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MODULE – 1
Introduction to Services

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 Synopsis – Module 1
INTRODUCTION TO SERVICES
 What are services?
 Why service marketing?
 Myths about services
 Differences in marketing of tangible goods versus services marketing
 The service marketing mix

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 GOODS & SERVICES
GOODS
 Goods are items that can be seen
and touched.
 Consumer goods are bought for
personal use, not for producing
other goods.
 Capital goods are bought for
producing other goods.

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 PERISHABLE COMMODITY

 “Any commodity which might get spoiled after a week of proper handling
and shipping conditions”
 Perishable commodities are those commodities which deteriorate quickly
when not stored properly. Perishable commodities usually require some
fort of refrigerated storage.
 NON -PERISHABLE COMMODITY

 Technically speaking there is no such thing as non-perishable

commodities, as all goods deteriorate overtime. But some commodities
deteriorate so slowly that they are called non-perishable.
 These items are usually kept in the dry store where they are kept cool and
are protected from moisture contamination. Dry goods like flour, grains
and past often comes in bags or sacks and are safe.
 Eg : Noodles and Past
 GOODS & SERVICES
SERVICES
 The action of helping or doing
work for someone.
 Consumer services are intangible
in nature, it’s a work taken from
experts on pay.

 Which takes more Hi…

AKIM’s
contribution ???????????????????
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PRODUCT OR SERVICE
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 Sector wise contribution to GDP of India 2018-19

• Services sector is the largest sector of India. Gross Value Added (GVA) at current prices for
Services sector is estimated at 92.26 lakh crore INR in 2018-19. Services sector accounts for
54.40% of total India's GVA of 169.61 lakh crore Indian rupees. With GVA of Rs. 50.43 lakh
crore, Industry sector contributes 29.73%. While, Agriculture and allied sector shares 15.87%.
• (The sector that depends on the agricultural activity in various ways and which affects the
outcome of the agricultural sector is referred to as allied sector)
15.87%

SERVICE

INDUSTRY
54.40%
29.73%
AGRI & ALLIED

Source: 13
http://statisticstimes.com/economy/sectorwise-gdp-contribution-of-india.php#:~:text=Services%20sector%20accounts%20for%2054.40,
 What are services ?
• A service is an act or performance that one part can offer to another that is
essentially intangible and does not result in the ownership of anything. Its
production may or may not be tied to a physical product – Philip Kotler
• Services are economic activities that create value and provide benefits for
customers at specific times and places as a result of bringing about a
desired change in – or on behalf of – the recipient of the service.
• Services are deeds, processes, and performances. Their broader definition
states that services include all economic activities whose output is not a
physical product, is generally consumed at the time it is produced, and
provides added value in forms that are essentially intangible concerns of
the purchaser – Zeithaml and Bitner
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Source info : “Service Marketing” People, Technology, Strategy – Book by Christopher Lovelock – PgNo.3
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• An interesting way to distinguish between goods and services is to place them on
scale from tangible-dominant to intangible-dominant.
Philip kotler proposes 5 categories of market offer
1. Pure tangible good(Eg-soap or salt).
2. Tangible good with accompanying services(Eg-cars or computers)
3. Hybrid (Eg-restaurant) combining roughly equal parts of goods and services.
4. Major service with accompanying minor goods and services (Eg-air travel).
5. Pure service (Eg-babysitting or psychotherapy).

Source: “Service Marketing” People, Technology, Strategy – Book by Christopher Lovelock – PgNo.11 17
 Characteristics of service
 Intangibility  Inseparability
 Make them person or equipment  Inconsistency
based  Standard form
 Use of facts, figure and opinions  Customer specialization
 Use of technology
DO’S
 Through personalization of DON’T S

services 1.Smile 1.Respond emotionally

 Making the service conveniently 2.Look customers in the eye 2.Crowd the customer
3.First two words give the 3.Carry on other conversion
available right opening 4.Use slang greeting
4.Listening and appearing 5.Order customer about
 Customer leverage to listen 6.Blame colleagues or the
5.Offer information and organizer
 Physical facilities help 7.Show favoritism
6.Question tactfully to 8.Promise what you cant
 Communication materials avoid ‘intrusion’ perform
7.Read the body language
 Price 8.Use names
9.End neatly
 Post-purchase communication

