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Marketing of Services
Introduction
Definition of Services:
“A service is a ny act or performance 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.” By Phillip Kotler
&Bloom (1984).

Categories of service mix :
1. Pure tangible goods

2. Tangible good with accompanying services.

3. Hybrid

4. Major service with accompanying minor goods & services.

5. Pure services.

Characteristics of services:
1. Intangibility: Services are intangible. They cannot be seen, tasted, felt,
heard or smelt before they are bought unlike physical products.

2. Inseperability : Services cannot be seperated from the service
provider. In fact production, distribution & consumption of a servise
takes place simultaneously in buyer- seller interactions.

3. Variability: Services are highly variable. it is almost impossible to have
the same service from the same seller the second time. No two
customers can have exactly similar service even though they
experienceit simultaneously.

4. Perishability : Services perish. They cannot be stored.

5. Customer Participation: Service production is not a one – sided activity.
Customers are co- producers of services.

Intangible : a) Services cannot be stored or inventoried. Differences between product & Services marketing Physical goods 3.e. c) Pricing is difficult. 2. No ownership: service consumers will have experiences but not ownership. shampoo) Services 1. patented) b) Services cannot be readily displayed or communicated. Goods are product in the factory ( biscuits. distribution & consumption are independent functions. Production. beauty 1. Tangible products i. Standardized or homogeneous(soap. core value) 4.. . 2 6.

Environment 7. Finance 8. . Health 5. Transfer of ownership takes place. Making a call. b) Services cannot be returned or resold.perishable (can be kept in stock or stored) 5. c) There is no knowledge that the service delivered matches what Paradigms in Services was planned & promoted. distribution & Agreement on Trade in Services) consumption are simultaneous 155 activities are identified as process. Non. 6. Production. 2. Construction & engineering outcome. a) It is difficult to synchronize supply & demand with services. 4. According to GATS (General 4. 6. 3 2. many uncontrollable factors. Services are produced in buyer- (Paradigms means examples) seller interactions. 8. Perishable i. It is a thing depend on employee actions. Customers do not participate b) Service quality depends on in production. 11 major categories:- b) Customers participate in & affect 1. it cannot be stored. Communication c) Employees affect the service 3. For eg. Education e) Mass production is difficult. Heterogeneous: a) Service delivery & customer satisfaction 7. marketing 3.e. Business services the transaction. 5. services & these are classified into a) Customers affect each other. Distribution d) Decentralization may be essential.

Kotler (1980): extent of customer contact required in service delivery. e) Individual v/s collective services.. buying motives. D) Physical effects v/s mental effects. Recreation 11. 3. c) reversibility v/s non.reversibility of these effects. Tourism 10. i. Hill ( 1977) : on the basis of. 4. Chase(1978): primarily people –based. Judd (1964) : classified services on the basis of goods i. buying practice. Rathmell (1974): type of selle. type of buyer. Transfer of ownership does not take place. degree of regulation. Customers may or may not participate in its production. non. 9. 7. It is an activity or process. 7. Transport Classification of Services: 1.e. rented goods services.e. Thomas(1978): primarily equipment based 6. Shostack (1977) Sasser et al (1978) : on the basis of proportion of physical goods & intangible services contained within each product “package”. a) Services affecting persons v/s those affecting goods.. 2. 8. B) Permanent v/s temporary effects of the service. owned goods services. . high contact/s low contact.goods services. 4 6. 5.

e) basic demand characteristics. c) meets personal needs v/s business needs. Lovelock (1983): a) the nature of the service act. profit v/s non. 10. b) degree of labour intensity. f) services content benefits. .b) extent to which client’s presence necessary. d) nature of demand in relation to supply.profit. Lovelock (1980): a) people based v/s equipment based. b) relationships with customers. 5 8. c) customization and judgment in service delivery. Schemnnet (1986): a) degree of interaction and customization. b) Relative involvement of goods. d) public v/s private. 11.e) methods of service delivery. Vandermerwe & Chadwick (1989): a) degree of consumer/ producer interaction. g) service delivery procedures. 9.

5 y to eva Y-Valu 1 1.5 2.5 luat y.valu 0. Consumers have a more difficult time evaluating and choosing services than goods. partly because services are intangible and non.5 4. The customer is the heart of effective services marketing.5 3. These . Recognizing these differences and thoroughly understanding consumer evaluation processes are critical for the customer focus on which effective services marketing is based.5 4.5 4 3.5 2. The services’ unique characteristics require different consumer evaluation processes from those used in assessing goods.5 3. 6 4.5 3 Most Most goods services 2.5 2 Eas 1.5 e 0 0 0 0 Difficult 0 0 0 0 Y-Values to evaluate Figure 1 continuum of evaluation for different types of products Importance of customer relationship management : specific for service industry.standardized and partly because consumption is so closely interwined with production.

