Services Marketing

Unit 1: Introduction

1.1 Introduction to Services Marketing

Modern economy has been constantly defined as a service oriented economy.
This is because of the importance of services as an industry that captures a
major market share in both, developed as well as developing countries. Today,
growth of service sector is an indicator that a country is making good economic
progress.
History has been witness to a progressive transition from agriculture sector to
manufacturing and eventually the service sector, which becomes the pillar of
country’s economy.
This paradigm shift has brought up a complete change in the definition of goods
and services. Unlike in the past, goods and services are no longer considered as
two separate entities. Services are considered as an integral part of the product
category.
According to American Marketing Association, services are nothing but activities,
benefits, value propositions, satisfactions that are provided to a consumer, either
wholesome or in relation to a sale of goods.

1.2 How do you characterize services?

Intangibility
A major trait of service is intangibility. Services cannot be seen, touched, smelt,
tasted; it does not have a physical existence. This primary characteristic is the
differentiating factor between a service and a product. Moreover, in case of
marketing as a service companies need to tag an intangible attribute to a
tangible offering.

Heterogeneous
If you consider the basic nature of services, each service offering is unique and
cannot be repeated; even by the same service provider. The fact with products is
that they can be produced in a large scale and each product can retain its
characteristics. For example: every burger churned out by McDonalds is the
same, however a service rendered by the representative at the counter will be
different for two different customers.

Perishable
Services cannot be stored, saved or further sold to another person, once it is
consumed. A service delivered to one customer, cannot be offered to the other
customer. For example – if a customer is not satisfied with the service of a
barber, cannot return the haircut service that was provided to him. The only
thing that a customer can do is not to visit the same barber again.
Offered & Consumed In Parallel
This is with reference to the fact that a service will be rendered and consumed at
the same time. This also testifies the fact that services cannot be stored as it is
perishable. If we take the same example of barber and haircut, a haircut is
delivered to and consumed at the same time. Furthermore, it is practically not
possible to separate the service from the service provider. For example – a
customer cannot get a haircut if there is no barber.

1.3 Types of Services

Any set of services can be broadly classified into two categories:
1. Core Services
Core Services are those that are rendered as a primary objective of the
transaction. For example – Services provided by lawyer, teacher, barber
are considered as core services
2. Ancillary Services
Ancillary services are also known as supplementary services and they are
provided to support a product or a core service. For example – home
delivery service provided by restaurant is an additional service beyond
their core service of providing food.

1.4 Difference between Goods and Services

The following table describes the difference between goods and services

Goods Services
A physical product or commodity A process or an activity
Tangible Intangible
Homogenous Heterogeneous
Production and consumption can be Production and consumption cannot be
separated separated
Can be stored or saved Cannot be stored
Ownership can be transferred Ownership cannot be transferred

1.5 Definition of Services Marketing & its Importance

Services marketing is defined as the marketing of services which are intangible
as against tangible products. As mentioned earlier, services cannot be stored or
saved. Furthermore, a service that is offered to a consumer cannot be offered to
another consumer.

“A product is usually sold, a service is usually

offered”
Services’ marketing is comparatively a new concept which came into existence
and grew in importance by the end of 20 th century.
Importance of Services’ Marketing

Since services are an intangible offering, marketing them becomes a daunting

yet important task. Following are the reasons why services’ marketing is
considered to be extremely important

Differentiator
Since products look the same, the services work as the differentiating factor
between two products. For example – if you visit McDonalds and a local
restaurant, both may offer the same type of burger and you may not be able to
differentiate between the two. But what sets them apart is the service that is
provided by the attendant. Hence, marketers can latch upon the opportunity to
promote the services offered and stay ahead of competition.
Relationship
Since service is intangible, customer relies on the trust factor. A large part of
services marketing depends on the relationship build around trust between
buyer and seller. Moreover, a buyer will also consider buying a service if he has
heard about a success of that service from the said service provider, through his
own network of people.
Retaining Customers
Today’s market is extremely competitive. The demand is less and the supply is
more. For a small segment of customers, we have a large pool of service
providers. Moreover, services are offered and consumed at the same time, which
involves the customer from the beginning, throughout the journey. Hence it is
important to keep them engaged, take their feedback and improve upon the
services so that a service provider can retain these customers.

