July 29, 2015 1

SERVICE MARKETING: AN
INTRODUCTION

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 UNIT 1: INTRODUCTION
July 29, 2015 2

1. Concept of Service Marketing

2. Development of Service Marketing
3. Differentiating Goods and Service Marketing
4. Challenges for Service Marketers
5. Triangle of Service Marketing
6. Service Marketing Mix

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 1. Concept of Service July 29, 2015 3

Marketing
 For building up our basic understanding about
service marketing, we should consider at least
three things – defining services, defining service
marketing, and recognizing the main marketable
service entities.

 So, let’s focus on understanding the basic concepts

on service, service marketing and main marketable
service entities.

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 Defining Service …
July 29, 2015 4

 Simply speaking, service is the way how a provider or

producer acts by means of its deeds, processes or
performances so as to satisfy the expectations,
deprivations, motivations and unmet needs of the receivers
of the outputs of such deeds, processes or performances.
 Facebook provides with social networking features, The
British Airways offers with worldclass flight experiences,
Hospital offers quality healthcare solutions. These all
are a few examples of services.
 The quality of such services relies on effectiveness of the
actions of the provider – the deeds, the way they are
produced – processes, and the effects they generate on
experiencing or consuming them – performances.
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 Defining July 29, 2015 5

 A service may beService …an intangible and more

referred to as
perishable component of any business offering – absolute
package as a core product or as an augmented form to
promote the tangible products.
 Normally, the production and consumption of services
takes place simultaneously.
 The purpose of creating such may be business as well as
purely service to the society.
 There is big difference between the services offered by
‘service not for profit’ organizations and ‘service at a cost’
organizations.
 Let’s consider ‘service at a cost’ proposition in business.
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 July 29, 2015 6

 The overall approach of generating awareness, interest,

Defining Service
desire and action (AIDA)Marketing … that are put
to consume services
on offer of the provider may be referred to as service
marketing.

 Communication of the core meaning, benefits, and

procedures of consumption of a service; making it
convenient for the reach of target customers; building a
sound in-bound and outbound logistics support system;
selection, development and promotion of an effective
service distribution network; and developing and
promoting systems visibility are a few integrated functions
related to marketing of services.
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 July 29, 2015 7

 Ordinarily, ‘service marketing’ can be linked to the overall

Defining Service
approach adopted Marketing
by a firm to promote the…
service
component of its offering – no matter whether it is a core
offering or augmented one.
 The key functions related to marketing of services will
include branding and packaging of services, performing
advertising and publicity about the services on offer,
promoting the business partners that leverage marketing
and promotion of services across the markets, assessing the
service impact and customer satisfaction, and so on – as it
applies to marketing of tangible goods.
 In other words, service marketing refers to the overall
approach of promoting the marketable service entities.
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 Main Marketable Entities
July 29, 2015 8

Can you justify with examples how these elements

can serve as marketing entities?
1. Goods or commodities
2. Services
3. Ideas Better, differentiate
these in respect with --
4. Events a. tangibility,
5. Places b. perishability,
6. Persons c. transfer of
ownership,
7. Information d. heterogeneity, and
8. Properties e. timing of production
9.Experiences and consumption?
10.Know-how
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 Video Demonstration

• https://www.youtube.com/watch?v=D2f507ExIco
 July 29, 2015 10

Implications of Intangibility
 Services cannot be inventoried.
 Services cannot be patented.
 Services cannot be readily displayed or
communicated.
 Pricing is difficult.
 Services cannot be physically handed over
the buyer after transaction.
 There will remain a long-term debate over
the ownership of services as they cannot be
fully separated from their maker.
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 Implications of July 29, 2015 11

Heterogeneity
 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.
 Quality of delivered services will vary from person
to person delivering it.
 Different customers will have varying level of
perception on delivered service quality.
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 July 29, 2015 12
Implications of Simultaneous Production and
Consumption
 Customers participate in the process and affect the
transaction.
 Customers affect each other, a less satisfied
customer may affect adversely to a greater extent.
 Employees affect greatly the service outcomes.
 Mass production of services is quite difficult.
 If not consumed immediately, many services turn
into big cost to the firm.

