Services Marketing BA7013

II year III semester

UNIT I
The world economy is increasingly characterized as a services economy. This is
because of the increased importance & the share of service sector in the economies of
most developed & developing countries. There has been a rapid shift from agriculture
to industry & then to the service sector. The shift has brought about a change in the
definition of goods & services. Goods are no longer considered separate from services
but represent an integral part of the product & this interconnectedness of goods &
services is represented on a goods-services continuum.
Definition & characteristics of services:
According to the American Marketing Association a service is 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. eg: IBM Global leader in IT, services &
consulting ;Intangible deeds & performances are 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, comfort or health that are
essentially intangible concerns of its first purchaser.
Service industries: Services as products, customer service & derived service
Services- 4 categories
1. Service industry & company
2. Services as products
3. Customer service
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4. Derived service

SERVICE INDUSTRIES & COMPANIES: Includes those industries &

Companies are typically classified within service sector whose core product is a
service.

PURE SERVICE COMPANIES: Taj palace hotels-lodging

Air India-transportation
Birla sunlife-Insurance & financial services
Fortis- healthcare
Columbia Asia health care
SERVICES AS PRODUCTS:
Services as products represent a wide range of intangible product offerings that
customers pay for in the market place. Service products are sold by service companies
& non-service companies such as manufacturing & technological companies .eg: IBM
&HP offer IT consulting services to the marketplace competing with firms such as
EDS, ACCENTURE, which are traditional pure service firms.
CUSTOMER SERVICE:
It is also a critical aspect of what we mean by service. It is the service provided in
support of a companys core products. Cos typically do not charge for customer
service provided. Many companies operate customer service call centers, often staffed
around the clock. Quality customer service is essential to build customer
relationships. It should not be confused with services provided for sale by the
company.
DERIVED SERVICE: The value derived from physical goods is really the service
provided by the good, not the good itself.eg: Computers provide information.

Historical evolution of service sector

Service marketing is a relatively new phenomenon in the domain of marketing. It
gained importance as a discipline towards the end of the 20th century. Services
marketing first came into force in the 1980s when there was debate of whether the
marketing of services was significantly different from that of products, and whether it
should be classified as a separate discipline. Prior to this, services were considered as
an aid to the production and marketing of goods, and were not deemed as having
separate relevance on their own. The 1980s saw a shift in this thinking. As the service
sector started to grow in importance in post-industrial societies and emerged as a
significant employer and contributor to those nations' GDPs, academia and marketing
practitioners began to look at the marketing of services in a new light. Empirical
research was conducted which brought to light the specific distinguishing
characteristics of services. By the mid 1990s, services marketing were firmly
entrenched as a significant sub-discipline of marketing with its own empirical
research and data, growing significance in the increasingly service sector dominated
economies of the new millennium. New areas of study in the field opened up and
were the subject of extensive empirical research. This gave rise to concepts such as
the product-service spectrum, relationship marketing, franchising of services,
customer retention, and others.
Services in the modern economy
As consumers, we use services every day. Turning on a light, watching TV, talking on
the telephone, catching a bus, visiting the dentist, posting a letter, getting a haircut,
refuelling a car, writing a cheque or sending clothes to the cleaners are all examples of
service consumption at the individual level. The institution at which you are studying
is itself a complex service organisation. In addition to educational services, the
facilities at todays colleges and universities usually comprise libraries and cafeterias,
counselling services, a bookshop and careers offices, copy services, telephones and
Internet connections, and maybe even a bank.
If you are registered at a residential university, additional services are likely to include
halls of residence, health care, indoor and outdoor sports and athletic facilities, a
theatre and, perhaps, a post office.

Unfortunately, customers are not always happy with the quality and value of the
services they receive. People complain about late deliveries, rude or incompetent
personnel, inconvenient service hours, poor performance, needlessly complicated
procedures and a host of other problems. They grumble about the difficulty of finding
sales assistants to help them in shops, express frustration about mistakes on their
credit card bills or bank statements, shake their heads over the complexity of new
self-service equipment, mutter about poor value and sigh as they are forced to wait for
service or stand in queues almost everywhere they go.
Suppliers of services often seem to have a very different set of concerns. Many
complain
about how difficult it is to make a profit, how hard it is to find skilled and motivated
employees, or how difficult to please customers have become. Some firms seem to
believe that the surest route to financial success lies in cutting costs and eliminating
unnecessary frills. A few even give the impression that they could run a much more
efficient operation if it werent for all the stupid customers who keep making
unreasonable demands and messing things up!
Forces for change in service management

Changing patterns of government regulation.