1.6 Evolution of Services Marketing

Services marketing is not a new concept. Over decades, the concept of services
marketing has been discussed and debated. The change that has happened is in
the role that services marketing plays. Fisk, Brown and Bitner have classified
four distinct stages in the evolution of services marketing

 Crawling Out Stage | Occurred before 1980

 Scurrying About Stage | Occurred between 1980 and 1986
 Walking Erect Stage | Between 1986 and 2000
 Galloping Stage | From 2000 till date

Crawling Out Stage

During period, there was a strong discussion to create a new division that will
deal with various problems and challenges in the services sector. However,
specific areas of marketing theory were found to be incomplete, insufficient and
inappropriate, when it came to handle these problems. Key highlights were the
differences between marketing channels used in services and that used for
physical goods and commodities. There were also severe discussion implications
of these marketing strategies.
Traditional marketing experts were of the belief that organizations did not need a
separate theoretical body for this activity; the existing structure should be
sufficient to cater to the objectives of the organization. There was no water tight
definition of services and it was so tightly linked with product that most of the
times services was an ancillary component to the product or goods.
Scurrying About Stage
During this phase, which was predominant between 1980 and 1985, a constant
endeavour was made to classify services clearly. The focus was on managing
quality of service delivery. Eminent experts like Valerie Zeithaml, Parasuraman
and Berry had developed their own ‘gaps model’ that highlighted the importance
to assess quality in services offered by organizations.
Furthermore, other factors important for management of service marketing
included elements like interpersonal aspects of services and ‘relationship
marketing’ and ‘internal marketing’
Walking Erect Stage
Since 1986, there was a drastic change in the thought process as people stopped
discussing the comparison of services with goods. Moreover, the discussion was
more focused on addressing marketing challenges faced by services
organization. This include factors like Service Encounters, Service Design,
Perceived Service Quality and Customer Satisfaction. Strong weightage was
given to Internal Marketing and Relationship Marketing.

Galloping Stage
From the year 2000, the services sector has grown considerably and it has been
the major contributor of a country’s GDP. The concepts of marketing have
changed drastically and technology is a major factor for providing effective
marketing to services organization.

1.7 Importance of 7Ps in services marketing

The 7Ps of marketing comprises of three additional elements, beyond the

traditional four elements of marketing mix. However, the implications of these
elements are different when it comes to services marketing. Let us look at each
element of the marketing mix and what role does it play in services marketing
Product
When it comes to services, product is intangible, heterogenous and perishable.
Furthermore, its production and consumption happens simultaneously. Hence,
there is a possibility of customizing the services offered depending upon the
requirement of customer. However, extensive customization may dilute the
standard service delivery and have a significant impact on its quality. Hence,
specific care needs to be taken while designing a service offering.

Price
It is difficult to define price of a service compared to that of products or goods. A
product can be derived easily taking into account the cost of raw materials used
to prepare the product. However, when it comes to services, you need to
consider cost factors like attendant’s costs like labour and any administrative
overheads. Hence, if we consider the example of a restaurant, they not only
have to charge for the food that is served, but also the ambience that they
provide to customers.

Place
Since service delivery is concurrent with its production and cannot be stored or
transported, the location of the service product assumes importance. Service
providers have to give special thought to where the service would be provided.
Thus, a fine dine restaurant is better located in a busy, upscale market as
against on the outskirts of a city. Similarly, a holiday resort is better situated in
the countryside away from the rush and noise of a city.
Promotion
Since a service offering can be easily replicated promotion becomes crucial in
differentiating a service offering in the mind of the consumer. Thus, service
providers offering identical services such as airlines or banks and insurance
companies invest heavily in advertising their services. This is crucial in attracting
customers in a segment where the services providers have nearly identical
offerings.

Now let us look at the 3 additional elements of services marketing mix, which are
specific to marketing of services

People
People is a crucial factor that defines a service delivery, because the service and
the person delivering the service cannot be separated. For example – just as a
restaurant is known for its food, it is also known for the services provided by the
attendants. As a result, a lot of emphasis is put on customer service training.

Process
Another crucial element is the process of service delivery. This ensures that the
same quality and standard of service is offered to every customer. Hence, you
will see that most organizations have a service delivery metrics that details out
every factor that needs to be considered while delivering a service. For example
– in a restaurant, they have details like how to greet a customer to what to say
during a greeting and how to answer questions raised by a customer.

Physical Evidence
Since services are intangible in nature, a majority of service providers weave a
tangible component around these services to enhance customer experience. For
example – in a hair salon, you will see well designed waiting areas with
comfortable sofas and magazines to read, so that customers don’t get bored
while waiting. Similarly, in restaurants they have beautifully designed interiors
and decorations to offer an exceptional experience to their guests.