Module – 1

Services Marketing
Ms. Archana Vijay

Topics to be covered :
Introduction to services : Reasons for the growth of services sector and its contribution, difference
in goods and service marketing, characteristics of services, concept of service marketing triangle,
service marketing mix, GAP models of service quality.
Consumer behaviour in services, Search, experience and credence property, consumer expectations
of services, two levels of expectation, Zone of tolerance, Factors influencing customer expectation of
services.
Customer perception of services, Factors influencing customers perception of service, Service
encounters, Customer satisfaction, Strategies for influencing customer perception

Reasons for the growth of services sector and its contribution

• Growth in upper income families : Demand for services is on the rise with a stable middle
class and growth in upper-income families. A sector of the economy becoming less
concerned about material needs. In the consumer sector, this leads to increasing demand
for services such as health, education and entertainment.
• Increased Rate of Digitalization : The digital world has also opened the door to more service
based growth with disruptive based technology and the ability to operate a business with
location independence. The local economy is no longer a limiting factor and businesses take
their services online and offer them to a larger audience.
• Technological shift : Technology is driving major shifts in the service sector as well with
traditional roles like taxi services being replaced by Lyft, Uber and other options that
connect a large, part-time workforce to a specific market. Airbnb opened the rental market
to individual property owners by cutting out management companies and placing a large
audience directly in touch with owners.
• Rapid urbanization : Rapid rate of urbanization has also led to the growth of service sector.
Banking, Insurance, Legal services, Salon services, IT services, e-commerce are being used
prominently in urban areas.
• Expansion of the private sector : As the private sector is expanding, there is increased
inclination of service oriented firms like restaurants, salons, fitness centres etc.
• Increased demand for intermediate and final consumer services : There is a high demand of
consumer services.
• Access to efficient services has become crucial for the productivity and competitiveness of
the entire economy.

Contribution of service sector

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 • In June 2021, India's exports increased by 48.34% to US$ 32.5 billion, marking the seventh
consecutive month of growth.
• The Indian services sector was the largest recipient of FDI inflows worth US$ 88.95 billion
between April 2000 and June 2021. The services category ranked 1st in FDI inflow as per
data released by the Department for Promotion of Industry and Internal Trade (DPIIT).
• In the first-half of 2021, private equity investments in India stood at US$ 11.82 billion, as
compared with US$ 5.43 billion in the same period last year.
• In August 2021, the Department of Telecommunications (DoT) issued a letter of intent (LoI)
to OneWeb (backed by Bharti Group) for satellite communication services licence.
• In July 2021, Tata Teleservices collaborated with Zoom Video Communications to offer
bundled communication services.
• In April 2021, the Ministry of Education (MoE) and University Grants Commission (UGC)
started a series of online interactions with stakeholders to streamline forms and processes
to reduce compliance burden in the higher education sector, as a follow-up to the
government’s focus on ease of doing business to enable ease of living for stakeholders.
• By October 2021, the Health Ministry’s eSanjeevani telemedicine service, crossed 14
million (1.4 crore) teleconsultations since its launch, enabling patient-to-doctor
consultations, from the confines of their home, and doctor-to-doctor consultations.
• In April 2021, Elon Musk’s SpaceX has started accepting pre-orders for the beta version of
its Starlink satellite internet service in India for a fully refundable deposit of US$ 99.
Currently, the Department of Telecommunications (DoT) is screening the move and more
developments will be unveiled soon.
• In December 2020, a cohort of six health-tech start-ups—AarogyaAI, BrainSightAI, Fluid AI,
InMed Prognostics, Wellthy Therapeutics, and Onward Assist—have been selected by the
India Edison Accelerator, fuelled by GE Healthcare. India Edison Accelerator, the
company's first start-up partnership programme focused on Indian mentors, creates
strategic partners to co-develop healthcare solutions.

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 • The Indian healthcare industry is expected to shift digitally enabled remote consultations
via teleconsultation. The telemedicine market in India is expected to increase at a CAGR of
31% from 2020 to 2025.
• In December 2020, Gamma Skills Automation Training introduced a unique robotics &
automation career launch programme for engineers, an ‘Industry 4.0 Hands-on Skill
Learning Centre’ located at IMT Manesar, Gurgaon in Haryana.
• In December 2020, the 'IGnITE’ programme was initiated by Siemens, BMZ and MSDE to
encourage high-quality training and technical education. 'IGnITE' aims to develop highly
trained technicians, with an emphasis on getting them ready for the industry and future,
based on the German Dual Vocational Educational Training (DVET) model. By 2024, this
programme aims to upskill ~40,000 employees.
• In October 2020, Bharti Airtel entered cloud communications market with the launch of
business-centric ‘Airtel IQ’.

