Polytechnic University of the Philippines

College of Business Administration

Department of Marketing Management
Sta. Mesa, Manila

Services
Marketing
Learning Module

COMPILED BY: FLORIAN C. CAMIT, DBA

 PREFACE

This is an instructional material for Services Marketing. The author compiled many
studies, principles, from various sources. The references used was cited in the end of the
module.

Moreover, this learning module is intended for marketing management students of

Polytechnic University of the Philippines, with the purpose of making the students capable of
distant learning and self-assessment. Discovering knowledge concepts with minimal
intervention and the less use of information technology (internet) is observe. Materials,
references, learning exercises, and learning activities are provided as tools to hopefully
accomplish this goal. Both basic and important concepts are given emphasis to serve as
framework for the module itself.

Finally, the student is expected to answer the questions at the end of each chapter, any
questions, queries, clarification and recommendation specially from students is welcome, just
send via email at fcamit@yahoo.com.

Regards,

Florian C. Camit, DBA

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 COURSE OUTCOMES

Services has been one of the strongest and fast-growing sectors of the Philippine economy.
Its gross value-added contribution reached to 57% in 2014 (from 36.6% in the 1970s), and it
also grows by an average of 6.3% from 2000 to 2014.

In connection to this trend, this learning material will help students understand the overview
of service marketing. Taking advantage of this unique competitive advantage in the services
sector, the Philippines aims to position itself as the core of services trade in Southeast Asia and
the Asia-Pacific region.

• In this module students will be able to learn the definition and function of service
marketing.
• Learn the basic concepts of Services Marketing, using practical examples of day to day
occurrences of Filipino Consumerism.
• Identify and examine the nature of services
• Demonstrate the difference between Marketing of Services from the Marketing of
Physical goods.
• Learn the evolving environment of services and the importance of service sector to
global economy.
• Describe and integrate the services marketing triangle to service-oriented business
model.
• Integrate the 7P’S of marketing as one of the effective implementing marketing strategy
in Service Marketing.

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 TABLE OF CONTENTS

I Definition of Service Marketing 4

II Concept of Services 8

III How does Services Marketing differ from Physical 12

Goods Marketing?

IV Characteristics of Services 16

V Classification Based on Services Fields 21

VI Classification Based on Services to Customers 25

VII Classification of Services by Christopher Lovelock 27

VIII The Evolving Environment of Services 29

IX The Services Marketing Triangle 39

X The 7P’S of Services Marketing 41

Evaluation 45

References 46

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Learning Outcomes:

After reading this area you will understand the following.

• Learn the definition and function of service marketing.

• Learn the idea of what service is and provide basic examples of it.

COURSE MATERIAL I: Definition of Services Marketing

What is a Service?

Services have traditionally been difficult to define. Complicating matters further is the
fact that the way in which services are created and delivered to customers is often hard to
grasp, since many inputs and outputs are intangible.

Most people have little difficulty creating simple definitions of manufacturing (physical
inputs are processed or assembled in a factory to create goods) or agriculture (live plants are
grown and then harvested for use as food or other purposes), but defining service can elude
them. Here are two approaches that capture the essence.

• A service is an act or performance offered by one party to another. Although the process may
be tied to a physical product, the performance is essentially intangible and does not normally
result in ownership of any of the factors of production.

• Services are economic activities that create value and provide benefits for customers at
specific times and places, as a result of bringing about a desired change in – or on behalf of –
the recipient of the service. More amusingly, services have also been described as ‘something
which can be bought and sold, but which you cannot drop on your foot’.

In a business philosophy, anything that has a need and want could be sold, marketed
and has a specific market to make money out of it. Goods, Services, and Ideas could be
marketed.

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 Many of us, would go out and buy things we need. If we want run out of grocery items,
like soap, toothpaste, mouthwash, or laundry detergent there is always the grocery stores where
we can find such items we need. We go to the isles with our grocery carts and look for them.

But what do we do if we find that we discover that our washing machine broke down? Do
we need to buy another brand-new washing machine? Or find someone to fix them. It is much
cheaper to do the latter.

We look at the mirror and find that our hair is already long, what we do; we need the
service of a barbershop or a hair stylist for that matter.

All we did, is we find the services of a professional, and paid them to solve a problem
that we ourselves need.

So now we can define what is a service? A service is “a deed, a performance, an effort”

(Rathmell; 1966).

If work has been done to clear up the streets of garbage, someone paid the garbage
collector to clean up the streets, (taxes we paid), but this work of “cleaning” up only exist as an
“idea”, it is only our minds that dictates what, how, “clean” it should be, like we need to clean
ourselves and make us fresh, we cannot clean our minds by just our minds, we need a to buy a
physical good, such as a bath soap to do the job.

As Services Marketers, like Mr. Quickie, they cannot put say a “shoe repair” and store it
in a bottle, so when a customer comes for a shoe repair, a bottle is just is needed, the act of
repairing a customer shoes, comes together with a customer on the one hand, and a waiting
customer at the other end. The “production and consumption” must go hand in hand.

The famous English economist, Adam Smith, in his book entitled the “Wealth of Nation”
1776, argued that only physical goods could be owned, acquired, and transfer title to one owner
to another with some value of exchange say money or barter but never a service no matter how
noble the latter is.

Then came the famous French economist, Jean Baptiste argued that some “goods” like
service, production and consumption are deemed inseparable , and in service rendered by a
craftsman, this two, are inseparable and could be considered as a legitimate goods, that could
be sold or bought just like ordinary physical goods.

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 Access to goods (rent), labor, preferred skills, facilities, network, and system are some
Services Marketed.

SMDC, need labor in the form of skilled laborers, engineers, accountants, project
engineers to construct condominiums and houses.

