UNIT 17 SERVICES MARKETING Services

Marketing

Structure

17.0 Objectives
17.1 Introduction
17.2 What are Services?
17.3 Difference between Products and Services
17.4 Interdependence of Products and Services
17.5 Services Classification
17.6 Marketing of Services
17.6.1 The Services Marketing Mix

17.6.2 Marketing Strategies for Service Firms

17.6.3 Challenges in Marketing of Services

17.7 Product-Support Services

17.8 Let us Sum Up
17.9 Key Words
17.10 Answers to Check Your Progress
17.11 Terminal Questions

17.0 Objectives
After going through this unit; you shall be able to:

• explain the unique features of services and their classification;

• describe the scope of services;
• establish the difference between product and service and how are they
independent of each other;
• explain the challenges involved in marketing of services;
• state the concept of services marketing mix;
• comprehend the need of and usage of product support services; and
• elaborate various strategies adopted by firms offering services.

17.1 INTRODUCTION
What do you mean by services? Are they the offerings in the market and if
they are why are they given so much of importance? Why it has emerged as a
separate subject. The importance of services sector in the economy of almost
all the developed and developing countries has been increasing. If we see the
economic history of all the nations, we can say that most of the developing
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Services Marketing nations have seen transition from agriculture to industry to the services
and Emerging issues
sector. The sector has emerged as the most important contributor to their
respective economies. Considering the increasing importance of services
sector, it becomes very important to explore the services sector and elaborate
the uniqueness of the marketing strategies of services. In this unit, you will
learn about the meaning and scope of services, how are they different from
products and the interdependence between product and service, their
classification and marketing strategies of services.

17.2 WHAT ARE SERVICES?

Whenever we think of marketing or talk of marketing people generally think
of tangible goods i.e., products. This is the general perception. It is important
to keep in mind that marketing is done for both tangible as well as intangible
goods. The marketing of intangible goods (services) are much more complex
than that of tangible goods. Let us first understand the meaning of services,
and their peculiar characteristics.

It should be remembered that marketing concepts and techniques are equally

applicable to services with relevant adaptations in certain decision areas. Any
market offering that is intangible is called services. The services are
separately identifiable, essentially intangible activities which provide
want satisfaction, and which are not necessarily tied to the sale of a
product or another service. For example, hospitals, hotels, universities,
banks, insurance companies, transport firms, fire departments, police and post
office.

To put it in simple terms, a product is an object, a device, a tangible thing;

and a service is a deed, a performance, an effort. This captures the essence of
the difference between products and services. Services are a series of deeds,
processes and performances; hence tend to be more intangible, personalized,
and custom-made than products. For instance, the services offered by Urban
Clap, SBI, Tata consultancy services (TCS),Infosys, HCL technologies,
IGNOU, IRCTC and MTNL are intangible deeds and performances.
Similarly, the core offerings of hospitals, hotels, and utilities comprise
primarily deeds and actions performed for customers.

Services are produced not only by service businesses such as those listed
above, but are also integral to the offerings of many goods. For example, care
manufacturers offer warranties and servicing contracts, and industrial
equipment producers offer maintenance services. White goods manufacturers
provide after-sales services. Even producers of items such as medicines and
food items offer services to the consumers in the form of educating them
through pamphlets as to how to use and maintain the item. These are
examples of deeds, processes and performances associated with product
offerings.

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On the basis of the broad definitions given above services may include all Services
Marketing
economic activities whose output is not a physical product, is generally
consumed at the time it is produced, and provides added value in forms
(such as convenience, amusement, timeliness, comfort or health) that are
essentially intangible concerns of its first purchaser. This definition has
been used also to delineate the service sector of the economy.

It should be remembered that marketing ideas and practices are equally

applicable to services with slight adaptations in certain decisional areas.
Services in content are different from products.

Courts offer a service. So are hospitals, the fire department, the police and the
post office. These are not products in the normal sense and yet it is very
important for each of these institutions to have an appropriate image. The
police are often criticized; the fire department is generally praised; the post
office are criticized for delays; the hospitals perhaps are criticized for
negligence and exorbitant rates and so on. It is obvious that controlling the
quality of services is important for building up its image.

Apart from government or public sector undertakings, there are ‘non-profit’

organizations such as museums and charities. Although being non-profit,
they also have to provide the best form of service for their popularity. The
business and commercial sectors, which include airlines, banks, hotels, and
insurance companies, and the professionals such as chartered accountants,
management consulting firms, medical practitioners etc., also need
marketing.

Details of industries classified within the service sector, is discussed below

for understanding of the broad spectrum of the services sector.