Relaxation of professional association restrictions on marketing.

Privatisation of some public and nonprofit services.

Technological innovations.

Growth of service chain and franchise networks.

Internationalisation and globalisation.

Pressures to improve productivity.

The service quality movement.

Expansion of leasing and rental businesses.

Manufacturers as service providers.

Need for public and nonprofit organisations to find new income.

Hiring and promotion of innovative managers.

Goods Versus Services

Goods

Services
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1) They are tangible in nature

1)They are intangible in nature

2)They can be inventoried or

2)services cannot be stored hence

Stored

they are perishable

3)They can take different stages

3)most of the services cannot be

i.e. from production &

separated i.e. production &

consumption

consumption are done

simultaneously

4)They producer provides the

4)Service provider performs the

identical types of products

same service differently &

to all the customers

provide varying levels of

service from one time to another

Basic difference between goods and services

Customers do not obtain ownership of services.

Service products are intangible performances.

There is greater involvement of customers in the production process.
Other people may form part of the product.
There is greater variability in operational inputs and outputs.
Many services are difficult for customers to evaluate.
There is typically an absence of inventories.
The time factor is relatively more important.
Delivery systems may involve both electronic and physical channels.
Factors contributing to the growth of services sector in India
Reason
Affluence

Effect
Per capita income

Service effected
Pest control, personal security, Interior design.

Leisure time

Travel & Holiday

Beauty parlors, event management etc.

Travel agencies, Hotels, entertainment, career

Health Consciousness Awareness

prospects
Health clubs, Spas, Old age homes , gyms, yoga,

Working Couples

Working wives

meditation
Day care centers, home delivery, packed food

Product complexity

Variety available

Water purifiers, Microwaves, PC, (= AMC)

Life complexity

Lack of time

Tax consultants, legal service, property advisors,

and Investment advisors
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Resource scarcity &

Ecology
New Products

Need of conservation

Car pools, water management, high rise

IT

apartments
PCO, pager, e- commerce , Internet service

provider, mobile service providers, cyber caf

Characteristics of services & their marketing implications
I)

Intangibility
It refers to the lack of tangible assets which can be seen, touched, smelled, heard or
tasted prior to purchase. Services vary in the degree to which they are intangible.
Such as a college education, air travel, & sporting events are highly intangible, which
cannot be smelled or tasted prior to the purchase.
Marketing implications of intangibility feature of services:

II)

Services cannot be inventoried

Services cannot be patented

Services cannot be readily displayed or communicated

Pricing is difficult

Heterogeneity
A distinguishing characteristic of services that reflects the variation in consistency
from one service transaction to the next is called as heterogeneity.
Marketing implications of heterogeneity feature of services:

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

III)

Simultaneous production & consumption of services

Performing a service involves assembling and delivering the output of a mix of
physical facilities and mental or physical labour. Often customers are actively
involved in helping to create the service product either by serving themselves (as in
using a launderette or withdrawing money from an automated cash machine (ATM))
or by cooperating with service personnel in settings such as hairdressers, hotels,
colleges or hospitals. Under such circumstances, service firms have much to gain
from trying to educate their customers so as to make them more competent.
Marketing implications of simultaneous production & consumption of services:

Customers participate in and affect the transaction

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Customers affect each other

Employees affect the service outcome

Decentralization may be essential

Mass production is difficult

IV)

Perishability
A distinguished characteristic of services in that they cannot be saved, their unused
capacity, cannot be reserved & they cannot be inventoried.
Marketing implications of perishability feature of services:

It is difficult to synchronize supply and demand with services

Services cannot be returned or resold
Need for the study of services marketing

Size of Service Sector

The Services Sector contributes the most to the Indian GDP. The Sector of
Services in India has the biggest share in the country's GDP, it accounts for more
than 50% contribution

The various sectors under the Services Sector in India are construction, trade,
hotels, transport, restaurant, communication and storage, social and personal
services, community, insurance, financing, business services, and real estate.

