Government to create plans for agrarian-based economic
v
growth.

n i
U
(a) GIZ (b) GFF

L,
(c) WIZ (d) WTO

O
9. The government is also making substantial efforts in this regard

/ S
to increase India’s commercial services exports share from ____

L
in the global services market and enable a multi-fold expansion

O
of the GDP.

/C (a) 3.3% (b) 3.8%

CE
(c) 3.5% (d) 4.0%

D D 10. Which among these is not the factors contributing to the growth
of service sector:

© (a) Business trends

(b) Changes in society
(c) Government policies
(d) Shifts in employees preferences
11. ____ has lead to emergence of new categories of products
and services, the erosion of domestic handicraft skills, the

22 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
INTRODUCTION TO SERVICE SECTOR AND ECONOMIC TRANSFORMATION

complexity of mechanical gadgets and manufactured goods, and Notes

new pressures.
(a) Consumer Literacy (b) Availability of goods
(c) Merchandising Practices (d) Family size
12. The service sector’s contribution to the Indian economy is
unprecedented. The GVA (Gross Value Added) is more than
_____ of what it represents.

h i
l
(a) 50% (b) 60%
(c) 75% (d) 40%
D e
of
13. While the transition to a ______ has many advantages, including
increased productivity and efficiency, it has also raised issues,

ty
including income inequality and job displacement.
(a) Service economy (b) Market economy
s i
(c) Mixed economy
e r
(d) Socialist economy
14. What is full form of ICT?
i v
(a) Install Center Training
U n
(b) Install Central Technology
L ,
O
(c) Information Centre Training

/ S
(d) Information and Communication Technology

L
15. The _______serve as the GIZ’s guiding principles and are
O
C
applied through the ESC approach.

E /
(a) Sustainable Development Goals

C
(b) Sustained Developed Goal

D
©D
(c) Substantial Developing Goals
(d) Seasonal Development Goals

1.10 Answers to In-Text Questions

1. (a) Educational
2. (a) Industrial Revolution
3. (d) Gross Value Added

PAGE 23
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes 4. (b) Sociocultural

5. (c) Agriculture
6. (d) Agricultural transformation
7. (a) GDP
8. (a) GIZ
9. (a) 3.3%
10. (d) Shifts in employees preferences
h i
11. (a) Consumer Literacy
e l
12. (a) 50%
D
of
13. (a) Service economy

ty
14. (d) Information and Communication Technology
15. (a) Sustainable Development Goals
s i
e r
1.11 References
i v
‹
U n
Banerjee, Debjani (2011). Analysis of literature review of consumption

L ,
pattern – an important indicator of economic development, International
Journal of Enterprise Computing and Business Systems, ISSN

S O
(Online): 2230-8849 http://www.ijecbs.com,Vol. 1 Issue 2, pp.
‹

L /
Merrill, R.S. (1968), “Technology” International Encyclopedia of

O
Social Sciences. 15:576-86; Edited by David I. Sills, ‘The Macmillan

/ CCo.’ & The Free Press, New York, 1968.

CE
‹ Philip Kotler and Paul N Bloom - Marketing Professional Services.

D
‹ Verma, M.M. & Goswami, I. (2003). Emerging experience economy:

D
A new challenge to HR profession. Personnel Today, Vol: 24 (2),

© ‹
July-Sept. 2003. ISSN: 0970-8504, pp.
Virmani, A (2008): “Growth and Poverty: Policy Implications for
Lagging States”, Economic & Political Weekly, January 12, Vol.
43, No. 2, pp. 54-62.

24 PAGE
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School of Open Learning, University of Delhi
INTRODUCTION TO SERVICE SECTOR AND ECONOMIC TRANSFORMATION

1.12 Suggested Readings Notes

‹ Services Marketing by Valarie Zeithmal, Mary Jo Bitner, Dwayne

Gremler – June, 2018 (7th Edition).
‹ Services Marketing, by Zeithaml et al., Tata McGraw Hill Education
Private Limited. -2019 (7th edition).
‹ Hefley, B., and W. Murphy, eds. Service Science, Management

i
and Engineering Education for the 21st Century, Service Science:
Research and Innovations in the Service Economy Series. New
l h
York: Springer, 2008.
Marketing, Tata McGraw Hill by Dhruv Grewal, (2018), 10th Edition,
D e
of
‹
India-2018.

ty
‹ Services Marketing, Rama Mohana Rao-Pearson, 2nd Edition-January
2020.
s i
‹

e r
Services Marketing: Texts and Cases by Vinnie Jauhari and Kirti

v
Dutta – April, 2017.

n i
, U
O L
/ S
O L
/ C
C E
D
©D

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© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
L E S S O N

2
Service as Marketing
Entity
Dr. Rituraj Saroha
Content Writer
School of Open Learning

h i
University of Delhi

e l
Email-Id: rituraj.saroha@gmail.com

STRUCTURE D
2.1 Learning Objectives of
2.2 Introduction
i ty
2.3 7KH &RQFHSW DQG 'H¿QLWLRQ RI 6HUYLFHV
r s
Service as Marketing Entity
v e
i
2.4
2.5 Unique Characteristics of Services

U n
Strategic Implications of Services Marketing
,
2.6
2.7 Service Dominant Logic

O L
S
2.8 Types of Services
2.9 Summary
L /
2.10

C O
Answers to In-Text Questions
2.11
E /
Self-Assessment Questions

C
2.12 References
2.13
D
Suggested Readings

©D
2.1 Learning Objectives
‹ Learn about the meaning and definition of services.
‹ Understand the unique characteristics of services which distinguish them from goods.
‹ Gain insights regarding the services being one of the important marketing entities.
‹ Have knowledge and understanding about strategic implications of services marketing.

26 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 SERVICE AS MARKETING ENTITY

‹ Appreciate the underlying fundamentals of service-dominant logic Notes

and practical ways of implementing the same in modern businesses.
‹ Gain knowledge about classification of services into various types
along with examples.

2.2 Introduction
Marketing as an activity involves directing the flow of goods and services
right from their concept stage to ultimately ensuring customer delight by
h i
effectively meeting or surpassing their specific needs. Evidently, marketing
e l
D
of services is an integral part of marketing as a study discipline in addition

of
to the marketing of goods. Services marketing forms one of the important
entities of modern-day marketing. The present lesson deals with studying

ty
in detail about what the marketing of services entails as an activity in

i
addition to the unique characteristics of services vis-à-vis goods, their
s
r
strategic implications, and classification of services into various types.

e
i v
2.3 The Concept and Definition of Services

U n
2.3.1 The Concept of Services
L ,
O
All the economic and industrial activities have been categorized into
S
L /
three groups which are primary, secondary and tertiary. As is widely
known, primary economic activities involve the collection, extraction or

C O
production of raw materials or natural resources, such as, agriculture,

E /
mining, fishing, forestry, logging, quarrying etc. On the other hand, the

C
secondary economic activities involve the construction or manufacturing

D
of finished goods utilizing the raw materials. The activities resorted to

©D
by small potteries, factories that manufacture chemicals, plastics, steel,
automobiles, furniture etc. are examples of secondary activities as they
utilize the naturally available raw materials and turn them into useful
goods. In contrast to the above-mentioned activities, the tertiary economic
sector entails a wide range of activities which ensure the provision of
services to consumers as well as other businesses such as education,
transportation and logistics, financial, administration, governance, auditing,
communication, education, training, security, technology and medical
services. In modern economy, the tertiary sector has grown to play the

PAGE 27
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes most important role of all the three sectors. This sector totally relies
upon provision of services to support all the economic activities. As this
sector has assumed the role of the most crucial sector for the success of
modern economy, it becomes inevitable to study the concept, definition,
characteristics and marketing of services.

2.3.2 Definitions of Services

American Marketing Association in 1960 defined services simply as
h i
e l
“activities, benefits, or satisfactions which are offered for sale, or provided

D
in connection with the sale of goods”. This limits the concept of services

of
to the sale of goods, even though services encompass activities falling
well beyond its ambit.

ty
Philip Kotler (1989), the renowned marketing guru defines a service

s i
“as any activity or benefit that one party can offer to another that is

e r
essentially intangible and does not result in the ownership of anything. Its

i v
production may or may not be tied to a physical product”. This definition

n
chiefly draws upon the nature of services. So, in order to fully grasp the

U
concept, we must study further definitions.

,
L
Stanton (1981) defines services as “separately identifiable, intangible

O
activities which provide want satisfaction when marketed to consumers

/ S
and/or industrial users and which are not necessarily tied to the sale of a

O L
product or another service. To produce a service may or may not require
the use of tangible goods. However, when such use is required, there is

/ C
no transfer of title or permanent ownership to these tangible goods”. To

C Eexplain this definition, let us consider the case of information technology

(IT) services. When IT companies develop and sell client-specific software

D to their customers, they extensively use computer hardware for software

©D
development and testing procedures but while transferring the ownership
of the developed software to the clients do not involve selling of their
tangible hardware even though the clients make use of the developed
software to further solve their business problems.
On similar lines, Judd (1964) has defined services as market transactions
“where the object of the market transaction is other than the transfer of
ownership (and title, if any) of a tangible commodity”.

28 PAGE
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 SERVICE AS MARKETING ENTITY

Section 2 of Indian Consumer Protection Act, 1986, defines service as Notes

“service of any description which is made available to potential users and
includes, but not limited to, the provision of facilities in connection with
banking, financing, insurance, transport, processing, supply of electrical or
other energy, board or lodging or both, housing construction, entertainment,
amusement or the purveying of news or other information, but does not
include the rendering of any service free-of-charge or under a contract
of personal service”. This definition specifies various kinds of services.
The study of all the above-mentioned definitions in totality gives the
h i
learner a fair and wholesome idea about what a service entail. Though a
e l
D
service differs from the goods by its very nature, it may be an integral

of
part of an overall product alongside the tangible good.

ty
2.4 Service as Marketing Entity

s i
Services marketing involves a strategy for promoting and showcasing

e r
the intangible benefits and offerings delivered by a company so as to

i v
drive end customer value which can be employed for standalone service

U n
offerings as well as complementary services to tangible products. It has
matured as an academic field of study in recent years (Grove et. al, 2003).

L ,
It is defined as “the integrated system of business activities designed to

O
plan, price, promote and distribute appropriate services for the benefit of

S
existing and potential consumers to achieve organizational objectives”.

L /
The services sector has evolved to assume a great significance in all

O
modern economies. It has not only grown to dominate many national

C
/
economies all over the world but also assumed a bigger role in the

C E
global economy as well (World Trade Report 2019). Services sector is
the fastest growing economic sector (WTO, 2017). The contribution of

D
services sector has increased in the global GDP as well in national GDP

©D
of major world economies. For example, the services sector in the United
States accounted for just 43 per cent of its GDP in 1950, it had grown
to 61 per cent by 1990, and had reached almost 80 per cent in 2019
(BEA, 2019). In Japan, services represent 68 per cent of GDP while it
contributes 72 per cent in New Zealand’s GDP. Emerging economies, too,
are becoming more services-based – in some cases, at an even faster pace
than advanced ones. Despite emerging as the “world’s factory” in recent
decades, China’s economy is shifting dramatically into services where
services now account for over 52 per cent of GDP – a higher share than

PAGE 29
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 MBAFT 7606 SERVICE MARKETING

Notes manufacturing – up from 41 per cent in 2005. In India, services now

make up almost 50 per cent of GDP, up from just 30 per cent in 1970
(World Trade Report 2019). In Brazil, the share of services in GDP is
even higher, at 63 per cent (World Bank, 2019). Between 1980 and 2015,
the average share of services in GDP across all developing countries
grew from 42 to 55 per cent (UNCTAD, 2017). The data given above
indicate towards the massive contribution and significance of services
sector in modern world economy, owing to which it has also become an
important marketing entity. Services have grown to become significant
h i
e l
entities that can be marketed. Services are intangible entities that involve

D
performing some kind of act or deed for the customers or economic

of
activities performed to meet the consumer’s demand, needs, promotion
and marketing.

2.5 Unique Characteristics of Services

i ty
r s
e
In order to distinguish services from tangible goods and effectively
v
n i
manage the marketing of services by developing a deep understanding
of their inherent nature, we must explore the unique characteristics of

, U
services. An organization is expected to design specific marketing policies

O L
for its service offerings which align with their distinctive characteristics.
The commonly stated unique characteristics of services are as enlisted
below:
/ S
O L
2.5.1 Intangibility

/ C
E
Intangibility is essentially the characteristic if services by virtue of which it

D C is not possible to touch, taste, feel, see, hear or smell services. Owing to its
intangibility, a service cannot be stored, transferred, standardized, patented,

© D copied exactly by the competitors, displayed readily or communicated easily

to the prospective customers. Intangibility characteristically distinguishes
a service from physical goods which are tangible in nature. However,
there is a continuum of tangibility or goods-services continuum (Figure
2.1) which further distinguishes the nature of products with pure goods
at one extreme and pure services at the other. It must be noted here that
most of the products lie between the aforesaid two extremes (Rathmell,
1966). According to Shostack (1977), most of the product offerings entail
a combination of tangible and intangible elements. It is this essence of

30 PAGE
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 SERVICE AS MARKETING ENTITY

the product being purchased which determines its categorization as a Notes

good or a service.
Figure 2.1 represents that teaching services are at one end of goods-
services continuum which is intangibility dominant, while salt represents
its other extreme which is tangibility dominant. It indicates that while
you buy salt, you can physically see, feel, touch and smell it as it is
tangible in nature. On the other hand, teaching is an intangible service,

i
wherein, while a learner pays fee for a taught course in a college for the

h
purpose of deriving knowledge and educational services delivered by the
college teachers, he is unable to check the service benefits or features
e l
beforehand while paying the fees. The quality of an intangible product
D
of
can only be experienced while it is being consumed or availed, and that
generally which happens only after making the payment for accessing the

ty
service. Intangibility is the most distinctive characteristic of any service
offering owing to which it becomes distinct from the goods.
s i
e r
i v
U n
L ,
S O
L /
O
Figure 2.1: Continuum of tangibility or goods-services continuum

C
/
(Source: G. Lynn Shostack, ‘Breaking Free from Product Marketing’, 1977,

E
C
Journal of Marketing, AMA).

D
2.5.2 Inseparability

©D
Inseparability is another distinctive characteristic of any service offering
by virtue of which it often cannot be separated from the person or the firm
selling it. It renders it impossible to separate the production or provision
of a service from its consumption. A service is often provided by a person
either who possesses a specific skill set (e.g. singer, doctor, etc.) or is
adept at using a particular equipment or handling a tangible product in
order to provide a particular service (e.g. dry cleaning) or allows the
service consumers to access or make use of physical infrastructure (e.g.

PAGE 31
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 MBAFT 7606 SERVICE MARKETING

Notes hotel, train, etc.). Thus, services are first sold, then produced and later or
simultaneously consumed which is quite distinctive from goods which can
be produced at a particular time, then can be stored and ultimately can
be sold or consumed at any desired future instance. As the services are
often produced and consumed at the same time, they cannot be produced
on a mass scale unlike goods.

2.5.3 Heterogeneity

h i
e l
Services are inherently heterogeneous in nature as they are highly variable

D
owing to the involvement of human element during the provision or

of
rendering of services. Since no two service providers are same in every
aspect, the services rendered by them somewhat differs in certain aspects.

ty
Even the same service provider may not be able to provide exactly same

i
service levels at each instant due to the variability in time, place, efficiency
s
r
or well-being of the service provider. It is because of this heterogeneity

e
v
inherent in the nature of the services, that it is not possible to fully

n i
standardize the service outputs. Franchising operations undertaken by

U
various brands or service providers such as McDonalds, Starbucks etc.,

L ,
attempt to ensure a certain standard conformity amongst all their outlets,
but it is ultimately not possible even for them to ensure the same level of

O
service outputs at all their outlets all the time. In contrast, the physical
S
L /
goods can be successfully standardized on a mass scale across all the
manufacturing locations.

C O
E /
2.5.4 Perishability

D C As mentioned above, services cannot be stored. As they are to be produced

©D
and consumed at the same time without any provision/possibility of their
storage for the purpose of future consumption, services are perishable in
nature. Unlike goods which can be stored to be sold off later, services go
waste in the absence of a customer. If services are not consumed at the
instance of their production, they go waste forever. For example, vacant
seats in a cinema hall or an airline flight represent permanently perished or
lost opportunities of service consumption. In the cases of fluctuating levels
of service demand, the perishable nature of services further aggravates
the situation. Efficient mechanisms of demand forecasting and creative

32 PAGE
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 SERVICE AS MARKETING ENTITY

planning to ensure optimum capacity utilization are extremely important Notes

decisions to be made in order to offset the potential lost opportunities
as consequences of perishable nature of service offerings.

2.5.5 No Transfer of Ownership

When a consumer pays to experience or access any service, he does not
become the owner of the service. The payment made by him only makes
it possible for him to access or avail the service for a particular period in
h i
a stipulated manner even though it involves no transfer of ownership. On
e l
D
the contrary, when a customer pays to buy any physical goods such as a

of
refrigerator, automobile or watch, the ownership or title of that goods is
transferred permanently in the name of the paying customer. However,

ty
a service can only be accessed for the stipulated duration only with no

i
transfer of its ownership rights. For example, when you pay money to buy
s
r
a ticket for any movie show or airline flight, you are authorized access

e
v
to the given cinema hall or flight seat only for the stipulated instance

n i
without any claim to the ownership of the cinema or flight seat.

services in a self-explanatory chart form:

, U
Figure 2.2 Represents the above-explained unique characteristics of

O L
/ S
O L
/ C
C E
D
©D

Figure 2.2: Unique characteristics of services

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School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes 2.6 Strategic Implications of Services Marketing

Marketing strategies for service organizations are different from those
adopted in case of other non-service organizations. Marketing strategies
for service firms have significant differences from those of other firms
owing to the different inherent characteristics of services viz. Intangibility,
perishability, inseparability, heterogeneity and no transfer of ownership.
Developing marketing strategies for service organizations typically involve

h
selecting the target markets to which the service offerings are intended
i
e
to cater and developing a service marketing mix for each selected
l
D
target market. A target market is a group of customers having similar

of
characteristics to which the service offering is designed specifically to
appeal. During the analytical stage of developing marketing strategies,

ty
the marketers basically attempt to resolve the answers to some specific

s i
marketing questions. Finding answers to these marketing questions require

r
serious strategic thinking. Thomas (1978) has enlisted these questions for
e
v
the managers of service organizations as mentioned below:
‹
n i
Do we fully understand the specific type of service business we are
in?

, U
L
‹ How can we defend our business from competitors?
‹

S O
How can we obtain more cost-efficient operations?
‹

L /
What is the rationale for our pricing strategy?
‹

C O
What process are we using to develop and test new services?

E
‹
/ What acquisitions, if any, would make sense for our company?

C
The unique answers to these specific questions lead to the development of

D
marketing strategies for service businesses. So, even though the managers

©D
of service-based businesses must deal with more difficult marketing tasks,
they can yet successfully market their service-based businesses using
effective marketing strategies as described below:
‹ Firstly, they must be able to define their services clearly.
‹ They must outline their value proposition i.e. what makes their
service different from the other service providers working in their
industry and what value does their service brings to their clients.
‹ They must specialize or find a niche market for catering to.

34 PAGE
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 SERVICE AS MARKETING ENTITY

‹ They must focus on their existing client relationships and nurturing Notes
them further by sharing useful information with them and adding
more value to their service offerings before trying to find new
clients.
‹ They must outline how they can protect their businesses from
competitors and how they came up with the price they are charging
for their service. They must know what their competitors are

i
charging for the same or similar services and what perceived value
they provide to their customers. Following this exercise, they will
l h
e
be better equipped to justify their prices to their current as well as
prospective clients.
D
of
‹ Next, comes the designing of an effective services marketing mix
for each of the service offerings which involves designing effective

i ty
product strategies, pricing strategies, distribution strategies, promotion
strategies, people strategies etc.
r s
e
Services marketing strategy focuses on delivering processes, experiences,
v
i
and intangibles to customers rather than physical goods and discrete
n
U
transactions. Delivering experiences successfully and building customer

,
relationships are complicated undertakings involving many different

O L
strategies and tactics (Zeithaml et. al, 2010). Consequently, the marketing
strategies for services are different from those adopted for physical goods.

/ S
Intangibility of services is the chief reason behind the same as unlike

O L
while purchasing goods, the customers have no idea regarding what kind
of services they are going to get unless they have got the same. Thus,

/ C
the customers are wary while deciding to buy any services and need a lot

E
of questions satisfactorily answered before taking a decision. Designing
C
D
marketing strategies for services involve attempting to the answer these

©D
customer questions as already explained above.
The challenges faced by the service marketer are different from those
faced by any product marketer. The reasons behind the unique marketing
challenges faced by the service marketer are the unique characteristics
of the services which make it pertinent to design unique strategies at
various levels to market the services effectively. Due to the intangible
nature of the services, the management and marketers find it challenging
to design a competitive marketing strategy for services since different
customers tend to associate the same service with different attributes and

PAGE 35
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes evaluate it differently. Because of this, it is very difficult to standardize

any service offering for different consumers. As the requirements of
all customers differ from each other, the service marketer must keep in
mind the specific customer requirement while marketing his services to
different customers. Secondly, it is very difficult to effectively match
the demand and supply constraints for a service offering when compared
vis-a-vis a product offering. The demand for services is dependent upon
several factors and varies among the customers. So, it is challenging to
match the capacity of the service firm to the varying service demand.
h i
e l
So, by applying various strategies, the service marketers sometimes try

D
to influence the varying service demand to match their supply capacity.

of
Also, when the demand exceeds the capacity of service firms to supply,
it leads to the issues of managing the waiting lines effectively without

ty
any losing the customer base – which gain requires strategic planning

s i
and implementation of effective service marketing strategies. If these

r
strategies are not in place, the service firm runs the danger of losing its
e
v
customer base while they wait for service delivery in the waiting lines

n i
as they can be easily tempted by competitors during such a stage of

U
waiting and being impatient. Thus, managing waiting lines again is an

L ,
important issue of strategic planning for most of the service firms as it
is not possible to store any service owing to its perishability and it has

O
to be provided instantaneously at the same as it is to be consumed by
S
/
a number of waiting customers. In the following segments, the learners
L
O
will learn about the competitive service strategies and service recovery

C
strategies adopted by the service marketers.

E /
C
2.6.1 Competitive Marketing Strategy for Service Marketers

D D Any service firm that offers different products and services must prepare

© unique strategic competitive plans for its different business propositions

as well as different markets to which it caters. These strategic plans are
to made and implemented at three business levels as explained below:
‹ Corporate-Level Strategy: Corporate-level strategic planning essentially
involves selection of services the firm or company should compete
with along with the development of a portfolio of businesses. It
defines the organization’s overall direction and the high-level ideas
that needed to be adopted in order to move in the chosen direction.

36 PAGE
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 SERVICE AS MARKETING ENTITY

Corporate-level strategic plans are created by the top management for Notes
a longer time span and encompass the vision, values, strategic focus
areas, strategic objectives and the most important Key Performance
Indicators (KPIs).
‹ Business-Unit Level Strategy: Every service organization has various
fully functional units of business having their own visions and
directions, which are known as Strategic Business Units (SBUs).

i
Business-unit level strategy is a means of achieving the goals of
a specific SBU in the organization. Business-unit level strategy
l h
e
making involves formulating competitive strategy and other strategic
decisions regarding the choice of services, satisfying customer
D
of
needs, gaining competitive advantage, creating or tapping into new
business opportunities, etc. For example, a large bank is involved

ty
in selling multiple services in different industries and customers.

s i
It has specific business units such as corporate banking, wealth

e r
management, risk management, and capital raising each having

i v
distinct goals and business strategies to achieve these goals.
‹

U n
Functional Level Strategy: Functional level is at the operating end
of a service organization at which tactical and functional decisions

L ,
are made. Functional level strategy making guides the day-to-day

O
functioning of the employees and steers the organization in the right

/ S
direction. Functional strategies include the following:
z

O L
planning and executing the day-to-day actions required to
deliver corporate and business-unit level strategies,

/ C
E
z maintaining relationships between different business units,

C
departments and teams, and
z
D
guiding how the functional goals are to be met and measured.

©D
Various commonly used models for developing competitive marketing
strategy for service organizations include Boston Consulting Group (BCG)
Matrix, General Electric Business Screen, Michael Porter’s Model, Ansoff
Grid etc.

2.6.2 Service Recovery Strategies

It is widely known that it is costlier for a services organization to
attract a new customer than to retain an existing customer, because of
PAGE 37
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 MBAFT 7606 SERVICE MARKETING

Notes which the service organizations endeavour to retain a loyal customer

for long time duration by minimizing service failures. Service failure
occurs when the customers do not get what they had expected to get
in terms of service. This is where the role of service recovery comes
into play. Service recovery refers to a service organization’s capacity to
fix an unhappy customer’s issue using vital customer service. “Service
recovery is a process that identifies service failures, effectively resolves
customer problems, classifies their root cause, and yields data that can be

h
integrated with other measures of performance to assess and improve the
i
e l
service system” (Tax and Brown, 2000). It is the capability of a service

D
organization to effectively address and resolve a dissatisfied customer’s

of
problem by means of sound customer service. Service recovery does not
occur naturally in the business – the service organization has to design

ty
effective systems that enable its service representatives to deliver the best

s i
possible resolution to its customers. As an example of service recovery –

r
let us consider the case of a Ski resort that had its customers stuck on a
e
v
broken chair lift for an hour in the cold due to some unavoidable service

n i
failures or other factors, offered all the stuck people a hot drink and gave

U
them free Ski passes for their next visits. The below mentioned are the

,
necessary steps essential for any service recovery strategy to succeed:

L
O
‹ Service organizations must track, anticipate and pre-empt the service

S
recovery by ensuring effective and regular customer interactions.
‹
L /
Offering sincere apologies to the customers aggrieved of service

C O
failures and showing regret for what the customer has gone through

/
in the situation.

CE
‹ Empowering the employees to take ownership of the problem and

D
take steps to correct it immediately while being friendly to the

D
customers.

© ‹ Getting to the root cause of the problem and resolving it by acting

promptly without wasting any time unnecessarily.
‹ Offering something extra and complimentary to the aggrieved customers
like free shipping or a free month’s subscription, in order to make
up for the customer’s sense of injustice.
‹ Following up with the customer and ascertaining how he felt after
the service was fixed.

38 PAGE
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 SERVICE AS MARKETING ENTITY

‹ Adequately training the front-line employees to deliver a fail-safe Notes

service.

2.7 Service Dominant Logic

Service-dominant (S-D) logic is a theoretical framework developed by
Stephen Vargo and Robert Lusch based in 2004 on the underlying ideas that
human beings apply their competences to benefit others and reciprocally
benefit from others’ applied competences through service-for-service
h i
exchange and that the products or services only become valuable when
e l
D
consumers use them. It is a mindset for a unified understanding of the

of
purpose and nature of organizations, markets and society taking service
as the basis of exchange. The cornerstone proposition of S-D logic is that

ty
the organizations, markets, and society are fundamentally concerned with

i
the exchange of service—the applications of competences (knowledge and
s
r
skills) for the benefit of a party. It asserts that the service is exchanged

e
v
for service; all firms are service firms; all markets are centred on the

n i
exchange of service, and that all economies and societies are essentially

U
service based. Consequently, marketing thought, and practice should be

,
grounded in service logic, principles and theories.

L
O
In line with the propositions of the S-D logic, it follows that instead

S
of just service marketing “breaking free” from goods marketing, which

L /
has been the pursuit of the services marketing sub-discipline for the last

O
several decades, all of marketing discipline needs to break free from the

/ C
goods and manufacturing-based model i.e., goods-dominant (G-D) logic.

E
S-D logic embraces concepts of the value-in-use and co-creation of value

D C
rather than the value-in-exchange and embedded-value concepts of G-D
logic. Vargo and Lusch, 2004 postulate that service provision rather than

©D
goods is fundamental to economic exchange and view all interactions
within an economy as service-to-service interactions. It appreciates that
the view that all products render a service to their consumers and that
the products’ value is derived from the interaction between its consumers
and the products. The service-dominant logic regards the customers as
co-creators of value and believes that they bring more than just their
money to business transactions. So, S-D logic is a customer-centric
perspective adopting which can help businesses to focus on the customer
and their needs rather than just on the product. In this manner, S-D logic

PAGE 39
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes is more aligned towards the modern marketing ethos. Some of the ways
in which the modern marketers can apply S-D logic to their businesses
are as enlisted below:
‹ The products must be treated as vehicles that deliver a service.
‹ The focus must be on understanding what the customers want and
need.
‹ It must be ensured that the customers’ needs are always at the
forefront.

h i
‹

e l
It must be studied how the customers interact with the service being

D
offered.

of
‹ The collaborative nature of business relationships must be emphasized
upon.

ty
Strong relationships must be built with the customers and regular
i
‹

s
engagement with them is necessary.
‹

e r
It must be considered how technology can be used to improve the
customer experience.
i v
‹

U n
Regular feedback must be elicited from customers, which should be

,
used to improve the services offered.
‹

O L
The philosophy of co-creation with customers must be embraced.
One must innovate continuously to meet the customers’ changing
S
‹
needs.
L /
C O
2.8 Types of Services

E /
C
In his book titled “The Marketing of Services”, Donald W. Cowell (1984)

D
has given an illustrative list of selected services (Figure 2.3), which

©D
includes:
‹ utilities,
‹ transport and communication services,
‹ distributive trader services,
‹ insurance, banking and finance services,
‹ business, professional and scientific services,
‹ recreation and leisure services,
‹ miscellaneous services.

40 PAGE
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 SERVICE AS MARKETING ENTITY

Selected Illustrative Services Notes

Utilities Recreation and Leisure
Gas Cinemas, theatres
Electricity Sport and recreation
Water Supply Betting and gambling
Hotels, motels, restaurants, cafes
Public houses and clubs
Catering contractors
Transport and Communication Miscellaneous
h i
Railways Repair services

e l
D
Road passengers Hairdressing

of
Road haulage Private domestic
Sea transport Laundries
Air transport Dry cleaning
Postal service
i ty
s
Telecommunications
Distributive Traders
e r
Wholesale distribution
i v
n
Retail distribution

U
Dealers and agents

Insurance, Banking and Finance

L ,
Insurance

S O
Banking
Finance
L /
Property service

C O
E /
Business, Professional and Scientific
Advertising
Consulting
D C
©D
Marketing Research
Accountancy
Legal
Medical and dental
Educational services
Research services
Figure 2.3 : Selected Illustrative Services
(Source: Donald W. Cowell, ‘The Marketing of Services’, 1984,
Butterworth-Heinemann Ltd., London).

PAGE 41
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School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes All the types of services as highlighted in Figure 2.3, can be further
grouped as social services, business services and personal services.
Social services are provided voluntarily provided by an individual or a
group of individuals to achieve certain social goals which may include
goals of improving the living standards of the weaker sections of society,
providing educational and health services to the poor etc. These services are
provided without any profit earning motive. For example, the educational

i
services provided by NGOs to poor slum dwelling children.

l h
Business services are utilized by business organizations to conduct their

D e
activities. These services assist the business but do not deliver any
tangible commodities. The major business services are insurance, banking,

of
warehousing, transportation and communication services. Banking services
are provided by nationalized as well as commercial banks which lead

i ty
to play an essential role in an economy by providing their customers

r s
with institutional credit and finance to businesses in different forms for

e
different purposes in addition to providing money withdrawal facilities

v
n i
through cheques, drafts, orders etc. and locker, debit card and credit card
facilities. On the other hand, insurance services involve facilitating the

U
companies with insurance for their business. Insurance companies sign
,
L
agreements with their customer organizations, charge premium fees and

O
then transfer their risk to themselves. The signed insurance agreement

/ S
contains a promise by the insurance company to pay the pre-mentioned

O L
insured company a fixed amount either on the maturity of the fixed period
or in case of an accident or mishap to the business. Different kinds of

/ C
insurance are life insurance, marine insurance, fire insurance, health

C Einsurance, etc. Transportation services are supported by different modes

of transport such as rail, air, sea, road and waterways and involve the

D transfer of people, goods, raw materials, inventory, finished goods etc.

