RVS INSTITUTE OF MANAGEMENT STUDIESKUMARAN KOTTAM CAMPUS, KANNAMPALAYAM - 641402

BA9253 - SERVICES MARKETING

COURSE MATERIAL & NOTES

Unit – 1 INTRODUCTION

Definition

Service Economy

Evolution & Growth of service sector

Nature and Scope of Services

Unique Characteristics of Services

Challenges and issues in Services Marketing

Definition

Marketing – Meaning:

Marketing is a human activity directed at satisfying needs and wants through

an exchange process.

Services – Meaning:

A service as an act or performance that one arty 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.

Services include all economic activities whose output is not a physical

product or construction, is generally consumed at the time it is produced, and

provides added value in forms (such as convenience, amusement, timeliness,

comfort or health) that are essentially intangible concerns of its first purchaser”

The American Marketing Association has taken a lead in defining services as

“activities, benefits or satisfactions which are offered for sale or provided in

connection with the sale of goods.

Examples of services are:

Trade

Hotels and Restaurants

Railways

Other Transport & Storage

Communication (Post, Telecom)

Financial

Real Estate

Business Services (BPO, KPO etc.)

Public Administration; Defence

Personal Services

Community Services

Difference between Goods and Services

It has been argued that there are no major differences between goods and

services, as a great deal of similarity has been found in the marketing of both

goods and services.

Though the processes of marketing goods and services are increasingly

resembling each other a few possible differences do remain the most

prominent among them being

Goods Services

Tangible Intangible

Homogeneous Heterogeneous

Production and distribution are separated from consumption

Production, distribution and consumption are simultaneous processes

A thing An activity or process

Core value processed in factory Core value produced in the buyer-seller interaction

Customers do not participate in the production process

Customers participate in production

Can be kept in stock Cannot be kept in stock

Transfer of ownership No transfer of ownership

Why Marketing of Services

The following factors make it clear that application of modern marketing principles

by the service generating organizations would pave avenues for qualitative-cum-

quantitative transformation.

Upward Trend in the disposable income:

We can’t negate that of late the disposable income of masses has been found

moving upward. This trend is fond even in developing countries like ours. These

facts are a mute testimony to the proposition that even in the Indian economy we

find positive developments which have been creating new opportunities for the

development of services sector.

Increasing Specialization:

We are living in a age of specialization in which only perfection is to be

rewarded suitably. More and more sophistication in the process of economic

transformation is due mainly to the increasing specialisation.

Growing Fashion:

With the development of corporate culture and the emergence of well-

established services sector, there would be basic change in the lifestyles. Since

the IT would show their influence in almost all the areas, it is natural that fashion

would take shape of an industry.

Professionalism in Education:

The development of HR would be given a transcendental priority by almost all

the organisations either producing goods or generating services. Of course , the

corporate culture makes an advocacy in favor of performance-orientation bur it is

not possible unless we assign due weight age to employee-orientation.

Information Explosion:

of Late the developed countries have been found making sincere efforts to

build a super highway for communications. The tremendous opportunities

generated by communications would influence almost all the sectors.

Sophistication in Market:

With the development of communication services, it is natural that we find

sophistication in the market where customer expectations would be found high.

The westernized life styles would change the hierarchy of needs and

requirements and fashion oriented, comfort-generating house hold items would

have a profitable market.

Increasing Governmental Activities:

The expanding governmental Activities due mainly to the participation of the

state in almost all sectors of the economy would also make ways for the

development of the services sector. The trade and cultural exchange policies, the

global partnership, the convention industry, the hospitality industry etc., would

have a profitable market.

Types of Services

Primary Sector - is something like extracting e.g. mining, cultivate like

Agriculture Primary Sector (Horti-culture\Aqua-culture) farming.

Secondary Sector - like manufacturing process ( machinery provide service).

Tertiary Sector - Business: Consultation, Finance, Banking, Trade: Retailing,

Maintenance, Repair, Infrastructure, Communication, Transportation, Social\

personal, Restaurants, Health Care, Entertainment Public Administration:

Education, Government Administration.

