Services Marketing
Dr. Swapnaja Tapadia
What Is a Product?
• Anything offered to a market that satisfies a want or
need.
– Includes: physical objects, services, events, persons,
places, organizations, ideas, or some combination thereof.
What Is a Service?
• Activities, benefits, or satisfactions offered to a market that
are essentially intangible and do not result in the ownership
of anything.
– Examples: banking, hotel, airline, retail, tax preparation, home repairs.
The Nature of Services
• regardless of the “product”, there is a services
component to the offerings of all firms
• in some cases, a service is the principal
purpose of the transaction, as in the rental of
a car, a haircut, or legal services -- we refer to
this as the core service
• in others, service is performed in support of
the sale of a tangible product -- these are
referred to as supplementary services
12 - 4
Goods Vs Services
BASIS FOR COMPARISON SERVICES
GOODS
Meaning Goods are the material items Services are amenities,
that can be seen, touched or facilities, benefits or help
felt and are ready for sale to the provided by other people.
customers.
Nature Tangible Intangible
Transfer of ownership Yes No
Evaluation Very simple and easy Complicated
Return Goods can be returned. Services cannot be returned
back once they are provided.
Separable Yes, goods can be separated No, services cannot be
from the seller. separated from the service
provider.
Variability Identical Diversified
Storage Goods can be stored for use in Services cannot be stored
future or multiple use.
Production and Consumption Goods have a significant time Services are produced and
gap between production and consumed together
consumption
Four Service Characteristics
4 Characteristics of Services
1. Intangibility - “u can’t touch this”
2. Production (or performing the service) and
Consumption (using the service) - happens at
the same time
3. Variability/Heterogeneity - services are
not always delivered the same way
4. Perishability - cannot be put in inventory or
stored for later use
ie. You can’t buy 2 haircuts
Characteristics of Services
1. Intangibility - “u can’t touch this”
• Services cannot be protected through patents
- therefore a really great travel package and
service can be copied
a really great physical object can be patented, and
NOT allowed to be copied
Characteristics of Services
1. Intangibility - “u can’t touch this”
• Hard to explain and display Services if you can’t
see them
• Prices are difficult to set - depends on
customers expectations
Characteristics of Services
1. Intangibility - “u can’t touch this”
Marketing Strategies
• stress tangible cues, eg. Smiling face
• use personal information, sources, references
• use word-of-mouth
• contact customers after they buy to stimulate
continued enthusiasm and hope they “talk it up”
Characteristics of Services
2. Inseparability of Production (or performing
the service) and Consumption (using the
service) - happens at the same time
• Many people involved in delivering a service
• mass production of services is hard to do
Characteristics of Services
2. Inseparability of Production (or performing
the service) and Consumption (using the
service) - happens at the same time
Marketing Strategies
• Emphasize how much you train your people - so their
ability to give you good service will be high
• Have many locations so customers can get to you
• ie. Insurance sales come to your home
Characteristics of Services
3. Heterogeneity - services are not always
delivered the same way
It is very difficult to standardize services
eg. A machine can make ice cream cones a
standard size 100% of the time
A person filling an ice cream cone with a scoop
cannot do it the same amount each time, unless
you use a machine to dispense the ice cream
Characteristics of Services
3. Variability/Heterogeneity - services are not
always delivered the same way
It is very difficult to standardize services
eg. A Taxi driver cannot drive you to the office in
exactly the same time each day because the traffic
patterns change
eg. A travel agent can sell you a vacation package -
but cannot guarantee you will like the trip exactly
the same way another tourist did.
Characteristics of Services
4. Perishability - cannot be put in inventory or
stored for later use
ie. You can’t buy 2 haircuts
Demand fluctuates and changes, sometimes
depending on the season, or weather
eg. Taxi in the rain, vacation in summer
Four Service Characteristics –
Restaurant Example
How do the service
characteristics of intangibility,
variability, inseparability, and
perishability relate to
restaurants?
Goods and Services
Continuum
• There are two classes of services.
– Services that are the main purpose of a
transaction —renting a truck to move.
– Services that supplement the sale of a tangible
good — for example, an information hotline for
computer software.
• The focus here is primarily on identifiable, intangible
services that are the main object of a transaction
designed to provide want-satisfaction to customers;
supplementary services growing in importance,
however.
The Goods-Services
Continuum
Canned Ready- Auto- Draperies, Rest- Repairs: Air Insurance,
foods made mobiles Carpets aurant auto, house, travel Consulting,
clothes meals landscaping Teaching
MOSTLY GOODS MOSTLY SERVICES
Various Classes of Consumer and
Industrial Goods and Services
Goods and Services
Consumer Goods Consumer Services Industrial Goods Industrial Services
Convenience Goods Shopping Goods Specialty Services Convenience Services Production Goods Support Services
eg. Mac's Milk eg. clothing eg. banking eg. fast foods raw material component materials accessory equipment installations
grain, steel parts nuts, bolts tools, computers
eg. newspaper eg. groceries eg. travel eg. circuit board eg. buildings
eg. wiring
harness
Classification of
Services
Services
“Any activity or benefit that one party can
offer to another that is essentially intangible
& does not result in the ownership of
anything. It’s production may or may not be
tied up to a physical product.”
