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Unit 1
Services Marketing
SERVICES MARKETING
Unit – I: Introduction
Syllabus:
Definition – Service Economy – Evolution and growth of service sector – Nature and
Scope of Services – Unique characteristics of services - Challenges and issues in Services Marketing.
Table of Contents
1.1 Introduction: ........................................................................................................................................... 2
1.1.a. Reasons for growth in the service sector:....................................................................................... 4
1.2 Definition of Services Marketing:........................................................................................................ 5
1.2. a. Difference between Goods and Services: ...................................................................................... 5
1.3 SERVICE ECONOMY: ................................................................................................................................ 7
1.3. a. Role of Services in an Economy:..................................................................................................... 7
1.4 Evolution and growth of Service Sector: ................................................................................................. 8
1.4. a. THE FIRST ERA: ............................................................................................................................... 8
1.4. b. THE SECOND ERA: .......................................................................................................................... 8
1.4. c. BUILDING COMMUNITY: ................................................................................................................ 9
1.5 Factors influencing the growth of service sector:................................................................................. 10
1.6 Nature and scope of Services:............................................................................................................... 10
1.7 Characteristics of a Service: .................................................................................................................. 11
1.8 Challenges and Issues in Services Marketing: ....................................................................................... 13
1.8. a. Classification of Services: ............................................................................................................. 13
1.8.b. Ethics in Services Marketing: ....................................................................................................... 15
1.8.c. Myths about Services: ................................................................................................................... 15
1.8. d. Developing Framework for Analyzing Services: ........................................................................... 16
1.9 Service Marketing Mix: ......................................................................................................................... 16
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 1
Services Marketing
SERVICES MARKETING
Unit – I: Introduction
1.1 Introduction:
The turn of the century has seen profound changes in the global economy. Services had played a
crucial part in these changes, because the services are become the way organizations met with their
market. Already organizations discovered that their survival no longer exclusively depends on their
products they offer, but also on the additional offerings they make to their customers that differentiate
from their competitors innovative organizations, offering new services as well as unique customer
services, are now succeeding in markets where established organizations have failed (Lovelock and
Patterson, 1998:4).
Services marketing are not a self-enclosed task but are integral to service organizations as a
whole and the object of the activity is people, who are reactive, not passive as compared with a product
(Irons, 1997:18). Services marketing concepts, frameworks and strategies were developed as the result of
interlinked the forces of many industries, organizations, and individuals who have realized the
increasingly important role services are playing in the current world economy. Initially the development
of services marketing focused on service industries. However, manufacturing and technology industries
recognized services as a prerequisite to complement their products, in order to compete successfully in the
market place. Therefore it can be argued that, in most industries, providing a service is no longer an
option but a necessity.
What are services?
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 (such as convenience, amusement, timeliness, comfort
or health) that are essentially intangible concerns of its first purchaser.
Examples of Service Industries:
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

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Health Care
 hospital, medical practice, dentistry, eye care
Professional Services
 accounting, legal, architectural
Financial Services
 banking, investment advising, insurance
Hospitality
 restaurant, hotel/motel, bed & breakfast
 ski resort, rafting
Travel
 airline, travel agency, theme park
Others
 hair styling, pest control, plumbing, lawn maintenance, counseling services, health club,
interior design
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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Services Marketing
Why Services Marketing?
 Services based economies
 United States – 80%
 India – 48%
 Traditional marketing course has more focus on manufacturing and packaged goods (like P&G,
Unilever, General Foods)
 There is a need for Marketing concepts specifically for Services
 Service initiatives and promoting service quality leads to competitive advantage and so to profits
 Customer satisfaction index for services is declining
Contributions of Service Industries to India’s Gross Domestic Product:
Employment Opportunities in India – 2012
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 1
Services Marketing
1.1.a. Reasons for growth in the service sector:
Households as well as firms are demanding more services as well as services of increasing quality
and sophistication. There are number of reasons for this growth in the service sector as mentioned below:
Greater affluence:
With the increasing affluence of people resulting from the growth of economies there has been a
greater desire for Quality life. Consumers are willing to spend more on leisure resulting in greater demand
for recreation and entertainment facilities, tourist resorts and other hospitality services. Also, there has
been a tendency on externalization of services production from households to the formal economy.