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 Implications of July 29, 2015 13

Perishability
 It is difficult to synchronize supply and demand of
services.
 Services cannot be returned or resold.
 They cannot be stocked for future sale or use.
 Opportunity cost is always unpredictable.

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 14
Value Added by Physical, Intangible July 29, 2015
Elements Helps
Distinguish Goods and Services

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 Tangibility Spectrum

Salt
 Soft Drinks
 Detergents
 Automobiles
 Cosmetics
 Fast-food
Outlets

 Intangible
Dominant

Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies  
Airlines
Investment
Management 
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Consulting 
Teachi1n4
 July 29, 2015 16
More Examples of Services and Service Industry
1. Health Care: hospital, medical practice, dentistry, etc.
2. Professional Services: accounting, legal, architectural, research and
innovation, consulting, management contracts, etc.
3. Financial Services: banking, investment advising, insurance, etc.
4. Hospitality: restaurant, hotel/motel, bed and breakfast, ski, etc.
5. Travel: airlines, travel agencies, theme park, etc.
6. Public Service: national security, defense, general admin., etc.
7. Social Service: politics, economic development, NGO/INGO, etc.
8. Education: education, counseling, coaching, teaching, etc.
9. Others: hair style, pest control, plumbing, lawn maintenance,
counseling services, health club, etc.

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 2. Development of Service July 29, 2015 17

Marketing
What resulted in evolution of services?
1. Evolution of human being as a social entity required
services of others for living better lives.
2. The financial prosperity and well-being of people made it
realize the need of special services in which they could
spend their disposable money.
3. Changing behavior and values of people forced them
realize the need of services.
4. Felt importance of spending some portion of life in
pleasure, entertainment and leisure resulted evolution of
services as alternatives to it.
5. A range of survival needs also resulted in evolution of
services.
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 What resulted in evolution of July 29, 2015 18

6. Toservices?
facilitate the challenges of material developments, it
required a number of services.
7. Various new inventions required to be attached with a
number of services.
8. More service sectors evolved to create jobs, empowerment
and employment as part of government and social
development missions.
9. Due to more educated and aware people, they got realized a
number of services required.
10.To meet the ever-increasing and ever-evolving unmet needs
of the human beings.

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 Additional Reasons of Growth of July 29, 2015 19

1. Services
Evolution of service-based economies
2. Economic changes
3. Service as a business imperative in manufacturing and
IT
4. Increasing needs of professional services, especially in
hospitality, research and innovation
5. Industrial deregulation; political legal changes; policy
changes
6. Globalization
7. Socio-demographic changes
8. Technological changes

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Recap of the definition-SERVICES
“Services are activities, benefits or satisfaction
which are offered for sale or provided in
connection with sale of goods”. - The American
Marketing Association

“Services are those separately

identifiable essentially
intangible activities, which
want satisfaction
provide
when marketed to consumers
and/or industrial uses and which are not
necessarily tied to the sale of a product or another
service”. - Stanton
COMPONENTS OF
SERVICE

Physica
l
Product
1. The Physical Product
The various products marketed by a firm involve
the physical transfer of ownership of those
products. They are tangible and their quality is
standardised.

For Example, physical products include T.V., Radio,

Refrigerators, Computers, Hair oil, Vacuum Cleaner,
Washing Machine, etc.
2. Service Product
A service is an activity or benefit that one party can
offer to another which is essentially intangible in
nature. Service involve some interaction with
customers without effecting transfer of ownership.

For example, people visiting exhibitions, trade fairs

are allowed to inspect the consumer durables
without being approached by sales representatives.
Salesmen are trained in making proper approach to
the customer visiting their showrooms.
3. Service Environment
The potential customers form an impression about
the service on the basis of service environment.
The service environment represents the physical
back drop that surrounds the service.

