Unit One

Understanding Concepts of
Services Marketing

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 What is a Service?
 A service is an act or performance offered by one
party to another. (Christopher Lovelock)
 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 the
recipient of the service.

 Services are deeds, processes, and performances.

Services are not tangible things that can be touched,
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seen, and felt, but rather are intangible deeds and
performances. (Zeithaml and Bitner)
 What is a Service?
 A service is an activity or series of activities of more or
less intangible nature that normally, but not necessarily,
take place in interactions between customer and service
employees and/or physical resources or goods and/or
systems of the service provider, which are provided as
solutions to customer problems. (Christian Gronroos)
 Services include all economic activities whose output is
not a physical product, is generally consumed at the time
it is produced, and provides added value in forms that
are essentially intangible concerns of its first
purchaser.(Quinn, Baruch, and Paquette)
 Services are activities, benefits or satisfaction which
are offered for sale or provided in connection with sale
of goods”. (AMA)

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 What is a Service?
 A service is intangible and perishable. It is an occurrence or
process that is created and used simultaneously. While the
consumer cannot retain the actual service after it is produced,
the effect of the service can be retained. (Sasser, Olsen, and
Wyckoff)
 A service is a time-perishable, intangible experience
performed for a customer acting in the role of co-
producer. (James Fitzsimmons)

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 Conceptualizing The Service ‘Offering’

 Core services vs. augmented or supplemental

services
 Charles Revson of Revlon : ‘In the factory we

make cosmetics; in the drug store we sell hope.’

 The augmented product, supplementary,
peripheral and facilitating: offer additional
benefits.
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Conceptualizing The Service ‘Offering’

 The ‘augmented product’ for services is

usually in the form of further services
and these are also referred to as form of
additional benefits such as:
 Credit and financing,
 Fast and reliable delivery,
 Free-phone,
 Supportiveness, and
 Repair and maintenance.

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Conceptualizing service ‘offerings’

Examples of Core Benefits of Services:

 Rail travel – safe and reliable transportation

 Tax Consultant – peace of mind

 Education Course – career enhancement, self-actualization

 Hotel– hospitality, rest and

recuperation/recovery/convalescence
 Hairdresser – feel more attractive, confidence-booster.

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 Concepts of Tangible and Intangible Dimensions

 The tangible/intangible dimensions as a basis for

conceptualizing different types of services, simple
to complex.
 Customer expectations have two dimensions:
instrumental and psychological aspects. (Gronroos)
 The ‘instrumental’ dimension: the ‘what’ of service
delivery.
 The psychological dimension: the ‘functional’ aspects or
‘how’ of service delivery
 Create good ‘functional’ quality as well as ‘technical’
quality and so contribute to the overall image of the
service package and service company.

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 Tangible and Intangible Dimensions of Service Delivery

Tangible Elements Intangible Elements

(Relatively Easy To Measure) ( Relatively Difficult To Measure)

Physical facilities Image

Credit facilities Congenial atmosphere
Speed of delivery Security/confidentiality
Technical expertise/support Advice/guidance
Appearance of staff Competence of staff
Responsiveness
Accessibility/courtesy
Individual customer service

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 Various Forms of Services
1. Service as an Organization
 that is the entire business or not-for-profit structure that resides
within the service sector.
 For example, a restaurant, an insurance company, a charity.
2. Service as Core Product
• The commercial outputs of a service organization such as a bank
account, an insurance policy or a holiday
3. Service as product augmentation
• Any peripheral activity designed to enhance the delivery of a core
product.
• For example, provision of a courtesy car, complimentary coffee at
the hairdressers.
4. Service as Product Support
• any product- or customer-oriented activity that takes place after
the point of delivery.
• For example, monitoring activities, a repair service, up-dating
facilities.
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Industries Classified Within The Service Sector
 Transportation
 Public utilities
 Communication
 Wholesale and retail trade
 Finance and banks
 Insurance
 Real estate
 Hotels
 Theatre halls
 Auto repair
 Health services
 Legal services
 Federal and state government
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 Services Vs Customer Service
• Services are provided for sale by a company.
• Customer service is the service provided in
support of a company’s core products. It
includes:
• Answering questions
• Taking orders
• Dealing with billing issues
• Handling complaints
• Scheduling maintenance or repairs
• Quality customer service is essential to
building customer relationships

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 Cont.
Services are what a business provides, things like
cleaning or food delivery.
Customer service is how well you deliver those
services and how much you care about your
customers' experience with them.