Demand for services like interior decoration, laundry, care of household products etc. has increased which
consumers used to perform themselves earlier. Also, with increased incomes, there has been a greater
demand for financial services.
Working women:
As more and more women have started working, the time has become most scarce commodity in
family life. This has led to more demand for crèches, baby-sitting, household domestic help etc. Further,
working women and the resulting two income households have created greater demand for, certain
services like retailing, real estate and personal finance services
Greater life expectancy:
The economic growth and increasing standard of living have also resulted in the greater life
expectancy and there by an expanding old age population. Thus there is an increased need for services
like old age homes, nursing homes, healthcare centers, etc.
Greater complexity of products:
With rapid development in technology, the consumer today uses a lot of complex products in his
day to day life. Thus there is a greater demand for specialists who provide maintenance and upkeep of
such products like cars, home computers, household appliances etc.
Increased complexity of life:
The greater complexity of life has created demand for a wide range of services, especially legal
and financial advice. The number of specialists in income tax, labor laws, legal affairs, marriage
counseling, employment services etc. has been increasing.
Globalization:
The tendency of investment funds and businesses to move beyond domestic and national markets
to other markets around the globe, thereby increasing the interconnectedness of different markets.
Globalization has had the effect of markedly increasing not only international trade, but also cultural
exchange.
Globalization of economies has led to an increased demand of communication, travel and
information services. Also there has been an increased and new demand on legal and other professional
services.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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While the role of agriculture gas been reducing in the economies of industrial societies, that of service
sector has been increasing at a fast pace. Thus, as the economies shift from developing to developed
economies then, they show more and more shift towards services.
1.2 Definition of Services Marketing:
“A service is an activity or benefit that one party can offers to another party. Intangible and does not
result in the ownership of anything”.
- Philip Kotler
The American Marketing Association defines services as - “Activities, benefits and satisfactions
which are offered for sale or are provided in connection with the sale of goods.”
It is often time-based, performances bring about desired results to recipients, objects, or other assets
for which purchasers have responsibility. In exchange for money, time, and effort, service customers
expect value from access to goods, labor, professional skills, facilities, networks, and systems; but they do
not normally take ownership of any of the physical elements involved.
1.2. a. Difference between Goods and Services:
1. Higher Intangibility
2. Lack of Ability to store them for future Sale
3. Greater Interaction between the customer and the service Factory
4. Greater Variability in Service Delivery
5. Greater Variability among service customer’s Expectations
Given below are the fundamental differences between physical goods and services:
Goods
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Tangible
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A physical commodity
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Homogeneous
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Production and distribution are separation
from their consumption
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Can be stored
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Transfer of ownership is possible
Services
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Intangible
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A process or activity
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Heterogeneous
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Production, distribution and consumption are
simultaneous processes
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Cannot be stored
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Transfer of ownership is not possible
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 1
Services Marketing
Generic Differences between Goods & Services:
The above characteristics which differentiate goods & services are very general in nature are not
strictly applicable in some cases. Some marketing gurus like C Lovelock tried to use certain other
attributes to differentiate between the two, as follows:
Nature of the product:
According to L.L. Berry, goods can be physical objects, equipment, devices, or things whereas
services can be deeds, performances, activities, experiences. In most cases the market offerings are some
combination of the two in different proportions. The marketers adopt different strategies for different
combinations.
Problems in quality control:
The intangible nature of the services makes it difficult for the quality definition, measurement,
setting standards & delivery. In fact they are all inside the mind of the consumer, which differs from
person to person according to their perception. The other problem is that the quality can’t be improved
once it is delivered for it gets consumed on delivery. So the marketer has to be very careful about the
quality at the time of delivery.
Involvement of customer in production & delivery:
Goods are produced & stored till some buyers buy them. In contrast most services are designed,
produced & delivered in the presence of buyers according to their need & order. So not only the buyers
decide the quality & other attributes of a service, they also influence or create an environment for the
delivery with interaction with the servers. This may be pleasant / favorable or unpleasant / unfavorable
which again tell upon the final delivery quality. To eliminate the interaction with the servers and to
enhance the buyer involvement, today much automation has taken place, like ATMs, Tele banking etc.