For example, providing hygienic food is the core

service in a hotel or restaurant. Customers expect
the restaurants to be maintained clean, offer
flexible dining hours prompt service, soft music,
décor, exotic menu etc.
4. Service Delivery
The Service delivery is one of the important
components of service. Service delivery is of great
importance to the customer’s overall perception
about the quality of service. The service provider
should give due consideration to the way service is
rendered to customers. Services are created as
they are consumed.
SERVIC
ES
CHARACTERISTICS OF
SERVICES
1. Intangibility
2. Inseparability
3. Heterogeneity (Individuality or Variability)
4. Perishability
5. Ownership
6. Absence of Quantitative measurement
 Classifications of service marketing:-

A. On the Basis of Degree of Involvement of the Customer – 1. People

Processing 2. Possession Processing 3. Mental Stimulus Processing 4.
Information Processing

• B. On the Basis of Service Tangibility – 1. Highly Tangible 2. Services Linked

to Tangible Goods 3. Tangible Goods Linked to Services 4. Highly Intangible

• C. On the Basis of Skills and Expertise Required – 1. Professional Service

Marketing 2. Non-Professional Service Marketing

• D. On the Basis of the Business Orientation of the Service Provider – 1.

Commercial Organisation 2. Non-Profit Organisation

• E. On the Basis of the Types of End Users – 1. Consumer Service Marketing

2. Business to Business Service Marketing 3. Industrial Service Marketing.
I. On the Basis of Degree of Involvement of the Customer:

1. 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.

• 2. 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.

• 3. 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.

• 4. Information Processing- In this case, data, information, knowledge are

gathered and analysed for clients, like research studies, market surveys,
data processing, accounting, legal services, programming, etc.
II. On the Basis of Service Tangibility:

• Here the degree of tangibility (the tangibility spectrum) has been taken
into consideration with the same number of classes.
1. Highly Tangible- The service includes physical products (highly tangible)
for use during the contract period, like a cell phone or a house on rent.

• 2. Services Linked to Tangible Goods- These are the guarantee or

warranty periods, during which the sellers provide free or subsidised
services to the customer, like machines, vehicles, gadgets, etc.

• 3. 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.

• 4. Highly Intangible- Here, no products are offered as part of the services,

like haircuts, body massage, movie, etc.
 III. On the basis of skill and
expertise required:

• The basis of the level of skills required to render a set of services, as-
1. Professional (High Skill) Service Marketing – These services require
a higher level of qualification and training to provide services, like
doctors, lawyers, pilots, IT professionals, etc.

• 2. Non-Professional (Low Skill) Service Marketing – These services

don’t require any special prerequisites in skills, and can be performed
by anybody with some practice, like office security guards, babysitters,
courier delivery boys, etc
 IV. On the basis of the
Business orientation of the
service provider
• This kind of service marketing depends on the business style or
orientation (objective, purpose, aim) of the organisation, as-
1. Commercial Organisations (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.

• 2. Non-profit Organisations (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 organisation,
and that is obtained from public donations, trust funds, or
government aid. This category includes government bodies and
also no-profit-no-loss (cost to cost) organisations.NGOs, welfare
societies, disaster relief organisations, etc. are examples.
 V. On the Basis of the Types of
End Users:

• Service marketing can be classified by the type of consumers who

consume them.
1. 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.

• 2. Business to Business Service Marketing (B2B) – This is between two

companies, like one company hiring another, to do market research for it.

