SERVICES MARKETING

Strategic Marketing Management

DEFINITION

SERVICES: TO INCLUDE ALL ECONOMIC

ACTIVITIES WHOSE OUT PUT IS NOT A
PHYSICAL PRODUCT OR CONSTRUCTION;
GENERALLY CONSUMED AT THE TIME IT IS
PRODUCED AND PROVIDES ADDED VALUE
IN FORMS (SUCH AS AMUSEMENT,
CONVENIENCE, TIMELINESS, COMFORT,
OR HEALTH) THAT ARE ESSENTILLY
INTANGIBLE CONCERNS OF ITS FIRST
PURCHASER.

SOME MAJOR SERVICE DOMAINS

RETAILING & WHOLESALING

TRANSPORTATION, DISTRIBUTION & STORAGE
BANKING AND INSURANCE
REAL ESTATE
COMMUNICATION AND INFORMATION
PUBLIC UTILITIES, GOVT AND DEFENCE
HEALTH CARE
BUSINESS, PROFESSIONAL AND PERSONAL SERVICES
RECREATIONAL AND HOSPITALITY SERVICES
EDUCATION
OTHER NON-PROFIT ORGANIZATIONS

SERVICES ARE DIFFERENT

GOODS SERVICES
Services Cannot be
inventoried
Cannot be patented
Readily
Displayed/Communicated
Pricing is difficult

Tangible

Intangible

Standardized

Heterogeneous

Prod Separate
From
Consumption

Simultaneous
Production &
Consumption

Nonperishable

Perishable

Services Delivery & Customer

Satisfaction Depend On
Employees
Quality Depends On Many
Uncontrollable Factors
No Surety that Services go
as Planned/ Promoted
Customers participate in and
after the transaction
Customers affect each other
Employees affect outcome
Low Centralization
Mass Production Difficult
It Is Difficult to Synchronize
Supply and Demand
Services cannot be Returned

SERVICES CHARACTERISTICS

Intangibility

Inseparability

Services

Perish ability

Heterogeneity

Service Firms are Different

1. Simultaneous production and

consumption means that clients of
services consume the output of the
organization at the same time it is
produced
2. Customized output and customer
participation means that clients become a
part of the production process
3. Intangible output means that a service is
abstract such as information or
knowledge
4. Service firms are usually more labor
intensive, with many employees needed
to meet the needs of the customer

Service Firms Typology

Typology of service organizations is based on two
dimensions:
1.
Degree of labor intensity:
The ratio of labor cost incurred to the value of plant
and equipment.
Lawyers office is highly labor intensive
Trucking firm is _______in labor intensity
University is _____ on labor intensity
2.
Customer Interaction & Customization: It
contains two concepts: (1) degree to which consumer
interacts with the service process, and (2) the degree
to which service is customized to the consumer
A fast food restaurant would be ______ on customer
interaction but ______ on customization; whereas a
prestigious, waiter-service restaurant would be ______ on
both counts.

Typology of Services
Service Factory

Service Shop

(Low Labor Intensity/Low

Customization)

(Low Labor Intensity/High

Customization)

Airlines
Hotels
Logistics Firms

Hospitals
Construction Firms
Publishers

Mass Service

Professional Services

(High Labor Intensity/Low

Customization)

(High Labor Intensity/High

Customization)

Retailers
Schools
Commercial Banking

Doctors
Architects
Lawyers

Challenges in Services Marketing

1.
.
.

2.
.
.

Service Factory
Monitoring the technological sector of the
environment
Scheduling supply and demand as it is
difficult to increase capacity in the short
term in peak and off- seasons
Service Shop
Monitoring the technological sector of the
environment
Finding flexible and adaptable
technologies and work processes to make
customization possible without
overspending

Service Business
Technology
3.
.
.

4.
.
.
.

Mass Service
Managers face marketing challenges
Must try to bring in a warm, friendly touch, though the
customer doesnt get as much personalization as
desired
Treating the customers with a sense of warmth
Professional Services
Must deal with higher costs and more talented HR
Managing costs by keeping them down or passing
them to consumer becomes a significant challenge
Maintaining quality and responding to customer
interaction

TRADITIONAL MARKETING MIX

PRODUCT PLACE

PROMOTIO
N

PRICE

GOOD FEATURES

CHANNEL TYPE

PROMOTION
BLEND

FLEXIBILITY

QUALITY LEVEL

EXPOSURE

SALES PEOPLE

PRICE LEVEL

ACCESSORIES

OUTLET
LOCATION

ADVERTISING

TERMS &
CONDITIONS

PACKAGING

TRANSPORTATION

SALES
PROMOTION

DIFFERENTIATION

WARRANTIES

STORAGE

PUBLICITY

DISCOUNTS

BRANDING
PRODUCT LINES

MANAGING
CHANNELS

ALLOWANCES

EXPANDED MARKETING MIX

FOR SERVICES
PEOPLE

PHYSICAL
EVIDENCE

PROCESS

EMPLOYEES:

FACILITY DESIGN

FLOW OF
ACTIVITIES:

Recruiting, training

EQUIPMENT

Standardized

Motivation

SIGNAGE

Customized

Teamwork &
Rewards

DRESS

NUMBER OF STEPS:

CUSTOMERS:

OTHER TANGIBLES:

Simple or Complex

Education

Reports/Business
Cards

CUSTOMER
INVOLVEMENT:

Training

Statements,
guarantees

High or Low

SERVICE MARKETING
TRIANGLE
COMPANY
INTERNAL MKTG

EXTERNAL MKTG

Enabling Promises

Technology

PROVIDERS
INTERACTIVE MKTG
Keeping Promises

Making Promises

CUSTOMERS

Standardized vs. Customized

Services
1.
.
.

2.
.
.
.

Variety:
Number of exceptions in the work
Frequency of unexpected and novel events
that occur in service process
Analyzability:
When the service process is analyzable, the
work can be reduced to mechanical steps
Participants can follow an objective,
computational procedure to solve problems
Problem solution may involve the use of
standard procedures such as instruction
manuals, or technical knowledge such as
textbook

Standardized/Customized
Services

When work is not analyzable, it is

difficult to identify correct solution when
variability (a novel situation) arises
No store of techniques or procedures
exist to tell a person exactly what to do
The cause of, or solution to, a problem is
not clear , so employees rely on
accumulated experience, intuition and
judgment

Standardized/Customized
Services
Low Analyzability/Low
Variability

Low Analyzability/High
Variability

Teaching of Humanities/Social
Sciences
Skills Training/Coaching
Orchestra Musicians
General Admin./Management

Counseling/Rehabilitation
services
Advertising Agencies
Interior Decorators
Fashion Designers
Beauticians

High Analyzability/Low
Variability

High Analyzability/High
Variability

Auditing/Accounting Firms
Teaching of Empirical Sciences
Technical Training

Doctors
Engineering Services
Architects
Lawyers

SERVQUAL

SERVQUAL (Service Quality) was originally measured on

10 aspects of: reliability, responsiveness, competence,
access, courtesy, communication, credibility, security,
understanding the customer and tangibles.
By the early nineties the authors had refined the model
to the useful acronym RATER:
Reliability
Assurance
Tangibles
Empathy
Responsiveness

SERVQUAL DIMENSIONS

TANGIBLES - the appearance of physical

facilities, equipment, personnel and
information material
RELIABILITY - the ability to perform the
service accurately and dependably
RESPONSIVENESS - the willingness to
help customers and provide a prompt
service

SERVQUAL DIMENSIONS

ASSURANCE - a combination of the

following
Competence - having the requisite skills and
knowledge
Courtesy - politeness, respect, consideration
and friendliness of contact staff
Credibility - trustworthiness, believability
and honesty of staff
Security - freedom from danger, risk or
doubt

SERVQUAL DIMENSIONS

EMPATHY - a combination of the

following:
Access (physical and social) approachability and ease of contact
Communication - keeping customers
informed in a language they understand
and really listening to them
Understanding the customer - making the
effort to get to know customers and their
specific needs

SERVQUAL (RATER)

The RATER model is a simple and useful

model for exploring and assessing
customers' service experiences and has
been used widely by service delivery
organizations. It is an efficient model in
helping an organization shape up their
efforts in bridging the GAPS between
perceived and expected service.

SERVQUAL (RATER)

The five gaps that organizations should

measure, manage and minimize:

Gap 1 is the distance between what customers expect

and what managers think they expect the Perception
Gap
Gap 2 is between management perception and the actual
specification of the customer experience the Standards
Gap
Gap 3 is from the experience specification to the delivery
of the experience are standards consistently being met:
the Control Gap
Gap 4 is the gap between the delivery of the customer
experience and what is communicated to customers the
Communication Gap
Gap 5 is the gap between a customer's perception of the

REASONS FOR GAPS

GAP 1 (Perception Gap) - not knowing what
customers expect
Lack of a marketing orientation
Inadequate upward communication (from
contact staff to management)
Too many levels of management

REASONS FOR GAPS

GAP 2 (Standards Gap) - the wrong

service quality standards
Inadequate commitment to service
quality
Lack of perception of feasibility - it
cannot be done
Inadequate task standardization
The absence of goal setting

REASONS FOR GAPS

GAP 3 (Control Gap) - the service

performance gap
Role ambiguity and role conflict - unsure of
what yourremit is and how it fits with others
Poor employee or technology fit - the wrong
person or system for the job
Inappropriate supervisory control or lack
ofperceived control - too much or too little
control
Lack of teamwork

REASONS FOR GAPS

GAP 4 (Communication Gap) - when

promises made do not match actual
delivery
Inadequate horizontal communication
between departments or services
A propensity to overpromise

REASONS FOR GAPS

GAP 5 (Expectation Gap) - when

experience does not match actual
expectations
Building wrong/too high/too many
expectations
Not understanding target customers
needs and value perceptions