Absence of inventories:
Services can’t be stored unlike goods, when demand is less more goods can be produced & stored
to meet the increased demand at a future date. Services are not available later if they are not utilized at the
time of availability. Also in case of mass or group service, the capacity can’t be exceeded.
Structure & nature of distribution channels:
For the goods there are distribution channels which make them available with the buyers. But
services normally don’t have one as these are consumed at the time & point of production, so this is like
direct marketing of goods. The services come directly from the service provider or its franchise.
Importance of prompt service:
Time plays an important role in providing service. People don’t like to wait for the service to be
delivered, and look for that elsewhere. In case of goods, the time tolerance limit is more in general.
Difficulty in evaluating service quality:
It’s very difficult to assess or evaluate a service before consuming or experiencing it. The best
method available for this purpose is to go by others who have used the service – word-of-mouth, opinion
of the experiencers. But again the experience or the level of satisfaction varies from person to person, so
one has to be careful in selecting.
Basic Differences between Goods & Services:
1. Customers don't obtain the ownership of services
2. Service Products are ephemeral (transitory & perishable) and can't be inventoried.
3. Intangible elements dominate value creation.
4. Customers may be involved in the production process,
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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5. Other people may form part of the product.
6. There's is greater variability in operational inputs & outputs.
7. Many services are difficult for customers to evaluate.
8. The time factor assumes a great importance.
9. Distribution channels take different forms.
1.3 SERVICE ECONOMY:
The portion of an economy devoted to service activities such as financial services, education,
sales, research, and entertainment. Technological improvements have allowed developed countries to
transfer resources from agriculture and manufacturing to providing services.
Service economy can refer to one or both of two recent economic developments:
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
The increased importance of the service sector in industrialized economies. The current list
of Fortune 500 companies contains more service companies and fewer manufacturers than in
previous decades.
The relative importance of service in a product offering. The service economy in developing
countries is mostly concentrated in financial services, hospitality, retail, health, human
services, technology and education. Products today have a higher service component than in previous
decades. In the management literature this is referred to as the servitization of products. Virtually
every product today has a service component to it.
1.3. a. Role of Services in an Economy:
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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Services Marketing
1.4 Evolution and growth of Service Sector:
1.4. a. THE FIRST ERA:
SERVICES MARKETING Fisk, Brown and Bitner (1993) employed the metaphor of biological
evolution to describe the history of the services marketing field. Biological evolution describes how
species emerge and develop, so Fisk, Brown and Bitner’s portrayal of the emergence and development of
the services marketing field involved three ‘evolutionary’ stages:
1) Crawling Out (Pre 1980) – when early services scholars created and defended the services marketing
field;
2) Scurrying about (1980 to 1985) – when a rapidly growing and enthusiastic community of scholars
quickly built the basic structure of services marketing;
3) Walking Erect (1986 to 1992) – when the services marketing field achieved a measure of respect and
legitimacy within the marketing discipline and beyond.
Before examining recent stages of service evolution, it is worthwhile to ponder why marketing
was the first area of business and academe to “discover” and research services. We believe it is because
the marketing field is by necessity customer-centered. Hence, marketing managers and marketing
academics were the first to observe the many service failures and inefficiencies experienced by customers
as the service economy expanded. Further, it is noteworthy that marketing managers and academics in
North America and Europe were observing these problems nearly simultaneously. This customer-centric
orientation positions marketing well to address the future needs of service customers.
1.4. b. THE SECOND ERA:
THE EMERGENCE OF A MULTIDISCIPLINARY FIELD:
Remarkable change has occurred in the services marketing field since the publication of Fisk,
Brown and Bitner (1993). To portray these changes in the services field, we continue with a metaphorical
approach, but we shift the nature of the evolutionary metaphor from biological evolution to social
evolution. Recent Stages of Service Evolution Making Tools A tremendous technology infusion,
especially of information technology made it possible for most service industries to rapidly increase the
technological sophistication of the service they provide customers. Prominent among these technology
changes is the emergence of the Internet and the many web-based services that are possible via the
Internet. Included in these technology changes are numerous self-service technologies. These changes
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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have prompted service marketers to study technology infusion into services and the role of self-service
technologies in customer-firm relationships.
