Service Marketing - Tapas Bala

COURSE NO-511
Service Marketing
Service is any activity, performing by benefit that one party offers
other party that is essentially intangible and it never changes its
ownership.
Service marketing involves of marketing of something which is

intangible and which is usually consume at the point of delivery.
Tapas Bala
BBA, MBA (RU)
2010
D E PA R T M E N T O F M A R K E T I N G , U N I V E R S I T Y O F R A J S H A H I
Service Marketing
Service Marketing
Service
Service is any activity, performing by benefit that one party offers other party that is essentially
intangible and it never changes its ownership.
Characteristics of Service
There are four characteristics that differentiate services from goods—intangibility, inseparability,
heterogeneity, and perishability—are major factors driving the differences between goods and
services marketing.
a. Intangibility: Because services are intangible, it is impossible for prospective customers to

sample—feel, see, hear, taste or smell—a service before they buy it. Consequently, a
company’s promotional program must be explicit about the benefits to be derived from the
service, rather than emphasizing the service itself. Four promotional strategies that may be
used to suggest service benefits and reduce the effect of intangibility are;
Visualization: For example, Carnival Cruise Lines the benefits of its cruises with ads
that shows happy people dancing, dining, playing deck games, and visiting exotic
places.
Association: By connecting the service with a tangible good, person, object or place, a
particular image can be created. Professional sports teams are linked with cities or
regions to give them an identity.
Physical representation: American express uses color—gold or platinum—for its credit

card services to symbolize wealth and prestige. Enterprise, the auto rental firm, depicts a
car wrapped as a package in its TV ads to emphasize its unique delivery feature.
Documentation: There are two forms of documentation—past performance and future

capability. A hospital can document its past performance, for example, by pointing out
in its ads how many babies have been born and cared for in its obstetrics department.
b. Inseparability: Service typically can not be separated from the creator-seller of the service.
Moreover, many services are created, dispensed and consumed simultaneously. For example,
dentists create and dispense almost all their services to be performed. The same is true of a
fast-food drive-up window employee, a physical therapist, and even an automatic teller
machine.
c. Heterogeneity: It is difficult if not impossible for a service firm, or even an individual seller
of services, to standardize output. Each unit of the service is somewhat different from every
Tapas Bala, MBA (Marketing), R.U. Mo. No. 01710-441939, 01670-283338 Page
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Service Marketing
other unit of the same service because of the human factor in production and delivery.
Regardless of its efforts, Delta Airlines does not give the same quality of service on every
flight, or even to each passenger on the same flight. All performances of the Boston
Orchestra, or all haircuts you get, are not of equal quality.
d. Perishability: Services are highly perishable because the existing capacity cannot be stored
or inventoried for future use. A cruise ship that sails with unoccupied staterooms, empty seats
at a church service and idle house painters represent available supply that is lost forever.
Perishability creates potential imbalances in supply and demand. Furthermore, the demand
for many services fluctuates considerably by season, by day of the week and by hour of the
day. Ski lifts can sit idle all summer, whereas golf courses in some areas go unused in the
winter. The ridership of city buses fluctuates greatly during the day.
Scope of business
Using a broad definition of transactions and customers, it is appropriate to recognize both for
profit and non business services organizations.
a. For-profit services firms sell to consumers or other businesses with profitable operations as
a primary goal. This category is reflected in the following examples, classified by industry;
Housing and other structures: Rental of offices, warehouses, hotels, motels,

apartments, houses, and farms.
Household operations: Home maintenance and repairs, security, landscaping, and

household cleaning.
Recreation and entertainment: Theaters, spectator sports, amusement parks,

participation sports, restaurant meals, and resorts.
Personal care: Laundry, dry cleaning, personal grooming care and spas.
Medical and health care: Physical and mental medical services, dental, nursing,
hospitalization, optometry and physical therapy.
Private education: Vocational schools, nursery schools, charter schools, and some
continuing education programs.
Professional business services: Legal, accounting, advertising, marketing, research,

public relations, and management consulting.
Financial services: Personal and business insurance, banking, credit and loan service,
brokerage service and investment counseling.
Tapas Bala, MBA (Department of Marketing), R.U. Mo. No-01710-441939, 01670-283338 Page 3
Service Marketing
Transportation: Freight and passenger service on common carriers, automobile repairs

and rentals and express packaging delivery.
Communications: Broadcasting, telephone, fax, computer and Internet services.
Non business organization

Non business services organizations are of two types. One type is not-for-profit (N-F-P) services
organizations, which have a profit goal because growth and continued existence depend on
generating revenue in excess of its costs. However, profit (which may be referred to by a
different name such as “surplus”.) is secondary to the N-F-P’s primary objective.
Educational: Private grade schools, high schools, colleges, and universities.
Cultural: Museums, opera and theater groups, zoos, and symphony orchestras.
Religious: Churches, synagogues, temples, and mosques.
Charitable and philanthropic: Charities, service organizations ( Salvation Army, Red

cross), research foundations, and fund raising groups (United Way).
Social concerns: Organizations dealing with family planning, civil rights, termination of
smoking, environmental concerns, the homeless, those for or against abortion, or those
for or against nuclear energy.
Professional and trade: Labor unions, certification groups, professional associations

(American Marketing Association), health maintenance organizations.
Social: Fraternal organizations, civic clubs, special interest clubs.
Health care: Hospitals, nursing homes, health research organizations (American Cancer
Society, American heart association), health maintenance organizations.
Political: Political parties, individual politicians.
Finally the scope of services is further broadened by including a second type of non business
organization. A non profit organization provides services but does not have a profit or surplus
objectives.
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Service Marketing
Service Marketing
Service marketing involves of marketing of something which is intangible and which is usually
consume at the point of delivery. Booms and Bitner suggested three key elements for service
marketing. These are discussed below;
Key element of service marketing
a. People: Most services are provided by people, the selection, training and motivation of
employees can make a huge difference in customer satisfaction. Ideally, employees
should exhibit competence, a caring attitude, responsiveness, initiative, problem-solving
ability, and good will. Service companies such as FedEx and Marriott empower their
front-line personnel to spend up to $100 to resolve a customer problem.
b. Physical evidence: Companies also try to demonstrate their service quality through
physical evidence and presentation. A hotel will develop a look and style of dealing with
customers that realizes its intended customer value proposition, whether it is cleanliness,
speed or some other benefit.
c. Delivery process: Service companies can choose among different processes to deliver
their services. Restaurants have developed such different formats as cafeteria-style, fast-
food, buffet, and candlelight service.
There are four core management tasks
a. Managing differentiation against competitors
b. Managing the overall brand image
c. Managing the quality of a service delivered to customer and setting their expectations
d. Managing communication
Difference between product and services
Much of initial the initial research into services sought to differentiate them from goods,
focusing particularly on four generic differences—intangibility, heterogeneity (variability),
perishability of output, and simultaneity of production and consumption. Although these
characteristics are still commonly cited, they have been criticized as over generalizations and
there is growing recognition that they are not universally applicable to all services. More
Service Marketing
practical insights are provided in the following list of eight generic differences. Which are
helpful in distinguishing services marketing from goods marketing?
a. Nature of the product: Berry captures the distinction well when he describes a good as “an
object, a device, a thing,” in contrast to a service which is “a deed, a performance, an effort”.
Marketing a performance (which in the case of rental services may involve an object like a
power tool a car) is very different from attempting to market the physical object itself. For
instance, in automobile rentals, customers usually reserve a particular category of car, rather
than a specific model, paying more attention to such elements as the location and appearance
of pickup and delivery facilities; availability of inclusive insurance, cleaning and
maintenance. Although services often include tangible elements—such as sitting in an airline
seat, eating a meal, or getting damaged equipment repaired—the service performance itself is
basically an intangible.
b. Greater involvement of customer in the production process : Performing a service

