Services Marketing - Definition and Characteristics

Introduction
The world economy nowadays is increasingly characterized as a service economy. This
is primarily due to the increasing importance and share of the service sector in the
economies of most developed and developing countries. In fact, the growth of the
service sector has long been considered as indicative of a countrys economic
progress.
Economic history tells us that all developing nations have invariably experienced a
shift from agriculture to industry and then to the service sector as the main stay of the
economy.
This shift has also brought about a change in the definition of goods and services
themselves. No longer are goods considered separate from services. Rather, services
now increasingly represent an integral part of the product and this interconnectedness
of goods and services is represented on a goods-services continuum.
Definition and characteristics of Services
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.
The defining characteristics of a service are:
Intangibility: Services are intangible and do not have a physical existence. Hence
services cannot be touched, held, tasted or smelt. This is most defining feature of a
service and that which primarily differentiates it from a product. Also, it poses a
unique challenge to those engaged in marketing a service as they need to attach
tangible attributes to an otherwise intangible offering.
1. Heterogeneity/Variability: Given the very nature of services, each service
offering is unique and cannot be exactly repeated even by the same service
provider. While products can be mass produced and be homogenous the same is
not true of services. eg: All burgers of a particular flavor at McDonalds are
almost identical. However, the same is not true of the service rendered by the
same counter staff consecutively to two customers.
2. Perishability: Services cannot be stored, saved, returned or resold once they
have been used. Once rendered to a customer the service is completely
consumed and cannot be delivered to another customer. eg: A customer
dissatisfied with the services of a barber cannot return the service of the haircut
that was rendered to him. At the most he may decide not to visit that particular
barber in the future.
3. Inseparability/Simultaneity of production and consumption: This refers
to the fact that services are generated and consumed within the same time
frame. Eg: a haircut is delivered to and consumed by a customer simultaneously
unlike, say, a takeaway burger which the customer may consume even after a
few hours of purchase. Moreover, it is very difficult to separate a service from
the service provider. Eg: the barber is necessarily a part of the service of a
haircut that he is delivering to his customer.

Types of Services
1. Core Services: A service that is the primary purpose of the transaction. Eg: a
haircut or the services of lawyer or teacher.
2. Supplementary Services: Services that are rendered as a corollary to the sale
of a tangible product. Eg: Home delivery options offered by restaurants above a
minimum bill value.
Difference between Goods and Services
Given below are the fundamental differences between physical goods and services:
Goods

Services

A physical commodity

A process or activity

Tangible

Intangible

Homogenous

Heterogeneous

Production and distribution are

separation from their consumption

Production, distribution and consumption

are simultaneous processes

Can be stored

Cannot be stored

Transfer of ownership is possible

Transfer of ownership is not possible

Four Factors That Distinguish Services Marketing

It's been called "selling the invisible"delivering intangible services as a core
"product" offering.
Law firms, management consultants, IT services and telecom providers, architectural
groups, healthcare and educational organizations, financial and insurance institutions,
and a multitude of business-to-consumer operations profit from performing and
delivering people-based services.
But invisibility, or intangibility, is just one factor that distinguishes services marketing
from product marketing. Along with inseparability, variability, and perishability, these
four characteristics affect the way clients behave during the buying process and the
way organizations must interact with them.

Additionally, these characteristics influence the development of marketing strategies

and the more tactical marketing mixfrom the "packaging" and pricing of services
bundles, to defining distribution plans and promotions options.
To ensure business success, services marketing professionals must clearly understand
these characteristics, how they affect client behavior, and how their organization can
respond to diminish engagement risk, improve customer perceptions, and enhance
market opportunities.

Intangibility
Services are not physical and cannot be "possessed." Because they can't be seen,
touched, or made tangible in some way, assessing their quality and value is difficult.
A services client will never know how good the service is until after he receives it. In
some cases, it actually may be months or years before a trigger event occurs to
activate the service, at which time the client hopes to experience the promised
service quality (e.g., an IT crisis triggers service, or an accident initiates an insurance
claim).
This can be unsettling for the client, whose response is to look for tangible signals
about the service process and quality prior to purchase to reduce uncertainty and
reservation.
The Marketing Response: Services marketing professionals must determine how to
effectively communicate the services process, deliverables, and benefits in order to
build client confidence. Tangible signals that indicate services quality and value come
from personal interaction, trusted recommendations, clear communications,
equipment used or processes followed, pricing, and the physical environment in which
the business operates.
With promotions, a logo symbol can offer a sense of tangibilitythe "good hands" of
Allstate, the Merrill Lynch bull, the Prudential Insurance rock. Testimonials and case
studies can be used to build client confidence and rapport. The communications
material itself (paper, design, and content) can convey quality, too.
Pricing can also be an indicator of quality: Premium pricing often suggests higher
quality, while prices that are too low may hint at the inexperience, limited depth, or
vague processes of the services producer.
But tangibility must extend beyond promotions and price. Because positive personal
interaction and "chemistry" is a gauge of quality to the client, marketing as a
discipline must be influential in the training of sales and service associates. These
individuals literally are the embodiment of marketing for the organization. Their ability
to deliver on the brand promise affects business success.