Services Vs Goods
Services Goods
Intangible Tangible
Heterogeneous Homogenous
Produced in Buyer Seller interaction Produced in factory
Production, distribution & consumption takes All three are separate & independent
place simultaneously
Consumers participate in production Consumers don’t generally participate
Cannot be stored Can be stored
Transfer of ownership cannot take place Transfer of ownership does take place
Characteristics of
Services
Classification of
Services
It is required to design & apply marketing techniques to
completely satisfy the customer & increase profits & identify
new emerging services.
Classifications can be done on following basis:
• Classification by Industry
• Classification by Target Effect
• Skill level of service provider (Professional/ Nonprofessional)
• Labor intensiveness (People-based/Equipment-based)
• Degree of customer contact (High / Low)
• Goal of the service provider (Profit /Nonprofit)
Classification By
Industry
a. Entertainment industry
b. Education
c. Telecommunications
d. Finance & Insurance
e. Transportation
f. Public utilities
g. Government services
h. Health
i. Hospitability Industry
j. Business services
k. Telecommunications
l. Trading
Classification By
Target Effect
Based on Degree Of Customer Involvement:
1. People Processing: Services aimed at physical care e.g.
Healthcare, clinics, restaurant, hospitals, hair stylists, fitness centers
2. Mental Stimulus Processing: Services aimed at mind of customer
e.g. Education, information, entertainment, consulting, psychotherapy
3. Possession Processing: Services aimed at physical possession &
tangible assets e.g. repair & maintenance, laundry, repair services,
landscaping, house cleaning services
4. Information Processing : Services for intangible assets e.g.
Banking, legal consultation, brokerage, financial services.
Skill level of service
provider
•Teacher
•Doctor
•Engineer
•Accountant
Labor intensiveness
Mechanic
Electrician
Labor
Plumber
Artisan
Degree of customer
contact
High Degree (Every day) – TV channels,
mobile etc.
Moderate Degree (Regular) – Teacher,
Barber, washer man etc.
Low Degree ( Occasional ) – Priest,
Doctors etc.
Importance of Services
Marketing
1. To reduce dependence of technology
2. Increases competitive strength
3. Creation of new sources of
employment.
4. To improve the standard of living.
Services cannot be
inventoried
Services cannot be
patented
Implications
of Services cannot be readily
Intangibility displayed or communicated
Pricing is difficult
✓ Service delivery and
customer satisfaction
depend on employee
actions.
Implications ✓ Service quality depends on
of many uncontrollable factors.
Heterogeneity
✓ There is no sure knowledge
that the service delivered
matches what was planned
and promoted
✓ Customers participate in and
Implications affect the transaction
of ✓ Customers affect each other
Simultaneous ✓ Employees affect the service
Production outcome
and ✓ Decentralization may be
Consumption essential
✓ Mass production is difficult
Implications of
Perishability
✓ It is difficult to
synchronize supply
and demand with
services
✓ Services cannot be
returned or resold
PRODUCT LEVELS (TV)
CORE BENEFIT : SERVICES OR BENEFITS CUSTOMER
IS REALLY BUYING. HERE, CUSTOMER IS
BUYING MEANS FOR ENTERTAINMENT
(INFORMATION).
POTENTIAL
PRODUCT
BASIC PRODUCT : BASIC TELEVISION WITH
AUGMENTED
PRODUCT ESSENTIAL FUNCTIONS.
EXPECTED
PRODUCT EXPECTED PRODUCT : TELEVISION WITH VERY
CLEAR PICTURE & SOUND .
BASIC
PRODUCT
AUGMENTED PRODUCT: TELEVISION WITH LCD,
LED, 3D TECHNOLOGIES ALONG WITH 24 X 7
SERVICE BACK UP, FINACIAL SUPPORT,
CORE
DELIVERY, WARRANTY ETC.
BENEFIT
POTENTIAL PRODUCT : ALL POSSIBLE
AUGMENTATIONS & TRANSFORMATIONS PRODUCT
/ OFFERING MIGHT UNDERGO IN THE FUTURE.
PRODUCT LEVELS
In planning its market offering, the marketer needs to
think through five levels of the product.
Each level adds more customer value, and the five
constitute a customer value hierarchy.
• Core benefit: The most fundamental level is the core
benefit. The fundamental service or benefit that the
customer is really buying. Ex. - A hotel guest is buying
“rest and sleep”; the purchaser of a drill is buying
“holes.”
• Basic Product: At the second level, the marketer has to
turn the core benefit into a basic product. Ex. - A hotel
room which includes a bed, bathroom, towels, and
closet.
PRODUCT LEVELS
• Expected Product: At the third level, the marketer
prepares an expected product, a set of attributes and
conditions that buyers normally expect when they buy
the product. Ex. - Hotel guests expect a clean bed, fresh
towels, and so on.
• At the fourth level, the marketer prepares an
augmented product that exceeds customer
expectations. A hotel might include a remote-control
television set, fresh flowers, and express check-in and
checkout. However, product augmentation adds cost, so
the marketer must determine whether customers will
pay enough to cover the extra cost.
PRODUCT LEVELS
Augmented benefits soon become expected benefits,
which means that competitors have to search for still
other features and benefits. And as companies raise the
price of their augmented product, some competitors
can offer a “stripped-down” version of the product at a
much lower price.
• Potential Product: At the fifth level stands the potential
product, which encompasses all of the possible
augmentations and transformations the product might
undergo in the future. Here, a company searches for
entirely new ways to satisfy its customers and
distinguish its offer.
PRODUCT LEVELS
Ex. - Marriott’s Towne Place Suites all-
suite hotels represent an innovative
transformation of the traditional hotel
product.