involves assembling and delivering the output of a mix of physical facilities and mental or
physical labor. Often customers are actively involved in helping to create the service product
—either by serving themselves (as in a fast-food restaurant or Laundromat) by cooperating
with service personnel in setting such as hair salons, hotels colleges, or hospitals.
c. People as part of the product: In-high contact services, customers not only come into
contact with service personnel, they may also rub shoulders with other customers (literally
so, if they ride a bus or sub way during the rush hour). The difference between two service
businesses often lies in the quality of employees who deliver the service. Similarly, the type
of customers who patronize a particular service business helps to define the nature of the
service experience.
d. Greater difficulties in maintaining quality control of the standard: Manufactured goods

can be checked for conformance with quality standards long before they reach the customer.
But when services are consumed as they are produced, final “assembly” must take place
under real-time conditions. As a result, mistakes and shortcomings are harder to conceal.
e. Harder for customer to evaluate: Most physical goods tend to be relatively High in search
qualities; these are attributes which a customer can determine prior to purchasing a product,
such as color, style, shape, price, fit, feel, hardness, and smell. Other goods and some
services, by contrast, many emphasize experience qualities which can only be discerned after
purchase or during consumption; as with taste, wear ability, ease of handling, quietness and
personal treatment. Finally, there are credence qualities—characteristics that customers find
harder to evaluate even after consumption. Examples include surgery and technical repairs
that are not readily visible.
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Service Marketing
f. Absence of inventory: Because a service is a deed or performance, rather than a tangible

item that the customer keeps, it is “perishable” and cannot be inventoried. Of course, the
necessary facilities, equipment and labor can be held in readiness to create the service. But
these simply represent productive capacity, not the product itself. Having unused capacity in
a service business is rather like running water into a sink without a stopper: The flow is
wasted unless customers (or possessions requiring service) are present to receive it. When
demand exceeds capacity, customer may be sent away disappointed, since no inventory is
available for backup.
g. Relating importance of time factor: Many services are delivered in real time. Customers
have to be physically present to receive service from organizations such as airlines, hospitals,
haircutters, and restaurants. There are limits as to how long customers are willing to be kept
waiting; further, service must be delivered expeditiously so that customers do not spend
excessive time receiving service.
h. Structure and nature of distribution channel: Unlike manufacturers, which require

physical distribution channels to move goods from factory to customers, many service
businesses either use electronic channels (as in broadcasting or electronic funds transfer) or
else combine the service factory, retail outlet, and point of consumption into one.
Categorizing of service process activities

Customer involvement in production (also referred to as “inseparability”) is often cited as a
distinctive characteristics of services. This suggests that we should evaluate service processes to
determine if different types of processes result in different levels of customer involvement.
a. Tangible actions to people bodies, such as airline transportation, haircutting, and surgery
(people processing). Customers need to be physically present throughout service delivery
in order to receive the desired benefits of such services.
b. Tangible action to goods and other physical possessions, such as airfreight, lawn
mowing, and janitorial services (possession processing). In these instances, the object
requiring processing must be present, but the customer need not be.
c. Intangible action directed to people minds, such as broadcasting and education (mental
stimulus processing). In this instance, customers must be present mentally but can be
located either in a specific service facility or in a remote location connected by broadcast
signals or telecommunication linkages.
d. Intangible action directed at intangible assets, such as insurance, investment banking and
consulting (information processing0. For these services, no direct involvement with the
customer may be needed (at least in theory) once the request for service has been
initiated.
Service Marketing
Who or What is The Direct Recipient of the service?
What is the Nature of the People Possessions

Service Act?
Tangible actions Services directed at people’s Services directed at physical

bodies possessions
Passenger transportation Freight transportation

Health care Repair and maintenance
Lodging Warehousing/storage
Beauty salons Janitorial services
Physical therapy Retail distribution
Fitness centers Laundry and dry cleaning
Restaurants/bars Refueling
Haircutting Landscaping/lawn care
Funeral services Disposal/ recycling
Intangible actions Services directed at people’s Services directed at
minds intangible assets
Advertising/PR Accounting
Arts and entertainment Banking
Broadcasting/cable Data processing
Management consulting Data transmission
Education Insurance
Information services Legal services
Concerts Programming
Psychotherapy Research
Religion Securities investment
Voice telephone Software consulting
Narrow definition of Marketing
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Service Marketing
Although many service firms have become sophisticated marketers, professional marketing
management is still relatively new to others. Some service industry executives, especially in
operations, continue to define marketing as simply advertising and public relations; others extend
this definition only as far as sales and market research. They may still seek to exclude marketers
form decisions in such areas as new product development, retail site location, pricing and
product line policy.
Market segmentation: A market segment is composed of a group of buyers who share common
characteristics, needs, purchasing behavior or consumption patterns. Effective segmentation
should group buyers into segments in ways that result in as much similarity as possible on the
relevant characteristics within each segment but dissimilarity on those same characteristics
between each segment.
Target segment: A target segment is one that has selected from among those in the broader
market. Frequently, target segments are defined on the basis of several variables. For instance, a
department store in a particular city might target residents of the metropolitan area (geographic
segmentation) who had incomes within a certain range (demographic segmentation0, valued
personal service form a knowledgeable staff and were not highly price sensitive (both reflecting
segmentation according to expressed attitudes and behavioral intentions).
Positioning
Positioning is the process of establishing and maintaining a distinctive place in the market place
in the market for an organization and/or its individual’s product offerings.
Identifying and selecting Target Segments
A market segment is composed of a group of buyers who share common characteristics, needs,
purchasing behavior, or consumption patterns. Effective segmentation should group buyers into
segments in ways that result in as much similarity as possible on the relevant characteristics
within each segment but dissimilarity on those same characteristics between each segment.
A target segment is one that a firm has selected from among those in the broader market.
Frequently, target segments are defined on the basis of several variables. For instance, a
department store in a particular city might target residents of the metropolitan area (geographic
segmentation) who had incomes within a certain range (demographic segmentation), valued
personal service form a knowledgeable staff and were not highly price sensitive (both reflecting
segmentation according to expressed attitudes and behavioral intentions). Because competing
retailers in the city would probably be targeting the same customers, the department store would
have to position itself is ways that created a distinctive appeal; appropriate characteristics to
highlight might include a wide array of merchandise categories, breadth of selection within each
Service Marketing
product category, and the availability of such supplementary services as advice and home
delivery.
A dynamic environment for services
Perhaps even more than manufacturing, service industries are currently undergoing dramatic
changes. Many factors underlie the ongoing transformation of service management that is taking
place, not only in highly developed economies such as United States, Canada, Japan, Australia
etc. Among these factors are;
a. Changing pattern of government regulation: Many service industries have