Transportation and Public Utilities

• Transportation (Railroad transportation, Local and inter-urban passenger

transit, warehousing, Water transportation, Air transportation, Pipelines
gas, and other Transportation services)
• Communication (Telephone and telegraph, Radio and television
broadcasting)
• Electric gas and sanitary services
• Wholesale Trade
• Retail Trade
• Finance, Insurance, and Real Estate
• Banking
• Credit agencies other than banks
• Security and commodity brokers, and services
• Real estate
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Services Marketing
and Emerging issues Holding and other Investment

Other Services

• Hotels and other lodging places

• Personal services Business services
• Auto repair, services and garages
• Miscellaneous repair services
• Motion pictures
• Amusement and recreation services
• Health services
• Legal services
• Education services
• Social services and membership organizations
• Miscellaneous professional services
• Private household services

Federal Government

• Civilian
• Military

Government Enterprises

State and Local Government

• Education
• Other services

Source:Valarie A. Zeithaml and Mary Jo Bitner, Services Marketing, McGraw Hill, New
York.

The above is not a very exhaustive listing, this will provide you a clear idea
about services encompass a wide range of activities.

Characteristics of Services

Based on the above discussion, we can identify four basic characteristics of

services that differentiate them from products. They are: (1) intangibility, (2)
heterogeneity, (3) simultaneous production and consumption, and (4)
perishability. Let us discuss them in detail.

Intangibility

The basic difference between goods and services is intangibility. Services are
performances or actions rather than objects. Therefore, they cannot be seen,
felt, tasted, or touched in the same manner that we can sense tangible goods.
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The absence of tangible features that it is difficult for the seller to Services
Marketing
demonstrate or display services. Similarly, it is also difficult for buyers to
sample, test or make a thorough evaluation before buying them. For example,
health care services actions are surgery, diagnosis, examination, and
treatment performed by doctors and directed towards patients. One cannot see
or touch these services, although you may be able to see and touch certain
tangible components of them like equipment, hospital room. In fact, services
such as health care are not easy for the consumer to grasp even mentally.
Even after a diagnosis or surgery has been completed, the patient may not
fully comprehend the services performed. Moreover, he/she feels about the
surgery performed by the doctors.

Heterogeneity

It is often impossible to assure homogeneity and consistency in service

provided by a seller, because services are performances rendered by them.
Hence no two services may be precisely alike. The service is performed and
delivered by employees (people), and people differ in their performance.
Heterogeneity also results because, two customers may not be precisely alike.
Each will have unique demands or experience and may require the service in
a unique way. For instance, take the case of a restaurant which is a hospitality
service. One customer may prefer a crisp Masala Dosa with sambhar while
another prefer soft Masala Dosa with coconut chutney. The cook has to
prepare and serve according to their tastes. The heterogeneity connected with
services is largely the result of interaction between employees and customers.

Simultaneous Production and Consumption

Most goods are produced first, then sold and consumed while services are
sold first and then produced and consumed simultaneously. For example, an
automobile may be manufactured in Mumbai, shipped to Delhi, sold two
months later, and used over a period of years. But restaurant services cannot
be provided until they have been sold and the dining experience is essentially
produced and consumed at the same time. Similarly, in travel services, the
ticket has to be bought first and then the travel service has to be availed of.
Very often, the customer is present while a service is being produced thus the
views of the customer are taken into account in the production process. For
example, in the restaurant when one orders for a cup of coffee, he ask for
strong coffee (more coffee, less milk) without sugar. Here the customer has
influenced the process of coffee. Frequently, customers interact with one
another during the service production process and thus effect one another's
experiences. For example, strangers seated next to each other in an airplane
may well affect the nature of the services experience for each other. Another
outcome of simultaneous production and consumption is that service
producers themselves playing as a part of the product itself and as an
essential ingredient in the service experience for the consumer.

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Services Marketing Perishability
and Emerging issues
Perishability refers to the fact that services cannot be saved or resold or
returned. A seat on an airplane or in a restaurant, an hour of a lawyer's or
telephone line capacity used cannot be reclaimed and used or resold at a later
time. This is in contrast to goods that can be stored or resold another day, or
even if the consumer is unhappy. It is not easy to reset a bad haircut nor is it
possible to transfer it to another consumer. Perishability makes this an
unlikely possibility for most of the services.

17.3 DIFFERENCE BETWEEN PRODUCT AND

SERVICES
As we have discussed earlier, the basic difference between the products and
services lies in their characteristics. Products are tangible. They have a
physical shape and form therefore they can be seen, touched, felt whereas,
service are just the opposite, they cannot be touched, felt or seen. Products
are homogeneous, say for example, all the body soaps bought from anywhere
in the world would be same, whereas the services are heterogeneous. If Mr. X
go to a doctor for a particular illness and he is given the treatment and
medication. The same treatment and medication will not be given to another
patient. Product bought can be returned or resold. On the other hand services
are perishable. They cannot be returned, resold or stocked. There is no
transfer of ownership of the market offering in case of services as they are
intangible, but in case of products, ownership is transferred to the buyers as
soon as they purchase the commodity from the seller. Hence, there is an
element of seperability in case of products, whereas, in case of services they
are not separable from the producer/ service provider. Although a Chartered
accounted has given the consultancy services to his clients, the clients cannot
separate the services from him.

