SERVICES MARKETING

1.

What are services? Categorize them.

INTRODUCTION:
The world economy is increasingly characterised as a
services economy. This is because of the increased
importance & the share of service sector in the economies of
most developed & developing countries. There has been a
rapid shift from agriculture to industry & then to the service
sector. The shift has brought about a change in the definition
of goods & services. Goods are no longer considered
separate from services but represent an integral part of the
product & this interconnectedness of goods & services is
represented on a goods-services continuum.
Definition & characteristics of services:
According to the American Marketing Association services is
defined as activities, benefits & satisfactions which are
offered for sale or provided in connection with the sale of
goods.
Services are deeds, processes &performances provided or co
produced by one entity or person for another entity or person.
eg: IBM Global leader in IT, services & consulting ;Intangible
deeds & performances are provided for its customers.
Services are all economic activities whose output is not a
physical product or construction. It is generally consumed at
the time it is produced & provides added value in forms such
as convenience ,amusement, timeliness, comfort or health
that are essentially intangible concerns of its first purchaser.
Service industries: Services as products, customer service &
derived service
Services-

4 categories

1. Service industry & company

2. Services as products
3. Customer service
4. Derived service
SERVICE INDUSTRIES & COMPANIES: Includes those
industries & Companies are typically classified within service
sector whose core product is a service.
PURE SERVICE COMPANIES: Taj palace hotels-lodging
Air India-transportation
Birla sunlife-Insurance & financial services
Fortis- healthcare
Columbia asia health care
SERVICES AS PRODUCTS:
Services as products represent a wide range of intangible
product offerings that customers pay for in the market place.
Service products are sold by service cos& non-service cos
such as manufacturing & technological cos .eg: IBM &HP
offer IT consulting services to the marketplace competing with
firms such as EDS, ACCENTURE, which are traditional pure
service firms.
CUSTOMER SERVICE:
It is also a critical aspect of what we mean by service. It is
the service provided in support of a companys core products.
Cos typically do not charge for customer service provided.
Many companies operate customer service call centers, often
staffed around the clock. Quality customer service is essential
to build customer relationships. It should not be confused with
services provided for sale by the company.
DERIVED SERVICE: The value derived from physical goods
is really the service provided by the good, not the good
itself.eg: Computers provide information.

MODULE-3
1)

Define

customer

expectations,

customer

satisfaction & customer delight. Should service

marketers delight their customers?
CUSTOMER EXPECTATIONS:
They are beliefs about service delivery that serve as
standards

or

reference

points

against

which

performance is judged. Customers are accustomed to

compare

their

perceptions

of

performance

with

reference points when they are evaluating service

quality. Therefore thorough knowledge about customers
expectations is critical to services marketing. A service
provider can deliver quality service only when he is
aware about customers expectations. If he gauges
customers expectations in a wrong way,then he is
bound to lose out in the competitive market & may incur
financial losses.
CUSTOMER SATISFACTION:
When the customer gets the desired treatment that he
expects from the service provider. eg: When you visit a
super market, you find the required product & also the
sales executives very pleasing &informative. You are
satisfied at the end of the purchase.
CUSTOMER DELIGHT:
As a customer you get value addition, something more
than you actually expect from the service provider
which is a desirable experience. eg: When you fly in
Emirates, you get a, call from them asking about your
choice of music & on the day of travel there is a
chauffeur driven car-limousine at your service, playing
your favourite music & all along you feel like a
queen/king with all this service. This is something more
you get beyond you expectation-customer delight.

2)

What is the difference between desired service &

adequate service? Why should a service marketer
understand both the services?
MEANING & TYPES OF SERVICE EXPECTATIONS:
Usually,

the

level

of

expectation

varies

widely

depending up on the reference point which the

customer holds. Lets imagine that we are planning to
dine in a restaurant.
Ideal expectations or desires- HIGH-Everyone

says

that this place has fantastic service philosophy & I want

to celebrate my birthday here.
NORMATIVE should EXPECTATIONS:HIGH-This is
quite an expensive restaurant & so food ought to be
good & service must be excellent.
EXPERIENCE BASED NORMS: ADEQUATE-Most of
the time, this place is good but when it gets busy the
service is slow.
ACCEPTABLE

EXPECTATIONS:

ADEQUATE-

expect this restaurant to serve me in a adequate way.