Creating Language
Language is itself one of the most sophisticated tools created by the human species. Every new
academic field must develop a technical language for communicating knowledge that is created by the
community of scholars within the field. Technical words and phrases that originated in services marketing
have become mainstream to the marketing field. These terms include: service encounters, service quality,
Service Theater, service experience, services capes, and service recovery.
1.4. c. BUILDING COMMUNITY:
THE FUTURE OF THE SERVICE FIELD
Building Community is the next stage in the social evolution of the service field. Academic
disciplines play essential roles in the creation and diffusion of knowledge. As the academic study of
service phenomena has steadily broadened its reach from its origins in the services marketing and
management fields, the rapid increase in the number of participants in the services field creates both
opportunity and peril. We believe that the broader services field has reached a critical juncture.
Sophisticated social networking is needed to grow and disseminate service knowledge.
CONCLUSION
The evolution of the service field from its beginnings in services marketing to a much broader
service field was described. We have offered recommendations for the future of the service field. A
culture of multidisciplinary collaboration is needed for the service field to build a community of scholars,
business leaders and customers. Critical to this are T-shaped people--including those from the arts--who
can communicate via a common language that bridges areas of service endeavor. Such T-shaped people
can move us from silos of knowledge to webs of knowledge. Through it all, a customer- centric
orientation must be adopted and maintained. To that end, we argue that the entire service field, not just
service marketing, should be customer centered.
Services in India
Today, the service sector contributes more than 50 percent to India's GDP. This is a far cry from
the situation a few decades back, when India was basically an agricultural economy. This shift from
manufacturing and agriculture to services is being witnessed in countries all over the world. With the
increasing prominence of services in the global economy, Services Marketing has become a subject that
needs to be studied separately. Marketing services is different from marketing goods because of the
unique characteristics of services, namely intangibility, heterogeneity, perishability and inseparability.
These characteristics also require the marketing mix of services to be extended, to include Process, People
and Physical evidence, in addition to the four traditional Ps of Product, Price, Place and Promotion.
Services marketing are a people-dependent activity, owing to the fact that there is often no tangible
product that is delivered to customers.
The importance of concepts like relationship marketing cannot therefore be ignored in marketing
services. These also help in branding the service. Services marketing discuss the unique features of
services and their significance to marketing, and examine each of the seven elements of the marketing
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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mix. The book also contains chapters on different service industries in India like Information Technology
and Retailing, which have been experiencing tremendous growth in the recent years.
1.5 Factors influencing the growth of service sector:
Demographic changes:
Three basic phases relevant in the growth of services are:
1. Decrease in the rate of mortality, infant death & fertility, as a result the target audience increases for
services marketing.
2. Increase in the proportion of the young people, and if they get employment then they will have more
disposable income to buy services, and also can be employed in service industry.
3. Finally, people live longer; we have more elderly people to whom services can be marketed, because
they have the need and paying capacity.
Social changes:
Because of the improvement in the social conditions of the households people have more
disposable income. More so for families where women also earn. New needs are created & catered, e.g.,
working mothers increase surplus income of the family, and are a consumer of child care services as they
have less time to look after the children. Lifestyle changes are one such area. The latest craze is highflying professionals need high quality services & service providers.
Economic changes:
1. After the WW-II, there was stabilization of political activity, more pieces, & due to the
technological advancements during the war, the economy of household improved. More factories, more
employments, more surplus earning, more goods, and slowly more services, as the govt. withdrew control
over land ownership etc.
2. Then came the globalization & liberalization where MNCs opened shops in India & Indian
companies started going abroad. More money is now available on loan, so people now spend & pay later
Political & legal changes:
This is more visible in the cases of formerly USSR & PRC; both countries make improvements in
their economies.
Technological changes:
Probably, the single most important factor is the technological advancements which
revolutionalised both the products & services sectors. It is well said, when someone says that the products
being equal in quality parameters, will enjoy patronage when attached to the quality of service delivery.
Policy changes:
Govt. is the policy makers of a country, and the policies have a major impact on the development
of the country. This may happen slowly or rapidly, according to its favorable nature to the population in
general and development partners in particular. In India it happened slowly, like some sectors were
opened to private ownership, globalization, liberalization, decontrol, EXIM policies, GATT etc.
