Part 1

FOUNDATIONS
FOR SERVICES
MARKETING

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 Chapter
Introduction to Services 1

 What are services?

 Why services marketing?
 Service and Technology
 Characteristics of Services Compared to
Goods
 Services Marketing Mix
 Staying Focused on the Customer

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 Objectives for Chapter 1:
Introduction to Services
 Explain what services are and identify important trends in
services.

 Explain the need for special services marketing concepts and

practices and why the need has developed and is accelerating.

 Explore the profound impact of technology on service.

 Outline the basic differences between goods and services and

the resulting challenges and opportunities for service
businesses.

 Introduce the expanded marketing mix for services and the

philosophy of customer focus, as powerful frameworks and
themes that are fundamental to the rest of the text.

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 Examples of Service 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
 airline, travel agency, theme park
 Others
 hair styling, pest control, plumbing, lawn maintenance, counseling
services, health club, interior design

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 Introduction

 The services sector is not only the dominant sector in

India’s GDP, but has also attracted significant foreign
investment, has contributed significantly to export and has
provided large-scale employment.
 India’s services sector covers a wide variety of activities
such as trade, hotel and restaurants, transport, storage
and communication, financing, insurance, real estate,
business services, community, social and personal
services, and services associated with construction.

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 Market Size

 The services sector is a key driver of India’s economic

growth.
 According to RBI, in February 2021, service exports stood
at US$ 17.54 billion, while imports stood at US$ 10.61
billion.

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 Industry Developments
 The services* category in India attracted cumulative foreign
direct investment (FDI) worth US$ 85.86 billion between April
2000 and December 2020. The services category ranked 1st
in FDI inflow as per data released by the Department for
Promotion of Industry and Internal Trade (DPIIT).
 In April 2021, the Ministry of Education (MoE) and University
Grants Commission (UGC) started a series of online
interactions with stakeholders to streamline forms and
processes to reduce compliance burden in the higher
education sector, as a follow-up to the government’s focus
on ease of doing business to enable ease of living for
stakeholders.

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 Industry Developments

 On March 17, 2021, the Health Ministry’s eSanjeevani

telemedicine services crossed 3 million (30 lakh)
teleconsultations since its launch, enabling patient-to-
doctor consultations from the confines of their home and
doctor-to-doctor consultations.
 In April 2021, Elon Musk’s SpaceX has started accepting
pre-orders for the beta version of its Starlink satellite
internet service in India for a fully refundable deposit of
US$ 99. Currently, the Department of Telecommunications
(DoT) is screening the move and more developments will
be unveiled soon.

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 Industry Developments

 In December 2020, a cohort of six health-tech start-ups—

AarogyaAI, BrainSightAI, Fluid AI, InMed Prognostics,
Wellthy Therapeutics, and Onward Assist—have been
selected by the India Edison Accelerator, fuelled by GE
Healthcare. India Edison Accelerator, the company's first
start-up partnership programme focused on Indian
mentors, creates strategic partners to co-develop
healthcare solutions.
 The Indian healthcare industry is expected to shift digitally
enabled remote consultations via teleconsultation. The
telemedicine market in India is expected to increase at a
CAGR of 31% from 2020 to 2025.
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  In December 2020, Gamma Skills Automation Training
introduced a unique robotics & automation career launch
programme for engineers, an ‘Industry 4.0 Hands-on Skill
Learning Centre’ located at IMT Manesar, Gurgaon in Haryana.
 In December 2020, the 'IGnITE’ programme was initiated by
Siemens, BMZ and MSDE to encourage high-quality training
and technical education. 'IGnITE' aims to develop highly trained
technicians, with an emphasis on getting them ready for the
industry and future, based on the German Dual Vocational
Educational Training (DVET) model. By 2024, this programme
aims to upskill ~40,000 employees.
 In October 2020, Bharti Airtel entered cloud communications
market with the launch of business-centric ‘Airtel IQ’.
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 Government Initiatives