MINIMUM TOLERABLE EXPECTATIONS: LOW- I
expect terrible service from this restaurant but I have
come as the price is low.
CUSTOMER EXPECTATIONS:

Deeper & broader than requirement

Usually un stated

Drives all your intentions & decisions

Primary measure of your success

EXPECTATIONS OF SERVICE:
Desired service expectations are influenced by explicit service
promises,

implicit

service

promises,

word

of

mouth

communication & past experience.

SUB CATEGORIES OF SERVICE:
Restaurant-expensive, ethnic, fast food or airport-desired
expectations across categories of service i.e fast food
restaurant-quick convenient tasty food in a clean setting while
in an expensive restaurant-elegant surroundings, gracious
employees, candle light dinner, fine food.
3)

Explain zone of tolerance with examples.

ZONE OF TOLERANCE: Range or window in which
customers do not particularly notice service performance.
When it falls out of the range very high or low; the service
attracts the customers attention either in a positive or
negative way. eg: Service at a check out line in a grocery
store. If service consumes a period of 5 to 10 mins ,he may
grumble & look at the watch. The longer the wait is below the
zone of tolerance[10 min],the more frustrated he becomes.
Performance

basically

varies

across

providers,

across

employees from the same providers & even with the same
service employee.
The extent to which the customers recognise & are willing to
accept this variation is called as zone of tolerance.
This zone of tolerance can expand or contract for a given
customer. An airline customers zone of tolerance will narrow
when she is running late & she has to make the plane while
on the other hand, a customer who arrives at the airport early
may have a longer zone of tolerance, making the wait in line
far less noticeable, then when he is pressed for time.

 Different customers possess different zones of tolerance. Very

busy customers are time pressed & desire short waiting time.
eg: when it comes to having repair personnel or guy who
presses clothes, working women in particular have a more
restricted window of acceptable time duration for that
appointment than customers who work from home or the ones
who are homemakers.
An individual customers zone of tolerance increase or
decreases depending on a number of factors including
company controlled factors such as price. When there is
increase in price, customers are less tolerant of poor service.
Zone of tolerance vary for service dimensions. Customers
tolerance zones vary for different service attributes or
dimensions. Customers are likely to be less tolerant about
unreliable services[broken promises or service errors]than
other service deficiencies.
Desired service is relatively idiosyncratic & stable compared
with adequate service which moves up & down in response to
competition & other factors.
4.

Which

are

the

factors

that

influence

customers

expectations?
Factors that influence customers expectations of service
Personal needs
Lasting service intensifiers
1.

Personal needs are those states or conditions

essential to the physical or psychological wellbeing of
the customer. They are pivotal factors that decide what
the customers decide in service.
Personal needs can be categorised into four divisions:
o

Physical

Social

Psychological

Functional

A person who goes to a caf right after work expects

quick & efficient service as he is hungry & tired, while a
person who goes to chat with friends would wait longer
to get served as he comes there for entertainment
purpose.
2.

Lasting service intensifiers: They are individual

stable factors that lead the customer that lead the
customer to a heightened sensitivity to service. One of
the most important of these factors is1. Desired service
expectations ,which occur when customer expectations
are driven by another person or group of people. eg: A
parent choosing a vacation for the family-customers
individual expectation is intensified because they
represent & must answer to other parties who derive
the service.

3.

Personal

service

philosophy:

the

customers

underlying generic attitude about the meaning of

service & the proper conduct of service providers.
Customers who are themselves into service business
have strong service philosophies. eg:An air hostess
who is trained for ettiquecy will be well mannered &
courteous. She would expect similar treatment from
another person of the same job profile & her
expectations

from

the service

providers

will be

intensified.
5.

Which are the factors that influence adequate service?

Sources of adequate service expectations;
1.

Adequate service-is the level of service the customer

finds acceptable. These influences are short term &

tend to fluctuate more compared to desired service

expectations.
Factors that influence adequate service:
Temporary service intensifiers
Perceived service alternatives
Customer self perceived service role
Situational factors
Predicted service
Temporary service intensifiers: Personal emergency

situations where there is an urgent need for service eg:

accidents-need for automobile insurance
Perceived service alternatives: Other service providers
Customers self perceived service role: they specify the level
of service expected. eg:I want my dosa piping hot, nicely
roasted & golden in color
2)

PERCEIVED

SERVICE

ALTERNATIVES:

Other

providers from whom customers can obtain service. If

customers believe that they have multiple service
providers to choose from or if they can provide the
service for themselves, their levels of adequate service
are higher than those of customers who believe that it is
not possible to get better service anywhere.
3)

Customers self perceived service role: Customers

perceptions of the degree to which customers exert an
influence on the level of service they receive.