Services marketing concepts and strategies have developed in response to the

tremendous growth of service industries

Most new employment is provided by services

Strongest growth area for marketing

Deregulation and Services Marketing

Specific demand for services marketing concepts has come from deregulated
industries and professional services

Deregulatory moves by governments have affected service industries such as

airlines,
banking, and telecommunications

As a result, marketing decisions that used to be tightly controlled by government

are now partially, and sometimes totally, within the control of individual firms
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List of economic services

The following is an incomplete list of service industries, grouped into rough sectors.
Parenthetical notations indicate how specific occupations and organizations can be regarded
as service industries to the extent they provide an intangible service, as opposed to a tangible
good.

business functions (that apply to all organizations in general)

consulting
customer service

human resources administrators (providing services like ensuring that employees

are paid accurately)
childcare
cleaning, repair and maintenance services

janitors (who provide cleaning services)

gardeners
mechanics
construction
carpentry

electricians (offering the service of making wiring work properly)

plumbing
death care

coroners (who provide the service of identifying cadavers and determining time
and cause of death)

funeral homes (who prepare corpses for public display, cremation or burial)
dispute resolution and prevention services
arbitration

courts of law (who perform the service of dispute resolution backed by the power
of the state) diplomacy

incarceration (provides the service of keeping criminals out of society)

law enforcement (provides the service of identifying and apprehending criminals)

lawyers (who perform the services of advocacy and decision making in many
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dispute resolution and prevention processes)

mediation

military (performs the service of protecting states in disputes with other states)

negotiation (not really a service unless someone is negotiating on behalf of

another)

education (institutions offering the services of teaching and access to information)

library
museum
school

entertainment (when provided live or within a highly specialized facility)

gambling

movie theatres (providing the service of showing a movie on a big screen)

performing arts productions
sport
television
fabric care
dry cleaning

Self-service laundry (offering the service of automated fabric cleaning)

financial services
accountancy

banks and building societies (offering lending services and safekeeping of money
and valuables)
real estate
stock brokerages
tax preparation

foodservice industry

personal grooming
hairdressing
manicurist / pedicurist
body hair removal
dental hygienist
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health care (all health care professions provide services)

hospitality industry

information services

data processing

database services

Interpreting

Translation

risk management

insurance

security

social services

social work

transport

Public utility

electric power

natural gas

telecommunications

waste management

water industry

Relationship between characteristics and quality of services delivered

Services are intangible, so customers cannot touch and feel a service before it is
actually delivered. Hence, customers have to be provided with a sample of the service,
so that they are able to understand the quality of the service. In case of restaurant or
repair service, a customer cannot understand the quality of the service unless he/she
experiences the service at least once. In order to give cues about the quality of the
service, service providers communicate tangible cues like clean, shinning, well
decorated and painted facilities and equipment to the customers. They might also give
a free sample service, to communicate the quality of the service they provide.
Services are delivered and consumed simultaneously during interactions between the
customer and service personnel. In order to ensure that the interactions deliver value
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and are of a high quality, service personnel have to rehearse and practice the service
script several times before delivering the actual service. They have to focus not only
on what they deliver to customers, but also how they do so. For instance, restaurant
and repair personnel have to learn and perform the service courteously with the
customers; otherwise customers would be offended and dissatisfied with the service.
Service personnel must learn to deliver the service with empathy and care to the
customers.
Services are perishable in nature. So services have to be tangiblised in the form of
video demonstrations, tape records, testimonials, etc. so that customers can feel the
quality of the service even when the actual service is not being delivered. As services
perish once it is delivered, any mistake in the service provision would call for redoing
that part of the service, which is called service recovery. Service recovery can lead to
unnecessary expenditure for the service provider. So service providers have to learn
and practice delivering the service right first time and each time. In short, they have to
ensure

that

the

services

they

provide

are

reliable

in

nature.