traditionally been highly regulated. Regulatory agencies mandated price levels, placed
geographic constraints on distribution strategies, and in some instances, prescribed
product attributes. In the late, 1970s the United States began a trend toward complete or
partial federal deregulation in several major service industries.
b. Relaxation of professional association standards: Another American initiative, also

copied elsewhere, has been government or legal pressure to force professional
associations to remove or relax bans on advertising and promotional activities. Among
the types of professionals affected by such rulings are accountants, architects, doctors,
lawyers and optometrists, whose practices now engage in much more vigorous
competitive activity than previously.
c. Privatization: The term “privatization” was copied in Great Britain to describe the
policy of returning nationalized industries to private ownership. The transformation of
service operations as national airlines, telecommunication services, and natural gas
utilities into private enterprise services has led to restructuring, cost cutting, and a more
market-focused posture.
d. Computerization and Technological Innovation: New technologies are radically the

ways in which many service organizations do business with their customers—as well as
what goes on behind the scenes. Perhaps the most powerful force for change today comes
from the integration of computers and telecommunications.
e. Growth of Service Chains and Networks: More and more services are being delivered
through national or even global chains or system networks. Respected brand names such
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Service Marketing
as McDonald’s, Body Shop, Meridien hotels, Citicorp, and Singapore Airlines have
spread far from their original national roots.
f. Expansion of leasing and rental businesses: Leasing and rental businesses represent a
marriage between service and manufacturing businesses. Increasingly, both corporate and
individual customers find that they can enjoy use of a physical product without actually
owning it.
g. Manufacturing as service providers: Service profit centers within manufacturing firms

are transforming many well-known companies in fields such as computers, automobiles,
and electrical and mechanical equipment. Supplementary services once designed to help
sell equipment—including consultation, credit, transportation and delivery, installation,
training and maintenance—are now offered as profit-seeking services in their own right,
even to customers who have chosen to purchase competing equipment.
h. Non-business organizations adopt market-focused strategies: Financial pressures

confronting public and nonprofit organizations are forcing them to cut costs, develop
more efficient operation, and pay more attention to customer needs and competitive
activities.
i. The globalization of service business: The internationalization of service companies is

readily apparent to any tourist or business executive travelling abroad. Airlines and
airfreight companies that were formerly just domestic in scope now have foreign route
networks. This strategy may reflect a desire to serve existing customers better or to
penetrate new markets or both.
j. The service quality movement: The 1980s are marked by growing customer discontent
with the quality of both goods and services. Many of the problems with manufactured
products were centered on poor service at the point-of-purchase—the retail store—
including difficulties in solving problems, obtaining refunds, or getting repairs made after
the sale.
k. Hiring and promotion of innovative mangers: Traditional service industries used to be

very inbred. Managers tended to spend their entire careers working within a single
industry, even within a single organization. Relatively few managers possessed graduate
degrees in business, such as an MBA.
Like the factors above any revolution, some of the origins of today’s service sector
revolution go back a number of years, whereas others reflect a chain of relatively recent
events that continues to unfold.
Developing a service concept for a specific segment
Service Marketing
Research is needed to identify what attributes of a given service are important to specific market
segments and how well prospective customers perceive competing organizations as performing
against these attributes. But it’s dangerous to over generalize: Strategies should recognize that
the same individuals may set different priorities for attributes according to
a. The purpose of using the service

b. Who makes the decision
c. The timing of use (time of day/week/season)
d. Whether the individual is using the service alone or with a group
e. The composition of that group
Positioning role in marketing strategy
Positioning plays a pivotal role in marketing strategy, because it links market analysis and
competitive analysis to internal competitive analysis. From these, there, a position statement can
be developed that enables the service organization to answer the questions. “What is our product
(or service concept), what do we want it to become, and what actions must we take to get there.
Principal uses of positioning in marketing management
1) Provide a useful diagnostic tool for defining and understanding the relationships between
products and markets.
How does the product compare with competitive offerings on specific attributes?
How well does product performance meet consumer needs and expectations on
specific performance criteria?
What is the predicted consumption level for a product with given set of
performance characteristics offered at a given price?
2) Identify market opportunities for;

a. Introducing new products
What segments to target?

What attributes to offer relative to the competition?
b. Redesigning (repositioning) existing products

Appeal to the same segments or to new ones?
What attributes to add, drop or change?
What attributes to emphasize in advertising?
Eliminate product that

Do not satisfy consumer needs
Face excessive competition
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Service Marketing
3) Making other marketing mix decisions to pre-empt, or respond to, competitive moves;
a. Distribution strategies
What to offer the product (locations, types of outlet)?

When to make the product available?
b. Pricing strategies
How much to charge?
What billing and payment procedures to employ?
c. Communication strategies
What target audience(s) are most easily convinced that the product offers a
competitive advantage on attributes that are important to them?
What message(s)? Which attributes should be emphasized and which competitors

—if any—should be mentioned as the basis for comparison on these attributes?
Which communication channels—personal selling versus different advertising

media? (Selected not only for their ability to convey the chosen message(s) to the
target audience(s), but also for their ability to reinforce the desired image of the
product.)
Developing a positioning strategy can take place at several different levels, depending on the
nature of the organization involved. Among multisite, multiproduct, service businesses, a
position might be established for the entire organization, for a given service outlet, or for a
specific offered at the outlet. It’s particularly important that there be some consistency between
the positions held by different services offered at the same location, since the image of one may
spill over onto the others. For instance, if a hospital has an excellent reputation for obstetrical
services, this may enhance perception of its services in gynecology, pediatrics, surgery and so
forth.
Because of the intangible, experimental nature of many services, an explicit positioning strategy
is valuable in helping prospective customers to get a mental ‘fix’ on a product that would
otherwise be rather amorphous. Failure to select a desired position in the marketplace—and to
develop a marketing action plan designed to achieve and hold this position—may result in one of
several possible outcomes, all undesirable:
a. The organization (or one of its products) is pushed into position where it faces head-on
competition from stronger competitors.
Service Marketing
b. The organization (product) is pushed into a position which nobody else wants because
there is little customer demand there.
c. The organization’s (product’s) position is so fuzzy that nobody knows what its distinctive
competence really is.
d. The organization (product) has no position at all in the market place because nobody has
ever heard of it.
Steps in developing a positioning strategy
Competitive strategy is often narrowly focused at direct competitors—firms which market

products that offer customer a similar way of achieving the same benefits (e.g. in the case of
education, another college offering similar classes). However, there may also be a serious threat
from generic competitors, which offer customers a different way of achieving similar benefits.
The steps which is involves in developing positioning strategy;
Market analysis Definition and