©D
from one place to another.
On the other hand, the services that give different customers’ a different
experience are known as personal services. These types of services are
generally unstandardized in nature and vary based on various factors like
the service provider, customers’ demands, preferences, etc. For example,
restaurants, hotels, tourism, etc.

42 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
SERVICE AS MARKETING ENTITY

IN-TEXT QUESTIONS Notes

1. Which one of the following is not a characteristic of services?

(a) Homogeneity (b) Intangibility
(c) Inseparability (d) Perishability
2. Which of the following is not an element of ‘Physical Evidence’?
(a) Employee dress (b) Equipment
(c) Employee training (d) Facility design

h i
3. Which of the following is not an element of ‘People’?
e l
D
(a) Motivation (b) Flow of activities

of
(c) Teamwork (d) Customer training
4. Which of the following is difficult to evaluate?
(a) Auto repair (b) Jewellery
i ty
(c) Furniture (d) Clothing
r s
v e
5. Intangibility, perishability, inseparability and homogeneity are

n i
the characteristics of which of the following?
(a) Services
U
(b) Products

L,
(c) Goods (d) Both (b) & (c)

O
6. Who proposed the concept of service-dominant logic?
(a) Tax & Brown
/ S (b) Vargo & Lusch

O L
(c) Zeithaml & Bitner (d) Michael Porter

C
7. Which of the following is the main reason for difficulty in

E /
services marketing?

D C
(a) Separability
(c) Availability
(b) Intangibility
(d) Demand supply gap

© D
8. Which among the following defined ‘service recovery’?
(a) Zeithaml & Bitner (b) Vargo & Lusch
(c) Tax & Brown (d) Michael Porter
9. Which of the following decisions is most likely to be taken at
the corporate level?
(a) Marketing strategy to launch a product
(b) Testing the service delivery

PAGE 43
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 MBAFT 7606 SERVICE MARKETING

Notes (c) Designing the mission and vision of the service organisation
(d) Marketing strategy to launch a product
10. Which of the following is not a measure adopted to ensure
service recovery?
(a) Identifying service failures
(b) Resolving customer problems
(c) Defining service delivery parameters
h i
e
(d) Collecting the performance data of service system
l
D
11. A service that occurs without interruption, confusion or hassle

of
to the customer is called as which of the following?

ty
(a) Seamless service (b) Digital service
(c) Marketing myopia
s i
(d) Functional service

e r
12. The unique service characteristic that reflects the interconnection

i v
between the service and its provider is called as which of the

n
following?
(a) Homogeneity
, U (b) Intangibility

O L
(c) Inseparability (d) Perishability

S
13. Which of the following is not a measure adopted to apply S-D

L /
logic to modern businesses?

C O (a) Emphasizing exchange of goods

/ (b) Building strong customer relationships

CE
(c) Continuous innovation to meet customer needs

D D (d) Understanding customer needs and wants

©
14. Which of the following characteristics mainly deals with the
inability to inventory services?
(a) Homogeneity (b) Intangibility
(c) Inseparability (d) Perishability
15. Which of the following statements can be considered as false?
(a) Services cannot be touched or seen in the same manner as
goods

44 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 SERVICE AS MARKETING ENTITY

(b) Consumer judgments about services tend to be more Notes

subjective than objective
(c) Customers involvement affects service quality
(d) Services are first produced, then sold, then consumed

2.9 Summary
The study of the present lesson sequentially takes the learner through
h i
various stages of understanding the concept of services, how services are
e l
D
formally defined, what services are, and how they are an essential part of

of
marketing entities. Next, the learner is made to appreciate various unique
characteristics of services which leads to the rendering the marketing

ty
of services as being different from goods marketing. Then, the strategy

i
implications of service firms are discussed in detail. This is followed
s
r
by deeply understanding the fundamentals as well as practical ways to

e
v
implement the service-dominant logic. Finally, the various types and

n i
classifications of services are discussed along with relevant examples.

U
Going through the present lesson equips the learner to form a strong

,
conceptual base of knowledge of services marketing. Further reading

O L
and research on the subject will lead to unearthing greater insights. The
learner is encouraged to further understand the explained concepts through

/ S
following real-world case studies of how the above-explained concepts

L
find practical implications in service firms.
O
/ C
E
2.10 Answers to In-Text Questions

D C
1. (a) Homogeneity

©D
2. (c) Employee training
3. (b) Flow of activities
4. (a) Auto repair
5. (a) Services
6. (b) Vargo & Lusch
7. (b) Intangibility
8. (c) Tax & Brown

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© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes 9. (c) Designing the mission and vision of the service organisation
10. (c) Defining service delivery parameters
11. (a) Seamless service
12. (c) Inseparability
13. (a) Emphasizing exchange of goods
14. (d) Perishability
15. (d) Services are first produced, then sold, then consumed
h i
e l
D
2.11 Self-Assessment Questions

of
1. Explain the continuum of tangibility along with a diagram and suitable

ty
examples.

i
2. Define services and explain how they differ from goods.
s
e r
3. Mention all the unique characteristics of services and explain them

i v
in detail along with real-life examples of each.

U n
4. What are the key fundamentals if service-dominant logic? Suggest
the practical ways in which the modern marketers can apply S-D

L ,
logic to their businesses.

O
5. Explain the bases on which the services can be classified into different

S
/
types? Explain about each service type by quoting examples from

L
real business world.

O
/ C
2.12 References

C E ‹ Bureau of Economic Analysis (2019), “Interactive Access to Industry

D Economic Accounts Data: GDP by Industry”, U.S. Bureau of Economic

©D
Analysis, online version.
‹ Cowell, D. W. (1984). The marketing of services (p. 107). London,
Heinemann.
‹ Grove, S. J., Fisk, R. P., & John, J. (2003). The future of services
marketing: forecasts from ten services experts. Journal of Services
Marketing, 17(2), 107-121.
‹ Judd, R. C. (1964). The case for redefining services. Journal of
Marketing, 28(1), 58-59.

46 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
SERVICE AS MARKETING ENTITY

‹ Kotler, P. (1989). Marketing Management – Analysis Planning and Notes

Control. Prentice Hall of India Private Limited, New Delhi.
‹ Rathmell, J. M. (1966). What is meant by services? Journal of
Marketing, 30(4), 32-36.
‹ Shostack, G.L. (1977). Breaking Free from Product Marketing. Journal
of Marketing, 41(2).
‹ Stanton, W.J. (1981). Fundamentals of Marketing. McGraw Hill,
New York.
h i
‹ Tax, S. S., & Brown, S. W. (2000). Service recovery. Handbook of
e l
D
services marketing and management, 271-85.

of
‹ Thomas, D. R. (1978). Strategy is different in service businesses.
Harvard Business Review, 56(4), 158-165.
‹

i
United Nations Conference on Trade and Development (UNCTAD)
ty
r s
(2017), “Information Economy Report 2017: Digitalization, Trade
and Development”, Geneva: UNCTAD.

v e
‹

n i
Vargo, S. L., & Lusch, R. F. (2004). Evolving to a new dominant

U
logic for marketing. Journal of marketing, 68(1), 1-17.
‹

L ,
World Bank (2019), “Services value added (% of GDP)”, World
Bank Development Indicators, Washington, D.C: World Bank, online
version.
S O
‹

L /
World Trade Organization (WTO) (2019), “World Trade Report

O
2019: The future of services trade”, Geneva: WTO.
‹
/ C
Zeithaml, V. A., Bitner, M. J., & Gremler, D. D. (2010). Services

E
marketing strategy. Wiley International Encyclopedia of Marketing.

C
D
©D
2.13 Suggested Readings
‹ Adrian Palmer, Principles of Services Marketing, (New York: McGraw
Hill), 1998.
‹ Christian Gronroos, Service Management and Marketing, New York.
John Wiley, 2000.
‹ Christopher H. Lovelock, Services Marketing: People, Technology,
Strategy, (New Jersey: Pearson), 2001.

PAGE 47
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes ‹ Donald W. Cowell, The Marketing of Services, (London: Heineman),

1996.
‹ Hans Kaper, Piet Van Helsdinger and Wonter de Vries Jr, Services
Marketing Management (New York: John Wiley), 1999.
‹ John E.G. Bateson, Managing Services Marketing, (III ed), (Oriando:
Dryden Press), 1995.
‹ K. Douglas Hoffman John E. G. Bateson, Essentials of Services
Marketing, (Orlando: Harcourt College Publishers), 2002.
h i
‹

e l
Payne: Essence of Services Marketing, (New Delhi: Prentice Hall of

D
India).

of
‹ Ravi Shanker, “Services Marketing: Text and Readings,” (New Delhi:
Excel Books, 2002).
‹

i ty
Teresa A. Swartz and Dawn Iacobucci, Handbook of Services

r s
Marketing and Management, (New Delhi: Sage), 2000.
‹

v e
Valarie A. Zeithaml and Mary Jo Bitner, Services Marketing, (New

i
Delhi, Tata McGraw-Hill), 2000.
n
U
‹ Wirtz Jochen, Lovelock Christopher H, Chatterjee Jayanta.: Services

,
Marketing, 8e Edition, Pearson.

L
O
‹ Woodruffe, Helen: Service Marketing. MacMillan India.

/ S
O L
/ C
C E
D
©D

48 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
L E S S O N

3
Marketing Mix and
Relationship
Marketing
i
Dr. Rahul Pratap Singh Kaurav

l h
Associate Professor

D e
FORE School of Management, New Delhi
Email-Id: rsinghkaurav@gmail.com

STRUCTURE of
i ty
3.1 Learning Objectives
r s
3.2 Introduction
v e
3.3 Marketing Mix for Services
n i
3.4 Relationship Building

, U
L
3.5 Service Encounter
3.6 Service Innovation

S O
3.7 Summary
L /
O
3.8 Answers to In-Text Questions

/ C
3.9 Self-Assessment Questions

E
3.10 Suggested Readings
C Objectives
D
©D
3.1 Learning
‹ Understand the concept of value and its importance in marketing.
‹ Identify the different value drivers and their role in creating value for the customer.
‹ Evaluate the effectiveness of a business’s marketing mix.
‹ Understand the principles, practices, and implementation of relationship marketing.

PAGE 49
© Department of Distance & Continuing Education, Campus of Open Learning,
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 MBAFT 7606 SERVICE MARKETING

Notes ‹ Identify the key elements of successful relationship building with

customers for cocreating value.
‹ Understand the concept of customer bonding and its importance in
building customer loyalty.
‹ Identify the different types of customer bonding strategies and their
effectiveness.
‹ Evaluate the lifetime value of a customer and its impact on business
profitability.
h i
‹

e l
Develop strategies to increase customer lifetime value through effective

D
bonding strategies.

of
‹ Understand the concept of service encounters and their role in shaping
customer perceptions.
‹

i ty
Identify the different types of service encounters and their characteristics.
‹

r s
Evaluate the effectiveness of a business’s service innovation efforts.

v e
This chapter aims to provide a broad understanding of core concepts and

n i
the ability to apply them in practical business settings in the scenario

U
of services.

3.2 Introduction L ,
S O
/
This book is designed to provide a comprehensive guide for MBA distance
L
O
learning students focusing on modern marketing and relationship building.

C
In the previous chapter, you examined the service as a marketing entity,

E /
service-dominant logic, and types of services. This chapter covers essential

C
topics such as the marketing mix, relationship marketing, bonding,

D
service encounters, and service innovation. Each section includes suitable

©D
examples, tables, and figures to facilitate understanding and retention of
key concepts. Additionally, activities are suggested throughout the book
to encourage hands-on learning.

3.3 Marketing Mix for Services

The marketing mix combines elements that a company uses to promote
its products or services. For products, 4Ps are popularly considered
part of the marketing mix, i.e., product, price, place, and promotion.

50 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
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 MARKETING MIX AND RELATIONSHIP MARKETING

For services extended, 3Ps are added to the list, i.e., people, process, Notes
and physical evidence. This section will discuss the importance of each
element and how they work together to create value for the customer.
The services marketing mix, also known as the 7Ps of marketing, is an
expanded framework that includes product, price, place, promotion, people,
process, and physical evidence. This framework is essential for developing
effective marketing strategies for service-based businesses. Here is a list
of examples of services from the Indian environment of business:
Medical Services: Apollo Hospitals, Fortis Healthcare, Max Healthcare
h i
l
‹

‹ Hospitality Services: Taj Hotels, Oberoi Hotels, Leela Hotels

Transportation Services: Ola, Uber, Zoomcar, BluSmart
D e
of
‹

‹ Food Delivery Services: Swiggy, Zomato, Uber Eats

ty
‹ Insurance Services: Life Insurance Corporation, Star Health Insurance

s i
A. Product: In the context of services marketing, the product refers to

e r
the intangible services a business provides. Services can be classified

i v
into various types, such as professional services, hospitality services,

n
healthcare services, financial services, and so on. To develop a

, U
successful marketing strategy, service-based businesses must ensure
that their services meet the needs of their target customers. Example:
L
Ola, a ride-hailing service in India, offers a range of services such
O
S
as micro, mini, and prime cabs, as well as luxury cars for premium

L /
customers. They also offer additional services like Ola Rentals, Ola

O
Outstation, and Ola Bike, which cater to the different needs of their

C
customers.

E /
B. Price: Pricing strategies for services differ from those for physical

D C
products. Service pricing often depends on the value provided to
customers and the competition in the market. Pricing strategies can

©D
range from value-based pricing to dynamic pricing, depending on
the nature of the service and the target market. Example: Zomato, a
food delivery platform in India, uses dynamic pricing for its delivery
fee based on the distance between the restaurant and the customer’s
location. They also offer Zomato Gold, a subscription-based loyalty
program that offers exclusive discounts at partner restaurants.
C. Place: The place element in the services marketing mix refers to the
channels through which services are delivered to customers. Service-

PAGE 51
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes based businesses must choose their distribution channels to reach

their target customers effectively. Example: Swiggy, a food delivery
platform in India, has a widespread network of delivery partners who
are assigned to deliver food from restaurants to customers. They
also have a robust online platform and mobile app for customers
to place their orders.
D. Promotion: Promotion is crucial for service-based businesses to create

i
awareness, generate interest, and encourage trial among potential

h
customers. Service promotion can include various channels such
as digital marketing, social media, events, and customer referral
e l
programs. Example: MakeMyTrip, an online travel agency in India,
D
of
runs various promotions throughout the year, offering discounts,
cashback, and other incentives to encourage customers to book

ty
travel services through their platform.

s i
e r
Product

v
ni
Physical
Price
Evidence

, U
O L
/ S Process Place

O L
/ C
E
People Promotion

D C Figure 3.1: Elements of extended (4+3) marketing mix [initial 4 are

©D
generic, and later 3 are part of the services sector only]
E. People: People refer to the employees of the service-based business
who directly interact with customers. The behaviour and attitude
of the employees can significantly impact the quality of service
delivered to customers. Example: Taj Hotels, a premium hospitality
brand in India, invests heavily in training its employees to provide
exceptional customer service. For better customer service, they have
a comprehensive employee training program that includes on-the-
job training, classroom training, and mentorship programs.

52 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
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 MARKETING MIX AND RELATIONSHIP MARKETING

F. Process: Process refers to the systems and procedures involved Notes

in customer service delivery. Efficient and well-designed service
processes can help businesses deliver high-quality services consistently.
Example: Kotak Mahindra Bank, a leading financial institution in
India, has a robust online banking system that allows customers
to perform various banking transactions from the comfort of their
homes or offices. They also have a mobile app that customers can
use to check their account balances, transfer funds, pay bills, and
more.
h i
G. Physical Evidence: Physical evidence refers to the tangible elements’
e l
customers use to evaluate service quality. Tangible elements can include
D
of
the physical facility’s appearance, the environment’s cleanliness,
the website’s, or mobile app’s design, and so on. Example: Apollo

ty
Hospitals, a leading healthcare provider in India, ensures its physical
facilities are clean, well-maintained, and equipped with modern
s i
medical equipment. They also have a user-friendly website and
e r
mobile app that allow customers to book appointments.
i v
Table 3.1: Elements and examples of services marketing mix

U n
,
7PS OF Product Price Place Promotion People Process Physical

L
MARKETING Evidence

ITEMS Features,

S O
List price, Channels, Advertising, Employees, Service Store

/
INCLUDED design, discounts, coverage, sales training, design, layout,

L
quality, credit assortments, promotion, appearance, delivery, signage,
branding, terms, locations, personal uniforms, customer furnishings,
packaging

C O
payment inventory selling, skills experience, amenities,

/
options publicity quality displays
control

CE
EXAMPLES Medical Base fare, Online Social media Staff, Booking Facilities,
services, surge platforms, marketing, training, process, amenities,

D
hospitality pricing, physical loyalty uniforms, customer cleanliness,

D
services, discounts, facilities, programs, appearance, support, ambiance,

©
transpor- subscription mobile referral behaviour complaints equipment
tation ser- models apps marketing management,
vices, food quality
delivery control
services

3.3.1 Concept of Value and Value Drivers

Value is the perceived worth of a product or service to the customer.
Value drivers are the factors that contribute to the creation of value. This

PAGE 53
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes sub-section covers the concept of value, its importance, and the various
value drivers in the marketing context. Additionally, it provides examples
of companies that have successfully implemented value-based marketing
strategies. Table 3.2 will give you an idea of different industries and
their Key Value Drivers.
Table 3.2: A comparison of value drivers in different industries
Industry Value Drivers

i
Healthcare Quality of service, expertise of medical professionals, technology
Hospitality Customer service, convenience, atmosphere, amenities
l h
Financial
Professional
Trust, reliability, convenience, transparency

D e
Expertise, reliability, responsiveness, communication skills

of
Retail Product quality, availability, convenience, customer experience
Information Accuracy, relevance, timeliness, accessibility
Education
i ty
Quality of instruction, expertise of educators, learning outcomes
Transportation
r s
Speed, reliability, comfort, safety

e
Telecom Network quality, availability, customer service, pricing
Real Estate
i v
Location, property quality, pricing, customer service

U n
Activity: Create a value proposition for a hypothetical product or service

,
using value drivers (hint: consider a product you use daily).

O L
3.4 Relationship Building

/ S
O L
In modern marketing, building long-term customer relationships is
essential for sustainable success. This section will cover the importance

/ C
of relationship building and the strategies businesses can use to foster

C Elasting customer connections. Relationship building is an important

aspect of service marketing because it helps to establish trust and loyalty
D
©D
between service providers and customers. Services are typically intangible
and can be difficult to evaluate before purchase, so customers often rely
on their perception of the service provider and their past experiences to
make decisions. By building a strong relationship with customers, service
providers can improve their customers’ perceptions of their services and
increase their likelihood of repeat business.
Effective relationship building involves understanding customers’ needs
and preferences, communicating clearly and regularly, and delivering
high-quality services consistently. Service providers can use personalised

54 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MARKETING MIX AND RELATIONSHIP MARKETING

communication, frequent follow-ups, and loyalty programs to strengthen Notes

customer relationships. Furthermore, strong relationships with customers
can also lead to positive word-of-mouth recommendations and referrals,
which can help to attract new customers and increase business. Thus,
relationship building is crucial for service providers to differentiate
themselves from competitors, build a loyal customer base, and improve
their bottom line.

3.4.1 Relationship Marketing

h i
e l
D
Relationship marketing focuses on nurturing long-term customer relationships

of
and increasing customer loyalty. This subsection will discuss the key
principles of relationship marketing, its benefits, and the strategies businesses

ty
can use to develop and maintain strong customer relationships. For an

i
apt solution, the concept of the Relationship Marketing Continuum was
s
r
first introduced by Leonard Berry in 1983. Berry argued that traditional

e
v
marketing approaches focused too much on attracting new customers and

n i
not enough on building long-term relationships with existing customers.

U
He proposed that businesses move from transactional marketing to partner

relationships.
L ,
relationship marketing, which aims to build strong, ongoing customer

S O
The idea of relationship marketing was further developed by other

L /
marketing scholars and practitioners throughout the 1980s and 1990s,

O
including Jagdish Sheth and Atul Parvatiyar. They argued that relationship

/ C
marketing was particularly important in services, where customers often

E
rely on personal interactions and trust to make decisions. The Relationship

D C
Marketing Continuum was developed to describe the different levels
of relationship marketing businesses could engage in. The continuum

©D
provided a framework for businesses to assess where they were on
the spectrum of transactional to partnership relationship marketing and
identify strategies for moving towards more personalised and long-term
customer relationships. The importance of relationship marketing and the
Relationship Marketing Continuum has increased recently as businesses
face growing competition and changing consumer preferences.
The Relationship Marketing Continuum is a framework that describes
the different levels of relationship marketing businesses can engage

PAGE 55
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes in, ranging from transactional marketing to partnership marketing. The

continuum includes five elements: transactional marketing, database
marketing, interactive marketing, network marketing, and partnership
marketing. Transactional marketing is the lowest level of relationship
marketing and involves completing individual customer transactions.
Database marketing uses customer data to develop targeted marketing
campaigns and personalised offers. Interactive marketing involves two-
way communication between the service provider and the customer, such
as through social media or customer service chats. Network marketing
h i
e l
involves building relationships with other organisations or partners to reach

D
new customers and provide additional services. Partnership marketing is

of
the highest level of relationship marketing and involves working closely
with customers to achieve mutual goals.

ty
The Relationship Marketing Continuum is used to help businesses assess

s i
where they are on the spectrum of transactional to relationship marketing

e r
and to identify strategies for moving towards more personalised and

i v
long-term relationships with customers. By building strong customer

U n
relationships, businesses can differentiate themselves from competitors
and create loyal customer bases that provide a steady revenue stream.

L ,
S O Partnership

/
marketing
Network

O L Interactive
marketing

C
marketing

/
Database

CE
marketing
Transactional
marketing

D D
©
Figure 3.2: The Relationship Marketing Continuum
Activity: Analyse the case study of BigBasket’s relationship marketing
campaign.

56 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MARKETING MIX AND RELATIONSHIP MARKETING

CASE STUDY 1: Notes

BigBasket
One example of a service business in India that has successfully
implemented relationship marketing is BigBasket, an online grocery
delivery platform. BigBasket builds strong customer relationships
through personalised communication, targeted promotions, and
exceptional customer service. For example, the company regularly
sends customised newsletters to its customers, featuring information
h i
on new products, promotions, and special offers tailored to each
e l
D
customer’s preferences and past purchases. The company also has

of
a customer service team available 24/7 to help customers with any
questions or issues.

ty
BigBasket’s commitment to relationship marketing has helped the

s i
company achieve high customer loyalty and retention levels. The

r
company reports that 70% of its orders come from repeat customers. In
e
v
addition, the company’s loyal customer base has become an important

n i
source of referrals, helping to drive new customer acquisition and grow

, U
the business. To further strengthen its relationships with customers,
BigBasket also offers a loyalty program where customers can earn

L
reward points for every purchase they make. These points can be
O
S
redeemed for discounts on future purchases, encouraging customers

L /
to continue shopping with BigBasket and reinforcing their loyalty

O
to the brand.

/ C
Overall, BigBasket’s focus on relationship marketing has been a

E
key factor in the company’s success, helping to differentiate it from

D C
competitors and build a loyal customer base. By providing personalised
communication, exceptional customer service, and targeted promotions,

©D
BigBasket has created strong relationships with its customers and
established itself as a leader in the Indian online grocery delivery
market.

3.4.2 Importance of Relationship Marketing

Relationship marketing is a strategy that focuses on building long-term
relationships with customers rather than just selling products or services.

PAGE 57
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School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes Relationship marketing is particularly important in-service marketing

because services are intangible, and customers rely on their perceptions
of service providers to make decisions. Effective relationship marketing
involves understanding customers’ needs and preferences, communicating
regularly, and consistently delivering high-quality services. By building
strong customer relationships, service providers can improve customer
loyalty, retention, and profitability. The following are some importance
of relationship marketing:

h i
l
‹ Relationship marketing in services builds customer loyalty and

e
retention, ultimately increasing profitability.
‹
D
It differentiates service providers from competitors and provides a

of
competitive advantage.

ty
‹ Strong relationships with customers increase referrals and positive

i
word-of-mouth, attracting new customers and increasing business.

s
‹

e r
Relationship marketing provides opportunities for upselling and

v
cross-selling additional services, increasing revenue.
‹
n i
Personalised communication, exceptional customer service, and

U
targeted promotions improve customer satisfaction.

,
O L
3.4.3 Bonding and Lifetime Value

/ S
L
This section will explore the concept of bonding, which refers to creating

O
strong emotional connections between a brand and its customers. It will also

/ C
discuss the concept of Customer Lifetime Value (CLV), which measures

E
a company’s net profit from a customer throughout their relationship.

D C Bonding and lifetime value are two service marketing concepts closely
related to relationship marketing. Bonding refers to developing a strong

©D
emotional connection between a customer and a service provider. Lifetime
value refers to the total value that a customer brings to a service provider
over the course of their relationship.
In services marketing, bonding is particularly important because services
are intangible, and customers rely on personal interactions and trust to
make decisions. Service providers can improve customer loyalty, retention,
and lifetime value by developing a strong emotional connection with
customers.

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For example, a hair salon might develop a strong emotional connection Notes
with customers by providing personalised services, such as remembering
their preferred haircut and colour and engaging in friendly conversation
during their appointment. Over time, this emotional connection can
increase loyalty and retention, as the customer is more likely to return
to the salon for future appointments.
Lifetime value is also important in-service marketing because it allows

i
providers to assess the total value a customer brings to their business
over time. By understanding lifetime value, service providers can identify
l h
e
their most valuable customers and focus on building strong relationships
with them. This can increase profitability, as loyal customers are more
D
of
likely to purchase additional services and refer new customers to the
service provider.

i
For example, a fitness centre might offer loyalty rewards to its most
ty
r s
valuable customers, such as free personal training sessions or discounts

e
on merchandise. This can incentivise these customers to continue using

v
increasing lifetime value for the service provider.
n i
the fitness centre and refer new customers to the business, ultimately

, U
Table 3.3: Factors contributing to strong brand-customer

L
bonding with suitable examples

O
S
Factors contributing to strong Examples
brand-customer bonding

L /
Personalised communication and service A restaurant remembering a customer’s

C O favourite dish and offering it upon

E /
Consistent service quality
their return
An airline providing a consistently high

D C level of service across multiple flights

©D
Emotional connection and shared values A fitness centre promoting a healthy
lifestyle and creating a sense of
community among its members
Trust and reliability A financial institution providing
transparent and dependable financial
advice
Customer engagement and participation A hotel offering personalised experiences
and encouraging customer feedback
Proactive problem resolution A telecommunications company resolving
customer issues quickly and efficiently

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Notes 3.4.4 Calculating Customer Lifetime Value (CLTV)

Customer Lifetime Value (CLTV) is a crucial metric utilised by businesses
to assess the overall worth of a customer throughout their entire relationship
with the company. This valuable indicator quantifies the expected revenue
a customer is anticipated to generate throughout their engagement with the
business. By evaluating CLTV, companies can gain insightful information
about the long-term profitability associated with each customer.
CLTV is especially significant for service-oriented businesses, as it
h i
e l
provides a means to identify and prioritise the most valuable customers.

D
By analysing this metric, companies can discern which customers

of
contribute the most to their revenue streams and profitability. With this
knowledge, businesses can tailor their strategies and allocate resources

ty
effectively to enhance customer retention and optimise revenue over

s i
time. By understanding CLTV, service providers can invest in building

r
long-term relationships with their most valuable customers and provide
e
v
personalised experiences that meet their needs and preferences. Let us

n i
calculate CLTV for a real-life situation.
CASE STUDY 2:
, U
O L
Let’s say a fitness centre has a new customer, Himanshi, who signs
up for a monthly gym membership for 2000 INR per month. Himanshi

/ S
is expected to continue using the gym for the next 2 years before

O L
moving away. During this time, Himanshi also purchases additional
services, such as personal training sessions, at an average cost of

/ C
1500 INR per month. To calculate Himanshi’s lifetime value, we can

C E use the following formula:

D
Lifetime Value = (Average Monthly Revenue per Customer ×

©D
Customer Lifespan) - Customer Acquisition Cost
In this scenario, the average monthly revenue per customer is 3500
INR (2000 monthly gym membership + 1500 in additional services).
Himanshi’s customer lifespan is 2 years, or 24 months. Finally, let’s
assume the customer acquisition cost for the fitness centre is 1000,
which includes marketing expenses and any discounts or promotions
offered to attract new customers.

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 MARKETING MIX AND RELATIONSHIP MARKETING

Using the formula, we can calculate Himanshi’s lifetime value as Notes

follows:
Lifetime Value = (3500 × 24) - 1000
Lifetime Value = 83,000 INR
Based on this calculation, Himanshi is expected to generate a total
revenue of 83,000 for the fitness centre over the course of her
relationship with the business.

h i
l
This calculation is important for service providers because it allows
them to identify their most valuable customers and focus on building
strong relationships with them. By understanding the lifetime value of a
D e
of
customer, service providers can develop targeted marketing campaigns,
loyalty rewards, and other strategies to increase retention and maximise
revenue over time.
i ty
r s
Activity: When new customer signup for Amazon Prime mobile phones,

e
it costs 299 per month and is expected to remain a customer for the next
v
n i
3 years. Additionally, the customer will rent 49 movies per month. To
acquire a customer, the company must spend about 150 INR. Calculate

, U
the lifetime value of a customer using a real or hypothetical scenario.

O L
This seems to be an easy calculation for your ideas. Still, in real life, it
is far more complex and difficult than you think because: (i) calculating

/ S
the cost of acquisition is not easy, (ii) estimating the time of journey is
L
also difficult, (iii) full subscription companies like KUKU FM do not
O
C
have options of additional buys.

E /
C
3.5 Service Encounter

D
©D
A service encounter refers to the pivotal interaction that takes place
between a customer and a service provider. During this encounter, the
customer engages directly with the service provider, forming a crucial
point of connection between the two parties. This section will discuss
the importance of service encounters, their various types, and how they
can be used to build strong customer relationships. This interaction can
occur through various channels, such as in-person, online, or via phone,
and is a critical moment in the customer’s experience with the service.