In case of Products, they are first produced and then offered in the market.
After buying, the consumer can consume it. Whereas, in case of service, the
process is different. Consumer of services first buy those services and then
they consume it. For instance, you call a hair stylist from Urbanclap, you pay
for her services first and then get the services. In case of services, the
production and consumption are simultaneous unlike the products. Services
are heterogeneous in nature thus can be highly customized and invidualized.
Service provider can render services according to the specific need of every
consumer. Whereas, in case of products, they cannot be totally individualized
or customized. It can be done for a segment of customers.

Most importantly, in case of services, a producer cannot really take advantage

of the sudden increase in its demand. Production of services cannot be
increased according to the changing demand pattern. For example, in the
situation like current pandemic situation, the healthcare facilities could not be
increased according to the rising need to the patients. Hospital premises could
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be increased, utilities could be increased up to certain extent but there could Services
Marketing
not be sudden increase in specialized healthcare service providers or staff
such as doctors, nurses, ward boys etc. As a result of the differences between
products and services and because of peculiar characteristics of services,
marketers find it challenging to market the services. You will further learn in
detail about the challenges in marketing of services in section 17.6.3.

Table 17.1: Difference between Products and Services at a glance

Bases Products Services

Tangibility Tangible, can be touched Intangible, hence cannot be
seen and felt. touched seen and felt.

Heterogeneity Homogeneous in nature Heterogeneous in nature.

and they are standardized.

Seperabilityof After purchase the Cannot be separated from

market offerings products are separated service provider or
from the producer and producer.
ownership is transferred
from seller to the buyer.
Perishability Not perishable, can be Perishable, hence cannot be
stored. stocked or stored.
Resale/return Resold or returned as they Cannot be resold or returned
are not perishable. as the moment it is
consumed, its utility is
destroyed.
Customisation Customisation is limited. Highly customized or
individualized as they can
be delivered as per the
specific requirement of the
individual customer.
Evaluation of its Can be easily evaluated. Evaluation is complicated
want satisfying here.
ability

17.4 INTERDEPENDENCE OF PRODUCTS AND

SERVICES
Though, the products differ from services in many respects, there are so
many inter-linkages between services and products in several instances. In
fact, services and products complement each other in many cases. Sales
prospects of products that are in need of substantial technological support and
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Services Marketing maintenance will be badly affected if proper arrangement for service is not
and Emerging issues
made. For this reason, the initial contract of sale of a product often includes a
service clause. This practice is common in the case of many durable goods. In
the case of TV s, cars, refrigerators, washing machines, etc., manufacturers
provide free after sale service for a certain period. Similarly, the sale of
computer hardware is critically linked to availability of proper servicing and
software. Sellers of capital equipment often enter into maintenance contracts
with buyers. These are some instances of services complementing products.
Similarly, products also complement services. For example, an airline cannot
exist without airplanes. Without rooms, furniture and kitchen equipment, a
hotel cannot provide hospitality service. In the same way, hospitals (health
care service) cannot provide services without using tangible products such as
operation instruments, testing equipment, medicines, hospital buildings, etc.

There is an increasing recognition of this complementary nature of services

and products. Manufacturing based industries (such as automobiles and
computers) are recognizing the role of service in improving the
competitiveness of a product. In many industries providing quality service is
no longer simply an option. The quick pace of developing technologies
makes it difficult to gain strategic competitive advantage through physical
products alone. Customers not only expect high quality goods, but also
expect high levels of service along with them. Companies are realizing the
need to focus on service to keep pace with rising customer expectations and
to compete effectively. Similarly, various services sectors are depending on
quality products to improve their service quality. Good hospitals use the
latest technical and testing equipment, hotels provide well furnished rooms,
TV channels use the digital transmission equipment, banks use the ATM
equipment, airlines use most comfortable airplanes, etc. Thus, continuous
product improvement and service improvement are simultaneously going on
in many sectors.

An important point which needs to be mentioned here is that when it comes

to a marketing offer it becomes very difficult to draw a clear, demarcating
line between product and service. According to T. Levitt, a renowned
marketing specialist, “In almost every tangible pure physical product, an
intangible service component is associated. Therefore, everybody is in
service. ” Philip Kotler, one of the world’s leading authorities on marketing,
classified a marketing offering into the following categories for establishing
the product– services relationship:

a) Pure Tangible Good only: The offering is only tangible goods such as
toothpaste, soap, etc., but no services accompanying the product.

b) Tangible Good with Accompanying Service: The offering consists of a

tangible good accompanied by one or more service. Automobiles
companies, for example, offers repairs, maintenance, warranty
fulfillment, frees service up to a period or kilometers, and other services
350 along with its cars. For more technologically sophisticated durable
 products, the sales depend on accompanying services. Examples include Services
Marketing
computers, TVs, washing machines and many other durable goods.
Industrial goods particularly Capital goods also require certain types of
services along with the tangible product.

c) Hybrid: The offering consists of equal parts of goods and services. For
example, people go to the restaurants both for food and service.