Size analysis of market
Location segments
Trends
Selection of
most appropriate
target market
segments to serve
Internal
Articulation of Marketing
corporate
desired position action
analysis
in the plan
Resource
marketplace
Constrains
Values
Selection of
which benefits to
emphasize to
customers
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Competitive
Analysis of
analysis
possibilities for
Strengths
effective
Weakness
differentiation against
Current
competition
positioning (as
perceived by
consumers.
a. Market analysis: Market analysis is needed to determine such factors as the overall level
and trend of demand and the geographic location of this demand. Is demand increasing or
decreasing for the benefits offered by this type of service? Are there regional or international
variations in the level of demand? Research may be needed to gain a better understanding not
only of customer needs and preferences within each of the different segments, but also of
how each perceives the competition.
b. Internal corporate analysis: Internal corporate analysis requires the organization to identify
its resources (financial, human labor and know-how and physical assets), any limitations or
constraints and the values and goals (profitability, growth, professional preference etc.) of its
management.
c. Competitive analysis: Identification and analysis of competitors can provide marketing

strategies a sense of their strengths and weakness, which, in turn, may suggest opportunities
for differentiation.
The outcome of integrating these three forms of analysis is a position statement that articulates
the planned position of the organization in the marketplace (and, if desired, that of each of the
component services that it offers).
Managing demand and managing capacity
Some capacity is elastic in its ability to absorb extra demand. A subway car, for instance, may
offer 40 seats and allow standing room for another 60 passengers with adequate handrail and
floor space for all. In short, there are several actions that managers can take to adjust capacity to
match the fluctuating levels of demand;
a) Schedule downtime during the periods of low demand: To ensure that 100 percent of
capacity is available during peak periods, scheduled repair and maintenance activities should
Service Marketing
be conducted when demand is expected to be low. Employee vacations should also be taken
during such periods.
b) Use part-time employees: Many organizations hire extra workers during their busiest
periods. Examples include postal workers and store clerks at Christmas-time, extra lifeguards
on summer weekends, and additional hotel employees during vacation periods.
c) Rent or share extra facilities and equipment: To limit investment in fixed assets, a service
business may be able to rent extra space or machines at peak times. Firms with
complementary demand patterns may enter into formal sharing agreements.
d) Cross train employees: Even when the service delivery system appears to be operating at
full capacity, certain physical elements—and their attendant employees—may be
underutilized. If employees can be cross-trained to perform a variety of tasks, they can be
shifted to bottleneck points as needed, thereby increasing total system capacity. In
supermarkets, for instance, the manager may call on stockers to operate cash registers when
checkout lines start to get too long.
Whether a service organization pursues a strategy of level capacity or elects to chase demand, its
managers need to understand and forecast the forces determining demand.
Strategies for managing demand
a) Demand exceeds maximum available capacity with the result that potential business may be
lost.
b) Demand exceeds the optimum capacity level, no one is turned away, but all customers are
likely to perceive deterioration in the quality of service delivered.
c) Demand and supply are well balanced at the level of optimum capacity.
d) Demand is below optimum capacity and productive resources are under utilized, this poses
the risk (in some instances) that customers may find the experience disappointing or doubts
about the viability of the service.
Approaches for managing demand
There are five common approaches to managing demand;
The first, which has the virtue of simplicity but little else, involves taking no action and leaving
demand to find its own levels. Eventually customer learn from experience or word of mouth
when they can expect to stand in line to use the service and when it will be available without
delay. The trouble is, they may also learn to find a competitor who is more responsive.
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Service Marketing
More interventionist approaches involve influencing the level of demand at any given time, by
taking active steps to reduce demand in peak periods and to increase demand where there is
excess capacity.
Two more approaches both involve inventorying demand until capacity becomes available. You
can accomplish this either by introducing a reservations systems that promises customers access
to capacity at specified times, or by creating formalized queuing systems (or by a combination of
the two).
Capacity Situation Relative to Demand
Approaches Used to Insufficient Capacity Sufficient Capacity Excess Capacity

Managed Demand (Excess Demand) (Satisfactory (Insufficient Demand)
Demand)
Taking no action Unorganized queuing Capacity in fully Capacity is wasted.

results (May irritate utilized (But in this (Customers may have
customers and the most profitable a disappointing
discourage future use) mix of business?) experience for
services like theater.)
Reduced demand Pricing higher will Take no action (but Take no action (but
increase profits. see above) see above)
Communication can
be employed to
encourage usage in
other time slots. (Can
this effort be focused
on less
profitable/desirable
segments?0
Increase demand Take no action, unless Take no action, unless Price lower
opportunities exist to opportunities exist to selectively (try to
stimulate (and give stimulate (and give avoid cannibalizing
priority to) more priority to) more existing business;
Service Marketing
profitable segments. profitable segments. ensure all relevant

costs and covered).
Use communications
and variation in
products/distribution
(but recognize extra
costs, if any, and
make sure appropriate
trade-offs are made
between profitability
and usage levels.
Inventory demand Consider priority Try to ensure most Clarify that space is
by reservation system for most profitable mix of available and that no
system desirable segments. business. reservations are
Make other customers needed.
shift (a) to outside
peak period or (b) to
future peak.
Inventory demand Consider override for Try to avoid Not applicable.

by formalized most desirable bottleneck delays.
queuing segments. Seek to
keep waiting
customers occupied
and comfortable. Try
to predict wait period
accurately.
The above table links these five approaches to the three basic situations of insufficient capacity
relative to demand, sufficient capacity, and excess capacity, and added a brief strategic
commentary.
Using marketing mix elements to shape demand patterns
All the elements of the marketing mix have a role to play in stimulating demand during periods
of excess capacity and in decreasing it (demarketing) during periods of insufficient capacity.
Price is often the first variable to be proposed for bringing demand and supply into balance, but
change in product, distribution strategy, and communication efforts can also play an important
role.
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a) Product variance: Although pricing is the most commonly advocated method of balancing
supply and demand, it is not quite as universally feasible for services as for goods. A rather
obvious example is provided by the respective problems of a ski manufacturer and a ski slope
operator during the summer. The former can either produce for inventory or try to sell skis in
the summer at a discount. If the skis are sufficiently discounted, some customers will buy
before the ski season in order to save money.
b) Modifying the timing and location of delivery: Rather than seeking to modify demand for
a service that continues to be offered at the same time in the same place, some firms respond
to market needs by modifying the time and place of delivery. Three basic options are
available;
The first represents a strategy of no change; regardless of the level of demand, the
service continues to be offered in the same location at the same times.
A second strategy involves varying the times when the service is available to reflect
changes in customer preference by day of week, by season, and so forth.
A third strategy involves offering the service to customers at a new location. One
approach is to operate mobile units that take the service to customers rather than
requiring them to visit fixed-site service locations.
c) Pricing strategy: For price to be effective as a demand management tool, the marketing
manger must have some sense of the shape and slope of a product’s demand curve (i.e. how
the quality of service demanded responds to increases or decreases in the price per unit) at a
particular point in time. It’s important to determine whether the aggregate demand curve for
a specific service varies sharply from one time period to another.
d) Communication effort: Even if the other variables of the marketing mix remain unchanged,
communication efforts alone may be able to help smooth demand. Signing, advertising, and
sales messages can remind customers of peak periods and encourage them to travel at
uncrowned, off-peak times when service is, perhaps, faster or more comfortable. Examples
include postal service requests to “Mail Early for Christmas” public transport messages
urging non-computers—such as shoppers or tourists—to avoid the crush conditions of the
commute hours, and communications from sales reps for industrial maintenance firms
advising customers of periods when preventive maintenance work can be done quickly.
Inventory demand through queuing and reservation
What is a manager to do when the possibilities for shaping demand have been exhausted and yet
supply and demand are still out of balance? Taking no action at all and leaving customers to sort
things out for themselves is no recipe for service quality and customer satisfaction. Instead, the
Service Marketing
search must turn to strategies for ensuring order predictability, and fairness in place of a random
free-for-all.
Although service businesses can rarely inventory supply, they can often inventory demand. This
task can be achieved in one of two ways;
a. By asking customers to wait in line on a first-come, first-served basis (queuing). Or
b. By offering them the opportunity of reserving space in advance.
A multi-pronged approach to reducing waits times
The best solutions to waiting problems are to tackle the root causes, which often require a
reexamination of existing operational and human resource strategies. Service delays are often
caused by multiple factors, requiring multiple solutions. Since such changes may cost money,
marketers must be able to relate expenditure to the competitive advantages of providing
customers with faster service. To reduce the wait for service in retail branches, the bank adopted
a three-pronged strategy.
a) Improvement in service operation: Improvement in the service operation: An electronic

