1

SERVICE MANAGEMENT
Dr.Bharath V MFM., M.Com., Ph.D
Assistant Professor
Department of Management
Kristu Jayanti College (Autonomous)
Bengaluru

[email protected]
 2

Service Marketing
• Service marketing is the promotion and selling of
intangible offerings that provide value to customers, such
as experiences, activities, or benefits, rather than physical
goods.

• Examples include healthcare, banking, hospitality, and

consulting services.

• Unlike product marketing, which focuses on tangible

goods, service marketing emphasizes building trust,
understanding customer needs, and delivering high-
quality interactions to encourage repeat business and
brand loyalty.
 3

Characteristics of Service Marketing

• Intangibility

• Services cannot be seen, touched, or owned, which

makes it challenging for customers to evaluate their
quality before purchase.

• Example: A customer booking a hotel room cannot "see"

the experience in advance; they rely on reviews, brand
reputation, and past customer experiences to judge
quality.
 4

• Inseparability: Services are often produced and

consumed simultaneously, meaning the customer
experience heavily depends on the service provider.
• Example: In a hair salon, the customer receives a haircut
while interacting with the stylist. The quality of service is
linked to the stylist's skill, personality, and ability to meet
the customer’s expectations.

• Variability (or Heterogeneity):Services can vary greatly

depending on who provides them, when, where, and how.
This can make standardization challenging.
• Example: Two different chefs at the same restaurant may
prepare the same dish slightly differently, resulting in
variations in the dining experience for customers.
 5

• Perishability: Services cannot be stored or inventoried

for later use. If a service is not utilized when available, the
opportunity is lost.
• Example: An empty airline seat on a flight cannot be
"saved" for another customer if it goes unused, resulting
in lost revenue for that trip.

• Customer Participation
• Customers often play an active role in the service
experience, and their involvement can affect the outcome.
• Example: In a fitness class, the instructor provides the
service, but the experience and results also depend on
the customer’s level of participation and engagement.
 6

• Ownership: Services do not result in ownership. After the

service is provided, customers benefit from the outcome
or experience without owning a physical item.

• If a customer buy a product he become its owner, but in

case of services, he may pay for its use but he will never
own it,
• In respect of the payment of services, the customers may
pay in the form of charges, rent and commission etc. and
get the benefits and satisfaction,

• Example: After a consulting session, the client gains

knowledge or advice but does not "own" the session itself,
only its benefits.
 7

Classification of Services
• Classification of service based on tangible action

• Wherever people or products are involved directly, the

service classification can be done based on tangibility.

• Services for people – Like Health care, restaurants and

saloons, where the service is delivered by people to
people.
• Services for goods – Like transportation, repair and
maintenance and others. Where services are given by
people for objects or goods.
 8

Classification of services based on

intangibility
• Services directed at people’s mind : Consultancy
services

• Services directed at intangible assets: Banking, legal

services and insurance
 9

• Consumer Services vs. Business Services

• Consumer Services: These services are provided

directly to individual customers to fulfill personal needs.
• Example: Healthcare services provided in clinics or hospitals,
personal grooming services like salons and spas, and education
services in schools and universities.

• Business Services: These services are provided to other

businesses to support their operations or add value to
their offerings.
• Example: IT support for managing corporate systems, consulting
services for strategic planning, and logistics and transportation
for supply chain needs.
 10

• People-Based vs. Equipment-Based Services

• People-Based Services: In these services, individuals

provide the service directly, and quality may depend
heavily on the service provider’s skill.
• Example: Legal services provided by lawyers, medical
consultations by doctors, and coaching services by fitness
trainers.

• Equipment-Based Services: These services rely

primarily on technology or machinery rather than the
service provider’s physical presence.
• Example: ATM banking services for cash withdrawals, vending
machines for snacks, and car washes using automated
machinery.
 11

• High-Contact vs. Low-Contact Services

• High-Contact Services: These require a high level of

interaction between the customer and service provider.
• Example: Restaurants, where servers interact with customers,
healthcare services involving direct patient care, and hospitality
where guests are in continuous contact with hotel staff.