Source: “Service Marketing” People, Technology, Strategy – Book by Christopher Lovelock – PgNo.4 18
 Perishability
 Peak-load pricing
 Motivating non-peak consumption
 In-house alternative service
 Reservation/appointment
Alternate ways to accommodate the supply base and win over demand
• Use of part-time employees
• Renting facilities
• Sharing services with other organization
• Developing multiple-skill persons
• Reduction in time taken to serve individual customers
• Standardizing the service
• Automating
• Extended business hours
• Expanding customer’s role in delivery
• Less urgent service can be postponed
 Ownership
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 Transformation of the service economy
There are various resources for the growth of the service sector these can be divided in to

SOCIAL BUSINESS ADVANCES

CHANGES TRENDS In IT

GOVERNMENT INTERNATION
POLICIES ALIZATION

1. Increased Demand for Service.

2. More Intensive Competition

Service Innovation Stimulated by Application of New and Improved

Technologies

Increased Focus on Service Marketing and Management

Source: https://www.slideshare.net/wickedkhan/lovelock-ppt-chapter01-11847699 20
Source: “Service Marketing” People, Technology, Strategy – Book by Christopher Lovelock – PgNo.23
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 Myths about service
1. Service are non productive – they don’t create wealth
2. Essential services must remain public services
3. The expansion of services in the economy is a result of reclassification,
not substantive changes in our economy.
4. Service sectors jobs are low skill and low wage
5. The expansion of the service sector drives down productivity growth
6. Service sector innovation investment is low
7. Public sector innovation cannot be measured

Source: https://www.slideshare.net/chandumath/module-1-service-marketing 26
 Differences in marketing of tangible goods versus services marketing

BASIS FOR PRODUCT SERVICE

COMPARISON MARKETING MARKETING
Meaning Product marketing refers to the Service marketing implies
process in which the marketing the marketing of economic
activities are aligned to promote activities, offered by the
and sell a specific product for a business to its clients for
particular segment. adequate consideration.

Marketing mix 4 P's 7 P's

Sells Value Relationship

Who comes to whom? Products come to customers. Customers come to service.

Transfer It can be owned and resold to It is neither owned nor

another party. transferred to another party.

Source : https://keydifferences.com/difference-between-product-and-service-marketing.html 27
 BASIS FOR PRODUCT SERVICE
COMPARISON MARKETING MARKETING

Returnability Products can be returned. Services cannot be returned

after they are rendered.
Tangibility They are tangible, so customer can They are intangible, so it is
see and touch it, before coming to the difficult to promote services.
buying decision.
Separability Product and the company producing Service cannot be separated
it, are separable. from its provider.
Customization Products cannot be customized as per Services vary from person to
requirements. person, they can be
customized.

Imagery They are imagery and hence, receive They are non-imagery and
quick response from customers. do not receive quick
response from customers.

Quality comparison Quality of a product can be easily Quality of service is not

measured. measurable.

Source : https://keydifferences.com/difference-between-product-and-service-marketing.html 28
 “Because you're worth it”
“It's finger lickin' good”
“Be 100% Sure”
“To inspire moments of optimism and uplift.”
“The Ultimate Driving Machine”
“To bring inspiration and innovation to every athlete in the world.”

“We are Harley Davidson.”

“Think different.”
“Save money. Live better.”
“Quality, safety, and innovation.”
“Quality never goes out of style.”
 L'Oreal – “Because you're worth it”
KFC – “It's finger lickin' good”
Dettol: “Be 100% Sure”
Coca-Cola: “To inspire moments of optimism and uplift.”
BMW: “The Ultimate Driving Machine”
Nike: “To bring inspiration and innovation to every athlete in the world.”

Harley Davidson: “We are Harley Davidson.”

Apple: “Think different.”
Walmart: “Save money. Live better.”
Toyota: “Quality, safety, and innovation.”
Levi’s: “Quality never goes out of style.”
 The Service Marketing Triangle
COMPANY

INTERNAL EXTERNAL
MARKETING MARKETING
“Enabling “Making
Promises” Promises”

SERVICE

FRONT LINE EMPLOYEES CUSTOMER

INTERACTIVE MARKETING
“Keeping Promises” 31
Source: “Service Marketing , Text & Readings – P.K.Sinha & P.K.Sahoo, Pgno 214
 Actors in Triangle (Service Marketing Triangle)

1. Company: refers to the leadership team of the company in question.

2. Employees: refers to all employees, including subcontractors who deliver the

company’s service.