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Notes Service encounters have been studied in service marketing since the 1980s.
The term “service encounter” was first introduced by Richard L. Oliver
in the 1980s. Oliver defined service encounters as “the point at which the
customer comes into contact with the service firm’s production system.”
Here is an example of a service encounter: A customer visits a coffee
shop and orders a latte. The barista takes the order and prepares the
drink while engaging the customer in friendly conversation. The customer

i
receives the latte and expresses satisfaction with the quality of the drink
and the service.
l h
D e
Since then, service encounters have been the focus of numerous research
studies, as they are seen as a critical moment in the customer’s experience

of
with the service. Researchers have explored various aspects of service
encounters, including the factors that influence customer satisfaction, the

i ty
impact of service provider behaviour on the encounter, and the role of

r s
technology in shaping service encounters. One influential model in the

e
study of service encounters is the “SERVQUAL” model, developed by

v
n i
A. Parasuraman, Valarie A. Zeithaml, and Leonard L. Berry in the mid-
1980s. The SERVQUAL model proposes five dimensions of service quality

U
that can be used to assess customer perceptions of service encounters:
,
L
reliability, responsiveness, assurance, empathy, and tangibles. Service

O
providers can use service encounters to create positive moments of truth

/ S
that enhance customer satisfaction and loyalty while addressing any issues

O L
that may arise during the encounter. However, there are some limitations
to service encounters:
‹
/ CService encounters can be influenced by factors outside the service

C E provider’s control, such as the customer’s mood or external events.

D
‹ Service encounters are often complex and involve multiple touchpoints,

©D
making controlling every aspect of the customer’s experience difficult.
‹ Service encounters can be impacted by the service provider’s internal
processes, such as staffing levels or training.
Despite these limitations, service encounters can also be opportunities for
providers to create a moment of truth. This critical moment can either
enhance or damage the customer’s perception of the service. A moment
of truth can occur at any point during the service encounter. It can be
influenced by several factors, such as the service quality, the behaviour

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 MARKETING MIX AND RELATIONSHIP MARKETING

of the provider, and the customer’s overall experience. For example, in Notes
the coffee shop scenario, the moment of truth occurred when the customer
received their latte and expressed satisfaction with the quality of the
drink and the service. This positive moment of truth may encourage the
customer to return to the coffee shop and recommend the service to others.
Overall, service encounters are important moments in the customer’s
experience with the service, and service providers can use these encounters

i
to create positive moments of truth that enhance customer satisfaction
and loyalty.
l h
3.5.1 Moment of Truth
D e
The moment of truth refers to a critical point in the service encounter
of
ty
when the customer forms an impression of the service. This subsection will

s i
discuss the moment of truth concept and provide strategies for businesses

e r
to create positive service experiences for their customers. It is a moment

i v
when the customer’s perception of the service is either enhanced or

n
damaged, based on the quality of the service and the behaviour of the

, U
provider/service enabler. An example of a moment of truth in the context
of a streaming company could be when a customer encounters technical

O L
difficulties while streaming a movie. The moment of truth occurs when

S
the customer reaches out to the streaming company’s customer service

L /
for assistance. The customer’s perception of the streaming company will

O
be shaped by the quality of the customer service experience, and whether

/ C
the issue is resolved to their satisfaction.

C E
If the customer service is responsive, empathetic, and able to resolve the
issue quickly and efficiently, this can create a positive moment of truth for

D
the customer. This positive moment of truth can increase customer loyalty

©D
and positive word-of-mouth recommendations. However, if the customer
service is unresponsive, unhelpful, or unable to resolve the issue, this
can create a negative moment of truth for the customer. This negative
moment of truth can lead to customer dissatisfaction and negative word-
of-mouth recommendations. For interpreting it to the deep of businesses,
following is the list of elements of MOT:
‹ Service Quality: The level of quality of the service provided to the
customer.

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Notes ‹ Service Encounter: The interaction between the customer and the
service provider.
‹ Customer Experience: The overall experience that the customer has
with the service.
‹ Customer Satisfaction: The degree to which the customer is satisfied
with the service.
‹ Customer Loyalty: The likelihood of the customer to continue using
the service and recommending it to others.
h i
e l
D
of
i ty
r s
v e
n i
, U
O L
/ S
O L
/ C
D CE Figure 3.3: Types of Moments of Truth
By understanding the elements and types of MOT, service providers

© D can focus on creating positive moments of truth that enhance customer

satisfaction and loyalty while addressing any issues that may arise during
the encounter.

3.5.2 Service Types and Service Encounter

This subsection will cover the different types of services (e.g., tangible
goods, intangible services) and how they influence the nature of service

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 MARKETING MIX AND RELATIONSHIP MARKETING

encounters. It will also discuss the various stages of a service encounter. Notes
Services can be broadly categorised into tangible goods and intangible
services. Tangible goods are physical products, such as a car or book,
that can be touched, seen, and held. Intangible services, however, are
non-physical and cannot be touched or held, such as consulting services
or healthcare. Here are the different types of services:
Table 3.4: Different types of services, tangibility spectrum,

i
and possible customisations
Type of Service Tangible or Level of
l h
Tangible goods
Intangible
Tangible
Customization
Low
D e
of
Intangible services Intangible High
Professional services Intangible High

i ty
Personal services Intangible High

s
Hospitality and travel services Intangible High
Financial services Intangible
e r
Low to medium
Information and communication services Intangible
i v High

U n
Table 3.4 illustrates that while some services are tangible (such as tangible
goods), many services are intangible (such as professional or personal

L ,
services) and require a high level of customisation to meet each customer’s

O
unique needs. Additionally, some services (such as financial services) may

/ S
have a lower level of customisation due to regulatory requirements or other

O L
constraints. By understanding the level of tangibility and customisation
required for different types of services, service providers can tailor their

/ C
offerings and service delivery to meet the unique needs of their customers.

E
The nature of service encounters can differ depending on the service being
C
D
provided. For tangible goods, the service encounter often occurs during

©D
the pre-sale, sale, and post-sale stages, when the customer interacts with
the product and the service provider. In contrast, for intangible services,
the service encounter often occurs during service delivery, when the
customer is interacting directly with the service provider. Regardless of
the service type, service encounters can be broken down into various
stages. These stages may include:
1. Pre-Contact Stage: This stage involves the customer’s preparation
and expectation for the service encounter. This may include research
on the service provider, their reputation, and the service offerings.

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 MBAFT 7606 SERVICE MARKETING

Notes 2. Encounter Stage: This stage involves the actual interaction between
the customer and the service provider. This may include initial
greeting, communication, problem resolution, and transactions.
3. Post-Encounter Stage: This stage involves the customer’s evaluation
of the service encounter and their subsequent behaviour. This may
include feedback, complaints, and loyalty or repeat purchases.
The quality of the service encounter can greatly impact the customer’s

i
perception of the service provider and the service itself. A positive service
encounter can enhance customer satisfaction and loyalty, while a negative
l h
word-of-mouth recommendations.
D e
service encounter can damage customer satisfaction and lead to negative

of
Therefore, service providers should strive to create positive service
encounters through effective communication, personalised service, and

i ty
proactive problem resolution. By creating positive service encounters,

s
service providers can enhance customer satisfaction and loyalty and build
r
e
a strong reputation for delivering high-quality services.

i v
n
3.5.3 Service Encounter Classification
U
L ,
This subsection will discuss various classification schemes and their

O
implications for designing effective service encounters. Service encounters

S
can be classified based on various factors, including the degree of

L /
customer contact, the level of customisation, and the interaction between

O
the customer and the service provider. Here is a table that categorises

/ C
service encounters based on these factors:

C E Table 3.5: Classification of Service Encounters with Examples

D
Service Encounter Description Example

©D
Classification
High-contact service These encounters involve A face-to-face consultation
encounters high customer contact and with a doctor or a hairdresser.
interaction with the service
provider.
Low-contact service These encounters involve Online banking, vending
encounters lower customer contact and machines, or self-checkout
may be delivered through at a store.
automated or self-service
channels.

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Service Encounter Description Example Notes

Classification
High-customisation These encounters involve a Personalised financial advice,
service encounters high degree of customisation tailor-made clothing, or
to meet each customer’s custom-made furniture.
unique needs.
Low-customisation These encounters involve a Fast food restaurants, basic
service encounters lower degree of customisation car maintenance services, or
and may be delivered through standardised legal documents.

h i
standardised processes or
offerings.
e l
Self-service These encounters are self- Online shopping, mobile
D
of
encounters directed and do not involve banking, or self-service gas
direct interaction with a stations.

i ty
service provider.

s
Remote service These encounters are con- Customer support services,
encounters ducted through remote
e r
telemedicine, or online

i v
channels such as phone, tutoring.

n
email, or chat.

U
These are some live and interesting examples; by categorising service

,
L
encounters based on these factors, service providers can better understand

O
the nature of the interaction between the customer and service provider

S
and tailor their service delivery to meet each customer’s unique needs.

L /
Activity: Identify and analyse a recent service encounter you have

O
experienced. Classify the encounter based on the discussed criteria and

C
/
suggest ways to improve the service.

E
D C
3.6 Service Innovation

©D
In today’s competitive market, businesses must continually innovate to stay
ahead. This section will discuss the importance of service innovation and
the different approaches businesses can use to create new and improved
services.
Service innovation can be achieved by modifying existing service encounters
or by implementing new systems and processes. This subsection will
explore various strategies for service innovation through encounter and
system modification, including the use of technology, process improvement,

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 MBAFT 7606 SERVICE MARKETING

Notes and customer feedback. Service innovation refers to developing new or

improved services that meet customers’ changing needs and demands.
This can involve creating new services or improving existing ones to
better meet customer needs and expectations.
The concept of service innovation has been around for many years, with
many companies and industries investing in research and development to
create new and improved services. For example, the airline industry has

i
a long history of service innovation, with many airlines investing in new

l h
technologies and services to improve the flying experience for passengers.

e
One notable example of service innovation is the introduction of in-flight

D
entertainment systems. In the early days of air travel, passengers had few

of
entertainment options and often had to rely on reading books or magazines
to pass the time. However, in the 1960s, the airline Braniff International

ty
introduced the first in-flight entertainment system, featuring movies and

s i
music passengers could enjoy during their flights. This innovation was

e r
a game-changer for the industry, and many airlines followed suit by

i v
introducing their in-flight entertainment systems.

U n
Another example of service innovation is the development of online
shopping and e-commerce. In the early days of the internet, many people

L ,
were sceptical of buying products online, as they were unsure about the

O
security of online transactions. However, over time, companies such as

/ S
Amazon and eBay developed secure online shopping platforms that made

O L
it easy for customers to purchase products from the comfort of their own
homes. This service innovation transformed the retail industry and paved

/ C
the way for other online services and platforms. Here are some more

C Estories about different businesses, how they have evolved with the help
of Service Innovation:

D
©D
1. Domino’s Pizza: In 2009, Domino’s Pizza faced a crisis when a
video showed employees mishandling food. Rather than apologising
and moving on, the company used this moment as an opportunity
to innovate. They spent months developing a new pizza recipe,
debuting in a national ad campaign. The new pizza was a hit, and
Domino’s sales increased dramatically. This service innovation helped
the company recover from a crisis and transformed how they did
business.

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2. Disney World: Disney World is known for its exceptional customer Notes
service, and one key to their success is its use of technology. Recently,
the company has introduced a mobile app that allows visitors to
check wait times for attractions, reserve dining reservations, and
even order food from their phones. This service innovation has
made the Disney World experience more convenient and enjoyable
for visitors and has helped the company stay at the forefront of the
theme park industry.

h i
l
3. Uber: Uber revolutionised the taxi industry by introducing a service

e
that allowed customers to request a ride quickly and easily from
their phones. This service innovation made it easier for customers
D
of
to get a ride and allowed drivers to work on their own schedule and
earn extra income. The success of Uber has inspired many other

ty
companies to adopt a similar model and has transformed the way
people think about transportation.
s i
e r
Today, service innovation continues to be an important area of focus

i v
for many companies and industries. With changing customer needs and

U n
expectations, companies must continue to innovate and develop new and
improved services to stay competitive in the marketplace. By investing

L ,
in service innovation, companies can differentiate themselves from their

O
competitors, attract new customers, and build loyalty and trust with their
existing customer base.
/ S
O L
3.6.1 Service Innovation: Through Encounter and System
Modification
/ C
C E
Service innovation encompasses creating novel or enhanced services
D
©D
that effectively address customers’ evolving needs and expectations.
It involves exploring and implementing fresh ideas and approaches to
deliver services better aligned with customer requirements in a dynamic
marketplace. One way that service innovation can be achieved is through
encounter and system modification. This approach involves changing the
service encounter or the overall service system to improve the customer
experience. Service encounter modification refers to making changes to
the way that customers interact with service providers. This can involve

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 MBAFT 7606 SERVICE MARKETING

Notes improving the physical environment, such as redesigning a store layout

or adding new amenities. It can also involve changing how employees
interact with customers, such as providing more personalised service or
improving the communication skills of customer-facing employees. Service
encounter modification aims to create a more positive and memorable
experience for customers, which can lead to increased customer satisfaction
and loyalty.

i
On the other hand, system modification involves changing the overall

l h
service system to improve efficiency, quality, or responsiveness. This

e
can involve introducing new technologies, streamlining processes, or

D
redesigning how services are delivered. System modification aims to

of
make the service delivery process more efficient and effective, leading to
cost savings, improved quality, and a better overall customer experience.

ty
One example of service innovation through encounter modification is the

s i
introduction of the Apple Store. When Apple opened its retail stores in

e r
2001, they were unlike any other store in the technology industry. Rather

i v
than simply selling products, Apple created a unique customer experience

U n
by designing their stores to feel more like a gathering place or community
centre. They created an inviting atmosphere with comfortable seating,

,
free Wi-Fi, and expert staff on hand to provide personalised assistance.
L
O
The result was a retail experience unlike any other, and the Apple Store

S
became a model for other retailers looking to innovate their service
encounters.
L /
O
Another example of service innovation through system modification is the

C
/
implementation of self-checkout kiosks at grocery stores. By introducing

C Eself-checkout technology, stores can reduce wait times and improve

efficiency while providing customers with a more convenient and flexible

D checkout experience. This service innovation has become increasingly

©D
popular recently, and many stores have reported higher customer satisfaction
scores. Service innovation through encounter and system modification can
help businesses create new and improved services that meet customers’
changing needs and demands. By changing the service encounter or the
overall service system, businesses can improve the customer experience,
reduce costs, and differentiate themselves from competitors.

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 MARKETING MIX AND RELATIONSHIP MARKETING

Notes

Assess the

h i
l
current

e
service

D
encounter

of
i ty
r s
e
Figure 3.4: A Framework for Service Innovation through

v
i
Encounter and System Modification

U n
By following this framework, businesses can effectively innovate their

,
services through encounter and system modification, delivering improved

L
customer experiences and differentiation in the marketplace.

O
S
1. Identify Customer Needs and Assess the Current Service Encounter

/
or System: The first step in service innovation is to identify the
L
O
needs and preferences of customers. This can be done through

C
market research, customer feedback, and other sources of customer

E /
insights. Once customer needs have been identified, the next step

C
is to assess the current service encounter or system. This involves

D
analysing the various touchpoints that customers have with the

©D
service and the underlying processes and systems that support the
service delivery.
2. Identify Opportunities for Improvement: Based on the customer
needs and the assessment of the current service encounter or system,
the next step is to identify opportunities for improvement. This may
involve changing the physical environment, such as redesigning
a store layout or introducing new technologies or processes to
streamline service delivery.

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Notes 3. Develop and Test New Service Concepts: Once opportunities for
improvement have been identified, the next step is to develop new
service concepts that address customer needs and capitalise on the
opportunities for improvement. These concepts should be tested
with customers to ensure they are effective and well-received.
4. Implement and Evaluate: After new service concepts have been
developed and tested, the next step is implementing them and

i
evaluating their effectiveness. This involves monitoring customer

l h
feedback and key performance indicators to ensure the new service

e
concepts deliver the desired outcomes.

D
5. Continuously Improve: Finally, service innovation is an ongoing

of
process, and businesses should continuously seek to improve
their service encounters and systems to stay competitive and meet

i ty
changing customer needs. This may involve regularly monitoring

r s
customer feedback, introducing new technologies and processes,

e
and developing new service concepts.

v
i
Activity: Identify a service innovation opportunity in a real or hypothetical
n
U
business. Develop a plan to implement the innovation using encounter

,
and system modification strategies.
CASE STUDY
O L
/ S
Starbucks and its Service Marketing Mix

O L
Starbucks, the Seattle-based coffeehouse chain, is a global phenomenon.
Established in 1971, it has since spread globally, with

/ C
over 30,000 locations as of 2021. The company is

C E renowned for its dedication to providing high-quality

coffee and creating a unique “Starbucks Experience”.
D
©D
The Starbucks experience is about more than just
buying a cup of coffee. From the moment a customer
enters a Starbucks store to the moment they leave,
every interaction is designed to create a unique and positive experience.
Starbucks refers to this as the “Third Place” concept, aiming to make
their stores comfortable between home and work for their customers.
Let’s examine the company’s service marketing mix, broken down
into the 7Ps: Product, Price, Place, Promotion, People, Process and
Physical Evidence.

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Product: Starbucks’ primary product is high-quality, gourmet coffee. Notes

They also offer a variety of other beverages, pastries, snacks, and
even a selection of merchandise, such as mugs and coffee makers.
Their menu also changes seasonally, and they often introduce new
drinks, which helps keep the menu fresh and exciting.
Price: Starbucks’ pricing strategy could be defined as “premium”.
Their products are priced higher than those of many competitors.
The company justifies these prices with superior quality, customer

h i
l
service, and the overall experience provided in their coffeehouses.
Place: Starbucks has locations worldwide, in urban and suburban
D e
of
areas, shopping centres, university campuses, and more. The company
also sells coffee beans, instant coffee, and ready-to-drink beverages

ty
in supermarkets. This widespread distribution allows Starbucks to
reach a vast customer base.
s i
r
Promotion: Starbucks uses various advertising methods, including
e
v
social media, mobile app promotions, print advertisements, and more.

n i
They also have a rewards program, which encourages repeat business

U
by offering free drinks after a certain number of purchases.

,
L
People: Starbucks highly emphasises its staff, or “partners”, as the

O
company calls them. They believe that happy employees lead to

/ S
satisfied customers, so they offer benefits and training opportunities

L
to their staff.

O
Process: From ordering and making the coffee to serving and

C
E /
interacting with customers, Starbucks aims to create a unique, positive
experience for each customer.

D C
Physical Evidence: Every aspect of a Starbucks coffeehouse, from

©D
the décor to the background music, is carefully curated to create
a pleasant, inviting atmosphere. The Starbucks logo on their cups,
packaging, and storefronts is strong physical evidence.
Questions Related to the Case Study:
1. How does Starbucks’ premium pricing strategy fit into its service
marketing mix?
2. How does Starbucks utilise its ‘People’ component to ensure
customer satisfaction?

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 MBAFT 7606 SERVICE MARKETING

Notes 3. Explain how the ‘Physical Evidence’ factor contributes to the

“Starbucks Experience”.
4. How does Starbucks’ ‘Process’ add value to its service marketing
mix?
Answer
1. Starbucks’ premium pricing strategy aligns with its high-quality
offerings and the unique customer experience they provide. This

h i
strategy fits into their overall service marketing mix, targeting

e l
customers who value superior quality, excellent service, and a

D
unique coffeehouse experience over cost.

of
2. Starbucks heavily invests in its ‘People’ component. The company
ensures their employees deliver excellent service by providing

i ty
their staff with competitive benefits and thorough training.

s
The positive interactions between employees and customers
r
e
contribute significantly to overall customer satisfaction.

i v
3. The ‘Physical Evidence’ aspect contributes to the “Starbucks

n
Experience” by creating an inviting and comfortable atmosphere
U
,
for customers. Everything, from the furniture and décor to the

L
design of their cups and packaging, enhances the customer

O
experience and communicates the company’s commitment to

S
/
quality.

L
4. Starbucks’ ‘Process’ adds value by creating a pleasant and
O
C
seamless customer experience. This includes everything from

E / the ease of ordering and customising drinks to the efficiency

C
and friendliness of service. The company’s commitment to

D
customer service excellence is evident in its processes, which

©D
ultimately helps to create the “Starbucks Experience”.

IN-TEXT QUESTIONS
1. What are the two main categories of services?
(a) Physical and intangible
(b) Tangible goods and intangible services
(c) Product-based and service-based
(d) None of the above

74 PAGE
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MARKETING MIX AND RELATIONSHIP MARKETING

2. Which type of service requires a high level of expertise and Notes

training?
(a) Personal services
(b) Tangible goods
(c) Professional services
(d) Information and communication services
3. What is a moment of truth in services marketing?

h i
(a) A critical moment when a customer forms an impression
e l
D
of the service provider based on their experience

of
(b) A moment when a customer purchases a service
(c) A moment when a customer recommends a service to
others
i ty
r
(d) A moment when a customer receives a discount on a
s
service
v e
n i
4. Which stage of a service encounter involves the customer’s

U
evaluation of the service encounter and their subsequent behaviour?
(a) Pre-contact stage
L ,
O
(b) Encounter stage

/ S
(c) Post-encounter stage

L
(d) None of the above
O
C
5. What is a high-contact service encounter?

E /
(a) An encounter that involves a high degree of customer

D Ccontact and interaction with the service provider

©D
(b) An encounter that involves a lower degree of customer
contact and may be delivered through automated or self-
service channels
(c) An encounter that involves a high degree of customization
to meet the unique needs of each customer
(d) An encounter that is entirely self-directed and does not
involve direct interaction with a service provider

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 MBAFT 7606 SERVICE MARKETING

Notes 6. What is a low-contact service encounter?

(a) An encounter that involves a high degree of customer
contact and interaction with the service provider
(b) An encounter that involves a lower degree of customer
contact and may be delivered through automated or self-
service channels
(c) An encounter that involves a high degree of customization
to meet the unique needs of each customer
h i
e l
(d) An encounter that is entirely self-directed and does not

D
involve direct interaction with a service provider

of
7. Which type of service encounter involves a high degree of

ty
customization to meet the unique needs of each customer?
(a) High-contact service encounter
s i
e r
(b) Low-contact service encounter

i v
(c) High-customization service encounter

n
(d) Low-customization service encounter
U
,
8. Which type of service encounter involves a lower degree of

O L
customization and may be delivered through standardized
processes or offerings?

/ S
L
(a) High-contact service encounter

C O (b) Low-contact service encounter

/ (c) High-customization service encounter

CE
(d) Low-customization service encounter

D D 9. What is a self-service encounter?

©
(a) An encounter that involves a high degree of customer
contact and interaction with the service provider
(b) An encounter that involves a lower degree of customer
contact and may be delivered through automated or self-
service channels
(c) An encounter that involves a high degree of customization
to meet the unique needs of each customer

76 PAGE
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MARKETING MIX AND RELATIONSHIP MARKETING

(d) An encounter that is entirely self-directed and does not Notes

involve direct interaction with a service provider
10. Which type of service encounter is conducted through remote
channels such as phone, email or chat?
(a) High-contact service encounter
(b) Low-contact service encounter

i
(c) Remote service encounter
(d) Self-service encounter
l h
11. What is the critical moment in a customer’s experience with a
D e
of
service?
(a) Pre-contact stage
(b) Encounter stage
i ty
(c) Post-encounter stage
r s
(d) Moment of truth
v e
n i
12. What is the level of customization for low-customization service
encounters?

, U
L
(a) Low
(b) Medium

S O
(c) High
L /
O
(d) None

/ C
13. What is the level of customer contact for low-contact service

E
encounters?

C
D
(a) High

©D
(b) Low
(c) Medium
(d) None
14. Which type of service encounter requires a high degree of
customer contact and interaction with the service provider?
(a) Self-service encounter
(b) Remote service encounter

PAGE 77
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 MBAFT 7606 SERVICE MARKETING

Notes (c) High-contact service encounter

(d) Low-contact service encounter

3.7 Summary
This chapter covers various aspects of services marketing, including the
marketing mix for services, the concept of value and value drivers, and
the importance of relationship marketing. It also discusses bonding and

h i
e l
lifetime value and calculates customer lifetime value (CLTV). Service
encounters and the moment of truth are also explored in this chapter, along
D
with the different types of services and service encounter classifications.

of
The chapter concludes with a discussion of service innovation, specifically

ty
through encounter and system modification. This chapter highlights the

i
unique challenges and opportunities of marketing services. It provides

r s
insights and strategies for businesses looking to improve their service

e
offerings and build stronger customer relationships.
v
n i
U
3.8 Answers to In-Text Questions

L ,
1. (b) Tangible goods and intangible services

S O
2. (c) Professional services

L /
3. (a) A critical moment when a customer forms an impression of the

O
service provider based on their experience

/ C
4. (c) Post-encounter stage

CE
5. (a) An encounter that involves a high degree of customer contact

D
and interaction with the service provider

© D 6. (b) An encounter that involves a lower degree of customer contact

and may be delivered through automated or self-service channels
7. (c) High-customization service encounter
8. (d) Low-customization service encounter
9. (d) An encounter that is entirely self-directed and does not involve
direct interaction with a service provider
10. (c) Remote service encounter

78 PAGE
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MARKETING MIX AND RELATIONSHIP MARKETING

Notes
11. (d) Moment of truth
12. (a) Low
13. (b) Low
14. (c) High-contact service encounter

3.9 Self-Assessment Questions

h i
l
1. What are the key elements of the marketing mix for services, and
how do they differ from the marketing mix for tangible goods?
2. How do value drivers contribute to the perceived value of a service,
D e
of
and what are some examples of value drivers in the services industry?

ty
3. What is relationship marketing, and why is it important in the

i
services industry? How can businesses build and maintain strong

s
r
relationships with their customers?

v e
4. How does bonding between a customer and a service provider

n i
develop, and what are some strategies for building stronger bonds

U
with customers?

L ,
5. What is the customer lifetime value (CLTV), and how is it calculated?

O
Why is CLTV an important metric for businesses to track?

/ S
6. What is a service encounter, and what are the different service

O L
encounters? How can businesses improve the customer experience
during service encounters?

/ C
7. What is the moment of truth, and why is it critical in the customer

E
experience? How can businesses ensure customers’ expectations are
C
D
met or exceeded during the moment of truth?

©D
8. What is service innovation, and how can businesses use encounter
and system modification to drive service innovation? What are some
examples of successful service innovations in the services industry?

3.10 Suggested Readings

‹ Services Marketing: People, Technology, Strategy (9th Edition), By
Jochen Wirtz and Christopher Lovelock.

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School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes ‹ Services Marketing: Integrating Customer Focus Across the Firm

by Valarie A. Zeithaml, Mary Jo Bitner, and Dwayne D. Gremler.
‹ Services Marketing: Concepts, Strategies, & Cases by K. Douglas
Hoffman and John E.G. Bateson.
‹ Textbook of Marketing of Services: The Indian Experience Paperback
by Nimit Chowdhary and Monika Prakash.
‹ Services: Trends and Insights by Monika Prakash, Rahul Pratap
Singh Kaurav, Ambrish Sharma.
h i
‹

e l
Services Marketing: Concepts and Practices Paperback by Ramneek

D
Kapoor, Justin Paul, Biplab Halder.

of
‹ Baber, R., Kaurav, R. P. S., & Paul, J. (2020). Impact of individual
market orientation on selling and customer orientation. Journal of

ty
Strategic Marketing, 28(4), 288-303.

s i
r
‹ Kaurav, R. P. S., Prakash, M., Chowdhary, N., & Briggs, A. D.

e
(2016). Internal marketing: Review for next generation businesses.

v
i
Journal of Services Research, 16(1).

n
U
‹ Kaushal, N., Kaurav, R. P. S., Sivathanu, B., & Kaushik, N. (2023).

,
Artificial intelligence and HRM: identifying future research Agenda

O L
using systematic literature review and bibliometric analysis. Management
Review Quarterly, 73(2), 455-493.

/ S
O L
/ C
C E
D
©D

80 PAGE
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L E S S O N

4
Service Marketing
System
Saurabh Gupta
Assistant Professor

i
Shri Ram College of Commerce

l h
Delhi University

e
Email Id: saurabh.gupta@srcc.du.ac.in

D
of
STRUCTURE

ty
4.1 Learning Objectives
4.2 Introduction
s i
4.3 Servuction System
e r
i v
n
4.4 Consumer and Prosumer in Service Marketing
4.5 Service System Mapping
U
,Line of Visibility
L
4.6 Front Line

O
4.7 Line of Internal Interactions and
S
4.8 Service Blueprinting
L / Orientations
O Trinity
4.9 Service System and Functional

C
/ Production, Marketing and Human Resources
4.10 Service Management

E
4.11 Interaction Between
C
D
4.12 ,QWHU)XQFWLRQDO &RQÀLFW DQG +DUPRQLVDWLRQ

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4.13 Summary
4.14©Answers to In-Text Questions
4.15 Self-Assessment Questions
4.16 References
4.17 Suggested Readings

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 MBAFT 7606 SERVICE MARKETING

Notes 4.1 Learning Objectives

‹ Understand the concept of the servuction system in service marketing
and explain its components.
‹ Differentiate between consumers and prosumers and explain their
roles in the service marketing system.
‹ Describe the process of service system mapping and its significance

i
in designing effective service experiences.
‹
l h
Identify and define the concepts of front line, line of internal

e
interactions, and line of visibility in the service marketing system.
D
of
‹ Demonstrate knowledge of service blueprinting and its application
in visualizing and improving service processes.

ty
‹ Explain the concept of the service management trinity and its role in

s i
coordinating production, marketing, and human resources in service
organizations.
e r
‹

i v
Analyse the interactions and potential conflicts between different

U n
functional areas in service organizations and propose strategies for
inter-functional harmonization.

L ,
O
4.2 Introduction

/ S
L
Service marketing is an essential aspect of modern business. The service

O
marketing system refers to the process of developing, promoting, and

/ C
delivering services to customers. Unlike traditional marketing, service

E
marketing is unique in that it involves intangible products that cannot be

D C touched or seen. In this regard, service marketing is more complex and

requires a more comprehensive approach to ensure customer satisfaction.

©D
The service marketing system is designed to ensure that customers receive
high-quality services that meet their unique needs. The system involves
various steps, including market research, service design and development,
pricing, promotion, and delivery. Each stage of the service marketing
system is critical to delivering services effectively. For instance, market
research helps businesses understand customer needs and preferences,
which are critical for service design and development.

82 PAGE
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 SERVICE MARKETING SYSTEM

Effective service marketing requires a customer-centric approach that Notes

places the customer at the centre of the marketing process. This approach
involves understanding customer needs, preferences, and expectations and
aligning service delivery to meet these needs. Service marketing also
involves building long-term relationships with customers through excellent
customer service. This way, businesses can build customer loyalty, which
is critical in ensuring business success.

4.3 Servuction System

h i
e l
D
The Servuction System is a concept that is widely used in the service

of
industry. It refers to the process of production and delivery of services
to customers. The system involves a complex interaction between the

ty
customer and the service provider. This interaction comprises of various

i
elements such as the physical environment, the service provider, and the
s
r
customer. The Servuction System is a comprehensive approach that is

e
v
used to understand how services are produced, delivered, and consumed.

n i
The Servuction System is a model that is used to understand the customer’s

, U
experience in the service industry. It is a useful tool for service providers
as it helps them to identify the various touchpoints of the service delivery

O L
process. The Servuction System model has three main components:

S
the front stage, the backstage, and the service environment. The front

L /
stage refers to the service provider’s interaction with the customer. The

O
backstage refers to the service provider’s internal operations, while the

/ C
service environment refers to the physical surroundings where the service

E
is provided.

D C
The Servuction System is an essential concept in the service industry
as it helps service providers to understand the customer’s experience

©D
and how it can be improved. By understanding the various components
of the system, service providers can identify areas where they need to
make changes to improve the customer’s experience. The Servuction
System model is also useful for service providers to identify the various
touchpoints in the service delivery process. This allows them to design
the service delivery process in an efficient and effective way.