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 What is Services Marketing?
Definition of service Marketing
 Services marketing is a form of marketing businesses that
provide a service to their customers use to increase brand
awareness and sales. Unlike product marketing, services
marketing focuses on advertising intangible transactions that
provide value to customers.
 Services marketing is an organizational function and a set of
processes for identifying or creating, communicating, and
delivering value to customers and for managing customer
relationship in a way that benefit the organization and stake-
holders.(AMA)
14 Unit-1 Concepts in Service Marketing
 Why Services Marketing?
Many forces led to the growth of services marketing.
1. A Service Based Economy
 Economic importance of services can be explained

by the following::
The service sector represents major share of GDP
The service sector has become a major employer
Trade in services is growing world wide

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 Why Services Marketing?
2. Services as a business imperative in Manufacturing and
IT
 Manufacturing and technology industries revenues and
profit are coming from services
 Customers not only expect excellent, high-quality goods;
they also expect high levels of services all with them.
 As manufacturers and IT companies become more and more
service-focused, the need for special concepts and
approaches for managing and marketing services becomes
even more apparent.
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 Cont....
3.Services Marketing Is Different
 More variable exist in the marketing mix of services

than for consumers goods.

 Marketing and operations are more closely linked.

 Customer/employee interface is high

 Pricing of services is difficult.

 Promotional price cuts tended to erode positioning

and image.
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Differences In Goods Vs. Services Marketing
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

(variable) 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 separate Simultaneous Customers participate in and affect the transaction.

from consumption production and Customers affect each other.
consumption Employees affect the service outcome.
(inseparable) 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

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 The Services Marketing Triangle

• The services marketing triangle shows the three interlinked

groups that work together to develop, promote and deliver
services.
The key players are:
 The company
 The customers, and
 The providers
 There are three types of marketing that must be successfully
carried out for a service to succeed:
 External marketing: Making promises
 Internal marketing: Enabling promises
 Interactive marketing: Keeping promises

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 The Service Marketing Triangle

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 The Service Marketing Triangle

1) External Marketing: Making Promises

 External marketing is just the beginning for services marketers:
Promises made must be kept.
 A company makes promises to its customers regarding what they
can expect and how it will be delivered.
 Traditional marketing activities such as advertising, sales,
special promotions, and pricing facilitate this type of
marketing.
 For services the design and decor of the facility, and the service
process itself also communicate the promise to customers.

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 The Service Marketing Triangle

2) Interactive Marketing: keeping promises

 Keeping promises or interactive marketing is critical

from the customer's point of view.

 Service promises are kept or broken by the employees

of the firm or by third-party providers in real time.

 Promises are kept or broken and the reliability of

service is tested every time the customer interacts

with the organization.

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 The Service Marketing Triangle
3)Internal Marketing: enabling promises
 To deliver on the promises made, service providers
must have the skills, abilities, tools, and motivation.
i.e. they must be enabled.
 Enabling involves:
 Recruiting,
 Training
 Providing with tools and appropriate internal systems
 Rewarding for good service
 Internal marketing hinges on the assumption that
employee satisfaction and customer satisfaction are
inextricably linked.

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The Gaps Model of Service Quality
 Parasuraman et al. (1985) proposed that service quality is
a function of the differences between expectation and
performance along the quality dimensions.