4)

SITUATIONAL FACTORS: Service performance that

many people conditions that customers view as beyond
the control of service provider. eg: catastrophes like
earthquakes which affect a large no of people-for
insurance companies ,customers service expectations

will reduce because people recognize that there are

inundated demands for their service.
6.

Which sources hold good for both desired & predictable

services?
SOURCES:
1)

EXPLICIT SERVICE PROMISES-They are personal &

non-personal statements about service made by the
organization to the customer. Statements are personal
when they are communicated by sales people or repair
personnel; they are non-personal when they come from
web pages ,advertising, brochures & other written
publications.

2)

IMPLICIT SERVICE PROVIDERS-service related cues

that lead to inferences about what these service should
& would be like. These quality cues are dominated by
price & tangibles associated with service.

3)

WORD OF THE-MOUTH COMMUNICATION-It is

unbiased. Influences both desired & predicted service.

4)

PAST EXPERIENCE-Customers previous exposure to

service that is relevant to the focal service, is another
force in shaping predictions & desires.

6.

How do we measure the quality of service in marketing?

Outline the importance of service quality in marketing
with relevant illustrations.
Quality in service is defined by the degree of compliance
between stated goals & achieved targets. It is easy to conform
to a standard. Because of intangibility factor, it is difficult to
understand service & comprehend it.

Perception of service quality is felt by all parties involved in a

service delivery process: service providers, customers &
suppliers. Quality can be viewed from multiple perspectives:
Product-based: Based on measurable parameters.
It is suitable for goods but is a challenge for services. The
number of times the telephone rings before the receiver is
picked up by a service provider can be a basis of measuring
service quality.
IMPORTANCE OF QUALITY IN SERVICE:

Lower costs-Quality control processes lower cost &

increase productivity.

Immune or less vulnerable to price wars: High

quality services have higher price. eg: Bose music
systems.

Higher customer loyalty: SQ ensures customer

satisfaction that drives customer loyalty & enhanced
profits.

Higher market share: loyal customers contribute to

positive word of-mouth publicity.

Higher ROI-High quality service contributes to higher

profitability. eg: Apple

QUALITY IN SERVICE :

The measurement & assessment of service quality is

very challenging owing to the intangibility factor.

Quality can be viewed on following basis:

Product based-The no of times a phone rings before its

attended by service provider can be a basis of
measuring responsiveness.

User based: Quality is in the eyes of the beholder.

TYPES OF SERVICE QUALITY:

MANUFACTURING BASED

Conformance based

Output is considered to be of high quality if it conforms

to design specifications.

VALUE BASED: Service provider must strike a balance

between conformance & performance.

Transcendental: Quality can only be experienced;

cannot be described or documented. eg: tourism

Sub categories:

Internal service quality: conformance & compliance to

design standards.

7.

External quality: it is customers perception

Service dimensions are determinants of service quality &

performance. Justify.

The various service dimensions are:

Eight dimensions were identified by David. A. Garvin.

PERFORMANCE

FEATURES

RELIABILITY

CONFORMANCE-Delivery

quality

meeting

design

standards.

SERVICABILITY-behavioral dimension; politeness

AESTHETICS-external appearance

PERCEIVED QUALITY

Eg: When we consider the case of The Mumbai

dabbawalahs,we understand their commitment towards
their work which was 99.99% accurate. Their work
culture is amazing where they give importance to
delivering quality products that are inexpensive thats
affordable by the common man & are punctual, reliable
& conform with quality standards (six sigma)qualifying
all the service dimensions, thus set an example that
working in teams is effective to implement their action
plan.

8.