queuing system only routed customers to the next available station but also provided
supervisors with online information to help match staffing to customer demand. Meantime,
computer enhancements provided tellers with more information about their customers,
enabling them to handle more requests without leaving their stations.
b) Changes in human resources strategies: A revised job description for teller mangers made
them responsible for customer queuing times and for expediting transactions. Then an offer-
of-the-day program equipped a designated offer with a new category of peak-time letter
positions was introduced, paying premium wages for 12-18 hours work for a week.
c) Customer-oriented improvements to the delivery system: Quick drop desks were

established on busy days to handle deposits and simple requests, in addition to new express
teller stations reserved for deposits and check cashing. Lobby hours were expanded form 38
to 56 hours a week, including Sunday.
Internal measures and customer surveys showed that the improvements had reduced wait times
and increased customer perceptions that First Chicago in “the best” bank in the region for
minimal teller-line waits (a meaningful competitive positioning strategy in an industry where
there is little product differentiation).
Segmentation as an alternative to “First come first served”
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Service Marketing
Not all queuing systems work on a first-come, first served basis. Market segmentation is
sometimes used to design queuing strategies that set different priorities for different types of
customers. Allocation to separate queuing areas may be based on;
a) Urgency of job—triage nurses in hospital emergency units make decisions on which patients
need to be treated immediately and which can safely be asked to wait.
b) Duration of service transaction—supermarkets and banks are among the service businesses
that offer “express lanes” for customers wishing to make quick transactions.
c) Payment of a premium price—customers are often willing to pay more to save time and
obtain greater comfort. Thus, separate check-ins may be offered at the airport for first calls
and economy-class passengers.
d) Importance of the customer—customers whose business is especially valued may have their
importance acknowledged by being given priority treatment. For instance, economy class
passengers who travel more than a certain number of miles a year on a particular airline may
be rewarded for their loyalty by being allowed to check in at the business class desk where
the wait is better.
Adding value to the core product
There are potentially dozens of different supplementary services, but almost all of them can be
classified into one of the following eight clusters;
a) Information: To obtain full value from any good or service, customers need relevant
information. New customers and prospects are especially information hungry; they want to
know what product will best meet their needs. Others concerns may include directions to the
site where the product is sold (or details of how to order it), service directions to the site
where the product is sold (or details of how to order it), service, hours, prices, and usage
instructions. Finally, customers may want documentation of what has already taken place,
such as confirmation of reservations, receipts and tickets and summaries of account activity.
Directions to service site—conditions of sale/service

Schedules/service hours—Notification of changes
Price—Documentation
Instruction on using core product/supplementary services—confirmation of
reservations
Reminders—summaries of account activity
Warnings—receipts and tickets
Service Marketing
b) Order taking: Once the customer are ready to buy, a key supplementary element should
come into play; Accepting applications, orders and reservations. Unless the service
organization (or its designated intermediaries) is easily accessible to customers; it may lose
the business.
Example of order taking
i. Applications
Membership in clubs or programs,
subscription services (e.g. utilities),
prerequisite-based services (e.g. credit, college enrollment),
ii. orders
On-site fulfillment,
mail/telephone order for subsequent fulfillment), and
iii. reservation
seats,
tables,
rooms rentals of vehicles or other equipment,
professional appointments,
admissions to restricted facilities (e.g. exhibitions)
c) Save keeping: While visiting a service site, customers often want assistance with their
personal possessions. In fact, unless certain caretaking services are provided (notably parking
for their cars), they may not come at all. The list professional safekeeping services when
customers come to visit in a long one. It includes;
Caring for possessions customers bring with them
 Child care
 Pet care
 Parking facilities for vehicles
 Valet parking
 Coat room
 Baggage handling
 Storage space
 Safety deposit/security
Caring for goods purchased (or rented) by customers

 Packaging
 Pick-up
 Transportation
 Delivery
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Service Marketing
 Installation
 Inspection and diagnosis
 Cleaning
 Refueling
 Preventive maintenance
 Repairs and renovation
 Upgrade
d) Billing: Billing is common to almost all services (unless the service is provided free of
charge). Inaccurate, illegible or incomplete bills offer a splendid opportunity to disappoint
customers who may up to that point, have been quite satisfied with their experience. For
example,
Periodic statements of account activity
Invoice for individual transactions
Verbal statements of amount due
Self-billing (computed by customer).
e) Consultation: Providing information suggests a simple response a customers’ questions (or
pre-prepared information that anticipates their needs). Consultation by contrast, involves a
dialogue to probe customer requirements and then develop a tailored solution. At its simplest,
consultation consists of immediate advice from a knowledgeable service person in response
to the request; “What do you suggest?” Effective consultation requires an understanding of
each customer’s current situation, before suggesting a course of action. Examples of
consultation elements
Advice—Tutoring/training in product usage
Auditing –Management or technical
Personal counseling—consultancy
f) Hospitality: Certain services require customers to enter the service factory and stay there
until service delivery is complete. Well-managed businesses try, at least in small ways to
treat customers as guests—especially if they have to spend a long time on site. Hospitability
is potentially a very pretty petal, reflecting pleasure at meeting new customers and greeting
old ones when they return. Courtesy and consideration for customers’ needs apply to
telephone interactions, too, but it is in face-to-face encounters that hospitality finds its full
expression. Examples of hospitality are
Greeting
Food and beverages
Toilets and washrooms
Bathroom kits
Service Marketing
Waiting facilities and amenities