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 MBAFT 7606 SERVICE MARKETING

Notes 4.4 Consumer and Prosumer in Service Marketing

Consumer and prosumer are two important terms in service marketing
that refer to the role of customers in the delivery of services. A consumer
is a person who purchases and uses a service, while a prosumer is a
customer who actively participates in the production and delivery of the
service. The concept of prosumer has gained popularity in recent years
as more and more businesses are seeking to engage customers in the
co-creation of services.
h i
e l
In service marketing, the role of the consumer is changing from passive

D
receivers of services to active participants. This shift is largely due to

of
the rise of the prosumer, who is increasingly involved in the creation and
delivery of services. Prosumers are customers who use their knowledge,

ty
skills, and resources to help create and deliver services. This can take

s i
many forms, such as providing feedback, co-designing services, or even

r
physically participating in the service delivery process. By engaging
e
v
prosumers in the creation and delivery of services, businesses could

n i
create more personalized and customized experiences for their customers.

U
One of the main benefits of prosumers in service marketing is the

,
L
ability to create a stronger connection between the service provider and

O
the customer. By involving customers in the production and delivery of

/ S
services, businesses can build stronger relationships with their customers

L
and create a sense of community around their brand. Prosumers also allows

O
for greater flexibility and agility in service delivery, as businesses can

/ C
quickly adapt to changing customer needs and preferences. Overall, the

E
rise of prosumers in service marketing is a positive trend that is helping

D C to drive innovation and improve customer experiences.

©D
IN-TEXT QUESTIONS
1. Servuction system refers to:
(a) The process of creating and delivering services
(b) The physical environment in which services are delivered
(c) The interaction between consumers and service providers
(d) The marketing strategy for promoting service

84 PAGE
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 SERVICE MARKETING SYSTEM

2. A prosumer is a term used to describe: Notes

(a) A professional consumer who regularly purchases services

(b) A producer who also consumes the services they produce
(c) A proactive consumer who actively participates in service
co-creation
(d) A professional service provider with extensive knowledge

i
in their field

l h
4.5 Service System Mapping
D e
of
Service System Mapping (SSM) is a powerful tool used in service
design to better understand how a service operates from the customer’s

i ty
perspective. It involves mapping out the various touch points that a

s
customer interacts with when using a service, including physical, digital,
r
e
and human interactions. The goal of SSM is to identify areas where

i v
the service can be improved, such as reducing wait times or improving

n
communication between the customer and service provider.

U
,
Service System Mapping is a collaborative process that involves multiple

L
stakeholders, including service designers, service providers, and customers.

O
By mapping out the service system together, stakeholders can gain a better

S
/
understanding of the customer’s needs and pain points, as well as identify

O L
areas where the service can be improved. SSM can be used at various
stages of the service design process, from ideation and prototyping to

/ C
implementation and evaluation.

C E
Ultimately, Service System Mapping is a valuable tool for service designers

D
and providers looking to improve the customer experience. By gaining

©D
a better understanding of how a service operates from the customer’s
perspective, designers can make informed decisions about how to improve
the service and create a more positive experience for customers. SSM
is a key component of service design, and its benefits can be seen in
improved customer satisfaction, increased efficiency, and higher revenues
for service providers.

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 MBAFT 7606 SERVICE MARKETING

Notes 4.6 Front Line

Front line service is the first point of contact between a customer and a
company’s products or services. It is the face of a business, and it is the
first impression that a customer gets. Front line service is essential for
a business to succeed because it can either make or break a customer’s
perception of the company. Therefore, it is crucial for businesses to have
an in-depth understanding of the front line of service marketing system.

h i
The front line of service marketing system refers to the various touchpoints

e l
where a customer interacts with a business. It includes all customer-

D
facing employees, such as salespeople, customer service representatives,

of
and support staff. These employees play a crucial role in delivering
an excellent customer experience. They are responsible for building

ty
relationships with customers, resolving issues, and providing support in
a timely and efficient manner.
s i
e r
Understanding the front line of service marketing system is critical for

i v
businesses because it allows them to identify areas for improvement and

U n
implement strategies to enhance the customer experience. By analysing
customer feedback and interactions, businesses can identify patterns and

L ,
areas of weakness. They can then develop training programs and processes

O
to address these issues and improve the overall customer experience. This

/ S
will not only lead to increased customer satisfaction but also increase

L
customer loyalty and retention, ultimately leading to increased revenue

O
and growth for the business.

/ C
CE
4.7 Line of Internal Interactions and Line of Visibility

D D 4.7.1 Line of Internal Interactions

© The line of internal interactions refers to the communication and
collaboration that takes place within an organization. It is the line that
connects the different departments, teams, and individuals within the
company and allows them to work together towards a common goal. The
line of internal interactions is essential for the success and growth of an
organization, as it helps to ensure that everyone is on the same page and
working towards the same objectives.

86 PAGE
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 SERVICE MARKETING SYSTEM

One of the key benefits of the line of internal interactions is that it Notes
promotes transparency and accountability within the organization. When
team members are communicating regularly and sharing information, it
becomes easier to identify and address any issues or challenges that may
arise. This helps to prevent misunderstandings and ensures that everyone
is aware of what is expected of them. Additionally, when individuals are
held accountable for their actions and decisions, it creates a culture of
responsibility and ownership, which can lead to increased productivity
and better results.
h i
Another important aspect of the line of internal interactions is that it
e l
fosters collaboration and innovation. When teams are working together
D
of
and sharing ideas, they are more likely to come up with creative solutions
to problems and find new ways to improve processes and procedures.

ty
This can lead to a more dynamic and agile organization that is able to

s i
adapt to changing market conditions and stay ahead of the competition.

e r
Additionally, when individuals are encouraged to share their ideas and

i v
contribute to the overall success of the company, they are more engaged

retention.
U n
and motivated, which can lead to higher levels of job satisfaction and

L ,
Overall, the line of internal interactions is a critical component of any

O
successful organization. It helps to promote transparency, accountability,

/ S
collaboration, and innovation, which are all essential for achieving long-

O L
term growth and success. By fostering a culture of communication and
collaboration, companies can ensure that everyone is working towards

/ C
the same objectives and to achieve its goals.

C E
4.7.2 Line of Visibility
D
©D
The line of visibility is an important concept in service marketing. It refers
to the point at which the customer interacts with the service provider. In
a service marketing system, the line of visibility is the point at which
the service provider and the customer come into direct contact. It is the
point where the service is delivered and where the customer’s experience
of the service begins. The line of visibility is a critical component of
the service marketing system, as it is where the customer’s perception
of the service is formed.

PAGE 87
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 MBAFT 7606 SERVICE MARKETING

Notes In a service marketing system, the line of visibility is the point at which
the customer’s experience of the service begins. It is the moment when the
service provider and the customer come into direct contact. At this point,
the customer’s perception of the service is formed, and it is important for
the service provider to ensure that the experience is positive. The line of
visibility is where the service provider can make a better and impactful
great first impression and to establish trust with the customer.

i
The line of visibility is a key element of the service marketing system. It

l h
is where the service provider and the customer come into direct contact,

e
and it is where the customer’s perception of the service is formed. The

D
service provider must ensure that the experience is positive, as this will

of
influence the customer’s perception of the service and their willingness
to return in the future. The line of visibility is an important factor in

ty
service marketing, and it is essential that service providers understand

s i
its significance and take steps to ensure that it is a positive experience
for the customer.
e r
IN-TEXT QUESTIONS
i v
U n
3. Service system mapping involves:

,
(a) Creating a visual representation of the service delivery
L
O
process

/ S
(b) Mapping out the customer journey from start to finish

L
(c) Identifying potential service failures and bottlenecks

CO
(d) All of the above

E/
4. The line of visibility in a service organization represents:

DC
(a) The point where the customer interacts directly with the

©D
service provider
(b) The boundary between the front stage and backstage of
service delivery
(c) The extent to which the service process is visible to the
customer
(d) The line separating the marketing and production
departments

88 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
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 SERVICE MARKETING SYSTEM

4.8 Service Blueprinting Notes

Service Blueprinting is a powerful tool used in service design to analyse,

visualize, and improve the customer experience. It is a process that allows
businesses to understand their customer’s journey and identify areas of
opportunity for improvement. Service Blueprinting is a comprehensive
method that includes mapping out all the interactions and touchpoints that
a customer experiences, including both physical and digital interactions.
This process helps businesses to identify gaps in their customer service
h i
and make necessary changes to improve their customer satisfaction.
e l
D
The process of Service Blueprinting involves breaking down the customer

of
experience into various stages, including pre-service, service delivery,
and post-service. This helps businesses to understand the interactions

ty
between customers and employees, as well as the various touchpoints

s i
that customers encounter throughout their journey. By analysing these

r
interactions, businesses can identify areas where they need to improve
e
v
their service delivery, such as increasing staff training, improving the

n i
physical environment, or streamlining communication channels.

U
Service Blueprinting is a powerful tool that businesses can use to improve

,
L
their customer experience and gain a competitive edge in their industry.

O
By mapping out their customer’s journey, businesses can identify areas

/ S
of opportunity for improvement and make necessary changes to enhance

L
the overall customer experience. This process can lead to increased

O
customer satisfaction, loyalty, and ultimately, increased profits. With

/ C
its comprehensive approach, Service Blueprinting is a valuable tool for

E
businesses of all sizes and industries.

D C
4.9 Service System and Functional Orientations

©D
Service system and functional orientations are two important concepts in
the field of service management. A service system refers to a network of
resources and activities that are organized to deliver a service to a customer.
A functional orientation, on the other hand, refers to a perspective that
emphasizes the importance of the internal functions of an organization,
such as production, marketing, and finance. In this context, service system
orientation emphasizes the importance of creating a service system that
is customer-centric and focused on delivering value to the customer.

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 MBAFT 7606 SERVICE MARKETING

Notes A service system orientation is important because it helps organizations

to focus on the needs of their customers. By designing a service system
that is customer-centric, organizations can ensure that their customers
are satisfied with the services they receive. This can lead to increased
customer loyalty, repeat business, and positive word-of-mouth advertising.
A service system orientation also helps organizations to identify areas
where they can improve their services by analysing customer feedback
and identifying opportunities for improvement.

h i
l
A functional orientation, on the other hand, can sometimes lead organizations

e
to focus too much on their internal functions and not enough on their

D
customers. This can result in a service system that is not well-aligned

of
with customer needs and expectations. A functional orientation can also
create silos within an organization, where different departments are more

ty
focused on their own functions than on the overall goal of delivering

s i
value to the customer. To avoid these pitfalls, organizations need to

e r
balance their functional orientation with a customer-centric perspective,

i v
focusing on the needs of their customers while also ensuring that their

n
internal functions are aligned with those needs.

U
L ,
4.10 Service Management Trinity

S O
Service system and functional orientations are two concepts that are

L /
critical to understand in the field of service management. Service system

O
orientation refers to the idea that service organizations should focus on

/ C
creating and managing a complete service system. This means that they

E
need to consider all the components of the service system, including

D C the service environment, service personnel, service processes, and

service technology. On the other hand, functional orientation refers to

©D
the traditional functional approach to service management, where each
functional department within an organization is responsible for its own
specialized area of service delivery.
The Service Management Trinity is a framework that combines the concepts
of service system and functional orientations to provide a comprehensive
approach to service management.
The three components of the Service Management Trinity are:
(i) service processes,

90 PAGE
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 SERVICE MARKETING SYSTEM

(ii) service personnel, and Notes

(iii) service technology.
Service processes refer to the set of activities that are required to deliver
a particular service. This includes the steps involved in creating and
delivering the service, as well as the systems and procedures that support
these activities. Service personnel refer to the people who are involved
in delivering the service, including customer service representatives,

i
technicians, and other service professionals. Service technology refers
to the tools and technologies that are used to support service delivery,
l h
such as software applications, communication systems, and equipment.

D e
of
By combining the concepts of service system and functional orientations,
the Service Management Trinity provides a holistic approach to service

ty
management. This framework recognizes that each component of the service

i
system is interconnected and interdependent, and that effective service

s
r
management requires a coordinated effort across all three components.

e
Service organizations that adopt the Service Management Trinity are better
v
i
able to align their service delivery with customer needs and expectations,
n
U
while also improving their operational efficiency and effectiveness. In

,
conclusion, the Service Management Trinity is an important concept for

O L
anyone interested in service management and that can help organizations
to deliver high-quality service and achieve their business objectives.

/ S
L
IN-TEXT QUESTIONS

O
5. Service blueprinting is a technique used to:

C
/
(a) Design the physical layout of service facilities

E
C
(b) Create a detailed plan for service process improvement

D
(c) Develop marketing strategies for service promotion

©D
(d) Train frontline employees in customer service skills
6. The Service Management Trinity consists of:
(a) Production, marketing and finance
(b) Marketing, operations and human resources
(c) Marketing, sales and customer service
(d) Strategy, execution and evaluation

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 MBAFT 7606 SERVICE MARKETING

Notes 4.11 Interaction Between Production, Marketing and

Human Resources
Service Production
Service production is an important concept in the field of business and
economics. It refers to the process of creating and delivering services to
customers. Unlike physical goods, services are intangible in nature and

i
cannot be touched or seen. Therefore, the production of services involves

l h
a different set of processes and factors than the production of goods.

D e
Understanding service production is crucial for businesses to efficiently
and effectively deliver high-quality services to their customers.

of
One of the key factors in service production is the role of the customer.
Unlike in the production of goods, the customer is an active participant

i ty
in the production of services. This means that the service provider must

r s
understand the needs and preferences of the customer in order to deliver a

e
service that meets their expectations. This requires effective communication

v
n i
and collaboration between the service provider and the customer. Service
providers must also be able to quickly adapt to changing customer needs

U
and preferences in order to remain competitive in the market.
,
O L
Another important factor in service production is the role of technology.
With the rise of digital technologies, service production has become

/ S
increasingly complex and sophisticated. Technology can be used to automate

O L
and streamline service production processes, making them more efficient
and cost-effective. For example, online booking systems and chatbots

/ C
can help service providers manage customer interactions more efficiently

C Eand quickly. However, technology can also pose challenges for service

D
providers, such as the need to constantly update and maintain digital

©D
systems and the potential for technology to replace human interactions.
Marketing Strategies
Marketing strategies are essential for any business looking to grow and
succeed in today’s competitive world and marketing that requires a unique
approach is marketing services. Unlike physical products, services are
intangible and cannot be seen or touched, which means that marketing
strategies for services need to be different from those for products.
Effective marketing strategies for services are crucial to ensure that the
service is communicated effectively to the target audience.

92 PAGE
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 SERVICE MARKETING SYSTEM

One of the most important marketing strategies for services is to understand Notes
the target audience. Unlike products that can be marketed to a wide
range of people, services typically target a particular group of consumers.
Understanding the target audience will enable a business to develop
specific marketing strategies that will resonate with them. This can be
done by conducting market research, analysing customer feedback, and
studying the competition. By understanding the target audience, businesses
can tailor their marketing messages to appeal to their needs and wants.

h i
l
Another marketing strategy for services is to establish a strong online

e
presence. In today’s digital age, the internet is one of the most effective
ways to market services. By creating a website, social media accounts,
D
of
and using paid advertising, businesses can reach a wider audience and
promote their services. A strong online presence can also provide valuable

ty
information about the services, such as customer reviews and testimonials,

s i
which can help to build trust and credibility with potential customers.

e r
Finally, building relationships with customers is another important

i v
marketing strategy for services. Unlike products, services often require

U n
ongoing interactions with customers. By building strong relationships with
customers, businesses can encourage repeat business, positive word-of-

L ,
mouth referrals, and brand loyalty. This can be achieved through excellent

O
customer service, personalized communication, and offering value-added

/ S
services. By focusing on building relationships with customers, businesses

time.
O L
can create a loyal customer base that will continue to support them over

Human Resources
/ C
C E
Human resources play a vital role in the success of any organization,

D
particularly in service marketing systems. This subtopic focuses on the

©D
significance of human resources in service marketing systems and how
it can impact the overall success of an organization.
One of the primary roles of human resources in service marketing systems
is to ensure that the organization has the right people in the right positions.
This involves recruiting, hiring, and training employees to perform their
roles effectively. A well-trained and motivated workforce can provide
excellent service to customers, which can enhance the reputation of the
organization and attract more customers.

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 MBAFT 7606 SERVICE MARKETING

Notes Moreover, human resources in service marketing systems are responsible

for developing and implementing policies and procedures that ensure
employee satisfaction and retention. This includes providing competitive
compensation and benefits, promoting work-life balance, and creating a
positive work environment. Happy employees are more likely to provide
exceptional service, which can lead to customer loyalty and increased
revenue for the organization.

i
Benefits of Collaboration:

l h
There are many benefits to collaboration between the marketing, production,
and human resources departments. These include:

D e
of
(a) Improved Customer Satisfaction: When the three departments work
together effectively, they can create a service that meets or exceeds

ty
customer expectations.

s i
(b) Increased Efficiency: By working together, the three departments

r
can streamline the service delivery process, which can lead to cost
e
v
savings and improved productivity.

n i
(c) Enhanced Employee Morale: When employees feel like they are

, U
part of a team and that their work is valued, they are more likely
to be engaged and productive.

O L
(d) Improved Competitive Advantage: By providing a superior service

/ S
experience, businesses can gain a competitive advantage over their
rivals.

O L
/ C
4.12 Inter-Functional Conflict and Harmonisation

C EInter-functional conflict is a situation where there is disagreement or

D competition between different departments or teams within an organization.

©D
Such conflicts can arise due to differences in objectives, priorities, resources,
communication breakdown, or personal conflicts among employees. Inter-
functional conflicts can be detrimental to organizational performance, as
they can lead to reduced productivity, low morale, poor communication,
and ultimately, failure to achieve organizational goals. However, conflict
management through harmonization can help organizations to address
inter-functional conflicts effectively.

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 SERVICE MARKETING SYSTEM

Harmonization is the process of aligning different functions and Notes

departments within an organization to work towards a common goal.
This process involves creating a shared vision, establishing clear goals
and performance metrics, improving communication, and fostering
collaboration and teamwork. Conflict management through harmonization
involves identifying the source of conflict and finding ways to resolve it
through mutual understanding and compromise. This approach requires
open communication, active listening, and a willingness to work together
towards a shared objective.
h i
Successful conflict management through harmonization can yield several
e l
benefits for an organization. Firstly, it can lead to improved communication
D
of
and collaboration between different departments, which can enhance
organizational performance and innovation. Secondly, it can foster a

ty
positive work environment, where employees feel heard, valued, and

s i
motivated to work towards common goals. Finally, it can promote a culture

e r
of continuous improvement, where conflict is seen as an opportunity to

i v
learn and grow, rather than a source of tension and stress.

4.13 Summary
U n
L ,
O
Lesson 4 of Unit III focuses on the service marketing system, specifically

S
the servuction system, consumer and prosumer, service system mapping,

L /
front line, line of internal interactions and line of visibility, and service

O
blueprinting. Additionally, the lesson covers service system and functional

/ C
orientations, including the service management trinity, interaction between

E
production, marketing, and human resources, inter-functional conflict,

D C
and harmonization.
The servuction system is a concept that describes the interplay between

©D
the service provider and the customer in the service delivery process.
It emphasizes the active involvement of customers in co-creating the
service experience. The lesson also explores the role of consumers as
prosumers, who not only consume but also participate in the production
or customization of services.
Service system mapping is a technique used to visualize and analyse the
different components and interactions within a service system. It helps

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 MBAFT 7606 SERVICE MARKETING

Notes in identifying areas of improvement and enhancing the overall service

experience. The concepts of front line, line of internal interactions, and
line of visibility are used to understand the various touchpoints and
interactions within a service organization.
Service blueprinting is a method for designing and documenting the service
delivery process. It involves creating a detailed visual representation that
outlines the different steps, roles, and interactions involved in delivering

i
a service. Service blueprints help in identifying potential bottlenecks,
improving efficiency, and enhancing service quality.
l h
D e
The lesson also explores the relationship between service management
and various functional orientations within an organization, including

of
production, marketing, and human resources. The service management
trinity refers to the coordination and integration of these three functions
to ensure the effective delivery of services.
i ty
r s
Interactions between production, marketing, and human resources are

e
crucial for successful service delivery. However, conflicts may arise due
v
i
to differences in priorities, goals, or perspectives. The lesson discusses
n
U
the importance of harmonization and finding common ground to resolve

,
inter-functional conflicts and achieve a cohesive service marketing system.

L
Overall, Lesson 4 delves into the intricacies of the service marketing

O
S
system, highlighting the significance of customer involvement, service

/
system mapping, service blueprinting, and the interaction between different
L
O
functional orientations in delivering high-quality services.

/ C
E
4.14 Answers to In-Text Questions

D C 1. (a) The process of creating and delivering services

©D
2. (c) A proactive consumer who actively participates in service co-
creation
3. (d) All of the above
4. (c) The extent to which the service process is visible to the customer
5. (b) Create a detailed plan for service process improvement
6. (b) Marketing, operations and human resource

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 SERVICE MARKETING SYSTEM

Notes
4.15 Self-Assessment Questions
1. How would you define a service marketing system?
2. How does the servuction system influence the delivery of services?
3. How can the service marketing system effectively engage both
consumers and prosumers?
4. What is service system mapping, and why is it important?
5. What role do front-line employees play in delivering a positive
h i
customer experience?
e l
6. How can organizations manage and optimize the line of visibility
D
of
and internal interactions?

ty
7. What is service blueprinting, and how does it contribute to the
service marketing system?

s i
r
8. What benefits can be derived from adopting a service system

e
v
orientation?
9. What is the service management trinity?
n i
U
10. How do production, marketing, and human resources interact within
,
L
a service marketing system?

O
11. What strategies can be implemented to promote harmonization and

S
system?
L /
collaboration among different functions within the service marketing

C O
4.16 References
E /
‹

D C
Berry, L.L. and Parasuraman, A. (1991). Marketing Services Competing

©D
through Quality. The Free Press, New York.
‹ Berry, L.L. (2002). Relationship Marketing of Services - Perspectives
from 1983 and 2000. Journal of Relationship Marketing, 1(1), 59-
77.
‹ Zeithaml, V.A. and Bitner, M.J. (2003). Services Marketing: Integrating
Customer Focus Across the Firm. McGraw-Hill, New York.
‹ Lovelock, C.H. and Wirtz, J. (2011). Services Marketing: People,
Technology, Strategy. Prentice Hall, Upper Saddle River, NJ.

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School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes ‹ Shostack, G.L. (1984). Designing Services that Deliver. Harvard

Business Review, 62(1), 133-139.
‹ Eiglier, P. and Langeard, E. (1987). Servuction: Le Marketing des
Services. McGraw-Hill, Paris.
‹ Vargo, S.L. and Lusch, R.F. (2004). Evolving to a New Dominant
Logic for Marketing. Journal of Marketing, 68(1), 1-17.
‹ Grönroos, C. (2000). Service Management and Marketing: A Customer
Relationship Management Approach. Wiley, Chichester.
h i
‹

e l
Edvardsson, B., Gustafsson, A., and Roos, I. (2005). Service Portraits

D
in Service Research: A Critical Review. International Journal of

of
Service Industry Management, 16(1), 107-121.
‹ Parasuraman, A., Zeithaml, V.A., and Berry, L.L. (1985). A Conceptual

ty
Model of Service Quality and Its Implications for Future Research.
Journal of Marketing, 49(4), 41-50.
s i
e r
4.17 Suggested Readings
i v
‹
U n
Zeithaml, V. A., Bitner, M. J., & Gremler, D. D. (2006). Services

,
marketing: Integrating customer focus across the firm (5th ed.).
L
O
New York, NY: McGraw-Hill/Irwin.
‹

/ S
Grönroos, C. (1990). Service management and marketing: A customer

O L
relationship management approach. New York, NY: Lexington Books.
Prahalad, C. K., & Ramaswamy, V. (2004). The future of competition:
C
‹

E / Co-creating unique value with customers. Boston, MA: Harvard

Business School Press.

D C ‹ Shostack, G. L. (1982). Service design: Beyond the marketing mix.

©D
Journal of Marketing, 46(2), 49-56.
‹ Bitner, M. J. (1990). Servicescapes: The impact of physical surroundings
on customers and employees. Journal of Marketing, 56(2), 57-71.
‹ Normann, R. (1991). Service management: Strategy and leadership
in service businesses. New York, NY: John Wiley & Sons.
‹ Shostack, G. L. (1984). Designing services that deliver. Harvard
Business Review, 62(1), 133-140.

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SERVICE MARKETING SYSTEM

‹ Silvestro, R., Fitzgerald, B., & Johnston, R. (1994). Integrating the Notes
operations and marketing perspectives: A process-based approach.
International Journal of Service Industry Management, 5(2), 18-32.
‹ Gummesson, E. (1995). Relationship marketing: From marketing mix
to relationship marketing. New York, NY: McGraw-Hill.
‹ Bowen, J. T., & Ford, R. C. (1998). Managing service organizations:
Using the service profit chain to link customer and employee

i
satisfaction. Boston, MA: Harvard Business School Press.
Sasser, W. E., Jr., Olsen, R. P., & Wycoff, D. D. (1978). The manage-
l h
e
‹

D
ment of service operations. New York, NY: Free Press.

of
i ty
r s
v e
n i
, U
O L
/ S
O L
/ C
C E
D
©D

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L E S S O N

5
Service Buying Behaviour,
Innovation and
Competition
i
Dr. Shruti Gulati

l h
Assistant Professor

D e
Lady Shri Ram College for Women
University of Delhi

of
Email-Id: gulati_shruti@yahoo.co.in

i ty
STRUCTURE
r s
v e
5.1 Learning Objectives
n i
U
5.2 Introduction
5.3 Service Buying Behaviour
L ,
5.5 Innovation and CompetitionO
5.4 Service Marketing Strategy

/ S
5.6 Summary
O L
C
5.7 Answers to In-Text Questions
/
5.9 ReferencesE
5.8 Self-Assessment Questions

D C Readings
©D
5.10 Suggested

5.1 Learning Objectives

‹ To familiarize with the dynamics of service buying behaviour.
‹ To understand the service market strategy: segmentation target and positioning.
‹ To understand innovation and competition in service sector.

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 SERVICE BUYING BEHAVIOUR, INNOVATION AND COMPETITION

Notes
5.2 Introduction
We often use the word goods, while discussing buying and seldom forget
the mention of services even though service form an important part of a
consumer’s journey. The word service was defined by American Marketing
Association in 1960s as “activities, benefits, or satisfactions which are
offered for sale, or provided in connection with the sale of goods”. This

i
definition is very restrictive in nature and that it specified services as

h
those ancillaries to selling of goods.
Understanding services and its characteristics is important for businesses
e l
and service providers to deliver satisfying service experiences to their
D
of
customers. The characteristics of service can vary depending on the
specific context, but there are some common features associated with
service. These are:
i ty
‹ Intangible
r s
e
Services are intangible and cannot be seen or touched like physical
v
i
products. They are experienced at the time of delivery. For example,
n
U
travel is an experience and not a commodity to be touched and felt.

,
‹ Inseparable

L
Services are often created and consumed simultaneously, unlike
O
S
tangible products that can be manufactured and stored separately.

L /
For example, you get an instant haircut while sitting in a hair salon.

O
‹ Variability

/ C
Services can vary in quality and consistency due to factors such as

C E
the skills and attitudes of the service provider. For example, an
experienced barber may perform haircut with more precision than

D
an absolute beginner.

©D
‹ Perishable
Services cannot be stored for future use and are perishable, which
essentially means they need to be utilized at the time they are
offered. For example, you get a foot massage at a massage parlour.
‹ Heterogeneous
Services are often customized or tailored to meet the specific needs
of individual customers. For example, you can specify which hair
cut you wany desire to get and that can vary person to person.

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 MBAFT 7606 SERVICE MARKETING

Notes ‹ Customer Involvement

Services require active involvement from customers, who need to
participate or collaborate to receive the service effectively. For
example, you will have to instruct the barber what are you looking
for in a haircut.
The growth of services marketing has been influenced by various
factors, and multiple industries, companies, and individuals have

i
contributed to defining the scope of concepts, frameworks, and

l
strategies within this field. The field of services marketing and
h
impact of these forces.
D e
management has developed and evolved as a result of the combined

of
Service marketing encompasses the strategies and techniques specifically

ty
developed for promoting and selling services, considering the distinct

i
characteristics and challenges associated with marketing intangible

s
r
services rather than physical products. Service marketing employs

e
specific approaches to effectively promote and sell services, considering
v
i
their unique characteristics, and addresses various aspects such as
n
U
differentiation, quality, delivery, customer relationships, recovery,

,
and internal alignment.

O L
5.3 Service Buying Behaviour
/ S
O L
5.3.1 Service Buying Behaviour

/ C
C E
Service buying behaviour involves playing various roles by an individual
or groups for making a purchase decision. They help in defining the

D D dynamics in the service buying.

©
While service provider plays an important role in the process of service
buying behaviour with their responsibility of comprehending the buyer’s
needs and preferences, offering pertinent information, delivering the service,
and ensuring customer satisfaction. There are also other different roles
and responsibilities in service buying behaviour. These are:
1. Initiator: the person who initiates service buying behaviour is
referred to as initiator. He is usually the one who recognizes that

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SERVICE BUYING BEHAVIOUR, INNOVATION AND COMPETITION

there is a need for a service which is usually either a problem or Notes

an opportunity. He hence initiates the process of buying of services.
For example, the doctor may prescribe some tests to a child based
on his initial medical examination or record.
2. Influencer: Influencers are those individuals that possess the ability to
influence or affect the decision-making process which in turn impacts
the ultimate selection. Influencer offer his expertise, suggestions, or

i
recommendations based on his knowledge, personal experience, or
relationship with the buyer. Influencers can be individuals such as
l h
colleagues, friends, family members, industry experts, or and now
even online influencers.
D e
For example, before getting the tests done, a second opinion from
of
ty
a family doctor may be taken.

s i
3. Decider: The decider is the individual or group entrusted with

r
the responsibility of making the ultimate decision regarding the
e
v
procurement of a service. They weigh inputs from different sources,

n i
evaluate alternative options, and ultimately select the service provider.

, U
For example, a whitewashing contract in the college may eventually
be decided by the principal or head of the institution.

