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SM

McGraw-Hill © 2000 The McGraw-Hill Companies

McGraw-Hill © 2000 The McGraw-Hill Companies
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SM Module – I

Introduction to services: Concepts, Contribution

& reasons for the growth of services sector,
Difference in goods and service in marketing,
Myths about services, characteristics of
services, concept of service marketing
triangle, Service marketing mix, GAP Models
of service quality. Marketing challenges in
service induatry.

McGraw-Hill © 2000 The McGraw-Hill Companies

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SM Introduction

• Services are deeds, processes and

performance
• Intangible, but may have a tangible
component
• Generally produced and consumed at the
same time
• Need to distinguish between SERVICE and
CUSTOMER SERVICE

Dr. Saleem G Sonnekhan – SDMCET- DHW

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SM Challenges for Services

• Defining and improving quality

• Communicating and testing new services
• Communicating and maintaining a consistent
image
• Motivating and sustaining employee commitment
• Coordinating marketing, operations and human
resource efforts
• Setting prices
• Standardization versus personalization
Dr. Saleem G Sonnekhan – SDMCET- DHW
McGraw-Hill © 2000 The McGraw-Hill Companies
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Examples of Service
SM
Industries
• Health Care
– hospital, medical practice, dentistry, eye care
• Professional Services
– accounting, legal, architectural
• Financial Services
– banking, investment advising, insurance
• Hospitality
– restaurant, hotel/motel, bed & breakfast,
– ski resort, rafting
• Travel
– airlines, travel agencies, theme park
• Others:
– hair styling, pest control, plumbing, lawn maintenance, counseling
services, health club

Dr. Saleem G Sonnekhan – SDMCET- DHW

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Figure 1-1
SM Tangibility Spectrum
Salt
 Soft Drinks

 Detergents
 Automobiles
 Cosmetics
Fast-food
 Outlets

 Intangible
Dominant

Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies

Airlines 
Investment
Management 
Dr. Saleem G Sonnekhan – SDMCET- DHW
Consulting 
McGraw-Hill
Teaching
© 2000 The McGraw-Hill Companies
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SM Why Services Marketing

• Service –Based Economies.

• Service as a business imperative in
manufacturing and information Technology.
• Deregulated Industries and professional
service needs.
• Services marketing is different
• Service Equals profits

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SM Service and Technology

• Potential for New service offerings

• New ways to deliver service.
• Enabling both customers and Employees.
• Extending the Global Reach of services.
• The Internet is a service
• The Paradoxes and Dark side of
Technology and service.

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Characteristics of Services
SM
compared to Goods.

Intangibility Heterogeneity

Simultaneous
Production Perishability
and
Consumption
Dr. Saleem G Sonnekhan – SDMCET- DHW
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SM Implications of Intangibility

 Services cannot be inventoried

 Services cannot be patented
 Services cannot be readily displayed
or communicated
 Pricing is difficult

Dr. Saleem G Sonnekhan – SDMCET- DHW

McGraw-Hill © 2000 The McGraw-Hill Companies
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SM Implications of Heterogeneity

 Service delivery and customer satisfaction

depend on employee actions
 Service quality depends on many
uncontrollable factors
 There is no sure knowledge that the service
delivered matches what was planned and
promoted

Dr. Saleem G Sonnekhan – SDMCET- DHW

McGraw-Hill © 2000 The McGraw-Hill Companies
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Implications of Simultaneous
SM
Production and Consumption

 Customers participate in and affect the

transaction
 Customers affect each other
 Employees affect the service outcome
 Decentralization may be essential
 Mass production is difficult

Dr. Saleem G Sonnekhan – SDMCET- DHW

McGraw-Hill © 2000 The McGraw-Hill Companies
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SM Implications of Perishability

 It is difficult to synchronize supply and

demand with services
 Services cannot be returned or resold

Dr. Saleem G Sonnekhan – SDMCET- DHW

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SM Table 1-2
Services are Different
Goods Services Resulting Implications
Tangible Intangible Services cannot be inventoried.
Services cannot be patented.
Services cannot be readily displayed or communicated.
Pricing is difficult.
Standardized Heterogeneous Service delivery and customer satisfaction depend on
employee actions.
Service quality depends on many uncontrollable factors.
There is no sure knowledge that the service delivered
matches what was planned and promoted.
Production Simultaneous Customers participate in and affect the transaction.
separate from production and Customers affect each other.
consumption consumption Employees affect the service outcome.
Decentralization may be essential.
Mass production is difficult.
Nonperishable Perishable It is difficult to synchronize supply and demand with
services.
Services cannot be returned or resold.