SMDC, need not buy, heavy equipment, but could lease it out to save funds and divert
cash to other more pressing needs to make the projects viable, like spending on marketing
activities to push up sales of condo units.

SMDC, could outsource network and systems to aide in logistics, procurement, and the
use of communication technology equipment.

ACTIVITY 1

Multiple choice: Choose the best answer for the questions below.

1. A service is any act, performance or __________ that one party can offer to another and

that is essentially __________ and does not result in the __________ of anything.

a. product; tangible; ownership

b. experience; tangible; production

c. experience; intangible; ownership

d. product; intangible; ownership

e. thing; of value; transfer

2. Which of the following can NOT be classified as a consumer service?

a. Architecture

b. Telecommunications

c. Restaurant

d. Football match

e. Airline

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3. Which of the following could a retailer of flat screen televisions offer as supplementary

services?

a. Financing

b. Installation

c. In-home consultation

d. After-sales service

e. All of the above

4. Which of the following types of value are NOT provided by services?

a. Time

b. Experiential

c. Place

d. Problem generating

e. Form

5. Services involve actions and performances and as such can easily be inventoried.

a. True

b. False

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Learning Outcomes:

• In this area you will be able to identify and describe the concepts of services to be
familiarized with its nature.
• Describe service based on historical perspective, contemporary perspective and
alternative view.

COURSE MATERIAL II: Concept of Services

Scholars have long debated the nature of services. Some of the earliest attempts to
define services focused on what makes them different from goods. Late-eighteenth and early-
nineteenth century definitions highlighted the nature of ownership and wealth creation. Classical
economists contended that goods were objects of value over which ownership rights could be
established and exchanged. Ownership implied possession of a tangible object that had been
acquired through purchase, barter or gift from the producer or previous owner and was legally
identifiable as the property of the current owner. In contrast, when services were purchased, no
title to goods changed hands.

Historical perspectives

Adam Smith's seminal work, The Wealth of Nations (1776), distinguished between the
outputs of what he termed "productive" and "unproductive" labor. The former, he stated,
produced goods that could be stored after production and subsequently exchanged for money
or other items of value. But unproductive labor, however "honorable, ...useful, or... necessary"
created services that perished at the time of production and therefore did not contribute to
wealth.

French economist Jean-Baptiste Say argued that production and consumption were
inseparable in services, coining the term "immaterial products" to describe them. In the
1920s, Alfred Marshall was still using the idea that services "are immaterial products.”

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 In the mid nineteenth century John Stuart Mill wrote that services are "utilities not fixed
or embodied in any object, but consisting of a mere service rendered ...without leaving a
permanent acquisition."

Contemporary perspectives

When services marketing emerged as a separate sub-branch within the marketing discipline
in the early 1980s, it was largely a protest against the dominance of prevailing product-centric
view. In 1960, the US economy changed forever. In that year, for the first time in a major trading
nation, more people were employed in the service sector than in manufacturing
industries. Other developed nations soon followed by shifting to a service-based economy.

Scholars soon began to recognize that services were important, rather than as some
residual category left over after goods were taken into account. This recognition triggered a
change in the way services were defined. By the mid twentieth century, scholars began defining
services in terms of their own unique characteristics, rather than by comparison with
products. The following set of definitions shows how scholars were grappling with the distinctive
aspects of service products and developing new definitions of service.

• "Goods are produced: services are performed." (Rathmell, 1966)

• "A service is an activity or a series of activities which take place in interactions with a
contact person or a physical machine and which provides consumer satisfaction."
(Lehtinen, 1983)

• "The heart of the service product is the experience of the consumer which takes place in
real time... it is the interactive process itself that creates the benefits desired by the
consumer." (Bateson, 1992)

• "Services are deeds, processes and performances." (Zeithmal and Bitner, 1996)

• "Services are processes (economic activities) that provide time, place, form, problem-
solving or experiential value to the recipient." (Lovelock, 2007)

• "The term 'service'... is synonymous with value. A supplier has a value proposition, but
value actualization takes place during the customer's usage and consumption process."
(Gummesson, 2008)

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Alternative view

A recently proposed alternative view is that services involve a form of rental through
which customers can obtain benefits. Customers are willing to pay for aspirational experiences
and solutions that add value to their lifestyle. The term, rent, can be used as a general term to
describe payment made for use of something or access to skills and expertise, facilities or
networks (usually for a defined period of time), instead of buying it outright (which is not even
possible in many instances).

There are five broad categories within the non-ownership framework

1. Rented goods services: These services enable customers to obtain the temporary right
to use a physical good that they prefer not to own (e.g. boats, costumes)

2. Defined space and place rentals: These services obtain use of a defined portion of a
larger space in a building, vehicle or other area which can be an end in its own right (e.g.
storage container in a warehouse) or simply a means to an end (e.g. table in a
restaurant, seat in an aircraft)

3. Labor and expertise rental: People are hired to perform work that customers either
choose not to do for themselves (e.g. cleaning the house) or are unable to do due to the
lack of expertise, tools and skills (e.g. car repairs, surgery)

4. Access to shared physical environments: These environments can be indoors or

outdoors where customers rent the right to share the use of the environment (e.g.
museums, theme parks, gyms, golf courses).

5. Access to and usage of systems and networks: Customers rent the right to participate in
a specified network such as telecommunications, utilities, banking or insurance, with
different fees for varying levels of access.

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 ACTIVITY 2

Name: ___________________ Course and Subject: ____________________

Based on what you have learned on the concepts of services, identify if the statement
given is TRUE or FALSE. Write your answer on the space provided.