O L
4. Buyer: The person or group who carries out the actual purchase

/ S
transaction is called buyer. They have the power to negotiate terms,

O L
conclude contracts, and fulfil the payment process.
For example, a parent may decide and pay for classes of home tuition
for his child.
/ C
C E
5. User: The individual or group that directly uses or is benefitted from

D
the acquired service is a user. The satisfaction and experience of

©D
the user is vital in the future buy of the service and recommending
it.
For example, students are the users of coaching services offered by
trainers.
6. Gatekeeper: In specific buying situations, gatekeepers may be present
to manage or control the decision-making. They are expected to
have the ability to govern the information flow, refine available
choices, or impact the decision-making process. Gatekeepers can be

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 MBAFT 7606 SERVICE MARKETING

Notes individuals such as administrative assistants, procurement departments,

or compliance officers.
For example, Governing Body members decide and approve decisions
relating to the college or institutions.
Studying the service buying behaviour is important as acknowledging
influencers, engaging with decision-makers, addressing user needs, and
maintaining positive relationships with buyers, service providers, can

i
customize the marketing strategies and service delivery to effectively
meet the expectations and requirements of all the parties involved.
l h
5.3.2 Difference in Perspective D e
of
While products and services are often used interchangeably, the perspective

i ty
in buying behaviour is different for them both. The key points of difference
are:
r s
1. Intangibility
v e
n i
Since services can not be touched like a product, it eliminates the touch

U
and feeling options before deciding to purchase. This is restrictive

L ,
as there are no physical attributes that can help in deciding and
evaluating the features. For example, you can touch and feel a car

O
before purchasing it, but you cannot touch or feel a cab service of
S
a car.
L /
O
2. Experiential Nature

/ C
Services are experience based products and that require interactions

C E between the service provider and the customer which decides the
final satisfaction received by the customer. But products can be

D judged based on tangible attributes that can be seen through open

©D
naked eye.
For example, you can tell how you enjoyed a movie in the theatre
by the experience that you had at the movie hall, while you can
judge how the television is through its tangible features like HD
display, speaker sound etc.
3. Returns and Exchange
When buying a product, buyers have the option of returning the
product if they later find it as inappropriate. So, there’s option

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 SERVICE BUYING BEHAVIOUR, INNOVATION AND COMPETITION

of returning a product to the seller for a refund or replacement, Notes

which is a relatively straightforward process when a customer is
dissatisfied. However, in the case of services, returning them to the
service provider is not possible as services are intangible in nature
and cannot be physically returned. There may be service recovery
option like discount on next service etc. but no immediate return
is possible.

i
For example, if you don’t like a haircut, you cannot return it. But
you can return a shampoo if you realise that you’ve bought a wrong
l h
e
one.
4. Value Perspective
D
of
Products have a derived value from the product itself, while the value

ty
of a service is dependent on the service provider. So, the value of

i
service cannot be separated by the provider, but for products, it

s
r
depends on the final user.

v e
For example, a surgery for vision correction depends on the doctor

n i
who is performing the Lasik surgery. But if the lubricating eye

U
drops have helped the dryness of eyes depends on the directions

L
and followed obeyed by the patient. ,
of use and the frequency of such drops as prescribed by the doctor

S O
5.3.3 Risk Analysis
L /
C O
While all purchases involve some level of perceived risk, the purchase

E /
of services tends to involve more risk compared to the purchase of

C
goods. This is primarily due to the intangible nature, variability, and

D
perishability commonly associated with services. Various forms of risk,

©D
such as financial, time, performance, social, or psychological, can arise,
and these risks may be heightened when it comes to services. Services
are intangible in nature and heavily reliant on experiential qualities,
which means that consumers typically have less pre-purchase information
available to them when selecting services compared to goods. Research
indicates that greater intangibility, whether for goods or services, leads
to increased perceptions of risk.
Due to the non-standardized nature of services, consumers often experience
uncertainty regarding the outcome and consequences of buying a service.

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 MBAFT 7606 SERVICE MARKETING

Notes Also, purchasing services typically involves higher perceived risk compared
to other purchases since services generally lack warranties or guarantees,
barring a few exceptions. Unlike products, dissatisfied customers cannot
easily return a service as it is already consumed till they realize their
dissatisfaction with it. Additionally, certain services, particularly those
in technical or specialized fields such as healthcare or legal services,
are difficult to be evaluated against satisfaction due to limited common
knowledge and experience in those domains.

h i
l
Some common risks involved in the purchase of services that need to

e
be analysed are:
1. Performance Risk
D
of
Since services are dependent on the service provider there is risk

ty
involved which relates to service provider’s capability to achieve

i
the expected outcome or fulfil customer expectations. There is

s
r
a potential for the service to fall short of meeting the desired

e
performance standards, leading to dissatisfaction or adversely
v
i
affecting the consumer’s objectives.
n
U
For example, a singer may not always perform well in alive concert

,
and the sponsors may feel the performance risk.

L
O
2. Financial Risk

/ S
Purchase of services involves financial risk as there is always a

O L
requirement of investment. There is a possibility of not obtaining the
anticipated value or return on investment. Consumers may face the

/ C
risk of paying an excessive amount for a service or not achieving

C E the desired outcomes in proportion to the cost incurred.

D
For example, the brokerage paid may not justify the returns that the

©D
broker’s investment would fetch.
3. Time Risk
Services often require a time commitment, including waiting for
appointments, service delivery, or completion. There is a risk of
encountering delays or experiencing an inefficient use of time,
which can be particularly critical in situations where time is of the
essence.

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SERVICE BUYING BEHAVIOUR, INNOVATION AND COMPETITION

For example, a stitching service for bridal wear has a restriction of Notes
time which can not be extended.
4. Security and Privacy Risk
Certain services require sharing of personal or sensitive information with
the service provider. This introduces a risk of data breaches, privacy
infringements, or the improper handling of personal information,
particularly in services associated with financial transactions,

i
healthcare, or technology.

l h
5.3.4 Decision Process
D e
of
1. Need Arousal

ty
This is the first stage which involve arousal of a need that can

i
be fulfilled by a particular service. When customer recognizes an

s
r
unsatisfied need, it can be influenced by various cues or stimuli. These

e
cues can be both commercial and social in nature. Commercial cues
v
i
are within the control of service marketers and can be strategically
n
U
designed to stimulate customer needs like price, service product,

,
advertising and promotion, distribution etc. social cues include word

O L
of mouth, reference groups, social class etc.
For example, you hear about a new fine dine restaurant from a friend

/ S
who shares a good experience. Your need to dine there is aroused.
2. Recognition of Need
O L
/ C
Needs can take up the form of primary or secondary. While primary

C E
needs are recognised by the urgency, or the occasion or priority
of purchasing that service. Such as a need for getting vaccination

D
even at a private hospital which was paid, despite free facilities

©D
at government hospitals during Covid-19 due to the urgency of
safeguarding against the deadly virus.
On the other hand, secondary needs are of the nature of follow ups
to the primary needs. Such as getting a haircut done because you
are attending a destination wedding soon is a secondary need of
service.

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 MBAFT 7606 SERVICE MARKETING

Notes 3. Choice of Level of Involvement

The duration and level of consumer involvement in the decision-
making process can vary. If consumers lack confidence in their
purchase decision or are unfamiliar with the product, brand, or
service category, they are likely to spend more time in the decision-
making process. Similarly, if they perceive the offer to be complex,
anticipate higher consumption risks, or if there are multiple users

i
involved, it is natural for them to take more time in deciding.

l h
For example, a patient going in for a heart surgery will be very

D
everyone has information on such a critical subject. e
involved in the decision because it’s a major decision and not

of
4. Information Search and Alternative Identification

ty
During this phase of the decision-making process, customers spend a

s i
lot of time and effort to gather information and explore the possible

r
alternatives. While during routine purchases, customers already
e
v
possess knowledge about the brand and service, and its benefits.

n i
Thus, they require less time for information search and alternative

U
exploration to meet their needs.

,
Brands that readily come to mind and are recognized by customers
L
O
during the purchase are referred to as the “evoked set.” Those

S
brands that are suggested by friends, colleagues, advertising, and

L /
other sources form the “consideration set”.

O
For example, while planning a holiday, a consumer searches for all the

C
/
desired information for travel planning such a hotel, accommodation,

C E transport etc. They also try to identify the alternatives that are
available. Like what means of travel are available air, road or water.
D
©D
5. Evaluation of Alternatives
The consumer engages in a process of comparing various attributes
of different alternatives, using their own decision-making criteria.
These include factors such as price, core and benefits, reputation,
and performance expectations etc. The consumer then evaluates the
alternatives based on subjective parameters, like brand perception
and personal attitudes. These alternatives are then prioritized during
decision-making.

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SERVICE BUYING BEHAVIOUR, INNOVATION AND COMPETITION

For example, a tourist planning a visit from Delhi to Amritsar will Notes
evaluate the various modes of transport available like train and
flight. This will be evaluated based on factors such as cost of travel,
convenience, etc.
6. Decision - To Buy or Not
At this point, the consumer makes a final call which is to decide
if s/he wishes to buy the service or not. This decision is based on

i
various factors such as cost benefit analysis. This decision also
includes aspects of final purchase such as brand, payment method,
l h
etc., which comprise the terms of purchase.

D e
of
For example, a consumer may decide if he wishes to purchase the
holiday package right away or wait for holidays (defer), will he

ty
make the advance booking or full payment.
7. Purchase Action
s i
e r
Once the decision to purchase has been made, the purchase action

i v
is done which essentially involve other purchase related decisions
such as size, colour, design etc.

U n
For example, while booking a movie, someone may just want the

L ,
lounge recliner seats and not any other. Unavailability of the desired

O
may even lead to cancellation.

/ S
8. Post Purchase Feeling and Behaviour

O L
Once the service is purchased and availed i.e., it been used, the

C
consumer display various post purchase behaviour and feelings. This

E /
depends on the level of satisfaction basis the experience. Here the

C
customer can be delighted if his/her experience was more than what

D
s/he expected or satisfied if it’s the same. But if the service was

©D
below the expectation s/he shall be dissatisfied. Also, sometimes the
customer may face what is usually referred as cognitive dissonance.
This arises when the customer has certain doubts or confusion with
respect to his/her purchase and experience and is a state of conflict
of the mind.
For example, after getting a hair spa the customer may be delighted
as it has been more rejuvenating than they thought.

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 MBAFT 7606 SERVICE MARKETING

Notes

h i
e l
D
of
i ty
r s
v e
n i
, U
O L
S
Figure 5.1: Decision Process

L /
O
5.4 Service Marketing Strategy

C
/ Service Marketing Strategy
C E5.4.1

D D Service Marketing Strategy focuses on the effective combination of the 7

©
Ps of service marketing mix with an aim to meet customer needs, survive
competition with service differentiation, and appropriate value creation.
Service Marketing Mix includes:
1. Product/Service Offering
For services industry, product is the core offering like therapy service,
consultancy service etc.

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 SERVICE BUYING BEHAVIOUR, INNOVATION AND COMPETITION

2. Price Notes
Price includes the monetary aspect i.e., what the service provider will
charge for his service offering like hourly rate of a dance session.
3. Place
Place involves the delivery of services from the point of origin to the
customer. For example, setting up of coaching institutes at different
localities.
4. Promotion
h i
Promotion refers to the efforts made by marketers to inform and
e l
promote their services such as social media campaigns, radio ads
D
of
etc.

ty
5. People

i
An important aspect of services is the people involved in the

s
r
service. This is crucial since service by nature is inseparable and
his competence determines the customer experience.
v e
6. Process
n i
U
Services are experiential, the whole process plays a role in determining

,
L
the customer experience. For example, a surgery may be very

O
effective, but the process may be very painful.
7. Physical Evidence
/ S
O L
Since service is intangible and experiential, it needs various tangible
items like equipment, materials etc. For example, the quality of oil

/
used for massage.
C
C E
The service marketing strategy involves segmenting the market, positioning

D
of service and designing targeted marketing campaigns. The aim is to

©D
provide exceptional customer service such that there is brand loyalty and
positive word of mouth.

5.4.2 Segmentation, Targeting and Positioning

Segmentation
Originally introduced by Wendell R. Smith in a 1956 in a paper market
segmentation is the process of dividing a diverse market into smaller

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 MBAFT 7606 SERVICE MARKETING

Notes homogeneous sub-units. Market segmentation involves identifying distinct

groups of buyers within a market who have different needs, characteristics,
or behaviours, and potentially require separate services or marketing
strategies.
Segments are often created by the process of market segmentation which
is analysing the nature and composition of a market, where customers
based on similar needs and other relevant characteristics are grouped.

i
Customers within each segment share similar preferences and traits, while
different segments display different preferences and traits.
l h
e
Segmentation should be done in a manner that the segments are:

D
of
‹ Measurable: Such as purchasing power, size etc. and not vague like
slightly north.

ty
‹ Accessible: Such as north, west etc. and not space.
‹

s i
Actionable & Differentiable: Where there is a potential demand and

e r
can be reached like urban areas for luxury product and not rural
areas.
i v
n
Market segmentation for services:

U
,
1. Demographic segmentation

L
This segmentation is done by grouping service consumers based on

O
S
demographic factors such as age, gender, income, education, etc.

/
These have been discussed below:
L
O
‹ Age

/ C This is done based on the age of the customer. For example,

C E medical services are divided differently for infants, senior

citizens etc.
D
©D
‹ Gender
This is done as per the gender such as males and females.
For example, there are different beauty salons for men and
women.
‹ Income
Based on income level, groups for services are segmented
such as high-end clientele for consultancy and low or budget
clients.

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 SERVICE BUYING BEHAVIOUR, INNOVATION AND COMPETITION

‹ Education Notes
As per education levels, some service can be divided such
as tutoring of primary school students, senior secondary and
college students.
2. Geographic Segmentation
This segmentation is based on geographic factors such as location
or region or population type or density etc. Some examples are
discussed below:
h i
‹ Separate transport services for residents and interstate customers
e l
D
like Ola Cabs and Ola Outstation.

of
‹ Different singing classes based on the region for example
Punjabi music classes for North India, Classical music for

ty
south India etc.

s i
r
3. Psychographic Segmentation

v e
Dividing the market by considering psychological, which includes

i
lifestyle and personality traits is called psychographic segmentation.
n
U
For example, there are two type of pet lovers and accordingly the

,
services. Pet services that are basic and some are premium that

O L
include services of grooming like pets are human beings such as
personalized care. Or eco friendly and basic services of drycleaning
clothes.
/ S
O
4. Behavioural Segmentation
L
/ C
This segmentation includes behavioural attributes such as occasion

E
of service, benefits of service, values, attitude etc. For example,

C
booking a table for birthday celebration.

D
©D
Targeting
Targeting in service marketing involves selecting specific customer segments
to focus on and tailoring marketing efforts to meet their unique needs. It
includes identifying specific segments based on demographics, behaviours,
and preferences and targeting them through directing resources towards
them. By understanding and prioritizing the target segments, service
providers can develop customized marketing strategies that resonate with
customers and improve overall satisfaction. This approach maximizes

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 MBAFT 7606 SERVICE MARKETING

Notes resources, enhances customer acquisition and retention, and ultimately

leads to business success.
For targeting, the service marketer assesses various customer groups
and selects those that they believe can be effectively served with their
available resources. Often referred as target marketing as well, these can
take the following forms:
‹ Undifferentiated Marketing

i
In this form of marketing, the entire target market is focuses and
h
l
not ant specific segment. This strategy involves the whole market
e
D
together and thus requires a singular marketing mix. This is also

of
referred as mass marketing as it assumes the market as a whole
(mass) behaves similarly.

ty
For example, the Public Transportation Services like Metro, they

s i
have no differentiation or strategies to target any specific group

r
and focus on any person who wishes affordable and fast transport.
e
‹ Differentiated Marketing
i v
U n
Differentiated marketing in services entails customizing marketing
approaches and offerings to cater to distinct market segments,

L ,
considering their individual requirements, preferences, and traits.

O
For example, Fitness centres have different marketing strategies for

S
L /
different clients and their requirement like weight loss program,
muscle program, program for senior citizens etc.

C O
Concentrated Marketing
/
‹

E
In this form of marketing, all marketing resources and activities

D C are directed towards a narrowly defined customer group, with the

aim of targeting a single specific market segment using specialized

©D
marketing efforts. The focus of this strategy is specialisation.
For example, a Luxury Spa Service will cater to only the high-income
affluent class individuals for their expectations.
‹ Micro Marketing
Micro marketing in services involves customizing marketing strategies
and offerings to cater to the distinct requirements of individual
customers or small, highly specific market segments. This approach

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 SERVICE BUYING BEHAVIOUR, INNOVATION AND COMPETITION

emphasizes personalization, treating each customer as a unique Notes

entity with their own set of needs and preferences.
For example, financial advisory services that offers personalised
consultations to individual clients.
‹ Niche Marketing
Niche marketing in services involves directing marketing efforts and
offering to only a specific and specialized small segment of the
market which has unique needs (niche) and preferences. This strategy
h i
aims to customize the marketing approach to cater specifically to
e l
D
the requirements of that niche.

of
For example, Vegan ice creams by a company will target only those
specific customers that have vegan dietary preferences.

ty
Positioning

s i
r
Not just segmentation, it is extremely important for any service provider to

e
position its product rightly within its market. Positioning means placing the

v
n i
service in the minds of the customer. For this they often use differentiation
to survive. Position plays a vital role in combating competition in the

U
minds of consumer as they can grab a specific spot. Positioning in
,
L
service marketing involves creating a distinct and favourable perception

O
of a service in the minds of target customers. It is a strategic process

/ S
that aims to differentiate the service from competitors by highlighting

O L
its unique value, benefits, and attributes. Through marketing activities,
communication messages, and service experiences, service providers shape

/ C
how customers perceive and understand their service. This positioning

C E
strategy is based on understanding customer needs and preferences, and
it guides the development of marketing efforts to effectively communicate
D
the service’s value proposition. By establishing a strong and differentiated

©D
position, service providers can attract and retain customers, stand out in
the market, and build a positive brand reputation.
Case: McDonald’s Positioning Strategy
McDonald’s has positioned itself as a prominent global fast-food chain
by focusing on key strategies:
‹ Convenience and Speed: McDonald’s focuses on its quick-service
model, catering to busy individuals and families seeking convenient
and efficient meals on the go.

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Notes ‹ Affordable Pricing: McDonald’s positions itself as a provider of

budget-friendly meals, offering affordable prices through its value
menus and promotions.
‹ Consistency and Standardization: McDonald’s maintains a consistent
brand image by delivering the same quality, taste, and service across
its global locations.
‹ Family Environment: McDonald’s targets families by creating a

i
welcoming atmosphere and offering amenities such as play areas
and the very famous happy meal options for children.
l h
‹

D e
Menu Diversity: McDonald’s has expanded its menu to cater to a

of
wide range of tastes and preferences, including vegetarian, non-
vegetarian, and eggetarians.

ty
‹ Global Recognition: McDonald’s positions itself as a globally

s i
recognized brand, utilising its widespread presence to instil a sense

r
of familiarity and reliability among customers worldwide.
e
i v
Through these positioning strategies, McDonald’s has established itself as

U n
a leading fast-food chain, known for its convenient service, affordability,
consistency, family appeal, diverse menu offerings, and global presence.

L ,
Case: Starbucks Segmentation, Target and Positioning Strategy

O
Starbucks is a global leader and a very popular coffeehouse chain which

S
L /
is known for its successful approach in launching luxurious experience
coffee and snacks across the world. For this, Starbucks uses various

O
segmentation, targeting, and positioning strategies which help them in
C
E /
effectively serving its diverse customer base across the world. An overview
of Starbucks’ approach is discussed as follows:

D C Segmentation

©D
Starbucks mostly uses demographic and psychographic segmentation for
delivering to diverse customers. These have been discussed below:
1. Demographic Segmentation: Starbucks targets a broad demographic
range, including young adults, professionals, and students. Also, they
cater to different income levels, education levels, and occupations
with their diverse range.
2. Psychographic Segmentation: Starbucks segments its market based on
psychographic factors such as lifestyle, values, and attitudes. Their

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 SERVICE BUYING BEHAVIOUR, INNOVATION AND COMPETITION

target is those individuals who value quality, premium coffee, and Notes
the overall luxurious Starbucks experience. This includes customers
who appreciate convenience, socializing, and a sense of community.
Targeting
Starbucks adopts a unique targeting strategy which focusses on multiple
segments simultaneously. The primary target market of Starbucks is:
1. Coffee Enthusiasts: This segment includes those individuals who
have deep love and affinity for high-quality coffee and are always
h i
on a lookout for unique coffee experiences.
e l
D
2. Young Urban Professionals: They also targets young professionals

of
whose focus is convenience, a warm environment, and quiet work
or socializing place.

ty
3. Students: Starbucks also targets students by offering a study friendly
space and have special promotions for exam periods.
s i
Positioning
e r
i v
Starbucks is very clear as to how they wish to position itself in the minds

U n
of the customer. They perceive Starbucks as a premium coffeehouse which

,
offers a luxurious, warm, and welcoming environment. That works and
they view Starbucks as:

O L
S
1. High-Quality Coffee: Starbucks places great importance on ensuring

/
the sourcing, roasting, and brewing of top-notch coffee to deliver
L
O
an exceptional coffee experience which is superior and luxurious.

/ C
2. Third Place Experience: Starbucks positions its stores as an inviting

E
and comfortable “third place” for customers to unwind, socialize,

C
or work, bridging the gap between home and work environments.

D
©D
3. Personalized Experience: Starbucks’ USP is the personalization that
they offer to their customers be it in their order choice through
customization or writing names on the coffee glasses, they attempt
to offer a unique experience like no other.
4. Social Responsibility: Starbucks also takes initiative such as ethical
sourcing, sustainability, and community involvement, that they often
highlight and hence positioning it as a socially responsible brand.

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 MBAFT 7606 SERVICE MARKETING

Notes By implementing these strategies of segmentation, targeting, and positioning,

Starbucks successfully meets the diverse requirements and preferences of
its customers. With a strong emphasis on quality, customer experience,
personalized offerings, and social responsibility, Starbucks has firmly
established itself as a prominent global coffeehouse brand.

IN-TEXT QUESTIONS
1. Service buying behaviour is riskier than product buying.
(a) True
h i
(b) False
e l
2. How many P’s are there in service mix?
D
of
(a) 4

ty
(b) 2
(c) 6
s i
(d) 7
e r
i v
3. Waiting for service completion like appointment delays can be
categorised as:

U n
,
(a) Financial Risk

L
(b) Security Risk

O
S
(c) Performance Risk

L /
(d) Time Risk

O
4. The tangible aspects of service in service mix are called:

C
/ (a) Physical Evidence

CE
(b) Process

D
(c) People

© D (d) All of the above

5.5 Innovation and Competition

5.5.1 Market Innovation

Service market innovation involves the creation and implementation of
unique, new, inventive and innovative strategies, concepts, and approaches

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 SERVICE BUYING BEHAVIOUR, INNOVATION AND COMPETITION

within the service industry. Its purpose is to generate value for customers, Notes
differentiate from competitors, and foster business growth. It requires
introducing new and innovative ideas, technologies, processes, and
business models that transform the way services are designed, marketed,
and delivered. By embracing innovative methods, organizations can meet
evolving customer needs, enhance service quality, and stay ahead in a
dynamic market environment.

i
For example, Uber came up with a “ride share” option which allowed
fellow users to on board the same cab going on similar routes with the
l h
e
intent of being a cost-effective cab option. Soon it became an ecofriendly
and cheap alternative to booking the full cab. This was done with the
D
of
help of GPS technology and seamless app interface that allowed smooth
booking and commuting.

i ty
Service innovation can be classified into different types. These include

r s
core service innovation, which focuses on improving the key elements

e
and features of a service. Service delivery innovation aims to enhance the

v
n i
methods and processes used to deliver services to customers. Service design
innovation involves rethinking and restructuring the design of services

U
to better meet customer needs. Service marketing innovation revolves
,
L
around creating innovative marketing strategies and channels to promote

O
services effectively. Business model innovation involves reimagining the

/ S
fundamental structure and monetization of services. Social and environmental

O L
innovation integrates sustainability and social responsibility principles into
service offerings. By pursuing these various types of service innovation,

/ C
organizations can create new value propositions, differentiate themselves,

E
and respond to changing customer demands.

C
D
©D
5.5.2 Competitive Differentiation
Competitive differentiation in service marketing refers to the unique
qualities and characteristics that distinguish a company’s product or
service from those offered by competitors. It is aims at understanding
customer preferences and for better customer experience. For surviving
competition, it looks at various factors like product functionality, brand
perception, pricing, or customer service for effectively communicating to
potential buyers. By emphasizing what sets their service offerings apart,

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Notes companies can attract, acquire, and retain customers, ultimately gaining
a competitive edge in the market.
Swiggy’s Competitive Differentiation
Swiggy, a prominent food delivery platform in India, has distinguished
itself from competitors through several key factors. Firstly, Swiggy offers
a diverse range of restaurant options, surpassing its rivals with a wider
selection of cuisines and establishments. Secondly, Swiggy’s ordering

i
experience is technologically advanced, utilizing user-friendly mobile apps

l h
and websites to provide seamless browsing, real-time delivery tracking,

D e
and personalized recommendations. Thirdly, Swiggy prioritizes fast and
reliable delivery, ensuring efficient service compared to competitors who

of
may struggle with delays. Additionally, Swiggy introduces innovative
features and loyalty programs, such as Swiggy POP, Swiggy Super,

i ty
Swiggy One and Swiggy Daily Tiffin, to enhance customer satisfaction

r s
and engagement. The company’s strong commitment to customer support

e
and issue resolution further sets it apart, with a dedicated support team

v
n i
available round the clock. Lastly, Swiggy has gathered exclusive partnerships
with popular restaurants, offering customers access to unique deals and

U
promotions not available through other platforms. Through these strategies,
,
L
Swiggy has emerged as a leading food delivery platform, distinguishing

O
itself in the Indian market.

/ S
L
5.5.3 Competitive Advantage and Value Chain Analysis
O
/ C
Value chain analysis was first discussed by Michael Porter in 1985 and

C Erepresents all the activities that a business needs for creating a product
or service from starting to end. This essentially includes the primary

D activities such as operation and logistics that add value directly to the

©D
final product. And support activities such as technology support and
development or human resources that add value indirectly.
A value chain analysis enables decision-makers to identify the most valuable
activities and those that could be improved or automated to provide the
company a competitive edge. By doing this, the company may boost
profit margins and optimise primary operations, which are responsible for
the largest portion of production costs. On the other hand, this analysis
will also point the support activities that could benefit from increased

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 SERVICE BUYING BEHAVIOUR, INNOVATION AND COMPETITION

funding to produce better value. A value chain analysis, however, at its Notes
most basic, reveals a company’s competitive advantages as well as its
flaws and possible dangers.
Value chain analysis can help in gaining competitive advantage by:
1. Identifying Value Creating Activities
Conducting value chain analysis, the company can identify the
specific activities within its operations that generate value for
customers. This facilitates the company to concentrate on focusing
h i
on those activities and ensuring exceptional customer satisfaction
e l
D
and differentiation from competitors.

of
2. Formulating Competitive Strategies
Not just does value chain allow identification of these value adding

ty
activities, they also reveal which activities can be enhanced for

s i
better performance and competitive advantage. Hence value chain

e r
analysis can help formulating strategies based on intensive research

i v
and development, technological innovation etc such that they offer
a competitive advantage.

U n
5.6 Summary
L ,
S O
This chapter discusses the unique nature of the service industry and its

L /
attributes being different from products with respect to experiential nature,

O
tangibility etc. It also discusses the perceived risks that come along with

/ C
services. Service buying behaviour is a series of steps that begins from

E
need arousal and end at post purchase behaviour. This brings a difference

D C
in the perspective of buying a service and product. To adapt to the services,
there are various marketing strategies adopted. The most common forms

©D
are segmentation, targeting and positioning. While segmentation aims at
dividing the heterogenous groups into homogenous groups different aspects
such as geographic, psychographic etc., targeting involves defining and
targeting the market with specialised effort. Positioning is an important
aspect of any brand which involves placing service and brand in the
mind of the customer. There are various efforts that service marketers
make to survive the competition. Innovation is among them which means
bringing new ways of doing things and newer ideas on board. Value chain

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 MBAFT 7606 SERVICE MARKETING

Notes analysis is also a mean of gaining competitive advantage as it allows a

company to know what is driving value to the company and how (directly
or indirectly).

5.7 Answers to In-Text Questions

1. (a) True

i
2. (d) 7
3. (d) Time Risk
l h
4. (a) Physical Evidence
D e
5.8 Self-Assessment Questions
of
i ty
1. Discuss the decision process of a service buying.

r s
2. Discuss the terms: target, segmentation and positioning of services.

v e
i
3. Academic Suite is an education company called which offers a

n
wide range of educational courses and programs such as STEM

, U
(Science, Technology, Engineering, and Mathematics), humanities,
languages, business, and professional skills to learners of all ages

O L
such as K-12 students, college students, adult learners, and working

S
professionals seeking professional development. Academic Suite

L /
aims to provide accessible and high-quality learning opportunities

O
across India. They also wish to expand overseas.

/ C ‹ How can the company segment their market? Suggest.

CE
‹ What shall be their targeting strategy?

D
‹ How should they position themselves?

© D ‹ What innovative measures should they take to gain a competitive

advantage?
‹ Also discuss the probable risks they are prone to.

5.9 References
‹ Wilson, A., Zeithaml, V. A., Bitner, M. J., Gremler, D. D. (2016)
Services Marketing Integrating Customer Focus Across the Firm.
3rd European ed. McGraw-Hill Education.

122 PAGE
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School of Open Learning, University of Delhi
SERVICE BUYING BEHAVIOUR, INNOVATION AND COMPETITION

‹ Wirtz, J. & Lovelock, C. (2022) Services Marketing: People, Notes

Technology, Strategy, 9th ed. World Scientific.

5.10 Suggested Readings

‹ Wilson, A., Zeithaml, V. A., Bitner, M. J., Gremler, D. D. (2016)
Services Marketing Integrating Customer Focus Across the Firm.
3rd European ed. McGraw-Hill Education.
Jha, N. Verma, J. P., Moitra, R. (2016) Service Marketing, 1e,
h i
l
‹

e
Himalaya Publishing House.

D
of
i ty
r s
v e
n i
, U
O L
/ S
O L
/ C
C E
D
©D

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L E S S O N

6
Service Quality, Service
Delivery, Service Culture
Mr. Tushar Marwaha
Department of Management Studies

i
Shaheed Sukhdev College of Business Studies

l h
University of Delhi, India

e
Email-Id: tusharmarwaha@sscbsdu.ac.in

D
of
STRUCTURE

ty
6.1 Learning Objectives
6.2 Introduction
s i
6.3 Concept of Service Quality
e r
i v
n
6.4 Implementing Service Quality
6.5 Managing Service Demand and Supply

, U
L
6.6 Service Culture
6.7 Service Recovery
S O
6.8 Summary
L /
O
6.9 Answers to In-Text Questions

/ C
6.10 Self-Assessment Questions
6.11 References
C E
D
6.12 Suggested Readings

©D
6.1 Learning Objectives
‹ Examine the concept of service quality by distinguishing between technical and
functional aspects in a service-oriented context.
‹ Evaluate and apply service quality models for effective measurement and implementation
in service organizations, considering factors such as customer satisfaction and
operational efficiency.

124 PAGE
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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

‹ Discuss the challenges associated with managing demand and supply Notes
imbalances and develop strategies to effectively address and mitigate
these imbalances.
‹ Assess the importance of service culture and develop strategies for
managing by values, service recovery, and employee empowerment
to foster a customer-centric service culture.

i
6.2 Introduction

l h
e
As we have seen in the previous units, a service is a set of activities
that support or meet the needs of a customer. It is an intangible activity/
D
of
product and that is cannot be stored and it does not have any residual
value after consumption or loss of consumption opportunity like say a

ty
newspaper can be sold for scrap after perusing the news that it contains.

s i
r
This lack of tangibility and the ability to assign value to the components

e
of a service being delivered complicates the entire process of defining

i v
and tracking the service and the money that can be charged for the same.

U n
Additionally, due to its fundamental intangibility, it is very difficult to
replicate a service the way a product can be replicated. So, while a bus

L ,
may be same as the other members of a fleet of buses, a bus journey

O
can be unique in each instance.

/ S
Still, like a product, the customer of a service demands similarity in the

O L
level and components of the service being provided for the same amount
of money. Assuring a unified service experience for multiple customers

/ C
is crucial to maintaining the reputation of the service provider in the

E
minds of the customer.
C
D
This is where service quality comes in. Unlike a product, service quality

©D
aims to ensure repeatability and the provision of broadly similar service
activities which is difficult since the number of variables affecting
service delivery are higher and due to the fact that service delivery is
overwhelmingly taking place through human employees and not machines.
Delivering Quality Service to the customer does not work well a hit-and-
miss approach. It works best when there are processes in place, defined
service delivery standards and robust systems to collect feedback and fix
what is broken. Customer satisfaction should be ultimate goal always.