What

are the challenges posed by service

industry?
Main challenges are:
Intangibility factor.
Service marketers are faced with the need to provide
value to consumers based on intangibles that can be
difficult to quantify and deliver. Increasingly, consumers
are requiring higher and higher levels of service and
more convenient access to information. With tangible
products, consistency can be maintained more readily
and quality can be monitored and impacted.
In service industries, the number of people or touchpoints involved in the delivery process and the
inconsistencies in human behaviors and actions make
maintaining quality and brand consistency an ongoing
challenge.
Ultimately past experience given by the service provider plays
a vital role in making future decisions regarding consumption
of the service repeatedly from the same service provider.

Innovation in service is also expected by youth centric

customers

that

poses

challenge

in

services

marketing.

The profit a customer is expected to

generate while he maintains a relationship with the

company.

CUSTOMER RELATIONSHIP MANAGEMENT:

1)

Why marketing concepts & philosophies are premises for

developing a CRM system?
CRM consists of three components; customer, relationship &
management.
Customer: The customer is the only source of companys
present profit & future growth. A good customer who provides
more profit with less resource is scarce because customers are
knowledgeable & the competition is fierce. CRM can be thought
as a marketing approach that is based on customer information.
Relationship: The relationship between a company & its
customers involves continuous bidirectional communication &
interaction. The relationship can be short term or long term
continuous or discrete, repeating or one-time. It can be attitudinal
or behavioural. Customers may have positive attitude towards
the company & its products but their buying behaviour is highly
situational.
Management: It is not only a marketing activity but also involves
continuous corporate change in culture & processes. CRM
requires a comprehensive change in the organisation & its
people.
CRM extends itself from customer acquisition to customer
retention to customer delight. The important steps are:
1)

Identifying the right customer:

Right customer segmentation. The segmentation criteria
must change needs to changer from conventional
demographic/psychographic segmentation to need based
behavioural segmentation. This will need to right definition
of the right target customer. Consumer behavioural
variables are more relevant & actionable & can help in

right targeting. Hence marketers can develop sustainable

business models & can differentiate themselves from
others

by

using

high-level

consumer

behavioural

variables.
2)

Retaining the right customer:

It is v. important to measure customer profitability.
ROC (return on customers) should be calculated on three
dimensions that are Frequency of customer purchase,
Value per transaction, Profitability. The customers who are
low on all these dimensions need least focus. The
customers scoring high on all these three need maximum
focus. The customers lying between these two extremes
need to be carefully analyzed to decide the degree of
focus required for each of the segments.
Marketers need to lay down systems & processes to keep
track of these dimensions. Identification & sizing of these
clusters can help develop right strategies of each
customer group.

3)

Delighting

the customer:

Marketers need to develop strong value prepositions in

terms of better products & better services so that
strategies are not only consumer-centric but also lead to
high profitability. Pleasing the customers should not be at
the cost of hurting the company.
The CRM BUSINESS CYCLE:
Acquire & retain
Understand & differentiate
Develop & customize
Interact & deliver
1)

Acquisition & retaining: Acquisition is a vital stage in

building customer relationship. For the purpose of
customer acquisition, an organization is likely to focus its
attention on prospects, enquiries, lapsed customers,

former customers, competitors customers referrals & the

existing buyers.
2)

Understand & differentiate: Organizations cannot have

a relationship with customers unless they understand
them, find out what they value, what type of services are
important to them, how & when they like to interact & what
they want to buy. They should involve in these activities.

3)

Develop & customize: Service provider should also cater

to the nische segment by customizing service to their
requirements.
eg:.

Dell has a service philosophy wherein the customer

specifies his configuration to the service provider & the

same is delivered in 21 days.
4)

Interact & deliver: Sales personnel must be pleasant

with customers & offer them information relevant to the
product or service provided; deliver desired service on
time avoiding delays & deficiencies in service
performance.

PRINCIPLES OF CRM:

Treat customers individually.

Acquire & retain customer loyalty through personal

relationship.
Select Good customers instead of Bad customers based
on life time value

EVOLUTION OF CRM:

Customers as strangers

Customers as acquaintances

Customers as friends

Customers as partners.

RELATIONSHIP CHALLENGES:

The customer is not always right.

The wrong segment

Not profitable in the long run

Difficult customers-dysfunctional customers

Ending business relationships

SHOULD FIRMS FIRE THEIR CUSTOMERS?

LIFETIME VALUE OF A CUSTOMER: The profit a customer is
expected to generate while he maintains a relationship with the
company.