 The model focuses on strategies and processes that firms

can employ to drive service excellence

 They developed a service quality model (Figure

below ) based on gap analysis.

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 The Gaps Model of Service Quality

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 The Gaps Model of Service Quality

The various gaps visualized in the model are:

 Gap 1: Difference between consumers’ expectation
and management’s perceptions of those expectations,
i.e. not knowing what consumers expect.
(Knowledge Gap)
 Gap 2: Difference between management’s
perceptions of consumer’s expectations and service
quality specifications, i.e. improper service-quality
standards. (Standard Gap)

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 The Gaps Model of Service Quality

 Gap 3: Difference between service quality

specifications and service actually delivered i.e.
the service performance gap. (Delivery Gap)

 Gap 4: Difference between service delivery and the

communications to consumers about service
delivery, i.e. whether promises match delivery?
(Communications Gap)

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The Gaps Model of Service Quality

 Gap 5: Difference between consumer’s expectation

and perceived service.
 This gap depends on size and direction of the four
gaps associated with the delivery of service quality
on the marketer’s side.

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 The Gaps Model of Service Quality

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 Services Quality Dimensions
a. Reliability entails the consistency of service performance and
dependability.

b. Responsiveness concerns the willingness and readiness of

staff to deliver the service and respond to customers’
requirements.

c. Competence refers to the ability of the service company to

actually deliver the service.

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 Services Quality Dimensions

d. Credibility concerns the trustworthiness,

believability and honesty experienced during the
service encounter.

e. Empathy and understanding the customer is one of

the most intangible dimensions in practice.

f. Image is the mental representation of reality

sustained by an individual or group.

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 STRATEGIES FOR CLOSING GAP

 By approaching human resource decisions and strategies

from the point of view that the primary goal is to motivate
and enable employees to deliver customer-oriented
promises successfully, and organization will move toward
closing gap. The strategies presented here are organized
around four basic themes.

32 Unit-1 Concepts in Service Marketing

 Cont.…
 To build a customer-oriented, service minded workforce,
an organization must
1. Hire the right people
 Compete for the Best people
 Hire for service competencies and Service inclination
 Be the preferred Employer
2. Develop people to deliver service quality
Train for Technical and Interactive Skills
Promote Teamwork

33 Unit-1 Concepts in Service Marketing

 Cont.’
3. Provide the needed support systems
Develop service oriented internal processes
Measure internal service Quality
Provide supportive technology and equipment
4. Retain the best people
 Treat Employees as Customers
 Measure and Reward Strong Service performers
 Include employees in the Company’s Vision

34 Unit-1 Concepts in Service Marketing

 The Traditional Marketing Mix
 The traditional marketing mix involves the four p’s.
1. Service outcome /product
 The technical outcome is the end result of the service or the
“what” of the service. For dental services, it would be the
completed crown.
The functional outcome is the process of receiving the
service or “how” the service was provided. Functional
service is the way the customer or client was treated by
the firm’s staff. For dental service, it is the way the
dentist, the dental assistant, and the receptionist
interacted with the patient

35 Unit-1 Concepts in Service Marketing

 Cont.
2. Price
Because services are intangible and experiential in nature, the
price becomes more important to consumers as a cue of what to
expect. Higher prices tend to convey higher quality.
3. Distribution
 Because of the inherent characteristics of services,
distribution becomes challenging. Distribution is the
availability and accessibility of a service to consumers.
4. Promotion
 Service firms have several means of promoting their firm.
Advertising, sales promotion, and personal selling are the
major components.
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 Expanded Marketing Mix for Services
The services marketing mix includes:
People:- It refers to 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:- is the environment in which the service
is delivered and where the firm and the customer interact, and
any tangible commodities that facilitate performance or
communication of the service.
Process:- It refers to the actual procedures, mechanisms, and
flow of activities by which the service is delivered – the
service delivery and operating systems
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 Thank you!

38 Unit-1 Concepts in Service Marketing