d) Major Service with Accompanying Minor Goods and Services: Here

the offering is predominantly in the form of a service. Here consumer
primarily goes for the quality of service but may give importance to
accompanying minor goods and services. For example, Airlines not only
provide the transportation as the major service, but also provide food,
drinks, magazine and other facilities as accompanying minor goods and
services.

e) Pure Services: The offering consists primarily of service and no or very

insignificant accompanying minor goods or services. For example,
insurance, banking, psychotherapy, baby-sitting, hair cutting, etc.
Because of this varying nature of goods-to-service mix, it is difficult to
generalize services without further distinctions. Services can be classified or
distinguished as follows:
i) Equipment based services (e.g. Automatic car washing, repair etc.) and
people based services (e.g. accounting services, banking, etc.).
ii) Services requiring presence of clients (e.g. surgery, hair cutting, etc.) and
services not requiring presence of clients (e.g. banking, broking, etc.).
iii) Services meeting personal needs (e.g. telephone, credit cards, etc.) and
services meeting business needs (e.g. technical consultancy, call centre
services, etc.).
iv) Service providers with profit oriented objectives and service providers
with non-profit oriented objectives.
v) Service enterprises under private sector and service enterprises under
public sector.

17.6 SERVICES CLASSIFICATION

A large number of classification schemes for services have been developed to
provide strategic insights in managing them. Utilizing different bases, these
schemes allow us to understand the nature of the service act, the relationship
between service organization and its customers, the nature of service demand
and the attributes of a service product. Let us discuss the schemes briefly.

1) The Nature of the Service Act

Using the two dimensions of tangibility of the service act and to whom
services are directed at, Lovelock classified services according to the fact
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Services Marketing whether services are directed at people or possessions, at minds, physical
and Emerging issues
possessions or assets. Table 17.2 will help you understand this classification
scheme.

Table 17.2Nature of the Service Act

Nature of the Service Services Directed At

Act

Tangible Action People Possession

Services directed Directed at goods,
at peoples bodies Physical possessions
Healthcare, Salons, Transportation,
Restaurants, Laundry/Dry-cleaning, Lawn
Transportation care.
IntangibleAction Services directed Services directed at
at people’s minds intangible assets Banking,
Education, Legal Services,
Broadcasting, Insurance,
Information, Accounting
Museums.

2) Relationship between Service Organisation and Customers

In the service sector both institutional and individual customers may enter
into continuing relationships with service providers and opt for receiving
services continually. Services can therefore be classified on the basis of
whether the nature of the relationship is continuous or intermittent and
whether a consumer needs to get into a membership relationship with the
service organisation to access and utilize theservice.

Table 17.3: Services and Customer Relationships

Type of Relationship
Nature of Delivery Membership Non-Membership
Continuous Insurance Police protection
Education Public highway
Banking

Discrete Theatre seat Car rental, Pay

subscription telephone
Commuter tickets Restaurant

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3) How the Service is Delivered Services
Marketing
Lovelock has used two issues of number of delivery sites (whether single or
multiple)and the method of delivery to classify services in a 2 x 3 matrix. The
implications here are that the convenience of receiving the service is the
lowest when the customer has to come to the service and must use a single or
specific outlets. As his options multiply, the degree of convenience can go on
rising, from being able to choose desirable sites, to getting access at
convenient locations.

Table 17.4: Services delivery modes

Service Delivery Modes

Nature of Interaction between Availability of Outlets

Customer
and Organisation
Single site Multiple site
Customer goes to service Theatre Bus Service
organisation Fast Food Chain

Services organisation comes to Lawn care Mail delivery

the customer Pest control Emergency auto repair
Customer and organisation Credit cards Telephone company
transact business at arms length Local TV Broadcasting
station

4) Proportion of Tangibility and Intangibility

Using the characteristic of intangibility of services, Shostack proposed that

all goods and services can be placed on a tangibility intangibility continuum.
This is done with services clustering towards low to high intangibility.
Accordingly, services can be classified as those with a low intangibility
content (a fast food restaurant) and a pure service, having very high
intangibility content (education, consultancy, medical advice).

5) Service Inputs

Services based on this criterion have been classified as primarily equipment

based or primarily people based service depending upon which input is
primarily applied to get service outputs. The equipment based services can be
further classified according to whether they are fully automated, or consist of
equipment monitored by un skilled persons (lift operators, delivery van
personnel) or need the presence of skilled personnel to man the equipment
(quality control, diagnostic services).
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Services Marketing 6) Contact between the Consumer and the Service Provider
and Emerging issues
Services also differ in the extent of contact that needs to be maintained
between the User and Provider. The marketing implication in this case being
the necessity of physical presence of the provider as well as need to manage
desired quality of personnel in case of high contact services. On this basis all
services can be classified as high contact or low contact services, depending
upon the time a user needs to spend with the service organisation/provider in
order to utilize/acquire the service. Examples of low contact services are
telecommunications, dry-cleaning and broadcasting while high contact
services are education, hospitality, theatre performance.

