Learning Objectives:

▪ Explain what services are and identify important trends in

services

▪ Explain the need for special services marketing concepts and

practices and why the need has developed and is accelerating

▪ Explain the profound impact of technology on service

2
1.1 What are Services?

1.1.1 Defining services

a) Services are deeds, processes, and performances provided or

coproduced by one entity or person for another entity or person
(Zeithaml, Bitner & Gremier, 2015)

b) Services are deeds, efforts, and performances

(Hoffman & Bateson, 2006)

c) You need to find more definition similar to the above ones.

3
1.1.2 Services related concepts

a) Service industries and companies

- Those industries and companies which are typically classified within the
service sector and whose core product is a service

Ex: find your own examples

b) Service as a product
- A wide range of intangible product offerings that customers value and
pay for in the marketplace

Ex: find your own examples

4
c) Customer service
c) Service provided in support of a company’s core products

– do not charged
- provided on site, over the phone, via the Internet
- essential to customer relationships

Ex: find your own examples

d) Derived service
d) The value derived from physical goods is really the service provided
by the good, not the product itself

Ex: A razor provides barbering service, a computer provides information

and data manipulation service
5
1.1.3 Tangible spectrum
▪ The primary difference between goods and services is the property of
intangibility

▪ Providing an example for pure service or pure good is very difficult

▪ Many services contain at least some goods elements

Ex: menu in a restaurant, filling forms in a bank etc.

▪ As the product becomes more and more tangible dominant, fewer

service aspects are apparent

6
▪ The scale of market entities displays a continuum of products based on their
tangibility where goods are tangible dominant and services are intangible
dominant.

Salt
Soft drinks
Deodorants
Automobile
Cosmetic
Fast-food outlets Intangible
Dominant

Tangible
Dominant Fast-food outlets
Advertising agencies
Airlines
Investment management
Consulting 7

Teaching
▪ Two important lessons learnt from the scale of market entities.

i. In reality, there is no such thing as a pure service or pure product.

ii. The tangible aspects of the intangible dominant product and intangible
aspects of the tangible dominant product are an important source of
product differentiation and new revenue streams

8
9
1.1.4 The Molecular model
▪ A conceptual model that is used to study the relationship between tangible
and intangible components of a firm’s operations.
Distribution Distribution
Price Price

options
Service Vehicle
frequency

Pre- & post In flight Vehicle

Transport
flight service
service

Food & Transport

drink

Market positioning Key Market positioning

Tangible elements
Airlines Automobiles
10
Intangible elements
Adding service aspects to a product often
transforms the product from a
commodity into an experience

By doing so, increases the revenue-

producing opportunities of the product
dramatically

11
1.2 Why Services Marketing?

1.2.1 Service-based economies

▪ The tremendous growth of service industries – i.e. both established and

growing economies alike

▪ The trade in service is growing worldwide

▪ There is a growing market for services and increasing dominance of

services in economies worldwide

12
Sources of Growth in Sri Lanka

The Sri Lankan economy grew by an 3.1 per cent in 2017

60.%
56.80%
50.%

40.%

30.%
26.80%
20.%

10.%
9.50%
6.90%
0.%
Agriculture Industry Services Taxes less
subsidies
Source: Annual Report 2017, Central Bank of Sri Lanka.
13
 ……there is no such thing as service
industries. There are only industries
where service components are greater
or less than those of other industries.

Levitt (1972)

14
List of countries by sector composition of the labor force
2010 (in percentage)
Agriculture Industrial Service
Sector Sector Sector
World 36.6% 21.4% 41.9%
United States 0.7% 20.3% 79.1%
China 38.1% 27.8% 34.1%
Japan 3.9% 26.2% 69.8%
Germany 2.4% 29.7% 67.8%
France 3.8% 24.3% 71.8%
United Kingdom 1.4% 18.2% 80.4%
Brazil 20% 14% 66%
Italy 4.2% 30.7% 65.1%
Canada 2% 15% 83%
India 52% 14% 34%
Russia 9.8% 27.5% 62.7%
Spain 4.2% 24% 71.7%
Australia 3.6% 21.1% 75%
Mexico 13.7% 23.4% 62.9%
15
South Korea 7% 23.6% 69.4%
Employed population by major economic sector in 2017
Employee persons 3,736,500
50.% Services ,
45.% 45.50%

40.%
35.% Industry ,
Agriculture , 28.40%
30.% 26.10%
25.%
20.%
15.%
10.%
5.%
0.%
Agriculture Industry Services

Source: Annual Report 2017, Central Bank of Sri Lanka. 16

1.2.2 Service as a business imperative in goods-focused
business

▪ What is “service imperative”?