• 3. Industrial Service Marketing – This is the case where a manufacturing

company buys services from a service provider like supply, erection,
commissioning, and maintenance of the plant and machinery.
CLASSIFICATION OF
SERVICES
1. Classification of Services by Adrian Payne
(a) Communications and information services
(b) Public utilities, government and defence
(c) Health care
(d)Business, Professional and
Personal Services
(f) Recreational and hospitality services
(g) Education; and
(i) Other non-profit organisations
CLASSIFICATION OF
SERVICES
2. Classification of Services by
Christopher Lovelock
(a) Nature of Service Act
(b)Typeof relationship that the
service organisation has with its customers
(c)Scope for Customisation and
Judgement in Delivery System
(d)Nature of demand and supply for
the service
(e) Methods of Service Delivery
 Nature or Service Recipient of Services
Act People Things

 Health Care  Freight,

Tangible Actions  Beauty Saloons Transportatio
 Restaurants n
 Dry Cleaning
 Veterinary
 Education  Banking
Services

Intangible Actions  Information Services  Legal Services

 Entertainment  Insurance
CLASSIFICATION OF
SERVICES
1. Consumer Service 2. Industrial Service:
Marketing:  Financial Services
 Food Services  Insurance services
 Hotels and Motels  Transport & warehousing
 Personal care services  Engineering services
 Car services firms  Advertising and
 Entertainment services promotion services
 Transport services  Office services,
 Communication Services  Management
 Insurance services consultancy services.
 Financial services
CLASSIFICATION OF SERVICES –
Philip Kotler
1. Pure Tangible Goods
2. Tangible Goods with accompanying services
3. Hybrid
4. Major service with accompanying minor
goods and services
5. Pure service
SERVICES DESIGN
A service involves creation and delivery of core
benefits in order to satisfy an identified need of the
customer. As a process, it refers as to how a service
is provided or delivered to a customer. In a
competitive market, the importance of the actual
process in service delivery has been recognised.
 Service Customer
Service Customer
Performance Experience
Requirements Expectations
Standards With service

Service Design

Service Custom Service Customer

er Provider
Product Facilitie Encounter Provider
Operati Service behaviour
Design s Design Environment interactio
ons n
Process Process
Design Design

Service
Quality
Video Examples of service Design
• https://www.youtube.com/watch?v=-0BnIUKiLrw

• https://www.youtube.com/watch?v=HNOY8GLVy_8
Factors Influence Designing Service
Process
1. The Service Itself
2. Customer Participation in the process
3. Location of Service Delivery
4. Level of Customer Contact
5. Degree of Standardisation
6. Complexity of the service
Mgt model for Service Design / Stages /
Process
Specifying Generating &
Developing
design evaluating Developing
design
performance design design details
attributes
standards concepts

Improving Assessing Measuring Implementing

performance satisfaction performance the design
 July 29, 2015 44

1. Since the services are intangible, it is quite difficult to

define and improve their quality.
2. Communicating and testing new services is always
complicated as they do not have any tangible form.
3. Communicating and maintaining a consistent image is
always a tough task.
4. Motivating and sustaining employee commitment to serve
the best is a highly complicated task.
5. Coordinating marketing, operations and human resource
efforts for best service delivery is another challenge.
6. Setting prices of services is very much difficult job.
7. Standardization and customization of services is difficult.
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 July 29, 2015 45

 It is a tri-logical concept advocating that

effectiveness of service delivery relies on three
integral elements – company that offers of owns
services, customers for whom the services are
targeted to, and the employees responsible for
the delivery of services.

 It all talks about how the company, its employees

and customers can work collectively for setting,
enabling and delivering the promises more
effectively.
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 July 29, 2015 46

The Services Marketing Triangle

Company
(Management)

enabling the promise setting the promise

Employees Customers
Interactive Marketing-delivering
the promise
 July 29, 2015 47

Technology connects all the agencies responsible in it.

