Services

Marketing
 Course Outcomes
CO No CO Description

Course Analyzing and applying the knowledge of Service Marketing

Outcome (CO) concepts and understanding the growing importance of Service
1 Industry
Course
Outcome (CO) Identifying the customers focus on services
2
Course Understanding the services design and delivering the same through
Outcome (CO) intermediaries or channels
3
Course Emphasizing the role of pricing and promotion with
Outcome (CO) sectoral perspectives
4
 Introduction
• Kotler and Bloom in 1984, defined service as, “any activity or benefit
that one party can offer to another that is essentially intangible and
does not result in the ownership of anything. Its production may or
may not be tied to a physical product”.
• We may say service as, “an activity or series of activities rather than
things which has some element of intangibility associated with it,
which involves some interaction between the customer and the
service provider, and does not result in a transfer of ownership.
• Customer has a vital role to play in the production process as the
services are provided in response to the problems of customers as
solution. The production of the service may or may not be closely
associated with a physical product”.
 Services
• Services marketing is Marketing
marketing based on relationship and value. It may be
used to market a service or a product.
• Service marketing refers to the application of a different set of tactics or
strategies to anticipate the consumer’s need for an intangible product. And
thus, meet their requirements accordingly, to create maximum value for
them from their purchase.
• Marketing a service-base business is different from marketing a product-
base business. There are several major differences, including:
• The buyer purchases are intangible
• The service may be based on the reputation of a single person
• It's more difficult to compare the quality of similar services
• The buyer cannot return the service
• Service Marketing mix adds 3 more p's, i.e. people, physical
evidence, process.
 CHARACTERISTICS OF
SERVICES
• Intangibility: The most basic and universally cited characteristic of
services is intangibility, because services are performances or actions
rather than objects, they cannot be seen, felt, tasted, or touched in
the same manner that we can sense tangible goods.
• For example, when we buy a soap, we can see, feel, smell and use to
check its effectiveness in cleaning.
• When we travel by a plane, the benefit which we are deriving is a
service (transportation) but, it has some tangible aspects such as the
particular plane in which we fly (Boeing, Avro, Concorde, etc.) and the
food and drink which are served.
 CHARACTERISTICS OF
SERVICES
• Inseparability: In most cases a service cannot be separated
from the person or firm providing it.
• Services are typically produced and consumed at the same
time.
• A plumber has to be physically present to provide the
service, the beautician has to be available to perform the
massage.
• The service provider and the client are often physically
present when consumption takes place.
 CHARACTERISTICS OF
SERVICES
• Heterogeneity: Since services are performances, frequently produced
by human beings, no two services will be precisely alike.
• The human element is very much involved in providing and rendering
services and this makes standardization a very difficult task to
achieve.
• The doctor who gives us complete attention in one visit may behave a
little differently in next visit.
• Heterogeneity also results because no two customers are precisely
alike; each will have unique demands or experience the service in a
unique way.
 CHARACTERISTICS OF
SERVICES
• Perishability: Perishability refers to the fact that services cannot be
saved, stored, resold, or returned.
• Since services are deeds, performances or acts whose production and
consumption takes place simultaneously, they tend to perish in the
absence of consumption.
• Goods can be stored and sold at a later date in the absence of a
customer.
• Services, on the other hand, go waste if they are not consumed. A
seat on an airplane or in a restaurant, an hour of a consultant’s time,
or telephone line capacity not used cannot be reclaimed and used or
resold at a later time.
 CHARACTERISTICS OF
SERVICES
• Ownership: When we buy a product, we become its owner-be it a
pen, book, shirt, TV or Car. In the case of a service, we may pay for its
use, but we never own it.
• By buying a ticket one can see the evening film show in local cinema
theatre; by paying wages one can hire the services of a chauffeur who
will drive his car; by paying the required charges we can have a
marketing research firm survey into the reasons for our product’s
poor sales performance, etc.
• In case of a service, the payment is not for purchase, but only for the
use or access to or for hire of items or facilities; and transfer of
ownership does not take place.
