Chapter Contents

 The concept of services

 Characteristics of services Vs Products
 Rationale of studying marketing of services
 Services triangle
 Gap Model of service Quality
 Services marketing mix
 Definition of Services
• According to the American marketing association,
Services are defined as:
• Activities, benefits & satisfactions which are offered for
sale or provided in connection with the sale of goods.
• Services are deeds, processes & performances provided
or co-produced by one entity or person for another entity
or person.
• e.g.: IBM-Global leader in IT, Services &
Consulting; Its products of Intangible deeds/activities &
performances and provided for its customers
• Services are all economic activities whose output is
not a physical product or construction.
• It is generally consumed at the time it is produced &
provides added value in forms such as convenience,
amusement, timeliness/ appropriateness, comfort or
health that are essentially intangible concerns of its
first purchaser.
• Philip Kotler and Bloom defined service as “any
activity or benefit that one party can offer to another
Differentiating Goods from Services
 It is very difficult to draw a clear, defining line
between goods and services in a marketing offer.
• According to Theodore Levitt a well-known
marketing specialist, in almost every tangible pure
physical product an intangible service component is
associated.
• Therefore, everybody is in service. He classified
products into two categories, namely, search goods
and experience goods.
• Search goods are those which are packaged and the
customers can see, evaluate and go for a trail before
making a purchase. For example, scooters, fans, lock
and so on.
• Experience goods are those which can be evaluated
only after purchase and consumption. For example, a
holiday, travel and so on.
1.2 Characteristics of services Vs Products

Services have basically four characteristics that

greatly effect deign of marketing programmes.
They are:
•Intangibility
•Inseparability
•Variability
•Perishability
 Intangibility
• Services are intangible. They cannot be seen, tasted, felt,
heard or smelt before they are bought unlike physical
products. The intangibility creates a feeling of uncertainty
about the outcome of a service. For example, a tourist does
not know what the exact outcome of experience would be
before consuming the service; a woman who purchases
services in a beauty parlour for a facial cannot fore see the
exact results. This characteristic of the service makes the
buyers look for evidence of quality in the service. Buyers try
to draw quality inference from the service environment such
as the place, people, equipment, communication material,
symbols and the technical design of the service package.
•
• To handle this marketing problem the service
providers have to manage evidence. They would try
to make the intangible tangible to the best possible
extent. The service design would be in such a way
that it must be able to transform intangible services
into concrete benefits. Let us take an example of an
insurance company that wants to position itself as a
modern insurance company.
 Inseparability
• Services cannot be separated from the service provider. In
fact, the production, delivery and consumption of a service
take place simultaneously in the buyer-seller interactions.
This characteristic of a service creates problems to the
marketer, particularly in the case of market expansion.
• Wherever the service provider intends to offer services, he
should have a service production unit that offers the same
service quality standards. However, some service
organizations are able to reduce direct interactions by
introducing new technologies. For example, banking
originations have introduced the cheque facility, the credit
card facility, tele-banking and ATM to minimize direct
buyer-seller interactions.
 Variability
• Services are highly variable. It is almost impossible to have the same
service from the same seller the second time. No two customers can
have exactly similar service even though they experience it
simultaneously. For example, the experience of bus travelers vary
with the seats they occupy. The experiences of passengers sitting on
the window side, inner side, front rear and rear of the bus will not be
similar, though they take the service simultaneously.
• A receptionist of a hotel cannot extend the same kind of smile to the
customers during all her working hours. Service organizations face
major problems in standardizing and communicating the service
standards because of the characteristic. While customers look for
communication for the company relating to service standards for
arriving at a purchase decision, the service providers often struggle to
develop service standards.
• However, variability of services can be used as
an opportunity by service originations. Since
innovation is the key to success, this
characteristic offers enormous opportunities to
introduce several changes in the service offer
without distributing the basic structure of the
offer. The service provider can offer better
experience and delight to the customers by
introducing surprise change in the service
package.
 Perishability
• Services perish. They cannot be stored. Thus a train
that leaves the railway station half full means that the
service of the empty half remains unused. An
unutilized service capacity cannot be used further.
• When the demand is stable, perishability cannot be a
problem to the service organization. But service
firms face many problems when demand fluctuates.
The major challenge to these firms is to balance the
supply demand positions. Thus, demand management
is one of the major tasks for the service firms.
 1.3 Why Services Marketing
• Many forces led to the growth of services marketing with the
notable ones include the following.
– A Service Based Economy
• The economic importance of services cannot be overstated. The
sector represents a major share of GDP and it has become a major
employer. The economic importance of service is also evident
with the fact that trade in services is growing worldwide.
– Services as a Business Imperative in Manufacturing and IT
• Manufacturing and technology industries revenues and profit are
coming from services. Customers not only expect excellent, high
quality goods; they also expect high levels of services all with
them. As manufacturers and IT companies become more and more
service-focused, the need for special concepts and approaches for
managing and marketing services becomes even apparent.
 – Services Marketing is Different
• More variables exist in the marketing mix of
services than for consumer goods. In a service
business, marketing and operations are closely
linked than in a manufacturing business. The
service production process is a part of the
marketing process.
• Customer/employee interface is a major
difference between goods marketing and
services marketing.
 • Services triangle
Company
(Management)