Company or Management

Technolog
y

Employees or Providers Customers or Users

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Video Example: Mariott Hotels

• https://www.youtube.com/watch?v=BhY5OAz4vIA
 49

Overall Strategic Specific Service

Assessment Implementatio
1. How is the service n
organization doing on all 1. What is being promoted
three sides of the and by whom?
triangle? 2. How will it be delivered
2. Where are the and by whom?
weaknesses? 3. Are the supporting systems
3. What are the in place to deliver the
strengths? promised service?
Internal Marketing - Definition
“The means of applying the philosophy and
marketing to people who serve the external
customers so that:
a) The best possible people can be employed and
retained; and
b) They do the best possible work”.
- Berry
Internal Marketing - Definition
“Treating with equal importance the needs of the
internal market (the employees) and the external
market (customers) through proactive
programmes and planning to bring about
organisational objective by delivering employee
and customer satisfaction”.
- Helen Woodruffe
Objectives of Internal Marketing

Objectives of Internal Marketing

Overall Strategic level Tactical level

objective objectives objectives
s
 Supportive mgt  Sale of Services
methods  Supporting
 Personnel Policy Services
Internal  Campaigns
Trading Policy Single
 Planning & Marketing efforts
Control
Role of Internal Marketing
1. Internal marketing motivates the personnel to
work better and satisfy customers.
2.Every employee needs information for his
effective functioning in an organisation. Internal
marketing builds a good communication network
which provides information to all employees
thereby supporting the service environment.
3.Internal marketing enables the service
organisation to gain additional market share.
4. It signifies the role of every employee and
reduces conflict between the functional areas of
business.
Role of Internal Marketing
5.Customer service gets a high priority and the
entire organisation focuses on a customer-oriented
approach.
6.Internal marketing helps to develop committed
personnel who can provide best possible service to
customers.
7.Internal marketing equips people with technical
skill and knowledge required for their effective
functioning.
8. It builds the corporate image by creating
awareness and appreciation of the company’s aims
and strength.
Components of Internal Marketing
1. Latest methods of training
2. Continuous interaction with the management
3. Internal Communication
4. Marketing research
5. Other human resource management activities
Steps in developing Internal Marketing
1. Market Definition
2. Market Research
3. Market Segmentation
4. Selection of Techniques
5. Marketing Communication
6. Marketing Orientation
External Marketing
External marketing is directed at those individuals
and groups that buy goods and services from
organization.
an External involve
traditional marketing efforts such as s
marketing
research, personal selling, advertising, directmarket
mail,
sales promotion, pricing and public relations. The
organization makes promises which correspond
with the personal needs and wishes
Internal & External Marketing
External Marketing Internal Marketing
1. There is interaction between the There is interaction between the
organization and customers organization and its employees.
2. Customers influence the operations of Management plays a crucial role in
the organization. finalising tasks and directing employees.
3. Organisation makes promises to its Internal marketing enables the employees
customers. to fulfil the promises made during
external marketing
4. Customers derive benefits from the Employees derive benefits from
service offering. compensation plan adopted by the
company.
5. External Marketing aims at achieving Internal marketing increases job
customer satisfaction satisfaction among employees.
6. Market research is conducted on Feedback is obtained from employees.
customer trends, competitors’ strategy Training and appraisal of employees are
etc., in the market. suitably adopted.
 July 29, 2015 59

 Product, price, place and promotion decisions are

referred to as traditional elements of marketing
mix.
 Service marketing mix goes three steps further as it
incorporates additional three elements including
people, physical evidence and processes involved
in production and consumption of services.

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Service Marketing Mix
The traditional marketing mix is considered in the
context of services. Since a different marketing mix
is needed for services some have expanded the
traditional four Ps.
1. Product
2. Pricing
3. Promotion
4. Place
5. People
6. Process
7. Physical evidence
Service Marketing Mix

Product

CUSTOMER Price

Promotion

Physical
Evidence
Service Marketing Mix - Definition
“The marketing mix concept is a well established
tool used as a structure by marketers. It consists of
the various elements of a marketing programme
which need to be considered in order to
successfully implement the marketing strategy and
positioning in the company’s market. It is
important internal elements or ingredients that
make up an organisation’s marketing programme”.
– Adrian Payne
Product (Service Product)
According to Adrian Payne, a product is an overall
concept of objects or processes which provide
some values to customers. Goods and services are
sub-categories of product. The term produce is
used in a broad sense to denote either a
manufactured good or product and a service.
Strictly speaking, customers are not buying goods
or services but specific benefits and value from the
total offering. This total offering to the customer is
termed as “offer”.
Product (Service Product)

