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Marketing of Services
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.

6. No ownership: service consumers will have experiences but not


Differences between product & Services marketing

Physical goods 3. Goods are product in the

factory ( biscuits, beauty
1. Tangible products i.e., core value)

4. Production, distribution &

consumption are
independent functions.
2. Standardized or

1. Intangible :

a) Services cannot be stored or

inventoried, patented)

b) Services cannot be readily

displayed or communicated.

c) Pricing is difficult.

2. Heterogeneous: a) Service
delivery & customer satisfaction
7. It is a thing
depend on employee actions.
8. Customers do not participate
b) Service quality depends on
in production.
many uncontrollable factors.

c) There is no knowledge that the

service delivered matches what
Paradigms in Services
was planned & promoted.
3. Services are produced in buyer-
(Paradigms means examples)
seller interactions.
According to GATS (General
4. Production, distribution &
Agreement on Trade in Services)
consumption are simultaneous
155 activities are identified as
process. For eg. Making a call.
services & these are classified into
a) Customers affect each other. 11 major categories:-

b) Customers participate in & affect 1. Business services

the transaction.
2. Communication
c) Employees affect the service
3. Construction & engineering
4. Distribution
d) Decentralization may be
essential. 5. Education

e) Mass production is difficult. 6. Environment

7. Finance

8. Health

5. Non- perishable (can be

kept in stock or stored)
5. Perishable i.e. it cannot be

a) It is difficult to synchronize
supply & demand with services.
6. Transfer of ownership takes
place. b) Services cannot be returned or

6. Transfer of ownership does not

take place.

7. It is an activity or process.

8. Customers may or may not

participate in its production.

9. Tourism

10. Recreation

11. Transport

Classification of Services:
1. Judd (1964) : classified services on the basis of goods i.e., rented
goods services, owned goods services, non- goods services.

2. Rathmell (1974): type of selle, type of buyer, buying motives, buying

practice, degree of regulation.

3. Shostack (1977) Sasser et al (1978) : on the basis of proportion of

physical goods & intangible services contained within each product

4. Hill ( 1977) : on the basis of; a) Services affecting persons v/s those
affecting goods. B) Permanent v/s temporary effects of the service, c)
reversibility v/s non- reversibility of these effects. D) Physical effects
v/s mental effects. e) Individual v/s collective services.

5. Thomas(1978): primarily equipment based

6. Chase(1978): primarily people –based.

7. Kotler (1980): extent of customer contact required in service delivery.

i.e., high contact/s low contact.

8. Lovelock (1980): a) people based v/s equipment based.b) extent to

which client’s presence necessary, c) meets personal needs v/s
business needs, d) public v/s private, profit v/s non- profit,e) basic
demand characteristics, f) services content benefits, g) service delivery

9. Lovelock (1983): a) the nature of the service act, b) relationships with

customers, c) customization and judgment in service delivery, d)
nature of demand in relation to supply,e) methods of service delivery.

10. Schemnnet (1986): a) degree of interaction and customization, b)

degree of labour intensity.

11. Vandermerwe & Chadwick (1989): a) degree of consumer/ producer

interaction, b) Relative involvement of goods.

4.5 4.5 4.5


3.5 3.5
3 Most
2.5 2.5
1.5 y to
eva Y-Valu
1 1.5
luat y- valu
0.5 e
0 0

0 0 Difficult
0 0 0 0 Y-Values to

Figure 1 continuum of evaluation for different types of products

Importance of customer relationship management :

specific for service industry;
The services’ unique characteristics require different consumer
evaluation processes from those used in assessing goods. Recognizing these
differences and thoroughly understanding consumer evaluation processes
are critical for the customer focus on which effective services marketing is
based. The customer is the heart of effective services marketing. Consumers
have a more difficult time evaluating and choosing services than goods,
partly because services are intangible and non- standardized and partly
because consumption is so closely interwined with production. These

characteristics lead to differences in consumer evaluation processes for

goods & services in all stages of the buying process.

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

2. Consumers engage in greater post- purchase evaluation and

information seeking with services than with goods.

3. Consumers engage in more post- purchase evaluation than pre-

purchase evaluation when selecting & consuming services.

4. Consumers perceive greater risks when buying services than when

buying goods.

5. The consumers’ evoked set of alternatives is smaller with services than

with goods.

6. For many non- professional services, the consumers’ evoked set

frequently includes self- provision of the services.

7. Positive (negative) moods & emotions enhance (decrease) the

likelihood of performance of behavior with positive expected

8. Mood & emotion bias the customers’ evaluation of service encounters

in ‘mood- congruent” directions.

9. The mood of the customer influences the way impressions of a service

are encoded, retained & retrieved by the customer.

10. The greater the human interaction in the service encounter, the
more likely the consumer’s evaluation of the service will be influenced
by moods & emotions.