Service Economy

Service economy can refer to one or both of two recent economic

developments. One is the increased importance of the service sector in industrialized

economies.

The term is also used to refer to the relative importance of service in a product

offering. The service economy in developing countries is mostly concentrated

in financial services, health, and education. Products today have a higher service

component than in previous decades. In the management literature this is referred to

as the servitization of products. Virtually every product today has a service

component to it. The old dichotomy between product and service has been replaced

by a service-product continuum. Many products are being transformed into services.

For example, IBM treats its business as a service business. Although it still

manufactures computers, it sees the physical goods as a small part of the "business

solutions" industry. They have found that the price elasticity of demand for "business

solutions" is much less than for hardware. There has been a corresponding shift to

a subscription pricing model. Rather than receiving a single payment for a piece of

manufactured equipment, many manufacturers are now receiving a steady stream of

revenue for ongoing contracts.

Environmental effects on Service Economy

Much easier integration with accounting for nature's services

Much easier integration with state services under globalization, e.g. meat

inspection is a service that is assumed within a product price, but which can vary

quite drastically with jurisdiction, with some serious effects.

Association of goods movements in commodity markets with negative

commodity (representing emissions or

other pollution, biodiversity loss, biosecurity risk) public bad’s so that no

commodity can be traded without assuming responsibility for damage done by its

extraction, processing, shipping, trading and sale - its comprehensive outcome

Easier integration with urban ecology and industrial ecology modelling

Making it easier to relate to the Experience Economy of actual quality of

life decisions made by human beings based on assumptions about service, and

integrating economics better with marketing theory about brand value e.g.

products are purchased for their assumed reliability in some known process. This

assumes that the user's experience with the brand (implying a service they

expect) is far more important than its technical characteristics

Role of Service Economy in Development

Services constitute over 50% of GDP in low income countries and as their

economies continue to develop, the importance of services in the economy

continues to grow The service economy is also key to growth, for instance it

accounted for 47% of economic growth in sub-Saharan Africa over the period 2000–

2005 (industry contributed 37% and agriculture 16% in the same period). This means

that recent economic growth in Africa relies as much on services as on natural

resources or textiles, despite many of those countries benefiting from trade

preferences in primary and secondary goods. As a result, employment is also

adjusting to the changes and people are leaving the agricultural sector to find work in

the service economy. This job creation is particularly useful as often it provides

employment for low skilled labour in the tourism and retail sectors, thus benefiting

the poor in particular and representing an overall net increase in employment. The

service economy in developing countries is most often made up of the following:

Financial services

Tourism

Distribution

Health, and

Education

The export potential of many of these products is already well understood, e.g. in

tourism, financial services and transport, and however, new opportunities are arising

in other sectors, such as the health sector. For example:

Indian companies who provide scanning services for US hospitals

South Africa is developing a market for surgery and tourism packages

India, the Philippines, South Africa and Mauritius have experienced rapid growth

in IT services, such as call centers, back-office functions and software

development

Service Economy Growth: Key Influences and Concerns

Technological Influences

Socio-Cultural Influences

Competitive Influences

Service Sector Growth Concerns

How important is the Service Sector in Our Economy?

The size of the service sector is increasing in almost all economies around the

world.

Services make up the bulk of today’s economy and also account for most of

the growth in new jobs.

Even in emerging economies, service output is growing rapidly and often

accounts for half or more of GDP ( Gross Domestic Product – Sum of all

goods and services produced within the boundaries of a country).

Jobs range from high-paid professionals and technicians to minimum-wage

positions.

Service organizations can be any size – from huge global corporations to local

small businesses.

The services sector has been growing at a rate of 8% per annum in recent

years.

Predicted Keys to Success within the Service Sector

Niche marketing.

Firm’s ability to master technological change.

Firm’s abilities to excel at customer service and develop compelling service experiences.

Understanding of the value of customer retention.