PAGE 125
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 MBAFT 7606 SERVICE MARKETING

Notes In this chapter we will discover more about service quality, the factors that
affect it, the tools and methods used by companies to offer better service
to their customers and some implementation challenges as well. It must
be said that in today’s world, no product can also be sold effectively with
the support of some service element. Even a tube of toothpaste comes
with the email address of a customer service employee.
We will also be looking into the concept of Service Quality Benchmarking

i
wherein we will see how the service industry defines benchmarking,

l
how the various companies operating within the pure service space such
h
e
as hotels track and rate themselves against their competitors and peers

D
in other industries and how such benchmarking activities can help the

of
company grow as a service provider. Certain models and methods help
add depth to this entire concept.

i ty
Furthermore, this chapter will also talk in detail about service implementation

r s
and its challenges and strategies while laying emphasis on newer service

e
concepts like managing service demand and supply levels, Service Culture

v
n i
and Service Recovery to meet its aim of offering a comprehensive picture
about the concept and tangential linkages to service quality and service
delivery.
, U
O L
To help enhance our learnings, throughout this lesson, we will be taking
two running examples, that of a hotel and that of a call centre (like the

/ S
one used by your bank or telecom provider). It will help you understand

O L
the concepts better if you can picture these two examples and your
experiences with one or both of these organisations and use them as a

/ C
reference point. Additional examples would be added in-situ as needed.

C E6.3 Concept of Service Quality

D
©D 6.3.1 What is Service Quality?
Service quality refers to the degree to which a service meets or exceeds
customer expectations. It encompasses various aspects of the service
experience, including reliability, responsiveness, assurance, empathy, and
tangibles. Service quality is measured by the extent to which the service
fulfils customer needs, delivers value, and creates customer satisfaction.

126 PAGE
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School of Open Learning, University of Delhi
 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

A good service encounter resonates with the customer and can produce Notes
repeat purchases and positive word-of-mouth publicity. Quality service
can also induce the customer to increase their wallet share for the service
organisation; i.e. they tend to start purchasing more goods and services
from stores where they have received good service.
Organizations that prioritize service quality focus on consistently providing
exceptional experiences, meeting customer expectations, and building

i
long-term customer relationships. By delivering high service quality,
organizations can differentiate themselves from competitors, enhance
l h
e
customer loyalty, and drive business success.

D
of
6.3.2 The 7Ps of Service Marketing

ty
Service marketing is a specialized field that requires a holistic approach

s i
to effectively promote and deliver services to customers. The 7Ps of

e r
service marketing provide a comprehensive framework for organizations
to strategize and optimize their service offerings.
i v
service-based businesses viz:
U n
These 7Ps encompass key elements that contribute to the success of

L ,
1. Product: In service marketing, the product refers to the core service

O
or intangible offering provided to customers. It involves defining

S
L /
and designing services that meet customer needs and expectations.
This includes aspects such as service features, customization options,

O
and service levels. e.g. the user-friendly nature of the Amazon app,
C
E
Prime members. /
the wide selection of merchandise it offers and speedy delivery for

D C
2. Price: Pricing plays a crucial role in service marketing. Determining

©D
the right pricing strategy involves considering factors such as
costs, value perception, market demand, and competition. Price
setting should align with the perceived value of the service and be
competitive in the market.
3. Place: The place element in service marketing pertains to the location
and channels through which services are delivered. It involves
decisions on physical facilities, online platforms, distribution
channels, and accessibility. The goal is to ensure convenience and

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 MBAFT 7606 SERVICE MARKETING

Notes ease of access for customers. This can also involve the layout of
the store and the store ambience.
4. Promotion: Promotion involves the communication and marketing
activities undertaken to create awareness and generate demand for
services. It includes advertising, public relations, sales promotion,
and digital marketing efforts. The promotion strategy should highlight
the unique benefits and value proposition of the service.

i
5. People: The people aspect of service marketing refers to the
personnel involved in service delivery. It includes employees,
l h
D e
service providers, and customer-facing staff. Training, hiring, and
maintaining a competent and customer-oriented workforce is crucial

of
to delivering high-quality service experiences. They are the key to
effective service delivery.

i ty
6. Process: Process refers to the sequence of activities and steps involved

r s
in delivering the service to customers. It encompasses service design,

e
workflow, customer interactions, and service delivery systems. An
v
i
efficient and well-defined process ensures consistency and enhances
n
U
the overall customer experience. For example, every McDonald’s

,
outlet offers a similar level of quality, taste and cleanliness.

L
7. Physical Evidence: Physical evidence represents the tangible aspects

O
S
associated with the service. It includes the physical environment,

/
facilities, equipment, signage, and other tangible cues that influence
L
O
customer perceptions. Creating a pleasant and conducive physical

C
environment enhances customer trust and confidence in the service.

E / e.g. the luxurious ambience of a PVR or Cinepolis cinema encourages

C
the customer to feel good and engenders the perception of value

D
for money for the movie ticket that they have paid for.

©D
The last 3 Ps, People, Process and Physical Evidence have particular
relevance to Services Marketing since people are the key to delivering
good service and processes enable them to deliver consistent service,
thereby ensuring repeatability and customer satisfaction.
By considering and optimizing these 7Ps, organizations can develop a
comprehensive service marketing strategy. The interplay between these
elements helps organizations deliver exceptional service experiences,
create value for customers, and build strong customer relationships. A

128 PAGE
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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

customer-centric approach, coupled with an effective implementation of Notes

the 7Ps, can lead to improved customer satisfaction, loyalty, and business
success in the competitive service industry.

6.3.3 The Service-Quality-Delivery-Pricing Paradigm

The Service-Quality-Delivery-Pricing (SQDP) paradigm is a comprehensive
framework that combines service quality, service delivery, and pricing
strategies in organizations. It recognizes the interconnectedness of these
h i
elements and their impact on customer satisfaction, organizational success,
e l
D
and profitability.

of
Service Quality: Service quality refers to the level of excellence in
the services provided to customers. It encompasses dimensions such as

ty
reliability, responsiveness, assurance, empathy, and tangibles. High service

s i
quality is crucial for meeting customer expectations, building customer
loyalty, and maintaining a competitive edge.
e r
i v
Service Delivery: Service delivery focuses on the processes and activities

U n
involved in delivering services to customers. It includes aspects such
as service design, resource allocation, employee training, and workflow

L ,
optimization. Effective service delivery ensures that services are delivered

O
efficiently, accurately, and consistently.

/ S
Pricing: Pricing involves determining the monetary value attached to

O L
the services provided. It includes factors such as cost analysis, market
positioning, competitor pricing, and customer perceived value. Pricing

/ C
strategies should align with service quality and delivery to ensure fair

E
value exchange for customers and profitability for the organization.
C
D
The SQDP paradigm recognizes the interdependence of service quality,

©D
delivery, and pricing. It emphasizes that these elements should be aligned
and harmonized to create a value proposition that meets customer
expectations while generating revenue for the organization. A balance
needs to be struck between service quality, efficient delivery, and fair
pricing to achieve optimal customer satisfaction and organizational success.
What this essentially means is that the organization is offering a level of
service that it had committed to provide for a particular price point, in a
time bound and effective manner. For example, we expect a 5-star hotel
to have swimming pool while we do not have such expectations from

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 MBAFT 7606 SERVICE MARKETING

Notes a 3-star hotel that is based in the city; say the ITC Maurya at Dhaula
Kuan in Delhi vs. a Radisson Blu at the Outer Circle of Connaught Place
in Delhi. But this difference in service levels has to be communicated
to the customer before he makes the booking so that he does not have
expectations which may be fulfilled at that particular price point.
Implementing the SQDP paradigm requires an integrated approach.
Organizations should carefully consider customer needs and preferences, set

i
service quality standards, optimize service delivery processes, and develop

l h
pricing strategies that reflect the value provided. Regular monitoring,

e
feedback collection, and continuous improvement are essential to ensure

D
ongoing alignment and adaptation to changing market dynamics.

of
A related development of the SQDP paradigm is the QCD (Quality, Cost,
Delivery) framework developed by the UK automotive industry. Though

i ty
it is primarily aimed at the manufacturing sector, the principles it lays

r s
down such as Not right first time (NRFT), Delivery schedule achievement

e
(DSA), People productivity (PP) and Value added per person (VAPP) can

v
i
readily be employed by the service industry.

n
U
The crux is offering suitable service at s specific price point otherwise

,
there is a risk of over-delivery-under-pricing or over-pricing-under-delivery;

O L
both scenarios are not ideal when managing customer expectations and
corporate budget requirements. Getting the price point wrong can lead to

/ S
over-taxed resources such as employees when a higher level of service

O L
is offered for a low price point leading to over-use and long queues
or customer dissatisfaction when a high price charged is tepid service.

/ C
For example, Kingfisher Airlines collapsed partly due to the fact that

C Eit was attempting to offer service levels comparable to that of a full-

D
service carrier like Air India while charging ticket prices to match those

©D
of a low-cost-carrier like Indigo. Continental Lite (the low-cost arm of
erstwhile US airline major, Continental Airlines) faced the same fate due
to customer confusion with the brand, operating challenges caused by the
high-service-high-frequency demand model and decisions that had a high
impact on financial performance of both Continental Lite and its parent.
By embracing the SQDP and QCD paradigms, organizations can create a
strong value proposition that resonates with customers, supports sustainable
profitability, and drives business growth. It enables organizations to deliver

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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

high-quality services efficiently, price them appropriately, and ultimately Notes

satisfy customer expectations while achieving their financial goals.

6.3.4 Delivering Quality Service to the Customers

Delivering quality service to customers is essential for organizations to
build customer loyalty, enhance their reputation, and drive business success.
It involves consistently meeting or exceeding customer expectations,
providing exceptional experiences, and creating value for customers.
h i
Some key aspects to consider when delivering quality service:
e l
1. Understanding Customer Needs: To deliver quality service,
D
of
organizations must have a deep understanding of their customers’
needs, preferences, and expectations. This requires actively listening

i ty
to customers, conducting market research, and gathering feedback to

r s
gain insights into their desires and pain points. As an example, think

e
of the needs of customer who calls up the call centre of a bank to

i v
report that he has lost his mobile phone and needs to suspend SMS

U n
based OTP and banking services. A simple menu of options like
Press 1 to Report loss of Mobile with Registered Mobile number

L ,
would be more appreciated than a long-winded run through all the

O
interactive options.

/ S
2. Personalized and Customer-Centric Approach: Customers appreciate

O L
personalized experiences that cater to their individual needs. Tailoring
services to meet specific customer requirements can significantly

/ C
enhance their satisfaction. Adopting a customer-centric approach means

E
placing the customer at the centre of decision-making, anticipating
C
D
their needs, and going the extra mile to exceed their expectations.

©D
For example, a family visiting a hotel would appreciate a kids play
area over a wet bar at the swimming pool and a free-of-charge extra
bed in the room as compared to a romantic dinner for two.
3. Consistency and Reliability: Consistency is crucial in delivering
quality service. Customers expect reliable and consistent service
experiences every time they interact with an organization. This
entails ensuring that service is delivered promptly, accurately, and
consistently across all touchpoints. Avoiding service gaps, delays,
or inconsistencies helps build trust and loyalty. This can work to

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 MBAFT 7606 SERVICE MARKETING

Notes the advantage of a hotel chain where a good experience with one
hotel property in say Jaipur is duplicated at another hotel property
in say Agra, leading the customer to develop a greater level of trust
with the hotel chain and be motivated to book a stay at another
group hotel in say Chennai.
4. Effective Communication: Clear and effective communication is
essential in service delivery. It involves providing accurate and

i
relevant information to customers, being attentive to their inquiries

l h
or concerns, and ensuring that communication channels are accessible

e
and responsive. Open and transparent communication builds trust and

D
enhances the overall service experience. Here, an opaque business

of
model like that of BluSmart or the lack of a local call centre for
Amazon in India have the potential to foster the development of

ty
mistrust in the minds of the customers.

s i
r
5. Empowered and Well-Trained Employees: Service quality relies

e
heavily on the skills, knowledge, and attitude of employees.

v
n i
Organizations should invest in employee training and development
programs to equip them with the necessary skills and knowledge to

U
deliver quality service. Empowering employees to make decisions
,
L
and resolve customer issues independently can also lead to more

O
efficient and satisfactory service interactions. An organisation

/ S
where the employees keep on saying “I will refer your issue to my

O L
manager” will only end up irritating a customer who for example,
only wants to check out late by one hour.

/ C
6. Continuous Improvement: Delivering quality service is an ongoing

C E process. Organizations should continuously seek ways to improve

D
their service offerings based on customer feedback, market trends,

©D
and industry best practices. Regularly evaluating performance,
identifying areas for improvement, and implementing necessary
changes help maintain service quality and stay ahead of competitors.
7. Service Recovery: Inevitably, there will be instances where service
falls short of expectations. Prompt and effective service recovery is
essential in such situations. Organizations should have procedures in
place to address customer complaints or service failures promptly
and professionally. Resolving issues efficiently and going above and
beyond to rectify any problems can actually strengthen customer

132 PAGE
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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

relationships and loyalty. This will be discussed in more detail later Notes
on.
If we take the example of a hotel, it must judge the needs to its customers
accurately to determine what sort of services it offers and at what price
point. The needs of business traveller are considerably different from those
of a family travelling with young children though both of them want a
hotel room that is clean and the hotel itself offers multiple amenities;

i
just that their definition of these amenities would be different. A business
traveller may appreciate a business centre with laptops, printers and high-
l h
e
speed internet, a family leisure traveller would appreciate a supervised
play area for under 12 year olds. Additionally, while a business traveller
D
of
may be willing to pay a price premium for services that he prioritises
such as proximity to offices (e.g. Cyber Hub in Gurugram), the leisure

ty
family traveller would most likely prioritise his budget and seek hotels

s i
that offer good services but do not charge exorbitant prices for things
like dinner at the hotel restaurant.
e r
i v
The other aspects as discussed above would fall in place accordingly.

U n
In summary, delivering quality service requires service organizations

,
to understand multiple aspects that are in play while serving customers

O L
and by prioritizing these aspects, organizations can create a culture of
exceptional service, exceed customer expectations, and build long-term
customer loyalty and advocacy.
/ S
O L
C
6.3.5 Factors Affecting the Delivery of Quality Service

E /
The delivery of quality service is influenced by various factors that can

D C
impact customer experiences and satisfaction. Understanding and managing

©D
these factors is crucial for organizations aiming to consistently deliver
high-quality service.
Some key factors that affect the delivery of quality service are:
1. Employee Engagement and Competence: Employees play a vital
role in service delivery. Their level of engagement, competence,
and motivation directly impact the quality of service provided.
Organizations must invest in hiring and training employees who
possess the necessary skills, knowledge, and attitude to deliver
exceptional service. Empowering employees, recognizing their

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 MBAFT 7606 SERVICE MARKETING

Notes efforts, and fostering a positive work environment can enhance

service delivery.
2. Process Efficiency and Design: The efficiency and effectiveness
of service delivery processes significantly impact the quality of
service. Organizations should strive for streamlined processes that
minimize errors, delays, and redundancies. Well-designed processes,
supported by technology and automation where applicable, can

i
enhance operational efficiency and ensure consistent service delivery.
3. Service Culture and Leadership: The organizational culture and
l h
D e
leadership style shape the service delivery approach. A service-oriented
culture, where customer satisfaction is valued and promoted at all

of
levels, fosters a customer-centric mindset among employees. Strong
leadership that sets a clear vision, communicates expectations, and

i ty
supports employee development is crucial in driving a culture of
quality service.
r s
e
4. Customer Expectations and Feedback: Customer expectations
v
i
greatly influence their perception of service quality. Organizations
n
U
must understand and manage customer expectations through effective

,
communication, setting realistic service promises, and consistently

O L
meeting or exceeding those promises. Regularly collecting and
analysing customer feedback helps identify areas for improvement

/ S
and ensures service offerings remain aligned with customer needs.

O L
5. Technology and Infrastructure: The availability and effectiveness of

C
technology and infrastructure impact service delivery. Organizations

E / should invest in appropriate technology tools, systems, and infrastructure

C
to support efficient and seamless service delivery. This includes

D
user-friendly interfaces, reliable communication channels, and secure

©D
data management systems. Supporting employees with a robust IT
system that can track the customer profile and previous orders and
interactions will enable the call centre executive to have a better
picture of the customer’s needs and deal with her current problem
more effectively.
6. External Factors and Industry Trends: External factors such as
economic conditions, market trends, and regulatory changes can affect
service delivery. Organizations need to monitor and adapt to these
external influences to ensure their service offerings remain relevant

134 PAGE
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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

and competitive. Staying informed about industry trends, customer Notes

preferences, and emerging technologies enables organizations to
proactively adjust their service delivery strategies.
7. Service Recovery and Problem Resolution: Service failures and
customer complaints are inevitable, but effective service recovery
and problem resolution can turn a negative experience into a
positive one. Organizations should have robust processes in place

i
to address customer issues promptly, empathetically, and with a
focus on resolving problems to the customer’s satisfaction. A strong
l h
e
feedback collection and handling mechanism can favourably influence
a customer facing a problem.
D
of
To conclude, it can be said that organizations that effectively manage these
factors are better equipped to consistently provide exceptional service,

i ty
exceed customer expectations, and build strong customer relationships.

r s
6.4 Implementing Service Quality
v e
n i
Every organization offers a modicum of service quality to its customers.

U
However, quality service allows an organization to distinguish itself from
,
L
its competitors in the minds of the customers.

O
As John Ruskin (noted English philosopher) says, “Quality is never an

S
/
accident. It is always the result of intelligent effort. There must be the

L
will to produce a superior thing.”

O
C
Certain companies such as Taj Hotels, Indigo Airlines, Singapore Airlines

/
and Domino’s Pizza have built their brand on the quality of the service
E
C
they deliver; be it in the form of speedy pizza delivery or employees

D
forsaking personal safety to help guests escape the deadly 2008 attacks

©D
on the Taj Mahal Palace hotel in Mumbai.
Simply saying that these organisations have good service because they
are good organisations is a misnomer. Offering good service is a process
that includes steps such as measuring the current offerings, benchmarking,
identifying steps for improvement, and motivating employees to deliver good
service, repeatedly and to the most obnoxious of customers. Companies
that undertake such efforts usually tend to offer better services that their
peers.

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 MBAFT 7606 SERVICE MARKETING

Notes 6.4.1 Measuring Service Quality

Effective measurement of service quality is crucial for organizations to
understand customers’ experiences and identify areas for improvement.
Various methods and tools can be used for service quality measurement,
including:
1. Surveys and Questionnaires: Conducting customer surveys and

i
questionnaires allows organizations to gather feedback on various

l h
aspects of service quality. These tools provide quantitative and

D e
qualitative data, enabling organizations to identify strengths and
weaknesses and measure customer satisfaction levels. There is

of
however, a fine art to questionnaires. They should not be too long
so as to put off customers from filling them up but should also

i ty
not be so short that they do not capture a detailed picture of the

s
customer’s interaction with the organisation.
r
e
2. Mystery Shopping: Mystery shopping involves hiring individuals to

v
n i
pose as customers and evaluate the service experience. This method
provides first-hand insights into the quality of service delivery,

, U
employee performance, and adherence to service standards. Banks,

L
hotels and fast-food chains often utilise mystery shoppers to see if

O
service delivery standards are being met.

S
L /
3. Customer Feedback and Complaints: Organizations should actively
encourage and collect customer feedback and complaints. Analysing

C O
this information helps identify areas of improvement and rectify

E / service failures promptly. This is more important in today’s world

C
with social media platforms providing an outlet for customer feedback;

D
platforms where the customer feedback cannot be censored by say,

©D
the hotel.

6.4.2 Service Quality Benchmarking

Service quality benchmarks are predetermined standards or metrics
used to assess the level of service provided by an organization. These
benchmarks are typically established based on industry best practices,
customer expectations, and internal goals. They encompass various

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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

aspects of service delivery, such as responsiveness, reliability, empathy, Notes

assurance, and tangibles.
Service Quality benchmarks are important in today’s world as the highly
competitive business landscape means that providing exceptional service
has become crucial for organizations to differentiate themselves in an
increasingly crowded world of competitors; each bent on offering me-too
services. Additionally, today’s customers expect a chimera; an unnatural

i
blend of standardised services and unique “wow” services that enhance
their experience. These benchmarks serve as guidelines and standards
l h
e
against which organizations can measure their performance, spot the
latest trends in the market, identify areas for improvement, and ultimately
D
of
strive for excellence.
Service Quality Benchmarks are especially helpful in key areas such as:

i ty
1. Measuring Customer Satisfaction: Service quality benchmarks serve

r s
as a yardstick for evaluating customer satisfaction. By monitoring

e
and measuring key performance indicators (KPIs) against these
v
i
benchmarks, organizations can gain insights into their customers’
n
U
experiences and identify areas where they excel or fall short. This

,
enables them to make informed decisions and implement targeted

L
improvements to enhance overall satisfaction levels.

O
S
2. Identifying Performance Gaps: Benchmarks help organizations

/
identify performance gaps between their current service delivery
L
O
and desired standards. By comparing their performance against

C
established benchmarks, organizations can pinpoint areas of weakness

E /
or inefficiency. This analysis enables them to develop strategies and

C
allocate resources to bridge these gaps, thus raising the quality of

D
service provided.

©D
3. Setting Performance Goals: Service quality benchmarks provide a
reference point for setting performance goals and objectives. By
defining clear targets aligned with industry standards and customer
expectations, organizations can establish a roadmap for continuous
improvement. These benchmarks help create a culture of excellence
within the organization, motivating employees to meet and exceed
customer expectations. Here the issue lies with the goal identification
and setting process. For example, today when the goals are being

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 MBAFT 7606 SERVICE MARKETING

Notes set, call centre operators deliberately work at a slower pace leading
the owner to set lower performance goals that the operators can
easily meet and partake of the performance motivators being offered.
On the other hand, very high goals that are extremely difficult
to meet will put off employees from trying to reach them at all.
Remember, the typical human perception is that the grapes on the
higher, difficult to reach branches must be sour.

i
4. Enhancing Customer Loyalty: Consistently delivering high-quality

l
service improves customer loyalty and retention. Service quality
h
e
benchmarks act as a compass, guiding organizations in delivering

D
exceptional experiences that surpass customer expectations. Satisfied

of
customers are more likely to become loyal brand advocates, resulting
in increased customer lifetime value and positive word-of-mouth

ty
referrals. Such referrals are often highly prized in today’s world of

s
paid reviews and sponsored YouTube videos.
i
e r
5. Competitive Advantage: Service quality benchmarks enable organizations

i v
to gain a competitive edge in the market. By consistently surpassing

U n
industry standards and customer expectations, organizations can
differentiate themselves from their competitors. Superior service quality

L ,
becomes a unique selling proposition that attracts new customers,

O
retains existing ones, and builds a reputation for excellence.

/ S
However, Benchmarks and standards are only as good as their implementation.

O L
To effectively implement and improve service quality benchmarks, the

C
following steps should be considered:

E /
1. Research and Benchmarking: Conduct research on industry best

D C practices and customer expectations to identify relevant service quality

benchmarks. Analyse competitor performance to understand market

©D
standards and set ambitious yet achievable goals. Identifying suitable
competitors is key here. A call centre should not be benchmarking
itself against a hotel for example.
2. Data Collection and Analysis: Collect customer feedback, conduct
surveys, and measure key performance indicators to gather quantitative
and qualitative data. The data should then be analysed diligently to
identify trends, patterns, and areas for improvement.

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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

3. Performance Measurement: Establish metrics and benchmarks aligned Notes

with customer expectations and organizational goals. Monitor and
measure performance against these benchmarks regularly, and track
progress over time. Effective HR tools and policies in this context
can actually help the organization show that their words meet their
actions on say, a transparent performance evaluation and reward
system.

i
4. Continuous Improvement: Use performance insights to develop
improvement initiatives. Engage employees at all levels and empower
l h
e
them to contribute ideas and suggestions. Implement changes
systematically, evaluate their impact, and refine strategies as needed.
D
of
5. Employee Training and Development: Invest in training programs
to equip employees with the skills and knowledge necessary to

i ty
deliver exceptional service. Foster a customer-centric culture by

r s
promoting empathy, effective communication, and problem-solving

e
skills. Regular trainings to reinforce service quality and upskill the

v
employees can help a lot.

n i
, U
6.4.3 Models of Service Quality Delivery

O L
At an academic level, certain models on Service Quality have been proposed

/ S
and these have found varying degrees of usage in the corporate world.

L
Some of the more popular models are covered briefly below.

O
C
1. SERVQUAL Model:

E /
Developed by Parasuraman, Zeithaml, and Berry in 1985, the SERVQUAL

D C
model is a widely recognized framework for assessing and measuring
service quality. The model focuses on identifying gaps between customers’

©D
expectations and perceptions of service quality, providing insights for
service improvement efforts.
The SERVQUAL model consists of five dimensions that collectively
shape customers’ perceptions of service quality:
(a) Reliability: This dimension refers to the ability of the service provider
to deliver services consistently and accurately. Reliability encompasses
aspects such as dependability, timeliness, and consistency of service
delivery.

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 MBAFT 7606 SERVICE MARKETING

Notes (b) Assurance: Assurance relates to the competence, credibility, and

professionalism of the service provider and its employees. It includes
factors such as the knowledge and courtesy of staff, their ability to
instil trust and confidence in customers, and the presence of reliable
service guarantees.
(c) Tangibles: Tangibles pertain to the physical aspects of service delivery
that customers can observe or touch. This includes the appearance

i
and condition of facilities, equipment, and other tangible elements
that contribute to the overall service experience.
l h
D e
(d) Empathy: Empathy focuses on the service provider’s ability to
understand and address customers’ individual needs and concerns.

of
It involves aspects such as personalized attention, caring, and
attentiveness to customers’ specific requirements.

i ty
(e) Responsiveness: Responsiveness refers to the willingness and

r s
promptness of the service provider to help customers and provide

e
prompt service. It includes factors such as quick response times,
v
i
effective communication, and proactive assistance.
n
U
The SERVQUAL model helps organizations identify gaps between

L ,
customer expectations and perceptions in each dimension, enabling them
to pinpoint areas for improvement and prioritize service enhancements. By

S O
closing these gaps, organizations can strive to meet or exceed customer

/
expectations, leading to improved customer satisfaction and loyalty. The
L
O
model has been widely adopted and adapted in various industries and

C
continues to be a valuable tool for service quality management.

E /
2. RATER Model:

D C Introduced by Zeithaml, Bitner, and Gremler in a textbook on Services

Marketing, The RATER model is a service quality framework that expands

©D
upon the dimensions of the SERVQUAL model. The RATER model
emphasizes five key dimensions that customers consider when evaluating
service quality:
(a) Reliability: Similar to the SERVQUAL model, reliability refers to
the ability of the service provider to deliver services consistently
and accurately. It focuses on factors such as keeping promises,
delivering on time, and providing dependable service.

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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

(b) Assurance: Assurance encompasses elements related to the trustworthiness Notes

and credibility of the service provider. It includes factors such as
the competence and knowledge of employees, their ability to inspire
confidence, and the security and privacy provided during service
interactions.
(c) Tangibles: The tangibles dimension focuses on the physical evidence
and visual aspects of service delivery. It includes factors such as

i
the appearance of facilities, equipment, and personnel, as well as
the availability of supporting materials or documentation.
l h
(d) Empathy: Empathy emphasizes the service provider’s ability to
understand and address the individual needs and concerns of
D e
of
customers. It involves aspects such as personalized and attentive
service, demonstrating care and understanding, and actively listening
to customer feedback.
i ty
r
(e) Responsiveness: Responsiveness refers to the promptness and
s
e
willingness of the service provider to assist customers. It involves
v
i
factors such as quick response times, effective communication, and
n
U
proactive efforts to address customer requests or issues.

L ,
The RATER model builds upon the SERVQUAL model by explicitly
incorporating the tangibles dimension, which highlights the importance

S O
of physical evidence in service quality evaluation. By considering these

/
five dimensions, organizations can gain a comprehensive understanding
L
O
of customer perceptions and expectations, enabling them to identify

C
areas for improvement and enhance overall service quality. The RATER

E /
model provides a valuable framework for organizations seeking to deliver

C
exceptional service experiences and build strong customer relationships.

D
3. SERVPERF Model:

©D
The SERVPERF model is a service quality measurement framework that
focuses on assessing the actual performance of service delivery, rather than
comparing customer expectations and perceptions like the SERVQUAL
model. The SERVPERF model is based on the belief that customers’
evaluations of service quality primarily depend on their assessments of
the service received.

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 MBAFT 7606 SERVICE MARKETING

Notes The key dimensions of the SERVPERF model include:

(a) Service Quality: This dimension measures the overall quality of the
service provided, encompassing various aspects such as reliability,
responsiveness, tangibles, and assurance. It focuses on evaluating the
actual performance of the service based on predetermined service
quality indicators.
(b) Customer Satisfaction: Customer satisfaction reflects the level of

i
contentment or fulfilment experienced by customers as a result of the

l h
service received. It measures how well the service meets customers’

e
expectations and whether it fulfils their needs and desires.

D
of
The SERVPERF model differs from the SERVQUAL model in that it does
not involve comparing customer expectations with their perceptions of

ty
service quality. Instead, it solely focuses on evaluating the actual service

i
performance and its impact on customer satisfaction. The model suggests

s
r
that organizations should strive to improve service quality directly by

e
enhancing their service delivery processes, rather than by managing
v
customer expectations.
n i
U
By using the SERVPERF model, organizations can obtain valuable insights

L ,
into the effectiveness of their service delivery processes and the level
of customer satisfaction. This model helps organizations identify areas

S O
for improvement, make data-driven decisions, and implement strategies

/
to enhance service quality and customer satisfaction. Ultimately, the
L
O
SERVPERF model aids in driving continuous improvement and delivering

C
exceptional service experiences to customers.

E /
Studying these models is intellectually stimulating and gives us great

D C ideas about delivering quality service. However, as is usually the case,

implementing models and academic research into real life service conditions

©D
can be challenging.
Furthermore, implementing standards in service delivery is a complex
and challenging activity.

6.4.4 Implementing Standards in Service Delivery

Implementing standards in service delivery is essential for organizations
to ensure consistency, quality, and customer satisfaction. Standards serve

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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

as guidelines and benchmarks for employees, defining expectations, and Notes

setting a foundation for exceptional service. This essay explores the
importance of implementing standards in service delivery, the benefits
they offer, and key steps for successful implementation.
The Importance of Implementing Standards can be summed up with the
following keywords:
1. Consistency: Standards provide a framework for consistency in

i
service delivery. They ensure that customers receive a consistent
experience regardless of the time, location, or employee serving
l h
them. Consistency builds trust, enhances the reputation of the
organization, and fosters customer loyalty.
D e
2. Quality Assurance: Standards act as quality assurance mechanisms,
of
ty
ensuring that services are delivered at a predefined level of quality.

i
They set expectations for performance, reliability, accuracy, and

s
r
professionalism. By adhering to standards, organizations can deliver

e
high-quality services consistently, meeting or exceeding customer
v
expectations.
n i
U
3. Customer Satisfaction: Implementing standards helps improve

L ,
customer satisfaction. When customers receive services that meet
or exceed their expectations consistently, they are more likely to be

S O
satisfied and have positive experiences. Satisfied customers are more

/
likely to become loyal and advocate for the organization, leading
L
O
to increased customer retention and word-of-mouth referrals.