1. _____________ Classical economists contended that goods were objects of value over
which ownership rights could be established and exchanged.
2. _____________ French economist Jean-Baptiste Say argued that production and
consumption were separable in services, coining the term "immaterial products" to
describe them.
3. _____________ The heart of the service product is the experience of the consumer
which takes place in real time.
4. _____________ In a business philosophy, anything that has a need and want could be
sold, marketed, and has a specific market to make money out of it. Goods, Services, and
Ideas could be marketed.
5. _____________ A service is an act or performance offered by one party to another.
Although the process may be tied to a physical product, the performance is essentially
tangible and does not normally result in ownership of any of the factors of production.

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Learning Outcomes:

After reading this chapter you will learn the following.

• Identify and describe the differences between goods and services.

• Be familiar with the basic examples of goods and services.
• Understand that consumers themselves are involved during the service production
process.

COURSE MATERIAL III: How does service/s marketing differ from physical goods
marketing?

Man has five basic senses, namely smell, taste, touch, vision and hearing.

When we buy a perfume, we are attracted the way it is presented, i.e. the wonderful
bottle, with vibrant colors, the solid, lines or shape of the box, and the lovely scented perfume,
that reminds of something, could be scent of or the fragrance of flowers.

When we purchase, something, we use the five basic senses, that help us decide
whether the product is attractive, durable, strong, soft, hard, long, short using the desired
attributes of the product, in resolving and fulfilling the needs or wants of us, as a consumer.

In this manner, we can got hold of the product or goods, we pay for them, and take it
with us, and store it for later use. Such goods like soap, milk, lubricants, are such products that
can stored.

Now, some services we need, like going to a saloon for a haircut, to trim or style our
hair, is quite different from, buying a soap or nails in a hardware store, the uniqueness of
services, is that, no one can cut your hair while you are at home, or somewhere else you have
to go to a saloon for the hair style, compared with buying a soap or soda, you can ask anyone,
to buy it for you because a service cannot be transported.

A person cannot “store” the services of a barber or a hair stylist for future use. It really
cannot, the service for a haircut must be produce or rendered upon to the one who needs a

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haircut and be consumed immediately by the person who needs it. Not like, buying groceries,
where one who needs a carton of milk, one can store it in the fridge for later consumption.

A service for a haircut could not be mass produce, for one particular customer, meaning,
if the person intends to cut his hair or style his hair, 18 times a year , he could not ask to render
18 haircuts in one service, for future use, the service should only be given once. Not like buying
a fruit, say a lemon, you could store a dozen of lemons for future use but never a dozen haircuts
for future consumption.

A hairstylist cannot make a patent for a style of hair he created or fashioned. Each
person has a different way of cutting hair, for that reason alone, it is very hard to distinguish,
whether a style of haircut is a reproduction of another hairstylist, because not every hairstylist
has the same make, in cutting hair, although the end product is the same. Not like a product,
where a specific product or invention could be patented, because, the maker of the product
could be carefully measured, analyze and calculated to a specific measurement, or method, so
no one can copy such product or invention.

Microsoft, software is a classic example, although many of its competitors, reverse

engineer the software, and knew how to come up with the same operating systems, Microsoft
patented its software/operating system used in all of its computers, cell phones to protect its
propriety rights against existing competitors.

Serviced quality of a service is different to control. There are many beauty parlors but
why is it; one has a favorite, saloon? There are many Gas Station or Petrol Station why is it one
has a favorite Petrol Station, where in fact they are selling the same brand of gasoline. There
are many banks, but why it is, there is a favorite Branch of a Bank, where one goes to.

The reason is service quality is different to control. When once comes to Jollibee, or
McDonalds on a certain day, if the one on the counter, has a terrible day, and one customer has
a bad day, then, the customer experience would be quite different. No matter how hard the crew
of Jollibee or McDonald’s service with a “smile”, the customer would also be affected by his
experience on that day. If we put it vice versa, say the security guard of Jollibee or McDonalds,
has a bad day, then the customer will also have a “bad customer experience”, because the
service is “without a smile.”

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 Compare this with making a cake, pastries or sweets. Ingredients is carefully measured,
and process completely followed. No one would like to eat a burnt bread or an unattractive
cake or sour sweets. There must be careful measurements and process to follow, to come up
with a desired and expected result.

Service cost is exceedingly difficult to calculate. When someone orders a coffee, not
one has the same taste or preferences for what coffee should appear or taste like. Just like
some chefs, some prefer more salts, some less in cooking.

Demand for services fluctuates. If say many Doctors and Nurses are present with few
patients, during a certain month, there would be enough doctors to treat a handful of patients.
But during a pandemic, like Covid-19, there would be a shortage of medical health workers
because of the unexpected rise of patients. The services of a particular need could not be
calculated or predicted. Not like in goods, one could easily predict the demand of a certain
good, say during rainy days, there would be a surge in demand for umbrellas or raincoats during
the rainy days not much demand during the hot days or summer months.

Consumers themselves are involved during the service production process. When
somebody buys a snicker, the snicker was already manufactured way months ago or imported
some months ago before it reaches the department store shelves until someone buys them. In a
particular service, say a shoe repair, the customer must go to a shoe store, say Mr. Quickie, to
explain, discuss, and describe to Mr. Quickie, what is to be done to the shoe for repair, could
be a replacement of a sole, or the color or size of slide (zipper) which the customer desire.

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 ACTIVITY 3

Name: ___________________ Course and Subject: ____________________

Give 10 local companies in the Philippines whose core product is a service.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

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Learning Outcomes:

After reading this chapter you will be able to.