7.congruent” directions. 9. physical evidence of the service is the setting. Consumers engage in more post.provision of the services. The greater the human interaction in the service encounter. 11. 6. 12. The mood of the customer influences the way impressions of a service are encoded.professional services. 2. 4.purchase evaluation than pre- purchase evaluation when selecting & consuming services. 7 characteristics lead to differences in consumer evaluation processes for goods & services in all stages of the buying process. the consumers’ evoked set frequently includes self. 5. Consumers engage in greater post. Mood & emotion bias the customers’ evaluation of service encounters in ‘mood. service customers are the “audience”. . 10. Consumers perceive greater risks when buying services than when buying goods. The consumers’ evoked set of alternatives is smaller with services than with goods. The delivery of a service can be conceived as drama where service personal are the “actors”. and the process of service assembly is the performance. retained & retrieved by the customer. 3. For many non. Positive (negative) moods & emotions enhance (decrease) the likelihood of performance of behavior with positive expected outcomes. 8. Service encounters can be viewed as role performances. Some of the major differences are given by Zeitham & Bitner these are: 1. Consumers seek & rely more on information from personal sources than from non-personal sources when evaluating services before purchase.purchase evaluation and information seeking with services than with goods. the more likely the consumer’s evaluation of the service will be influenced by moods & emotions.

Consumers attribute some of their dissatisfaction with servicesto their own inability to specify or perform their part of the service. Customer compatibility is a factor that influences customer satisfaction. Zeithmal & Berry (1985). including provision of more of an attribute than expected may detract from. 8 13. Departures from the customer’s expected script. Brand switching is less frequent with services than with products. Negative departures from the customers’ expected script will detract from the service performance. Consumers perceive the quality of a service by experiencing the consumption process and by comparing the experience with their expectations.word-of-mouth -customer needs -PR -Advertising . Service marketing system: Service Quality Quality means the degree of excellence in service performance. 16. Consumers adopt innovations in services more slowly than they adopt innovations in goods.” by Parasuraman. Total Traditional perceived marketing Quality activities like: Total Expected Perceiv -Market communication perceived service ed service quality .image quality . or add to. Definition of Service Quality “ the degree and direction of discrepancy between consumers’ perceptions and expectations in terms of different but relatively important dimensions of the service quality which can affect their future purchasing behavior. 19. particularly in high contract services. the service experience. 15. 17. 14. Consumers may complain less frequently about services than about goods due to their belief that they themselves are partly responsible for their dissatisfaction. 18.

In common with the Grönroos model it shows the perception gap (Gap 5) and outlines contributory factors. 9 Image Functional quality (how) Technical quality (what) Gaps Model of Service Quality Source The figure below shows the "GAP" model of service quality from Parasuraman et al. It is based on substantial research amongst a number of service providers. In this case expected service is a function of word of mouth communication. This model offers an integrated view of the consumer-company relationship. and perceived service is a product of service delivery and external communications to consumers.  The Customer Gap  The Provider Gaps: . personal need and past experience. (Zithaml & Bitner 1996).

10  Gap 1 – not knowing what customers expect  Gap 2 – not having the right service designs and standards  Gap 3 – not delivering to service standards  Gap 4 – not matching performance to promises  Putting It All Together: Closing the Gaps .

Ziethmal & Berry in 1988. a survey instrument was developed BY Parasuraman. The instrument is called SERVQUAL. 11 SERVQUAL: For the purpose of measuring customer satisfaction with respect to different aspects of service quality. The basic assumption of the measurement was that customers can evaluate a firms’ service quality by comparing their .

the willingness to help customers and provide a prompt service 4.approachability and ease of contact – Communication . RESPONSIVENESS .politeness.a combination of the following: – Access (physical and social) . SERVQUAL is applicable to all service industries. consideration and friendliness of contact staff c) Credibility . TANGIBLES .  We can assess service quality from the customer’s perspective  We can track customer expectations and perceptions over time and the discrepancies between them  We can compare a set of Servqual scores against those of competitors or best practice examples . They are: 1. believability and honesty of staff d) Security . The SERVQUAL scale includes 5 dimensions. ASSURANCE .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 Importance of SERVQUAL. respect.having the requisite skills and knowledge B) Courtesy . equipment.trustworthiness. RELIABILITY . personnel and information material 2. 12 perceptions with their expectations. EMPATHY . risk or doubt 5.a combination of the following A) Competence .the appearance of physical facilities.the ability to perform the service accurately and dependably 3.freedom from danger.