Services are variable in nature as these are intangible and simultaneous in nature.
Hence, the same service delivered by different people varies and the service provided
by the same person at different times varies from time to time. Hence, service
personnel have to learn the service script well and deliver the service strictly as per
the service script in order to minimise the variability of the service and increase its
reliability, dependability, credibility, consistency and accuracy. Customers perceive
the

restaurant

service

as

reliable

when they provide the same quality and level of service each and every time the
customer purchases the service from the restaurant.
Tangibility spectrum
Services tend to be more intangible than manufactured products, and manufactured
products tend to be more tangible than services. For example, the fast-food industry,
while classified as a service, also has many tangible components such as the food, the
packaging, and so on. A useful way to distinguish a service from a product is to place
them on a scale from tangible-dominant to intangible-dominant when more than half the
value comes from service element.

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Impact of technology on Banking industry.

Automated Teller Machines (ATM) It has been estimated that there are around 400,000 ATMs
worldwide out of which 1,00,000 are located in Japan alone. ATMs allow the user to perform
upto 150 kinds of transactions ranging from simple cash withdrawals and deposits, to fund
transfer to trading in stocks to buying mutual funds to something mundane like payment of
electricity bills, booking air-tickets and making hotel reservations.Technology in Banking
Image Processing As financial services including capital markets and banking are highly
document intensive, image processing technology can have a far reaching impact for such
applications for its less paper handling characteristics. Virtual Bank The customer activated
terminal (CAT) or Kiosk is an interactive multimedia display unit, housed in a small
enclosure, typically consisting of a computer workstation, monitor, video disk player and a
card reader. It allows the customers to browse through information and use the available
banking services at their own speed.
Electronic Funds Transfer at Point of Sale (EFTPOS) While travelers cheques meant paynow- buy-later and credit cards had buy-now-pay- later advantages, EFTPOS or debit cards
signify buy- now-pay-now but without cash transaction. The user presents his ATM card
when he buys goods and the EFTPOS system immediately debits his bank account. Home
Banking Smart phones with screen built-in modems and programmable microprocessors let
the customer access a variety of financial services from home.
Electronic Data Interchange (EDI) EDI typically denotes paperless financial transactions
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across the locations. The companies can now operate their bank accounts through corporate
banking terminals in their own offices which are linked to the bank computers. Companies
can thus carry out transactions like transferring funds, managing its cash flow, opening letters
of credit, etc. without any paper work. Smart Cards The Processor type smart cards with inbuilt integrated circuits (ICs) or micro-chips offer a wide range of transactional opportunities
even from remote areas. The smart cards are extensively being used for employee clocking
in, withdrawing cash from ATM, using pay-phones, payment of various bills, etc.
Impact of technology on Insurance industry
E-Insurance Today various insurance companies are providing facilities to their clients. They
can check the balance premium, maturity date, dues and outstanding of their policy. They are
provided various new information regarding new policy. The customer can pay the premium
amount of their policy from the e- insurance option. E-CRM Insurance industry is a data-rich
industry, and thus, there is a need to use the data for trend analysis and personalization. It is
very difficult to interact with each and every person to whom the insurer wants, and in the
insurance sector the customer relationship management is base. Thus with the help of e-crm
insurer are taking knowledge about their customer and providing information directly to
them. It also reduces the cost of marketing which increases the profit of business.
Role of information technology in Services Marketing
Information Technology (IT) revolution takes places everywhere. Organizations
implementing IT are able to provide better services and thereby able to improve their
businesses manifold. In earlier days IT has enormously been used in manufacturing sector
regarding product designing and development, product modification etc. Now-a-days the
importance of IT has been strongly felt and applied in the services sector.
Application of IT in Hospitals
The hospital management is taking place with the application of IT. Starting from the
reception by recording a patient's name, the IT has been used everywhere in an hospital. A
patient's record comprising his name, age, sex, disease found, blood group, height,
weight, blood pressure level, etc. has been maintained as database in a computer in the
hospital. So whenever the patient arrives his previous record can be verified. Similarly
when the surgeries take place, the hospitals use computers and specialized software for
judgement of diseases/problems and for curing the diseases. For billing purposes also the
computers have been used widely in hospitals.
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Application of IT in Pharmaceutical Shops