 GOODS VS
BASIS FOR COMPARISON SERVICES
GOODS SERVICES
Meaning Goods are the material items that Services are amenities, facilities,
can be seen, touched or felt and benefits or help provided by other
are ready for sale to the customers. people.

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 from No, services cannot be separated
the seller. 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 There is a time lag between Production and Consumption of
production and consumption of services occurs simultaneously.
goods.
TANGIBILITY
SPECTRUM
 TANGIBILITY
SPECTRUM
Industry/ Tangible or Rationale
Product
Intangible?
Can of food Tangible The consumer is simply a physical product without any expectation of additional service
Car Tangible The consumer is primarily receiving tangible product, however the manufacturer may package the offering with
some intangible elements, such as: finance, free servicing and a warranty period
Pre-made meal Tangible This is similar to the above example of the can of food, but also contains an intangible element – in this case the product
has moved beyond simply a basic ingredient to be a mixed offering of food items that can be quickly and easily prepared
as a meal. Therefore, the preparation provided can be considered an element of service
Fast food Mixed Most textbooks will describe a fast food (or quick serve) outlet as having a balanced mix of tangible and intangible
elements.
The various menu items are clearly tangible and the intangible elements are the use of the facilities (that is, seating, rest
rooms, and playground) as well as the actual customer service provided
Formal Mixed The next level up the intangibility continuum would be a formal (fine dining) restaurant. Like a fast food chain, they also
restaurant provide tangible food and drink; however they package their offering with high levels of customer service, special
orders, and high quality facilities and so on
Airline Intangible Airlines primarily deliver intangible benefits – essentially the physical movement of people, luggage and goods. They
have some tangible offerings as well, usually food and beverages served on the flight
Movies Intangible Movies/cinemas are similar to airlines above, where the prime offering is intangible (entertainment, great viewing
experience, comfortable facilities), as well as some tangible elements of snacks, drinks and even souvenirs, toys and
3D glasses
Hotel Intangible Hotels and associated hospitality providers are highly intangible in their offerings. Consumers have use of a room, the
hotel’s facilities and possible entertainment. Like the food businesses above, they will also tangible meal solutions
Education/Cons Intangible At the top end of the continuum are industries such as education, professional service firms, banking and insurance. They
ulting can be considered “pure” service firms as they do not tend to offer anything tangible elements (other than a book or a
report, for example, from a consulting firm
TYPES OF MARKET OFFERINGS &
IMPLICATIONS
CONCEPT OF SERVICE MARKETING
TRIANGLE
 MARKETING MIX FOR
• PRODUCT: ASERVICES
product is an overall concept of objects or processes which provide some
value to customer; goods and services are subcategories which describe two types of
product. Thus, the term product is frequently used in a broad sense to denote either a
manufactured good or a service.
• In fact, customers are not buying goods or services - they are really buying specific
benefits and value from the total offering.
• To find this match it is desirable to analyse the service at the following levels:
• Customer benefit concept: The service product which is offered in the market must have
its origin in the benefits which the customers are seeking.
• But, the problem is that customers themselves may not have a clear idea of what they are
seeking, or they may find it difficult to express or it may be a combination of several
benefits and not a single one.
• Over a period of time, the benefits sought may also change. This change in customer may
come about by a satisfactory or unhappy experience in utilizing the service, through
increased sophistication in service use and consumption, and changing expectations.
 MARKETING MIX FOR
SERVICES
• Service concept: Using the customer benefits as starting point, the service
concept defines the specific benefits which the service offers. At the generic level,
the service concept refers to the basic service which is being offered. A center for
performing arts may offer entertainment and recreation.
• Service offer: After defining the business in which we are operating, the next step
is to give a specific shape and form to the basic service concept. In the category of
musical concerts the choice may be vocal or instrumental, with vocal whether
light or classical, Hindustani, Carnatic or Western.
• Service forms: In what form should the services be made available to the
customers is another area of decision making. Should each performance have a
separate entrance ticket, with a higher priced ticket for a well-known performer?
