19MMT506A - Services Marketing - Unit1

Course Code: 19MMT506A
Course Title: Services Marketing
Course Leader:
Prof H N Nagesha
E-mail: hnagesha.ms.mc@msruas.ac.in
1
Faculty of Management and Commerce © Ramaiah University of Applied Sciences
Unit1
Introduction to Services Marketing
• Perspectives on Marketing in the Service
Economy
• Principal Industries of the Service Sector
• Forces Transforming Service Markets
• Categories of Services
• Challenges of Services Marketing
• Traditional Marketing Mix Applied to Services
• The Extended Services Marketing Mix
2
Introduction
Marketing consists of activities designed to

generate and facilitate exchanges intended to
satisfy human or organisational needs or wants
3
Introduction
Evolution of Marketing:
Product-Orientation Stage “Make all you can”
1. Demand exceeds available supply
2. All that is made can be sold
3. Focus is on engineering and generating output, not the customer
4. Epitomized between late 1800s and early 1930s
“The American public can have any color car it wants so long as
it’s black.”
Henry Ford, referring to the Model T
4
Introduction
“Sell all you make”
Sales-Orientation Stage
1. Supply frequently exceeds demand
2. Focus is on promotion and pricing; objective is to sell all the
inventory
3. Hard-sell techniques create stereotype of pushy, annoying
salesperson
4. Epitomised between early 1930s and 1950s
5
Introduction
Market-Orientation Stage “Make what you can

sell”
1. Variety in markets, variety in products
2. Employs full marketing mix
3. Focus is on customer needs and satisfaction; profitability over
volume
4. Most typical current orientation
6
Introduction
“Make it together
with the customer”
Service Dominant Logic
1. Service industries gain more and more importance

2. Ideas generated in the service field spread to other sectors (like
industrial marketing, marketing for consumer goods, …)
3. “Intangible product features”
7
Objectives of Marketing
Marketing discipline follow three main objectives:
1. Customer satisfaction and (service) quality

2. Stimulation of market exchanges and customer
retention
3. Branding of services, products, and companies
8
1. Customer satisfaction and (service) quality
Delivered (perceived) Expected

service/product ≥ service/product*
 Customer satisfaction
Delivered (perceived) Expected

service/product < service/product*
 Customer dissatisfaction
* requires a “positive expectation”

9
2. Stimulation of market exchanges and

customer retention
Customer satisfaction is a main determinant for stable and
voluntary buying relationships
Compliance management plays an important role in
retaining customers
Stimulation of market exchanges and customer retention is
supported by a strong service/product/company brand
10
3. Branding of services, products, and companies
11
Services - Definition
Services
 Economic activities offered by one party to another
 Most commonly employ time-based performances to bring
about desired results in:
1. Recipients themselves
2. Objects or other assets for which purchasers have
responsibility
12
Defining Services
Services
• In exchange for their money, time, and effort,
service customers expect to obtain value from:
1. Access to goods, labour, facilities, environments, professional
skills, networks, and systems
2. But they do not normally take ownership of any of the
physical elements involved
13
Examples of Service Industries
Health Care Financial Services

Hospital, medical practice, Banking, investment
dentistry, eye care advising, insurance
Professional Services
Accounting, legal,
architectural
14
Examples of Service Industries
Hospitality Travel
Restaurant, hotel/motel, bed Airline, travel agency,
& breakfast, ski resort, rafting theme park
Others
Hair styling, pest control,
plumbing, lawn
maintenance, counseling
services, health club,
interior design
15
Importance of Services
16
 Consumers use services every day – listening to radio, watching

TVs, talking on the telephone, taking a bus, getting a haircut, etc,.
 Institutions offer library, cafeterias, counseling services,
placement facilities, bookstores, internet services, photocopying,
bank, post office, etc,
 Businesses offer wide array of services. Examples are – airlines,
banking, insurance, hotels, transportation, telecommunications,
tourism, courier, health care, etc
17
• Services Dominate Economy in Most Nations

• Most New Jobs are Generated by Services
 Fastest growth expected in knowledge-based industries
 Many new jobs are well-paid positions requiring good
educational qualifications
18
Changing Structure of Employment
Agriculture
Services
Industry
Time, per Capita

Source: IMF, 1997
Income
19
Contribution of Services Industries to Global GDP
20
Estimated Size of Service Sector in
Selected Countries
Indian services sector