Potential

Augmented

Expected

Core Total
Product
1. The core or generic product
The core product represents the basic services of a
product. This product is at its basic level. For
example, food served in a restaurant a bed in a
hotel room for the night safety of deposits and
loanable funds in a bank.
2. The expected product
The expected product consists of the core product
together with the minimal purchase conditions
which need to be met. For example in a restaurant
in addition to basic food served, aspects such as
cleanliness, timely service polite and courteous
service of bearer, availability of menu and
background music are expected.
3. The augmented product
Augmented product refers to offerings (product
benefit or services in addition to what customers
expect). This concept enables a product to be
differentiated from another. For example, though
IBM has not got technologically advanced core
product they are praised for excellent customer
service. This adds value to their core product in
terms of reliability and responsiveness.
4. The Potential product
Potential product refers doing
potentially feasible to to everything and
The concept
holdof potential
attract
product
the of a
customers. is viewed in terms of a pleasing flower
restaurant
arrangement, manager’s word of thanks, readiness
to go out of the way to serve, etc.
PRICE
Price plays a significant role in the marketing mix
by attracting revenue to the marketer. Pricing
decisions are important for determining the value
of the service as perceived by the customer and
building of an image for the service. Price serves as
a basis for perception of quality. The pricing
strategy should be in tune with the marketing
strategy. Pricing strategy should gain competitive
advantage for the firm.
PRICE Decisions - Reasons
1. Pricing decisions have an impact on marketing
channels. Suppliers, sales people, distributors,
competitors and customers all are affected by
the pricing system.
2. Since services are intangible in nature, pricing
of services is highly important. The price is
indicative of the quality of service that
customers receive. Customers, by going through
the menu of a restaurant can perceive the
quality of food and the restaurant’s service level.
PRICE Decisions -
Reasons
3. Pricing gives customers information about the
immediacy of delivery and the importance of
availability. Premium pricing is followed during
maximum demand period and discounted
pricing when the demand for the service is low.
4. Pricing allows homogeneous services to be
differentiated and facilitates the adoption of a
premium pricing strategy.
PRICING Objective
The price policies for service marketers should be
on the lines of those used throughout the general
field of marketing. The pricing policy to be
followed should be based on pricing objectives.
The important pricing objectives are survival,
profit maximisation, sales maximisation, prestige
and ROI.
In quoting prices, some firms try to meet
competition. Where adverse market conditions
prevail, marketers quote lower prices in order to
ensure survival in the market, even foregoing
profitability.
PROMOTION
Promotion is an important part of the marketing
mix for many marketers. The promotion element
of the service marketing mix communicates the
positioning of the service to customers. Promotion
adds tangibility and helps the customer evaluate
the service offer. The promotion mix includes six
elements, namely (a) Advertising (b) Personal
Selling (c) Sales Promotion (d) Public Relations (e)
Word of mouth and (f) Direct mail.
PROMOTION

Personal
Selling
PROMOTION
(a) Advertising for services
Advertising is the impersonal communication used
by service firms. Advertising in service marketing
adds to the customer’s knowledge of the service,
persuades the customer to buy and differentiates
the service from other service offerings. Persistent
advertising is, therefore, a must for the success of
the marketing of the service.
(b) Personal Selling
Personal Selling has assumed much importance in
service firms owing to the following reasons.
a) There is a personal interaction between
the service provider and the customer
b) The service is provided by a person
not a machine.
c) “People” are becoming part of the
service product.
(c) Sales Promotion
Those marketing activities other than personal
selling, advertising and publicity that stimulate
customers and dealers effectively such as display
shows, exhibitions, demonstrations and various
non-recurrent selling efforts not in the ordinary
routine are the sales promotional measures.
(c) Sales Promotion
TOOLS OF SALES PROMOTION