 Lounges, waiting areas, seating
 Weather protection
 Magazines, entertainment, newspapers
Transportation
Security
g) Exception: Exceptions involve a group of supplementary services that fall outside the
routine of normal service delivery. However, astute managers anticipate exceptions and
develop contingency plans guidelines in advance. There are several types of exceptions;
 Special request: There are many circumstances when an individual or corporate
customer may request some degree of customized treatment that requires a
departure from normal operating procedure. For examples;
 Children’s needs
 Dietary requirements
 Medical or disability needs
 Religious observance
 Deviations from standard operating procedures
 Problem solving: Situations arise when normal service delivery (or product
performance) fails to run smoothly as a result of accidents, delays, and equipment
failures or customers experiences difficulty in using the product. For examples;
Warranties and guarantees against product malfunction.
Resolving difficulties that arise from using the product.
Resolving difficulties caused by accidents, service failures, and problems

with staff or other customers
Assisting customers who have suffered an accident or medical emergency.
 Handling of complaints/ suggestions/compliments: This activity requires well-

defined procedures. When you want to express dissatisfaction, offer suggestions
for improvement or pass on compliments. It should be easy for you to do so, and
the service provider should be able to make an appropriate response quickly.
 Restitution: Customers expect to be compensated for serious performance

failures. This compensation may take the form of repairs under warranty, legal
settlements refunds, an offer of free service in the future, or other forms of
payment in kind.
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Service Marketing
h) Payments: In most cases, a bill requires the customer to take action on payment (and such
action may be very slow in coming!). One exception is bank statements which detail charges
that have already been deducted from the customer’s accont
 How information technology exchange delivery of supplementary services.
 Opportunity to use information technology
 Managerial implication
 What are the elements of information service
 Save keeping, looking after the customer possession.
 Exceptions: what are the supplementary services
Planning, creating, and delivering service

SERVICE OPERATION CONCEPT
CORPORATE OBJECTIVES
AND RESOURCES Geographic Scope of Operations.
 Area(s) served.
MARKET RESOURCES
 Single site versus multisite
OPPORTUNITY ALLOCATION
 Facility location
ANALYSIS ANALYSIS
 Telecommunication linkages.
Scheduling
MARKET POSITIONING STATEMENT OPERATING ASSETS STATEMENT
 Hours/day/seasons of service
 Continuous versus intermittent.
What product (s) What physical facilities
 If intermittent, what frequency
With equipment
With what distinguishing characteristics
FacilitiesWhat
design and layoutand
information
SERVICE
To whatMARKETING CONCEPT
target market segments
Operating assets deployment
communications technology
What customer benefits  What task human resources
 Core product  (numbers
Where and skills)
 Supplementary service  when
 Service reliability levels Leverage through intermediaries
 Accessibility (where and when)
operating assets
At what cost
Tapas Bala,MBA Leverage through
(Department of Marketing), R.U. Mo. No-01710-441939,
Money customers assets
01670-283338 Page 25
 Time (partnerships and self-service).
 Material effort Specific tasks assigned to “front
 Physical effort stage” and “backstage” operations
Service Marketing
SERVICE DELIVERY PROCESS
The task begins at the corporate level with a statement of institutional objectives and an appraisal
of current or obtainable resources. From market and competitive analysis, marketing
opportunities can be identified. A positioning statement can be developed for each service that
the firm plans to offer to one or more specific market segments, indicating the characteristics that
distinguish it from the competition in meaningful ways.
This positioning strategy must then be related to a statement of the operating assets needed for
execution. Can the organization affod to allocate the necessary physical facilities, equipment,
information and communication technology, and human resources needed to support a given
positioning strategy?
Alternatively, could the firm leverage its own resources by using off-balance sheets obtained by
developing partnerships with intermediaries or even with customers themselves?
The next step in the process involve establishing a service marketing concept, to clarify the
benefits offered to customers and the costs that they will incur in return. This marketing concept
26
Service Marketing
considers both core and supplementary services, reliability levels for these services, and where
and when customers will be able to have access to them. Costs include money, time, mental
effort, and physical effort.
A parallel step is to establish a service operations concept, which stipulates the geographic scope
and scheduling of operation, describes facilities design and layout, and indicates how and when
operating assets should be deployed to perform specific tasks. The operations concept also
addresses opportunities for leveraging through intermediaries or the customers themselves.
Finally, it clarifies which tasks will be assigned to front stage and which to backstage operations.
Creating new services
Success in services marketing depends not only on performing well in the provision of existing
services, but also in creating new ones. The word “new” is perhaps one of the most overused
terms in the marketer’s lexicon. Heany proposes six categories of product innovation, running
from major innovations to simple changes;
a. Major innovation: Major innovations are new product for markets as yet undefined and un-
dimensioned. Past examples include the first broadcast television service, FedEx’s
introduction of nationwide, overnight package delivery and CompuServe (the first major on-
line service.
b. Start up business: Start up businesses consist of new products for a market already served
by products that meet the same generic need. Service examples include the creation of out-
patient surgical centers for same-day surgery as an alternative to overnight hospitalization,
and Merrill Lynch’s development of the Cash Management Account that combines
brokerage, debit card and bank checking in a single package.
c. New products: New products for the currently served market represent an attempt to offer
existing customers a product that the firm didn’t previously offer, although it was available
elsewhere. Examples include retail banks that add insurance services or museums that open
restaurants.
d. Product line extensions: Product line extensions are additions to the current product line or
distinctive new ways of delivering existing products. Examples include new menu items in a
restaurant, new routes for an airlines, or delivery innovations such as self-service islands at a
gas station, or adding an online retailing option to an existing mail/telephone order catalog.
e. Product improvements: Product improvements are the commonest type of innovation,

involving changes in the features of current products. Examples include improvements to the
core service (such as faster execution) as well as change in supplementary services.
Service Marketing
f. Style changes: Style changes represent the most modest type of innovation although they are
often highly visible. Repainting of aircraft in new color schemes, outfitting service
employees in new uniforms, or introducing a new design of bank checks are all examples of
style changes.
Searching for new ideas
Ideas for new services may come form many different directions. Technology—especially in the
form of linkages between computers and telecommunications—is likely to a particularly fruitful
source of new service ideas in coming years. Another source, curiously enough, is durable goods.
Turning goods into services: Many services are concerned with helping customers to obtain
the benefits associated with use of a particular type of physical product. Three different types of
services may compete with ownership and use of good involving combinations of renting the
item and hiring people to operate it. Other derivative services include financing, installation,
operator training, insurance, maintenance, repair and finally, removal and disposal. Some of
these services often begin as supplementary activities to add value to the core product. Thus an
equipment manufacturer may assist customers with financing new purchases, installing that
equipment, selling extended warranties (which are a form of insurance) and providing repair and
maintenance services. Marketers and entrepreneurs should always be alert to opportunities to add
value and functionality to new goods, to extend the useful life and value of existing goods, and to
assist in disposing of physical products when they cease to be useful or even become a liability.
Transferring services into goods: “Technology allows the benefits of services that formerly
had to be delivered by service personnel in a real-time environment to be captured in a physical
product. Richard Normann has coined the term “frozen services” to describe goods that allow
customers to unlock the value through self-service. Many information-based services, for
instance, can be captured in some form of storage medium for re-use at a later date. Books are a
long-established alternative to lectures in an educational setting.
Product line & brand
Most service organizations offer a line of products rather than just a single product. Some of
these product are distinctly different form one another—as, for example, when a company
operates several lines of business. In response to changing market opportunities, company may
revise the mix of products that they offer. In the early 1980s, for instance, the Marriott
Corporation had five operating groups;
a. Full service business and resort hotels.