• Low-Contact Services: These require minimal

interaction, often leveraging technology to reduce direct
contact.
• Example: Online banking services, e-learning platforms where
students study independently, and utility services (like electricity)
where the consumer only interacts with the service provider for
billing.
 12

• Professional Services vs. Non-Professional Services

• Professional Services: These are specialized services

offered by certified professionals with specific expertise or
qualifications.
• Example: Accounting and auditing by CPAs, legal advice by
attorneys, and architecture services by certified architects.

• Non-Professional Services: These services do not

require extensive qualifications and can often be provided
by individuals with basic training.
• Example: House cleaning services, babysitting, and
landscaping services.
 13

• Core Services vs. Supplementary Services

• Core Services: These form the primary service that fulfills

the main purpose of the customer’s need.
• Example: The transportation provided by an airline from one
destination to another, or education at a university.

• Supplementary Services: These add value to the core

service by providing additional support or enhancing
customer satisfaction.
• Example: The in-flight meals and entertainment offered by
airlines or career counseling at a university.
 14

• Personal Services vs. Property Services

• Personal Services: Services directed towards individuals

to meet their personal needs or desires.
• Example: Healthcare for personal health, beauty services at a
spa, and fitness training for physical health improvement.

• Property Services: These services focus on the care,

maintenance, or improvement of a customer’s physical
property or possessions.
• Example: Home cleaning, car repairs, and lawn care services.
 15

• On-Site vs. Off-Site Services

• On-Site Services: These are services that are provided

at the customer’s location or designated facility.
• Example: Home healthcare, plumbing repair, and catering
services for events held at a customer’s location.

• Off-Site Services: These are services provided at the

service provider’s facility or another location.
• Example: Laundry services at a laundromat, vehicle repair at a
mechanic's garage, and dental checkups at a clinic.
16
 17

The 7Ps of Service Marketing

• Product
• The core offering that fulfills a customer’s needs or wants,
which in services is often intangible.

• Example: For a spa business, the product includes

massage services, facial treatments, and wellness
packages. The business focuses on the relaxation
experience and well-being benefits.
 18

Price

• The cost customers pay for the service. In service

marketing, pricing can be challenging due to the
intangible nature of services and often includes various
pricing strategies.

• Example: A consulting firm may charge by the hour,

offer package rates, or use a project-based pricing model,
depending on client needs and service scope.
 19

• Place
• The channels or locations through which a service is
delivered to customers.
• Example: An online education platform offers courses
that can be accessed anywhere with internet connectivity,
providing convenience for global students.

• Promotion
• The strategies used to inform, persuade, and remind
customers about the service.
• Example: A gym may run seasonal promotions, offer
discounts on memberships, partner with influencers, or
use social media to showcase success stories and fitness
tips to attract new members.
 20

• People
• The individuals who provide the service, as they directly
impact the customer’s experience.
• Example: In a restaurant, waitstaff, chefs, and hosts are
crucial in creating a positive dining experience. Well-
trained, friendly staff improve customer satisfaction and
encourage repeat visits.

• Process
• The procedures, mechanisms, and flow of activities by
which the service is delivered.
• Example: In telemedicine, the process includes booking
an appointment online, connecting with a healthcare
provider through a secure video link, receiving a
diagnosis, and paying electronically. A smooth process
ensures patient satisfaction and convenience.
 21

Physical Evidence
• The tangible aspects that help customers evaluate a
service and form perceptions about its quality.

• Example: In a hotel, physical evidence includes the

cleanliness and ambiance of rooms, the lobby decor, staff
uniforms, and any printed or digital material (like
brochures or a mobile app) that reflects the brand’s
quality.
 22

Application of the 7Ps for a SaaS

Company
• Product
• The core product is an online project management
platform designed to help teams collaborate, track project
progress, assign tasks, and communicate efficiently.