Because of the increase in competition, IT has also been applied in pharmaceutical shops.
Whenever any medicine enters the shop, all the information related to the medicine its
name, quantity, manufacturing date, expiry date, its content, price and other information
can be entered into a computer system. Whenever the sales take place, computerized
billing would be provided to the customers. The bill would carry plenty of information for
the benefit of customers indicating the name of the medicine, quantities purchased by
them, its price, manufacturing and expiry date. Whenever any medicine has been sold the
software created would also give indications to the manager/supervisor of a
pharmaceutical shop related to the number of quantities sold, number of quantities
available in the shop and the computer also warn them regarding the date of expiry.
Application of IT in Educational Institutions
The Government of India has come out with a statement stating that Information
Technology (IT) is India's tomorrow. Hence the educational institutions have to use IT for
teaching the children. Latest hardware and software can be used and the latest computer
languages and packages have to be taught to the students. It is not enough if student of
computer science alone has been taught about IT, but also the students of other disciplines
have to be taught about IT. Because, the application of IT takes place everywhere.
Application of IT in Share Trading
Gone are the days when stock brokers use to shout at the trading hall of a stock exchange
quoting their price? Now-a-days with the help of computer terminal and internet
connection, purchasing and selling of share takes place everywhere. A client can look at
the transactions taking place through the computers. The volume of the shares traded and
the turnover has got consistently improved because of the online share trading.
Application of IT in Banking
Tremendous improvement has taken place in the Indian banking sector because of the IT
revolution. All the private and foreign banks have gone for 100 percent computerization.
At a rapid fast, the government owned nationalized banks are also improving their
number of computerized branches. With the help of computerization, the transaction takes
place at a faster rate and the waiting time of a customer in a queue is getting minimized. E
Banking is emerging in the Indian banking sector. The banks provide the facility of
internet banking, phone and mobile banking with the help of IT. All the branches of a
bank are networked. The networking also takes place between two or more branches in
order to provide easy accessibility for a customer. The cost incurred on infrastructure,
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furniture and employees has got decreased because of the application of IT.
Application of IT in Advertising Agencies
'Creativity' is the slogan chanted in Ad Agencies. Creativity involves doing things
differently. Things can be done differently with the help of IT. The Ad Agencies use lot of
software for creating advertisements. Lot of animations and graphics can be done using
IT tools.
Application of IT in Marketing Research Agencies
Marketing Research (MR) agencies involve in lot of research activities starting from
research survey on product development till distribution and measurement of customer
response. Gone are the days of manual analysis of data. The MR agencies use
sophisticated statistical software packages for data analysis and interpretation. Some of
the statistical software packages are created by their own for customized problems.
Hence, application of IT tools take place in full swing at MR agencies.
Application of IT in Indian Railways
The Indian Railways has the proud of being the 'largest employer'. The application of IT
has provided various benefits for the Indian Railways and its passengers. With the issue
of computerized railway tickets, the errors have been minimized. A passenger can book
the train ticket from any part of the country. A passenger can also book the train ticket at
his convenient place, as the online reservation system has been introduced.
Application of IT in other services sector
Now-a-days the reservation for film shows take place through online ticket booking. The
cinema theatres in order to avoid queues and unnecessary rush follow the system of
online ticket booking so that through internet anyone can book tickets at their convenient
places. In order to reduce the queue, computerization takes place in petrol bunks also.
Computerization ensures speedier billing and reduces the queue in petrol bunks. In
Regional Transport Offices, computerization ensures prompt and quick delivery of
service to the peoples. The leading libraries are also computerized these days. Application
of IT tools provides various benefits for the libraries and readers. The books available in
the libraries and those on circulation can easily be found. The issue and return date can
easily be identified and other information related to the library can also easily be sought.
IT also paves way for online shopping. Websites like Amazon.com: Online Shopping for
Electronics, Apparel, Computers, Books, DVDs & more, fabmart.com etc. provide online
shopping facilities. Online hundi system has been introduced by some of the leading
temples in India. With the help of online hundi system, those interested in donating
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amount to these temples can remit their amount with the help of credit card numbers
through internet.
Challenges and issues in services marketing
Challenges are integral part of any business environment. It gets more complex with
services because of its nature and the participants in it. Therefore, the features of services