eg other departments or services we deal with  We can use data on customer priorities to feed into the House of Quality (QFD)  Customer priorities and their ranked order of importance can become the WHATS  These WHATS can then be compared with the HOWS (key business processes) and relationships matched to check service design and provision according to key requirements Understanding Customer Expectations & Zone of Tolerance. 13  We can compare the expectations and perceptions of different customer groups . Customers’ expectations play a pivotal role in judging a company’s service. Customers are the sole judges of service quality. Firms earn reputation for quality service by surpassing customer expectations. Customer expectations has two parts: – What customers want to occur? – What customers believe will occur? • Two Levels of Expectations – A Desired Level: What a customer hopes to receive.this is particularly useful in the public sector  We can assess the expectations and perceptions of internal customers . – An Adequate Level: What the customer believes “can be” or “should be” • A zone of tolerance separates the desired level and what is deemed adequate • Performance level above the tolerance zone will surprise customers & increase loyalty . Customer Expectations: are beliefs about service delivery that function as standards or reference points against which performance is judged.

• Customers’ expectation levels are dynamic & fluctuate in response to a variety of factors • Desired level of service tends to change more slowly and in smaller amounts • Adequate service level appears to move readily up and down – into zone to tolerance . • Consider a bank customer who wishes to cash a check in 3 minutes ( desired level) • In the past. 14 ZONE OF TOLERANCE. customers have waited for up to 10 minutes ( adequate level) • The range between 3 minutes to 10 minutes is Range of Tolerance • Service time below3 minutes will thrill customers • Service time above 10 minutes will annoy customers Changes in customer’s expectation levels.

15 • Factors that influence customers’ expectation levels: – Enduring Service Intensifiers – Personal Needs – Transitory Service Intensifiers – Perceived Service Alternatives – Self-perceived Service Role – Explicit Service Promises – Implicit Service Promises – Past Experiences – Word of Mouth Communications • There is a gap between customer perceptions and customer expectations • Two potential service gaps must be assessed: – Gap between perceived & adequate service -called Measure of Service Adequacy(MSA) – Gap between perceived & desired service – called Measure of Service superiority (MSS) .

” Steps involved in segmenting & targeting services. Step2 Develop profiles of resulting segments.. “Market Segmentation is the dividing of heterogeneous markets into segments. Targeting & Positioning SEGMENTATION : Market segmentation is learning & defining who the organization wants to have relationship with. • Companies must perform above the adequate service level to gain competitive advantage • This however is a temporary advantage • Customers’ adequate service levels will raise rapidly when competitors deliver higher level of service • Companies performing in the region of competitive advantage can ill- afford complacency • Develop true customer franchise i. Unwavering customer loyalty by: • Exceeding the desired service level • Exceptional service will build strong customer loyalty • Constantly monitor customer expectations • Understand factors driving customer expectations • Continuously strive for service superiority Segmentation. It should be ensured while segmentation that each segment is homogeneous in all significant characteristics. SEARCH Step3 Develop measuresof segment attractiveness . 16 • MSA & MSS score will determine a firm’s competitive position from a service standpoint Implications of understanding Consumer’s expectations.e. Step 1 Identify bases for segmenting the markets.

Accessibility 3.segment structural attractiveness 3. Behavioural segmentation 5. Geographic segmentation 3.undifferentiated market .Technographic segmentation 6. They are: 1. 17 STEP 4 Select the target segments.Sustainability 4.Segment size & growth 2. Requirements for effective Segmentation 1.Customer profitability segmentation.Actionability 5. SELECT Step5 Ensure that segments are compatible STRATEGY Bases for market segmentation: 1.company objectives & resources TARGETING: There are 3 desirable alternatives for a service organization when selecting a target market. Psychographic segmentation 4.Demographic segmentation 2. Measurability 2.Differentiability Criteria for evaluating market segments for market targeting: 1.

Leadership positioning. 18 Service marketing offer total markets (all consumers) 2. market segment n………… 3. . Quality positioning. Service benefits. Customization Service package 1 customer 1 Service package 2 customer 2 Service package n…. Service application positioning. Positioning Strategies: Service attribute. Differentiated markets Service package 1 market segment 1 Service package 2 market segment 2 Service package n…. positioning intends to influence the perceptual process of consumers against a product or a service. Service user positioning. In other words. Excellence positioning. Price positioning. customer n………… SERVICE POSITIONING: Positioning means projecting the image of the product or service in such a way that consumers perceive its value distinctively from that of competitive offers.