7) Profit and Public vs Private Services

Service can also be classified on the basis of whether they are primarily
directed at public at large or primarily at individuals. The public services
include utilities and infrastructural services like transport and
communication. They also include services provided by the state for public
welfare like hospitals, educational and vocational institution, parks and
museums etc. The private services on the other hand include the whole gamut
of services designed for and consumed by customers as individuals e.g.,
restaurants, beauty care and medical advice. The implications underlined by
this classification manifest themselves in issues regarding planning and
design of service for public vs. private consumption. Involved here are issues
of process, volume and distribution of services when they are designed as
public services. Services have also been classified by Kotler as services
designed for profit and nonprofit services, depending upon the marketing
objectives to be pursued in the exchange of services.

Check Your Progress A

1) Fill in the blanks:

i) …………………… are a series of deeds, processes and

performances.

ii) The basic difference between goods and services is ………………. .

iii) Services cannot be ……………………. from the service provider or
producer.

iv) On the basis of relationship between service organisation and

customers, service can be classified as ………………….. service.

v) Education, hospitality and theatre performance are ………………

contact services.

2) State whether the following statements are True or False:

i) The output of services are physical products.

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 ii) Perishability refers to the fact that services cannot be saved or resold Services
Marketing
or returned.
iii) Services have the characteristic of homogeneity.
iv) A fast food restaurant is an example of a pure service.
v) Services and products complement each other in many cases.

17.6 MARKETING OF SERVICES

Marketing theory and practice were developed initially in connection with
physical product such as soaps, cars, and other tangible products. However,
in the recent years there has been a phenomenal growth of services. We find
this trend world-wide. More and more tangible or physical products now
contain a service component, both to meet the needs of the targeted customer
segment and to create a distinctive differentiation for competitive reasons.
Many manufactured goods are supported by services such as warranties or
guarantees.

There are a large number of companies who are mainly in the service
business. Service industries vary greatly in terms of services they provide and
their size. In the present world of information era, many service industries
such as banking and other financial services are not only the mainstay of
economy but also dominating Internet and e-commerce.

Academicians and marketing experts have brought to light the specific

characteristics of services which we have discussed in the previous section
and come to know that services differ from goods in many aspects therefore
different marketing approach is necessary for services. This need gives rise to
the concept of service marketing. This does not mean that the traditional
marketing philosophies, methods and techniques are totally irrelevant to the
services sector. In fact, the fundamentals of marketing are the same for both
the sectors. What is required is the development of an adaptable mechanism
to a different environment, keeping in view the service characteristics. Thus,
service marketing is nothing but the application of suitably modified and
customized traditional marketing philosophies to the services sector.

Services marketing is a sub-field of marketing, where the traditional

marketing philosophies are modified and customized to suit the needs of the
service sector. It includes marketing of different forms of services such as
telecommunication services, financial services, hospitality services, rental
services, travel services, health care services and professional services.

17.6.1 The Services Marketing Mix

The unique characteristics of services make the traditional 4 P marketing mix
seem inadequate. Careful management of these 4 Ps - Product, Price, Place
and Promotion though essential, are not sufficient for successful marketing of
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Services Marketing services. Further the strategies for the four Ps require some modification
and Emerging issues
while applying to services.

Since services are produced and consumed simultaneously, the contact

personnel or the service delivery personnel become extremely important. It is
during these encounters of service providers and customers i.e. the process -
on which a lot depends with regards to the final outcome as well as the
overall perception of the service by the customer. The actual physical
surroundings during these encounters have also a substantial bearing on the
service delivery. All these facts lead to the development of an expanded
marketing mix with three new P's added to the traditional mix. These are:

People: All human actors who play a part in service delivery thus influence
the buyer’s perceptions; namely, the firm’s personnel, the customer, and
other customers in the service environment.

Physical evidence: The environment in which the service is delivered and

where the firm and customer interact, and any tangible components that
facilitate performance or communication of the service.

Process: The actual procedures, mechanisms and flow of activities by which

the service is delivered - the service delivery and operating system

Because of the simultaneous production, delivery and consumption of

services, the nature of marketing departments and marketing functions
become quite different as compared to goods. The marketing function - all
activities which influence the preferences of the consumers towards the
offerings - is mainly handled by marketing departments in case of goods.
Here as far as consumers are concerned, marketing departments (the
organisational entity which is responsible for some, but not necessarily all
marketing activities performed by the firm) can plan and implement most of
the marketing activities i.e., the marketing department is able to control
almost the total marketing function. In the service sector the situation is
entirely different. A traditional marketing department in services can only
control a minor part of the marketing function. Usually, it does not have the
necessary authority to manage the buyer/seller interaction. The marketing
department therefore, cannot plan and implement activities pertaining to
interactive marketing function.

Therefore the marketing function, which is a key function in service sector

require a special treatment. The total marketing in services include three
different types of marketing as shown in Figure 17.1.