Service form refers to the various options relating to each service element.
• Service delivery system: The consumer’s service experience is, as such, a result of
provider-customer interaction, atmosphere, emotional stress, anxieties, surprises,
etc. It is because of these delivery factors (varying at different points of time) that
no two customer experiences are identical.
 MARKETING MIX FOR
SERVICES
• Price: Pricing is one factor that has received much less attention in
service firms.
• The role price plays in the marketing strategy is lesser known in
service firms than in manufacturing firms.
• The pricing strategy for services is difficult to achieve unlike in
products, where in the final price depends on the raw materials, cost
of production and distribution etc.
• However, in service pricing, you cannot measure the cost of the
services easily.
• For example, if you are in the food and hospitality industry, how would
you charge the customers for the care shown by the host or hostess,
the ambience in the restaurant or the fine taste of the delicacies?
 MARKETING MIX FOR SERVICES

• Unlike in manufactured goods, where price has one common name across a wide
range of goods, such as, fruits, clothes, computers, cars, etc.; price in services goes by
different names.
• The services are diverse. The extent of their diversity can be gauged by the names by
which the price is called in services. Some terms referring to price in different
services are listed. Almost every service has its own price terminology.
 MARKETING MIX FOR
The pricing tactics thatSERVICES
may be used to sell services are:
• (i) Differential or Flexible Pricing: Customer’s ability to pay differentials (as in professional services of
management consultants, lawyers). Ex services of management consultants, lawyers
• (ii) Discount Pricing: It refers to the practice of offering a commission or discount to intermediates such as
advertising agencies, stock brokers, property dealers for rendering a service. Ex try a new service
• (iii) Diversionary Pricing: It refers to a low price which is quoted for a basic service to attract customers. Ex.
restaurant
• (iv) Guaranteed Pricing: It refers to pricing strategy in which payment is to be made only after the results are
achieved. Ex. Employment agencies
• (v) High Price Maintenance Pricing: This strategy is used when the high price is associated with the quality of
the service. Ex. doctors
• (vi) Introductory Pricing: It is one in which an initial low price is charged in the hope of getting more
business at subsequently better prices. Ex. Start ups
• (vii) Offset Pricing: It is quite similar to diversionary pricing in which a basic low price is quoted but the extra
services are rather highly priced. Ex. doctor
• (viii) Competitive parity pricing: Prices are set on the basis of following those set by the market leader.
 MARKETING MIX FOR
• Place – TheSERVICES
place where you choose to conduct your service business can
make or break your organizational growth.
• You need to understand how visible your setup would be to potential
customers and how frequently it would be visited by consumers.
• For example, would you set up a fast-food center near a college or office
hub, where students and professionals can quickly grab a bite or next to a
big restaurant in a classy neighborhood?
• Since service delivery is simultaneous with its production and cannot be
stored or transported, the location of the service product assumes
importance.
• Service providers have to give special thought to where the service would
be provided.
• Thus, a fine dine restaurant is better located in a busy, upscale market as
against on the outskirts of a city. Similarly, a holiday resort is better
situated in the countryside away from the rush and noise of a city.
 MARKETING MIX FOR
SERVICES
• There are three critical issues that must be sorted out while evolving the
distribution channels for a service:
• (i) Location of the service: Location is concerned with the decisions a firm
makes about where its operations and staff are situated. The importance of
location for a service depends upon the type and degree of interaction
involved.
• (ii) Channels through which services are provided: The second decision
variable in the distribution strategy is whether to sell directly to the
customers or through intermediaries. Traditionally it has been argued that
direct sales are the most appropriate form of distribution for services.
• (iii) How to provide service to maximum number of customers: The third
decision variable in the distribution strategy is how to provide the service
to a maximum number of customers in the most cost-effective manner.
 MARKETING MIX FOR
• PromotionSERVICES
– The service industry usually has stiff competition across
different verticals and the business would need a lot of promotions to
pass on the right message to potential customers.
• While advertising, online and direct marketing are the best ways to
promote your service you need to have a good mix of communication
channels to address a larger audience.