Difference in Goods and Service Marketing

Goods Marketing Service Marketing

Meaning Product marketing refers to the Service marketing implies the
process in which the marketing marketing of economic
activities are aligned to activities, offered by the
promote and sell a specific business to its clients for
product for a particular adequate consideration.
segment.
Marketing mix 4 P’s Product, Price, Place, 7 P’s Product, Price, Place,
Promotion Promotion, People, Process,
Physical evidence.
Sells Value Relationship
Who comes to whom? Products come to customers Customers come to Service
Transfer It can be owned and resold to It is neither owned nor
another party. transferred to another party.
Returnability Products can be returned. Services cannot be returned
after they are rendered.
Tangibility They are tangible, so customer They are intangible, so it is
can see and touch it, before difficult to promote services.
coming to the buying decision.
Separability Product and the company Service cannot be separated
producing it, are separable. from its provider.
Customisation Products cannot be customised Services vary from person to
as per requirements. person, they can be
customised.
Imagery They are imagery and hence, They are non-imagery and do
receive quick response from not receive quick response
customers. from customers.
Quality comparison Quality of a product can be Quality of service is not
easily measured. measurable.

Characteristics of services

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1. Perishability:
Service is highly perishable and time element has great significance in service marketing.
Service if not used in time is lost forever. Service cannot be stored.

2. Intangibility:
Unlike product, service cannot be touched or sensed, tested or felt before they are availed. A service
is an abstract phenomenon.
3. Inseparability:
Personal service cannot be separated from the individual and some personalised services are created
and consumed simultaneously
For example hair cut is not possible without the presence of an individual. A doctor can only treat
when his patient is present.
4. Heterogeneity:
The features of service by a provider cannot be uniform or standardised. A Doctor can charge much
higher fee to a rich client and take much low from a poor patient. At the same time, there can be
variations in the hair cutting services provided by an hair expert.
5. Lack of ownership :
There is no ownership being owned by the consumers in case of services. A customer when comes out
of an amusement park does not own anything inspite of spending money.

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6. User participation :
User participation is very important in services as the outcome of services is based on the collaborative
efforts of the provider and the customer.

Concept of Service Marketing Triangle

The service marketing triangle can also be used to market the service to consumers. The marketing
completely depends on the interaction going on between the customer and the service provider.
1) Company to Customers

One of the critical thing is to communicate the service strategy to the customers. Most of the E-
commerce companies are nowadays employed in convincing the customers to buy from their portal
only. For this buying, they are communicating various service advantages which the customers have.

Communication of the service strategy to customers is important to build the trust of customers and
hence to convert the customers to be loyal to the company.

2) Company to employees

Another important relationship in the service triangle is that between the company and the
employees. Imagine an Airline where the flight attendants themselves are frustrated with the
company. You, as a customer, will land up with the poorest services.

Hence, training employees, building value and trust, and empowering employees are some of the ways
that the company can make their employees a positive influencing force for the customers.

3) The most important relationship in the service triangle – Employee to Customers

The employee to customer interaction is also known as the “moment of truth” or “critical incidents”.
A single customer can become dissatisfied with the way the employee treated him. Or that single

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customer can buy a lot of material from the same store, because the employee treated him or her like
a king or queen.

That’s the difference your employees can create when they interact with customers. There are
companies which are high in the customer satisfaction index, just because their employees are well-
trained and are empowered to take their own decisions. More importantly, these employees are
ingrained with the habit that “Customer is king”.

Once your employees starts treating the customer as if they are really king, the whole service triangle
gets completed, and you will get the best results from all processes employed.

Service Marketing Mix

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Service marketing mix refers to the combination of marketing activities an organization engages in
to promote and sell intangible services, as opposed to tangible products. In addition to the four Ps
of traditional product marketing — product, price, place and promotion — the services marketing
mix includes the three Ps of service marketing: people, process and physical evidence. The services
marketing mix is also referred to as the extended marketing mix.

• Product refers to the tangible and intangible benefits of a product or service, and how it
meets customers' needs.
• Price refers to the appropriateness of the pricing structure of a product or service.
• Place refers to the availability to customers of a product or service.
• Promotion refers to efforts to make a target audience aware of a product or service.

Businesses which are marketing services also use the four Ps in their promotional efforts. However,
they also need some service-specific techniques to persuade potential customers of the value of
their offering. These elements of service marketing are known as the three
Ps: people, process and physical evidence.