b. Family and fast food restaurants chains
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Service Marketing
c. Contract food service (including both institutional catering and in-flight kitchens for
airlines).
d. Theme parks
e. Cruise ships.
A good example comes from British Airways (BA), which explicitly recognizes eight different
air travel products—or brands—under the British Airways umbrella. (The company also has
equity shares in several other airlines). There are four intercontinental service brands—
Concorde (supersonic deluxe service), First Class (deluxe subsonic service), Club World
(business class), and World Traveler (economy class); two intra-European brands—Club Europe
(business class) and Euro Traveler (economy class); and within the United Kingdom, the
SuperShutttle brand, offering a guaranteed economy seat and high-frequency service.
Pricing strategy
What types of cost that a customer incurred by a customer to receive service?
The monetary price is particularly important to marketing organizations that rely on receipt of
revenues from customers for significant portion of their incomes. But there are several other
costs that customers may incur in using a service. These costs are;
a. Time cost: Time is central to service delivery. For customers, there is an opportunity cost
to the time spent in pursuit of service, since that time could, perhaps be spent in other
ways.
Service Marketing
b. Physical efforts: Physical efforts may be required to obtain some services, especially if
the customer must come to the service factory and delivery entails self-service.
c. Psychic costs; Psychic costs are sometimes attached to the use of a particular service—
mental effort, feelings of inadequacy or even fear.
d. Sensory costs: Sensory costs may include putting up with noise, unpleasant smells,
drafts, excessive heat or cold, uncomfortable seating, visually unappealing environments,
and even unpleasant tastes (one of the reasons that many children dislike health care).
Finally, it can be said that the bundle of benefits presented by the product must be traded off
against the bundle of costs associated with using it. In many given situation, customers are
making judgments about what they get in return for what they give.
Foundation of pricing strategy
The foundation underlying pricing strategy can be described as a tripod, with the three legs being
named costs, competition, and value to the customer.
Cost: The costs to be recovered set a floor to the price that may be charged for a specific
product. Companies seeking to make a profit must recover the full costs associated with
producing and marketing a service, and then add a sufficient margin to yield a satisfactory profit.
Competition: The price charged by competitors for similar or substitute products may determine
where, within the ceiling-to-floor range, the price level should actually be set. An exception
occurs in the case of “loss leaders” designed to attract customers who will also buy profitable
products from the same organization.
Value to the customer: The term “value” is one that is rather loosely used. Research by Zenithal
found that “What constitutes value—even in a single product category—appears to be highly
personal and idiosyncratic.” The net value is the sum of all the perceived benefits (gross value)
minus the sum of all the perceived costs.
In exploratory research on beverages, she found four broad expressions of value;
a. Value is low price.

b. Value is whatever I want in a product.
c. Value is the quality I get for the price I pay and
d. Value is what I get for what I give.
How to increase Net Value
A marketer can increase the net value of a product either by adding benefits or by cutting costs
(or by a combination of the two). Of particular interest to service marketers are the opportunities
to cut for customers by such means as;
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Service Marketing
a. Reducing the amount of time involved in service purchases, delivery and consumption.
b. Minimizing unwanted mental effort or psychological stress involved in obtaining service.
c. Putting out any unwanted physical effort that customers are required to undertake in
order to obtain service.
d. Minimizing unpleasant sensory experiences through such means as creating more

attractive visual environments, noise education, installing furnishing and equipment that
are more comfortable to use, curtailing offensive smells, and ensuring that any foods,
beverages or medicines to be consumed taste nice.
Establishing monetary pricing objectives
Pricing strategy must be a clear understanding of the organization’s objectives. There are three
basic categories of pricing objectives open to a service organization. These are;
a. Revenue oriented objectives: Private sector firms are profit-seeking organizations. Within
certain limits, they attempt to maximize the surplus of income over expenditures. Managers
responsible for public and nonprofit service organizations, by contrast, are more likely to be
concerned with breaking even or keeping the operating deficit within acceptable bounds.
Determining the cost of the pricing equation can be difficult. We’ll look at three different
types of costs;
Fixed costs: Fixed costs are those that would continue (at least in the short run) to be
incurred even if no services were provided. This “institutional overhead” is likely to
include such elements as building rent, depreciation, utilities, taxes, insurance,
administrative salaries, and wages of contract employees who cannot be laid off at short
notice, security, and cost of capital.
Semi-variable cost: Semi-variable cost is those that are related to the number of
customers served or volume or services produced by the organization. Included are
operating costs such as incremental utilities, cleaning at service delivery sites, and wages
and salaries incurred in paying overtime or hiring additional personnel.
Variable costs: Variable costs are those associated with making an additional sale—
such as a new loan at a bank, a single seat in a train or theater, a room in a hotel, or one
more repair job.
b. Operations Oriented Objectives: Some organizations seek to match demand and supply so
as to ensure optimal use of their productive capacity at any given time. Hotels, for instance,
seek to fill their rooms, since an empty room is an unproductive asset. Similarly, professional
firms want to keep their staff members occupied, airlines want to fill empty seats, and repair
shops try to keep their facilities, machines, and workers busy. When demand exceeds
Service Marketing
capacity, however, these organizations may try to increase profits and ration demand by
raising price.
c. Patronage oriented: Not all service organizations suffer from a short-term capacity
constraint. New services, in particular, often have trouble attracting customers. Introductory
price discounts may be used to stimulate trial, sometimes in conjunction with promotional
activities such as contests and giveaways. Firms wishing to maximize their appeal among
specific types of customers need to adopt pricing strategies that recognize differential ability
to pay among various market segments.
Formulating pricing strategy
By now it should be clear that determining pricing strategies in a service organization requires
making decisions on a range of different issues. These, in turn, must be based on both a clear
understanding of the organization’s objectives and sound information on a range of relevant
inputs.
a. How much should be charged for this service?
What costs is the organization attempting to recover? Is the organization trying to

achieve a specific profit margin or return on investment by selling this service?
How sensitive are customers to different prices?
What prices are charged by competitors?
What (discounts) should be offered from basic prices?
Are psychological pricing points (e.g. $4.95 versus $5.00) customarily used?
b. What should be the basis of pricing?

Execution of a specific task.
Admission to a service facility.
Units of time (hour, week, month, year).
Percentage commission on the value of the transaction/
Physical resources consumed.
Geographic distance covered.
Weight or size of object serviced.
Should each service element be billed independently?
Should a single price be charged for a bundled “package”?
c. Who should collect payment?

The organization that provides the service
A specialist intermediary (travel or ticket agent, bank, retailer etc.).
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Service Marketing
How the intermediary should be compensated for this work—flat fee or percentage
commission?
d. Where payment should be made?

The location at which the service is delivered.
A convenient retail outlet or financial intermediary (e.g. bank).
The purchaser’s home (by mail or phone).
e. When should payment be made?

Before or after delivery of the service.
At which times of day.
On which days of the week.
f. How should payment be made?

Cash (exact change or not).
Token (where can these be purchased?)
Stored value card.
Check (how to verify).
Electronic funds transfer.
Charge card (credit or debit).
Credit account with service provider.
Vouchers.
Third-party payment (e.g. insurance company, government agency)?
g. How should price be communicated to the target market?