• Be familiar with the characteristics of services and their implications for marketing.
• Describe the implications of service characteristics and suggested marketing responses.
• Describe the continuum of products based on their intangibility

COURSE MATERIALS IV: Characteristics of Services

The increasing interest in services sector has drawn the considerable attention to the
discussions over what constitutes a service and whether services marketing is a distinctive
subject to study. Many authors developed definitions of a service; however, given the diversity
of services, it is hard to find any consistent definition which could be applied to all services. Most
definitions focus on the fact that a service is intangible in nature and does not result in the
ownership of anything. According to A. Payne “a service is an activity which has some element
of intangibility associated with it, which involves some interaction with customers or with
property in their possession and does not result in a transfer of ownership.

A change in condition may occur and production of the service may or may not be strongly
associated with a physical product” Ch. Lovelock and J. Wirtz stated that “services are
economic activities offered by one party to another. Often time-based, performances bring about
desired results to recipients, objects, or other assets for which purchasers have responsibility. In
exchange for money, time, and effort service customers expect value from access to goods,
labor, professional skills, facilities, networks, and systems; but they do not normally take
ownership of any of the physical elements involved” P. Kotler suggested that ”a service is an
activity or benefit that one party can offer to another that is essentially intangible and does not
result in the ownership of anything. Its production may or may not be tied to a physical product”.
He has identified four categories of offer, varying from a ‘pure’ good to a ‘pure service’” :

• a pure tangible good such as soap, sugar, tea,

• a tangible good with accompanying services like computers,

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 • a service with accompanying minor goods or services such as airline travel,

• a pure service like baby-sitting.

In practice, it can be very difficult to distinguish services from goods. A good is frequently
purchased with some service component. Similarly, a service is augmented by tangible
evidence added to the service. Thus, instead of analyzing product in terms of its subcategories,
the more relevant concept is to consider ”the offer” proposed to the customer, which might be
either a good, a service or, in most circumstances, combination of both. An illustration of
products depending upon the level of intangibility is shown in Figure below. The concept of
a continuum, ranging from tangible-dominant to intangible-dominant was first suggested by L.
Shostack.

A continuum of products based on their intangibility

Source: G. Lynn Shostack, Breaking Free from Product Marketing, Journal of Marketing,
April 1977.

Services have several distinctive characteristics which differentiate them from goods and
have a number of important marketing implications. The four characteristics of services are:
intangibility, inseparability, heterogeneity, and perishability.

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Intangibility

To a large extent services cannot be experienced by physical senses. They cannot be seen,
tasted, felt, or touched like tangible goods. In fact, many services are difficult to be examined
before they are purchased. The lack of physical evidence increases the level of uncertainty
when the customer is choosing among competing services. In some cases, even after the
service has been delivered, the customer might not fully understand the service performance
(e.g., diagnosis, treatment). Inseparability. Whereas most goods are produced first, then sold
and consumed, most services are sold first and then produced and consumed at the same time.
In many cases customers are present when the service is being produced, so the producer and
customers interact with each other during the service production process. This means that the
service producers play an important role in the service experience for the customer (e.g.,
teaching, consulting).

Heterogeneity

Unlike tangible goods, services are highly variable. This is because services are performances,
frequently produced by the service personnel, which means that the performed services will not
be precisely alike. Thus, the variability of services might result in different levels of service
quality. Another problem is that customers are usually involved in the service production
process, so it can be difficult to carry out monitoring and control to ensure consistent standards
(e.g., hairdressing, baby-sitting).

Perishability

Services differ from goods, as they cannot be saved, stored, resold, or returned. This contrasts
with goods that can be stored in inventory, resold, or returned if the customer is unhappy. An
airline that offers the seats on a given flight, cannot sell those seats after the plane has left.
Similarly, a hotel that offers rooms at a scheduled date, cannot sell them after that. Thus, the
perishability of services results in a greater attention paid to the demand forecasting and
capacity utilization.

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 Table: Implications of service characteristics and suggested marketing responses

Services tend to exhibit four described characteristics, yet any specific service displays
a different combination of each of these factors. For example, a fast-food service is
standardized, possesses tangible elements and is perishable. On the other hand, financial
services are much less tangible, highly varied and can be performed away from the customer.
An understanding of the degree to which a given service possesses any of the distinguished
characteristics is crucial for identifying challenges and designing marketing programs. A service
which is properly analyzed in terms of its characteristics and whose benefits are accurately
assessed might be an important source of competitive advantage.

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 ACTIVITY 4

Name: ___________________ Course and Subject: ____________________

Multiple choice: Services have several distinctive characteristics, write the best answer on the
questions below.

1. Which of the following is not a distinct characteristic of services _____?

a. inseparability
b. perishability
c. intangibility
d. inconsistency
e. variability
2. Services are typically produced and consumed simultaneously. This is an example of the
_____ characteristic of services.
a. inseparability
b. simultaneously
c. perishability
d. variability
e. intangibility
3. Services cannot be stored. This describes the _____ characteristic of services.
a. variability
b. intangibility
c. perishability
d. inconsistency
e. inseparability
4. Because a physical product does not exist, the ________ of the service provider's are
especially important.
a. characters
b. colors
c. logo
d. brand image
e. facilities
a. inseparability
5. The most important determinant of service quality is:
a. Reliability
b. Assurance
c. Tangibles
d. Responsiveness

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Learning Outcomes:

This area will help you understand the following concept.

• Comprehensive examples of service based on service fields.

• Describe the different service fields and their basic ideas.

COURSE MATERIAL V: Classification Based on Service Fields

Classifications Based on Services Fields

A. Health Care Services – these services cater to the health and well being of sick and
healthy person.

Examples:

San Juan Medical Hospital Value Care

Philippine General Hospital Intellicare

B. Financial Services – these caters to the financial needs of institution or private

individuals, say banks, cooperatives, savings and loan associations, thrift banks, rural
banks. Pawnshops, money transfers and remittance company.

