1.

Introduction

• In India, Services already contribute over 50% in the GDP… and is increasing !
• Services employ over 60% of the working population !!  that is why interest in services
marketing is growing
• Types of Services activities :
S.no. Type Eg.
1 Govt. Military, Hospital, Courts, Police, Municipal
2 Private non-profit Museum, Temples, Library, Institutes
3 Service business Airlines, Banks, IT/ITES, Construction, Insurance
4 Service component Real estate, Automobile, Computer, Electronics,
in manufacturing Appliances
 1. Introduction

• Services (def.) : is any act or performance 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.
• Usually, a Business offer = Product + Service; though the proportion may vary from 100%
Product to 100% Service
• Classification of offer based on the above:
S.no. Type Eg.
1 Pure tangible good Soap, toothpaste, grocery
2 Tangible good with accompanying service Automobile, Computer, Real estate
3 Good & service in similar proportion Restaurant, Construction, Transport
4 Major service with accompanying goods Airlines, Cinema, Bank, Legal
5 Pure service Education, Physician, Parlour

• Implication of such classifications  study the company-client interactions and conditions

 to decide upon marketing strategy
 2. Characteristics of services & their marketing
implications
• Services have four major characteristics:
1. Intangibility
2. Inseparability
3. Variability
4. Perishability

• Each of the above has significant implication on marketing, which shall be discussed in
detail.
 2. Characteristics of services & their marketing implications
Intangibility
• Services are intangible  cannot be seen, tasted, felt, heard, or smelled before they are
bought !
• Therefore to reduce uncertainty and instil confidence buyers want to ensure service quality.
• This is done by  drawing inferences about the service quality from the place, people,
equipment, communication material, symbols, and the price
• Therefore the service provider’s important task is to highlight the evidence !
‐ to tangibilize the intangible
‐ Check the contrast: “goods marketers have to bring in abstract ideas to earn top of the
mind recall whereas services marketers are challenged to put physical evidence to their
abstract offer !!!”

• How do services companies tangibilize/provide the feel of the offer ?

• Eg.: how could a bank show evidence of being a “fast bank” ?
 2. Characteristics of services & their marketing implications
Intangibility

S.no. Parameter Bank Real estate company

1 Place Clean queues, helpful reception, clear
counter nos.
2 People Should be busy not doing time-pass; must
be courteous
3 Equipment Computers, servers, internet should be
modern up-to-date
4 Communication Advertisements should give clear message
material of speed and efficiency;
5 Symbols Of speed, like cheetah or flacon or Maruti
6 Price Guarantee speed and willing to pay price,
i.e. Rs 10. credited in customer a/c if the
delay > 10 min
 2. Characteristics of services & their marketing implications
Inseparability
• Services are produced and mostly consumed simultaneously (unlike physical goods which
are stocked in terms of raw material, WIP, finished goods, etc.)
• If the service is rendered by a person then the provider becomes a part of the service; like
bank person, parlour, doctor, etc.
• Since both the service-provider and the client are simultaneously present, their interaction
during the service  very important for the long-term relationship !
• Both the parties affect the outcome of the services rendered  therefore it is of utmost
importance to manage the temperament of both the parties!!
• Sometimes clients prefer a specific service provider among many persons  resulting in
skewed demand. Eg. A particular surgeon, a specific hair stylist, a popular artist, etc.
‐ Service provider sets differential pricing for specialist service provider
‐ Multiple / more nos. of client may be attended to at the same time
‐ Time allocation per client may be reduced to increase the throughput
‐ Continuous training of the service providing personnel to make them more efficient
 2. Characteristics of services & their marketing implications
Variability

• Services are highly variable since they depend on who provides them and when and where
they are provided.
• Eg.: the quality of heart transplant depends on which surgeon who performs the surgery.
And in case of a particular heart surgeon, the quality shall depend upon his mental state
and energy levels during each operation.
• Eg.: similarly, for large complicated projects, contractor like L&T is preferred over other
contractors. Also the quality of project shall depend upon the site management & team!
• Service buyers are aware of this variability  therefore they do lot of homework (like
references and site visits) before finalizing
• Steps toward quality control:
1. Detailed procedure for recruitment & training. Eg. Airlines, Hotels, Banks.
2. Monitoring and evaluating customer satisfaction, complaints and taking corrective
actions.
3. Standardizing the service operations flowchart  trying to reduce subjectivity due to
humans atleast “behind the line of visibility”
2. Characteristics of services & their marketing implications
Variability: eg. of a service operations flowchart
 2. Characteristics of services & their marketing implications
Perishability

• Services cannot be stored !!!