Contributed to around 60
per cent in the GDP
during 2012-13
21
Contributions of Service Industries to U.S. GDP
Agriculture, Forestry,
Mining, Construction 8% Finance, Insurance,
Real Estate 20%
Manufacturing 14%
Wholesale and
Government Retail Trade 16%
(mostly services)13%
Transport, Utilities,
Other Services 11% Communications 8%
SERVICES
Business Services 5% Health Services 6%
22
US Labour Force by Industry (%)
23
US GDP Product by Industry (%)
24
Firms Focus on Services
• Services can provide higher profit margins and

growth potential than products
• Customer satisfaction and loyalty are driven by
service excellence
• Services can be used as a differentiation strategy
in competitive markets
25
Forces Driving Service Markets
26
Social Business Advances in
Changes Trends IT
Government
Globalization
Policies
● New markets and product categories
● Increase in demand for services
● More intense competition
Innovation in service products & delivery systems, stimulated by better
technology
Customers have more choices and exercise more power
Success hinges on:

● Understanding customers and competitors
● Viable business models
● Creation of value for customers and firm 27
Changes Trends IT
Government
Globalization
Policies
●Changes in regulations
●Privatization
●New rules to protect customers,
employees, and the environment
●New agreement on trade in services

28
Changes Trends IT
Government
Globalization
Policies
● Rising consumer expectations
● More affluence
● Personal Outsourcing
● Increased desire for buying experiences vs. things
● Rising consumer ownership of high tech equipment
● Easier access to more information
● Immigration
● Growing but aging population
29
Changes Trends IT
Government
Globalization
Policies
● Push to increase shareholder value
● Emphasis on productivity and cost savings
● Manufacturers add value through service and
sell services
● More strategic alliances

● Focus on quality and customer satisfaction
● Growth of franchising
● Marketing emphasis by nonprofits
30
Changes Trends IT
Government
Globalization
Policies
●Growth of Internet
●Greater bandwidth
●Compact mobile equipment
●Wireless networking
●Faster, more powerful software
●Digitization of text, graphics, audio, video
31
Changes Trends IT
Government
Globalization
Policies
●More companies operating on

transnational basis
●Increased international travel

●International mergers and alliances
●“Offshoring” of customer service
●Foreign competitors invade domestic
markets
32
What Are Services?
33
What are Services?
• Services involve a form of rental, offering

benefits without transfer of ownership
1. Include rental of goods
2. Marketing tasks for services differ from those
involved in selling goods and transferring ownership
34
What are Services?
• Types within non-ownership framework:

1. Rented goods services
2. Defined space and place rentals
3. Labour and expertise rentals
4. Access to shared physical environments
5. Systems and networks: access and usage
35
Rentals Vs Owning
• Implications of Renting Versus Owning
 Markets exist for renting durable goods rather than selling
 Renting portions of larger physical entity
 Example: office space, apartment
 Customers more closely engaged with service suppliers
 Time plays central role in most services
 Customer choice criteria may differ between rentals and

outright purchases
 Services offer opportunities for resource sharing

36
Goods v/s Services
Customers do not obtain ownership of services

Services are ephemeral and cannot be inventoried
Intangible elements dominate value creation
Customers may be involved in the process
Other people may form part of the product
There is greater variability in operational inputs and
outputs
37
Goods v/s Services
Many services are difficult for customers to evaluate

The time factor assumes great importance
Distribution channels take different forms
38
Characteristics of Services
Intangibility Heterogeneity
Simultaneous
Production
and Perishability
Consumption
39
Implications of Intangibility
• Services cannot be inventoried

• Services cannot be easily patented
• Services cannot be readily displayed or
communicated
• Pricing is difficult
40
Tangible Vs Intangible elements
Salt
Soft Drinks
CD Player
High Golf Club
New Car
Tailored clothing
Furniture rental
Fast food restaurant
Tangible Plumbing Repair
elements Office Cleaning
Health Club
Airline Flight
Retail Banking
Low
Insurance
Weather forecast
Low Intangible elements High

41
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
42
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
43
Implications of Perishability
• It is difficult to synchronize supply and

demand with services
• Services cannot be returned or resold
44
Trends in Services Marketing
45
Service - The Old View
• Service is a technical after-sale function that is provided

by the service department.
Old view of service = Old View: Service = wrench time

Customer Service Center
46
Service – The New View
• Service includes every interaction between any customer
and anyone representing the company, including:
Dealers
Web site and any
Salespeople
e-channel Interaction
Billing and Accounting

Customer Receptionists and
Personnel Schedulers
Management and
Service Employees Executives
47
Service Can Mean all of These
Service as a product Services as value add for goods
Customer service Service embedded in a

tangible product
48
Goods Companies Expanding into Services
Boeing Kodak
49
Faculty
©M. S. of
Ramaiah
Management
University
andofCommerce
Applied Sciences © Ramaiah University of Applied Sciences
Sectoral View of Service
Industry
50
Categorising Service Processes
Marketers need to understand the nature of processes to

which their customers may be exposed
Process – method of operation, - such as filling a car’s
tank with fuel or transporting a passenger in an
international flight
A process transforms an input into output
Process involve people and objects
51
Categories of Services
• Bases of categorization:
– Differences in nature of service act (tangible /intangible)
– Who or what is direct recipient of service (people
/possessions)
1. People Processing
2. Possession Processing
3. Mental Stimulus Processing
4. Information Processing
52
Categories Of Services
53
People Processing
 Customers must:
Physically enter the service factory
Co-operate actively with the service

operation
 Managers should think about process

and output from customer’s
perspective
To identify benefits created and non-
financial costs:
- Time, mental, physical effort

