Marketing of

Services
Unit 1

Prof. Debjani Chakraborty

Chapter Contents
• Concepts and Issues of Services Marketing.
• Service, core and supplementary services.
• Classification and characteristics of services.
• Service levels and delivery.
• Emergence of the service economy.
• Factors affecting growth of the service sector.
• Strategic Issues in Services Marketing.
Why Study Services?
• Services Dominate Economy in Most Nations

• Most New Jobs are Generated by Services

• Fastest Growth Expected in Knowledge-Based Industries
• Many New Jobs are Well-Paid Positions Requiring Good
Educational Qualifications
Contribution of Services Industries to Global GDP
Definition of Service Marketing:

• Service marketing is marketing based on relationship and

value. It may be used to market a service or a product. With
the increasing prominence of services in the global economy,
service marketing has become a subject that needs to be
studied separately.
• Marketing services is different from marketing goods because
of the unique characteristics of services namely, intangibility,
heterogeneity, perishabil­ity and inseparability.
• In most countries, services add more economic value than
agriculture, raw materials and manu­facturing combined. In
developed economies, employment is dominated by service
jobs and most new job growth comes from services.
• Jobs range from high-paid professionals and technicians to
minimum-wage positions. Service organizations can be of any
size from huge global corporations to local small businesses.
Most activities by the government agencies and non-profit
organizations involves services.

• The American Marketing Association, defines services as

activities, benefits, or satisfactions that are offered for sale or
provided with sale of goods to the customer, that is, pre-sale
and after-sales services. Berry states, ‘while a product is an
object, devise or physical thing, a service is a deed,
performance, or an effort’.
Features of Services:
• 1. Intangibility:
• A physical product is visible and concrete. Services are intangible.
The service cannot be touched or viewed, so it is difficult for
clients to tell in advance what they will be get­ting. For example,
banks promote the sale of credit cards by emphasizing the
conveniences and advantages derived from possessing a credit
card.

• 2. Inseparability:
• Personal services cannot be separated from the individual.
Services are created and consumed simultaneously. The service is
being produced at the same time that the client is receiving it; for
example, during an online search or a legal consultation. Dentist,
musicians, dancers, etc. create and offer services at the same time.
• 3. Heterogeneity (or variability):
• Services involve people, and people are all different. There is a strong
possibility that the same enquiry would be answered slightly differently by
different people (or even by the same person at different times). It is
important to minimize the differences in performance (through training,
standard setting and quality assurance). The quality of services offered by
firms can never be standardized.

• 4. Perishability:
• Services have a high degree of perishability. Unused capacity cannot be
stored for future use. If services are not used today, it is lost forever. For
example, spare seats in an aeroplane cannot be transferred to the next
flight. Similarly, empty rooms in five-star hotels and credits not utilized are
examples of services leading to economic losses. As services are activities
performed for simultaneous consumption, they perish unless consumed.
• 5. Changing demand:
• The demand for services has wide fluctuations and may be
seasonal. Demand for tourism is seasonal, other services such
as demand for public transport, cricket field and golf courses
have fluctuations in demand.

• 6. Pricing of services:
• Quality of services cannot be standardized. The pricing of
services are usu­ally determined on the basis of demand and
competition. For example, room rents in tourist spots
fluctuate as per demand and season and many of the service
providers give off-season discounts.
• 7. Direct channel:
• Usually, services are directly provided to the customer. The
customer goes directly to the service provider to get services
such as bank, hotel, doctor, and so on. A wider market is
reached through franchising such as McDonald’s and
Monginis.
• A service consists with two product
element to perform it function.
• The two product elements are core
product and supplementary services.
• Core product is the core set of benefits
and solutions delivered to customer while
the supplementary services are service-
related activities that surround the core
product.
• “Core and supplementary services are
generally referred to as the Flower of
Service and can help firms to improve
their service levels and overall client
satisfaction.”
• Supplementary services augment the
core service offering, by facilitating its
use and enhancing its value and
appeal.
• There are two types of supplementary services
• Facilitating: either needed for service delivery, or help in the use
of the core product
• Enhancing: add extra value for the customer

In a well-managed service organization, the petals and core are

fresh and well-formed
Market positioning strategy helps to determine which
supplementary services should be included
60993-MKTG_2013_011 SM_Product.pdf
• Supplementary service can be graphed into eight categories:

• Information,
• Consultation,
• Order- taking,
• Hospitality,
• Safekeeping,
• Exceptions,
• Billing and
• payment.

• Not every core product – whether a good or a service – is surrounded by

supplementary elements from all eight clusters, of course.