• Since a service offering can be easily replicated promotion becomes
crucial in differentiating a service offering in the mind of the
consumer.
• Thus, service providers offering identical services such as airlines or
banks and insurance companies invest heavily in advertising their
services.
• This is crucial in attracting customers in a segment where the services
providers have nearly identical offerings.
 MARKETING MIX FOR
SERVICES
• The promotion mix of services include the following elements:
• (i) Advertising: It is any kind of paid, non-personal method of promotion by
an identified organisation or individual. The role of advertising in services
marketing is to build awareness of the service, to add to
customer’s
knowledge of the service, to help persuade the customer to buy, and to
differentiate the service from the other service offerings.
• (ii) Personal selling: Personal selling has a vital role in services, because of
the large number of service businesses which involve personal interaction
between the service provider and the customer, and service being provided
by a person, not a machine. The problem with using personal selling
to
• promote
(iii)Sales services is that inIncertain
promotion: the types of
case of services,
services,thethe
service cannot be
sales
separated
techniques from theare
which performer.
used are varied and various in number. Traditionally,
promotion
sales promotion has been used mainly in the fast moving consumer goods
market. However, in the recent past we have seen a trend for many service
firms to use sales promotion.
 MARKETING MIX FOR
SERVICES
• (iv) Publicity: It is unpaid for exposure which is derived by getting
coverage as a news or editorial item.
• It is possible to get publicity when the service which one is offering is
unique and, therefore, newsworthy, by holding a press conference in
which offered services can be associated with some issues of greater
social relevance or by involving the interest of the newspaper or its
staff in covering the service.
• (v) Word of mouth: One of the most distinctive features of promotion
in service businesses is the word of mouth communications. This
highlights the importance of the people factor in services promotion.
• Customers are often closely involved in the delivery of a service and
then talk to other potential customers about their experiences.
Research points to personal recommendations through word of
mouth being one of the most important information sources.
 MARKETING MIX FOR
• People: SERVICES
• Your business is not just built on your goals, company vision and principles
but also depends heavily on your employees.
• It is the people who work for you who are responsible in creating happy
and returning customers.
• People in your organization are the epicenter of the quality of your services
and need to have the best of talents to gain customer loyalty and trust.
• People are a defining factor in a service delivery process, since a service is
inseparable from the person providing it.
• Thus, a restaurant is known as much for its food as for the service provided
by its staff. The same is true for banks and departmental stores.
• Consequently, customer service training for staff has become a top priority
for many organizations today.
 MARKETING MIX FOR
• CustomersSERVICES
not only influence their own service outcomes, but they
can influence other customers as well. People can be subdivided into:
• (i) Service personnel: Service personnel are important in all
organizations but more so in an organization involved in providing
services.
• The behavior and attitude of the personnel providing the service is an
important influence on the customer’s overall perception of the
service and he can rarely distinguish between the actual service
rendered and the human element involved in it.
• (ii) Customers: Customers are important because they are a source of
influencing themselves, being actively involved in service delivery, and
other customers as well.
• In case of doctors, lawyers, consultants one satisfied customer will
lead to a chain reaction, bringing in his wake a number of other
customers.
 MARKETING MIX FOR
SERVICES
• Process – How efficiently your services are delivered to the customer
is an important aspect of your service blueprint and you need to
emphasize on setting up a process for doing so.
• You need to ask yourself “Do I want to have a process in place that is
quick, reliable and easy to monitor or one that is sluggish but
necessarily passes through several layers of hierarchy?”
• In today’s competitive world, companies are always in the race to
deliver services quickly, efficiently and with the highest quality.
• The process of service delivery is crucial since it ensures that the same
standard of service is repeatedly delivered to the customers.
• Therefore, most companies have a service blue print which provides
the details of the service delivery process, often going down to even
defining the service script and the greeting phrases to be used by the
service staff.
 MARKETING MIX FOR
SERVICES
• The importance of this element is especially highlighted in service
businesses where inventories cannot be stored.