Free Offers

Contests

Discount and Commission

Fairs and Shows

Coupons, Prizes

Cash Refunds

Warranties
(d) Publicity or Public Relations
Publicity consists of non-personal stimulation of
demand for a product or service by way of
arranging commercially significant news to have
appeared in mass media free of cost (not paid for
the sponsor). Publicity is a free news appearing in
mass media about a company and its products.
(e) Word of Mouth Promotion
Customers who are already exposed to the delivery
of a service, share their experiences with other
potential customers. They offer advice on service
providers and businesses who are established
already. Personal recommendations through word
of mouth constitute themost important
information source. Service buyers trust a
particular service when recommendations for
buying come from friends, associates collegues
or experts.
4. PLACE
Place mix of services marketing involves the
location and channels which are the two key
decision areas. The service provider should decide
as to how to deliver the service to the customer
and where this should take place. The service
provider should ensure that the promised services
reach the ultimate users without any distortion.
With regard to location, a service firm decides
where its operations and staff are situated.
5. PEOPLE
In all the organisations, people play a decisive role.
Employees working in the service organisations
are the contact people with the customers.
Employees working in a bank, hotel, hair-cutting
saloon etc., are all frontline people. They are in
direct contact with the customers who visit their
services. The role of these frontline people decides
the success of the service organisation. A service
organisation can be only as good as its people. The
strength and success of the service organisation
lies in the quality of the service personnel working
in the organisation.
6. PHYSICAL EVIDENCE
Physical evidence is another important variable to
be considered in the context of services marketing.
Since a service is intangible, it is important for the
client to search for evidences which enables him to
evaluate the service. Physical evidences are those
tangible clues which customers may receive during
the process of receiving the service. The customers
evaluate the worthiness of the service with the
physical evidences they receive.
7. PROCESSES
The processes by which services are created and
delivered to the customers are an important
element of marketing mix. Customers perceive the
delivery system as a part of the service itself. The
decisions on process management are of great
importance to the success of the marketing of the
service. The processes involve the procedures,
tasks, schedules, mechanisms, activities and
routines by which a service is delivered to the
customer.
PRODUCT PLACE PROMOTION PRICE
Physical good Channel type Promotion Flexibility
features blend

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms
Packaging Outlet location Sales Differentiation
promotion
Warranties Transportation Publicity Allowances
Product lines Storage
Branding
 PEOPLE PHYSICAL PROCESS

EVIDENCE
Employees Facility design Flow of activities

Customers Equipment Number of steps

Communicating Signage Level of customer

culture and values involvement
Employee research Employee dress

Other tangibles
Video Example of Coca- Cola

• https://www.youtube.com/watch?v=YrnBu19LOXI
 Ways to Use the 7 Ps
Overall Strategic Specific Service
Assessment Implementation
1. How effective is a firm’s 1. Who is the customer?
services marketing mix? 2. What is the service?
2. Is the mix well-aligned with 3. How effectively does the
overall vision and services marketing mix for a
strategy? service communicate its
benefits and quality?
3. What are the strengths and
weaknesses in terms of 4. What changes or
the 7 Ps? improvements are needed?

July 29, 2015 [email protected] 30

Managing Demand & Supply
Service marketers encounter challenges of
matching supply demand in a
and
environment. Services aredynamic
perishable. Production
and consumption of service take place
simultaneously. Services also cannot be
transported from one place to another or
transferred from one person to another. So, service
firms are not able to build inventories during
periods of slow demand to use later when the
demand increases.
Managing Demand & Supply