Dr. Saleem G Sonnekhan – SDMCET- DHW

McGraw-Hill © 2000 The McGraw-Hill Companies
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Figure 1-5
SM The Services Marketing Triangle
Company
(Management)

Internal External
Marketing Marketing
“enabling the “setting the
promise” promise”

Employees Interactive Marketing Customers

“delivering the promise”
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
Dr. Saleem G Sonnekhan – SDMCET- DHW
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Ways to Use the
SM
Services Marketing Triangle
Overall Strategic Specific Service
Assessment Implementation
• How is the service • What is being promoted
organization doing and by whom?
on all three sides of • How will it be delivered
the triangle? and by whom?
• Where are the • Are the supporting
weaknesses? systems in place to deliver
• What are the the promised service?
strengths?
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© 2000 The McGraw-Hill Companies
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Figure 1-6

SM The Services Triangle

and Technology
Company

Technology

Providers Customers

McGraw-Hill Dr. Saleem© G Sonnekhan

2000 – SDMCET- DH
The McGraw-Hill Companies
 18

SM Services Marketing Mix:

7 Ps for Services

• Traditional Marketing Mix

• Expanded Mix for Services: 7 Ps
• Building Customer Relationships Through
People, Processes, and Physical Evidence
• Ways to Use the 7 Ps

Dr. Saleem G Sonnekhan – SDMCET- DHW

McGraw-Hill © 2000 The McGraw-Hill Companies
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SM Traditional Marketing Mix

• All elements within the control of the firm that

communicate the firm’s capabilities and image to
customers or that influence customer satisfaction
with the firm’s product and services:
 Product
 Price
 Place
 Promotion
Dr. Saleem G Sonnekhan – SDMCET- DHW
McGraw-Hill © 2000 The McGraw-Hill Companies
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SM Expanded Mix for Services --

the 7 Ps

• Product
• Price
• Place
• Promotion
• People
• Process
• Physical Evidence

McGraw-Hill Dr. Saleem G Sonnekhan – SDMCET- DHW© 2000 The McGraw-Hill Companies
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Table 1-3
SM Expanded Marketing Mix for
Services
PRODUCT PLACE PROMOTION PRICE
Physical good Channel type Promotion Flexibility
features blend

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms
Packaging Outlet location Sales Differentiation
promotion
Warranties Transportation Publicity Allowances
Product lines Storage
Branding

Dr. Saleem G Sonnekhan – SDMCET- DHW

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Table 1-3 (Continued)
SM Expanded Marketing Mix for
Services
PEOPLE PHYSICAL PROCESS
EVIDENCE
Employees Facility design Flow of activities

Customers Equipment Number of steps

Communicating Signage Level of customer

culture and values involvement

Employee research Employee dress

Other tangibles

Dr. Saleem G Sonnekhan – SDMCET- DHW

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 23

SM Ways to Use the 7 Ps

Overall Strategic Specific Service

Assessment Implementation
• How effective is a firm’s • Who is the customer?
services marketing mix? • What is the service?
• Is the mix well-aligned • How effectively does the
services marketing mix for a
with overall vision and
service communicate its
strategy? benefits and quality?
• What are the strengths and • What changes/improvements
weaknesses in terms of the are needed?
7 Ps?

Dr. Saleem G Sonnekhan – SDMCET- DHW

McGraw-Hill © 2000 The McGraw-Hill Companies
 24
Services Marketing Triangle
SM
Applications Exercise
• Focus on a service organization. In the context
you are focusing on, who occupies each of the
three points of the triangle?
• How is each type of marketing being carried out
currently?
• Are the three sides of the triangle well aligned?
• Are there specific challenges or barriers in any of
the three areas?