Therefore, creating client relationships, setting appropriate expectations, and learning

to represent the company in an acceptable way (e.g., through appearance, attitude,
and communications) should augment standard knowledge and process training.
Because it is critical to services delivery, the success of client interactions should be
quantified, measured, and improved with regularity.
Inseparability
The production of the services can't be separated from its consumption. For example,
the production and consumption of a medical exam happen together, as do many
consulting services and IT maintenance contracts.
This leads to two important factors. First, the client is, essentially, "in the factory,"
watching production all along the way. It is very important for a service provider or
consultant to carefully manage the "production process" as the client is able to
observe it in action and make judgments about quality and value.
Second, the client often expects the service to be provided in a specific way or by a
specific individualand that can pose challenges in assigning staff, managing the
process, and ensuring the frontline people display the appropriate knowledge,
attitude, and appearance when delivering the service.
The Marketing Response: Services marketing professionals can encourage client
participation during the delivery process. As the client is engaged through interviews,
strategy sessions, regular communications, testing, and face-to-face updates at major
milestones, he gains confidence and builds commitment to the engagement and
relationship.
To manage distribution and pricing considerations in the face of inseparability, the
marketing professional can identify the level of personalization that the client requires
and the company can support. For example, interactions can be managed through
conference calls versus on-site visits, or exchanges can be shifted from high-contact
to low-contact operations (e.g., personalized banking to ATM or online banking). These
changes should be carefully evaluated to ensure client acceptance and positive brand
impact.

Variability
Sometimes called "heterogeneity," services quality and consistency are subject to
great variability because they are delivered by people, and human behavior is difficult
to control. Personal performance and quality can vary by time of day (people get
tired), time of month or year (during tax time for CPAs), workload, experience,
attitude, knowledge, and other factors. Maintaining client trust during lapses (which
will happen) is critical.
Also, variability is why it can be risky to have one person make the sale and establish
the relationship, and another deliver the service. The original contact person is the

one who reduced risk for the client; when someone else delivers the service, the client
may become agitated or wary.
The Marketing Response: Services marketing professionals particularly can
overcome variability by developing special service packages.
For example, the level of quality to be received can be deliberately limited. IT
maintenance contracts frequently offer a range of service packages (e.g., from "basic"
with response in 4-6 hours, to "premium" with immediate, on-call support).
Standardizing some service offerings enables the organization to be very specific in
noting service and quality deliverables, thus decreasing variability and meeting client
expectations simultaneously.
When this method is used, variability can become a point of differentiation as it
enables flexibility and services customization.
When promoting services, marketers can overcome client concern about service
consistency in two waysthrough team introductions and through positive referrals.
The sales leader should make it clear that a qualified team will work with the client,
and schedule face-to-face introduction and discovery sessions to smooth the nextphase transition process.
In addition, positive word-of-mouth referrals, written testimonials and case studies, or
reference-able accounts can dispel client concerns about variability.
Because things can and do go wrong, the services producer should know how to
deliver a professional client response. How quickly the response is delivered is critical.
The objective is to maintain client trust; so shifting blame, explaining it away, or
ignoring it can further damage the relationship. The services producer should provide
an apology, fix the problem or situation quickly,

make up for the inconvenience with additional free services or a token of appreciation,
and determine the reason for the error and fix it at the rooteven if it means people
or process changes.
Finally, research shows that employee satisfaction is the most important factor in
providing high quality service. Potential client interaction problems can be minimized
through adequate training, empowering employees to make more customer-focused
decisions, and rewarding them for positive customer-oriented behavior.
Also, establishing employee feedback mechanisms so that management can hear and
take action on issues of concern will strengthen employee perceptions of the
company, increase satisfaction, and result in better client interactions.
Perishability
You can't store services for future use. When a client misses an appointment with his
attorney, that time can never be recaptured. When hotel rooms are empty and theater
tickets go unsold, the inherent value vanishes.

Perishability also affects performance, as balancing supply and demand can be

difficult. Demand may be seasonal, time sensitive, or crisis driven. When demand
fluctuates, it can be a challenge to maintain high performance levels.
For example, a CPA at tax time may have difficulty giving the same personalized
attention as at other times of the year. In IT services, performance could be tested
during peak times of disaster recovery, massive server outages, or when juggling new
installation projects in four states. While product marketers handle supply/demand
issues through production scheduling and inventory management, services marketers
don't have that advantage.
The Marketing Response: Unlike the other three characteristics, perishability
primarily is a concern of the service producerthe client is aware of this factor only
when there is an insufficient supply and he has to wait for the service. For the services
marketing professional, perishability affects pricing and distribution most distinctly.

If the services are particularly time sensitive, demand-based pricing can be instituted
as with airline tickets, seasonal vacations, or even a partner's hourly fee structure. For
many services, managing demand is handled by scheduling delivery through
appointments, while increasing supply is addressed through multiple locations or
additional site personnel.
Another way to balance supply-demand issues is through the use of retainer
agreements. For those services that are long-term, maintenance, or consultative in
nature, this pricing and delivery method ensures the client of ongoing services
delivery with a greater consistency in quality and allows the services producer to
establish a more predictable cash flow and forecasting scenario.
The Final Factor
What's right for your services organization? How can your company strengthen client
relationships and improve its competitive position?
Understanding the characteristics of services can provide a unique opportunity for
services producers to improve business success by rethinking their pricing models and
packaging options, improving production processes and client participation, enhancing
customer focus, and building employee relationship skills.