Chapter

What are services?

Why services marketing?
Characteristics of Services Compared to

Goods
The Services Marketing Triangle
Services Marketing Mix

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
OR
Activity or benefit that one party can offer to
another that is essentially intangible and does not
result in the ownership of anything. Its production
may or may not be tied to a physical product.

Examples of Service Industries

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

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

Goods versus Services

Source: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, A Conceptual Model of Service Quality and Its Implications for Future Research, Journal of
Marketing 49 (Fall 1985), pp. 4150.

Characteristics of Services
Intangibility

Heterogeneity

Simultaneous
Production
and
Consumption

Perishability

Implications of Intangibility
Services cannot be inventoried
Services cannot be easily patented
Services cannot be readily displayed or

communicated
Pricing is difficult

Implications of Heterogeneity
Service delivery and customer satisfaction

depend on employee and customer actions

Service quality depends on many

uncontrollable factors
There is no sure knowledge that the service

delivered matches what was planned and

promoted

Implications of Simultaneous
Production and Consumption
Customers participate in and affect the

transaction
Customers affect each other
Employees affect the service outcome
Decentralization may be essential
Mass production is difficult

Implications of Perishability
It is difficult to synchronize supply and demand

with services
Services cannot be returned or resold

The Services Marketing Triangle

COMPANY
Internal
Marketing

External
Marketing

enabling the
promise

setting the
promise

Technology

PROVIDER
S

CUSTOMER
S
Interactive Marketing
delivering the promise"

THE SERVICES MARKETING TRIANGLE

There are three types of marketing:
External marketing
Internal marketing
Interactive marketing

All these revolve around making and keeping

promises to customers.
For services, all three types of marketing
activities are essential for building and
maintaining relationships with customers.

External Marketing
A company makes promises to its customers

regarding what they can expect and how it will be

delivered.
Traditional marketing activities: advertising,
sales, special promotions etc.
For services, some other factors like the service
employees, the design and dcor of the facility,
the service process etc. also helps to set
customer expectations.
Tendency to overpromise also leads to shaky
beginning of the customer relationship

Interactive Marketing: Keeping Promises

Promises made must be kept
The most critical from customer point of view
Also delivered through technology
Interactive marketing occurs in the moment of

truth when the customer interacts with the

organisation and the service is produced and
consumed.
Reliability of services is tested every time the
customer interacts with the organisation.

Internal Marketing: Enabling Promises

In order to deliver the promises made, the

providers or service systems must have the

skills, abilities, tools, and motivation to deliver.
It also indicates that employee satisfaction and
customer satisfaction are closely interlinked.

THE SERVICES MARKETING TRIANGLE

All three sides are essential to complete the

whole and are critical for the success.

Without one of the sides in place, the triangle,

or the total marketing efforts, cannot be

optimally supported.

THE SERVICES MARKETING MIX

Another way to begin addressing the

challenges of services marketing is to think

creatively about marketing mix extended
marketing mix for services.
One of the most basic concepts in marketing

is marketing mix.
Marketing Mix: The elements an

organization controls that can be used to

satisfy or communicate with customers.

Traditional Marketing Mix

All elements within the control of the firm that

communicate the firms capabilities and image

to customers or that influence customer
satisfaction with the firms product and
services:
Product
Price
Place
Promotion

Expanded Mix for Services -The 7 Ps

Product
Price
Place
Promotion
People
All human actors who play a part in service delivery and thus

influence the buyers perceptions: namely, the firms personnel,

the customer, and other customers in the service environment.

Physical Evidence
The environment in which the service is delivered and where the

firm and customer interact, and any tangible components that

facilitate performance or communication of the service.

Process
The actual procedures, mechanisms, and flow of activities by which

the service is deliveredthe service delivery and operating

systems.

Table 1.3

Expanded Marketing Mix for

Services