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 Company Services
(Management) Marketing

Internal Marketing
External Marketing
Enabling the Promise External Setting the
Providers Customers

Interactive Marketing
Delivering the Promise

Figure 17.1: The Services Marketing Triangle

As can be seen from the triangle, the traditional marketing mix and marketing
departments basically address to 'External Marketing' only. However, all
three sides, are critical to successful services marketing and the triangle can't
be supported in the absence of anyone of the sides.

17.6.2 Marketing Strategies for Service Firms

Service firms started using marketing tools very late. Traditional 4Ps work
well for tangible goods, but additional elements are required in case of
services. These additional Ps are (i) physical evidence, (ii) processes, and (iii)
people. Because most services are provided by people, the selection, training
and motivation of employees can make a huge difference in customer
satisfaction. Companies also try to demonstrate their services quality through
physical evidence. Example hostel, banks with atmospherics can show
quality of service.

Service firms can choose among different processes to deliver their services.
For example, installation of ATM by banks, Teller system, hospitals etc. In
view of the complexity, service marketing requires not only external
marketing, but also internal and interactive marketing. External marketing
describes the normal work to prepare, price, distribute and promote the
service to customers. Internal marketing describes the work to train and
motivate employees to serve customers well (you will learn more about
internal marketing in Unit 20).The interactive marketing describes the
employees’ skills in servicing the clients/customers.

Although services are intangible but we can create some sense of tangibility
in it by creating a nice physical evidence. For example, in hospitality sector
or in restaurants, creating an attractive cozy ambience can give a different
feeling to the customers. We can understand the importance of the extended
three Ps in making strategies by the services firm, by taking an example of a
spa or beauty salon. First impression is created at the reception counter.
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Services Marketing Customers’ first encounter is with the receptionist. The communication and
and Emerging issues
behavior of the receptionists decide whether a new client entering into the spa
will be converted into a customer or not. In addition to that the whole process
of attending the customers and taking them to the chambers and quality of
delivered services will make an impact on the decision of the customers. The
ambience and the aroma plays a very important role in having delighted
customers, besides the services that are rendered to them at the centers.

Thus while formulating marketing strategies, a service firm needs to take into
consideration all the seven Ps of marketing i.e., Product Decision, Price
Decision, Promotion Decision, Place Decision, People Decision, Process
Decision and Physical evidence Decision.

17.6.3 Challenges in Marketing of Services

Owing to the peculiar characteristics of the services, marketers in service
business face a unique set of challenges while formulating the effective
marketing strategy. Although these challenges are innate, they can always be
worked upon.The traditional marketing mix is composed of the 4 Ps viz.,
product price, promotion and place (distribution). These elements appear as
core decision variables in any marketing plan. All these four variables are
interrelated, and there is an optional mix of the four factors for a given
market segment at a given point of time. Though, conceptually marketing of
services is no different from marketing of products, thestrategies of the 4 P's,
however, require some modifications when applied to services. Because of
the significant differences between goods and services, marketers of services
face some distinctive challenges. Such challenges revolve around
understanding customer needs and expectations, and the efforts to keep
promises made to customers. The basic differences between products and
services, and the associated marketing implications, are shown in Table 17.5

With adequate focus on the 7 PS (Product, Price, Promotion, Place, people,

process and physical evidence) of services mix, marketers develop a
marketing strategy that suits best for the services that they are offering. It is
needless to mention here that extra focus is to be given on the extended Ps
i.e., People, Process and Physical evidence. While delivering the services the
marketers have to consider the expected outcome of the services rendered to
the customers. Also, marketers have to thoroughly keep in mind the people
and the process involved in delivering the service. People who are interacting
with the customer as first communicator of the firm can really play a very
important role. For instance, you go to a hotel room and the guard who is
welcoming you at the doorstep while opening the doors for you may have a
huge impact in the minds of the customers. Similarly, the processes through
which the services are rendered are also the decision points for the customer,
thus, deciding the fate of marketing. If the process is soothing and pleasing,
half battle is won there. Say, you are going to take corona vaccine, the
process through which vaccine is administered, also plays a very important
358 role. Although services cannot be touched or seen but there are some physical
evidences of the services, such as a beautiful hotel room with clean towels Services
Marketing
and new toiletries.

Table 17.5: Differences between Products and Services, andthe

Associated Marketing Challenges

Goods Services Resulting Marketing

Implications
Tangible Intangible Services cannot be inventoried.
Services cannot be patented.
Services cannot be readily
displayed or communicated
Pricing is difficult

Standardised Heterogeneous Service delivery and customer

satisfaction.
Depend on employee actions .
Service quality depends on
many uncontrollable factors.
There is no sure knowledge that
the service delivered matches
what was planned and promoted
Production Simultaneous production Customers participate in and
separate from and consumption affect the transaction
consumption Customers affect each other
Employees affect the service
outcome.
Decentralization may be
essential.
Mass production is difficult.
Non- Perishable It is difficult to synchronize
Perishable supply and demand.
Services cannot be returned or
resold.