• Core products can be explained as a basic form of a product. To put it

simply, core products are the main reasons for customers purchasing
from a business. For Hilton Hotels & Resorts core product is hotel rooms
that customers stay in for a specific period of time.
Four broad categories of services
• Based on differences in nature of service act
(tangible/intangible) and who or what is direct recipient of
service , there are four categories of services:
• People processing
• Possession processing
• Mental stimulus processing
• Information processing

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Four broad categories of services

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People processing
People Processing
Customers must:

 physically enter the service factory

 co-operate actively with the service
operation
Managers should think about process
and output from customer’s perspective
 to identify benefits created and non-
financial costs:
Time, mental, physical effort

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Possession Processing
 Possession Processing
 Customers are less involved
compared to people
processing services
 Involvement may be limited
to just dropping off the
possession
 Production and consumption
are separable

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Mental Stimulus Processing
● Mental Stimulus Processing
● Ethical standards required when
customers who depend on such
services can potentially be
manipulated by suppliers
● Physical presence of recipients
not required
● Core content of services is
information-based
Can be ‘inventoried’’

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Information Processing
 Information Processing
 Information is the most intangible
form of service output
 May be transformed into
enduring forms of service output
 Line between information
processing and mental stimulus
processing may be blurred.

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 Services Pose Distinctive Marketing Challenges

• The common differences are:

• Most service products cannot be inventoried
• Intangible elements usually dominate value creation
• Services are often difficult to visualize and
understand
• Customers may be involved in co-production
• People may be part of the service experience
• Operational inputs and outputs tend to vary more
widely
• The time factor often assumes great importance
• Distribution may take place through nonphysical 24

channels
Powerful Forces Are Transforming
Service Markets
Forces Transforming the Service Economy
Social Business Advances in
Changes Trends IT

Government
Globalization
Policies
● New markets and product categories
● Increase in demand for services
● More intense competition

Innovation in service products & delivery systems, stimulated by better

technology

Customers have more choices and exercise more power

Success hinges on:

● Understanding customers and competitors
● Viable business models
● Creation of value for customers and firm
Forces Transforming the Service Economy (1)
Social Business Advances
Changes in
Trends
IT
Government
Globalization
Policies

● Changes in regulations
● Privatization
● New rules to protect customers,
employees, and the environment

● New agreement on trade in services

 Forces Transforming the Service Economy (2)
Social Business Advances
Changes in
Trends
IT
Government
Globalization
Policies
● Rising consumer expectations
● More affluence
● Increased desire for buying experiences vs.
things
● Rising consumer ownership of high tech
equipment
● Easier access to more information
● Immigration
● Growing but aging population
 Forces Transforming the Service Economy
(3)
Social Business Advances
Changes in
Trends
IT
Government
Globalizatio
Policies n

● Push to increase shareholder value

● Emphasis on productivity and cost savings
● Manufacturers add value through service and
sell services

● More strategic alliances

● Focus on quality and customer satisfaction
● Growth of franchising
● Marketing emphasis by nonprofits
Forces Transforming the Service Economy
(4)
Social Business Advances in
Changes Trends IT

Governmen
t Globalization
Policies

● Growth of Internet
● Greater bandwidth
● Compact mobile equipment
● Wireless networking
● Faster, more powerful software
● Digitization of text, graphics, audio, video
Forces Transforming the Service Economy (5)
Social Business Advances
Changes in
Trends
IT
Government
Globalization
Policies

● More companies operating on transnational

basis

● Increased international travel

● International mergers and alliances
● “Offshoring” of customer service
● Foreign competitors invade domestic markets
 Problems in Marketing
Services:
• 1. A service cannot be demonstrated.

• 2. Sale, production and consumption of services takes place

simultaneously.

• 3. A service cannot be stored. It cannot be produced in

anticipation of demand.
• 4. Services cannot be protected through patents.

• 5. Services cannot be separated from the service provider.

• 6. Services are not standardized and are inconsistent.

• 7. Service providers appointing franchisees may face

problems of quality of services.
• 8. The customer perception of service quality is more directly
linked to the morale, motivation and skill of the frontline
staff of any service organization.
 BASIS FOR
GOODS SERVICES
COMPARISON
Meaning Goods are the Services are amenities,
material items that facilities, benefits or
can be seen, touched help provided by other
or felt and are ready people.
for sale to the
customers.
Nature Tangible Intangible
Transfer of ownership Yes No
Evaluation Very simple and easy Complicated
Return Goods can be Services cannot be
returned. returned back once
they are provided.
Separable Yes, goods can be No, services cannot be
separated from the separated from the
seller. service provider.
Variability Identical Diversified
Storage Goods can be stored Services cannot be
for use in future or stored.
multiple use.
Production and There is a time lag Production and
Consumption between production Consumption of
and consumption of services occurs
goods. simultaneously.
• Service level describes, usually in measurable terms, the services a
network service provider furnishes a customer within a given time
period. When used as a call center metric, service level measures the
percentage of incoming calls that an agent answers live in an
established amount of time.

• For example, a service level of 90% can be achieved if 9 out of every

10 phone calls are answered before the established time limit.

• There are multiple approaches to determining service levels, each

involving how call centers define abandoned calls. They may be
treated, for instance, as:

• Missed opportunities (counted against the service level)

• Ignored (unavoidable and a part of doing business)
• Completed (where the caller would have been serviced properly
without a premature abandonment of the call when the wait time is
reasonably short).