Examples:

BDO Universal Bank, Inc,

Villarica Pawnshop

M. Lhuiller Jewellers

Palawan Remittance Center

Bank of the Philippine Islands

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 C. Knowledge Services – provides expertise and technical as well as manpower services
to companies.

Examples:

Staff Builders

Jobstreet.com

IT Staff Specialist

SGV

D. Travel and Hospitality Services – helps hospitality to passengers, commuters,

transients, expats, and tourists.

Examples:

Manila Hotel

Negros Navigation

Cebu Pacific

Raja Travel

Tours

E. Entertainment Services – provides entertainment to customers

Examples:

GMA 7

YouTube

Twitter

Tiktok.

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 F. Information Services – provides data, numbers, facts and figures to certain or specific
industries,

Examples:

National Statistics Office

National Science Council Board

PAGASA

National Library

NEDA

G. Supply Services – provides energy, food, basic industrial or consumer needs.

Examples:

MWSS

PLDT

MERALCO

NFA National Food Authority

NGA National Grain Authority

H. Personal and Maintenance Services - provides personal and maintenance services of

institutions or private individuals.

Examples:

ABC Manpower Agency Inc. Phils.

Staff builders

POEA

JAD GTC Manpower Inc

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Governmental, Quasi –Governmental, and Nonprofit Services

- Provides social services and social work for free to society and country.
Examples – Philippine National Police, Bureau of Fire Protection, GSIS, PhilHealth.

ACTIVITY 5

Aside from the mentioned examples above, give at least two more examples of companies that
falls under the following category:

1. Health Care Services

a.
b.
2. Financial Services
a.
b.

3. Knowledge Services
a.
b.
4. Travel and Hospitality Services
a.
b.

5. Entertainment Services
a.
b.

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Learning Outcomes:

This area will help you understand the following concept.

• Comprehensive examples of service based on services to customers.

• Describe the different services to customer and their basic ideas.

COURSE MATERIAL VI: Classification Based on Services to Customers

1. Consumer Services – provided to customers who are purchasing for their own not
intended for reselling, for their own personal needs or consumption.

Examples:

SM Department Stores – caters to various customer needs, like clothing/apparel, groceries,

food,

Jollibee

Starbucks

SM Mall of Asia

Landmark Department Stores

2. Business-to-business services - provided to customers who are purchasing on behalf

of their organization.

Examples:

Alibaba.Com

National Food Authority

Aling Puring’s PureGold Club.

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 ACTIVITY 6

Name: ___________________ Course and Subject: ____________________

Look for a current article, journal, or news report that addresses a services marketing issue,
then write the following below: (You may include news report from television or radio.)

1. Summary of the of the key points of the article.

2. Personal reaction to the article based on the marketing perspective gained during the
course.

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Learning Outcomes:

This area will help you understand the following concept.

• Describe the classification of services by Lovelock

• Identify the difference between the services based on nature of service act, type of
relationship that the service organization has with its customers, scope for customization
and judgment in delivery system, nature of demand and supply for the service, and
methods of service delivery.

COURSE MATERIAL VII: Classification of Services by Christopher Lovelock

a. Nature of Serviced Act – personal/impersonal. Some business model needs a personal

relationship as a marketing strategy to attract or gain customers, e.g. Hair salon, or
some banks use a client based product offering tailor fit to the needs of its client,
Impersonal serviced such as used of technology based, like ATMs, on line banking,
negates human intervention but delivers fast and convenience to the customer.
b. Type of relationship that the service organization has with its customers –
transactional/relationship. In a Business to Business type of customer, like system
selling, a transactional relationship usually happens, this is so because of the complexity
and time saving process that is needed to close a sale while in a relationship selling, this
is usually done in Business to Consumer as in the case of a so called “suki”, in a market
place, wherein a Filipino consumer building a relationship for years with a seller there by
gaining his trust and confidence in the buying process.
c. Scope for Customization and Judgment in Delivery System. Again, it is a challenge
for customizing a service for one, the human being, is not a machine that can be
program or computer that has a predictable output, external variables affect people in
the organization, just like in a pandemic, the challenge of going to work, transportation
poses a big challenge to companies to provide a means of transportation to its large
work force.
d. Nature of demand and supply for the service. The demand for a certain service is
really unpredictable, say an owner of a Hair Salon, Could not predict the weather, if it
rains, affecting the customer, making hard for them to come for a haircut, therefore, at
that moment, there is an oversupply of hairstylist doing nothing all throughout the day.

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 e. Methods of Service Delivery – fast delivery/ fresh/timely. Fruits and vegetables have
to be delivered fresh and on time. Important documents must arrive on time. But a
challenge of daily traffic is constantly beheading the owners of the businesses how to go
about delivering what was promised, on time, fresh and timely.

ACTIVITY 7

Name: ___________________ Course and Subject: ____________________

Choose a service company you are familiar with and describe your experience with
them. What do you observe? How do they treat the customers or clients?

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Learning Outcomes:

This area will help you understand the following.

• Importance of the service sector in the global economy and learn the evolving
environment of services.
• Identify the different forces for change in service management.

COURSE MATERIALS VIII: The Evolving Environment of Services

Around the world, innovative newcomers offering new standards of service have
succeeded in markets where established competitors have failed to please today’s demanding
customers. Many barriers to competition are being swept away, allowing the entry of eager
newcomers, ranging from tiny start-up operations like garden maintenance or baby-sitting
services to well-financed multinational firms importing service concepts previously developed
and tested in other countries.

Established businesses often find it hard to maintain customer loyalty in the face of
competition from innovative firms offering new product features, improved performance, price
cutting, clever promotions and the introduction of more convenient, technology driven delivery
systems. Depending on the industry and the country in which the service firm does business,
the underlying causes of such changes may include any of the twelve forces listed in table
below. Like the factors underlying 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.