Source: Valarie A. Zeithaml and May Jo Bitner. Services Marketing, McGraw Hil1, New
York.

Intangibility presents several marketing challenges. As services cannot be

inventoried, fluctuations in demand are often difficult to manage. For
example, there may be very huge demand for hotel accommodation in Shimla
in summer as against low demand in winter. Yet, hotel owners have the same
number of rooms to sell year-round. Services cannot be patented legally.
Hence, new service concepts can be easily copied by competitors. Since
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Services Marketing services cannot be readily displayed or easily communicated to customers, it
and Emerging issues
may be difficult for consumers to assess the quality of a particular service
before use. Decisions about what to include in advertising and other
promotional materials may prove challenging, as is pricing. The actual costs
of a unit of service are hard to determine and the price/quality relationship is
complex. As services are not tangible, it is not possible to provide samples
and significant physical evidence. The physical evidence of services includes
all of the tangible representations of the service such as brochures, letterhead,
business cards, report formats, and equipment. These physical evidence cues
provide excellent opportunities for the firm to send consistent and strong
messages regarding the organization’s purpose, the intended market segment,
and the nature of the service.

The intangibility of the service reduces the marketers' ability to provide

samples. This makes communicating the service offer much more difficult
than communicating a product offer. Brochures or catalogues explaining
services often must show a "proxy" for the service in order to provide the
prospective customer with tangible clues. A cleaning service for instance, can
show a picture of an individual removing trash or cleaning a window or even
a photograph of a clean room. However, the picture will not fully succeed in
communicating the quality of service.

As services are heterogeneous ensuring consistent service quality is

challenging. Further, quality depends on many factors that cannot be fully
controlled by the service supplier, such as the ability of the consumer to
articulate his or her needs, the presence (or absence) of other customer, and
the level of demand for the service etc. Because of these complicating
factors, a marketer is often not sure whether the service is being delivered as
originally planned and promoted. All associated problem is that, unlike in the
case of products there is no objective yardstick to determine the quality of a
service. Laboratory tests can establish the quality of a product but the quality
of service is dependent on the perception of the customer.

Since services often are produced and consumed simultaneously, mass

production is difficult, if not impossible. Moreover, it is not usually possible
to gain significant economies of scale through centralized production.
Usually operations need to be relatively decentralized so that the service can
be delivered directly to the consumer in convenient locations. Also because
of simultaneous production and consumption, the customer is involved in and
observes the production process thereby affecting (positively or negatively)
the outcome of the service transaction. Some customers call cause problems
in the service setting, leading to lowering of customer satisfaction. For
example, in a cinema theatre, one person misbehaving with other audience
can create negative experience to the entire audience and may become a
dissuading factor next time.

As services are perishable, they cannot be stored for future consumption.

360 Hence, demand forecasting and planning for capacity utilisation are
challenging decision areas for marketers. The fact that services cannot Services
Marketing
typically be returned or resold implies the necessity for strong recovery
strategies when things do go wrong. For example, while a bad haircut cannot
be returned, the hairdresser should have strategies for recovering the
customer's goodwill when such a problem occurs. The hair dresser may, by
refunding the charges collected from the customer, perhaps, recover part of
the goodwill lost.

The role of personnel deserves special consideration in the marketing of

services. Because the customer interface is intense, proper provisions need to
be made for training personnel. Major emphasis must be placed on
appearance and behavior. Most of the time, the person delivering the service
(rather than the service itself) will communicate the spirit, values and
attitudes of service provider. All human actors who play a part in service
delivery influence the buyer's perceptions and provide cues to the customer
regarding the nature of the service itself. How these people are dressed, their
personal appearance, their attitudes and the way they interact with customers,
all influence customer's perceptions of the service. Therefore, the role of
service provider or contact person is very important.

The areas of pricing and financing require special attention. Because

services cannot be stored, much greater responsiveness to demand fluctuation
must exist and therefore, much greater pricing flexibility must be maintained.
Hotels offering discounts in room tariff during off seasons is part of the
flexible pricing strategy. The intangibility of services also makes financing
more difficult. Financial institutions are less willing to provide financial
support to services than for products. This is because of three reasons: (a) the
value of services is more difficult to assess, (b) service performance is more
difficult to monitor, and (c) services are difficult to repossess. Therefore,
receiving payments may be much more troublesome for a financier in the
case of services than products. This poses a challenge to the marketer of
services in procuring finances.

Usually, short and direct channels are required for marketing of services.
Closeness to the customer is of overriding importance in order to correctly
understand what the customers want, to reach them fast with minimum cost;
to monitor the flow and utilization of services, and to assist the construct in
obtaining a truly tailor made service.