Internal External
Marketing Marketing

“enabling the “setting the

promise” promise”

Employees Customers
Interactive Marketing
“delivering the promise”
External marketing: Making Promise
• “Anything that communicates to the customer before service
delivery can be viewed as part of this external marketing function”.
• Through its external marketing efforts, a company makes promises
to its customers regarding what they can expect, and how it will be
delivered.
• Traditional marketing activities such as advertising, sales, special
promotion, and pricing facilitate this type of marketing. The service
employees, the design and décor of the facility, and the service
process itself also communicate and help to set customer
expectations. Unless consistent and realistic promises are set via all
of these external communication vehicles, a customer relationship
will be off to be a poor beginning. Further, if there is a tendency to
over promise, the relationship may also be off to a weak beginning.
 Interactive marketing: Keeping Promises

• External marketing is just the beginning for

services marketers: promises made must be kept.
Service promises are most often kept or broken by
the employees of the firm or by third-party providers,
most often in real time. Interactive marketing occurs
in the moment of truth when the customer interacts
with the organizations and the service is produces and
consumed. Interestingly, promises are kept or broken
and the reliability of service is tested every time the
customer interacts with the organizations.
 Dimensions/measures of Service Quality

• Reliability: Perform promised service

dependably and accurately.
• Responsiveness: Willingness to help customers
promptly.
• Assurance: Ability to convey/communicate
trust and confidence.
• Empathy: Ability to be approachable.
• Tangibles: Physical facilities and facilitating
goods.
Dimensions: measures of service quality
Edge: Effectiveness
Features: a prominent part or characteristic
 Service Quality Gap Model

Customer Customer Satisfaction Customer

GAP 5
Perceptions Expectations

Managing the Customer / Understanding

Evidence Communication Marketing Research the Customer
GAP 4 GAP 1

Service Management
Perceptions
Delivery of Customer
Expectations
Conformance
Design GAP 2
GAP 3
Conformance Service Design
Service
Standards
Gaps in Service Quality
 Services marketing mix

• Product: the service product requires consideration of

the range of services provided, the quality of services
provided and the level of services provided. Attention
also will need to be given to matters like the use of
branding, warranties and after sale service.
• The service product mix of such elements can vary
considerably and may be seen in comparisons of
service range between a small local building society
and one of the largest in the country; between a small
local building society and one of the largest in the
country; or between a small hotel offering a limited
menu range and a four star hotel offering a wide range
of meals
• Price: Price considerations include levels of prices,
discounts, allowances, commissions, terms of payment,
and credit. Price may also pay a part in differentiating
one service from another and therefore the customers
perceptions of value obtained from a service and the
interaction of price and quality are important
considerations in many services price sub mixes.
• The second component of marketing mix is the price
because service are intangible and experiential in
nature, the price become more important to consumers
as a cue of what to expect. Higher price tend to convey
higher quality. However, as extremely high price may
be viewed by consumer as a rip-off.
• Place: the location of service provider and their
accessibility are important factors in service marketing.
Accessibility relates not just to physical accessibility but
to other means of communications and contact. Thus the
type and distribution channels used (e.g. travel agent) and
their coverage are linked to the crucial issue of service
accessibility. Distribution is the availability and
accessibility of a service to consumers.
• Promotion: include the various methods of
communicating with markets whether through
advertising, personal selling activities, sales promotion
activities and other direct forms of publicity and indirect
forms of communication like public relations. Promoting
a service is more complex than promoting a good.
• People: All human actors who play a part in service delivery and
thus influence the buyer’s perceptions: namely the firm’s
personnel, the customer, and other customers in the service
environment.
• Because of the intangibility, especially in case of pure services,
people delivering those services take on an added significance.
Their presence makes the intangible tangible. And, therefore, they
are an important element of the marketing mix. How these people
are dressed, their personal appearance and their attitude and
behaviors al influence the customer perception of the service.
• This may not be the case for goods. Customers are interested in
goods to the point of their having good quality. It does not matter
to them who prepared them and how they behave while at work
as long as they produce products according to the quality
customers want.
• Process: the actual procedures, mechanisms, and flow of
activities by which the service is delivered the service delivery
and operating systems.
• The actual delivery step the customer experiences, or the
operational flow of the service, also give customers evidence on
which to judge the service. Some services are very complex,
requiring the customer to follow a complicated and extensive
series of actions to complete the process. The level of complexity
or simplicity of a process is a function of the service and
organization’s outlook.
• A customer-focused process should be simple and efficient that
on the one hand facilitates employees to deliver efficiently and on
the other enables customers to feel that their decision of buying
the service has been correct. That enables customers to simplify
their purchase process for the future and helps business retain
their customers.
• Physical Evidence: The environment in which the service is
delivered and where the firms and customer interact, and any
tangible components that facilitate performance or
communication of the service.
• Again, for the factor of intangibility of services, customers are
not able to judge services until they buy them. The level of risk
involved in buying a service is a prime concern of potential
buyers. To put to rest those risks, companies attempt to create
tangible evidence to convincingly sell intangible products.
Physical evidence therefore forms an important strategy of
marketing mix for services.

• The physical evidence of service includes all of the tangible

representations of the service such as: brochures, letterheads,
business cards, report formats, and equipments. In some cases it
includes the physical facility where the service is offered.
Thank You!