UNIT-1 INTRODUCTION TO S ERVICE MARKETING

1.MEANING
- In simple services are deeds, processes & performance.
- Services offered by IBM are not tangible things that cannot be touched, seen & felt but rather are intangible deeds &
performances.
- To be precise an ad agency offers advertising service, marketing consulting service, design & releasing and other
services for its clients. This work might result in tangible report, ads or a brochure. But for the most part, the entire
services is represented to client through problem analysis activities, meeting with clients, follow up calls and reporting-
a series of deeds, processes & performances.
- Similarly, the core offering of hospitals, hotels, banks & utilities primarily deeds & action performed for its customers.
- Defining service: “All economic activities whose output is not physical product or construction, is generally consumed
at the time it is produced and provides value added in forms (such as continence, amusement, timeliness, comfort or
health) that are essentially intangible concern for its first purchaser.”
- When we are studying Services Marketing one should understand about the meaning of Services Industries, Services as
Products, Customer Service & Derived Service.
 Services Industries & Companies: It includes those industries & companies typically classified within the services
sector whose core product is services. E.g.: Hotels (lodging), Airlines (Transportation), Banks (Financial Services),
Hospitals (Healthcare), Telecom (Communication) etc.
 Services As Products: It represent a wide range of intangible product offering that customer value & pay for in market
place. Service offering by services & non-services Companies example is IBM & Hewlett Pakard consulting service Vs.
FDS & Accenture.
 Customer Service: It is a critical aspect of what we mean by service. Customer service is service provided in support of
company’s core product in/directly.
 Derived Service: A new philosophy by Steve Vargo & Bob Lusch’s in Journal of Marketing that all good & product are
valued for the service they provide. Ex: PC for information & data manipulation, TV/VCD for entertainment, Vacuum
for Cleaning etc.

A Glance of Service sector in Nepalese Economy

Sector Percentage of Service
Percentage
in of Labor Force
Nepalese GDP in 2006Employed in different sector 2006
Agriculture38% 76 %

Industries 20% 6%

Service 42% 18%

Tangibility Spectrum

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2.IMPORTANCE OF SERVICE MARKETING
 Services based Economies
- Service industries are providing most of employment & GDP in most of countries.
- Another indicator of the economies importance of service is that trade in services is growing world wide.
- Even in Nepal service sector like tourism, healthcare, education, bank, consulting, manpower telecom, media etc. are
growing rapidly.
Country Percentage of GDP from service
USA 78.6
UK 73.4
Japan 73.1
Canada 68.5
India 60.7
China 40
 Services as business imperatives in Manufacturing & IT
- Early in the development of the field of services marketing & management came from service industries such as
banking, transportation & healthcare.
- Non-manufacturing & Technology industries such as automobile & software are also recognizing the need to provide
quality service & revenue producing service in order to have competitive edge.
- Ex: Electronics/ White goods: In-store Consulting, Maintenance & Performance Support, Financial Support etc.
 Deregulated Industries & Professional Service Need:
- Specific demand for services marketing concepts has come from the deregulated industries & professional services as
both these groups have gone through rapid changes in the ways than they do business.
- In past several large service industries such as airlines, banking, and communication are partially or totally freed by
government & transferred to individual firm.
- Providers of professional services (such as physicians, lawyers, accountant, engineers & architects) have also demanded
new concepts & approaches for their as these industries have become increasingly competitive & professional standards
have been modified to allow advertise.
 Service Marketing is Different
- Skills & experience is not directly transferable.
- More variable exists in the service marketing mix.
- Marketing & Operation are more closely linked because service production is part of marketing process.
- Customer interface is major difference.
 Service equals Profit
- Corporate strategies focused on customer satisfaction, revenue generation & service quality may actually be more
profitable than strategies focused on cost cutting strategies that attempt to do both simultaneously- Institute of
Marketing Science
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- “Service Profit Chain” linking internal service & employee satisfaction to customer value & ultimately profit through
customer satisfaction. – Harvard Business School
 But “Service Stinks”
- Customer perceives that overall the quality of services is declining.

3.Challenges in Services Marketing Due to Special Charecteristics

- Services are said to have four key characteristics which impact on marketing programs. These are:
 Intangibility
- Services are said to be intangible - they cannot be seen or tasted, for example.
- This can cause lack of confidence on the part of the consumer as was apparent earlier, in considering pricing and
services marketing, it is often difficult for the consumer to measure service value and quality.
- To overcome this, consumers tend to look for evidence of quality and other attributes, for example in the decor and
surroundings of the beauty salon, or from the qualifications and professional standing of the consultant.
 Inseparability
- Services are produced and consumed at the same time, unlike goods which may be manufactured, then stored for later
distribution.
- This means that the service provider becomes an integral part of the service itself.
- The waitress in the restaurant, or the cashier in the bank, is an inseparable part of the service offering.
- The client also participates to some extent in the service, and can affect the outcome of the service.
- People can be part of the service itself, and this can be an advantage for services marketers.
 Heterogeneity Invariability
- Because a service is produced and consumed simultaneously, and because individual people make up part of the service
offering, it can be argued that a service is always unique; it only exists once, and is never exactly repeated.
- This can give rise to concern about service quality and uniformity issues. Personnel training and careful monitoring of
customer satisfaction and feedback can help to maintain high standards.
 Perishability
- Services are perishable; they cannot be stored. Therefore an empty seat on a plane, for example, is a lost opportunity
forever.
- Restaurants are now charging for reservations which are not kept, charges may be made for missed appointments at the
dental clinic.
- Perishability does not pose too much of a problem when demand for a service is steady, but in times of unusually high
or low demand service organizations can have severe difficulties.