Evolution and Growth of Service Sector

Evolution of the Services Marketing Field

• Crawling Out (Pre 1980)

– Early services marketing work was conceptual/theoretical.

– Goods Marketing vs. Services Marketing Debate:

• Shostack (1977) – “Breaking Free From Product Marketing.”

• Berry (1980) – “Services Marketing is Different.”

• Scurrying About (1980-1985)

– More services research was published.

• Literature was still mostly conceptual.

• Literature was beginning to move beyond goods vs. services issues.

– Enthusiasm centered around AMA Services Marketing Conferences.

– Emergence of a core group of academics & business practitioners.

• Walking Erect (1985–1992)

– Increasing number of services scholars.

– Explosive growth in the literature:

• Acceptance of services research by major journals

• More dissertations

• More textbooks

– Academic events in Europe

– Creation of academic centers:

• Arizona State University’s Center for Service Leadership

THE SECOND ERA: THE EMERGENCE OF A MULTIDISCIPLINARY

FIELD

Remarkable change has occurred in the services marketing field since

the publication of Fisk, Brown and Bitner (1993). To portray these

changes in the services field, we continue with a metaphorical approach,

but we shift the nature of the evolutionary metaphor from biological

evolution to social evolution.

Recent Stages of Service Evolution

Making Tools

A tremendous technology infusion, especially of information technology

made it possible for most service industries to rapidly increase the

technological sophistication of the service they provide customers.

Prominent among these technology c h a n g e s is the e m e r g e n c e

o f t h e Internet and the many web-based services that are possible via

the Internet. Included in these technology changes a re numerous

se l f -service technologies. These changes have prompted service

marketers to study technology infusion into services and the role of self-

service technologies in customer-firm relationships.

Creating Language

Language is itself one of the most sophisticated tools created by the

human species. Every new academic field must develop a technical

language for communicating knowledge that is created by the community

of scholars within the field. Technical words and phrases that

originated in services marketing have become mainstream to the

marketing field. These terms include: service encounters, service quality,

Service Theater, service e x p e r i e n c e , service scapes, and se rv i ce

recovery.

Building Community: The Future of the Service Field

Building Community is the next stage in the social evolution of

the service field. Academic disciplines play essential roles in the creation

and diffusion of knowledge. As the academic study of service phenomena

has steadily broadened its reach from its origins in the services

marketing and management fields, the rapid increase in the number of

participants in the services field creates both opportunity and peril.

We believe that the broader services f ield has reached a critical

juncture. Sophisticated social networking is needed to grow and

disseminate service knowledge.

Reasons for growth in service sector

Experienced rapid since World War II as many nations shift from a

manufacturing based economy to a service economy.

Major stimulus for this shift – movement to an information age spurred by the

invention of the computer and advancements in telecommunications.

As countries continue to shift from an agricultural and industrialized economic

base, the demand for services will continue to increase

Larger discretionary income offers opportunities for entertainment services

In addition to the entertainment services, there will be an increase in demand

for services that enable individuals to have more free time, such as house

cleaning, lawn, and child care services. The increase in the demand for these

services is due to increase in number of women in work force.

Advances in product technology led to rise in the demand for services.

Growth in intermediate demand from firms.

Importance of Staff function than line managers.

High professional and specialized services were taken from outside to grow big.

It leads to outsourcing of services.

Growth in final demand from customers.

Increase in affluence( wealth, rich, prosperous)

Increase in affluence( wealth, rich, prosperous)

More leisure time

Increasing proportion of working woman

Growth in population of DINKS(Double Income no Kids)

Greater complexities of products.

Greater Complexities in life

Greater concern for resource scarcity and ecology

Increasing number of new products

Increasing proportion of earning younger generation.

Additional factors Contributing Growth

Aging population

Longer life expectancies

Increased leisure time

Higher per capita income

Increased time pressure

More female work force participation

Changing social and cultural values

Advances in technology

Service Sector Growth and Development Sustainability

The service sector produces “intangible” goods, some well known—government, health,

education—and some quite new—modern communications, information, and business

services. Producing services tends to require relatively less natural capital and more

human capital than producing agricultural or indus- trial goods. As a result demand has

grown for more educated workers, prompting countries to invest more in education—an

overall benefit to their people. Another benefit of the growing service sector is that by

using fewer natural resources than agriculture or industry, it puts less pressure on the

local, regional, and global environment.