The view that the intangible aspects of product are becoming

the key features that differentiate the product in the market
place

17
▪ Companies across industries have discovered the value of service innovations
and service growth strategies – i.e. discover the potential for service led-
growth

Ex:

18
▪ Why all companies are choosing to focus on services?

a) The commoditization of products in many industries has resulted in price

and margin pressures on many physical products – i.e. service can help
firms to customize their offerings, adding value for customers

b) Customers are demanding services and solutions

c) Services often have higher profit margins than products, thus provide
platforms for firm profitability

d) Customers loyalty and customer satisfaction are driven in large part by

service quality and service offering

e) Service can be differentiator for many industries who are in high

competition

19
1.2.3 Deregulated industries and professional service
needs

▪ Deregulated and professional services have changed the ways they do business

▪ Deregulation created turmoil in many service industries

- Because of deregulation marketing decisions of many large services industries,

including airlines, banking, telecommunications etc. that used be controlled by
the government are now partially or totally with in the control of individual firms.

- Deregulation accelerated the need for more sophisticated,

customer-based and competition-sensitive marketing

Ex: find examples

20
▪ Professional services are not anymore avoiding using the word “Marketing”.
- Professional services (such as physicians, lawyers, accountants, engineers,
and architects) have demanded new concepts and approaches for their
business.
- Interested in understanding & segmenting customers and delivering of quality
services.

21
1.2.4 Service marketing is different
▪ Marketing and managing services presented issues and challenges not
faced in manufacturing and packaged goods companies

▪ It needs unique skills and experiences for business people and new
concepts and approaches for marketing and managing service businesses

22
1.2.5 Service equals profits
▪ Investing in service initiatives and promoting service quality is main ways of
differentiating and creating advantage

▪ The quality service has been the foundation for success for many firms

23
 The Marketing Science Institution –

“Corporate strategies focused on customer

satisfaction, revenue generation and service quality
many actually be more profitable than strategies
focused on cost cutting or strategies that attempt
to do both simultaneously”.

24
1.3 Service and Technology?
▪ The influence of the technology is the most profound trend affecting services
marketing today

1.3.1 New service offerings

- Internet-based companies
e.g. find examples

- Smart phones offer countless service applications

e.g. find examples

- Internet provides a way to offer new services

e.g. find examples

- Many new technology services are awaiting

e.g. find examples
25
1.3.2 New ways to deliver service

▪ Technology is providing approaches for delivering existing services in more

accessible, convenient, productive ways

▪ Technology facilitates;

- Basic customer service functions

- A direct mode for making purchases and conducting business
- An easy for customers to learn, do research, and collaborate with others

26
1.3.3 Enabling both customer and employees

▪ Technology enables customer to be more effective in getting service

e.g. self-service technologies, E-banking, online shopping,

▪ Technology enables employees to be more effective and efficient in

delivering service
e.g. CRM and sales support software, customize service through accessing
customers‘ information immediately and timely

27
1.3.4 Extending the global reach of services

▪ Technology discovered the potential for reaching out to customers

around the globe in ways not possible before

▪ Information, customer service, and transactions can move without

any boundaries to any customers

28
1.3.5 The Internet is a service
▪ The Internet is just “one big service”

▪ All business and organizations that operate on the Internet are essentially
providing services – i.e. providing information, performing basic customer
service functions, facilitating transactions, promoting social interaction among
individuals
▪ Customer expect – dependable outcome, easy access, responsive
systems, flexible, apologies and compensation from technology-based
businesses and from e-commerce solutions?

▪ Can customer get what they always expect from technology based businesses
and from e-commerce situations?

29
1.3.6 The paradoxes and dark side of technology and
service
▪ Customers concerns about privacy and confidentiality

▪ Some customers are simply not interested in using or ready to use technology –
i.e. “customer technology readiness”

▪ With technology infusion comes a loss of human contact

▪ The payback in technology investments is often uncertain

30
•An activity – You need to find some digital
usage statistics – i.e. all the digital activities done -
in Sri Lankan context and add to that to your lecture
notes

31