• Example: Features might include task management, file

sharing, messaging, analytics, and integration with other
tools like Slack, Google Drive, and Microsoft Teams.
 23

• Price: Pricing models for SaaS products often include

subscription-based plans with different tiers based on
features and team size.
• Example: The company might offer a premium model
(free plan with basic features), monthly or annual
subscriptions for standard and premium plans, and
discounts for long-term commitments. Enterprise-level
clients may have custom pricing based on their needs.

• Place: Since it’s a SaaS platform, customers access the

product online from anywhere with an internet connection.
• Example: The platform is hosted in the cloud and
accessible via a web browser or mobile app, making it
convenient for remote and hybrid teams.
 24

• Promotion
• Promotion involves raising awareness of the tool’s benefits
through digital marketing, partnerships, and content marketing.
• Example: The company might run ads on social media and
search engines, publish blog posts and case studies on
productivity, collaborate with influencers in the tech space, and
offer webinars or free trials to demonstrate the platform's value.

• People
• Customer service and technical support teams play a
significant role in service delivery, as they assist users with
setup, troubleshooting, and account management.
• Example: The company provides 24/7 support for premium
users, onboarding specialists for new clients, and dedicated
account managers for large enterprise clients to ensure
effective use of the tool.
 25

• Process
• The process includes smooth user onboarding, account setup,
integration with other tools, and ongoing support.
• Example: When users sign up, they go through a guided setup
and receive tutorials on platform features. The company uses
automated reminders and in-app notifications to assist users in
optimizing their workflows on the tool.

• Physical Evidence
• Even though SaaS is digital, physical evidence still includes
tangible elements that reinforce the brand and quality of the
service.
• Example: Physical evidence might include an intuitive, well-
designed user interface (UI), secure login credentials, well-
designed tutorials and training videos, email support follow-
ups, and user testimonials displayed on the website.
 26

Customer involvement
• Customer involvement is a critical aspect of service
marketing because services are often co-produced with
customers, and their active participation can directly
impact the quality, satisfaction, and outcome of the
service experience.

• In services marketing, customer involvement refers to the

level of engagement and interaction customers have with
the service provider during the service process. It plays a
crucial role in shaping perceptions, creating value, and
influencing customer loyalty and satisfaction.
 27

Levels of Customer Involvement in

Services

• Low Involvement Services: Services where customer

involvement is minimal and primarily limited to initiating or
accepting the service.

• Moderate Involvement Services: Services where

customer feedback and interaction play an essential role,
but the service provider still performs most of the work.

• High Involvement Services: Services that require active

and continuous involvement from the customer to co-
create the service experience.
 28

Importance of Customer Involvement in

Services Marketing
• Enhanced Service Quality
• Customer feedback and participation help tailor the
service to individual needs, which can improve the quality
and relevance of the service.

• Example: In healthcare, a patient’s active participation in

providing detailed information about their symptoms helps
doctors make accurate diagnoses and offer more effective
treatment.
 29

• Customization and Personalization

• Involving customers enables businesses to customize

services to meet specific preferences, making the service
more personal and valuable to the customer.

• Example: In a personal training service, a trainer may

involve the client in setting fitness goals and choosing
workout routines that match their interests and physical
condition.
 30

• Increased Customer Satisfaction and Loyalty

• When customers feel involved in the service delivery, they

are more likely to feel a sense of ownership and
satisfaction, leading to repeat business and loyalty.

• Example: A restaurant that allows customers to customize

their meals or provides “chef’s special” suggestions based
on the customer’s tastes may see higher customer
satisfaction and loyalty.
 31

• Efficient Service Delivery

• Active customer involvement can make the service

process smoother and faster by providing necessary
information or participating in specific service aspects.