• That’s the reason of no-refund/deduction-in-refund in case of no-show in travel, hotel
booking, etc.
• Perishability is a big problem when there is demand fluctuation.
• Eg.:
1. Public transport has to deploy more trains/buses during peak traffic hours.
2. Multiplex cinema and restaurants have higher rates during the weekends.
• Various strategies have been proposed to meet to provide better match of demand and
supply in a service business;
1. On demand side
2. On supply side
 2. Characteristics of services & their marketing implications
Perishability
On demand side
S.no. Strategy
1 Differential pricing
2 Non peak demand
creation
3 Complimentary services
for the waiting customers
4 Reservation system
Eg.
Pubs offer ‘happy hours’ during weekdays
McDonalds started offering breakfast
items; and ATM by banks
Lounges to sit until the restaurant table is
ready
Complex algorithms deployed for
international aviation
 2. Characteristics of services & their marketing implications
Perishability

On supply side

S.no. Strategy Eg.

1 Part-time employees
2 Peak-time throughput
3 Increased customer
participation
4 Sharing of men and
machines
Malls deploy part-time staff during week
ends
Restaurants deploy additional manpower
to increase throughput in peak-time
Customers fill forms in banks or hospitals
Construction companies move men and
machines to the site with high work-load
 3. Marketing strategies for service firms

• Though banks, airlines and hotels have been utilizing marketing techniques.
• Services marketing, in general, has lagged behind manufacturing firms in their use of
marketing management; reasons :
1. Many service firms are small like small contractors, barber, car repair.
2. Professional service providers like doctors, advocates, CAs, etc. thought it was
unethical or below dignity to use marketing!
3. Services businesses like hospitals, schools etc. have such high demand that they never
felt the need of marketing
4. Many large service firms are proprietor-owned and do not use modern management
techniques, eg. Large construction contractors, restaurants
 3. Marketing strategies for service firms

• Most importantly, services businesses are more difficult to manage using traditional
marketing approach; reasons :
1. Goods manufactured are fairly standard whether the customer buys it or doesn’t
2. In services marketing there are multiple instances which impact the clients psychology :
‐ the interaction between the client and the service provider
‐ multiple service providers
‐ Mood/energy of the service provider
‐ the environment,
‐ waiting time,
‐ observing/interacting with other customers, etc.

• Thus the service outcome is influenced by a host of variable elements.

• Elements in service encounter  systems approach  flowchart of activities
3. Marketing strategies for service firms
Elements in service encounter  systems approach
 3. Marketing strategies for service firms

• Services businesses have three types of marketing – External marketing, Internal marketing
& Interactive marketing

S.no. Type Eg.

1 External
2 Internal
3 Interactive
Normal work by the company to
communicate, price, promote the service
to the customers
Work done by the company to train and
motivate its employees to serve
customers well
Describes the employee's’ skill in serving
the client, and help create the
perception of satisfaction in the client’s
mind
3. Marketing strategies for service firms
 3. Marketing strategies for service firms

• The satisfaction of the client depends upon his perception of service quality.
• How does the customer judge/evaluate the service quality?
1. Technical quality: was the surgery successful? Was the apartment handed over as
promised?
2. Functional quality: was the behaviour of surgeon/staff cordial? Was the response of
the real-estate firm professional, honest, transparent?

• Based on difficulty in evaluation, the Services/Products are classified as :

1. Search quality  buyer can evaluate before purchase
2. Experience quality  difficult to evaluate before but can be done after usage
3. Credence quality  difficult to evaluate even after consumption/experience

• Classification based on the above: next slide….

3. Marketing strategies for service firms
 3. Marketing strategies for service firms

• The services are generally in experience or credence category  customers feel more RISK in
purchase decision !
• This has implications on the marketing strategy as following:
1. Customers rely more on the word of mouth than on the advertisements  how to
satisfy the customers so that they spread positive references/feedback ?
2. Customers rely heavily on the physical cues, personnel, environment to make
judgements  how to improvise these facets so that the customer is comfortable and
satisfied ?
3. Customers become highly LOYAL to the service provider if satisfied  this is the WISH
for every marketer that the customers remain loyal… so how to satisfy the customer ?

• Further service companies have three tasks of:

1. Increasing competitive differentiation
2. Increasing their service quality
3. Increasing their productivity
 4. Managing differentiation

• To put in simple words it is difficult to differentiate services !

• The customers view a service as fairly homogenous  they care less about the provider
than the price !!
• How does a service company in the business of – bank, construction, real estate, airlines,
mobile telephone, electricity, mall, etc. differentiate itself ?