People in the Service Mix

Unlike products, which are consumed independently from the individuals responsible for creating
them, people play an integral role in the consumption of services. Customer satisfaction for services
consumption is based upon the quality of interactions with the personnel who provide the service.
In addition to skills and knowledge relative to the provision of services, services personnel must also
have an aptitude for interpersonal communication.

Process Used by the Organization

Process refers to the systems an organization implements in order to facilitate the delivery of
services. Efficient and effective processes allow service delivery personnel to anticipate customer
needs, identify and implement appropriate solutions, and respond to customer feedback in order
to improve service delivery. Service delivery processes can improve customer satisfaction, increase
customer retention, and increase the value of a service offering.

Physical Evidence or Environment

Physical evidence refers to the tangible and intangible elements that comprise the environment in
which services are delivered. Tangible aspects of service delivery are the physical elements of the
service environment that influence customer opinions about the overall service. For example, a
clean and comfortable restaurant interior can improve customers' perceptions of the dining
experience. Intangible aspects of service delivery — such as reputation and the opinion's of other
customers — are the immaterial elements of service marketing that influence customer
perceptions.

GAP Models of Service Quality

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The GAP Model of Service quality helps to identify the gaps between the perceived service and the
expected service. Five Gaps occur in the Service Delivery Process. They are:
• The gap between Customer Expectation and Management Perception
• The gap between Service Quality Specification and Management Perception
• The gap between Service Quality Specification and Service Delivery
• The gap between Service Delivery and External Communication
• The gap between the Expected Service and Experienced Service.

GAP 1: Gap between Management Perception and Customer Expectation

This gap arises when the management or service provider does not correctly analyze what the
customer wants or needs. It also arises due to insufficient communication between contact employees
and managers. There is a lack of market segmentation. This Gap occurs due to insufficient market
research. For Instance- A café owner may think that the consumer wants a better ambience in the
café, but the consumer is more concerned about the coffee and food they serve.

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GAP 2: Gap between Service Quality Specification and Management Perception
This gap arises when the management or service provider might correctly comprehend what the
customer requires, but may not set a performance standard. It can be due to poor service design,
Inappropriate Physical evidence, Unsystematic new service Development process.
An example would be restaurant Managers who may tell the waiters to provide the order of the
consumer quick, but do not specify “How Quick”.

GAP 3: Gap between Service Quality Specification and Service Delivery

This gap may arise in situations existing to the service personnel. It may occur due to improper
training, incapability or unwillingness to meet the set service standards. It can be due to inappropriate
evaluation and compensation systems. Ineffective Recruitment is the main cause of this gap.
The failure to match the supply and demand can create this gap. There is also a lack of empowerment,
Perceived Control, and framework. An example would be a restaurant having very specific standards
of the food communicated but the restaurant staff may not be given proper instruction as to how to
follow these standards.

GAP 4: Gap between External Communication and Service Delivery

Consumer Expectations are highly influenced by the statements made by the company
representatives and advertisements. This gap arises when these assumed expectations are not fulfilled
at the time of Delivery of Service.
An example would be a restaurant that has printed on its menu that it serves 100% Vegetarian Food
but in reality, it serves Non-Vegetarian Food as well. In this situation, consumer expectations are not
met.

GAP 5: Gap between Experienced Service and Expected Service

This gap arises when the consumer misunderstands the service quality. For Instance, A Restaurant
Manager may keep visiting their consumer to ensure quality check and consumer satisfaction, but the
consumer may interpret this as an indication that something is fishy or there is something wrong in
the service provided by the restaurant staff.

Consumer Behaviour in Services : Search, Experience and Credence Property

Economists and marketers use of the Search, Experience, Credence (SEC) classification of goods and
services, which is based on the ease or difficulty with which consumers can evaluate or obtain
information. These days most economics and marketers treat the three classes of goods as a
continuum. Archetypal goods are:

• Search goods: those with attributes that can be evaluated prior to purchase or
consumption. Consumers rely on prior experience, direct product inspection and other
information search activities to locate information that assists in the evaluation process.
Most products fall into the search goods category (e.g. clothing, office stationery, home
furnishings).
• Experience goods: those that can be accurately evaluated only after the product has been
purchased and experienced. Many personal services fall into this category (e.g.
restaurant, hairdresser, beauty salon, theme park, travel, holiday).
• Credence goods: those that are difficult or impossible to evaluate even after consumption
has occurred. Evaluation difficulties may arise because the consumer lacks the knowledge
or technical expertise to make a realistic evaluation or, alternatively because the cost of
information-acquisition may outweigh the value of the information available. Many
professional services fall into this category (e.g. accountant, legal services, medical
diagnosis/treatment, cosmetic surgery)

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Consumer expectation of services

Customers' service expectations have two levels: desired and adequate. The desired service level is
the service the customer hopes to receive. It is a blend of what the customer believes “can be” and
“should be.” The adequate service level is that which the customer finds acceptable.
A) Desired Service Level: Level of performance customers want or hope to receive from a
service. Desired service is a blend of what the customer believes “can be” and “should be”.
For instance, a student in a MBA college desires the right job in the right place for the right
salary from the placement team.