3. Customers: refers to all customers and potential customers of the company.

The lines between the points show the different types of marketing that must occur:

4. External Marketing: occurs between the company and its customers.

5. Internal Marketing: occurs between the company and its employees.

6. Interactive Marketing: occurs between the employees and the customers.

Source : https://expertprogrammanagement.com/2018/03/services-marketing-triangle/ 32
Forms of external marketing include:
Key components of internal
• Advertising
• Personal selling marketing include:
• Public relations (PR) • Motivating employees
• Direct marketing
• Teaching customer satisfaction

We use external marketing to achieve techniques

many aims including:
• Communicating company goals
• Creating awareness.
• Setting price expectations. regularly
• Setting service level expectations. • Management of change
• Informing customers if any
prerequisites that must be in place • Training staff on how to use the
before they can use the service. company’s services
• Good pay and working conditions

Source : https://expertprogrammanagement.com/2018/03/services-marketing-triangle/ 33
 To wrap things up let’s consider a simple example, that of a luxury hotel.
• First, let’s consider external marketing. A luxury hotel may want to educate customers
through advertising and public relations. Here, they will want to inform customers that
their rooms have the finest quality fixtures, fittings, and toiletries. They are likely to also
want to convey that their staff are knowledgeable and very willing to help with whatever
request a customer may have.
• To deliver these promises the company focuses on internal marketing. It establishes
more concierge roles within the hotel than the industry average. This helps ensure that
staff feel they have the time they need to help each customer to the best of their ability.
Employees are also trained on the local area, local activities, and excursions. The
company also teaches every employee how to handle and diffuse difficult guests and
situations.
• One of the ways that the hotel handles interactive marketing is as follows. They employ
someone to manage their social media presence and reputation.
• Now suppose a guest tweeted that they are in their room preparing for an important
meeting the next day. This would be noticed by the member of staff managing the
hotel’s social media presence. Then, whilst the guest is at their meeting the hotel might
leave a handwritten note and some chocolates in their room.
• The note will wish that their meeting went well. The chocolates will make them feel
cared about and listened to. This makes the customer feel valued in the short term. It
also makes them more likely to remain a customer over the long-term.

Source : https://expertprogrammanagement.com/2018/03/services-marketing-triangle/ 34
 The 8 Components of Integrated Service Management

Product Elements
Process
Place & Time
Productivity & Quality
Promotion & Education
People
Price & Other User Costs
Physical Evidence

Source: “Service Marketing” People, Technology, Strategy – Book by Christopher Lovelock – PgNo.16 35
 Challenges of Services

• Defining and improving quality.

• Communicating and testing new services.

• Communicating and maintaining a consistent image.

• Motivating and sustaining employee commitment.

• Coordinating marketing, operations and human resources efforts.

• Setting prices

• Standardization versus personalization.

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 Gaps Model of Service Quality”
• Marketing of services in an effective way is a complicated process which calls for
different strategies, skills and tasks. Unlike products, maintaining consistent quality
of services becomes very difficult as services are rendered by people whose skills,
knowledge, experience and expertise vary greatly from one another.
• Service marketers faced this problem for a long period of time about how to tackle
this complex problem in a systematic manner. Merely designing effective quality
management processes is not enough to achieve desired objectives.
• One of the ways seeing service marketing in a structured and integrated way is a
model called “The Gaps Model of Service Quality” which was devised by
Parasuraman, Zeithaml, and Berry in 1988. The model can be simply defined as an
easy depiction of reality.

Source: http://www.iaeme.com/MasterAdmin/Journal_uploads/IJM/VOLUME_7_ISSUE_5/IJM_07_05_011.pdf &

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“Service Marketing , Text & Readings – P.K.Sinha & P.K.Sahoo, Pgno 195
 THE GAPS MODEL
• It is a helpful structure to understand the service quality in an organization. The
gap model includes 5 gaps; of which one is a customer gap and four are provider’s
gaps. The most important service quality gap is the customer gap – the contrast
between customer expectations and perceptions.