1.6 Nature and scope of Services:
The second level of the services address the nature of the services in terms of the degree of
tradability, to whom or what the action is directed, and the degree of merchantability.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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1. Tradability: Tradability is the relative involvement between goods and services in the production of
the services.
2. Merchantability: Merchantability is the relative distance the customer and the service provider in the
acquisition or performance of the service.
Learning Objectives:
1. Service process matrix.
2. The service package.
3. Distinctive characteristics of a service operation.
4. The strategic classification of services.
5. The role of a service manager from an open-systems view of service.
1.7 Characteristics of a Service:
What exactly are the characteristics of a service? How are services different from a product? In
fact many organizations do have service elements to the product they sell, for example McDonald’s sell
physical products i.e. burgers but consumers are also concerned about the quality and speed of service,
are staff cheerful and welcoming and do they serve with a smile on their face?
There are five characteristics to a service which will be discussed below.
1. Lack of ownership:
You cannot own and store a service like you can a product. Services are used or hired for a period
of time. For example when buying a ticket to the USA the service lasts maybe 9 hours each way, but
consumers want and expect excellent service for that time. Because you can measure the duration of the
Service consumers become more demanding of it.
Inseparable - from the point where it is consumed, and from the provider of the service. For
example, you cannot take a live theatre performance home to consume it (a DVD of the same
performance would be a product, not a service). The consumer is actually involved in the production
process that they are buying at the same time as it is being produced, for example an eye test or a
makeover. One benefit would be that if you are unhappy with you makeover you can tell the beautician
and that instant feedback means that the service quality is improved. You can't do that with a product.
Another attribute is that services have to be close to the person consuming them i.e. goods can be made in
a central factory location which has the benefits of mass production. This localization means that
consumption is inseparable from production.
2. Intangibility:
You cannot hold or touch a service unlike a product. In saying that although services are
intangible the experience consumers obtain from the service has an impact on how they will perceive it.
What do consumers perceive from customer service? The location and the inner presentation of where
they are purchasing the service.
Intangible - cannot have a real, physical presence as does a product. For example, motor
insurance may have a certificate, but the financial service itself cannot be touched i.e. it is intangible. This
makes it tricky to evaluate the quality of service prior to consuming it since there are fewer attributes of
quality in comparison to a product. One way is to consider quality in terms of search, experience and
credence.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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3. Inseparability:
Services cannot be separated from the service providers. A product when produced can be taken away
from the producer. However a service is produced at or near the point of purchase. Take visiting a
restaurant, you order your meal, the waiting and delivery of the meal, the service provided by the
waiter/waitress is all a part of the service production process and is inseparable, the staff in a restaurant
are as apart of the process as well as the quality of food provided.
4. Perishability:
Services last a specific time and cannot be stored like a product for later use. If travelling by train,
coach or air the service will only last the duration of the journey. The service is developed and used
almost simultaneously. Again because of this time constraint consumers demand more.
5. Heterogeneity:
It is very difficult to make each service experience identical. If travelling by plane the service
quality may differ from the first time you travelled by that airline to the second, because the airhostess is
more or less experienced. A concert performed by a group on two nights may differ in slight ways
because it is very difficult to standardize every dance move. Generally systems and procedures are put
into place to make sure the service provided is consistent all the time, training in service organizations is
essential for this, however in saying this there will always be subtle differences.
6. Variability:
Services are highly variable. It is almost impossible to have the same service from the same seller
the second time.
7. Customer participation:
Service product is not one side activity customers are core product of services. The product
quality of services greatly depends upon the ability, skills and performance of the employees as well as
the activity and performance of the customer.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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1.8 Challenges and Issues in Services Marketing:
Companies that are marketing a product face different challenges compared with those that are
promoting a service. If you’re transitioning from marketing products to services or vice versa, you have to
know and understand these differences to effectively promote and sell. Understanding the different
challenges in product and service marketing can help you establish the right approach.
Tangibility:
A product is tangible, which means the customer can touch and see the product before deciding to
make a purchase. Items such as packaging and presentation may compel a customer to purchase a
product. Services, on the other hand, are not tangible, which can make them more difficult to promote and
sell than a product.