B) Adequate Service Level: Minimum level of service a consumer will tolerate and accept
without being dissatisfied. For instance, during the time of recession, many postgraduate
students during the time of recession accepted entry level jobs at low salary as the economic
condition was not good. Their standard of adequate service gone down during that time.

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 C) Zone of Tolerance: Area between the adequate level of service and the desired level of
service.

D) Predicted Service Level: Level of service consumers actually expect from the service firm.

Zone of Tolerance
The zone of tolerance is a range of service performance that a customer considers
satisfactory. A performance below the tolerance zone will engender customer frustration and
decrease customer loyalty. A performance level above the tolerance zone will pleasantly
surprise customers and strengthen their loyalty.

Factors influencing customer expectation of services

1. Explicit service promises:

Explicit service promises are personal and non-personal statements about the service made by the
organization to customers. The statements are personal when they are communicated by salespeople
or service or repair personnel; they are non-personal when they come from advertising, brochures,
and other written publications. Explicit service promises are one of the few influences on expectations
that are completely in the control of service provider.
Promising exactly what will ultimately be delivered would seem a logical and appropriate way to
manage customer expectations and ensure that reality fits the promises. However, companies and the
personnel who represent them often deliberately overpromise to obtain business or inadvertently
overpromise by stating their best estimates about delivery of a service in the future.

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Explicit service promises influence both the levels of desired service and predicted service: They shape
what customers desire in general as well as what they predict will happen in the next service
encounter from a particular service provider or in a certain service encounter.

2. Implicit service promises:

Implicit service promises are service-related cues other than explicit promises that lead to inferences
about what the service should and will be like. These quality cues are dominated by price and the
tangibles associated with the service.
In general, the higher the price and the more impressive the tangibles, the more a customer will expect
from the service. Consider a customer who shops for insurance, finding two firms charging radically
different prices.
She may make the inference that the firm with the higher price should and will provide higher quality
service and better coverage. Similarly, a customer who stays at a posh hotel is likely to desire and
predict a higher standard of service than from a hotel with less impressive facilities.

3. The word-of-mouth communication:

The importance of word-of-mouth communication is shaping expectations of service is well
documented. These personal and sometimes non-personal statements made by parties other than
the organization convey to customers what the service will be like and influence both predicted and
desired service.
Word of mouth tends to be very important in services that are difficult to evaluate before purchase
and direct experience of them. Experts (including consumer Reports, friends and family) are also word-
of-mouth sources that can affect the levels of desired and predicted service.

4. Past experience:
The customer’s previous exposure to service that is relevant to the focal service, is another force in
shaping predictions and desires. The service relevant for prediction can be previous exposure to the
focal firm’s service.
For example, you probably compare each stay in a particular hotel with all previous stays in that hotel.
But past experience with the focal hotel is likely to be a very limited view of your past experience. You
may also compare each stay with your experiences in the other hotels and hotel chains.
Customers also compare across industries: hospital patients, for example, compare hospital stays
against the standards set by telephone service, one reason why cable service is often judged to be
poor. In a general sense, past experience may incorporate previous experience with the focal brand,
typical performance of a favorite brand, experience with the brand last purchased or the top-selling
brand, as well as the average performance a customer believes represents a group of similar brands.

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Factors influencing customer perception of services
• Customer reviews. Ninety-three percent of customers read online reviews before purchasing.
• Marketing. It's likely not a big surprise that the way you showcase your brand through
marketing has a big impact on how customers perceive you. ...
• Company values – Company values of trust, honesty and integrity affects the customer
perception
• Product / Service quality : Based on SERVQUAL Model
• Product / Service attributes and features : The attributes and features of the product
• Consumer Emotions : Emotions of the customers affect the customer perception.
• Equity /fairness evaluations : The fairness of evaluations about the product.