4.The Service Triangle & Services Marketing Mix

 The Service Triangle:
- Service marketing is about promise made & kept to customers.
- A strategic framework known as The Service Triangle Visually reinforces the importance of people in
the ability of firms to keep their promises & success in building customer relationships.
Firm
(MGMT)

Internal Marketing External Marketing

“Enabling Promise” “Making the Promise”

Employees Customers

Interactive Marketing
“Delivering Promise”

- The triangle shows the 3 interlinked groups that work together to develop, promote & deliver service.
- These key players are labeled on the points of triangle; the firm, the customers & the providers (employees).
- Providers can be the firms employees, sub contractors or out sourced entities who actually deliver the firms service.

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- To service to succeed 3 types of marketing should be carried out between 3 points of the triangle; external marketing,
interactive marketing & internal marketing.
- The external marketing efforts that the firm engages in to set up its customer expectations & make promises to customer
regarding what is to be delivered.
- Interactive marketing (real time marketing) where promises are kept/broken by the firm’s employees, sub-contractors or
agents.
- Internal marketing is the activities to aid providers in their ability to deliver on the service promise; recruiting, training.
Motivating, rewarding & providing equipment and technology.
- Unless service employees are able & willing to deliver on the promises made, the firm will not be successful & the
service triangle will collapse.

 Sewrvice Marketing Mix:

- Another way to begin addressing the challenges of services marketing is to think creatively about the marketing mix-
through an expanded marketing mix for services.
 Traditional marketing Mix
- One of the most basic concepts in marketing is the marketing mix, defined as the elements an organization controls that
can be used to satisfy or communicate with customers.
- The traditional marketing mix is composed of the four P's: product, price, place (distribution), and promotion.
- These elements appear as core decision variables in any marketing text or marketing plan. The notion of a mix implies
that all of the variables are interrelated and depend on each other to some extent.
- Further, the marketing mix philosophy implies that there is an optimal mix of the four factors for a given market
segment at a given point in time.
Product Place Promotion Price People Physical Evidence
Process
Physical good Channel Type Promotion BlendFlexibility Employees Facility Flow of
Features Exposure Sales force Price Level Customers Design Activities
Quality Level Intermediaries Advertising Terms Communicating Equipment No. of Steps
Accessories Outlet Location Sales PromotionDifferentiation Culture & Values Signage Level of Customer
Packaging Transportation Publicity Allowances Employee Dress Involvement
Warranties Storage Research Others
Product line
Branding
Overall Strategic Assessment Specific Service Implementation
How effective is firms Marketing mix Who is the customer & what is service
Is the mix well-aligned with overall vision How effectively does the services marketing
&strategy Mix for a service communicates its benefit
&quality
What are the strength & weakness in terms of What changes/improvement are needed
7 P’s
- Key strategy decision areas for each of the four P's are captured in the first four columns-in Table
- Careful management of product, place, Promotion and price will clearly also be essential to the successful marketing of
services.
- However, the strategies for the four P's require some modifications when applied to services.
- For example, traditionally promotion is thought of as involving decisions related to sales, advertising, sales promotions,
and publicity.
- In services, these factors arc also important, but because services - are produced and consumed simultaneously, service
delivery people (such as clerks, ticket-takers, nurses, phone personnel) are involved in "real-time" promotion of the
service "even if their jobs are typically defined in terms of the n service
- Pricing also becomes very complex in services where "unit costs" needed to calculate prices may be difficult to
determine, and where the customer frequently uses price as a cue to quality.
 Expanded mix for services
- Because services are usually produced and consumed simultaneously, customers are often present in the firm's factory,
interact directly with the firm's personnel, and are actually part of the service production process.

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- Also, because services are intangible customers will often be looking for any tangible cue to help them understand the
nature of the service experience. These facts have led services marketers to conclude that they can use additional
variables to communicate with and satisfy their customers. For example, in the hotel industry.
o People: All human actors who play part in service delivery & this influence the buyers’ perception namely firm’s
personal, the culture & other customs in service environment.
o Physical Evidence: The environment in which the service is delivered & where the firm & customer interact any
tangible components that facilitate performance that facilitate performance or communication of the service.
o Process: The actual procedure, mechanism & flow of the activities by which the service is delivered- the service
delivery operating system.

5.Goods Vs. Service Marketing

- There is general agreement that differences between goods & service exist and that the distinctive characteristic result in
challenges (as well as advantages) for managers of services
- Following are main differences between goods & services.
Goods Services Resulting Implication
Tangible Intangible Service cannot be inventoried.
Service cannot be easily patented.
Service cannot be readily displayed or Communicated.
Standardized Heterogeneous Pricing is difficult.
Service delivery & Customer satisfaction depends upon
employee & customer action.
Service quality depends on many uncontrollable factors
There is no sure knowledge that the service delivered
Matches what was planned & promoted.
Production Separate Simultaneous Production Consumers participate in and affect the transaction.
From Consumption & Consumption Customer affects each other.
Employees affect the service outcome.
Decentralization may be essential.
Mass production is difficult.
Non-perishable Perishable It is difficult to synchronize supply & demand with service.
Services cannot be returned & resold.