Relationship and Value:
Products tend to fill a customer's need or want, so companies can use this to sell a product. A
service is more about selling a relationship and the value of the relationship between the buyer and seller
of the service. For example, a car is something a buyer can touch and see as well as use. A service, such
as lifestyle coaching, for example, is not tangible. A lifestyle coach may be able to assist clients in
creating a life plan and implementing steps to transform his life into one that the client wants to live, but it
is not something tangible that the client can place in his home and look at every day. Therefore, the client
needs to perceive the value of the service, which can be harder to get across.
One versus Many:
Marketing products tends to involve multiple products that make up the line. For example,
cleaning product manufacturers tend to market not just one cleaning product. Instead, they have a line of
cleaning products to serve the various needs of their customers. Services, on the other hand, typically
have a single option. It can be harder to promote and sell the reputation of one single service over the
benefits of many different products.
Comparing Quality:
Measuring the quality of a product is easier than measuring that of a service. If a customer buys a
cleaning product to clean the kitchen sink and it doesn’t do the job, the customer knows the value of the
product is zero. On the other hand, it is harder to measure the quality of a service.
Return Factor
If a customer purchases a product and it doesn’t work as it is supposed to, the customer can return
the product for her money back or at least to receive a store credit. A service is consumed as it is offered,
so it lacks the return factor that a product has. Some service providers overcome this by offering
moneyback guarantees.
1.8. a. Classification of Services:
Now we shall distinguish between various types or classes of services. Different types of services
need different marketing strategies.
Degree of involvement of the customer:
This category is based on the degree of involvement of the customer:
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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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: The customer’s presence is not required but 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 : Here the customer’s mental attention is required if not physical
presence in order to experience the service, like career counseling, advertising, consultation & education
services, etc.
4. Information Processing: In this case, data, information, knowledge are gathered & analyzed
for the use of the clients, like research studies, market surveys, data processing, accounting, legal
services, programming, etc.
Service tangibility:
Here the degree of tangibility (the tangibility spectrum) has been taken into consideration, with the same
no. of classes (namely four):
1. Highly Tangible: The service includes a physical product (highly tangible) for use during the
contract period, like the cell phone or a house on rent.
2. Service Linked To Tangible Goods: These are the guaranty or warranty periods, during
which the sellers provide free or subsidized service to the customer, like machines, vehicles, gadgets, etc.
3. Tangible Goods Linked to Services: Here some physical goods are given to the customer as
the part of a service, like food with a train/air ticket; hotel accommodation includes morning breakfast,
etc.
4. Highly Intangible: Here no products are offered as a part of the services, like haircuts, bodymassage, cinema, etc.
Skills & expertise required:
This is on the basis of the level of skills required to render a set of services, as:
1. Professional (High Skill) Services: These services require a high level of qualification &
training to provide the services, like doctors, lawyers, pilots, IT professionals, etc.
2. Non-Professional (Low Skill) Services: These services don’t require any special prerequisites
in skills, and can be performed by anybody with some practice, like office security guards, baby-sitting,
courier delivery boys, etc.
The business orientation of service provider:
This kind of services depends on the business style or orientation (objective, purpose, aim) of the
organization, as:
1. Commercial Organizations (Profit Oriented): The main objective here is to make a profit by
providing service. They strive to do all that are required to earn a profit by keeping the customers
satisfied.
2. Non-Profit Organizations (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
organization, and that is obtained from public donation, trust fund, or govt aid. This category includes
Govt. bodies and also no-profit-no-loss (cost to cost) organizations. Schools, NGOs, welfare societies,
disaster relief organizations, etc. are examples.
The type of end user:
Services can be classified by the type of consumers, who consume them:
1. Consumer Services (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 (B2B): This is between two companies, like a company hiring another to
do a market research for it.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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3. Industrial Services: This is the case where a manufacturing company buys services from a
service provider like supply, erection, commissioning, maintenance of the plant & machinery.