GAP MODEL OF SERVICE QUALITY

Customer Gap 1 Customer Gap
Provider Gap 1 Not knowing what customers want
Provider Gap 2 Not selecting the right service designs and standards: For
giving quality service it is not sufficient
Provider Gap 3 Not Delivering to Service Designs and Standards
Provider Gap 4 Not Matching Performance to Promises

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 Factors leading to customer gap

Customer Expectations
Customer
GAP

• Provider Gap 1: Not knowing what customers expect

• Provider Gap 2: Not selecting the right service designs & standards
• Provider Gap 3: Not delivering to service standards
• Provider Gap 4: Not matching performance to promises

Customer Perceptions

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 The sources through which or because of which a customer develops
expectations are:
• Market controlled factors like pricing, advertising or sales promises
• There are other factors on which the service provider has little control –
inherent personal needs, word-of-mouth communications, what options
customers have: competitors’ offerings.
Note: Some marketing experts call this gap as GAP No.1 and some call it GAP
No.5. So it better to name it as “The Customer Gap”.

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Many reasons are there because of which companies are unable to
understand customer’s expectations. They are:
Companies do not interact directly with the customers. G
Companies are unwilling to ask about expectations.
Companies are unprepared to address the expectations. A
P
1

 Inadequate Market Research Orientation

Insufficient market research
Research not focused on service quality
Inadequate use of market research
 Lack of Upward Communication
Lack of interaction between manager and customer
Insufficient communication between contact employees and managers
Too many layer between contact personnel and top management
 Insufficient Relationship Focus
Lack of market segmentation
Focus on transaction rather than relationship
Focus on new customers rather than relationship customers
 Inadequate Service Recovery
Lack of encouragement to listen to customers complaints
Failure to make amends when things go wrong
No appropriate recovery mechanisms in place of service failures 42
 G
A
P
2

• Poor Service Design:

Unmethodical and disorganized new service development process. Unclear,
undefined service designs.
Non-success in connecting service design to service positioning.
• Absence of customer driven standards:
Absence of customer driven service standards.
Lack of process management to target customer requirements.
Dearth of formal process in setting service quality goals.
• Inappropriate physical evidence and service escape
Inability in building tangibles according to customer expectations.
Service escape (the impact of the physical environment in which a service
process takes place) design that fail to meet customers’ and employees’ needs.
Insufficient maintenance and upgrading of the service escape.

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 G
A
P
• Problems with Human Resource Policies: 3
Faulty Recruitment
Role conflict and Role ambiguity
Poor fit among employee, technology and job
Lack of teamwork, empowerment and perceived control
• Customers who do not fulfil roles: Even customers are expected to play their part in
service delivery process.
Customers do not have knowledge of their roles and responsibilities.
Customers affect each other negatively.
• Problems with service intermediaries:
Contradictor objectives followed by performance by the intermediaries
Problems in controlling service quality and consistency
Problems in how much power and control to be given intermediaries
• Failure to match supply and demand:
Failures to adopt according to peaks and valleys of demand
Wrong customer mix or marketing mix
Too much of reliance on price to smooth the demand.
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 G
A
P
4

•Lack of integrated service marketing communications:

Tendency to see each external communication in isolation.
No interactive marketing in communication plan.
No strong internal marketing (with employees) program
• Ineffective management of customer expectations:
No management of customer expectations through all forms of communication.
No proper education of customers.
• Over Promising:
Exaggerated promises through advertisement, personal selling or through
physical evidence cues.
• Inadequate horizontal communications:
No proper communication between sales and operations.
No proper communication between advertising and operations.
Variations in policies and procedures across service outlets

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 Gaps in Service Quality
GAP PROBLEM CAUSE(S)
1. Consumer The service features offered Lack of marketing research; inadequate
expectation – don’t meet customer needs upward communication; too many levels
mgmt. between contact personnel and management
perception
2. Management The service specifications Resource constraints; management
perception – defined do not meet indifference; poor service design
service quality management’s perceptions of
specification customer expectations

3. Service quality Specifications for service Employee performance is not standardized;

specification – meet customer needs but customer perceptions are not uniform
service delivery service delivery is not
consistent with those
specifications
4. Service delivery The service does not meet Marketing message is not consistent with
– external customer expectations, which actual service offering; promising more than
communication have been influenced by can be delivered
external communication

5. Expected service Customer judgments of A function of the magnitude and direction of

– perceived high/low quality based on the gap between expected service and
service expectations vs. actual perceived service
service
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