• Differentiation on the basis of:

1. Offer
2. Service delivery
3. Image
 4. Managing differentiation

1) Offer
• Should include innovative features to distinguish it from competitor offer.
• Offer = primary package + secondary package
• Primary package = what customers expects (basic air travel)
• Secondary package = innovative features (choice of food; air-to-ground phone; in-flight
entertainment; frequent fliers scheme; etc.)
• Biggest problem is such innovations are easily copied !!!
• Inspite of this, Attitude of improvement, regular research, introduction of service innovation,
shall certainly provide a competitive edge in the short term.
• This shall help create reputation and perception of being innovative  will lead to customer
satisfaction & loyalty.
 4. Managing differentiation

2) Service delivery
• Service delivery could be differentiated in three ways (also known a 3-Ps of service
marketing) :
1. through People : having more reliable and capable people in customer-contact
2. through Physical environment : more attractive, comfortable and soothing
environment in which the service is provided
3. through Process : design superior delivery process, which provides an unique
advantage to the customers.

3) Image
• Drive a message through symbols and branding.
• Symbols/logo should convey what the company stands for  this instils confidence in the
customer’s sub-conscious mind
4. Managing differentiation
Image
 recap…. Marketing strategies for service firms

• The services are generally in experience or credence category  customers feel more RISK in
purchase decision !
• This has implications on the marketing strategy as following:
1. Customers rely more on the word of mouth than on the advertisements  how to
satisfy the customers so that they spread positive references/feedback ?
2. Customers rely heavily on the physical cues, personnel, environment to make
judgements  how to improvise these facets so that the customer is comfortable and
satisfied ?
3. Customers become highly LOYAL to the service provider if satisfied  this is the WISH
for every marketer that the customers remain loyal… so how to satisfy the customer ?

• so the moot questions are :

1. How to retain customers?
2. How to improve satisfaction?
3. How to make customers LOYAL?
 recap... Managing differentiation

• This could be achieved through three tasks :

1. Increasing competitive differentiation
2. Increasing their service quality
3. Increasing their productivity

• The customers view a service as fairly homogenous  they care less about the provider
than the price  therefore differentiate
• How does a service company in the business of – bank, construction, real estate, airlines,
mobile telephone, electricity, mall, etc. differentiate itself ?
• Differentiation on the basis of:
1. Offer
2. Service delivery
3. Image
 6. Managing service quality

• One of the most important ways to differentiate  by delivering consistently higher quality
service than competitors
• Also, higher service quality  increases satisfaction of customers  higher retention 
improved customer loyalty  higher margins and/or consistent sales  word of mouth 
increase in sales

• Customer satisfaction : Perceived service > Expected service

Dissatisfaction : Perceived service < Expected service
Customer delight : Perceived service >> Expected service

• Expectation of service is formed by : word of mouth, past experience, firm’s advertisement

• In order to bridge the gap between Perceived service and Expected service, companies need
to analyse & evaluate the entire value-chain.
• Zeithaml, Parsuraman, Berry, proposed service-quality model in 1985.
6. Managing service quality (Zeithaml, Parsuraman, Berry, proposed service-quality model in 1985)
 6. Managing service quality
The model identifies five gaps which causes unsuccessful delivery & therefore dissatisfied
customers :

S.no. Gap between Implications Eg. of apartment purchase

1 Customer Management must interpret the Sales person must note down in
expectation & customer’s expectation as correctly detail the specific requirements in
management as possible the layout design of the apartment.
perception And make realistic commitments.
Customer usually gets many surprises
during possession.
2 Management Service SOPs are prepared by the Real estate company’s sales person
perception & the company i.e. there is no external should pass-on the specific layout
prepared service interface. So this gap could be requirements to the operations team
specification reduced to negligible
 6. Managing service quality
S.no. •Gap
S.no.between Implications Eg. of apartment purchase
•Gap between
3 Service specs &
•Implications
This gap pertains to operations Small requirements are usually
the actual department of the company. Ideally ignored under the excuse of
delivery of there should not be any gap. unavailability of material or colour or
service the required size
4 Actual delivery & This gap arises due to marketing Marketing communicates delivery
the company’s team’s perception of the SOPs, service time & fulfilment of the specific
external specs and actual delivery. This gap is requirements on the based on the
communication very important since it influences the internal feedback. Usually they have to
customer’s expectations. “eat their words”
5 Perceived service Expected service: marketing has part This is catch22 situation for marketing
& the expected influence in its formation in setting the right expectations!
service Perceived service: operations team is Ideally; Perception > Expectation >
primarily responsible alongwith Competitors' delivery
marketing’s communication.