• Example: In banking services, customers who use self-

service tools, such as online banking or mobile apps,
streamline their transactions, reducing wait times and
enhancing their experience.
 32

• Reduced Perceived Risk

• In services where outcomes may be uncertain (like
financial consulting), customer involvement can reduce
perceived risk by making the process transparent and
inclusive.
• Example: A financial advisor involving clients in
discussions about investment options and decisions can
help clients feel more informed, reducing anxiety about
their investment choices.
 33

Strategies for Encouraging Customer

Involvement in Service Marketing
• Educating Customers
• Educating customers on how to engage with the service
effectively can empower them and make them more likely
to participate.

• Example: Banks may provide tutorials on using online

banking tools, helping customers take an active role in
managing their finances.
 34

• Empowering Customers with Choices

• Offering options allows customers to customize the
service to fit their needs, increasing satisfaction and
engagement.
• Example: Streaming services, such as Netflix, allow
customers to create personalized watchlists and choose
from a wide range of content.

• Building Interactive Platforms

• Digital platforms where customers can interact with
service providers and other customers foster involvement
and engagement.
• Example: Fitness apps that allow users to track progress,
set goals, and join community challenges increase
motivation and interaction with the service.
 35

• Feedback and Co-Creation Opportunities

• Inviting customers to provide feedback or participate in
the service development process builds a sense of
ownership.

• Example: Product testing sessions for a new software

feature, where customers test and provide feedback,
allows them to feel more connected to the final product.
 36

Customer loyalty in Service Marketing

• Customer loyalty in service marketing is essential
because it reflects the customer’s commitment to
repeatedly choose a specific service provider over
competitors.

• Since services are often intangible, loyalty in this context

is closely tied to trust, satisfaction, and the overall
experience that the service provider delivers.

• High levels of customer loyalty lead to increased

customer retention, brand advocacy, and positive word-of-
mouth, which are especially valuable in competitive
service industries.
 37

Why Customer Loyalty Matters in Service Marketing?

• Increases Customer Retention

• Loyal customers are more likely to return, reducing the need to
continually attract new customers, which can be costlier.
• Example: A loyal client at a salon will keep returning for
haircuts and other treatments, making the salon’s revenue
more predictable.

• Builds Positive Word-of-Mouth

• Satisfied, loyal customers tend to share positive experiences
with others, bringing in new clients at a lower acquisition cost.
• Example: A loyal hotel guest who shares their experience on
social media or through reviews can help attract other potential
guests.
 38

• Boosts Lifetime Customer Value (LCV)

• Loyal customers are more likely to spend more over time,
as they trust the provider and feel comfortable making
additional purchases.
• Example: A bank with loyal customers may see those
customers expanding into other services, like taking out
mortgages, opening savings accounts, or investing.

• Creates a Competitive Advantage

• Strong customer loyalty can serve as a buffer against
competition, as loyal customers are less likely to switch to
a competitor for minor differences in price or offerings.
• Example: A frequent flyer who values an airline’s service
and rewards program is less likely to switch airlines for a
slightly cheaper ticket.
 39

Factors Influencing Customer Loyalty

in Service Marketing
• Service Quality: Consistently high-quality service is
foundational for loyalty, as customers are unlikely to stay
with a provider that doesn’t meet their expectations.
• Example: A reliable and high-quality healthcare provider
builds patient trust and loyalty over time.

• Customer Experience and Engagement: The overall

experience, from initial interactions to follow-ups, can
greatly influence loyalty.
• Example: A streaming service with a user-friendly
interface, personalized recommendations, and responsive
customer support engages users more effectively, leading
to loyalty.
 40

• Trust and Transparency: Trust is crucial, especially for

services that involve sensitive information or significant
financial commitments.
• Example: A financial advisor who transparently
communicates investment risks and openly shares
updates builds trust, leading to customer loyalty.