1.8.b. Ethics in Services Marketing:
1. Aggressive Promotion through telemarketing and personnel selling
2. Invasion of Privacy
3. Misleading claims backed by poor service performance
Service Firms
Customer Service in a service firm is highly interactive in nature. Customer interacts with the
firm physical facilities, personnel, and tangible elements like the price of the service. The success of any
service firm depends on how its performance is judged and perceived by the customer. Today, Service
Firms are becoming highly competitive, so, it is essential for service firms to provide high quality
services for their survival.
1.8.c. Myths about Services:
Not so long ago, the services sector grew slowly. But after the IT revolution & international trade
development the growth is rapid.
1. Myth – 1: Service is a necessary evil for manufacturing Firms: Manufacturers offer
guarantee, warranty, R & M, for their products to the buyers, which people think are not productive. In
the modern concept of marketing, it’s the level of customer services which attract, convert a prospect,
retain a customer, and have a competitive advantage.
2. Myth – 2: The service sector is labor intensive & less productive: This is a thing of the past.
With the advancement of technology, several key servers are replaced by the machine substitutes.
Humans only control them, raising the no. of skilled employment. Also slowly it is felt that the
comparisons between the efficiency levels of two different sectors are not relevant or prudent.
3. Myth – 3: Service firms earn less revenue compared to other two sectors: In the earlier
days when a services sector was not developed the revenues were low. Now the advent of technology, IT
revolution, the service sector is widely developed and still growing. Things are really growing day by day
& high-end services are added continually.
4. Myth – 4: Growth in the service economy is linked to the public sector services: In India
after independence, govt used to control most of the public services, hence there was a feeling that the
growth of economy is dependent on growth of public services. But since 1980s slowly the process of
privatization started & got a boost in 1990s & the economy was opened to globalization & liberalization.
With this slowly one by one services are taken up by private players, like banking, insurance, telecom,
power, energy, road transport, hotels tourism, FIIs, etc.
5. Myth – 5: Marketing a service is not different from marketing a product: In reality they
are, because of the most important factor – Intangibility. So there is difference between marketing a
“seen, felt, tested” object and an “imagined concept of an experience”
6. Myth – 6: Growth in the service sectors eliminates jobs from the manufacturing sectors:
This view has arisen in the developed countries where the industrial scenario is saturated & service sector
grows. People require physical objects to satisfy their physical & psychological needs. Also most services
revolve around some physical objects or they require some specific products to supplement the services,
so the manufacturers are here to stay. Also the growth in service sector will generate employment which
in turn creates surplus purchasing power to buy more goods.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 1
Services Marketing
1.8. d. Developing Framework for Analyzing Services:
Here we would like to group the services using the right basis to enhance the ability of the
managers to solve complex problems they face in marketing services. According to C H Lovelock, the
services can be categorized based on similarities in certain characteristics rather than the industries they
belong, for the significant improvement in the development & implementation of marketing strategies.
Let’s discuss them one by one:
1. The Type of Service: The service provider has to define & identify the target customer, and
analyses what the relative position of the survive in the tangibility spectrum. The services can be tangible
or intangible:
a. Tangible – when directed towards the customer or his physical possessions, like transport or
courier.
b. Intangible – when directed towards the customer’s mind or his intangible possessions, like a
seminar on a topic, an insurance policy for the client & his family members.
2. The Nature of Relationship shared by the Customer with the Service Organization:
a. Long Term Association: Certain types of services are inherently long term like insurance,
b. Short Term Association: While some others are short term like beauty care.
3. The Method of Delivery: There are several methods of delivery, like:
a. The customer visits the place of service providers – Cinema,
b. The service provider visits the customer’s house – pesticide maintenance,
c. Doorstep delivery: Internet orders where the delivery is at doorstep – flowers, birthday
cakes,
d. Proximity delivery: A convenient place very close to the customer’s house – ATMs.
4. Types of demand & Supply: Services have variety of demands – uniform to highly irregular.
E.g., banking has reasonably smooth, where hospital surgery ward has highly fluctuating demand. Even
there are services with a fixed capacity, and the service provider can’t cater to more customers, like cable
operator, or fitness centers.
5. Extent of Customization needed, & Exercise of Judgment: Customization is changing or
adjusting the nature & qualities of the service to suit different customers. Customers differ in their
requirements and hence customization is necessary. Only the extent of customization varies from nominal
to substantial. Cinema halls have the least customization like sitting arrangement, while Lawyers & legal
consultants have substantial amount of customization to suite the particular case. Exercising judgment
comes to play where in the process of service delivery the servers interacting with the customer adjust the
service by applying their own judgment & deciding what is best for the customer.