are its challenges itself. To begin with, let us look at the traditional challenges or the
challenges that are imbibed in the nature of services itself.
1. Intangibility: The service is not physical in nature, thus service marketers have no
physical evidence to support their claim of the services. Example: A Portfolio manager
has only empirical data to prove his words of service levels and not anything in substance.
2. Inconsistency: Services delivered generally vary in quality based on different
situations so they are not always consistent. Example, A pizza delivery boy may deliver
pizza at your home in 20 minutes and also sometimes on 30th minute.
3. Inseparability: Services and customers cannot be separated. Thus service marketer has
to transact or be present at the time of service delivery because it is produced and
consumed at the same time. Thus service marketers face a big challenge to deliver on
time due to this feature.
4. Perishibility: Services perish with the delivery. Thus service marketers do not have
evidence of the service provided. They rely on feedback from customer which may vary
due to customers mood. Further there are various other traditional challenges of service
marketing such as ownership issue, as there is no ownership transfer in ownership.
Modern challenges for service marketers are the concepts that play an important role in
service delivery by a service marketer.
1. Gaps Model: Gaps model discusses the gap between customers expectation of
services and service marketers perception of the customer. This results in incorrect
designing and standards of service product. Further, this results in inappropriate service
delivery and finally communication gap due to incorrect service product design and
delivery. This makes service marketer overvalue or undervalue customer expectations.
2. Setting standards due to customization: It is very difficult for a service marketer to
define standards due to customization of the service product. For example, we have ISO
standards in products and Egmark for products that define standardization. However, for
services, the service delivery varies from place to place, from person to person. The topic
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focuses on challenges due to changing business environment. Thus let us now look at the
emerging challenges of the service marketing and how the modern service marketer
handles these challenges. 1. 4th Dimensional approach to management: Service marketers
need to be proactive and focused on all aspects of customer perception, whether internal
or external. Fourth dimensional approach is the suppliers, distributors, customers,
employees all are to be cared and focused with responsiveness. 2. Managing Social
media: Social media influence is very contagious. For the matter of fact: 78% of people
trust recommendations of other consumers- AC Nielson; Trust in advertisement report,
2009. Thus making it challenging for service marketers to influence customer behaviour
by facts and advertisement as people have a platform now to communicate and discuss
brands and products.
3. Prosumer Concept: Consumer is not just consumer now, with social media and mass
media development, service marketer cannot ignore the customer. Customer now
participates in production of goods. Example; customer feedback forums over social
media, complaints all are tracked and focused by service marketers to understand
customers and their requirements.
4. Mass marketing becomes Niche marketing: As markets are getting saturated,
selection of right mode of marketing is extremely important due to focus on R.O.I in
advertisements. Example: Dell Generated $6.5 million sales from twitters in 2010.
5. Managing interactive markets: Markets are interactions now, not merely transactions.
Thus service marketer has to focus on reputation management, complaint resolutions etc
to make sure service disruptions are not exaggerated in media and to other consumers.
This service marketer needs to be proactive in handling reputation and complaints. We
can see development of programmes related to reputation management. Example: Om
Logix, a marketing consultancy company has programmes such as Online Reputation
Management to meet these challenges of organisations. Thus we discussed about few of
the emerging issues that service marketer face in the challenging business environment.
Service marketer should keep few aspects in mind in this challenging business
environment to be successful. A few of them are briefly discussed here.
1. Learn more about consumers: Its time that service marketer knows their customer even
better. Run Customer relationship programmes (CRM), gather customer feedback,
knowledge, tastes, after sales service etc.
2. Be clear and authentic: False claims and big brand ambassador do not earn huge bucks
anymore. Its interactive market due to development in communication networks.
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Example: Airtel rebranding failed even after 200 cr. of advertisement budget, where as
their HFZ (Har Ek Friend Zaruri) campaign of Airtel at a cost of 35 cr. made gave higher
viewer penetration and R.O.I as compared.
3. Create audience driven engagement programmes: This will promote healthy
interactions among customers and also customers feel engaged with the brands. This
creates loyalty. Example: In March 2010, when HBO planned Bond month focusing on
Bond movies for the month of march, It attracted popularity by having Dress the Bond
girl concept online, which engaged people visiting HBO website with average user
engagement of 15 minutes.
4. Make social media work for organization: Understand the potential of social media and
leverage it sophistically to make it work positively for the business.

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