Through what communication medium? (Advertising, signage, electronic display,
sales people, customer service personnel).
What message content (how much emphasis should be placed on price).
COMMUNICATIONS ISSUES FOR SERVICE MARKETERS
Communication plays a key role in positioning an organization and its products in the market. It
is used to;
a. Inform customers about the firm and its product.
b. Persuade customers that a specific product offers the best solution to a customer’s
needs/
c. Remind customers of product availability and motivate them to act.
Service Marketing
Elements of the Marketing Communication Mix
Most service marketers have access to numerous forms of communication, sometimes referred to
collectively as the marketing communications mix, a subset of the broader marketing mix.
Different elements have different capabilities relative to the types of messages that they can
convey and the market segments which are most likely to be exposed to them. The
communication mix comprises a variety of strategic elements; these are;
a. Personal selling: Personal selling involves interpersonal encounters on a face-to-face (or in

telemarketing, voice-to-voice) basis. This proximity allows the sales representative to tailor
the message to fit the customer’s needs and concerns.
b. Customer service: when a customer has the potential to buy potential to buy several
different products from the same supplier, firms often encourages their customer contact staff
to cross-sell additional services. However, these strategies may fail if not properly planned.
c. Advertising: A broad array of paid advertisement media are available to marketers to act as
communication channels.
Broadcast advertising has traditionally taken place through television and radio, but
exiting new opportunities exist through the new channels offered by the internet and
world web. (Making money on the web P-402).
Print advertising: Print advertising is usually defined as paid messages inserted in

newspapers and magazines;
Printed messages of a much larger format may appear on outdoor media such as bill
boards and posters as well as on pubic transportation vehicles. Electronic displays have
the potential to create striking presentation that include moving images and changing
colors
Another form of advertising, often linked to sales promotion, consists of retail displays
in store windows.
Finally, there is direct marketing, in the form of mail, telemarketing, and fax or E-mail.
This last mentioned group offers the potential for personalized messages sent to highly
targeted micro-segments including one-to-one communications.
d. Promotion: A promotion can be thought of as a communication attached to an incentive,

which often takes the form of a price reduction. The term “promotion” is derived from the
Latin word meaning “to move forward”. An that’s precisely what promotions are designed to
do;
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Service Marketing
e. Corporate design: Another key communication element for service businesses is corporate
design, which refers to the consistent use of distinctiveness colors, symbols, lettering, and
layout on such tangible elements as signage, retail store fronts, vehicles, uniforms and
stationary to provide a unifying and recognizable theme linking all the firm’s operations.
Guidelines for Service Advertising
George and Berry maintain that advertising intangible services performed by fallible and
inconsistent human beings is quite a different thing from advertising physical goods. They
present six guidelines for service advertising based on some of the special characteristics of
services.
a. One is to recognize that service is performance rather than an object.
b. Advertising, they say, should not only encourage customers to buy the service but also
target employees as a second audience, motivating them to deliver high quality service.
c. Service firm should try to use their own employees—rather than professional models—in
their print and broadcast advertisements.
d. Tangible clues should include not only employees but also physical facilities such as
service delivery sites.
e. Another guideline is to capitalize on word-of-mouth advertising by trying to stimulate

this highly credible form of communication. They also urge service advertisers to seek
continuity over time through the use of recognizable symbols, spokes people, slogans,
trademarks, and music.
f. Finally, they declare that when advertising a performance, it’s essential to promise what’s
possible, so as to foster realistic expectations.
Service vs. Packaged Goods
Implication for promotion strategy
Increased use of promotions poses a challenge for service marketers, who have traditionally
lacked the experience and sophistication of other counterparts in packaged goods firms. Several
of the differences distinguishing services from goods have implications for effective and
Service Marketing
appropriate use of short-term promotions in services marketing. The four relevant differences are
given below;
a. Absence of inventories: Since finished services cannot be inventoried, promotions may help
service marketers to shape demand to match the capacity available at any given time. There
are main opportunities for service marketers to design and deliver promotions that
communicate an otherwise mundane price reduction in an exciting and attention-getting
manner. The opportunity is greater for services when a large gap exists between normal
selling price and variable costs, permitting the firm to offer large discounts (or promotions
with a sizable monetary value) to help fill capacity that would otherwise go unused.
Packaged goods promotions by contrast, rarely seek to smooth demand. It’s easier for
packaged goods firms to manage manufacturing capacity in the short run than it is for such
high fixed-cost services as hotels, and airlines to make substantial changes in productive
capacity.
b. Reduced Role for Intermediaries: Another major difference between services and
packaged goods is that fewer services than goods are sold through channel intermediaries.
Packaged goods marketers need to decide how to allocate funds among advertising,
consumer promotion and trade promotion.
36

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COURSE NO-511

Service marketing involves of marketing of something which is

a. Intangibility: Because services are intangible, it is impossible for prospective customers to

Physical representation: American express uses color—gold or platinum—for its credit

Documentation: There are two forms of documentation—past performance and future

Housing and other structures: Rental of offices, warehouses, hotels, motels,

Household operations: Home maintenance and repairs, security, landscaping, and

Recreation and entertainment: Theaters, spectator sports, amusement parks,

Professional business services: Legal, accounting, advertising, marketing, research,

Transportation: Freight and passenger service on common carriers, automobile repairs

Communications: Broadcasting, telephone, fax, computer and Internet services.

Non business organization

Educational: Private grade schools, high schools, colleges, and universities.

Religious: Churches, synagogues, temples, and mosques.

Charitable and philanthropic: Charities, service organizations ( Salvation Army, Red

Professional and trade: Labor unions, certification groups, professional associations

Social: Fraternal organizations, civic clubs, special interest clubs.

Political: Political parties, individual politicians.

Key element of service marketing

There are four core management tasks

a. Managing differentiation against competitors

b. Managing the overall brand image

Difference between product and services

b. Greater involvement of customer in the production process : Performing a service

d. Greater difficulties in maintaining quality control of the standard: Manufactured goods

f. Absence of inventory: Because a service is a deed or performance, rather than a tangible

h. Structure and nature of distribution channel: Unlike manufacturers, which require

Categorizing of service process activities

Who or What is The Direct Recipient of the service?

What is the Nature of the People Possessions

Tangible actions Services directed at people’s Services directed at physical

Passenger transportation Freight transportation

Narrow definition of Marketing

Identifying and selecting Target Segments

A dynamic environment for services

a. Changing pattern of government regulation: Many service industries have

b. Relaxation of professional association standards: Another American initiative, also

d. Computerization and Technological Innovation: New technologies are radically the

g. Manufacturing as service providers: Service profit centers within manufacturing firms

h. Non-business organizations adopt market-focused strategies: Financial pressures

i. The globalization of service business: The internationalization of service companies is

k. Hiring and promotion of innovative mangers: Traditional service industries used to be

Developing a service concept for a specific segment

a. The purpose of using the service

Principal uses of positioning in marketing management

2) Identify market opportunities for;

What segments to target?

b. Redesigning (repositioning) existing products

Eliminate product that

What to offer the product (locations, types of outlet)?

What billing and payment procedures to employ?

What message(s)? Which attributes should be emphasized and which competitors

Which communication channels—personal selling versus different advertising

Steps in developing a positioning strategy

Competitive strategy is often narrowly focused at direct competitors—firms which market

Market analysis Definition and

c. Competitive analysis: Identification and analysis of competitors can provide marketing

Managing demand and managing capacity

Strategies for managing demand

Approaches for managing demand

There are five common approaches to managing demand;

Capacity Situation Relative to Demand

Approaches Used to Insufficient Capacity Sufficient Capacity Excess Capacity