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 Forces for Change in Service Management

Changing Patterns of Government Ownership and Regulation

Traditionally, many service industries were highly regulated. Government agencies set
price levels, placed geographic constraints on distribution strategies and, in some instances,
even defined the product attributes. Since the late 1970s, there has been a trend in the USA
and Europe towards partial or complete deregulation in a number of major service industries.
Further relaxation of regulations on trade in services between members of the European Union
has already started to reshape the economic landscape of Europe. Meanwhile, in Latin America,
democratization and new political initiatives are creating economies that are much less
regulated than in the past. Reduced government regulation has already eliminated or minimized
many constraints on competitive activity in such industries as airfreight, airlines, railways, road
transport, banking, securities, insurance and telecommunications. Barriers to entry by new firms
have been dropped in many instances, geographic restrictions on service delivery have been
reduced, there is more freedom to compete on price and existing firms have been able to
expand into new markets or new lines of business.

But reduced regulation is not an unmixed blessing. Fears have been expressed that if
successful firms become too large – through a combination of internal growth and acquisitions –

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there may eventually be a decline in the level of competition. Conversely, lifting restrictions on
pricing may benefit customers in the short run as competition cuts prices, but may leave
insufficient profits for needed future investments. For instance, fierce price competition among
American domestic airlines led to huge financial losses within the industry, bankrupting several
airlines. This made it difficult for unprofitable carriers to invest in new aircraft and raised
worrying questions about service quality and safety.

Profitable foreign airlines, such as British Airways and Singapore Airlines, gained market
share by offering better service than American carriers on international routes. Of course, not all
regulatory changes represent a relaxation of government rules. In many countries, steps
continue to be taken to strengthen consumer protection laws, to safeguard employees, to
improve health and safety, and to protect the environment.

Privatization

The term ‘privatization’ was coined in Great Britain to describe the policy of transforming
government organizations into investor-owned companies. Led by Britain, privatization of public
corporations has been moving rapidly ahead in a number of countries across Europe, as well as
in Canada, Australia, New Zealand and, more recently, in some Asian and Latin American
states. The transformation of such service operations as national airlines, telecommunication
services and utilities such as gas, electricity and water into private enterprise services has led to
restructuring, cost-cutting and a more market-focused posture. When privatization is combined
with a relaxing of regulatory barriers to allow entry of new competitors, as in the British
telecommunications or water industries, the marketing implications can be dramatic. The
privatization of utilities has led to a trend towards international ownership, which many
authorities see as irreversible.

Privatization can also apply to regional or local government departments. At the local
level, for instance, services such as refuse collection and cleaning have been shifted from the
public sector to private firms. Not everyone is convinced, however, that such changes are
beneficial to all sectors of the population. When services are provided by public agencies, there
are often cross-subsidies, designed to achieve broader social goals. With privatization, there are
fears that the search for efficiency and profits will lead to cuts in service and price increases.
The result may be to deny less affluent segments the services they need at prices they can
afford. Hence the argument for continued regulation of prices and terms of service in key

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industries such as healthcare, telecommunications, water, electricity and passenger rail
transportation.

Technological Innovations

New technologies are radically altering 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. Companies operating information-based services, such as financial service
firms, are seeing the nature and scope of their businesses totally transformed by the advent of
national (or even global) electronic delivery systems, including the Internet and its best-known
component, the World Wide Web.

For instance, Amazon.com delivers the same product to customers as a traditional

bookshop, but in a very different context. Although booklovers may complain that it cannot offer
the chance to browse the shelves of a friendly bookshop and leaf through a book, Amazon.com
offers far more choice and convenience, global access and often lower prices. The launch of
Amazon’s Kindle e-reader, followed by Apple’s iPad, enabled the download of books, starting a
transformation in the way people consume literature. Although people had been downloading
music for years, the success of Apple’s iPod and iTunes store made this means of consuming
music commonplace, with a far-reaching effect on the music industry.

Technological change affects many other types of services, too, from airfreight to hotels
to retail stores. Express courier firms such as TNT, DHL, FedEx and UPS, for instance,
recognized that the ability to provide real-time information about customers’ packages had
become as important to success as the physical movement of those packages. Technology
does more than enable the creation of new or improved services. It may also facilitate re-
engineering of such activities as delivery of information, order-taking and payment, enhance a
firm’s ability to maintain more consistent service standards, permit the creation of centralized
customer service departments, allow replacement of personnel by machines for repetitive tasks
and lead to greater involvement of customers in operations through self-service and the
Internet.

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Growth of Service Chains and Franchise

Networks More and more services are being delivered through national or even global chains.
Respected brand names such as Burger King, Body Shop, Crédit Suisse, Hertz, Ibis, Lufthansa
and Mandarin Oriental Hotels have spread far from their original roots. In some instances, such
chains are entirely company-owned; in others, the creator of the original concept has entered
into partnerships with outside investors. Franchising involves the licensing of independent
entrepreneurs to produce and sell a branded service according to tightly specified procedures. It
is an increasingly popular way to finance the expansion of multi-site service chains that deliver a
consistent service concept.

Large franchise chains are replacing (or absorbing) a wide array of small, independent service
businesses in fields as diverse as bookkeeping, car hire, dry-cleaning, hairdressing,
photocopying, plumbing, fast-food restaurants and estate agency services. Among the
requirements for success are the creation of mass media advertising campaigns to promote
brand names nationwide (and even worldwide), standardization of service operations,
formalized training programs, a never-ending search for new products, continued emphasis on
improving efficiency and dual marketing programs directed at customers and franchisees,
respectively.