• Personalization and Customization: Personalizing

services to meet individual needs makes customers feel
valued, strengthening loyalty.
• Example: A hotel that remembers a returning guest’s
room preferences or dietary needs demonstrates
attentiveness, fostering loyalty.
 41

• Reward and Recognition Programs: Loyalty programs

reward repeat business, encouraging customers to
choose the provider again in the future.
• Example: A coffee shop with a points system that rewards
customers with a free drink after multiple purchases
incentivizes them to return.

• Effective Problem Resolution: Swiftly and effectively

handling complaints or service failures shows customers
they’re valued and that the provider is reliable.
• Example: A telecom provider that resolves connectivity
issues promptly and compensates customers for
downtime is more likely to retain loyalty even during
service disruptions.
 42

Strategies to Build and Enhance

Customer Loyalty
• Implement Loyalty Programs: Offering rewards for repeat
customers encourages continued use of the service.
• Example: Airlines use frequent flyer programs to reward
repeat travelers with points that can be redeemed for
upgrades, extra baggage, or flights.

• Focus on Consistent Service Quality: Ensuring high-

quality service at every interaction builds trust and
encourages repeat business.
• Example: A luxury spa with consistently high-quality
treatments and customer service fosters loyalty by meeting
or exceeding expectations every visit.
 43

• Use Personalized Communication: Sending

personalized offers, thank-you notes, or birthday
messages shows customers they are valued individually.
• Example: A restaurant that sends personalized offers on
special occasions, like birthdays, enhances the
customer’s connection to the brand.

• Provide Convenient and Seamless Omnichannel

Access: Allowing customers to access services easily
across multiple channels (online, in-app, in-store) adds
convenience and enhances the experience.
• Example: Banks that offer online, mobile, and in-branch
services provide a seamless experience, fostering loyalty
by meeting customers wherever they are.
 44

• Train Employees to Enhance Customer Interactions

• Skilled and customer-oriented staff improve interactions,
making customers feel valued and increasing loyalty.
• Example: A hotel that trains staff to remember repeat
guests’ names and preferences adds a personal touch
that builds loyalty.

• Regularly Gather and Act on Customer Feedback

• Actively seeking feedback and implementing changes
based on it demonstrates a commitment to improvement.
• Example: A fitness center that regularly surveys members
on class offerings and then updates schedules or services
based on feedback creates a loyal customer base by
showing responsiveness.
 45

GAP model
• The GAP Model was first proposed by A. Parasuraman, Valarie
Zeithaml and Leonard L. Berry in 1985.
• The GAP Model of Service Quality helps the company to
understand the Customer Satisfaction.
• the GAP Model is widely used to understand the various
deviations that are occurring in the process of service delivery
to potential customers.
• GAP Model creates a roadmap for the overall service delivery
process and identifies the gap between the processes so that
the complete model works efficiently and effectively.

• The GAP Model of Service quality helps to identify the gaps

between the perceived service and the expected service
 46

Five Gaps occur in the Service Delivery

Process
• The gap between Customer Expectation and Management Perception

• The gap between Service Quality Specification and Management

Perception

• The gap between Service Quality Specification and Service Delivery

• The gap between Service Delivery and External Communication

• The gap between the Expected Service and Experienced Service

 47

GAP-1- The gap between Customer

Expectation and Management Perception

• The gap between Customer Expectation and

Management Perception refers to the disparity that
exists when management, or the company,
misunderstands or is unaware of what customers actually
expect from a product or service.

• This gap can lead to poor customer satisfaction and

missed business opportunities. The core of the problem
lies in assumptions or miscommunications that lead to
products, services, or experiences that don’t fully meet
customer needs.
 48

Ex: Hotel Service

• Customer Expectation: A customer books a luxury hotel
room expecting a relaxing and comfortable stay, where
the room is clean, the amenities work well, and the
service is prompt. They also expect to have a smooth
check-in process and friendly, responsive staff.
• Management Perception: The hotel management
believes that their customers prioritize the quality of the
bed and the cleanliness of the room. They think that the
guests' main concerns are only related to the
accommodation itself and may underestimate the
importance of service quality, such as a quick check-in,
friendly staff, and quick responses to requests.
 49

GAP 2: Gap between Service Quality

Specification and Management Perception

• The gap between Service Quality Specification and

Management Perception refers to the situation where
management has a different understanding or
interpretation of the service quality standards they have
set compared to what they believe their customers
expect.