 Under Union Budget 2021-22, the government allocated

Rs. 7,000 crore (US$ 963.97 million) to the BharatNet
programme to boost digital connectivity across India.
 FDI limit for insurance companies has been raised from
49% to 74% and 100% for insurance intermediates.
 On January 15, 2021, the third phase of Pradhan Mantri
Kaushal Vikas Yojana (PMKVY) was launched in 600
districts with 300+ skill courses. Spearheaded by the
Ministry of Skill Development and Entrepreneurship, the
third phase will focus on new-age and COVID-related
skills. PMKVY 3.0 aims to train eight lakh candidates.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Government Initiatives
 In January 2021, the Department of Telecom, Government of
India, signed an MoU with the Ministry of Communications,
Government of Japan, to strengthen cooperation in the areas
of 5G technologies, telecom security and submarine optical
fibre cable system.
 On November 4, 2020, the Union Cabinet, chaired by the
Prime Minister, Mr. Narendra Modi, approved to sign a
memorandum of understanding (MoU) between the Ministry of
Communication and Information Technology and the
Department of Digital, Culture, Media and Sports (DCMS) of
United Kingdom Government to cooperate in the field of
telecommunications/information and communication
technologies (ICTs).
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
 Government Initiatives
 In October 2020, the government selected Hughes
Communications India to connect 5,000 village panchayats in
border and naxal-affected states and island territories with
satellite broadband under BharatNet project by March 2021.
 In September 2020, the government announced that it may
infuse Rs. 200 billion (US$ 2.72 billion) in public sector banks
through recapitalisation of bonds
 In the next five years, the Ministry of Electronics and
Information Technology is working to increase the contribution
of the digital economy to 20% of GDP. The government is
working to build cloud-based infrastructure for collaborative
networks that can be used for the creation of innovative
solutions by AI entrepreneurs and startups.
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
 On Independence Day 2020, Prime Minister Mr. Narendra Modi
announced the National Digital Health Mission (NDHM) to provide a
unique health ID to every Indian and revolutionise the healthcare
industry by making it easily accessible to everyone in the country. The
policy draft is under ‘public consultation’ until September 21, 2020.
 In September 2020, the Government of Tamil Nadu announced a new
electronics & hardware manufacturing policy aligned with the old policy
to increase the state's electronics output to US$ 100 billion by 2025.
Under the policy, it aims to meet the requirement for incremental human
resource by upskilling and training >100,000 people by 2024.
 Government of India has launched the National Broadband Mission with
an aim to provide Broadband access to all villages by 2022.

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 Broad trends in Service Sector globally
 With more companies offering tiered service based on the calculated profitability
of different market segments, many customers are in fact getting less service than
they have in the past
 Increasing use by companies of self service and technology based service is
perceived as less service because no human interaction or human personalization
is provided
 Customer expectations are higher in all industries because of the excellent service
they receive from some companies
 Organizations have cut costs to the extent that they are too lean and too
understaffed to provide quality service
 The competitive job market results in less skilled people working in frontline
service jobs; talented workers soon get promoted or leave for better opportunities
 Many companies give lip service to customer focus and service quality, but they
fail to provide the training, compensation and support of employees needed to
actually deliver quality service
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 Figure 1.2

Tangibility Spectrum
Salt
 Soft Drinks
 Detergents
 Automobiles
 CosmeticsFast-food
 Outlets
 Intangible
Dominant

Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies

Airlines 
Investment
Management 
Consulting 
Teaching
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 Table 1.1

Eight Central Paradoxes of Technological

Products

Source: D. G. Mick and S. Fournier, “Paradoxes of Technology: Consumer Cognizance, Emotions, and Coping Strategies,” Journal of Consumer
Research 25 (September 1998), pp. 123–47.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 Table 1.2

Goods versus Services

Source: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, “A Conceptual Model of Service Quality and Its Implications for Future Research,” Journal of
Marketing 49 (Fall 1985), pp. 41–50.

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 Why study Services Marketing?

 Service-based economies

 Service as a business imperative in manufacturing and IT

 Deregulated industries and professional service needs

 Services marketing is different

 Service equals profits

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 Characteristics of Services
Compared to Goods

Intangibility Heterogeneity

Simultaneous
Production
and Perishability
Consumption

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 Implications of Intangibility

 Services cannot be inventoried

 Services cannot be easily patented

 Services cannot be readily displayed or communicated

 Pricing is difficult

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 Implications of Heterogeneity

 Service delivery and customer satisfaction depend on

employee and customer actions

 Service quality depends on many uncontrollable factors

 There is no sure knowledge that the service delivered

matches what was planned and promoted

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Implications of Simultaneous 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

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 Implications of Perishability

 It is difficult to synchronize supply and demand with

services

 Services cannot be returned or resold

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 Challenges for Services
 Defining and improving quality
 Designing and testing new services
 Communicating and maintaining a consistent image
 Accommodating fluctuating demand
 Motivating and sustaining employee commitment
 Coordinating marketing, operations, and human resource
efforts
 Setting prices
 Finding a balance between standardization versus
personalization
 Ensuring the delivery of consistent quality

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 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

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 Expanded Mix for Services --
The 7 Ps
 Product
 Price
 Place
 Promotion
 People
 All human actors who play a part in service delivery and thus influence the
buyer’s perceptions: namely, the firm’s personnel, the customer, and other
customers in the service environment.
 Physical Evidence
 The environment in which the service is delivered and where the firm and
customer interact, and any tangible components that facilitate performance
or communication of the service.
 Process
 The actual procedures, mechanisms, and flow of activities by which the
service is delivered—the service delivery and operating systems.

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 Table 1.3

Expanded Marketing Mix for Services

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 Ways to Use the 7 Ps
Overall Strategic Assessment
 How effective is a firm’s
services marketing mix?
 Is the mix well-aligned with
overall vision and strategy?
 What are the strengths and
weaknesses in terms of the
7 Ps?
McGraw-Hill/Irwin
Specific Service Implementation
 Who is the customer?
 What is the service?
 How effectively does the
services marketing mix for a
service communicate its
benefits and quality?
 What changes/
improvements are needed?
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.