Internationalization and Globalization

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 today have extensive foreign route networks. Numerous financial service firms,
advertising agencies, hotel chains, fast-food restaurants, car hire agencies and accounting firms
now operate on several continents. This strategy may reflect a desire to serve existing
customers better, to penetrate new markets, or both. The net effect is to increase competition
and encourage the transfer of innovation in both products and processes from country to
country. Many well-known service companies in Europe are foreign-owned; examples include
Citicorp, McDonald’s, Andersen Consulting, TNT, Harrods and Four Seasons Hotels. In turn,
Americans are often surprised to learn that Burger King and Holiday Inn are both owned by
British companies. A walk round many of the world’s major cities quickly reveals numerous
famous service names that originated in other parts of the globe. Franchising allows a service

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concept developed in one country to be delivered around the world through distribution systems
owned by local investors.

Internationalization of service businesses is being facilitated by free trade agreements – such

as those between Canada, Mexico and the United States (NAFTA), between the South
American countries comprising Mercosur or Pacto Andino, and, of course, between the 27
current member states of the European Union. However, there are fears that barriers will be
erected to impede trade in services between free trade blocs and other nations, as well as
between the blocs themselves. Developing a strategy for competing effectively across
numerous different countries is becoming a major marketing priority for many service firms.

Pressures to Improve Productivity

With increasing competition, often price-based, has come greater pressure to improve
productivity. Demands by investors for better returns on their investments have also fueled the
search for new ways to increase profits by reducing the costs of service delivery. Historically,
the service sector has lagged behind the manufacturing sector in productivity improvement,
although there are encouraging signs that some services are beginning to catch up, especially
when allowance is made for simultaneous improvements in quality. Using technology to replace
labor (or to permit customer self-service) is one cost-cutting route that has been followed in
many industries. Re-engineering of processes often results in speeding up operations by cutting
out unnecessary steps. However, managers need to be aware of the risk that cost-cutting
measures driven by finance and operations personnel without regard for customer needs may
lead to a perceived deterioration in quality and convenience.

The Service Quality Movement

The 1980s were marked by growing customer discontent with the quality of both goods and
services. Many of the problems with manufactured products concerned poor service at the retail
point-of-purchase and with difficulties in solving problems, obtaining refunds or getting repairs
made after the sale. Service industries such as banks, hotels, car hire firms, restaurants and
telephone companies were as much criticized for human failings on the part of their employees
as for failures on the technical aspects of service. With the growing realization that improving
quality was good for business and necessary for effective competition, a radical change in
thinking took place.

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Traditional notions of quality (based on conformance to standards defined by operations
managers) were replaced by the new imperative of letting quality be customer driven, which had
enormous implications for the importance of service marketing and the role of customer
research in both the service and manufacturing sectors.10 Numerous firms have invested in
research to determine what their customers want on every dimension of service, in quality
improvement programs designed to deliver what customers want, and in regular measurement
of how satisfied their customers are with the quality of service received.

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 the
use of a physical product without actually owning it. Long-term leases may involve use of the
product alone – such as a lorry – or provision of a host of related services at the same time. In
road transport, for instance, full-service leasing provides almost everything, including painting,
washing, maintenance, tires, fuel, license fees, road service, substitute vehicles and even
drivers. In the UK, as the home improvement and the do-it-yourself markets have grown, many
entrepreneurs have gone into business to rent electrical and mechanical equipment ranging
from carpet cleaners and hedge trimmers to power tools, wallpaper strippers and cement
mixers.

Personnel, too, can be hired for short periods rather than employed full-time, as evidenced by
the growth of firms supplying temporary workers, from secretaries to security guards (whom
Americans sometimes refer to jokingly as ‘rent-a-cops’). Europe is following practices that have
long prevailed in Canada and the United States, with more students becoming part-time
workers.

Manufacturers as Service Providers

Service profit centers within manufacturing firms are transforming many well known companies
in fields such as computers, motor vehicles 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.

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Several large manufacturers (including General Electric, Ford and Mercedes) have become
important players in the global financial services industry as a result of developing credit
financing and leasing divisions. Similarly, numerous manufacturing firms now seek to base
much of their competitive appeal on the capabilities of their worldwide consultation,
maintenance, repair and problem-solving services. In fact, service profit centers often contribute
a substantial proportion of the revenues earned by such well-known ‘manufacturers’ as IBM,
Hewlett-Packard and Rank Xerox.

Pressures on Public and Nonprofit Organizations to Find New Income Sources

The financial pressures confronting public and nonprofit organizations are forcing them not only
to cut costs and develop more efficient operations, but also to pay more attention to customer
needs and competitive activities. In their search for new sources of income, many ‘nonbusiness’
organizations are developing a stronger marketing orientation, which often involves rethinking
their product lines, adding profit-seeking services such as shops, retail catalogues, restaurants
and consultancy, becoming more selective about the market segments they target and adopting
more realistic pricing policies.

As the costs of staging soccer matches has risen (not least because of the sharp rise in
players’ salaries), many football clubs across Europe have become highly marketing-oriented. A
growing number engage in significant merchandising activities, with shops selling goods from
replica football strips to babywear. New or renovated stadia now feature restaurants and special
spectator boxes that can be sold or rented to companies.

Hiring and Promotion of Innovative Managers

Traditionally, many service industries were very inbred. Managers tended to spend their entire
careers working within a single industry, even within a single organization. Each industry was
seen as unique and outsiders were suspect. Relatively few managers possessed graduate
degrees in business, such as an MBA, although they might have held an industry-specific
diploma in a field such as hotel management or healthcare administration. In recent years,
however, competition and enlightened self-interest have led companies to recruit better qualified
managers who are willing to question traditional ways of doing business and able to bring new
ideas from previous work experience in another industry. In retail banking, for instance, senior
managers in fields such as marketing are sometimes recruited from fast-moving consumer

36 | P a g e
goods companies. And within many firms, intensive training programs are now exposing
employees at all levels to new tools and concepts.