17.7 PRODUCT SUPPORT SERVICES

Product support services play a very important role in acquiring and retaining
the customers into the business. When the customers buys a tangible product,
they not only buy that product but also various other solutions that are
associated with the product. For example, when a customer buys a smart
phone or any other electronic gadgets (commodities), she is provided with the
manuals, product information booklet, warranty, guarantee and other after
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Services Marketing sales services. The marketer may also include free services, maintenance etc.
and Emerging issues
Besides, the way in which the consumers’ grievances and complaints are
handled, the response time, installation facilities, product demonstration etc.
also plays a very important role in acquiring and maintaining a loyal
customer in the business. These are called product support services. Better
the services higher shall be the foot fall of the customers in the stores. This
also gives an edge to the marketer’s vis-à-vis the competitors in the market.
This is one of the important ways, in which, the marketer can differentiate the
product in the market. These product support services increase the customer
loyalty and enable customer retention. Goodwill and credibility of the
marketer and the product, depends, up to a large extent, on the product
support services that are provided to the customers.

Check Your Progress B

1) Fill in the blanks:

i) The various other solutions that are associated with the product in
the form of warranty, guarantee, maintenance, installation etc. are
called …………………………

ii) Usually, …………………. channels are required for marketing of

services.

iii) The extended Ps of service marketing are ……………… .

iv) The intangibility of the service reduces the marketers' ability to
provide …………………… .

v) ……………….. refers to theactual procedures, mechanisms and

flow of activities by which the service is delivered

2) State whether the following statements are True or False:

i) The role of service provider or contact person is not important in

marketing of services.

ii) Elements of marketing mix for services are different from tangible
products.

iii) Quality of service is dependent on the perception of the customer.

iv) Product support services decreases the customer loyalty and disable
customer retention.

v) Some sense of tangibility in services can be created by creating a

nice physical evidence.

17.8 LET US SUM UP

The term service is rather general in concept and includes a wide variety of
362 services. Services are essentially performances. Marketing of services needs a
different treatment because of the unique characteristics of services that Services
Marketing
distinguish them from products. These characteristics are intangibility,
heterogeneity, inseparatability and perishability. Due to these characteristics
services marketing includes three additional marketing mix elements viz.
People, Physical Evidence and Process.

Any market offering that is intangible is called services. The services are
separately identifiable, essentially intangible activities which provide want
satisfaction, and which are not necessarily tied to the sale of a product or
another service. For example, hospitals, hotels, universities, banks, insurance
companies, transport firms, fire departments, police and post office.

Services marketing mix consists of 7 Ps of marketing i.e. Product, Price,

Promotion, Place, People, Process and Physical Evidence.

While formulating marketing strategies, a service firm needs to take into

consideration all the seven Ps of marketing i.e. Product Decision, Price
Decision, Promotion Decision, Place Decision, People Decision, Process
Decision and Physical evidence Decision.

Owing to the peculiar characteristics of the services, marketers in service

business face a unique set of challenges while formulating the effective
marketing strategy. Although these challenges are innate, they can always be
worked upon.

Product support services play a very important role in acquiring and retaining
the customers into the business. Product support services increase the
customer loyalty and enable customer retention. Goodwill and credibility of
the marketer and the product, depends, up to a large extent, on the product
support services that are provided to the customer

17.9 KEYWORDS
Hybrid Offering: it consists of equal parts of goods and services.

People: all human actors who play a part in service delivery thus influence
the buyer’s perceptions; namely, the firm’s personnel, the customer, and
other customers in the service environment.

Physical Evidence: the environment in which the service is delivered and

where the firm and customer interact, and any tangible components that
facilitate performance or communication of the service.

Process: the actual procedures, mechanisms and flow of activities by which

the service is delivered - the service delivery and operating system.

Pure Services: it consists primarily of service and no or very insignificant

accompanying minor goods or services.

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Services Marketing Pure Tangible Goods: when the offering is tangible goods only with no
and Emerging issues
services accompanying the product.

Services: the services are separately identifiable, essentially intangible

activities which provide want satisfaction, and which are not necessarily tied
to the sale of a product or another service.

17.10 ANSWERS TO CHECK YOUR PROGRESS

A. 1. i. services ii. intangibility iii. separated iv. continuous and discrete v.
high

2.i. False ii. True iii. False iv. False v. True

B. 1. i. Product support services ii. short and direct iii. people, process and
physical evidence iv. samples v. process

2. i. False ii. True iii. True iv. False v. True

17.11 TERMINAL QUESTIONS

1) What do you understand by the term service? Discuss the characteristics
of services.
2) Differentiate between products and services giving suitable examples.
3) Discuss the various classification schemes for services with examples.
4) “Though, the products differ from services in many respects, there are so
many inter-linkages between them”. Comment
5) Discuss the challenges faced by a marketer while formulating an
effective marketing strategy for services.
6) Briefly discuss the service marketing mix and service marketing triangle.
7) Owing to the peculiar characteristics of the services, explain the
marketing strategies adopted by service firms.

Note: These questions will help you to understand the unit better. Try to
write answers for them. But do not submit your answers to the University
for assessment. These are for your practice only.

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