• This gap can lead to a disconnect between what is

promised and what is actually delivered, resulting in
customer dissatisfaction.
 50

Ex: Restaurant Service

• Service Quality Specification: The restaurant sets a
service quality specification to serve food within 15
minutes after ordering, ensure that staff is friendly and
professional, and maintain a clean dining environment.

• Management Perception: Management perceives that

the primary factors customers care about are quick
service and cleanliness. They assume that as long as the
food is delivered within the set time, the customers will be
happy with the service quality. They also believe that staff
friendliness is sufficient as long as the staff is polite and
professional in their behavior.
 51

GAP 3: Gap between Service Quality

Specification and Service Delivery
• It occurs when there is a difference between the service
standards or specifications that the company has set and
the actual delivery of those services.

• This gap can happen due to various reasons, such as

poor execution, lack of resources, insufficient training, or
process inefficiencies. It typically leads to customer
dissatisfaction when the company fails to meet its own
service promises.
 52

Ex: Airline Service

• Service Quality Specification: An airline sets a service quality
specification that includes timely check-in, friendly staff, clean
cabins, and quick baggage handling. The airline promises that
passengers will be checked in within 15 minutes, bags will be
delivered within 20 minutes after landing, and staff will provide
assistance with a smile.

• Service Delivery: During peak travel times, the airline's check-

in process becomes slow due to understaffing, resulting in
longer wait times for customers. Additionally, some staff
members are less attentive or seem overwhelmed, leading to a
less-than-friendly atmosphere. Baggage handling is delayed
due to logistical problems, and the cabins, while clean, are not
as well-maintained as the airline promises.
 53

GAP 4: Gap between Service Delivery

and External Communication
• It occurs when there is a disconnect between how a
company communicates its service promises externally
(through marketing, advertising, or other communications)
and the actual service that is delivered.

• This gap can lead to customer disappointment when the

service experience does not align with what was
communicated to them previously.
 54

Ex: Hotel Marketing vs. Actual

Experience
• External Communication: A hotel’s website and
advertisements promote its luxury spa, top-tier amenities,
and exceptional customer service, boasting about
personalized experiences, quick check-in, and room
upgrades for loyal customers.

• Service Delivery: Upon arrival, the customer experiences

a long check-in line, no room upgrade despite their loyalty,
and finds that the advertised spa services are unavailable
due to maintenance. Additionally, the staff is not as
attentive as expected.
 55

GAP 5: Gap between Expected Service and

Experienced Service
• Gap between Expected Service and Experienced
Service is one of the most critical gaps in the Service
Quality Model (SERVQUAL).

• It refers to the difference between what customers

expect from a service and what they actually experience
during their interaction with the company.

• If the actual service falls short of customer expectations,

this leads to dissatisfaction, whereas if the service
exceeds expectations, customers are delighted and may
become loyal advocates.
 56

Ex: Restaurant Dining Experience

• Expected Service: A customer visits a fine dining
restaurant that has a reputation for excellent food, a great
ambiance, and impeccable service. Based on online
reviews and word-of-mouth, the customer expects prompt
service, attentive waitstaff, a great meal, and a pleasant
dining atmosphere.

• Experienced Service: However, upon arrival, the

customer has to wait for 20 minutes to be seated despite
having a reservation. Once seated, the waiter is slow to
take the order, the meal arrives cold, and the ambiance is
noisy due to large groups nearby. The overall service
quality falls short of the customer's expectations.