/ C
4. Efficiency and Productivity: Standards enhance efficiency and

E
productivity by providing clear guidelines for employees. Standards

D C
streamline processes, eliminate ambiguity, and ensure that employees
are aligned with organizational goals. This results in improved

©D
productivity, reduced errors, and streamlined service delivery.
Some steps for Successful Implementation of Standards in Service Delivery
include:
1. Define Service Standards: Identify the key aspects of service delivery
that are critical to the organization’s success. Develop clear and
measurable service standards that align with customer expectations,
industry best practices, and organizational objectives. Standards
should be specific, realistic, and easily understood by employees.

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 MBAFT 7606 SERVICE MARKETING

Notes 2. Communicate and Train: Effective communication and training

are crucial for successful implementation. Clearly communicate
the service standards to all employees, explaining their importance,
expectations, and benefits. Provide comprehensive training programs
to equip employees with the knowledge, skills, and tools necessary
to meet the standards consistently.
3. Monitor and Evaluate: Regularly monitor and evaluate service delivery

i
to ensure compliance with the established standards. Implement
mechanisms to collect customer feedback, conduct performance
l h
e
assessments, and measure key performance indicators. This ongoing

D
monitoring allows for timely identification of gaps and opportunities

of
for improvement.
4. Provide Resources and Support: Allocate resources, both financial

i ty
and human, to support employees in meeting service standards.

r s
Ensure that employees have the necessary tools, equipment, training,

e
and support to deliver services at the desired level of quality. Foster

v
n
improvement, and innovation.i
a supportive environment that encourages continuous learning,

, U
5. Continuous Improvement: Implement a culture of continuous

O L
improvement, where standards are reviewed and updated regularly to
reflect changing customer needs, industry trends, and organizational

/ S
goals. Encourage employees to provide feedback, share insights,

L
and contribute to the enhancement of service standards.

O
C
6. Recognition and Rewards: Recognize and reward employees who

E / consistently meet or exceed service standards. Celebrate achievements,

C
acknowledge exemplary performance, and provide incentives to

D
motivate employees to deliver exceptional service. This fosters a

©D
positive work environment and reinforces the importance of standards
in service delivery.
However, an organization must be prepared to be flexible, adding the
‘Flexible’ dimension to the QCD framework seen earlier in 1.3.3; building a
QCDF framework that accepts that there will be implementation challenges
when a new service benchmark or operational code is released and that
the organization is prepared to be flexible to deal with the implementation
challenges thus faced. Remember the goal is not to plan the execution

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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

but to execute the plan and offer the customer a higher level of service Notes
than before.
Implementing standards in service delivery is essential for organizations
aiming to provide consistent, high-quality service experiences. Standards
ensure consistency, quality assurance, customer satisfaction, and operational
efficiency. By defining clear service standards, communicating and training
employees, monitoring performance, providing resources and support, and

i
fostering a culture of continuous improvement, organizations can successfully
implement service standards. Ultimately, the implementation of standards
l h
e
contributes to enhancing customer experiences, building customer loyalty,

D
and positioning the organization as a leader in its industry.

6.4.5 Challenges in Benchmarking for Service Delivery o f

i ty
s
Benchmarking is a valuable tool for organizations to assess their

e r
performance, identify areas for improvement, and learn from industry

i v
best practices. However, benchmarking for service delivery comes with

n
its own set of challenges.

U
Some of the common challenges faced by organizations and model
,
L
strategies to overcome them are as below:

O
1. Data Availability and Comparability: One of the key challenges

S
L /
in benchmarking is obtaining reliable and comparable data. Service
delivery metrics may vary across industries and organizations, making

O
it difficult to find relevant benchmarks. Data collection methods,
C
E /
definitions, and measurement techniques may differ, hindering accurate
comparisons. To overcome this challenge, organizations should invest

D C
in comprehensive data collection processes, standardize measurement

©D
criteria, and seek benchmarks from similar industries or organizations
facing similar service delivery challenges. For example, creating and
effectively administering a suitable questionnaire for the customer
to fill while checking out of an hotel can help the management
obtain suitable data about the performance of its employees and
systems in delivering service to this customer. Similarly, keeping
a track of customer feedback for the hotel on aggregator websites
such as TripAdvisor and MakeMyTrip can help as well.

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Notes 2. Appropriate Performance Indicators: Selecting the right performance

indicators is critical for meaningful benchmarking. Service delivery
involves multiple dimensions, and organizations must identify the
most relevant indicators for their specific context. It is essential to
strike a balance between comprehensive measures and practicality.
Organizations should define clear goals, align performance indicators
with customer expectations, and consider a combination of objective
(e.g., response time, error rate) and subjective (e.g., customer

h i
satisfaction) measures to capture the full-service experience. Here

e l
the challenge is to strike a balance between serving the needs of

D
the customers and preventing the employees from feeling exploited

of
and mistreated.
3. Benchmarking Resistance and Siloed Thinking: Resistance to

ty
change and a siloed mindset can hinder successful benchmarking.

s i
Some employees may be reluctant to share information or adopt

e r
practices from other organizations, fearing a loss of control or

i v
competitiveness. Overcoming resistance requires effective change

U n
management, emphasizing the benefits of benchmarking, and fostering
a collaborative culture. Encouraging open communication, knowledge

,
sharing, and cross-functional collaboration can break down silos
L
O
and create a conducive environment for benchmarking initiatives.

S
For example, an airline can learn how to offer better service to its

L /
first-class passengers by observing how the restaurant at a 5-star

O
hotel operates. Even though both these organisations belong to

/ C
different industries, the typical customer of a 5-star hotel would

E
fly first class and vice versa.

D C 4. Contextual Differences: Organizations operate in diverse contexts,

such as cultural, regulatory, or geographical variations. Benchmarking

©D
against organizations in different contexts can be challenging due to
these contextual differences. It is important to consider the unique
circumstances and adapt benchmarks accordingly. Organizations
should seek benchmarks from similar contexts or adjust benchmarks
to account for contextual variations. Additionally, organizations can
engage with local industry associations or professional networks to
gain insights into context-specific challenges and best practices. For
example, IKEA in India is forced to offer services such as at-home

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installation and furniture assembly because the Indian customer Notes

expects such services.
5. Dynamic Business Environment: The business environment is
dynamic, with trends, technologies, and customer expectations
constantly evolving. Benchmarking practices must keep pace with
these changes. Regularly reviewing and updating benchmarks is
crucial to remain relevant and competitive. Organizations should
establish mechanisms for continuous monitoring, reassessment,
and adjustment of benchmarks to ensure they reflect the current
h i
landscape.
e l
6. Limited Access to Benchmarking Partners: Finding appropriate
D
of
benchmarking partners can be a challenge, especially for organizations
operating in niche industries or with limited networking opportunities.

ty
To overcome this hurdle, organizations can explore industry conferences,

s i
networking events, or professional associations to connect with

e r
potential benchmarking partners. Additionally, leveraging technology

v
platforms and online communities can provide access to a broader

n i
network of organizations for benchmarking purposes. Suitable industry

U
wide organisations such as the ASCI (Advertising Standards Council

L ,
of India) and SIAM (Society of Indian Automobile Manufacturers)
can help provide industry wide data and expected standards of
behaviour from its members.
S O
L /
7. Long-Term Commitment: Benchmarking is not a one-time effort

O
but a continuous process. It requires a long-term commitment from

C
organizations. To sustain benchmarking initiatives, organizations

E /
should establish dedicated teams, allocate resources, and integrate

C
benchmarking activities into their strategic planning. Regularly

D
reviewing progress, celebrating successes, and communicating

©D
the benefits of benchmarking can help maintain organizational
commitment over the long term.
Benchmarking for service delivery comes with challenges such as data
availability and comparability, selecting appropriate indicators, overcoming
resistance, accounting for contextual differences, adapting to a dynamic
business environment, limited access to benchmarking partners, and
ensuring long-term commitment. By addressing these challenges through
standardized data collection, collaborative cultures, contextual adaptation,
continuous monitoring, networking efforts, and sustained commitment,

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 MBAFT 7606 SERVICE MARKETING

Notes organizations can overcome these hurdles and unlock the benefits of
benchmarking to drive service delivery excellence.
Service quality management and benchmarking play a vital role in today’s
service-oriented and customer-centric business environment. By measuring
customer satisfaction, identifying performance gaps, setting performance
goals, enhancing customer loyalty, and gaining a competitive advantage,
organizations can continuously improve their service delivery. Implementing

i
and improving service quality benchmarks requires a proactive approach,

l h
a commitment to excellence, and a focus on continuous learning and

e
improvement. By striving for service quality excellence, organizations can

D
foster customer loyalty, drive business growth, and establish themselves

of
as leaders in their respective industries.

ty
IN-TEXT QUESTIONS

s i
1. Which of the following best defines service quality?
(a) The cost of a service
e r
i v
(b) The physical attributes of a service

U n
(c) The degree of excellence in service delivery that meets

,
or exceeds customer expectations

L
(d) The speed of service delivery
O
S
2. What is an essential step in implementing service quality within

L /
an organization?

CO
(a) Setting high prices for services

E/
(b) Conducting regular service audits

C
(c) Ignoring customer feedback

D D (d) Reducing service capacity

©
3. Why is managing service demand and supply important for
organizations?
(a) To increase the cost of services
(b) To exceed customer expectations
(c) To optimize resource allocation and avoid service gaps
or overcapacity
(d) To minimize customer interactions

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4. What does a service culture refer to? Notes

(a) The physical environment of a service facility

(b) The shared values, beliefs and behaviours that prioritize
customer satisfaction and service excellence
(c) The size of the organization providing the service
(d) The speed at which a service is delivered
5. What is the purpose of service recovery?

h i
(a) To prevent service failures from occurring
e l
(b) To ignore customer complaints
D
of
(c) To restore customer confidence and satisfaction after a
service failure
(d) To reduce service demand
i ty
r s
6. Which of the following is an example of a service recovery
strategy?
v e
(a) Ignoring customer complaints
n i
U
(b) Providing compensation or remedies to address customer
,
L
issues

O
(c) Decreasing service quality standards

S
/
(d) Increasing service prices
L
C O
/
6.5 Managing Service Demand and Supply

C E
Service organizations often face challenges in balancing the demand

D
for their services with their capacity to meet that demand. Imbalances

©D
between demand and supply can result in customer dissatisfaction,
service disruptions, loss of business opportunities and increased costs
of operation. It is therefore important to plan for and manage demand
and supply imbalances in service delivery and have strategies in place
to effectively address these challenges.

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Notes 6.5.1 Understanding Demand and Supply Imbalances

Demand and supply imbalances occur when the demand for services
exceeds the available supply or when the supply exceeds the demand.
Both scenarios can have detrimental effects on service quality and customer
satisfaction viz:
1. Excess Demand: When the demand for services exceeds the organization’s

i
capacity to deliver, customers may experience long wait times,

l h
delays, or difficulties in accessing the service. This can lead to

D e
customer frustration, dissatisfaction, and potential loss of business.
2. Excess Supply: On the other hand, having excess supply with limited

of
demand can result in underutilized resources, wasted capacity, and

ty
increased operational costs. This imbalance can affect the financial

i
viability of the organization.

r s
To better understand this, let’s take an example. An airline may have 3

v e
check-in/ check-out counters at the airport that are usually sufficient to

n i
handle the flow of passengers but early morning flights and flights at the

U
start of summer vacations see more passengers. Now the airline can add

,
additional counters but these would remain under-used for most of the

O L
year (increasing the operational costs) but not adding more counters to
handle peak rush can lead to longer wait times and customer dissatisfaction.

/ S
L
There is a fine balance between off-peak and peak demand that directly

O
affects the number of counters needed. To accurately predict demand (and

C
the need for “sufficient” counters), airlines can resort to data analysis

E /
on passenger flow to judge “normal” demand (which determines the

C
number of permanent counters to staff) and explore the possibility of

D adding temporary counters or using tele check-in or kiosk check-in style

©D
automation tools to help cope with the peak volume of passengers. The
Delhi Airport faces such problems regularly and tries to tackle them with
a variety of measures.

6.5.2 Managing Demand and Supply Imbalances

Effectively managing demand and supply imbalances is crucial for service
organizations to maintain high service quality, customer satisfaction, and

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operational efficiency. Organizations employ many techniques and tools Notes

to help them with this crucial activity.
Some of the tools and techniques that can be used are described briefly
below:
1. Demand Forecasting: Accurate demand forecasting is crucial in
managing imbalances. Organizations should collect and analyse
historical data, market trends, and customer insights to anticipate

i
fluctuations in demand. This enables them to make informed decisions
regarding resource allocation and capacity planning.
l h
2. Capacity Management: Effective capacity management involves
D e
of
aligning the organization’s resources and capabilities with anticipated
demand. It includes optimizing staffing levels, infrastructure, and

ty
technology to ensure efficient service delivery. Regular capacity

i
assessments and adjustments are necessary to maintain a balance

s
r
between demand and supply. But here, flexibility is called for if

e
the number of operators fluctuate with fluctuating demand. Trained
v
i
call centre operators are difficult to find and regularly hiring and
n
U
firing them is not in the long-term interests of the organization.

L ,
3. Service Differentiation: Organizations can offer different service
options or tiers to manage demand. By providing varying levels

S O
of service with corresponding prices, organizations can influence

/
customer choices and distribute demand across different service
L
O
offerings.

/ C
4. Reservation Systems and Appointments: Implementing reservation

E
systems or appointment scheduling can help manage demand by

D C
allocating specific time slots for customers. This approach ensures
a controlled flow of customers, reduces waiting times, and enhances

©D
the overall customer experience. Here, lane jumping and preferential
treatment need to be avoided as far as possible.
5. Flexibility and Agility: Organizations should build flexibility into
their operations to handle fluctuations in demand effectively. This
can include cross-training employees, implementing flexible work
schedules, and having contingency plans in place to address sudden
spikes or drops in demand.

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Notes 6. Collaborative Partnerships: Collaborating with other service

providers or complementary businesses can help manage imbalances.
Organizations can enter into partnerships or agreements to share
resources, accommodate overflow demand, or refer customers to
each other during peak periods.
7. Service Level Agreements: Establishing service level agreements
(SLAs) with customers can help manage expectations and allocate

i
resources effectively. SLAs define the service parameters, response

l
times, and performance metrics, ensuring a mutual understanding
h
e
between the organization and its customers.

D
8. Technology and Automation: Leveraging technology and automation

of
can optimize service delivery and help manage demand and supply
imbalances. Online self-service platforms, chatbots, and automated

i ty
processes can handle routine inquiries, transactions, and service

r s
requests, reducing the burden on human resources.

e
9. Continuous Improvement: Organizations should regularly evaluate
v
i
and analyse the effectiveness of their demand and supply management
n
U
strategies. By monitoring key performance indicators, customer

,
feedback, and market trends, organizations can identify areas for

delivery.
O L
improvement and implement necessary changes to enhance service

/ S
L
6.5.3 Demand and Supply Management in Real Life
O
C
Situations

E /
C
Demand and supply management is a critical aspect of service organizations’

D
operations, allowing them to optimize their resources, meet customer

©D
needs, and ensure efficient service delivery.
Below are some examples of how service organizations manage demand
and supply and the consequences of getting it wrong:
1. Airlines: Airlines implement demand and supply management strategies
to maximize their capacity utilization and revenue. They use revenue
management systems to analyse historical data, demand patterns,
and market conditions to determine optimal pricing strategies and
allocate seats effectively. By offering dynamic pricing, airlines can

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SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

match supply with demand, fill planes to capacity, and maximize Notes
revenue. Hey can also use dynamic pricing to encourage more
price elastic customers such as leisure travellers to book seats in
planes flying at less common hours such as after 10 pm. This can
work because the leisure traveller is more flexible schedule wise
and prioritises economy over “regular” flights during the business
rush period say around 7-8 am at a busy airport like Mumbai for
the popular Mumbai-Delhi flight.

h i
l
2. Hotels: Hotels manage demand and supply through strategies such

e
as yield management and room inventory optimization. They adjust
room rates based on demand fluctuations, seasonal variations, and
D
of
market conditions. Yield management systems help hotels optimize
revenue by offering different pricing options, discounts, and packages

ty
to attract customers during low-demand periods and maximize

s i
occupancy during high-demand periods. ‘Pay for two nights and

e r
Stay for nights’ is a common tactic used by hotels to fill rooms

i v
that would otherwise go empty in lean periods such as the monsoon
season in Goa.

U n
3. Call Centres: Call centres employ workforce management tools to

L ,
manage staffing levels based on expected call volumes and peak

O
hours. By forecasting call volumes and analysing historical data, call

/ S
centres can adjust staffing schedules to match anticipated demand,

O L
ensuring that enough agents are available to handle customer inquiries
and reduce wait times. AI enabled tools and app based banking can

/ C
reduce the toll on human call centre operators and thus keep a lid

E
on the operating costs.

C
D
4. Healthcare Providers: Healthcare organizations implement demand

©D
and supply management techniques to optimize resource allocation
and manage patient flow. They use patient appointment scheduling
systems to balance appointment availability, ensure efficient use of
healthcare professionals’ time, and minimize patient wait times. By
managing appointment slots, healthcare providers can align their
capacity with patient demand.
5. Retailers: Retailers use demand forecasting models to anticipate
customer demand for products and optimize inventory levels. By
analysing sales data, market trends, and external factors, retailers

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 MBAFT 7606 SERVICE MARKETING

Notes can forecast demand and adjust their supply chain accordingly. This
enables them to ensure product availability, minimize stockouts, and
reduce excess inventory, improving operational efficiency. Sales like
Black Friday and Diwali deals can entice customers to stores in
bulk while those like Summer Specials or Evening Deals can attract
people during lean periods. Some restaurants like Haldiram’s in
Delhi use special breakfast menus and pricing to attract customers
to come to the outlets earlier in the morning (say before 11am)
before the regular rush picks up.
h i
e
6. Restaurants: Restaurants manage demand and supply through l
D
reservation systems and seating optimization. They use reservation

of
platforms to allocate tables, manage waiting lists, and optimize
seating capacity. By accurately predicting customer demand and

ty
effectively managing table turnover, restaurants can balance the

s i
number of reservations and walk-in customers, ensuring optimal

e r
service levels and minimizing customer wait times.

i v
7. Public Transportation: Public transportation providers utilize demand

U n
and supply management techniques to optimize their services. They
analyse passenger demand patterns, peak travel times, and route

L ,
utilization to adjust schedules, deploy additional vehicles during

O
high-demand periods, and optimize route planning. This helps ensure

/ S
that public transportation services meet customer needs, reduce

O L
overcrowding, and enhance the overall travel experience. The Delhi
Metro app can be an example of a tool that can be used to manage

/ C
overcrowding and aid in planning smoother journeys.

CE
8. Event Management: Event management companies use demand

D
and supply management strategies to plan and execute successful

D
events. By analysing historical attendance data, market trends, and

©
customer preferences, they can forecast demand and determine the
appropriate venue size, seating capacity, and resource allocation.
This ensures that events are well-managed, resources are utilized
efficiently, and customer expectations are met.
In conclusion, service organizations employ various demand and supply
management strategies to optimize their operations and meet customer
needs. From dynamic pricing and yield management in the airline and
hotel industries to appointment scheduling and inventory optimization

154 PAGE
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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

in healthcare and retail, these organizations leverage data, forecasting, Notes

and resource allocation techniques to ensure efficient service delivery,
customer satisfaction, and revenue optimization. Effective demand and
supply management practices are crucial for service organizations to thrive
in competitive markets and provide exceptional customer experiences.

6.6 Service Culture

h i
6.6.1 Describing Service Culture
e l
D
of
Service culture refers to the collective behaviours, values, and attitudes
within an organization that prioritize and enhance the customer experience.

ty
It encompasses the way employees interact with customers, the level of

i
responsiveness and professionalism displayed, and the overall commitment

r s
to exceeding customer expectations. A strong service culture permeates

e
every aspect of an organization, from frontline staff to management,
v
n i
creating a customer-centric environment. It is most strongly felt and
evangelised by the staff members of the organization.

, U
In a company with a positive service culture, employees are empowered

O L
to go above and beyond to ensure customer satisfaction. They possess a
deep understanding of the importance of their role in delivering exceptional

/ S
service and take pride in their work. Communication is open and transparent,
L
fostering a collaborative atmosphere where employees share best practices
O
C
and ideas to continuously improve the customer experience.

E /
Service culture is evident in the organization’s values and mission,

C
which are aligned with a customer-centric approach. Organizations with a

D
strong service culture invest in comprehensive training programs to equip

©D
employees with the necessary skills and knowledge to handle customer
inquiries, resolve issues, and provide personalized service. They prioritize
ongoing development and create a supportive environment that encourages
employees to take ownership of customer interactions.
A vibrant service culture extends beyond individual interactions and
permeates the organizational structure and processes. Feedback mechanisms
are in place to capture customer input, allowing the organization to
identify areas for improvement and make necessary adjustments. Service

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 MBAFT 7606 SERVICE MARKETING

Notes excellence is celebrated and recognized, reinforcing the value placed on

exceptional customer experiences.
Ultimately, a strong service culture fosters customer loyalty, drives business
growth, and sets organizations apart in today’s competitive marketplace.
It demonstrates a commitment to understanding and meeting customer
needs, resulting in memorable experiences that leave a lasting impression.

i
6.6.2 Parameters of Service Culture

l h
e
Service culture is influenced by several key parameters that shape the

D
customer experience within an organization. These parameters define

of
the values, behaviours, and practices that guide employees in delivering
exceptional service. Understanding and managing these parameters is

ty
crucial for building a strong service culture.

s i
r
Some important parameters of service culture are as below:

e
1. Leadership: Leadership plays a vital role in shaping the service culture
v
i
of an organization. Leaders must set a clear vision for customer
n
U
service and consistently communicate and reinforce the importance

,
of delivering exceptional experiences. They should lead by example,

O L
demonstrating the desired behaviours and values. Effective leaders
empower employees, provide the necessary resources and support,

/ S
and create a culture of accountability. When an owner of Manager

O L
of the hotel regularly roams the property and assists in customer
service as and when needed, it enhances the morale of the staff

/ C
and encourages them to work better.

CE
2. Employee Engagement: Engaged employees are more likely to deliver

D
outstanding service. Organizations need to foster a positive work

© D environment that promotes employee engagement, satisfaction, and

well-being. This includes providing opportunities for growth and
development, recognizing and rewarding exceptional performance,
and encouraging open communication and collaboration among teams.
This is especially important in monotonous roles such handling calls
in a call centre or serving guests in a hotel restaurant. In such job
roles, intrinsic motivation and any efforts such as job rotation to
break the monotony and provide additional learning opportunities
can help a lot to prevent employees from tuning out.

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3. Customer-Centric Processes: Processes and systems within an Notes

organization should be designed with the customer in mind. This
involves streamlining and simplifying procedures to enhance efficiency
and reduce customer effort. Feedback loops should be established to
capture customer insights, which can be used to improve processes
and address pain points. But, employee pain points should also be
addressed. Remember, we do not want employees to feel overburdened
and customers to feel under-served.

h i
l
4. Training and Development: Investing in comprehensive training

e
programs is crucial for developing the skills and knowledge required
to deliver excellent service. Training should cover not only technical
D
of
aspects but also soft skills like communication, empathy, and
problem-solving. Ongoing development opportunities ensure that

ty
employees stay updated with the latest trends and best practices in
customer service.
s i
e r
By effectively managing these parameters, organizations can create a

i v
service culture that fosters customer loyalty, drives business growth, and

U n
sets them apart from their competitors. It requires a holistic approach,
where leadership, employee engagement, customer-centric processes, and

L ,
continuous training work together to create a customer-centric environment.

S O
/
6.6.3 How Customers See the Service Culture

O L
Customers’ perception of a company’s service culture is influenced by

/ C
various factors that shape their overall experience. The way customers

C E
see the service culture can have a significant impact on their satisfaction,
loyalty, and willingness to recommend the company to others.

D
©D
Some of the key aspects that shape customers’ perception are:
1. Interactions with Frontline Employees: Customers’ direct interactions
with frontline employees greatly influence their perception of the
service culture. Politeness, attentiveness, and professionalism exhibited
by employees leave a lasting impression. Customers appreciate
friendly and knowledgeable staff who go the extra mile to address
their needs and provide personalized service. A smile and additional
effort on part of the employee can make the customer feel valued.

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 MBAFT 7606 SERVICE MARKETING

Notes 2. Responsiveness: Customers value prompt and efficient service. A

service culture that prioritizes responsiveness ensures that customers’
inquiries, requests, and concerns are handled in a timely manner.
Companies that proactively communicate with customers and provide
updates on their requests or issues are viewed favourably. Rapid
and effective responses to voiced customer needs such as room
service always help build a positive perception in the minds of the
customer.

h i
l
3. Consistency: Customers expect consistent service experiences

e
across different touchpoints and interactions with a company. A

D
strong service culture ensures that service quality, standards, and

of
values are upheld consistently. When customers receive consistent
experiences, it builds trust and confidence in the company. This is

ty
where employee training comes in so that two distinct employees

s i
manning the check-in counter at different times (e.g. different duty

e r
shifts - morning and evening) can offer a very similar level of
service to the customer.
i v
U n
4. Problem Resolution: How effectively and empathetically a company
resolves customer problems significantly impacts their perception of

L ,
the service culture. Promptly addressing issues, taking ownership,

O
and providing satisfactory solutions demonstrate a customer-centric

/
approach.
S
O L
5. Personalization: Customers appreciate personalized experiences that
show an understanding of their individual needs and preferences.

/ C
A service culture that emphasizes personalization creates a positive

C E impression and enhances customer loyalty.

D
6. Brand Reputation: Customers’ perception of a company’s overall

©D
brand reputation can also influence their view of the service culture.
Positive word-of-mouth, online reviews, and recommendations from
others contribute to customers’ expectations and perceptions.
Customers assess these aspects of the service culture based on their
interactions and experiences. Therefore, it is vital for companies to
prioritize customer satisfaction, consistently deliver exceptional service,
and actively listen to customer feedback to continually improve the service
culture and meet customers’ expectations.

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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

6.6.4 Taking Steps to Boost the Service Culture Notes

Boosting the service culture within an organization requires proactive

measures and a commitment to creating a customer-centric environment.
Some steps that can be taken to enhance the service culture include:
1. Define and Communicate Service Standards: Clearly define the
service standards and expectations for employees. Develop a service

i
manifesto or set of guiding principles that outline the organization’s
commitment to exceptional service. Communicate these standards
l h
throughout the organization, ensuring that everyone understands
and embraces them. For example, banks in India are required to
D e
of
publish a pamphlet with service standards and a General Schedule
of Charges so that customers know what to expect and how much
they will be charged for indicated services.
i ty
r s
2. Training and Development: Invest in comprehensive training programs

e
that equip employees with the skills and knowledge necessary to

v
n i
deliver outstanding service. Offer ongoing development opportunities
to enhance their customer service skills, communication abilities, and

, U
problem-solving techniques. Empower employees to take ownership

L
of customer interactions and provide personalized solutions. Trainee

O
programs are one such tool used by many hotels to train employees.

S
L /
3. Empower Frontline Employees: Provide frontline employees with
the autonomy and authority to make decisions that benefit customers.

C O
Empowering them to resolve issues and address customer concerns

/
without unnecessary bureaucratic hurdles can significantly enhance
E
C
the service experience. Something like a reversal of SMS banking

D
charges (amounting to less than Rs. 100/-) or a complimentary drink

©D
a meal at the hotel restaurant can help sooth ruffled customers.
4. Encourage Feedback and Recognition: Create mechanisms for
customers to provide feedback, such as surveys, suggestion boxes,
or online reviews. Actively listen to customer feedback and use
it as a tool for continuous improvement. Recognize and reward
employees who consistently deliver exceptional service, fostering
a culture of appreciation and motivation. You may have observed
‘Employee of the Month’ style boards at McDonald’s restaurants
and Swiggy Champion/ Saviour style stories in the Swiggy app.

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Notes 5. Foster a Collaborative Environment: Encourage teamwork and

collaboration among employees to share best practices and learn from
each other’s experiences. Create opportunities for cross-functional
collaboration to improve the overall customer experience. Regularly
communicate success stories and positive customer feedback to
inspire and motivate employees.
6. Lead by Example: Leadership must exemplify the desired service

i
culture. Leaders should actively engage with customers, demonstrate
empathy, and model the behaviours expected from employees. By
l h
e
leading by example, leaders reinforce the importance of excellent

D
service and inspire others to follow suit. The owner of petrol pump

of
who mans the pump himself and supervises his employees regularly
aids in the customers’ developing a positive perception of quality

ty
and negligible levels of cheating; something which unfortunately

s i
is quite rampant in the fuel marketing sector.

e r
By taking these steps, organizations can foster a service culture that

i v
prioritizes the customer, drives employee engagement, and creates

n
memorable experiences that set them apart from competitors.

U
L ,
6.6.5 Role of Employee Empowerment in Service Delivery

S O
/
Employee empowerment plays a crucial role in service delivery as it

O L
enables employees to take ownership of their roles, make independent
decisions, and go above and beyond to meet customer needs.

/ C
Some key aspects of employee empowerment in service delivery are:

CE
1. Autonomy and Decision-Making: Empowered employees have the

D
authority to make decisions without constantly seeking approval from

© D higher levels of management. They can assess customer situations,

think critically, and take appropriate action to resolve issues or
provide exceptional service. This autonomy leads to quicker and
more efficient problem-solving, enhancing the overall customer
experience. A teacher who has a little flexibility in using teaching
tools in sync with the needs and capabilities of her class would
tend to do better than one who is made to rigidly follow the stated
teaching guidelines.

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SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

2. Flexibility and Adaptability: Empowered employees are encouraged Notes

to be flexible and adapt their approach to meet the unique needs of
each customer. They have the freedom to tailor solutions, suggest
alternatives, and find creative ways to exceed customer expectations.
This flexibility allows for personalized service and builds customer
loyalty.
3. Customer-Focused Mindset: Empowered employees have a customer-

i
focused mindset, which means they actively listen to customers,
empathize with their concerns, and find ways to address their needs.
l h
e
They take ownership of customer interactions and strive to provide
a positive experience at every touchpoint. A satisfied customer leads
D
of
to a satisfied employee in this case.
4. Continuous Improvement: Empowered employees are more likely

i ty
to identify areas for improvement and suggest innovative solutions.

r s
They contribute to a culture of continuous improvement by sharing

e
insights and ideas for enhancing service delivery. Empowerment

v
n i
encourages employees to take responsibility for their own growth and
development, leading to increased job satisfaction and motivation.

U
Kaizen or ‘continuous improvement’ (a system adopted by the
,
L
Japanese automobile industry) can work wonders in the service

O
industry as well. All it requires is a commitment from the top

/ S
management to encourage employee feedback and suggestions not

O L
by mere words, but by demonstrating that the suggestions received
are actually implemented. After all, front-line employees typically

/ C
employ shortcuts to help with their workflow and if these little

C E
time savers can be adopted across the organisation, it can boost
employee productivity and ultimately customer satisfaction.