Nature and Scope of Services

The second level of the services address the nature of the services in terms

of the degree of tradability, to whom or what the action is directed, and the degree of

merchantability.

Tradability: Tradability is the relative involvement between goods and

services in the production of the services.

Merchantability: Merchantability is the relative distance the customer and

the service provider in the acquisition or performance of the service.

Although both services marketing and goods marketing start with the

critical need identification and need design functions, goods are produced

before it is sold and services are sold before it is produced.

Services marketing has more limited influence on customers before the

purchase than goods marketing

Services dominated by experience qualities, attributes that can be

meaningfully evaluated only after purchase and during production-

consumption.

Post sale marketing and Word of Mouth Communication have prominent

effect in winning customer’s loyalty.

Services marketers can create brand awareness and induce trial before

the sale, but they demonstrate benefits and build brand awareness most

effectively after the sale

Experience Qualities: Evaluation takes place only after the service has

been consumed or during the process of consumption.

Credence Qualities : Some services are difficult to evaluate even after

consumption

Learning Objectives:

Service process matrix.

The service package.

Distinctive characteristics of a service operation.

The strategic classification of services.

The role of a service manager from an open-systems view of service.

Unique Characteristics of Services

What exactly are the characteristics of a service? How are services different from a

product? In fact many organisations do have service elements to the product they

sell, for example McDonald’s sell physical products i.e. burgers but consumers are

also concerned about the quality and speed of service, are staff cheerful and

welcoming and do they serve with a smile on their face?

There are five characteristics to a service which will be discussed below.

1. Lack of ownership

You cannot own and store a service like you can a product. Services are used or

hired for a period of time. For example when buying a ticket to the USA the service

lasts maybe 9 hours each way , but consumers want and expect excellent service for

that time. Because you can measure the duration of the service consumers become

more demanding of it.

2. Intangibility

You cannot hold or touch a service unlike a product. In saying that although services

are intangible the experience consumers obtain from the service has an impact on

how they will perceive it. What do consumers perceive from customer service? the

location, and the inner presentation of where they are purchasing the service?.

3. Inseparability

Services cannot be separated from the service providers. A product when produced

can be taken away from the producer. However a service is produced at or near the

point of purchase. Take visiting a restaurant, you order your meal, the waiting and

delivery of the meal, the service provided by the waiter/ress is all apart of the service

production process and is inseparable, the staff in a restaurant are as apart of the

process as well as the quality of food provided.

4. Perishibility

Services last a specific time and cannot be stored like a product for later use. If

travelling by train, coach or air the service will only last the duration of the journey.

The service is developed and used almost simultaneously. Again because of this

time constraint consumers demand more.

5. Heterogeneity

It is very difficult to make each service experience identical. If travelling by plane the

service quality may differ from the first time you travelled by that airline to the

second, because the airhostess is more or less experienced.

A concert performed by a group on two nights may differ in slight ways because it is

very difficult to standardise every dance move. Generally systems and procedures

are put into place to make sure the service provided is consistent all the time,

training in service organisations is essential for this, however in saying this there will

always be subtle differences.

Challenges and Issues in Services Marketing:

Companies that are marketing a product face different challenges compared with

those that are promoting a service. If you’re transitioning from marketing products to

services or vice versa, you have to know and understand these differences to

effectively promote and sell. Understanding the different challenges in product and

service marketing can help you establish the right approach.

Tangibility

A product is tangible, which means the customer can touch and see the product

before deciding to make a purchase. Items such as packaging and presentation may

compel a customer to purchase a product. Services, on the other hand, are not

tangible, which can make them more difficult to promote and sell than a product.