Outcome of lack of Inventory-Capability

Demand Balanced
Excess exceeds Excess
Demand demand & Capacity
optimum supply at the
capacity level of
optimum
capacity
1. Excess demand
Every service firm has a maximum capacity to
serve customers. Maximum capacity represents
the absolute limit of service availability. When
demand for the service of a particular firm exceeds
its maximum capacity, it results in undesirable
consequences. First, the existing customers of the
firm may cross over to the competitor, selling
similar service. As a result, the service firm may
lose considerable business. Second, in case of excess
demand for services, the working hours of staff
may be stretched.
2. Demand exceeds optimum capacity
Both optimum and maximum capacity may not be
the same. At optimum capacity level, resources are
fully employed but not over-used. As a result,
customers will receive quality service on time. But
when demand exceeds optimum capacity, the staff
and facilities are stretched, resulting in poor
service.
3. Demand and supply are balanced at
the level of optimum capacity
Optimum capacity refers to the efficient use of the
capacity from the point of view of both the
customers and the company. When demand and
supply are balanced at the level of optimum
capacity, staff and facilities are regarded to be
occupied at an ideal level. No employee is over-
stretched and facilities are maintained well. As a
result, customers stand to benefit. Moreover,
utilisation of optimum capacity gives a
psychological satisfaction to customers too.
4. Excess capacity
Excess capacity means the demand is below the
optimum capacity. Staff and facilities will be under-
utilised. Under-utilisation of facilities like labour
and equipment results in loss of profit to the firm.
However, customers may prefer such a situation as
they can avail full facilities at will. On the other
hand, customers may be disappointed by low
demand too in the long run. They may even worry
that they have chosen an inferior service provider.
 Strategies for Managing Demand &
Supply
1. Understanding capacity constraints
2. Understanding demand patterns
3. Capacity planning
4. Managing capacity to match demand
5. Managing demand to match capacity
6. Strategies to be used when demand
and capacity cannot be matched.
1. Understanding capacity constraints

a. Time
b. Labour
c. Equipment
d. Infrastructure
2. Understanding demand patterns
a. Charting Demand pattern
b. Predicting cycles
c. identifying random demand fluctuations
d. Disaggregating demand pattern by market
segment.
3. Capacity Planning
Types of Capacity Planning:
a. Long term capacity planning
b. Short term capacity planning
Social factors

Economy
Long-term
capacity
decisions
Markets

Competitors
 4. Managing capacity to match
demand
The strategic approach to matching supply
and demand focuses on adjusting capacity.
So, the service firm should build into its
capacity some degree of flexibility. The
extent of flexibility depends upon the type of
service offered, cost, labour availability and
other factors.
 5. Managing demand to match
capacity
This strategy involves shifting demand to
match capacity when demand exceeds
capacity. Then, the organisation tries to shift
customers to periods of slow demand. This is
just convincing the customers to use the
service during periods of slow demand. So,
people who cannot shift their demand
represent lost business for the firm.
 5. Managing demand to match
capacity
Demand too Demand too
Shift Demand low
high
Use signage to communicate busy
days and times.
Use sales and advertising to
Offer incentives to
increase business from
customers for usage during non-
peak times current market segments.
 Take care of loyal or regular
Modify the service offering to
•customers first.
appeal to new market
Advertise peak usage times and segments.
benefits of nonpeak use.  Offer discounts or price
 Charge full price for the reductions.
 Modify hours of operation
•service – no discounts .  Bring the service to
the
customer
6. Strategies to follow when demand
& capacity cannot be matched
Sometimes, it may not be possible for the service
organisations to manage capacity to match
demand or vice versa. For example, in a health
clinic patients wait longer to be examined by the
doctor during monsoon/inclement weather when
more people catch ‘flu’. The demand is flexible but
the service capacity is inflexible and it is not
economical for health clinics to add additional
facilities or physician to handle peaks in
demands.
• UNIT – I
• Introduction to Services: Growth and development of
service sector economy, contribution to the Indian
economy, Service Characteristics, Service Classification,
Service Marketing Mix. Consumer Behavior in Services:
Customer Expectation of Service, Customer Perceptions
of Service. Service Quality: Integrated gaps model of
service quality. Prescriptions for closing quality gaps