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SERVQUAL

SERVQUAL is based on a set of five dimensions which have been consistently ranked by customers to
be most important for service quality, regardless of service industry. These dimensions defined by
the SERVQUAL measurement instrument are as follows:

• Tangibles: appearance of physical facilities, equipment, personnel, and communication

materials.
• Reliability: ability to perform the promised service dependably and accurately.
• Responsiveness: willingness to help customers and provide prompt service.
• Assurance: knowledge and courtesy of employees and their ability to convey trust and
confidence.
• Empathy: the caring, individualized attention the firm provides its customers.

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Service Encounters
A service encounter is defined as a moment when a customer interacts with a service or product for
the first time. ... Research evidence indicates that customers generally compare their expectations
with the performance of service industries and they are influenced by the quality of service they
receive.

The importance of encounters:

a. If a customer is interacting with a firm for the first time, the initial encounter will create a first
impression of the organization.

b.Even when the customer has had multiple interactions with a firm, each individual encounter is
important in creating a image of high quality.

c. A combination of positive and negative interactions will leave the customer confused towards the
firms quality.

d.Not all encounters are important. There are certain key areas where it is important to concentrate.
Ex: In hotel-early encounter to visitors.

In hospitals encounters with nurse is important.

Types of service encounters:

1.Remote counter:

It can happen without any direct human contact. Ex: ATM, Internet website, Billing statement.

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Although there is no direct human contact, each represents an opportunity for the firm to
reinforce/establish quality perceptions in the customer. Here, tangible evidence, quality of technical
processes will determine the quality.

2.Phone encounter:

This will occur between and customer and the firm. Organisations such as insurance, telecom
department will use this.

Ex: Enquiry

Here tone of voice, employee knowledge, effectiveness/efficiency in handling customer will judge the
quality.

3.Face-face-encounter:

Determining and understanding service quality issues in face-face to contexts is most complex of all
verbal and nonverbal behaviours are important determinants of quality.

EX: In a b2b setting direct encounter between the business customer and sales people will determine
the quality.

Sources of pleasurable and displeasure in service encounter:

1.Recovery –employee response to service delivery system failure:

There has been a failure in service delivery system and an employee is required to handle customer
complaints/ disappointments.

2.Adaptability- Employee response to customer needs and requests:

Here how the service firm is able to adapt its delivery system when the needs are not met. Here the
customers judge service

3.Spontaneity –unprompted and unsolicited employee action:

Employee spontaneity in delivering memorably good or poor service is the remembered by the
customers.

Ex: Being treated like royalty.; Rudeness, Stealing, discrimination, ignoring the customers.

4.Coping- Employee response to problem customers:

In some cases, customers were basically uncooperative provider. In such cases how the service
provider copes with the situation is a challenging.

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Customer satisfaction

Customer satisfaction is defined as a measurement that determines how happy customers are with
a company's products, services, and capabilities. Customer satisfaction information, including

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surveys and ratings, can help a company determine how to best improve or changes its products and
services.
Customer satisfaction is defined as "the number of customers, or percentage of total customers,
whose reported experience with a firm, its products, or its services (ratings) exceeds specified goals."
Customers play an important role and are essential in keeping a product or service relevant; it is,
therefore, in the best interest of the business to ensure customer satisfaction and build customer
loyalty.

How to achieve customer satisfaction?

• Listen to customers. In order to give customers what they want, you have to know what they
want. ...
• Be proactive. ...
• Practice honesty and manage expectations in marketing. ...
• Understand your customers.

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Strategies for influencing customer perception

1.Measure and manage customer satisfaction service quality:

Track the trends, diagnose problems, and link to other customer focused strategies.

2.Aim for customer quality and satisfaction in every service encounter.

Every service encounter is critical to customer retention. Thus many firms aim for zero defects or 100%
satisfaction.

Clear documentation of all the points of contact between the organsiation and its customers.
Development of understanding of customer expectation by developing appropriate strategy.

3.Plan for effective recovery

When service customers have been disappointed on the first try doing right the 2nd time is essential
to maintain customer loyalty. This implies a need for service process and system analysis to determine
the root cause of failure and redesign the service system.

4.Facilitate adaptability and flexibility:

The existence of this encounter theme suggested the need to know when and how the system can
flexed, and when and how to explain to customers why a

5.Encourage spontaneity:

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Recruitment and selection procedures can be used to hire employees with strong service orientation
whose natural tendency is to be service minded. Strong service culture, employee empowerment,
effective supervision and monitoring should be done.

6.Help employees cope with problem customers:

Employees need appropriate training and tools to deal with problem customers. Training the
customers is essential so that they know what to expect and know the appropriate behavior in the
situations.

7.Manage the dimensions of quality at the encounter level:

Whenever the customer is encountering the service, the service firm should take measures to
maintain the dimensions of service of service quality.

Thank you

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