11. The delivery of a service can be conceived as drama where

service personal are the “actors”, service customers are the
“audience”, physical evidence of the service is the setting, and the
process of service assembly is the performance.

12. Service encounters can be viewed as role performances.


13. Negative departures from the customers’ expected script will

detract from the service performance.

14. Departures from the customer’s expected script, including

provision of more of an attribute than expected may detract from, or
add to, the service experience.

15. Customer compatibility is a factor that influences customer

satisfaction, particularly in high contract services.

16. Consumers attribute some of their dissatisfaction with servicesto

their own inability to specify or perform their part of the service.

17. Consumers may complain less frequently about services than

about goods due to their belief that they themselves are partly
responsible for their dissatisfaction.

18. Consumers adopt innovations in services more slowly than they

adopt innovations in goods.

19. Brand switching is less frequent with services than with products.

Service marketing system: Service

Quality means the degree of excellence in service performance. Consumers
perceive the quality of a service by experiencing the consumption process
and by comparing the experience with their expectations.

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.” by
Parasuraman, Zeithmal & Berry (1985).

Traditional perceived
marketing Quality
activities like:
Expected Perceiv
-Market communication perceived
service ed
- image quality

- word-of-mouth

-customer needs






Gaps Model of Service Quality Source

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

 The Customer Gap

 The Provider Gaps:


 Gap 1 – not knowing what customers expect

 Gap 2 – not having the right service designs and


 Gap 3 – not delivering to service standards

 Gap 4 – not matching performance to promises

 Putting It All Together: Closing the Gaps


SERVQUAL: For the purpose of measuring customer satisfaction

with respect to different aspects of service quality, a survey
instrument was developed BY Parasuraman, Ziethmal & Berry in
1988. The instrument is called SERVQUAL.

The basic assumption of the measurement was that customers

can evaluate a firms’ service quality by comparing their

perceptions with their expectations. SERVQUAL is applicable to all

service industries. The SERVQUAL scale includes 5 dimensions.
They are:
1. TANGIBLES - the appearance of physical facilities,
equipment, personnel and information material

2. RELIABILITY - the ability to perform the service accurately

and dependably

3. RESPONSIVENESS - the willingness to help customers and

provide a prompt service

4. ASSURANCE - a combination of the following

A) Competence - having the requisite skills and knowledge

B) Courtesy - politeness, respect, consideration and friendliness of

contact staff

c) Credibility - trustworthiness, believability and honesty of staff

d) Security - freedom from danger, risk or doubt

5. 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

Importance of SERVQUAL.

 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

 We can compare the expectations and perceptions of different

customer groups - this is particularly useful in the public sector

 We can assess the expectations and perceptions of internal customers

- 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


 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


Customer Expectations: are beliefs about service delivery that

function as standards or reference points against which performance is
judged. Customers’ expectations play a pivotal role in judging a company’s
service. Firms earn reputation for quality service by surpassing customer
expectations. Customers are the sole judges of service quality. 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.

– 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

• Consider a bank customer who wishes to cash a check in 3 minutes
( desired level)

• In the past, customers have waited for up to 10 minutes ( adequate


• 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.

• 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


• Adequate service level appears to move readily up and down – into

zone to tolerance

• 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


• 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)

• MSA & MSS score will determine a firm’s competitive position from a
service standpoint

Implications of understanding Consumer’s

• 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.e,. 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, Targeting & Positioning

Market segmentation is learning & defining who the organization wants to
have relationship with. “Market Segmentation is the dividing of
heterogeneous markets into segments. It should be ensured while
segmentation that each segment is homogeneous in all significant

Steps involved in segmenting & targeting services.

Step 1 Identify bases for segmenting the markets.

Step2 Develop profiles of resulting segments. SEARCH

Step3 Develop measuresof segment attractiveness


STEP 4 Select the target segments.


Step5 Ensure that segments are compatible


Bases for market segmentation:

1.Demographic segmentation

2. Geographic segmentation

3. Psychographic segmentation

4. Behavioural segmentation

5.Technographic segmentation

6.Customer profitability segmentation.

Requirements for effective Segmentation
1. Measurability





Criteria for evaluating market segments for market

1.Segment size & growth

2.segment structural attractiveness objectives & resources

There are 3 desirable alternatives for a service organization when selecting
a target market. They are:

1.undifferentiated market

Service marketing offer total markets (all


2. Differentiated markets

Service package 1 market segment 1

Service package 2 market segment 2

Service package n…. market segment n…………

3. Customization

Service package 1 customer 1

Service package 2 customer 2

Service package n…. customer n…………

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. In other words, positioning intends to influence the
perceptual process of consumers against a product or a service.

Positioning Strategies:
Service attribute, Service benefits, Service application positioning,
Service user positioning, Quality positioning, Price positioning, Leadership
positioning, Excellence positioning.