D
©D
5. Engagement and Accountability: Employee empowerment fosters
a sense of engagement and accountability. When employees are
trusted with decision-making power, they feel a greater sense of
ownership and pride in their work. This leads to higher levels of job
satisfaction, increased productivity, and a willingness to go the extra
mile to deliver exceptional service. Team appraisals and team-based
rewards can bring in an intrinsic sense of responsibility because
now the person affected most by your inaction as an employee is

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 MBAFT 7606 SERVICE MARKETING

Notes not the faceless customer nor the hated General Manager at the
Head Office but your immediate colleague.
Overall, employee empowerment is a vital component of successful service
delivery. By empowering employees, organizations create a customer-
centric culture where employees are motivated, engaged, and equipped
to provide outstanding service that exceeds customer expectations.

i
6.7 Service Recovery

l h
6.7.1 What is Service Recovery?
D e
of
Service recovery refers to the actions taken by a company to address

ty
and resolve customer complaints, issues, or negative experiences in order

i
to regain customer satisfaction and loyalty. It is an essential aspect of
s
r
customer service as it provides an opportunity to turn a negative situation

e
v
into a positive one.

n i
It is an unfortunate reality that a customer needs service recovery only

, U
when the initial service delivery has failed and the customer is dissatisfied.
Now some customers choose not to express their dissatisfaction verbally
L
but do so by quietly rejecting the service delivery organization and moving
O
S
to an alternate service provider. The customers for whom service recovery

L /
actually works are the ones who choose to complain. These customers

O
are valuable to the organization because through their complaint they are

C
actually highlighting deficiencies in the service delivery process; deficiencies

E /
which would ordinarily get overlooked. In all of this discussion on service

C
recovery, we are assuming that we are dealing with an organization that

D actually cares about delivering quality service and is a learning organization

©D
as well; i.e. an organization that wishes to learn from its mistakes and fix
its shortcomings. Otherwise this whole concept becomes untenable. Now
comes the hard part which is actually accepting the customer’s complaint
and attempting to take meaningful and satisfactory (to the customer; of
course assuming that she is a reasonable customer and does not want to
tar and feather a specific problem causing employee) action to redress
the situation and both pacify and re-satisfy the customer.
Service recovery involves promptly acknowledging the customer’s concern,
actively listening to their feedback, and taking immediate steps to rectify

162 PAGE
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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

the problem. This may include offering a sincere apology, providing a Notes
solution or compensation, and ensuring that the issue does not reoccur in
the future. Effective service recovery demonstrates a company’s commitment
to customer satisfaction and can help rebuild trust and enhance the overall
customer experience.
A successful service recovery not only resolves the immediate problem
but also leaves a lasting positive impression on the customer. It can turn

i
dissatisfied customers into loyal advocates who appreciate the company’s
efforts to make things right. By prioritizing service recovery, organizations
l h
e
can demonstrate their commitment to customer-centricity and improve
customer retention and brand reputation.
D
6.7.2 Executing Service Recovery of
i ty
s
Executing service recovery effectively requires a systematic approach that

e r
focuses on promptly addressing customer concerns, finding appropriate

i v
solutions, and restoring customer satisfaction. It is essential if the

n
organization wants to retain the customer as a repeat customer. In many

, U
cases, the organization may simply settle for resolving the customer
complaint satisfactorily enough so that the customer does not bad-mouth
the organization in social media fora.
O L
/ S
Some of the key steps to execute service recovery include:

O L
1. Active Listening and Empathy: When a customer raises a complaint
or expresses dissatisfaction, it is crucial to actively listen to their

/ C
concerns with empathy. Allow them to express their frustrations

E
and emotions without interruption. Show genuine understanding
C
D
and concern for their experience. Dismissing customer complaints

©D
off had is the worst thing that can be done as is mute listening and
stonewalling.
2. Swift Response: Time is of the essence in service recovery. Respond
to the customer’s issue promptly, acknowledging their complaint and
assuring them that their concern is being taken seriously. Prompt
action demonstrates the organization’s commitment to resolving
the problem. However, here lies a caveat. Sometimes in the rush
to address customer complaints we end taking actions that may
not be all together appropriate. The key is to take enough time

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 MBAFT 7606 SERVICE MARKETING

Notes to find an amicable and effective resolution but not to take an

inordinate amount in doing so. So for example, a complaint about
poor housekeeping and room cleaning service in a hotel may be
addressed immediately; whereas a complaint about bad employee
behaviour at the hotel spa may need more time to be investigated
thoroughly and then addressed.
3. Apology and Accountability: Offer a sincere apology to the customer,

i
taking responsibility for the issue at hand. Taking ownership of

l
the problem helps rebuild trust and shows the customer that their
h
e
satisfaction is a priority. Sincerity is the key here.

D
4. Solution and Compensation: Provide an appropriate solution that

of
addresses the customer’s specific issue. Offer compensation or a
gesture of goodwill, such as a refund, discount, or additional service,

i ty
to show the customer that their inconvenience is acknowledged and

r s
valued. Here employee empowerment also makes an appearance.

e
Minor issues can be settled with small gestures such as voucher for

v
n i
a free drink at the hotel bar and the front-line employees should
be empowered enough to do so.

, U
5. Follow-Up and Resolution: Ensure that the solution provided is

O L
implemented promptly. Follow up with the customer to confirm
that the issue has been resolved to their satisfaction. This step

/ S
demonstrates the organization’s commitment to long-term customer

O L
satisfaction and helps prevent similar issues from arising in the future.
This step can also be used to soothe the customer and attempt to

/ C
bring them back to the organization. For example, while a customer

C E complains about faulty workmanship at an auto repair shop and his

D
complaint is addressed, a follow up call a few days later by the

©D
Service Delivery Manager may help motivate the customer to give
the shop a second chance.
6. Learn and Improve: Service recovery should not end with resolving
the immediate problem. Analyse the root cause of the issue to identify
areas for improvement in processes, products, or training. Make the
necessary changes to prevent similar situations from recurring. The
aim should be to completely eliminate the problem and not simply
behave like we are sticking a Band-Aid on leaking nuclear reactor.

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By executing service recovery effectively, organizations can turn negative Notes

experiences into positive ones, regain customer trust and loyalty, and enhance
their reputation for exceptional customer service. It is an opportunity
to showcase a commitment to customer satisfaction and reinforce the
organization’s dedication to continuous improvement.

6.7.3 Short-term Actions to Mitigate Need for Service

i
Recovery

l h
e
Short-term actions can be taken to mitigate the need for service recovery
by proactively addressing potential issues before they escalate.
D
of
Some of the key steps to consider could be:

ty
1. Clear Communication: Ensure that communication with customers is

i
clear, accurate, and transparent. Provide comprehensive information

r s
about products, services, and policies to manage customer expectations

e
and minimize misunderstandings. Additionally, provide clear mechanisms
v
for registering complaints as well.

n i
U
2. Robust Training: Invest in thorough training programs for employees

,
to equip them with the necessary skills and knowledge to deliver

O L
exceptional service. Focus on customer service techniques, effective
communication, problem-solving, and conflict resolution to handle

/ S
customer interactions effectively. They need to be taught (through

L
managerial action) that while a complaint is bad, what is worse is
O
C
that if the root cause is not identified and addressed.

E /
3. Quality Control: Implement stringent quality control measures to ensure

C
that products and services meet or exceed customer expectations.

D
Conduct regular inspections, audits, or evaluations to identify and

©D
rectify any quality issues promptly.
4. Proactive Monitoring: Establish systems to proactively monitor
customer feedback, both solicited and unsolicited, through surveys,
social media monitoring, or customer feedback mechanisms. Actively
listen to customer concerns and address any emerging issues before
they escalate.
5. Empower Frontline Employees: Empower frontline employees
to make decisions and resolve customer issues promptly without

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 MBAFT 7606 SERVICE MARKETING

Notes unnecessary escalation. Provide them with the authority, tools, and
resources necessary to address customer concerns effectively.
6. Continuous Improvement: Foster a culture of continuous improvement
by encouraging employees to provide suggestions and feedback for
enhancing processes, products, and services. Regularly review and
evaluate customer feedback to identify opportunities for improvement
and take appropriate action.

i
By implementing these short-term actions, organizations can proactively

l h
address potential service issues, minimize customer dissatisfaction, and

D e
reduce the need for extensive service recovery efforts. This proactive
approach helps build strong customer relationships and enhances the
overall customer experience.
o f
i t
6.7.4 Systemic Efforts to Reduce Need for y Service Recovery
Activities
r s
v e
n i
Systemic efforts focus on implementing long-term strategies and changes
within an organization to reduce the need for service recovery activities.

, U
By addressing root causes and improving overall service delivery, these

L
efforts aim to enhance the customer experience and prevent bad ones

O
from happening in the first place.

S
/
Some of the key systemic approaches are:

L
O
1. Process Optimization: Streamline and optimize internal processes to

C
minimize errors, delays, and customer frustration. Identify bottlenecks,

E / eliminate unnecessary steps, and automate where possible to improve

C
efficiency and reduce the likelihood of service failures.

D D 2. Employee Training and Development: Invest in comprehensive

training programs to equip employees with the skills and knowledge
© necessary to deliver exceptional service. Continuous training and
development opportunities ensure that employees stay updated on
best practices and are equipped to handle customer needs effectively.
3. Feedback and Performance Management: Establish a robust
feedback and performance management system to regularly assess
employee performance. Provide constructive feedback, coaching,

166 PAGE
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 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

and recognition to motivate employees and address any performance Notes

gaps that may impact service quality.
4. Customer-Centric Culture: Foster a customer-centric culture throughout
the organization by aligning values, goals, and incentives. Encourage
employees at all levels to prioritize customer satisfaction and make
customer-centric decisions.
5. Data-Driven Decision Making: Leverage customer data and feedback

i
to drive decision-making processes. Analyse trends, identify recurring
issues, and proactively make improvements based on data insights
l h
to address customer pain points. Maybe adding more employees for
the breakfast rush at a hotel can help or perhaps the reservation
D e
of
management software can be upgraded to make it easier for the
employees to track a guest (and her needs and activity patterns) in
the hotel.
i ty
r s
6. Technology and Innovation: Embrace technology and innovation

e
to enhance service delivery. Implement customer relationship
v
i
management systems, self-service options, and automation tools that
n
U
improve efficiency, accessibility, and convenience for customers.

,
But self-service options may end up being at odds with the level

O L
of service being provided. So, for example; while a self-check-in
kiosk at Delhi Airport may work for the ordinary economy class

/ S
flier, it may not be wholly effective for a senior executive who is

L
flying First-Class with Emirates Airlines to New York.

O
C
By implementing these systemic efforts, organizations can create a

E /
foundation for delivering exceptional service consistently. These long-

C
term strategies focus on improving processes, empowering employees,

D
and fostering a customer-centric culture, ultimately reducing the need for

D
service recovery activities and enhancing overall customer satisfaction.

©
6.8 Summary
The chapter delves into various aspects of service quality, implementation
strategies, managing demand and supply, fostering a service culture, and
service recovery within organizations.
The concept of service quality is introduced as a critical factor in achieving
customer satisfaction and loyalty. It emphasizes meeting or exceeding

PAGE 167
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School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes customer expectations, ensuring reliability, responsiveness, empathy,

assurance, and tangibles. Service quality is a multidimensional construct
that requires a comprehensive approach to implementation.
Implementing service quality involves aligning organizational goals,
designing effective service processes, and empowering employees to deliver
exceptional service experiences. It highlights the importance of leadership
commitment, employee training, and continuous improvement initiatives.

i
Successful implementation requires a customer-centric mindset and the

l h
integration of service quality principles throughout the organization.

D e
Managing service demand and supply involves striking a balance between
customer expectations and operational capabilities. It explores techniques

of
such as forecasting demand, capacity management, yield management, and
waiting line management. By effectively managing demand and supply,

i ty
organizations can optimize resource allocation, enhance efficiency, and
reduce customer dissatisfaction.
r s
e
Service culture plays a vital role in shaping the overall service experience.
v
i
It encompasses the shared values, beliefs, and behaviours of employees,
n
U
which ultimately influence customer interactions. Cultivating a strong

,
service culture involves creating a supportive work environment, providing

O L
ongoing training and development opportunities, and recognizing and
rewarding exceptional service delivery. A robust service culture promotes

/ S
employee engagement, teamwork, and a customer-centric mindset.

O L
Service recovery addresses situations when service failures or customer

C
dissatisfaction occurs. It emphasizes the importance of promptly and

E /
effectively resolving customer issues to restore trust and loyalty. The

C
chapter explores strategies for service recovery, including listening to

D
customer complaints, taking immediate action, providing compensation or

©D
remedies, and learning from service failures to prevent future occurrences.
In conclusion, the chapter covers the concept of service quality,
implementation strategies, managing service demand and supply, fostering
a service culture, and service recovery. Understanding and effectively
implementing these concepts and strategies are crucial for organizations
to deliver exceptional service experiences, build customer loyalty, and
maintain a competitive edge in today’s dynamic business environment.

168 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

Delivering quality service is essential in today’s competitive world and Notes

it is important for both pure service organizations like a hotel or college
and for service enhanced products such a mobile phone or washing
machine. It is an exciting and oddly satisfying feeling to have customer
walk away from your organization satisfied with the services that they
have received. A satisfied customer is your best advertisement.
But, delivering quality service needs a lot of effort and a systematic

i
approach at your end. So, whether you are running your own business
or working as the manager of a hotel, do remember that developing and
l h
e
executing the right processes can help you in your endeavour to effective
serve your customers.
D
of
CASE STUDY

ty
Beating The Recession Through Customer Experience
A Case Study of DUCA Financial Services Credit Union, Canada
s i
Introduction
e r
i v
During the “Great Recession” of 2008, the global banking industry

n
faced significant challenges, leading to the failure of numerous financial
U
,
institutions. This Case Study examines how DUCA Financial Services

L
Credit Union (Hereinafter DUCA), a Credit Union used Customer

O
Experience to not just survive, but flourish, during that time.

S
Overview

L /
O
The Canadian banking industry is dominated by five ‘Schedule 1’

C
banks: Royal Bank of Canada, Toronto Dominion Bank, Bank of

E /
Montreal, Bank of Nova Scotia and Canadian Imperial Bank of

C
Commerce.

D
Credit unions, although smaller in size than the “Big Five” play a

©D
significant role in Canadian personal banking. Over a third of Canada’s
population currently dealt with one of the country’s 440 credit unions.
About DUCA
DUCA had been founded in 1954 by a group of Dutch-Canadian
immigrants who saw the need for an alternative to the big banks,
which at the time were largely inaccessible to the general public.

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School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes With the simple philosophy of people helping people, DUCA opened
its doors in Toronto and has since grown to be one of the most stable
financial institutions in the province of Ontario, with assets exceeding
two billion dollars.
Over the years DUCA had grown to provide full financial services
to 60,000 members with 16 branches.
DUCA’s Philosophy
DUCA embodies a philosophy of “people helping people,”. Processes
h i
e
in DUCA emanate from this philosophy. From a financial management
l
D
perspective, DUCA’s history of prudent lending, conservative investing

of
and controlled expenses has ensured continued success and stability
for members’ assets. And at branch level, DUCA has made a point

ty
to hire individuals who have strong customer service skills, and train

s i
them to deliver consistent world-class experiences.
Global Banking In Turmoil
e r
i v
Just past the mid-point of 2008, market uncertainty began to impact

n
the banking sector world-wide. Six U.S. banks had already failed
U
,
that year, and it was widely predicted that this was just a fraction

L
of things to come.

O
The predictions came true as, in the U.S. alone, 25 financial institutions
S
L /
failed, including the mammoth Washington Mutual Bank. DUCA was
not immune to the global financial problems. The market uncertainty

C O
caused a significant drop in the company’s deposits beginning in

/
August.

CE
DUCA Responds

D D To counter the downward trend and restore member confidence, DUCA

took proactive measures. The credit union increased communications
© with its members, emphasizing its solid financial position and
commitment to their well-being.
DUCA undertook numerous efforts and initiatives to ensure that it
would continue to provide great customer service to its members/
customers. Recognizing the significance of exceptional customer
service, DUCA invested heavily in training its employees to deliver
consistent world-class experiences.

170 PAGE
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School of Open Learning, University of Delhi
SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

By December 2008, the decline in deposits was effectively halted, Notes

indicating the initial success of their efforts.
DUCA Continues its Efforts
DUCA’s efforts continued into 2009, yielding profound results. The
credit union paid a 4% dividend to its members on existing shares
and added 10% in new patronage shares in January.
Their competitive products, coupled with outstanding customer service,
helped restore member confidence, and DUCA experienced growth
h i
even during one of the worst economic downturns.
e l
D
DUCA’s growth can be seen in this table below. Their numbers are

of
in stark contrast to the industry. During this same time period, over
100 financial institutions in the U.S. had failed.

ty
Table: Performance as of August 2009

s i
r
YTD Growth (8 mths) 12 month growth

e
Assets 8.23% 7.76%
Loans 4.65%
i v
7.11%
Deposits 8.43%

U n 7.58%

,
Core Reasons for DUCA’s Remarkable Success

O L
DUCA’s success in a VUCA (Volatile, Uncertain, Complex &
Ambiguous) period of the global banking industry can be put down
to these 6 factors:
/ S
O L
(i) In-Touch Leadership: DUCA’s CEO Advisory Council (a small

C
group of individuals representing a cross-section of DUCA’s

E /
employees. This group served as a sounding board for ongoing

C
initiatives and current business practices) facilitated continuous

D
communication between the leadership and employees, ensuring

©D
alignment and positive engagement. This group also enabled
the CEO to stay in touch with all aspects of the business, and
ensured that DUCA would continue to resonate positively with
employees and members.
(ii) Internal Analysis: DUCA hired a consultant to implement two
internal surveys. The first was a Work Environment Study,
which attempted to identify employee satisfaction levels and
potential areas where the organization could be improved.

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 MBAFT 7606 SERVICE MARKETING

Notes The second, a Service Value Study, was implemented 6 months

later to follow up on the benchmark results of the first survey
(iii) Ongoing Customer Service Training & Development: DUCA’s
consultant helped it to implement a comprehensive customer
service training program, significantly impacting member
satisfaction. To ensure that these lessons stuck, DUCA followed
it up with an internal customer service training initiative to
ensure that all employees were aligned and working together.

h i
(iv) Continuous Improvement: Inspired by Kaizen (the Japanese
e l
D
philosophy of making small but continuous improvements),

of
DUCA emphasized continuous improvement and sought inputs
from its staff on how to do so. Using surveys, DUCA collected

ty
inputs from the CEO Advisory Council, employees, members/

i
customers and other sources and undertook feedback analysis

s
r
in conjunction with the training programs being run to figure

v e
out a best course of action, DUCA continues to make sure that

i
it is constantly refining its processes and practices.
n
U
(v) Fiscal Responsibility: DUCA’s focus on profitability and efficiency

L ,
allowed them to keep operating expenses lower than industry
averages, resulting in lower service charges for members. DUCA’s

S O
operating expenses at 1.62% of average assets are significantly

/
lower as compared to the Credit Union average of 2.87%. This
L
O
increases profitability, and allows for lower service charges.

/ C
(vi) Rewarding Loyal Members: DUCA’s bonus share program

E
shared profits with members, strengthening the value proposition

D C of banking with DUCA; its members enjoying a net impact of

less interest being paid and more interest being earned.

©D
Result of DUCA’s Customer-Centric Approach
As a result of its focus on customer experience, DUCA not only
weathered the recession but thrived. Today, with over $2 billion
in assets and a reputation for stability and unparalleled member
satisfaction, DUCA stands as a testament to the power of putting
customers at the heart of business strategy..

172 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

Case Questions Notes

1. How did DUCA Financial Services Credit Union’s philosophy
of “people helping people” contribute to their success during
the “Great Recession” of 2008? How did this guiding principle
influence their approach to customer experience and service
delivery?
2. Discuss the impact of market uncertainty on DUCA Financial
Services Credit Union during the global banking turmoil of

h i
2008. How did the credit union respond to the drop in deposits,
and what strategic measures did they take to restore member
e l
D
of
confidence?
3. DUCA Financial Services Credit Union invested heavily in

ty
customer service training and development. How did this

i
initiative contribute to the credit union’s ability to thrive during
s
r
the recession? Provide examples of how exceptional customer

e
v
service positively impacted their members’ experience.

n i
4. Identify and elaborate on the five core reasons for DUCA’s

, U
remarkable success during the recession. How did their “In-
Touch Leadership,” continuous improvement efforts, fiscal

L
responsibility, and loyalty reward program contribute to their
O
S
growth and reputation for stability and member satisfaction?
Reference/Source
L /
O
This case study has been adapted from:

C
E /
Belding Training. (2020). How One Bank Beat the Recession by
Focusing on Their Customer. Retrieved from https://beldingtraining.

C
com/wp-content/uploads/2020/02/How-one-bank-beat-the-recession-
D
D
by-focusing-on-their-customer.pdf

©
6.9 Answers to In-Text Questions

1. (c) The degree of excellence in service delivery that meets or

exceeds customer expectations
2. (b) Conducting regular service audits
3. (c) To optimize resource allocation and avoid service gaps or
overcapacity

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 MBAFT 7606 SERVICE MARKETING

Notes 4. (b) The shared values, beliefs and behaviours that prioritize customer
satisfaction and service excellence
5. (c) To restore customer confidence and satisfaction after a service
failure
6. (b) Providing compensation or remedies to address customer issues

6.10 Self-Assessment Questions

h i
e l
1. Explain the concept of service quality and its significance in the
service industry. How does providing high-quality service contribute
D
to the success and competitiveness of an organization?

of
2. Implementing service quality requires a systematic approach. Describe

ty
the key steps involved in implementing service quality within an

i
organization. What strategies can be employed to measure and
s
monitor service quality effectively?

e r
i v
3. Managing service demand and supply is crucial for maintaining

n
optimal service levels. Discuss the challenges organizations face

, U
in managing service demand and supply. What strategies can be
utilized to effectively align service capacity with customer demand?

O L
4. Service culture plays a vital role in delivering exceptional customer

/ S
experiences. Define service culture and explain its importance in

L
fostering a customer-centric organizational environment. How can

O
organizations promote and sustain a strong service culture?

C
E /
5. Service recovery is a critical component of service management.
Describe the concept of service recovery and its significance in

D C maintaining customer satisfaction and loyalty. Provide examples of

©D
effective service recovery strategies that organizations can employ
when faced with service failures or customer complaints.

6.11 References
‹ Deshpande, R., & Raina, A. (2014). The ordinary heroes of the Taj.
Harvard business review. 89. 119-125. Retrieved from https://hbr.
org/2011/12/the-ordinary-heroes-of-the-taj.

174 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
SERVICE QUALITY, SERVICE DELIVERY, SERVICE CULTURE

‹ Department of Trade and Industry. (2005). Quality, cost, delivery: Notes

measuring business performance. London, UK. Retrieved from https://
industryforum.co.uk/wp-content/uploads/sites/6/2015/07/QCD.pdf.
‹ Cronin, J. J., & Taylor, S. A. (1994). SERVPERF versus SERVQUAL:
Reconciling performance-based and perceptions-minus-expectations
measurement of service quality. Journal of Marketing, 58(1), 125–131.
doi:10.1177/002224299405800110.

i
‹ National Research Council. (2000). Surviving Supply Chain Integration:
Strategies for Small Manufacturers. Washington, DC: The National
l h
Academies Press. https://doi.org/10.17226/6369.

D e
of
‹ Parasuraman, A., Zeithaml, Valerie, & Berry, Leonard. (1985).
A conceptual model of service quality and its implications for

ty
future research (SERVQUAL). Journal of Marketing, 49(4), 41.
doi:10.2307/1251430.

s i
‹

e r
Zeithaml, Valerie, Bitner, Mary Jo, & Gremler, Dwayne (2018).

v
Services Marketing: Integrating customer focus across the firm (7th
ed.). New York, NY. McGraw-Hill Education.
n i
6.12 Suggested Readings
, U
O L
Ford, R. C., Heaton, C. P., & Brown, S. W. (2001). Delivering
S
‹

L /
excellent service: Lessons from the best firms. California Management
Review, 44(1), 39–56. doi:10.2307/41166110.

C O
/
‹ Frei, Frances, X. (2006). Breaking the Trade-off between Efficiency

E
and Service. Harvard Business Review. 84. 93-101, 156.
‹

D C
Frei, Frances, X. (2006). Customer-Introduced Variability in Service
Operations. Harvard Business School Background Note 606-063.

©D
‹ Kotler, P., Wong, V., Saunders, J., & Armstrong, G. (2005). Principles
of Marketing (4th European ed.). Harlow, Essex. Pearson Education
Limited.
‹ Lovelock, C., Wirtz, J., & Chatterjee, J. (2018). Services Marketing:
People, Technology, Strategy. (Indian Subcontinent Adaptation).
Noida, UP: Pearson.
‹ Reichheld, F. F., & Sasser, W. E., Jr (1990). Zero defections: Quality
comes to services. Harvard Business Review, 68(5), 105–111.

PAGE 175
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 Glossary
4P’s: McCarthy’s 4P’s (product, place, price, promotion, process, physical distribution)
also called marketing mix.
7P’s: 4P’s + promotion, process, physical distribution also called service mix.
Bonding: The emotional connection that develops between a customer and a service provider.
Consumer and Prosumer: A consumer refers to an individual or organization that consumes
h i
e l
or uses a service. A prosumer, on the other hand, is a term that combines “producer” and

D
“consumer” and refers to individuals who not only consume services but also actively

of
participate in their production or customization.
Continuum of Tangibility: A Continuum of tangibility is a spectrum of goods and services

i ty
made up of tangible and intangible elements. The tangible elements on the extreme left

s
of the spectrum are pure goods and the intangible elements on the extreme right end of
the spectrum are pure services.
e r
i v
Customer Lifetime Value (CLTV): The estimated total value that a customer will bring

n
to a business over the course of their relationship.
U
,
Employee Empowerment: It enables employees to take ownership of their roles, make

L
independent decisions and go above and beyond to meet customer needs.

O
S
Encounter Modification: Changing how customers interact with service providers to

L
improve the customer experience.
/
O
Excess Demand: When the demand for services exceeds the organization’s capacity to

/ C
deliver, customers may experience long wait times, delays or difficulties in accessing the

E
service.

C
Excess Supply: Having an excess supply of service resources with limited demand can
D
©D
result in underutilized resources, wasted capacity and increased operational costs.
Front Line: The front line refers to the employees or personnel who directly interact
with customers during the service delivery process. They are often the face of the service
organization and play a crucial role in shaping the customer’s perception and experience.
Innovation: New and unique
Inseparability: Inseparability of any service is its characteristic by virtue of which it cannot
be separated from the person or the firm selling it which further renders it impossible to
separate the production of a service from its consumption.

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 MBAFT 7606 SERVICE MARKETING

Notes Intangibility: Intangibility of services is their inherent characteristic by

virtue of which it is not possible to touch, taste, feel, see, hear or smell
a service.
Inter-Functional Conflict and Harmonization: Inter-functional conflict
refers to disagreements or tensions that arise between different departments
or functions within a service organization. Harmonization, on the other
hand, refers to the process of resolving conflicts and fostering cooperation

i
and collaboration among different functions to achieve common goals
and enhance service performance.
l h
the course of their relationship.
D e
Lifetime Value: The total value that a customer brings to a business over

of
Line of Internal Interactions: The line of internal interactions represents

ty
the flow of activities and communication between different departments

i
or functions within a service organization. It includes coordination and

s
r
collaboration between various units to ensure efficient service delivery.

v e
Line of Visibility: The line of visibility separates the front stage (visible

n i
to customers) from the backstage (not visible to customers) in a service

U
environment. It determines which activities and processes are directly

,
observed by customers and which remain behind the scenes.

L
O
Marketing Mix for Services: Businesses use marketing tools and tactics

S
to promote and sell their services. In the services business, they are

L /
primarily known as 7Ps.

O
Moment of Truth: The critical moment in a customer’s experience with

C
/
a service where their expectations are either met or exceeded.

C EPhysical Evidence: It is a set of tangible cues that hints towards the

D
quality of service being delivered.

©D
Quality-Cost-Delivery (QCD): This framework lays down principles
such as Not Right First Time (NRFT), Delivery Schedule Achievement
(DSA), People Productivity (PP) and Value Added Per Person (VAPP)
that can readily be employed by the service industry.
RATER Model: The RATER model, introduced by Zeithaml, Bitner and
Gremler, expands on the SERVQUAL dimensions by including additional
aspects: reliability, assurance, tangibles, empathy and responsiveness.

178 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 GLOSSARY

Relationship Marketing: A marketing approach that focuses on building Notes

long-term customer relationships rather than simply selling products or
services.
SERVPERF Model: The SERVPERF model focuses on the performance
aspect of service quality. It assesses the actual service received by
customers, rather than comparing expectations and perceptions.
SERVQUAL Model: Developed by Parasuraman, Zeithaml and Berry,

i
the SERVQUAL model focuses on five dimensions of service quality:
reliability, assurance, tangibles, empathy and responsiveness.
l h
Service: A service is any activity or benefit that one party can offer
D e
of
to another, which is essentially intangible and does not result in the
ownership of anything.

ty
Service Blueprinting: Service blueprinting is a visual representation of

s i
the service delivery process that helps identify and design the various

r
customer touchpoints, employee actions and support processes. It provides
e
v
a detailed overview of the service experience and enables improvements
in service quality and efficiency.
n i
, U
Service Culture: It refers to the collective behaviours, values and attitudes
within an organization that prioritize and enhance the customer experience.

O L
Service Encounter: Any interaction between a customer and a service
provider.
/ S
O L
Service Encounter Classification: The categorisation of service encounters
based on the level of customisation and customer contact involved.

/ C
E
Service Innovation: The development of new or improved services that

C
meet customers’ changing needs and demands.

D
Service Management Trinity: The service management trinity refers to

©D
the interdependence and interaction between three key functions in service
organizations: production (operations), marketing and human resources.
These functions work together to ensure the effective design, delivery
and management of services.
Services Marketing: It is the integrated system of business activities
designed to plan, price, promote and distribute appropriate services for
the benefit of existing and potential consumers to achieve organizational
objectives.

PAGE 179
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
 MBAFT 7606 SERVICE MARKETING

Notes Service Quality: It refers to the degree to which a service meets or

exceeds customer expectations. It encompasses various aspects of the
service experience, including reliability, responsiveness, assurance, empathy
and tangibles.
Service Quality Benchmarks: These are predetermined standards or
metrics used to assess the level of service provided by an organization.
These benchmarks are typically established based on industry best practices,

i
customer expectations and internal goals.
Service-Quality-Delivery-Pricing (SQDP): This paradigm is a
l h
and pricing strategies in organizations.
D e
comprehensive framework that combines service quality, service delivery

of
Service Recovery: It is a process that identifies service failures, effectively

ty
resolves customer problems, classifies their root cause and yields data

i
that can be integrated with other measures of performance to assess and

s
r
improve the service system.

v e
Service System Mapping: Service system mapping is a technique used to

n i
visualize and analyse the various components, processes and interactions

U
involved in a service system. It helps in understanding the flow of

,
activities, identifying bottlenecks and improving overall service delivery.

L
O
Servuction System: The servuction system refers to the combination of

S
factors and processes involved in the creation and delivery of services.

L /
It includes both visible (physical environment, employees) and invisible

O
(technology, systems) elements that influence the customer’s service

/ C
experience.

C ESystem Modification: Changes the overall service system to improve

efficiency, quality or responsiveness.

D
©D
USP: Unique Selling Proposition
Value Drivers: Factors that contribute to the perceived value of a service,
such as quality, convenience and customer service.

180 PAGE
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School of Open Learning, University of Delhi