54
Possession Processing
 Customers are less physically

involved compared to people
processing services
 Involvement is limited
 Production and consumption are
separable
55
Mental Stimulus Processing
● Ethical standards required when

customers who depend on such
services can potentially be
manipulated by suppliers
● Physical presence of recipients

not required
● Core content of services is

information-based
Can be ‘inventoried’
56
Information Processing
 Information is the most intangible

form of service output,
 But may be transformed into
enduring forms of service output
 Line between information
processing and mental stimulus
processing may be blurred
57
Who or what is the direct recipient of the services?
People Possession
People processing Possession processing
Tangible Passenger transportation Freight transportation
Actions Health care Repair and maintenance
What is the nature of the service act?
Lodging Warehousing/ storage

Beauty saloons Office cleaning services
Fitness center Retail distribution
Restaurants / bars/ hotels Laundry and dry cleaning
Barbers Refueling
Funeral services Landscaping/ gardening
Physical therapy Disposal / recycling
Mental stimulus processing Information processing
Intangible Advertising / PR Accounting
actions Arts and entertainment Banking
Broadcasting / cable Data processing
Management consulting Data transmission
Education Insurance
Information services Legal service
Music concerts Programming
Psychotherapy Research
Religion Securities investment
Voice telephone Software consulting
58
Challenges Posed by Services
59
Services Marketing Challenges
i. Most service products cannot be inventoried

ii. Intangible elements usually dominate value creation
iii. Services are often difficult to visualize and understand
iv. Customers may be involved in co-production
v. People may be part of the service experience
vi. Operational inputs and outputs tend to vary more widely
vii.The time factor often assumes great importance
viii.Distribution may take place through nonphysical channels
60
Challenges of Service Marketing
1. In services, the benefits are created by actions or

performances
2. Services environment is dynamic
3. Services marketing require closer coordination between
marketers and managers responsible for operations and
human resources
4. Employees must be efficient and customer service
oriented
61
5. The service product must be tailored to customer needs,

priced realistically, distributed through convenient
channels, and actively promoted to customers
6. Marketing concepts and practices that have been
developed in marketing companies can not be directly
transferable to service organisations
62
7. The organisations must continually be aware of trends

in the size and structure of each market
8. Firms must monitor the competitors activities closely
63
Difference Implications Marketing-Related Tasks
 Use pricing, promotion, reservations

• Most service products  Customers may be turned
to smooth demand; work with
cannot be inventoried away
operations to manage capacity
 Emphasize physical clues, employ

• Intangible elements  Harder to evaluate service
metaphors and vivid images in
usually dominate value & distinguish from
advertising
creation competitors
• Services are often

 Greater risk & uncertainty  Educate customers on making good
difficult to visualize &
perceived choices; offer guarantees
understand
 Interaction between
 Customers may be  Develop user-friendly equipment,
customer & provider
involved in co- facilities & systems; train customers,
 Poor task execution could
Production provide good support
affect satisfaction 64
64
Difference Implications Marketing-Related Tasks
 Behavior of service  Recruit, train employees to reinforce

 People may be part of
personnel & customers service concept
service experience
can affect satisfaction  Shape customer behavior
 Operational inputs and  Hard to maintain quality,  Redesign for simplicity and failure
outputs tend to vary consistency, reliability proofing
more widely  Difficult to shield  Institute good service recovery
customers from failures procedures
 Time factor often  Time is money; customers
 Find ways to compete on speed of
assumes great want service at
delivery; offer extended hours
Importance convenient times
 Distribution may take  Electronic channels or

 Create user-friendly, secure websites
place through non- Voice
and free access by telephone
physical channels telecommunications
65
Service Marketing Mix
66
Traditional Marketing Mix
• All elements within the control of the firm that

communicate the firm’s capabilities and image to
customers or that influence customer satisfaction
with the firm’s product and services:
1. Product
2. Price
3. Place
4. Promotion
67
Services Marketing Mix- 7 Ps
1. Product
2. Price
3. Place
4. Promotion
5. Physical Environment
6. Process
7. People
68
Physical Environment: The environment in which:

 The service is delivered
 Where the firm and customer interact
 Any tangible components that facilitate
performance or communication of the service/s
69
Process:
 The actual procedures, mechanisms, and flow of
activities by which the service is delivered
 Includes service delivery and operating systems
70
People:
 All human actors who play a part in service
delivery and influence the buyer’s perceptions
 Example:
 The firm’s personnel
 The customer
 Other customers in the service environment
71
Product Elements
• Service products are at the heart of services marketing

strategy
• Marketing mix begins with creating service concept
that offers value
• Service product consists of core and supplementary
elements
 Core products meet primary needs
 Supplementary elements are value-added enhancements
72
Price and Other User Outlays
• Customer costs involve more than price paid to

seller
• Identify and minimize non-monetary costs incurred
by users:
i. Additional monetary costs associated with service usage (e.g.,
travel to service location, parking, phone, babysitting, etc.)
ii. Time expenditures, especially waiting
iii. Unwanted mental and physical effort
iv. Negative sensory experiences
73
Place and Time
• Service distribution can take place through

physical and non-physical channels
• Some firms can use electronic channels to deliver
all or some of their service elements
• Information-based services can be delivered
almost instantaneously electronically
• Delivery Decisions: Where, When, How
74
Place and Time
• Time is of great importance as customers are

physically present
• Convenience of place and time become
important determinants of effective service
delivery
75
Promotion and Education
• Plays three vital roles:

1. Provide information and advice
2. Persuades the target customers of merit of service
product or brand
3. Encourages customer to take action at specific time
76
Promotion and Education
• Customers may be involved in co-production:

1. Teach customer how to move effectively through
the service process
2. Shape customers’ roles and manage their
behavior”
77
Physical Environment
• Design services and provide tangible evidence of
service performances
• Create and maintain physical appearances
 Buildings/landscaping/Interior design/furnishings
 Vehicles/equipment
 Staff grooming/clothing
 Sounds, Smells and Other tangibles
• Manage physical cues carefully - can have

profound impact on customer impressions
78
Process
• How firm does things may be as important as

what it does
• Customers often actively involved in processes,
especially when acting as co-producers of
service
79
Process
• Operational inputs and outputs vary more

widely
– Quality and content varies among employees,
between employees
– Variations can be with different customers
– Variations from time of the day
80
Process
• Variability can be reduced by:

– Standardized procedures
– Implementing rigorous management of service quality
– Training employees more carefully
– Automating tasks
– Train employees in service recovery procedures
• Manage process design and “flow of customers”
81
People
• Interactions between customers and contact

personnel strongly influence customer perceptions
of service quality
• Well-managed firms devote special care to
selecting, training and motivating service
employees
• Other customers can also affect one’s satisfaction
with a service
82
References
– Lovelock, Wirtz and Chatterji (2013), Services

Marketing - People, Technology and strategy, 7th
Edition, Pearson Education
83
Disclaimer
• All data and content provided in this presentation

are taken from the reference books, internet –
websites and links, for informational purposes only.
84

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Course Code: 19MMT506A

Course Title: Services Marketing

Marketing consists of activities designed to

Market-Orientation Stage “Make what you can

1. Service industries gain more and more importance

Marketing discipline follow three main objectives:

1. Customer satisfaction and (service) quality

1. Customer satisfaction and (service) quality

Delivered (perceived) Expected

Delivered (perceived) Expected

* requires a “positive expectation”

2. Stimulation of market exchanges and

Health Care Financial Services

 Consumers use services every day – listening to radio, watching

• Services Dominate Economy in Most Nations

Time, per Capita

Indian services sector

• Services can provide higher profit margins and

Customers have more choices and exercise more power

Success hinges on:

●New agreement on trade in services

● More strategic alliances

●More companies operating on

●Increased international travel

• Services involve a form of rental, offering

• Types within non-ownership framework:

 Renting portions of larger physical entity

 Example: office space, apartment

 Customers more closely engaged with service suppliers

 Time plays central role in most services

 Customer choice criteria may differ between rentals and

 Services offer opportunities for resource sharing

Customers do not obtain ownership of services

Many services are difficult for customers to evaluate

• Services cannot be inventoried

Low Intangible elements High

• Service delivery and customer satisfaction depend

• It is difficult to synchronize supply and

• Service is a technical after-sale function that is provided

Old view of service = Old View: Service = wrench time

Billing and Accounting

Service as a product Services as value add for goods

Customer service Service embedded in a

Marketers need to understand the nature of processes to

Co-operate actively with the service

 Managers should think about process

- Time, mental, physical effort

 Customers are less physically

● Ethical standards required when

● Physical presence of recipients

● Core content of services is

 Information is the most intangible

Lodging Warehousing/ storage

i. Most service products cannot be inventoried

1. In services, the benefits are created by actions or

5. The service product must be tailored to customer needs,

7. The organisations must continually be aware of trends

 Use pricing, promotion, reservations

 Emphasize physical clues, employ

• Services are often

Difference Implications Marketing-Related Tasks

 Behavior of service  Recruit, train employees to reinforce

 Distribution may take  Electronic channels or