None of the industries in the service sector find themselves untouched by some of the factors
described above. In many industries, notably transportation and financial services, several
elements are converging – like a gale, a new moon and heavy rains – to produce a flood tide
that will wreck organizations whose management seeks to maintain the status quo. Other
managers with more foresight recognize, like Shakespeare’s Brutus, that a tide taken at the
flood can lead to fortune. But where does this tide lead and what does it imply for the role of
marketing in the service sector? We’ve described some of the challenges facing service
managers, but these changes also bring opportunities.

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 ACTIVITY 8

Name: ___________________ Course and Subject: ____________________

Interview a business owner/personnel engaged in services, (e.g. On-line delivery, food panda,
SPA, Resto Bar) and ask them some insights on how they handle challenges during this
Pandemic.

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Learning Outcomes:

After reading this area of the module you will be able to.

• Identify and describe the components of the services market triangle.

• Differentiate internal marketing, external marketing, and interactive marketing.

COURSE MATERIAL IX: The Service Marketing Triangle

In the book of entitled “Services Marketing”, Integrating Customer Focus Across the Firm
by Valerie A. Zeithaml, Mary Jo Bitner and Dwayne D. Gremler, developed a so-called Service
Marketing Triangle, as a tool to develop a Service marketing Strategy.

It has three sides or focus that must be align to each sides of a service marketing
strategy, Company to Customer is the External Marketing or “making the promise”/External
marketing made by the Company to the Customer, say in BDO, “we find ways”, promise made
to its customer to help in a creative way difficulties or demands of its customers, Mercury Drug’s
“ang gamot ay lagging bago” tells it all that they will not sell expired medicines or health

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products. On the other side of the Triangle, Employees and Customers, wherein, the Employees
are task to “Delivering the promise” or the “interactive marketing”. And the last sides of the
Triangle wherein the Employees and the Company is the “enabling the promise” or the Internal
Marketing wherein, the Company and Employees would interact and communicate on how to
deliver what was communicated externally to the Customers, by making policy and bench marks
or controls to deliver what was promised to the customers. A promise of “maasahan Motolite”,
24/7 fast and efficient delivery of a battery whenever and wherever needed, So the company,
Motolite must provide delivery services and vehicles, dispatchers on call 24/7

ACTIVITY 9

Name: ___________________ Course and Subject: ____________________

During this pandemic, what business model in the service industry is doing good or you
think is profitable? What business model in the service industry is not doing well? (answer using
Service Marketing Triangle Theoretical Framework).

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Learning Outcomes:

After reading this area of the module you will be able to.

• Identify and describe the components of the 7P’s of Services Marketing.

• Integrate the 7P’s to create a marketing strategy for a service-oriented business model.

COURSE MATERIAL X: The 7P’s of Services Marketing

In the 1980’s, AMA Conference, decided to add and formulated the 7p’s of marketing
(Process, Physical Evidence, People) to compliment the 4p’s of Marketing (Price, Place,
Promotion, Product) develop by Edmund Jerome McCarthy an American professor and author,
“Basic Marketing: A Managerial Approach “ , 1960, then popularized by Philip Kotler,
”Marketing Management”2000, p.9

The Marketing strategy for services includes the 7’ps of Services Marketing, using a
combination of the 7’ps is a good source for boosting sales, increasing market penetration,
product retention, thereby increasing profits in the long run.

Promotion. In this Marketing Strategy, the business of service needs to employ marketing
promotions to boost sales, such as Special offers, Advertisements of the product, direct
marketing, some games or competition, or going into joint ventures.

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Price. Some pricing strategies include, price skimming, wherein, the product would sell high,
and gradually lowers to some price points wherein the customer perceives the price to be just
and acceptable. Others include, price penetration, to acquire large market share (lowering the
price), value-based pricing, wherein, the emphasis is on the products market value.

Physical Evidence. The building itself (such as prestigious offices or scenic headquarters). ...

The interior of any service environment is important. ...

Packaging.

Internet/web pages.

Paperwork (such as invoices, tickets, and dispatch notes).

Brochures.

Furnishings.

Process. Standardization & Service Delivery.

Again, let us reiterate that standardization and service delivery is a challenge to Services,
because external factors like traffic, manpower, are so much variable and can really affect the
process of delivery and production of a service. Metro Manila and high density areas is a
challenge for a delivery of a package door to door, an employee could be sick or terminated,
and this would affect the delivery and production of services to customers.

People. The employees, organization culture, customer service, the way a company handles
customer relationship management, is crucial to Service Marketing, because they directly affect
the “customers-interactive marketing”, to deliver what is promise-external marketing to its
targeted customers.

Product. This includes quality of customer satisfaction and customer experience in rendering
the service which the customer paid for.

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Place. This includes the accessibility of the service to its target customers, where are they
located, the distribution channels the company used to deliver the services promised. This also
includes cyber space or websites used to access the services needed.

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 ACTIVITY 10

Name: ___________________ Course and Subject: ____________________

Choose a company with service-oriented business model and describe their marketing strategy
using the 7P’s. (e.g. Mr. Quickie, what can you say about their Place, Promotion etc.)

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 Evaluation

GRADE/SCORE

FIRST HALF Activity 1

Activity 2

Activity 3

Activity 4

Activity 5

SECOND HALF Activity 6

Activity 7

Activity 8

Activity 9

Activity 10

FINAL GRADE/SCORE

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 REFERENCES

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 41. ^ McCarthy, Jerome E. (1964). Basic Marketing. A Managerial Approach. Homewood,
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48. ^ Fine, S.,Social Marketing, Allyn and Bacon, 1991, Chapter 9

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