Dr. Saleem G Sonnekhan – SDMCET- DHW

McGraw-Hill © 2000 The McGraw-Hill Companies
 25

SM
GAP Models of service quality
The Customer Gap
Expected
Service

GAP

Perceived
Service

Part 1 Opener
McGraw-Hill Dr. Saleem G Sonnekhan – SDMCET- DHW
© 2000 The McGraw-Hill Companies
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SM The Providers Gaps

Gap1: The Listing Gap

Gap2: The Services design and Standards gap
Gap 3: The Service Performance Gap
Gap 4: The Communication Gap

McGraw-Hill Dr. Saleem G Sonnekhan – SDMCET- DHW

© 2000 The McGraw-Hill Companies
 27
Gap 1: The Listing Gap
SM Customers Expectations
•Inadequate marketing research orientation.
•Insufficient marketing research
•Research not focused on service quality
•Inadequate use of market research
•Lack of Upward communication
Gap •Lack of interaction between management & customers
• Insufficient communication between contact employee and
mangers
1 •Too any layers between contact personal and top management

•Insufficient relationship focus

•Lack of market segmentation
•Focus on transactions rather than relationships
•Focus on new customers rather than relationship customers
•Inadequate service recovery
•Lack of encouragement to listen to customers complaints
•Failure to make amends when thing go wrong
•No appropriate recovery mechanisms in place for service
failures
Company Perceptions of customers
expectations
McGraw-Hill Dr. Saleem G Sonnekhan – SDMCET- DHW
© 2000 The McGraw-Hill Companies
 Gap2: The Services design and Standards gap28
SM Customers – driven service
designs & Standards
• Poor service Design
– Unsystematic new service development process
– Vague, undefined service designs
Gap – Failure to connect service design to service positioning
• Absence of customer-drive standards
2 – Lack of customer-drive service standards
– Absence of process management to focus on customer requirements
– Absence of formal process for setting service quality goals.
• Inappropriate physical evidence and servicescape
– Failure to develop tangibles in line with customers expectation
– Servicescape design that does not meet customer and employee needs.
– Inadequate maintenance and updating of the servicescape.
Management perceptions of
customers expectations
McGraw-Hill Dr. Saleem G Sonnekhan – SDMCET- DHW
© 2000 The McGraw-Hill Companies
 Gap 3: The Service Performance Gap29
SM Customer-driven service
Designs and standards
• Deficiencies in human resource policies
– Ineffective recruitment
– Role ambiguity and role conflict
Gap – Poor employee- technology job fit
– Inappropriate evaluation and compensation system.
– Lack of empowerment, perceived control, and teamwork
3 • Failure to match supply and demand
– Failure to smooth peaks and valleys of demand
– Inappropriate customer mix.
– Over-reliance on price to smooth demand
• Customer not fulfilling roles
– Customers lack knowledge of their roles and responsibilities
– Customers negatively impact each other
• Problems with service intermediaries
– Channel conflict over objectives and performance
– Channel conflict over costs and rewards
– Difficulty controlling quality and consistency tension empowerment and control

Service delivery
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Service Delivery
SM • Lack of integrated services marketing communication.
– Tendency to view each external communication as independent
– Not including interactive marketing in communication plan
– Absence of strong marketing program
• Ineffective management of customer expectations
Gap – Not managing customer expectation through all forms of communciation
– Not adequately educating customers
4 • Overpromising
– Overpromising in advertising
– Overpromising in personal selling
– Overpromising through physical evidence cues
• Inadequate horizontal communications
– Insufficient communication between sales and operations
– Insufficient communication between advertising and operations
– Difference in policies and procedures across branches or units
• Inappropriate pricing
– High price that raise customers expectations
– Prices that are not tied to customer perceptions of value
Dr. Saleem G Sonnekhan – SDMCET- DHW
McGraw-Hill External communications to customers
© 2000 The McGraw-Hill Companies
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SM Gaps Model of Service Quality

CUSTOMER Expected
Service

Customer
Gap
Perceived
Service

External
COMPANY Service Delivery Communications
GAP 4 to Customers
GAP 1 GAP 3
Customer-Driven Service
Designs and Standards

GAP 2
Company Perceptions of
Consumer Expectations
Part 1 Opener
McGraw-Hill Dr. Saleem G Sonnekhan – SDMCET- DHW
© 2000 The McGraw-Hill Companies
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Gaps Model of Service
SM
Quality

• Customer Gap:
• difference between expectations and perceptions
• Provider Gap 1:
• not knowing what customers expect
• Provider Gap 2:
• not having the right service designs and
standards
• Provider Gap 3:
• not delivering to service standards
• Provider Gap 4:
• not matching performance to promises
Part 1 Opener
McGraw-Hill Dr. Saleem G Sonnekhan – SDMCET- DHW
© 2000 The McGraw-Hill Companies