1.9 Service Marketing Mix:
The service marketing mix is also known as an extended marketing mix and is an integral part of
a service blueprint design. The service marketing mix consists of 7 P’s as compared to the 4 P’s of a
product marketing mix. Simply said, the service marketing mix assumes the service as a product itself.
However it adds 3 more P’s which are required for optimum service delivery.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 1
Services Marketing
The product marketing mix consists of the 4 P’s which are Product, Pricing, Promotions and
Placement. These are discussed in my article on product marketing mix – the 4 P’s.
The extended service marketing mix places 3 further P’s which include People, Process and
Physical evidence. All of these factors are necessary for optimum service delivery. Let us discuss the
same in further detail.
Product:
The product in service marketing mix is intangible in nature. Like physical products such as soap
or a detergent, service products cannot be measured. Tourism industry or the education industry can be an
excellent example. At the same time service products are heterogeneous, perishable and cannot be owned.
The service product thus has to be designed with care. Generally service blue printing is done to define
the service product. For example – a restaurant blue print will be prepared before establishing a restaurant
business. This service blue print defines exactly how the product (in this case the restaurant) is going to
be.
Place:
Place in case of services determine where is the service product going to be located. The best
place to open up a petrol pump is on the highway or in the city. A place where there is minimum traffic is
a wrong location to start a petrol pump. Similarly a software company will be better placed in a business
hub with a lot of companies nearby rather than being placed in a town or rural area.
Promotion:
Promotions have become a critical factor in the service marketing mix. Services are easy to be
duplicated and hence it is generally the brand which sets a service apart from its counterpart. You will
find a lot of banks and telecom companies promoting them rigorously. Why is that? It is because
competition in this service sector is generally high and a promotion is necessary to survive. Thus banks,
IT companies, and dotcoms place themselves above the rest by advertising or promotions.
Pricing:
Pricing in case of services is rather more difficult than in case of products. If you were a
restaurant owner, you can price people only for the food you are serving. But then who will pay for the
nice ambience you have built up for your customers? Who will pay for the band you have for music?
Thus these elements have to be taken into consideration while costing. Generally service pricing involves
taking into consideration labor, material cost and overhead costs. By adding a profit markup you get your
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 1
Services Marketing
final service pricing. You can also read about pricing strategies. Here on we start towards the extended
service marketing mix.
People:
People are one of the elements of service marketing mix. People define a service. If you have an
IT company, your software engineers define you. If you have a restaurant, your chef and service staff
defines you. If you are into banking, an employee in your branch and their behavior towards customers
defines you. In case of service marketing, people can make or break an organization. Thus many
companies nowadays are involved into specially getting their staff trained in interpersonal skills and
customer service with a focus towards customer satisfaction. In fact many companies have to undergo
accreditation to show that their staff is better than the rest. Definitely a USP in case of services.
Process:
Service process is the way in which a service is delivered to the end customer. Let’s take the
example of two very good companies – McDonalds and FedEx. Both the companies thrive on their quick
service and the reason they can do that is their confidence on their processes. On top of it, the demand of
these services is such that they have to deliver optimally without a loss in quality. Thus the process of a
service company in delivering its product is of utmost importance. It is also a critical component in the
service blueprint, wherein before establishing the service, the company defines exactly what should be the
process of the service product reaching the end customer.
Physical Evidence:
The last element in the service marketing mix is a very important element. As said before,
services are intangible in nature. However, to create a better customer experience tangible elements are
also delivered with the service. Take an example of a restaurant which has only chairs and tables and
good food, or a restaurant which has ambient lighting, nice music along with good seating arrangement
and this also serves good food. Which one will you prefer? The one with the nice ambience. That’s
physical evidence. Several times, physical evidence is used as a differentiator in service marketing.
Imagine a private hospital and a government hospital. A private hospital will have plush offices and welldressed staff. Same cannot be said for a government hospital. Thus physical evidence acts as a
differentiator.
This is the service marketing mix (7p) which is also known as the extended marketing mix.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.