• Through the introduction of automatic teller machines (ATMs) banks
have been able to free staff to handle more complex customer needs
by diverting cash only customers to the ATMs.
• This suggests that close is needed between the
marketing and operations staff who are
cooperation involved in
management.
process
• By identifying processes as a separate marketing mix element,
its importance to service quality is duly recognized.
 MARKETING MIX FOR
• Physical
it
SERVICES
Evidence – While offering your services, you can either do

without adding a personal touch or by differentiating your offerings

by adding an element of delight to the customer.
• For example, would you prefer to visit a bookstore that only has a stack of
books with a cashier nearby or one that also has a place to sit, where you
can browse through the book you are interested in and enjoy the
light music in the backdrop while you make a choice?
• The ambience of a bookstore or restaurant, the music, the friendly face of
the host etc. are all part of the physical evidence of a service and they are
an important element of the service marketing mix.
• Since services are intangible in nature most service providers strive
to
incorporate certain tangible elements into their offering to
enhance customer experience.
• Thus, there are hair salons that have well designed waiting areas often with
magazines and plush sofas for patrons to read and relax while they await
their turn.
• Similarly, restaurants invest heavily in their interior design and decorations
 MARKETING MIX FOR
• There may be two kinds of physical evidence:
• (i) PeripheralSERVICES
evidence: It is actually possessed as a part of the purchase of service. An
airline ticket, cheque book, or receipt for a confirmed reservation in a hotel are examples
of peripheral evidence.
• A cheque book is of value only if customer has money in the bank, without that it is of no
significance. Peripheral evidence adds on to the value of essential evidence, such as
writing pad, pen, match box, complimentary flowers and drinks, etc. in a hotel, which
customer may take away.
• (ii) Essential evidence: Whereas the peripheral evidence is possessed and taken away by
the customer, the essential evidence cannot be possessed by the customer; the building, its
size and design, interior layout and decor, logo, etc. of the organizations are constituents
of essential evidence.
• The essential evidence is a very critical input in determining the atmosphere and
environment of the service organization.
• Physical evidence can be used to build strong association in the customers’ minds and
service can be differentiated from the competitor’s similar offering. By making the
service more tangible and making it easier for the customer to grasp the concept of the
service, marketers can create the ideal environment for the service offering.
• 1. On the Basis of End User:
Classification of
Services
• Consumer Service Marketing (B2C) – This is between the service provider (the company) and the individual
customer for his personal consumption like medical treatment, fitness services.
• Business to Business Service Marketing (B2B) – This is between two companies, like one company hiring
another, to do market research for it.
• Industrial Service Marketing – This is the case where a manufacturing company buys services from a service
provider like supply, commissioning, and maintenance of the plant and machinery.
• 2. On the Basis of Tangibility:
• Highly Tangible- The service includes physical products (highly tangible) for use during the contract period, like
a house on rent.
• Services Linked to Tangible Goods- These are the guarantee or warranty periods, during which the sellers
provide free or subsidized services to the customer, like machines, vehicles, gadgets, etc.
• Tangible Goods Linked to Services- Here some physical goods are given to the customer as part of a service,
like food with a train/air ticket, hotel accommodation which includes morning breakfast, etc.
• Highly Intangible- Here, no products are offered as part of the services, like haircuts, body massage, movie,
etc.
• 3. On the Basis of Specialization:
• i. Professional services – These are services which can be provided only by sufficiently qualified and
experienced persons. Some of such service providers also have recognition by the required authorities.
Examples – counseling, audit, legal services, health care etc.
• ii. Nonprofessional services – These are services which can be provided even by persons not possessing any
educational or professional qualifications. Examples – domestic servants, gardening, painting etc.
 Classification of
• 4. On the Basis of Profit Orientation:
Services
• i. Commercial services – These are the services offered on business lines with an intention of
earning profit. Examples- salons or beauty parlors.
• ii. Social services – These are the services offered on philanthropic lines without any intention of
earning profit. These are provided with the intention of serving the society and are therefore also
called social services. Examples – services rendered to orphanages, charitable trusts etc.