Relationship and Value

Products tend to fill a customer's need or want, so companies can use this to sell a

product. A service is more about selling a relationship and the value of the

relationship between the buyer and seller of the service. For example, a car is

something a buyer can touch and see as well as use. A service, such as lifestyle

coaching, for example, is not tangible. A lifestyle coach may be able to assist clients

in creating a life plan and implementing steps to transform his life into one that the

client wants to live, but it is not something tangible that the client can place in his

home and look at every day. Therefore, the client needs to perceive the value of the

service, which can be harder to get across.

One versus Many

Marketing products tends to involve multiple products that make up the line. For

example, cleaning product manufacturers tend to market not just one cleaning

product. Instead, they have a line of cleaning products to serve the various needs of

their customers. Services, on the other hand, typically have a single option. It can be

harder to promote and sell the reputation of one single service over the benefits of

many different products.

Comparing Quality

Measuring the quality of a product is easier than measuring that of a service. If a

customer buys a cleaning product to clean the kitchen sink and it doesn’t do the job,

the customer knows the value of the product is zero. On the other hand, it is harder

to measure the quality of a service.

Return Factor

If a customer purchases a product and it doesn’t work as it is supposed to, the

customer can return the product for her money back or at least to receive a store

credit. A service is consumed as it is offered, so it lacks the return factor that a

product has. Some service providers overcome this by offering money-back

guarantees.

CHALLENGES IN SERVICES MARKETING

Managing, growing, and profiting with both product and service businesses are

challenging tasks. But the challenges are different from one to the other. Listed

below are some of the most common and difficult challenges of growing and

managing consulting, professional, or technology service businesses that don't

necessary apply to product businesses.

1. Clients can't see or touch services before they purchase themThis makes services difficult to conceptualize and evaluate from the

client perspective, creating increased uncertainty and perception of risk. From

the firm's perspective, service intangibility can make services difficult to

promote, control quality, and set price.

2. Services are often produced and consumed simultaneously.

This creates special challenges in service quality management that

product companies do not even consider. Products are tested before they go

out the door. If a product has quality problems while in production, the

company can fix them and customers are none the wiser. Service production

happens with the customer present, creating a very different and challenging

dynamic.

3. Trust is necessary.

Some level of trust in the service organization and its people must be

established before clients will engage services. This is as important, sometimes

more important, than the service offerings and their value proposition.

4. Competition is often not who you think.

Competition for product companies are other product companies. Competition

for service companies are often the clients themselves. Sure, sometimes you find

yourself in a competitive shootout (some firms more than others), but often the

client is asking 'should we engage this service at all' and 'if so, should we just do

it in-house'.

5. Brand extends beyond marketing

Brand in service businesses is about who you are as much as what you say

about yourself. And internal brand management and communications can be

equally as vital to marketing success as are external communications.

6. Proactive lead generation is difficult

Many service companies have tried, and failed, at using lead generation

tactics that work wonders for product companies. Implemented correctly,

traditional product techniques, such as direct marketing and selling, can work for

services, but the special dynamics of how clients buy services must be carefully

woven into your strategy.

7. Service deliverers often do the selling.

Many product companies have dedicated sales forces. For services,

the selling is often split between sales, marketing, professional, and

management staff.

8. Marketing and sales lose momentum.

Most product companies have dedicated marketers and sellers. They

market and sell continuously, regardless of the revenue levels they generate.

In many services companies the marketers and sellers also must manage and

deliver. This can often lead to the Services Revenue Rollercoaster-wide

swings between revenue and work overflow, and revenue and work drought.

9. Passion is necessary, yet elusive.

The more passion, spirit, hustle, and desire your staff brings to the

organization every day, the more revenue and success you will have. The

correlation between staff passion and financial success is direct and measurable

(as is the correlation between lack-of-passion and organizational failure). Yet

institutionalizing passion, while necessary, is agonizingly elusive.

Ethics in Services Marketing

1. Aggressive Promotion through telemarketing and personnel selling.

2. Invasion of Privacy.

3. Misleading claims backed by poor service performance.