• 5. On the Basis of Labor Intensiveness:
• i. People based services – These are services which involve human labor of a high degree. These
services are actually provided by these human beings. Examples – repairs of auto
mobiles, catering, event management, security services etc.
• ii. Equipment based services – These are services where certain equipment play a dominant role.
The role played by laborers is either minimal or totally absent. Examples- vending machines,
ATMs, self-activating machines.
• 6.Onthe Basis of Contact and Interaction between the Service Provider and the
Service Consumer:
• i. High contact services – These are the services where the contact or the interaction between the
service provider and the service consumer, is very high. The service cannot be provided in the
absence of such contact or interaction. Examples – Psychiatric counseling, surgery etc.
• ii. Low contact services – These are the services where the contact or the interaction between the
service provider and the service consumer is very low. The service can be provided even without
such a contact or interaction. Examples – tailoring, diagnostic services etc.
 Classification of
• 7. On the Basis of Degree ofServices
Involvement of the Customer:
• People Processing- The customer has to be present at the place of delivery to experience
or consume the service, like a training workshop, a dance class, health care, etc.
• Possession Processing- Even if the customer’s presence is not required, his possession or property
needs to be deposited for service, like car servicing/repair, TV/VCD repair, laundry, courier service,
etc.
• Mental Stimulus Processing- In this case the customer’s mental attention is required, if not physical
presence, in order to experience services like career counselling, advertising, consultation
and education services, etc.
• Information Processing- In this case, data, information, knowledge are gathered and analyzed for
clients, like research studies, market surveys, data processing, accounting, legal
services, programming, etc.
• 8. On the Basis of the Business Orientation of the Service Provider:
• Commercial Organizations (Profit Oriented) – The main objective here is to make a profit
by
providing service. They strive to do all that is required to earn profits by keeping the customers
satisfied.
• Non-profit Organizations (Service Oriented) – The main objective here is to serve the
target
clientele, without any motive to earn any profit. Of course money is needed for running such an
organization, and that is obtained from public donations, trust funds, or government aid.
 REASONS FOR GROWTH OF
• (i) SERVICES
Consumer affluence: Due to the fast rise in the income of
consumers, they are attracted towards the new areas like clubs, health
clubs, domestic services, travel and tourism, entertainment, banking,
investment, retailing, insurance, repairs, etc. and these are growing
much faster than ever before.
• (ii) Working women: During the recent times a large number of
women have come up in a variety of professions. The work
performance of women in most of services sector like bank,
insurance, airlines, etc. is highly appreciable. In short, women are
getting involved in almost all male dominated activities.
• (iii) Leisure time: People do get some time to travel and holiday, and
therefore, there is a need for travel agencies, resorts, hotels and
entertainment. There are others who would like to utilise this time to
improve their career prospects, and therefore, there is a need for
adult education, distance learning, part time courses, etc.
 REASONS FOR GROWTH OF
Human SERVICES
• (iv)Greater life expectancy: According to the World Development Report and World
Resource Index, the life expectancy of people has increased significantly all over
the world barring few developing countries. Greater life expectancy invites opportunities
in services like hospitals, Nursing Homes, entertainment, leisure services, investment
banking and so on.
• (v) Product innovations: In the changing time the consumers have become
more
conscious of quality than cost. They need high quality goods at par with international
standards. In this process many more services have emerged on account of product
innovation. Some of them are servicing, repairs, training & development, education, etc.
• (vi) Product complexity: A large number of products are now being purchased
in
households which can be serviced only by specialized persons e.g. water
purifiers, microwave oven, computers, etc., giving rise to the need for services.
• (viii) Complexity of life: Certain product and services have made human life
more
comfortable and complex as well. Also, life itself has become more complex due to the
socio-economic, psycho-political, technological and legal change. This has brought about
the emergence of services like legal aid, tax consulting, professional services, airlines,
courier services, insurance, banking, etc.
• (viii) New generation: Every new generation has its own characteristics and enjoys a
different life style. Today’s generation with all these changes provide more opportunities